THE TICKER

This is where we are: The Swamp is shunning Saudi Arabia and President Trump is not. 

Two more K Street firms canceled highly lucrative lobbying contracts with the Middle Eastern kingdom on Monday, as the regime considered acknowledging that Saudi agents killed journalist Jamal Khashoggi in what it would describe as an interrogation gone wrong. 

The Glover Park Group, founded by Clinton administration veterans, was earning $150,000 a month helping the regime with a range of issues in Washington, my colleague Tom Hamburger reports. And the Republican-founded BGR Group was pulling down $80,0000 a month. “BGR is no longer working for Saudi Arabia,” said Jeffrey H. Birnbaum, president of BGR’s public-relations division. The pair joined the Harbour Group in cutting ties to the Saudis — that firm terminated its work for the country last week. 

Trump is demonstrating a greater willingness to give the Saudis the benefit of the doubt. The president on Monday morning told reporters he’d spoken for 20 minutes with King Salman, the country’s ruler, who again denied involvement. “I don’t want to get into his mind, but it sounded to me like maybe these could have been rogue killers,” Trump said, previewing the explanation the Saudis adopted later in the day. “Who knows? We’re going to try getting to the bottom of it very soon, but his was a flat denial.” 

Trump is also lagging behind U.S. industry in shunning the kingdom, too. Business elites from Wall Street to Silicon Valley spent the past two years in embracing Mohammed bin Salman, the nation’s 33-year-old crown prince, as a progressive reformer — part of a broader rebranding push by the nation that happened to offer rich rewards in the form of arms deals, banking fees, investments from its quarter-trillion dollar sovereign wealth fund, lobbying contracts and more.

Bold-faced corporate chiefs are now canceling plans to attend Saudi Arabia’s annual Future Investment Initiative, dubbed “Davos in the Desert,” which kicks off for the second time next week. Yet Treasury Secretary Steven Mnuchin is still slated to appear, though a final decision is slated for Friday.

Mnuchin has faced calls from a bipartisan chorus of lawmakers to back out, and former Treasury Secretary Paul O’Neill told the New York Times the notion that Mnuchin would still appear is “ridiculous.”

But Mnuchin, like the president he serves, has invested considerable time and credibility in an alliance with the Saudis. As the Times’s Alan Rappeport notes, “The Treasury Department oversees the United States’ sanctions arsenal, and Mr. Mnuchin has been aggressively urging American allies to step up pressure against Iran after Mr. Trump’s withdrawal from the 2015 Iran nuclear deal. Saudi Arabia has supported that decision, and its influence in the region is needed to help isolate Iran.”

Saudi Arabia still has a number of American business partners so far unwilling to stiff-arm it. Top U.S. defense contractors including Boeing, Raytheon, and Lockheed Martin, for example, all have remained quiet, The Washington Post’s Christian Davenport and Aaron Gregg write. The kingdom has spent $90 billion on American arms since 1950 — and $5.5 billion last year alone. “Lockheed Martin, the largest defense firm in the world, has long counted Saudi Arabia as a key customer. Earlier this year, Marillyn Hewson, Lockheed’s chief executive, hosted Mohammed bin Salman and gave him a tour of the company’s satellite and missile defense production facilities in Sunnyvale, Calif.,” Davenport and Gregg report. “Lockheed has had a presence in Saudi Arabia since 1965, with the delivery of its first C-130 Hercules military transport aircraft. Since then, it has sold the kingdom missile defense systems, helicopters, satellites and ships.”

And the kingdom, for now, can continue to call on a number of K Street firms it has on retainer. The regime spread $27 million around downtown last year — a sum that Hamburger notes makes it one of the freest-spending foreign governments attempting to shape American policymaking. Among those still working with Saudi Arabia, according to disclosures: Hogan Lovells, with former senator Norm Coleman (R-Minn.) on the account; Gibson Dunn, including former U.S. solicitor general Ted Olson; and Brownstein Hyatt Farber Schreck. 

