Japan & China Defend Currencies

EU conducting investigations into major tech companies under Digital Markets Act

Jim Wiesemeyer

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March 25, 2024 08:19 AM

EU conducting investigations into major tech companies under Digital Markets Act

Today’s Digital Newspaper

MARKET FOCUS

EU conducting investigations into major tech companies under Digital Markets Act
Boeing’s CEO, David Calhoun, will step down at end of 2024
Fifth Circuit Court of Appeals lifts administrative stay on climate reporting rules
One and done? (interest rate cuts)
Goldman Sachs forecasts commodities will see boost from interest rate cuts in 2024
Malanga on market expectations, fed actions, and potential concerns
China and Japan issue warnings to currency speculators
Offshore yuan surged past 7.25 per dollar mark, rebounding from four-month lows
Ag markets today
Investigation into sugar producers in India
Powerful winter storm causing widespread disruptions across Central Plains & Midwest
NWS weather outlook
Pro Farmer First Thing Today items
Highlights of Pro Farmer newsletter

CONGRESS

Lawmakers on two-week Easter recess

ISRAEL/HAMAS CONFLICT

Israel agrees to U.S. proposal on prisoner-hostage exchange

RUSSIA & UKRAINE

Russia’s ag watchdog may redistribute grain export quotas if firms fail standards

CHINA

China reveals new procurement regulations aimed at Intel and AMD
Western CEOs gather in Beijing for China Development Forum

ENERGY & CLIMATE CHANGE

Nissan aiming to slash electric vehicle (EV) manufacturing expenses by 30%

LIVESTOCK, NUTRITION & FOOD INDUSTRY

Yogurt heist highlights cyber gangs’ targeting of U.S. goods
Chick-fil-A reversing 2014 commitment to use only antibiotic-free chicken

POLITICS & ELECTIONS

Sen. Murkowski expresses strong opposition to Trump’s candidacy & GOP trajectory

MARKET FOCUS

— Equities today: Asian and European stock indexes were mostly weaker overnight. U.S. stock indexes are pointed toward weaker openings. In Asia, Japan -1.2%. Hong Kong -0.2%. China -0.7%. India closed. In Europe, at midday, London -0.4%. Paris -0.4%. Frankfurt -0.1%.

U.S. equities Friday and for the week: All three major indices registered solid gains for the week despite the Dow and S&P finishing lower on Friday, with the Dow up 2% for the week, the Nasdaq gained 2.9% and the S&P 500 was up 2.3%. On Friday, the Dow was down 305.70 points, 0.72%, at 39,475.90. The Nasdaq was up 26.98 points, 0.16%, at 16,428.82. The S&P 500 eased 7.35 points, 0.14%, at 5,234.18.

— European Union (EU) is conducting investigations into major tech companies, including Alphabet, Apple, and Meta, under the Digital Markets Act. This comprehensive law aims to regulate the dominance of tech platforms within the EU. The European Commission, the bloc’s executive arm, has stated that it is examining the companies’ compliance with this legislation. The commission expressed concerns that the proposals submitted by these tech giants to adhere to the act have not met the required standards. The Digital Markets Act includes provisions for significant penalties for any violations detected.

— Boeing CEO Dave Calhoun is planning to depart from the company by the end of the year, alongside the departure of chairman Larry Kellner, who will not seek re-election to the board. Steve Mollenkopf, a current board member, has been elected to succeed Kellner. Additionally, Stan Deal, CEO of Boeing Commercial Airplanes, is retiring, with Stephanie Pope taking his place as chief operating officer of the unit immediately. Boeing has faced significant challenges over the past five years, including two fatal crashes of the 737 Max aircraft in 2018 and 2019, resulting in the deaths of 346 individuals. More recently, a door plug incident on an Alaska Airlines 737 Max in January caused substantial damage to the aircraft. These issues have led to repeated safety groundings and accumulated losses exceeding $31 billion for Boeing.

— Fifth Circuit Court of Appeals has lifted its administrative stay on the climate reporting rules issued by the Securities and Exchange Commission (SEC), following the selection of the Eighth Circuit Court of Appeals as the venue for nine lawsuits against the SEC. This decision was reported by Bloomberg, although it was made in an unpublished opinion. The expectation is that the cases challenging the SEC rule, including those from Republican-led attorneys general, the Sierra Club, and the Natural Resources Defense Council, will be heard by the Eighth Circuit. The SEC finalized its rule on March 6, which excluded Scope 3 emissions from the reporting requirements. This move was welcomed by many in agriculture, as it had the potential to prevent companies from seeking information from farmers on their climate-related practices, given that Scope 3 emissions cover all levels of the supply chain.

