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

[Posted: 9:30 AM EDT] | PDF

We open today’s Comment with the latest on Afghanistan, where President Biden has rejected calls to extend the U.S. evacuation effort beyond his August 31 deadline.  We then review a range of U.S. domestic developments, followed by some key foreign news.  We close with the latest on the coronavirus pandemic.

Afghanistan:  In yesterday’s G7 virtual meeting, President Biden apparently pushed back hard against allies who argued to keep U.S. military forces in Afghanistan past his August 31 deadline, contending that the risk of attack on troops and evacuees would be too great.  Meanwhile, Taliban officials said they would stop Afghans from trying to enter the airport, purportedly to prevent continued chaos around the facility.  They said they would continue to allow foreigners with valid travel documents in, and U.S. officials said they were working with the Taliban to allow Afghans with valid travel documents to reach the airport.

• U.S. officials have reportedly sent messages to stranded Americans in Kabul, asking them to send their GPS coordinates and wait for a rescue team to come, according to people informed about the efforts.  Military teams from Germany, the U.K., and France were carrying out similar operations for their citizens who are trying to get out of Afghanistan, according to these sources.
• Two U.S. congressmen, Representatives Seth Moulton (D., Mass) and Peter Meijer (R., Mich.), flew into Kabul airport.  They wanted to get on-the-ground intelligence to relay to fellow elected officials and expected to press the Biden administration to extend the timeline for evacuating Americans and Afghans from the country.  The two ended up agreeing with the administration’s August 31 evacuation timeline after their trip.

U.S. Fiscal Policy:  The House yesterday narrowly passed a measure greenlighting the main contours of next year’s federal budget, including the Democrats’ $3.5 trillion antipoverty and climate proposals, and locking in a deadline of September 27 to vote on the $1.0 trillion “hard” infrastructure bill.  The measure represents a compromise between Democratic progressives, who wanted to approve both proposals simultaneously, and Democratic moderates, who wanted to pass the infrastructure bill first.  In reality, the approved measure will put pressure on House progressives to pass their detailed antipoverty and climate plan as quickly as possible in order to keep the moderates from abandoning it.  Nevertheless, some versions of the Democrats’ proposals are likely to be passed into law, but what gets passed may end up being significantly watered down from the current proposals.

U.S. National Security:  On her swing through Asia yesterday, Vice President Harris’s departure from Singapore to Vietnam was delayed for several hours in connection with an “anomalous health incident,” according to the State Department.  The government has used that term to describe the “Havana Syndrome” that appears to result from unknown attack vectors against U.S. diplomats.  The announcement immediately raised concerns that Harris herself may have been targeted, although the State Department later insisted she was fine.  In any case, if foreign interests targeted the vice president’s delegation, it would be a major escalation of the attacks and put greater pressure on the federal government to get to the bottom of the problem.

U.S. Cybersecurity:  President Biden today will host a summit of top U.S. business leaders to discuss ways to enhance cybersecurity.  Following the afternoon meeting, the companies are expected to announce a number of “concrete steps” and commitments to help fight cybercrime.

China:  Shares of Chinese internet retailer Pinduoduo (PDD, $99.12) jumped more than one-fifth after it said yesterday that it would donate $1.5 billion in future earnings to charity.  Commentators on Beijing’s new “common prosperity” policy have focused on its effort to rein in large, fast-growing companies that could become rival power centers and its more recent income redistribution slant.  Now, a third major plank of the program involves the government “encouraging” rich companies and individuals to “contribute” more to charity.  Given the way investors reacted to the Pinduoduo news, it appears they’re wagering that big charitable donations will help keep firms in Beijing’s good graces.

• As we’ve noted, the common prosperity program is a significant regulatory risk for Chinese companies.  However, there is also a budding labor shortage that companies are dealing with as young people shun factory jobs and more migrant workers stay home.
• Some migrant workers are worried about catching COVID-19 in cities or factories, despite China’s low caseload. Other young people are gravitating toward service-industry jobs that pay more or are less demanding.

Japan:  With Prime Minister Suga’s popularity plunging ahead of this autumn’s elections, Former Foreign Minister Fumio Kishida said he would run to replace Suga as the Liberal Democratic Party’s leader in September’s party elections.  Kishida will be at least the second LDP official who has announced an effort to depose Suga.

European Union-Russia:  In a sign of how Russia might use its energy exports for political purposes after the imminent completion of the Nord Stream 2 natural gas pipeline from Russia to Germany, Moscow is refusing to significantly boost its current gas exports through Ukraine, despite the fact that Europe’s gas supplies are at their lowest levels in years and prices are surging to record levels.  The refusal to boost flows through Ukraine deprives that pro-Western country of vast amounts of transit fees.

COVID-19:  Official data show confirmed cases have risen to 213,396,756 worldwide, with 4,456,252 deaths.  In the United States, confirmed cases rose to 38,077,814, with 630,840 deaths.  Vaccine doses delivered in the U.S. now total 428,529,385, while the number of people who have received at least their first shot totals 202,041,893.  Finally, here is the interactive chart from the Financial Times that allows you to compare cases and deaths among countries, scaled by population.

Virology

• According to the latest CDC data, 60.9% of the U.S. population has now received at least one dose of a vaccine, and 51.6% of the population is fully vaccinated.
• Johnson & Johnson (JNJ, $175.39) said researchers found antibody levels increased ninefold among people who received a second dose of its vaccine, compared with one month after they received a first dose.
  • The company didn’t specify exactly when or how many subjects received the second dose; information posted about the clinical trial in an online government database indicates it was administered six months after the first shot.
  • In any case, the study is expected to bolster the case for allowing booster shots with the J&J vaccine.
• In a sign of how corporate vaccine mandates are spreading following the full authorization of the shot from Pfizer (PFE, $48.38) and BioNTech (BNTX, $368.20), Goldman Sachs said it would require proof of vaccination from all staff and clients entering the bank’s offices starting September 7.  It will require any employees who were not fully vaccinated to work from home.
• In Japan, Prime Minister Suga has imposed states of emergency or similar policies on even more areas.  With emergency or quasi-emergency measures now applied in 33 of the country’s 47 prefectures, there are growing calls — including from the National Governors’ Association last week — for one or the other to be expanded nationwide as a fifth wave fueled by the Delta variant continues to spread.
• An official intelligence assessment by U.S. spy agencies on the origins of the pandemic didn’t reach a definitive conclusion regarding whether the new coronavirus jumped to humans naturally or via a lab leak, in part because of the lack of detailed information from China.  The report, delivered to the White House on Tuesday, highlights the challenge in understanding the source of the pandemic as China continues to withhold lab records, genomic samples, and other data.

 Economic and Financial Market Impacts

• With risk markets continuing to be buoyed by stimulative fiscal and monetary policies related to the pandemic, established companies are taking advantage of the hot market by raising billions of dollars in follow-on stock offerings.  In fact, follow-on stock issuances are proceeding at the fastest pace since 1996.

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