China has surge in imports fueled in part by rise in imports of U.S. farm products
In Today’s Updates
* December U.S. corn futures testing resistance at $4
* France makes sweeping cuts to crop estimates
* Indonesian president warns country to ready for La Nina weather hazards
* Consultancy cuts grain production and export forecasts for Ukraine
* Solar 'new king' of the power market
* IEA: recovery in energy demand hinges on pandemic
* India’s government to inject $10 billion into economy
* Global pact on taxing tech giants is on hold
* USDA's WHIP+ implementation tests Tester's patience
* China’s imports post biggest surge since before coronavirus pandemic
* China commits to buy 1.7 million tonnes of Malaysian palm oil until 2023
* China’s car market records first quarter of year-over-year sales growth in two years
* China calls on U.S. to halt sales of weapons to Taiwan
* Coal the latest Australia/China dustup?
U.S. food & beverage industry update:
* Do babies need to eat meat?
* Report: Covid-19 a $16 trillion virus
* J&J suspending Phase 3 trials of Covid-19 vaccine
* Britain orders new pandemic lockdowns
* First confirmed U.S. coronavirus re-infection
Politics & Elections:
* Forecasting 2020 U.S. Senate elections using presidential polling data
* Trump claims Covid immunity and offers to kiss crowd at rally
Other Items of Note:
* European foreign ministers to draw up proposals to impose sanctions on Russia
* Steve Quarles joins American Wind Energy Association
Equities today: U.S. equity futures signal a mixed opening — Dow 30 and S&P 500 futures are pointing to a lower open, while Nasdaq futures are up around 0.9%. Most Asian stocks closed slightly higher. The Shanghai Composite Index was flat after trade data showed that Chinese exports rose nearly 10% in September, reflecting a continuing recovery (see details below). European stocks are down between 0.2-0.4%. Uncertainty about a second wave of infections and the extent to which governments may have to renew restrictions to control the spread is weighing on investors’ minds as the third-quarter earnings season kicks off today. Johnson & Johnson's shares slid 1.5% ahead of the New York opening bell after it halted its coronavirus vaccine trials due to a participant becoming unexpectedly sick, prompting fresh speculation about when immunization shots may become widely available.
U.S. equities yesterday: The Dow finished with a gain of 250.62 points, 0.88%, at 28,837.52. The Nasdaq rose 296.32 points, 2.56%, at 11,876.26. The S&P 500 gained 57.09 points, 1.64%, at 3,534.22.
On tap today:
• U.S. consumer prices for September are expected to advance 0.2% from a month earlier and 1.4% from a year earlier. Excluding food and energy, CPI is expected to increase 0.2% from a month earlier and 1.8% from a year earlier. (8:30 a.m. ET)
• International Monetary Fund releases its World Economic Outlook at 8:30 a.m. ET.
• Bank of England Gov. Andrew Bailey speaks on employment and Covid-19 at a Lords Economic Affairs Committee meeting at 10 a.m. ET.
• USDA Grain Inspections report, 11 a.m. ET.
• USDA Crop Progress report, 4 p.m. ET.
• San Francisco Fed President Mary Daly speaks about the Fed and inequality at 8 p.m. ET.
India’s government said it would inject $10 billion into the economy to boost demand during the pandemic. It is to spend an extra $3.4 billion on infrastructure and to provide interest-free loans worth $1.6 billion to states (whose revenues have been battered). Economists say it is not enough; GDP fell by 24% year-on-year in the quarter that ended in June.
New taxes vs. trade war. World governments failed to agree to new rules on taxing the profits of multinational companies, a long-running point of tension between the U.S. and Europe over levies paid by the likes of Apple and Google. What's at stake? The Organization for Economic Cooperation and Development (OECD), the forum for talks, said the new global rules it is developing could add $100 billion a year to multinational companies’ tax bills. That might sound like an unappealing prospect for investors, but the OECD painted a bleaker alternative: a chaos of digital taxes and tariffs that could cut global output by 1%. Link to WSJ for details.
• Outside markets: The U.S. dollar index is firmer. Nymex crude oil prices are higher and trading around $40.25 a barrel. In bond markets, the yield on benchmark 10-year Treasury notes edged down to 0.756%, from 0.775% on Friday.
• China trade data helped move crude oil futures higher ahead of the U.S. open, with U.S. crude trading around $40.30 per barrel and Brent crude around $42.55 per barrel, both up more than 2% from Monday’s finish. Prices were nearly unchanged in Asian action after losing ground in Monday trade. U.S. crude was up two cents at $39.45 per barrel while Brent crude was up two cents at $39.45 per barrel.
• December U.S. corn futures testing resistance at $4; if so, $4.20 is the next area on the continuation chart. One analyst says, “It's difficult to push above that leel without fresh bullish news.”