— Ag markets today: Corn and soybean futures swung to both sides of unchanged during the overnight session, while wheat favored the upside. As of 7:30 a.m. ET, corn futures were trading fractionally lower, soybeans were 1 to 3 cents higher, SRW wheat was 4 to 6 cents higher, HRW wheat was 2 to 3 cents higher and spring wheat was steady to a penny higher. Front-month crude oil futures were about 40 cents higher, and the U.S. dollar index was around 300 points higher.

Wholesale beef prices drop. Wholesale beef prices fell $3.01 for Choice and $2.26 for Select on Friday, while movement totaled only 85 loads. That could signal a potential short-term top following the run of strong price gains and movement as retailers geared up for the upcoming grilling season.

Cash hog index continues to firm, pork movement slows. The CME lean hog index is up a nickel to $83.59 as of March 21, extending the seasonal climb since the beginning of the year. The pork cutout value firmed $1.30 on Friday, though movement was just 232.1 loads and failed to clear 300.0 loads on any of the days last week, signaling slowed retailer demand.

— Agriculture markets Friday and for the week:

Corn: May corn fell 1 1/2 cents to $4.39 1/4 but rose 2 1/2 cents on the week.
Soy complex: May soybeans fell 19 1/2 cents to $11.92 1/2 and closed 5 3/4 cents lower on the week. May soymeal fell $5.20 to $339.10 but rallied $4.40 from a week ago. May soyoil plunged 115 points to 47.64 cents and lost 178 points on the week.
Wheat: Winter wheat futures saw impressive buying into the weekend. May SRW futures rose 8 cents to $5.54 3/4, marking a weekly gain of 26 1/4 cents. May HRW futures rallied 8 3/4 cents to $5.90 1/2, up 24 1/4 cents on the week. May spring wheat rose 4 1/2 cents to $6.61 and gained 14 1/2 cents on the week.
Cotton: May cotton closed 68 points lower at 91.53 cents and marked a 241-point loss on the week.
Cattle: April live cattle slid 87.5 cents to $187.50, which represented a weekly rise of just 25 cents. Meanwhile, expiring March feeder futures skid 92.5 cents to $249.95 and next-nearby April tumbled $3.125 to $251.50. That latter close marked a weekly drop of 62.5 cents.
Hogs: Hog futures ended the week in mixed fashion, with deferred contract gains deviating from slippage in nearby April. The latter ended the day down 32.5 cents at $84.575. That represented a weekly drop of $2.35.

— Quotes of note:

One and done? Atlanta Fed President Bostic stated over the weekend he only expected one rate cut in 2024, pushing back slightly on the 2024 dot (which showed three cuts).
Goldman Sachs forecasts that commodities will see a boost from anticipated interest rate cuts in 2024, aiding industrial and consumer demand. Analysts predict a potential 15% return on raw materials throughout the year as borrowing costs decrease, manufacturing rebounds, and geopolitical uncertainties linger. The bank specifically mentions copper, aluminum, gold, and oil products as likely to experience price increases. However, Goldman Sachs emphasizes the importance of selective investment, cautioning that gains in commodities won’t be across the board.
“We should abandon the fantasy of phasing out oil and gas and, instead, invest in them adequately reflecting realistic demand assumptions,” Amin Nasser, chief executive of Saudi Aramco, the world’s biggest oil producer, told delegates at last week’s CERAWeek get-together in Houston.
“USTR inherited the Trump-era tariffs and has been in this very uncomfortable position of defending the continuation of those tariffs but also not having much to show for new initiatives.” — Reva Goujon, a China expert and director of the Rhodium Group.

— Malanga on market expectations, fed actions, and potential concerns. Dr. Vince Malang, president of LaSalle Economics, commented on the Federal Open Market Committee’s (FOMC) stance on interest rates and inflation last week. He notes that initially, market expectations predicted six rate cuts for the year due to weakening economic growth, but this was revised down to three as the economy displayed resilience and inflation remained high. The FOMC maintained its forecast for three rate cuts despite upgrading projections for economic growth and inflation. Malanga said the Fed hinted at slowing its balance sheet reduction program at its recent meeting but kept rates steady. He suggests that the Fed could have avoided bias by initiating an interest rate cut sooner, citing potential softening in labor markets and concerns about rising inflation. He again warns of potential stagflation, where rising unemployment coincides with slow growth and high inflation.

Malanga predicts that consumer confidence may suffer from rising gasoline prices and flight delays, potentially leading to political pressure on the Fed from both the left and right. He suggests that the Fed’s actions should align with its forecast for rate cuts, which could lead to a steepening yield curve.