Meanwhile, think tanks — another key tool in the Saudi influence arsenal — are struggling with whether to return donations from the kingdom, BuzzFeed's Emily Tamkin reports. The Middle East Institute says it will stop taking Saudi money, pending clarity about Khashoggi's disappearance; the Center for Strategic and International Studies remains undecided.

MARKET MOVERS

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— Goldman Sachs: Don't panic. CNBC's Jeff Cox: “While investors wait for the sequel to last week's market sell-off, Goldman Sachs strategists think the worst of it already may have passed. As Wall Street recovered from a nearly 6 percent sell-off from the most recent high in the Dow industrials that knocked more than 1,500 points off the blue chip index, Goldman's experts said solid fundamentals should help keep a floor for stock prices. ‘We see limited further downside,’ David Kostin, the firm's chief U.S. equity strategist, said in a note. He added that the kind of pullback the market saw last week was common. ‘Despite the recent sell-off, equity fundamentals are strong and we remain constructive on the path of the S&P 500,’ he added.”

— Yellen: Trump's Fed criticism is unhelpful. WSJ's Nick Timiraos: “Former Federal Reserve Chairwoman Janet Yellen said [Trump’s] attacks on the central bank could be counterproductive if they cause investors to doubt the Fed’s commitment to keeping inflation in check. Ms. Yellen said Monday at the annual convention of the Mortgage Bankers Association that she didn’t think the central bank or her successor as Fed chairman, Jerome Powell, would be influenced by Mr. Trump’s criticism last week, in which he said the Fed had ‘gone crazy’ in its campaign to slowly raise short-term borrowing costs. . . . Ms. Yellen said Mr. Trump was entitled to express his view about monetary policy. ‘There’s no law against that,’ she said. ‘But I don’t think it’s wise.’ ”

— U.S.-Saudi tensions unsettle oil prices. WSJ's Christopher Alessi: “Oil prices closed higher Monday on the back of mounting threats between the U.S. and Saudi Arabia over the suspected killing of a dissident Saudi journalist. … Prices have recently been pulled lower by negative market data, including climbing crude supplies in the U.S. and downward revisions to demand growth by the Organization of the Petroleum Exporting Countries and the International Energy Agency. …The tit-for-tat threats between the U.S. and the Saudis are ‘giving rise to new uncertainty for the oil market,’ according [to] the analysts at Commerzbank.”

— Retail sales disappoint. The Associated Press's Martin Crutsinger: “U.S. consumer spending edged up a slight 0.1 percent in September, a disappointing performance in which rebounding auto sales were offset by weakness in other areas. The Commerce Department said Monday that the scant gain in September followed an equally meager 0.1 percent increase in August. It was the weakest two-month performance since the start of the year and was well below economist projections of a solid 0.6 percent rise in sales.”

Suspense builds for Goldman, Morgan Stanley earnings. Bloomberg: "Unusually divergent results from major rivals in recent days make it harder for investors to anticipate what the figures from Goldman Sachs and Morgan Stanley will look like early Tuesday morning. Might they follow JPMorgan Chase & Co. in missing analysts’ estimates -- or Citigroup Inc., which saw its shares jump on higher-than-expected revenue from fixed-income products? Some analysts studying the numbers say they see bright spots -- such as commodities trading and equities issuance -- that could bode well for Goldman Sachs and Morgan Stanley. Those operations may have helped them counter a slump in investment banking that has bedeviled the industry."

The U.S. housing market is running out of steam, but its slowdown looks nothing like the historic collapse that took down the whole economy in 2007.
The Wall Street Journal
TRUMP TRACKER

TRADE FLY-AROUND:

— China to U.S.: Keep your oil. WSJ's Georgi Kantchev and Rebecca Elliott: “U.S. oil exports to China have slowed to a trickle amid the trade spat between Washington and Beijing, in an abrupt reversal that is upending global crude trade flows and forcing American producers to find new buyers. China was the biggest buyer of U.S. crude oil in the first half of this year. But in August, U.S. crude exports to China, the world’s largest oil importer, fell to zero...

"In September, only 30,000 barrels a day of U.S. oil went to China, down from an average of over 350,000 barrels in the year up till July. . . . For China, ‘putting a dent in U.S. oil exports takes aim at one of the indicators most trumpeted by the Trump administration: U.S. energy dominance,’ said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University and a former energy official in the Obama administration.”

