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Good morning. Today we look at China’s big-guns response to tepid economic data, volatility in U.S. markets, how trade tensions could lock U.S. hog farmers out of the world’s biggest pork market, and more speculation on where Amazon will plunk its HQ2.
CHINA’S ECONOMY SLOWS…
China’s economic expansion slowed to its weakest pace since the financial crisis. While the economy remains on track to meet Beijing’s full-year growth target of about 6.5%, the third-quarter performance underscores recent trouble—a scaleback of industrial production, slowing retail sales, anemic big-ticket investments and rising corporate defaults, Lingling Wei reports.
Part of the slowdown is due to Beijing’s initiative of the past two years to contain debt and fend off financial risks. Even though the country started to loosen its control on credit in recent months, easing measures so far have failed to rejuvenate fixed-asset investment. If growth continues to diminish, Chinese officials and government advisers say Beijing is ready to roll out more pro-growth measures.
…BUT CHINA’S MARKETS REBOUND
Chinese stocks rallied after a rare, joint effort by top officials to soothe investors. China’s central-bank governor and banking and securities regulators all called on investors to maintain their composure. Later, Vice Premier Liu He, President Xi Jinping’s economic czar, called for confidence in China’s economic outlook. Mr. Liu said the trade conflict with the U.S. is hurting market sentiment but: “Frankly, the psychological impact is bigger than the actual impact.”
Even with Friday’s rally, the Shanghai Composite has lost nearly 23% so far this year, making it the worst performer among the world’s major indexes.
Comments or suggestions? Write to Jeffrey Sparshott at realtimeeconomics@wsj.com, tweet to @WSJecon and visit wsj.com/economy for the latest news. (Responses may be quoted in this newsletter.)
WHAT TO WATCH TODAY
U.S. existing-home sales for September, out at 10 a.m. ET, are expected to fall to an annual pace of 5.29 million.
The Bank of England’s Mark Carney speaks to Economic Club of New York at 11:30 a.m. ET.
The Atlanta Fed’s Raphael Bostic speaks on the economic outlook at 12 p.m. ET, and the Dallas Fed’s Robert Kaplan participates in a moderated Q&A at 12:45 p.m. ET.
TOP STORIES
U.S. MARKETS YO-YO
The Dow Jones Industrial Average tumbled more than 300 points Thursday. The causes: geopolitical tensions and worries about the state of the global expansion. Losses accelerated throughout Thursday’s session as investors confronted several more threats to the market, including companies struggling with rising costs, further instability in the European Union and increasing tension between the U.S. and Saudi Arabia, Jessica Menton and Michael Wursthorn report.
After months of muted moves in the market, volatility has come roaring back, dashing investors’ hopes that a fresh round of earnings would help rejuvenate stocks and get major indexes back into record-setting territory.
PORKY’S REVENGE
U.S. hog farmers are getting elbowed out of China. For now, it’s an unpleasant hiccup. Longer term, it could mean a fundamental realignment in the global supply chain that leaves American producers on the outside looking in, Jacob Bunge and Lucy Craymer report.
What’s happening: China is the world’s biggest pork consumer and a lucrative market for hog farmers. But China’s tariffs on U.S. pork have climbed as high as 70%, making U.S. imports more expensive. At the same time, an outbreak of African swine fever in China has increased demand for imported pork. To fill the void, Chinese customers are increasingly looking to companies in Europe and South America to fill their orders—and those companies aim to turn that opportunity into long-term business.
HQ2
Amazon.com executives have made a fresh round of visits to several of the 20 finalists for its $5 billion second-headquarters project. The discussions, which follow an initial round of visits early this year, have added to the already intense speculation regarding which way the technology giant is leaning. While Amazon appears to be narrowing its list of 20 finalists, it is still unclear which cities may be in the lead, and what exactly the additional visits indicate about specific cities’ chances.
The visits over the past couple of months include New York City, Newark, N.J., and Chicago. In addition, Amazon has been following up with other locations, including Miami and the Washington, D.C., area. Some cities, like Raleigh, N.C., haven’t heard from the retail giant in months, Laura Stevens, Shayndi Raice and Keiko Morris report.
READERS RESPOND
We asked: Do you think President Trump’s criticism of the Fed will damage the institution and perhaps ultimately the economy?
I don’t think so. I yield to no one in cherishing the political independence of the Fed, which is more important now than ever. But it’s not realistic to insist that politicians representing millions of people whose living standards are profoundly affected by Fed actions never comment on those actions. —Jared Bernstein, Center on Budget and Policy Priorities
The Fed needs to be independent of political pressure so that it can respond as needed to economic events. Raising rates at this point will give them flexibility when they need it down the road. —Laurence Laboda
Over many decades I have come to the conclusion that the Fed Reserve and especially the FOMC’s major problem is arrogance that their monetary policies make markets. They do not, they tend to pervert markets and continue to do with no accountability for their actions. —Jay Davidson, First American State Bank
The Fed has done a great job in communicating its action to the markets. The president is merely trying to juice the economy further which is not needed now. —Tony Schmitt
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
Women who give birth as teens tend to partner with lower-quality dads. That’s not great for the kids. “Unlike previous research, we have information on fathers and find that negative selection of fathers of children born to teen mothers plays an important role in producing inferior child outcomes. These effects are particularly large for mothers from higher socio-economic groups,” Anna Aizer, Paul Devereux and Kjell Salvanes write in a National Bureau of Economic Research working paper.
Children of wealthier parents are more likely to attend and graduate from college. They’re also more likely to put their parents in debt. “We show descriptive evidence that parental support for college increases the subsequent level of housing debt that parents hold but does not reduce student debt for children,” V. Joseph Hotz, Emily Wiemers, Joshua Rasmussen and Kate Maxwell Koegel write in a National Bureau of Economic Research working paper.
from Real Time Economics https://ift.tt/2q29MVY
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