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U.S. Stocks, Bond Yields Fall on Trade Tensions

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U.S. shares slumped Friday after China mentioned it will impose retaliatory tariffs on further U.S. merchandise and President Trump vowed to reply.

The Dow Jones Industrial Common dropped greater than 530 factors, or 2.1%, placing a halt to a comparatively quiet week for markets. Yields on U.S. authorities bonds additionally tumbled, as did commodities markets, akin to oil and copper, which might be delicate to the 2 nations’ commerce battle.

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Business/Markets

FirstFT: Today’s top stories  | Financial Times

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FT subscribers can click on right here to obtain FirstFT day by day by electronic mail.

How properly did you retain up with the information this week? Take our quiz.

Saudi Arabia is pressuring rich households to purchase in to the preliminary public providing of its state oil firm, as a part of a plan to attain the $2tn valuation coveted by Crown Prince Mohammed bin Salman.

Eight folks aware of the talks stated they had been a part of a plan to construct confidence within the Saudi Aramco deal, which has been rocked by final weekend’s devastating assaults on Saudi Arabia’s oil infrastructure.

4 of the sources stated the goal was to “sturdy arm”, “coerce” or “bully” a number of the wealthiest households within the kingdom to change into cornerstone buyers in what has been billed because the world’s largest ever IPO.

Most of the households focused had members beforehand imprisoned in Riyadh’s Ritz-Carlton resort in 2017 and 2018, in what the federal government billed as a crackdown on corruption.

The ploy of leaning on native households is a flawed one and the crown prince dangers gilding himself right into a nook, our Lex column writes. (FT)

Within the information

Fed intervention
The Federal Reserve intervened in US cash markets for the third day in a row on Thursday, injecting $75bn into the short-term lending market, and stated it could achieve this once more on Friday when markets open. The upheaval within the repurchase, or repo, market is a reminder that we’re flying blind, Gillian Tett writes. (FT)

EU Fee hopes for Brexit deal
Jean-Claude Juncker opened the door to a potential Brexit breakthrough on Thursday, saying he was able to scrap the controversial Irish “backstop” if UK prime minister Boris Johnson supplied a viable different. In the meantime, Britain will goal a commerce cope with Japan as one among its high priorities after Brexit alongside related pacts with Europe and the US. (FT)

Airbnb plans to go public in 2020
The 11-year-old reserving platform might be among the many largest listings subsequent 12 months, having been valued at $31bn in its most up-to-date funding spherical. However Airbnb’s plans have hit a wall in New York, the place authorized challenges may undercut investor confidence. (FT, Bloomberg)

Singapore echoes Libra alarm
The top of Singapore’s central financial institution has warned that Fb’s Libra digital forex raises world monetary dangers, becoming a member of a rising listing of regulators calling for a co-ordinated strategy. Fb founder Mark Zuckerberg met Donald Trump and US lawmakers on Thursday to deal with considerations concerning the cryptocurrency, knowledge privateness and allegations of political bias. (FT)

China detains FedEx pilot
Chinese language authorities have detained a FedEx pilot in Guangzhou, the most recent setback for the US logistics firm, which additionally faces a collection of investigations towards the backdrop of commerce tensions. Donald Trump is critical about separating the US from China, and the remainder of the world might be compelled to decide on, Edward Luce writes. (FT)

Murky Mercosur
Austria’s parliament is threatening to reject the ratification of the EU-South America commerce deal, throwing into doubt 20 years of negotiations. (Politico)

Hedge funds on the defensive
The hedge fund DE Shaw has averted an funding workers exodus after imposing new non-compete employment contracts below menace of being fired, in accordance with an inner memo seen by the FT. A number of computer-driven hedge funds endured a “painful month” after their fashions had been caught by Treasury yield jumps and a sell-off of beforehand widespread shares. (FT)

Mitsubishi says rogue dealer misplaced $320m
An worker in Singapore suffered large losses by failed bets on the oil worth in a case harking back to the scandal that introduced down Barings Financial institution. (FT)

Zein al-Abidine Ben Ali dies
The Tunisian dictator, the nation’s second president since independence from France in 1956, has died on the age of 83. Zein al-Abidine Ben Ali dominated Tunisia for 23 years till he was compelled into ignominious exile in January 2011. (FT)

The day forward . . . local weather strike

As world leaders collect for a UN Local weather Motion Summit in New York subsequent week, younger folks led by Swedish activist Greta Thunberg will maintain a world strike on Friday to demand pressing motion. Preserve as much as the minute with our Reside weblog. Firms are racing to burnish inexperienced credentials forward of anticipated widespread worker walkouts, with Google asserting 18 wind and photo voltaic power offers on Thursday throughout the US, Europe and Latin America.

