US FINANCIAL MARKET

Stock, Bond Drop Deepens After Jobs Data Surprise: Markets Wrap – Bloomberg, 10/3/2023

• Stocks slumped while the retreat in Treasuries get fresh legs as investors digested an unexpected rise in job openings in August.
• The S&P 500 and Nasdaq 100 indexes fell more than 1% after Tuesday data showing the number of available positions rose to 9.61 million from less than 9 million in July, according to the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey, or JOLTS.
• The Dow Jones Industrial Average fell 0.9%.
• The hotter-than-expected number drove swaps traders to increase wagers on the Federal Reserve raising rates in December.
• The US 30-year yield traded near the highest level since 2007, and 10-year rates reached above 4.75%, reigniting calls for the rate on the benchmark bond to hit 5%.
• West Texas Intermediate crude wavered, tested $89 a barrel while the dollar index reached a 10-month high.
• This week’s Treasury selloff came after US lawmakers managed to avert a government shutdown, prompting traders to increase bets that the Federal Reserve will raise rates in November.
• Atlanta Fed President Raphael Bostic beat the “higher-for-longer” drum Tuesday saying the central bank needed to keep rates elevated “for a long time.”
• Comments from other Fed policymakers were even more hawkish, with Cleveland Fed president Loretta Mester saying on Monday that one more rate hike was likely needed and Governor Michelle Bowman urging multiple increases.
• The Stoxx Europe 600 fell 1.1%.
• The Bloomberg Dollar Spot Index rose 0.1%.
• Gold futures fell 0.3% to $1,841 an ounce.

Netflix Plans to Raise Prices After Actors Strike Ends – Wall Street Journal, 10/3/2023

• Netflix plans to raise the price of its ad-free service a few months after the continuing Hollywood actors strike ends, the latest in a series of recent price increases by the country’s largest streaming platforms.
• The streaming service is discussing raising prices in several markets globally, but will likely begin with the U.S. and Canada, according to people familiar with the matter.
• It couldn’t be learned how much Netflix will raise prices by or when exactly the new prices will take effect.

Meta Plans to Charge $14 a Month for Ad-Free Instagram or Facebook – Wall Street Journal, 10/3/2023

• Would people pay nearly $14 a month to use Instagram on their phones without ads? How about nearly $17 a month for Instagram plus Facebook—but on desktop?
• That is what Meta Platforms wants to charge Europeans for monthly subscriptions if they don’t agree to let the company use their digital activity to target ads, according to a proposal the social-media giant has made in recent weeks to regulators.
• The proposal is a gambit by Meta to navigate European Union rules that threaten to restrict its ability to show users personalized ads without first seeking user consent—jeopardizing its main source of revenue.
• Meta officials detailed the plan in meetings in September with its privacy regulators in Ireland and digital-competition regulators in Brussels.
• The plan has been shared with other EU privacy regulators for their input, too.
• Meta has told regulators it hopes to roll out the plan—which it calls SNA, or subscription no ads—in coming months for European users.
• It would give users the choice between continuing to access Instagram and Facebook free with personalized ads, or paying for versions of the services without any ads, people familiar with the proposal said.
• Under the plan, Meta has told regulators it would charge users roughly €10 a month, equivalent to about $10.50, on desktop on a Facebook or Instagram account, and roughly €6 for each additional linked account, the people said.
• On mobile devices the price would jump to roughly €13 a month because Meta would factor in commissions charged by Apple’s and Google’s app stores on in-app payments.

Microsoft CEO Says Google’s Agreements With Apple Unfairly Harmed Bing – Wall Street Journal, 10/3/2023

• Google has used unfair tactics to hobble Microsoft’s Bing search engine, Microsoft Chief Executive Satya Nadella said on the witness stand Monday in the landmark U.S. antitrust case against Google, adding there might be limits to how much new artificial-intelligence applications can reshape the market.
• Testifying in a packed courtroom in Washington, Nadella endorsed the Justice Department’s theory that Google, a unit of parent company Alphabet, cemented its dominance of internet search through agreements with Apple that have made Google’s search engine the default on Apple’s Safari web browser.
• Because of these default agreements, “you get up in the morning, you brush your teeth, and you search on Google,” Nadella said.
• “With that level of habit forming, the only way to change is by changing defaults.”
• Nadella said Microsoft is trapped in a “vicious cycle” where Google uses its roughly 90% market share to continually improve its search results and bolster its bottom line, which in turn further reinforces its monopoly.
• The notion that there is real choice in the search engine market is “bogus,” Nadella said, calling Google’s agreement with Apple a “fantastic, simple oligopolistic arrangement.”

