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The World
President Joe Biden and top lawmakers agreed to further talks aimed at breaking a deadlock over raising the $31.4 trillion U.S. debt limit, with just three weeks before the country may be forced into an unprecedented default. After about an hour of talks in the Oval Office, Biden, a Democrat, and House of Representatives Speaker Kevin McCarthy, a Republican, committed their aides to daily discussions about areas of possible agreement as a default looms as soon as June 1. (Reuters)
Biden says he’s exploring 14th amendment to defuse debt ceiling standoff: The president said he would look at possibly invalidating the debt ceiling through the 14th amendment “months down the road.” (Politico)
How the debt limit is playing in the primary. (Politico Playbook)
Americans Lack Confidence in Major Economic Leaders: With the U.S. facing a deadline to increase the nation’s debt limit and the threat of an economic recession looming, Americans lack confidence in a variety of key U.S. leaders on economic matters. Gallup finds between 34% and 38% of U.S. adults expressing a "great deal" or "fair amount" of confidence in President Joe Biden, Federal Reserve Chair Jerome Powell, Treasury Secretary Janet Yellen and congressional leaders in both major parties to do or recommend the right thing for the economy. (Gallup)
Putin tells WWII event West is waging a ‘real war’ on Russia: President Vladimir Putin declared Tuesday that the West has unleashed “a real war” against Russia, reprising a familiar refrain at scaled-down Victory Day celebrations that may reflect the toll the Ukraine conflict is taking on his forces. Putin’s remarks came just hours after Moscow fired its latest barrage of cruise missiles at targets in Ukraine, which Russia invaded more than 14 months ago. Ukrainian authorities said air defenses destroyed 23 of 25 missiles launched. “Today civilization is once again at a decisive turning point,” Putin said at the annual commemorations celebrating the defeat of Nazi Germany in World War II. “A real war has been unleashed against our motherland.” (Associated Press)
Ukraine has accused Russia of effectively halting the Black Sea grain export deal by refusing to register and inspect cargo ships, creating a backup of 90 vessels in Turkish territorial waters. The deal is set to expire on May 18 and Russia has signaled it intends to extract major concessions to agree to renewal. (Reuters)
EU Targets Eight Chinese Companies in Russia Sanctions Push: The European Union is considering sanctioning eight Chinese companies over Russia’s war in Ukraine, diplomats said, with the bloc looking to target firms they believe have provided Moscow electronic items, including semiconductors, that can be used for military purposes. The proposed listings are part of an 11th package of sanctions against Russia over its invasion. (Wall Street Journal, Morning Consult)
Fears mount for the Arctic as cooperation with Russia stalls: For nearly three decades, the Arctic Council has been a successful example of post-Cold War cooperation. Now, a year after council members stopped working with Russia following its invasion of Ukraine and as Norway prepares to assume the chairmanship from Moscow on May 11, experts are asking whether the polar body's viability is at risk if it cannot cooperate with the country that controls over half of the Arctic coastline. An ineffective Arctic Council could have dire implications for the region's environment and its 4 million inhabitants who face the effects of melting sea ice and the interest of non-Arctic countries in the region's mostly untapped mineral resources. (Reuters)
Chinese Foreign Minister Qin Gang met with U.S. Ambassador to China Nicholas Burns to emphasize the need to stabilize relations and "prevent accidents between China and the United States," in what's the highest level engagement between the two countries since the February spy balloon incident. Chinese police launched a raid against another consulting firm with U.S. ties, Capvision Partners, and state broadcaster CCTV accused Western countries of spying on China's key economic sectors to suppress China. (New York Times)
Japan, South Korea to link radar systems to track N.Korea missiles. (Reuters)
Economy
The Fed’s watching commercial real estate: Trouble in the commercial real estate sector — including office buildings across the country that stand largely unoccupied — is a possible risk to the U.S. financial system. That's one takeaway from a new report by the Federal Reserve that offers a twice-yearly assessment of what the central bank sees as its biggest concerns. A huge shift in where white-collar staff decides to work is rippling through the commercial real estate market, with warnings that sharp drops in property valuations will follow as office space demand slumps. That could spell trouble for the already battered financial sector, with uncertainty about the ultimate effect on the economy. (Axios, Federal Reserve)
Key measure of bank stress eases. (Axios)
The decline of the five-day commute is a boon to suburban retail. A growing number of restaurants and retail businesses in city office districts are relocating their businesses to the suburbs, where visits to shopping centers are on the rise as fewer people commute to downtown workplaces. Even high-end enclosed malls, which were hard hit by the Covid-19 pandemic, are showing signs of improvement. The changes are coming at the expense of city retailers that are struggling to draw customers back. (WSJ)
