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Sep 17, 2020

News | Business | UK Economy: Bank of England warns of 'unusually uncertain' outlook, reveals negative rates under consideration

 

Elliot Smith


LONDON - The Bank of England on Thursday left interest rates unchanged and maintained its current level of asset purchases, but warned that the outlook for the economy remains “unusually uncertain.”

All members of the Monetary Policy Committee (MPC) voted to keep the main lending rate at 0.1%, with the central bank having cut rates twice from 0.75% since the beginning of the pandemic. The MPC also voted unanimously to maintain target for the total stock of its bond purchases at £745 billion ($960.8 billion).

The Bank of England also revealed that the MPC had been briefed on the Bank’s plans to explore how a negative bank rate could be implemented effectively, meaning it is now openly considering how to use negative interest rates.

Sterling fell by around 0.6% against the dollar in the wake of the announcement.

Britain faces concurrent risks of a no-deal Brexit, a spike in coronavirus cases leading to the reintroduction of some social restrictions, and the end of the government’s furlough scheme next month, which had supported millions of dormant workers during the pandemic.

After plunging a record 20.4% in the second quarter to officially enter recession, the U.K. economy saw signs of recovery with a 6.6% monthly expansion in July, after nationwide lockdown measures were gradually lifted.

However, a spike in cases to more than 3,000 per day has forced the government to implement new rules on social gatherings and implement localized lockdowns in certain regions, casting doubt over the country’s recovery.

“The recent increases in Covid-19 cases in some parts of the world, including the United Kingdom, have the potential to weigh further on economic activity, albeit probably on a lesser scale than seen earlier in the year,” the Bank said in its summary.

It added that there remains a risk of a “more persistent period of elevated unemployment than in the central projection.”

Despite stronger-than-expected domestic economic data in recent months, the central bank said the economic outlook remains “unusually uncertain,” as its central assumptions include a free trade deal with the European Union coming into effect on January 1 and a gradual dissipation of the impact of Covid-19.

The MPC also said it does not intend to tighten monetary policy until there is “clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably.”

‘Unenviable choice’

Vivek Paul, U.K. chief investment strategist at BlackRock Investment Institute, said the employment figures to date do not tell the full story given recent headlines about the amount of British firms considering redundancies, and expects the headline unemployment figure to rise “materially” in the fourth quarter.

“The global policy revolution, where central banks and governments have taken unprecedented measures to support economies and of which the UK’s furlough scheme is a prime example, has been the bedrock of the strong risk-asset rally in recent months — but the potential for premature withdrawal of stimulus is a big risk to markets and the economy,” Paul said.

“The Bank of England and the U.K. government face the unenviable choice between either being accused of premature policy withdrawal, or having extended stimulus to the point that it becomes incredibly difficult to unwind in future.”

He added that if Brexit talks collapse or Covid-19 cases rise significantly through the winter, calls for further intervention will become stronger.

Negative rates back in play?

Giles Coghlan, chief currency analyst at HYCM, anticipates that negative rates could be seen in February 2021.

The Bank now projects that third-quarter GDP will be around 7% below the level seen in the fourth quarter of 2019, slightly stronger than previously expected.

“With Brexit risks ahead the Bank of England face further possible headwinds. They said that investment intentions remain very weak and uncertainties among businesses were elevated,” Coghlan said.

“All in all, this is a Bank preparing for tough days ahead, especially as job redundancies could rise to 735,000 this year according to the Institute for Employment Studies after a Freedom of Information request obtained by the BBC.”

News | Business: Jobless claims were lower than expected but employment growth is still sluggish

 

Jeff Cox


First-time claims for unemployment insurance beat Wall Street estimates last week as the U.S. economy enters a critical new stage.

Filings totaled 860,000 for the week ended Sept. 12, the Labor Department reported Thursday. Economists surveyed by Dow Jones had expected 875,000, against the previous week’s upwardly revised 893,000.

The number represents a modest downshift in claims, which had hit a peak of 6.9 million in late March as the economy shut down to try to slow the coronavirus pandemic. Since then, the labor market has recovered though millions remain displaced from job closures associated with the virus measures.

The beat on claims had little impact on financial markets, with Wall Street opening sharply lower.

Mohamed El-Erian, chief economic advisor at Allianz, tweeted that the numbers were “at pace below what’s both needed and possible” even though first-time and continuing claims topped estimates.

Claims had remained above 1 million a week through late August. Earlier in September, the Labor Department changed the way it adjusted for seasonal factors to account better for the influence the virus measures have had on the economy.

The economy faces new challenges now after a summer of strong employment growth. Economists and health-care professionals worry that a resurgence in Covid-19 cases could stall or reverse the gains the economy has seen in recent months.

Another piece of good news was a decline in continuing claims, which fell 916,000 to 12.63 million, compared with the 13 million consensus from FactSet. The four-week moving average for continuing claims dropped by 532,750 to 13.5 million. Continuing claims peaked at 24.9 million in early May.

Economists worry that the end of government assistance to unemployed workers that provided an extra $600 a week on top of what they normally would receive in benefits would exacerbate the problems in the jobs market. However, the pace of claims is continuing to fall, though the total still is considerably above anything the U.S. had seen pre-pandemic.

The total receiving benefits, which runs a week behind the headline claims number, actually edged higher for the week ended Aug. 29, to 29.77 million, according to unadjusted numbers. At the same time, those receiving benefits under the Pandemic Unemployment Assistance program, which is open to those who normally wouldn’t be eligible, fell sharply to 658,737 for the current week, a drop of 209,577.

The claims data accompanied some disappointing numbers in housing, which has been on a tear for much of the summer. Housing starts fell 5.1% due to a slump in multifamily construction. Single-family starts, a far larger part of the housing market, jumped 4.1%. Permits fell 0.9% overall, but those for single family surged 6% against a slump of 14.2% in multifamily.

