Daily Market Report | June 10, 2021
US FINANCIAL MARKET
Stocks Climb Amid Mixed Economic Data – Wall Street Journal, 6/10/2021
- U.S. stocks edged higher Thursday after data showed another leap in consumer prices and a continuing recovery in the labor market as the economy emerges from the Covid-19 pandemic.
- The S&P 500 ticked up 0.4%, putting it on pace for a new closing record. The Dow Jones Industrial Average jumped 0.6%, and the technology-focused Nasdaq Composite rose 0.4%. All three gauges edged slightly lower on Wednesday.
- Consumer prices rose 5% in May from a year earlier, the Labor Department said, marking the highest annual inflation rate in nearly 13 years. Investors are seeking to determine whether the acceleration will fade away or prove long-lasting, potentially prompting the Federal Reserve to dial back efforts to stimulate the economy.
- On Thursday, the yield on 10-year Treasury notes edged up to 1.517%.
- It settled Wednesday at 1.489%, its lowest level in more than three months.
- Separate data showed jobless claims, seen as a proxy for layoffs, fell to 376,000 last week, extending a recent decline for unemployment benefits and adding to signs of a healing labor market.
- In corporate news, GameStop shares fell almost 6%. The original meme stock and videogame retailer said Wednesday it was planning a stock offering after resetting its leadership team.
- The euro was 0.2% lower against the dollar at $1.2162 after the European Central Bank kept its key interest rates on hold and said it would keep buying bonds at a faster pace than earlier in the year.
- Overseas markets were mixed. Despite a decline in travel, leisure and retail stocks, the Stoxx Europe 600 ticked up 0.1%. The regional gauge closed at a record Wednesday.
- Asian markets closed broadly higher. The Shanghai Composite Index ended the day up 0.5%, while Japan’s Nikkei 225 edged up 0.3%.
Fauci Says He Didn’t Play Down China Lab-Leak Theory of Covid-19 Origins – Wall Street Journal, 6/10/2021
- Anthony Fauci, the government’s top infectious-disease authority, said he never played down the possibility that the SARS-CoV-2 virus could have been leaked from a lab in China, calling accusations he did so for political reasons “preposterous.”
- Dr. Fauci was informed as early as February 2020 that Covid-19 exhibited unusual viral characteristics that suggested it could have potentially been engineered in a lab, according to emails recently obtained by the Washington Post and BuzzFeed.
- Some Republican lawmakers have used the emails to accuse Dr. Fauci of having played down the lab-leak theory.
- President Biden has asked the national intelligence community to redouble efforts to investigate the lab-leak theory alongside the theory that the coronavirus came from human contact with an infected animal.
G-20’s Economy Returns to Pre-Pandemic Level, But Gaps Linger – Bloomberg, 6/10/2021
- The economy represented by the Group of 20 leading industrial and developing nations returned to its pre-pandemic level in the first quarter albeit with differences across the bloc.
- The G-20 area’s gross domestic product grew 0.8% from the previous quarter, the Organization for Economic Cooperation and Development reported on Thursday.
- India, Turkey, China, Australia, South Korea and Brazil are now all back at the levels of output seen before the coronavirus struck. But, the U.S., Italy and South Africa were among those still falling short, with the U.K. and Italy recording the largest gaps.
GameStop Remakes C-Suite, Board in Turnaround Push – Wall Street Journal, 6/10/2021
- GameStop reset its leadership team as the videogame retailer looks to leverage its recent popularity with investors to reverse years of languishing sales and strategic missteps.
- The company named two Amazon.com Inc. veterans as its chief executive and chief financial officer, and shareholders voted Ryan Cohen as chairman, cementing his oversight of a company at the center of a monthslong, social-media-fueled trading frenzy that has drawn the curiosity of individual investors, Wall Street firms and regulators.
- For the most recent quarter, GameStop said sales grew 25% from a year earlier to $1.3 billion, continuing its recovery from the pandemic with a smaller retail-store fleet.
- The company narrowed its quarterly loss to roughly $66.8 million from $165.7 million a year earlier.
P&G says commodity, freight costs to bite more this fiscal year – Reuters, 6/10/2021
- Procter & Gamble’s freight and commodity costs have amounted to around $600 million after tax so far this fiscal year, its chief financial officer said at a conference on Thursday, exceeding the company’s prior expectations.
- The company had previously said it expected more than $200 million in freight costs and about $125 million in commodity costs after tax for the fiscal year ended May 2021.
