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U.S. Congress’ November agenda not for the faint of heart

By Richard Cowan

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U.S. Congress' November agenda not for the faint of heart
© Reuters. A general view of the U.S. Capitol, in Washington, U.S., October 28, 2021. REUTERS/Al Drago

By Richard Cowan

WASHINGTON (Reuters) – November is shaping up to be a momentous month for President Joe Biden as Democrats controlling the U.S. Congress face a formidable workload that, if completed, would lock in the $2.75 trillion pillar of his domestic agenda – one that some compare to the 1930s “New Deal” or the 1960s “Great Society.”

If the sheer dollar figure was not daunting enough, Biden last week framed the early November agenda this way in a closed-door meeting with House of Representatives Democrats, according to a source familiar with his remarks:

“I don’t think it’s hyperbole to say that the House and Senate majorities and my presidency will be determined by what happens in the next week.”

That is just for starters.

A further $1.5 trillion in annual domestic spending to fund routine government operations also must be cobbled together before a Dec. 3 deadline. Failure in the deeply divided Congress could trigger a partial government shutdown.

Layered on top of that is the same Dec. 3 deadline for raising Washington’s $28.4 trillion cap on borrowing, a mundane process in which Republicans say they will refuse to participate.

Failure on that front would plunge the federal government into a historic default on its debt, creating financial troubles that could ripple through the global economy.

As soon as this week, the House could vote to pass the first prong of the $2.75 trillion package – more than $1 trillion to improve roads, bring broadband to underserved rural areas and invest in other infrastructure. It is a bill that even some Republicans support.

That could follow quickly with debate on the partisan, $1.75 trillion bill Democrats have fought over among themselves for months, undercutting Biden’s popularity. It is half of the $3.5 trillion Biden initially sought.

Biden, who is in Europe for G20 and climate summits, said on Sunday that the package will be voted on sometime this week, “God willing.”

With a large portion of the public saying it is unaware of the larger bill’s tax cuts for lower-income families with children, expanded social safety-net programs and $550 billion of investments to tackle climate change, Transportation Secretary Pete Buttigieg took to the airwaves on Sunday to tout them.

“This is not half a loaf. It is a feast of good policy,” Buttigieg said on ABC’s “This Week.”

BATTLES ABOUND

With Republicans united against much of the Democrats’ spending plans and the Democratic caucus fractured, it is unclear Congress can manage such a heavy load.

Adding to that is a looming Senate fight over election reform legislation. If the Democrats’ effort falters, as expected, it could prompt them to alter the “filibuster” rule so that minority Republicans cannot block such bills so easily.

But the Democrats’ top priority will be passage of the two massive bills that together make up most of Biden’s domestic agenda.

After months of negotiation, moderates and liberals in the party were nearing agreement on the safety-net bill.

But Senator Bernie Sanders, a leading liberal, told CNN’s “State of the Union” broadcast on Sunday that he insists a provision be included to cut prescription drug costs.

With the November 2022 congressional election campaigns nearing, the flurry of legislation will test whether Democrats, without much help from Republicans, can push through a major expansion of government programs while cutting taxes for some and raising them on the ultra-wealthy and corporations.

Democrats could be emboldened if the party scores a victory in Tuesday’s tight election for governor in Virginia.

A possible Republican upset could give Democratic moderates in Congress second thoughts, however, about signing onto Biden’s sweeping “Build Back Better” plan.

Economy

Futures rise as easing China COVID curbs lift travel, leisure stocks

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© Reuters. A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 22, 2022. REUTERS/Brendan McDermid

By Shreyashi Sanyal

(Reuters) – Travel and leisure shares propped up U.S. stock index futures after China relaxed some COVID-19 quarantine requirements for international travelers, raising hopes of a revival in global growth.

Airlines, cruises, casinos and hotels were among the gainers in premarket trading after China’s slashing of the quarantine time for inbound travelers by half boosted hopes of a big jump in international travel and spending.

Shares of Walt Disney (NYSE:DIS) Inc rose 2.5% to top the list of gainers on the Dow Jones Industrial Average, after the company’s Shanghai Disney Resort said it would reopen the Disneyland theme park on June 30 after being shut for more than three months.

Spirit Airlines (NYSE:SAVE) and American Airlines (NASDAQ:AAL) Group Inc were the biggest gainers in the sector, rising 4% and 2% respectively.

Melco Resorts jumped 10% and led the rise in the casino sector, closely followed by Wynn Resorts (NASDAQ:WYNN), MGM Resorts (NYSE:MGM) International.

Wall Street’s main indexes started the week on soft footing after worries of surging inflation and an aggressive Federal Reserve dominated sentiment amid few market moving catalysts till the start of earnings season in two weeks.

