Suez ship still stuck, vaccine reassessment, and a Treasury test.
Still stuck
The ship that has completely blocked the Suez Canal remains stuck in place. While operations to free the channel continue today, the best chance to move the vessel may not come until Sunday or Monday when the tides are highest. The blockage is halting $9.6 billion a day of traffic, and the knock-on effects of closing one of the world's most important transit points is likely to worsen for ships carrying everything from crude oil to cement to live animals.
Another look
AstraZeneca Plc reported a slightly lower efficacy rate for its Covid-19 vaccine after trial results released earlier were criticized for using outdated data. The company says the efficacy is 76%, down from the earlier 79% it claimed. A research group is preparing to make public a paper criticizing the trial data from Russia's Sputnik V vaccine. There was some good news on the vaccine front with the European Union and the U.K. signaling an easing of tensions over supplies.
Claims, bond sale
Weekly jobless claims probably moved lower last week, with economists expecting 730,000 new filings and a drop in continuing claims to 4 million. The data, released at 8:30 a.m. Eastern Time, is unlikely to change the wider outlook for the labor market or Fed policy. One thing the market will certainly be keeping a close eye on today is the auction of $62 billion of 7-year notes at 1:00 p.m. after last month's disastrous sale of that tenor triggered a major selloff in Treasuries.
Markets mixed
The upbeat assessment for the U.S. economy given by Treasury Secretary Janet Yellen and Fed Chair Jerome Powell is helping risk appetite. Overnight the MSCI Asia Pacific Index added 0.2% while Japan's Topix index closed 1.4% higher. In Europe, the Stoxx 600 Index was 0.2% lower by 5:50 a.m. with energy shares the worst performers on sliding oil prices. S&P 500 futures pointed to a gain at the open, the 10-year Treasury yield was at 1.621% and gold slipped.
Coming up...
The third reading of U.S. fourth quarter GDP accompanies claims data at 8:30 a.m. The presidents of the New York, Atlanta, San Francisco and Chicago Federal Reserve banks all speak later. The heads of Facebook Inc., Alphabet Inc.’s Google and Twitter Inc. will appear before a House panel about the spread of false information on their platforms. President Joe Biden holds his first press conference.
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 Suez Canal is still blocked, and according to some estimates, nearly $10 billion worth of global shipping traffic per day is being disrupted. In a way, this situation is a perfect symbol of the problems facing global shipping this year. Everyone knows by now that there have been massive logistical problems and delays at the ports this year, amid surging demand for goods.
But there's another way that this incident, beyond just the symbolism, says a lot about global shipping. The Ever Given (the stuck vessel) is longer than the Eiffel Tower. It's one of the largest container ships in the world.
In recent years the shipping industry has made big bets on gigantic ships in an attempt to wring more efficiency out of the system. But that's been a contributor of logistical problems. Earlier this year, Tracy Alloway and I interviewed Marc Levinson, the author of The Box (a book about the shipping container) who said this about the push for larger vessels:
...Ship lines, like companies in many other industries, have relentlessly pursued economies of scale. Bigger was better. And it was true when you could build a ship that could carry 3000 containers instead of 2000 containers, the costs per container dropped a lot. And when you could build a ship that could carry 10, rather than five, the cost per container was much lower. So ship lines were aggressively pursuing economies of scale. What they didn't count on was that at some point the vessels would get so big that diseconomies of scale would set in. And that's what's happened in shipping the point at which ships got built beyond perhaps 17 or 18,000 TEUs (twenty-foot equivalent units) with the point at which they just got too big. And that's when you started to have this confusion in the ports.
That's when you start to have these delays in shipping, that's when you start to have the entire industry become less reliable. And the diminished reliability is one of the things that is leading manufacturers and retailers to have a new sourcing pattern, to make their products in different places and to have redundant value chains. Size is never anything. And, and many of the ship lines mistakenly thought that it was.
As my colleague Brendan Murray wrote yesterday in a piece, with supply chains globally so slow, the big winners in this current moment are the smaller, faster cargo ships, which are used by more nimble players.
So the crisis in the Suez is partly just a fluke. But it's also perfectly emblematic of a broader problem of an industry that bet big on gigantic ships, that are now contributing to logistical challenges all around the world.
Joe Weisenthal is an editor at Bloomberg.
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