US consumer confidence sinks

Good morning. Here's what happened overnight and what you need to know today.

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1.

Low spirits: US consumer confidence dropped more than expected to 98.7 in September, the steepest month-to-month decline in three years, foreshadowing possible worsening conditions in the labour market and increasing the likelihood of a second big cut from the Federal Reserve. More people say they are worried about jobs with the steepest decline in confidence seen among those aged 35-54 and earning under USD50,000 ($72,780) annually. Based on a survey with a 17 September cutoff, the index fell from 105.6 in August to well below the Bloomberg consensus forecast of 104. ING chief international economist James Knightley said that, “historically this has been a major warning signal that unemployment is going to rise. This report suggests a breach of 5% is possible before year-end, which would undoubtedly raise the odds of a second 50bp Fed rate cut.” (Capital Brief)

2.

Lebanon chaos: Lebanon descended into chaos as Israel continued deadly airstrikes targeting what it says are Hezbollah targets, killing at least 558 people on Monday in the deadliest attack since 2006. Among those dead from an airstrike in Beirut on Tuesday was Hezbollah missile commander Ibrahim Qubaisi, the Israel Defense Forces (IDF) said. Israel reportedly hit 1,600 targets in Lebanon related to the Lebanese militant group since Monday, displacing over 16,000 civilians forced to abandon their homes, particularly in southern Lebanon. Hezbollah retaliated, firing between 50 to 100 rockets into Israel on Tuesday, most of them intercepted. The conflict has taken centre stage at the UN General Assembly in New York, as fears of a wider conflict involving regional powers, including Iran, continued to grow. Joe Biden addressed the fighting in his last UN speech as president, saying: “a full-scale war is not in anyone’s interests. Even as the situation has escalated, a diplomatic solution is still possible – in fact it remains the only path for lasting security.” (Capital Brief)

3.

Beijing rally: Investors piled into bullish options on US-traded Chinese stocks after China's central bank launched a major stimulus package to revive its economy, driving a surge in Chinese shares across global markets. The iShares China Large-Cap ETF (FXI) saw call volumes hit their highest since February, Bloomberg reported. The largest trade involved USD6.75 million ($9.80 million) spent on options betting on a 12% rally. Alibaba and PDD Holdings ADRs jumped 7% and 11% respectively, while US-listed Baidu and JD.com also gained. In Asia, Hong Kong's Hang Seng Index and the Shanghai Composite surged over 4%. The rally extended to US and emerging-market ETFs, with the iShares MSCI Emerging Markets ETF (EEM) call volume four times the norm. Meanwhile, US stocks faced mixed results amid a drop in consumer confidence, though the S&P 500 rebounded. Commodity prices also rose as China's demand outlook lifted metals and oil. (Bloomberg)

4.

Bowman’s caution: Michelle Bowman, the first Federal Reserve governor to dissent against the central bank’s interest rate decision since 2005, said in a speech interest rates should be lowered at a measured pace given remaining inflationary risks and the resilient labour market. Speaking at the Kentucky Bankers Association, Bowman said the recent 50 basis-point rate cut might signal unnecessary concerns about the US economy’s strength, warning the large cut could be misinterpreted as a sign of economic fragility or an early victory over inflation, which she believes is still "uncomfortably above" the Fed's 2% target, currently at 2.5%. She highlighted risks of stoking pent-up demand and inflation pressures if rates drop too quickly and pointed to steady wage growth, consumer spending and GDP as signs of an economy that remains resilient. (Bowman’s speech)

5.

Biden’s UN farewell: In his final UN speech as US President, Joe Biden urged nations to unite amid escalating Middle East conflicts, Russia's war in Ukraine, rising tensions with China and AI risks. He spoke of efforts to combat climate change, Sudan’s civil war and the opioid crisis, dedicating significant time to AI. “It will change our ways of life, our ways of work, our ways of war,” he told world leaders, warning of “profound risks, from deep fakes to disinformation to novel pathogens to bioweapons.” He stressed the urgent need for responsible management of the technology. Reaffirming his decision not to seek re-election, Biden said, “Some things are more important than staying in power. It’s your people that matter the most. Never forget, we are here to serve the people, not the other way around.” (CNN)(NBC News)

6.

Swipe monopoly: The US Department of Justice sued Visa, accusing the payment giant of monopolising the debit card market and suppressing competition. Reuters reported the lawsuit was filed in Manhattan federal court alleging Visa entered into agreements with merchants and rivals, such as PayPal, Apple and Block, to maintain dominance and penalised those seeking alternatives. The DOJ claims Visa's actions violate antitrust laws, with the company collecting over USD7 billion ($10 billion) annually from processing over 60% of US debit transactions. The complaint points to Visa's response to the 2012 Dodd-Frank Act reforms, with 'cliff pricing' tactics and disloyalty penalties forcing merchants to use Visa's network. The lawsuit follows a years-long probe, partly sparked by Visa's failed 2021 attempt to acquire fintech Plaid. Visa shares dropped over 5%. (Reuters)(Bloomberg)

7.

Banking Russians: Yevgeny Prigozhin's Wagner Group used JPMorgan Chase and HSBC to process payments for companies in Africa, expanding Wagner's operations despite US sanctions against Prigozhin since 2016, The Financial Times reported citing leaked documents. A Washington-based think-tank, C4ADS, reported that in 2017, a Sudanese company fronting for Prigozhin's operations made equipment purchases from China, routed via these banks. Meroe Gold, a Sudanese mining company linked to Prigozhin, used JPMorgan for a payment to China and sent another transaction via Hang Seng Bank, part of the HSBC Group. JPMorgan told the paper they were unaware of handling transactions tied to Wagner, while HSBC declined to comment. Wagner exploited financial systems to build its transnational criminal empire, including operations in Sudan and the Central African Republic. Prigozhin's assets were later absorbed by the Russian defence ministry after his death in 2023. (FT)

8.

Voice unlocked: OpenAI began rolling out its voice assistant feature to all paid ChatGPT users, including ChatGPT Plus subscribers and ChatGPT Team service customers, with Enterprise and Edu subscribers gaining access next week, media reported. Initially introduced in May, the feature's release was delayed to address safety concerns. The current version lacks some originally demonstrated capabilities, such as computer-vision feedback, Bloomberg said. OpenAI said the voice assistant can't impersonate others and filters prevent the generation of copyrighted audio, the publication added. The latest rollout introduces five new voices, bringing the total to nine, with names like "arbor," "spruce," and "maple." OpenAI had previously limited the feature's release to select ChatGPT Plus customers in July. (Bloomberg)