| | | | | |  | | By Ben White and Aubree Eliza Weaver | Presented by |  | | | Editor's Note: Morning Money is a free version of POLITICO Pro Financial Services' morning newsletter, which is delivered to our subscribers each morning at 6 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day's biggest stories. Act on the news with POLITICO Pro. | | | So still don't worry about inflation, right? — The very firm conventional wisdom around the financial industry is that the recent spike in inflation — which just hit the highest level in a decade — will be entirely transitory. In fact, many market insiders say the longer term risks are much more deflationary. Maybe so. But Wall Street doesn't really think so at the moment. Stocks tanked again with the Dow down nearly 700 points, or 2 percent, and the Nasdaq down closer to three percent. Gas prices should ease once the Colonial Pipeline comes back online (more below.) But higher prices are flowing out through rents, airline fares, new and used cars and plenty of other products. All of it bollixes up President Joe Biden's $4 trillion "Build Back Better" plans at least a little bit, given that Republicans have handy arguments at the moment to say all the spending and free Fed money and generous benefit payments are driving up inflation and holding down hiring. This may not be correct. But it's politically compelling at the moment. Rick Rieder, BlackRock's Chief Investment Officer of Global Fixed Income: "Within core inflation, clear Covid impacts could be seen in the 10% increase in airfares and 7% gain in lodging, as depressed sectors of the economy saw stronger demand, while semiconductor shortages drove vehicle prices 10% higher (the largest one month increase since 1953)." Via Mohamed A. El-Erian: " The two big macroeconomic data surprises over the past few days should encourage greater humility and open-mindedness in the way policy makers, economists and Wall Street analyze the U.S. economy. "If they don't, they will significantly increase the risk that a policy mistake, a market accident or both will derail what should and needs to be a long period of high, inclusive and durable growth. Friday's shockingly disappointing jobs number and Wednesday's much greater-than-expected surge in inflation have more in common than just embarrassing many economic forecasters." Powell pushback — Via American's for Financial Reform's Carter Dougherty on Rich Bernstein's positive comments about Fed Chair Jerome Powell in Wednesday's MM: "Powell's horrible track record on regulation, which includes gutting restrictions on bank speculation, watering down rules on loss-absorbing capital, and weakening stress tests, is crucial. Tough regulation helps monetary policy by providing other tools to deal with bubbles and instability. It's not some extraneous part of the Fed chair's job, and it's a part Powell has done very badly." MM sidebar : This plays into the dump Quarles/keep Powell argument, though obviously Powell is the man at the top. GOOD THURSDAY MORNING — Email me on bwhite@politico.com and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on aweaver@politico.com and follow her on Twitter @AubreeEWeaver. TWEET DU JOUR — Via @elonmusk saying Tesla has suspended vehicle purchases using Bitcoin because of the cryptocurrency's carbon footprint. Musk said Tesla was "looking at" other cryptocurrencies. Dogecoin anyone? I mean he is the self-anointed "Doge-Father." | | A message from Canadian National Railway Company: CN + KCS: Creating The North American railway for the 21st century.
