A daily market update from FS Insight — what you need to know ahead of opening bell

“Education is not the means of showing people how to get what they want. Education is an exercise by means of which enough men, it is hoped, will learn to want what is worth having.” ~ Ronald Reagan

Overnight

Consumer prices rose 0.2% in August with core inflation higher than expected CNBC

Kamala Harris baited Donald Trump into a debate on her terms Semaphor

Fed backpedals on plan to increase big-bank capital WSJ *

Americans’ inflation-adjusted incomes rebounded to pre-pandemic levels last year AP

BOJ policymaker signals readiness to raise rates if inflation on track RT

US sanctions Iran over Russia missile shipments Semaphor

China’s $6.5T stock rout is worsening economic confidence BBG

Maldives hunts for bailout to avoid first Islamic sovereign debt default FT

Dozens of attorneys general urge Congress to add social media warning labels Axios

Key witness in trial of FTX founder Sam Bankman-Fried seeks no prison time at upcoming sentencing AP

Chinese bank was told to wire authorities $11mn after founder disappeared FT

Goldman’s credit-card exit hampered by lax lending standards WSJ

Apollo and State Street are launching a private credit ETF BBG

Nippon Steel flies to Washington for last-gasp push to save US Steel deal FT

UniCredit CEO approaches Commerzbank to explore merger talks, source says RT

Brian Niccol wants Starbucks to focus on coffee again Barron’s

Campbell is dropping the ‘Soup’ from its name CNN

Samsung Electronics plans global job cuts of up to 30% in some divisions RT

More than 150 dead in Vietnam as typhoon floods capital BBCBiden admin condemns “dangerous” conspiracy about Haitian immigrants Axios

Chart of the Day

MARKET LEVELS

MORNING INSIGHT

Good morning!

Going into Wednesday morning, we have clarity regarding the first 2024 Presidential Debate and August Core CPI (Street expectations are +0.20%). To us, the fact these will be behind us (not “anticipated”) is arguably more important. That is, I am not sure the outcome of either really sways markets. Instead, the fact these are behind us is the “clarity” and helps markets regain some footing.

Click HERE for more.

TECHNICAL

• Trends remain negative and in need of improvement despite early week gains
• September’s “First Four days” signals a distinct possibility of additional weakness
• Financials remain in good shape technically despite Bank weakness

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CRYPTO

We discuss the current market psychology leading up to this morning’s CPI release, discuss the implications of last night’s presidential debate, and take a closer look at Helium (HNT), the altcoin that has demonstrated outsized strength with high trading volumes over the past month.

Click HERE for more.

First News

Particular developments in power. On Tuesday, a robot in Japan began a two-week mission to retrieve the first sample of melted fuel debris from the Fukushima Daiichi nuclear power plant, which suffered a meltdown after the 2011 Tōhoku earthquake and resulting tsunami. The sample is required to plan the final phase of cleaning up and decommissioning Daiichi, with an estimated 880 tons of radioactive molten fuel still inside. Officials from the Tokyo Electric Power Company (TEPCO) hope to complete the cleanup in 30 to 40 years, a timetable that some have criticized as unrealistically aggressive. 

Disasters such as this one have triggered fears of nuclear power, but the increased energy demands sparked by the rise of AI and data centers, the move toward electric vehicles, and cryptocurrency mining have helped nuclear-power advocates to push ahead with plans to build new reactors. Italy, which has banned nuclear power since 1987, announced that early next year, it plans to propose legislation to lift that prohibition. New reactor designs – including small modular reactors some view as safer, cheaper, and easier to build – helped persuade “Il Bel Paese” to consider reversing its decades-long policy. 

Small modular reactors can be constructed in significantly less time than the six to eight years it takes for more traditional reactors, but it still can take 24 – 36 months. That might be just as well, given that the CEO of Kazatomprom, the largest uranium miner, warned that the Russian-Ukraine war is making it increasingly difficult for his company to continue supplying nuclear fuel to the West. Hopefully, by the time current plans for new nuclear-plant construction are approved and under way, this will no longer be the case. 

Baby, baby, baby. This week, China announced plans to halt most international adoptions, with the exception of adoptions by foreign nationals with a blood relationship to the child. International adoptions are on the wane, driven in part by criticism over corruption and abuse associated with the practice. South Korea, for instance, yesterday unveiled fresh evidence to support allegations that from the 1960s to the 1980s, mothers were forced to give up their children for adoption in the U.S., Denmark, and Australia. 

Yet other factors are likely to have also motivated the policy shift. In China, international adoptions began in 1992 largely as a response to a profusion of babies being abandoned at police stations, hospitals, and orphanages by parents seeking to avoid being penalized for violating the country’s one-child law. This phenomena has ebbed as China’s birth rate declined, and China’s shrinking workforce is widely seen as a cause for serious economic and social concern. A halt to the international adoption of Chinese children could help to ameliorate the problem, at least slightly. 

The Middle Kingdom is also hoping to tackle the problem from the other end, by raising the country’s retirement age. China’s National People’s Congress announced that it is drafting a law to “gradually delay mandatory retirement ages.” Although officials are arguably wary about the social unrest and unhappiness that will come from such a change in policy, China has one of the lowest retirement ages amongst large economies: Men can retire and draw a state pension as early at 60, while women can retire at 55 (white-collar occupations) or 50 (blue-collar jobs).

The problems of an aging population, a shrinking workforce, and a low birth rate are not unique to China. Many other countries are confronting this problem. For example, South Korea has a birth rate of just 0.72 (a birth rate of 2.1 is considered needed to maintain population size), so it was cause for vexation this week when it was reported that sales of dog strollers had exceeded sales of baby strollers.

The low U.S. birth rate has become part of the U.S. election discussion from both major Presidential campaigns in recent weeks – tacit bipartisan agreement that a problem exists Former President Donald Trump proposed paying “baby bonuses” to incentivize having children, as well as federal funding for IVF. His running mate, Sen. JD Vance, suggested increasing child tax credits to $5,000 per child.

Democrats have not directly mentioned the country’s shrinking birth rate, but Vice President Kamala Harris has proposed policies that focus on making it more economically feasible to have children: $6,000 tax credits to parents of newborns, paid parental leave, universal pre-school, and affordable child care. 

Similar proposals (as those proposed by both campaigns) have been tried elsewhere, however, and Phillip Levine, an economics professor and expert on fertility rates at Wellesley College, said that there is little evidence that they have made any significant impact in that respect.