The World
Global trade flows collapsed in the spring, marking the largest fall in two decades, as coronavirus lockdowns disrupted air and sea transport and dealt a blow to the demand for many consumer and investment goods. The CPB Netherlands Bureau for Economic Policy Analysis said 2Q20 cross-border flows were 12.5% lower than 1Q20, the largest drop since records began in 2000. Mexico's economy had its worst quarter since Great Depression, as 2Q20 GDP fell 17.1% from the prior quarter. Lebanon suffered another dramatic inflation surge as the country’s financial meltdown continued with no end in sight: Consumer prices rose an annual 112.4% in July. Meanwhile, Japan and UK will sign equal-to-EU trade deal by September. (Wall Street Journal, Reuters, Bloomberg, Nikkei Asian Review, )
The Phase One trade agreement with China is offering less than meets the eye: While the Chinese committed to boost their purchases of American products by $200 billion this year and next, it is delivering less than promised. So far this year, Beijing’s pace puts it less than halfway toward meeting its target. Meanwhile, Vanguard is closing Hong Kong and Japan fund businesses and shifting its Asia HQ to Shanghai. (Finance 202, Peterson Institute, Nikkei Asian Review)
The U.S. banned 24 Chinese companies from purchasing certain sensitive American products, citing their role in helping the Chinese military construct artificial islands in the disputed South China Sea. Meanwhile, China launched two missiles, including an “aircraft-carrier killer”, into the South China Sea, one day after China said a US U-2 spy plane entered a no-fly zone. As the China-U.S. tensions raise Taiwan conflict fears, the Taiwanese military released a video of troops “fending off attack from Chinese mainland.” (New York Times, Reuters, South China Morning Post)
Chinese diplomats helped visiting military scholars evade FBI scrutiny, the U.S. says, and the U.S. closed the Chinese consulate in Houston after finding an intelligence-gathering operation aided by diplomats to collect cutting-edge scientific research from American universities. Meanwhile, an intensifying purge of disloyal Chinese Communist party law and order officials is setting the stage for President Xi to be named party chairman and hold on to power beyond his second term. (Wall Street Journal, Financial Times)
Sweden stepped up its military readiness because of the “heightened security situation” in the Baltic Sea as tensions reached their highest level since the cold war. Sweden’s foreign minister said the deployment was related to Russian military maneuvers. In the Middle East, the Islamic State is ramping up attacks in Iraq and Syria. (Financial Times, The Telegraph)
Tensions are rising in the Eastern Mediterranean, prompted by what seems like a rivalry over energy resources: Turkey has pursued an aggressive gas exploration effort, its research vessel heavily protected by naval warships; France became involved, siding with the Greeks. Most recently a small number of UAE F-16 warplanes deployed for exercises with Greece. While gas exploration is the immediate cause, the roots lie much deeper: A long-standing conflict between Greece and Turkey being revived in a new context. Further, there’s now a geo-strategic rivalry that pits a much more assertive Turkey against several other players. The battleground extends from Libya across the Mediterranean to Syria and beyond. Meanwhile, Erdogan warned that Turkey will ‘never make concessions’ in eastern Mediterranean, as Greece plans to extend the western limit of its territorial waters in the Ionian Sea to 12 miles. (BBC News, Financial Times, Reuters)
The Payroll Tax Deferral plan remains on hold without IRS guidance, as companies continue to seek instructions on delayed collection of tax and the Chamber of Commerce says companies are unlikely to participate. Meanwhile, the Chamber — the nation’s biggest business lobby — is behind the push to shield employers from coronavirus liability. (Bloomberg, Washington Post)
Keeping schools closed could cost the U.S. economy at least $700 billion — 3.5% of GDP — as parents lose work hours — or even quit their jobs — when schools and day-care centers remain closed. (Barron’s, Axios)
FDA Commissioner Stephen Hahn apologized for overstating the lifesaving benefits of treating patients with convalescent plasma. Meanwhile, U.S. islands from Hawaii to Puerto Rico have become new hot spots: The U.S. Virgin Islands is halting tourism for a month. Puerto Rico’s Senate is closed after several high-ranking officials came down with Covid-19. Hawaii is facing a surge. Guam is enduring its most restrictive lockdown. Separately, rural parts of Illinois are raising alarms about rising rates: In the past two weeks, eight of its 10 counties with the fastest rates were in smaller nonmetropolitan counties. (Los Angeles Times, New York Times, Wall Street Journal)
Economy
Best Buy’s online sales more than tripled in 2Q20, but it warned growth would likely cool in 3Q20, as high unemployment and uncertainty around government stimulus could leave consumers with less cash to spend. Further, consumers have reported shortages or delays trying to order everything from Google’s Chromebooks to Maytag freezers. A search on Best Buy’s website showed many chest freezers are sold out or unavailable in its Northeast stores. (The Information, Wall Street Journal)
Gary Cohn, former top economic adviser to President Trump and ex-president of Goldman Sachs, joined a SPAC led by veteran ESG investor Clifton Robbins (CEO of Blue Harbour, ex-General Atlantic). It's been renamed Cohn Robbins Holdings and has upsized its proposed IPO from $300 million to $600 million. (Axios, Financial Times)
Ford is rethinking its office space, betting that work will be partly remote for a longer term and asking 30,000 employees to clear out their desks to make way for workplace revamp. (Wall Street Journal)
The UN warned that up to 120 million tourism jobs are at risk this year, with the economic damage likely to exceed $1 trillion in 2020 alone. Italy fears ‘catastrophe by October’ as tourists vanish. (UN, The Telegraph)
Technology
An avalanche of U.S. tech companies filed to go public this week, including a few prominent software unicorns. On Monday alone, tech companies Unity, Asana, Snowflake, Sumo Logic and JFrog all filed, along with telemedicine company Amwell. On Tuesday, Palantir filed its long-anticipated S-1. (Crunchbase)
Nine venture capital firms are announcing that they're now including "diversity riders" in term sheets submitted to startups, requiring that best efforts are made to bring underrepresented investors into the deals. (Axios)
Salesforce shares jumped 14% during after-hours trading after the 21-year-old company announced revenue growth of 29% in its July quarter compared to last year, marking the first time the company has surpassed $5 billion in a single quarter. (The Information)
Shared bike and scooter companies in California are urging state legislators to oppose a bill that would “threaten the very existence of micromobility” in the state. The bill would prohibit companies from including language in their terms of service asking riders to waive liability for injuries — a provision shared mobility companies claim would essentially force them to shut down if enacted. (The Verge)
Smart Links
Why Airbnb’s IPO should clear $30 billion. (The Information)
SEC updates “Accredited Investor” definition. (SEC)
Davos 2021 rescheduled to next summer. (WEF)
U.S. digital-media publishers curb international expansion. (Digiday)
AI thrashes human fighter pilot 5-0 in simulated F-16 dogfights. (New Scientist)
New algorithm can find hidden patterns in your dreams. (Science)
Antarctica: 60% of ice shelves at risk of fracture. (The Guardian)