America’s Reopening Is Put on Pause as Daily U.S. Covid Cases Reach a Record

Posted on 06/26/2020 7:27 AM

China focus in Australia, Canada | Biofuel waivers | Germany's slaughterhouse woes

 


In Today’s Updates


 

* Canada PM Trudeau rejects Meng-for-Michaels proposal with China
* Australian lawmaker's home raided over links to Chinese Communist Party
* U.S. Senate passes China sanctions bill over Hong Kong
* White House weighing options for beating Huawei on 5G
* Germany mulls action against U.S. over Nord Stream threat
* Senators again press EPA to reject biofuel waivers
* Federal Reserve putting fresh limits on the U.S. banking industry
* Odds decreasing for V-shaped U.S. economic recovery

* More upbeat economic forecast for the EU
* Pelosi says Mnuchin talks aren't focused on aid
* Major differences among lawmakers on next ag sector aid package
* More than a billion dollars in coronavirus aid went to dead people
* U.S. food supply update
* German slaughterhouses in focus after virus outbreak returns
* Experts don’t see food as vehicle for virus transmission... but what about livestock?
* USDA again raises grocery store price forecast
* Future of fast food has arrived ahead of schedule
* Update on reopening America... and around the world
* Texas puts reopening on hold amid new Covid-19 outbreak
* Coronavirus update
* U.S. breaks record for daily coronavirus cases 102 days after first lockdown
* CDC: 20 million Americans have had the virus
* White House coronavirus task force briefing today — first since April 29
* Trump continues to play down severity of epidemic

* House passes policing reform bill amid usual stalemate
* Trump administration asks Supreme Court to invalidate ObamaCare/ACA

* House today expected to approve statehood for Washington, D.C.
* House vote next week on more than $1.5 trillion infrastructure plan
* Rule ends chance of House vote on WTO this year
* Jack Abramoff, disgraced lobbyist, set to return to jail for new violations
* Cotton AWP moves higher

 


MARKET FOCUS


 

Equities today: U.S stock futures slid amid continued new outbreaks of Covid-19, and hospitalizations, in Texas and other states, increasing concerns about new restrictions and a slowdown in the economy reopening. Several states, including Arizona, Texas, South Carolina and Florida, saw confirmed cases rise by more than 30% over the past week. Major Asian equity benchmarks ended the day mixed. The pan-continental Stoxx Europe 600 rose slightly.

 

     U.S. equities yesterday: The Dow gained 299.66 points, 1/18%, at 25,745.60. The Nasdaq rose 107.84 points, 1.09%, at 10,017.00. The S&P 500 was up 33.43 points, 1.10%, at 3,083.76.

 

On tap today:

 

     • U.S. personal income for May, due at 8:30 a.m. ET, is expected to fall 7.0% from the prior month and consumer spending is expected to rise 8.7% from a month earlier.
     • U.S. personal consumption expenditure price index excluding food and energy for May, due at 8:30 a.m., is expected to be unchanged from a month earlier and rise 0.9% from a year earlier.
     • University of Michigan consumer sentiment index for June, due at 10 a.m., is expected to tick up to 79.0 from a preliminary reading of 78.9.
     • Baker Hughes rig count is out at 1 p.m.

 

Odds decreasing for a V-shaped U.S. economic recovery. Hopes for a V-shaped recovery were undermined this week. Some reasons: First, the number of new coronavirus infections is rising across the country, forcing some states to ease their reopening plans. For investors just hoping things get back to normal, this is a major roadblock. Second, economic data continue to show that a rapid economic recovery isn’t likely. Initial weekly jobless claims came in at 1.48 million, the 14th consecutive week above 1 million. Continuing claims fell to 19.5 million from 20.3 million, but still a very large number.

 

     Meanwhile, a UCLA economist says it will take until early 2023 to restore the U.S. economy and will need “all the king's horses and all the king's men.” The U.S. economy faces a rough and gradual comeback from its massive pandemic-induced decline, according to UCLA Anderson's latest economic outlook.

