DAILY MARKET REPORTS
- U.S. stocks turned lower Tuesday as new manufacturing data came in lower than expected, adding to concerns about the health of the domestic economy.
- Major indexes had opened slightly higher but gave up those gains after data showed U.S. factory activity contracted for the second straight month.
- ISM’s U.S. manufacturing activity index fell to 47.8 in September, the lowest since June 2009, below economists’ expectations of 50.1.
- Investors fled flocked to the safety of U.S. government bonds and gold following the release of the data.
- The yield on the U.S. 10-year Treasury note fell to 1.651%, from above 1.7% earlier in the session.
- Investors will be closely watching Friday’s employment report for September to see whether August’s hiring slowdown was an anomaly.
US FINANCIAL MARKET
Too big to lend? JPMorgan’s cash tweaks take toll on U.S. repo
- JPMorgan Chase has become so big that some rival banks and analysts say changes to its $2.7 trillion balance sheet were a factor in a spike last month in the U.S. “repo” market, which is crucial to many borrowers.
- Publicly-filed data shows JPMorgan reduced the cash it has on deposit at the Federal Reserve, from which it might have lent, by $158 billion in the year through June, a 57% decline.
- Although JPMorgan’s moves appear to have been logical responses to interest rate trends and post-crisis banking regulations, the data shows its switch accounted for about a third of the drop in all banking reserves at the Fed during the period.
- In the past JPMorgan would have gladly seized the opportunity to lend cash in the repo market, where loans are backed by the best collateral, often U.S. Treasury securities.
- But on Sept. 17 even as the majority of repo loans were being made at 5% and above, twice the usual rates, JPMorgan was limited in how much cash it could provide because of regulatory and other constraints, a person familiar with the trading said.
- Rates in the $2.2 trillion market for repurchase agreements rose as high as 10% on Sept. 17 as demand for overnight cash from companies, banks and other borrowers exceeded supply.
Over 2,500 Companies File for Tariff Exclusions on Chinese Imports
- More than 2,500 companies asked the Trump administration to exclude about 31,000 of their products as of midnight Monday, the deadline for filing requests to be exempted from the $200 billion tranche of tariffs implemented last year on products imported from China.
- The appeals cover goods that are being assessed a 25% tariff, which is set to jump to 30% on Oct. 15.
- The USTR has ruled on 439 requests for exclusions from the $200 billion tranche so far, or about 1% of all filings.
- Of 61 requests granted as of Tuesday morning, 10 went to Apple for its Magic Mouse 2, Magic Trackpad 2 and electronic components used in its Mac Pro.
- Apple has had five requests denied, among the 378 the USTR has turned down so far.
Novel Plan Aims to Settle Opioid Suits
- Endo International, Johnson & Johnson and other drugmakers that face sprawling litigation over the opioid crisis are exploring an unusual way to settle the cases: by participating in Purdue Pharma LP’s bankruptcy.
- Drugmakers and distributors face some 2,500 lawsuits brought by virtually every state as well as cities, counties, Native American tribes and others accusing the pharmaceutical industry of helping fuel widespread opioid addiction.
- Five drugmakers battling the cases—Endo, J&J, Teva, Allergan and Mallinckrodt—are looking to enact a global settlement of the litigation that would be implemented through OxyContin maker Purdue’s chapter 11 case.
- The mechanism, if successful, would allow the companies to contribute money into a trust set up through the bankruptcy in exchange for a complete release from liability.
Amazon’s Grocery-Store Plan Moves Ahead with Los Angeles Leases
- Amazon.com is advancing a plan to open a chain of U.S. grocery stores with early outposts in Los Angeles, Chicago and Philadelphia, according to people familiar with the matter.
- In the Los Angeles area, it has signed more than a dozen leases, the people said.
- The first few stores are likely to be in the dense suburban locations of Woodland Hills and Studio City, while another grocer is slated for the city of Irvine, in nearby Orange County, a person familiar with the matter said.
- These stores could open as early as the end of the year.
Ford, Retrenching in India, Sets Up Joint Venture With Mahindra
- Ford will transfer most of its operations in India to Mahindra & Mahindra as part of a joint venture with the Indian auto maker.
- Mahindra, one of India’s largest auto makers, will own 51% of the venture and Ford 49%.
- The companies value the venture at about $275 million.
- Ford expects to book an $800 million to $900 million noncash charge related to the establishment of the joint venture in the third quarter, the company said in a regulatory filing Tuesday.
Comcast emerges as new Google antitrust foe – sources
- Comcast, one of America’s largest media and communications companies, is wading into the epic regulatory pile-on against big tech companies such as Google, according to people familiar with the matter.
