5 Things You Need to Know to Start Your Day

Good morning. WeWork goes bankrupt, the Fed says the battle against inflation isn’t done and Wall Street bosses see risks everywhere. Here’s [View in browser]( [Bloomberg]( Good morning. WeWork goes bankrupt, the Fed says the battle against inflation isn’t done and Wall Street bosses see risks everywhere. Here’s what’s moving markets. — [Sam Unsted]( WeWork bankrupt [WeWork filed for bankruptcy]( listing nearly $19 billion in debt, a fresh low for the once-high-flying co-working company which has struggled to turn around its fortunes after the pandemic. It said it has sealed a restructuring deal with creditors holding about 92% of its secured notes and that it will streamline its rental portfolio of office space. Ultimately, the expensive leases on its books [proved too costly](, even after a debt relief pact earlier this year. Inflation fight Federal Reserve Bank of Minneapolis President Neel Kashkari said it is[too soon to declare victory over inflation](, despite signs in recent economic releases that price pressures are easing. “Let’s get more data and see how the economy evolves,’’ he said in an interview with Fox News, adding that three months of promising numbers on inflation isn’t enough. Fears everywhere Wall Street bosses speaking at an event in Hong Kong said they see [financial risks everywhere](, from fragile markets to international geopolitical tensions. The mood on stage at the Global Financial Leaders’ Investment Summit was dour, with executives trading both observations and fears about the current backdrop. Elsewhere, Morgan Stanley’s outgoing chief executive, James Gorman, has said he will also [vacate his post as the bank’s chairman]( by the end of 2024, following his departure from the CEO post at the end of this year. Treasuries rise Treasury yields are lower, stock futures are falling and the dollar is stronger. Traders appear to be awaiting more from Fed officials on the rate path outlook following Kashkari’s comments, with Fed Chair Jerome Powell also set to speak later in the week. Chinese fast-fashion giant Shein is said to be targeting a [valuation of $90 billion]( as it lays the groundwork for an eventual IPO. Coming up… US trade balance and consumer credit data is on the slate later on Tuesday and there will be a slew of Federal Reserve officials speaking, including Neel Kashkari on Bloomberg Television. Austan Goolsbee, Christopher Waller, Lorie Logan and John Williams are all speaking too. Ride-sharing firm Uber Technologies and private-equity house KKR are due to update. The Magnificent Seven stocks including Apple and Nvidia have gained almost 90% so far this year. Is it time to short big tech? What contrarian signal is the best to follow to enter the market? Which asset is the hedge against any potential equity losses during the times when bonds fail to serve as a buffer? Share your views in the latest [MLIV Pulse survey](. What We’ve Been Reading This is what’s caught our eye over the past 24 hours. - The US debt interest bill surpasses [$1 trillion a year](. - Nintendo [raises its outlook]( and game sales target. - UBS makes progress on [winning back clients](. - Ken Griffin says global investors [have to invest in China](. - Elon Musk’s [brain implant startup]( is about to start operating. - Cathie Wood [sells out of Roku]( after its stock surges. - Trump [shouts at judges and lawyers]( from the witness stand. And finally, here's what Joe’s interested in this morning I wrote about it yesterday, but last week felt like a real turning point. Between the cool economic data, and the dovish-sounding press conference from Powell, people are taking very seriously the idea that the next move by the Fed will be a rate cut. The rate cut talk of course produced a big rally in stocks (the Nasdaq is up 39% on the year once again) and a powerful move lower in rates. Of course, this isn't all "good" news. As mentioned the labor data came in cool. There are more signs that the extraordinary jobs boom is coming to an end. It's not just that the economy is creating fewer jobs and the unemployment rate is going up, but wage growth is decelerating as well. [Nominal incomes]( are slowing. With the the official U3 unemployment rate hitting 3.9%, there's been a lot of talk about the the Sahm Rule. [As its creator Claudia Sahm put it on Twitter](, the rule simply states. "...when the three-month moving average of the national unemployment rate rises by 0.50 percentage points or more relative to its low during the previous 12 months, we are in a recession." We're not yet there. So that's good. But on the other hand, any meaningful rise in the unemployment rate does offer some reasons to worry. If people who want to be working can't find jobs, they're going to spend less. If people spend less, that's someone else's income going away. And then that theoretically means more job losses. So the point is that the unemployment rate has a tendency historically to snowball. It's pretty basic stuff, but makes seemingly marginal moves in the unemployment rate a big, blinking caution sign. In a note to clients yesterday, Steve Englander of Standard Chartered offers up his own modified Sahm Rule, which goes: Our version of the rule is triggered when the 2mma of the unemployment rate rises by 0.4ppt or more relative to its minimum over the past year (Figure 1). It does not differ from the Sahm rule much but will be slightly quicker to signal that a significant UR increase is coming. The cost of the ‘nimbleness’ is that our signal could have a tendency to give more false signals of impending UR increases. However, the only false signal in the last 55 years came when the UR nipped higher near a peak in 2003, not when we were looking for the UR to rise from a trough. Here's his chart: Perhaps you can quibble with the best calibration is, depending on the purpose. Claudia Sahm herself developed the line of thinking as a means for coming up with a theoretical timing mechanism for sending out automatic relief checks. Again though the core idea here is that historically, seemingly modest increases in the unemployment rate tend to be predictors of large increases in the unemployment rate and recessions. So going to the rate cut talk the two questions are really: A) Is the labor market flashing a warning sign? B) If it is flashing a warning sign, can the Fed cut rates and arrest a downturn? Say what you will about the rise in interest rates over the last year and a half, but we're not at ZIRP anymore, where the Fed has to resort to exotic things like QE in order to try to stimulate the economy. Good old fashioned rate cuts are a tool that may have some teeth and if timed right could forestall a deeper downturn. But given that inflation is still running hot, nailing the timing may be tricky. 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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