New York Times reports on Trump's tax returns
In Today’s Updates
* Dow futures surge more than 350 points following a 4-week losing streak
* Nikkei 500 runs to record high as Japanese economy shows improvement
* Chinese industrial profit continues to improve
* Americans starting new businesses at fastest rate in more than a decade
* Fed Chairman Powell's bottom line in congressional testimony last week
* 'Negative real interest rates are highly stimulative': Dr. Vince Malanga
* Inflation is here if you know where to look for it
* Prospects for higher bond yields stay muted
* China’s central bank to keep monetary policy more flexible and targeted
* Yuan closing out strongest quarter against dollar in more than a decade
* Ag market nuggets from CFTC Commitments of Traders report
* Cattle on Feed Report: Placements much bigger than expected
* Shipping capacity crunch could boost prices of many holiday items
* Huge deficits forecast for Gulf nations
* Tesla CEO Elon Musk on the future of energy
* Pelosi says a last-minute coronavirus aid deal remains on the table
* China halts some seafood imports
* U.S. cracks down on top Chinese chip maker
* China wants to tap its own market
U.S. food & beverage industry update:
* Grocery stores and food companies preparing for possible surge in sales
* USDA raises overall 2020 food price inflation outlook
Update on re-opening America... and around the world:
* Florida lifting all state restrictions for restaurants and other businesses
* Some big states continue to loosen dining restrictions
* India second country after U.S. to report more than six million infections
* Those dying from Covid-19 least likely to own life insurance
Politics & Elections:
* Trump nominated Amy Coney Barrett to Supreme Court
* What happens if Trump and Biden end up with same number of electoral votes
* Durbin: Hillary Clinton is 'flat-out wrong' in saying Biden 'should not concede'
* New York Times obtained tax-return data for President Trump
Other Items of Note:
* Deadline to carry out the 2020 census restored to Oct. 31
* Armenia and Azerbaijan clashed
Equities today: Dow futures surged more than 350 points following a 4-week losing streak. Underpinning some of the investor optimism are renewed hope over a new stimulus deal making its way out of Washington D.C. in the next few weeks and a wave of M&A talk. Major averages are on track to post steep losses for September, a historically weak month for stocks. The Dow and the S&P 500 have fallen 4.4% and 5.8%, respectively, while the Nasdaq has dropped 7.3%. In Asia, China's Shanghai Composite fell 0.1%, Hong Kong's Hang Seng rose 1%, while Japan's Nikkei rose 1.3% at the close. Germany's DAX rose 2.7%, Britain's FTSE 100 rose 1.5%, and the Euro Stoxx 50 rose 2.2%.
Nikkei 500 runs to record high as Japanese economy shows improvement. Japan's Cabinet Office reports that the early preliminary reading for the Leading Economic Index for September was 86.9 to match consensus expectations. The broad measure of economic activity rose from a mark of 83.8 in August and 78.4 in July. The positive economic news helped push the Nikkei 500 to a record today in Tokyo as it finally topped the closing high from December of 1989. The broad-based Nikkei 500 is considered a better measure of overall economic activity in Japan than the oft-quoted Nikkei 225.
U.S. equities Friday: The Dow rose 358.52 points, 1.34%, at 27,173.96. The Nasdaq gained 241.30 points, 2.26%, at 10,913.56. The S&P 500 advanced 51.87 points 1.60%, at 3,298.46.x
For the week, the Dow lost 1.8% and the S&P 500 fell 0.6%.
On tap today:
• European Central Bank President Christine Lagarde appears via videoconference before the European Parliament's Committee on Economic and Monetary Affairs at 9:45 a.m. ET.
• Dallas Fed's manufacturing survey for September is expected to hold steady at eight. (10:30 a.m. ET)
• USDA Grain Export Inspections, 11 a.m. ET
• Cleveland Fed President Loretta Mester speaks at a virtual economic equality webinar at 2 p.m. ET.
• USDA Crop Progress report, 4 p.m. ET.
• Japan releases Tokyo inflation figures for September at 7:30 p.m. ET and provisional trade figures for September at 7:50 p.m. ET.
