The World
U.S. business activity increased to a six-month high in July, but companies reported a drop in new orders as a resurgence in COVID-19 cases weighed on demand. IHS Markit said its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, rose to a reading of 50.0 this month from 47.9 in June. The increase ended five straight monthly contractions. Meanwhile, U.S. new home sales beat expectations in June. (Reuters)
‘A Band-Aid on a bullet wound’: Workers are getting laid off anew as PPP runs out. There's no official count, but some recipients are starting layoffs: Some 22% of PPP recipients have laid off or expect to lay off workers after exhausting their loan, up from 14% in June, per a survey by the National Federation of Independent Business. A recent report from Goldman Sachs found that only about one in six businesses that received loans said they were confident they could pay their employees without further assistance. (Washington Post, Finance 202)
The EU is preparing to restrict the sale of products that could be used for “internal repression, the interception of internal communications or cyber-surveillance” to Hong Kong. A draft document outlines a “coordinated package responding to the imposition” of the law, to be carried out by the EU or its member states. It is expected to be enacted before the end of July. Meanwhile, China ordered the closure of the U.S. consulate in the southwestern city of Chengdu in retaliation for Washington’s decision to shut its Houston consulate. Separately, China’s tightening grip on Hong Kong has some in the West predicting the city’s days as a global financial center are numbered. Beijing, however, is betting the former British colony will grow into a bigger and more lucrative capital-raising hub for Chinese businesses. Western banks already appear to be bending to the new reality. (The Times, South China Morning Post, Wall Street Journal)
As the border stand-off between Indian and Chinese troops in the Himalayas stretches into its 11th week, increasingly loud voices are urging New Delhi to rethink its backing for Beijing’s cherished one-China policy. (South China Morning Post)
Russia conducted an unusual anti-satellite test earlier this month, provoking concern that Moscow is working to improve its capability to attack American space-based systems. U.S. and Russians officials are scheduled to meet next week to discuss security of space systems and arms control issues. (Wall Street Journal)
After rocketing higher in March as the ultimate haven currency, the dollar is now headed for its worst month since the beginning of 2018, and many strategists see the sell-off continuing. Negative real rates in the U.S., the relentless spread of the coronavirus in America and a pickup in global risk sentiment have seen investors hitting the eject button on long positions in the greenback. (Bloomberg)
Economy
CD&R turns to its global financial crisis playbook amid pandemic.The firm has executed seven transactions during the pandemic, including a UK PIPE deal and platform and bolt-on acquisitions. The firm’s latest transactions, as well as the first few deals win the early years of Fund XI, will look a lot like its $5 billion Fund VIII, which came out of the GFC, the firm’s Co-President and Head of Europe David Novak told Private Equity International: “We always look back on history. Yet we also have to take a view that some businesses will recover and get back to the old normal, while others will need to shift in line with changing consumer sentiment and behavior, and we’ve invested in both situations.” (Private Equity International)
Private equity tops public pension asset classes. In the decade ended June 30, the asset class returned a median 13.7%, with the median return among the top 10 plans a bit higher at 15.6%. (Pensions & Investments)
Just over a year after its inception, Shanghai’s tech-focused Star board is emerging as a serious alternative to markets like New York and Hong Kong for China’s startups seeking to go public. Meanwhile, China's banking regulator has asked the country's lenders to make preparations for a "big rise" in non-performing loans as part of Beijing's efforts to brace its financial system for shocks from the coronavirus at home and a hostile environment abroad. (Bloomberg, Yahoo)
Excellent weekend read (17 mins): Official corporate values only matter to the extent they shape employees’ activities and decisions on a day-to-day basis. This raises a fundamental question: How well does behavior inside a company align with cultural aspirations? In other words, when it comes to their core values, do companies walk the talk? To measure the gap between aspiration and action, we collected the official corporate values statements for more than 500 large organizations and compared these official values with how employees view their companies on common corporate values based on an analysis of more than 1.2 million Glassdoor reviews. The analysis reveals that there is no correlation between the cultural values a company emphasizes in its published statements and how well the company lives up to those values in the eyes of employees. All of the correlations between official and actual values were very weak, and four of the nine — collaboration, customer orientation, execution, and diversity — were negatively correlated. (MIT Sloan Management Review)
Technology
The TikTok debate has exposed a deepening fissure among venture capitalists over their attitudes toward China, as Silicon Valley and China could morph from frenemies into full-blown adversaries. China skeptics in Silicon Valley are fundamentally opposed not only to the China Communist Party's ideology, but also to its data collection policies; Globalist VCs argue that those averse to China misunderstand local dynamics, and mistakenly view tech competition as a zero-sum game. Meanwhile, China tech is headed for a record IPO year. (Axios, The Information)
Monday's first-of-its-kind congressional hearing with the CEOs of Amazon, Apple, Google and Facebook is likely to be postponed because of the announcement that the late Rep. John Lewis will lie in state at the U.S. Capitol next week. (Politico)
Google is taking aim at Amazon. Again. The company is unveiling another initiative to compete more effectively with Amazon’s e-commerce business, waiving sales commissions and allowing retailers to use popular third-party payment and order management services like Shopify instead of the company’s own systems. (New York Times)
Supermarkets struggle to profit from the online grocery boom. Meanwhile, MissFresh, a Chinese online grocery startup backed by Tencent, completed its latest funding round raising $495 million. (Financial Times, Bloomberg)
Smart Links
How to predict Black Swan events. (Stanford University)
Governments must beware the lure of free money. (Economist)
Wealthy buyers snap up ‘safe haven’ private islands to flee pandemic. (Financial Times)
Global auction sales declined 49% in the 1H20. (Barron’s)
Lockdown was the longest period of quiet in recorded human history. (MIT Technology Review)
Fallen tree planted by George Washington gets solemn honors before facing the sawmill. (Washington Post)