Baltic Dry Index. 3199 +96 Brent Crude 73.71
Spot Gold 1807
Coronavirus Cases 02/04/20 World 1,000,000
Deaths 53,100
Coronavirus Cases 26/07/21 World 194,835,316
Deaths 4,175,139
In central banking as in diplomacy, style, conservative tailoring, and an easy association with the affluent count greatly and results far much less.
John Kenneth Galbraith
It is Fed week once again. While no change in policy is expected, the big question is over the Fed’s guidance. Will Chairman Powell signal that a policy change might come before 2023.
In China, a stock crackdown continues, meanwhile the latest USA v China talks in China seem to be off to a bad start.
Will the Delta variant kill off a fast return to the office? Cruising? Air travel?
Below, the latest from the Asian stock casinos.
Hong Kong’s Hang Seng index drops nearly 3%; China tech and education shares plunge
SINGAPORE — Shares in Asia-Pacific were mixed in Monday morning trade, as Chinese tech and education stocks plunged on regulatory pressure.
Hong Kong-listed shares of Chinese tech giant Tencent slipped 5.84% in Monday morning trade. Alibaba also dropped 4.53% while Meituan fell 7.47%. The Hang Seng Tech index plunged 5.37%.
Those losses came after China’s antitrust regulator ordered Tencent to give up its exclusive music licensing rights and slapped a fine on it for anti-competitive behavior, marking yet another development in Beijing’s ongoing crackdown on its domestic internet titans.
Shares of private education firms listed in Hong Kong also tumbled as Chinese authorities also stepped up restrictions on the sector. New Oriental Education & Technology Group, Koolearn Technology and China Beststudy Education Group all saw their shares plummeting more than 30% each.
The broader Hang Seng index in Hong Kong fell 2.73%
Elsewhere, Asia-Pacific markets were mixed.
Returning to trade following holidays on Thursday and Friday, the Nikkei 225 in Japan jumped 1.39% while the Topix index advanced 1.4%.
Mainland Chinese stocks declined, with the Shanghai composite down 2.11% while the Shenzhen component fell 2.457%.
South Korea’s Kospi edged 0.46% lower. In Australia, the S&P/ASX 200 hovered above the flatline.
MSCI’s broadest index of Asia-Pacific shares outside Japan traded 1.5% lower.
----Investors likely continued to monitor the Covid situation in Asia as it weighs on sentiment.
In South Korea, the second highest level of virus restrictions will be applied to non-capital areas starting Tuesday, local agency Yonhap reported. Elsewhere, Tokyo’s daily coronavirus tally has exceeded 1,000 for six days in a row, according to Kyodo News.
Indonesia on Sunday also extended its Covid restrictions by a week, according to Reuters. The country has been among multiple Southeast Asian nations that have been grappling with a resurgence in infections.
On Friday, the Dow Jones Industrial Averaged closed above 35,000 for the first time ever while the S&P 500 jumped 1.01% to 4,411.79 and the Nasdaq Composite gained 1.04% to 14,836.99. Friday’s moves upward saw all three major indexes stateside at new closing highs.
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U.S.-China meeting off to a tense start as Beijing official says relations are in a ‘stalemate’
BEIJING — Another high-level meeting between U.S. and Chinese officials — this time in the Chinese city of Tianjin, just outside of Beijing — began with criticism.
Chinese Vice Foreign Minister Xie Feng said during talks Monday with U.S. Deputy Secretary of State Wendy Sherman that the two countries’ relationship “is now in a stalemate and faces serious difficulties,” according to an English-language press release from China’s Ministry of Foreign Affairs.
“Fundamentally, it is because some Americans portray China as an ‘imagined enemy,’” the release said, adding, “We urge the United States to change its highly misguided mindset and dangerous policy.”
The statement said, however, China still wanted to work with the U.S., on the condition leaders “change course” and adhere to Chinese interests.
The U.S. Embassy in Beijing did not immediately have a comment when contacted by CNBC.
Tensions between the U.S. and China have escalated in the last several years. Former U.S. President Donald Trump used tariffs and sanctions in an attempt to address longstanding criticism against China, such as unequal market access, lack of intellectual property protection and forcing businesses to transfer technology in order to operate in the country.
Sherman is in China for a meeting with her counterparts there Sunday and Monday.