Ag Watch List:
Chinese industrial profit continues to improve. Profits at Chinese industrial companies rose for a fourth straight month as China continues to show momentum with industrial production after the Covid-19 slowdown. The National Bureau of Statistics reported industrial profits were up 19% in August after a 20% pop in July. Along with higher production, lower costs and fees are helping to pad the bottom line in China for industrial producers. Despite the recent turnaround, industrial profit was still down 4.4% from last year. "Sustained and stable growth of corporate profits continues to be under pressure in the face of a complex and changing domestic and international environment," warned government economist Zhu Hong.
Americans are starting new businesses at the fastest rate in more than a decade, seizing on pent-up demand and new opportunities after the pandemic shut down and reshaped the economy. Applications for the employer identification numbers that entrepreneurs need to start a business have passed 3.2 million so far this year, compared with 2.7 million at the same point in 2019, according to the U.S. Census Bureau. That group includes gig-economy workers and other independent contractors who may have struck out on their own after being laid off. Even excluding those applicants, new filings among a subset of business owners who tend to employ other workers reached 1.1 million through mid-September, the most since 2007. Link to details via Wall Street Journal.
Fed Chairman Powell's bottom line in congressional testimony last week: "Both employment and overall economic activity, however, remain well below their pre-pandemic levels, and the path ahead continues to be highly uncertain. The path forward will depend on keeping the virus under control, and on policy actions taken at all levels of government.” The Fed Chair worries that business bankruptcies and looming homeowner evictions could mushroom, doing long-term harm to the economy.
“Negative real interest rates are highly stimulative, and they will be once structural impediments are lifted,” says Dr. Vince Malanga. president of LaSalle Economics, Inc. A successful vaccine remains key to unleashing pent up demand and boosting economic activity. But one must first be approved, then distributed and then accepted by the public. This will require a unified voice from the political and scientific community. But in the current politically charged atmosphere, good luck with that.”
Inflation is here if you know where to look for it. The WSJ notes (link) that if it feels like the price of everything you buy has been soaring, that’s because it has — even as central bankers everywhere worry about the danger of deflation. “The gap between everyday experience and the yearly inflation rate of 1.3% in August is massive. The price of the stuff we’re buying is rising much faster, while the stuff we’re no longer buying has been falling, but still counts for the figures. Economists will be relieved that the laws of supply and demand are still working, at a time when so much in the discipline is in doubt. But for investors it hangs a veil over the outlook for perhaps the single most important issue for the markets: whether we’re headed for a future of inflation, deflation or a continuation of the past decade’s lackluster price rises.”
• Outside markets: Dollar eased from two-month highs on a corrective pullback, but looks set for more gains, while gold and silver remain under pressure. Nymex crude oil prices are weaker and trading around $40.00. Meantime, the yield on the U.S. Treasury 10-year note is trading around 0.67% today.
• Crude oil prices are edging up ahead of the U.S. trading start even as prices had been weaker on concerns over Covid impacts on crude demand. U.S. crude was trading around $40.45 per barrel and Brent around $42.55 per barrel. Crude oil was under pressure in Asian trading with U.S. trading around $40 per barrel and Brent around $41.70 per barrel.
• Prospects for higher bond yields stay muted. Bond strategists' median forecast predicts the 10-year yield will climb 10 basis points from its current 0.65% level, with the highest projections just above 1%. That is assuming recovery of economic growth continues as a result of the Fed's unprecedented accommodative stance. Some may also be expecting the U.S. election to pave the way for more fiscal stimulus, with a Democratic sweep scenario seen boosting yields through higher government spending.
• China’s central bank at its regular monetary policy meeting pledged to keep its monetary policy more flexible and targeted, including giving more credit to businesses.
• China's yuan is closing out its strongest quarter against the dollar in more than a decade, boosted by optimism over China’s economic outlook and by the country’s comparatively high interest rates.
