Biden’s infrastructure bill clears the Senate. Predictions that Bitcoin will hit $100,000 are back in vogue. Delta is already hitting Asian economies. Here’s what you need to know this morning.
The Senate passed a $550 billion infrastructure plan that would represent the biggest burst of spending on U.S. public works in decades. The bipartisan 69-30 vote marked a significant victory for President Joe Biden’s economic agenda. The bill still faces hurdles in the House, which is scheduled to be on break until September 20. If the package clears both chambers, it includes new spending for roads and bridges, power grid upgrades and broadband expansion. However, the cryptocurrency industry failed to win a change to crypto tax reporting rules in the bill. Elsewhere in U.S. politics, Andrew Cuomo announced his resignation as governor of New York, bowing to pressure to leave office or face impeachment in the wake of multiple sexual-harassment allegations. “In my mind, I’ve never crossed the line with anyone,” he said.
Asian stocks look set to
follow their U.S. peers higher as investors assessed the ability of the economy to sustain less stimulus and rising virus outbreaks. Treasuries slipped while the dollar edged higher.
Futures pointed to modest gains in Japan and Australia and dipped in Hong Kong. Crude oil bounced back from a three-week low on bets that the global demand recovery will remain intact despite the fast-spreading delta variant. And Bitcoin was back above $45,000 amid renewed fervor for the digital coin.
Predictions of $100,000 are in vogue once again.
As China investors search for clues about which industries might be next in President Xi Jinping’s crackdown, they’re also pondering another question: Why now? Leading China watchers canvassed by Bloomberg point to a range of factors driving the crackdown. But two in particular stand out in explaining why this is happening now rather than five or 10 years ago: The push for self-reliance as ideological divisions with the U.S. become more entrenched, and Xi’s own consolidation of power ahead of a once-in-five-year leadership reshuffle in 2022, at which he’s set to extend his indefinite rule over the country. Right now no one knows just how far Xi will go. Read the full story here.
Asia’s economies are already showing a hit from the surging delta variant of Covid-19 as consumers stay at home and airplanes idle on the tarmac. Flight capacity in China is pointing to a slump in travel, manufacturing in Southeast Asia is hurting and Australian business sentiment has tumbled. Goldman Sachs, JP Morgan economists are warning of a “negative delta in Asia” and have lowered their growth forecasts for China. Meanwhile, the delta variant is forcing U.S. hospitals to ration intensive care beds; Japan has now administered 100 million shots; and Germany has ended free testing to prod people into getting vaccinated.
Chip shortages that have held back automakers and computer manufacturers are getting worse. Chip lead times, the gap between ordering a semiconductor and taking delivery, increased by more than eight days to 20.2 weeks in July from the previous month. That gap was already the longest wait time since the firm began tracking the data in 2017. Shortages of microcontrollers, logic chips that control functions in cars , industrial equipment and home electronics, jumped in July.
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
There's a saying about best-laid plans. Companies have spent years diversifying their supply chains to places like Vietnam and Malaysia, and at the start of the global pandemic that seemed like a smart idea that was paying off. China was basically closed and Southeast Asia appeared to be handling the virus better than much of the world.
Not so much anymore as the region now finds itself at the center of an intense wave of the delta variant, while even China is grappling with rising cases. Manufacturing PMIs for Malaysia, Vietnam and Indonesia have already dipped below the 50 level that signifies contraction and China is getting perilously close to doing the same.
The question now is whether outbreaks in the heart of the world's manufacturing region will end up exacerbating supply-chain issues and crimping growth in other economies. As Viktor Shvets at Macquarie notes: "Not all threats are made equal. What is particularly troublesome is that the latest wave is attacking the factory of the world, i.e., Asia-Pacific ... Normalization will require a truly global vaccination effort and keeping variances at bay."
You can follow Tracy Alloway on Twitter at @tracyalloway.
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