Baltic Dry Index. 3300 +19 Brent Crude 75.55
Spot Gold 1808
Dow jumps 440 points to record, rebounding from one-day slide
All three major averages notched record closes on Friday, rebounding from the previous session’s losses over concerns of a slowdown in global economic growth.
The Dow Jones Industrial Average rose 448.23 points, or 1.3%, to a record close of 34,870.16. The S&P 500 bounced by about 1.1%, closing at an all-time high of 4,369.55. The technology-heavy Nasdaq Composite rose just shy of 1% to close at a record of 14,701.92.
The S&P 500 earned its sixth week of gains in seven.
Friday’s comeback brought all three majors averages into the green for the week. The Dow rose 0.2% for the week. The S&P 500 and Nasdaq gained 0.4% and 0.4% since Monday, respectively.
The stocks that led the losses on Thursday, reopening plays and banks, notched gains on Friday. Bank of America jumped about 3.3%, leading a bounce in financial shares. Royal Caribbean popped 3.6% and Wynn Resorts gained close to 2%. American Airlines and United Airlines both gained more than 2%.
The small cap benchmark Russell 2000 rallied more than 2% on Friday.
Shares of General Motors gained 4.8% after Wedbush said the stock is a buy and could jump more than 50% as investors realize the extent of its tech and electric vehicle evolution.
Big Tech stocks’ gains were capped on Friday as President Joe Biden signed a new executive order aimed at the competitive practices by the sector’s giants. Amazon fell 0.3% after hitting a new all-time high on Thursday.
Earnings season begins in the week ahead with eye-popping growth set to validate market’s 2021 run
Second-quarter earnings reporting season gets underway in the week ahead and eye-popping results could validate a market that continues to easily shake off any concerns on its steady march to record high after record high.
The second quarter’s profits for S&P 500 companies are expected to be up 65% from the same quarter a year ago in the depths of the pandemic, according to Refinitiv. The growth will be led by a near 570% increase in profits for industrials, one of the hardest hit sectors during the pandemic.
“The second quarter could be as good as it gets for economic growth,” said Callie Bost, senior investment strategist at Ally Invest. “Earnings growth may slow, but analysts still expect S&P profits to grow by double digits in the next two quarters. It’s crucial not to lose faith in the market just because the economy’s strongest growth may be behind us.”
The S&P 500 climbed to yet another record on Friday following a minor setback on Thursday. Banks and other stocks linked to an economic comeback led the way. With Friday’s gain, the benchmark posted a 0.4% gain for the week and its sixth positive week in seven, bringing its 2021 gains to over 16%.
The financial sector starts the earnings season off with reports from JPMorgan Chase and Goldman Sachs Tuesday. Bank of America, Citigroup and Wells Fargo report Wednesday, and Morgan Stanley and Truist report Thursday.
The banking industry is expected to produce blowout results for the second quarter with S&P 500 financial sector earnings doubling year over year, according to Refinitiv. Major banks recently announced they will boost their dividend payouts after the Federal Reserve gave lenders a thumbs-up as all 23 passed the central bank’s stress test.
Bank stocks led Thursday’s sell-off on Wall Street as some investors took bets off in the face of a surprising drop in Treasury yields. They then immediately snapped back Friday. Strong earnings result could help stabilize the sector that gyrated amid intensifying worries about slowing growth.
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A deal on global tax reform will be finalized ‘very soon,’ German finance minister says
LONDON — A deal on global tax reform will be finalized “very soon,” German Finance Minister Olaf Scholz told CNBC on Friday, adding he hopes the changes could come into force by 2023.
“We are now really on the road [to a deal],” Scholz told CNBC’s Annette Weisbach. “We will reach an agreement here at the G-20 when the 20 nations are agreeing on the same idea of having an international global minimum taxation.”
“This will be a process that will finish very soon,” he added.
Taxation is under the spotlight this weekend as finance ministers and central bankers of the 20 most advanced economies in the world are gathered in Venice, Italy. Their aim is to hammer out a deal that will force the biggest multinationals in the world to pay more taxes.
This comes after 130 countries and jurisdictions agreed last week to sign up for a global corporate minimum tax rate proposal that the G-7 presented in June.
Under the deal, multinationals could be forced to pay a minimum tax rate of 15% wherever they operate, rather than only paying the majority of duties in the nations where they have their headquarters. This has allowed corporate giants to shift profits to countries with very low tax rates or with other accounting incentives.
″The change in the U.S. administration was a major breakthrough in this area and I am really confident that we will have the agreement we need to reach at this point in time here in Venice,” Nadia Calvino, Spain’s economy minister, said Friday.
President Joe Biden’s administration has been pushing for a global agreement on taxation since taking office. Taxation is seen as one way to find new funding to deal with the economic shock from the coronavirus pandemic, while also addressing inequalities.