• Ag market nuggets from CFTC Commitments of Traders report for the week ended Sept. 22 (Source: Bloomberg):
— Funds boost net-bullish soybean bets to eight-year high
— Net bullish soybean-meal bets rise to two-year high
— Net bullish soybean-oil bets rise to eight-month high
— Net bullish corn bets advance to 14-month high
— Net bullish Chicago wheat bets cut to four-week low
— Hedge funds boost net bullish hog bets to 15-month high
— Net bullish cattle bets cut to five-week low
— Net bullish feeder-cattle bets cut to 14-week low
— Net bullish raw-sugar bets boosted to three-week high
— Net bullish New York cocoa bets cut to three-week low
— Net bullish cotton bets climb to three-week high
— Net bullish orange-juice bets cut to 21-week low
• Cattle on Feed Report: Placements much bigger than expected. USDA estimates there were 11.394 million head of cattle in large feedlots (1,000-plus head) as of Sept. 1, which was just 50,000 head more than the average pre-report estimate implied and up 3.8% from year-ago. The number of cattle placed into feedlots last month increased 9.2% from last year, far exceeding the average pre-report estimate. August marketings dropped 3.1% from year-ago levels, though that was slightly better than expected. Pro Farmer analysts say the much-bigger-than-expected placements number is likely to weigh on deferred live cattle futures on Monday. But once the data is factored into the market, attention should return to the cash and product markets to see if recent strength is sustained.
• Shipping capacity crunch could boost prices of many holiday items. Ocean freight rates from China to U.S. ports have soared since spring; ditto for truck and rail rates on routes originating from Los Angeles. Merchandise from China is competing for space on ships
with heavy orders of medical gear like masks. California warehouses that filled to the brim while much of the economy was on pandemic lockdown are still being emptied of goods.
• Huge deficits forecast for Gulf nations. Gulf economies in the Middle East could be set up for trouble due to their overreliance on oil. Factoring in subdued crude oil prices, S&P Global Ratings estimated that Gulf Cooperation Council central government deficits will soar to $490B cumulatively between 2020 and 2023. Separately, the IMF said that Saudi Arabia needs to see oil prices at $76.10 to achieve fiscal breakeven in the current year and is at risk of seeing a huge budget deficit of as much as 11% of GDP.
• On the future of energy: Tesla CEO Elon Musk sat down with NYT Opinion's Kara Swisher for the latest episode of her new podcast, Sway, out this morning. He said that the end of vehicles relying on fossil fuels is near, but also expressed sympathy for the industry’s workers: “For a lot of the people in the oil and gas industry, especially if they’re on the older side, they kind of bought their companies and did their work before it was clear that this was a serious issue.” Link to podcast.
— Pelosi said Sunday a last-minute coronavirus aid deal remains on the table as House Democrats try to forge ahead on a “smaller” aid package costing about $2.4 trillion. House Speaker Nancy Pelosi (D-Calif.) said there’s a chance she and Treasury Secretary Steven Mnuchin can still reach a deal on a coronavirus stimulus package, and that Democrats will unveil a new “proffer” shortly. “I trust Secretary Mnuchin to represent something that can reach a solution, and I believe we come to an agreement,” Pelosi said yesterday on CNN’s State of the Union.
Pelosi added that if a deal isn’t struck soon, Democrats might vote on a House-only version of a coronavirus relief package, including funds for airlines and restaurants, and more Paycheck Protection Program funding. “The public is going to have to see why $2.2 (trillion), or now $2.4 (trillion), perhaps, is necessary,” she said, adding that President Donald Trump’s “denial of the virus, and resistance to do anything to crush it, has made matters worse.”
— Update on China:
- China halts some seafood imports. Chinese authorities said they had suspended some seafood imports from two Russian vessels and a Brazilian company after Covid-19 was found in samples. The General Administration of Customs will from Saturday suspend imports from two Russian vessels for four weeks after outer packaging and product samples from the ships tested positive. Brazil’s Monteiro Industrial de Pescados Ltda will be subject to a similar ban for a week starting Saturday, after a sample of inner packaging from the firm’s frozen ribbon fish products tested positive for the virus. They add to a long list of restrictions on imports by China, which has been investigating imported meat, seafood, packaging and containers as a potential virus source.
