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Daily Market Report | September 8, 2021

US FINANCIAL MARKET

Stocks Waver as Nasdaq Fades From Record – Wall Street Journal, 9/8/2021

  • U.S. stocks wobbled Wednesday on investors’ concerns that Covid-19 cases remain elevated and uncertainty about when central banks may dial back easy-money policies.
  • Stocks have lost steam in recent days as investors assessed the rise in coronavirus cases and a weaker-than-expected jobs report on Friday. Money managers are awaiting fresh cues from the Federal Reserve and the European Central Bank about how signs of a slowing economic recovery and high inflation levels may influence their plans to taper monetary stimulus.
  • Shares of cryptocurrency exchange Coinbase fell over 3.4%. The company said Wednesday that the Securities and Exchange Commission (SEC) has threatened to sue if it launches a program that lets users earn interest by lending crypto assets.
  • Labor Department’s job openings for July rose to 10.9 million compared to 10.2 million from the last month. Economists surveyed by The Wall Street Journal expected the report to show 10.1 million unfilled jobs.
  • The Fed is due to release a report known as the Beige Book at 2 p.m. ET, offering an assessment of the current state of the economy.
  • The yield on the benchmark 10-year Treasury note ticked down to 1.353% from 1.370% on Tuesday.
  • Overseas, the pan-continental Stoxx Europe 600 fell 0.7%. Investors are selling out of European stocks ahead of Thursday’s ECB meeting, because of rising expectations that policy makers will discuss scaling back asset purchases, according to Antonio Cavarero, head of investments at Generali Investments.
  • The Shanghai Composite Index ended the day relatively flat, while Hong Kong’s Hang Seng Index edged down 0.1%.
  • Japan’s Nikkei 225 rose 0.9% by the close, climbing for a seventh consecutive trading session.

Coinbase Says SEC Plans Enforcement Action Over Crypto Lending Program – Wall Street Journal, 9/8/2021

  • The Securities and Exchange Commission is investigating Coinbase Global over a lending program the company plans to market and has indicated it would sue the company over the offering, Coinbase said Tuesday.
  • Coinbase co-founder and Chief Executive Brian Armstrong disclosed the dispute in a series of tweets late Tuesday. He called the SEC’s actions “sketchy” and “intimidation tactics behind closed doors,” and said other crypto companies are able to offer such programs.
  • Coinbase’s lending platform would allow customers holding a stablecoin called USD Coin to earn interest by lending it to other traders.
  • Stablecoins are crypto assets that are supposed to maintain a peg to national currencies, such as the dollar, and make it easier to swap from one crypto asset to another. Coinbase planned to eventually expand the program to include other cryptocurrencies.
  • The SEC indicated the activity would constitute a type of investment that needs to be registered with the government under investor-protection laws.
  • Several state regulators, including in New Jersey, have accused other crypto lending platforms, including one offered by BlockFi, of violating securities laws.

PayPal to Buy Japan’s Paidy for $2.7 Billion – Wall Street Journal, 9/8/2021

  • PayPal agreed to buy Japanese “buy now, pay later” startup Paidy for about $2.7 billion, in a move that will boost its business in the world’s third-largest e-commerce market.
  • The transaction adds to a flurry of activity involving companies that let consumers pay for purchases in installments, as an alternative to traditional forms of credit.
  • In August, Square said it would buy Australia’s Afterpay for about $29 billion, while Affirm Holdings entered a partnership with Amazon.com, sending the financial-technology group’s shares soaring.
  • PayPal will pay for Paidy primarily in cash, it said late Tuesday.
  • It expects the deal to close in the fourth quarter and to minimally dilute earnings per share, as measured on a non-GAAP basis, or not in line with generally accepted accounting principles.

JPMorgan to buy majority stake in Volkswagen’s payments business – Reuters, 9/8/2021

  • JPMorgan has struck a deal to buy a majority stake in German car giant Volkswagen’s payments business ahead of a planned rollout of in-car technology that allows drivers to automatically pay for fuel or tolls.
  • The U.S. bank has agreed to buy close to 75% of Volkswagen Payments for an undisclosed sum, subject to regulatory approvals.
  • The Luxembourg-based business was founded in 2017 and operates across 32 countries.
  • It offers car purchase and leasing, in-vehicle payments, fueling and electric vehicle charging and subscription services such as insurance and in-vehicle entertainment.
  • JPMorgan said it plans to invest in and rebrand the payments business and expand its mobility-focused payments to other industries.