Wopke Hoekstra, the Dutch finance minister, also told CNBC that he is “optimistic” about a deal this weekend.
Retail cargo continues to see double-digit increases
As supply chain disruptions continue, increases are recorded over 2020.
July 9. 2021
Imports at the nation’s largest
retail container ports are continuing to show double-digit growth over last
year as strong consumer demand keeps up its momentum, according to the monthly
Global Port Tracker report released today by the National Retail Federation and
Hackett Associates.
“The year-over-year growth we saw this spring was off the charts because the
comparisons were against a time when most stores were shut down due to the
pandemic,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold
said. “But we’re continuing to see strong growth even as we enter a point when
stores had begun to reopen last year. That’s a sign of the tremendous demand
from consumers. The challenge for retailers and supply chains is keeping
shelves stocked as port congestion and other supply chain disruptions continue
to impact the industry and the economy more broadly.”
“Operational constraints brought about by the COVID-19 pandemic combined with
the surge in consumer demand have severely strained the logistics supply
chain,” Hackett Associates Founder Ben Hackett said. “The level of growth in
the last year has put unprecedented pressure on importers, carriers and
domestic transportation providers alike.”
U.S. ports covered by Global Port Tracker handled 2.33 million Twenty-Foot
Equivalent Units in May, the latest month for which final numbers are
available. That was up 8.6 percent from April and up 52.2 percent from a year
earlier. The number set a new record for the most containers imported during a
single month since NRF began tracking imports in 2002, topping the previous
record of 2.27 million TEU set this March. A TEU is one 20-foot container or
its equivalent.
In New Papers, Economists Argue Deficits Are Like Ponzi Schemes
Laurence Kotlikoff and others say accumulating debt to pay for current expenses is taking money from the young to pay off the old.
July 8, 2021, 12:24 PM EDT
The current boom in deficit spending by governments around the world probably owes at least something to Olivier Blanchard, who in 2019 wrote, “Put bluntly, public debt may have no fiscal cost.” Blanchard, a former chief economist of the International Monetary Fund, argued that if the economy’s growth rate is durably higher than the government’s borrowing rate, a lump of debt becomes more affordable over time because interest payments shrink as a share of the economy.
It seemed like an invitation to open the red ink spigots, even though Blanchard has since hedged and even expressed concern this year that the Biden administration’s deficit spending will overheat the U.S. economy.
Now, a pair of research papers by Boston University economist Laurence Kotlikoff and co-authors question Blanchard’s original conclusions. The authors say saddling future generations with more debt doesn’t pass the test of Pareto improvement, which is the standard Blanchard held himself to. A policy is Pareto-improving if it makes some people better off without making anyone worse off. If even one person is harmed by a policy, it’s not Pareto-improving.
Kotlikoff, who calls himself a deficit realist rather than a deficit hawk, argues that accumulating debt to pay for current expenses is like a Ponzi scheme in that money from new players (the young) is used to pay off people who started playing the game earlier (the old). The Ponzi scheme collapses when the economy’s growth rate falls below the interest rate. “For awhile it all looks great, then somebody gets nailed,” Kotlikoff says in an interview.
---- In one paper, Deficit Follies, Kotlikoff and three co-authors, Johannes Brumm of Karlsruhe Institute of Technology in Germany, Xiangyu Feng of Boston University, and Felix Kubler of the University of Zurich in Switzerland, look at three situations involving deficit spending at times when the economy’s growth rate exceeds the government’s interest rate. They conclude: “None provides a basis for taking from the young and giving to the old.” In one case, for example, the reason the government’s interest rate is very low is that people are worried about risks to their livelihoods, so they buy government bonds as a hedge, which pushes down the government’s interest rate. The government is tempted to amp up borrowing at its low interest rate, but the right way to mitigate livelihood risk, the authors write, is progressive taxation, in which money flows from people who were lucky in their careers to those who were unlucky.
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'I'd gladly pay you Tuesday for a hamburger today '
https://www.youtube.com/watch?v=68eue5cpbsE
Global Inflation Watch.
Given our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its own.
Double whammy for food buyers as freight costs spike amid high grain prices
July 9, 2021 5:18 AM By Naveen Thukral, Gavin Maguire
SINGAPORE (Reuters) - Rising costs to ship crops globally are adding to concerns about food inflation that are already at decade-highs and hitting cost-sensitive consumers in import-dependent markets.
The cost of bulk carriers that move grains and oilseeds from production hubs in the Americas and Black Sea to key consumers have roughly doubled from last year due to rising fuel costs, tighter vessel supply and longer port turnaround times amid COVID-19 curbs, according to grain and shipping sources.
“Freight cost has become a real challenge as it comes when we see huge increases in grain prices,” said Phin Ziebell, agribusiness economist at National Australia Bank in Melbourne.