The goal of the meeting was not a negotiation, but an effort to keep high-level communication channels open, senior State Department officials said in a briefing with reporters over the weekend.
The U.S. officials expected to meet with Xie first, and then Chinese Foreign Minister Wang Yi second.
The leaders are expected to work toward the first meeting of Chinese President Xi Jinping and U.S. President Joe Biden, likely around the G-20 summit in October.
More
https://www.cnbc.com/2021/07/26/us-china-tianjin-meeting-wendy-sherman-xie-feng-wang-yi.html
‘Disturbing’ actions by China signal early stages of a cold war, economist Stephen Roach warns
Economist Stephen Roach warns Beijing’s crackdown against U.S.-listed China stocks will have widespread market implications.
Roach, who is considered one of the world’s leading experts on Asia, believes the actions are signaling the early stages of a cold war.
“I am a congenital optimist when it comes to China. But I find these actions really quite disturbing,” the former Morgan Stanley Asia chairman told CNBC’s “Trading Nation” on Friday. “China is going after the core of its new entrepreneurial driven economy, and it’s going after their business models.”
According to Roach, the tensions between the world’s two largest economies could get to levels not seen since the early 1970s.
“Even if U.S. companies don’t trade directly with China, virtually everything they touch goes through global supply chains,” said Roach. “So, a chill in the U.S.-China relationship has significant implications for U.S. companies and for investors investing in U.S. companies. You can’t get away from the China connection.”
----Roach, now a Yale senior fellow, has been sounding the alarm on the contentious backdrop for months. On “Trading Nation” in April, he warned U.S.-China relations were eroding and the two countries were on the brink of a cold war. Now, Roach suggests a line has been crossed.
“These are actions that are really in getting to the core of what has been so exciting about China for a number of years,” Roach said. “They concern me a lot.”
In the Wall Street casinos this week, will the Fed signal green or red? My money’s on green which happily almost spells greed. Fed Chairman Powell isn’t about to blow up the Biden Presidency with a wipe-out of the one percenters.
Earnings and the Federal Reserve are next big catalysts as stocks enter week ahead on an upswing
Published Fri, Jul 23 2021 5:25 PM EDT Updated Fri, Jul 23 2021 5:27 PM EDT
Here comes one of the biggest market weeks of the summer.
First, the Federal Reserve meets Tuesday and Wednesday. While no action is expected, there could be some mention of the central bank’s possible wind down of its bond program. That could move the markets since the tapering of the central bank’s bond purchases is seen as the first step on the way to interest rate hikes.
Then there are about 165 S&P 500 companies releasing earnings reports, including the biggest tech names— Apple, Microsoft, Amazon, Alphabet and Facebook. Tesla is reporting, as are industrial heavy weights Boeing and Caterpillar. There are slew of consumer names, including Procter & Gamble and McDonald’s.
There is also important economic news. The second quarter is expected to be the peak period for post-pandemic growth, and gross domestic product for the quarter will be released Thursday. On Friday, the Fed’s favorite inflation measure, the personal consumption expenditure inflation index, is released.
Fresh highs for major indexes
The three major U.S. stock indexes enter the busy week with fresh closing records. The Dow closed above 35,000 for the first time on Friday. The S&P 500 gained 1% to close at 4,411.79, and the Nasdaq Composite ended the day up 1%.
“I think earnings are going to be the show, and if the pattern we’ve seen thus far continues next week, and it’s likely it will, that’s going to find a market that has a path of least resistance to the upside and I think that’s good news,” said Art Hogan, chief market strategist at National Securities.
According to Refinitiv, earnings for the second quarter are looking to be up 78.1%.
“It’s going to be crazy,” said Hogan. “I think the order of magnitude of earnings beats is still underappreciated, and I think that will continue next week: 87% of companies are beating estimates.”
More
Finally, is the Yuan setting up to challenge the dollar reserve standard in the decade ahead?
China’s digital yuan could pose challenges to the U.S. dollar
Published Sat, Jul 24 2021 9:00 AM EDT
China is beating the U.S. when it comes to innovation in online money, posing challenges to the U.S. dollar’s status as the de facto monetary reserve. Nearly 80 countries — including China and the U.S. — are in the process of developing a CBDC, or Central Bank Digital Currency. It’s a form of money that’s regulated but exists entirely online. China has already launched its digital yuan to more than a million Chinese citizens, while the U.S. is still largely focused on research.
