Member Briefing August 23, 2022

August 23, 2022

Posted By: Harold King in Daily Briefing,

Pandemic Bolsters China’s Position as the World’s Manufacturer

Though some of China’s gains in global markets may unwind as the effects of the pandemic fade, the trend nonetheless highlights just how hard it is to unplug from the world’s largest factory floor. Such “decoupling,” as it is known in policy circles, is especially challenging as Chinese factories extend their reach into higher-end products like chips and smartphones and new technologies such as electric cars and green energy.

China’s share of global goods exports by value increased over the course of the pandemic, to 15% by the end of 2021 from 13% in 2019, according to data from the United Nations Conference on Trade and Development, which tracks global trade. Major competitors’ share of global exports shrank over the same period, suggesting China’s gains came at the expense of others. Germany’s share of global exports fell to 7.3% in 2021 from 7.8% in 2019; Japan’s share declined to 3.4% from 3.7%; and the U.S.’s share slipped to 7.9% from 8.6%.

War in Ukraine Headlines

Pat Ryan and Marc Molinaro in NY-19 Special Election Today

A special election here next week could offer Democrats a preview of the pain coming their way in November. Or it could provide powerful evidence that a Republican wave election is not in the offing. The matchup in the 19th district, which Biden carried by less than 2 points in 2020, is between Ryan, the Ulster County executive who has campaigned aggressively on abortion rights, and Marc Molinaro, the Dutchess County executive who has framed his bid as a referendum on the Biden administration’s economic failures.

Both parties are dumping money into this Hudson Valley district to notch a short-lived but symbolic victory in the last competitive race before the midterms. The winner will succeed Democrat Antonio Delgado for just a few months. But the messaging, turnout and margin of the contest will offer tea leaves into what lies ahead this fall in the battle for control of the House.

Fauci to Leave Biden Administration in December

Anthony Fauci, President Biden’s chief medical adviser and the government’s top infectious disease official, said he would step down in December. In addition to his role as Mr. Biden’s chief medical adviser, Dr. Fauci is director of the National Institute of Allergy and Infectious Diseases and chief of NIAID’s Laboratory of Immunoregulation. He will step down from all three roles.

Before 2020, he often received bipartisan praise. During the Covid-19 pandemic, he was praised by many public-health officials and Democrats for what they said were straightforward assessments of the risks posed by the virus. He became a household name, appearing on T-shirts and tote bags. Many Republicans criticized him, however, arguing he overstated the government’s authority to require precautions and flip-flopped on how the coronavirus spread and the need to mask.

U.S. COVID – Omicron-Specific Covid Booster Shots are Just Weeks Away. Here’s Who Will—and Won’t—be Eligible

Newly updated Covid booster shots designed to target omicron’s BA.5 subvariant should be available within in the next three weeks. That begs an important question: Who’s going to be eligible to get them?

The short answer: anyone ages 12 and up who has completed a primary vaccination series, a Centers for Disease Control and Prevention spokesperson tells CNBC Make It. It’s unlikely to matter whether you’ve received any other booster doses or not before, the spokesperson says — but if you’re unvaccinated, you won’t eligible for the updated formula until you complete a primary series with the existing Covid vaccines. The longer answer is somewhat more complex, because it depends on which booster shots get approved and when.

Pfizer Seeks Authorization for Updated COVID Vaccine, Without Fresh Clinical Trial Data

Pfizer and BioNTech said Monday that they have asked the Food and Drug Administration to authorize a new booster shot targeted at the Omicron BA.4/BA.5 strain of the coronavirus that causes Covid-19, the first step in a process that could lead to more effective booster shots. Notably, in the same press release, the companies said that a clinical study investigating the safety, tolerability, and immunogenicity of the vaccine, which also includes the original Covid strain, is expected to start this month, meaning data would not be available for the FDA to consider.

The application to authorize the vaccine without new clinical trial data is part of a bold and potentially controversial gambit by the U.S. and its advisers to try and get ahead of the fast-mutating coronavirus, SARS-CoV-2. But it’s one that could also have a big payoff. One of the problems for the Covid vaccines is that by the time a booster shot designed to take on a variant has gone through clinical trials – which have already been accelerated to take only a matter of months – a new variant may be on the horizon. So the FDA and its advisers have backed a plan that argues that enough is now known about the Moderna and Pfizer/BioNTech platforms to approve booster shots before clinical data are available.

COVID-19 Associated with Increased Risk of Brain Disorders 2 Years After Infection

A study published on Wednesday shows a history of COVID-19 infection is associated with an increased risk of neurological aftereffects. “COVID-19 is associated with increased risks of neurological and psychiatric sequelae in the weeks and months thereafter,” reads the study, titled “Neurological and psychiatric risk trajectories after SARS-CoV-2 infection: an analysis of 2-year retrospective cohort studies including 1,284,437 patients.” Sequelae are conditions resulting from a prior illness or incident.

The study examined de-identified data from more than a million patients using an international health records network that drew from the U.S., Australia, the U.K., Spain, Bulgaria, India, Malaysia and Taiwan. Most patients considered by the study were American.

Boeing, MIT Announce Decarbonized Aerospace Research Partnership

On August 15, at the Farnborough Air Show, Boeing Co. and the Massachusetts Institute of Technology announced a new three-year project to research how the aerospace industry can reduce or eliminate carbon emissions. The project, Pathways to Sustainable Aviation, will send its findings to a real-time visualization of aerospace-related carbon emissions called Cascade.

“Addressing how the aerospace industry reduces its environmental footprint is critical to the future of air travel,” said project’s lead principal investigator, R. John Hansman, professor aeronautics at MIT. Hansman, who also leads the International Center for Air Transportation at the institute, said he looked forward to examining how to make flying greener on an industry scale.

