Trump threatens to permanently cut funding to WHO
In Today’s Updates
* USDA CFAP rule coming today
* Fed's Powell, Treasury's Mnuchin to testify today on CARES Act
* Oil extends rally
* Survey: Global economic recovery might take up to three years
* Some state attorneys general support waiving RFS requirements
* SBA publishes PPP changes making rural electric co-ops eligible for PPP
* Seaports starting to reel from the coronavirus-driven upheaval in trade flows
* Australia threatens China with WTO challenge over barley tariffs
* U.S. businesses doubling down on China (investment)
* Report: Treasury has spent small portion of aid
* U.S. food supply update
* Perdue predicts current supply chain disruptions won’t cause long-term changes
* Tyson Foods poultry facility in Wilkesboro, N.C., remains closed
* Coronavirus update
* Coronavirus is overwhelming Brazil's hospitals
* Trump warns WHO on funds, membership
* Chinese President Xi Jinping pledges $2 billion to WHO to fight global pandemic
* Trump reveals he is taking hydroxychloroquine
* German, French leaders support Covid-19 aid package
* Sen. Marco Rubio to chair Senate Intelligence Committee
* USDA required to offer food stamp recipients access to food delivery services
* U.S., U.K. trade talks make progress
* Justices will not review Valero challenge* CFTC pressed over carbon fees
Equities today: Stocks rallied in Asia after U.S. stocks surged Monday on hopes that a new vaccine could help combat the coronavirus pandemic. Japan’s Nikkei 225 and Hong Kong’s Hang Seng Index were up 1.5% and 2.1%, respectively. South Korea’s Kospi Composite added 2.3%. Stocks initially rallied slightly in Europe but then turned lower. Futures tied to U.S. equities signaled a lower open.
U.S. equities yesterday: The Dow shot up 911.95 points, 3.85%, at 24,597.37. The Nasdaq moved up 220.27 points, 2.44%, at 0,234.83. The S&P 500 advanced 90.21 points, 3.15%, at 2,953.91.
Federal Reserve Chairman Jerome Powell said the central bank would use its “full range of tools to support the economy” in testimony prepared for delivery today. Treasury Secretary Steve Mnuchin and Powell will both appear this morning before the Senate Banking Committee to discuss the first quarterly report of the Coronavirus Aid, Relief and Economic Security (CARES) Act. On the CBS news program 60 Minutes on Sunday, Powell said that “policies that help businesses avoid avoidable insolvencies and that do the same for individuals” should be the focus of any further economic rescue measures considered by Congress. “We are committed to using our full range of tools to support the economy in this challenging time even as we recognize that these actions are only a part of a broader public-sector response,” Powell said in his prepared remarks. “We expect to maintain interest rates at this level until we are confident that the economy has weathered recent events and is on track to achieve our maximum-employment and price-stability goals.” Senators are expected to grill the two about actions still needed to keep the world's largest economy afloat and about missteps in rolling out aid so far, like glitches that held up PPP loans and policy changes that saw companies return their funds.
Oil prices extended their rally, fueled by accelerating production cuts and a pickup in demand. U.S. crude has gained nearly 3%, trading above $32.70 per barrel while Brent crude has moved up a more subdued 0.4% to trade just under $35 per barrel. Oil prices are staging a furious comeback from last month’s collapse, lifted by record supply cuts and a pickup in global fuel demand that many investors hope heralds a swift economic recovery. Meanwhile, Chinese oil demand has reportedly almost rebounded to pre-pandemic levels. Gasoline and diesel are leading the oil recovery, as commuters are choosing to drive rather than use public transport. The most heavily traded U.S. crude-oil futures contracts have risen to $31.65 a barrel after hitting a low of $11.57 last month. Prices started the year above $60. Brent crude futures, the global gauge of oil prices, have rebounded to $34.81.
A global economic recovery might take up to three years. European CEOs and chairman surveyed by the Conference Board were overwhelmingly pessimistic about near-term prospects, mirroring the grim outlook of American chief executives.
Ken Osmond, who played Eddie Haskell on “Leave It to Beaver,” died on Monday at 76.
