Wednesday Morning Reads
- Mystery Is Bedeviling Global Markets
- Spike in Bond Yields
- American Factories Are Roaring Back
- Renewable Diesel Boom
- The Hottest Amenity From Developers
- Empty Office Buildings Squeeze City Budgets
- Return-to-Office Plans Are Set in Motion
- Forget GameStop
- Why We Launched A SPAC
- A Bleak Future For Long-Term Government Bonds
- Housing, We Have a Problem
The U.S. will be able to vaccinate its entire adult population by the end of May, according to President Biden, bringing the target forward by two months. That's largely thanks to a deal his administration engineered between two of the country's biggest drugmakers. The U.S. government has agreed to provide Merck (MRK) with nearly $270M to help produce a vaccine from Johnson & Johnson (JNJ), which received FDA emergency use approval this past weekend.
Bigger picture: Merck is already one of the world's largest vaccine makers, but it has fallen behind in the race to develop a jab for COVID-19. It's instead going to be using the fresh federal funding to produce raw materials, scale up manufacturing capacity and complete the fill-and-finish process. The funding is in addition to Merck's continued investment in its global vaccines manufacturing network as part of its planned capital investments of more than $20B from 2020 through the end of 2024.
"This is the type of collaboration between companies we saw in World War II," Biden declared. "I want to thank Johnson & Johnson and Merck for stepping up and being good corporate citizens during this national crisis." The White House is also boosting the number of vaccine doses being sent to states each week from 14.5M-15.2M, up from 8.6M when Biden took office in January. He also called on states to give priority to teachers, school staff and child care workers.
What else is happening? The remarks came shortly after Texas became the largest state to end its mask mandate and authorized all businesses to reopen "100 percent." Texas was followed shortly thereafter by Mississippi, where Gov. Tate Reeves said he would end a statewide mask mandate effective Wednesday, adding "It is time!" On the other side of the fence, CDC Director Dr. Rochelle Walensky said she is "really worried about more states rolling back public health measures... At this level of cases, with variants spreading, we stand to completely lose the hard-earned ground we have gained." (223 comments)
The SEC has been operating under temporary leadership since the end of December, when Chairman Jay Clayton left the agency after 3.5 years in the role. Since taking office, President Biden has been looking to appoint Gary Gensler to lead Wall Street's chief regulator, prompting the latter to testify before the Senate Banking Committee on Tuesday. He was mainly grilled on tactics used by some online brokerages, given the recent GameStop (GME) trading frenzy and its fallout.
Who is Gary Gensler? He's a former Goldman Sachs partner and ex-chief of the Commodity Futures Trading Commission (under the Obama administration). Gensler also spent time at the U.S. Treasury in the 1990s and served as the CFO for Hillary Clinton's 2016 presidential campaign. On the academia front, he's a professor at MIT's Sloan School of Management, where he teaches classes on digital currencies and blockchain.
At the hearing, the SEC nominee pledged to analyze the rise of stock trading "gamification" and intervene if necessary. He'll also "look at market structure in the equity markets around payment for order flow when frankly just a couple - a handful - of financial firms are buying most of the retail flow in America." Gensler further indicated the agency could soon move to force companies to disclose more about their political spending, climate risks and board diversity.
On cryptos: "To the extent that somebody is offering an investment contract or security that's under the SEC's remit, and they have exchanges that operate there, then we have to make sure there's investor protection. If it's not that, and it's a commodity, as Bitcoin (BTC-USD) has been deemed to be, then it's either a question for Congress or it's possibly a question for the Commodity Futures Trading Commission."
After losing its position as Europe's leading financial capital, the British government is looking toward looser stock listing rules to attract tech firms and SPACs. A surge in blank check companies has short-circuited the traditional IPO process, prompting a need for change to support the U.K.'s financial services sector. New listing rules would also aim to diversify London's recently struggling stock market, which is skewed toward older areas like banking, energy and mining.
Backdrop: Just weeks after the Brexit transition period ended on Jan. 1, Amsterdam surpassed London as Europe's largest share trading center, which piled pressure on the city to improve its competitiveness. SPACs have meanwhile surged in popularity during the pandemic, reaching record highs last year and continuing at breakneck speed so far in 2021. In fact, in the first two months of the year, there have been $61B worth of SPAC IPOs globally, almost all listing in the U.S. ($83B worth of deals were recorded in 2020).
Proposals: Current U.K. rules require SPACs to suspend trading once a target is acquired - meaning investors are locked in even if they don't like the purchase - but new recommendations from the Financial Conduct Authority could lift that requirement. Other changes would make it easier for company founders to list shares without giving up control, including dual-class share structures or reducing the free float requirement. Dual-class share structures have seen the Nasdaq and New York Stock Exchange attract many hot tech IPOs that have served as magnets for new growth companies to list in the U.S.
