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US and Canada Report on Jobs as G7 Fin Mins Talk Taxes

Overview: Stronger than expected US employment data, ahead of today’s monthly report and compromise proposal on corporate tax by the White House to help secure a deal on infrastructure sent US bond yields and the dollar high. Late dollar shorts were force



Overview: Stronger than expected US employment data, ahead of today's monthly report and compromise proposal on corporate tax by the White House to help secure a deal on infrastructure sent US bond yields and the dollar high. Late dollar shorts were forced to cover.  The greenback is mixed now, with the yen, sterling, and Antipodeans slightly firmer. The Norwegian krone, Canadian dollar, and euro are still heavy.  The dollar is rising against most emerging market currencies, though, of note, the Turkish lira is stabilizing after losing about 1.25% yesterday, its largest loss in four weeks.  The JP Morgan Emerging Market Currency Index is slipping for the second consecutive session and is practically flat on the week.  China, Australia, and New Zealand equities rose ahead of the weekend, but most other markets in the Asia Pacific region fell, while  Tokyo was mixed.  European bourses are mixed, with the Dow Jones Stoxx 600 hovering around the record high set on Tuesday.  US futures are little changed, and the 10-year Treasury yield is around 1.63%, about a three basis point increase on the week.  The two-year yield is poking above 16 bp for the first time in three weeks.  European bonds are quiet.  Note that rating decisions are expected today from Moody's for Russia and Turkey, while Fitch assesses Italy and DBRS, Germany.  Gold, which had traded as high as $1910 yesterday, extended the biggest drop in four weeks and fell to almost $1856 before finding a bid in Asia.  Even if little changed, oil prices are firm, with the July WTI contract hovering around $69 a barrel, consolidating a 4.25% gain this week.  

Asia Pacific

Japan's household spending in April was stronger than expected, rising 13% year-over-year.  The acceleration from 6.2% in March illustrates the powerful base effect.  On a seasonally adjusted basis, spending rose by a minor 0.1%, though it is the third consecutive monthly increase.  The extended emergency into June and the weakness in income point to continued challenges ahead.  Many economists expect the world's third-largest economy may be contracting still.  On the other hand, the pace of vaccinations is accelerating, and a stronger recovery is expected in H2.  

As widely anticipated, the Reserve Bank of India kept its repo at 4% but adjusted other dimensions of its monetary policy.  It announced a Q3 bond-buying of INR1.2 trillion (~$16.4 bln) after completing INR1 trillion purchases this quarter.  The central bank also extended its liquidity facility for businesses especially hit hard by the pandemic. As a result, the fiscal year's GDP forecast was cut to 9.5% from 10.5%.  The RBI now sees inflation finishing the year just above 5%.  The latest print, for April, stood at 4.3%.

The US will prohibit new purchases of equities in 59 Chinese companies as of August 2.  This looks like a net add of 11 new businesses from what was inherited from the previous administration.  The Biden administration has put the initiative on stronger legal footing and made the policy clearer and more transparent.  It will be run by the US Treasury, with input by State and Defense Departments.  It will be updated on a rolling basis. 

The dollar rose to almost JPY110.35 in early Asia before stalling.  It is holding above JPY110.00, and there is an expiring option for $440 mln at JPY109.90.  The attempt to rechallenge the year's high set at the end of March near JPY111 appears to require a further increase in US yields.  The Australian dollar consolidated yesterday's sell-off that brought it to its lowest level since mid-April, a little below $0.7650.  Yesterday's fall, about 1.3%, was the largest since mid-May.  The next important support is in the $0.7580-$0.7600 area.  The greenback rose against the Chinese yuan for the fourth session this week.  The cumulative gain of about 0.66% was the largest since last September.  The dollar approached the 20-day moving average (~CNY6.4140) for the first time since mid-April.  We had suggested potential into the gap from May 24-25 found between CNY6.4150 and CNY6.4180.  A move above there targets the CNY6.4400-CNY6.4550 area.  Today's fixing was the tightest this week.  At CNY6.4072, it compares with the median forecast in Bloomberg's survey of CNY6.4074.  


The G7 finance minister meets today.  The focus is on coordinating the tax reform position that can be presented to the G20 and OECD.  The US is downplaying expectations.  As we discuss below, the minimum tax of the revised US proposal of 15% needs to be understood within the context of US domestic politics.  Previously, the OECD had been discussing a minimum rate of 12.5%, which would have avoided the pushback by Ireland.  There seems to be greater interest in Europe to address the problem that some companies with a large internet presence do not pay taxes to local authorities for local sales.  There does appear to be an agreement to reform this process and not just apply it to US tech giants, but the thresholds of revenues and profits appear to still be debated.  Separately, the UK host is pushing hard for an agreement to impose some environmental impact/risks reporting by large businesses.  

