Every Friday, Brian Jacobsen provides perspective on key events and topics of the current week and his thoughts about what the week ahead may hold. Here’s his report for the week of August 28–September 3, 2021. Plus: Since we started a new month on Wednesday, there’s a quick recap of the big stories from August 2021.
The week that was
· Hurricane Ida hit the Gulf Coast. Ida weakened to a tropical storm but brought massive amounts of rain and wind. More than 1 million people went without power. The Gulf of Mexico is a significant source of oil production and refining. Rigs and facilities were closed ahead of the storm hitting.
· Chile’s central bank surprised investors by hiking its policy rate 0.75 percentage points to 1.5%.
· Surveys of Chinese purchasing managers indicated manufacturing growth in China is slowing and nonmanufacturing (mostly services and distribution) activity actually contracted. This could be due to some port closures in the wake of the rise of COVID-19 cases. A U.S. survey of manufacturing purchasing managers showed some incremental improvement across a number of dimensions. Prices paid have been high but dropped a little. Production activity increased. Supplier delivery times remained long due to strained supply chains, but the delivery times somewhat improved. So, supply chain problems may be healing at least slowly. Employment contracted, highlighting that labor issues are rather persistent.
· The U.S. military carried out drone strikes against ISIS-K targets in Afghanistan.
· North Korea reportedly has restarted its plutonium reactor.
· The European Union recommended that member states impose restrictions on unvaccinated travelers from the U.S.
· China’s government said it wants gaming platforms to restrict children’s playtime to three hours per week. The government then said that streaming services need to enforce certain rules around language and decorum.
The week to come
· The Reserve Bank of Australia has a policy meeting on Monday, September 6, while the Bank of Canada has a policy statement coming out on Wednesday. The European Central Bank’s policy announcement comes out on Thursday.
· China’s August data on exports and imports are to be released on Tuesday. Inflation data for August are to be released on Wednesday.
· U.K. industrial production data for July comes out Friday.
A look back at August’s big stories
· The Senate passed a bipartisan infrastructure bill. The House will likely vote on that bill by September 27. Both the Senate and the House passed a budget blueprint, setting the stage to use the reconciliation process to pass $3.5 trillion in spending for the 2022 fiscal year. The blueprint calls for raising taxes on the wealthy and corporations while cutting taxes for everyone else. President Biden has previously proposed raising the corporate tax rate from 21% to 28%, but some moderate Democrats have said they wouldn’t support such a large increase.
· China’s government cracked down on technology companies, and China’s President Xi Jinping gave a speech in which he said he wanted the government to promote “common prosperity” and that growing wealth inequality was at odds with that goal. Investors took that to mean the outlook for luxury brands and retailers isn’t as bright. China’s government published its five-year plan for increasing regulation of economic activity. The plan seems to focus on technology, education, and health care. The document says the purpose is to modernize the regulatory environment with an aim of improving Chinese people’s lives.
· The country of Haiti was devastated by an earthquake and a tropical storm.
· Louisiana was hit with Hurricane Ida. Hundreds of thousands of people lost power.
· Afghanistan fell into the hands of the Taliban. A suicide bomber killed 13 American soldiers and many Afghans as American troops were trying to evacuate civilians. The U.S. military retaliated, thwarting further attacks.
· Minutes from the July Federal Open Market Committee meeting showed that “most” Federal Reserve (Fed) officials agreed they could slow the pace of asset purchases later this year. Fed Chair Powell said that he thinks the Fed could taper later this year.
· The Food and Drug Administration gave full approval for the Pfizer Inc./BioNTech SE vaccine for individuals 16 and older. Up to this point, it was being used under an emergency-use authorization.
· Korea’s central bank hiked rates 0.25 percentage points, becoming the first developed market central bank to hike rates since the pandemic began.
Thanks for reading, stay informed!
CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.