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

[Posted: 9:30 AM EDT] | PDF

Good morning.  Risk markets are weaker this morning.  Fears of slowing global economic growth, the persistence of the pandemic, and the unsettling images from Kabul are weighing on sentiment.  Our coverage begins with the events in Afghanistan.  Up next is economics and policy, followed by China news and our international roundup.  We close with pandemic news.

Afghanistan:  We continue to monitor events in the country.  Over the weekend, the government of Ashraf Ghani has collapsed as he has fled the country.  Over the past month, the Taliban has captured key cities amid almost non-existent resistance in most areas.  By taking Kabul, the Taliban has effective control of the country.  The U.S. era in Afghanistan has come to a rapid and chaotic end.  The last land route out of Afghanistan has been taken by the Taliban, leaving air evacuation from Kabul airport as the only remaining exit.  The airport has reportedly come under fire, so leaving the country may not be possible at some point.  Scenes at the airport, similar to the iconic ones observed in 1975 Saigon, will become a lasting memory.  Crowds have packed the airport, hoping for a flight out.  Western nations are scrambling to pull embassy personnel out of the country.  U.S. embassy officials were ordered to destroy sensitive materials, and most personnel are being evacuated.  It appears that U.S. forces control the Kabul airport, but it is unclear how long that will last.  The State Department has told remaining employees to stay at the embassy.  Helicopters have been ferrying workers out, as it has become too dangerous to escape by car.  European embassies will remain in Kabul to process visas for local employees who would be in great danger from the Taliban government.  Germany is sending its military to evacuate its embassy.

Unfortunately for the Taliban, taking territory is one thing, but governing is another.  Afghanistan is divided along tribal and ethnic lines, and once outside powers are ousted, the country will likely spiral into civil conflict.   When the Taliban was in control before 2001, it was a brutal regime; although we expect a return to such governance, it is possible the group may govern with a lighter hand this time around.  The old leadership is mostly gone, and the lesson from before is that harsh conditions trigger opposition.

Although it’s still a bit early to tell, our read is that the chaotic end to the U.S.-sponsored government in Afghanistan will have serious political ramifications.  The administration was caught flat-footed by the speed of the Taliban offensive.  SoS Blinken was on the Sunday news shows arguing that what was happening in Afghanistan “was not Saigon.”  It’s arguably worse.  What is going on in Kabul is being described as “Saigon on steroids.”  The U.S. had effectively withdrawn in 1973, and the government of South Vietnam held power until 1975.  Establishment figures are calling the decision to leave Afghanistan and the collapse of the government an intelligence and planning failure.   What went wrong?  The president appears to have made up his mind early on to exit Afghanistan.  As a policy, this is defensible.  Although it has been argued that a failed state in Afghanistan could be a breeding ground for international terrorism as it was with al Qaeda, there are many failed states in the world and the U.S. can’t occupy all of them.  Afghanistan, by itself, is not central to U.S. foreign policy interests.  However, what happened over the past two weeks shows a clear lack of preparation.  According to reports, the president didn’t take the advice of military leaders.  Again, this isn’t a shock; the military rarely wants to abandon missions.  Leaving like this isn’t in anyone’s playbook and suggests a lack of planning.  After all, the administration knew we were leaving.  The lack of preparation will have political costs.  It can be argued that the Trump administration left Afghanistan as unfinished business, and “leftover” issues are always part of transitions.  In any case, once you are sworn in, they become your problems.

Whenever an event like this occurs, questions are raised about America’s reliability as an ally.  The human tragedy of Afghans who supported the war effort and are left behind reflects badly on the U.S.  History shows that if an area of the world is considered a vital interest, the U.S. has remarkable staying power.  The security support for Europe and Japan can attest to this.  However, areas that are not vital can be abandoned rather quickly.

All presidencies face unexpected crises.  The George W. Bush administration wanted a “humble” foreign policy…until 9/11.  President Obama took power into the teeth of a deep recession and a financial crisis.  The pandemic clearly affected the Trump administration.  The Biden government has been aggressively pushing for major fiscal policy actions; Afghanistan will almost certainly become a serious distraction and could potentially derail the process.  To allow such chaos raises concerns about competence.

Economics and policy:  The FOMC is leaning toward policy tightening, and the House is starting to prepare for the budget and infrastructure bills.

