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The World
From California to Virginia, many states that faced devastating shortfalls in the depths of the pandemic recession now find themselves flush with tax revenues because of a rebounding economy and a soaring stock market. Lawmakers who worried about budget cuts are now proposing lucrative increases in school spending, tax cuts and direct payments to their residents. That turnaround is partly the product of strong income tax receipts, particularly in states that heavily tax high earners and the wealthy, whose finances have fared well in the crisis. The unexpectedly rosy picture is raising pressure on President Biden to repurpose hundreds of billions of dollars of federal aid approved this year, in order to help fund a potential bipartisan infrastructure deal. (New York Times)
More than a dozen state treasurers are threatening to pull assets from large financial institutions if they agree to decarbonize their lending and investment portfolios. Led by coal-heavy West Virginia, the effort includes treasurers from North Dakota, Kentucky, Pennsylvania and Oklahoma. The state officials signing the letter collectively manage more than $600 billion in assets in state treasuries, pension funds and other government accounts. (Axios)
U.S. home-price growth is surging, as demand overwhelms supply. March marked highest annual rate of price growth—13.2%—since December 2005. (Wall Street Journal)
Trade between the UK and the EU fell by 21.3% in 1Q21 as Brexit and the Covid-19 crisis disrupted businesses. This is far larger than the 0.8% drop recorded for trade between the UK and the rest of the world, suggesting new Brexit rules had a significant impact at the start off the year. The period saw trade between the UK and EU fall behind the country’s trade with the rest of the world for the first time. (The Times)
Why does the EU have so little leverage with Belarus? Brussels has the same problem with Minsk it has with Moscow: The EU needs Russian energy to keep the lights on, and a decent amount of its imported oil and gas flows through pipelines that traverse... Belarus. If the EU really wanted to hurt Lukashenko, it would temporarily stop buying the Russian oil and gas that Belarus collects handsome transit fees for. But the EU would then be shooting itself in the foot, not to mention that such a move — perhaps supported by France — would be fiercely opposed by Germany and Eastern European member states that rely on that route for their energy. It would also mean picking yet another fight with Putin. Finally, the Belarusian economy has a lot in common with Russia's, which is often compared by some economists to a cockroach: primitive in many ways, but highly resilient to pain. Its main export is potash fertilizer, which Belarus can easily sell to other countries to offset a possible EU ban. Foreign direct investment currently stands at a dismal 2% of GDP, so any trade restrictions arising from sanctions would have little effect. (GZERO Media)
Belarus dissident’s ‘confession’ video suggests coercion and torture, experts and advocates say. (Washington Post)
If Belarus gets away with it, other dictators will follow: Autocrats around the world may have a new tool at their disposal. (The Atlantic)
Last year, on one of the northernmost air bases in the world, Russia’s military laid the final stretch of reinforced concrete on a runway to make it long enough to handle modern jet fighters and strategic bombers. The finishing touches to Nagurskoye Airbase, located on a largely ice-locked archipelago in the Arctic Ocean, are turning a once-abandoned staging point for Soviet aircraft into one of Russia’s most advanced military outposts. It is one in a string of new and refurbished bases meant to service the Kremlin’s ambitions in the resource-rich Arctic. The goal is to project Russian power in a region where Washington is lagging. An aircraft taking off from Nagurskoye could reach the U.S.’s northernmost military base, in Thule, Greenland, in under an hour, and New York in around two hours. (Wall Street Journal, Associated Press)
Vladimir Putin and Joe Biden will hold a summit meeting on June 16 in Geneva, in an effort to repair strained relations between the countries. (Financial Times)
The top U.S. health official HHS Secretary Xavier Becerra called for a swift follow-up investigation into the coronavirus’s origins amid renewed questions about whether the virus jumped from an animal host into humans in a naturally occurring event or escaped from a lab in Wuhan, China. Becerra told an annual W.H.O. ministerial meeting that international experts should be given “the independence to fully assess the source of the virus and the early days of the outbreak.” (Washington Post)
Leaders of France and Germany voiced support for making the W.H.O. more independent and building up its ability to respond to global health crises. (New York Times)
Timeline: How the Wuhan lab-leak theory suddenly became credible. (Washington Post)
Taiwan has been hit by a triple blow of drought, blackouts and COVID surge. Maintaining production is crucial to island's economy during the global chip shortage. (Nikkei Asian Review)
Japan's Asahi Shimbun, an official partner of the Tokyo 2020 Olympics, called for the Summer Games to be cancelled in an editorial, citing risks to public safety and strains on the medical system from the pandemic. (Reuters)
In the year since George Floyd’s murder, at least 17 states, including Minnesota, have enacted legislation to ban or restrict chokeholds and neck restraints in the last year. (Los Angeles Times, Minneapolis Star Tribune)
Summer looks bright for domestic travel: 68% of Americans plan to travel domestically this summer, while 18% expect to take an international trip. (Morning Consult)
Economy
If you thought working from home was messy, here comes hybrid work: At JPMorgan Chase, employees on some teams can schedule work-from-home days, but not on Mondays or Fridays. At Salesforce offices that have reopened, Thursdays are proving to be the most popular in-office day, creating high demand for meeting rooms and collaboration spaces, and prompting the company to rethink its office design. PricewaterhouseCoopers execs have voiced worries that workers who stay remote could wind up as second-class corporate citizens. Many managers now worry about a brain drain from their ranks. Some companies that are hiring say they can’t find knowledge workers willing to come into an office five days a week. An upcoming survey of 9,000 workers by Accenture found 83% of respondents viewed a hybrid workplace as optimal. (Wall Street Journal)