Don’t miss our quick movie exploring environmental inaction, created in collaboration with The Royal Courtroom and that includes actress Nicola Walker. (Reuters, FT)

And from the archive . . . 
Greta Thunberg: ‘All my life I’ve been the invisible lady’Extinction Revolt: inside the brand new local weather resistance

Take our ballot on the local weather strike

Greenland’s local weather change gold rush
Temperatures in Greenland have risen greater than twice as quick as the remainder of the world because of the retreat of Arctic sea ice. However for villages like Ilulissat, local weather change has additionally unleashed a speedy financial growth. Elsewhere, we take a look at how local weather change ought to information your funding technique. (FT)

Signal as much as Ethical Cash

This week’s Ethical Cash takes an inside take a look at the native prices of local weather change, why “inexperienced quantitative easing” is irking France’s central financial institution governor, and the buyers focusing on US lobbying associations. Signal-up right here

Did you retain up with the information this week? Take our quiz. Which web firm introduced that it’ll present physique cameras to Britain’s Metropolitan Police? Fb, Google, or Twitter? 

What else we’re studying

FT Globetrotter
Introducing FT Globetrotter, our new insider metropolis guides for the trendy enterprise traveller. We’re unlocking the town secrets and techniques of the world’s world enterprise centres, starting with London, New York, Paris, Frankfurt, Hong Kong and Tokyo. Discover out the place to energy lunch in Frankfurt, the most effective locations for a run in Tokyo, and addresses for correct espresso in Paris, plus a lot, far more. A taster is out there solely on the FT app (which you’ll be able to obtain right here).

Seeking the actual Snowden
Nobody noticed Edward Snowden coming: not even the NSA, writes Janine Gibson, who helped deliver “The Supply’s” revelations of mass surveillance to the world. How a lot has modified since then — and why did it take him six years to jot down about his determination to show whistleblower? (FT)

Inside Amazon’s largest workplace
Amazon’s first worldwide campus opened in August hundreds of miles from Seattle. The 15-storey tower in Hyderabad, which boasts indoor cricket nets and homes over 15,000 staff, is a testomony to the ecommerce firm’s ambitions in India. Have a look inside. (Bloomberg)

The remaking of Notre-Dame
Whereas it’s nonetheless too early to evaluate the human prices of lead air pollution from the Notre-Dame fireplace, in Paris, the story is already yesterday’s information: of extra pressing concern is the cathedral’s reconstruction, which may take one other six months, and has divided France. (FT)

Intercourse, politics and Palm Seaside
For a 13-mile strip of sand often called an insular enclave of the very previous and the very rich, Palm Seaside, Florida is experiencing a burst of cultural relevance within the Trump period. “We’ve by no means felt so near energy.” (FT)

Falling down
We have to be higher at predicting unhealthy outcomes, says Tim Harford. If we modified the best way dangers are calculated then worst-case eventualities might be averted. (FT)

China’s nice company sell-off
The story of China’s world shopping for spree, adopted by a document $40bn sell-off for the reason that begin of the 12 months, is carefully linked to the federal government’s efforts to stimulate progress, adopted by tightening credit score situations and the commerce battle with Washington. (FT)

The ‘Rolex of chocolate’
The Marañón Canyon in northern Peru is dwelling to the Pure Nacional tree, which produces the world’s oldest and rarest number of cacao. A illness outbreak in Ecuador rendered the tree extinct, and its delectable chocolate misplaced perpetually. However then two American mining suppliers made a startling discovery. (BBC)

Video of the day

Why US residents are shopping for insulin overseas
Democratic presidential hopeful Bernie Sanders joins a gaggle of diabetics crossing the border into Canada the place prescribed drugs are less expensive. (FT)

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Transports Keep Flashing Warning Signals Even as Stocks Flirt With Records

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FedEx
Corp.

FDX 1.02%

has supplied the most recent sign {that a} turning level is coming within the enterprise cycle.

The supply firm minimize its 2020 outlook after the closing bell Tuesday, pointing to commerce tensions and a weak international economic system.

Chief Government

Frederick Smith

stated on the corporate’s convention name that FedEx is taking steps to scale back its capability, partly as a result of the absence of a commerce take care of China has diminished the motion of products internationally.

Buyers usually have a look at the transport sector as a bellwether of the economic system. Believers in what is called the Dow Idea say weak point in shares of corporations that transport uncooked items and supplies can level to turmoil for the broader market.

Sectors together with transportation and manufacturing have been sending out indicators for months {that a} flip within the enterprise cycle is close to, leaving traders to query the longevity of the decadelong bull market in U.S. shares.

The issue is there isn’t a simple demarcation between a rising economic system and a contracting one, no solstice or equinox that marks the flip of the seasons. Divining when the economic system has slipped right into a recession—or, a minimum of, doing it forward of different traders—requires sifting and analyzing myriad tea leaves and smoke indicators.

