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Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | | |  | | By Ben White and Aubree Eliza Weaver | Editor’s Note: Morning Money is a free version of POLITICO Pro Financial Services' morning newsletter, which is delivered to our s each morning at 6 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. | | | Some more red flags — The spread of the Delta variant of Covid-19 obviously presents a risk to the economy, though perhaps not an existential one given the rates of vaccination among highly vulnerable populations. And those who are getting Covid now are, sadly, mostly people who don’t care about masks or lockdowns and will mostly keep up their current economic activities. But there are other signals flashing that the economy faces something of a test this fall even as growth rates will be quite high given the nightmare of last year. We can’t judge too much from one set of weekly jobless claims. But the surprise move higher to 419,000 over 350,000 expectations was not a great sign. Via Cliff Hodge, Chief Investment Officer for Cornerstone Wealth : “The miss on claims and upward revisions continues to be a head-scratcher. There are over 9.2 million job openings, the highest on record by a long shot, yet many are hesitant to get back in the labor force. One data point isn’t a trend, and a one-off can probably be chalked up to Delta variant concerns. If jobs data doesn’t inflect soon, the markets and the Fed will be put on notice.” The housing market is also clearly cooling after a red hot spring despite a slight increase in existing home sales. Via Pantheon’s Ian Shepherdson: “This modest increase in sales is just a brief diversion against the downward trend, signaled clearly by the near-30% drop in mortgage applications since their December peak. “We expect sales to fall sharply over the next few months; demand is mean-reverting to its pre-Covid level. Supply remains very tight, but above the lows seen earlier this year.” GOOD FRIDAY MORNING — Happy weekend, everyone! Email me on bwhite@politico.com and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on aweaver@politico.com and follow her on Twitter @AubreeEWeaver. | | | | STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president’s ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today. | | | | | | | | FUTURE OF WORK — Emails keep flowing in from our recent piece with Eleanor Mueller on how challenging it is for employers and employees to figure out when and how to return to the office, especially in the face of Delta. Via a senior financial services industry official: “Couldn’t agree more with the observation that no one, workers or bosses, has any idea of what the new normal will look like. I call it the Grand Experiment — we’ll likely spend all of 2022 testing, learning and adapting. But at the end of the day, whatever the outcome, it will prove to be a distinctive ‘moment’ in history of industrial evolution. BIDEN COULD STILL GET HIS BIPARTISAN MOMENT — Our Marianne LeVine, Burgess Everett, and Laura Barrón-López: “Ben Cardin is ‘not particularly pleased’ with parts of the bipartisan infrastructure package. Kirsten Gillibrand has ‘no reason to be against it.’ And Elizabeth Warren said she’ll support it if ‘it makes some people happier.’ “Those are Democratic senators' scintillating reviews for a plan billed as a major goal of President Joe Biden. As negotiators rush to finish their package by Monday, they're signaling they’ll go along with it, even if it’s through gritted teeth. … Even Democratic senators skeptical of GOP cooperation said they were hopeful that a bipartisan deal on physical infrastructure would come to fruition” ECB HAS TO STAY ON HOLD — Our Bjarke Smith-Meyer: “Growing concerns over how the Delta variant of the coronavirus could hamper the eurozone’s economic recovery strengthened the European Central Bank’s resolve to keep printing money and leave interest rates unchanged. “The Frankfurt-based institution announced … that it would continue to front-load its €1.85 trillion anti-pandemic bond-buying program and hike rates only when its inflation target of 2 percent is within sight over the medium term. … Several economists in their analyses interpreted [Christine] Lagarde’s comments to mean that rate hikes are years away, especially considering that the ECB currently expects inflation to reach 1.4 percent in 2023.” | | | WALL STREET INCHES HIGHER IN PIVOT BACK TO GROWTH STOCKS — Reuters’ Stephen Culp: “Wall Street edged higher on Thursday, as lackluster economic data and mixed corporate earnings sent investors back to growth stocks. A pull-back in economically sensitive cyclicals kept the S&P 500's and the blue-chip Dow's gains muted, while small-caps underperformed their larger rivals. “But megacap market leaders such as Apple Inc, Amazon.com, Facebook Inc, Google-owner Alphabet Inc and Microsoft Corp rose ahead of their quarterly results next week, putting the tech-laden Nasdaq out front. All three major U.S. stock indexes currently stand within 0.5 percent of their record closing highs.” WHIFF OF DANGER AS MARKET GAINS LACK SCOPE — AP’s Stan Choe: “Even before Monday’s swoon — the worst day for stocks on Wall Street in