Brookfield Raises $12 Billion for Flagship Private Equity Fund – Bloomberg, 10/3/2023

• Brookfield Asset Management has raised $12 billion for its largest ever private equity fund, boosting its financial firepower after a period of heavy spending.
• The Canadian investment firm has committed $3.5 billion of its own money to the BCP VI vehicle, according to a statement on Tuesday, with the remainder coming from investors including pension plans, sovereign wealth funds and family offices.
• Brookfield has been one of the world’s most active investment firms this year, even as many of its peers have remained on the sidelines in a quiet spell for mergers and acquisitions.
• Toronto-based Brookfield, which has already spent about $4 billion from its new fund, sees more opportunity to do deals in sectors including technology and health care, according to Cyrus Madon, chief executive officer of its private equity group.

US ECONOMY & POLITICS

US Job Openings Top All Forecasts as White-Collar Positions Jump – Bloomberg, 10/3/2023

• US job openings unexpectedly increased in August, fueled by a surge in white-collar postings, highlighting the durability of labor demand.
• The number of available positions increased to 9.61 million from a revised 8.92 million in July, the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey, or JOLTS, showed Tuesday. Hiring edged up, while layoffs remained low.
• The level of openings topped all estimates in a Bloomberg survey of economists.
• The so-called quits rate, which measures voluntary job leavers as a share of total employment, held at 2.3%, matching the lowest since 2020.
• The pickup in openings reflected a more than half-million increase at professional and business services as well as more postings in finance and insurance, education and non-durable goods manufacturing.
• While an improvement in workforce participation and consistent wage increases have helped ease worker shortages, challenges remain.
• The ratio of openings to unemployed people was little changed at 1.5.

Bostic Says Fed Should Hold Rates High ‘For a Long Time’ – Bloomberg, 10/3/2023

• The Federal Reserve should hold interest rates at elevated levels “for a long time” to bring inflation back down to its 2% target, Atlanta Fed President Raphael Bostic said.
• “I am not in a hurry to raise, but I am not in a hurry to reduce either,” Bostic said Tuesday at an event in Atlanta, referring to the US central bank’s benchmark interest rate.
• “If we reduce too soon, or send signals that we are not resolved, we won’t get to 2% — and we have to get to 2%. That’s non-negotiable,” he said.
• “So, I want us to hold. I think that’s the appropriate thing to do, for a long time.”
• “We can afford to be patient” as long as inflation expectations don’t move, the Atlanta Fed chief said Tuesday.
• “Our surveys say that is not happening. That is why I am willing to be patient,” he said, adding that Fed policy gets more restrictive “as inflation comes down.”
• “I don’t think we need to push it that hard,” he said.

Fed’s Mester Says One More Rate Hike May Be Needed This Year – Bloomberg, 10/3/2023

• Federal Reserve Bank of Cleveland President Loretta Mester said the US central bank will likely need to raise rates once more this year and then hold them at higher levels for some time to get inflation back to its 2% target.
• However, Mester said the final decision will depend on how the economy evolves, pointing to a slowdown in China, the possibility of an extended strike by members of the United Auto Workers union and a potential government shutdown as risks to the outlook for inflation and growth.
• “I suspect we may well need to raise the fed funds rate once more this year and then hold it there for some time as we accumulate more information on economic developments and assess the effects of the tightening in financial conditions that has already occurred,” Mester said Monday.
• “Whether the fed funds rate needs to go higher than its current level and for how long policy needs to remain restrictive will depend on how the economy evolves relative to the outlook,” she said in remarks prepared for an event organized by the 50 Club of Cleveland, a group of business leaders and lawyers.
• Mester, who does not vote on monetary policy this year, said the rate of inflation remains too high and the risks are still “tilted to the upside.”

House to Vote on Kevin McCarthy’s Fate Later Tuesday – Wall Street Journal, 10/3/2023

• The House is set to hold a referendum later Tuesday on Speaker Kevin McCarthy’s leadership, after a longtime critic forced a vote to try oust him from the role.
• The historic and unprecedented challenge will test both Republican unity and likely make Democrats the swing votes in deciding McCarthy’s fate, due to the GOP’s narrow majority in the chamber.
• The test comes after Rep. Matt Gaetz (R., Fla.) on Monday filed a motion that forces a vote to push McCarthy out of his post.
• McCarthy on Tuesday morning told Republicans he would hold a vote related to Gaetz’s motion during the first vote series, set for Tuesday afternoon, according to people familiar with the comments.
• The vote would be to table, or kill, the measure.
• “They haven’t asked for anything, and I’m not going to provide anything,” McCarthy said Tuesday on CNBC.
• If lawmakers are “going to play politics with how you become speaker—if that’s the case, then I think we’ve got real problems,” he said.

Congressman’s Car Stolen at Gunpoint in Washington – Wall Street Journal, 10/3/2023

• Rep. Henry Cuellar (D., Texas) was carjacked in Washington on Monday evening, according to his office, the second lawmaker this year to be the victim of a violent crime in the nation’s capital.
• Cuellar wasn’t physically harmed, said Jacob Hochberg, his chief of staff.
• The incident occurred Monday evening in the Navy Yard neighborhood when three armed assailants approached the congressman while he was parking and stole the car.
• The vehicle was later recovered by police, Hochberg said.