Shareholders may pursue 737 MAX claims against Boeing board, court rules – Reuters, 9/8/2021

  • A Delaware judge ruled on Tuesday that Boeing’s board of directors must face a lawsuit from shareholders over two fatal 737 MAX crashes that killed 346 people in less than six months.
  • Vice Chancellor Morgan Zurn ruled Boeing stockholders may pursue some claims against the board, but dismissed others.
  • Zurn’s ruling in the Court of Chancery said the first of the two fatal 737 MAX crashes was a “red flag” about a key safety system known as MCAS “that the board should have heeded but instead ignored.”
  • Boeing said late Tuesday it was “disappointed in the court’s decision to allow the plaintiffs’ case to proceed past this preliminary stage of litigation. We will review the opinion closely over the coming days as we consider next steps.”

Ford Bites Apple for a Taste of Tesla – Reuters, 9/8/2021

  • The head of Apple’s car project, Doug Field, is going to work for Ford Motor to lead the automaker’s advanced technology and embedded systems efforts, a hiring coup for Ford Chief Executive Jim Farley.
  • Field most recently served as vice president of special projects at Apple and was previously senior vice president, engineering at Tesla . Earlier in his career, Field worked at Ford.
  • In his new role, Field will report to Farley, leading software and connectivity strategy, and working in partnership with Hau Thai-Tang, Ford’s chief product platform and operations officer, Ford said.
  • Thai-Tang oversees the development and design of cars and trucks, as well as supply chain and other operations, Ford said on Tuesday.

U.S. bank profits drop as industry slows reductions in credit loss provisions – FDIC – Reuters, 9/8/2021

  • U.S. bank profits fell 8.3% to $70.4 billion in the second quarter of 2021 as firms slowed their reductions in credit loss provisions, the Federal Deposit Insurance Corporation reported Wednesday.
  • The regulator also reported that average net interest margin for banks hit a new record low of 2.5%, although loan balances actually grew slightly for the first time since the second quarter of 2020 on the back of stronger borrowing for cars and credit cards.

US ECONOMY & POLITICS

U.S. job openings rise to record 10.9 million in July – Reuters, 9/8/2021

  • U.S. job openings raced to a new record high in July, suggesting that last month’s sharp slowdown in hiring was due to employers being unable to find workers rather than weak demand for labor.
  • Job openings, a measure of labor demand, jumped 749,000 to 10.9 million on the last day of July, the highest level since the series began in December 2000, the Labor Department said in its monthly Job Openings and Labor Turnover Survey, or JOLTS report, on Wednesday. Hiring was little changed at 6.7 million.
  • The government reported last Friday that nonfarm payrolls increased by only 235,000 jobs in August, the smallest gain since January, after surging 1.053 million in July.

Job Postings Level Off as Delta Variant Cools Demand for In-Person Workers – Wall Street Journal, 9/8/2021

  • Job openings in the U.S. plateaued in late summer at records as the Delta variant of Covid-19 curtailed previously strong demand for restaurant, salon and other in-person service positions.
  • Postings on job-search site Indeed.com were up about 39% at the end of August from February 2020, ahead of the pandemic.
  • That marked a modest gain from the comparable week of July, when postings were up 37% from February 2020.
  • The August gain was largely driven by increased demand for jobs that can be done from home, such as software development. Postings for child care fell and openings in construction and at restaurants rose only slightly.
  • That is a contrast from the spring when businesses ramped up as more people received vaccinations.
  • For example, job postings in food service rose 11.4% in the four-week period ended April 23 and hospitality and tourism openings rose 14.3%

U.S. workers are changing jobs more often and demanding better wages -NY Fed survey – Reuters, 9/8/2021

  • More U.S. workers are switching jobs and asking for higher wages as the labor market continues to heal from the crisis caused by the coronavirus pandemic, according to a survey released Tuesday by the New York Federal Reserve.
  • The share of workers who became unemployed in the previous four months dropped to 0.4% in July from 10.5% in July 2020 and is now below the 0.5% seen in November of 2019 before the pandemic.
  • The percentage who moved to a new employer rose to 5.9% in July from 4.4% a year earlier.
  • The New York Fed survey showed workers also raised their expectations for how much they should be paid.
  • The average reservation wage, or the minimum annual wage consumers said they needed before they would even consider accepting a job offer, increased sharply from a year earlier to $68,954 in July 2021.
  • That was down from the series high of $71,403 reached in March of this year, but still above the $64,226 seen in July of 2020.
  • The increase was largest for workers above age 45 and for people without college degrees.