- U.S. cracks down on top Chinese chip maker. The Commerce Department is reported to have instructed U.S. chip companies in a broad letter to the industry that they must obtain licenses before exporting certain technology to Semiconductor Manufacturing International, which is China's largest manufacturer of semiconductors. The letter warns that exports to Semiconductor Manufacturing or its subsidiaries risk being used for Chinese military activities. China’s biggest chipmaker insisted that it has no links to the armed forces.
- China wants to tap its own market. Chinese makers of goods for export are seeking to turn inward and sell domestically, a pivot considered key to making the world’s second-largest economy more self-sufficient. In recent weeks, Chinese President Xi Jinping has called for the country to embrace what he calls domestic circulation — a policy designed to bolster local supply chains and encourage domestic consumption to make China more resilient to future commercial or geopolitical disruption, such as the coronavirus pandemic and the U.S./China trade war. Link to WSJ article.
- U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.
— Food and beverage industry update:
- Grocery stores and food companies are preparing for a possible surge in sales amid a new rise in Covid-19 cases and the impending holiday rush. Supermarkets are stockpiling groceries and storing them early. Food companies are accelerating production of their most popular items, and leaders across the industry are saying they won’t be caught unprepared in the face of another pandemic surge. These changes, a reaction to the sudden and massive shortages grocers experienced in the spring, amount to a shift from the just-in-time inventory management practices that have guided the fast-moving retail business for decades. Now, food sellers are stockpiling months, rather than weeks, worth of staples such as pasta sauce and paper products to better prepare for this winter, the WSJ reports (link).
- USDA raises overall 2020 food price inflation outlook as Covid impacts keeping costs higher. Overall U.S. food price inflation is now forecast rise more than expected in 2020 as price increases seen as a result of the Covid-19 pandemic have been slow to decline.
U.S. food price inflation in 2020 is now seen at 2.5% to 3.5%, up from 2% to 3% USDA forecast one month ago, according to USDA’s Economic Research Service (ERS). Food away from home (restaurant) prices are now seen rising from 2% to 3%, up from a level of 1.5% to 2.5% that they saw in August. “Prices have been relatively slow to retreat from the highs reached as a result of the pandemic, so some forecasts have been revised upward this month,” ERS said.
Grocery story price forecast was unchanged from the prior 2.5% to 3.5% level, despite food price forecasts for individual commodities being adjusted upward. So far in 2020, USDA said that grocery store prices have risen 3.3% while restaurant prices are up 2.6% compared to the same period in 2019. The overall food price inflation has averaged 3% so far in 2020 compared with 2019.
Of the food categories tracked by ERS, beef prices are up 10.5% while fresh fruit prices have fallen 1.4%. ERS increased their forecasts for 8 of the 22 CPI categories for 2020 while the outlook for egg prices has been revised down from prior forecast levels. “Meat prices have continued to decline, but the pace at which they are declining is not fast enough to achieve average 2020 prices below pre-Covid-19 levels,” ERS said. They pointed to beef and veal prices decreasing 8.2% from June to July 2020 and another 4.6% from July to August, but as noted, so far their year they are up 10.5% from 2019 levels.
Pork prices are down 1.1% in August compared with July, but remain 6.1% above year-ago, wile poultry prices are still 5.1% above year ago despite easing 0.2% in August compared with July. “Slaughterhouses have recouped much of the lost slaughter capacity that occurred as a result of the pandemic, and prices are expected to continue to decrease through 2020,” ERS said. “However, they will likely decrease at a slower rate than they did this spring.”
As for egg prices, USDA now expects those to rise 6% to 7% in 2020, down from their month-ago outlook for an increase of 7% to 8%. “Egg prices reached a high in April 2020 but have been trending downward in the months since,” USDA observed. “These declines are influenced at least in part by decreased demand from foodservice.”
Outlook for 2021: USDA kept its forecasts for food prices in 2021 steady this month compared with their release in August, forecasting overall food prices to rise 2% to 3% with increases of 1.5% to 2.5% for restaurant prices and 1% to 2% for grocery store prices. USDA made no adjustment to price forecasts within the various commodities they track relative to food prices.