 

More upbeat economic forecast for the EU. "We are probably past the lowest point" of the economic crisis caused by the coronavirus pandemic, ECB President Christine Lagarde said in a webinar overnight, boosting markets across Europe. She still warned of the possibility of "a severe second wave" and cautioned that some industries like airlines, hospitality and entertainment will come out of the "recovery process in a different shape." To cope with the recession, the ECB in June extended its Pandemic Emergency Purchase Program (PEPP) until mid-2021 and increased it by €600 billion to €1.35 trillion.

 

Regulators ease bank rules; Fed releases stress test results. The Federal Deposit Insurance Commission and Office of the Comptroller of the Currency said Thursday they are planning to loosen some of the restrictions that were put in place via the Volcker rule, shifting to allow banks to make large investments into venture capital and related funds. The rule shift will allow banks to avoid putting cash aside for derivative trades between of the same firm. The move, analysts say, could possibly open up billions of dollars in capital for such actions.

 

     Meanwhile, the Fed voted to require large banks to suspend share repurchases and cap dividend payments in the third quarter. The four-to-one vote saw only Fed Governor Lael Brainard vote not. The Fed will now move forward on a quarter-by-quarter basis.

 

     The Fed also released their so-called “stress tests” on banks, analyzing bank capital under three scenarios amid the Covid-19 crisis in terms of the economic situation. The “traditional” stress test showed all large banks remain well capitalized, but under the very worst of the Covid-19 scenarios, “many” of those banks would be operating within their capital buffers, while one-quarter would be near their minimum capital standards. “Past experience shows that banks operating close to their regulatory minimums are much less likely to meet the needs of creditworthy borrowers, and the resulting tightening of credit conditions could impair the recovery,” Brainard said.

 

Market perspectives:

 

     • Crude oil futures are firmer, having given back some of their initial rise in Asian action. U.S. crude is trading around $38.85 while Brent crude is trading around $41.40 per barrel. Oil headed for a weekly decline — only the second since April — as a surge in U.S. coronavirus cases clouded the demand outlook. Tempering the negative outlook were huge cuts to Russia’s seaborne crude exports.

     • U.S. meat crisis that saw plants shutter after thousands of workers fell ill with coronavirus has reduced the country’s frozen stockpiles of animal protein. Red-meat inventories last month hit the lowest since 2014, driven by a drop in pork supplies in cold storage, according to USDA data published Monday.

        cold storage

 

     • Outlook for wheat harvests in European Union’s top shippers is growing slimmer, shrinking export prospects for the season that kicks off next month.
 

       Wheat in Europe

 


POLICY FOCUS


 

Senators again ask EPA to reject retroactive waivers. A bipartisan group of 16 senators led by Sens. Amy Klobuchar (D-Minn.) and Joni Ernst (R-Iowa) asked EPA (link) to deny 52 retroactive biofuel usage waivers requested by refiners. “These petitions should not even be entertained because they are inconsistent with the Tenth Circuit decision, Congressional intent, the EPA’s own guidance, and —most importantly — the interests of farmers and rural communities who rely on the biofuel industry,” the letter noted.

 

     Retroactive waivers “would only worsen the unprecedented economic challenges facing the biofuels industry and the rural communities that it supports,” the letter added.

 

     The letter also urged EPA to explain exemptions for refineries owned by Chevron Corp. and Exxon Mobil Corp.

 

     Background: Refineries have filed at least 52 applications with EPA seeking retroactive biofuel-blending waivers going back to 2011, after a federal court ruled a continuous string of exemptions is required to obtain relief. Refiners seek to shore up their eligibility because without waivers they can spend hundreds of millions of dollars annually complying with the Renewable Fuel Standard.