a couple months — the market was flashing concerning signals. Chief among them were sharp moves in the bond market that indicated worsening expectations for economic growth and inflation. Critics also noticed that a dwindling number of stocks was driving the broad market’s rise toward more records. “From June 1 through July 16, the S&P 500 climbed nearly 3 percent and set more than a dozen records along the way. But during that span, 57 percent of stocks in the S&P 500 fell. They lost an average of roughly 7 percent, mirror the average gain of the stocks in the index that rose.” DIDI JOINS CHINA’S WORST U.S. IPOS — Bloomberg’s Drew Singer: “Didi Global Inc. is quickly becoming one of the worst IPOs of this year among foreign companies on news China is mulling additional penalties — from fines to a delisting — for the ride-hailing giant. "Didi shares tumbled nearly 10 percent Thursday in New York, extending their decline to 26 percent below the initial public offering price set less than a month ago after Bloomberg reported Chinese regulators are considering harsher measures. BITCOIN IS FAILING ITS FIRST INFLATION TEST — WSJ’s Paul Vigna: “Bitcoin’s steep selloff is undercutting the argument made by the digital currency’s proponents that it’s an inflation hedge. “The original cryptocurrency has lost about half of its value since mid-April, fizzling after a spectacular rally that saw it surge above $60,000 from around $7,000 at the start of 2020. It traded Wednesday afternoon at $31,864, and got a small boost after Tesla Inc. boss Elon Musk said he has personal holdings of the cryptocurrency, as does his space company SpaceX. The timing is ironic.” | | | FED RAMPS UP DEBATE OVER TAPER TIMING, PACE — WSJ’s Nick Timiraos: “Federal Reserve officials are set to accelerate deliberations at their meeting next week over how to scale back their easy-money policies amid a stronger U.S. economic recovery than they anticipated six months ago. Fed Chairman Jerome Powell has said their discussions are focusing on two important questions: When to start paring their monthly purchases of $80 billion in Treasury securities and $40 billion in mortgage securities, and how quickly to reduce, or taper, them.” JOBLESS CLAIMS RISE TO 419,000 FROM A PANDEMIC LOW — AP’s Christopher Rugaber: “The number of Americans seeking unemployment benefits rose last week from the lowest point of the pandemic, even as the job market appears to be rebounding on the strength of a reopened economy. “The Labor Department said Thursday that jobless claims increased last week to 419,000, the most in two months, from 368,000 the previous week. The number of first-time applications, which generally tracks layoffs, has fallen steadily since topping 900,000 in early January.” NEW COVID CYCLE COULD CHALLENGE FED, RECOVERY — Reuters’ Howard Schneider: “Five weeks after dropping its reference to the coronavirus as a weight on the economy, the U.S. Federal Reserve is confronting a challenging new rise in cases that has fueled doubts about the global recovery and is already forcing other central banks to consider retooling their policies." RISING RENTS THREATEN TO PROP UP INFLATION — NYT’s Coral Murphy Marcos, Jeanna Smialek and Jim Tankersley: “The rental market, which slumped during the pandemic, has snapped back more quickly than many economists predicted, and renters across the country are facing sticker shock. "When the pandemic hit, many people who lost their jobs discontinued their apartment leases to live with parents or roommates temporarily. Others fled big cities out of health concerns. Apartments went empty, and landlords began offering incentives, such as a free month, to entice tenants.” | | | | Be a Policy Pro. POLITICO Pro has a free policy resource center filled with our best practices on building relationships with state and federal representatives, demonstrating ROI, and influencing policy through digital storytelling. Read our free guides today . | | | | | | | | TRANSITIONS — Via our Victoria Guida: “Bryan Hubbard, deputy comptroller for public affairs at the Office of the Comptroller of the Currency, is retiring after 16 years at the agency. ‘He has been a fixture at the agency since 2005 and has helped agency heads and executives navigate some of the most significant challenges facing the agency during those years,’ Acting Comptroller Michael Hsu said in an email to staff. His last day isn’t until Sept. 1, but he will be on ‘some well-earned leave’ starting July 26, according to the email, obtained by POLITICO. “‘I am thrilled to have worked with eight agency heads to help them promote the safety, soundness, and fairness of the federal banking system,’ Hubbard said. ‘What a great job this has been and what terrific colleagues I have enjoyed while serving our nation.’” MEDIA MOVE — David Gura is joining NPR as a business correspondent. He most recently was host and correspondent at MSNBC and NBC News, anchoring “Up with David Gura.” Todd Malan will join the executive team at Talon and become a senior officer of the Company. Previously, Todd was Vice President for Corporate Relations — Canada & Americas for Rio Tinto, based in Washington DC. | | | | Follow us on Twitter | | | | Follow us | | | | |  |
