Weather Freezes Chunk of U.S. as Energy Prices Soar; Too Early to Assess Impact on Wheat

Posted on 02/16/2021 5:55 AM

Senate to vote Feb. 23 on Vilsack’s return to lead USDA

 


In Today’s Digital Newspaper


 

Market Focus:
• Extremely dangerous low temperatures across the plains states
• Wind chill warnings and advisories in effect in many states
• Oil prices rally as cold blast hits Texas; WTI crude tops $60;
• Brent highest since Jan. 2020
• Gasoline futures rose 5.2% to $1.78/gallon
• Japan's leading stock market index set a new 30-year high on Monday
WSJ article looks at relationship between labor market and immigration

• U.S. is running out of legal borrowing authority
• Bitcoin prices hit a record high over the weekend, trading above $49,500
• Copper prices keep rising; tin prices have gone vertical amid shortages  
• U.S. steel price gains have outpaced China’s steel rally
• Lumber prices have shot to fresh records

 

Biden Administration Personnel

• Vilsack’s nomination to be considered by Senate Feb. 23
• Biden’s deputy press secretary resigns

 

China Update:
• China exploring limiting rare-earth minerals critical to defense industry: FT
• What’s China up to?
• Key China decision awaits as next ambassador to U.S.

 

Trade Policy:
• New WTO head: Nigerian economist Ngozi Okonjo-Iweala

 

Energy & Climate Change:

• Jaguar cars to go all-electric by 2025; JLR plans full range of E-models by 2030


Coronavirus Update:
• U.S. sees lowest Covid-19 daily case count since October
• CDC: Covid-19 testing won’t be required before domestic flights
• Biden plans to focus on Covid-19 in first G7 meeting

 

Politics & Elections:
• What House election analysts who were so wrong in 2020 predictions should look at
• Support for third U.S. political party at high point: Gallup
• North Carolina GOP censures Sen. Burr over impeachment vote


Other Items of Note:
• Iran says it will end snap IAEA inspections if nuclear deal terms not met
• Ebola returns in West Africa
• Dog inherits $5 million

 


MARKET FOCUS


 

Equities today: U.S. stock futures are higher, with equities set for their longest winning streak since 2003. In Asia, exchanges in mainland China were closed for the Lunar New Year holiday. Hong Kong’s Hang Seng Index rose 1.9% in the first day of trading after the holiday period, with energy and banking stocks leading gains. Australia’s S&P/ASX 200 and South Korea’s Kospi Composite added 0.7% and 0.5% respectively. Japan’s Nikkei 225 jumped 1.3% by the close of trading

 

     Monday markets: On Monday, Japan’s Nikkei 225 jumped 1.9% by the close of trading, rising above 30000 for the first time in 30 years. Fresh data showed that the Japanese economy expanded 3% in the fourth quarter due to a recovery in domestic demand and exports, beating economists’ expectations.

 

On tap today:

 

     • New York Fed's Empire State survey for February, due at 8:30 a.m. ET, is expected to rise to 5.9 from 3.5 a month earlier.
     • USDA Export Inspections, 11 a.m. ET.
     • Federal Reserve: Governor Michelle Bowman speaks on community bank regulation and supervision at 11:10 a.m. ET, Kansas City’s Esther George speaks on the economy and monetary policy at 12:30 p.m. ET, Dallas’s Robert Kaplan will speak at an economy and monetary policy event at 1 p.m. ET, and San Francisco’s Mary Daly talks on the economy, monetary policy and inequality at 3 p.m. ET.
     • Japan machinery orders for December and provisional trade figures for January are out at 6:50 p.m. ET.

 

The U.S. closed the door to nearly all incoming foreign workers last year. The causes were Covid-19 restrictions that locked global borders and Trump administration policies that drastically reduced work visas, with the exception of farmworkers. A Wall Street Journal article (link) says the effect was “an unexpected experiment in one of the country’s most hotly debated issues — the relationship between the labor market and immigration. The preliminary finding: Even with skyrocketing U.S. unemployment, businesses that relied on foreign workers and were able to remain open during the pandemic struggled to fill jobs.:

 

    Labor

 

You’ve heard this one before… U.S. is running out of legal borrowing authority. Democrats chose not to include an increase in the federal debt ceiling in President Biden’s $1.9 trillion coronavirus relief package, leaving the issue to be addressed later this year. The decision means Democrats will either have to include a debt-limit increase in a second tax-and-spending package that is likely to pass along party lines or negotiate with Republicans to have it added to another bill. If Congress doesn’t act by late summer or early fall, the U.S. will run out of legal borrowing capacity, according to an estimate from the Bipartisan Policy Center. Usually one would say this issue will be dealt with at the last minute. But this is not usual … so perhaps one should say the last second.  

