Biden plan hangs in the balance, ECB decision day, and a U.S. economy check.
No deal yet
President Joe Biden will go to Capitol Hill today to make
one last pitch for his economic agenda ahead of his trip to Europe for the
Group of 20 talks in Rome and the
climate summit in Scotland. Talks yesterday failed to reach agreement amid
arguing over tax measures to raise revenues for what could be $2 trillion in social spending. The White House messaging to progressives has changed somewhat from one of big ambition to something closer to ‘
a lesser bill is better than no bill at all’. It now seems almost certain that
negotiations will blow past the end of October deadline.
Central banks
The European Central Bank is expected to hold policy unchanged when its latest decision is announced at 7:45 a.m. Eastern Time this morning. President Christine Lagarde is likely to say that underlying pressures remain too weak for policy makers to pull back stimulus in her press conference 45 minutes later. The ECB position is becoming increasingly isolated, with the Bank of Canada yesterday ending its bond buying program and accelerating the timing of future rate increases. Brazil’s central bank delivered its biggest rate hike in nearly two decades and indicated more are on the way. The Bank of England seems set to tighten by the end of the year and Federal Reserve officials are becoming increasingly concerned about inflation.
Growth
With the third quarter dominated by the delta variant’s impact on consumer spending and supply-chain problems, this morning’s growth figures for the period are expected to show a significant slowdown in activity. The median estimate from economists surveyed by Bloomberg is for annualized growth of 2.6%, well below the second quarter’s 6.7% pace. The data release at 8:30 a.m. is accompanied by the latest weekly initial jobless claims number, which may show another small improvement.
Markets mixed
Equity investors continue to concentrate on a busy earnings season, with results so far enough to keep global gauges close to record highs. Overnight the MSCI Asia Pacific Index slipped 0.6% while Japan’s Topix index closed 0.7% lower. In Europe, the Stoxx 600 Index had added 0.1% by 5:50 a.m., with earnings and a drop in commodity prices weighing on the resource and energy sectors. S&P 500 futures pointed to a small rise at the open, the 10-year Treasury yield was at 1.548%, with the spread to the two-year yield dropping below 1 percentage point. Oil moved below $82 a barrel and gold was unchanged.
Earnings
Tech megacaps dominate today’s earnings schedule with both Amazon.com Inc. and Apple Inc. reporting. Both sets of results will be closely watched for supply and demand issues, ahead of the busy holiday season. Starbucks Corp., Caterpillar Inc., Yum! Brands Inc., Comcast Corp., Mastercard Inc., and Shopify Inc. are among the many other companies updating investors. Elsewhere in corporate news, some oil majors will appear before the House Oversight and Government Reform Committee investigating a “long-running, industry wide campaign” of climate disinformation.
What we've been reading
Here's what caught our eye over the last 24 hours.
And finally, here’s what Joe’s interested in this morning
The pressure on supply chains this year has put our ports, trucks, warehouses and rail systems front and center of our minds in a whole new way. For most people this stuff just happens in the background, outside of view. An item just appears on the shelf. Now, we get regular counts of how many boats are sitting in the water, waiting to unload their containers.
Tracy Alloway and I have been covering the mess for basically the whole year on the Odd Lots podcast, and one of the recurring themes that emerges is how loose and informal the operations are on the back end. Getting your container onto a boat in China often involves who you know, and it's not uncommon for contracts to just not be honored. On a recent episode, Flexport CEO Ryan Petersen joked: "we call our industry freight forwarding, but I'm like, it should be called freight email forwarding because you're just kind of shuffling PDFs around the world trying to make things happen."
On today's episode, we speak with Craig Fuller, the CEO of data and information firm Freight Waves. We cover a lot of ground, starting with the Herculean challenge of getting the ports to operate 24/7, which is the White House's goal. We talk about the different segments of the trucking market, and how the drayage operators (who move containers from the ports to inland warehouses) operate very differently than the long-haul truckers, who may move a container between two points in the U.S.
Anyway again, one striking thing is just how informal it all seems. There's no central repository or network or trading platform for containers and movers. A lot of it just happens on Facebook or Telegram rooms such as this below, where you have drivers and dispatchers just non-stop posting for jobs to see if there's anyone available, or if anyone needs a container moved from one random city to another. It looks like this. It's OTC trading.
As Craig explains, some companies are trying to be the Tinder or Uber for matching drivers with jobs. But the system remains incredibly loose and unconsolidated.
So while there's a lot of attention paid to the sort of sheer physical limitations stressing the system right now, there's also a lot to learn about the back end, and how it operates from both a financial and communications standpoint.
The whole episode is a must listen. Check it out here or on Apple or Spotify.
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Five Things You Need to Know to Start Your Day - Bloomberg
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