China's third-quarter growth expected to drag. Reuters: "At week’s end, global investors and policy makers will likely be given a stark reminder of the costs of a bitter Sino-U.S. trade war, with a Reuters poll predicting that China’s third-quarter growth will slow to its weakest pace since the global financial crisis... A poll of 68 economists showed gross domestic product likely grew 6.6 percent in July-September from a year earlier, slowing from the previous quarter’s 6.7 percent and hitting the weakest pace since the first quarter of 2009."

Mattis: U.S. not trying to contain China. Bloomberg: "Secretary of Defense James Mattis played down tensions with Beijing, saying the U.S. was 'not out to contain China' and was cooperating whenever possible, but that there would be times they would 'step on each other’s toes.' 'Obviously, we’re not out to contain China. We’d have taken an altogether different stance had that been considered. It has not been considered,' he told reporters Monday on a plane en route to Vietnam." (Mattis looks to be headed for the exits; Trump is considering replacing him with David McCormick, co-CEO of the investment firm Bridgewater Associates, Foreign Policy's Lara Seligman reports.)

— U.S. still wants ban on Iranian oil sales. Reuters's John Irish: “The United States still aims to cut Iran’s oil sales to zero and does not expect restored oil sanctions against Tehran to have a negative impact on a market that is well-supplied and balanced, a senior U.S. official said on Monday. U.S. special envoy for Iran Brian Hook was talking to reporters after a visit to India, a major importer of Iranian oil, and talks with officials from France, Britain and Germany before the start of a new round of U.S. sanctions on Nov. 4 targeting Iran’s energy sector and financial transactions. . . . Hook declined to answer questions on possible waivers on sanctions for countries that are reducing their imports or whether the United States would target the SWIFT international payments messaging system.”

Lai Xiaomin, a former Communist Party secretary and ex-head of Huarong Asset Management, is the latest executive caught up in China’s vast anti-corruption drive.
The New York Times

MELTDOWN WATCH:

President says retailer ‘obviously improperly run’ many years
Bloomberg News
POCKET CHANGE

— Microsoft co-founder Paul Allen dies. The Post's Harrison Smith: “Paul Allen was the self-described ‘idea man,’ the shy son of librarians. Bill Gates was the business-oriented partner who brought the ideas to life. And in 1975, when Mr. Allen was 22 and Gates was 19, the friends formed a company that became known as Microsoft and unleashed a personal-computer revolution that made both men fabulously wealthy. Mr. Allen left the company after only eight years, amid a bout with Hodgkin’s disease and a deteriorating friendship with Gates.

"But he remained a powerful force in technology and philanthropy for decades, investing his billions in an eclectic array of businesses and charitable efforts while acquiring sports teams, discovering World War II shipwrecks and backing aerospace ventures that drew on his childhood fascination with ad­ven­ture stories and science fiction. He was 65 when he died Oct. 15 in Seattle. The cause was complications of non-Hodgkin’s lymphoma, according to a statement from his family. Mr. Allen had battled the disease in 2009 and announced earlier this month that his lymphoma had returned.”

— Bank of America posts profit. AP's Ken Sweet: “Bank of America said Monday that its third-quarter profits rose by 32 percent from a year ago, as higher interest rates allowed BofA to charge more for loans, and lower corporate tax rates helped it save hundreds of millions on taxes. The Charlotte, North Carolina-based banking giant said it earned a profit of $7.17 billion, or 66 cents a share. . . . Like other big banks that have reported so far this quarter, Bank of America’s quarterly results were driven by higher interest rates and lower taxes. BofA’s net interest income rose 6 percent from a year earlier to $11.9 billion.”

— Executives worry about currency. CNBC's Jeff Cox: “While investors worry about the impact tariffs will have on profits, currency issues are scaring companies more so far. Early results from third-quarter earnings season show that more executives are citing foreign exchange pressures than the tariff battle in which the U.S. has found itself with its trading partners, according to a FactSet examination of conference call transcripts. With just 24 companies in the S&P 500 reporting so far, the sample size is small. But it's a trend worth watching as investors look for any sign that could derail what otherwise should be a stellar season . . . So far, 15 of the 24 reporters, or 60 percent, cited foreign exchange issues at some point during their conference calls as a negative factor either in the previous quarter or for the future.”

