It was a bad day on Wall Street yesterday as the S&P 500 index slipped 0.9% to 2,543.76 points. The Dow Jones industrial average lost 0.4% to 26,396.96 points, and the Nasdaq composite index lost 0.2% to 7,720.18 points. The U.S. economy has been showing signs of strength over the past week, but economists were still expecting the markets to be volatile and cautious.

Stocks plunged on Wall Street on Thursday as investors took a fresh look at China’s growth problems, and bond yields dropped as markets appeared to be pricing in a more extended period of the U.S. Federal Reserve’s stimulus program.

Daily business meeting

8. July 2021Updated

8. July 2021, 10:59 a.m. AND

8. July 2021, 10:59 a.m. AND

Stock prices fell and bond yields plunged Thursday as investor concerns about the unevenness of the economic recovery spread across financial markets.

The emergence of the highly contagious variant of the delta coronavirus has reminded us that the pandemic is still a threat to public health and the economy. Although infection and mortality rates in the U.S. are well below those seen earlier this year, the Centers for Disease Control and Prevention estimated Wednesday that the delta variant is now responsible for more than half of new infections in the United States.

Government bond trading reveals concerns about the economy

Shares of travel and tourism companies fell Thursday, an indication of investor sentiment about the risk of a pandemic. Carnival Corporation, Norwegian Cruise Line and American Airlines fell more than 3% in early trading.

There are growing concerns about the strength of the economic recovery, said Edward Moya, senior market analyst at Oanda, a foreign exchange firm. The spread of the virus to other countries suggests that we will not have a strong second half of the year.

Investors also analyzed the latest economic data from the Labor Department, which showed that the number of new jobless claims in the states rose slightly to 370,000, from the 350,000 that economists had expected.

The S&P 500 index fell more than 1 percent, its biggest one-day loss since mid-June, and the yield on 10-year government bonds fell to 1.3 percent.

The Stoxx 600 Europe fell 1.8%, while the FTSE 100 in the UK and the DAX in Germany lost almost 2%.

Oil prices also fell Thursday. West Texas Intermediate, the U.S. benchmark for crude oil, fell 0.4 percent to $71.88 a barrel.

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Headquarters of the European Central Bank in Frankfurt, Germany. Eurozone inflation has hovered around the central bank’s 2% target in recent months.Credit…Ralph Orlowski/Reuters

The European Central Bank announced on Thursday that it will change the criteria for setting its monetary policy, giving it more room to take anti-crisis measures even if inflation is above the official target. The bank also said it would use its influence on bond markets to combat climate change.

After an 18-month review of its strategy, the bank’s board said Thursday that it would no longer aim to keep inflation below but close to 2 percent, which had been its guiding principle since 2003. Instead, the Bank will be content with a 2% target and will be willing to accept a transition period if inflation rises slightly above the target.

Two percent is not a ceiling, European Central Bank President Christine Lagarde said at a news conference Thursday.

This seemingly insignificant change allows the bank to continue injecting credit into the eurozone economy even if annual inflation rises above the target level, as long as policymakers view the spike as temporary.

This scenario could soon become a reality. Inflation in the eurozone has stabilised at 2% in recent months and could rise further if the economy picks up and shortages of essential goods, such as food, improve. Under the previous strategy, the central bank would have been forced to raise interest rates or take other measures to slow down the economy, even though the crisis was not over.

By law, price control is the top priority of the central bank in the 19 eurozone countries, so any adjustment in its approach to inflation has a significant impact on the interest rates businesses and consumers pay on loans, and on employment and economic growth.

The bank also said it would take climate change into account when buying corporate bonds as part of its stimulus package. Bond buying, with newly created money, is one of the Bank’s main tools for stimulating borrowing and economic growth. But in the future, the European Central Bank will favour companies that make a serious effort to reduce the amount of carbon dioxide they produce.

In practice, the central bank has already amply demonstrated that it was willing to break its own rules to deal with the pandemic or the debt crisis that almost destroyed the euro a decade ago.

A more modern and clear strategy will make it easier for the ECB to communicate with markets and the public, Holger Schmieding, chief economist at Berenberg Bank, said in a note to clients. It anchors the flexibility that the ECB has given itself anyway.

