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Daily Market Report | June 14, 2021

US FINANCIAL MARKET

Stocks Edge Lower After S&P 500 Hits Record – Wall Street Journal, 6/14/2021

  • The S&P 500 drifted lower Monday as investors shifted their attention to an upcoming Federal Reserve meeting for potential clues into the central bank’s path for interest rates.
  • The broad benchmark edged down 0.3% in recent trading, while the Dow Jones Industrial Average shed about 156 points to 34327. The Nasdaq Composite, meanwhile, was flat.
  • Stocks have ground higher amid an improving growth outlook in many developed countries and continued central bank support. All eyes will be on the Fed’s comments this week following a two-day meeting. Investors remain concerned that the Fed’s evolving views on inflation and the labor market could prompt the central bank to scale back easy-money policies sooner than previously expected.
  • Brent crude, the international energy benchmark, rose 0.9% to $73.33 a barrel, the highest since April 2019.
  • In bond markets, the yield on the benchmark 10-year Treasury note ticked up to 1.485% from Friday’s 1.462% level.
  • Overseas, the pan-continental Stoxx Europe 600 ticked up less than 0.1% after closing at a record Friday.
  • Japan’s Nikkei 225 rose 0.7% by the close of trading, and South Korea’s Kospi Index added 0.1%. Chinese and Australian markets were closed Monday for public holidays.

UK’s Johnson set to delay end of COVID curbs as Delta cases rise – Reuters, 6/14/2021

  • British Prime Minister Boris Johnson is expected to delay a further easing of COVID-19 restrictions by several weeks on Monday following concerns about a rapid rise in Delta variant infections.
  • Under a so-called “road map” outlined by Johnson in February, the government said most social restrictions would be lifted “no earlier” than June 21, when pubs, restaurants, nightclubs and other hospitality venues could fully reopen.
  • Johnson has not denied suggestions in the media that the end of lockdown would be delayed by up to a month, saying in recent days there was “serious concern” about rising infections and hospitalizations.
  • The hesitancy comes despite Britain having one of the fastest vaccine rollouts in the world. More than 41 million people have received their first shot and nearly 30 million have had both doses – about 57% of the adult population.

Italy halts AstraZeneca vaccine for under-60s – Reuters, 6/11/2021

  • The Italian government said on Friday it was restricting the use of the AstraZeneca COVID-19 vaccine to people over the age of 60, after a teenager who had received the shot died from a rare form of blood clotting.
  • People under the age of 60 who have received a first dose of AstraZeneca should be given a different vaccine for the second dose, the government’s chief medical adviser Franco Locatelli said at the same news conference.
  • “The risk-benefit assessment has changed,” Locatelli said, without mentioning the death of Canepa, who suffered from a low platelet count, brain haemorrhage and abdominal blood clots.

Novavax Covid-19 Vaccine Is 90% Effective in Key Study – Wall Street Journal, 6/14/2021

  • An experimental Covid-19 vaccine from Novavax was 90.4% effective at preventing symptomatic disease in adults in a large clinical trial, the company said, results that move the shot a step closer to global use.
  • The 29,960-person study conducted in the U.S. and Mexico also found that the vaccine was similarly effective against newer coronavirus strains, especially the alpha variant now dominant in the U.S., Novavax said.
  • Researchers identified 77 cases of mild to severe Covid-19 among all study subjects between January and April.
  • Of these, 14 were among those who had received the vaccine, and 63 among those who had gotten a placebo.
  • Novavax said 82% of the subjects in the study who got symptomatic Covid-19—and for whom genetic-sequence data were available—were infected with newer variants.
  • It is a different mechanism from the Pfizer-BioNTech and Moderna Covid-19 vaccines, which use gene-based technologies, and those from Johnson & Johnson and AstraZeneca, which use viral-vector technology.

Lordstown Motors Executives Resign Amid Inaccurate Preorder Disclosures – Wall Street Journal, 6/14/2021

  • Lordstown Motors said its chief executive and top financial leader have resigned, decisions that come amid a new report from a board committee that says some aspects of disclosures it made about truck preorders were inaccurate.
  • Lordstown Motors, which plans to manufacture electric trucks at a plant in Ohio, on Monday said Steve Burns, its CEO, and Julio Rodriguez, its finance chief, have stepped down from the company.
  • Mr. Burns also stepped down from the company’s board, according to Lordstown Motors.
  • The company also said Monday that a special board committee found that some disclosures it made about preorders for the truck it hopes to manufacture were inaccurate.
  • The committee largely rejected a report about Lordstown from short-seller Hindenburg Research, the company said.
  • The committee was established to investigate allegations made by Hindenburg, which in a March report said that Lordstown Motors had misled investors about the strength of its preorder reservations and progress toward starting production of an electric truck.