Yesterday's announcement that one of Russia's sovereign wealth funds would complete its shift away from the US dollar had little market impact. It seemed a more symbolic defiant move ahead of the Biden-Putin meeting on June 16.  To be sure, it is not Russia abandoning the dollar as much as it has been the US sanction regime that has tightened.  The National Well-Being Fund will shift its dollar holdings, estimated to be less than $35 bln to the central bank. No market operation is necessary. The central bank manages the allocation of its reserves and has been authorized to buy gold too.  Although there is a perennial fear that the dollar's reserve role will change, the fact of the matter is that as of the end of last year, foreign central banks held more dollars than ever before in reserves (~$7 trillion).  The US Treasury's TIC data, which is not comprehensive, showed Russia's Treasury bond holdings at $4 bln in March, down from $10 bln at the end of 2019 and $102.5 bln at the end of 2017.  We argue that a move out of Treasuries and into European bonds and gold comes at the cost of yield, transparency, and liquidity. 

The euro peaked on Monday near $1.2255.  It is testing the $1.2100 area in late morning turnover in Europe.  There is a 1.14 bln euro option at $1.21 that expires a little after the US jobs report.  Today could be the fourth consecutive losing session, and yesterday's loss was the biggest since April 30.  The next target is around $1.2050, a (38.2%) retracement of the rally since the March 31 low.  Below there, support is expected in the $1.1985-$1.2000 area.  The $1.2140 area offers the initial cap.  Sterling posted a bearish outside down day yesterday, but follow-through selling was limited to a few ticks, and it has returned above $1.4100.  It is holding below the 20-day moving average (~$1.4140) for the first time since mid-April. It needs to resurface above it to stabilize the tone into next week.   


To boost the chances of forging a deal with Republicans on a substantial infrastructure bill, the White House offered to amend its call to unwind Trump's tax cuts on corporations and lift the tax schedule back to 28%.  The problem with the tax hike is not that Republicans oppose it. Rather, it is that Biden has not persuaded all of the Democrat Senators of the merit.  The compromise is a 15% minimum tax--there is no minimum now, but the average effective tax rate is of profitable businesses is even lower, according to some estimates.  We had underscored the linkage between Biden's domestic agenda and the reversal of the US position at the OECD/G20.  Biden first proposed a 21% minimum corporate tax rate.  The lack of sufficient support spurred a compromise of a 15% global minimum.  The G7 finance ministers are coalescing around this now.  

The unexpectedly mediocre April job report presaged a string of disappointing data that included retail sales, industrial production,  housing starts, durable goods orders, and personal expenditures.  Even under normal times, employment data can be volatile and subject to statistically significant revisions.  While the market often does not focus on data revisions, a large upward revision to the April series coupled with a robust May report would be a powerful cocktail. Note that there have been more references to talking about tapering at the coming meetings since the big miss in the April report. Just like the Fed is looking through the near-term uptick in inflation, it is looking through the volatility of the monthly employment report.  The four-week moving average of weekly jobless claims has halved since late last year.  They remain elevated but significant progress has been made.  The median forecast in Bloomberg's survey has crept up and now is just north of 670k.  The surge in the ADP private-sector estimate to 978k was above expectation but partly blunted by the downward revision to the April series (to 654k from 742k). It is still a multiple of the government's initial estimate of  218k private-sector job growth.  Confidence that the combination of fiscal/monetary stimulus and the widespread vaccination and re-open is accelerating growth, we look for a strong report and upward revisions to the April estimate. Like last time, though, the initial move in the markets may be a head fake.   

Canada's April employment report was also disappointed.  It lost 207k jobs, of which nearly 130k were full-time positions. It is expected to have shed employment again last month.  If it does, the Bank of Canada may temper its rhetoric at next week's meeting.  Recall that at its last meeting (April 21), it announced it would slow its bond purchases and anticipated the output gap would be closed in H2 22.  As early as mid-March, the market was discounting the better part of 75 bp of interest rate hikes over the next two years.  Since the April announcement, the market has moved broadly sideways between around 65-75 bp of tightening priced in.  However, during the same time, the Canadian dollar has appreciated by almost 2% to bring the year-to-date appreciation to over 5%, the strongest of the major currencies.  The Bank of Canada has expressed concern recently about the loss of competitiveness of further currency appreciation.  The Canadian dollar has stalled near $0.8330 (~CAD1.20), an important chart area.  It could mark the neckline of a large topping pattern that would signal a move back to parity and beyond over time.  

