News/Markets/Policy Updates: Oct. 16, 2024
Note: Abbreviated format today as I am in en route to Nashville for a speech. — Equities today: Asian and European stock indexes were mostly weaker overnight. U.S. stock indexes are pointed to slightly higher openings. In Asia, Japan -1.8%. Hong Kong -0.2%. China +0.1%. India -0.4%. In Europe, at midday, London +0.6%. Paris -0.6%. Frankfurt -0.6%. Earnings: Abbott Laboratories, Citizens Financial Group, Crown Castle, CSX, Discover Financial Services, Equifax, Kinder Morgan, Morgan Stanley, PPG Industries, Prologis, Steel Dynamics, Synchrony Financial, and U.S. Bancorp announce quarterly results. U.S. equities yesterday: Major indices were unable to finish higher, keeping the Dow and S&P 500 from recording another record finish. The Dow lost 324.80 points, 0.75%, at 42,740.42. The Nasdaq fell 187.10 points, 1.01%, at 18,315.59. The S&P 500 was down 44.59 points, 0.76%, at 5,815.26. — Strong bank profits boost optimism for U.S. soft landing. Quarterly profits at major American banks have fueled optimism that the U.S. economy is on track for a soft landing. Executives from JPMorgan Chase and Bank of America highlighted robust consumer spending, defying concerns over inflation and high household debt. Goldman Sachs, despite a slowdown in corporate mergers, reported $3 billion in third-quarter profits. A Goldman executive noted that the global economy is trending above average. A recent fund manager survey also showed increased optimism, with investors shifting from bonds to stocks, signaling bullish sentiment. — The pound fell to its lowest since August as UK inflation fell below the Bank of England’s 2% target. Consumer prices rose 1.7% in September compared to a year earlier, down from a pace of 2.2% previously, the Office for National Statistics said on Wednesday. That’s lower than the 1.9% expected by economists and the 2.1% forecast by the British central bank in August. — Ag markets today: Corn, soybean and spring wheat futures posted mild corrective gains overnight, while the winter wheat markets faced light followthrough selling. As of 7:30 a.m. ET, corn futures were trading 1 to 2 cents higher, soybeans were 4 to 6 cents higher, winter wheat markets were 1 to 3 cents lower and spring wheat was steady to 3 cents higher. The U.S. dollar index was modestly firmer, and front-month crude oil futures were mildly weaker this morning. Wholesale beef prices remain strong. Wholesale beef prices jumped $3.51 for Choice to $316.83 and $2.99 for Select to $292.09 on Tuesday, while movement totaled 136 loads. Given the strength in wholesale prices, especially for Choice beef, packer cutting margins have improved and are in the black despite the five-week string of higher cash cattle prices. Pork movement surges. The pork cutout fell 57 cents to $94.40 on Tuesday as all cuts except ribs and bellies weakened. But the drop in price spurred a strong pickup in retailer demand as movement surged to 416.4 loads. — Agriculture markets yesterday: — Ag trade: Japan purchased 700 MT of milling wheat and 220 MT of feed barley. Egypt purchased 50,000 MT of sunflower oil from unspecified origins and passed on a tender to buy soyoil. — Ukraine grain and oilseed exports surge in early October. Ukraine’s grain and oilseed exports reached 2.71 million metric tons (MMT) between Oct. 1-15, a sharp rise from 1.99 MMT in the same period of September, according to the Ukrainian grain traders union (UGA). Increased corn exports drove the surge, with volumes comprising 921,000 metric tons of wheat, 862,000 metric tons of corn, 308,000 metric tons of soybeans, 307,000 metric tons of barley, and 293,000 metric tons of rapeseed. — Russia’s winter wheat regions to receive much-needed rain. Russia’s Volga River Basin and the USDA-defined “Southern Region” will receive much-needed precipitation during the coming week that will likely promote aggressive late-season planting of winter wheat. World Weather Inc. notes that much more moisture will be needed to fix the moisture deficits and planted acreage may remain lower than usual. World Weather also notes portions of eastern Ukraine may remain too dry to support favorable late-season planting. — Russia’s Grain Exporters Union starts publishing indicative prices for wheat exports. Russia’s Grain Exporters Union began publishing indicative export prices for Russian wheat on Tuesday, following discussions on exports during a meeting between agriculture ministry officials and leading exporters last week. The union said the indicative export price for wheat with 12.5% protein content on a free-on-board (FOB) basis from the Black Sea port of Novorossiysk was $240 per metric ton for October, $245 for November and $250 for December. “The members of the union agreed to calculate and provide the market with price guidelines based on our understanding of fair export quotations, taking into account rising production costs, high interest rates and payment delays,” the union’s head told Reuters. It will be up to individual exporters to decide whether to follow the guidance provided by the published prices. — Summit seeks dismissal of federal suit over carbon pipeline. Summit Carbon Solutions urged the U.S. District Court for the Northern District of Iowa to dismiss a federal legal challenge to its carbon capture pipeline, arguing the case belongs