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- Ukraine is ready to load five grain ships despite Russian threats.
- BAE wins a GBP4 billion UK contract for nuclear submarines.
- After a year as PM we get the `real Rishi’: opinion.
- Property sharks are circling a GBP9 million deal.
- Ex-Softbank executive is setting up a stablecoin to dodge high inflation.
Open Interest Changes
Millions of Americans will start making payments again on their federal student loans, after a pandemic-era pause for over three years ended on Sunday, fanning concerns of the spillover effects on the U.S. economy. Interest began accruing on loans again on September 1 and payments came due starting Sunday.
Bigger picture: More than 40M people together owe over $1.6T in federal student loan debt. Note that the moratorium on payments had been extended multiple times and President Joe Biden's student loan forgiveness plan was blocked by the Supreme Court. Even so, administration policies are expected to blunt the impact of repayments, such as the income-driven repayment plan aimed at low-income households. The resumption's impact on households and the economy remains uncertain, on account of the unprecedented long break. It could lower consumer spending by $9B per month, according to Oxford Economics, in turn reducing 2023 GDP growth to 1.7%, and resulting in a 0.3% decline in 2024.
"To our knowledge, there has never been a circumstance in which an entire lending market was turned off and turned back on again," said Jefferies analyst John Hecht. He added that the resumption will lead to higher delinquencies and net charge-offs, and increased loan demand, although loan origination volumes may be subdued. Discretionary spending is widely expected to take a major hit. BTIG said results of retailers and restaurateurs will be affected, while UBS said soft goods sales will likely decline. Keep an eye on student loan-related stocks - SoFi Technologies (SOFI), Navient (NAVI), Nelnet (NNI) and SLM Corp. (SLM).
SA commentary: While noting the risks to consumer spending, Investing Group Leader Fear & Greed Trader pointed out that monthly payments on all types of consumer debt - including student loans - as a percent of income is very low. Dane Bowler said the resumption is not a dire situation, as the interest and principal burden is hitting consumers at a time when their balance sheets look excellent. Take the WSB survey. (4 comments)
The U.S. Senate passed the 45-day spending bill that the House passed earlier Saturday, averting a government shutdown that would've seen thousands of federal workers furloughed without pay. The legislation, which was signed by President Joe Biden before the midnight deadline, gives Congress more time to negotiate a full FY2024 budget. The stopgap spending bill funds the government until November 17 at 2023 spending levels, and includes $16B of natural disaster relief, but no aid for Ukraine. SA analyst Damir Tokic warned that while averting the shutdown is good news for the economy and government workers, it may not be positive for financial markets. (109 comments)
Apple (AAPL) will address issues raised by users about recent iPhone 15 models running too hot, primarily blaming a software bug and not their sleek titanium casing. The company is working on an update to the iOS 17 system that powers the iPhone 15 lineup to prevent overheating. Separately, Evercore ISI highlighted strong iPhone 15 Pro deliveries in the U.S. while demand in China and Japan has been slightly weaker. In North America, lead times for iPhone 15 have hit record highs, an encouraging sign given the somewhat tepid response to the product's launch. Note that iPhones accounted for 48.5% of Apple's overall revenue for the most recent quarter. (60 comments)
Crude oil concluded its best quarterly gain since the initial months of the war in Ukraine, but Wall Street expects this rally to lose steam. Front-month WTI crude (CL1:COM) closed Q3 with its best showing since Q1 2022, while energy stocks also had a strong quarter, with the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) up 17%. But barring a supply crisis, few analysts see oil prices staying above $100/bbl in the near term, and many think prices will likely hover near $90 for the rest of the year. While J.P. Morgan said higher oil prices are starting to weigh on demand, Investing Group Leader HFIR believes this oil rally is only just getting started. (233 comments)
In Asia, Japan -0.3%. Hong Kong closed. China closed. India closed.
In Europe, at midday, London -0.4%. Paris -0.3%. Frankfurt -0.2%.
Futures at 7:00, Dow flat. S&P flat. Nasdaq +0.2%. Crude +1.1% to $91.78. Gold -0.9% at $1,849.70. Bitcoin +4.2% to $28,334.
Ten-year Treasury Yield +6 bps to 4.63%.
Today's Economic Calendar
What else is happening...
California Gov. Newsom rejects unemployment pay for striking workers.
Tesla (TSLA) rolls out updated Model Y in China; starting price unchanged.
Biden administration plans record low number of offshore drilling leases.
'Hey above-median spender' - Jefferies lists software, internet picks.
Deliveries watch: Li Auto (LI), XPeng (XPEV), Nio (NIO) numbers in.
Eldorado Gold (EGO) on track to meet full-year production guidance.
Macau's Golden Week starts off strong in likely boost for China economy.
Novo Nordisk (NVO) underperforms as Viatris fights Wegovy patents.
Cigna (CI) agrees to pay $172M to resolve Medicare overpayment claims.
Activewear brand Vuori in talks with investment banks for potential IPO.