CN is the better bid, better partner, better railway and best solution for KCS. Together, CN and KCS will create a true USMCA railroad that establishes a seamless single-line service to expand North American trade and power economic prosperity. For important information, visit www.connectedcontinent.com. | | | | | | President Biden meets with Senate Environment and Public Works ranking member Shelley Moore Capito (R-W.Va.); Senate Energy and Natural Resources ranking member John Barrasso (R-Wyo.); Senate Finance ranking member Mike Crapo (R-Idaho); Senate Banking, Housing, and Urban Affairs ranking member Pat Toomey (R-Pa.); Commerce, Science and Transportation ranking member Roger Wicker (R-Miss.); and Sen. Roy Blunt (R-Mo.) to talk infrastructure… Initial jobless claims at 8:30 a.m. expected to be fairly flat at 500K from 498K… Producer Prices at 8:30 a.m. expected to rise 0.3 percent headline and 0.4 percent core. COLONIAL PIPELINE RESTARTS — Our Ben Lefebvre: "The Colonial Pipeline restarted operations… five days after a cyberattack on the company forced it to shut down the crucial fuel line that delivers nearly half the gasoline to the East Coast. "The closure triggered panic buying across the southeastern U.S. this week that drained supplies of gasoline at many retail stations, posing a threat to the economic rebound from the pandemic, as well as a political risk for … Biden, who marshaled much of his Cabinet to mount a robust response to the supply disruption. Still, Colonial Pipeline warned that resuming operations on the 5,500-mile artery that runs from Houston to New Jersey would take some time." BIDEN FTC NOMINEE MOVES AHEAD — Our Leah Nylen: "Lina Khan, the progressive tech critic… Biden nominated to the Federal Trade Commission, won bipartisan approval from the Senate Commerce Committee… earning support from all but four GOP members. "The panel agreed to move forward with Khan's nomination by voice vote. Sens. Dan Sullivan of Alaska, Marsha Blackburn of Tennessee, Mike Lee of Utah and Cynthia Lummis of Wyoming, all Republicans, asked to be recorded as opposed to putting Khan on the FTC. Khan's support from Republicans — eight of the panel's 12 GOP members voted in her favor — may indicate growing bipartisan appetite for reining in major online platforms like Google, Facebook and Apple." CRYPTO CLASHES AHEAD — Our Kellie Mejdrich: "SEC Commissioner Hester Peirce … criticized an agency staff warning about risks and potential losses associated with Bitcoin futures, a sign that commission Republicans may clash with Democratic SEC Chair Gary Gensler on oversight of cryptocurrencies. "'I didn't love the tone of yesterday's statement,' Peirce said during a virtual appearance at the Wall Street Journal's Future of Everything Festival. 'We want people to be cautious no matter what product they buy. But I think we need to — again — have a more welcoming tone. So we'll see whether the new chairman — what his approach is.'" | | | | SUBSCRIBE TO "THE RECAST" TODAY: Power is shifting in Washington and in communities across the country. More people are demanding a seat at the table, insisting that politics is personal and not all policy is equitable. The Recast is a twice-weekly newsletter that explores the changing power dynamics in Washington and breaks down how race and identity are recasting politics and policy in America. Get fresh insights, scoops and dispatches on this crucial intersection from across the country and hear critical new voices that challenge business as usual. Don't miss out, SUBSCRIBE . Thank you to our sponsor, Intel. | | | | | | | | STOCKS SINK AGAIN — AP's Damian J. Troise and Alex Veiga: "Inflation worries rattled Wall Street Wednesday, pulling the Dow Jones Industrial Average more than 680 points lower and placing the major stock indexes on track for their worst week in more than six months. "The selling came as investors reacted to a surprisingly big jump in inflation last month that stoked concerns that the economy may bounce back too fast from its pandemic-induced doldrums. Tech giants, which had soared during the past year of lockdowns, took some of the biggest losses. Only energy stocks eked out a small gain." TRADERS NOT BETTING ON A QUICK MARKET REBOUND — Reuters' Saqib Ahmed: "Traders are not betting on a quick rebound from the stock market dip, in contrast to prior selloffs, options data showed on Wednesday, as U.S. stocks sold off sharply with high-flying tech names particularly hit. "Investors' tendency to look past minor wobbles in stocks as the S&P 500 rallied about 90 percent over the past year or so has been a key feature of the equity market since it rebounded from March 2020 pandemic lows and has helped make market pullbacks shallow and brief. That, however, may be changing." | | | |   | | | | | | ECONOMISTS STRUGGLE TO FORECAST RECOVERY — Bloomberg's