Average U.S. Vehicle Age Hits Record 12 Years – Wall Street Journal, 6/14/2021

  • The average age of vehicles on U.S. roadways rose to a record 12.1 years last year, as lofty prices and improved quality prompt owners to hold on to their cars longer.
  • It was the first time the average vehicle age rose above 12 years, according to data released Monday by research firm IHS Markit.
  • While the average vehicle age has risen steadily over the last 15 years, the trend accelerated during the coronavirus pandemic partly because of a drop in new-car sales, IHS said.
  • The finding reflects the stronger value of vehicles throughout their life cycles, from higher new-vehicle prices Americans have been paying for years to steeper prices on the used-car lot, said Todd Campau, associate director of aftermarket solutions at IHS.
  • Improved vehicle quality also is a factor, he said.
  • The total number of vehicles in operation in the U.S. has risen about 10% since 2013, to around 279 million, according to IHS.

The Pandemic Supercharged the Corporate Debt Boom – Wall Street Journal, 6/14/2021

  • Before the pandemic, U.S. companies were borrowing heavily at low interest rates. When Covid-19 lockdowns triggered a recession, they didn’t pull back. They borrowed even more and soon paid even less.
  • Nonfinancial companies issued $1.7 trillion of bonds in the U.S. last year, nearly $600 billion more than the previous high, according to Dealogic.
  • By the end of March, their total debt stood at $11.2 trillion, according to the Federal Reserve, about half the size of the U.S. economy.
  • At the start of 2020, the average investment-grade corporate bond yielded 2.84%, a rough indication of the interest rate companies with solid credit ratings would have to pay on new bonds.
  • At the peak of pandemic fears, it rose to about 4.6%, but by the end of last year it had fallen to an all-time low of 1.74%. Companies rushed to try to lock in those low borrowing costs.

Spotlight on Xbox Game Pass as Microsoft showcases upcoming games – Reuters, 6/14/2021

  • Microsoft on Sunday showcased 30 upcoming games and said most of those titles will be available on its monthly subscription service, Xbox Game Pass.
  • The company said it would launch new games on Game Pass every month through the end of the year, including titles such as PC strategy series “Age of Empires IV” and racing game “Forza Horizon 5.”
  • One of Microsoft’s big-ticket games, “Halo Infinite,” is now set for a holiday launch this year after being delayed due to the challenge of developers being stuck at home during coronavirus restrictions.
  • Microsoft also announced launch dates of two big-budget games, exclusive to Xbox and PC – role playing game “Starfield” and vampire-themed shooting game “Redfall.” “Starfield” will launch on Nov. 11, 2022 and “Redfall” next Summer.
  • Gaming analytics firm Newzoo forecasts that the global games market will generate revenue of $175.8 billion in 2021, with 2.9 billion players, and surpass $200 billion in 2023.

US ECONOMY & POLITICS

Fed Officials Could Pencil In Earlier Rate Increase at Meeting – Wall Street Journal, 6/14/2021

  • Federal Reserve officials could signal this week that they anticipate raising interest rates sooner than previously expected following a spate of high inflation readings.
  • In March, the last time they released quarterly economic forecasts, most officials expected to keep the Fed’s benchmark interest rate near zero through 2023 to encourage the economy’s recovery from the pandemic.
  • Officials are set to release updated projections Wednesday after a two-day policy meeting.
  • Fed officials’ individual March projections, charted in their so-called dot-plot, showed all 18 policy makers expected to leave interest rates unchanged through this year.
  • Four expected to start lifting rates next year, and seven projected that rates would be higher by the end of 2023.
  • The new dot-plot coming Wednesday could show more individuals expect to raise rates in 2022 or 2023, analysts say. A June survey of 127 market participants by MacroPolicy Perspectives LLC showed 68% of respondents expecting at least one rate increase in 2023.