• Solar is 'new king' of the power market. The global response to Covid-19 can "reshape the future of energy" for years to come, according to the International Energy Agency's annual World Energy Outlook report. Renewables will take "starring roles" and solar will take "center stage" due to supportive government policies and declining costs. "I see solar becoming the new king of the world's electricity markets," said Fatih Birol, IEA's executive director. "Based on today's policy settings, it is on track to set new records for deployment every year after 2022."
Capital spending on energy this year is set to plunge by 18%, as global energy demand is expected to fall by 5% in 2020, a pullback not seen since World War II, the Paris-based agency said in its annual report on the future of the industry. But the projected investment cuts are highly uneven, highlighting a divergence in what companies, markets and investors are willing to finance. Spending on renewable energy held up better than any other source.
OPEC publishes its monthly report later today, and the CEOs of some of the world's biggest oil producers speak at the Energy Intelligence Forum today.
• IEA says recovery in energy demand hinges on pandemic. Getting a vaccine and other treatments for the Covid-19 virus in place would mean a global economic rebound in 2021 and a recovery in energy demand by 2023, according to the World Energy Outlook from the International Energy Agency (IEA). However, if the recovery is delayed, that would translate into a recovery in world energy demand being delayed until 2025 as "a deeper near-term slump erodes the growth potential of the economy, high unemployment wears away human capital, and bankruptcies and structural economic changes mean that some physical assets become unproductive as well." IEA chief Fatih Birol told Reuters it was not clear if the pandemic has accelerated or decelerated efforts to make the oil industry more sustainable. "The era of global oil demand growth will come to an end within the next 10 years, but in the absence in a large shift in government policies, I don't see a clear sign of a peak,” Birol said. “A global economic rebound would soon bring oil demand back to pre-crisis levels.” IEA said that the uncertainty created by the pandemic has oil producers unsure on investment decisions, a situation also increasing market volatility.
Items in Pro Farmer's First Thing Today include (Link to subscribe to FTT):
• France makes sweeping cuts to crop estimates
• Indonesian president warns country to ready for La Nina weather hazards
• Consultancy cuts grain production and export forecasts for Ukraine
— USDA's WHIP+ implementation tests Tester's patience. As noted previously, USDA last Friday finally released some information about the much delayed and complex Wildfire and Hurricane Indemnity Program-Plus (WHIP+) program, with promises for more info ahead. But that did not satisfy Sen. Jon Tester (D-Mont.) who said: “Better late than never, but when it comes to providing relief to Northeastern Montana farmers who have been waiting nearly a year for FSA to get its act together, this is unacceptable. I shouldn’t have to hold FSA’s feet to the fire just to get them to follow the law and do right by folks in production ag, but you better believe I’m keeping the coals hot and ready, so Montana farmers don’t get left out in the cold. Disaster relief needs to make it into the pockets of these producers immediately — no more delays.”
— Update on China:
- China’s imports post biggest surge since before coronavirus pandemic. China’s exports grew by 9.9 per cent in September year on year, while imports surged by 13.2%, the first growth of inbound shipments since June, and was considerably above expected of just 0.4% growth. This was up from a 2.1% contraction in August. The Customs Bureau announced the strongest import growth since December, sending monthly inbound shipments to an all-time high of $203 billion.
Exports grew by 9.9% in September versus a year earlier, up slightly from 9.5% growth in August.
China’s overall trade surplus dropped sharply to $37 billion in September, down from $58.93 billion in August.
Bilateral trade with the U.S. surged in September, with China’s American imports rising 24% from a year earlier to $13.2 billion and exports surging 20.36% to $43.96 billion. The trade surplus with the US stood at $30.75 billion, an 18.86% rise from September 2019, but down from August’s $34.1 billion.
China’s grain imports rose 35% from a year earlier, while inbound meat shipments were up 40.5%. Soybean shipments rose 17.6% vs September 2019 to $3.7 billion.
- U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.
- China commits to buy 1.7 million tonnes of Malaysian palm oil until 2023. Bilateral meetings between China and Malaysia have resulted in China committing to purchase 1.7 million tonnes of palm oil until 2023, according to Malaysian Foreign Minister Datuk Seri Hishammuddin Tun Hussein. He also noted the two sides discussed trilateral efforts for Malaysian palm oil and palm-oil based products to address food security in third countries. He further noted the two countries also agreed to promote sustainability requirements for palm oil products that follow the Malaysian Sustainable Palm Oil (MSPO) standards and the Green Food label.
- China’s car market recorded its first quarter of year-over-year sales growth in two years as a broad economic recovery bolstered consumer confidence and discounts boosted demand, especially for electric vehicles. The economic rebound in China, which began in the industrial sector in the spring, is now beginning to wash over the country’s consumers, raising hopes for gross domestic product growth to regain its pre-coronavirus rate of between 5% and 6% when third-quarter numbers are released next week.
- China calls on U.S. to halt sales of weapons to Taiwan. Reports that the U.S. has decided to go ahead with three sales of advanced weapons to Taiwan prompted a harsh response from China, with the country’s foreign ministry saying it would make a “legitimate and necessary” response to further sales. Spokesman Zhao Lijian told reporters the U.S. should cancel all weapons sales to Taiwan.