Though the broader market remains to be flirting with data, the transport sector has struggled to get well misplaced floor—a probably ominous signal for traders who consider transports must rebound for the market to interrupt greater.

The U.S. manufacturing sector, some argue, has already fallen into recession. On Monday, the New York Fed’s manufacturing index slid to simply 2, under its degree from the start of the final recession, which started in 2007.

The Dow Transportation Common—which tracks 20 of the nation’s largest airways, railroads and truckers, together with FedEx—remains to be down 8.8% over the previous yr, although it has gained 15% this yr. FedEx itself has fallen 37% over the previous 12 months, together with a 12% drop this week.

Moreover, an index of freight shipments maintained by the analysis agency Cass Info Techniques Inc. has been falling each month this yr. After the three% drop within the August index, the agency stated “the shipments index has gone from warning of a possible slowdown to signaling an financial contraction.”

By any reckoning, this enlargement is outdated. It started in June 2009, making it the longest on document, and it exhibits a number of the typical indicators of a late-stage enlargement. That doesn’t robotically imply the enlargement should finish, although.

Even the Nationwide Bureau of Financial Analysis, the official arbiter of the cycle, doesn’t have a strict definition of it. Whereas the shorthand is 2 consecutive quarters of contracting GDP progress, it isn’t a concrete definition.

The enterprise cycle might be learn via financial information, however it’s actually about human nature, stated Nick Reece, an analyst and portfolio supervisor at Merk Investments LLC. That’s what makes it so onerous to pin down.

“It’s pushed by greed and concern, feelings of extreme pessimism and optimism,” he stated.

The employment image appears to be like wholesome, with the unemployment fee and weekly jobless claims each low. However a greater technique to look at the well being of the workforce, Mr. Reece stated, is to take a look at shifting averages quite than one month’s numbers.

SHARE YOUR THOUGHTS

Do you assume the transportation sector’s struggles are momentary, or an indication of an even bigger drawback for the economic system? Be part of the dialog under.

For instance, he stated, when the 12-month shifting common of jobless claims—at the moment at 221,800—rises above the 24-month shifting common—at the moment at 223,500—it’s a signal that progress within the labor pressure has peaked.

One other signal is when the present unemployment fee, 3.7%, strikes above the 12-month shifting common, which sits simply one-tenth of a proportion level greater, at 3.8%.

These numbers haven’t flipped, however they’re shut. Mr. Reece thinks the economic system will continue to grow, however he places the possibilities of a recession arriving within the subsequent six months at 30% to 40%.

“We’ve been within the eighth inning for a very long time,” he stated.

To obtain our Markets e-newsletter each morning in your inbox, click on right here.

Write to Paul Vigna at paul.vigna@wsj.com

Copyright ©2019 Dow Jones & Firm, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Investors take out record number of options to trade ‘no-deal’ Brexit

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Traders have taken out a document variety of choices contracts to guess on or hedge towards strikes in UK rates of interest, amid rising considerations that Britain might depart the EU on the finish of October with out an settlement on its future relationship with the bloc.

Open curiosity — a measure of merchants’ dwell positions in futures and choices on UK charges over the following three months — surged to 18.4m contracts on Tuesday at ICE Futures Europe, the primary derivatives alternate in London. The choices, if exercised, would permit buyers to revenue from sudden fee cuts or defend themselves from the injury stemming from fast fee rises.

The depth of enterprise has far outstripped the 13m of excellent futures and choices positions open on ICE within the run-up to the unique Brexit date of March 29. Greater than 14m of that whole includes choices, which give merchants the best however not an obligation to purchase or promote a contract on a set date.

Most positions cowl the three months to December however more and more buyers are additionally taking out positions that expire in March or September 2020 that consider fee cuts.

That timeframe is anticipated to cowl the UK’s negotiations with the EU and Britain’s departure date of October 31. Prime minister Boris Johnson has promised to go away the bloc on the finish of the month “do or die”, regardless of parliament voting to stop the UK leaving and not using a deal.

The exercise displays the excessive stakes for buyers who worry there could also be little time to react to unfolding political developments. “We’ve seen a bigger than regular vary of market contributors expressing a view, or shopping for safety from the opportunity of future rate of interest strikes,” mentioned Steve Hamilton, international head of monetary derivatives at ICE.

Traders expect no change to the Financial institution of England’s base fee of 0.75 per cent in a while Thursday, based on information by CME Group, which additionally ascribes a 13 per cent likelihood to a lower in November. The BoE has been guiding markets to anticipate gradual fee rises, based mostly on the belief that the UK will strike an accord with the EU and depart easily.

Some buyers have shied away from markets that sometimes function indicators of UK financial energy, comparable to sterling or gilts, due to the excessive ranges of uncertainty over all potential outcomes.

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