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Daily Market Report | July 6, 2021

US FINANCIAL MARKET

U.S. Oil Prices Retreat After Hitting Six-Year High on OPEC Standoff – Wall Street Journal, 7/6/2021

  • Oil prices whipsawed as an OPEC deadlock raised the prospect that the alliance could fail to come to agreement about limits on production, leading big producers to open the taps.
  • The United Arab Emirates refused to sign up to the Saudi Arabia-backed strategy, prompting the group to cancel Monday’s planned meeting.
  • The U.S. has pushed the cartel to reach a deal that would allow output to rise, cooling the surge in prices. “Administration officials have been engaged with relevant capitals to urge a compromise solution that will allow proposed production increases to move forward,” Reuters reported a White House spokesperson as saying Monday.

Ransomware Hackers Demand $70 Million to Unlock Computers in Widespread Attack – Wall Street Journal, 7/6/2021

  • The boss of the company at the heart of a widespread hack that has affected hundreds of businesses said he briefed the White House and that attackers are demanding a single $70 million ransomware payment.
  • The cyberattack that started to unfold Friday is estimated to have hit hundreds of mostly small and medium-size businesses and tens of thousands of computers.
  • It quickly set off alarms in U.S. national security circles over concern that it could have far-reaching effects.
  • The ransomware incident has raised concerns because Kaseya’s VSA software is used by many technology companies to provide computer management services, potentially providing a gateway to other victims.
  • The attack locked up computers at schools in New Zealand and locked up cash registers at Coop, a Swedish grocery store chain that was forced to shut some outlets.

After Apple Tightens Tracking Rules, Advertisers Shift Spending Toward Android Devices – Wall Street Journal, 7/6/2021

  • Advertisers have begun shifting their spending patterns in the months since Apple began requiring apps to gain iPhone and iPad users’ permission to track them.
  • After the tracking change took effect in April, many users of Apple’s iOS operating system have received a high volume of prompts from apps asking permission to track them—requests that most have declined.
  • Less than 33% of iOS users opt in to tracking, according to ad-measurement firm Branch Metrics.
  • As of June 22, more than 70% of iOS devices had been upgraded to a version that requires the tracking prompt, according to Branch Metrics, allowing advertisers to begin assessing the impact.

Toyota’s Chip Supply Helps It Beat General Motors for the First Time – Wall Street Journal, 7/6/2021

  • Toyota’s decision to build a stockpile of chips for its cars paid off by lifting it above perennial top dog General Motors in the U.S. for the first time.
  • Between April and June, Toyota sold 688,813 vehicles in the U.S., giving it a razor-thin 577-unit margin of victory over GM, according to figures from the two companies.
  • It was the first time a Japanese car maker took the top position in the U.S., according to car-shopping website Edmunds.com, and came as the politically sensitive U.S. trade deficit is widening.
  • Toyota’s factories have run at over 90% capacity so far this year, compared with 50% to 60% for most of its rivals, according to LMC data.
  • The market is so tight that sedans are selling again, Toyota said, after years in which the U.S. tilted toward trucks and SUVs. Dealers said the current sales frenzy includes people who can’t afford one of the bigger models.

Facebook, Twitter, Google Threaten to Quit Hong Kong Over Proposed Data Laws – Wall Street Journal, 7/6/2021

  • Facebook, Twitter and Alphabet’s Google have privately warned the Hong Kong government that they could stop offering their services in the city if authorities proceed with planned changes to data-protection laws that could make them liable for the malicious sharing of individuals’ information online.
  • A letter sent by an industry group that includes the internet firms said companies are concerned that the planned rules to address doxing could put their staff at risk of criminal investigations or prosecutions related to what the firms’ users post online.
  • Doxing refers to the practice of putting people’s personal information online so they can be harassed by others.
  • Hong Kong’s Constitutional and Mainland Affairs Bureau in May proposed amendments to the city’s data-protection laws that it said were needed to combat doxing, a practice that was prevalent during 2019 protests in the city.
  • The proposals call for punishments of up to 1 million Hong Kong dollars, the equivalent of about $128,800, and up to five years’ imprisonment.