 

Germany mulls options against U.S. over Nord Stream threat. Germany is preparing to strike back against the U.S. if President Donald Trump follows through on his threat to kill off the Nord Stream 2 gas pipeline with additional sanctions. Chancellor Angela Merkel’s administration is considering pressing for coordinated European Union action, according to two German officials familiar with the discussions cited in a Bloomberg account (link). An economy ministry paper seen by Bloomberg News said such measures by the U.S. would be new and could hit significantly more German and European companies and banks as well as state agencies.
 

Update on China:

  • U.S. Senate passes China sanctions bill over Hong Kong. The bipartisan legislation targets officials and banks that undermine the city’s autonomy. Because it sets mandatory sanctions, the legislation has drawn objections from Trump administration officials concerned it could impact their ability to conduct diplomacy with China and give Congress too much power over foreign relations. The measure, sponsored by Sens. Chris Van Hollen (D-Md.) and Pat Toomey (R-Pa.), was approved by unanimous consent. Companion legislation has been introduced in the House and it would have to pass that chamber before it reaches President Trump’s desk.
     
  • Australia's counter-espionage agency ASIO is conducting a sweeping investigation into allegations Chinese government agents have infiltrated the office of an Australian NSW Labor politician to influence Australian politics. Australian media report that if sufficient evidence was found, the inquiry could ultimately result in an Australian and world first: a prosecution for foreign interference offenses arising from an alleged covert Chinese Communist Party plot to influence a serving politician. The target of the raid, New South Wales state legislator Shaoquett Moselmane, is known for his pro-Beijing stances and has praised Chinese President Xi Jinping’s “unswerving” leadership in the face of the coronavirus pandemic. The raid comes after the Australian government recently passed foreign interference legislation following the revelation that Chinese businessmen had funded local candidates in Australia.
     
  • Canadian Prime Minister Justin Trudeau rejects Meng-for-Michaels proposal. In the case of Huawei executive Meng Wanzhou’s possible extradition to the U.S. and the linked-in imprisonment of Michaels Spavor and Kovrig on bogus spying charges, the prime minister unleashed his position Thursday in clear language and a firm response. If the proposed swap went ahead, Trudeau warned, China would be emboldened to become unscrupulous hostage-takers, seizing foreigners for trade when one of their own gets in trouble overseas. Canadian exporters, including the ag sector, are bracing for China's reaction.
     
  • The White House is weighing options for beating Huawei on 5G. The Wall Street Journal reports that the Trump administration is reportedly prodding U.S. companies to consider buying Ericsson or Nokia, the other leaders in 5G wireless technology, or giving the European companies tax breaks and other financial benefits. Major telecommunications companies are shifting away from Huawei as the coronavirus pandemic deepens global suspicion of companies backed by the Chinese Communist Party.

Update on next aid package:

  • Pelosi says Mnuchin talks aren't focused on aid. House Speaker Nancy Pelosi (D-Calif.) said her discussions with Treasury Secretary Steven Mnuchin are “more general” these days and aren’t focusing on more stimulus. Still, Mnuchin is getting the message from other quarters, such as the Federal Reserve, that Americans needs more relief, she said in a virtual interview with the Washington Post. Link for details.
     
  • There's a battle brewing over what the next ag sector aid should total and look like in the coming aid package. The Dem-pushed House bill has no language to replenish USDA's Commodity Credit Corporation (CCC); nothing to boost CCC's borrowing authority. While USDA Sec. says Covid aid is needed for 2020 crops, the House measure included nothing on that topic, with no aid beyond second quarter losses. Some reason this could be Democratic campaign strategy to sow disgruntlement in the rural sector to anger many who vote for GOP candidates.

Update on implementation of CARES 1, including CFAP:

  • The Trump administration plans to publicly release details about coronavirus relief loans for small businesses by the end of next week after reversing its position on withholding the data. Company names and other details about PPP loans of $150,000 and more, plus certain details about smaller loans without information identifying the firms, will be posted on the SBA’s website, according to a Treasury Department official.
     
  • More than a billion dollars in coronavirus aid went to dead people. The Government Accountability Office said yesterday that the $1.4 billion mistake arose from bureaucratic errors, including not checking death records. It called on the IRS to develop options for getting the payments returned. Link for details.
     
