Morning Consult Finance: China Said to Consider Partial Trade Deal With U.S.


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  • Chinese negotiators are open to negotiating a partial trade deal with the United States, although they are doubtful about reaching a final trade agreement during meetings this week in Washington, according to an official with direct knowledge of the talks. China would be willing to buy more U.S. agricultural products, the official said, if President Donald Trump does not impose more tariffs, including levies that are set to go into effect this month and December. (Bloomberg)
  • At an economic conference in Denver, Federal Reserve Chairman Jerome Powell said the Fed will start buying Treasury securities to expand its balance sheet and suggested that another interest rate cut in October was possible, saying the Fed will “act as appropriate to support continued growth.” However, Powell said the asset purchases don’t represent another round of quantitative easing and instead are meant to prevent the volatility seen in the repo market last month. (The New York Times)
  • The Treasury Department is weighing a rollback of tax regulations designed to prevent American companies from sending income to offshore branches to lower U.S. taxes, according to several people familiar with the discussions. They also said Treasury was not likely to move forward with a complete repeal even though external entities were advocating for that. (Bloomberg)

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General

The U.S.-China Relationship Is Worsening Rapidly Before Talks
Shawn Donnan, Bloomberg

This was supposed to be the week U.S.-China trade talks got back on track and the two sides found a way to avoid sending more unsettling signals to financial markets and a global economy that looks increasingly fragile.

Fed Minutes Will Show Rate Lean After September Cut
Nick Timiraos, The Wall Street Journal

The Federal Reserve will provide new clues about its thinking on where to set interest rates when it releases the minutes of its Sept. 17-18 meeting on Wednesday at 2 p.m. EDT.

Democrats report little progress on USMCA following Mexico trip
Sean Higgins, Washington Examiner

A delegation of congressional Democrats reported little progress in advancing the U.S.-Mexico-Canada Agreement on trade following a meeting Tuesday with Mexican President Andres Manuel López Obrador.

Weak U.S. producer inflation bolsters case for Fed rate cut
Lucia Mutikani, Reuters

U.S. producer prices unexpectedly fell in September, leading to the smallest annual increase in nearly three years, likely giving the Federal Reserve further room to cut interest rates for the third time this year in October.

China ‘strongly urges’ US to remove sanctions and stop accusing it of human rights violations
Yun Li, CNBC

China’s Ministry of Commerce said Tuesday that it “strongly urges” the U.S. to stay clear of the country’s domestic issues, after the White House blacklisted a slew of Chinese companies due to alleged human rights violations against Muslim minorities in China’s far-western region of Xinjiang.

Trump’s Tariffs Were Supposed to Ding China, But the U.S. Economy Is Getting Hit 2.5x Harder
Shawn Tully, Fortune

Trump continues to boast that his that his trade war with China is a one-sided winner for the U.S., a campaign that’s inflicting such unbearable pain on our opponent, and minimal damage at home, that China will inevitably cave. But a close look at the costs shows that it’s China—not the U.S.—that’s proving the master in the art of the trade war.

Stocks Jump on Fresh Trade-Deal Hopes; Dollar Dips: Markets Wrap
Robert Brand, Bloomberg

Stocks in Europe jumped with U.S. index futures as China revived hopes of progress in trade talks with America this week despite a host of potential headwinds. Treasuries and gold turned lower.

Banking

Fed, other regulators approve changes to ‘Volcker rule’ to ease bank restrictions
The Associated Press

The Federal Reserve and four other regulatory agencies announced final approval Tuesday to changes in the “Volcker rule” passed after the 2008 financial meltdown to crack down on trading excesses that contributed to the crisis.

Financial Products and Investments

Fidelity Investments to Reduce Fees on College Savings Plans
Michael McDonald, Bloomberg

Fidelity Investments cut fees for the majority of its college savings plans as it launched portfolios that combine active and passive money management.