- Coal the latest Australia/China dustup? Australia is looking into whether China has stopped imports of Australian coal, Prime Minister Scott Morrison said after media reports that is the case. "When it comes to coal, in China they do have their own coal industry and it is not uncommon that from time to time the Chinese government will have domestic quotas to support local production and local jobs in China," Morrison told reporters in a briefing. "The arrangements they put around domestic quotas in coal production is not unusual.” IHS Markit reported authorities at the ports in Bayuquan and Jingtang in northern China and Fangcheng in the south indicated Australian cargo would be rejected from discharge and clearing, effective October 1.
China has already targeted Australian barley with tariffs and has launched an investigation into whether Australian wine was being dumped on the Chinese market.
— Food and beverage industry update:
- Do babies need to eat meat? For its first-ever dietary guidelines for children under two, the USDA weighs recommendations for a diet including fruit, vegetables—and meat, prompting objections from plant-based advocates. Link for details from the WSJ.
— Coronavirus update:
- Summary: Global cases of Covid-19 are now at 37,827,594 with 1,081,127 deaths, 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 7,804,336 with 215,086 deaths.
Link to Covid Case Tracker
Link to Our World in Data
- Covid-19 is a $16 trillion virus. "The estimated cumulative financial costs of the Covid-19 pandemic related to the lost output and health reduction [is]...more than $16 trillion, or approximately 90% of the annual gross domestic product of the U.S. For a family of four, the estimated loss would be nearly $200 ,000. Approximately half of this amount is the lost income from the Covid-19-induced recession; the remainder is the economic effects of shorter and less healthy life," Harvard University's David Cutler and Lawrence Summers write in the Journal of the American Medical Association. Link for details.
- Johnson & Johnson said it was suspending Phase 3 trials of its Covid-19 vaccine following an unexplained illness in a study participant. The American drugmaker noted that so-called serious adverse events are to be expected during large trials. A rival vaccine being developed by the University of Oxford and AstraZeneca was paused — and later restarted — for similar reasons last month.
- First confirmed U.S. coronavirus reinfection. A Nevada man tested positive for Sars-Cov-2, the virus responsible for Covid-19, after developing moderate symptoms in April. He then suffered more severely two and a half months later, requiring emergency oxygen therapy. University of Nevada scientists who examined the 25-year-old over the period found many more differences in the two genetic fingerprints than could be explained by mutations during one long illness, confirming two separate infections.
- U.K. issues Covid-19 updated plan. Boris Johnson, Britain’s prime minister, set out plans for a three-tiered system of local restrictions for England, designed to control the spread of Covid-19 without requiring a nationwide lockdown. Regions will be on “medium”, “high” or “very high” alert, each of which will entail different rules. The number of covid-19 cases in Britain has risen significantly in October, especially in the north of England.
Elsewhere, France is hoping to avoid another general lockdown, while Italy and the Netherlands are considering new restrictions. The Czech government closed schools, restaurants and bars through early November. Finally, China has recorded its biggest Covid-19 cluster in months. The Chinese city of Qingdao will test its more than nine million residents after the discovery of a dozen new cases linked to a local hospital.
POLITICS & ELECTIONS
— 2020 Presidential Election Interactive Map
— The Green Papers
— Real Clear Politics
— 2020 Political Atlas
— 2020 Demographic Swingometer
— Presidential debate: Scheduled to occur Oct. 22.
— Days until election
- Forecasting the 2020 U.S. Senate elections using presidential polling data. That is what Sabato’s Crystal Ball did and the result: “An analysis of these polling data suggest that Democrats are likely to achieve a net gain of between one and eight seats with the most likely result a net gain of five seats, enough to give them a small Senate majority.” Link for details.
- Trump claims Covid immunity and offers to kiss crowd at rally. President Trump offered to kiss members of the audience and claimed he was immune to Covid-19 during a rally in Florida that marked the U.S. president’s return to the campaign trail just 10 days after he was hospitalized with the virus. “They say I’m immune. I feel so powerful . . . I’ll kiss the guys and the beautiful women,” Trump said on Monday night in front of a cheering crowd, many of whom were not wearing masks or practicing social distancing.
OTHER ITEMS OF NOTE
- European foreign ministers agreed to draw up proposals to impose sanctions on Russia over the poisoning of Alexei Navalny, a prominent critic of Vladimir Putin, Russia’s president. They also expressed willingness to impose more sanctions on those involved in the repression of protesters in Belarus, including Alexander Lukashenko, the country’s president, who stole August’s election.
- Steve Quarles, who has served in top staff roles at the Interior Department and the Senate Energy Committee, joined the American Wind Energy Association (AWEA)as chief counsel for environment and wildlife, the group announced. Quarles served as deputy Interior undersecretary during the Carter administration. Before joining AWEA, he was a partner at the law firm Nossman LLP, where he focused on wildlife and renewable energy.