One of the most powerful businessmen in the world is Jack Ma - the founder of e-commerce colossus Alibaba (NYSE:BABA) - but he's found himself at odds with the Chinese government. After he criticized Chinese-state owned banks last year, Beijing retaliated with an antitrust investigation into Alibaba and pulled the listing of Ant Group, set to be the world's biggest IPO, in which Alibaba owns a one-third stake.
The latest: The financial payments powerhouse, which is also China's largest holder of consumer credit information, has defied intense government pressure by only giving a small amount of financial data to the country's central bank, FT reports. Personal credit information is a so-called "public good," according to the PBOC, and should be kept by a publicly owned entity or government agency. The central bank has long wanted to create a pool of credit data to help state-owned banks gauge creditworthiness due to increasing consumer loan defaults.
Ant is China's largest holder of consumer credit data, while its Alipay app is the country's biggest payments platform. The company, along with retail behemoth Alibaba, has seen Jack Ma become China's richest person, though he lost the title this week as his business empire came under regulatory scrutiny.
Thought bubble: Ant will likely cave in because, after all, it is a Chinese company and must listen to the government to stay in business. But Ma's fight with the authorities is another example of the escalating tensions between the state and China's private sector as President Xi exerts tighter control over the economy. Another area to consider is consumer trust in Ant Group, with many clients complaining online that they will walk away if their credit info is reported to the government.
At its annual Ignite developers conference, which was a streamed event this year due to the pandemic, Microsoft (NASDAQ:MSFT) joined other tech titans in setting the stage for a mixed reality future. Its new platform called Mesh will allow individuals in different physical locations to participate in a shared holographic experience. Users will initially be able to express themselves as avatars, but over time, Mesh will allow people to project their own image through holoportation.
Quote: "This has been the dream for mixed reality, the idea from the very beginning," said Microsoft Technical Fellow Alex Kipman. "You can actually feel like you're in the same place with someone sharing content or you can teleport from different mixed reality devices and be present with people even when you’re not physically together."
Powered by the Azure cloud platform, Mesh will soon offer developers a full suite of AI-powered tools for avatar creation. Those include session management, spatial rendering, and synchronization across multiple users and holoportation to build mixed reality solutions. The open Mesh standards will also allow developers to design across supported devices, which includes Microsoft's HoloLens 2 headset, a range of other VR headsets, smartphones, tablets and PCs.
Outlook: Microsoft has already announced two apps built on the platform - Mesh for HoloLens and a Mesh-enabled version of Altspace VR, which essentially allows for holographic work meetings with enterprise-grade security features. The company further hopes there will eventually be a robust portfolio of third-party Mesh apps and integrations within Microsoft products like Teams. It may also soon get a high-priced competitor from Apple (NASDAQ:AAPL), which is reportedly working on a $3,000 mixed reality headset for release as early as next year.
What else is happening...
CBOE files to list what could be the first U.S. Bitcoin ETF.
Biden backs former President Trump's stance on solar tariffs.
Inflation expectations are key in a post-Phillips Curve World - Fed's Daly.
Tuesday's Key Earnings
Box (NYSE:BOX) +0.8% AH following strong revenue guidance.
Hewlett Packard Enterprise (NYSE:HPE) unchanged AH on profit beat, slight revenue dip.
Kohl's (NYSE:KSS) +0.7% keeping bull case alive with earnings topper.
Nordstrom (NYSE:JWN) -2.6% AH with sales down 20% in Q4.
Target (NYSE:TGT) -6.8% accelerating spending on new store growth.
In Asia, Japan +0.5%. Hong Kong +2.7%. China +2%. India +2.3%.
In Europe, at midday, London +1%. Paris +0.7%. Frankfurt +1%.
Futures at 6:20, Dow +0.7%. S&P +0.6%. Nasdaq +0.7%. Crude +1.8% to $60.84. Gold -0.6% at $1723.60. Bitcoin +6% to $51783.
Ten-year Treasury Yield +3 bps to 1.44%
Today's Economic Calendar
7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
9:45 PMI Services Index
10:00 ISM Non-Manufacturing Index
10:00 Fed's Harker: "Equitable Workforce Recovery"
10:30 EIA Petroleum Inventories
12:00 PM Fed's Bostic Speech
1:00 PM Fed's Evans Speech
2:00 PM Fed's Beige Book
6:05 PM Fed's Kaplan Speech