US ECONOMY & POLITICS

Schumer Sets Up Vote on Debt Ceiling After Saying It Must Be Raised by End of Week – Wall Street Journal, 10/5/2021

• Senate Majority Leader Chuck Schumer set up a vote by Wednesday on increasing the federal government’s borrowing ceiling, but didn’t lay out how Democrats planned to pass a bill without Republican votes.
• Treasury Secretary Janet Yellen has told Congress that the limit must be raised by Oct. 18 or the government won’t be able to pay its bills. A default on the debt could have catastrophic financial consequences, and the pressure on both parties to resolve the issue will likely grow as Congress nears the deadline.
• In a letter to President Biden Monday, Senate Minority Leader Mitch McConnell (R., Ky.) urged him to “engage directly with congressional Democrats” on raising the debt ceiling.
• He emphasized that Democrats could raise the debt ceiling on their own by reopening the reconciliation process, which would allow them to move a bill through the 50-50 Senate with just a simple majority, rather than the 60 votes required of most legislation. “This is the path they will need to take,” Mr. McConnell said.
• Democratic leaders have said trying to address the debt limit through a process tied to the budget known as reconciliation would be risky and time-consuming.
• However, it remains an option for Democrats, who could decide to revise their budget resolution either to increase the debt limit as a stand-alone bill or fold it into a broader healthcare, education and climate-change package they are writing.

U.S. Services Gauge Edges Up as Business Activity Strengthens – Bloomberg, 10/5/2021

• U.S. service providers expanded at a faster-than-expected pace in September, supported by a pickup in business activity and durable growth in new orders.
• The Institute for Supply Management’s non-manufacturing index edged up to 61.9 last month from 61.7 in August, data showed Tuesday. The median forecast in a Bloomberg survey of economists called for the measure to fall to 59.9.
• The ISM gauge of business activity among non-manufacturers, which parallels the group’s factory production measure, rose to 62.3 from a six-month low.
• ISM’s measure of services employment showed hiring expanded at a slightly slower pace in September. The government’s jobs report, out Friday, is expected to show total payrolls rose by almost 490,000 in the month.
• The ISM new orders gauge was little changed at 63.5 and the group’s gauge of prices paid by U.S. service providers marched higher.

U.S. Trade Deficit Widens to Record on Consumer-Goods Imports – Bloomberg, 10/5/2021

• The U.S. trade deficit widened to a record in August, reflecting a pickup in the value of imports of consumer goods and industrial supplies.
• The gap in trade of goods and services increased 4.2% to $73.3 billion, from a revised $70.3 billion in July, according to Commerce Department data released Tuesday.
• The value of goods and services imports rose 1.4% to a record $287 billion in August.
• The U.S. imported $3 billion more consumer goods during the month, mostly due to pharmaceuticals and toys, games and sporting goods. Exports climbed 0.5% to $213.7 billion.

U.S. Wants New Trade Talks With China, but Will Keep Tariffs – Wall Street Journal, 10/5/2021

• The Biden administration began defining its China trade policy Monday, saying it aims to launch new talks with Beijing but will keep existing tariffs in place, while also restoring the ability of U.S. importers to seek exemptions from those levies.
• Ms. Tai said the U.S. would press China to carry out pledges it made as part of the Phase One accord signed in January 2020—including by maintaining steep tariffs put in place by Mr. Trump on what is currently about half of China’s exports to the U.S.
• But she said there were no plans to launch an investigation into Chinese trade practices, which had been under discussion within the administration.
• At the same time, she said, the U.S. will reopen a process for U.S. companies to seek exemptions from tariffs.
• That exemption process ended after President Biden took office, drawing complaints from manufacturers and others who say they have no cost-effective alternatives to certain Chinese components.

Treasury to Begin Redistributing Rental-Assistance Money to High-Need Communities – Wall Street Journal, 10/5/2021

• The Treasury Department is set to soon claw back federal rental assistance from groups that haven’t acted to spend enough of the money so it can be given to other communities with greater need, according to new guidance published Monday.
• Grantees that haven’t obligated at least 65% of the funds received under the pandemic Emergency Rental Assistance program by Sept. 30 must submit an improvement plan to the Treasury Department laying out steps they plan to take to get more funds out the door, the agency said.
• The lowest-performing groups—those that haven’t spent or distributed at least 30% of the funds received—could see the relief money redistributed to other communities.
• Since last December, Congress has appropriated a total of $46.6 billion to help tenants who were behind on their rent. As of Aug. 31, $7.7 billion had been distributed, the Treasury Department said last month.