- Behind the closed doors of a congressional task force last month, Comcast’s video ads division FreeWheel accused Google of using privacy concerns as a pretext to limit FreeWheel’s ability to sell ads on behalf of its clients’ YouTube channels, four people briefed on the discussion said.
- Comcast may be drawing a line in the sand and wants to avoid letting Google do to the video ad business what it has done to the online ad market.
TSMC counter-sues U.S. chip rival GlobalFoundries for patent infringement
- Apple supplier TSMC has counter-sued smaller contract chipmaking rival GlobalFoundries in the United States, Germany and Singapore, saying the U.S. firm has infringed 25 of its patents.
- Taiwan Semiconductor Manufacturing Company said that in lawsuits filed on Monday it has asked for injunctions to stop GlobalFoundries’ manufacture and sale of chips that infringe the patents.
- The lawsuits come just over a month after GlobalFoundries sued TSMC for allegedly infringing 16 patents, seeking to stop imports into the United States and Germany of products made with technologies using those patents.
US ECONOMY & POLITICS
U.S. Factory Gauge Hits 10-Year Low as World Slowdown Widens
- U.S. factory activity contracted for the second straight month in September, the latest sign of a continued slowdown in global manufacturing amid trade tensions.
- The Institute for Supply Management said Tuesday its U.S. manufacturing index fell to 47.8 in September from 49.1 in August. Economists surveyed by The Wall Street Journal expected a 50.1 reading for September.
- The reading is the lowest since June 2009 and represents a continuation of the slowdown seen in August, when the index contracted for the first time since August 2016.
U.S. construction spending rises less than expected in August
- U.S. construction spending barely rose in August as the largest increase in private residential investment in nine months was offset by a second straight monthly decline in outlays on nonresidential projects.
- The Commerce Department said on Tuesday construction spending edged up 0.1%.
- Data for July was revised down to show construction outlays unchanged instead of nudging up 0.1% as previously reported.
- Construction spending fell 1.9% on a year-on-year basis in August.
New York Fed Adds About $54.9 Billion to Financial System
- The Federal Reserve Bank of New York added $54.85 billion to the financial system Tuesday by using the market for repurchase agreements, or repo, to relieve funding pressure in money markets.
- Banks asked for $54.85 billion in overnight reserves, all of which the Fed accepted, offering collateral in the form of U.S. Treasury and mortgage securities.
Pompeo Took Part in Ukraine Call, Official Says
- Secretary of State Mike Pompeo was among the administration officials who listened in on the July 25 phone call between President Trump and Ukraine’s president, a senior State Department official said Monday, a disclosure that ties the State Department more closely to the House impeachment inquiry.
- Also Monday, House committees subpoenaed Mr. Giuliani to turn over documents related to his communications with Trump administration officials about his efforts in Ukraine, as well as any other documents related to that effort, by Oct. 15.
- Lawmakers are focusing on a whistleblower complaint by a person identified as an officer at the Central Intelligence Agency and a record of the call between the two presidents that was released by the administration.
- If the Democrats approve articles of impeachment, the matter would move to trial in the Senate, which Senate Majority Leader Mitch McConnell confirmed Monday he would hold.
Barr Seeking Foreign Help on Origins of Russia Probe
- Attorney General William Barr has asked President Trump to introduce him to a number of foreign officials who he believes may have information relevant to the Justice Department’s review of the origins of the Russia investigation and has held overseas meetings with some of them, a department official said Monday.
- The revelation underscored Mr. Barr’s personal involvement in a review that the president hopes will discredit the underpinnings of the nearly two-year probe into his campaign’s possible ties to Moscow’s election interference in 2016.
- Mr. Trump, for example, recently called Australia’s prime minister at Mr. Barr’s request, two government officials said, to ask him to help with the inquiry.
Trump’s approval rating drops to low, but Americans still oppose impeachment, survey finds
- Americans by a narrow margin oppose impeachment hearings to remove President Donald Trump from office, according to the latest CNBC All-America Economic Survey.
- The survey found 47% opposing impeachment hearings and 44% approving.
- The results are much closer than when an NBC/Wall Street Journal poll asked the same question in December 2017, finding 41% approving of impeachment hearings and a majority 54% disapproving.
- The poll shows that 88% of Republicans oppose impeachment, compared with 76% of Democrats who favor it.
- Independents are split about evenly, with 42% favoring impeachment and 43% opposing.
- The president’s economic approval numbers also took a hit, declining to 42% from 48% in the May CNBC survey.