EU F(x): Dollar's post Fed gains fizzle as long rate pause seen

 

3 minutes - Source: CNBC


wakila | E+ | Getty Images

Having ridden a short-covering rally sharply higher after the Federal Reserve left interest rates on hold, the U.S. dollar erased virtually all of those gains on Thursday as markets digested the U.S. central bank’s policy statement.

The greenback rebounded across the board in late Asian trade, posting its biggest daily rise in more than a week as dealers unwound short positions taken ahead of the Fed decision.

But with the new guidance from the Fed focused on keeping U.S. interest rates at current record lows until employment and inflation reach its targets, some strategists argue any dollar strength is likely to be temporary.

At its policy meeting, the Fed pledged to keep rates near zero until at least the end of 2023 when the labour market reaches “maximum employment” and inflation is on track to “moderately exceed” the 2% target.

With these conditions last met between March and October 2018, and before that in 2000, Commerzbank strategists said the Fed was imposing conditions for rate hikes that were met only very rarely in the past.

“The headlines focus mainly on the fact that the Fed does not expect any rate hikes until year-end 2023 based on its revised projections, but if one takes the forward guidance literally it might take much longer until rate hikes will be considered,” they said.

Against a basket of its rivals, the dollar index rose about 0.32% to trade at 93.493 before erasing most of its gains to trade nearly flat on the day at 93.22. It fell to more than two-year lows below 92 earlier this month.

The dollar’s weakness helped stem some of the selling pressure on other currencies such as the euro and the Australian dollar.

The single currency briefly hit a one-month low in Asian trading at $1.1737 before trimming some losses to stand 0.2% lower on the day at $1.1792.

Among Asian currencies, the Australian dollar was the hardest hit, falling 0.4% to $0.72770 despite strong jobs data.

The safe-haven Japanese yen changed hands at 104.76 against the greenback, a 2-1/2-month high.

The pound was broadly flat at $1.2958, after dropping more than 3.5% against the greenback and the euro last week. Sterling traders are now focusing on a meeting of the UK central bank, where it is likely to signal it is ready to pump more stimulus into Britain’s coronavirus-hit economy.

Asia F(x): Dollar's post Fed gains fizzle as long rate pause seen

 

3 minutes - Source: CNBC


wakila | E+ | Getty Images

Having ridden a short-covering rally sharply higher after the Federal Reserve left interest rates on hold, the U.S. dollar erased virtually all of those gains on Thursday as markets digested the U.S. central bank’s policy statement.

The greenback rebounded across the board in late Asian trade, posting its biggest daily rise in more than a week as dealers unwound short positions taken ahead of the Fed decision.

But with the new guidance from the Fed focused on keeping U.S. interest rates at current record lows until employment and inflation reach its targets, some strategists argue any dollar strength is likely to be temporary.

At its policy meeting, the Fed pledged to keep rates near zero until at least the end of 2023 when the labour market reaches “maximum employment” and inflation is on track to “moderately exceed” the 2% target.

With these conditions last met between March and October 2018, and before that in 2000, Commerzbank strategists said the Fed was imposing conditions for rate hikes that were met only very rarely in the past.

“The headlines focus mainly on the fact that the Fed does not expect any rate hikes until year-end 2023 based on its revised projections, but if one takes the forward guidance literally it might take much longer until rate hikes will be considered,” they said.

Against a basket of its rivals, the dollar index rose about 0.32% to trade at 93.493 before erasing most of its gains to trade nearly flat on the day at 93.22. It fell to more than two-year lows below 92 earlier this month.

The dollar’s weakness helped stem some of the selling pressure on other currencies such as the euro and the Australian dollar.

The single currency briefly hit a one-month low in Asian trading at $1.1737 before trimming some losses to stand 0.2% lower on the day at $1.1792.

Among Asian currencies, the Australian dollar was the hardest hit, falling 0.4% to $0.72770 despite strong jobs data.

The safe-haven Japanese yen changed hands at 104.76 against the greenback, a 2-1/2-month high.

The pound was broadly flat at $1.2958, after dropping more than 3.5% against the greenback and the euro last week. Sterling traders are now focusing on a meeting of the UK central bank, where it is likely to signal it is ready to pump more stimulus into Britain’s coronavirus-hit economy.

Market Insider | Biggest Moves PreMarket: Stocks making the biggest moves in the premarket: Snowflake, Carnival, Tesla, Moderna & more

 

Yun Li


Check out the companies making headlines before the bell:

Snowflake (SNOW) — Shares of Snowflake dropped more than 6% after the cloud company’s shares more than doubled at its market debut on the New York Stock Exchange. The initial public offering marked the largest software debut ever. Snowflake was worth $70.4 billion at the end of Wednesday’s trading, more than five times its $12.4 billion valuation in February.

Carnival (CCL), Norwegian Cruise Line (NCLH), United Airlines (UAL) — Shares of airlines and cruise operators came under pressure amid conflicting messages about the timeline of a coronavirus vaccine. President Donald Trump said late Wednesday that the U.S. could distribute a vaccine as early as October, while the director of the Centers for Disease Control and Prevention said vaccinations would be in limited quantities this year and not widely distributed for six to nine months. Carnival and Norwegian both fell more than 3%, while United Airlines and American Airlines (AAL) dipped at least 1% each.

Moderna (MRNA) — Shares of Moderna gained nearly 3% after the biotech firm CEO Stephane Bancel said it should have enough data from its late-stage trial to know whether its coronavirus vaccine works in November. Separately, the company announced a collaboration with Vertex Pharmaceuticals (VRTX) to develop a treatment for cystic fibrosis.

Eastman Kodak (KODK) — Shares of Kodak gained another 5% after an independent review found the company didn’t break any laws related to its disclosure of a $765 million loan from the U.S. government to help produce drug ingredients. The stock surged 36% on Wednesday alone.

