| By Julia Horowitz • Tuesday, October 1 | | | | Happy Tuesday. In today's newsletter: What to expect in the fourth quarter, PayPal in China and Elon Musk's latest promise.
US stock futures point higher after notching gains on Monday. Stocks in Europe opened mixed. Markets in China and Hong Kong were closed for the National Day holiday to mark the 70th anniversary of the People's Republic of China.
▸ Forwarded this newsletter? Want global markets news and analysis from CNN Business reporters every morning? You can sign up here. | | | What's happening now in markets: MARKET DATA AS OF 6:10 AM ET | | MARKET FLASH Welcome to the fourth quarter
The most recent quarter was not a great one for markets. Trade worries sparked volatility in both stocks and bonds. Ultimately, the Dow and S&P 500 rose just 1.2%. Nothing to phone home about, although both indexes remain near all-time highs.
Unfortunately, the fourth quarter — which kicks off today — shows little potential for a change in tune. Societe Generale strategist Kit Juckes perhaps put it best in his note to clients: The fourth quarter looks just like the third, but with darker mornings in the Northern Hemisphere.
Trade will remain a dominant theme. Negotiations are set to continue in Washington next week, though there's been little indication of real progress. Chatter about further escalation, including reports that the Trump administration is considering limits on US investment in Chinese companies, poses a real risk.
Absent a plunge in markets or the economy, or a political shock, "we maintain conviction in the view that the US and China are unlikely to find a path to tariff reduction," Morgan Stanley strategists wrote in a recent note.
Tariffs on Chinese goods worth $250 billion are poised to rise to 30% from 25% on October 15. Another round of tariffs on products popular with American consumers is scheduled for December. For now, investors should price in both hikes, per Morgan Stanley. | |
Couple trade uncertainty with the disappointing economic data of late, and the upside looks limited. Though the ISM Manufacturing Index, due later today, is expected to show a slight recovery in US manufacturing, data elsewhere still looks problematic. The final reading of PMI data for the eurozone puts manufacturing at its weakest level since October 2012.
"Before we become more positive on the outlook for stocks, we need to see progress in trade talks between the US and China, and an improvement in economic data," said Mark Haefele, chief investment officer at UBS Global Wealth Management.
Limiting any downside, Haefele points out, is the fact that central banks are in stimulus mode. The Fed cut interest rates twice in the third quarter, while the European Central Bank pushed rates further into negative territory and said it would restart bond purchases. That provides support as we move into year-end.
Haefele's view: "Central bank easing led by the US Federal Reserve and ECB has helped put a floor under markets." | | VOICES On the retail apocalypse "If a recession comes, credit will get cut off both to the consumers and the retailers. That is going to mean a rash of bankruptcies and a lot of lost jobs."
MARK ZANDI, CHIEF ECONOMIST FOR MOODY'S ANALYTICS
Read more from CNN Business. | | EYE ON ASIA PayPal finds a way into China | |
The first foreign firm licensed to provide digital payment services in China isn't Mastercard or Visa, but PayPal.
It clinched the license after China's central bank approved PayPal's acquisition of a 70% stake in GoPay, a Chinese payments company, my CNN Business colleague Clare Duffy reports.
The scene: American payment and credit card companies have for years been trying to break into the world's second largest economy, where an expanding middle class means a growing market of consumers who require lending, credit and money transfer services.
Since 2017, the Chinese government has allowed foreign firms to start applying for licenses to launch payment networks in the country. But the approval process has been sluggish, with the United States and China locked in a bitter trade war.
The challenge for PayPal and other Western firms is that the Chinese payments market is already fairly saturated. Alibaba's AliPay and Tencent's WeChat Pay dominate the mobile payments market, while state-controlled China UnionPay has a hold on the bank card industry. | | UP NEXT
Stitch Fix reports earnings after US markets close.
Also today →
▸ The ISM Manufacturing Index for September arrives at 10 a.m. ET.
▸ US construction spending data for August posts at the same time.
Coming tomorrow: Bed Bath & Beyond reports earnings at a tough moment for retailers.
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WHAT WE'RE READING AND WATCHING
▸ WeWork officially postpones its IPO (CNN Business)
▸ China is snapping up stakes in private companies at a record rate (WSJ)
▸ Top Credit Suisse exec quits over the bank's spying scandal (CNN Business)
▸ UK factories are stockpiling again ahead of new Brexit deadline (Reuters)
▸ Forever 21 bankruptcy reflects teens' new shopping behavior (AP)
▸ Stagflation, the Fed's worst nightmare, poses a real threat (CNN Business)
▸ Bitcoin probably isn't the world's most used cryptocurrency (Bloomberg) | | | OKAY, SO... Elon Musk is going as fast as he can
Musk, a man of big promises, has a pledge for NASA: a capsule designed to ferry astronauts to the International Space Station will be ready to go in three to four months.
The SpaceX CEO told CNN's Rachel Crane that SpaceX is going "as fast as [it] can" to get the overdue spacecraft ready for manned flights. The head of NASA, who last week chided Musk for giving a presentation on SpaceX's futuristic Mars rocket while the so-called Crew Dragon was still on the ground, has expressed skepticism about that timeline.
The company was expected to launch astronauts in July, but the craft exploded earlier in the year during a ground test of its emergency abort system. So let's file the latest vow under "wait and see."
P.S. Musk isn't the only industry leader talking to CNN Business right now. Also worth your time: sit-downs with Christine Lagarde, Disney CEO Bob Iger, Chipotle CEO Brian Niccol and Dallas Mavericks CEO Cynthia Marshall.
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