- Fifty percent of Americans now disapprove of Trump’s handling of the economy, up from 43% in May and the largest economic negative rating of his presidency.
Bernie Sanders’s Campaign Gets Summer Funding Boost
- Vermont Sen. Bernie Sanders raised $25.3 million in three months for his Democratic presidential bid, his campaign said Tuesday, exceeding the $18 million he raised in each of the previous two quarters this year.
- While many of the 19 Democratic presidential candidates are struggling to reach 165,000 donors—one requirement for making the November debate stage—Mr. Sanders says he has raised money from 1 million people and that his average donation is $19.
- South Bend, Ind. Mayor Pete Buttigieg said Tuesday that he had raised $19.1 million in the past three months, less than the $24.9 million he had raised in the second quarter, when he led the Democratic primary field as its best fundraiser.
- former Vice President Joe Biden and the other presidential candidates haven’t so far announced what they raised in the period that spanned July 1 to Sept. 30.
EUROPE & WORLD
The Bad News on China’s Economy Gets a Little Better This Month
- Gauges of China’s manufacturing activity rebounded in September thanks to improving domestic demand, but orders from overseas markets remained subdued amid a protracted trade fight between Beijing and Washington.
- China’s official manufacturing purchasing managers index rose to 49.8 in September from 49.5 in August, the National Bureau of Statistics said Monday.
- The reading, however, was above the median forecast of 49.6 of 11 economists polled by The Wall Street Journal.
- This is the fifth straight month that the index has stayed below the 50-mark, indicating a contraction in activity.
Hong Kong Protester Shot by Police as National Day Demonstrations Descend into Widespread Violence
- Hong Kong police shot a protester in the chest Tuesday, a day of bitter fighting that marked the worst and most widespread violence to hit the city in more than half a century.
- The incident was the first of its kind since protests erupted in early June, and happened as tens of thousands of demonstrators poured into the streets in Hong Kong’s main business districts and turned out in suburbs across the territory in counterrallies to China’s massive National Day celebration.
- The shooting is sure to further inflame the protest movement, which has shown no signs of abating despite the government’s pleas for calm.
- Across the city, as protesters were alerted to the shooting on their smartphones, there was temporary quiet at various battlegrounds where protesters and police faced off.
EU Braces for U.S. Tariffs Over Airbus and Vows to Retaliate
- European Union officials appeared to lose hope of dodging additional punitive U.S. tariffs, as the bloc’s calls for a negotiated settlement over aircraft subsidies have gone unanswered by President Donald Trump’s administration.
- EU’s trade chief Cecilia Malmstrom told reporters in Brussels that she expects the World Trade Organization to unveil a specific figure this week, authorizing the U.S. to hit the bloc with import duties in retaliation for illegal subsidies to Airbus.
- “We have not received a positive response” to proposals for a settlement, Malmstrom said after a meeting with EU trade ministers on Tuesday.
- The additional tariffs are expected as soon as this month, Malmstrom said. If that happens, the EU will respond in kind when the WTO rules early next year on the bloc’s dispute over U.S. subsidies to Boeing
- Europe is also looking “at all options,” including retaliation based on old WTO dispute rulings with which the U.S. isn’t complying, though no decision has been made, Malmstrom said, adding that any response would be compliant with WTO rules.
Japan’s New Tax Increase Tests Economy’s Strength
- Japan raised its national sales tax for the first time in more than five years on Tuesday, putting the world’s third-largest economy and its cautious consumers to the test.
- After postponing it twice, Prime Minister Shinzo Abe’s government went ahead with raising the tax to 10% from 8%. Mr. Abe said the government needed more money to support a fast-aging population.
OPEC Output Suffers Biggest Drop in 16 Years on Saudi Attacks
- OPEC’s oil production tumbled the most in 16 years last month after an attack on Saudi Arabia’s energy facilities temporarily halved output in the world’s biggest crude exporter.
- Supplies from the cartel’s 14 members plunged by 1.59 million barrels a day to 28.32 million a day, according to a Bloomberg survey of officials, ship-tracking data and estimates from consultants.
- It’s the biggest monthly drop since labor strikes briefly paralyzed Venezuela’s oil industry in 2002.
- Saudi production tumbled by 1.47 million barrels a day to 8.36 million, the steepest monthly decline recorded by Bloomberg data, after the Abqaiq processing plant and Khurais oilfield were targeted by missiles and drones on Sept. 14.
TODAY in HISTORY
- Henry Ford introduced the first mass-produced automobile on the market—the Model T car to the market. Each car cost $825. (1908)
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