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The World
The Federal Reserve has warned that the recent banking turmoil could fuel a broad credit crunch that risks slowing the US economy, while lenders told the central bank they plan to tighten lending standards due to worries about loan losses and deposit flight. Two separate publications by the Fed highlighted mounting concerns that the March collapses of Silicon Valley Bank and Signature Bank and last week’s failure of First Republic will lead to pullbacks in lending and drive down asset prices. The US central bank said in its twice-yearly financial stability report that despite “decisive actions” by regulators and officials to tackle the recent regional bank crises, worries about the “economic outlook, credit quality, and funding liquidity” could lead “banks and other financial institutions to further contract the supply of credit to the economy”. (Financial Times)
Yellen is calling CEOs personally to warn on US debt ceiling, sources say: Treasury Secretary Janet Yellen is reaching out to U.S. business and financial leaders to explain the "catastrophic" impact a U.S. default on its debt would have on the U.S. and global economies, two sources familiar with the matter said. The Treasury secretary is having one-on-one conversations with individual CEOs to warn them about the "dangerous consequences of the current brinkmanship." (Reuters)
Russia launched its biggest swarm of drones for months against Ukraine on Monday, the eve of Russia's May 9 holiday celebrating the defeat of Nazi Germany. Ukraine commemorated the occasion, known as Victory Day, on Monday in a symbolic break with Moscow. President Volodymyr Zelenskiy compared the Ukrainian troops currently fighting Russia with those who had battled the Nazis. Kyiv's mayor said Russia had fired 60 Iranian-made kamikaze drones at Ukrainian targets, including 36 at the capital, all of which had been shot down. Debris hit apartments and other buildings, injuring at least five people in the city. (Reuters)
Britain prepares to send long-range missiles to Ukraine: The U.K. is pushing the Biden administration into providing Ukraine with weapons that can reach further into Russian-held territory. (Washington Post)
Explosions ripped through Gaza early Tuesday morning as Israeli forces assassinated three senior members of the Islamic Jihad terror group, days after a short-lived but fiery flareup of violence set the restive region on edge. Israeli residents of areas within 40 kilometers (25 miles) of Gaza were instructed to enter bomb shelters amid fears of reprisal attacks as sorties continued to thunder across the Strip. Previous strikes on Islamic Jihad leaders have sparked barrages of rockets on Israeli civilians and intense battles with Israeli troops, some lasting several days. At least nine people were killed in the bombing runs, according to the health ministry of the Hamas-controlled territory. (Times of Israel)
Pakistan is locked in an intense debate over its future diplomatic direction, after a recent cable leak exposed the government's inclination to go all-in with China. Experts say Islamabad has grown fed up with a perceived lack of support from the U.S., as the South Asian country wrestles with an economic crisis that has brought it to the brink of debt default. But at the same time, observers say the leaks highlight divisions between Pakistan's civilian leadership and its powerful military, which typically prefers to balance ties with the rival superpowers. (Nikkei Asia)
With China increasingly looking to friendly nations to help lower its grain reliance on the United States and war-torn Ukraine, the first shipload of South African feed corn was offloaded last week. The noteworthy milestone was achieved by China’s largest food processor, manufacturer and trader – COFCO Group, which has for years been cultivating markets in South Africa, a fellow member of the BRICS group of emerging markets and also a participant in China’s Belt and Road Initiative. (South China Morning Post)
Amazon announced the launch of its new unit Amazon MGM Studios Distribution, which will allow the company to license Amazon Originals and other titles to third-party media companies, which could include streaming services (free, ad-supported or subscription) and cable TV. (TechCrunch)
Tennessee Gov. Bill Lee announced that he would call lawmakers back to the state's Capitol on Aug. 21 for a special session after the Republican-led Legislature adjourned earlier this year without taking on gun control. (ABC News)
Global military expenditure rose by 3.7% in 2022, according to new data from the Stockholm International Peace Research Institute. The rise was driven by increased spending in Europe in response to Russia's war in Ukraine and by some Asian countries, such as Japan, to counter China's growing military muscle. Ukraine made the biggest increase by far, shelling out seven times as much as it did the year before the Russian invasion. Russia's expenditure, meanwhile, rose nearly 10%. But, oddly enough, some countries actually invested less in defense despite global geopolitical uncertainty and rising threats. This included Turkey, which is suffering an inflation-fueled economic crisis that's eating into the military budget. (GZERO Media)
Economy
US inflation data in the coming week will provide clues about whether the Federal Reserve can pause its series of interest-rate hikes at next month’s meeting. The core consumer price index, which excludes food and energy, probably increased by 5.5% in April from a year ago after a 5.6% increase a month earlier. The annual advance would suggest just a slight moderation in the pace of underlying price pressures, and that inflation is proving persistent. (Bloomberg)