• We will have more to say on this topic in the next couple of weeks, but we are seeing unmistakable momentum for monetary policy tightening, despite Chair Powell’s insistence that it will be a while before the stimulus is reduced. Rising inflation and a rapid rebound in economic growth all support policy tightening.  However, while we are watching this trend toward reducing stimulus, we couldn’t help but notice last Friday’s plunge in consumer sentiment.

This chart shows the monthly percent change in the index; declines seen in August (the data is preliminary and will be finalized at the end of the month) are unusual, and more often than not, are tied to recessions.  What is depressing consumers?  It’s probably a lot of things, such as rising inflation, the lingering pandemic, political strife, etc.  This data suggests the FOMC should exercise caution.  We don’t have much experience with pandemic recoveries, and the Fed could get “wrong-footed” here.

• Freight rates remain elevated, exacerbating inflation. It is not obvious when bottlenecks will be resolved.
• House leadership is trying to finesse the two infrastructure measures. Progressives want the budget deal first, followed by the bipartisan package.  Moderates want them reversed.  We expect both will pass, but the budget deal will be well below the $3.5 trillion that is the current bill.
  • The U.S. is making the largest permanent increase in food stamps.
• The pandemic accelerated the work from home movement. Firms are scrambling, trying to determine what to do with office space.  State Street (STT, USD, 90.79) has decided to vacate two of its New York City locations.

China:  The Chinese economy is slowing, and there is growing evidence of Xi’s concentration of power.

• There is a clear slowdown occurring in the Chinese economy. Although the Delta variant has played a role, monetary policy is also tight.  Since the Great Financial Crisis, China has tended to stimulate the economy whenever there was a slowdown.  Given the recent crackdowns on credit, it is possible that the Xi government has accepted slower growth.
• For the past several months, investors have seen a whole series of edits from Beijing that have rattled several industries. One analyst suggests bureaucrats are acting swiftly on instructions or comments from General Secretary Xi in a fashion similar to the way they reacted to Chairman Mao’s instructions or comments during the Cultural Revolution.  If that is the case, predicting behavior will be exceedingly difficult.  It also reflects the growing concentration of power by Xi and the undermining of the CPC’s institutional framework created by Deng.
• U.S. corporations are getting antsy about the continued constraints on doing business with China.   The Biden administration is conducting a review of tariffs and other constraints but appears to be in no hurry to relax anything.
• U.S. higher education is facing a myriad of threats.  Weakening U.S. demographics and a backlash against high tuitions are part of the problem.  Another one is falling international student enrollment, especially from China.

International roundup:  Haiti, Beirut, and Canada are in the news.

• Late last week, Haiti suffered a major earthquake. The 7.2 magnitude event has killed at least 1,300 people and injured thousands.  And now, sadly, TS Grace is bearing down on the island today.  The storm is expected to reach the Gulf of Mexico by the week’s end.
• Just over a year ago, a massive explosion at the Port of Beirut and the government’s inability to respond has tipped the country into chaos. One problem that has emerged is that centralized electrical power has become intermittent, leading households and businesses to use portable generators.  The use of generators has increased the demand for fuel oil, leading some to hoard fuel.  The military was seizing fuel allegedly being hoarded when a fuel tank exploded, killing at least 28 people.
• PM Trudeau of Canada has called for snap elections set for September 20. Trudeau has been managing a minority government since 2019 and is looking to gain a majority.
• Wildfires have been hitting European countries in the Mediterranean. There are reports that suggest some of them in Italy may have been set by the Mafia in a bid to gain access to government relief funds.
• Russia is expelling a BBC reporter as tensions with foreign journalists increase.

COVID-19:  The number of reported cases is 207,278,035, with 4,364,473 fatalities.  In the U.S., there are 36,680,793 confirmed cases with 621,636 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 415,957,645 doses of the vaccine have been distributed with 356,433,665 doses injected.  The number receiving at least one dose is 198,088,722, while the number receiving second doses, which would grant the highest level of immunity, is 168,362,058.  The FT has a page on global vaccine distribution.