  • USDA to allow online applications for CFAP. Applications for the Coronavirus Food Assistance Program (CFAP) will now be accepted by USDA’s Farm Service Agency (FSA) via an online portal and the agency said would now be “leveraging commercial document storage and e-signature solutions” to allow for the completion of applications from home. Through the online portal, producers can use eAuthentication — secure USDA login credentials — to certify eligible commodities online, digitally sign applications and submit directly to the local USDA Service Center. Currently, the digital application is only available to sole proprietors or single-member business entities, FSA noted. The agency also said that offices can “work with producers to complete and securely transmit digitally signed applications through two commercially available tools: Box and OneSpan.” As of June 22, USDA has paid out $4.006 billion in CFAP payments to 252,489 producers.

Food supply/industry update:

  • German slaughterhouses in focus after virus outbreak has been hit with the largest outbreak since Germany reopened from the pandemic. A plant run by the Tönnies company has some 1,500 are symptomatic, and 7,000 are in quarantine. The entire Gütersloh district of northwestern Germany, where the plant is located, was forced back into lockdown.

    China suspended imports from the pork plant in Germany on June 18 and a Tyson Foods chicken processor in the U.S. on Sunday, after Covid-19 outbreaks among workers. A beef unit under Brazil’s Agra and a British pork plant owned by Pilgrim’s Pride on Monday voluntarily halted exports to China after workers tested positive for the virus, according to the Chinese customs authority.

    China country’s customs officials are asking global food exporters to sign a document that assures they’re meeting Covid-19 safety requirements to prevent transmission of the virus. Some food producers — including Tyson — are signing the requested affidavits, Bloomberg reported. China’s request for the exporters’ affidavit isn’t about trade, according to people cited in the Bloomberg account. Instead, it was meant to ease consumer concerns over the safety of imported products such as meat. “But that still raises the question of over why the link between the virus and food was drawn in the first place,” the item notes.

    Experts don’t see food as a vehicle for virus transmission. “There is no evidence that people can contract Covid-19 from food or from food packaging,” USDA Secretary Sonny Perdue and Food and Drug Administration Commissioner Stephen Hahn said in a statement on Wednesday. “The U.S. food safety system, overseen by our agencies, is the global leader in ensuring the safety of our food products, including product for export.” A Chinese customs official last week noted that the risk of the coronavirus spreading via the food trade was “extremely low.” A public health bulletin circulated this week by state media did not discourage eating imported food, but rather emphasized proper hygiene and handling.

    Australia’s government issued a statement dated Tuesday that cited the World Health Organization, saying “transmission through food is highly unlikely.”

    What about livestock? Scientists argue that focusing on mass testing of imported meats for surface contamination is missing a more important area of the food chain that needs to be monitored: livestock. “What needs to be looked at is the livestock before they are harvested — is there any evidence of the virus in the livestock?” said Gregory Gray, an infectious disease epidemiologist and professor at Duke University, who works on affiliated campuses in the US, Singapore and China. The comments are in today's South China Morning Post.

     
  • Future of fast food has arrived ahead of schedule. Chains like McDonald’s and Starbucks are quickly learning how to give customers what they want in our socially distant times. Those lessons will outlast the pandemic. Link to WSJ article.

    fast food
    Future of food
  • USDA again raises grocery store price forecast. Covid-19 has altered what is usually a fairly static set of forecasts by USDA relative to food prices, with USDA's Economic Research Service (ERS) now forecasting that grocery store (food at home) prices will rise 2.5% to 3.5% in 2020, up from a forecast in May of 2% to 3% and 0.5% to 1.5% they forecast in April. The upward adjustment came via ERS increasing their price forecasts for 14 of the 22 grocery foods this month compared with their month-ago outlook.