Draft Antitrust Bills Would Restrict Online Platforms – Wall Street Journal, 6/10/2021
- House lawmakers have drafted legislation designed to curb the market power of large online platforms by restricting them from certain lines of business and curtailing their ability to buy competitors, according to documents viewed by The Wall Street Journal.
- The lawmakers are considering five draft bills, the documents show.
- They would make it unlawful for operators of large platforms to control a business that creates an irreconcilable conflict of interest, to advantage their own products or services over a competitor, and to acquire companies that pose current or potential competitive threats.
- Another bill targets the budgets of antitrust enforcement agencies, while a fifth requires platforms to make their services interoperable with those of other companies.
Amazon Faces Possible $425 Million EU Privacy Fine – Wall Street Journal, 6/10/2021
- A European Union privacy regulator has proposed a fine of more than $425 million against Amazon.com, part of a process that could yield the biggest-yet penalty under the bloc’s privacy law, people familiar with the matter said.
- Luxembourg’s data-protection commission, the CNPD, has circulated a draft decision sanctioning Amazon’s privacy practices and proposing the fine among the bloc’s 26 other national data-protection authorities, the people said.
- The Luxembourg case relates to alleged violations of Europe’s General Data Protection Regulation, or GDPR, linked to Amazon’s collection and use of individuals’ personal data, and isn’t related to its cloud-computing business, Amazon Web Services, one of the people familiar with the matter said.
Tesla to Introduce Upgraded Model S to Jump-Start High-End Model Sales – Wall Street Journal, 6/10/2021
- Elon Musk is aiming to breathe new life into Tesla’s high-end sedan that helped establish the company as the world’s leading electric-vehicle maker.
- The redesign of the Model S is the latest sign that Tesla has evolved from a sprightly startup challenging incumbents with new vehicles, to an established manufacturer that also has to upgrade legacy models to keep potential buyers interested.
- The vehicle, dubbed Model S Plaid, can accelerate from zero to 60 miles an hour in less than two seconds, Tesla says on its website, and is priced starting around $130,000.
- U.S. sales of vehicles priced above $80,000 more than doubled in the first five months of the year, from the same period in 2019, according to research firm J.D. Power. Tesla delivered 2,030 combined Model S and Model X vehicles in the first quarter.
United to split 200-jet order between Boeing, Airbus -sources – Reuters, 6/10/2021
- United Airlines is in talks to buy around 200 single-aisle jets in a multibillion-dollar revamp set to benefit both Boeing and Airbus, industry sources said.
- If confirmed, the deal could include over 100 of Boeing’s 737 MAX 8 and several dozen larger Airbus A321neo jets, they said, asking not to be identified.
- The carrier is looking to upgrade its fleet at a time when travel is surging in the United States, according to Bloomberg News, which first reported the Boeing negotiations.
- That portion of the order could include 150 MAX aircraft, it said.
- In March, United ordered 25 new Boeing 737 MAX aircraft, as it prepares to replace aging jets and meet post-pandemic demand growth. read more
Keystone XL Oil Project Abandoned by Developer – Wall Street Journal, 6/10/2021
- Canada’s TC Energy and the Albertan provincial government said Wednesday they would scuttle the Keystone XL oil pipeline project, bringing to an end a years long controversy over an effort to pipe more Canadian crude to the U.S.
- The decision had been expected after President Biden used his first day in office to revoke a key permit for the pipeline to cross the country’s northern border, shutting down construction.
- It marks a historic victory for environmentalists who for a decade have made Keystone XL the focus of a campaign to block new pipeline construction as a way to limit oil consumption that contributes to global warming.
US ECONOMY & POLITICS
U.S. Inflation Is Highest in 13 Years as Prices Surge 5% – Wall Street Journal, 6/10/2021
- U.S. consumer prices continued to climb strongly in May, surging 5% from a year ago to reach the highest annual inflation rate in nearly 13 years.
- The Labor Department said May’s increase in consumer inflation was the largest since August 2008.
- The jump followed a 4.2% rise for the year ended in April.
- The core-price index, which excludes the often-volatile categories of food and energy, rose 3.8% in May from a year before—the largest increase for that reading since June 1992.
- On a month-to-month basis, overall prices rose a seasonally adjusted 0.6% and core prices rose 0.7%.
- Prices for used cars and trucks leapt 7.3% from the previous month, driving one-third of the rise in the overall index.
- The indexes for furniture, airline fares and apparel also rose sharply in May.
U.S. Jobless Claims Fall to Another Pandemic Low – Wall Street Journal, 6/10/2021
- Jobless claims declined to a pandemic low last week, a sign companies are hesitant to lay off employees as the U.S. economy quickly recovers.