 

     Public debt

 

Market perspectives:

 

     • Outside markets: The dollar slipped against most of its major peers as haven bids waned. The pound gained for a third day, closing in on $1.40, amid signs that trade between the U.K. and European Union is normalizing. Treasury 10-year yields rose four basis points to touch 1.25% — the highest since last March —while the 30-year equivalent pushed above 2%.

 

       Bond  yields

 

     • Bitcoin prices hit a record high over the weekend, trading above $49,500, according to data from CoinDesk. The cryptocurrency pulled back on Monday, easing back down to $48,300.

 

     • Extremely dangerous low temperatures across the plains states. "More than 50 million people could see temperatures dip below zero during the next several days as the record-setting deep freeze envelops the country," the WashPost reports (link). The entire state of Texas has been placed under a disaster declaration.

 

        North Pole

 

        Wind chill warnings and advisories are in effect from Nebraska to Illinois and northwest to Montana and the Dakotas, indicating the risk of frostbite from the combination of cold air and winds.

 

        AM lows

 

        The weather crippled Texas’ power system and sent energy prices soaring to record levels with at least 5 million people across the U.S. impacted. More than a million barrels a day of oil and 10 billion cubic feet of gas production are shut, while pipelines have declared force majeure and massive refineries have halted gasoline and diesel output. Natural gas futures are trading at their highest level since last November — futures rose 5.6% to $3.07 per million British thermal units. Gasoline futures rose 5.2% to $1.78 a gallon.

 

     • Copper prices keep rising; tin prices have gone vertical amid shortages. A tin squeeze is developing on metal markets “which has the potential to make the recent fun in GameStop seem like a minor skirmish because tin is a critical element in modern electronics and governments are starting to take notice,” says a Forbes article (link). “The most obvious sign that tin is being squeezed between excess demand and a supply shortage is the cash price for immediate delivery, up 80% since this time last year from $14,000 a ton on the London Metal Exchange (LME) to $25,290/t.

 

        Citigroup Inc. forecasts copper prices will rally to $10,000 a ton in six to 12 months on a better-than-expected recovery in demand, most notably outside China.

 

     • U.S. steel price gains have outpaced China’s steel rally. The Financial Times notes that “after the intense pressure on oil and gas, heavy industry’s role in the climate crisis is now under growing scrutiny.” Link to FT article/paywall. Meanwhile, prices of iron ore, used to make steel, recently surged to a nine-year high of $176.90 a metric ton. That is well above the cost of roughly $10 to $20 a ton that most global miners incur in digging the commodity out of the ground.

 

        Steel rally

 

     • Bitcoin prices notched a record high overnight, hitting $49,950, according to data from CoinDesk. The cryptocurrency has since pulled back slightly, and recently traded at $49,010.

 

     • Lumber prices have shot to fresh records, defying the normal winter slowdown in wood-product sales in a sign that the pandemic building boom is bowling into 2021. Records have been set across species, products and grades, according to pricing service Random Lengths. Link to WSJ article for more.

 

        Lumber prices

 


BIDEN ADMINISTRATION PERSONNEL


 

— Vilsack’s nomination to be considered by Senate on Feb. 23. It will be interesting to see if Vilsack shows up at this week’s virtual USDA Outlook Forum.

 

— Biden’s deputy press secretary resigns following news of alleged intimidation of Politico reporter. White House Deputy Press Secretary TJ Ducklo resigned Saturday after a story surfaced accusing him of demeaning and intimidating a Politico reporter. Ducklo reportedly tried to kill a story, which has since become public, about his relationship with Axios reporter Alexi McCammond, who previously covered Biden’s campaign. He “lashed out” at Politico reporter Tara Palmeri in January 2021 for pursuing the story, threatening to “destroy” her if she published the news, according to a Friday report from Vanity Fair (link).

 

— Gensler worth up to $119 million. Gary Gensler, President Joe Biden’s nominee to be chairman of the SEC, has a net worth of between $41 million and $119 million. Gensler, who was previously chairman of the Commodity Futures Trading Commission and a partner at Goldman Sachs, disclosed the figures in a form filed with the Office of Government Ethics, as part of the confirmation process. Income and assets are disclosed in ranges on the form. His biggest holding, of between $25 million and $50 million, was in the Vanguard Total Stock Market ETF.
 