    Meats, poultry, and fish prices increased 4.2% in May vs April and are now up 9.8% from year ago. “Processors have implemented health protocols for dealing with Covid-19 that might have hindered their ability to process cattle and hogs, although they have recouped much of the lost slaughter capacity,” ERS said. They now see those prices rising 4% to 5% in 2020.

    Fruits and vegetable prices are now expected to be steady to up 1% (-0.5% to +0.5% prior) while dairy products are now expected to rise 3% to 4% (2.5% to 3.5% prior).

    Despite the changes in grocery store prices, USDA held their overall food price inflation forecast at 2% to 3% for 2020 with restaurant prices also held at an increase of 1.5% to 2.5%.

    The Covid-19 situation has dramatically altered grocery store prices after four straight years of food prices either declining or rising less than 1% and the mid-point of the forecast increase would mark the biggest rise in prices since they increased 4.8% in 2011.

Update on reopening America... and around the world:

  • Texas puts reopening on hold amid new Covid-19 outbreak. Greg Abbott, Texas governor, said: “The last thing we want to do as a state is go backwards and close down businesses. This temporary pause will help our state corral the spread until we can safely enter the next phase of opening our state for business.” The state’s health department reported almost 6,000 people had tested positive for the virus, taking the cumulative case count to 131,917. The 5,996 new cases was the highest in the nation on Thursday, according to the Coronavirus Tracking Project, which reported the U.S. set another one-day record increase of nearly 42,000 infections. That was up from 38,700 on Wednesday, the previous one-day high. The number of Texans in hospital with the virus also rose to a record high of 4,739, an increase of 350 on the previous day and a more than 470% jump on the total at the start of April.
     
  • In California, Gov. Gavin Newsom warned that a potential influx of coronavirus-related hospitalizations could affect reopening plans.

Coronavirus update:

  • Summary: Covid-19 cases are now at 9,628,658 with 489,731 deaths, according to data from the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU). The U.S. case count is at 2,322,312 with 124,415 deaths.

    The U.S. set a record for new coronavirus cases. U.S. virus cases hit a record, with more than 39,000 new infections yesterday, surpassing the April 24 peak. The spike in cases seems to be driven by a rise in cases in the country’s south and west, including some states that were the first to reopen.

    On the same day that U.S. authorities registered 31,153 new cases, the entire European Union only registered 4,141. Included in that number is Italy, a former pandemic epicenter, which recorded only 226 new cases.

    US and EU cases

    President Trump has continued to play down the severity of epidemic, citing the relatively low death count — 776 per day according to the latest three-day moving average. “We have cases because you test. Deaths are down,” Trump said in Wisconsin on Thursday. “It came from China, and it hit 188 countries — not good, not good,” he later added.

    bad sign of cases

     
  • The Centers for Disease Control and Prevention estimates that only about 1 in every 10 Covid-19 cases in the U.S. has been identified, Director Robert Redfield said during a briefing with reporters Thursday. He also noted that most Americans are still susceptible to the virus. “This outbreak is not over. This pandemic is not over,” Dr. Redfield said. “Greater than 90% of the American public hasn’t experienced this virus yet.” The CDC’s estimate that more than 20 million Americans may have had the coronavirus reflects the large number of individuals who either exhibit mild or no symptoms or previously couldn’t get tested. The estimates are based on national serological surveys that looked at samples collected via blood banks or for non-Covid-19-associated tests, Dr. Redfield of the CDC said. The sample collection, which determines the presence of antibodies indicating a person had the disease, is still ongoing.
     
  • Vice President Mike Pence will host a briefing this afternoon with members of the coronavirus task force at the Health and Human Services Department. It will be the first such briefing in nearly two months.
     
  • Space agencies unveil site showing lockdown changes to Earth. Using data from 17 satellites, three space agencies have created a website that serves as a global dashboard for temporary changes observed from orbit. The European Space Agency, Japan Aerospace Exploration Agency and NASA Thursday unveiled the Earth Observing Dashboard at eodashboard.org. The data, which will be expanded in the future, monitors 30 environmental indicators, 17 economic signals and three agricultural indices. Link for more details via Associated Press report.

