U.S. ban on Chinese investments would take trade war to a new level

Good afternoon. We're back and bringing you what's happening in the business world today.

Situational awareness:

• WeWork announced it will formally pull its IPO filing after a tumultuous series of weeks saw its valuation plummet and the departure of CEO Adam Neumann.
• Forever 21 filed for bankruptcy and plans to close a number of stores in the U.S. and around the world. 

For more updates in Smart Brevity, sign up for one of our Axios newsletters.

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1 big thing: U.S. ban on Chinese investments would take trade war to a new level

By: Dan Primack ? Newsletter: Axios Pro Rata

The Carlyle Group's David Rubenstein has called capital one of America's greatest exports, particularly in regards to China. Now there's talk of a blockade.

The big picture: Bloomberg reported on Friday that the White House is considering limitations on U.S. investments in Chinese companies. Several other news outlets reported the same, including Axios. The White House itself did not confirm or deny the reports.

Details: Discussions included the possibilities of de-listing Chinese companies from U.S. stock exchanges and banning federal employee pensions funds from investing in Chinese equities.

• There is no known talk of making similar restrictions on state or municipal pension funds' direct of indirect investments. But, were it to expand there, it could create major headaches for venture and private equity firms that invest in Chinese companies (even private ones, since hold periods usually extend post-IPO).

What they're saying: A Treasury Department spokesperson subsequently said the administration is not contemplating changes to listing rules for Chinese companies "at this time," and Trump economic advisor Peter Navarro today told CNBC that the original Bloomberg story was "fake news."

• Again, the original reporting was legit.

The bottom line: The trade war may be moving well beyond tariffs, even if those involved are struggling to keep their stories straight.

Go deeper: China seems unfazed by U.S. threats to limit investor access

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2. An inflection point for the market

By: Dion Rabouin ? Newsletter: Axios Markets  

Illustration: Lazaro Gamio/Axios

The market's ebullient mood has soured as September comes to a close and stock traders seem to have lost the risk appetite that had been pushing equities back toward all-time highs.

Why it matters: This week will likely provide an inflection point that will drive the market through the Q3 earnings season, which picks up in mid-October, and could last through the Fed's meeting on Oct. 30.

• The market was in a similar position last September and ended up having its worst year in a decade as concern grew about the Fed's rate tightening cycle.

Between the lines: After 2 weeks of strong inflows to stocks, high yield bonds and other risky assets, investors sold both this past week, rotating back into safe-haven government bonds and money market funds, Bank of America Securities chief investment strategist Michael Hartnett pointed out in a note to clients.

The intrigue: This year has been what analysts at Bank of America Merrill Lynch called "The Miracle on Wall Street" in a recent note. (I called it "The Twilight Zone.")

• The analysts point out the S&P 500 is up 17% this year and on pace to gain 30% despite the fact that investors have been net sellers of equities in every single month, driving a total of $201 billion out of stocks year to date.

What to watch: The all-important U.S. nonfarm payrolls report will be released on Friday, but investors also will get key data on manufacturing from the U.S., China and the eurozone before the end of the week.

• Then there's the political fireworks: Democrats in the House look poised to push forward their impeachment inquiry into President Trump.
• And British Prime Minister Boris Johnson is pushing forward with his quest to pull the U.K. out of the EU with or without an agreement on goods and trade.

The big picture: With good news on politics in short supply and earnings expected to be negative for the second straight quarter, continued solid readings on jobs and consumer spending will be paramount.

• The GM strike could impact September's jobs numbers, which are already slowing, notes Bannockburn Global Forex chief market strategist Marc Chandler.
• The 12-month average of nonfarm payroll growth peaked in February 2015 at 260,000 and has slowed to 158,000 this year.
• "The quarterly average has steadily fallen this year, and it will again if the jobs growth reported on October 4 is less than 178,000," Chandler said.

Go deeper: No telling what impeachment could do to the stock market

Sign up for Dion’s Markets newsletter for a daily look at the news, trends and intrigue dominating business, finance and markets.

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3. Cities aren't ready for the AI revolution

By: Kim Hart ? Newsletter: Axios Cities

Table: Axios Visuals

Globally, no city is even close to being prepared for the challenges brought by AI and automation. Of those ranking highest in terms of readiness, nearly 70% are outside the U.S., according to a report by Oliver Wyman.

Why it matters: Cities are ground zero for the 4th industrial revolution. 68% of the world's population will live in cities by 2050, per UN estimates. During the same period, AI is expected to upend most aspects of how those people live and work.

The big picture: Many cities are focused on leveraging technology to improve their own economies — such as becoming more efficient and sustainable "smart cities" or attracting companies to compete with Silicon Valley.

The bottom line: But the majority of cities have ignored or downplayed the potential and significant downsides of the rise of automation, Oliver Wyman concluded after interviewing more than 50 business and city leaders and reviewing 250 city planning documents.

Go deeper: The cities to watch

Sign up for Kim's Cities newsletter for a weekly look at the technological and demographic trends shaping cities around the world.

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