Biden gets his bipartisan infrastructure deal. India’s mass vaccinations may not be enough to stop a fresh Covid wave. Crypto firms are on a hiring spree. Here’s what you need to know to start your day.
President Joe Biden celebrated his tentative deal with a group of Democratic and Republican senators on a $579 billion infrastructure plan, saying it would create millions of jobs while fulfilling a major piece of his economic agenda. U.S. stocks climbed to an all-time high as Biden’s deal added to optimism the economic recovery is taking hold. The bipartisan legislation is expected to move through Congress alongside a separate Democrats-only bill that would spend trillions more on what Biden called “human infrastructure” that the GOP opposes. Meanwhile, Biden demanded that Beijing end its crackdown on independent journalists in Hong Kong after news outlet Apple Daily ceased publishing this week under pressure from China. And Biden’s ban on controversial solar is designed to confront human rights abuses without stifling renewable energy use.
Asian stocks look set to rise after U.S. shares hit a record on a bipartisan $579 billion U.S. infrastructure deal that stoked economic optimism. The dollar fell. Equity futures climbed in Japan, Australia and Hong Kong after the S&P 500 and Nasdaq 100 pushed up to all-time peaks. The benchmark 10-year U.S. Treasury yield was little changed after climbing over the week. Meanwhile Wall Street banks are poised to announce a deluge of dividend increases and stock buybacks after the Federal Reserve’s stress tests showed the industry built up a stockpile of cash during the pandemic.
Officials in New Delhi rejoiced earlier this week when India hit a single-day record by administering more than 8 million Covid-19 vaccinations. But even this unprecedented pace may not be fast enough to head off a fresh wave of infections, experts say. Meanwhile, the prolonged Covid-19 pandemic is clouding economic projections for Southeast Asia, with most countries not expected to return to pre-pandemic growth levels for several years. The Philippines could be worst off, whereas Singapore is expected to be the lone country in the region that bucks the trend. And even mild cases of Covid can cause significant changes in the brain. Should we be alarmed?
Japanese Defense Minister Nobuo Kishi said the security of Taiwan was directly linked with that of Japan, as tensions around the island build up and its defenses are increasingly overshadowed by China’s military might. Taiwan is crucial for Tokyo, with the Luzon Strait to the south an important shipping lane for the energy tankers that resource-poor Japan relies on to power its economy. Taiwan has become an increasingly important topic for the U.S. and its allies, many of whom are concerned about China’s growing assertiveness around an island whose semiconductor industry has become a linchpin of the global supply chain. And speaking of islands, here’s one that could be the trigger that sparks a China-U.S. clash.
Looking for a job? Booming cryptocurrency firms say they’re struggling to find the right candidates to fill hundreds of positions as a frenzy of interest in digital currencies and other assets pits them against some of the world’s biggest financial institutions. Despite a rout in May, cryptocurrencies’ total market value is up 400% over the past year to about $1.4 trillion, and traditional financial firms such as Goldman Sachs, Bank of New York and DBS Group are starting to offer services and trading. That’s leaving fewer candidates for crypto firms who need hundreds of new workers to expand their businesses.
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
One of the biggest developments of last year was a bunch of emerging markets suddenly engaging in QE, with the Bank of Indonesia's debt monetization program being a prime example. How were developing countries able to bypass years of hand-wringing from bond investors over deficits and the need for fiscal stimulus and do stuff like this? In the latest episode of the Odd Lots Podcast, Bank for International Settlements Economic Adviser and Head of Research Hyun Song Shin makes the point that much of that fiscal space came courtesy of a gushing exhalation of liquidity from the advanced world:
“I think that was primarily because the Fed and other advanced economies’ central banks were able to really deploy their liquidity expansively. So they really opened the taps. What that meant was that financial conditions were kept very accommodative. The dollar, which strengthened briefly at the height of the pandemic, then went in a downward trajectory. And I think that gave a lot of space to the emerging markets. I think that's been a very important lesson now. It's been over a year since then. The question is how much more space do emerging markets have?”
U.S. financial conditions are still extraordinarily easy on a long-term basis. (In fact, you can’t even see the recent uptick after the Federal Reserve’s hawkish surprise last week on a long-term chart). Still it’s clearly worth watching how any tightening in the U.S. or other major economies might feed through into emerging markets. In Asia, for instance, China is now ahead of the Fed in terms of winding down its extraordinary stimulus from last year. That’s an unusual development given that China tended to follow U.S. monetary policy in the aftermath of the 2008 financial crisis, and there’s an argument to be made that Chinese financial conditions could end up being more important for parts of emerging Asia nowadays. All of this is to say, it’s going to be an interesting year for bond markets responding to central banks who are exiting novel and extraordinary levels of stimulus at vastly different speeds.
You can follow Tracy Alloway on Twitter at @tracyalloway.
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June 25, 2021 at 06:25AM
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Five Things You Need to Know to Start Your Day - Bloomberg
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