The US dollar set a new four-year low on Tuesday, a little above CAD1.20, and jumped to CAD1.2120 yesterday.  It closed above the 20-day moving average for the first time since April 20, the day before the Bank of Canada's hawkish announcement.  Follow-through buying is pressing into the CAD1.2130 area.  Resistance is seen in the CAD1.2145 area, and a break of it would signal a test on the CAD1.22 area, the high from mid-May.  The Mexican peso also remains under pressure after falling by 1.3% yesterday.  The dollar is trading near MXN20.20 in Europe. Nearby resistance around MXN20.22 does not look particularly strong, and the risk may extend toward the early May highs a little above MXN20.30.  The legislative and local elections this weekend may keep players on edge, but so will its proxy for the region as a whole.  Peru's presidential run-off has weighed on the sol.  Chile's legislature may consider a bill that allows entire pension savings to be withdrawn, and this undermined the peso yesterday and triggered a sharp 4% sell-off in local shares. It leaves Brazil as the regional favorite. Brazil reports May services and composite PMI.  Both are likely to have remained below the 50 boom/bust level.  The dollar fell for the sixth consecutive session yesterday against the Brazilian real and is approaching strong support near BRL5.00.  


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AstraZeneca antibody cocktail fails to prevent Covid-19 symptoms in large trial

AstraZeneca said a late-stage trial failed to provide evidence that the company’s Covid-19 antibody therapy protected people who had contact with an infected person from the disease, a small setback in its efforts to find alternatives to vaccines.



Astra antibody cocktail fails to prevent COVID-19 symptoms in large trial

(Reuters; )

June 15 (Reuters) – AstraZeneca (AZN.L) said on Tuesday a late-stage trial failed to provide evidence that its COVID-19 antibody therapy protected people who had contact with an infected person from the disease, a small setback in its efforts to find alternatives to vaccines.

The study assessed whether the therapy, a cocktail of two types of antibodies, could prevent adults who had been exposed to the virus in the past eight days from developing COVID-19 symptoms.

The therapy, AZD7442, was 33% effective in reducing the risk of people developing symptoms compared with a placebo, but that result was not statistically significant — meaning it might have been due to chance and not the therapy.

The Phase III study, which has not been peer reviewed, included 1,121 participants in the United Kingdom and the United States. The vast majority, though not all, were free of the virus at the start of the trial.

Results for a subset of participants who were not infected to begin with was more encouraging but the primary analysis rested on results from all participants.

FILE PHOTO: A computer image created by Nexu Science Communication together with Trinity College in Dublin, shows a model structurally representative of a betacoronavirus which is the type of virus linked to COVID-19, better known as the coronavirus linked to the Wuhan outbreak, shared with Reuters on February 18, 2020. NEXU Science Communication/via REUTERS

“While this trial did not meet the primary endpoint against symptomatic illness, we are encouraged by the protection seen in the PCR negative participants following treatment with AZD7442,” AstraZeneca Executive Vice President Mene Pangalos said in a statement.

The company is banking on further studies to revive the product’s fortunes. Five more trials are ongoing, testing the antibody cocktail as treatment or in prevention.

The next one will likely be from a larger trial testing the product in people with a weakened immune system due to cancer or an organ transplant, who may not benefit from a vaccine.


AZD7442 belongs to a class of drugs called monoclonal antibodies which mimic natural antibodies produced by the body to fight off infections.

Similar therapies developed by rivals Regeneron (REGN.O) and Eli Lilly (LLY.N) have been approved by U.S. regulators for treating unhospitalised COVID patients.

European regulators have also authorised Regeneron’s therapy and are reviewing those developed by partners GlaxoSmithKline (GSK.L) and Vir Biotechnology (VIR.O) as well as by Lilly and Celltrion (068270.KS).

Regeneron is also seeking U.S. authorisation for its therapy as a preventative treatment.

But the AstraZeneca results are a small blow for the drug industry as it tries to find more targeted alternatives to COVID-19 inoculations, particularly for people who may not be able to get vaccinated or those who may have an inadequate response to inoculations.

The Anglo-Swedish drugmaker, which has faced a rollercoaster of challenges with the rollout of its COVID-19 vaccine, is also developing new treatments and repurposing existing drugs to fight the virus.

AstraZeneca also said on Tuesday it was in talks with the U.S. government on “next steps” regarding a $205 million deal to supply up to 500,000 doses of AZD7442. Swiss manufacturer Lonza (LONN.S) was contracted to produce AZD7442.

Shares in the company were largely unchanged on the London Stock Exchange.

The full results will be submitted for publication in a peer-reviewed medical journal, the company said.

Reporting by Vishwadha Chander in Bengaluru; Editing by Shounak Dasgupta

Our Standards: The Thomson Reuters Trust Principles.


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Former FDA Head Takes on Exec Role at Flagship’s Preemptive Health Initiative

Stephen Hahn, the Commissioner of the U.S. Food and Drug Administration under former President Donald Trump, took on a new role as chief medical officer of a new health security initiative launched by Flagship Pioneering, a life sciences venture firm…



Former FDA Head Takes on Exec Role at Flagship’s Preemptive Health Initiative


Stephen Hahn, the Commissioner of the U.S. Food and Drug Administration (FDA) under former President Donald Trump, has taken on a new role as chief medical officer of a new health security initiative launched by Flagship Pioneering, a life sciences venture firm that incubates and curates biopharma companies.

