US ECONOMY & POLITICS

New York Manufacturing Contracts on New Orders, Shipments – Bloomberg, 10/16/2023

• A measure of New York state factory activity contracted in October, reflecting a pullback in demand and suggesting a slowing in inflationary pressures.
• The Federal Reserve Bank of New York’s general business conditions index decreased 6.5 points to minus 4.6 this month, data showed Monday.
• A reading below zero indicates contraction, and the latest figure was slightly better than the median forecast in a Bloomberg survey of economists.
• A gauge of new orders fell back into contraction in October, while the index of shipments remained in expansionary territory despite a sizable decline.
• The group’s measure of unfilled orders dropped significantly to minus 19.1, the lowest since the onset of the pandemic.
• Six months from now, the prices received measure dropped to the lowest level since September 2020.
• The current prices paid index held steady at 25.5.

Janet Yellen Says Higher Interest Rates May Persist in US – Bloomberg, 10/16/2023

• Treasury Secretary Janet Yellen said higher interest rates may persist, while insisting the US economy is “in a good place.”
• The interest on US debt, which stands at 98% of economic output, “remains manageable,” Yellen said on Monday in an interview with Sky News.
• “Higher interest rates may persist although that’s not clear,” she said.
• “Our fiscal situation is by no means unsolvable. We have to be attentive to it.”
• “Americans can certainly afford to stand with Israel and to support Israel’s military needs,” she said.
• “And we also can and must support Ukraine in its struggle against Russia.”
• “We’re looking at the economic implications of the hostilities here,” she said.
• “I think it’s too early to speculate on whether or not there will be significant consequences. I think importantly, it depends on whether the hostilities extend beyond Israel and Gaza, and that’s certainly an outcome we would like to avoid.”

Jim Jordan’s Backers for House Speaker Say This Time Is Different – Wall Street Journal, 10/16/2023

• Some Republicans say strong support from grassroots conservatives will help new House speaker nominee Jim Jordan (R., Ohio) win over dozens of GOP critics and take the gavel this week.
• But opponents are standing firm, Democrats are angling for a role and the math remains unforgiving, setting the stage for another unpredictable floor vote.
• Pressure is mounting on Republican lawmakers to resolve their internal fighting nearly two weeks after Kevin McCarthy (R., Calif.) was ousted in a historic vote.
• The White House is poised to ask Congress for an emergency national security aid package that could fund Ukraine, Taiwan, Israel and U.S. border security through next year’s presidential election.
• The Senate returns Monday from a weeklong recess, but without a functioning House, no legislation can pass in Congress and make it to President Biden’s desk.
• “We’ve got to get past this stage,” Rep. Frank Lucas (R., Okla.) said of the turmoil over the House speaker. “There’s not enough political oxygen in this place to think about other stuff.”
• Jordan, a founder of the ultraconservative House Freedom Caucus and staunch ally of former President Donald Trump, clinched the nomination last week after previous pick Rep. Steve Scalise of Louisiana, the House majority leader, bowed out.
• Jordan has locked up about two-thirds of Republicans, leaving him about 65 votes short of the majority of the full House he needs to become speaker.

Higher Rates Contribute to Rising Home Prices, Fed’s Harker Says – Bloomberg, 10/16/2023

• Federal Reserve Bank of Philadelphia President Patrick Harker said higher interest rates are making it more challenging for first-time home buyers by raising borrowing costs and limiting inventory, which is also leading to higher home prices.
• Higher rates discourage current owners from listing their homes for sale, which puts a crunch on inventory, Harker said Monday in remarks prepared for a convention in Philadelphia organized by the Mortgage Bankers Association.
• “The rise in interest rates not only raised borrowing costs on those looking to purchase a home, but it also contributed to the contraction of inventory,” Harker said.
• “And it is just simple market dynamics that a lack of inventory would elevate prices overall, further lessening the depth of the pool of potential buyers.”
• While new home sales are “trending upward,” those sales cannot fully compensate for the broader housing slowdown, he said.

