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The World
Don’t count on Fed Chair Jerome Powell to ride to the rescue of a faltering stock market -- at least not yet. Kansas City Fed President Esther George said that the market rout was no surprise in light of the central bank’s repeated caution that it will continue raising interest rates to cool the hottest inflation in decades. While she acknowledged equities were having a “rough” week, her remarks did nothing to soften the tone set by Powell on Tuesday, who warned that officials seek “clear and convincing” evidence that price pressures are retreating. (Bloomberg)
The U.S. economy could be heading for a recession in the next year, according to growing warnings from banks and economists. This week alone, former Goldman Sachs chief executive Lloyd Blankfein warned of a “very, very high risk” of recession; Wells Fargo CEO Charlie Scharf said there was “no question” that the U.S. economy is heading toward a downturn; and former Fed chair Ben Bernanke cautioned that the country could be poised for “stagflation” — a slowing economy combined with high inflation. (Washington Post)
Beijing warned that President Biden is making a “visit of destruction” as he begins a tour of US allies in Asia, while speculation mounts that North Korea will try to turn up the pressure on the US by carrying out a nuclear test to coincide with his visit to South Korea. Biden’s six-day tour of South Korea and Japan will destabilize the region, China warned, as South Korea said it had information that Pyongyang would mark the US leader’s trip with its first nuclear weapons test for five years. (The Times)
Satellite photos suggest China training to attack Japan's aircraft: China has set up an object that appears to be modeled on an airborne warning and control system (AWACS) plane used by the Japan Air Self-Defense Force (JASDF) in a desert area of Xinjiang, Nikkei has learned after analyzing satellite photographs with experts. (Nikkei Asia Review)
US lawmakers discussed measures that Washington should take to help defend Taiwan against any moves by mainland China’s military, including expedited weapon sales meant to arm Taipei “to the teeth”. (South China Morning Post)
Climate change threatens China with yet another deadly flood season. The government forecasts that flooding could be as bad as last summer when torrential rain killed hundreds and caused billions in damage. (Bloomberg)
Sen. Kyrsten Sinema (D-Ariz.) wants the Senate's bipartisan energy and climate talks to prioritize domestic battery production — and make it easier to mine critical minerals at home. Sinema's engagement on mining reform reveals both the possibilities — and pitfalls — of a potential bipartisan deal. Democrats are eager for a win this critical midterm year. Sinema's support for permitting the mining reforms puts her on the same page as Sen. Joe Manchin (D-W.Va.) — as well as some Senate Republicans. (Axios)
Student debt gap still growing: Racial and income gaps that affect students’ ability to attend and pay for college continue to grow and contribute to more debt and less wealth for certain groups of students, according to an annual report on equity trends in higher education. The “Indicators of Higher Education Equity in the United States: 2022 Historical Trend Report,” released Tuesday, showed that students from low-income families and those who received Pell Grants borrowed $43,983 to attend college, compared to $25,375 borrowed by students from higher-income families. Black students from low-income backgrounds borrowed $27,066 more than white students from similar backgrounds. The report also showed that four years after receiving their undergraduate degrees, 48 percent of Black students owed more than the amount they originally borrowed, while 17 percent of white students did. Black students owed an average of 6 percent more, while white students owed an average of 10 percent less. (Inside Higher Ed)
Economy
More subprime borrowers are missing loan payments: Consumers with low credit scores are falling behind on payments for car loans, personal loans and credit cards, a sign that the healthiest consumer lending environment on record in the U.S. is coming to an end. The share of subprime credit cards and personal loans that are at least 60 days late is rising faster than normal. In March, those delinquencies rose month over month for the eighth time in a row, nearing their prepandemic levels. (Wall Street Journal)
The euro is nearing parity with the dollar: Here’s what it could mean for investors: Sam Zief, global head of FX strategy at JPMorgan Private Bank, told CNBC on Wednesday that the path to parity would require “a downgrade in growth expectations for the euro area relative to the U.S., akin to what we got in the immediate aftermath of the Ukraine invasion.” (CNBC)
Japan inflation hits 7-year high of 2.1% in April, as consumer prices shoot past central bank's 2% target. (Nikkei Asia Review)
Salesforce will slow hiring and cut back other expenses. The company will join Meta, Netflix, Coinbase, Uber and others that have slowed or frozen hiring in recent weeks. Per an internal memo, cutbacks will include corporate travel and some upcoming off-sites. (Protocol)
