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All signs pointing to more rate hikes ahead

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The meeting was the last one for Chair Janet Yellen, who had guided the Fed through the first normalization steps following the ultra-accommodative moves taken due to the financial crisis. She gives way to Jerome Powell, who moves up from a Fed governor position and is expected largely to carry on Yellen’s strategy of gradual rate hikes.

Investors have been watching the inflation picture closely, with worries growing that the Fed may decide to move more quickly than expected if officials deem that policy is too loose for a growing economy.

The remarks came before the release of two government indicators showing even more pressures: a 2.9 increase in average hourly wages for January and an unexpectedly strong 0.5 percent monthly gain in the consumer price index.

Markets already were on edge after the January Fed meeting, during which the committee said it expected that “further gradual adjustments” in monetary policy would be necessary particularly given the progress of inflation towards the 2 percent goal. The two data points, coupled with the somewhat hawkish Fed statement, rocked markets, helping send major stock market averages briefly into a correction.

Inflation was a popular topic of conversation during the meeting.

Officials deemed that core personal consumption – excluding food and energy – likely will run “notably faster in 2018.” The 2017 level was mired around 1.5 percent for 2017. The Fed’s preferred inflation measure is the personal consumption expenditures index.

“Members expected that economic conditions would evolve in a manner that would warrant further gradual increases in the federal funds rate,” the minutes stated. “They judged that a gradual approach to raising the target range would sustain the economic expansion and balance the risks to the outlook for inflation and unemployment.”

The market widely expects the Fed to approve a quarter-point increase at the March meeting that would take the rate up to a target range of 1.5 percent to 1.75 percent. The rate is tied to most consumer debt. In addition to gradually increasing rates the committee also is slowly unwinding its portfolio of bonds, or balance sheet.

Officials said they probably underestimated the effects that the tax cuts passed in December would have on spending and growth. However, they remained unsure of how substantially the cuts would impact wages.

Hundreds of companies have issued one-time bonuses to workers. Committee members said that in discussions with business contacts, it was unclear how long-lasting those cash injections would be.

Data they had seen up to the point of the January meeting showed “few signs of a broad-based pickup in wage growth.”

“With regard to how firms might use part of their tax savings to boost compensation, a few participants suggested that such a boost could be in the form of onetime bonuses or variable pay rather than a permanent increase in wage structures,” the minutes stated. “It was noted that the pace of wage gains might not increase appreciably if productivity growth remains low. That said, a number of participants judged that the continued tightening in labor markets was likely to translate into faster wage increases at some point.”

Committee members also discussed conditions in the financial markets.

As of the meeting, the market had continued to hum along after getting off to its fastest start ever in 2018. Stocks did not start tailing off until after the meeting, particularly when the Labor Department reported on Feb. 2 the boost in hourly earnings.

FOMC members considered market valuations at that point to be “elevated” and the product of “broad-based appetite for risk among investors.” Some members cautioned that the Fed should be careful that “imbalances in financial markets may begin to emerge” as growth improves, and that the central bank also should monitor financial stability particularly against the prospects for lowered regulations.

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IPOs on track for record year as companies cash in on sky-high stock prices

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Traders work on the floor of the New York Stock Exchange (NYSE), July 21, 2021.

Brendan McDermid | Reuters

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Initial public offerings have come roaring back, on track for a record year as companies race to go public in a stock market at all-time highs.

Proceeds from U.S. IPOs have reached $89 billion in 2021, a 232% jump from the same period last year, according to data from Renaissance Capital. For the year-to-date period, the market is already at a record level in terms of funds raised, and it is expected to surpass the full-year all-time high of $97 billion raised in 2000 amid the dot-com boom, according to Renaissance.

“The valuations companies can get in the IPO market are high, historically,” said Matthew Kennedy, senior IPO market strategist at Renaissance Capital. “We attribute much of it to a decades-long buildup of unicorns and VC funding.”

Companies from stay-at-home tech to health-care innovators to e-commerce players are taking advantage of a booming stock market that keeps refreshing its record on the back of optimism toward the economic reopening. The IPO boom also coincides with the rising force of retail investors who are eager to own a piece of their favorite companies.

A total of 250 IPOs have priced in 2021, up 191% from the same period last year and already beating 2020’s total number of IPOs at 218, according to Renaissance Capital.

At least nine IPOs this year saw their shares doubling from their offering prices. E-Home Household Service, a Chinese housekeeping and home appliance service company, has surged more than 300% since its market debut in May.

Biotech Verve Therapeutics, ZIM Integrated Shipping, an Israeli container shipping company, as well as dLocal, an online payments firm in emerging markets, are among the top-performing IPOs this year.

The rebound in traditional IPO activities came as the SPAC market cooled down amid heightened regulatory pressure. After a record first quarter, special purpose acquisition company issuance fell 87% in the second quarter as regulators ramped up crackdown efforts, according Barclays data.

– CNBC’s Gina Francolla and Nate Rattner contributed to this story.

