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The World
Debt-Ceiling Fight Comes Down to Spending Limits: Negotiators worked Wednesday to reach an agreement on reining in government spending, which has emerged as the central hurdle to a deal to raise the debt ceiling, with a possible government default just a week away. U.S. stocks extended declines Wednesday, reflecting rising anxieties about the debt ceiling, with the Dow Jones Industrial Average posting a fourth-straight session of losses. The White House has offered a spending freeze for next year, while GOP negotiators have insisted that any deal must result in lower discretionary spending, calling it a critical step in starting to address the country’s growing debt, which now stands at $31.4 trillion. (Wall Street Journal)
US credit rating at risk for downgrade amid debt ceiling ‘brinkmanship’: Republican Speaker tries to reassure investors they have nothing to fear as deadline for potential default approaches. (Financial Times)
Yellen Says U.S. ‘Almost Certain’ to Miss Early June Payments Unless Debt Limit Is Raised: Treasury secretary says her agency isn’t helping investors get ready for a potential debt default. (WSJ)
Democrats’ worry grows over White House approach to debt talks: House Democrats say they want more visibility in what is being discussed and more aggressive pushback from President Biden against Republicans. (Washington Post)
Fed Signals Readiness to Act in Case of Debt-Limit Instability. (Bloomberg)
Russian mercenary boss Yevgeniy Prigozhin warned that Moscow’s brutal war could plunge Russia into turmoil similar to the 1917 revolution unless its detached, wealthy elite become more directly committed to the conflict. In a lengthy interview with Konstantin Dolgov, a political operative and pro-war blogger, Prigozhin, the founder and leader of the Wagner mercenary group, also asserted that the war had backfired spectacularly by failing to “demilitarize” Ukraine, one of President Vladimir Putin’s stated aims of the invasion. He also called for totalitarian policies: “Russia needs to live like North Korea for a few years, so to say, close the borders … and work hard.” (Washington Post)
U.S. officials said the drone attack on the Kremlin earlier this month was likely orchestrated by one of Ukraine’s special military or intelligence units, the latest in a series of covert actions against Russian targets that have unnerved the Biden administration. U.S. intelligence agencies do not know which unit carried out the attack and it was unclear whether President Volodymyr Zelensky of Ukraine or his top officials were aware of the operation, though some officials believe Mr. Zelensky was not. The agencies reached their preliminary assessment in part through intercepted communications in which Russian officials blamed Ukraine and other communications in which Ukrainian officials said they believed their country was responsible for the attack, in which two drones were flown on May 3 toward the Kremlin, causing little damage. (New York Times)
Canada and Saudi Arabia have agreed to restore full diplomatic ties and appoint new ambassadors, both countries said, bringing to a close a 2018 dispute that damaged relations and trade. The decision follows discussions held between Canadian Prime Minister Justin Trudeau and Saudi Crown Prince Mohammed bin Salman on the sidelines of the summit of the Asia-Pacific Economic Cooperation (APEC) Forum in Bangkok in November last year, according to statements from Canada and Saudi Arabia. (Reuters)
The US and South Korea are set to begin their largest-ever live-fire drills that will take place near the border with North Korea, which has threatened retaliation against the two nations it labels “war maniacs.” The drills getting underway on Thursday, less than 40 kilometers (25 miles) from the border, are the start of training that runs through June 15. The exercises are expected to include advanced weaponry and drones to better prepare the two allies to work together against North Korea as it ramps up its provocations, South Korea’s military said. (Bloomberg)
Construction at North Korea’s satellite launching station has hit a “new level of urgency,” most likely in preparation for a launch, a U.S.-based think tank said in a report citing commercial satellite imagery. North Korea says it has completed its first military spy satellite, and leader Kim Jong Un has approved final preparations for a launch to place it in orbit, without publicizing a date. Commercial satellite imagery from Monday shows that progress on a new launch pad in a coastal area east of North Korea’s Sohae Satellite Launching Station is moving forward at a "remarkable pace", 38 North, a Washington-based programme that monitors North Korea, said in a report. (Reuters)
Florida Gov. Ron DeSantis officially filed paperwork to seek the Republican nomination in the 2024 presidential election. DeSantis — widely seen as former President Trump's most serious challenger — made a name for himself challenging COVID protocols and pursuing an aggressive conservative agenda on race, gender and education in the state of Florida after easily winning re-election in 2022. DeSantis will use the various moves he's made in Florida — like fighting Disney, banning critical race theory, restricting discussions of sexual orientation and gender identity in classrooms, removing a "Soros-prosecutor," and opposing China — as a proposed "blueprint" for conservative policy across the country. (Axios)
How Airlines Are Trying to Prevent Another Summer Travel Nightmare: Daily airport volumes have been hitting their highest levels as Memorial Day weekend approaches. The coming days will be a test of whether carriers have planned adequately for the crowds the airlines and airports say they are anticipating. (Wall Street Journal)
Economy
McCarthy says debt ceiling standoff ‘not my fault,’ as White House warns of economic risks. A defiant House Speaker Kevin McCarthy said Wednesday the debt ceiling standoff was “not my fault” as he sent Republican negotiators to the White House to finish out talks, but warned the two sides need more time as they try to reach a budget deal with President Joe Biden. McCarthy said he remained optimistic they could reach an agreement before a deadline as soon as next week, when the Treasury Department could run out of cash to pay its bills. Financial markets are teetering as Washington edges closer to a debt default crisis that would be unprecedented in modern times, sending shockwaves around the globe. The White House blamed the Republicans led by McCarthy for risking a devastating default that would hit “every single part of the country” as they demand “extreme” spending cuts that would hurt millions of Americans. “We’re not going to default,” McCarthy, R-Calif., assured. (Associated Press)