Janet Yellen Says Treasury Could Exhaust Cash-Conservation Measures in October – Wall Street Journal, 9/8/2021

  • The Treasury Department could run out of room next month to keep paying the government’s bills on time unless Congress steps in to suspend or raise the federal borrowing limit, Treasury Secretary Janet Yellen said in a letter to congressional leaders Wednesday.
  • The Treasury has been using cash-conservation measures to keep paying the government’s obligations since Aug. 1, when the federal borrowing limit was reinstated after a two-year suspension.
  • Ms. Yellen urged lawmakers to suspend or raise the limit again before the Treasury exhausts those emergency measures, which she said will likely run out during October

EUROPE & WORLD

Euro zone banks face further rise in soured loans -ECB – Reuters, 9/8/2021

  • Euro zone banks are set to face a further deterioration of their loan book and many lenders have failed to adjust their credit control norms to acknowledge the unique nature of the pandemic, European Central Bank supervisory chief Andrea Enria said.
  • “There are signs that the asset quality deterioration caused by the pandemic may not yet have peaked, as it has been somewhat masked and certainly delayed by the extraordinary pandemic-related public support measures,” Eurofi Magazine quoted Enria as saying on Wednesday.
  • “Crucially, credit risk controls at some banks have not been sufficiently tailored to the specificities of this shock, meaning that they do not allow for a timely and proactive assessment of credit risk developments by looking past the public support measures,” Enria added.

Tiananmen Massacre Vigil Organizers Arrested by Hong Kong Authorities – Wall Street Journal, 9/8/2021

  • National-security police arrested four members of the group that for decades organized an annual vigil commemorating the victims of the 1989 Tiananmen Square massacre, the only such mass remembrance on Chinese soil before authorities banned it in 2020 citing pandemic restrictions on gatherings.
  • Police accused the group, the Hong Kong Alliance, of failing to comply with an order to hand over information as part of an investigation into allegations that the group was acting as a foreign agent.
  • Without naming them, police said three men and a woman, aged between 36 and 57, were arrested Wednesday under the national security law.
  • The Hong Kong Alliance said four of its leading members, including human-rights activist and lawyer Chow Hang-tung, were arrested.
  • The arrests are the latest in a series of moves by authorities in their campaign to stamp out the city’s pro-democracy opposition.

Israel’s Covid Surge Shows the World What’s Coming Next – Bloomberg, 9/8/2021

  • Israel, once a front-runner in the global race to move on from Covid-19, is now one of the world’s biggest pandemic hot spots.
  • The country that was once predicted to be the first to vaccinate its entire population had the highest per-capita caseload of anywhere in the week through Sept. 4, according to figures compiled by Johns Hopkins University.
  • Its world-beating inoculation rate, meanwhile, has tumbled down the league table.
  • Around 100,000 Israelis are getting inoculated every day, the vast majority of them with a third shot.
  • Following the spread of the delta variant over the summer, Israel has seen cases climb, reaching an all-time high of 11,316 daily cases on Sept. 2.
  • The number of people falling seriously sick and being hospitalized, though, has risen less than it did during the last coronavirus wave, peaking at 751 in late August, compared with 1,183 in mid-January. The trend is now downward.

Factmonster – TODAY in HISTORY

  • The San Francisco Peace Treaty was signed, formally ending World War II hostilities with Japan. (1951)
  • Ernest Hemingway’s Old Man and the Sea was published. (1952)
  • Star Trek premiered on television. (1966)
  • President Gerald Ford gave former President Nixon a full pardon for all federal crimes he may have committed while he was in office. (1974)

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