Senate joins House for recess | U.S.-China trade issues | Employment report | Russia investigation | Perdue in Minnesota | Health care | Senate tax reform | Brazil trucker strike | Cohn next Fed leader? | Cotton AWP | USAID administrator | CFTC nominees cleared | Other nominees approved | Banks cut oil price forecasts | No changes for RFS point-of-obligation | China not clamoring for U.S. beef
— Senate joins House for August recess. The Senate left town for its shortened August recess after the chamber on Thursday cleared a Food and Drug Administration bill and confirmed 69 nominations for various departments after Majority Leader Mitch McConnell (R-Ky.) announced a pre-recess package he negotiated with Minority Leader Chuck Schumer (D-N.Y.). "The Senate has confirmed more executive branch nominees this week than all of the executive branch nominees confirmed this year combined,” McConnell noted.
When Congress returns in September, lawmakers will face looming deadlines on the debt limit and funding the government for the upcoming fiscal year. Meanwhile, the Senate Budget Committee could mark up a fiscal 2018 budget resolution in September, to help set up a GOP tax overhaul. Meanwhile, House Speaker Paul Ryan (R-Wis.) told the Wisconsin State Journal that he "plans to introduce a tax overhaul bill in September with the goal of passing it through the House by the end of the year." Ryan also said if the House doesn't do its job "we will depress turnout" in 2018. Link to article.
The Senate is not expected to formally adjourn for the break, instead gaveling in-and-out once every three days through Labor Day in order to preclude President Donald Trump from making recess appointments. It's the same move that the Senate made during the administrations of Presidents Barack Obama and George W. Bush.
President Trump is headed to Bedminster, N.J., today for a 17-day trip at his golf club. The president today will speak on the phone with French President Emmanuel Macron, travel to FEMA headquarters for a briefing on hurricane season, and then depart this afternoon for a “working vacation.”
— No trade policy announcement on China today. A speech that President Trump was scheduled to give on Chinese trade today has reportedly been canceled. Trump had been planning to announce the start of an investigation into China’s violation of U.S. intellectual property rights and forced technology transfers.
However, the Commerce Department announced on Thursday a new anti-dumping and countervailing duty case into imports of certain cast-iron soil pipe fittings from China. The petitioner, the Illinois-based Cast Iron Soil Pipe Institute, is seeking dumping margins of about 92 percent on imports of the product, which were valued at an estimated $8.6 million last year. The International Trade Commission will make preliminary injury determinations around August 28.
— Commerce nominee urges enforcing China over trade issues. The U.S. should vigorously enforce its trade laws and be willing to punish trading partners who engage in unfair practices that undercut American companies in domestic or export sales, Commerce Department nominee Gilbert Kaplan told the Senate Finance Committee on Thursday. Asked about Chinese limits on market access for American financial services companies, Kaplan said the Chinese fear competition. “I think you are sort of suggesting, maybe we should consider putting caps on some of their services and investments in the United States,'' Kaplan said. "I think that is well worth looking into. I think we have to turn up some of the pressure if we want to solve the problems with China in services and other areas.”
Currency manipulation. Kaplan agreed with Sen. Sherrod Brown (D-Ohio) who said he thinks U.S. trade remedy laws allow the Commerce Department to treat currency manipulation as an illegal export subsidy. “Obviously, that is something I would have to discuss with the secretary ultimately, but in my view U.S. countervailing laws do cover currency manipulation,” Kaplan said, leaving open the need to confer with Commerce Secretary Wilbur Ross.
Kaplan would oversee the International Trade Administration as undersecretary for international trade. The committee is expected to vote on the nomination after the August recess in September.
— Strong jobs report. The U.S. economy added 209,000 jobs in July, according to the Employment report, higher than the expected gains of 180,000. The unemployment rate ticked down to 4.3% from 4.4% in June. Average hourly earnings rose 9 cents per hour, putting the annual average hourly earnings increase at 2.5%, the same as in June.
Market impacts: U.S. dollar rose sharply, with the yield on the 10-year US Treasury note rising. Data continues to show the U.S. labor market is solid and the wage growth data was neutral to Fed watchers. Traders are not convinced the Fed will increase short-term interest rates in December. The CME FedWatch tool signals 54% odds for no change in December and just over a 42% chance for an increase.
Bottom line: A tight labor market and tame wage growth will keep inflation or the lack of it as the key Fed focus.