The new gold boom: how long can it last? Periods of inflation have often boosted the precious metal. This time it is also being bought by central banks worried about geopolitical risk. (Financial Times)
Threats to the global banking system have ebbed, but the industry might be forced to curtail lending and revamp business models in an era of higher interest rates, industry executives said. “I think as a systemic risk, it’s over,” UBS Chairman Colm Kelleher said at The Wall Street Journal CEO Council Summit in London. “What’s not been solved yet is what is the funding model that will work going forward.”Barclays Chief Executive Officer C.S. Venkatakrishnan added that the acute crisis has passed but that many banks will be forced to change their business models—including possibly by curtailing lending. “I think the phase of initial discovery is over and I think there’s going to be a little bit of a longer-term discovery and adjustment,” he said. (Wall Street Journal)
Men are far more comfortable investing their own retirement money than women, a new Fed survey shows. This is across all education levels, but the gap is widest for those with a bachelor's degree or more, per the Federal Reserve's Economic Well-Being Survey. Which raises a couple of questions: Are men better at investing than women or do they simply believe they're better? And is a high comfort level in investing...a good thing? There's copious research out there that shows a confidence gender gap when it comes to investing, as the New York Times' Jeff Sommer wrote more than a decade ago. Generally speaking, men are overconfident — often to their detriment, he reported. Overconfidence translates into men trading more — often getting the timing wrong and losing money. Whereas women, who are more ready to admit when they don't know something, will buy and hold. (Axios)
Technology
Nvidia’s AI Victory Lap: The most important acronym in business right now is AI, but another one—GPU—isn’t far behind. Today’s earnings forecast from chip designer Nvidia, which makes graphics processing units that power ChatGPT and its ilk, shows what surging demand for the data center chip is worth. Nvidia said it expected to generate about $11 billion in revenue in the current fiscal quarter, which ends in July, up 64% from the same period last year. That figure, which CEO Jensen Huang said will be buoyed by demand for artificial intelligence software, would be $2.5 billion higher than Nvidia’s prior record for quarterly revenue. Then there’s the expected profit increase: Nvidia said gross margins would rise by nearly 4 percentage points in the July quarter. Even before today’s eye-popping projection, analysts expected the company’s earnings per share to rise 30% over the next 12 months, compared to 6% for a basket of 11 other semiconductor companies. It’s difficult to overstate how stock traders reacted to the blockbuster forecast. Nvidia’s shares, which had already doubled this year as AI hype reached a zenith, shot up 25% in after-hours trading. The company was worth $755 billion at the end of normal trading Wednesday, and by Thursday it could be worth more than $940 billion. To put that in perspective, the one-day gain in market capitalization would be 1.5 times what another top chipmaker, Intel, is worth overall. One question is whether supply can keep up with demand. (The Information)
Nvidia expects revenue boom as AI drives chip demand. (Financial Times)
Meta is waging its latest round of layoffs, estimated to impact about 6,000 people. These cuts are part of the company’s so-called “Year of Efficiency,” in which Meta is being massively restructured to save money and flatten the organization structure. This week’s layoffs primarily targeted business roles, while the April layoffs impacted tech teams. Meta also stopped recruiting for around 5,000 open roles. In total, about 21,000 people have lost their jobs at Meta. (TechCrunch)
Apple is planning a new interface for iPhones that shows information such as calendar appointments, the weather and notifications in the style of a smart-home display, part of a flurry of new features coming in its iOS 17 software update. The view will appear when an iPhone is locked and positioned horizontally, operating similarly to dedicated displays offered by Alphabet Inc.’s Google and Amazon.com Inc., according to people familiar with the project. The idea is to make iPhones more useful when they’re, for example, lying on a person’s desk or nightstand. (Bloomberg)
Silicon Valley venture capitalists are coming to terms with a new reality: Their once-prized China investments may be victims of a simmering cold war. As tensions between the U.S. and China have risen, some firms have sought ways to distance themselves from China’s tech scene. NEA, a VC firm whose Chinese investments date back two decades and include TikTok parent ByteDance, hasn’t made a new investment in China since 2021, according to a person with direct knowledge of the matter. And DCM, a U.S. VC firm with a focus on Chinese tech, has discussed giving its limited partners more say over their exposure to Chinese startups, according to a person with direct knowledge of the matter. (The Information)
Volt Typhoon targets US critical infrastructure with living-off-the-land techniques. Microsoft has uncovered stealthy and targeted malicious activity focused on post-compromise credential access and network system discovery aimed at critical infrastructure organizations in the United States. The attack is carried out by Volt Typhoon, a state-sponsored actor based in China that typically focuses on espionage and information gathering. Microsoft assesses with moderate confidence that this Volt Typhoon campaign is pursuing development of capabilities that could disrupt critical communications infrastructure between the U.S. and Asia region during future crises. (Microsoft)
Smart Links
After Years of Resistance, AWS Opens Checkbook for Open-Source Providers. (The Information)
Another Blow to the Return to Offices: Everyone’s Got Allergies. (WSJ)
Check Fraud Is Increasing. (WSJ)
Microsoft says Chinese hackers breached ‘critical’ US infrastructure. (Financial Times)
Singapore beats growth projections on tourism revival. (Financial Times)