• As we noted above with the consumer sentiment data, the Delta variant is affecting the economy, increasing costs and weakening demand.
• The earlier variants of COVID-19 were most deadly for older people. Younger people could be infected but usually had cases that could be managed at home.  However, the Delta variant has been causing a surge in hospitalizations for the 30-39 age cohort.
• In Indonesia, the Delta variant is adversely affecting children.
• Iceland has one of the world’s highest vaccination rates. It is also dealing with a surge in infections.  So far, the rate of hospitalizations has been low, confirming that vaccines for COVID-19 don’t grant sterilizing immunity.  They protect you from severe illness but not from getting infected.  If this is a permanent condition (and we suspect it is), we will live with this virus, much as we do with influenza.
• On August 24, U.S. intelligence agencies will provide their assessment of the Wuhan lab leak theory for the origin of COVID-19.

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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. Our report begins with a discussion about inflation. Next, we provide a round-up of international news, including the Taliban’s advancement in Afghanistan and Bolsonaro’s attempt to undermine the electoral process in Brazil. U.S. economics and policy news are up next, including details about the latest Census survey. China news follows, and we end with our pandemic coverage.

Let’s talk about CPI: The Bureau of Labor Statistics released the latest price figures this week and it offered some reassuring news. The month-over-month rise in CPI decelerated to its slowest pace in five months. In July, headline CPI rose 0.5%, down from the previous month’s reading of 0.9%. Additionally, core CPI slowed from 0.9% in June to 0.3% in the latest report. The deceleration was led by a steep decline in the pace of price increases for used cars. The report showed that the rise in used car prices slowed from 10.5% in June to 0.2% in the following month. Despite the moderation in CPI, inflation fears may still be warranted.

The chart above shows the geometric mean of the two-year change in the producer and consumer price indexes. This chart is designed to improve the year-over-year comparability of the indexes by averaging the change over the last two years, thereby limiting the pandemic distortions. That being said, the data suggests that despite the moderation in consumer prices in July, price pressures are still building throughout the economy. At this time, it appears that this pressure may be related to a lack of inventory. As a result of material shortages, demand for goods and services remains high as firms attempt to rebuild their inventories to meet growing demand. As of June, retail inventories for motor vehicles and clothes are still well below their pre-pandemic levels, while sales appear to be very strong. Over time, we believe as production capacity expands inventories will return to their normal level and this should relieve the economy of some inflationary pressure. Therefore, the most recent report has not changed our view that inflation is likely transitory.

International news: 

• The Venezuelan government and its opposition will meet in Mexico City on Friday to discuss how to resolve their differences. The discussion will be mediated by international observers such as Norway. At this time, there are no expectations of a breakthrough.
• On Sunday, Canadian Prime Minister Justin Trudeau is expected to announce a snap election on September 20 as he attempts to gain approval for his COVID-19 response. PM Trudeau is currently working with a minority government and relies on smaller parties to get legislation passed.
• Brazilian Supreme Court Justice Alexandre de Moraes opened a probe into President Jair Bolsonaro for posting documents from a sealed investigation. Bolsonaro has been trying to undermine the integrity of the election as he remains widely unpopular within the country. The documents that he posted were related to an investigation into the hacking of a federal election court. Over the last few months, he has been spreading unsubstantiated claims about election machines being targeted by foreign hackers. Bolsonaro’s behavior suggests that he may not accept the results of the election if he were to lose. Given the country’s history and Bolsonaro’s recent comments, we would not be surprised to see another military takeover in Brazil following the election. In this event, it would likely be very bad for Brazilian equities as Brazil would be hit by sanctions from the U.S. and Europe. However, in the long run we think conditions could become more favorable for stocks.
• The Taliban has edged closer to taking over the country of Afghanistan. The rebel group has taken several major cities throughout the country at a much faster pace than originally anticipated. On Thursday, it took control of its 10th provincial capital as it edges closer to surrounding Kabul, the capital of Afghanistan. In response to the Taliban’s advancement, EU Foreign Policy Chief Josep Borrell suggested that the Afghan government should attempt to reach a settlement with the group. The U.S. and U.K. have deployed troops in Afghanistan in order to expedite the evacuation of staff from embassies within Kabul.