Goldman Sachs is losing its most powerful Black women, according to new data the firm released in a report on its website. The bank had 19 Black women among its executives and senior officials as of November 2021, the bank said, down from 25 a year earlier, while the 24 Black men in that top rank stayed the same. Yet the bank’s overall Black employees in the US grew to 1,649 from 1,425, representing a boost to 7.4% from 6.8%. (Bloomberg)
A survey of 600 full-time Gen Z employees in the U.S. by hybrid work platform Robin: 39% of Gen Z employees want to start a family; 49% of them want to buy a home in the next five years. The majority of Gen Z employees surveyed are planning on leaving their roles within two years. However, salary bumps of more than 10% would help them stay put. 46% of Gen Z staffers working from the office full-time wish they were hybrid, and 20% wish they were fully remote. (Protocol)
What’s the Outlook for Digital Assets? Recent volatility underscores that crypto assets are still an emerging asset class with a large number of retail participants, Mathew McDermott, global head of digital assets at Goldman Sachs, explains. “The move so far has been correlated to the broader macro market moves,” notes McDermott, who points out that nearly every asset class with discounted cash flows has been hard hit by inflationary pressures. Blockchain, crypto and digital currencies are gaining broader acceptance among investors, companies and institutions. “Maturity across both the market participants and the infrastructure has given not only confidence to many different institutional sectors, but also has enabled many more traditional traders to really look forward in how they trade this marketplace because of this maturity in the product suite,” McDermott says. Venture capital investments in digital assets are surging. While valuations are pretty high, there continues to be “high levels of interest because people continue to see exponential growth opportunities and are keen to deploy that capital,” says McDermott. “I think valuations have got a little out of kilter, so perhaps we'll see some more sensible valuations in terms of investment opportunities, too.” (Goldman Sachs)
Technology
Y Combinator is advising its portfolio founders to “plan for the worst” as startups across the globe scramble to navigate a sharp reversal after a 13-year bull run. The investment firm — whose early backings include investments in Dropbox, Coinbase, Airbnb and Reddit — this week suggested startups cut their expenses and focus on extending their runways within the next 30 days. For those who don’t have the runway to “reach default alive,” YC is strongly suggesting that they consider raising money. “If your plan is to raise money in the next 6-12 months, you might be raising at the peak of the downturn. Remember that your chances of success are extremely low even if your company is doing well. We recommend you change your plan,” the firm said in the letter, titled “Economic Downturn.” (TechCrunch)
As telework continues for many U.S. workers, no sign of widespread ‘Zoom fatigue’: More than half of workers who say their jobs can mainly be done from home say they often use online platforms to connect with co-workers (56%). Most of these workers say they are fine with the amount of time they spend on video calls, but about one-in-four say they are worn out by it. (Pew Research Center)
Apple executives previewed its upcoming mixed-reality headset to the company’s board last week, indicating that development of the device has reached an advanced stage. (Bloomberg)
At Cameo, boom times give way to a sharp sales slowdown: As the end of pandemic restrictions cooled demand, the startup pushed staff to increase recruitment of celebrities, including former convicts and porn stars, and shelved its remote-first approach for some employees. Customer orders still fell far short of Cameo’s own goals. (The Information)
In the 10th annual Disruptor 50 list, CNBC highlights private companies that grew through the ups and downs of the pandemic and are poised to meet increasing economic and consumer challenges. All told, these firms have raised a half-trillion dollars in venture capital. At least 41 are unicorns, with valuations of $1 billion or more – 14 are valued at over $10 billion. But becoming a unicorn has become all too common, and as market volatility pressures valuations in both public and private markets, other stats stand out: 40 of the companies have a social or environmental purpose that is core to their business model. 10 of this year’s Disruptors are from the logistics sector, tackling the broken global supply chain that has fueled four-decade high inflation. Eight are reducing costs in a bloated health-care system and reaching underserved populations. Several more are dedicated to the climate crisis. Nine of this year’s Disruptors have a female founder. Sixteen feature CEOs from racial and ethnic minorities. (CNBC)
Smart Links
How relocating Americans created new inflation hot spots. (CNBC)
Japan to make big companies report gender pay gaps. (Nikkei Asia Review)
Amazon is being sued for pregnancy discrimination. (Protocol)
Teen tracking Musk’s jet says he’s now tailing Zuckerberg, too. (Bloomberg)
Anti-aging drugs are being tested as a way to treat covid. (MIT Technology Review)
Nearly 2 million households cut the cord in Q1. (Protocol)
Managers' prior work evaluations can affect diversity efforts. (MIT Sloan)
1955 Mercedes auctioned for $143 million, making it the most expensive car ever sold. (CNBC)