| Good morning. Caution urged on Fed policy, potential green shoots in China and record profit for a Swiss lender. Here's what's moving markets. Federal Reserve Bank of Atlanta President Raphael Bostic warned that policymakers need to be cautious to avoid overtightening monetary policy and risking doing any harm to the US labor market. Speaking at an event in South Africa, he said US monetary policy is "appropriately restrictive." Bostic added: "I think we should be cautious and patient and let the restrictive policy continue to influence the economy, lest we risk tightening too much and inflicting unnecessary economic pain." The contraction in China's manufacturing sector eased slightly in August and a gauge tracking new orders showed some improvement, sparking hopes that the worst of the factory downturn in the country may be coming to an end. The market reaction to the data was muted, but it does provide some tentative signs that the targeted measures taken by authorities to shore up the local economy are working. Switzerland's UBS Group has posted the largest quarterly profit on record for a lender as a result of the emergency takeover of rival Credit Suisse. The bank reported a $29 billion profit, a result of the accounting difference between the value of Credit Suisse's balance sheet and the $3.8 billion UBS paid for the bank. That tops the $14.3 billion profit JPMorgan Chase made in the first quarter of 2021. The news sent UBS shares soaring in Zurich, with investors seeing positive signs on the integration of the two companies. US stock futures are mixed, with the S&P 500 little changed but the Nasdaq 100 pointing lower. Treasuries are rising slightly, with markets seemingly in a holding pattern ahead of the nonfarm payrolls report tomorrow. Stocks in Europe are mostly trading higher, crude oil prices are edging up and gold is flat. Initial jobless claims data will top the agenda as the busy week for economic surveys continues, along with personal income and personal spending data. There is a smattering of earnings, including from discount retailer Dollar General and Campbell Soup, while chipmaker Broadcom and PC maker Dell Technologies will report after the close in New York. This is what's caught our eye over the past 24 hours. Today on the Odd Lots podcast, we have our final installment from Jackson Hole, an interview with Hyun Song Shin, who is the Head of Research at the Bank for International Settlements. The topic is financial stability, and how to a large degree the the sources of vulnerability feel very different than what people were concerned with coming out of the last crisis. Post-GFC, there was an effort to purge a lot of "risk" from the banking system, and a lot of that risk was basically credit risk of some sort.
In recent years, however, vulnerability has come from assets largely perceived as safe from a credit perspective, but risky in other ways. SVB went down due to losses in government bonds, as Treasuries sold off due to high inflation and rising rates. The UK saw a spasm last year with its pensions, amid the Gilt selling. And of course, in March 2020, the Fed had to step in to save the Treasury market, when volatility got so high, that even in ultra risk off moment, investors were selling them, instead of buying them. One thing that struck me about the conversation. There was a lot of angst in the 2010s that the entire task of re-igniting growth was left to the central banks. There was stimulus at the start of the Obama administration, but it was slow and didn't go very far. And so we had years of ZIRP and QE without much progress towards growth. In a way that's the story again, but in reverse. This time almost the entire task of fighting inflation has been left to central banks (though one exception is the release of oil from the SPR). There's no real action towards higher taxes or curtailing spending or other measures by which political actors could work to ease inflation. And so it all comes down to rate hikes. And so we get these extremely sharp moves in rates when things start to look like they're getting hot. And then the moves in rates create financial instability, a la SVB.
Anyway, Hyun is a brilliant character and was a perfect person to help wrap up our conversations there.
Check out the episode 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. | 
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