Markets Remain Anxious, Despite Falling Odds of a Recession

A recession seems remote, but market jitters persist

For the third time in three months, economists at Goldman Sachs have lowered the odds of a recession and now put the risk of a downturn in the United States at 15 percent. Yet despite the upbeat outlook, which follows other votes of confidence from Wall Street in recent weeks, global stocks and U.S. futures are in the red on Tuesday morning as inflation fears persist.

The strong labor market is propping up U.S. households. “Real disposable income looks set to reaccelerate in 2024 on the back of continued solid job growth and rising real wages,” Jan Hatzius, Goldman’s chief economist, wrote in a client note. On Friday, the Labor Department reported that wage gains had cooled in August, but real wages, adjusted for inflation, are trending higher.

Goldman is far more bullish than others. In March, the bank raised its recession odds to 35 percent in the wake of Silicon Valley Bank’s collapse and worries that contagion could hurt other lenders. But fears of a bank-led downturn have all but disappeared. Still, a Bloomberg survey of economists puts the likelihood of a U.S. recession in the next 12 months at 60 percent.

Voters aren’t feeling so confident either. Poll numbers released on Monday by The Wall Street Journal showed that President Biden’s popularity is still sagging, partly because of his track record on the economy. (Voters also say he’s too old to run for re-election.) It’s the latest indication that the White House’s summer P.R. offensive, playing up the gains reaped from Bidenomics, is not resonating with Americans.

Investors aren’t feeling bullish. After last week’s rally, the S&P 500 looks set to start the week on a down note, as rising oil prices drive inflation concerns. Another potential storm cloud: Investors are questioning whether the benchmark index can hold onto its 18 percent year-to-date gains if inflation rises this autumn.

Brent crude oil hit a high for the year on Monday. Markets are bracing for the OPEC+ cartel, led by Saudi Arabia and Russia, to announce this week that it will continue to pull back on production. Rising energy prices could force central banks to stay hawkish on interest rates.

On the good-news front: The futures markets see the chances of the Fed or the European Central Bank raising rates this month as increasingly unlikely.


Jill Biden tests positive for Covid, and President Biden doesn’t. The first lady will stay at the family home in Delaware, while Biden, who will be tested regularly ahead of a trip to the Group of 20 meeting in India on Thursday, has returned to Washington. Jill Biden’s illness is the latest reminder of an uptick in coronavirus infections that experts say should not be as dangerous as previous ones.

North Korea’s leader will hold talks with Vladimir Putin about supplying weapons to Russia. Kim Jong-un is expected to discuss the possibility with his Russian counterpart in person this month, according to American and allied officials. Meanwhile, oil and gas platforms in the Black Sea are increasingly becoming military targets in the Ukraine conflict.

An embattled Chinese real estate giant avoids default. Country Garden, the nation’s biggest property developer, told investors it had made a late $22.5 million interest payment before a 30-day grace period expired. The move buys the company some breathing room, but China’s real estate industry remains in crisis and is a huge drag on the economy — and Country Garden still must repay $15 billion in debt over the next 12 months.

Tech moguls and others escape Burning Man. Thousands who had flocked to the annual festival in the Nevada desert were finally able to leave on Monday, after heavy rain reduced the only road in and out of the event to mud. Among those affected were venture capitalists and well-known tech executives like Sergey Brin, the Google co-founder. The corporate lawyer and former Obama administration official Neal Katyal recapped his escape on social media.

A fight over the future of TV

As of today, 15 million Americans are still unable to watch the U.S. Open and other programming live on their TVs, thanks to a dispute between Disney and the cable giant Charter that has blacked out Disney channels like ESPN in major markets like New York City and Los Angeles.

Most of the time, so-called carriage fights get resolved quickly and quietly. But this battle could reshape the media landscape, as the two companies tussle over core issues like streaming.

The back story: Like most carriage disputes, this is about money. Disney wants to charge more for its channels, which also include FX and the Disney Channel (and, in some markets, the ABC broadcast station).

Meanwhile, Charter wants to include Disney’s streaming services — Disney+, ESPN+ and Hulu — in its cable packages at essentially no charge, according to Disney. Charter says much of the programming on streaming also airs on TV; Disney counters that it also produces exclusive content for those platforms.

It’s a clash of the future versus the past. Content providers like Disney have been increasingly shifting their focuses to streaming platforms, as customers flock to watching stuff online.

But such companies are also dependent on the huge, high-margin fees that cable companies fork over to carry their traditional channels — payouts that cable providers understandably don’t want to make, especially since they’re losing subscribers to cord cutting.

Charter says it’s mulling a radical move: getting out of the pay-TV business altogether. “We’re either moving forward with a new collaborative video model, or we’re moving on,” Chris Winfrey, the company’s C.E.O., told analysts on Friday. (Such a transformative decision is in keeping with the history of Charter’s most influential shareholder, the iconoclastic telecom mogul John Malone.)

Having Charter, America’s second-biggest cable company after Comcast, get out of pay TV could inspire others to follow suit, depriving media companies of a huge cash cow. The alternative — letting Charter offer effectively discounted access to streaming services — could lock in smaller revenue streams for content companies.

Disney has increasingly recognized the problems with relying on carriage fees, which have been shrinking; that’s why Bob Iger, its C.E.O., has publicly floated the idea of divesting its traditional TV assets. But it faces an uphill battle with Charter at a tough moment in time, as it struggles to make streaming profitable.