Olivia Rockeman and Reade Pickert: "The reopening of the U.S. economy is throwing forecasters for a loop. Estimates for two of the most widely followed economic reports this month — the consumer price index and the jobs report — have missed the actual figures by a long shot. "April payrolls, reported last week, were more than 730,000 short of the median estimate in a Bloomberg survey. On Wednesday, government data showed the headline increase in the CPI was roughly quadruple the consensus forecast." CLARIDA 'SURPRISED' BY INFLATION REPORT — WSJ's Paul Kiernan: "A top Federal Reserve official said on Wednesday he was surprised by a larger-than-expected jump in inflation last month, but stressed that more data would be necessary for the central bank to begin scaling back its easy-money policies. "'I was surprised,' Richard Clarida, the Fed's vice chairman, said of the 4.2 percent increase in consumer prices in April from a year earlier. 'This number was well above what I and outside forecasters expected.'" WHY ARE FEARS OF HIGH INFLATION GETTING WORSE — AP's Christopher Rugaber: "Gas prices are rising. Auto prices are soaring. Consumer goods companies are charging more for household basics like toilet paper, peanut butter and soft drinks. "All of which is resurrecting fears of an economic threat that has all but disappeared over the past generation: Runaway inflation. It occurs when prices for most goods and services not only rise but accelerate, making the cost of living steadily more expensive and shrinking the purchasing power of Americans' earnings and savings." | | | | SUBSCRIBE TO WEST WING PLAYBOOK: Add West Wing Playbook to keep up with the power players, latest policy developments and intriguing whispers percolating inside the West Wing and across the highest levels of the Cabinet. For buzzy nuggets and details you won't find anywhere else, subscribe today. | | | | | FED PRIVATELY PRESSES BIG BANKS ON RISKS FROM CLIMATE CHANGE — Reuters' Pete Schroeder: "The U.S. Federal Reserve has asked lenders to start providing information on the measures they are taking to mitigate climate change-related risks to their balance sheets, according to four people with knowledge of the matter. The previously unreported supervisory discussions highlight how U.S. watchdogs are moving to execute President Joe Biden's agenda to incorporate climate risk into the financial regulatory system, with potentially major ramifications for Wall Street. WALL STREET'S GRIP ON SECRET HARASSMENT HEARINGS STARTS TO CRACK — Bloomberg's Max Reyes: "Activists seeking to end secret hearings for harassment complaints against banks claimed a victory of sorts last month when they got almost half of Goldman Sachs Group Inc. shareholders to back their proposal. "But their path to ending forced arbitration on Wall Street is seen as long and arduous. Much of the finance industry, including Goldman, remains committed to settling disputes behind closed doors, and change is unlikely to pass easily through a divided Congress." CHINA WEIGHS NEW ECONOMIC ENVOY TO U.S. — WSJ's Lingling Wei and Bob Davis: "Beijing is considering whether to replace Vice Premier Liu He as its top economic envoy with Washington, according to officials with knowledge of the matter, a decision that Biden administration officials say will indicate the depth of China's interest in economic cooperation. "Under this scenario, these officials said, Mr. Liu, who has spent decades working on economic issues, would be succeeded by Hu Chunhua, a younger vice premier who made his mark overseeing the restive Tibet region and running the trade-reliant coastal province of Guangdong but who has little experience in U.S.-China relations." TRANSITIONS — Robert Baldwin is joining the Association for Digital Asset Markets (ADAM) as its new Head of Policy. | | A message from Canadian National Railway Company: CN+KCS: Safer. Faster. Cleaner. Stronger.
Creating The North American railway for the 21st century.
Safer. CN brings an uncompromising commitment to safety – both in culture and in ongoing investments in advanced technology.
Faster. A combination will provide more end-to-end single-owner, single-operator services from Mexico to Detroit than any other Class 1 railroad with more network access and benefits for customers, ports and terminal owners.
Cleaner. New competitive routes will be created through a combination of CN and KCS, accelerating the shift from truck to rail while driving down greenhouse gas emissions, fuel consumption and congestion.
Stronger. CN and KCS will create a true USMCA railroad that establishes a seamless single-line service to expand North American trade and power economic prosperity.
For important information, visit www.connectedcontinent.com. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |
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