Tesla (TSLA), Apple (AAPL), Amazon (AMZN) — Technology stocks are set to resume their recent sell-off with the so-called FANG block all dipping at least 1% in premarket. Apple and Amazon led the declines, both falling 1.5%. Meanwhile, Tesla dropped more than 3%. The tech-heavy Nasdaq Composite last week dipped into correction territory, falling more than 10% from a record high.

CVS Health (CVS) — Shares of CVS rose slightly after Piper Sandler initiated the drugstore chain with an “overweight” rating. The Wall Street firm said CVS is “well positioned to transform health care access, quality, reduce costs.” The stock is down more than 20% this year.

Penn National Gaming (PENN) — Shares of Penn National Gaming fell slightly even after Stifel hiked its price target on the sports-betting company to a Street high of $85 per share, representing a 25% gain from here. The stock has surged more than 14% this week alone.

Analysis | The Cybersecurity 202: Voting misinformation in Kentucky adds to logistical nightmare for election officials

Michelle Ye Hee Lee


Kentucky’s struggles show how the general-election voting season is off to a bumpy start. 

By this weekend, at least six states will have started some form of in-person early voting. Nearly 20 states will have started mailing out ballots requested by voters. And at least eight states will be able to start processing mail ballots once they’re returned. (My colleague Elise Viebeck is keeping track of this data, and she and our graphics team have compiled a handy “How to Vote guide” to help you figure out requirements and timelines in your state.)

Across the country, states have expanded voters’ access to mail voting and early in-person voting in response to the pandemic — as well as unease among voters about sending their ballots through the mail. Officials are trying to provide as many voting options as possible so voters can choose the one that makes them feel most comfortable.

The focus on starting voting earlier this year has contributed to a torrent of misinformation.

For example, one of the concerns Kentucky officials raised this week had to do with letters from a group called Center for Voter Information, a voter registration group with a history of sending mailers that are filled with errors. This group’s mailers have sown confusion in several states, including in Virginia

The group’s latest mailer to Kentuckians encourages people to register to vote — yet the mailer is being sent to voters who have already registered, thus confusing voters and disrupting the work of Kentucky election officials. 

“I condemn this shady out-of-state group and their efforts to tamper with our elections,” Kentucky Secretary of State Michael Adams said in a statement. “They mislead voters, who then drive unnecessary call volume to our overworked election officials around the state.”

Officials also flagged a different text message scam from a local area code that directed voters to a fake voter registration website that no longer appeared active as of Wednesday. 

State officials called attention to both efforts this week because county clerks were reporting a large number of calls about them, the secretary of state’s office said. 

Making matters even more complicated, election employees in Fayette County, home to Lexington, will be self-isolating for at least two weeks because of a positive coronavirus case in the office. Officials are hoping to reopen the department on Sept. 28, according to an announcement by the county clerk’s office.

The quarantines add to the nightmare scenario for election officials working to minimize confusion. 

The looming threat of the virus halting their work anytime between now and Election Day — and possibly even beyond Nov. 3, as they work to count, verify and certify ballots — only adds to the uncertainty. 

The temporary closure in Fayette County is expected to lead to delays in mailing out ballots to voters who have already requested them. Some may receive their ballots in early October, and others may receive them by the end of this month, the clerk said.

“This is a devastating setback for us,” Fayette County Clerk Don Blevins Jr. said in a statement. “We are in the process of establishing backup processes, but this will definitely have a significant impact.”

This week’s election-related news in Kentucky serves as a microcosm for election trends nationwide. 

For example, statewide, Democrats have far outpaced Republicans in requesting absentee ballots for November. As of Monday, about 242,000 voters had applied to receive a mail ballot, and nearly 80 percent of those requests were from Democrats, state officials said. 

The party breakdown in Kentucky mirrors national trends. A recent Washington Post-University of Maryland poll found that Democrats were far more likely than Republicans to prefer voting by mail in the fall, as President Trump and GOP leaders wage baseless attacks on the reliability of the mail-voting system. 


The keys

Dan Coats calls on Congress to establish a bipartisan, nonpartisan commission to oversee the election. 

President Trump's former director of national intelligence wrote in a New York Times opinion piece this morning that “this commission would not circumvent existing electoral reporting systems or those that tabulate, evaluate or certify the results. But it would monitor those mechanisms and confirm for the public that the laws and regulations governing them have been scrupulously and expeditiously followed — or that violations have been exposed and dealt with — without political prejudice and without regard to political interests of either party.” 

Security should also be in their purview, Coats argues: “Also, this commission would be responsible for monitoring those forces that seek to harm our electoral system through interference, fraud, disinformation or other distortions. These would be exposed to the American people in a timely manner and referred to appropriate law enforcement agencies and national security entities.” 

The stakes this year, according to Coats: “Voters … face the question of whether the American democratic experiment, one of the boldest political innovations in human history, will survive…. If we fail to take every conceivable effort to ensure the integrity of our election, the winners will not be Donald Trump or Joe Biden, Republicans or Democrats. The only winners will be Vladimir Putin, Xi Jinping and Ali Khamenei. No one who supports a healthy democracy could want that.” 

The underlying reason for the pitch: “The most urgent task American leaders face is to ensure that the election’s results are accepted as legitimate. Electoral legitimacy is the essential linchpin of our entire political culture. We should see the challenge clearly in advance and take immediate action to respond.” 

The Justice Department brought major charges against Chinese, Iranian and Russian hackers yesterday.

Prosecutors charged five Chinese citizens with hacking more than 100 companies and institutions, Ellen Nakashima and Devlin Barrett report. The targets ranged from social media companies to universities

The hackers, who appeared to be motivated by financial gain, are members of a group linked to a Chinese civilian spy agency responsible for counterintelligence. One of the hackers boasted that the government would protect him, according to the indictment.