Economics and policy:

• Details from the latest Census survey were released on Thursday. Here are a few takeaways from the report:
  • Over the last decade, the population grew 7.4%, the slowest pace since the Great Depression.
  • For the first time in history, the number of people who identify as White decreased.
  • People identifying as being more than one race were the fastest growing group. This change was partially due to adjustments made by the Census Bureau.
  • Additionally, almost half of the country’s children are nonwhite, suggesting the country will become more diverse over time.
  • Lastly, it appears more people have left rural areas in favor of cities. The change in demographics may have an impact on the makeup of Congress. An increase in urbanization generally favors Republicans’ ability to win more seats in the Senate.
• Bill Gates announced that a fund run by his investment firm will commit $1.5 billion to the Department of Energy if Congress enacts a program aimed at developing technologies that cut carbon emissions. The initiative is meant to attract other investors to raise an additional $15 billion.
• Home prices have risen in almost every part of the country according to the National Association of Realtors. The rise in home prices has likely been spurred by low interest rates.
• The Supreme Court lifted a ban on New York State’s eviction moratorium as litigation over the dispute continues.

China:

• Several provincial cities in China have declared a red alert following floods throughout the country.
• The population in Hong Kong declined at its fastest pace ever in 2020 as many people left the region following the passage of the national security law.
• A combination of the pandemic and worsening U.S./China relations have made Chinese students more hesitant to study at American universities.

COVID-19: The number of reported cases is 205,462,557 with 4,335,111 fatalities.  In the U.S., there are 36,306,917 confirmed cases with 619,093 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 411,253,925 doses of the vaccine have been distributed with 353,859,894 doses injected.  The number receiving at least one dose is 196,505,543, while the number receiving second doses, which would grant the highest level of immunity, is 167,354,729.  The FT has a page on global vaccine distribution.

• On Thursday, Supreme Court Justice Amy Coney Barrett turned down a challenge to Indiana University’s vaccine mandate. The school requires that all students be vaccinated unless they have a religious or medical exemption. Students who are not vaccinated would have to submit to testing. The students that sued the school in order to block the mandate argued that it violated their constitutional rights. This was the first vaccine mandate-related suit to be turned down by the Supreme Court.
• The Food and Drug Administration expanded the emergency use of the COVID-19 vaccine to include a third dose for certain immunocompromised people. Although the third dose has yet to be expanded to the broader population, the country’s leading infectious expert, Dr. Anthony Fauci, stated that people will eventually need to receive the third dose.
• Rising COVID-19 cases in China have led to a closure of shipping ports at the Yantian Port and Ningbo-Zhoushan Port. The port closures could exacerbate price pressures as it will be harder for firms to maintain inventories.
• More job postings are requiring applicants to be vaccinated. The push for vaccination highlights growing fears about the spread of the delta variant.

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

[Posted: 9:30 AM EDT] | PDF

Good morning.  U.S. equity futures are mostly steady this morning.  Financial markets are broadly steady, consistent with late summer trading.  Our coverage kicks off with news from China followed by the international roundup.  Economics and policy follow, and we close with our usual pandemic update.

China: U.S./China relations are taking on Cold War characteristics and Lithuania has Beijing upset.