Investors are now looking at data to determine whether the economy can withstand large interest rate hikes by the U.S. central bank to stamp out inflation.

A survey from the Conference Board is expected to show its consumer confidence index slipped to a reading of 100.4 in June, from 106.4 in May, at 10 a.m. ET.

The S&P 500 and the Nasdaq are set to post losses in June and are on course to log two straight quarterly declines for the first time since 2015.

At 6:49 a.m. ET, Dow e-minis were up 175 points, or 0.56%, S&P 500 e-minis were up 20 points, or 0.51%, and Nasdaq 100 e-minis were up 52.25 points, or 0.43%.

Nike Inc (NYSE:NKE) shed 2.8% as it forecast first-quarter revenue below estimates on expectations of more discounts and pandemic-related disruptions in China, its most profitable market.

Occidental Petroleum Corp (NYSE:OXY) climbed 3.1% after top investor Warren Buffett raised stake in the shale producer.

China ADRs also rose on Beijing easing its COVID curbs, with e-commerce firms Alibaba (NYSE:BABA).com, JD (NASDAQ:JD).com and Pinduoduo (NASDAQ:PDD) up between 1.2% and 1.4%

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Economy

Euro below $1.06 as Lagarde keeps July policy options open

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© Reuters. A shopper pays with a ten Euro bank note at a local market in Nice, France, June 7, 2022. REUTERS/Eric Gaillard

By Saikat Chatterjee

LONDON (Reuters) – The Aussie and the Canadian dollar climbed on Tuesday on firmer oil prices while the euro held below $1.06 as European Central Bank (ECB) President Christine Lagarde offered no fresh insight on the central bank’s policy outlook.

The ECB is widely expected to follow its global peers by raising interest rates in July to check soaring inflation though economists are divided on the magnitude of the rate hike to protect a struggling economic recovery due to high oil prices.

Oil prices are up 10% in barely a week on supply constraint concerns with Brent crude holding above $117, pushing the Canadian dollar and the Australian dollar up 0.3% and 0.4% respectively. [O/R]

“Oil is helping the Norwegian crown and the Canadian dollar to outperform and the euro is again running into resistance at the 1.06 level,” said Kenneth Broux, an FX strategist at Societe Generale (OTC:SCGLY) in London.

The euro held below $1.06 after the ECB’s Lagarde said the central bank would move gradually but with the option to act decisively on any deterioration in medium-term inflation, especially if there were signs of a de-anchoring of inflation expectations.

Money markets are pricing in about 238 basis points (bps) of cumulative rate hikes by mid-2023 compared to around 280 bps two weeks ago.

Broader currency market moves were contained in a big week for markets in economic data terms. German inflation figures are due on Wednesday, French data on Thursday and euro zone numbers on Friday.

At the other end of the dial, higher oil prices caused the partially convertible Indian rupee to open at a record low, and fall further to 78.67 per dollar.

The U.S. dollar index struck a two-decade high of 105.79 this month and was last steady at 103.93.

Elsewhere, the offshore Chinese yuan moved higher after China reduced COVID quarantine for international travellers.

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Economy

China’s economy recovering but foundation not solid, premier says

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© Reuters. FILE PHOTO: Chinese Premier Li Keqiang is seen on a screen as he attends a news conference via video link after the closing session of the National People’s Congress (NPC) in Beijing, China March 11, 2022. REUTERS/Ryan Woo

BEIJING (Reuters) -China’s economy has recovered to some extent, but its foundation is not solid, state media on Tuesday quoted Premier Li Keqiang as saying.

China will strive to drive the economy back onto a normal track and bring down the jobless rate as soon as possible, Li was quoted as saying.

“Currently, the implementation of the policy package to stabilise the economy is accelerating and taking effect. The economy has recovered on the whole, but the foundation is not yet solid,” Li was quoted as saying.

“The task of stabilising employment remains arduous.”

China’s economy showed signs of recovery in May after slumping the previous month as industrial production revived, but consumption remained weak and underlined the challenge for policymakers amid the persistent drag from strict COVID-19 curbs.

China’s nationwide survey-based jobless rate fell to 5.9% in May from 6.1% in April, still above the government’s 2022 target of below 5.5%.

In particular, the surveyed jobless rate in 31 major cities picked up to 6.9%, the highest on record. Some economists expect employment to worsen before it gets better, with a record number of graduates entering the workforce in summer.

Li vowed to achieve reasonable economic growth in the second quarter, although some private-sector economists expect the economy to shrink in the April-June quarter from a year earlier, compared with the first quarter’s 4.8% growth.

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