— USDA will brief lawmakers/staff this morning re: CFAP rule. Today is the day USDA will finally release details of the Coronavirus Food Assistance Program (CFAP). USDA usually releases details just ahead of briefings. Meanwhile, President Donald Trump today will give remarks about farmers and ranchers and the U.S. food chain.
Farmers can start applying for agricultural aid after Memorial Day, USDA Sec. Sonny Perdue said. Checks will start flowing to producers 7-10 days later. Perdue made the comments during a “rural town hall” hosted by the network RFD-TV. Perdue said the application process will open on May 26 and money would start moving as soon as a week later. The application window will remain open through August, Perdue said, but he expects most producers won’t wait that long to put in their paperwork for aid.
— Some state attorneys general support waiving RFS requirements. Requests by some states for EPA to waive the biofuel requirements under the Renewable Fuel Standard (RFS) this year “is clearly justified by law and circumstance,” according to a letter signed by seven state attorneys general to EPA Administrator Andrew Wheeler. Noting the regulatory relief being offered by the Trump administration in several areas, the officials argued that the biofuel sector is another where such an action is warranted. “Chemical refiners are crucial to advanced economies and provide economic support for both states and workers’ families alike,” the officials said. “These hard-working Americans are named ‘critical infrastructure workers’ by the Cyber and Infrastructure Security Agency, meaning they fill an economic need vital to economic and national security.” The global economic slowdown means that refiners have seen “decimated demand for oil and refined products, leaving refineries to either drastically cut costs or shut down entirely.”
The refiners zeroed in on the purchase of Renewable Identification Numbers (RINs) as a key factor which should translate into waiving the RFS requirements. Refiners can purchase RINs rather than blending biofuels with gasoline to show compliance with the RFS. “However, when implementing a requirement ‘would severely harm the economy or environment of a State, a region or the United States,’ the Administrator is explicitly empowered to waive the requirements,” the letter stated.
The letter was signed by attorneys general from Louisiana, Utah, Arkansas, West Virginia, Oklahoma, Wyoming and Texas.
Perspective: Despite receiving several requests over the years to waive RFS requirements, EPA has yet to grant any of those requests.
— SBA publishes PPP changes making rural electric co-ops eligible for PPP. The Small Business Administration (SBA) today publishes in the Federal Register (link) updates to the Paycheck Protection Program (PPP) to clarify that some rural electric cooperatives will be eligible to utilize the program. The PPP is intended to provide economic relief to small businesses nationwide adversely impacted by the Coronavirus Disease 2019 (Covid-19), and the SBA published an interim final rule that “supplements the previously posted interim final rules by providing guidance on additional eligibility requirements for certain electric cooperatives, and requests public comment.” The measure covers applications submitted under PPP through June 30, 2020, or until funds for the program are exhausted.
— Seaports are starting to reel from the coronavirus-driven upheaval in trade flows. The International Association of Ports and Harbors says in a new report that European ports have been the hardest hit so far, the Wall Street Journal reports (link), with ship calls falling by up to 25% at two-thirds of the continent’s gateways. The article notes that declining calls are the result of the enormous numbers of sailings that shipping lines have canceled in recent weeks as the earlier supply pullback in China has shifted into a demand downturn among locked-down Western nations. The capacity cuts are slicing into key revenue sources for ports. “That raises the potential for aid at some ports that are absorbing the financial impact of the dimming business.” Port volumes in the U.S. are sliding, with combined loaded container imports at the neighboring ports of Los Angeles and Long Beach off 8.1% in April.
— Update on China:
- Australia threatens China with WTO challenge over barley tariffs. Australia threatened to appeal to the World Trade Organization following Beijing’s announcement that it will slap punitive tariffs on its barley exports but has denied it is in a “trade war” with its largest trade partner. Simon Birmingham, Australia’s trade minister, said he was “deeply disappointed” by Beijing’s decision to impose duties of up to 80% on barley produced in Australia for up to five years — a move farmers said could cripple an A$2bn ($1.3bn) a year industry. “We reserve all rights to appeal this matter further and are confident that Australian farmers are among the most productive in the world, who operate without government subsidy of prices,” said Birmingham. “Australia is not interested in a trade war. We don't pursue our trade policies on a tit-for-tat basis.”