US ECONOMY & POLITICS

U.S. service sector activity cools in June; employment measure contracts – ISM survey – Reuters, 7/6/2021

  • U.S. services industry activity grew at a moderate pace in June, likely restrained by labor and raw material shortages, resulting in unfinished work continuing to pile up.
  • The Institute for Supply Management said on Tuesday its non-manufacturing activity index fell to 60.1 last month from 64.0 in May, which was the highest reading in the series’ history.
  • The survey’s measure of backlog orders increased to a reading of 65.8 from 61.1 in May.
  • Inventory sentiment among customers remained poor.
  • Business inventories were depleted in the first quarter amid pent-up demand.
  • The survey’s measure of prices paid by services industries dipped to a still-high 79.5 from 80.6 in May, which was the highest reading since September 2005.
  • The ISM survey’s measure of service employment fell to a reading of 49.3 in June from 55.3 in May.

Lower-Wage Workers See Biggest Gains From Easing of Covid-19 Pandemic – Wall Street Journal, 7/6/2021

  • New jobs at restaurants, hotels, stores, salons and similar in-person roles accounted for about half of all payroll gains in June, according to the Labor Department. And workers in those industries are seeing larger raises than other employees.
  • In the first six months of the year, the leisure and hospitality sector alone has accounted for nearly 50% of the 3.3 million jobs added in the U.S.
  • Average hourly wages for retail workers were up 8.6% in June from February 2020, before the pandemic took hold in the U.S. Wages for restaurants and other hospitality workers were up 7.9%.
  • Both gains are above both overall wage growth, at 6.6% in that period, and inflation.

Supermarkets Are Stockpiling Inventory as Food Costs Rise – Wall Street Journal, 7/6/2021

  • Supermarkets are stocking up on everything from sugar to frozen meat before they get more pricey, girding for what some executives anticipate will be some of the highest price increases in recent memory.
  • The move is a reversal from last year when consumers hoarded groceries because of concerns about food availability, disrupting the food industry. Now, retailers themselves are stockpiling to keep costs down and protect margins.
  • Associated Wholesale Grocers, the nation’s largest wholesaler for more than 3,000 grocery stores recently purchased 15% to 20% more inventory, mainly of packaged foods with longer shelf life, David Smith, chief executive officer said.

Soaring U.S. Rents Are the Sticky Inflation With Staying Power – Bloomberg, 7/6/2021

  • The cost of renting a home is soaring in cities across the U.S., squeezing the finances of low-income households and posing a threat to the consensus that pandemic inflation will soon fade away.
  • The median national rent climbed 9.2% in the first half of 2021, according to Apartment List.
  • While part of the increase reflects a bounce-back in prices that dropped earlier in the pandemic, the real-estate firm says rents are now higher than if they had stayed on their pre-Covid track.
  • Surveys by the New York Fed and Fannie Mae suggest renters are braced for further hikes of 7% to 10% in the coming year.

U.S. lobby groups write battle plan to beat Biden tax hikes – Reuters, 7/6/2021

  • U.S. business lobbying groups cheered a bipartisan $1.2 trillion infrastructure deal, but are gearing up to fight the corporate tax hikes looming in a separate but linked spending bill that Democrats aim to pass without Republican votes.
  • The U.S. Chamber of Commerce, the National Association of Manufacturers, the National Retail Federation and other deep-pocketed lobby groups plan to use the same argument they employed in 2017 to secure huge tax cuts from Republicans: higher corporate taxes equal fewer jobs.
  • Business lobbyists are focused on persuading Democratic senators Joe Manchin of West Virginia, Kyrsten Sinema of Arizona and a few Democratic House members that tax hikes will hurt small businesses just emerging from the pandemic.