— Markets taking notice of Russia investigation as grand jury impaneled. U.S. stocks, the dollar, and bond yields had slumped after the Wall Street Journal on Thursday reported that Special Counsel Robert Mueller has impaneled a federal grand jury in his probe of Russia’s interference in the 2016 U.S. election and potential collusion with the campaign of now-President Donald Trump. Reuters reported that subpoenas have been issued related to the meeting between Donald Trump Jr., Russian lawyers, and other parties in June 2016. On Thursday, U.S. Senators introduced legislation that would protect the special counsel from being fired by the president. White House lawyer Ty Cobb said the administration "favors anything that accelerates the conclusion of his work fairly."
— USDA Secretary Sonny Perdue continues his farm belt journey today in Minnesota. Perdue will participate in a discussion about the farm bill with Minnesota Farm Bureau President Kevin Paap and join Department of Agriculture employees at a Twins game at Target Field in Minneapolis.
Perdue talks farm bill. Perdue’s “Back to Our Roots” R.V. tour across five states saw him in Wisconsin on Thursday. In an interview with the Milwaukee Journal Sentinel (link), Perdue said his main goal for the 2018 Farm Bill was to ensure that it would not direct farmers’ planting decisions: “My principle for the farm bill is it should follow the market, not guide the market. I don’t want people farming for the farm bill,” he said.
— Senate panel to hold health-care hearing in September. Senate Finance Committee Chairman Orrin Hatch (R-Utah) announced that the panel will hold a health-care hearing in September, following a close but failed vote on repeal of ObamaCare. “We’ve also heard a lot of demands from members of the committee for a health-care hearing,” Hatch said at the opening of a Finance Committee hearing on Thursday. “I intend to do that as well at some point shortly after the recess.”
CHIP hearing, too. Hatch also said there will be a separate hearing in September on reauthorizing the Children’s Health Insurance Program (CHIP), which needs to be re-approved before a deadline of Sept. 30.
The HELP (Health, Education, Labor and Pensions) Committee is expected to take the lead role in crafting a bipartisan bill aimed at stabilizing the ObamaCare marketplaces, but the announcement indicates that the Finance Committee, which shares jurisdiction on health care, will also discuss the issue. Hatched noted the “main priority” of his committee in the fall will be tax reform.
Sen. Ron Wyden (D-Ore.), the top Democrat on the panel, responded that he was “glad” that Hatch had announced the hearing.
— Senate tax reform markup ahead. The Senate Finance Committee will hold a tax reform markup after the August recess, as well as several hearings on overhauling the tax code, Chairman Orrin Hatch (R-Utah) said Thursday. He didn’t announce dates for the markup and hearings, grouping them together on the committee’s post-recess agenda. But, Hatch said he wants to move tax reform legislation through regular order. “That will mean that we’re going to have to work very assiduously and close together to get things done,” Hatch said. “That means hearings and a markup here in the committee.”
— Brazil group to warn of possible loading delays from trucker strike. Brazil exporter group Anec said they will be sending out an official notice to foreign buyers that cautions grain loadings at Brazilian ports could be delayed due to a trucker strike that has snarled the process of getting grains and soybeans into export locations. Truckers have protested high fuel prices and have blocked BR-163 road in Mato Grosso for long periods of time since Tuesday, and local media reports indicate the protest has spread to Rio Grande do Sul and Parana. "Some of our members have asked us to send an official announcement regarding this problem, so they could explain possible delays to clients," said Anec director Sergio Mendes. While there are currently enough stocks at ports to keep loadings going, delays could happen if protests continue for an extended period.
— Cohn in the lead to head the Fed: Bloomberg. White House senior economic adviser Gary Cohn appears to have surged into the lead as the top candidate to become the next Federal Reserve Chair, according to a survey conducted by Bloomberg News. The survey gives Cohn a ranking of 75 out of 100, putting him ahead of current Fed Chairwoman Janet Yellen who came in at 55. Others mentioned as being in the mix are in the low 20s — former Fed governor Kevin Warsh, Columbia University economics professor Glenn Hubbard or Stanford University economist John Taylor. But the decision remains with President Donald Trump who spoke glowingly about Cohn in his recent interview with the Wall Street Journal, but he also talked positive about Yellen.