EUROPE & WORLD

France to Hit Pre-Crisis Output in Early 2022, Central Bank Says – Bloomberg, 6/14/2021

  • The French economy will return to pre-pandemic output at the start of 2022 as the lifting of restrictions and the acceleration of vaccinations fuel a stronger than previously expected rebound in the second half of this year, the Bank of France said.
  • The central bank raised its 2021 growth forecast to 5.8% from 5.4% in March as it sees strong spending and investment help the French economy outpace the euro-area average.
  • Productivity losses from the crisis are also less than previously estimated, and the institution revised up forecasts for 2022 and 2023. It now expects a 4.1% expansion next year, instead of 3.8% forecast in March.
  • The Bank of France revised its inflation forecast for 2021 to 1.5% from 1.1% in March. But it expects the rate to fall back to 1.2% in 2022 and 2023.

Euro zone production stronger than expected in April – Reuters, 6/14/2021

  • Euro zone industrial production was stronger than expected in April, driven by a more than doubling of durable consumer goods output from a year earlier as economies steadily reopened after COVID-19 pandemic lockdowns, data showed on Monday.
  • The European Union’s statistics office Eurostat said industrial output in the 19 countries sharing the euro rose 0.8% month-on-month for a 39.3% year-on-year surge.
  • The biggest production gain in April against March was in durable consumer goods, where output rose 3.4% after 1.2% monthly declines in both February and March.
  • In year-on-year terms, the gain in durable consumer goods output was a spectacular 117.3% after a 34.5% annual rise in March, with capital goods also surging 65.4% year-on-year and intermediate goods up 38.7%.

Toshiba’s chairman resists calls to resign, to bring in new directors – Reuters, 6/14/2021

  • Toshiba’s chairman on Monday pushed back against calls from shareholders to resign, saying he wanted to help to put things right at the crisis-hit Japanese conglomerate and would bring in new directors.
  • Toshiba is in the spotlight after an independent investigation last week alleged that management colluded with Japan’s trade ministry to block foreign investors from gaining board influence, in what one top shareholder called the world’s worst corporate scandal in a decade.
  • Toshiba, in response to the investigation, has said it would no longer put forward the names of two directors for re-election and that two other executives would also resign.
  • But this was not enough for proxy advisory firm Institutional Shareholder Services, which on Monday reiterated that Board Chairman Osamu Nagayama should step down – a call echoed by other investors.

Israel Gets New Government to End Netanyahu’s 12-Year Rule – Wall Street Journal, 6/14/2021

  • A new Israeli coalition government led by commando-turned-tech entrepreneur Naftali Bennett ended Benjamin Netanyahu’s 12-year run in power, but now faces the difficult tasks of reviving an economy battered by the Covid-19 pandemic and preserving a fragile cease-fire with Palestinian militant group Hamas.
  • Mr. Bennett of the right-wing Yamina party took over as prime minister Sunday after his new, wide-ranging coalition was backed by 60 lawmakers in the 120-member Knesset, ending months of stalemate.
  • Mr. Bennett, 49, is taking power at a delicate moment in Israel’s history. Four inconclusive elections since 2019 have left the country deeply polarized, and Mr. Bennett and his allies must mend those rifts while confronting a swath of divisive issues, ranging from the construction of new settlements and empowering the country’s Arab citizens to state assistance for ultra-Orthodox Jews, if he is to keep his alliance intact.

Aung San Suu Kyi’s Trial Begins in Myanmar After February Coup – Wall Street Journal, 6/14/2021

  • The trial of Aung San Suu Kyi, whose government was ousted in a military coup in Myanmar, began Monday on a series of criminal charges that could, if she is convicted, prevent her from returning to public life.
  • Ms. Suu Kyi, 75 years old, has been a defining figure in her country’s struggle for democracy for more than three decades.
  • She won international recognition as an activist fighting military rule and in 2016 became Myanmar’s de facto civilian leader during its transition to partial democracy.
  • The generals reversed that shift by ousting her from power on Feb. 1 and putting the commander-in-chief of the armed forces in absolute control. Ms. Suu Kyi has been detained ever since.
  • Authorities have charged Ms. Suu Kyi with seven criminal offenses, all of which her lawyers say are politically motivated. She faces two charges related to illegally imported walkie-talkies, two charges of violating pandemic-related rules, and one charge each of mishandling state secrets, intent to incite unrest and corruption.

Factmonster – TODAY in HISTORY

  • The United States Army was founded. (1775)
  • The Continental Congress adopted the Stars and Stripes as the official flag of the U.S. (1777)
  • German troops entered Paris. The Nazis opened the Auschwitz concentration camp in Poland. (1940)
  • Argentine forces surrendered to British troops on the Falkland Islands. (1982)

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