“China speed”

The auto industry has long been an important part of the European economy. One big reason: Some of the continent’s biggest carmakers, such as Volkswagen and Mercedes-Benz, have built big businesses in China, the world’s largest car market. But Chinese carmakers are now turning the tables and making major inroads in Europe, leading the race for electric vehicles and sending a shiver through the continent’s manufacturers.

The shift is on display this week at the I.A.A. Mobility car show in Munich, writes The Times’s Melissa Eddy. On the first day of the event, BYD, the electric car and battery maker backed by Warren Buffett, unveiled two new vehicles. And Xpeng said it would start selling its cars in Germany next year, branching beyond Norway, Denmark, the Netherlands and Sweden. Also, Leapmotor announced it would bring its S.U.V. to Europe in 2024.

Europe is a crucial battleground. Gas-fueled cars are set to be banned in the E.U. in 2035, and the industry fears it is falling behind its Chinese rivals on electrics. Inovev, an auto industry consulting firm, says Chinese brands accounted for 8 percent of new E.V.s sold in Europe this year, up from 4 percent in 2021.

Chinese companies also dominate the E.V. supply chain. Lower labor costs and local battery suppliers have enabled China’s carmakers to build a big lead. CATL, the manufacturer, alone accounts for about a third of the batteries in all E.V.s sold worldwide. UBS analysts say Western car manufacturers could lose a fifth of their global market share by the end of the decade.

The continent’s carmakers face a Chinese conundrum as they play catch-up. Some executives refer to “China speed” to describe the urgency they need to compete with their lower-cost rivals. But they will ultimately face a dual threat from China that won’t end soon, Henry Sanderson, executive editor at Benchmark Mineral intelligence, an E.V. supply chain consulting firm, told DealBook. “European automakers either face exports of Chinese E.V.s or they face a Chinese battery supply chain coming to Europe that they will have to rely on,” he said.

The week ahead

The earnings season is winding down, but there’s plenty on the holiday-shortened calendar this week. Here’s what to watch.

Wednesday: The Fed’s latest “beige book” report, which details economic activity region by region, is set for release. The European Union will also release retail sales data for the eurozone. The 20-nation bloc has been troubled by higher and more persistent inflation than the United States.

In earnings news, GameStop, the video game retailer, reports. The meme-stock momentum that made the stock soar has fizzled, pushing the company’s shares down roughly 25 percent over the past year.

Thursday: Investors will be parsing speeches from a trio of Fed officials — Raphael Bostic, John Williams and Patrick Harker, presidents of the Atlanta, New York and Philadelphia Feds, respectively — for clues on what the central bank will do at its meeting set for Sept. 19-20.

Friday: Kroger, the supermarket chain that is in the process of merging with Albertsons, reports second-quarter results. On the Fed-speech circuit: Bostic and Lorie Logan, president of the Dallas Fed, are scheduled to speak on the economy.

Saturday: The two-day Group of 20 summit begins in India with one big absence: Xi Jinping, China’s leader, will not attend the annual gathering for the first time since coming to power in 2012.



“Investors raise questions after Sequoia Capital’s turbulent year” (FT)

Shares in the skincare company L’Occitane dropped sharply after its billionaire chairman ended talks to take it private. (Bloomberg)

The private equity firm Thoma Bravo is reportedly close to a deal to buy NextGen Healthcare, a tech services company. (Bloomberg)


Why Apple and Microsoft are arguing to E.U. regulators that some of their products aren’t that popular. (FT)

Sam Altman, the C.E.O. of OpenAI, is the first recipient of Indonesia’s new golden visa as the country seeks to draw international investors. (Bloomberg)

Best of the rest

Novo Nordisk, the maker of the weight-loss drugs Ozempic and Wegovy, is now Europe’s most valuable company by market capitalization. (FT)

Black Americans are suffering from occupational segregation that bars them from the highest-paying careers. (NYT)

Here’s a close look at Spotify’s underperforming billion-dollar bet on podcasting. (WSJ)

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Andrew Ross Sorkin is a columnist and the founder and editor at large of DealBook. He is a co-anchor of CNBC’s “Squawk Box” and the author of “Too Big to Fail.” He is also a co-creator of the Showtime drama series “Billions.” More about Andrew Ross Sorkin

Ravi Mattu is the managing editor of DealBook, based in London. He joined The New York Times in 2022 from the Financial Times, where he held a number of senior roles in Hong Kong and London. More about Ravi Mattu

Bernhard Warner joined the The Times in 2022 as a senior editor for DealBook. Previously he was a senior writer and editor at Fortune focusing on business, the economy and the markets. More about Bernhard Warner

Sarah Kessler is a senior staff editor for DealBook and the author of “Gigged,” a book about workers in the gig economy. More about Sarah Kessler

Michael de la Merced joined The Times as a reporter in 2006, covering Wall Street and finance. Among his main coverage areas are mergers and acquisitions, bankruptcies and the private equity industry. More about Michael J. de la Merced

Lauren Hirsch joined The Times from CNBC in 2020, covering deals and the biggest stories on Wall Street. More about Lauren Hirsch

Ephrat Livni reports from Washington on the intersection of business and policy for DealBook. Previously, she was a senior reporter at Quartz, covering law and politics, and has practiced law in the public and private sectors.   More about Ephrat Livni

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