“For years, buyers enjoyed low grain and freight prices. I see no immediate end to high freight costs.”
Crop shipping costs surge on key routes as higher fuel costs, slower turnaround times bite
The cost of moving grains from Australia to Southeast Asia has risen to $30 a tonne from $15 last year, and to $55 from $25 from the U.S. Pacific Northwest to Asia, shipping sources said.
Ships carrying wheat from the Black Sea to Asia now cost around $65 a tonne, from around $35 last year.
“It is the cost of bunker fuel and the cost of bulk ships lifting the prices of carrying grains,” said one trader at a leading brokerage in Singapore. “We also have COVID-19 quarantine requirements slowing cargo movement.”
With world food prices having risen at their fastest pace in over a decade in May, the spike in crop freight costs poses a fresh challenge to food importers and policymakers attempting to keep inflation levels in check just as several key economies reopen following coronavirus lockdowns.
Global food price index hits 10-year highs after steep climbs in key crop prices
---- For a typical wheat buyer in Indonesia, the world’s second-largest wheat importer, the cost of a 50,000-tonne cargo of food-grade wheat from the Black Sea has jumped by $4 million from a year ago to around $15 million, with the freight cost alone rising by $1.5 million.
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Hiring in the City roars back to life
Friday 9 July 2021 6:00 am
The City is roaring back to life driven by financial services firms ramping up hiring activity as the spectre of Covid on the Square Mile recedes, new figures published today reveal.
The number of jobs available in London’s financial services sector rose more than twofold over the last year, according to Morgan McKinley’s spring employment monitor.
The surge in job postings has been triggered by trading conditions improving markedly amid a rebounding UK economy.
Read more: London home to nearly a third of all Europe’s tech unicorns
Available jobs were up 22 per cent over the last quarter. However, the number of job seekers rose sharply by 43 per cent, indicating that firms may be able to lower starting salaries and still attract talent.
Hakan Enver, managing director at Morgan McKinley UK, says: “14 months ago, Rishi Sunak announced an ‘economic intervention unprecedented in the history of the British state’.”
“As we now emerge from lockdown, we’re experiencing a rebound in economic activity and across recruitment.”
London firms have been buoyed by the success of the vaccination rollout and hiring activity is expected to run hot in the medium term, analysts at Morgan McKinley noted.
“There’s a sense of real momentum and gratitude for the UKs successful vaccination programme that has been critical to getting us back on track” Enver added.
“This is set to continue in the capital with the lifting of all restrictions, increased spending, the continued vaccination rollout and people returning to the office.”
Strong competition for talent has prompted firms to offer more generous benefits – average salaries for staff in the City jumped 17 per cent.
Prospects for graduates is improving, with firms on the Square Mile expanding their junior staff intake, Morgan McKinley said.
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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.
South Korea raises Covid restrictions in Seoul to top level as new cases hit another daily record
Published Thu, Jul 8 2021 9:58 PM EDT
South Korea will raise anti-coronavirus restrictions to the highest level in Seoul and some neighboring regions for two weeks from Monday, Prime Minister Kim Boo-kyum said on Friday, after new Covid-19 cases climbed to a daily record for the second day running.
The country reported 1,316 new Covid-19 cases as of midnight Thursday, up from Wednesday’s previous record of 1,275 a day. On Thursday a top health official warned the numbers may nearly double by the end of July.
Under the new curbs, people are advised to stay home as much as possible, schools are closed, public meetings are restricted to two people after 6:00 p.m. and rallies or other events are banned. Nightclubs and bars would be shut, while restaurants and cafes would be allowed limited seating and only take-out services after 10:00 p.m.
“Seoul alone saw 500 confirmed cases for the third day,” Kim told a televised government meeting. “Four out of five infections are from the metropolitan Seoul area.”
While the new, “Level 4” restrictions — the toughest of all distancing measures — will be imposed on Monday, Kim also advised the public to refrain from any private gatherings starting Friday.
He also said that during the two-week semi-lockdown the government will suspend a program introduced earlier this year that allowed mask-free outdoor gatherings for citizens vaccinated with at least one Covid-19 shot.
South Korea has only given both shots in the dual vaccination process to just over 10% of its 52 million population, while 30% have received at least one dose, the majority of whom are aged over 60. The country aims to reach herd immunity before November by inoculating 70% of the public with at least one shot by September.
South Korea’s total Covid-19 infections to date stand at 165,344, with 2,036 deaths.
https://www.cnbc.com/2021/07/09/south-korea-raises-covid-restrictions-in-seoul-to-top-level.html
Africa suffers worst surge in Covid cases as delta variant spurs third wave of pandemic
Published Thu, Jul 8 2021 1:13 PM EDT Updated Thu, Jul 8 2021 7:35 PM EDT
Africa, where less than 2% of the population is vaccinated against Covid-19, experienced its worst surge of cases last week since the pandemic began, the World Health Organization said Thursday.