First announced Monday, Flagship’s Preemptive Medicine and Health Security initiative aimed at developing products that can help people before they get sick. This division will focus on infectious disease threats and pursue bold treatments for existing diseases, including cancer, obesity, and neurodegeneration. 

In a brief statement, Hahn, who served as commissioner from December 2019 until January 2021, said the importance of investing in innovation and preemptive medications has never been more apparent. 

“In my career I have been a doctor and a researcher foremost and it is an honor to join Flagship Pioneering in its efforts to prioritize innovation, particularly in its Preemptive Medicine and Health Security Initiative. The more we can embrace a “what if …” approach the better we can support and protect the health and well-being of people here in the U.S. and around the world,” Hahn said in a statement. 

During his time at the FDA, Hahn was at the forefront of the government’s effort to battle the COVID-19 pandemic. His office oversaw the regulatory authorization of antivirals, antibody therapeutics and vaccines, as well as diagnostics and other tools to battle the novel coronavirus. 

Kevin Dietsch-Pool/Getty Images

Hahn bore the brunt of verbal barbs aimed at the FDA by the former president for not rushing to authorize a vaccine for COVID-19 ahead of the November 2020 election. The second vaccine authorized by the FDA for COVID-19 was developed by Moderna, a Flagship company. 

Prior to his confirmation as FDA Commissioner, Hahn, a well-respected oncologist, served as chief medical executive of the vaunted The University of Texas MD Anderson Cancer Center. Hahn was named deputy president and chief operating officer in 2017. In that role, he was responsible for the day-to-day operations of the cancer center, which includes managing more than 21,000 employees and a $5.2 billion operating budget. He was promoted to that position two years after joining MD Anderson as division head, department chair and professor of Radiation Oncology. Prior to MD Anderson, Hahn served as head of the radiation oncology department at the University of Pennsylvania’s Perelman School of Medicine.

Flagship Founder and Chief Executive Officer Noubar Afeyan said the COVID-19 pandemic that shut down economies and caused the deaths of more than 3.8 million people across the world was an important reminder that health security is a top global priority. In addition, the ongoing pandemic brings into “stark focus” the importance of preemptive medications. 

Hahn, who helmed the FDA for three years and before that served as chief medical executive at The University of Texas MD Anderson Cancer Center, has extensive experience overseeing clinical and administrative programs. Afeyan said the new division would benefit from Hahn’s experience as FDA Commissioner and help steer the Preemptive Medicine and Health Security initiative as it explores Flagship’s “growing number of explorations and companies in this emerging field.”

It is not unusual for former FDA heads to take prominent roles with companies. For example, former FDA Commissioner Scott Gottlieb, Trump’s first FDA Commissioner, took a position on the Pfizer Board of Directors weeks after departing his government role. He has also taken positions on other boards since then, including Aetion, FasterCures and Illumina.


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Five U.S. states had coronavirus infections even before first reported cases – study

At least seven people in five U.S. states were infected with the novel coronavirus weeks before those states reported their first cases, a new government study showed.



Five U.S. states had coronavirus infections even before first reported cases – study

(Reuters) – At least seven people in five U.S. states were infected with the novel coronavirus weeks before those states reported their first cases, a new government study showed.

Participants who reported antibodies against SARS-CoV-2 were likely exposed to the virus at least several weeks before their sample was taken, as the antibodies do not appear until about two weeks after a person has been infected, the researchers said.

The latest results build on findings from a Centers for Disease Control and Prevention study that suggested the novel coronavirus may have been circulating in the United States last December, well before the first COVID-19 case was diagnosed on Jan. 19, 2020.

A protective face mask lays, as the global outbreak of the coronavirus disease (COVID-19) continues, beside leaves at the lakefront in Chicago, Illinois, U.S., December 6, 2020. REUTERS/Shannon/File Photo

The positive samples came from Illinois, Massachusetts, Mississippi, Pennsylvania and Wisconsin, and were part of a study of more than 24,000 blood samples taken for a National Institutes of Health research program between Jan. 2 and March 18, 2020.

Samples from participants in Illinois were collected on Jan. 7 and Massachusetts on Jan. 8, suggesting that the virus was present in those states as early as late December.

“This study allows us to uncover more information about the beginning of the U.S. epidemic,” said Josh Denny, one of the study authors.

The findings were published in the journal Clinical Infectious Diseases.

Reporting by Mrinalika Roy in Bengaluru; Editing by Anil D’Silva

Our Standards: The Thomson Reuters Trust Principles.


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