- Unemployment claims fell to 376,000 last week from 385,000 a week earlier, the Labor Department said Thursday, bringing claims to the lowest level since the pandemic hit last spring.
- In the week ended May 22, 15.3 million Americans received unemployment benefits through regular state aid and federal emergency programs put in place in response to the pandemic.
- Half of U.S. states plan to end participation in federal supplemental unemployment benefits before the program expires in early September.
- Four of those states end participation this week, accounting for 470,000 of the 3.8 million people who will lose benefits early, according to forecasting firm Oxford Economics.
New Talks on Infrastructure Face Old Problem: How to Pay for It – Wall Street Journal, 6/10/2021
- The focus of infrastructure talks shifted Wednesday to a bipartisan group of senators after an initial round of White House discussions broke down, but negotiators face the same hurdles on how to pay for any major new spending package.
- Discussions intensified among a group of centrist-leaning Senate Republicans and Democrats trying to strike a deal that could spend up to $900 billion over five years, according to people familiar with the talks.
- Sen. Mitt Romney (R., Utah), who is part of the GOP wing of the bipartisan group, said there were eight or nine Republican senators involved in developing the new proposal, which he said wouldn’t include any tax increases.
- So far the bipartisan group has declined to specify how it would pay for an infrastructure proposal.
- Senate Majority Leader Chuck Schumer (D., N.Y.) indicated on Tuesday that Democrats were preparing to move forward with at least part of an infrastructure package through a process tied to the budget that would allow legislation to pass with just Democratic support.
- But some Democrats, most prominently Sen. Joe Manchin (D., W.Va.), have said they don’t want to push through legislation on party lines, at least not until all efforts at reaching a bipartisan deal have been exhausted.
Biden’s China Policy Is Emerging—and It Looks a Lot Like Trump’s – Wall Street Journal, 6/10/2021
- President Biden’s policy toward China came into sharper focus over the past week, with initiatives that suggest the president plans to retain his predecessor’s tough stance toward Beijing, despite differences in execution.
- Administration officials acknowledge that, overall, the recent steps build on actions taken by Mr. Trump. In the case of the investment blacklist and the orders affecting TikTok and other apps, they say, the Biden White House is aiming to make the measures more enforceable.
- The White House sees its China policy as resting on three pillars: strengthening the U.S. economy and democracy, rebuilding ties with allies that frayed under Mr. Trump, and defining areas of confrontation and cooperation with China.
- The third is a work in progress, the senior official said, adding that it has “taken the most time to develop.”
- Still, the administration has started to define those areas—and one is Taiwan.
U.S. Stresses Taiwan Trade-Relationship Priority in First Talks – Bloomberg, 6/10/2021
- The U.S. and Taiwan’s trade chiefs held discussions Thursday, with U.S. Trade Representative Katherine Tai emphasizing the importance of Washington’s trade and investment relationship with Taipei.
- In the virtual meeting with her Taiwanese counterpart, John Deng, Tai expressed the U.S.’s interest in working together on issues of common concern in multilateral organizations, the Office of the U.S. Trade Representative said in an emailed statement.
- Taiwan’s easing limits on imports of U.S. meat containing an additive showed the government’s determination to promote globalization and deepen bilateral economic and trade ties with the U.S., Taiwan’s Office of Trade Negotiations said in a statement.
- China opposes any official contact between the U.S. and Taiwan, which it regards as part of its territory.
- Any negotiations or discussions will inevitably be linked with U.S.-China relations, and could increase the tensions between the two.
Biden, Johnson to Meet Ahead of G-7 Summit in U.S.-U.K. Relations Test – Wall Street Journal, 6/10/2021
- President Biden and British Prime Minister Boris Johnson will meet in person for the first time Thursday, in a test of U.S.-U.K. relations amid the coronavirus pandemic, Brexit and growing tensions over Northern Ireland.
- The two leaders are expected to announce a wide-ranging “Atlantic Charter” aimed at solidifying trans-Atlantic relations.
- The charter, a riff on the joint statement made by then-Prime Minister Winston Churchill and President Franklin D. Roosevelt in 1941 when they set out their post-World War II vision, will focus on pandemic recovery, climate change, trade and security.
- The countries have also set up a task force aimed at reopening U.K.-U.S. travel, though the exact timeline for doing so hasn’t been established.
- Northern Ireland is likely to be at the top of this week’s agenda, amid a dispute between the U.K. and the European Union over a complex arrangement to manage trade and preserve peace there after Brexit.