Five Things to Watch in Today’s New York Congressional and State Senate Primaries

On Tuesday, voters will weigh in on state Senate and Congress. Vacancies in the House thanks to retirements, resignations and running for other offices – not to mention redistricting – have resulted in a large number of candidates running in congressional races across the state. And several high-profile state Senate races could have reverberating impacts on the direction of the chamber.

It’s a lot to keep straight, so here are four of the biggest things to watch on Tuesday.

Worsening Drought Seen as Next Big Threat of Economic Disruption

What do factory shutdowns in China, shipping delays in Europe and reduced agricultural output in the U.S. have to do with each other? They are all being caused by severe droughts impacting the world’s largest economies. Researchers say the dry spells are partly because of seasonal weather patterns like La Niña, but are also related to consequences of land degradation and climate change.

The Chinese province of Sichuan just announced it would extend industrial power cuts and activate its highest emergency response, impacting a number of global manufacturers like Apple, Foxconn, Toyota and Volkswagen. The vital Yangtze, the longest river in Asia, reached its lowest level on record for August, affecting supply of hydropower and causing widespread shortages. Over in Europe, cargo ships have had to reduce their loads due to critically low levels of the Rhine. The waterway is usually occupied with vessels transporting raw materials to power plants and factories, and Italy has even declared a state of emergency along its important Po River. Separately, agricultural forecasters in the U.S. now expect farmers to lose more than 40% of the cotton crop, while many acres of farmland are being left unplanted because of water shortages.

Europe’s Natural-Gas Crunch Sparks Global Battle for Tankers

European countries ramped up their purchases of liquefied natural gas from the U.S., Qatar and other sources this year as Russia cut supplies to the continent. They are competing with peers in South Korea and Japan—where gas demand has surged during a heat wave—for a finite amount of supply ferried by a limited number of vessels.

The jostling has increased orders for new tankers transporting LNG—specialized ships the length of three football fields—as well as their price. Rates to charter existing tankers have jumped too, which has helped push gas prices to records in Europe and Asia. Gas prices in Europe jumped a further 19% Monday after Russia said it would temporarily close a major pipeline for unexpected maintenance later this month. The rise in Europe dragged the U.S. natural-gas market up 5.6% to its highest level since 2008. Traders expect gas prices and tanker rates to zoom even higher if China, where demand has been curtailed by Covid-19 lockdowns, steps back into the market before winter.

Ford Confirms Layoffs, Says It Is Cutting About 3,000 Jobs

Ford Motor Co. plans to eliminate 3,000 jobs globally this week, according to a letter sent to employees Monday and obtained by Automotive News. The automaker is cutting 2,000 salaried positions and 1,000 agency jobs, CEO Jim Farley and Executive Chair Bill Ford said. Affected employees in the U.S., Canada and India will be informed this week, the letter said. The cuts are expected across a variety of roles, including purchasing, and are expected to come in both its Ford Blue and Model e divisions. The company told employees that in addition to eliminating jobs, it is reorganizing and simplifying functions within its organization.

“Building this future requires changing and reshaping virtually all aspects of the way we have operated for more than a century,” Farley and Ford wrote. “It requires focus, clarity and speed. And, as we have discussed in recent months, it means redeploying resources and addressing our cost structure, which is uncompetitive versus traditional and new competitors.”

Chinese Banks Cut Rates to Spur Economic Growth

Banks in China cut benchmark interest rates on loans to households and businesses, a small attempt to help revive growth in an economy struggling with a property bust and Beijing’s zero-tolerance to Covid-19. Changes to so-called loan prime rates, which are set by a panel of banks and represent the terms offered to the most creditworthy borrowers, usually follow soon after.

Economists say interest-rate cuts will probably do little to revive growth in China’s flagging economy, where would-be borrowers are on edge over the threat of new disruptions to daily life from any new Covid-19 outbreaks and gloomy about their prospects against a worsening backdrop for growth and jobs. That is sapping demand for loans.

General Dynamics Contracted for USN Subs Program

The U.S. Dept. of Defense allocated $236.2 million to General Dynamics Electric Boat for engineering, technical, design, and planning yard support services for operational strategic and attack submarines – as a modification to an earlier contract. The work will be performed at Groton, Conn., Kings Bay, Ga., Bangor, Wash., Pearl Harbor, Hawaii, and North Kingston and Newport, R.I. Work under this contract modification will be completed by September 2023.

The U.S. Navy operates three types of submarines, for attack, ballistic missile launch, and cruise missile launch – all of them nuclear powered. There are four classes of subs in service now: 29 Los Angeles-class and three Seawolf-class fast-attack submarines; 14 Ohio-class ballistic missile subs plus four more guided missile subs; and 19 Virginia-class fast attack subs. Two more Virginia-class subs have been delivered to the Navy, while seven are in construction now and two more are on order.

BA to Cut More Than 10,000 Flights from Winter Schedule

British Airways is to cut more than 10,000 flights from its winter schedule, in one of the clearest signs yet that airline bosses expect staff shortages and disruption that have plagued the industry to last into next year. It is the latest blow to the aviation industry, which cut thousands of jobs during the pandemic and is now struggling to rehire quickly enough to meet resurgent demand as passengers return.

The world’s leading airlines have also faced the twin headwinds of a worsening economic outlook and rising fuel costs that will need to be passed on to travelers through higher ticket prices. BA’s cuts to short-haul journeys amount to 8 per cent of its flight schedules between October and March, and come after the airline was forced to slash its summer flying plans to shore up its flagging operations. The airline has also axed hundreds of long-haul flights.