The European Central Bank’s new approach will certainly meet with criticism in countries such as Germany, where inflation fears are very high. Jens Weidmann, a member of the ECB’s Governing Council and President of the German Bundesbank, has called on the European Central Bank to scale back its stimulus measures to prevent inflation from spiralling out of control. He also said climate change is not a problem for central banks. However, Lagarde said board members unanimously approved the new strategy.

On Thursday, the Governing Council defended its decision to make climate change a central bank responsibility, arguing that it is relevant to inflation, output, employment, interest rates, investment and productivity, financial stability and the transmission of monetary policy.

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  • Initial applications for unemployment benefits rose slightly last week, the Labor Department announced Thursday.
  • The weekly number was about 370,000, 3,000 more than the previous week. The number of new applications for pandemic unemployment benefits, the state-funded program for the self-employed, small business owners and others not normally eligible for state benefits, was 99,000, 15,000 fewer than the previous week. The data are not seasonally adjusted. (On a seasonally adjusted basis, out-of-state claims totaled 373,000, up 2,000).
  • The number of new deposits from the States remains high by historical standards, but is only a third of its level in early January. Claims, a type of layoff indicator, have declined as businesses return to full operation, especially in hard-hit sectors such as leisure and hospitality.
  • More than 20 states recently stopped paying some or all federal unemployment benefits because of the pandemic – including a $300 supplement to other benefits – even though they are funded through September. Officials in those states have said these payments discourage people from looking for work.
  • The June jobs report from the Department of Labor showed that the economy had 6.8 million fewer jobs than before the pandemic. Another report showed that there were 9.2 million job openings at the end of May, as companies that had closed or cut back their workforces during the pandemic rushed to hire to meet the rebounding demand.
  • However, turnover is high: many more workers are being laid off than fired – a sign that many are moving out to jobs that pay even slightly better.

Lina Khan, Chairman, Federal Trade Commission. Amazon says their views against Big Tech should disqualify them from participating in lawsuits against the company.Credit…Pool photo by Graeme Jennings

Last week, Amazon launched a pre-emptive strike against the new chairwoman of the Federal Trade Commission, Lina Khan, using its usual line of attack against politicians who have had strong opinions in the past: an attempt to disqualify her for alleged bias.

Ms. Khan has made a name for herself by vehemently opposing Amazon and its antitrust laws. According to her, the widely held tech giant has shown that antitrust laws are not appropriate for the digital age. That disqualifies Ms. Hahn, and others, from participating in the F.T.C. lawsuit against Amazon, the company said. Amazon is under investigation by the FTC in connection with Big Tech’s acquisitions of small competitors, and the agency is separately investigating its proposed purchase of MGM.

So, asks the DealBook newsletter, does Amazon have a chance?

It is not easy to disqualify a commissioner. During her Senate confirmation hearing, Hahn ruled out a full suspension of investigations into major technology companies, stating that she would consider such requests on a case-by-case basis and consult with FTC lawyers. Expressing a critical opinion of the company is rarely grounds for dismissal, and most attempts at disqualification fail.

  • Impartiality does not mean ignorance, thoughtlessness or impartiality, a federal appeals court said in 1980 when it overturned the disqualification of an FTC commissioner.
  • In 2010, an attempt by Intel to disqualify a commissioner who had previously been an antitrust lawyer failed because the FTC found that his former job was not substantially related to the evaluation at issue.
  • In 2012, a future commissioner who worked at Google promised senators that he would recuse himself from all dealings with Google for two years to avoid any appearance of unfairness. In its motion, Amazon noted that the appearance of fairness also matters.

According to Bruce Hoffman, a partner at Cleary Gottlieb and former director of the FTC’s antitrust division, Amazon’s announcement may be a warning. Because it is unrelated to the case and more generally directed against Ms. Khan’s rejection, it serves essentially as notice to the agency. This could be Amazon’s way of saying: If you step in, it could come back to haunt you, he said.

Commissioners are chosen as much for their political views as for their experience, so many would be disqualified as their views, said Eleanor Fox, an antitrust researcher and her former colleague at Columbia University. Asked whether Amazon’s request to block Ms Khan would succeed, she said: Oh, I don’t think so.