China’s Ministry of Commerce confirmed late on Monday it would impose 73.6% anti-dumping and 6.9% anti-subsidy duties on Australian barley from May 19, saying imports of the grains had “materially damaged local industry.” The Chinese also cited the Australia's Murray Darling Plan as a subsidy for Australian barley growers. The Murray Darling Plan buys water rights from irrigators to improve the health of the basin and accounts for some 40% of Australian ag output. Birmingham said China had made errors in fact and law in the application of anti-dumping rules in this case.
Both ministers attempted to downplay the barley dispute, saying it was not linked to Canberra’s call for an inquiry into Covid-19 as Chinese officials had first raised concerns 18 months earlier.
U.S. barley is now eligible to be shipped into China via a phytosanitary agreement worked out between the two sides as part of the Phase 1 trade agreement.
Last week China imposed a ban on imports from four Australian meat-processing plants.
- U.S. businesses are doubling down on China. From Popeyes to Walmart, Tesla to Exxon Mobil, companies are betting that the country’s long-term growth potential still outweighs the mounting case against further expansion — including geopolitical tensions and slowing growth. While the pandemic has spurred businesses to rethink supply chains to reduce dependency on China, companies that are producing in China for Chinese customers are bulking up their local presence, the Wall Street Journal reports (link).
— Update on implementation of CARES 1
- Treasury has spent small portion of aid. The Treasury Department has spent only $37.5 billion thus far of a $500 billion pool of funds Congress provided to help struggling businesses, including airlines, during the pandemic, according to a congressional watchdog panel’s report (link). The figures, released yesterday, show Treasury has been slower to deploy cash for corporations than in providing separate stimulus payments and small-business loans. About $454 billion of the $500 billion is intended for the U.S. Federal Reserve to create emergency lending programs for businesses. Of that amount, the report said, $185 billion has been committed including $37.5 billion that has been sent to the central bank, which began purchasing some assets with the money last week. Treasury Secretary Steven Mnuchin said in prepared testimony for Congress that as much as $195 billion in credit support has been committed.
— U.S. food supply/industry update:
- USDA Sec. Sonny Perdue predicted that the current supply chain disruptions won’t cause long-term changes in the food system after the pandemic is over. “I don’t think we need to look at doing different things in our food supply chain,” Perdue said, adding that he thinks high prices at grocery stores will level out as schools, restaurants, meatpacking plants and other businesses come back online.
- A Tyson Foods poultry facility in Wilkesboro, N.C., remains closed 13 days after USDA Sonny Perdue said that all U.S. meatpacking plants would fully reopen in the next seven to 10 days. Perdue said on May 6 that plants will reopen after coronavirus outbreaks sparked closures and led to shortages at grocery stores and fast food chains. President Trump issued an executive order last month to keep meatpacking plants open during the pandemic. All the facilities by fellow leading food processing firms JBS and Smithfield are currently open, according to the companies. A Tyson Foods spokesperson said the company hopes to resume production at the Wilkesboro plant soon. The facility closed last week after an undisclosed number of workers tested positive.
— Coronavirus update:
- Summary: Global Covid-19 cases are at 4,822,430 with deaths at 318,851, according to data from the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU). The U.S. case count moved beyond 1.5 million to 1,508,957 with deaths at 90,369.
- The coronavirus is overwhelming Brazil's hospitals. In a country of 210 million people, Covid-19 has killed at least 116 nurses, according to Brazil’s Federal Nursing Council — the highest toll anywhere.
- Trump warns WHO on funds, membership. President Trump has given the World Health Organization (WHO) 30 days to make “major substantive improvements” or the U.S. will cease its funding. The agency must demonstrate “independence from China,” according to a letter, which the president posted on Twitter late Monday. Trump alleged in the letter that the WHO ignored early reports of the virus spreading in Wuhan, failed to share information with other countries, made misleading claims and neglected to urge China to allow for an independent investigation into the origins of the virus.