OTHER ITEMS OF NOTE


 

  • House Democrats passed a police reform bill aimed at ending police misconduct and racial bias, but few Republicans supported the measure, and it faces little chance of consideration in the Senate. “This moment in our great nation’s history demands that we work together across the aisle to fashion legislation that works, legislation that makes a real and lasting difference,” said Rep. Jim Jordan, the top Republican on the House Oversight and Government Reform Committee. “Unfortunately, Democrats haven’t done that. They show no signs of wanting to do that.”
     
  • Trump administration asks Supreme Court to invalidate ObamaCare/Affordable Care Act. In a late-night brief supporting a challenge brought by GOP governors, the Trump administration asked the court to entirely invalidate the Affordable Care Act (ACA). The brief argues that because the law's requirement to have health insurance was upheld in court as a tax in 2012 — and Congress has since repealed the financial penalty for violating that requirement in 2017 — it is no longer a tax and therefore no longer constitutional. "The entire ACA thus must fall with the individual mandate, though the scope of relief entered in this case should be limited to provisions shown to injure the plaintiffs," Solicitor General Noel Francisco wrote in the filing. House Speaker Nancy Pelosi (D-Calif.) called the request "an act of unfathomable cruelty" during the pandemic. Supreme Court consideration of the ACA won’t happen until the fall at the earliest, with any decision likely coming after Election Day.
     
  • Today, for the first time, the House of Representatives is expected to approve statehood for Washington, D.C. The bill is likely to pass on party lines, with Democrats voting in favor and Republicans against it. Afterward, it is almost certain to die in the Republican-controlled Senate. However, the vote is still significant as it signals the Democratic Party’s growing focus on the issue. It is possible if not likely that the District of Columbia will become a state (and perhaps Puerto Rico as well) whenever Democrats next control the House, the Senate and the White House... which could be as soon as next year. With about 705,000 residents, D.C. is larger than two states — Vermont and Wyoming. About 45% of D.C. residents are black, a higher share than in any state. Alaska and Hawaii are the most recent states to join, in 1959, which means the U.S. is in its longest stretch without adding a new state. The Washington Post points out that, “Because the Constitution calls for a federal district separate from any state, the House bill would designate a small downtown area — mostly government buildings — as the new national capital.”
     
  • House will vote next week on HR 2, a more than $1.5 trillion infrastructure plan that would include spending on clean energy, roads, bridges, transit systems, schools, housing and rural broadband and the postal service. The House Rules Committee is scheduled to meet Monday to set the terms for floor consideration of the bill.
     
  • Rule ends chance of House vote on WTO this year. House leaders shut the door Thursday on a vote by members this Congress on a resolution of disapproval of U.S. membership in the World Trade Organization. The rule means the next opportunity for such a vote won't occur until 2025.
     
  • Jack Abramoff, the disgraced lobbyist, is set to return to jail for new violations of the Lobbying Disclosure Act — this time, for work done for marijuana and cryptocurrency clients. Link to NYT article.
     
  • Cotton AWP moves higher. The Adjusted World Price (AWP) for cotton increased to 49.60 cents per pound, effective today, up from 48.87 cents per pound the prior week. This still leaves an LDP opportunity of 2.4 cents per pound. USDA also announced it will establish Special Import Quota #10 July 2 for 34,195 bales of upland cotton, applying to supplies purchased not later than September 29 and entered into the U.S. not later than Dec. 28.
     
  • Amy Walter of Cook Political Report: “Trump is in a deep hole. Can he dig himself out before November? “Every single poll that has come out in these last two weeks has painted a dire picture for President Donald Trump’s chances at re-election. His overall job approval rating sits somewhere around 41 percent. He’s down by an average of 9-10 points to Joe Biden. But we also know that it is only June. And, for those of us who covered the 2016 campaign, we feel as if we’ve been here before,” Walter writes.

 

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