5 Things You Need to Know to Start Your Day

China slides into deflation, WeWork faces a stunning fall and Amazon is in talks to become an anchor investor in Arm IPO. — David GoodmanFal [View in browser]( [Bloomberg]( China slides into deflation, WeWork faces a stunning fall and Amazon is in talks to become an anchor investor in Arm IPO. — [David Goodman]( China deflation Falling prices in China are adding pressure on policy makers to set up monetary and fiscal support even as signs that the decline is temporary may limit any stimulus. China’s consumer price index registered its [first drop in more than two years](, falling 0.3% in July from a year earlier, the National Bureau of Statistics said Wednesday. Producer prices fell for a 10th consecutive month, contracting 4.4%. Still, the figures might provide only limited help for global central banks, giving them some help in fighting inflation in their own countries but signaling a worsening outlook in the world’s second-largest economy. WeWork woes For the past four years, WeWork has been trying to deliver a turnaround story — one in which the rowdy co-working startup transforms into a stable, profitable public company. It sloughed off Adam Neumann, its rambunctious co-founder and former chief executive officer, and replaced him with an industry veteran boasting a reputation of saving troubled real estate companies. [WeWork was not saved](, and the co-working company now says there’s “substantial doubt” it will even be able to stay in business. That admission saw the firm’s shares drop 17% in premarket trading on Wednesday. The company cited sustained losses and canceled memberships to its office spaces. Amazon and Arm Amazon.com is [in talks to join other tech companies](as an anchor investor in Arm Ltd.’s initial public offering, according to a person familiar with the situation, part of preparations for a deal that could raise as much as $10 billion. Amazon is one of several tech companies that have talked to Arm about backing the offering, which is expected next month, said the person, who asked not to be identified because the deliberations are private. Arm, a chip designer that counts the world’s biggest tech firms as its clients, also has held discussions with Intel and Nvidia. Stocks gain European [stocks rallied]( as investors took some comfort from assurances by the Italian government that [a new windfall tax on banks]( will be capped. Italy’s benchmark FTSE MIB Index jumped about 2%, snapping a six-day streak of losses. Other markets tilted risk-on, with the euro strengthening, copper rebounding and US futures pointing to a recovery on Wall Street. Rice in Asia soared to its highest level since 2008. Coming up… In a data-light day, the US will report mortgage applications data at 7 a.m. The nation is also selling $38 billion of 10-year debt later while there are earnings from Disney and Roblox. How many vacation days do you take? Do you leave your desk for more than a week at a time? Do you check your work email while on vacation? Share your thoughts about the paid time off in the [latest MLIV Pulse survey.]( What we’ve been reading Here’s what caught our eye over the past 24 hours: - Country Garden default would be [worse than Evergrande](, BI says. - [BOE warned]( it faces above target inflation through 2026. - L’Occitane boss is said to be in [advanced talks]( on $6.5 billion buyout. - Investors visiting China find officials [fearful of upsetting Xi](. - Tycoon who gave away $750 million sees [profit in loans to poor](. - The [weight-loss drug frenzy]( is outrunning the company behind it. - Long taken for granted, [frozen peas](seek a new appeal in the UK. And finally, here’s what Joe’s interested in this morning… Yesterday we got the latest [NFIB Small Business Optimism Index](, and there were a few interesting things in there, that I think speak to some broader things happening in the economy right now. First, I'm always really interested in the question of what small businesses see as their number one problem right now. At the moment, it remains overwhelmingly access to quality labor. The line has come down a little bit from its peak about a year ago, but this is still significantly higher than anything else. The job market is still tight and difficult, from the perspective of employers. What's interesting too is how Interest Rates & Finance barely show up. Yes, it's ticked higher, but for all the rate hikes, and talk of tightening financial conditions, it just hasn't moved the dial for small businesses as an issue. If monetary policy has played a significant role in curbing activity, it's not showing up in this channel. Going back to labor quality for a second. The NFIB survey came out the same day as UPS generated significant buzz for the amount of money it will be paying some of its drivers, as part of its new agreement with the Teamsters. The [online jobs board Indeed]( saw a huge surge in interest for UPS jobs, following news that agreement will allow for full-time drivers to earn $170,000. Labor negotiations are often sort of cast in a light of zero-sumness. There's a pie. Shareholders of the company get one slice. Labor gets another slice. And they're fighting over how big each slice is. But in a time of labor tightness, it's more complicated than that, because a reputation for good stable and safe wages can improve labor recruitment and retention. And in fact, there's a good piece up on FreightWaves about [how the UPS agreement]( is likely to put stress on non-unionized FedEx, where pay scales are now much lower. Strong contracts also came up in our [recent episode of the podcast on the UAW](, and their role in reducing churn and losing workers to other non-auto industries. Anyway, this is another interesting chart from the NFIB report, and I have to admit I'd never noticed it before until [I saw it on Twitter posted by Bob Elliott](. It shows the gap between the so-called hard components of the survey and the softer, more outlook-based ones. The gap is massive. What's interesting is, the only time recently where the hard and soft data were roughly at the same level was during the Trump administration. Generally, the NFIB is seen as having a membership base [that tilts Republican or conservative](, so it's notable how big the gap has gotten over the last couple of years, with the change in administration. And in fact, you can see the soft components of the index absolutely shoot up higher immediately after Trump won in 2016. It's become popular to question the quality of sentiment surveys in general (like UMich or Conference Board) due to the phenomenon of respondents offering very different economic assessments due to their own partisan bias, and whether a member of their own party is in the White House or not. I think this slice of the NFIB gives a little hint that there's something to that. With a Democrat in the White House, the gap between actual activity (hiring, inventory levels, capex, etc.) and general outlook is quite large. When it was a Republican, that gap was pretty small. And the last time before Trump that there was no gap between the lines was during the middle of the Bush administration. Finally, since it's CPI day eve, here's one more chart from the report. The number of survey respondents that are raising prices has been dropping precipitously over the last year and at a pace roughly symmetrical it looks like to the rise. Good sign that things are cooling. Follow Bloomberg's Joe Weisenthal on Twitter [ @TheStalwart](. Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. You received this message because you are subscribed to Bloomberg's Five Things to Start Your Day: Americas Edition newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. [Unsubscribe]( [Bloomberg.com]( [Contact Us]( Bloomberg L.P. 731 Lexington Avenue, New York, NY 10022 [Ads Powered By Liveintent]( [Ad Choices](