|
|
|
|
|
Threats to Fed's Pulling Off a Soft Landing; China's Challenges Pile Up
|
|
|
|
|
|
Good day. Federal Reserve officials are set to hold interest rates steady this week after lifting them to a 22-year high to avoid missing their shot at sticking a soft landing for the U.S. economy, Nick Timiraos of The Wall Street Journal writes. Standing between the Fed and its goal are, he notes, four threats: keeping rates too high for too long, economic growth picking up, energy prices increasing or a financial crisis flaring. Elsewhere, China appears to have problems similar to those that had for years weighed on Japan, though Beijing faces additional economic challenges, economists say. They include geopolitical tensions far more serious than trade frictions Japan once faced with the U.S., and China’s government seeming ideologically less inclined than Tokyo was then to support growth.
Now on to today’s news and analysis.
|
|
|
Why a Soft Landing Could Prove Elusive
|
|
|
|
Soft landings are rare. PHOTO: MICHAEL NAGLE/BLOOMBERG NEWS
|
|
|
|
On the eve of recessions in 1990, 2001 and 2007, many Wall Street economists proclaimed the U.S. was on the cusp of achieving a soft landing, in which interest-rate increases corralled inflation without causing a recession.
Similarly, this summer’s combination of easing inflation and a cooling labor market has fueled optimism among economists and Federal Reserve officials that this elusive goal might be in reach.
But soft landings are rare for a reason: They are tricky to pull off. “You need a lot of luck,” said Antúlio Bomfim, a former adviser to Fed Chair Jerome Powell who is now at Northern Trust Asset Management.
|
|
Fed’s Lending to Financial Institutions Sees More Demand
|
|
Financial institutions as of Wednesday borrowed almost $108 billion from the Federal Reserve’s Bank Term Funding Program, which the Fed created after the collapse of Silicon Valley Bank in March to provide an additional source of liquidity at times of stress. That’s up by $138 million from the prior week. The increased borrowing occurred during a one-week period in which Treasury yields weren’t far from some of their highest levels of the year, a sign of diminished demand for underlying government debt. (MarketWatch)
|
|
Is China’s Economic Predicament as Bad as Japan’s?
|
|
Starting in the 1990s Japan became synonymous with economic stagnation, as a boom gave way to lethargic growth, declining population and deflation. Many economists say China looks similar, but with more intractable problems.
|
|
|
|
|
Student-Loan Restart Threatens to Pull $100 Billion From Consumers
|
|
Starting Oct. 1, tens of millions of student-loan borrowers will need to make payments averaging between $200 and $300 each month, which could divert up to $100 billion from Americans’ pockets over the coming year.
|
|
|
How UAW Pursued a Surprise-Attack Strike Strategy
|
|
The United Auto Workers union’s strike at three different factories Friday represents a show of force that, while more restrained than some expected, sends a signal to Detroit car makers that actions could escalate if talks drag out.
|
|
|
Prolonged Hollywood Writers Strike Tests Solidarity
|
|
Optimism from a few weeks ago that a resolution was in reach faded as each side traded missives. Meantime, a lack of work in Hollywood has taken a toll industrywide, and sown frustration, straining unity.
|
|
|
The U.S. Lost 4.1 Million Days of Work Last Month to Strikes
|
|
The United Auto Workers union’s walkout at three factories comes as American workers are striking at a pace not seen in nearly a quarter-century. Last month, large stoppages from strikes resulted in 4.1 million missed days of work, according to the Labor Department. That preliminary estimate was the biggest monthly total since August 2000. The recent surge has been fueled in part by Hollywood actors who in July joined writers on strike. Labor activism has been on the rise in other sectors. Some standoffs have led to stoppages, while others have been resolved with unions negotiating higher pay and better benefits from employers that have struggled to fill openings in a tight labor market.
|
|
|
Demands for Tips Are Up. Actual Tipping, Not So Much.
|
|
Prompts encouraging customers to leave a tip seem to be popping up everywhere, quietly raising prices for everything, but the spread of tipping requests might be generating more buzz than money.
|
|
|
|
Financial Regulation Roundup
|
|
|
Wall Street Is Furious Over Rising Fines From SEC
|
|
Wall Street is feeling the pain of inflation—at the tills of its regulators, as big banks and brokerage firms hand over bigger checks to settle regulatory investigations, including those that don’t result in losses for investors.
|
|
|
NYDFS to Require Higher Standards for Coin Listings and Delistings
|
|
New York’s financial regulator in proposed guidance to be published Monday, spells out its expectations for how crypto firms evaluate a coin offering before adoption, and steps and criteria a crypto firm must consider before delisting a coin.
|
|
|
Troubled Chinese Trust Company Brings In State Help
|
|
China’s Zhongrong International Trust, a shadow-banking giant whose financial troubles have rattled investors, broke its silence late Friday and said it is working with two state-owned institutions to address its problems.
