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Stocks look optimistic, Taiwan misspeaks and infectious diseases.Optimistic startStocks rose in Europe after US President Joe Biden said tha [View in browser]( [Bloomberg]( Stocks look optimistic, Taiwan misspeaks and infectious diseases. Optimistic start Stocks rose in Europe after US President Joe Biden said that tariffs imposed on China by the Trump administration were under consideration, sparking speculation that there may be a reversal of some measures. US stock futures rose, too, though participants in an MLIV Pulse [survey]( expect the S&P 500 Index gauge to keep falling and bottom around 3,500. Taiwan gaff President Joe Biden this morning said, in answer to a reporter question, that the [US military would intervene]( to defend Taiwan from any attack from China. The comment was walked back by the White House officials later who said Biden simply meant the US would provide equipment rather than troops should China invade. The US has long held a policy of “[strategic ambiguity](” towards the island. Biden, who is in Asia for [meetings with allies](, had earlier boosted the offshore yuan when he said he will [review Trump-era tariffs]( imposed on China. It seems likely that any goodwill with Beijing gained from that move was quickly extinguished by the Taiwan comments, with Foreign Ministry spokesman Wang Wenbin saying the US should "avoid causing grave damage to bilateral relations.” Infectious diseases Beijing reported a [record number]( of new Covid-19 cases for its current outbreak. Containing Covid has come at a crushing social and economic cost for China. Millions of Shanghai residents [have been confined]( to their homes for weeks, and even though the lockdown is easing, many restrictions remain in place. Meanwhile, confirmed and suspected [monkeypox]( cases have been identified in Europe and North America in recent weeks, raising alarm in a world still reeling from Covid-19 outbreaks. Davos week The International Monetary Fund may need to further trim forecasts [for economic growth]( this year, Managing Director Kristalina Georgieva said while at Davos. Despite increased risk of recession for some countries, a global recession isn’t the group’s base case. Members of the global elite are [back in Davos]( after a two-year hiatus due to the pandemic. The first day’s main event is a virtual speech from Ukraine President Volodymyr Zelenskiy. Coming up... It's a slow start to the week for economic data with just the April Chicago Fed National Activity Index on the docket at 8:30 a.m. The speaker slate is a little more lively: the ECB's Robert Holzmann and Joachim Nagel speak alongside the BOE Governor Andrew Bailey at a conference on "The return of inflation" starting at 10:15 a.m. The Fed's Raphael Bostic will discuss the economic outlook at noon. Zoom Video Communications Inc. and Advance Auto Parts Inc. are among the companies scheduled to report earnings What we've been reading Here's what caught our eye over the weekend. - US gets [baby formula](. - [Beijing lockdown]( angst. - [Electric cars]( are cheaper in New Jersey. - Big [electric bill]( shocks. - [Americans’ nest eggs]( are cracking. - Facebook slammed for spreading [Putin’s propaganda](. - Building houses to [attract workers](. And finally, here’s what Joe’s interested in this morning The Federal Reserve isn't the only game in town when it comes to cooling the economy and fighting inflation. There's a substantial fiscal tightening taking place as well. There's this frequent idea out there that the government is inclined to spend liberally in a downturn, but that it never does the opposite during the boom. This isn't the case though. For one thing, the various emergency spending plans that went into place in 2020 and 2021, have all for the most part expired. So there's certainly appetite to let emergency measures lapse. What's more, [as Stephanie Kelton pointed out on a recent episode of Odd Lots](, tax intake naturally goes up in a boom: "...taxes are already countercyclical, right? Tax revenues increase automatically as the economy grows and they drop off in a recession." It's easy to intuit why. Millions of people returning to the labor force automatically means a big increase in income taxes collected. The booming stock market (of 2021) meant a big capital gains tax haul. And of course, there are various taxes associated with the general boom in consumption that we saw last year. You can see, the US government regularly runs a surplus in the month of April (when taxes are due) and this year's was substantially larger than in any month in the past. Meanwhile, the GDP drag from fiscal tightening is expected to persist for some time, and at deeper levels than anything we saw after the Great Financial Crisis, at least according [to an estimate from the Hutchins Center on Fiscal & Monetary Policy]( (HT: [Cullen Roche](). There's not as much talk about this, in part because it just kind of happens automatically, without any fast-moving discretionary policy changes. Nonetheless, it's an important part of the story. In 2020, both monetary policy and fiscal were rowing in the same direction so to speak. The same is true in 2022 -- just in the opposite direction. Follow Bloomberg's Joe Weisenthal on Twitter [@TheStalwart]( Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. 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