The two groups tasked with this research in the U.S., MIT’s Digital Currency Initiative and the Federal Reserve Bank of Boston, are parsing out what a digital currency might look like for Americans. Privacy is a major concern, so researchers and analysts are observing China’s digital yuan rollout.
“I think that if there is a digital dollar, privacy is going to be a very, very important part of that,” said Neha Narula, director of the Digital Currency Initiative at the MIT Media Lab. “The United States is pretty different than China.”
Another concern is access. According to the Pew Research Center, 7% of Americans say they don’t use the internet. For Black Americans, that rises to 9%, and for Americans over the age of 65, that rises to 25%. Americans with a disability are about three times as likely as those without a disability to say they never go online. That is part of what MIT is researching.
“Most of the work that we’re doing assumes that CBDC will coexist with physical cash and that users will still be able to use physical cash if they want to,” Narula said.
The idea of a CBDC in the U.S. is aimed, in part, at making sure the dollar stays the monetary leader in the world economy.
“The United States should not rest on its current leadership in this area. It should push ahead and develop a clear strategy for how to remain very strong and take advantage of the strength of the dollar,” said Darrell Duffie, professor of finance at Stanford University’s Graduate School of Business.
Others see the digital yuan as insidious.
“The digital yuan is the largest threat to the West that we’ve faced in the last 30, 40 years. It allows China to get their claws into everyone in the West and allows them to export their digital authoritarianism,” said Kyle Bass of Hayman Capital Management.
https://www.cnbc.com/2021/07/24/the-us-is-deciding-how-to-respond-to-chinas-digital-yuan.html
Add in the global de-dollarisation effect of the global switch from hydrocarbons to “green” energy 2030-2050, and the dollar reserve standard faces big challenges anyway.
Economics is extremely useful as a form of employment for economists.
John Kenneth Galbraith.
Global Inflation Watch.
Given our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its own.
Is the US economy about to get an inflation break ahead? Possibly, but don’t count your chickens yet.
With the economy booming, the Fed not tapering and President Biden promising trillions more for “infrastructure” projects that look more like socialist wealth redistribution projects, inflation might still rip through the US economy, this year and next.
The rapid growth the U.S. economy has seen is about to hit a wall
Published Fri, Jul 23 2021 3:05 PM EDT Updated Fri, Jul 23 2021 5:52 PM EDT
The U.S. economy is expected to post another roaring growth spurt in the second quarter, before a slow and steady dose of reality starts to sink in.
Gross domestic product is projected to accelerate 9.2% for the April-to-June period, according to a FactSet survey. The Commerce Department will release its first estimate for second-quarter GDP on Thursday.
In a pre-pandemic world, that would have put annualized growth at its fastest level since the second quarter of 1983. However, the current circumstances and the outsized policy response they generated make this merely the third straight quarter of GDP that sits well above the post-Great Recession trend.
Things are about to change, however.
The economy is creeping back toward normal, the open checkbook from Congress is about to get tighter, and millions of sidelined American workers will be returning to their jobs. That means a gradual reversion to the mean for an economy more used to growing closer to 2% than the much stronger levels it has turned in during the reopening.
“Growth has peaked, the economy will slow a bit in the second half of this year, then much more noticeably in the first half of 2022 as fiscal support fades,” said Mark Zandi, chief economist at Moody’s Analytics. “The contours of growth are going to be shaped largely by fiscal policy over the next 18 months. The tailwind just blows less strongly, and may stop altogether by this time next year.”
It’s been a long road getting here, but the economy has gotten very close to its pre-pandemic self.
In fact, according to a running gauge that Jefferies keeps, overall output is at 98.6% of its “normal” level before Covid-19 turned everything upside down. The firm uses a slew of indicators to measure then versus now, and finds that while some areas such as employment and air travel are lagging, retail and housing have helped push overall activity to just below the 2019 level, at 98.6%.
“When I look holistically at household income dynamics and balance sheets, I see a very, very positive situation, very healthy fundamentals, and it’s hard to be pessimistic on the outlook,” said Aneta Markowska, chief financial economist at Jefferies.