The second-largest continent recorded more than 251,000 new Covid cases during the week ending July 4, a 20% increase from the prior week and a 12% increase from the January peak. Active cases in Africa recently surpassed 642,000, eclipsing a second-wave peak of 528,000 active cases in January, according to a BBC analysis of Johns Hopkins University data.
“Africa has just marked the continent’s most dire pandemic week ever. But the worst is yet to come as the fast-moving third wave continues to gain speed and new ground,” said Dr. Matshidiso Moeti, the WHO’s regional director for Africa. “The end to this precipitous rise is still weeks away. Cases are doubling now every 18 days, compared with every 21 days only a week ago.”
More than sixteen African countries, including Malawi and Senegal, are seeing new cases rise. The more transmissible delta variant has been detected in at least 10 of those countries.
Uganda, the Democratic Republic of Congo, Namibia, Zambia, Rwanda and Tunisia are also experiencing some of the worst upticks in infections, Africa Centers for Disease Control and Prevention said. Hospitalizations have increased by more than 40% across the continent in recent weeks.
“Alarm bells should be going off,” says Dr. Tom Kenyon, chief health officer at Project HOPE and former director of the Center for Global Health at the U.S. CDC. He said Africa’s rate of new cases will soon surpass Asia’s. “Given the horrors we just saw in India, that should be cause for alarm and stimulate action.”
Next, some very useful 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
FDA information. https://www.fda.gov/media/139638/download
Regulatory Focus COVID-19 vaccine tracker. https://www.raps.org/news-and-articles/news-articles/2020/3/covid-19-vaccine-tracker
Some more useful Covid links.
Johns Hopkins Coronavirus resource centre
https://coronavirus.jhu.edu/map.html
Rt Covid-19
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. Is converting sunlight to usable cheap AC or DC energy mankind’s future from the 21st century onwards.
Unlocking radiation-free quantum technology with graphene
Date: July 8, 2021
Source: Aalto University
Summary: 'Heavy fermions' are an appealing theoretical way to produce quantum entangled phenomena, but until recently have been observed mostly in dangerously radioactive compounds. Researchers have now shown it is possible to make heavy fermions in subtly modified graphene, which is much cheaper and safer.
Rare-earth compounds have fascinated researchers for decades due to the unique quantum properties they display, which have so far remained totally out of reach of everyday compounds. One of the most remarkable and exotic properties of those materials is the emergence of exotic superconducting states, and particularly the superconducting states required to build future topological quantum computers. While these specific rare-earth compounds, known as heavy fermion superconductors, have been known for decades, making usable quantum technologies out of them has remained a critically open challenge. This is because these materials contain critically radioactive compounds, such as uranium and plutonium, rendering them of limited use in real-world quantum technologies.
New research has now revealed an alternative pathway to engineer the fundamental phenomena of these rare-earth compounds solely with graphene, which has none of the safety problems of traditional rare-earth compounds. The exciting result in the new paper shows how a quantum state known as a "heavy fermion" can be produced by combining three twisted graphene layers. A heavy fermion is a particle -- in this case an electron -- that behaves like it has a lot more mass than it actually does. The reason it behaves this way stems from unique quantum many-body effects that were mostly only observed in rare-earth compounds until now. This heavy fermion behavior is known to be the driving force of the phenomena required to use these materials for topological quantum computing. This new result demonstrates a new, non-radioactive way of achieving this effect using only carbon, opening up a pathway for sustainably exploiting heavy fermion physics in quantum technologies.
In the paper authored by Aline Ramires, (Paul Scherrer Institute, Switzerland) and Jose Lado (Aalto University), the researchers show how it is possible to create heavy fermions with cheap, non-radioactive materials. To do this, they used graphene, which is a one-atom thick layer of carbon. Despite being chemically identical to the material that is used in regular pencils, the sub-nanometre thickness of graphene means that it has unexpectedly unique electrical properties. By layering the thin sheets of carbon on top of one another in a specific pattern, where each sheet is rotated in relation to the other, the researchers can create the quantum properties effect that results in the electrons in the graphene behaving like heavy fermions.
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This weekend’s musical diversion. Henry Purcell has fun with echoes. Approx. 2.5 minutes.
The Fairy Queen - Act II - Echo
https://www.youtube.com/watch?v=8I-fFtqtg9A
This weekend’s chess masterclass. Approx. 15 minutes.
The Tiger Returns!
https://www.youtube.com/watch?v=kGPi4S1WwPw
This weekend’s maths challenge. Approx. 5 minutes.
Can you solve the inscribed triangle problem?
https://www.youtube.com/watch?v=6K_j4Cj7mVo
Inflation is the one form of taxation that can be imposed without legislation.
Milton Friedman.
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