Three big trends from the Axios Re:Cap series on America's small business comeback: 1. Tech-tonic shift. The pandemic rapidly accelerated the small business sales model move from offline-to-online, and data suggests that much of the shift is permanent. 2. Most small business owners we spoke with received PPP loans — and everyone was unanimous in their praise of the program, crediting it with helping them continue to pay employees and, in some cases, keep their doors open. 3. No self-pity: Not a single small business owner expressed even an ounce of "woe is me." (Axios)
Small business owners are offering perks like backup childcare and financial planning to lure workers in today's difficult labor market. (Insider)
Private equity exit activity is returning “vigorously” following the pandemic-induced capital markets slowdown in 1H20, according to a survey of more than 100 private equity executives worldwide. EY’s 2021 Global Private Equity Divestment Study, published last week, found that private equity leaders are increasingly considering tax, ESG, digitalization and working capital factors in their divestment of assets. As the attractiveness and valuation of businesses shifts in a volatile period, private equity exit volume is on the rise and firms are refining exit strategies for stronger valuations. (Private Equity News)
Ethereum closes in on long-sought fix to cut energy use over 99%. The shift could boost Ether as Bitcoin’s environmental rap worsens; ETH’s 45,000 gigawatt usage may fall to 1/10,000th of that. Meanwhile, China’s latest crackdown on bitcoin and other cryptocurrencies has shaken the market, as major digital-currency exchanges suspend some activities that targeted users in China. (Bloomberg, Wall Street Journal)
Colleges line up to accept Bitcoin, cryptocurrency donations. Gifting cryptocurrency to a college or university allows donors to avoid paying capital gains tax on earnings. Many institutions are more than happy to jump through hoops to make it happen. (Inside Higher Ed)
Qiming Venture Partners, a prominent China-focussed VC firm whose portfolio includes TikTok owner ByteDance, has expanded into public stock market investments for the first time, with a recently launched $500 million fund that bets primarily on Chinese healthcare companies listed outside mainland China. Qiming’s previously unreported move is part of an emerging trend among top Chinese VC and private equity firms to set up separate entities that invest in publicly traded stocks. (The Information)
Congress seems poised to drain the safe harbor from SPACs, meaning that target companies would be under the same forward-looking liabilities as companies going public via IPOs or direct listings. (Axios)
Technology
Tech antitrust claims:
The District of Columbia Attorney General filed an antitrust suit against Amazon. The suit alleges that Amazon is suppressing competition by blocking merchants using Amazon’s platform from undercutting its price elsewhere. Meanwhile, Germany’s antitrust agency began a new investigation into Google over whether the U.S tech giant has been exploiting its dominant market position in maps, search, video and phones. (The Information)
The last two days of Apple’s high-profile antitrust trial against app developer Epic Games didn’t go the way Apple had hoped. The judge, Yvonne Gonzalez Rogers, voiced concerns about Apple’s App Store levying a 30% tax on digital purchases made in apps, an issue that is at the core of Epic’s complaint. She also said Apple’s practice of forbidding app developers to tell customers they can buy digital goods through a web browser for a cheaper price than what they pay in the apps “seems to be anticompetitive.” And Apple’s decision to put CEO Tim Cook on the stand backfired when he claimed under oath to not know basic details of his own business. (The Information)
A breakdown of the different arguments pertaining to the App Store and how they were presented and discussed in the Epic vs Apple trial. (Ben Thompson/Stratechery)
Microsoft, Accenture, and Goldman Sachs are teaming up with nonprofits like the Linux Foundation and climate groups to develop and share ways to build software that produces fewer carbon emissions when run in data centers. The Green Software Foundation, whose founders also include Microsoft-owned GitHub and software consultancy ThoughtWorks, plans to build tools and create standards for measuring the climate impact of software, and will work on training for software engineers who want to learn how to build programs that consume less energy. Data centers now account for about 1% of global electricity demand, and that’s forecast to rise to 3% to 8% in the next decade. (Bloomberg)
One perhaps predictable side effect of iOS 14.5 has been a major jump in spending on Android. The Post-IDFA Alliance study says spending on Android has jumped by between 8% and 21%, whereas spending on iOS fell by a more modest 2% to 3%, according to alliance members like mobile ad platforms AdColony and Liftoff. The cost of advertising on iOS has also dropped, although the study says this may be temporary. Further, iPhone is where the money is, accounting for more than 65% of global mobile revenue despite having a fraction of the install base. (Protocol, Post-IDFA Alliance)
Smart Links
Microsoft teases a ‘next generation of Windows’ announcement ‘very soon.’ (The Verge)
China’s renminbi hits three-year high against dollar. (Financial Times)
Snap hires Amazon's Darcie Henry as new chief human resources officer. (Axios)
Rural Italy scrambles to keep young workers in the countryside after many fled cities during the pandemic. (Bloomberg)
Greenland’s ice sheet is releasing huge amounts of mercury into rivers. (New Scientist)
a16z bets millions on Maven, a platform for cohort-based courses. (TechCrunch)
Roku wants to expand into smart home devices. (Protocol)
Live Events
Today, 2 pm ET: Trust in Financial Services: What Builds It, What Breaks It. For the first time ever, Morning Consult asked U.S. consumers how much they trust the financial services industry overall. Perhaps not surprisingly, financial services rank among the industries where trust is most important, second only to the healthcare industry. (Register: Morning Consult)
Today, 2 pm ET: The New Normal in the Workplace — How to prepare your workplace for the “new normal” as the threat of COVID gradually declines. How do you support your teams as they emerge from the trauma of COVID? What are the new expectations for workplace flexibility and support? (Register: Loyola University)