Deputy Attorney General Jeffrey Rosen slammed China for turning a blind eye to the alleged crimes. “No country can be respected as a global leader while paying only lip service to the rule of law and without taking steps to disrupt brazen criminal acts like these,” Rosen said.

Hours later, U.S. prosecutors indicted two Iranian nationals for allegedly hacking American computer networks to steal information for both personal financial gain and at the request of the Iranian government. The indictment accuses the pair of hackers of selling stolen data, including sensitive information on national security and nuclear information, to the Iranian government and other buyers, Matthew Choi at Politico reports

The hackers targeted a range of victims, including universities, media agencies and defense contractors dating back to 2013. The group also allegedly hacked internal communications from a government agency in Afghanistan to the nation’s president. 

The arrests are a warning shot by the Trump administration to Beijing and Tehran that it will not tolerate cybercrime. 

In July, the United States accused hackers affiliated with the Chinese government of trying to target companies and researchers working on a coronavirus vaccine. The Justice Department also indicted two Iranian hackers in a separate case earlier this week and is expected to announce more Iran-related hacking charges today.

“We will not bring the rule of law to cyberspace until governments refuse to provide safe harbor for criminal hacking within their borders,” John Demers, assistant attorney general for national security, said in a statement.

The Justice Department also unsealed charges against two Russian hackers, accusing them of stealing nearly $17 million in virtual currency, Jeff Stone at CyberScoop reports.

Chat room

Dmitri Alperovitch, chairman of Silverado Policy Accelerator and Co-Founder and Crowdstrike, breaks down some other significant points about the indictment against the Chinese hackers:

Trump isn't ready to sign off on TikTok’s deal with Oracle, he says.

The president said at a news conference yesterday that he hasn’t seen the deal but wouldn’t sign off on anything that isn’t “100 percent as far as national security is concerned.”

“I mean just conceptually, I can tell you I don’t like that,” he said of the possibility that TikTok's Chinese owner ByteDance could retain majority ownership in the deal.

He is expected to review the deal today. 

White House officials including Secretary of State Mike Pompeo have also expressed concerns, Bloomberg News reported.

Republicans in Congress are urging Trump to reject the deal.

A group of senators led by Sen. Marco Rubio (R-Fla.) said the deal “leaves significant unresolved national security issues” and urged Trump not to accept it.

“Any deal between an American company and ByteDance must ensure that TikTok’s U.S. operations, data, and algorithms are entirely outside the control of ByteDance or any Chinese-state directed actors, including any entity that can be compelled by Chinese law to turn over or access U.S. consumer data,” the senators wrote

The details of Oracle’s proposal to work with TikTok as a “trusted tech partner” aren’t public and it's unclear how Oracle would address White House worries that the app's algorithm could be used by Beijing for influence campaigns.

Sens. Thom Tillis (R-N.C.), Roger Wicker (R-Miss.), Rick Scott (R-Fla.), Dan Sullivan (R-Ark.) and John Cornyn (R-Tex.) also joined the letter.

Democrat Sen. Mark Warner (Va.) also took a swing at the TikTok deal, saying in a speech yesterday that the White House’s haphazard actions on TikTok will only invite retaliation against American companies”

“American credibility on what constitutes a national security threat is beginning to wear thin,” Warner said in a wide-ranging speech about U.S. strategy for innovation and China relations at the National Democratic Institute "That undermines the clarity and cogency of our arguments against technologies and firms that do represent very grave national security threats… such as Huawei or Kaspersky.”

The Department of the Interior left wireless networks vulnerable to hackers.

Investigators from the agency’s watchdog were able to intercept and decrypt wireless traffic in multiple bureaus of the agency, a new report from the department's Office of Inspector General reveals. All it took to breach the systems was cheap, easily concealed equipment operated via smartphone in a public area.

The investigators were also able to “identify assets containing sensitive data or supporting mission-critical operations” because of the security, which wasn't up to federal standards. 

“The Department is vulnerable to the breach of a high-value IT asset, which could cripple Department operations and result in the loss of highly sensitive data,” if the networks aren't fixed, the report warned.

The department’s top security officer agreed to the 14 security changes suggested by the report to prevent breaches.

Government scan

Justice Department won’t charge WeChat users with crimes even if the app is banned next week.

The Justice Department clarified its position in response to a lawsuit filed against the Trump administration by WeChat users, David Shepardson of Reuters reports. The group is seeking a preliminary injunction to stop the Trump administration from banning the popular Chinese messaging app.

The group claims in its lawsuit that the Trump administration did not provide sufficient evidence that the app is a national security threat when it decided to ban it alongside TikTok.

The Justice Department said Commerce Secretary Wilbur Ross will release regulations for the app on Sunday. Although users will not face civil or criminal penalties for use of the app, “use of the app for such communications could be directly or indirectly impaired through measures targeted at other transactions,” the department said.

Hill happenings

The Trump administration’s top intelligence official will resume some congressional intelligence briefings on election threats.

It is a reversal of Director of National Intelligence John Ratcliffe’s decision last month to stop the briefings, the Wall Street Journal reports. The move sparked immediate criticism from Democrats, who accused the administration of trying to conceal important election-related intelligence. Ratcliffe had cited leaks to the public of classified information as the rationale for the pullback. 

More Hill news:

Daybook

  • ITIF will hold a webinar, “An Allied Approach to Semiconductor Sector Competitiveness,” today at 11:30 am.
  • The Senate Judiciary Committee will hold a hearing to examine threats to U.S. intellectual property, focusing on cyberattacks and counterfeits during the coronavirus pandemic on Sept. 23 at 2:30 p.m.

Secure log off

Stephen Colbert has a counter-offer for Trump.