CHINA UPDATE


 

— China is exploring whether it can hurt U.S. defense contractors by limiting supplies of rare-earth minerals that are critical to the industry, the Financial Times reported (link/paywall). Industry executives said government officials had asked them how badly firms in the U.S. and Europe would be affected if China restricted rare earth exports during a bilateral dispute, the FT reported, citing people it didn’t identify involved in the consultation. Rare earths are used in everything from smartphones to fighter jets. China controls most of the world’s mining and has an even tighter hold of processing.

 

— What’s China up to? Claremont McKenna College professor of government Minxin Pei said that Chinese foreign policy today is driven by three things: first, perceived U.S. decline; second, perceived opportunity for China in becoming more active on the world stage; and finally, President Xi Jinping’s own ambition. Pe sayd “Xi is ideological. He doesn’t believe in markets and he has an overly ambitious policy agenda.” What’s more, his fear of any competing party leaders has, according to Pei, led to the appointment of less capable underlings.

 

— Key China decision awaits as next ambassador to U.S. Beijing continues to mull who to send to Washington to replace its long-time ambassador Cui Tiankai, who was asked to stay in that capacity during the Trump administration years, despite being well past retirement age and China’s longest-serving ambassador to the United States. Some China watchers signal the choice may be Foreign vice-minister Ma Zhaoxu, 11 years younger than Cui. Others think it might be foreign vice-minister Le Yucheng because of his better interpersonal skills.

 

     Still other possibilities include Liu Jieyi, who heads the State Council’s Taiwan Affairs Office; Fu Ying, a former senior diplomat and director of the Center for International Security and Strategy at Tsinghua University; Beijing’s top envoy in Hong Kong, Xie Feng; and Cong Peiwu, ambassador to Canada.

 

U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link

 


TRADE POLICY


 

— New WTO head: Nigerian economist Ngozi Okonjo-Iweala, 66, will head the World Trade Organization (WTO). She will be the first African and first woman in the job. Okonjo-Iweala, 66, was named director-general by representatives of the 164 countries that make up the WTO, which deals with the rules of trade between nations based on negotiated agreements. She will be the WTO’s first African leader and her term, which starts March 1, will end in August 2025 unless renewed. She said during an online news conference that she was taking over at a time when the WTO “is facing so many challenges, and it’s clear to me that deep and wide-ranging reforms are needed... it cannot be business as usual.” Link for more via the Associated Press. In her acceptance speech, Okonjo-Iweala warned against vaccine nationalism and described the troubles facing the beleaguered body as “numerous and tricky but not insurmountable.” The AP noted Okonjo-Iweala has been Nigeria’s finance minister and, briefly, foreign minister, and had a 25-year career at the World Bank as an advocate for economic growth and development in poorer countries. She rose to the No. 2 position of managing director, where she oversaw $81 billion in development financing in Africa, South Asia, Europe and Central Asia. In 2012 she made an unsuccessful bid for the top post with the backing of African and other developing countries, challenging the traditional practice that the World Bank is always headed by an American.

 

     WTO leader

 


ENERGY & CLIMATE CHANGE


 

— Jaguar cars to go all-electric by 2025 as JLR plans full range of E-models by 2030. Add another major car firm to the list of those going all-electric, or at least plans to, by a certain ate. This time it is Jaguar Land Rover’s luxury Jaguar brand who said it will be entirely electric by 2025. And the carmaker will launch e-models of its entire lineup by 2030, it said on Monday, as it joined a global race to develop zero-emission vehicles. JLR, owned by India’s Tata Motors, said its Land Rover brand will launch six pure electric models over the next five years, with the first one coming in 2024.

 


CORONAVIRUS UPDATE


 

—  U.S. sees lowest Covid-19 daily case count since October. While more than 64,900 new infections were reported on Sunday, it was the country's lowest case count since October. Just last month, reported infections were topping 200,000 a day. And California, one of the states hit hardest by the pandemic, reported its lowest daily case increase since early November. That comes amid a steady decline not only in new infections, but in hospitalizations and deaths as well.

 

— CDC: Covid-19 testing won’t be required before domestic flights. The Centers for Disease Control and Prevention said Friday it won’t currently recommend mandatory Covid-19 testing before domestic air travel, a proposal it had been weighing but met with strong objections from the airline industry. “At this time, CDC is not recommending required point of departure testing for domestic travel,” the CDC said. “As part of our close monitoring of the pandemic, in particular the continued spread of variants, we will continue to review public health options for containing and mitigating spread of Covid-19 in the travel space.” The CDC announcement comes after chief executives of major U.S. carriers — including American Airlines Group Inc., United Airlines Holdings Inc. and Southwest Airlines Co. — met on Friday with White House officials. The meeting included Jeffrey Zients, who is coordinating the administration’s Covid-19 response.

