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The World
Wall Street added to the global fall in equities as the liquidity crisis at Chinese property developer Evergrande shook stock markets in Asia, Europe and the US. The S&P 500 fell 1.7%, marking its worst day of trading since May. Energy stocks were the worst hit, along with financial groups and companies that produce basic materials. The Dow Jones dropped 614.41 points, or 1.8%. The technology-heavy Nasdaq Composite slid 2.2%. The CBOE Volatility index, or Vix, which measures expected volatility on the S&P and is known as Wall Street’s “fear gauge”, hit a high of 28.8 — its highest level since May — before falling back to 25.7. (Financial Times)
President Biden’s governing agenda is at risk of unraveling on Capitol Hill after a mounting series of delays, clashes and setbacks that have sapped momentum from an ambitious and intricate push to deliver on long-standing Democratic policy priorities. An overhaul of the nation’s voting laws has been blocked by Republicans. An effort to strike a bipartisan deal on police reforms has lost all momentum. A sweeping immigration plan to provide a path to legal residency for millions of undocumented immigrants is now all but dead. And centrist Democrats on Capitol Hill appear poised to pare down a planned $3.5 trillion economic package as their liberal counterparts in the House threaten in turn to kill the bipartisan infrastructure deal that passed the Senate last month. (Washington Post)
‘A solid black eye’: For the cadre of progressive groups fighting to bring down drug prices in a big way, last week was a massive setback. The broad coalition, which includes consumer advocates, employers, and labor unions, was blindsided when a trio of moderate House Democrats formally opposed Speaker Nancy Pelosi’s sweeping drug pricing package — a consequential move, since Democrats’ razor-thin majority means that even three opponents could force leadership to water down or abandon an otherwise popular policy. (STAT News)
The Australia-UK-US security pact — Aukus — has been greeted with rage in China and France. But more significant than the flamboyant anger in Beijing and Paris are the countries that are quietly applauding the agreement. The many Indo-Pacific nations that are worried by China’s increasing belligerence look to America, not France, to balance Chinese power. Japan and India, the two largest economies in the region outside China, have welcomed Aukus. Later this week, the White House will host a summit meeting of the leaders of the Quad — the US, India, Japan and Australia. Week by week, the US is visibly strengthening its network of security relationships across the Indo-Pacific. (Financial Times)
Japan has urged European countries to speak out against China’s aggression, warning that the international community must bolster deterrence efforts against Beijing’s military and territorial expansion amid a growing risk of a hot conflict. Japan’s defense minister, Nobuo Kishi, said China had become increasingly powerful politically, economically and militarily and was “attempting to use its power to unilaterally change the status quo in the East and South China Seas”, which are crucial to global shipping and include waters and islands claimed by several other nations. (The Guardian)
North Korea says Australia’s submarine deal could trigger ‘nuclear arms race’. (Washington Post)
Covid-19 overtakes 1918 Spanish flu as deadliest disease in American history. According to STAT’s Covid-19 Tracker, Covid deaths stand at more than 675,400. (STAT News)
Pfizer and its partner BioNTech will file for authorization of their Covid-19 vaccine for use in children after clinical trial results showed encouraging antibody levels in volunteers and side effects similar to those in teens and young adults. The pediatric study, in children ages 5 to 11, is the first to disclose results in young children. It used a lower dose of the vaccine, because earlier studies showed that the adult dose could cause more side effects. Adults receive two 30 microgram doses of the vaccine three weeks apart. In school-aged children, this was lowered to 10 micrograms. (STAT News)
A big gap between Pfizer, Moderna vaccines is seen for preventing COVID hospitalizations: Data collected from 18 states between March and August suggest the Pfizer-BioNTech vaccine reduces the risk of being hospitalized by 91% in the first four months after receiving the second dose. Beyond 120 days, however, that vaccine efficacy drops to 77%. Meanwhile, Moderna’s vaccine was 93% effective at reducing the short-term risk of COVID-19 hospitalization and remained 92% effective after 120 days. (Los Angeles Times)
Mergers cut mortality rates at rural hospitals, study finds. Researchers concluded that the lower rate continued for years after the merger was completed, and that such deals could play a significant role in improving the quality of rural healthcare services. (Healthcare Dive)
48% of U.S. adults say they get news from social media “often” or “sometimes,” a 5 percentage point decline compared with 2020. When it comes to where Americans regularly get news on social media, Facebook outpaces all other social media sites.