EUROPE & WORLD

India Tells Canada to Remove 41 Diplomats as Spat Intensifies, FT Says – Bloomberg, 10/3/2023

• India has instructed Canada to reduce the number of diplomats in the South Asian country by two thirds as relations between the two nations continue to slide over the murder of a Sikh separatist leader, the Financial Times reported, citing people it didn’t identify.
• New Delhi has told Canada it must repatriate about 40 diplomats by Oct. 10 and has threatened to revoke the immunity of diplomats who remain after that date, the newspaper said.
• Canada has 62 diplomats in India and has been told to reduce that by 41, it said.

Pentagon Sees Months Left in Supply of Weapons for Ukraine – Wall Street Journal, 10/3/2023

• The Pentagon has more than $5 billion remaining in its coffers to provide weaponry and other security assistance to Ukraine even after Congress declined to include more funding for the war in a weekend bill to keep the government open, Pentagon officials said.
• The $5.2 billion is roughly equivalent to the value of the weaponry the Biden administration has sent to Ukraine over the last six months for its fight against Russia, but administration officials said it is unclear how long that money could last.
• A number of factors contribute to the rate at which security aid flows to Kyiv, and officials believe the $5.2 billion could last only for another few months.
• The sum is roughly 12% of the total $43.9 billion in security assistance that the U.S. has sent since Russia’s February 2022 invasion, leaving a sizable amount of security assistance still available.
• But another pot of money the U.S. had been using for a longer-term program to refurbish Ukraine’s military and make it more compatible with North Atlantic Treaty Organization forces, the Ukraine Security Assistance Initiative, is empty, administration officials said.
• What’s more, an account used to replenish the Defense Department’s own arsenal after the provision of U.S. arms to Ukraine is now down to about $1.6 billion—insufficient to keep the Pentagon whole, officials said.

Key Taiwan Tech Firms Helping Huawei With China Chip Plants – Bloomberg, 10/3/2023

• Several Taiwanese technology companies are helping Huawei Technologies build infrastructure for an under-the-radar network of chip plants across southern China, an unusual collaboration that risks inflaming sentiment on a democratic island grappling with Beijing’s growing belligerence.
• They included a unit of Taiwanese chip material reseller Topco Scientific and a subsidiary of Taipei-based L&K Engineering, according to a Bloomberg News investigation.
• Across town at another Huawei-affiliated site, Bloomberg identified workers from a subsidiary of construction specialist United Integrated Services.
• Meanwhile, Taiwan’s Cica-Huntek Chemical Technology Taiwan said on its website that it had won contracts to build chemical supply systems for two Chinese chipmakers — Shenzhen Pensun Technology and Pengxinwei IC Manufacturing, which was blacklisted by the US last year.
• The previously unreported Taiwanese presence in Huawei’s efforts risk triggering a backlash on an island that is preparing for polls next January, with the question of Taiwan’s rocky relationship with China likely the most pivotal issue.
• Away from SMIC, Huawei is setting up its own shadow network of chipmakers with tens of billions of dollars in Chinese government support, according to trade group Semiconductor Industry Association.

‘They’re just meat’: Russia deploys punishment battalions in echo of Stalin – Reuters, 10/3/2023

• Drunk recruits. Insubordinate soldiers. Convicts.
• They’re among hundreds of military and civilian offenders who’ve been pressed into Russian penal units known as “Storm-Z” squads and sent to the frontlines in Ukraine this year, according to 13 people with knowledge of the matter, including five fighters in the units.
• Few live to tell their tale, the people said.
• “Storm fighters, they’re just meat,” said one regular soldier from army unit no. 40318 who was deployed near the fiercely contested city of Bakhmut in eastern Ukraine in May and June.
• He said he’d given medical treatment to a group of six or seven wounded Storm-Z fighters on the battlefield, disobeying an order from a commander – whose name he didn’t know – to leave the men.
• He said he didn’t know why the commander gave the order, but claimed that it typified how Storm-Z fighters were considered of lesser value than ordinary troops by officers.
• The soldier, who requested anonymity because he feared prosecution in Russia for publicly discussing the war, said he had sympathy for the men’s plight: “If the commandants catch anyone with the smell of alcohol on their breath, then they immediately send them to the Storm squads.”

Factmonster – TODAY in HISTORY

• Francis of Assisi, founder of the Franciscan order, died. – 1226
• President Lincoln declared the last Thursday in November as Thanksgiving Day. – 1863
• Rebecca L. Felton became the first woman U.S. Senator when she was appointed to serve out the term of Senator Thomas E. Watson. – 1922
• The Kingdom of Serbs, Croats, and Slovenes formally changed its name to the Kingdom of Yugoslavia. – 1929
• Captain Kangaroo and The Mickey Mouse Club premiered on television. – 1955
• East Germany and West Germany united to become Germany, 45 years after being split into two countries at the end of World War II. – 1990

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