The World
The Federal Reserve said it is willing to allow inflation to drift higher than its typical 2% target for periods of time — and won't be tempted to hike rates to offset rising prices when the unemployment rate gets too low. Chairman Jerome Powell said the changes reflected lessons that officials had learned in recent years about how inflation didn’t rise as anticipated when unemployment fell to historically low levels. Meanwhile, unemployment claims remained historically high at 1 million last week. (Axios, Federal Reserve, Wall Street Journal)
The world’s rich economies experienced the deepest contraction in at least six decades in the spring. The OECD said the combined economic output of its 37 members was 9.8% lower in 2Q20 than 1Q20, the largest decline since records began in 1960. Meanwhile, Germany is beefing up its already formidable stimulus package to prop up its economy, brushing away concerns from some economists that the state is keeping insolvent businesses afloat artificially. Wage subsidies for furloughed workers will be extended to the end of 2021. (Wall Street Journal-1, Wall Street Journal-2)
Former Australian Prime Minister Kevin Rudd warned of a ‘real danger’ for a US-China military clash before November vote, amid the diplomatic engagement collapse. Meanwhile, China’s South China Sea missile launch may push the U.S. to deploy more missiles and take a more aggressive stance towards Beijing, elevating the risk of an accidental armed conflict. Separately, HSBC is facing mounting pressure over its stance on Hong Kong after the U.S. claimed that the bank was helping China crack down on pro-democracy supporters. North Korean government hackers are trying to rob banks globally by draining ATMs and initiating fraudulent money transfers in an effort to fund its nuclear weapons program. (South China Morning Post, The Times, Wall Street Journal)
Vladimir Putin warned Belarus protesters: Don’t push too hard, as the Kremlin is willing to provide military or other law enforcement assistance to Belarus President Lukashenko. (New York Times, The Guardian)
Russia is preparing to approve a second vaccine against COVID-19 in late September or early October, as France made face masks mandatory everywhere in Paris. In the U.S., Abbott’s $5 Covid-19 rapid antigen test — about the size of a credit card and returns results in 15 minutes — secured emergency-use status from the FDA. Meanwhile, the CDC was instructed by higher-ups within the Trump administration to modify its testing guidelines to exclude people who do not have symptoms — even if they have been recently exposed to the virus. The new guidance is drawing strong pushback from NY and CA. Separately, CMS now requires hospitals to report various COVID-19 data, with the penalty for not reporting the data or correcting deficiencies being withdrawal from the Medicare and Medicaid programs. The American Hospital Association slammed the regulation, calling it "heavy-handed." (Reuters, Wall Street Journal, New York Times, HealthcareDive, Los Angeles Times)
The day sports stopped: Wednesday kicked off what will go down as one of the most important days in the history of athlete activism as Milwaukee Bucks players refused to leave the locker room for Game 5 of their playoff series. Subsequently, reports circulated that the Los Angeles Lakers and Los Angeles Clippers voted not to play the rest of the playoffs, though today NBA players voted to continue. Three Major League Baseball games — including the Milwaukee Brewers’ — were postponed out of protest. The WNBA and Major League Soccer did not play games either. (Axios, Bleacher Report, Los Angeles Times)
The Category 4 hurricane Laura reached Cameron, LA, around 1 a.m. Laura's winds and the unprecedented storm surge were record-breaking, as a chemical fire is reported and a shelter-in-place has been issued. No hurricane so powerful has ever hit the Pelican State's coast. (New Orleans Times-Picayune)
Economy
The SEC deemed more investors capable of navigating the opaque world of leveraged buyouts, hedge funds and startups, a decision likely to fuel further growth in private markets. (Wall Street Journal)
While stock market investors are increasingly focused on the election, history shows it may not matter. The results of presidential elections are merely one input among many shaping how investors value companies. This SunTrust chart of the S&P 500 over the past 75 years shows it’s impossible to eyeball changes in presidential power based on the performance of the index. (Finance 202)
Mall giant Simon is snapping up bankrupt retailers, pursuing Brooks Brothers, Lucky Brand and J.C. Penney. Analysts say the deals offer roster of iconic brands for rock-bottom prices and steady rent. Others see a desperate act that will only delay the inevitable demise of dozens of flailing malls nationwide. (Washington Post)
Banks revisit prime brokerage growth strategies as hedge funds bounce back: An asset class rotation among hedge funds could encourage prime brokers to invest significantly in specializing in servicing credit and multi-asset strategies. (The Trade)
CEOs speed up digital push and downsize offices: KPMG’s 2020 CEO Outlook: COVID-19 Special Edition shows that companies globally have moved more of their operations online, plan to reduce office space and have made recruiting and retaining staff their top priority since the pandemic struck. 80% of business leaders had accelerated their digital expansion plans during the lockdown; 69% were planning to cut their office space in the short term; 73% said the shift to working from home had increased the pool of job candidates. (Reuters, KPMG)
Should ESG Still Be A Priority Post-Pandemic? ESG encompasses any and all risks to long-term sustainable value—which is why it won’t be going away, says Sarah Fortt, a securities lawyer for Vinson & Elkins, who works with boards to assess their readiness to address corporate crises, including cybersecurity incidents, investor activism and, yes, pandemics. “When we think of sustainability, we often see it as a two-dimensional thing,” she says. “This crisis has shown us that it has many more dimensions to it. If anything, the pandemic has underscored the need for companies and boards to look at non-financial risks much more closely.” (Chief Executive)
Technology
TikTok is likely to announce sale of U.S. operations in the coming days in the $20-30 billion range, as CEO Kevin Mayer resigned (letter). The former Disney executive was in the role for only three months. Meanwhile, Walmart is partnering with Microsoft in its TikTok bid. (CNBC, Washington Post, Reuters)
A new Facebook-Apple fight over the mechanics of ad tech is surfacing an industry divide over user privacy and spotlighting longstanding dilemmas about the tracking and use of personal information online. (Axios)
Whole Foods may adopt Amazon Go’s cashierless technology as soon as next year. Meanwhile, Amazon opened its first Amazon Fresh physical grocery store, in LA. But Amazon already has Whole Foods and smaller Amazon Go stores? The idea here will be to build a new grocery store experience from the ground up targeting a different customer. (Eater, TechCrunch)
Global venture funding is down 6% from the 1H19, though excluding India’s Reliance Jio, 1H20 is down 17%. In 1H20, late-stage and technology growth rounds accounted for 66% of funding, up from 59% in 1H19. Funding in North America equaled 49% of total global venture funding in 1H20, Asia received 36% (up 5%), and Europe 13%. There does not seem to be a strong relationship between the toll COVID-19 has taken on a country and venture funding yet, although China and Spain suffered. In 2020, China and Spain both recorded their lowest first-half years in the past five years, with China down 33% from 1H19 and Spain down 55%. (Crunchbase)
Smart Links
FT & McKinsey Business Book of the Year Award 2020 — the longlist. (Financial Times)
U.S. Chamber poised to endorse a slate of Democrats, prompting internal uproar. (Politico)
Pool supplies retailer Leslie's eyes IPO as demand surges. (Reuters)
Warby Parker raised $245 million in new funding with post-money valuation at $3 billion. (Axios)
U.S. businesses, governments and non-profits join global push for 1 trillion trees. (World Economic Forum)
The pandemic was the best thing that ever happened to Wayfair. (Marker)