— Fidelity announces cryptocurrency company. CNBC's Kate Rooney: “Financial services giant Fidelity is taking a huge step into cryptocurrency. The 72-year-old firm announced the launch of a separate company, Fidelity Digital Asset Services, on Monday that will handle cryptocurrency custody and trade execution for institutional investors. ‘Our goal is to make digitally native assets, such as bitcoin, more accessible to investors,’ Fidelity Investments Chairman and CEO Abigail Johnson said in a press release. ‘We expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use.’ ”

— Infosys commits to hiring in America. The New York Times's Steve Lohr: “When Infosys, a big Indian technology outsourcing company, opened a new office in Indianapolis this year, executives hailed it as a step along a new path . . . The company, a shining success story in the Indian economy, is under mounting pressure to hire more Americans and do significantly more work onshore, in what would be a striking overhaul of its corporate culture and its business practices. In the process, Infosys has become a case study of how market forces and immigration changes by the Trump administration are reshaping corporations . . . Other big offshore outsourcing companies are also responding to the market and political threats, including Tata Consultancy Services, Wipro and Cognizant. But Infosys made the biggest, most public commitment to building up its work force in the United States, when the company declared last year that it would hire 10,000 workers in America by sometime in 2019.”

Porsche reined in its finance chief after he fueled speculation that the company was discussing a potential listing of a super luxury group combining Porsche, Lamborghini, Bugatti and Bentley that could value the group at up to $81 billion.
The Wall Street Journal
Chance to play a unique part in ‘Canadian business history’
Bloomberg News
MONEY ON THE HILL

Deficit balloons. The Post's Jeff Stein: "America’s budget deficit ballooned to $779 billion in 2018, the federal government said on Monday, as higher spending and stagnating tax revenue pushed the nation’s debt burden higher. The approximately 17 percent jump in the federal deficit came despite strong growth in the overall U.S. economy, an unusual instance in which the economy and the deficit are expanding at the same time. Typically, strong economic growth translates into lower deficits as the government collects more from taxpayers. 'What’s going on is revenues are not rising when they otherwise would be,' said Marc Goldwein, senior vice president of the Committee for a Responsible Federal Budget. 'The economy is growing by 5 to 6 percent, and revenue is basically flat.'"

From The Post's Heather Long: 

From Bloomberg's Sahil Kapur: 

THE REGULATORS

CFPB to define abusive acts by financial firms. WSJ's Yuka Hayashi: "A federal regulator plans to explain what it considers to be 'abusive' practices by companies selling financial services, a move aimed at giving a clearer idea of what behavior would get companies into trouble under relatively new government enforcement powers. Mick Mulvaney, the Consumer Financial Protection Bureau’s acting director, said Monday the bureau is working on a regulation defining how it views unfair, deceptive or abusive acts or practices, known as Udaap... He said the regulation would aim to remove uncertainty about what term means. 'We need some examples of things that are abusive but not unfair or deceptive.'"

CHART TOPPER

From The Post's Michelle Ye Hee Lee: 

DAYBOOK

Today

  • Kara Stein, commissioner at the Securities and Exchange Commission, takes part in a conversation on “retirement security” at the Brookings Institution in Washington.

Coming soon

  • The American Enterprise Institute hosts a presentation of the book “Finance and Philosophy: Why We’re Always Surprised” by Alex Pollock in Washington on Thursday.
  • The Heritage Foundation holds an event titled “Problems with the JOBS Act and how they can be fixed” in Washington on Oct. 23.
THE FUNNIES

From the New Yorker's Lila Ash:

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Today's daily cartoon by @lila__ash.

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BULL SESSION

Trump: Putin “probably” involved in assassinations:

Trump calls Sears bankruptcy “a shame”:

How U.S. sanctions on Iran are hitting an Iraqi holy city: