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. Today’s report begins with an update on the infrastructure spending negotiations. International news follows, with reports of new sanctions on Belarus and the EU-U.K. probing of a major U.S. tech firm. Economics and policy news are up next, including stories about the House Democrats’ transportation funding bill and a new U.S. investment ban on Chinese companies. China news follows, and we close with our pandemic coverage.

Infrastructure plan developments: On Thursday, President Biden announced that he is willing to make additional concessions in order to fund a bipartisan infrastructure package. Biden has lowered his price tag from $1.7 trillion to $1 trillion and has backed off plans to undo parts of the 2017 tax plan. In its place, he has proposed a minimum corporate tax rate of 15% for companies that have lots of tax credits and deductions. Additionally, he would like to repurpose $75 billion of unused COVID-19 relief aid that was approved under the previous administration. Last week, Republicans unveiled a plan that would provide $928 billion in infrastructure spending, up from the initial offer of $568 billion. Even though this is close to what the president is seeking, he is still holding out hope for additional funding. Senate Republicans are scheduled to meet with President Biden on Friday to discuss the matter further.

Although negotiations with Republicans are ongoing, President Biden is facing pressure from his fellow Democrats to go it alone via budget reconciliation. However, this plan has its own set of obstacles. On Thursday, Senate Parliamentarian Elizabeth MacDonough ruled that only one more automatic budget reconciliation is permissible this year. Hence, Democrats would need to ensure that everyone is on board before going through with this process. Possible holdout Senator Joe Manchin (D-W.V.) has stated that he doesn’t feel comfortable backing the bill without Republican support. At this time, it still appears that the infrastructure plan is likely to make its way through Congress.

International news: Alternatives to the vaccine patent waiver, Netanyahu tries to cling to power, and new sanctions on Belarus.

• To address the global vaccine shortage, the European Union has developed a workaround for the vaccine patent waiver favored by the U.S. and developing countries. The bloc’s plan would lift export restrictions on vaccines and their raw materials, expand manufacturing capacity, and make it possible for countries to override patents in certain cases.
• Rivals of Israeli Prime Minister Benjamin Netanyahu are pushing to hold a quick vote that would remove him from office. In response, Netanyahu has asked political allies to push talking points that imply his possible successor, Naftali Bennett, is unwilling to push President Biden on Iran and Palestine.
• The U.S. has sanctioned three Bulgarians and 64 companies in Bulgaria due to graft. The EU, which has the ability to ban companies from complying with U.S. sanctions, has signaled its approval of the new sanctions.
• EU ambassadors have adopted a plan to ban Belarus airliners from flying over EU territories or landing in EU airports. The ban was in response to Belarusian authorities forcing a plane to land in order to detain an activist journalist.
• Facebook (FB, $326.04) is being investigated by the EU and the U.K. for antitrust violations. The tech firm is being accused of using the data that it collects from advertisers on its platform to gain a competitive advantage in selling classified ads.
• Elections in Saxony-Anhalt could provide insight into the level of German anger over the COVID-19 lockdowns as the ultra-right AfD party is projected to do well. The region has really suffered due to the economic shocks caused by the pandemic.

Economics and policy: Biden’s ban on investment in Chinese companies and House Democrats’ transportation funding bill.

• On Thursday, President Biden signed an order that would amend a ban on U.S. investment in Chinese companies with ties to the Chinese military. The new amendment adds Chinese surveillance firms to the list of banned companies. The ban now includes 59 companies, including Huawei (002502.SZ, CNY4.49). Investors have one year to divest.
• House Democrats unveiled a $547 billion transportation funding package on Friday. The bill will look to improve the rail and transit systems, while also providing funding for road maintenance.
• The Biden administration is urging businesses to improve their ransomware defenses following several cyberattacks on big companies. They have recommended multi-factor authentication for sensitive accounts, use of endpoint detection, and regularly backing up data. The increased threat from cyberattacks has led the DOJ to elevate ransomware to a priority similar to terrorism.
• Washington is seeking a political agreement with the EU that would aid the transatlantic transfer of data, including citizens’ personal information. The agreement has already received some pushback from France, which has expressed hesitancy in agreeing to the data transfer after Edward Snowden released documents showing that the U.S. used this data to spy on EU members.
• The U.S. Department of Agriculture (USDA) stated that it does not expect the recent attack on JBS (JBSAY, $12.00) to have a major impact on food prices.
• Facebook (FB, $326.04) plans to announce on Friday that it will be ending its exemption on politicians with respect to hate speech. The company previously justified allowing posts from politicians that would typically violate its community standards by claiming that such posts were “newsworthy.”

China:

• Hong Kong police arrested the organizer of the Tiananmen vigil the day before the anniversary of the crackdown on pro-democracy protesters. The police are expected to patrol the streets of Hong Kong to prevent any new protests from springing up.
• Banks continue to ramp up hiring in Hong Kong despite China’s growing control over the special administrative region.

COVID-19:  The number of reported cases is 171,964,959 with 3,697,399 fatalities.  In the U.S., there are 33,325,218 confirmed cases with 596,391 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 368,375,195 doses of the vaccine have been distributed with 297,720,928 doses injected.  The number receiving at least one dose is 169,090,262, while the number of second doses, which would grant the highest level of immunity, is 136,644,618.  The FT has a page on global vaccine distribution.

• The White House announced that it would share excess doses of its COVID-19 vaccines with other countries. It plans to distribute 25 million vaccines to countries within Latin America, Southeast Asia, Africa, and Palestinian territories.
• Coronavirus cases have surged in African countries over the past few weeks, raising concerns over a possible third wave on the continent.
• Although the U.S. is on track to reach 70% vaccination by July, individual states are lagging behind. Vaccinations have leveled off in states in the Deep South and Mountain West due to limited access and shot hesitancy.
• Vaccine shortages have led Canada to recommend that people follow up their AstraZeneca vaccine (AZN, $56.25) with a different vaccine on the second dose. The National Advisory Committee on Immunization stated that Pfizer and Moderna can be used interchangeably.
• Concerns over rising COVID-19 cases in Japan led 10,000 volunteers to quit working for the Tokyo Olympics. Sponsors have now asked that the Olympic games be delayed so that it can accommodate spectators.

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