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President Biden drives an all-electric Ford F-150 in May. He is considering proposals to force automakers to switch to electric cars.Credit…Doug Mills/The New York Times

President Biden’s goal of reducing pollution by 50% from 2005 levels by 2030 requires a drastic shift in the nation’s economy away from fossil fuels, including a rapid conversion of American drivers from the combustion engines of the last century to zero-emission electric vehicles.

To achieve that goal, the Biden administration is imposing strict vehicle pollution regulations that could significantly reduce emissions and force automakers to increase sales of electric vehicles, according to four people familiar with the plan. That comes on top of plans to lower emissions standards to about the same level as President Barack Obama’s, reports Coral Davenport for the New York Times.

The risk for automakers is whether consumers will buy electric cars, which tend to be more expensive and have logistical problems, as the country has no network of charging stations for electric vehicles.

If Congress approves hundreds of billions of dollars for building charging stations and tax breaks for buyers and manufacturers of electric cars and trucks, Biden is expected to win industry support for stricter regulations that would put more electric vehicles on the road. Currently, only about 2 percent of cars sold in the United States are electric.

But if little or no funding is allocated to electric vehicles in the final infrastructure package, automakers will likely resist stricter emissions rules, forcing them to build and sell expensive electric vehicles.

In late June, Biden announced an agreement with a bipartisan group of senators on an infrastructure package that would include about $7 billion to build electric vehicle charging stations.

But that’s just a fraction of the $174 billion Biden wants to spend on vehicle electrification in a second infrastructure bill in the fall, which Democrats hope will include strong provisions to fund 500,000 electric vehicle charging stations and generous tax breaks for electric car buyers. None of the bills are guaranteed to pass in a sharply divided Congress.

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Google’s European headquarters in Dublin includes four buildings with a wellness centre and swimming pool.

The model that has driven the Irish economy for decades is under threat as a coalition of 130 countries works to overhaul the global tax system on which Ireland depends to attract companies that want to reduce the taxes they pay.

At stake are Ireland’s low official corporation tax rate (12.5%) and a tax system that helps international companies based in the country avoid tax in other countries where they make profits. The program has brought billions of euros to the Irish treasury and created hundreds of thousands of jobs, reports Liz Alderman for the New York Times.

Last week, Ireland was one of nine countries that did not sign up to a framework developed by the Organisation for Economic Co-operation and Development that could jeopardise these benefits. The agreement includes a new minimum global corporate tax rate of 15%, which will require tech and retail giants to pay tax where their goods or services are sold, not where the company’s headquarters are located. The details of the agreement are expected to be finalized in October, after which the governments of each country will approve it.

Some might say that this is not a good thing – Ireland risks giving the impression that it wants to deprive other countries of their fair share of tax revenues – and the government in Dublin has remained tight-lipped on this issue. The Ministry of Finance refused requests for interviews and did not respond to written questions. The multinationals that have benefited from the low-tax system are also silent and refuse requests to discuss the issue.

The Treasury estimates that the review of the global tax code could cost Ireland between €2 billion and €3 billion a year in lost tax revenue. Most of the money will go to other countries.

In total, the Irish state received €12 billion in corporate tax last year, €4 billion more than seven years ago. The top ten multinationals account for more than half of the total.

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  • A group made up of a dozen states and the District of Columbia is suing Google, arguing that its mobile app store is abusing its market power, expanding the legal challenges facing the Internet search giant. This is the fourth federal or state antitrust case filed against Google since October, but the first involving the company’s lucrative App Store. It was filed Wednesday in federal court in the Northern District of California. Public records show that Utah, North Carolina, New York and Tennessee filed the complaint. Apple, which operates another major app store for smartphones, is also under scrutiny for collecting a commission from developers on app sales and subscriptions.
  • If Bill Gates and Melinda French Gates do not find a way to work together on their foundation within two years of their planned divorce, Mr. Gates will not be able to do so. Gates gets full custody of the kids. That was one of the main conclusions of a series of statements on the future of the world’s largest philanthropic foundation made Wednesday that overshadowed the injection of $15 billion in funds. The foundation also plans to add trustees from outside its own circle, a step toward better governance that philanthropy experts have been calling for for years. The restructuring announced Wednesday could be the beginning of a process that will make the Gates Foundation more responsive to the people it is meant to help and loosen the grip on the reins that the founders have held for more than two decades.

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