EUROPE & WORLD

Euro zone business activity soared in June as lockdowns lifted – Reuters, 7/5/2021

  • Euro zone businesses expanded activity at the fastest rate in 15 years in June as the easing of more coronavirus restrictions brought life back to the bloc’s dominant service industry, a survey showed on Monday.
  • IHS Markit’s final composite Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, jumped to 59.5 last month from May’s 57.1, its highest level since June 2006.
  • Activity in Germany’s service industry grew in June at its fastest pace since March 2011 while in France the sector boomed following the easing of COVID-19 restrictions.
  • The services business expectations index climbed to 72.7 from 71.2, its highest since August 2000.
  • A PMI covering euro zone manufacturers, released last week, showed factory activity expanded at its fastest pace on record in June but that they faced the steepest rise in raw materials costs in well over two decades.
  • Those inflationary pressures were also felt by the services industry and the composite input prices index bounced to the highest in nearly 21 years.

Japan’s May household spending growth slows from previous month – Reuters, 7/5/2021

  • Japan’s household spending rose at a double-digit rate in May as consumers bought cars and mobile phones, though the pace of growth slowed from the prior month as a new wave of COVID-19 infections weighed on consumer confidence.
  • Household spending grew 11.6% year-on-year in May, the third month of gains, after a 13.0% rise in April, government data showed on Tuesday.
  • Stripping out big-ticket items like housing, cars and gifts, household spending was up 8.9% year-on-year, but down 6.5% compared to the same month two years earlier – a sign the recovery is taking time to bed in.
  • Separate data on Tuesday showed inflation-adjusted real wages in May posted the biggest year-on-year rise since June 2018, in part due to a year-on-year surge in overtime pay.

German car production forecast slashed as supply-chain woes persist – Reuters, 7/5/2021

  • Germany’s car industry on Monday slashed its forecast for production growth this year, indicating that the recovery from the coronavirus pandemic will be bumpy as manufacturers battle supply-chain disruptions.
  • The Association of German Automobile Manufacturers (VDA) cut its forecast for production growth to 3% from 13% previously, saying that production in recent months had been “significantly below expectations”.
  • It now expects 3.6 million cars to be made in Germany this year, down by 400,000 units from its last forecast, the VDA said in its mid-year market update.
  • Manufacturers idled production early in the pandemic in anticipation of a go-slow by car buyers, and have been caught short by a snapback in demand as economies have reopened this year.

Didi Falls Premarket as China’s Probes of U.S.-Listed Firms Jolt Investors – Wall Street Journal, 7/6/2021

  • China’s regulatory probes into three technology companies shortly after their U.S. listings have caught global investors off guard, showing the risks of owning shares in fast-growing businesses that have come under Beijing’s microscope.
  • On Tuesday morning, the American depositary receipts of newly listed Didi Global tumbled 22% in early premarket trading, after China’s cybersecurity regulator delivered a second blow to the ride-hailing giant two days after launching a review of its data security on Friday.
  • A unit of the regulator had also announced Monday data-security probes into popular mobile apps operated by Full Truck Alliance and Kanzhun, whose ADRs fell 16% and 10%, respectively, in premarket trading.
  • Didi’s Chinese ride-hailing app, Full Truck Alliance’s two truck-hailing platforms and Kanzhun’s online-recruiting app were ordered to stop adding users while the reviews take place.

European Business Leaders Want a Stronger Hand With China, Not Decoupling – Wall Street Journal, 7/6/2021

  • A powerful European business lobby group called on European Union politicians to push back harder against China’s state capitalism but not to lock out Chinese businesses, as advocated by some leaders who are following the U.S.’s lead on limiting commercial ties to China.
  • Members of the European Round Table for Industry, or ERT, a trade group of almost 60 chief executives and chairpersons of major Europe-based multinationals, on Monday called on EU leaders to push for better business terms with China and not to turn away, despite some leaders’ growing misgivings about Beijing and amid improving ties with Washington.
  • The ERT also urged Brussels not to use the coronavirus pandemic’s economic shock to augment Europe’s manufacturing and political autonomy in ways that become protectionist.
  • The group on Monday issued a position paper pushing back against calls from some European leaders for the bloc to develop greater “strategic autonomy” from both the U.S. and China by enhancing its own production capabilities and geopolitical stature.

Factmonster – TODAY in HISTORY

  • Sir Thomas More was beheaded after refusing to join Henry VIII’s Church of England. (1535)
  • Louis Pasteur successfully treated a patient with a rabies vaccine. (1885)
  • The Mars rover Sojourner rolled onto the Martian surface. (1997)

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