Home Prices Fell in Third of the U.S. During First Quarter: Prices drop in more parts of the U.S. than they have in over a decade. The hardest-hit housing markets were concentrated in California and the Mountain West. San Francisco posted a 14.5% median single-family existing-home sale-price decline compared with a year earlier, and San Jose median prices fell 13.7%. Pandemic boomtowns Austin, Texas, and Boise, Idaho, also posted price declines of more than 10%. (Wall Street Journal)
Chinese investment into Europe fell to its lowest point in almost a decade last year as European countries tightened rules to stymie a slew of Chinese acquisitions. The 22% decline in investment in 2022 reflects Europe’s recent moves to police the sale of assets to China after years of enthusiastically courting investment from Beijing. The researchers found that at least 10 out of 16 investment deals pursued in 2022 by Chinese entities could not be completed in the technology and infrastructure sectors, principally because of objections raised by authorities in the UK, Germany, Italy and Denmark. (Financial Times)
China’s imports fall in April as clouds gather for economic outlook: Slowing export momentum after unexpected March surge points to uneven recovery. (Financial Times)
China Finally Has a Rival as the World’s Factory Floor: As Western companies desperately search for a backup to China, their governments see democratic India as a natural partner, and the Indian government has pushed to make the business environment more friendly than in the past. Only India has a labor force and an internal market comparable in size to China’s, though the former remains mostly poor and unskilled. (WSJ)
Wall Street’s Hiring Binge Turns Into Bloat: Morgan Stanley’s decision to cut roughly 5% of its staff, or 3,000 people, has drawn headlines as a sign of how banks are responding to the near-dead initial public offering and deal markets. But the cuts at Morgan Stanley, as at other banks, will only make a small dent in workforces that expanded sharply in the pandemic era. Between the end of 2019 and the end of December 2022, Morgan Stanley expanded its workforce by 36%, or nearly 22,000 people, to more than 82,000. That came partly from acquisitions—the bank completed purchases of E-Trade and Eaton Vance during that period—but also as trading and dealmaking accelerated in a zero interest rate environment. The latest layoffs will reduce Morgan Stanley’s staff to 79,000, still a huge increase on the bank’s employee numbers in 2019. (The Information)
Technology
Why most car dealers still don’t have any electric vehicles: A new survey finds two-thirds of car dealers didn’t have a single electric vehicle for sale. A big part of it is due to supply chain blockages, with shortfalls in semiconductor and battery production preventing manufacturers from making enough electrics to meet demand. But 45 percent of dealers without EVs said they wouldn’t sell them even if they were available. The structure of the car sales model can put dealers, manufacturers, and customers at odds since the economics of EVs can disrupt the business model for dealerships. It’s another critical choke point: If a dealer is resistant to stocking electric cars and trucks, a buyer might not have any nearby options for the specific EV they want since manufacturers grant dealers monopolies in a given area. (Vox)
This abundant material could unlock cheaper batteries for EVs: Sodium. Lithium is currently the ruler of the battery world, a key ingredient in the batteries powering phones and electric vehicles. But as concerns about the supply chain swell, scientists are looking for ways to cut down expensive, hard-to-source battery ingredients. While there are already options that reduce the need for some, like cobalt and nickel, there’s been little recourse for those looking to dethrone lithium. But over the past few months, companies in China have announced forays into a new kind of battery chemistry that replaces lithium with sodium. In theory, these new batteries could help push costs down. (MIT Technology Review)
Tesla Breaks Ground on Lithium Refinery. (The Information)
ChatGPT Fever Has Investors Pouring Billions Into AI Startups, No Business Plan Required: Amid broader venture-capital doldrums, it is boom times for startups touting generative artificial intelligence tech. Analysts at research firm PitchBook predict that venture investment in generative AI companies will easily be several times last year’s level of $4.5 billion. As with the recently ended bull run of broader startup investing, though, investors often are jumping into AI startups even when it isn’t clear how they will make a profit—especially since the computational power required to train AI services can sometimes amount to tens of millions of dollars a year or more. The sudden influx of capital is also encouraging many AI researchers, some without management or operations experience, to start their own companies, adding to competition. (Wall Street Journal)
Spotify ejects thousands of AI-made songs in purge of fake streams: Platform cracks down on bots posing as listeners as flood of content rattles music industry. (Financial Times)
Smart Links
A Crisis Over Child Care Is Holding Back Companies and Blue-Collar Workers. (Wall Street Journal)
OpenAI CEO Sam Altman Says the Remote Work ‘Experiment’ Was a Mistake—and ‘It’s Over’. (Fortune)
‘Over Our Dead Bodies’: Backlash Builds Against $3 Trillion Clean-Energy Push. (Wall Street Journal)
Your job is (probably) safe from artificial intelligence. (The Economist)