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BioNTech says it plans to develop an mRNA vaccine to prevent malaria

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The headquarters of German immunotherapy company BioNTech stands on April 22, 2020 in Mainz, Germany.

Thomas Lohnes | Getty Images

German drugmaker BioNTech announced Monday it plans to develop an mRNA-based vaccine to prevent malaria, a life-threatening disease that impacts millions of people worldwide each year.

The company, which developed the United States’ first authorized Covid-19 vaccine with U.S. drugmaker Pfizer, said it is aiming to begin clinical trials testing the shot by the end of 2022.

The World Health Organization, European Commission and other organizations have been involved in the early planning phase of the new vaccine, the company said, and have offered their support to identify and set up the necessary infrastructure.

“The response to the pandemic has shown that science and innovation can transform people’s lives when all key stakeholders work together towards a common goal. We are committed to bringing our innovations to those who need them most,” BioNTech CEO Dr. Ugur Sahin said in a press release.

“Together with our partners, we will do whatever it takes to develop a safe and effective mRNA-based Malaria vaccine that will prevent the disease, reduce mortality and ensure a sustainable solution for the African continent and other regions affected by this disease,” he said.

Malaria is a deadly disease caused by a parasite. There were an estimated 229 million cases of Malaria and at least 409,00 deaths in 2019, according to the World Health Organization. The majority of the cases were in Africa, and children under age 5 are the most vulnerable group affected by the disease.

The development of the new vaccine comes as world continues to deal with the Covid pandemic, which began spreading worldwide in early 2020 and has since killed more than 4.1 million people, according to data from Johns Hopkins University.

Pfizer and BioNTech quickly developed a highly effective mRNA-based vaccine to target the virus. It’s been used in several countries, including the U.S., and is helping drive down the number of infections and deaths.

Messenger RNA, or mRNA, technology has been under development for years, but Pfizer’s and Moderna’s Covid-19 vaccines are the first time mRNA has been cleared for use in humans. The mRNA-based Covid vaccine works by tricking the body to produce a harmless piece of the virus, triggering an immune response. It’s said to be easier to produce over traditional vaccines, which generally use a dead or weakened virus to produce an immune response.

Due to the success of the mRNA Covid vaccine, other drugmakers are looking to develop new vaccines using the technology.

Pfizer, for example, has said it is developing an mRNA-based flu vaccine. Kathrin Jansen, head of Pfizer’s vaccine research and development, told CNBC in May that the technology could create “more potent” shots.

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Floods in Europe and China disrupt global shipping, supply chains

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The floods in China and Europe are yet “another body blow” for global supply chains, the CEO of a shipping firm told CNBC on Monday. 

“Rarely does a week go past without something new,” says Tim Huxley, CEO of Mandarin Shipping. 

Shipping has already seen massive disruptions this year. As parts of the world rebounded from the pandemic, increased spending led to a shortfall of containers, creating delays and driving up prices.

Then in April, one of the world’s largest container ships became wedged in the Suez Canal, halting traffic for nearly a week. The waterway is one of the busiest in the world, with about 12% of trade passing through it.

In June, an uptick of Covid cases in southern China caused more delays at ports in the region, again jacking up shipping prices.

‘Broken railway links’ caused by floods in Europe

Heavy rainfall and flooding have devastated parts of western Europe. Some of the most severe flooding happened in Germany and Belgium. Parts of Switzerland, Luxembourg and the Netherlands have been affected as well.

“This is really going to disrupt the supply chain because the railway links have all been broken,” Huxley told CNBC’s “Squawk Box Asia.”

He said that includes railways coming from the Czech Republic and Slovakia into the German ports of Rotterdam and Hamburg, which have been “seriously disrupted.”

“And so that’s going to delay cargo movements in and out,” he said. “It’s gonna really disrupt the industry.”

Huxley pointed to Thyssenkrupp, noting the German steel making giant could not get raw materials due to the flooding.

“That ultimately will have a knock on effect on industries such as the motor industry, domestic appliances and things like that,” he said.

S&P Global Platts reported, citing a letter to customers, Thyssenkrupp declared force majeure on July 16. A force majeure event occurs when unforeseeable circumstances, such as natural catastrophes, prevent one party from fulfilling its contractual duties, absolving them from penalties.

A source at the firm’s mills told S&P Global Platts that parts of the railway in Hagen are “missing,” adding it’s even more difficult than before to get trucks for delivery. Hagen is a city in Western Germany that is among the worst-hit by the floods.

Flooding in landlocked Henan disrupting supply of wheat, coal

Meanwhile, the disruption caused by the flooding in the Chinese province of Henan is made worse by the fact that the province is landlocked, said Huxley.

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The disruption of railways is, again, going to cause a “big impact,” he said. 

“Obviously, that will have an impact on shipping, that will force shipping rates up,” Huxley said. 

The distribution of wheat and coal has been affected, according to Huxley, who pointed out that Henan is the “bread basket” of China and has produced 38 million tons of wheat this summer. 

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