The WHO’s director has promised an independent inquiry about the pandemic as soon as possible.
- Chinese President Xi Jinping at the World Health Assembly pledged $2 billion to the WHO to fight the global pandemic. China pledged to make its treatment a global public good once one is available, in a sign that President Xi Jinping is seeking to defuse criticism of Beijing's response to the pandemic. In his address Monday at the World Health Assembly, Xi praised the WHO and said other governments should increase their financial commitments to it. Xi outlined a range of new Chinese commitments, including a “global humanitarian response depot and hub in China to ensure the operation of anti-epidemic supply chains.” It will offer physicians and supplies to dozens of countries, especially in Africa, he added.
Xi expressed uncertainty about the origins of the pandemic, saying: “We also need to continue supporting global research by scientists on the source and transmission routes of the virus.”
- President Trump revealed he is taking hydroxychloroquine, the anti-malaria drug he’s promoted as a treatment for coronavirus infection. Trump on Monday said he had been taking the drug, which is commonly used for malaria, for nearly two weeks. The Food and Drug Administration last month warned hydroxychloroquine and chloroquine, another antimalarial drug, could cause heart problems. The White House later released a memo from Sean Conley, a Navy officer who serves as the president’s physician, which sparked questions about Trump’s statement since he did not explicitly say that he had prescribed the medicine for Trump. “After numerous discussions he and I had regarding the evidence for and against the use of hydroxychloroquine, we concluded the potential benefit from treatment outweighed the relative risks,” Conley said. FDA has granted emergency authorization for hydroxychloroquine for use in clinical trials and in controlled hospital settings.
House Speaker Nancy Pelosi (D-Calif.) said taking scientifically unproven hydroxychloroquine is “not a good idea” for Trump in his “age group” and “morbidly obese...weight group.”
- German Chancellor Angela Merkel and French President Emmanuel Macron agreed to support a 500 billion-euro ($546 billion) aid package to help the European Union recover from the coronavirus in a major step toward tighter integration. Merkel said that Germany would accept a fund within the framework of the EU budget, financed by additional borrowing, that would make grants to member states that have been hardest hit by the virus. She said the bonds issued by the European Commission would be repaid from the EU budget, the lion’s share of which is covered by Germany.
OTHER ITEMS OF NOTE
- Sen. Marco Rubio to chair Senate Intelligence Committee. Senate Majority Leader Mitch McConnell (R-Ky.) selected Florida Sen. Marco Rubio to chair the Senate Intelligence Committee, succeeding Sen. Richard Burr (R-N.C.), who stepped aside during an FBI probe into stock trades.
- USDA would be required to offer food stamp recipients access to food delivery services under new legislation (HR 6904) introduced by Reps. Joe Neguse (D-Colo.), Jahana Hayes (D-Conn.), and Marcia Fudge (D-Ohio), chairwoman of the House Agriculture nutrition subcommittee.
- U.S., U.K. trade talks make progress. Officials from the U.S. and United Kingdom made progress on several areas over the past two weeks of negotiations and are moving forward at an “accelerated pace,” Liz Truss, U.K.’s international trade secretary, said Monday after the first round of talks. Progress was made as both sides “identified a mutually high ambition for services, investment and digital trade, among other areas,” Truss said. Truss said negotiators will keep talking over the coming weeks as they pursue a “comprehensive” trade deal, but the next formal round of virtual trade talks will begin on June 15 and last two weeks.
- Justices will not review Valero challenge. The U.S. Supreme Court won’t get involved in a long-running dispute between refineries and the EPA over who must comply with federal renewable fuel requirements. The justices on Monday declined to take up a petition from Valero Energy and American Fuel & Petrochemical Manufacturers, which say the EPA has repeatedly shirked its responsibility to review how the Clean Air Act’s Renewable Fuel Standard program applies to different types of companies.
- CFTC pressed over carbon fees. Sens. Sheldon Whitehouse (D-R.I.) and Brian Schatz (D-Hawaii) called on the Commodity Futures Trading Commission to include carbon emissions pricing and the role of federal financial regulators in an upcoming report on the risks of climate change to U.S. markets.