EUROPE & WORLD
ECB Set to Fall Behind Fed in Phasing Out Stimulus – Wall Street Journal, 6/10/2021
- The European Central Bank said it would keep its aggressive monetary stimulus in place despite mounting evidence of a vigorous economic recovery and rising inflation in the eurozone as the Covid-19 pandemic recedes.
- The ECB said in a statement that it would keep its key interest rate at minus 0.5% and continue to buy eurozone debt under an emergency €1.85 trillion bond-buying program, equivalent to $2.2 trillion, through at least March 2022.
- It said it would buy those bonds at a “significantly higher pace” than during the first months of this year, repeating a pledge made in March.
- Whereas some Fed officials say they are getting ready to think about paring central bank stimulus ahead of a policy meeting on June 15-16, ECB policy makers have signaled recently that they aren’t yet ready to follow suit.
Accelerating Oil Demand Will Shrink Global Glut, OPEC Says – Wall Street Journal, 6/10/2021
- The rebound in global oil demand is set to accelerate in the second half of 2021 as the world continues to burn through the supply glut it accrued last year, the Organization of the Petroleum Exporting Countries said Thursday.
- In its monthly market report, OPEC highlighted data showing that the crude inventories of the world’s developed countries had slipped to around 34 million barrels above the average level for 2015-19.
- Rising consumption of transportation fuels like gasoline mean oil demand will increase to 99 million barrels a day in the second half of 2021, a 5% increase on its level in the first six months of the year, OPEC said.
- Demand in the fourth quarter is expected to be 99.82 million barrels a day, just 150,000 barrels below 2019’s pre-pandemic average.
China Passes Law to Counter Foreign Sanctions – Wall Street Journal, 6/10/2021
- China enacted a new law aimed at countering foreign sanctions, in response to U.S. and European efforts to pressure Beijing on issues spanning human rights, trade and technology.
- Senior members of China’s legislature approved the “anti-foreign-sanctions law” on Thursday, state media said, following an expedited process that skipped public consultation and involved lawmakers reviewing the bill twice instead of the usual three times.
- Chinese academics and state media have described the law as a timely addition to Beijing’s legal tool kit for resisting Western coercion, by establishing mechanisms for retaliating against foreign sanctions and mitigating their impact on Chinese entities and individuals.
- State media said Chinese leader Xi Jinping has signed the law, which takes effect when published. The full text hadn’t been released as of Thursday evening Beijing time.
Japan’s wholesale prices rise at fastest pace in 13 years on commodities surge – Reuters, 6/10/2021
- Japan’s wholesale prices rose at their fastest annual pace in 13 years reflecting higher commodity costs, data showed on Thursday, a sign global inflationary pressures are pinching firms already struggling amid the coronavirus pandemic.
- The corporate goods price index (CGPI), which measures the prices companies charge each other for their goods, rose 4.9% in May from a year earlier, Bank of Japan data showed on Thursday, more than a median market forecast for a 4.5% increase.
- It followed a 3.8% gain in April and was the biggest annual increase since September 2008, when a global spike in food and raw material costs pushed up a range of prices in Japan.
- Core consumer prices – the key benchmark the BOJ looks at in setting monetary policy – fell 0.1% in April from a year, marking the ninth consecutive month of decline.
- With companies seen slow in passing on the higher costs on to households, the uptick in wholesale inflation is unlikely to prod the Bank of Japan into withdrawing its massive stimulus any time soon, analysts say.
Toshiba, Japan Officials Teamed Up Against Foreign Shareholders, Report Finds – Wall Street Journal, 6/10/2021
- Toshiba worked closely with Japanese government officials to block foreign-based shareholders from exercising their rights, using inappropriate threats and language such as “beat them up,” a company-commissioned report found.
- The report harked back to the days when Japan Inc. was a popular term to describe the perceived tight linkage between big business and government in blocking foreign influence in Japan.
- Toshiba management sought to prevent the commissioning of the report, which was written by three Japanese law firms, but shareholders voted in March to go ahead with it.
- The report covered the months leading up to a shareholder vote on July 31, 2020, in which Toshiba’s then-chief executive, Nobuaki Kurumatani, narrowly kept his job and beat back efforts by foreign-based shareholders including Singapore-based Effissimo Capital Management to put their own candidates on the board.
Factmonster – TODAY in HISTORY
- Wagner’s opera, Tristan and Isolde, premiered in Munich. (1865)
- The Six-Day War between Israel and Syria, Egypt, and Jordan ended. (1967)
- Ontario, Canada issued the first full same-sex marriage licenses in North America. (2003)
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