|
|
|
|
|
8:15 a.m.: Canada housing starts for August
10 a.m.: NAHB/Wells Fargo Housing Market Index for U.S. for September
9:30 p.m.: Reserve Bank of Australia meeting minutes
|
|
|
5 a.m.: EU harmonized consumer-price index for August
8:30 a.m.: Canada consumer-price index for August; U.S. housing starts for August
2 p.m.: Bank of Canada’s Kozicki speaks at University of Regina
|
|
|
U.S. Home Purchases Fall Through at Highest Rate in August
|
|
Residential real estate deals in the U.S. are falling through at the highest rate in almost a year, as high mortgage rates give home buyers sticker shock, according to Redfin. Nationwide, nearly 60,000 home-purchase agreements were canceled in August, equal to 15.7% of homes that went under contract that month. That is up from 14.3% a year earlier and marks the highest percentage since October 2022, when mortgage rates surpassed 7% for the first time in two decades. The average interest rate on a 30-year-fixed mortgage stood at 7.07% last month, lifting the typical home buyer’s monthly payment from last year. “Buyers get sticker shock when they see their high rate on paper alongside extra expenses for maintenance, repairs and closing costs,” a Redfin agent says. “A lot of sellers are also willing to let buyers slip away because they don’t want to
concede to repair requests.”
—Chris Wack
|
|
Fed to Keep Rates on Hold, Focus on if More Tightening Is Needed
|
|
The Federal Reserve is expected to stay on hold Wednesday as widely expected in the markets, with the focus to be on how the Fed's Open Market Committee assesses the need for later interest-rate increases, Danske Bank Research analysts say in a note. With little need to pre-commit to any policy action, Danske Research expects Fed Chair Jerome Powell to deliver a balanced message, highlighting positive development in cooling labour demand and recovering supply, but underscoring that there is still some way to go before declaring victory over inflation. Markets price a cumulative 11 basis points of Fed rate rise in the remainder of 2023, according to Refinitiv.
—Emese Bartha
|
|
|
Investors Keep Putting Money Into Private Credit
|
|
Despite concerns that people supplying money to private-credit funds might not keep pouring in cash as rates rise, key flows of money into these vehicles seem to be stabilizing, boosting shares of managers, Telis Demos writes.
|
|
|
UAW Strike Exposes Detroit’s Dysfunction
|
|
The strike in Detroit could cost General Motors, Ford and Chrysler-owner Stellantis billions of dollars, but worse it is a reminder that these scions of a fast-changing industry aren’t set up for change, Stephen Wilmot writes.
|
|
|
|
-
U.S. consumer sentiment fell more than expected this month, with the preliminary reading of the University of Michigan’s sentiment index down from 69.5 in August to 67.7. Economists polled by The Wall Street Journal expected a 69.2 reading. (Dow Jones Newswires)
-
U.S. industrial output increased modestly in August as a drop in auto manufacturing dented overall production. Industrial production, which measures manufacturing, mining and utilities output, rose 0.4% in August from the prior month, the Federal Reserve said Friday, following a 0.7% gain in July. (DJN)
-
Manufacturing activity in New York state recovered in September and businesses grew more optimistic about their prospects for the coming months, lifting the Empire State Manufacturing Survey’s general business conditions index from minus 19 in August to 1.9, the Federal Reserve Bank of New York said. (DJN)
-
Canadian existing-home sales fell 4.1% in August from July. On an unadjusted basis, transactions in August rose 5.3% from a year earlier, according to data from the Canadian Real Estate Association. (DJN)
-
The average house price in the U.K. rose 0.4%, or 1,386 pounds ($1,720) in the month to Sept. 9, lower than usual for this time of year according to new data from Rightmove. (DJN)
-
Singapore’s non-oil domestic exports fell for the 11th straight month in August, contracting 20.1% on year—with shipments of both electronics and non-electronics declining in most of its top 10 markets, Enterprise Singapore said. That compared with the median estimate of economists surveyed by The Wall Street Journal for a 15.0% decline. In July, non-oil domestic exports dropped by revised 20.3% on year. (DJN)
-
Indonesia's central bank may keep its benchmark seven-day reverse repo rate unchanged at 5.75% at its September meeting, according to seven economists polled by The Wall Street Journal. (DJN)
-
Malaysia's consumer-price index is expected to rise 2.0% on year in August, which was the same increase in July, according to the median estimate of six economists polled by The Wall Street Journal. (DJN)
-
Malaysia's exports and imports likely fell in August, according to five economists polled by The Wall Street Journal. Exports are tipped to have declined 17% on year, while imports are projected to have fallen 18.2%, resulting in a trade surplus of MYR16.26 billion, according to the median forecasts of those polled. (DJN)
-
Spain's tourism sector continued to add jobs in August compared with the same point last year as the industry rebounds from the pandemic era, according to figures from the country's tourism ministry. There were 5.1% more workers in tourism in August on year, though the total number was a little lower than in July, the data show. (DJN)
|
|
|
This newsletter is compiled by James Christie in San Francisco and Perry Cleveland-Peck in Barcelona.
Send us your tips, suggestions and feedback. Write to:
James Christie, Nell Henderson, Nick Timiraos, Paul Hannon, Tom Fairless, Megumi Fujikawa, Perry Cleveland-Peck, Nihad Ahmed, Michael Maloney, Paul Kiernan, James Glynn
Follow us on X:
@WSJCentralBanks, @NHendersonWSJ, @NickTimiraos, @PaulHannon29, @TomFairless, @megumifujikawa, @pkwsj, @JamesGlynnWSJ, @cleveland_peck
|
|
|
|