EUROPE & WORLD

Apple’s iPhones Off to Disappointing Start in China, Study Shows – Bloomberg, 10/16/2023

• Apple’s new iPhone 15 is selling far worse in China than its predecessor, according to separate analyses, reflecting stubbornly weak consumption as well as the rise of rivals like Huawei Technologies.
• Sales of Apple’s flagship device are down 4.5% compared with the iPhone 14 over their first 17 days after release, market tracker Counterpoint Research estimated in previously unreported figures provided to Bloomberg News.
• If the initial estimates are accurate, they represent one of the iPhone’s worst debuts in China since around 2018, when local names like Oppo and Vivo began to captivate Asian consumers.
• Counterpoint blamed the iPhone’s slump in China mainly on an economy struggling to rebound from its Covid trough.
• It also coincided with a government mandate to expand a ban on iPhone use to government agencies and state companies, underscoring Apple’s growing challenges there.
• And it stressed that in the US, the iPhone 15 likely posted a double-digit rise over 2022 in the first nine days of sales.

Iran Warns Expansion of Israel-Hamas War Becoming ‘Inevitable’ – Bloomberg, 10/16/2023

• Iran said Monday that an expansion of the war between Israel and Hamas was increasingly becoming unavoidable, a signal the main backer of the Palestinian militant group was preparing for a wider conflict.
• “The time for political solutions is running out and the possible expansion of the war on other fronts is approaching the inevitable stage,” Iranian Foreign Minister Hossein Amirabdollahian wrote on X, formerly known as Twitter.
• Iran supports armed groups around the Middle East including Hamas in Gaza and Hezbollah in Lebanon, but has denied any involvement in the unprecedented Oct. 7 attacks that killed 1,300 people in Israel.
• Hezbollah, one of the Middle East’s most powerful militias, has repeatedly exchanged fire with Israeli troops on the border with Lebanon over the past week, raising the specter of a second front opening up in Israel’s north.
• “We are fully prepared — when the time comes — for any action that we will carry out,” Hezbollah’s Deputy Secretary General Sheikh Naim Qasem said after the meeting.

Israel Opens Another ‘Safe Passage’ for Gazans to Move South – Bloomberg, 10/16/2023

• Israel announced another “safe corridor” in Gaza as it urges civilians to move to the south of the territory from the north, where it’s concentrating the bulk of its military activities.
• The Israel Defense Forces said it would “refrain from targeting a designated axis” between 8 a.m. and midday local time on Monday “to allow safe evacuation from north Gaza to the area south of Wadi Gaza and Khan Yunis.”
• The military is urging civilians to move for their own safety and last night said that 600,000 people had left northern Gaza.
• Israel is blaming Hamas for trying to stop civilians evacuating.
• It has emphasized that the safe corridor does not amount to a ceasefire.
• Over one million people, around half the total population of Gaza, have already been displaced, according to the United Nations Relief and Works Agency, which serves Palestinian refugees.

Albemarle’s $4.16 Billion Lithium Bet Scuttled by Australia’s Richest Person – Wall Street Journal, 10/16/2023

• Albemarle hoped to cement its position as the world’s most valuable lithium producer with a $4.16 billion takeover of Liontown Resources.
• As the clock counted down on Albemarle’s four weeks of due diligence on the deal, Gina Rinehart was active in the market, building a stake that has reached 19.9% by Friday.
• Rinehart’s Hancock Prospecting was coy on its plans, but analysts noted it had acquired enough stock to frustrate Albemarle’s intention to take the company private.
• On Sunday, Albemarle said it had abandoned the cash offer of three Australian dollars per share, blaming the increased difficulty in getting a deal done.
• “Moving forward with the acquisition, at this time, isn’t in Albemarle’s best interests,” Chief Executive Kent Masters said.
• Lithium is used in electric vehicles, smartphones and other applications.