In a separate question asking users of 10 social media sites whether they regularly get news there, 31% of U.S. adults say they get news regularly on Facebook, while 22% say they regularly get news on YouTube. Twitter and Instagram are regular news sources for 13% and 11% of Americans, respectively. (Pew Research Center)
92.1% of liberals, 60.1% of conservatives, and 78.4% of moderates strongly or somewhat support labeling misinfo in social media. (Northeastern University)
Economy
What is China Evergrande and why is it in trouble? China Evergrande Group is quickly becoming the biggest financial worry in a country with no shortage of them. With $300 billion in liabilities and links to myriad banks, Evergrande could send shock waves through the financial system and the broader economy should calamity strike. Its stock price has cratered and its bonds point toward potential default, yet Hui Ka Yan, the billionaire owner, has sought to reassure bankers that the property company will pull through. Investors aren’t sure how. They’re also asking whether major Chinese companies are still considered too big to fail by the central government, which prizes stability -- and what happens if they’re not. (Bloomberg)
How Beijing’s debt clampdown shook the foundation of a real-estate colossus: In a risky race against time that ran for two decades, China Evergrande Group turned billions of dollars in borrowed money into the dream of homeownership for millions of Chinese citizens. It launched project after project in every Chinese province, selling apartments years before they were completed and scratching together enough cash to stay just ahead of massive interest bills. The party has ended. Years of aggressive borrowing have collided with Beijing’s crackdown on debt, leaving the giant developer on the brink of collapse. Construction of Evergrande’s projects in many cities has stopped. The company has faced a litany of complaints and protests from suppliers, small investors and home buyers who sank their savings into properties the company promised to deliver. (Wall Street Journal)
Evergrande is the train wreck that the financial world and media can’t help but watch. Here’s breakdown on the story. (@SahilBloom)
How Evergrande could turn into ‘China’s Lehman Brothers.’ (Caixin Global)
Morgan Stanley sees a growing risk of a 20% drop in the S&P 500. It’s still a worst-case scenario, but the bank says evidence is starting to point to weaker growth and falling consumer confidence. (Bloomberg)
The August slowdown in U.S. job creation hit harder in states that pulled the plug early on enhanced federal unemployment benefits, places where an intense summertime surge of coronavirus cases may have held back the hoped-for job growth. New state-level data released by the Bureau of Labor Statistics showed the group of mostly Republican led states that dropped a $300 weekly unemployment benefit over the summer added jobs in August at less than half the pace of states that retained the benefits. (Reuters)
The average American's workweek has gotten 10% longer during the pandemic, according to a new Microsoft study published in Nature Human Behaviour. These longer hours are a key part of the pandemic-induced crisis of burnout at U.S. firms — and workers are quitting in droves. Microsoft calculated the length of the workday based on the time between Teams users' first email, message or work call and their last. So the longer workweeks don't necessarily mean we're working more, the study says. (Axios, Nature Human Behaviour)
Survey: Nearly 100% of human resources and 72% of executives said corporate culture was great during the pandemic — workers disagreed. (Forbes)
Soaring property prices are forcing people all over the world to abandon all hope of owning a home. The fallout is shaking governments of all political persuasions. It’s a phenomenon given wings by the pandemic. And it’s not just buyers — rents are also soaring in many cities. The upshot is the perennial issue of housing costs has become one of acute housing inequality, and an entire generation is at risk of being left behind. “We’re witnessing sections of society being shut out of parts of our city because they can no longer afford apartments,” Berlin Mayor Michael Mueller says. “That’s the case in London, in Paris, in Rome, and now unfortunately increasingly in Berlin.” That exclusion is rapidly making housing a new fault line in politics, one with unpredictable repercussions. (Bloomberg)