Housing and GSEs

California Governor Signs Rent Law Amid Rising Housing Costs, Homelessness
Alejandro Lazo, The Wall Street Journal

California will cap rent increases under a new law signed Tuesday by Gov. Gavin Newsom, the most significant piece of housing-related legislation in a year that also saw the shelving of a measure to relax zoning and spur more construction.

Bidding wars are taking a strange turn in the fall housing market
Diana Olick, CNBC

Cooler weather historically means a cooling off period in the housing market, but that is not the case this fall. After dropping to the lowest level in eight years, bidding wars are creeping back.

Taxes

Global Tax Proposal Widens Net Beyond Tech Giants
Paul Hannon and Richard Rubin, The Wall Street Journal

The search for a new agreement on how countries should tax multinational corporations advanced Wednesday, as international negotiators presented a way of rewriting the rules that they expect finance ministers from the Group of 20 leading economies will support.

IRS-Commissioned Report Responds to Criticism Over Free File Program
Laura Saunders, The Wall Street Journal

A new study commissioned by the Internal Revenue Service responded to intense criticism of the alliance between the agency and commercial tax-preparation companies. The report, obtained by The Wall Street Journal, pointed to shortcomings of the free online tax-preparation program, known as Free File, but concluded that its benefits remain substantial.

Electric-car tax credit issued improperly to thousands, audit finds
Sean Szymkowski, CNET

Somehow, the IRS doesn’t possess a way to ensure that those claiming the electric-car tax credit when filing their taxes each year aren’t doing so improperly. The government flat out said so in its latest audit report.

Financial Technology

Facebook’s Libra Hits Extra Regulatory Roadblocks in Europe
Valentina Pop, The Wall Street Journal

The European Union will introduce legislation aimed at preventing libra, Facebook Inc.’s proposed digital currency, from undermining Europe’s single currency and being used as a money-laundering tool—representing one of the toughest regulatory responses so far.

Senators Caution Mastercard, Visa, Stripe on Libra Membership
Lydia Beyoud and Joe Light, Bloomberg

Two Senate Democrats are urging three payment processing companies to reconsider their involvement with the Libra cryptocurrency project envisioned by Facebook Inc. and a coalition of other groups.

Robinhood Gives Banking Another Shot a Year After Botched Launch
Julie Verhage, Bloomberg

Robinhood Markets Inc. is giving banking another shot, 10 months after its first attempt at a checking and savings product flamed out in spectacular fashion. On Tuesday, the company laid out a new feature, called Cash Management, which takes a more traditional regulatory approach than the startup’s last foray into bank accounts.

Australia’s Afterpay names ex-Treasury Secretary Summers to U.S. advisory board
Nikhil Kurian Nainan, Reuters

Australia’s Afterpay Touch Group said on Wednesday that former U.S. Treasury Secretary Lawrence Summers will join its advisory board there, as it seeks to expand its buy-now-pay-later platform in the fast-growing U.S. market.

Opinions, Editorials and Perspectives

The Trade War is Harming America. Congress Should End It.
Dan Pearson, Morning Consult

Looking back at the past year and a half of the trade war, which side has the stronger case, Team Tariff or Team Trade?

Only Donald Trump Can Save the Global Economy
Ferdinando Giugliano, Bloomberg

As the global economy shows signs of stuttering, the race is on to find the right policy response.

The Real Problem Central Bankers Face: The Rest of Us
James Mackintosh, The Wall Street Journal

Economic theory has taken central banks to the upside-down world of negative rates and discussion of dropping money from (figurative) helicopters. Psychology is leading them to an even odder conclusion: perhaps the Federal Reserve needs to teach people to behave as the economic models require.

Research Reports

How do you solve a problem like Fannie and Freddie? Not by creating more of them
Peter Conti-Brown, Brookings Institution

September 6, 2008 arguably marked the beginning of the acute phase of the 2008 financial crisis. On that date, the U.S. government announced that housing giants Fannie Mae and Freddie Mac would be taken over by the government and, in the process, receive significant public support.

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