Bottom line: USDA’s outlook for food prices overall to increase from 2.5% to 3.5% in 2020 puts the increase further above the 20-year average of 2.3%, while restaurant prices increasing from 2% to 3% would still be under the 20-year average of 2.8%. Grocery prices have risen an average of 2% over the last 20 years, which means USDA’s outlook for a 2.5% to 3.5% rise remains above that historical average. Grocery store price inflation has been held down in part from those prices declining in 2016 and 2017 and then posting increases of less than 1% in both 2018 and 2019.
— Update on reopening America... and around the world:
- Florida is lifting all state restrictions for restaurants and other businesses, Gov. Ron DeSantis said. DeSantis said the order will allow workers of all industries in the state an opportunity to continue pursuing their careers during the coronavirus pandemic. He included provisions that will limit the number of restrictions local governments can place on businesses. “We’re also saying in the state of Florida everybody has a right to work,” DeSantis added. “[Local governments] can do reasonable regulations, but they can’t just say no.” The order removes state-level restrictions that forced restaurants and bars to limit capacity seating to 75% and establishes, as a rule, that no local government can make a law restricting capacity seating below 50%.
- Some big states continue to loosen dining restrictions, even as the number of newly reported U.S. coronavirus cases continues to rise. New York City restaurants will be allowed to reopen indoor dining with 25% occupancy on Sept. 30, restaurants in San Francisco could open their doors to welcome diners indoors with a 25% capacity limit as early as this week, and Florida is edging closer to full-capacity indoor dining. In Europe, the resumption of indoor dining has led to mixed results. Experts say it has contributed to a spike in cases in Madrid, but cities in Italy have avoided similar surges.
— Coronavirus update:
- Summary: Global cases of Covid-19 are now at 33,137,748 with deaths approaching 1 million at 998,372, according to data compiled by the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU). The U.S. case count is at 7,116,456 with 204,762 deaths.
Link to Covid Case Tracker
Link to Our World in Data
- India became the second country after the U.S. to have reported more than six million infections.
- Covid-19 deaths are leading to fewer life-insurance payouts than expected, reflecting the pandemic's heavy toll on older Americans and minorities, who are among the least likely to take out large policies.
POLITICS & ELECTIONS
— 2020 Presidential Election Interactive Map
— The Green Papers
— Real Clear Politics
— 2020 Political Atlas
— 2020 Demographic Swingometer
— Presidential debates: Scheduled to occur Sept. 29, Oct. 15 and Oct. 22.
— VP debate: Scheduled for Oct. 7.
— Days until election
- President Trump nominated federal appeals court Judge Amy Coney Barrett of Indiana to succeed Justice Ruth Bader Ginsburg. Barrett spent 16 years as a legal academic before President Donald Trump appointed her to a federal appeals court in 2017. Barrett, born in 1972, was a law professor at the University of Notre Dame in Indiana, where she went to law school. She is the first Indiana woman to sit on the 7th Circuit, which is based in Chicago and covers Indiana, Illinois and Wisconsin. And if confirmed, she would be only the fifth female Supreme Court justice and would join two female justices currently on the high court. Barrett was born and raised in Louisiana. She and her husband, Jesse, a former assistant U.S. attorney in Indiana, have seven children, including two children adopted from Haiti and one special needs child. The new justice will push the court further right, extending the majority of conservatives to 6-3, and possibly entrenching a right-leaning court for decades.
President Trump has indicated that he wants another judge installed before the Nov. 3 election in case a dispute over the results lands before the court, telling reporters at the White House: “I think this will end up in the Supreme Court. And I think it’s very important that we have nine justices.”
