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The World
Pace of US inflation eases to slowest in over two years: The annual pace of US inflation eased last month to its lowest level in more than two years, but lingering price gains will keep pressure on the Federal Reserve to consider additional interest rate increases. The consumer price index climbed 4 per cent in May compared with a year earlier, a significant step down from the 4.9 per cent annual jump registered in April and marking the slowest increase since March 2021. Inflation has also slowed sharply from its peak of 9.1 per cent last June. Consumer prices edged up just 0.1 per cent on a monthly basis in May. (Financial Times)
Persistently high inflation for more than two years has been coming down much more gradually than most thought, which is why the Fed has been so aggressive since the start of last year. The Labor Department reported that consumer prices rose 0.1% in May from April, putting them up 4% from a year earlier for the smallest 12-month increase in over two years. Much of that was because of the sharp decline in the cost of fuel: Prices excluding food and energy items—the so-called core that economists watch to get a better sense of inflation’s underlying trend—rose 0.4% from April, and were up 5.3% from a year earlier. (Wall Street Journal)
US pushing India to seal big armed drone buy for Modi visit: Ahead of Indian Prime Minister Narendra Modi's state visit to Washington, the Biden administration is pushing New Delhi to cut through its own red tape and advance a deal for dozens of U.S.-made armed drones, two people familiar with the matter said. India has long expressed interest in buying large armed drones from the United States. But bureaucratic stumbling blocks have hampered a hoped-for deal for SeaGuardian drones that could be worth $2 billion to $3 billion for years. (Reuters)
House Republicans passed legislation to preemptively block future attempts to restrict gas stoves after overcoming a revolt by the party’s conservative members. The bill — the Gas Stove Protection and Freedom Act — would prohibit the independent Consumer Product Safety Commission from using federal funds to ban the appliances as hazardous products. It passed on a vote of 248-180. (Bloomberg)
San Francisco’s once thriving hotel market is suffering its worst stretch in at least 15 years, pummeled by the same forces that have emptied out the city’s office towers and closed many retail stores. In San Francisco, hotels are still struggling badly in both occupancy and room rates compared with before the pandemic. Revenue per available room was nearly 23% lower in April compared with the same month in 2019. (Wall Street Journal)
San Francisco Mall Turned Over to Lender as Downtown Struggles: Owner of Westfield San Francisco Centre stops paying debt, citing drop in sales and foot traffic. (Wall Street Journal)
Federal officials warn Philadelphia’s I-95 collapse could affect shipping across the East Coast as local businesses feel the squeeze. Meanwhile, Pennsylvania is finalizing plan to reopen the highway. (Philly.com)
Economy
The chief executives of Goldman Sachs and Morgan Stanley said they were seeing “green shoots” in their struggling investment banking businesses, which implemented large-scale dismissals as higher interest rates damped activity. Wall Street firms are suffering through one of the leanest periods in years even by the standards of the feast-to-famine nature of investment banking, with a dearth of capital markets activity and deals as would-be buyers and sellers struggle to agree on price. However, after several quarters of falling investment banking revenues, Morgan Stanley’s James Gorman and Goldman’s David Solomon said the environment was showing signs of improving. (Financial Times)
Trading in options on US short-term interest rates heated up before and after May inflation data released Tuesday, with notable flows including apparent unwinds of wagers on Federal Reserve rate cuts later this year amid continued positioning for a pause in the hiking cycle on Wednesday. Flows in options on the benchmark Secured Overnight Financing Rate after the inflation data included 100,000 December 2023 call spreads, consistent with an unwind or adjustment of a hedge for Fed rate cuts into year-end. (Bloomberg)
Apartment rent growth is declining fast, shifting the rental market to the tenant’s favor for the first time in years. The average of six national rental-price measures from rental-listing and property data companies shows new-lease asking rents rose just under 2% over the 12 months ending in May. That is down from the double-digit increases of a year ago and represents the largest deceleration over any year in recent history. (Wall Street Journal)
Citadel’s Ken Griffin optimistic on growth in China: Billionaire investor Ken Griffin said China could prop up the global economy this year, helping avert an “ugly” slowdown in growth if the US suffers a recession. Speaking to the Financial Times on his first visit to Hong Kong since the Covid-19 pandemic, Griffin said he was optimistic China could beat its growth target. “Why might one be optimistic on China? They’re very clearly putting economic growth back at the top of their priority list,” said Griffin, founder of the US hedge fund Citadel and market maker Citadel Securities. (Financial Times)
China’s real estate slump predicted to last for years, threatening to spill into the wider region. (CNBC)
The Vietnamese economy is facing multiple headwinds, including shrinking exports and frequent blackouts, raising concerns over the outlook for Southeast Asia's rising manufacturing hub. One of Asia's fastest-growing economies in recent years, Vietnam's gross domestic product expanded 8% in 2022, with global companies investing in the country as an alternative production base to China. It also benefits from a young, growing consumer market. But recent data clearly show the economy is slowing. The January to May period saw declines of 11.6% in exports, 17.9% in imports and 2.5% in manufacturing versus the year-earlier period, according to the country's statistics office. The country's GDP growth slowed to 3.3% on the year in the first quarter of 2023, down from 5.9% in the fourth quarter of 2022. (Nikkei Asia Review)
Technology
Four-week-old AI start-up raises record €105mn in European push: A French start-up founded four weeks ago by a trio of former Meta and Google artificial intelligence researchers has raised €105mn in Europe’s largest-ever seed round. Mistral AI’s first round of financing values the Paris-based concern at €240mn, including the funds raised, according to people close to the company. The record amount raised highlights the growing frenzy surrounding AI and Europe’s desire to create a viable alternative to Silicon Valley companies such as Microsoft-backed OpenAI and Google’s DeepMind. (Financial Times)
Saudi Arabia has spent almost $8bn acquiring and building stakes in gaming companies across the globe in the past 18 months as part of a turbocharged investment spree with the aim of becoming a dominant force in the growing entertainment industry. (Financial Times)
A US court issues a temporary restraining order preventing Microsoft's Activision Blizzard acquisition and sets an evidentiary hearing for June 22 and 23, 2023. (The Verge)
In an internal memo to Reddit staff, CEO Steve Huffman addressed the recent blowback directed at the company, telling employees to block out the “noise” and that the ongoing blackout of thousands of subreddits will eventually pass. The memo, a copy of which was obtained by The Verge, is in response to popular subreddits going dark this week in protest of the company’s increased API pricing for third-party apps. Some of the most popular Reddit clients say the bill for keeping their apps up and running could cost them millions of dollars a year. More than 8,000 Reddit communities have gone dark in protest, and while many plan to open up again on Wednesday, some have said they’ll stay private indefinitely until Reddit makes changes. (The Verge)
Smart Links
Microsoft CFO Says OpenAI and Other AI Products Will Add $10 Billion in Revenue. (The Information)
Layoffs and AI Are Changing Tech’s Once-Invincible Job Market. (Bloomberg Businessweek)
Bud Light Loses Title as Top-Selling U.S. Beer. (Wall Street Journal)
Nvidia Joins $1 Trillion Club, Fueled by AI’s Rise; chip maker becomes seventh U.S. company to reach that market capitalization. (WSJ)
AMD reveals new A.I. chip to challenge Nvidia’s dominance. (CNBC)