in state courts. Plaintiffs filed suits in both state and federal courts, contesting the Iowa Utilities Commission’s approval of the pipeline. They claim compensation for eminent domain is insufficient for potential damages and criticize easement terms allowing route modifications without further compensation. Summit argued that questions about state law violations should be resolved by state courts. — Atlanta Fed President Bostic predicts slower growth, uncertain inflation path. Bostic anticipates a slowdown in the U.S. economy this year but expects it to remain strong. He projects GDP growth to slow to around 2% in 2025 as household savings dwindle, with this year’s growth on track at 2.6%. Bostic also noted that the Federal Reserve’s benchmark rate could eventually drop to 3%-3.5%, down from the current 4.75%-5%, though the timing remains uncertain. He foresees inflation remaining volatile while employment stays robust. A robust jobs report and higher-than-expected inflation for September have led to a cautious approach on further rate cuts. — U.S. warns it could withhold military assistance from Israel if the country doesn’t address the humanitarian crisis in Gaza within 30 days. The Biden administration issued a second warning to Israel, urging it to increase humanitarian aid to Gaza or risk losing American weapons financing. The conflict has seen Israel battling Hamas in Gaza and Hezbollah in Lebanon, with potential plans for a strike on Iran. Despite an earlier warning in April that led to a temporary rise in aid, the U.S. noted that assistance to Gaza dropped by over 50%, with September marking the lowest deliveries in a year. Over 42,000 people in Gaza and 2,000 in Lebanon have been killed, and 1.9 million Gazans displaced during the year-long war. The conflict began after a Hamas-led attack killed 1,200 Israelis. Meanwhile, Israel conducted an airstrike Wednesday on a municipal building in Nabatieh, Lebanon, killing the mayor and at least five others, according to security sources cited by Reuters. Israel reported striking dozens of Hezbollah targets in southern Lebanon with ground force coordination. The UN refugee agency stated that Israeli evacuation orders now cover over a quarter of Lebanon. — Study warns of major risks to U.S. farmers from potential U.S./China trade war. A recent economic study (link) commissioned by the American Soybean Association (ASA) and the National Corn Growers Association (NCGA) highlights the potential negative consequences of a renewed U.S./China trade war on American farmers and rural communities. The study, conducted by the World Agricultural Economic and Environmental Services, reveals that American-imposed tariffs could significantly harm U.S. producers while benefiting competitors like Brazil and Argentina. Key findings: Export decline: The study predicts an immediate and substantial drop in corn and soybean exports to China if a new trade war were to occur. Specifically: Market share shift: Brazil and Argentina would likely claim the lost market share, which would be challenging for American growers to reclaim in the future. The study suggests that Chinese tariffs on U.S. soybeans and corn would incentivize Brazilian farmers to expand production more rapidly than baseline growth. Economic impact: The potential trade war would lead to a steep drop in soy and corn prices, causing a ripple effect across rural economies where farmers live, purchase inputs, use services, and buy household goods. Reaction: Of note: This study comes at a time when U.S. lawmakers and officials from both political parties are increasingly considering tariff-forward approaches to address Chinese trade practices. However, leaders at NCGA and ASA believe maintaining a trading relationship with China is in America’s economic interests, even as both governments work through trade and other concerns. The research underscores the importance of thoughtful consideration regarding the impacts of tariffs and tariff retaliation on U.S. farms and rural communities, as the potential consequences could be far-reaching and long-lasting. — EU prepares retaliatory tariffs if Trump imposes trade measures post-election. The European Union has readied a list of U.S. goods it could target with tariffs if Donald Trump wins the 2024 U.S. election and enacts punitive trade measures. While the EU prefers to avoid conflict and seek common ground on issues like China, it said it is prepared to respond if necessary. Trump previously surprised the EU with tariffs on steel and aluminum in 2018, prompting retaliatory actions. The EU will prioritize trade relations regardless of the election outcome, but concerns remain over Trump’s proposed tariffs and unresolved trade disputes from Biden’s presidency. — Fox News’ Bret Baier is interviewing Vice President Kamala Harris today. It will be Harris’ first formal interview on Fox News as the Democratic presidential nominee. The interview will take place in Pennsylvania, a key battleground state. It is scheduled to air at 6 PM ET on Fox News during Baier’s show Special Report. The interview will be pre-recorded around 5 PM ET and aired uninterrupted and unedited. It’s expected to last approximately 25-30 minutes. Baier said the interview would be taped “as-live” before the show and aired without any cuts. Link for more. In a separate video (link), Baier said he will ask Harris “about things that matter” to voters, including the economy and immigration. He asked viewers to send him questions for Harris. Baier, as Fox News’ chief political anchor, is known for conducting tough but fair interviews across the political spectrum. Topics likely to be covered include abortion rights, immigration, the economy, foreign affairs, and Harris’ record on border security. This interview represents a significant opportunity for Harris to reach a diverse audience, including viewers who may not typically watch other cable news networks4. It’s seen as part of her campaign strategy to engage with undecided voters in the final stretch before the election. — Harris/Walz campaign unveils rural agenda to boost healthcare and economy. The campaign focuses on improving healthcare, boosting the rural economy, and supporting smaller farmers. Vice presidential candidate Gov. Tim Walz unveiled the plan at a farm in Pennsylvania, criticizing Trump’s policies for benefiting only large farmers. The campaign aims to reach rural voters through radio ads and interviews in key states. The agenda highlights the Biden administration’s efforts to expand rural broadband and infrastructure, contrasting with Trump’s approach, which critics argue favors corporate interests over small farmers. Link to fact sheet. — Georgia, a crucial battleground state, reported record turnout on its first day of early voting for America’s presidential election. More than 250,000 Georgians cast ballots — almost double the number who did so on the first day of the previous election. Meanwhile, Elon Musk was revealed to have donated $75 million to his pro-Trump super PAC between July and September. — Biden praises Harris as independent leader, emphasizes fresh direction for U.S. During a fundraising dinner in Pennsylvania, President Joe Biden endorsed Vice President Kamala Harris as a loyal partner who will chart her own path if elected president. Biden highlighted Harris’ ability to bring a fresh perspective to national challenges, contrasting her vision with that of Donald Trump. As Harris campaigns against Trump, she faces the challenge of distinguishing her policies from the current administration’s while maintaining loyalty to Biden. Despite this, Biden emphasized that every president forges their own direction, much like he did after serving as vice president under Barack Obama. — Charlamagne tha God presses Harris on reparations and border policies in tense town hall. In a town hall with Charlamagne tha God, Vice President Kamala Harris faced tough questions on reparations and her handling of the border crisis, key issues for Black voters. Harris said financial reparations for Black Americans need to be studied. The radio host repeatedly challenged Harris, criticizing her for scripted responses and pressing her on the Biden administration’s immigration policies. Harris stuck to her talking points, calling it “discipline.” While addressing the listener’s concerns on Trump’s threats, Harris pivoted to border comments. Despite the tense exchanges, Harris emphasized that her policies would benefit everyone, but the interview highlighted skepticism from Black voters ahead of the election. — Trump defends economic plans, dismisses criticism in Chicago interview. Donald Trump defended his economic policies during an interview at the Economic Club of Chicago. He emphasized his plans for dramatic tariff increases and closer consultation with the Federal Reserve, asserting these measures would lead to substantial economic growth. Key points: Economic policies Trump made clear that he’s not just taking aim at China, but longtime U.S. allies and trade-treaty partners as well. Of note: Trump got in a heated exchange with Bloomberg Editor-in-Chief John Micklethwait when talking about tariffs — telling the journalist he’s been “wrong” his entire life. Micklethwait repeatedly asked Trump how he would enact high tariffs on foreign companies without getting an economic blowback on the American consumer in exchange — as the current U.S. economy is intertwined with China and the EU. “The overall effect could be massive,” the editor said, adding that Trump is set to launch the U.S. into a “trade war.” Trump replied of his proposed policy: “It’s going to have a massive effect — positive effect. It’s going to be a positive effect… It must be hard for you to spend 25 years talking about tariffs as being negative and then have somebody explain to you that you’re totally wrong,” the former president jabbed. “The higher the tariff, the more likely it is that the company will come into the United States and build a factory in the United States so it doesn’t have to pay the tariff,” Trump said. Federal Reserve and deficit Immigration and national security Election and international relations Bottom line: Throughout the interview, Trump maintained a confident stance on his economic vision, despite widespread skepticism from economists and policy experts. — California House races key battleground for Democrats in 2024. The 2024 House race in California is shaping up to be a critical battleground for Democrats seeking to regain control of the chamber. According to Cook Political Report House Editor Erin Covey’s analysis, the outcome of several competitive districts in the Golden State could determine the balance