US ECONOMY & POLITICS

U.S. pending home sales race to seven-month high in August – Reuters, 9/29/2021

• Contracts to buy U.S. previously owned homes rebounded to a seven-month high in August, but higher prices amid tight supply are slowing the housing market momentum.
• The National Association of Realtors (NAR) said on Wednesday its Pending Home Sales Index, based on signed contracts, jumped 8.1% last month to 119.5. That was the highest reading since January and followed two straight monthly declines.
• Compared with a year ago, pending home sales fell 8.3% in August.
• Contracts soared 10.4% in the Midwest and vaulted 8.6% in the densely populated South.
• They rose 4.6% in the Northeast and advanced 7.2% in the West.

Republicans Block Latest Effort by Democrats to Advance Debt-Ceiling Bill – Wall Street Journal, 9/29/2021

• Republicans blocked Democrats’ latest effort to raise the debt limit, intensifying a high-stakes showdown in the Senate hours after Treasury Secretary Janet Yellen told lawmakers the government would be unable to pay all of its bills on time starting Oct. 18 unless Congress acts.
• With Senate Republicans having lined up against the debt-limit increase, the developments raise pressure on Democratic leaders to find a backup plan to avoid a default on U.S. obligations.
• That could include adding a debt-ceiling measure to an already complicated package to bypass a GOP filibuster in the Senate, or exploring other, unprecedented approaches to keep the federal government liquid.
• Senate Republicans have said Democrats, as the party in power, should raise the ceiling themselves.
• Democrats have emphasized that lifting the debt limit is a shared responsibility of both parties and said votes to lift or suspend the debt ceiling during the Trump administration were bipartisan.
• A vote to increase the debt limit doesn’t authorize new spending; instead it essentially allows the Treasury Department to raise money to pay for expenses the government has authorized.

Progressives Split on Backing Thursday’s House Infrastructure Vote – Wall Street Journal, 9/29/2021

• The House Democrats’ powerful progressive bloc split Tuesday over whether lawmakers should vote for a roughly $1 trillion bipartisan infrastructure package this week even if a larger education, healthcare and climate package remains in flux.
• Reaching a deal on that figure has eluded Democrats for weeks and it wasn’t clear Tuesday if the basic parameters of the package could be hammered out by Thursday’s infrastructure vote—and if that would be sufficient to reassure House liberals.
• Democratic leaders can likely afford to lose a handful of liberal votes in the House—which is split 220 Democrats to 212 Republicans—since some Republicans are expected to support the infrastructure bill.
• While infrastructure had broader bipartisan support in the Senate, House GOP leaders have urged their ranks to vote against it, arguing the proposal is now inseparable from the broader Democratic package, which the GOP staunchly opposes.
• After the group met Tuesday, Rep. Pramila Jayapal (D., Wash.), the chair of the Congressional Progressive Caucus, reiterated that half of the group’s roughly 100 members were willing to withhold their vote on infrastructure without Senate passage of the healthcare, education and climate package.
• Passing the infrastructure bill alone “will end all leverage that we have to pass a major reconciliation bill,” Sen. Bernie Sanders (I., Vt.) said in a statement.

First-Time Homebuyers Are Getting Crushed in a Cutthroat U.S. Market – Bloomberg, 9/29/2021

• Record price gains and fevered competition are crushing prospects for U.S. homeownership, a key driver of middle-class wealth.
• First-time buyers accounted for 29% of existing-home sales in August, the lowest share since January 2019 and below the five-year average of 32%, according to the National Association of Realtors.
• It’s a stark example of America’s uneven economic recovery. Soaring real estate values have gifted homeowners with record equity, with an average increase of more than $50,000 per mortgage in the past year, according to CoreLogic.
• But record-low borrowing costs, which should have made housing more affordable for young renters and minority groups historically left out of ownership, instead drove prices higher and pushed them even further behind.
• Meanwhile, the share of purchase mortgages backed by the Federal Housing Administration — a key lending source for young people, low-income Americans and minorities — has dropped to the lowest level since at least 2012, according to data from the American Enterprise Institute. It fell to 18% in June from 23% in March 2020, when lockdowns began.
• Investors and second-home buyers are flooding into hot markets, accounting for 41% of all sales in Phoenix, 36% in Las Vegas and 34% in Tampa, Florida, according to John Burns Real Estate.

FTC Weighs New Online Privacy Rules – Wall Street Journal, 9/29/2021

• The Federal Trade Commission is considering strengthening online privacy protections, including for children, in an effort to bypass legislative logjams in Congress.
• The rules under consideration could impose significant new obligations on businesses across the economy related to how they handle consumer data, people familiar with the matter said.
• The early talks are the latest indication of the five-member commission’s more aggressive posture under its new chairwoman, Lina Khan, a Democrat who has been a vocal critic of big business, particularly large technology companies.

