Americans told to avoid travel to Japan. Concerns about Asia’s recovery deepen as vaccination pace lags. The EU discusses more sanctions on Belarus after it forced a passenger jet to land. Here's what you need to know to start your day.
The U.S. said Americans should avoid traveling to Japan, with the country under a state of emergency over a widening Covid-19 outbreak that has sown doubts about Tokyo’s plans to host the Olympics in less than two months. The action is a fresh blow to a country struggling to convince its own public and the international community that it’s ready to host the Games. Meanwhile, organizers will decide next month whether or not to allow any spectators watch the events. Barring domestic fans would deliver a significant financial blow.
Asian stocks are set to open higher after technology shares led gains in the U.S. as investors put inflation worries on the backburner for now. Futures pointed higher in Japan, Australia and Hong Kong. The S&P 500 rose and the Nasdaq 100 outperformed amid a rally in technology giants. Bitcoin soared after plunging as much as 18% on Sunday. Benchmark 10-year Treasury yields and the dollar retreated. Oil jumped by the most in a month after Iran said that gaps remain in negotiations aimed at reaching a deal to end U.S. sanctions on its crude, which would add to supply in the market.
European Union leaders kicked off the process for adding more sanctions against Belarus and imposed an effective flight blockade on the country over the forced landing of a Ryanair jet and the arrest of a dissident journalist. On the first of two days of summit talks in Brussels, the leaders asked the European Commission to propose Belarusian officials to be added to an existing blacklist and their ministers to come up with broader measures to target businesses and entire sectors of the country’s economy. A new round of sanctions could target the financial interests of President Alexander Lukashenko and his close family and associates, as well as businesses, an EU official said. The leaders also vowed to ban Belarusian Airlines from entering EU airspace and asked EU-based carriers to avoid flying over Belarus.
Asia’s surging coronavirus infections and slow pace of vaccinations is testing the limits of what central banks can do to further support what, until recently, had been the world’s stand out economic recovery. With interest rates already low, the likely policy response will center on more government borrowing, relegating central banks to a supporting role. That backdrop will overshadow decisions this week where policy makers are expected to keep rates on hold — Indonesia, South Korea and New Zealand.
At least three Chinese companies — a bike-sharing platform, a podcaster and a cloud computing firm — have put their plans to list in the U.S. on hold, heralding a slowdown in what’s been a record start to a year for initial public offerings by mainland and Hong Kong firms. The delays throw a wrench in a listings flood by Chinese and Hong Kong companies in the U.S. that already reached $7.1 billion year-to-date, the fastest pace on record, after booming in 2020.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours:
And finally, here's what Tracy's interested in today
We've been talking a lot this year about the idea of demand spurring supply, rather than supply drawing in demand. Demand for things like lumber, semiconductors and rental cars has far exceeded supply in recent months, forcing prices up and (in theory) eventually increasing supply as sawmills, foundries and the Hertzes of the world ramp up capacity. As Jared Bernstein, President Joe Biden’s economic adviser, put it on a recent episode of the Odd Lots podcast: there is now “recognition that the world works much more in ‘Keynesian’ terms than ‘Say’s Law’ terms, meaning that it’s not correct to believe that supply creates demand, it’s more correct to believe that demand pulls in supply.”
It's something worth thinking about in relation to financial markets too, where easy financial conditions and demand for yield has sparked yet another boom in corporate bonds. In junk bonds, for instance, companies with the lowest credit ratings have rushed to sell new debt and are now set to issue $500 billion worth this year, according to Citigroup estimates. Notably, a lot of that debt is coming from first-time issuers with a record number of new companies selling junk bonds in the market over the past few months (again, according to Citi). It's a "potential sign of supply generated to meet vigorous demand," says Citi's Michael Anderson and Philip Dobrinov.
You can follow Tracy Alloway on Twitter at @tracyalloway.
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