5 Things You Need to Know to Start Your Day

Good morning. The risk of a government shutdown grows, oil prices creep higher and a possible strike expansion. Here’s what’s moving markets [View in browser]( [Bloomberg]( Good morning. The risk of a government shutdown grows, oil prices creep higher and a possible strike expansion. Here’s what’s moving markets. Shutdown risk A deal that would avert a US government shutdown this weekend [is looking less likely](. Republican House Speaker Kevin McCarthy wants to use a shutdown to secure more concessions, having got an agreement on long-term spending cuts in last spring’s showdown. “I want to sit down with the president to secure that border,” McCarthy said on Wednesday. Oil spike Crude oil has [pushed closer to the $100-a-barrel milestone]( after stockpiles at a major storage hub in Oklahoma dropped to critical levels and highlighted a widening global deficit. WTI briefly moved above $95-a-barrel on Wednesday in its biggest gain since early May. “It really all boils down to concerns over supply tightness continuing and even exacerbating going into the northern hemisphere winter months,” said Vandana Hari, founder of consultancy Vanda Insights. Strike expansion The United Auto Workers union is planning to [expand its strike]( against Detroit automakers on Friday unless there is substantial progress made in negotiations. The UAW started a walkout at General Motors, Stellantis and Ford plants on Sept. 15 and expanded that a week later at plants run by the former pair. Separately, Hollywood studios and striking actors are set to [resume talks]( next week. Chip stocks S&P 500 and Nasdaq futures are little changed heading into the session, with semiconductor stocks likely to be in focus following a [disappointing forecast]( from chipmaker Micron Technology. Peloton shares are soaring in premarket trading after its [deal with Lululemon](. WTI crude is sitting just below $94-per-barrel, the dollar is weaker against other G-10 currencies and Treasuries are flat. Coming Up… US initial jobless claims, the PCE price index, pending home sales and GDP are all on the economic data slate. Federal Reserve Chair Jerome Powell will host a town hall with educators, with the Fed’s Austan Goolsbee and Lisa Cook also set to speak at separate events. Sneakers and sporting apparel giant Nike will report after the market close in New York. Is your commute longer than before the pandemic? Have you changed the way you are getting to and from the office? Would you be coming in to the office more often if there were better public transit options available? Do you think the US office market will rebound without a severe crash? Let us know, fill out a quick [MLIV Pulse survey](. What We’ve Been Reading This is what’s caught our eye over the past 24 hours. - Trump rivals [attack each other]( without shaking his dominance. - Elon Musk wins a [US Space Force contract](. - Apple iPhone 15 Pro users say device [can get too hot](. - China [taking back pandas]( from American zoos. - Goldman’s Rubner sees [deeper stock losses]( ahead. - Evergrande [halts trading]( in Hong Kong. - Turning rewilding into a [multi-billion dollar industry](. And finally, here's what Joe’s interested in this morning The rate of inflation has come down a lot over the last year, but there is a lot of debate about why. Because the unemployment rate has remained quite low, we don't have a crisp, clean story about rate hikes slowing the economy, raising the unemployment rate, crimping demand, and causing price growth to slow. That's not to say there's been no effect from the Fed, but it is a bit muddled. One popular debate is over the degree to which there are "lags" in the impact of monetary policy. [It's been said for a long time](, that rate hikes work with "long and variable lags." But there's another view that these days, the lags are shorter or non-existent. The thinking is that the Fed is very clear in its forward guidance, and so markets can re-price the new rate (or rate path) almost instantaneously, as policy changes, or as data affects the expected policy trajectory. We clearly see there are some immediate aspects of monetary policy transmission. An unexpected hike, or unexpected hawkish turn, would likely show up in interest rates and the stock market right away. So what's the case for long lags? On [today's episode of the Odd Lots podcast](, we speak with [Julia Coronado](, the founder, CEO, and President of Macro Policy Perspectives. She's in the long lags camp, and basically her argument is that monetary policy transmission works through two distinct channels: capital markets and credit. The former is fast. Markets reprice fast. Credit, she says, is different. There's plenty of room for wiggle room in, for example, commercial real estate. Here's Julia: "There's the credit channel side where you've got this, you know, fixed rate financing for a couple of years, and, you've got time and there's legitimate uncertainty about where we're gonna be in a year in two years. Commercial real estate is a perfect example because they are a glass half full kind of people. And there's been a real conversation. I talk to a lot of people in the real estate industry, there's a real sense that if we hold on long enough, rates are gonna go back down." In other words, higher rates don't force some immediate change. You can hold out hope. You can, in times of low rates, term out debt, and wait around and see how things develop. You can just be a blind optimist, whatever. So from Julia's perspective, one risk is that the Fed sees an economy that's still too hot, and is still in tightening mode, even before the impact from the hikes we've already seen fully start to hit. It was a fascinating conversation, that also gets a lot into the big questions around CRE. Check it out on [Apple,]( [Spotify](, or elsewhere. Follow Bloomberg's Joe Weisenthal on Twitter [@TheStalwart]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. 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