DealBook: Nobody Knows What’s Happening With TikTok

 

14-17 minutes - Source: NYT



Credit...Erin Scott for The New York Times


Oracle and TikTok’s parent company, ByteDance, may have thought they had struck a deal that appeases both the Trump administration and Beijing. But eyebrow-raising comments by President Trump at a news conference yesterday suggest that it’s too early to tell, even as the White House’s deadline for TikTok to sell itself or get shut down is days away.

Mr. Trump said he wasn’t yet prepared to sign off on the deal. “They’re giving me studies on the deal — it has to be 100 percent as far as national security is concerned,” he told reporters. “No, I’m not prepared to sign off on anything.” He’ll be briefed on the latest proposal this morning.

What about that “big payment” to the Treasury? When asked whether the Oracle deal would include a payment to the U.S. government that Mr. Trump called for early in the process — a demand that took the business community by surprise — he answered, “Amazingly, I find that you’re not allowed to do that.” He implied that the companies were willing to pay, an extraordinary suggestion in itself, and said:

I’m saying, wait a minute, they’re willing to make a big payment to the government, and we’re not allowed to take the money? When does this happen? How foolish can we be? So we’re going to, we’re looking into that right now.

You understand that? In other words, I said I want a big chunk of that money to go to the United States government, because we made it possible. And the lawyers come back to me and they say, ‘Well, there’s no way of doing that.’

You know why? Because nobody’s ever heard of that before, nobody’s ever said that before. Nobody’s ever said, ‘Well we’ll approve the deal, but we want a lot of money to go to the government, because by approving the deal we’re making the deal valuable.’ They’ve never heard of that before. OK? Can you believe that?

There is plenty of other unsettled business. Trump administration officials now want U.S. companies to own a majority stake in TikTok, going against ByteDance’s — and, presumably, Beijing’s — desire to maintain control of the business. Asked whether he would favor ByteDance’s retaining control, Mr. Trump said, “Conceptually, I don’t like that.”

Other issues that are still up in the air:

• Whether Walmart (or others) will join the Oracle consortium. Two people said the retail giant was likely to team up with the group, which may explain why Senator Tom Cotton, who represents Walmart’s home state of Arkansas and is a notable hawk on China, has recently been quiet on the matter.

• Whether other Republican lawmakers will step up their opposition, after Senators Marco Rubio of Florida, Thom Tillis of North Carolina and John Cornyn of Texas said they might favor banning TikTok in the U.S. rather than letting ByteDance maintain control.

• Who will run TikTok, since Kevin Mayer stepped down as C.E.O. last month. Vanessa Pappas, the company’s head of North America since 2018, is leading the company in the interim, but executives are considering bringing in an outsider.

People involved in the negotiations tell DealBook they’re exasperated, given the president’s mercurial wants, the hard line taken by Beijing and constantly shifting commercial terms. Asked what will happen next, one source sighed: “Who the hell knows?”

____________________________

Today’s DealBook Briefing was written by Andrew Ross Sorkin in Connecticut, Lauren Hirsch in New York, Ephrat Livni in Washington, and Michael J. de la Merced and Jason Karaian in London.

____________________________


Image

Credit...Pool photo by Anna Moneymaker/EPA, via Shutterstock

The Fed faced internal dissent after pledging to keep rates unchanged for years. The central bank plans to leave rates near zero through at least 2023 and tolerate periods of higher inflation. Two Fed presidents voted against the plan, for different reasons: Robert Kaplan of Dallas wants more flexibility in setting rates, while Neel Kashkari of Minnesota wants a stronger commitment to keeping rates low for longer.

LVMH wants to delay its legal fight with Tiffany. The French conglomerate opposed an expedited trial over its effort to walk away from its $16.2 billion deal to buy Tiffany. The New York-based jeweler argued that the move was an effort to run out the clock on their merger agreement, which expires on Nov. 24.

U.S. retail sales growth is slowing. Spending climbed for a fourth straight month in August, but there are signs that the expiry of economic stimulus is taking a toll.

President Trump rejected the C.D.C. chief’s comments on Covid-19 vaccines and face masks. Dr. Robert Redfield, the head of the C.D.C., told a Senate panel that vaccines probably wouldn’t be distributed widely until next summer, and that wearing face masks was crucial. Mr. Trump later asserted that a vaccine could be available within weeks and played down the usefulness of masks.

Short-term thinking is leading to “really dumb decisions,” says Jamie Dimon. The JPMorgan Chase C.E.O. told a CNBC-moderated panel that governments aren’t taking steps to bring about healthy economic growth, including addressing income inequality. “What we focus on is blaming each other and we stifle ourselves, because we are unable to do very basic stuff,” he said.


Image

Credit...Justin Lane/EPA-EFE, via Rex, via Shutterstock, via

Whether — and how — to bring workers back to the office (however that’s defined) remains a contentious issue. Here’s the latest on how some big companies are managing it.

In the cautious camp:

Deutsche Bank told its U.S. employees that they aren’t expected back at the office until next summer, noting “understandable concerns about public transportation, cleanliness, security and other quality-of-life issues.”

Facebook is looking to hire a director of remote working as it carries out a plan to let employees permanently work from home.

In the other camp:

JPMorgan has reportedly stopped letting junior traders expense Uber rides to the office, ending a measure meant to help them avoid taking public transportation, Bloomberg reports.

• And in a different work arena, the Big Ten college football conference plans to play as soon as next month, reversing a decision to put the season off until next year. The announcement comes despite Louisiana State University’s football coach, Ed Orgeron, having casually acknowledged on Tuesday that “most” of his team had contracted Covid-19.

Shares in Snowflake, the data storage and analytics provider, more than doubled in their stock-market debut, making it the biggest I.P.O. ever for a software company. It’s the latest sign that investors’ appetite for tech companies seems insatiable.