More
World’s Food Supplies Get Slammed by Drought, Floods and Frost
Bloomberg News24 July 2021, 08:46 BST
Extreme weather is slamming crops across the globe, bringing with it the threat of further food inflation at a time costs are already hovering near the highest in a decade and hunger is on the rise.
Brazil’s worst frost in two decades brought a deadly blow to young coffee trees in the world’s biggest grower. Flooding in China’s key pork region inundated farms and raised the threat of animal disease. Scorching heat and drought crushed crops on both sides of the U.S.-Canada border. And in Europe, torrential rains sparked the risk of fungal diseases for grains and stalled tractors in soaked fields.
More
Below, why a “green energy” economy may not be possible anyway, and if it is, it won’t be quick and it will be very inflationary, setting off a new long-term commodity Supercycle. Probably the largest seen so far.
The “New Energy Economy”: An Exercise in Magical Thinking
https://media4.manhattan-institute.org/sites/default/files/R-0319-MM.pdf
Mines, Minerals, and "Green" Energy: A Reality Check
https://www.manhattan-institute.org/mines-minerals-and-green-energy-reality-check
Covid-19 Corner
This section will continue until it becomes unneeded.
Has the Delta variant, aka the India variant, blocked a fast return to the office? According to research from Israel, the Pfizer vaccine is only 39 percent effective against Delta, though it does seem to prevent serious illness.
Worse, vaccinated people can get reinfected and become infectious again. Though their own second illness is usually not severe, it’s unknown about the severity of the infection they might spread.
Worse still, the Delta variant has a shorter incubation period and is 1,260 times more infectious than the original coronavirus, according to last week’s research from China.
Then there’s the legal risk of forcing people to work in a potentially dangerous Delta office. The US tort bar will be salivating at the prospect of lucrative injury and wrongful death cases.
Delays, More Masks and Mandatory Shots: Virus Surge Disrupts Office-Return Plans
A wave of the contagious Delta variant is causing companies to reconsider when they will require employees to return, and what health requirements should be in place when they do.
July 23, 2021
Several hospital systems that previously held off making vaccines mandatory for health care workers are now willing to do so. Google employees in California who have voluntarily returned to the office are again wearing masks indoors. Goldman Sachs is considering whether to reinstitute testing for fully vaccinated employees in the company’s New York City offices, according to a person familiar with the situation who spoke on the condition of anonymity because nothing had been decided. And on Monday, Apple told its work force that it would push back its return-to-office date from September to October.
When companies began announcing tentative return-to-office plans this spring, there was a sense of optimism behind the messages. Covid cases were dwindling in the United States as the vaccine rollout picked up pace. Employers largely hoped their workers would get shots on their own, motivated by raffle tickets, paid time off and other perks, if not by the consensus of the medical community.
In recent days, that tone has suddenly shifted. The Delta variant, a more contagious version of the coronavirus, is sweeping through the country. Fewer than half of Americans are fully vaccinated, exacerbating the situation.
Nationally, the daily average of new coronavirus infections surged 180 percent in 14 days to 45,343 by Thursday, and deaths — a lagging number — are up 30 percent from two weeks ago, to nearly 252, according to New York Times case counts. Vaccines are still unavailable for children under 12, many of whom are preparing for an in-person return to school this fall.
America’s business leaders are being forced to decide whether to reverse reopening plans or to mandate vaccinations.
More
https://www.nytimes.com/2021/07/23/business/return-to-office-vaccine-mandates-delta-variant.html-
Strangely, the article below leaves out the wide availability and use of Ivermectin in India and the likely gross underreporting of infections and deaths.
After being ravaged by the delta Covid variant, how is India doing now?
Published Fri, Jul 23 2021 7:31 AM EDT Updated Fri, Jul 23 2021 4:25 PM EDT
The delta variant was first detected in India last October and it led to a massive second wave of Covid-19 cases in the country.
Since then, the highly infectious strain has spread globally.
The variant has usurped the previously dominant alpha variant, first detected in the U.K. last fall, and has prompted further waves of infections in Europe and an ominous incline in cases in the U.S.
Indeed, the delta variant now makes up 83% of all sequenced cases in the U.S., the director of the U.S. Centers for Disease Control and Prevention, Dr. Rochelle Walensky, said Tuesday, marking a dramatic rise from 50% the week of July 3.