• One of the features of the Cold War was how the U.S. and U.S.S.R. used various tactics to steer nations into their respective camps. The Soviets used force (Eastern Europe) and supplied critical exports (Cuba) or military equipment (Egypt, India).  The U.S. provided security at low cost (Japan, Europe, Canada), market access (South and Central America), shared intelligence (U.K., Australia, New Zealand, Canada), and military aid (Southeast Asia).  After the Cold War ended, much of the U.S. assistance remained, although the domestic political support has waned over the years.  As relations between the U.S. and China devolve into a cold war, both nations are offering carrots and sticks to build alliances.  Although the U.S. has officially indicated that it won’t force nations to choose, recent actions suggest otherwise.  In Brazil, the U.S. is pushing the country to abandon Huawei (002502, CNY, 5.17) telecommunications equipment.  Brazil is a longtime user of China’s technology and getting it to give up on Huawei will be difficult.  According to reports, Jake Sullivan offered NATO membership if Huawei is forced out of Brazil.  Brazil is deeply reliant on China so prying the country away from Beijing will be difficult.
• Lithuania has become a problem for Beijing. The Baltic nation has allowed Taiwan to open an office in the country under its own name, which smacks of statehood, something China opposes.  China has recalled its ambassador to Lithuania in protest.  As expected, state media is making all sorts of threats against Lithuania, including severing diplomatic relations, but there are limits to Beijing’s actions.  Lithuania is a small country, but it is a member of the EU and if China pushes aggressively, it could trigger a broader European reaction.
• Evergrande (EGRNF, USD, 0.80), the troubled Chinese property developer, confirmed it is in talks to sell assets in a bid to improve its financial situation. China’s growth since the Great Financial Crisis has been debt-fueled and trying to bring debt growth under control will almost certainly lead to lower growth.
• Michael Spavor, a Canadian citizen, has been sentenced to 11 years in prison on spying charges. It is improbable that Spavor is a spy (although that doesn’t mean Canadian intelligence doesn’t talk to him); instead, he is being used as leverage in the extradition case of Ming Wanzhou, the CFO of Huawei whom the U.S. accuses of violating Iranian sanctions.  The U.S. has protested the sentencing, but we doubt this will have much of an effect.
• General Secretary Xi has been steadily reversing the policies of Deng. The latter opened the economy and, to some extent, opened the country socially as well.  As Xi has consolidated power, behavior control has become part of his policy.  The latest area seeing a crackdown is post-work bar tours and “harmful karaoke.”
• There are reports that China is using subsidiaries controlled by the Xinjiang Production and Construction Corps to export goods produced in the region that may involve detained labor.
• Another element of Xi’s policies is the favoring of state-owned enterprises. This bias is undercutting small enterprises, which were important to the Chinese economy during the Deng years.  According to reports, small businesses are closing, putting pressure on the economy.
• Although data for female participation isn’t calculated in China, anecdotal reports suggest women are increasingly working in construction as male workers become less available.
• China has built two aircraft carriers and is working on a third. Interestingly enough, analysts are not all that concerned as there is a growing consensus that these vessels are becoming vulnerable to countermeasures.  Thus, it begs the question as to why China is building these, especially when it has developed missiles dubbed as “carrier killers.”
• The Belt and Road project is facing rising criticism over human rights abuses. On a related note, Beijing is increasing its investments in Myanmar.

 International roundup: North Korea won’t be ignored and details on the activities of Russian mercenaries comes to light.

• In our “2021 Geopolitical Outlook,” we warned that Pyongyang would likely test the new administration at some point. It looks like we may be coming to that point.  The U.S. and South Korean military exercises are scheduled for next week.  These regular actions tend to upset the Kim regime and the pattern apparently persists.  Kim Jong Un’s sister, Kim Yo Jong, is warning that the Hermit Kingdom will be increasing its military activity in light of these games, including boosting its nuclear arsenal.  North Korea is apparently also refusing to answer the hotline with South Korea in response to the exercises.  We doubt much else occurs from this incident, but it bears watching.
• The Wagner group is a Russian organization that provides mercenaries who have been active in Eastern Ukraine and Africa. The group allows Russia to have influence with a degree of plausible deniability.  It appears the group has been active in the Libyan conflict.  The BBC acquired a table from a Wagner operative which details its operations in Libya.  Some of the actions, which apparently include the deliberate killing of prisoners, would fall into the category of war crimes.
• Russia is positioning its new military aircraft, the “Checkmate,” as an alternative to the F-35.
• The Taliban continues to roll up gains in Afghanistan. Nine provincial capitals are either under Taliban control or are being contested.  Yesterday, Afghan government forces surrendered a base near Kunduz in northern Afghanistan.  Although the Taliban appears poised to take control of the country, maintaining that control will be problematic.  The most likely outcome is that a civil conflict will develop following the U.S. withdrawal.
• With German elections about six weeks away, the SDP member, Finance Minister Scholz, is seeing his party’s polling improve. The SDP has been part of a couple “grand coalitions” with the CDU/CSU and the SDP has faded from relevance.  Scholz is personally the most popular candidate for chancellor but is polling much better than his party.  Unfortunately, Germany has a parliamentary system so the only way Scholz can take power is if his party can dominate a coalition, which isn’t likely.  Meanwhile, the CDU/CSU candidate, Armin Laschet, is languishing in the polls; his personal support numbers are in single digits.  It is becoming evident that forming a government after the election will be difficult and it currently looks impossible to build a government without Green Party participation.
• Lithuania is also on the frontlines of the Belarus situation. As we noted in earlier reports, Belarus has taken a page from Turkey’s playbook, allowing Middle Eastern refugees to come to the country to traverse into the EU via Lithuania.  The Baltic state is getting border aid from the EU in response.
• Wildfires have been devastating parts of Greece over the past couple of weeks. Algeria is reporting wildfires as well.