The arc of Snowflake’s first day of trading: After its underwriters priced its shares at $120 apiece, the stock opened at $245, rose as high as $319 and closed at $254. That values the company at more than $70 billion, which is about the same as Goldman Sachs. (Another tech company that went public yesterday, JFrog, saw its share price jump 50 percent from its I.P.O. level.)

Excitement for all things from Silicon Valley has powered a boom in tech investing, especially during the pandemic, which has made people more reliant on the internet for work and life. That means rapidly amassing wealth for executives like Snowflake’s C.E.O., Frank Slootman, whose stake is now worth billions, and investors like Jack Dorsey of Twitter and Iconiq Capital, both of which have invested several times in Snowflake.

Snowflake’s first-day pop also gives ammo to critics of traditional I.P.O.s. Silicon Valley executives like the venture capitalist Bill Gurley have argued that such offerings tend to underprice companies’ shares, leaving billions of funds on the table. That view, as summed up in a tweet by the Zillow co-founder Spencer Rascoff: “On the one hand, congrats on the I.P.O. On the other hand, 🤦.”

• Expect to see more companies explore going public by merging with blank-check companies (which are still raising hundreds of millions) or by directly listing their stocks.


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Credit...Olivier Douliery/Agence France-Presse — Getty Images

This year’s presidential election will be the first for Patrik Frisk as a U.S. citizen, and the Swedish-born chief executive of Under Armour is marking it with a major get-out-the-vote initiative by the sports apparel business. His efforts have included encouraging employees and customers to vote by limiting internal meetings and deadlines on Election Day, putting voter registration information on product receipts and adding features about voting to the company’s app.

DealBook spoke with Mr. Frisk about voting, the pandemic’s impact on business and the status of Under Armour’s turnaround.

On whether Under Armour is worried about political backlash to its voting drive:

“We might be judged by it, but so be it. I don’t mind,” he said. “We think it’s partly our role as a brand.”

“This absolutely has nothing to do with party lines or anything like that,” he said. “This has to do with the fact that we stand for equality, the fact that we believe in democracy as a brand.”

On the difference between voting in the U.S. and his native Sweden, where turnout in 2018 was nearly 90 percent:

“I just think voting should be easier for everyone in the U.S.,” he said. In Sweden, “it’s very simple: I get my ballot mailed to me, and you can choose to mail it in or go vote with it.”

On how the pandemic has affected the company’s latest restructuring, which it recently updated to include more layoffs and cost cuts:

“The fact that team sports didn’t happen in the fall, the fact that ‘back to school’ didn’t really happen this fall is something everyone dealing with,” he said.

Under Armour has focused its turnaround on bringing new products more quickly to market and repositioning its brand. It is seeing positive signs in international markets, Mr. Frisk said. He declined to comment on investigations into the company’s accounting practices.

On which pandemic consumer trends will endure:

“We think for sure, the e-commerce and digital evolution probably accelerated three to five years,” he said, though how other changes — like a tentative return to cities — will affect business are less clear.

One silver lining: “People are going to think even more about their health and wellness level coming out of this.”

On bringing employees back to the office:

“It’s not going to be the same, at least not in the U.S. and Europe, that’s for sure,” he said. Some employees may need to go back to the office because of the nature of their positions, but others may stay remote for longer — or permanently. The company is taking a “soft opening” approach, allowing workers to stay at home until at least January.

“We’ll be setting ourselves up to manage through whatever ‘normal’ we need to have to be successful,” Mr. Frisk said.


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Credit...Christopher Lee for The New York Times

The U.S. Supreme Court will livestream its arguments in October, making the usually exclusive hearings accessible to all. When the court first aired live audio of its sessions in May because of the coronavirus pandemic, more than 130,000 listened live and nearly two million people have since heard the recordings.

Usually, only 50 of about 450 courtroom seats are reserved for the public, scarcity that fuels a cottage industry of paid line-waiters camping on sidewalks ahead of big cases, angling for “the legal version of Willy Wonka’s golden ticket.” Although recordings are released days after arguments, judicial transparency advocates have long demanded more real-time access, and they are likely to protest if livestreaming ends once pandemic restrictions are lifted.

• “It’s going to be very hard to get the genie back in the bottle,” predicts Gabe Roth, the executive director of Fix the Court, a nonpartisan advocacy group.

Even if live audio is here to stay, it won’t necessarily change how law firms work, says Timothy Bishop, a partner at Mayer Brown who argues cases at the court. Lawyers tend to travel to hearings with small teams anyway, and clients want to be present. “Seeing the justices’ facial expressions and interaction with each other tells you a lot,” he says.

More transparency has no significant downsides, Mr. Bishop says, and one important benefit is that it reveals the glory of the court. Though live audio could lead to more media coverage of mistakes or exchanges taken out of context, he says, “the court is a great institution that handles argument well, and it will be good if more people tune in to hear it in action.”

• The sessions begin on Oct. 5, and DealBook readers should take note of a consequential copyright showdown between Oracle and Google slated for Oct. 7.

Deals

• Private equity firms are taking advantage of robust corporate debt markets by having portfolio companies take out big new loans to pay themselves dividends. (FT)

• KKR has raised more than $11 billion for its fourth Asia-focused investment fund. (Reuters)

Politics and policy

• The Business Roundtable endorsed a “market-based mechanism” to battle climate change. (Politico)

• A federal judge criticized the U.S. attorney’s office in Manhattan for efforts to “bury” evidence in a high-stakes Iranian sanctions case. (NYT)

Tech

• One of Nikola’s board members, the hedge fund mogul Jeff Ubben, defended the electric truck maker against a short-seller’s fraud accusations and compared it to Apple. (FT)

• Facebook and Instagram flagged social-media posts from Tucker Carlson’s Fox News show as promoting “false information” about Covid-19. (NYT)

Best of the rest

• Is the company with a 20-second coronavirus test for real? (FT)

• Not being able to visit Chinese food factories is posing problems for rabbis who certify food as kosher. (Bloomberg)

• The pandemic has been good for golf. (WaPo)


News | Business | Tech: BioNTech buys German site from Novartis to boost vaccine output

 

2-3 minutes - Source: CNBC


The headquarters of German immunotherapy company BioNTech stands on April 22, 2020 in Mainz, Germany.