Additionally, Malanga highlights concerns about tepid demand for Treasury auctions and suggests that the Fed’s decision to taper its balance sheet reduction program may be due to the risk of a failed Treasury auction, like one experienced in the UK last year.

Market perspectives:

— Outside markets: The U.S. dollar index was higher, with the yen slightly weaker against the U.S. currency. The yield on the 10-year U.S. Treasury note was firmer, trading around 4.24%, with a mostly lower tone in global government bond yields. Crude oil futures were still higher ahead of US trading but off gains seen earlier. U.S. crude was trading around $80.95 per barrel and Brent was trading around $85.15 per barrel. Gold and silver futures were higher, with gold futures around $2,172 per troy ounce and silver was around $24.85 per troy ounce.

— People’s Bank of China (PBOC) and Japan have issued warnings to currency speculators, prompting a decline in the Topix index and dragging down Asian shares. Both the yen and yuan gained strength following measures taken by authorities to counteract last week’s currency depreciation. Japan’s top foreign exchange official attributed recent currency fluctuations to speculative activity. Meanwhile, the PBOC set the yuan’s fixing at a stronger-than-anticipated level (see next item), indicating its intent to prevent further devaluation, according to ANZ analysts. Additionally, reports suggest that the United States is considering enhancing its security alliance with Japan.

— Offshore yuan surged past the 7.25 per dollar mark, rebounding sharply from four-month lows, reportedly due to intervention by Chinese state-owned banks selling dollars in onshore markets to support the currency. The People’s Bank of China (PBOC) also set a midpoint rate for the yuan at 7.0996 per dollar, stronger than expected and marking the largest discrepancy in months, indicating authorities’ unease with the yuan’s weakness. Last week, the yuan experienced a nearly 1% decline amid speculation that China would implement further policy easing to stimulate the economy. A senior central bank official recently stated that the PBOC still has room to cut banks’ reserve requirement ratio, among other policy tools at its disposal. Investors are now awaiting Chinese manufacturing and services activity data in the coming days to assess the health of the world’s second-largest economy.

— An investigation into sugar producers in India who harvest cane for Coca-Cola and PepsiCo found an industry that is fueled by high worker debt, child marriages and hysterectomies. Link to New York Times article.

— A powerful winter storm is causing widespread disruptions across the Central Plains and the Midwest, prompting winter weather alerts for millions of people. The National Weather Service has cautioned that travel may become extremely difficult or even impossible in certain areas due to icy road conditions and whiteout conditions. Blizzard warnings are in effect for regions spanning from northern Colorado and Kansas to parts of Minnesota, Nebraska, and South Dakota. Forecasts indicate that the storm will progress across the Midwest and Great Lakes region by Tuesday before moving to the Northeast. In the Northeast, nearly 160,000 homes and businesses are currently without power following significant snowfall over the weekend.

— NWS weather outlook: Major Winter Storm continues today... ...Excessive Rainfall and Severe Weather impacts across Mississippi Valley and central Gulf Coast... ...Critical Risk of Fire Weather over southern Texas; frigid temperatures expand across Great Plains.

Items in Pro Farmer’s First Thing Today include:

• Quiet grain trade to open the week
• U.S. wintry weather not as strong as previously thought
• Drier weather for Argentina, central Brazil stays mostly dry

— Some highlights of most recent Pro Farmer newsletter (link to subscribe; a subscription gives you access to profarmer.com which includes searchable copies of Updates, plus commentary on markets in the morning, midday and evening, all sent to your email):

There is a notable shift from corn to soybean acres expected in 2024, with total corn and soybean plantings projected to be 178.5 million acres, down 0.5% from last year.
The Brazilian soybean crop estimate has consistently been higher than USDA’s estimate, with the difference averaging 567,000 metric tons from 2012-13 to 2020-21. However, since 2019-20, the difference has increased to more than 6.8 million metric tons, with USDA significantly above Brazil’s estimate.
The extended forecast predicts above-normal temperatures for April-June across major corn and soybean production areas, with the Upper Midwest remaining an area of concern for drought.
The Federal Reserve expects three rate cuts in 2024, with the 2% inflation target not expected to be reached until 2026.

CONGRESS

— Lawmakers are off on their two-week Easter recess, but not before another early Saturday vote on the second fiscal year 2024 funding package in the Senate, which the House passed earlier with more Democratic votes than Republican. President Joe Biden signed the measure on Saturday. Link to The Week Ahead for more details on this and other key events and reports this week.

ISRAEL/HAMAS CONFLICT

— Israel has agreed to a U.S. proposal on a prisoner-hostage exchange and is awaiting a response from Hamas. The deal would release around 700 Palestinian prisoners — including 100 serving life sentences for killing Israeli nationals — in exchange for the release of 40 Israeli hostages held by Hamas in Gaza, according to a CNN report. This comes as U.S. and Israeli officials are slated to meet in Washington this week as the Biden administration works to deter Israel’s planned military operation in Rafah.