What Are the Pandora Papers? Documents Link Politicians, Prominent Individuals to Offshore Holdings, Report Says – Wall Street Journal, 10/5/2021

• Wealthy individuals around the globe have used offshore tax havens to conceal their financial activities, creating shell companies, foundations and trusts to purchase real estate and other luxury goods, and in many cases, avoid paying taxes, according to an expansive new report.
• The report, released Sunday by the International Consortium of Investigative Journalists, named dozens of current and former world leaders and hundreds of politicians, public officials, billionaires, religious leaders and celebrities. It said many used offshore tax havens to evade taxes, and some were linked to financial crimes like money laundering.
• The so-called Pandora Papers linked 336 politicians from more than 90 countries and territories to 956 companies involved in offshore havens, most of which were created in the British Virgin Islands.
• Thirty-five current and former world leaders were identified, including King Abdullah II of Jordan, former U.K. Prime Minister Tony Blair and Czech Republic Prime Minister Andrej Babis, who have all denied wrongdoing.
• It also identified more than 130 billionaires around the globe.
• The documents date back as far as the 1970s, though the majority of them reviewed for the Pandora Papers fell between 1996 and 2020, according to ICIJ.

EUROPE & WORLD

German services lose momentum as catch-up effects wane, supply shortages spill over -PMI – Reuters, 10/5/2021

• Germany’s services sector activity continued to grow strongly in September, but the recovery from the COVID-19 pandemic lost momentum as catch-up effects are waning and more companies are affected by supply bottlenecks, a survey showed on Tuesday.
• IHS Markit’s final Purchasing Managers’ Index (PMI) for the services sector fell to 56.2 from 60.8 in August, still well above the 50 threshold which separates growth from contraction and a bit better than a flash reading of 56.0.
• The composite PMI index, which comprises both the services and manufacturing sectors, eased to 55.5 from 60.0 in August, reflecting the continued recovery of the manufacturing sector. The reading was better than a flash figure of 55.3.

EU Lawmakers Voice Doubts Over Approval for Nord Stream 2 – Bloomberg, 10/5/2021

• A group of European Union lawmakers questioned the Nord Stream 2 pipeline’s compliance with the bloc’s laws, underscoring tensions over the controversial project to ship Russian gas to Europe amid an unprecedented energy crisis.
• The European Commission should adopt interim measures against Russia’s exporter Gazprom PJSC if Nord Stream 2 starts operating before obtaining the necessary EU regulatory approvals, Parliament members representing five of the biggest political groups wrote in a letter to EU Energy Commissioner Kadri Simson that’s been seen by Bloomberg News.
• The lawmakers’ concern comes as Gazprom announced this week it started pumping gas into the pipeline for testing, just as a supply crunch pushed European energy costs to all-time highs.
• Gas prices have more than tripled this year as increased demand coincided with reduced supplies in a threat to the region’s economic recovery.

China’s Developers Priced for Meltdown as Contagion Risk Spreads – Bloomberg, 10/5/2021

• A missed bond payment by a Chinese developer reignited investor angst about the health of the nation’s property sector on Tuesday.
• Chinese junk dollar bonds were poised for their biggest selloff in at least eight years amid renewed concern that authorities will do little to alleviate the credit crisis gripping the industry. Yields are near a decade high.
• Fantasia Holdings Group became the latest property company to fail to repay a maturing bond on Monday, while a series of rating downgrades from global risk assessors and a slump in U.S. markets overnight added to investor jitters.
• Fantasia’s missed payment “provides a clear sign that despite piecemeal bailouts of select Evergrande assets, property market stresses remain elevated,” said Craig Botham, chief China economist at Pantheon Macroeconomics “The rot is unlikely to stop here.”

Factmonster – TODAY in HISTORY

• In the first televised White House address, President Truman urged Americans to refrain from eating meat on Tuesdays and poultry on Sundays to help starving people in other countries. (1947)
• Earl Warren was sworn in as the 14th Chief Justice of the U.S. Supreme Court. (1953)
• The Beatles released their first hit, “Love Me Do,” in Britain. (1962)
• Barry Bonds broke Mark McGwire’s record of 71 home runs in one season when he hit his 71st and 72nd homers. (2001)