From McDonald’s milkshakes to an extra few days in Afghanistan, getting what you want is proving trickier at the moment than may thought it would be. Joe Biden is insistent that the withdrawal timeline won’t be extended past the end of the month, despite calls from other coalition countries to do so. The president spoke to G7 leaders yesterday and said that they’re dealing with a “tenuous situation” with a “serious risk of breaking down as time goes on”, which is why he wants to stick with the deadline. He also pushed some blame back to his predecessor, by saying that the system for processing refugees had been “purposely destroyed” by the Trump administration. The executive director of the World food Programme has said that things need to move quickly and resolutions need to be found, because 14 million Afghans could be at risk of starvation, as the combinations of conflict, covid and drought are making an already terrible situation worse. The World Bank and IMF have frozen aid payments to the country.
Kamala Harris is doing what she can to keep her comments off Afghanistan and more on other US interests, as she tours South East Asia. The VP criticised China’s intimidating actions in the South China Sea in a speech in Singapore, in a bid to reaffirm some commitment to partners that might be feeling nervous given what’s going on. The Telegraph points out that for her it’s actually better to be close to the first Saigon than the current ‘second Saigon’ that is Kabul, which shows you just how bad it is for Joe Biden who is taking the flack for his actions from a media that is now well past the post-Trump honeymoon phase and is really calling Biden’s policies and competency into question
House of Representatives- Another Step Towards The Budget
Other US news is that the House of Representatives has taken another step to getting the $3.5 trillion budget agreed, with the weeklong stand-off between Nancy Pelosi and more centrist democrats coming to an end. This now paves the way for the bill to make it into law without the requirement for any Republican to vote in favour of it and in doing so would unleash another massive bout of expenditure by the US government. In addition to unlocking the pathway for the budget, there is now a final vote on the $550bn in infrastructure spending that was agreed by the House – that included a small amount of cross-party support- due to take place by the end of September.
Brexit & Supply Chain Problems
McDonalds probably has one of the most finely tuned and vertically integrated supply chains in the world, but even that isn’t enough to prevent them having problems with Brexit! The shortage of lorry drivers in the UK has meant that 1,250 of their outlets are without milkshakes and certain soft drinks! The Times takes the story much further and talks about the compounding issues facing food growers and suppliers, not just transport shortages, but shortages of labour and even the increased cost of cardboard all hitting their margins. There are also specific skill shortages, with butchers being cited as a job with a huge shortfall that is causing 10% less chickens being hatched because they won’t be able to be ‘processed’ once they reach maturity. The current upshot is that wages are rising whilst consumers are paying more and also having less choice as a result. According to the CBI, the problem is ‘chronic’ but not quite ‘acute’ yet, though it’s currently summer, where demand is lower and as we go into Christmas this is likely to change.
The Markets to Watch
In the markets, oil has been the one to watch this week, with a two day rally taking prices higher by more than 8%. This has been tempered slightly in the latest session, as covid lockdowns are starting to re-emerge in various parts of the world, which is putting question marks over near-term demand for energy. There’s an Opec meeting on September 1st that markets will be watching closely and if they were to announce output increases, as Joe Biden has urged them to, then this could weigh heavily on prices.
Covid cases in Australia continue to rise, with another 919 cases today in New South Wales. The growth in cases has led some scientists to admit that the country won’t be able to get back to ‘zero covid’ even as lockdowns are increased and that the strategy now should shift to containment as much as possible, whilst vaccination efforts need to ramp up significantly. New Zealand isn’t ready to quit on zero-covid and elimination remains the government’s strategy. There were 63 new cases reported today, bringing their total to 212 active cases.
Today’s data is very thin on the ground, so our hope is that Europe can follow Asian markets slightly higher on the session and not fall prey to a depressing news cycle – though with the resilience that markets have shown to bad news to date, this is the more likely outcome.