The headquarters of German immunotherapy company BioNTech stands on April 22, 2020 in Mainz, Germany.

Thomas Lohnes | Getty Images

Germany’s BioNTech is purchasing a German biotech production site from Swiss drugs giant Novartis to boost output of the coronavirus vaccine hopeful it is developing with Pfizer.

The transaction, for which the price tag was not disclosed, is part of a push to prepare for a global roll-out of the pair’s experimental vaccine that could be reviewed by regulators as early as next month, among the first in the Western world.

The facility in the German city of Marburg will be converted to be fully on stream in the first half of 2021 with an annual production capacity up to 750 million doses of the inoculation, based on the so-called messenger RNA (mRNA) technology.

The two companies were previously aiming to supply up to 100 million doses worldwide by the end of this year and an additional 1.3 billion doses by the end of 2021.

The new site, with its 300 staff that will join BioNTech, will allow for a larger 2021 output target but it is not yet clear by how much on balance, a company spokeswoman said.

The biotech firm said the facility will be one of the largest mRNA manufacturing sites in Europe, alongside two of BioNTech’s existing vaccine production sites. Pfizer has at least four production sites in the United States and Europe, it added.

Vaccine to be fridge-stored for 2 weeks

Separately, BioNTech said it expects that the experimental Covid-19 vaccine it is developing with Pfizer will be able to be stored at refrigerator temperatures for at least two weeks, seeking to allay concerns that the compound may have to be deep-frozen.

Speaking at an online media briefing on the purchase of an additional German production site, Chief Executive Ugur Sahin said tests have recently confirmed the genetic compound remains stable at 2 to 8 degrees Celsius for five days but he expects storability at those conditions to be two weeks or longer.

He added that a good vaccine should have an efficacy of at least 70% to 75% for it to quell the pandemic and that was also the yardstick that BioNTech had set itself.

News | Business | Market Insider: Fed picks its side in inflation debate and sends market a message — no rate hikes for years

 

Patti Domm


The Fed does not expect to see inflation pick up for years, and it is willing to keep rates at zero even after it does.

Stocks initially surged after the Fed released its post-meeting statement and its latest economic forecast, showing it will keep interest rates at zero at least through 2023, as expected. Stocks gave up their gains as Fed Chairman Jerome Powell briefed the media, and described the Fed’s guidance as strong and “powerful.” Major stock indexes pointed lower in Thursday’s premarket.

“He’s the great and powerful Oz. Investors got duped. They thought enhanced forward guidance meant something, but when they peeked behind the curtain they realized the Fed didn’t do anything, and the market rolled over,” said Michael Arone, chief investment strategist at State Street Global Advisors.

Treasury yields moved slightly higher after Powell said the Fed plans to keep its asset purchases at current levels for now. Some bond market pros have been expecting the Fed to increase Treasury purchases, and Powell did not commit to that. The 10-year Treasury yield rose to 0.695%.

“We’re going to continue to monitor developments, and we’re prepared to adjust our plans as appropriate,” Powell said.

But it was the Fed’s guidance that markets found dovish. In the Fed’s latest projections, core inflation is expected to stay low and not reach the Fed’s 2% target until 2023. At the same time, the job market is expected to improve to the point where unemployment is at 4% in 2023, below the longer run rate of 4.1%.

“This is dovish — lower rates for longer, higher equities, weaker dollar,” said Jon Hill, senior fixed income strategist at BMO. “The Fed is saying we’re not hiking in 2023, maybe in 2024. ... What they’re saying is these are our goals. We expect to have just barely met them and even then, they’re not raising rates.”

The Fed last month announced a change to its policy, where it will now let inflation run above its target for some time before it moves to raise rates. But in the central tendency of Fed forecasts, the Fed sees core inflation running below 2% through 2022. It expects core personal consumption expenditure inflation at 1.3% to 1.5% this year, and 1.6% to 1.8% next year. The pace reaches 1.9% to 2% by 2023.

 But AB economist Eric Winograd said Powell may have undercut the dovish message he was sending.

“He noted that targeting an inflation overshoot for ‘some time’ as the statement says, means that they are not targeting a ‘sustained’ overshoot. So how long is ‘some time’ if it isn’t sustained?’” Winograd said. “That imprecision is a problem that the committee is going to have to solve to reap the full benefits of the framework shift. It’s not a coincidence that the stock market, which had been in positive territory, flipped negative after the chair’s comments.”

Powell said the Fed expects inflation to ultimately improve. 

“That’s very strong forward guidance, and we think that will be durable guidance that will provide significant support for the economy,” he said.

While some Wall Street strategists and investors believe inflation could become a problem, the Fed has said it is more concerned about disinflation.

US Market | Futures Indicator: Dow futures fall more than 200 points, tech and airline stocks are lower

 

Fred Imbert


U.S. stock futures dropped as technology stocks declined, along with plays related to a successful coronavirus vaccine rollout.

Futures on the Dow Jones Industrial Average fell 262 points or 0.9% and pointed to an opening loss of more than 200 points for the average. S&P 500 futures and Nasdaq-100 futures both lost 1%.