Economics and policy:  Policy tightening beckons and tax revenues rise.

• The evidence that the FOMC is going to start withdrawing stimulus soon is becoming overwhelming. San Francisco FRB President Daly, whom we rank as a dove, has now indicated that some stimulus could be withdrawn this year.  While we don’t think Chair Powell is in favor of removing any stimulus in the near term, of this year’s voting members on the FOMC, three of the four rotating members (Barkin, Bostic, Daly) are on record calling for tightening, joining Governor Waller.  Although four dissents would not be enough to force a policy change, this level of dissent isn’t all that common.  The last time we had four dissents was in October 1992.  Since the Fed gained independence, there have been 21 dissents of four or more, or about 2.8% of the time.  We suspect Powell will try hard to avoid removing stimulus until he is reconfirmed as Fed chair, which means that he will try to hold off tightening until early next year.
• Yesterday, the Senate held its amendment session for the upcoming budget. For the most part, this session is all about making the other party look bad.  But the key takeaway is that the Democrats are going to try to push through their budget on a party-line vote.  Getting $3.5 billion in new spending along with a debt ceiling increase looks unlikely.
• As the economy recovers, tax revenue is increasing and that has led the fiscal deficit to narrow by $2.5 trillion. Tax revenue rose 18% to $3.3 trillion over the first 10 months of the fiscal year.
• One observation from the infrastructure bill is that the crypto industry was unprepared to be targeted as a revenue source. However, they did move quickly to respond.  Although their efforts failed, we doubt they will fail the next time.  At the same time, the move by regulators to bring crypto into the “fold” of financial products will tend to increase its usage.
  • On a related note, non-fungible tokens have become another tool for money laundering.
  • BitMEX paid fines and agreed to not allow American citizens to use its platform for trading cryptocurrencies.
  • Hackers took more than $600 million from a Poly Network, a distributed finance facility. The network asked for the “money” back and hackers returned about a third of it.
• Home demand remains robust and builders are slowing down accepting contracts to try to boost housing inventory. This activity is lifting home prices further.

COVID-19: The number of reported cases is 204,917,702 with 4,327,872 fatalities.  In the U.S., there are 36,193,574 confirmed cases with 618,496 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 409,566,315 doses of the vaccine have been distributed with 353,205,544 doses injected.  The number receiving at least one dose is 196,077,952, while the number receiving second doses, which would grant the highest level of immunity, is 167,105,507.  The FT has a page on global vaccine distribution.

• Texas hospitals are nearing capacity and are delaying elective surgeries to ensure enough beds for COVID-19 patients. Doing so will reduce hospital earnings.
• One overlooked element of the pandemic is that there is some degree of immunity that comes from surviving the virus. This means we may be closer to herd immunity than the vaccination data would suggest.  Unfortunately, neither vaccines nor infection give sterilizing immunity, meaning that new variants and weakening immunity over time can lead to reinfection.  This condition isn’t unique to coronaviruses.  Influenza is similar.   That means periodic booster shots will likely be necessary.
  • The FDA is expected to authorize a third dose to immunosuppressed individuals.
• China has partially closed the Ningbo-Zhoushan port due to COVID-19 infections.
• The IEA confirmed that the delta variant has adversely affected crude oil demand. Oil prices are off their highs due to the upswing in infections.
  • Southwest Airlines (LUV, USD, 51.84) reports that bookings have slowed and cancellations increased due to the rise in infections.
• An increasing number of firms are mandating vaccinations. Mandates have been problematic as long as the FDA’s approval of the vaccines is for emergency use.  But once vaccines get regular approval, mandates will likely expand.  The rise in the delta variant is also disrupting office reopenings.
• U.S. intelligence agencies have drafted their report on the origins of COVID-19.  Although the report is confidential, sources suggest it won’t definitively determine the origin as being either from a lab or from natural causes.

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