The World Health Organization has already warned that, based on the estimated transmission advantage of the delta variant, “it is expected that it will rapidly outcompete other variants and become the dominant circulating lineage over the coming months.”
In its latest weekly report on Wednesday, the WHO noted that as of July 20, the prevalence of delta among the specimens sequenced over the past four weeks exceeded 75% in many countries worldwide including Australia, Bangladesh, Botswana, China, Denmark, India, Indonesia, Israel, Portugal, Russia, Singapore, South Africa and the U.K.
But what of India where the delta variant first emerged in October?
The situation is still bad, data shows, but not as bad as it was when the second wave peaked in the country, when daily new cases were more than 400,000. On May 7, India reported a staggering 414,188 new infections and several thousand deaths.
Fortunately, cases have declined significantly since then. On Thursday, India reported 41,383 new coronavirus infections and 507 new deaths, the Indian Health Ministry tweeted.
---- Meanwhile, the percentage change in the number of new confirmed cases over the last seven days (relative to the number in the previous seven-day period) in parts of Europe and the U.S. is stark.
In France, the percentage change in the number of new cases over the past seven days is 223%, 112% in Italy while in Germany the percentage change is 50%. In the U.S., the percentage change in the last seven days is 58% higher than the previous seven-day period.
More
https://www.cnbc.com/2021/07/23/coronavirus-how-india-is-doing-now-after-delta-variant-spread.html
Indonesia’s Bali is running out of oxygen as government ponders curbs
Published Sat, Jul 24 2021 5:04 AM EDT Updated Sat, Jul 24 2021 5:17 AM EDT
The Indonesian island of Bali is running out of oxygen for its Covid-19 patients as infections surge, the chief of its health agency said, as Southeast Asia’s biggest country struggles with the region’s worst Covid epidemic.
Bali, famous for its tourist beaches and temples, along with the main island of Java and 15 other regions are under tight coronavirus restrictions, due to expire on Sunday. The government is debating whether to extend them or not.
“We’ve had an oxygen shortage since July 14 and it’s getting critical by the day because of a surge in new cases,” Ketut Suarjaya, the head of Bali’s health agency, said as quoted by Antara state news agency as saying on Friday.
“There’s an oxygen crisis in Bali.”
Indonesia, the world’s fourth most populous country, has had more than 3 million coronavirus infections and 80,598 deaths according to official data. The spread, driven by the Delta variant, has shown no sign of slowing.
Research organization Our World in Data said the country had a death rate three times higher than the global average.
The debate over coronavirus restrictions has pitted health experts, who say it is premature to ease curbs during the surge of infections, against employer groups that have warned of mass layoffs unless the curbs are relaxed.
Suarjaya said patients in Bali needed 113.3 tonnes of oxygen on Thursday, while hospitals only had 40.5 tonnes. He was not immediately available for comment on Saturday.
Oxygen shortages have also been seen on Java. The government has begun to import oxygen supplies from countries such as the United States and China.
Next, some vaccine links kindly sent along from a LIR reader in Canada. The links come from a most informative update from Stanford Hospital in California.
World Health Organization - Landscape of COVID-19 candidate vaccines. https://www.who.int/publications/m/item/draft-landscape-of-covid-19-candidate-vaccines
NY Times Coronavirus Vaccine Tracker. https://www.nytimes.com/interactive/2020/science/coronavirus-vaccine-tracker.html
Stanford Website. https://racetoacure.stanford.edu/clinical-trials/132
Regulatory Focus COVID-19 vaccine tracker. https://www.raps.org/news-and-articles/news-articles/2020/3/covid-19-vaccine-tracker
Some other useful Covid links.
Johns Hopkins Coronavirus resource centre
https://coronavirus.jhu.edu/map.html
Rt Covid-19
Centers for Disease Control Coronavirus
https://www.cdc.gov/coronavirus/2019-ncov/index.html
The Spectator Covid-19 data tracker (UK)
https://data.spectator.co.uk/city/national
Technology Update.
With events happening fast in the development of solar power and graphene, I’ve added this section. Updates as they get reported.
No update today. Normal service resumes tomorrow.
If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid.
John Maynard Keynes.
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