Mexican Sinaloa Cartel’s Message to Members: Stop Making Fentanyl or Die – Wall Street Journal, 10/16/2023

• The Sinaloa cartel, the leading exporter of fentanyl to the U.S., is prohibiting the production and trafficking of the illegal opioid in its territory after coming under increasing pressure from U.S. law enforcement, cartel members say.
• The order comes from the “Chapitos,” the group led by the four sons of imprisoned drug lord Joaquín “El Chapo” Guzmán, who transformed the Sinaloa cartel into a global empire managing the supply of narcotics, from Mexican heroin to Colombian cocaine and fentanyl made with precursors from Asia.
• The directive from the most powerful faction within the criminal group aims to evade pressure from U.S. law enforcement, operatives say, though some U.S. officials are skeptical that the ban will endure.
• The Biden administration is pushing the Mexican government to take more aggressive steps to dismantle the organization, considered by the U.S. to be the top fentanyl trafficking group.
• U.S. deaths from fentanyl have become an American political issue, with some Republicans, including lawmakers and others running for president, advocating to send the U.S. military into Mexico to fight criminal groups trafficking fentanyl.
• The Chapitos’ decision to wean themselves from fentanyl trafficking and production comes after a series of high-profile blows against the crime group in recent months.

Risk-Advisory Firms Decide Hong Kong Isn’t Worth It – Wall Street Journal, 10/16/2023

• A number of investigation firms are retreating from Hong Kong and moving staffers out of the city, the latest sign of concern among foreign companies as business dwindles and Chinese authorities crack down on corporate intelligence gathering.
• Three U.S. and British due-diligence companies that established a presence in the city more than a decade ago have exited or are winding down their operations this year, according to people familiar with the matter.
• They include Nardello, a global company built by a former U.S. federal prosecutor, and the Risk Advisory Group, co-founded by a former British fraud investigator.
• Nardello said it was reassigning staffers elsewhere but wasn’t fully closing its Hong Kong business.
• New York-based investigations firm Mintz Group closed its office in the city earlier this year, people close to the matter said.
• Its exit came soon after Chinese authorities raided Mintz’s Beijing office in March, detaining five of its Chinese employees.
• China imposed a $1.5 million fine on the firm in July for conducting “unapproved” statistical work.
• China has this year conducted a series of raids in mainland China on foreign-owned due-diligence firms, which advise clients on business risks, or conduct checks and investigations in the country.
• Besides raiding Mintz, Chinese authorities have also questioned the staff of blue-chip U.S. consulting firm Bain, and barred a Hong Kong-based senior executive at U.S. risk-advisory firm Kroll from leaving mainland China, The Wall Street Journal reported earlier.
• Many companies in the industry are re-evaluating their business plans and the potential risks they face in China, including their operations in the partly autonomous city of Hong Kong.

US to Tighten Curbs on China’s Access to Advanced Chip Tech – Bloomberg, 10/16/2023

• The US plans to tighten sweeping measures to restrict China’s access to advanced semiconductors and chipmaking gear, seeking to prevent its geopolitical rival from obtaining cutting-edge technologies that could give it a military edge.
• The latest rules aim to refine and close loopholes from curbs announced last October, according to people familiar with the matter.
• The Biden administration is seeking to strengthen controls on selling graphics chips for artificial intelligence applications and advanced chipmaking equipment to Chinese firms, the people said, asking not to be named because the rules aren’t yet public.
• The US will also impose additional checks on Chinese firms attempting to evade export restrictions by routing shipments through other nations, and add Chinese chip design firms to a trade restriction list, requiring overseas manufacturers to gain a US license to fill orders from those companies.
• The updated restrictions will be published early this week, people familiar with the deliberations said.

Factmonster – TODAY in HISTORY

• French queen Marie Antoinette was guillotined for treason. – 1793
• Margaret Sanger opened the first birth-control clinic in New York City. – 1916
• The Cuban Missile Crisis began. – 1962
• China detonated its first atomic bomb. – 1964
• John Paul II was elected pope. – 1978
• Hundreds of thousands of black men gathered in Washington for the “Million Man March” led by Nation of Islam leader Louis Farrakhan. – 1995
• Twelve Senate offices were closed when a letter to Sen. Tom Daschle was found to contain anthrax. – 2001
• The White House announced that North Korea had disclosed the existence of a secret nuclear weapons program. – 2002