RUSSIA/UKRAINE

— Russia’s ag watchdog may redistribute grain export quotas if firms fail standards. Russia’s agricultural watchdog proposed the redistribution of quotas among grain exporters in case of systematic failures on the part of exporters, such as Russia’s RIF trading house. Earlier this month, the watchdog said it had noted a large number of complaints about grain shipped by RIF not meeting international standards

CHINA UPDATE

— China has revealed new procurement regulations aimed at gradually eliminating American-made microprocessors produced by Intel and AMD from gov’t computers. State agencies are mandated to procure chips deemed “safe and reliable,” exclusively from Chinese manufacturers, as reported by the Financial Times. These guidelines align with China’s broader initiative to substitute foreign technology with domestically produced alternatives, echoing similar endeavors by the United States to lessen dependence on Chinese enterprises.

— Western CEOs have gathered in Beijing for the China Development Forum, seeking insights into navigating the complexities of conducting business in China amid increasing trade tensions. The presence of numerous American executives at the forum, including Tim Cook of Apple, Albert Bourla of Pfizer, Stephen Schwarzman of Blackstone, and Laxman Narasimhan of Starbucks, highlights China’s ongoing strategic importance despite concerns over “de-risking” and foreign investment exodus.

The forum occurs amid heightened trade tensions, exemplified by a recent U.S. crackdown on TikTok. Nonetheless, China aims to showcase reassurance to investors, with reports suggesting that Chinese leader Xi Jinping will meet with the attending CEOs, following a similar engagement in San Francisco last year after a summit with President Biden.

Despite efforts to bolster confidence, signs of a cooling environment persist. China reportedly plans to phase out Intel and AMD chips from government devices to promote domestic manufacturers, while consumer interest in Apple’s iPhone appears to be waning. Luxury group Kering experienced a significant market value decline after reporting slumping sales in China.

Nevertheless, CEOs like Tim Cook are striving to maintain positive relations. Cook has actively engaged on Chinese social media platform Weibo, sharing updates from his trip and expressing Apple’s commitment to investing more in China, despite external pressures to diversify supply chains.

ENERGY & CLIMATE CHANGE

— Nissan is aiming to slash its electric vehicle (EV) manufacturing expenses by 30% to enhance its competitiveness vis-a-vis Chinese competitors. The company, based in Japan, has encountered challenges in producing cost-effective EVs and has faced setbacks in the Chinese automotive market. As part of its strategic overhaul, Nissan intends to introduce 30 models within the next three years, among which eight will be categorized as “new energy” vehicles specifically tailored for the Chinese market.

LIVESTOCK, NUTRITION & FOOD INDUSTRY

— Yogurt heist highlights cyber gangs’ targeting of U.S. goods. A concerning incident cited in a Wall Street Journal article (link) involved a yogurt heist, shedding light on the growing trend of cyber gangs targeting U.S. goods. The item details that Rob Hoffman, a business owner, received a troubling email last year indicating that thieves had intercepted a shipment of approximately $50,000 worth of yogurt and plant-based milk destined for Florida. The perpetrators demanded a ransom of $40,000, posing a significant threat to Hoffman’s business. This scheme, termed as double brokering, represents a surge in fraudulent activities that are causing distress among freight movers throughout the United States. The incident underscores the vulnerability of supply chains to cybercrime and the need for enhanced security measures to safeguard valuable goods in transit.

— Chick-fil-A is reversing its 2014 commitment to use only antibiotic-free chicken and will now allow some antibiotics in its chicken starting in the spring of 2024. The restaurant chain announced the shift from “No Antibiotics Ever” (NAE) to “No Antibiotics Important to Human Medicine” (NAIHM) on its website. Antibiotics will be used on the chickens only if they or surrounding animals become sick, and the antibiotics used are not intended for human consumption. Link for details via USA Today.

POLITICS & ELECTIONS

— Sen. Lisa Murkowski (R-Alaska) expressed her strong opposition to Donald Trump’s candidacy and the current trajectory of the Republican Party in an interview with CNN. She stated that she cannot support Trump and confirmed that she would not vote for him. Murkowski also indicated uncertainty about her party affiliation, declining to confirm whether she would remain a Republican. However, she did not explicitly state her intention to become an independent, mentioning that she is navigating through challenging political circumstances. If Murkowski were to leave the Republican Party, it could be advantageous for Democrats, particularly in the Senate elections scheduled for November, according to the New York Times.

KEY LINKS

Policy Updates