EUROPE & WORLD

Euro zone sentiment edges up in Sept, defies expectations of drop – Reuters, 9/29/2021

• Euro zone economic sentiment edged higher in September after a fall in August, boosted by optimism among consumers and in the industry and construction sectors, while inflation expectations continued to rise among manufacturers and consumers alike.
• The European Commission’s economic sentiment indicator rose to 117.8 in September, from 117.6 in August, after hitting an all-time high of 119.0 in July.
• But Commission data showed sentiment in industry improved to 14.1 from 13.8 in August, though it did decline in services to 15.1 from 16.8.
• Consumers became more optimistic as well, with a reading of -4.0, up from -5.3 in August, and in the construction sector the indicator rose to 7.5 from 5.5, helping offset the decline in the retail sector to 1.3 from 4.6.
• Selling price expectations among manufacturers rose to 38.2 points, setting a new record high since the survey began in 2000, while consumer inflation expectations rose to 33.1 from 31.1 in August, approaching the 38.7 record from August 2001.

Hidden Debt Plagues China’s Belt and Road Infrastructure Plan, Studies Find – Wall Street Journal, 9/29/2021

• Hidden debt and problematic projects are emerging as features of China’s Belt and Road Initiative, with several research reports pointing to headwinds facing President Xi Jinping’s international infrastructure-development program.
• In its deep dive into Belt and Road projects, AidData, a research center at the College of William and Mary in Williamsburg, Va., counted 42 low- and middle-income countries that now have debt exposure to China exceeding 10% of their annual gross domestic product.
• It identifies $385 billion in Chinese loans as not included in nations’ official borrowing—or nearly half of China’s overseas lending for construction of roads, railways and power plants.
• This hidden debt has become more common because lenders fund activity through special-purpose corporations instead of host governments.
• The report also estimates 35% of China’s overseas infrastructure projects have faced major problems like corruption scandals, labor violations, environmental hazards and public pushback. AidData links almost 400 projects valued at $8.3 billion to China’s military.
• The report published Tuesday unravels details of $843 billion in Chinese loans for 13,427 projects primarily between 2000 and 2017.
• It is one of several Western analyses to detail challenges associated with Beijing’s international lending, much of it under the Belt and Road plan that officially began in 2013.

China Evergrande to Sell Bank Stake to State-Owned Firm for $1.5 Billion – Wall Street Journal, 9/29/2021

• A Chinese state-owned enterprise struck a deal to buy most of China Evergrande Group’s stake in a commercial bank for $1.5 billion, the latest sign that the country’s authorities are trying to help the property giant resolve some of its financial troubles.
• Evergrande said Wednesday that one of its units plans to sell nearly 20% of Shengjing Bank, which is based the Liaoning province city of Shenyang, to a company whose owners include the local branch of China’s State-Owned Assets Supervision and Administration Commission as well as the local and provincial governments.
• Evergrande holds 34.5% of the Hong Kong-listed regional lender, which it invested in five years ago. Its stake would drop to 14.6% following the deal, which needs regulatory approval. It said the sale was valued at about 9.99 billion yuan, the equivalent of about $1.55 billion.
• Shengjing Bank has also demanded that Evergrande use net proceeds from the stake sale to repay what the developer owes it, according to a regulatory filing.

Evergrande set to miss second offshore bond coupon payment this month, sources say – Reuters, 9/29/2021

• At least some of China Evergrande’s offshore bondholders had not received a due coupon payment by the close of Asia business on Wednesday, sources said, although the cash-strapped developer reached a $1.5 billion deal to settle debt with a Chinese bank.
• With liabilities of $305 billion, Evergrande has sparked concerns its woes could spread through China’s financial system and reverberate around the world – a worry that has eased with the Chinese central bank vowing to protect homebuyer interest.
• The company, which has nearly $20 billion in offshore debt, was due on Wednesday to make a $47.5 million bond interest payment on its 9.5% March 2024 dollar bond. It also missed paying a $83.5 million in coupon on another bond last Thursday.
• Two people familiar with the matter, who declined to be named due to the sensitivity of the matter, said at least some of the holders of the 2024 bonds had received no information from Evergrande about the payment on Wednesday.

Fumio Kishida to Become Japan’s Next Prime Minister After Party Election Win – Wall Street Journal, 9/29/2021

• Fumio Kishida, a former foreign minister who has called for Japan’s missile defenses to be beefed up, was elected ruling party leader on Wednesday, assuring him of becoming the nation’s next prime minister.
• Mr. Kishida, 64 years old, is an establishment choice who, like his predecessors, supports a strong U.S.-Japan alliance and is concerned about China’s military expansion.
• He also favors aggressive government spending worth hundreds of billions of dollars to lift Japan’s economy out of the doldrums caused by measures to limit the spread of Covid-19.

Factmonster – TODAY in HISTORY

• Seven people died after taking Extra-Strength Tylenol capsules laced with cyanide. This led to the use of safety seals on most consumer products. (1982)
• The space shuttle Discovery was launched, the first American staffed space flight since the Challenger disaster. (1988)