- Timeline for Barrett: Because Barrett has already been vetted, her nomination can move quickly. Sen. Lindsey Graham (R-S.C.), who leads the Senate Judiciary Committee, the panel tasked with vetting judicial nominees, said four days of confirmation hearings will begin Oct. 12 and that the committee should clear Barrett's nomination by Oct. 26. That would leave the full Republican-led Senate with roughly a week to confirm Barrett in the final days of the presidential campaign. Election Day is Nov. 3. “There’s plenty of time,” Sen. John Kennedy (R-La.), another member of the Judiciary Committee, said. The first day of the hearings will feature opening statements from members of the panel and Barrett. After that, senators will be able question Barrett about her stance and beliefs on a host of issues that could come before the high court. Then, testimony will be provided by legal experts and those who know Barrett. Graham, speaking on Fox News on Saturday, said after the week of hearings, her nomination will be held in the committee for one week — consistent with the committee's procedures — before passing the nomination to the full Senate. Next week, Barrett is scheduled to meet one-on-one with members of the Senate. These meetings will allow senators to both question Barrett on her opinion on issues and give them the chance to get to know the nominee.
Senate Majority Leader Mitch McConnell (R-Ky.) previously noted Justice John Paul Stevens was approved by the Senate 19 days after the White House formally sent his nomination in 1975 and Justice Sandra Day O'Connor's nomination took only 33 days to be approved by the body in 1981. "The Senate has more than sufficient time to process a nomination. History and precedent make that perfectly clear," he said. The average length of a Supreme Court nomination since 1975 has been 70 days from the submission of the nomination to a final Senate vote.
- If Trump and Biden end up with the same number of electoral votes, the Constitution requires the House to decide the result with each state casting one vote for its entire delegation. Republicans control 26 House delegations and Democrats have 22, with two others split evenly between the parties. But that balance could change in the newly elected Congress that begins in January.
Pelosi sent a letter to House Democrats on Sunday urging them “to consider whether the House might be pulled into deciding who is president when determining where to focus resources on winning seats in November... The Constitution says that a candidate must receive a majority of the state delegations to win,” Pelosi wrote. “We must achieve that majority of delegations or keep the Republicans from doing so.”
- Durbin: Hillary Clinton is 'flat-out wrong' in saying Biden 'should not concede under any circumstances.' Senate Minority Whip Dick Durbin (D-Ill.) said Sunday that former Secretary of State Hillary Clinton is “flat-out wrong” in saying Democratic nominee Joe Biden “should not concede under any circumstances.” "I disagree with Hillary Clinton. I respect her. I like her. But I think she's just flat-out wrong. The election itself is going to be announced. The winner will be announced at some point. It'll take a little longer with all the paper ballots that are being cast," Durbin told ABC's This Week on Sunday. Clinton, who lost to Trump in the 2016 election and conceded the morning after the contest, said in August that Biden "should not concede under any circumstances."
- The New York Times has obtained tax-return data for President Trump extending over more than two decades. It shows chronic losses and years of tax avoidance. Odd timing just ahead of Tuesday's first presidential debate? Of course not, it's called politics. Link to NYT exclusive. The report showed that Trump, whose net worth is estimated at $2.5 billion, paid no income taxes in 10 of the previous 15 years. He also only paid $750 in taxes in 2017, the year he became president. Democrats railed against Trump over the revelations. “Donald Trump is a liar, a cheater, and a crooked businessman,” Democratic Sen. Elizabeth Warren (D-Mass.) tweeted. “But he’s also taking advantage of a broken, corrupt, and unequal system that’s built for people like him to do what he did.” Trump’s supporters have mostly dismissed the claims. Charlie Kirk, founder of the pro-Trump political action committee Turning Point USA, tweeted “I’m far more interested in the tax returns of a politician who became a multimillionaire than the tax returns of a billionaire who became a politician.” Trump himself called the report “fake news.”
The Biden campaign quickly issued an ad last night via Twitter hitting Trump for paying little to no federal income taxes: "Teachers paid $7,239 Firefighters paid $5,283 Nurses paid $10,216 Donald Trump paid $750."
OTHER ITEMS OF NOTE
- Deadline to carry out the 2020 census was restored to Oct. 31, after a judge ruled that the Trump administration can’t end the count early. Census officials feared an early end could lead to an inaccurate count.
- Armenia and Azerbaijan clashed over the disputed region of Nagorno-Karabakh. Armenia accused its neighbor of launching air and artillery attacks on civilian areas under its control, while Azerbaijan said it was responding to shelling from the other side. More than 20 people have been killed. Both countries declared martial law and mobilized their citizens. Russia called for an immediate ceasefire.