Here’s what traders were watching Thursday:

  • Investors evaluated for a second day the Federal Reserve’s interest rate outlook where it indicated interest rates could stay anchored to the zero-bound through 2023 as the central bank tries to spur inflation. Fed Chairman Jerome Powell also pressed lawmakers to move forward with stimulus. While traders want low interest rates, they may be second guessing what rates this low for years means for the economic outlook.
  • Shares of stocks that would benefit most from a vaccine struggled in premarket trading amid conflicting messages about the timeline. President Donald Trump said late Wednesday that the U.S. could distribute a vaccine as early as October, contracting the director of the Centers for Disease Control and Prevention, who told lawmakers earlier in the day that vaccinations would be in limited quantities this year and not widely distributed for six to nine months. Carnival Corp and United Airlines both fell 2% in premarket trading.
  • Technology stocks, which weighed on the market Wednesday and were the source of the sell-off earlier this month, were down in premarket trading again. Tesla was off by 2%. Netflix fell 1%.
  • Shares of Snowflake, an IPO which captivated Wall Street on Wednesday as it doubled in its debut, were off by 3% in early trading.
  • Traders were monitoring the status of stimulus talks after President Trump suggested Wednesday he could support a larger package. However, Politico was reporting that Senate Republicans appeared reluctant to do so without more details on a bill.
  • Wall Street will get the latest look at U.S. weekly jobless claims at 8:30 a.m. ET. Jobless claims are expected to total 875,000, according to economists polled by Dow Jones, down slightly from the prior week.

The S&P 500 slid 0.5% on Wednesday in a late-day sell-off brought on by tech shares and a reassessment of the Fed’s forecast. Big Tech dragged down the S&P 500 and Nasdaq, with Apple, Facebook and Microsoft all closing lower. The S&P 500 was still up 1.3% this week heading into Thursday after posting its first two-week decline since May previously. But it now appears that comeback is fizzling.

Fed Chairman Jerome Powell said in a news conference easy monetary policy will remain “until these outcomes, including maximum employment, are achieved.”

Normally, the prospects of lower rates for a prolonged time period spur buying in equities but that was not the case on Wednesday.

“The major indices dipped back to their short-term trading range following the Fed’s announcements, confirming that bulls are still not out of the woods,” said Ken Berman, founder of Gorilla Trades. “While there was nothing scary in today’s Fed announcements, stocks reacted in a bearish fashion, especially in the tech sector.”

U.S. housing starts data are also set for release at 8:30 a.m.

News | Business | Singapore Summit: The U.S. is still a dominant power — but it's not clear if it remains the global leader

 

Yen Nee Lee


A U.S. flag flutters in the wind.

A U.S. flag flutters in the wind.

Gary Hershorn | Corbis News | Getty Images

SINGAPORE — The U.S. is still globally dominant in many areas including finance and technology — but it’s not clear if the world’s largest economy remains the leading power that other countries look up to, said experts during a debate at the Singapore Summit.

Speaking on the third day of the virtual conference, they discussed whether “A Leaderless and Divided World will be the New Normal.”

The debate took place against the backdrop of a shifting global order in which the U.S. — widely considered the main superpower — is seen retreating from international organizations it’s led for years, while China appears to be rising and challenging American dominance on several fronts.

One of the speakers, Ian Bremmer, president of political risk consultancy Eurasia Group, said he saw a world without leadership in the foreseeable future.

“If there was going to be true leadership, it would need to come from” the U.S., he said. He pointed out that the U.S. is still globally dominant, with its tech firms growing stronger during the coronavirus pandemic, the U.S. dollar’s role as the main reserve currency and strength of American banks.

But those strengths are also why the U.S. lacks the interest to lead, said Bremmer.

A world without a leader doesn’t hurt the U.S. the way it hurts other countries, he added. “The Americans are not going to be hugely interested or feel the impulse to fill that vacuum in the near term, so I believe that we’re going to be leaderless and divided going forward for the foreseeable future.”

The world has an inherent need for leadership. If the U.S. genuinely can no longer provide it, someone else will.

Niall Ferguson

Hoover Institution, Stanford University

However, Niall Ferguson, Milbank Family senior fellow at the Hoover Institution at Stanford University, argued that the leadership of the U.S. has in fact been “very striking” this year. It can be seen in the U.S. Federal Reserve providing financial leadership during the depth of the pandemic-induced crisis and Washington showing technological leadership in campaigning against Chinese tech firm Huawei, he said.

He also added that even if the U.S. did not step up as the global leader, someone else will because the world needs one.

“The world has an inherent need for leadership. If the U.S. genuinely can no longer provide it, someone else will. Perhaps China, perhaps — who knows — a European Union who now seems to have its own relatively strong leadership in Berlin and Paris,” Ferguson said.

Taking sides: U.S. or China?

The debate also centered on China’s rise as a global power and its attempt to fill the leadership void left by the U.S.

But the experts agreed that China is still far from playing a leading role on the international stage.

China itself has repeatedly said it’s not interested in replacing the U.S. or in exporting its ideology globally, said Yan Xuetong, dean of the Institute of International Relations at Tsinghua University.

Still, the U.S.-China rivalry may force other countries to choose sides. Yan noted that increasingly, countries are seen siding with China on economic issues and relying on the U.S. for security. He cited Singapore, Japan, Germany and France as examples of those who have taken such a stance.

Ngaire Woods, dean of University of Oxford’s Blavatnik School of Government, agreed that countries may need to “selectively cooperate” with either the U.S. or China.

In other words, for the third countries in the world, the smaller countries, the new competition between China and United States across these institutions does not spell doom and gloom.

Ngaire Woods

University of Oxford’s Blavatnik School of Government

In fact, the U.S.-China competition could be an opportunity for smaller countries to push for changes they would like to see in international bodies such as the International Monetary Fund and World Bank, said Woods, who’s a professor of global economic governance.

“We’ve seen every international institution changed and get pushed to listen to more of its members,” she said.

“In other words, for the third countries in the world, the smaller countries, the new competition between China and United States across these institutions does not spell doom and gloom. It spells an opportunity for other countries to start playing off those superpowers and push further for the changes they’ve been wanting in those institutions themselves.”