Coinbase decided not to launch its lending product after CEO Brian Armstrong said earlier this month that the SEC threatened to sue the cryptocurrency exchange if it released Lend, which planned to offer a 4% annual yield to people who lent their USD Coin cryptocurrency to Coinbase. The move is a big win for the SEC. Although the SEC has talked more about crypto regulations than proposed rules, its impact on Coinbase shows that sometimes a threat is all you need. It’s also a signal to other crypto companies, including exchanges, that they’ll have to step in line with what the regulator wants. (The Information)
Robinhood is testing a crypto wallet product, with evidence of the new feature showing up in a beta version of the company’s app. The trading platform’s customers have been pushing hard for a wallet, Robinhood CEO Vlad Tenev said during the company’s second-quarter earnings call in August. The potential new offering could allow Robinhood to better compete with crypto exchanges like Coinbase and Gemini, which already offer wallets that customers can use to store their crypto holdings. (Bloomberg, The Information)
Why Washington worries about Stablecoins: The Federal Reserve, Treasury and other regulators are worried that a technology that pledges stability will actually be a source of turmoil. (New York Times)
Technology
iOS 15 Is Here: The iPhone Software Update’s Small Tricks Make a Big Difference. Apple just released the latest iOS. It doesn’t bring a big visual overhaul, but new tools like weather notifications, a Focus mode and Live Text photo scanning make everyday use easier. Some changes: (Wall Street Journal, The Verge, The Guardian)
Notifications and Focus: Notifications have been redesigned to be clearer, now with app logos and contact photos. Less important notifications can also be bundled together as a summary and delivered daily at a time of your choosing. The biggest change is a feature called Focus. You can create profiles, such as work, home and personal, and set which contacts and apps are allowed to notify you based on the profile so that personal messages do not interrupt work and vice-versa.
Safari redesign: The controls, address and tab bar in Safari have been moved to the bottom of the screen. Tabs can be grouped and saved while you can swipe left and right to switch between them. The old style “single tab” interface with the address bar at the top of the screen is still available as an option.
FaceTime with non-Apple users: Apple’s FaceTime video calling service can now be used on Android and Windows PCs. Apple users can share a link to join a call from a browser without an account. Calls are still end-to-end encrypted.
Tesla's use of the phrase Full Self-Driving is "misleading and irresponsible," new NTSB chair Jennifer Homendy said: "It has clearly misled numerous people to misuse and abuse technology." Homendy also said Tesla shouldn't roll out its Full Self-Driving update with the city-driving tool before addressing safety deficiencies. (Source Code, Wall Street Journal)
Twitter disclosed a binding agreement to settle a class-action lawsuit, under which the social network will pay $809.5 million to resolve claims it provided misleading user-engagement info to investors. (Variety)
Concrete’s role in reducing building and pavement emissions: MIT researchers find emissions of U.S. buildings and pavements can be reduced by around 50% even as concrete use increases. (MIT News)
Smart Links
Justin Trudeau’s Liberals to form minority government. (Globe and Mail)
Bezos Earth Fund pledges $1 billion to nature conservation. (Barron’s)
The crazy SoCal housing market is cooling. But don’t expect a bargain. (Los Angeles Times)
The Washington Post announces the addition of 41 editing roles, including 2 masthead positions. (Washington Post)
Private equity is smashing records with multi-billion M&A deals. (Bloomberg)
An unprecedented year for private equity is spilling into the middle market. (Forbes)
DoorDash to offer alcohol delivery in 20 states and DC. (Cnet)