 

— Biden plans to focus on Covid-19 in first G7 meeting. President Biden will join leaders of the Group of Seven (G7) nations this Friday for a virtual summit focused on the global response to Covid-19 and efforts to build back world economies, a White House statement said Sunday. At the U.K.-hosted virtual gathering Biden will "focus on a global response to the Covid-19 pandemic."

 

     Other discussions with leaders at the summit will focus on economic recovery from the pandemic, which left millions out of work in the U.S. alone, as well as the G7's economic stance towards China, which the president has vowed to hold accountable for acts of economic espionage and other disputed trade issues.

 


POLITICS & ELECTIONS


 

— Democrats hold a slim House majority since Republicans surprised political observers and flipped over a dozen House seats in the 2020 election cycle. There are currently 211 Republicans, 221 Democrats, and three vacancies in the House, with 217 votes considered a majority until there's a full roster of lawmakers again. For those House election-watchers who were so off in 2020 House election predictions, the GOP has a clue for them in assessing 2022 contests. Republicans will try to paint the Biden administration as a job-killer. Rep. Tom Emmer of Minnesota, chairman of the National Republican Congressional Committee, the GOP campaign arm, argues President Biden’s revoking the permit for the construction of the Keystone XL pipeline on his first day in office will cost many American jobs. The NRCC is already hitting several House Democrats from Texas for not opposing the Biden administration more vocally over fracking, including Reps. Colin Allred, Henry Cuellar, Lizzie Fletcher, and Vicente Gonzalez. Republicans are already targeting seats where they think Democrats will feel the heat for backing Biden's halt of Trump administration support for Keystone and the Dakota Access Pipeline, as well as ban fracking on federal lands. "The polling we did last cycle showed us in places like Texas, New Mexico, Oklahoma, just how devastating this job-killing, anti-energy agenda is," Emmer said. "That's why we won."

 

— Support for third U.S. political party at high point: Gallup. Some 62% of U.S. adults say the “parties do such a poor job representing the American people that a third party is needed,” according to a Gallup poll. Independents are usually much more likely than Republicans or Democrats to favor a third political party, but in the current poll, Republicans are nearly as likely as independents to hold this view, 63% to 70%. That represents a dramatic shift for Republicans since last September when 40% favored a third party. Link for details.

 

     Gallup on third party
 

— North Carolina GOP censures Sen. Burr over impeachment vote. The North Carolina Republican Party said on Monday that it had voted unanimously to censure Sen. Richard Burr (R-N.C.) for his vote to impeach former President Donald Trump. “The North Carolina Republican Party Central Committee voted unanimously to censure Senator Richard Burr for his vote to convict former President Trump in the impeachment trial which he declared to be unconstitutional,” the party said in a statement. The group said that it did not support the Senate impeachment trial as it believes that the chamber did not have the authority under the Constitution to impeach a former president. The Senate on Saturday ultimately voted 57-43, which resulted in Trump’s acquittal. Sixty-seven votes were needed for a conviction.

 


OTHER ITEMS OF NOTE     


 

— Iran says it will end snap IAEA inspections if nuclear deal terms not met. Iran said on Monday it will block snap inspections by the U.N. nuclear watchdog from next week if other parties to the 2015 nuclear deal do not fulfil their obligations, a challenge to President Biden’s hope of reviving the accord. “If others do not fulfil their obligations by Feb. 21, the government is obliged to suspend the voluntary implementation of the Additional Protocol,” Foreign Ministry spokesman Saeed Khatibzadeh said. “... All these steps are reversible if the other party changes its path and honors its obligations,” he said, alluding to the United States.

 

— Ebola returns in West Africa. Health officials in Guinea are rushing to contain the first outbreak of the deadly disease in the region since 2016, days after authorities detected new cases in the Congo, testing a continent that is already battling the coronavirus.

 

— Dog inherits $5 million. A Tennessee dog is living the comfortable life after inheriting $5 million from her late owner, who stipulated in his will that his money should go to his pet. Lulu, an 8-year-old border collie, was named in the will of owner Bill Dorris, a Nashville businessman who died late last year at age 84. Martha Burton, 88, a neighbor who often cared for Lulu while Dorris was away, was named as the canine's caretaker in Dorris' will, which states Burton will be reimbursed for "reasonable" monthly expenses.

 


 

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