Daily Comment (November 12, 2021)

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

[Posted: 9:30 AM EST] | PDF

Good morning! U.S. equity futures are signaling a higher open this morning. Today’s report begins with U.S. economic and policy news, followed by our roundup of China-related stories. International news is next, and we conclude with our pandemic coverage.

Economics and policy:

  • Senator Joe Manchin (D-WV) stated he opposed the tax credit for union-made electric vehicles. He argued that the credit would unfairly allow automakers to offer steeper discounts than their competitors. Manchin is a key vote needed to get the social spending bill passed, so his opposition to the tax credit could mean that it gets dropped from the bill.
  • Jerome Powell’s chances of being reappointed as Federal Reserve Chair received a boost from the White House on Thursday. An official from the Biden administration suggested that his stock sales will not disqualify him from being renominated. Prediction markets currently show that Powell is still favored to retain his seat.
  • Miami’s mayor plans to give residents the proceeds from the city’s cryptocurrency. Residents will be able to collect their crypto by registering their own digital wallets.
  • The social spending package pushed by progressives is expected to cut taxes for most millionaires, according to the Tax Policy Center. If passed, The bill will give 65% of millionaires an average tax cut of about $17,000. The reduction in taxes is largely due to the removal of the cap on state and local tax deductions. Although lower taxes for millionaires undermines the progressives’ goal of raising taxes on the wealthy, we suspect that the removal of the SALT cap deduction is a key reason moderates are still considering passing the spending bill.
  • The global push to fight climate change has encouraged investors to divest from fossil fuels. Six European firms have announced plans to stop investing in shipping carriers that transport coal. The move comes after the countries agreed to begin the complete phaseout of coal at the COP26 conference.

China:

International news: 

  • The U.S. warned the European Union that Russia could be considering an invasion of Ukraine. Over the last month, Russian troops have amassed along its shared border with Ukraine. The U.S. fears Russia could manufacture a crisis in order to justify invading its border rival. In its defense, Russia has vehemently denied those claims and has accused the country of making provocative moves throughout the Black Sea.
  • On Friday, Belarus’s national airline announced it would no longer accommodate flights from Turkey to Belarus for refugees. The move comes a day after Belarus threatened to cut off the gas transit to the European Union if it imposed additional sanctions on the country due to its immigration policy. The EU has accused Belarus of trying to orchestrate an immigration crisis along its border to cause instability among the group’s members.
  • Brazil became the first country to allow the import of genetically modified wheat flour. The wheat is expected to be resistant to drought and is made with a common herbicide.
  • Hungary is set to impose price controls on petrol and diesel on Monday. The cap on prices comes as the country struggles to contain rising inflation.
  • In a rare sign of unity, China, Russia, and the U.S. have all urged the Taliban to cut ties with terrorist groups. The concerted push was in response to a growing number of attacks throughout the region that have been linked to the Islamic State.
  • South Korea’s primary opposition presidential candidate, Yoon Suk Yeol, has advocated that the country should strengthen its military ties with the U.S. and Japan to better cope with North Korea’s nuclear threat. Elections will take place on March 22, and current polls show that Yeol is the frontrunner to replace liberal President Moon Jae-in.

COVID-19:  The number of reported cases is 252,044,337, with 5,082,431 fatalities. In the U.S., there are 46,852,796 confirmed cases with 759,677 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 541,361,525 doses of the vaccine have been distributed, with 434,486,889 doses injected. The number receiving at least one dose is 222,591,394, the number of second doses is 194,382,921, and the number of the third dose, the highest level of immunity, is 26,087,147. The FT has a page on global vaccine distribution.

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