— Cotton AWP falls. The Adjusted World Price (AWP) for cotton will be at 63.41 cents per pound, effective today, down from 66.29 cents per pound the prior week. This marks the lowest level for the AWP since January 20 when it was at 62.58 cents per pound and also the first time since January 20 it has been under 64 cents per pound.
— Senate clears new USAID administrator. The Senate on Thursday approved several of President Trump’s nominees, including a new administrator for the U.S. Agency for International Development (USAID), former Rep. Mark Green (R-Wis.). President Trump’s budget called for gutting food-aid programs and other foreign assistance programs, but Green, during his confirmation hearing in June, said that USAID was an “irreplaceable force for good.” Green served in Congress from 1999 to 2007 and was U.S. ambassador to Tanzania from 2007 to 2009. Most recently, he was president of the International Republican Institute.
— CFTC chairman and two new members cleared by Senate. The Senate on Thursday confirmed Republican Chris Giancarlo as chairman of the Commodity Futures Trading Commission (CFTC) and approved two new members of the panel, Republican Brian Quintenz, and Democrat Russ Behnam. Giancarlo has been serving as acting chairman. Four of the five CFTC seats are now filled, evenly split between the political parties. Quintenz is the founder of a hedge fund, and Behnam is a former aide to Sen. Debbie Stabenow (D-Mich.), ranking member of the Agriculture Committee. Democrat incumbent Sharon Bowen has said that she plans to step down. Another pending GOP nominee to the CFTC, former Senate Agriculture staffer Dawn Stump, was not included in the package that Senate Democrats agreed to approve, but Republicans hope to get her confirmed after Congress returns to work in September. Stump was a former lobbyist for the derivatives industry.
— The Senate confirmed a batch of other nominees, including Treasury officials who could play important roles on fiscal priorities. The chamber also confirmed two nominees for the Federal Energy Regulatory Commission (FERC), a move that will give the commission a voting quorum after months of having just one member. Also given clearance by the Senate were President Trump's picks to be: surgeon general, head the Transportation Security Administration and principal deputy director of national intelligence. Several Federal Communications Commission nominees were also confirmed. Former Texas Sen. Kay Bailey Hutchison, who was nominated by President Donald Trump to be the top envoy to NATO, was also confirmed.
Mira Radielovic Ricardel was confirmed as undersecretary of Commerce for export administration; Richard Ashooh was confirmed as assistant secretary of Commerce for export administration; and Karen Dunn Kelley was confirmed as undersecretary of Commerce for economic affairs.
In other posts, Ray Washburne is officially headed to become president of the Overseas Private Investment Corporation; David Malpass won confirmation to become an undersecretary of the Treasury; and several ambassadors were also confirmed by voice vote, including Kelly Knight Craft, the new envoy to Canada.
— Banks again cut oil price forecasts. Brent crude is expected to average of $53 per barrel this year, according to a survey of 15 banks by the Wall Street Journal, down $2 per barrel from their prior outlook, while U.S. crude is expected to average $51 per barrel, a $1 reduction.
Those same banks have tempered their 2018 outlook, with U.S. crude expected to average $53 per barrel and Brent at $55 per barrel, both down $2 from the previous survey. Continued hefty crude supplies are behind the lowered outlook, the third consecutive month the banks surveyed have trimmed their expectations.
— No changes to RFS program. The Trump administration has reportedly rejected a point-of-obligation proposal that would let oil refiners off the hook for complying with the federal RFS mandates, with the EPA planning to formally announce the decision within the next two weeks, Politico first reported. The move was pushed by billionaire Carl Icahn, a longtime associate and early supporter of Trump, who owns the refiner CVR Energy. Icahn was named a "special adviser" to the president though he is not on the government payroll.
The Environmental Protection Agency is preparing to formally deny requests by Valero Energy Corp., Icahn’s CVR Energy Inc. and other oil companies to shift the compliance burden for using ethanol and other biofuels away from refiners, moving it to fuel blenders and other entities instead. Current law obligates refiners and importers to meet annual quotas for using biodiesel and traditional renewable fuel such as ethanol. Icahn has complained that the current program structure is "rigged" as it forces some refiners to buy those credits, known as "renewable identification numbers." Those so-called RINs are produced with each physical gallon of biofuel but are separated from the physical commodity once it is blended into motor vehicle fuel.
— Chinese consumers aren’t clamoring for U.S. beef and not much is showing up on store shelves, Bloomberg reported. Link for specifics.