The Biden administration plans new regulations that would require airlines to compensate passengers when flight times change drastically due to causes within the carriers’ control.The rule-making would require airlines to provide compensation in addition to refunds, similar to passenger-protection measures required in the European Union, when flights are canceled or passengers endure significant delays due to airline-caused disruption. It would also require airlines to cover expenses such as overnight hotel accommodations and transportation during such significant flight disruptions—services many carriers already provide. (Wall Street Journal)
Average new car price hits $48,000, pricing more people out of market: New cars, once part of the American Dream, are now out of reach for many. Higher interest rates have hit as automakers double down on pricier models, as the average price for a new car hit $48,008 in March. (Washington Post)
Small VCs May Struggle to Find New Lenders in Wake of Bank Collapses. Since the collapse of Silicon Valley Bank, Rocky Gor, the founder and CEO of Los Angeles–based loan marketplace Capx, has been approached by a handful of small venture capital firms with a problem: No one will lend to them. In the past, these VC firms relied on a specialized credit line offered by SVB and a handful of other banks, including First Republic Bank, that plugged the gap between when the investors, or limited partners, commit capital to VC funds and when that cash actually arrives. But the collapse of both SVB and First Republic is expected to make these loans harder to get. Big banks—such as JPMorgan Chase, which took over First Republic’s business—are wary of extending these loans, known as capital call credit lines, to the small VC firms that need them most but are seen as riskier bets. (The Information)
Technology
LinkedIn said it would cut 716 jobs as demand wavers, while also shutting down its China-focused job application. LinkedIn, which has 20,000 employees, has grown revenue each quarter during the last year, but it joins other major technology companies including its parent in laying off workers amid a weakening global economic outlook. (Reuters)
The old-fashioned TV business is slowly but surely sliding into the ocean. Yes, folks, while we’ve been obsessing about the money TV companies are losing on streaming, the older businesses have been falling apart. Rates of cord cutting from cable and satellite worsened in the first quarter. Today’s report from Dish Network, a satellite TV operator, showed that it had more TV subscriber defections in the period than in any quarter since 2018, based on data from MoffettNathanson. Dish finished March with 7.09 million TV subscribers, half what it had a decade ago. Meanwhile, the ad downturn is walloping the companies that own the TV networks. Warner Bros. Discovery, owner of TNT and CNN, reported on Friday morning—when few companies report earnings, so many people perhaps weren’t paying attention—that its TV ad revenues fell a whopping 15% in the quarter compared with a year earlier. On Thursday last week, CBS owner Paramount Global reported that its TV ad revenue fell 11%. The Hollywood writers’ strike, if not resolved quickly, could make things worse for the networks. (The Information)
The New York Times is getting around $100 million from Google over three years as part of a broad deal that allows the Alphabet GOOG 1.91%increase; green up pointing triangle unit to feature Times content on some of its platforms. The publisher announced its deal with Google earlier this year, which it described as an expanded agreement that included content distribution and subscriptions, as well as using Google tools for marketing and ad-product experimentation. The deal gives the Times an additional revenue driver as news publishers are bracing for an advertising-market slowdown. (Wall Street Journal)
GPTZero App Seeks to Thwart AI Plagiarism in Schools, Online Media: Journalists, screenwriters and college professors are among widening groups of people who are concerned about eventually losing their livelihoods to artificial intelligence programs like ChatGPT, which can produce copy faster and possibly better than humans. But one entrepreneur is pursuing technology to make it easier to distinguish between text written by people and that composed by a machine. Edward Tian, a 22-year-old Princeton University student studying computer science and journalism, developed an app called GPTZero to deter the misuse of the viral chatbot ChatGPT in classrooms. The app has racked up 1.2 million registered users since January. (Bloomberg)
Alphabet to unveil A.I. updates at Google I/O, showing off creative writing and coding capabilities. (CNBC)
Qualcomm’s longer term bet on the automotive sector as a lucrative customer base for its chips and related communications technology is getting a significant push today: The company announced that it is acquiring Autotalks, a fabless chipmaker out of Israel that builds semiconductor and system-on-a-chip technology to aid in automotive safety; sources tell us Qualcomm is paying between $350 million and $400 million for the startup. Autotalks’ tech is used in sensors that help vehicles (which can be bikes, cars or another form of mobility) and their drivers detect road hazards such as oncoming vehicles in a driver’s blind spots; it also communicates with other vehicles using compatible tech to improve responsiveness. (TechCrunch)
Smart Links
Rare-disease doctors support expanded newborn genomic screening, survey finds. (STAT News)
Goldman Shells Out $215 Million to End Case on Underpaying Women. (Bloomberg)
Writers' strike freezes 'Handmaid's Tale,' 'Game of Thrones' spinoff. (Reuters)
Canada expels Chinese diplomat for allegedly targeting lawmaker. (Financial Times)
The 2023 Pulitzer Prizes were announced. (Pulitzer.org)