Friday Morning Reads

Economy

On course for more rate hikes? "While a deeper and more persistent drop in equity markets could dash confidence and lead to a significant pullback in risk-taking and spending, we are far from this scenario," said Cleveland Fed President Loretta Mester, who leans somewhat hawkish. The economy is doing "very well," with inflation at the Fed's 2% goal and business and consumer spending expected to remain robust, with no strong pullback in a cooling housing market.

Calling it an "historic turning point," China and Japan have pledged to forge closer ties, signing a broad range of agreements including a $30B currency swap pact amid rising trade tensions with Washington. Asia's two biggest economies also agreed to boost cooperation in the securities markets like the listing of ETFs and inked a deal towards establishing a yuan clearing bank, as the renminbi slipped to its lowest against the greenback in a decade.

The U.S. is refusing to resume trade negotiations with China until Beijing comes up with a concrete proposal to address Washington’s complaints about forced technology transfers and other economic issues, officials told WSJ. The impasse threatens to undermine a meeting between President Trump and Xi Jinping at the G20 summit in November. Businesses have been counting on sufficient progress for the suspension of the next round of U.S. tariffs.

Meanwhile, China is cutting some of its oil trade with Iran after vowing for months to resist U.S. sanctions on the exports, which go into effect in early November. It comes as Saudi Arabia, seeking to damp a foreign relations crisis, said it would increase crude supply, pushing down prices and giving traders further options. China, Iran's top customer, has been importing about 600K barrels of Iranian crude a day.

South African President Cyril Ramaphosa is seeking $100B of new investments over the next five years and has already secured pledges for around $35B, mainly from China, Saudi Arabia and the UAE. When he took over in February, Ramaphosa staked his reputation on economic revival and his strong ties to the business community. But since then, the economy has sunk into recession and faced a series of downbeat data.

President Trump may send up to 1,000 active-duty troops to the U.S.-Mexico border as a caravan of several thousand migrants travels northward from Central America. "A wide range of administrative, legal and legislative options" are being considered, according to sources, but any ban would face likely legal challenges. Closing busy ports of entry along the Mexican border could also impede the flow of goods, affecting the U.S. economy.

Stocks

FAANG stocks and other tech shares are under pressure this morning following disappointing quarterly reports from Amazon (NASDAQ:AMZN) and Alphabet (GOOG, GOOGL). While revenue growth soared at its cloud unit, Amazon's revenue and Q4 holiday season outlook fell short of expectations. Google also beat on earnings, but sales came up short, while CEO Sundar Pichai confirmed 48 employees were terminated over the past two years for sexual misconduct.

Spectrum Strategy Task Force? The White House has weighed in on America's wireless device infrastructure, issuing a memorandum aimed at the government's approach to ensuring a continuing lead in 5G development. President Trump set a 180-day timetable for executive departments and agencies to report to Commerce Secretary Wilbur Ross their anticipated future spectrum requirements along with a comprehensive review of current frequency assignments and usage. Related: VZ, T, TMUS, S, USM, TDS, SHEN

Saying "America has the opportunity to lead in the technologies of the future," General Motors (NYSE:GM) wants the Trump administration to back a nationwide program to boost the sale of zero emission vehicles. The project could be modeled on California's effort - despite the government's opposition - resulting in 7M EVs on U.S. roads by 2030, but would not apply if "battery cost or infrastructure targets are not practicable within the time frame."

Two Sears board directors have hired investment bank Evercore to scrutinize deals that were led by former CEO Eddie Lampert before the U.S. retailer filed for bankruptcy protection, Reuters reports. The transactions, including separations of Sears' (OTCPK:SHLDQ) businesses and real estate, may come under examination in bankruptcy proceedings, with creditors claiming the transactions stripped the company of valuable assets.

Shares in Danish cannabis firm StenoCare more than tripled in value today in their debut on the Danish-Swedish Spotlight exchange, rising to as much as 33.50 crowns in early trading. Denmark is one of several European countries that recently legalized prescriptions of medicinal cannabis oil, perking a surge in investor interest in a substance that is still banned or restricted in many markets.

Royal Bank of Scotland reported a lower-than-expected profit of £448M for Q3 on the back of a "highly competitive market and an uncertain economic outlook." The bank set aside an impairment provision of £100M as a result, in order to account for concerns like Brexit. RBS also announced approval from the Dutch authorities to settle their European headquarters in Amsterdam.

Cryptocurrencies do not pose a threat to Visa (NYSE:V) in the near term, but the credit card giant is prepared to implement crypto-friendly systems if the digital currencies become more established. "We want to be in the middle of every payment flow in the world regardless of how it happens or what the currency is behind it. So if we have to go there, we will go there," CEO Al Kelly told CNBC.