Five Things You Need to Know to Start Your Day – Bloomberg

Posted: August 26, 2020 at 4:06 pm

You can catch coronavirus twice and the illness's effects on patients and the economymay last years. Meanwhile U.S. stocks hit an all-time high on treatment hopes. And China's big banks are on a hiring spree. Here are some of the things people in markets are talking about today.

A man was infected with the coronavirus for a second time after recovering from an initial bout in April, in what scientists said was the first case showing that re-infection may occur within a few months.The 33-year-olds second infection was detected via airport screening on his return to Hong Kong from Europe this month. Among those who survive the illness, there isan expanding population of so-called long-haulers left with debilitating conditions long after "recovery." Its now known that SARS-CoV-2 will leave a portion of the more than 23 million people its infected with a litany of physical, cognitive and psychological impairments, like scarred lungs, post-viral fatigue and chronicheart damage. Whats still emerging is the extent to which the enduring disability will weigh on health systems and the labor force. That burden may continue the pandemics economic legacy for generations, adding to its unprecedented global cost predicted to reach as much$35.3 trillionthrough 2025. Here's how Bloomberg is tracking the virus.

Asianstockslooked poised for modest gains after U.S. equities rose to a record high on virus treatmentoptimism. Treasuries retreated, and futurespointed higher in Japan and Australia, but slipped in Hong Kong. The S&P 500 notched another all-time high as optimism mounted that the virus wouldnt hamper growth. Exxon Mobil, Pfizer and Raytheon were kicked out of the Dow Jones Industrial Average as part of the stock benchmarks biggestreshufflingin seven years, actions that will boost the influence of technology companies that have dominated the 2020 stock market. The Nasdaq Compositeclosed at a record for a second consecutive session, and the dollar strengthened. Elsewhere, oil rallied and gasoline surged to a five-month high and gold traded below $1,950 an ounce.

Chinas mega banks are ramping up their recruitment of fresh graduates as a record number enter the labor market,boosting employment even as lenders deal with plunging earnings and ballooning bad debt. The four biggest state banks kicked off their autumn campus hiring this month, instead of in November as in previous years.China Construction Bank plans to add 16,000 graduates this year, up from 13,000 last year, while Bank of China will increase its hiring by 15% to more than 10,000, according to their advertisements. This is in direct response to the governments call to protect jobs, saidTang Jianwei, a Shanghai-based analyst atBank of Communicationss research institute. Even though the big banks are facing pressure on their own earnings, they still need people to develop the business. Also its important for them to assume social responsibility.

TikTok and its Chinese parent company ByteDance are suing the Trump administration to challenge a ban on the fast-growing video app,bringing a geopolitical fight over technology and trade into a U.S. courtroom.Trump says TikTok is a security risk for user data. The company said the presidents decision was made for political reasons, is unconstitutional and violates rights to due process.While thebandoesnt take effect for weeks, it has escalated tensions between the world's largest economies. On Aug. 14, Trump ordered ByteDance to sell its U.S. assets and said the U.S. should receive a cut of the proceeds.MicrosoftandOraclehave already shown interest, which argues TikTok poses no security threat.

The rebound in Asia's best performing stock market since Marchis just getting started, according to money managers. Pakistans central bank has been among the most aggressive globally in cutting interest rates this year. That's reduced the double-digit returns from fixed income and bolstered the bullish case for equities. If rates remain at these levels for some time, they will continue to drive the market,saidAyub Khuhro, chief investment officer at Faysal Asset Management, whose assets have tripled to 35 billion rupees ($210 million) in the past year.Pakistans KSE-100 Index is up 36% from the end of March. A slowdown in the rate of new infections coupled with measures to boost an economy that shrank for the first time in seven decades prompted the Dubai-based FIM Partners in July to make Pakistan its biggest exposure after the Philippines.

This is whats caught our eye over the past 24 hours:

I find Modern Monetary Theory (MMT) fascinating and frustrating at the same time. It's a very interesting debate about the nature of money, but it leads us to the place we're arguably already in. MMT suggests that because the state has a monopoly on printing money the only limitation on debt issuance is inflation. The suggestion is that governments can borrow a lot more in order to fund social programs of all kinds so long as it doesn't spark price increases. In other words the limitation on debt issuance is grounded in politics, rather than the illusion of a "limited fiscal budget."

But politics is and always has been the problem. It's pretty difficult to take a look at U.S. national debt currently estimated at $26 trillionand conclude that budgets have really been a binding constraint. The binding constraint is what U.S. politicians are willing to stomach and historically that process has been mired in bipartisanship.

Bloomberg

Anyway, the limitations of MMT have been on my mind quite a lot lately as we ponder how the Covid-19 crisis and various policy responses are affecting the economy. As I've written in this space before, the crisis is leading to incredibly inequitable consequences for individuals but it's also benefiting the largest companies with the biggest monopoly power over labor. In other words, the balance of power is tilting even further towards capital and away from people. Where does MMT come into this? There's a perception that the theory can rectify that imbalance if the government uses its extra fiscal headroom to enact things like universal basic income or some sort of jobs guarantee. But what if the problem could be solved a lot more simply, or at least, a lot less divisively?

Christopher Mims at the Wall Street Journal has an excellent piece out describing all the ways our current economic system has favored capital over labor especially through tax rates that have encouraged capital investment over the hiring of humans. It begs the question of whether a more politically palatable option might be to overhaul the corporate tax rates rather than enact sweeping programs that can easily be portrayed as "socialist."As the coronavirus crisis exacerbates the dominance of capital over labor, it seems likely that taxes will be a first step in rectifying that imbalance.

You can follow Tracy Alloway on Twitter at@tracyalloway.

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Five Things You Need to Know to Start Your Day - Bloomberg

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