by Bill O’Grady, Thomas Wash, and Patrick Fearon-Hernandez, CFA

[Posted: 9:30 AM EDT] | PDF

Good morning, all! U.S. equities appear to be headed for a higher open this morning. The overnight news was rather quiet. Our report begins with international news and discussions about rising tensions between Poland and the EU, Iranian hackers targeting workers in the defense industry, and the flood in western Europe. U.S. economics and policy news are up next, including an update on the protests in Cuba and the infrastructure bill. China news follows, and we end with our pandemic coverage.

International news:  Flood in western Europe, defense workers being targeted by Iranian hackers, and rising tensions between the EU and Poland.

• African nations are planning to lower intercontinental tariffs and are looking to raise $8 billion to offset the loss of tariff revenue. The decision is designed to make intra-trade within Africa relatively easier.
• On Thursday, a flood in Germany and Belgium caused by record rainfall across western Europe led to 100 confirmed deaths and more than 1,000 people feared missing.
• A secretive Israeli spyware company, Candiru, sold its software exclusively to governments. The software makes it easy for states to hack into iPhones, Androids, Macs, PCs, and cloud accounts. It has been used by governments to monitor and track dissidents.
• Poland and the European Union continued their six-year feud over the rule of law. On Thursday, the European Court of Justice ruled that Poland’s system of overseeing and disciplining judges is not compatible with EU law. In response, Poland has argued that the ruling goes against the Polish constitution. If Poland persists with its oversight system, the commission could ask the court to impose daily fines.
• Russia banned an investigative website that published a report suggesting that President Vladimir Putin secretly fathered a child outside of his marriage. The publisher of the report, Proekt Media, is based in the U.S.; however, anyone associated with the site potentially faces a prison sentence.
• Facebook (FB, $344.46) announced that it removed several accounts connected to a group of Iranian hackers that targeted employees of defense and aerospace industries in the U.S. and Europe.
• The European Central Bank is expected to maintain its policy accommodation for the foreseeable future, according to a Bloomberg survey of economists.

 Economics and policy: U.S. issues warning about business in Hong Kong, a U.S. tech firm is in talks to purchase its own foundry, and the Biden administration is exploring ways to restore the internet in Cuba.

• Federal Reserve Chair Jerome Powell reasserted his belief that inflation is likely going to be transitory. Although he has expressed concern with the rise in inflation, he stated it would be a mistake to withdraw the stimulus prematurely.
• The Biden administration restored protection of the Tongass Forest by re-imposing a ban on logging, roads, and mining in undeveloped forests.
• The Biden administration plans to issue a formal warning to companies doing business in Hong Kong. Officials are concerned that companies are not taking risks posed by China’s takeover of the region seriously enough.
• Intel (INTC, $55.81) is exploring a deal to purchase GlobalFoundries Inc. from Mubadala Investment, an investment arm of the Abu Dhabi government. Intel is expected to bid $20 billion for the U.S.-based foundry.
• The U.S. is exploring ways to help restore internet access in Cuba. The Cuban government shut off the internet following protests over its handling of the pandemic. Washington is also ready to send vaccines as long as the shots are administered by an international organization.
• Majority Leader Chuck Schumer has scheduled a vote on the infrastructure bill to take place on Wednesday. The bill is still largely unwritten and there have been a few obstacles that might prevent the bill from becoming law. Currently, the two sides are debating changes to funding mechanisms and the bill’s spending priorities.
• The U.S. is weighing a digital trade agreement to counter China’s growing influence. The new agreement will attempt to establish a global standard to the digital economy and will look to bring in countries from the TPP agreement.

 China: Beijing gives exemption for firms listing in Hong Kong, China is growing uneasy about U.S. troop withdrawal from Afghanistan, and pork prices fall in China.

• Chinese officials announced that firms going public in Hong Kong will be exempt from first seeking approval from the country’s cybersecurity regulator. Regulators will still vet companies that are looking to go public to make sure they are complying with local laws, but only those that plan to list in other countries will undergo a formal review.
• China has expressed concerns about the quick U.S. withdrawal from Afghanistan. There are growing fears within Beijing that instability from Afghanistan, with which it shares a small 46-mile border, could spread into its country. Over the last few years there has been growing anti-China sentiment due to the country’s growing influence in the region and its treatment of Uighur Muslims. On Wednesday, an explosion near a bus carrying Chinese workers was described by Beijing as a terrorist attack.
• China refused to set up a meeting with Deputy Secretary of State Wendy Sherman and her Chinese counterpart, Le Yucheng. Instead, China offered Sherman a meeting with Xie Feng, who is three ranks below Yucheng. The move was widely viewed as a snub and will likely heighten tensions between the U.S. and China.
• Chinese pork imports are expected to drop 50% following a sharp decline in domestic pork prices.
• Xi and Biden are expected to meet with other world leaders at the virtual APEC meeting on Friday. The informal meeting will focus on ending the pandemic and efforts to support the global recovery.
• At the urgency of the World Health Organization, Beijing is mulling over whether it will allow another inquiry into the origins of the coronavirus.

COVID-19:  The number of reported cases is 189,024,605 with 4,068,772 fatalities.  In the U.S., there are 33,977,713 confirmed cases with 608,406 deaths.  For illustration purposes, the FT has created an interactive chart that allows one to compare cases across nations using similar scaling metrics.  The FT has also issued an economic tracker that looks across countries with high-frequency data on various factors.  The CDC reports that 388,738,495 doses of the vaccine have been distributed with 336,054,953 doses injected.  The number receiving at least one dose is 185,135,757, while the number of second doses, which would grant the highest level of immunity, is 160,408,538.  The FT has a page on global vaccine distribution.

• The U.S. Surgeon General Dr. Vivek Murthy expressed concerns over the growing wave of misinformation about COVID-19 and related vaccines. He has called on tech companies to adjust their algorithms to demote false information.
• Health officials in southwest Missouri have asked for emergency hospitals to be set up to deal with the surge in cases of the Delta variant.
• Los Angeles County has told its residents that it must wear masks indoors following a sharp rise in COVID-19 cases. The county is weighing implementing new restrictions if cases continue to rise.
• President Biden announced that he is considering lifting travel restrictions with Europe following his meeting with German Chancellor Angela Merkel.
• Half of the people that contract COVID-19 experience other health complications. Although complications were more common for those over 50, young adults have also experienced health issues.
• Canada announced that it may start allowing vaccinated travelers to enter the country in September if “the current positive path of vaccination rates and public health conditions continue.”
• A Hong Kong study shows that health workers who have been fully vaccinated with the BioNTech/Pfizer (PFE, $40.09) shot have 10 times the mRNA than those who were vaccinated with the Sinovac Biotech (SVA, $1.36) shot.
• Nursing homes have struggled to convince staff to get vaccinated. Slightly more than half of nursing home staff have been fully vaccinated.
• States are starting to outlaw the required use of masks and proof of vaccinations in school.

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