of power in Congress. In the Central Valley, Republicans are defending two key seats: the 13th and 22nd districts. Covey notes that Vice President Kamala Harris’ performance in these areas will be crucial: “Both parties expect Harris to run several points behind Biden in California’s agriculture-heavy 13th and 22nd districts, where Latinos make up a large majority of the voting-age population.” This potential underperformance could impact Democratic challengers Adam Gray and Rudy Salas in their attempts to unseat incumbent Republicans John Duarte and David Valadao, respectively. The battle extends to Southern California, where three competitive races are unfolding in the 27th, 45th, and 41st districts. Covey highlights the unique challenges in each race: “Garcia, a former Navy fighter pilot and Raytheon manager, was first elected in a 2020 special election, flipping this seat after then-Democratic Rep. Katie Hill resigned from Congress amid a sex scandal.” In the 45th district, Republican Michelle Steel faces a tough challenge from Democrat Derek Tran. Covey observes: “Democrats hope Tran can cut into Steel’s support among Vietnamese voters, who typically lean toward Republicans.” The impact of the presidential race. Covey emphasizes that the presidential contest between Harris and Trump will significantly influence these House races: “Harris’ margin in this district could determine whether or not she survives.” This underscores the importance of Harris’ performance in her home state for Democrats’ hopes of regaining control of the House. Of note: On Tuesday, Cook Political Report shifted two race ratings: — Leadership battles await Congress post-election. With just 20 days until Election Day on Nov. 5, the focus is already shifting to critical leadership elections in the House and Senate. House Republicans: Set for Nov. 12, leadership races hinge on whether the GOP wins a majority. Speaker Mike Johnson’s (R-La.) leadership is secure if they do, but internal shake-ups are likely if they don’t, with figures like Steve Scalise (R-La.) and Jim Jordan (R-Ohio) potentially challenging for control, according to Punchbowl News. House Democrats: Expected to hold elections later, with minimal leadership tension as Hakeem Jeffries (D-N.Y.) and his team are poised to ascend if Democrats reclaim the House. A competitive vice-chair race, however, is emerging between Robin Kelly (D-Ill.) and Sara Jacobs (D-Calif.). Senate Republicans: The most competitive GOP Senate leadership election in 20 years unfolds the week of Nov. 11. John Thune (R-S.D.), John Cornyn (R-Tex.), and Rick Scott (R-Fla.) are vying for leadership, while internal debates push for reforms in a post-Mitch McConnell era. Senate Democrats: Leadership changes are minimal, with Chuck Schumer (D-N.Y.) expected to stay in control. Only the chair of the Policy and Communications Committee remains open following Debbie Stabenow’s (D-Mich.) retirement. — USDA announces $233 million in indemnity payments for farmers impacted by Hurricane Helene. The payments, issued under the Hurricane Insurance Protection-Wind Index (HIP-WI) and Tropical Storm (TS) endorsements, will help producers across several southeastern states recover from significant hurricane-related losses. Producers do not need to file a claim to receive an indemnity payment under HIP-WI. If a county is triggered, the AIP will issue an indemnity payment in the coming weeks. This marks part of a broader $630 million in aid paid out in 2024 for multiple hurricanes. USDA also deployed response teams to impacted states to support recovery efforts. Currently, Hurricane Helene estimated indemnities for both HIP-WI and TS by state include: — USDA projects 1.2 million households eligible for D-SNAP after Hurricane Helene. USDA estimated that nearly 1.2 million households could be eligible for Disaster Supplemental Nutrition Assistance Program (D-SNAP) benefits in the wake of Hurricane Helene. This estimate significantly expands upon the initial projections provided by the North Carolina Department of Health and Human Services (NCDHHS). Eligible areas: Eligibility criteria: Program details. The D-SNAP program is set to begin on Oct. 18, with a pre-registration period starting on Oct. 15. Key aspects of the program include: While the NCDHHS initially estimated that more than 150,000 people would apply for D-SNAP benefits, USDA’s projection of 1.2 million eligible households indicates a much larger potential impact. This significant increase in estimated eligibility underscores the severe and widespread effects of Hurricane Helene on the region. Additional support. For current SNAP recipients in affected areas, separate provisions are being made: Of note: D-SNAP is not a first responder program. It becomes operational only after normal business activities have resumed in the affected areas. — NWS outlook: Significant pattern change begins today across the Pacific Northwest and Intermountain West with much colder temperatures and the threat of widespread mountain snow through the end of the week... ...Above average temperatures build across the central and northern High Plains with the risk of fire weather increasing through Thursday... ...A chilly mid-October continues for much of the East with frost and freeze concerns from the central U.S. to parts of the Southeast and Appalachians. |
