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The World
President Joe Biden and House Speaker Kevin McCarthy ended discussions with no agreement on how to raise the U.S. government's $31.4 trillion debt ceiling and will keep talking with just 10 days before a possible default that could sink the U.S. economy. The Democratic president and the top congressional Republican have struggled to make progress on a deal, as McCarthy pressures the White House to agree to spending cuts in the federal budget that Biden considers "extreme," and the president pushes new taxes on the wealthy that Republicans reject. (Reuters)
Yellen Says It’s Now ‘Highly Likely’ US Out of Cash Early June. (Bloomberg)
Democrats' debt regrets: A growing number of Democrats now believe the only acceptable escape hatch is for Biden to invoke the 14th Amendment. (Axios)
Americans’ financial health deteriorated sharply in 2022 in the face of elevated inflation, the Federal Reserve concluded in a new report. The share of US adults reporting that they were “doing at least okay financially” fell 5 percentage points in 2022 to 73 per cent, marking one of the lowest readings since 2016. The survey also found that 35 per cent of Americans said they were worse off financially compared to a year earlier, the highest level since the question was first asked in 2014. (Financial Times)
Arizona, Nevada and California said they’re willing to cut back on their use of the dwindling Colorado River in exchange for money from the federal government -- and to avoid forced cuts as drought threatens the key water supply for the U.S. West. The plan, a potential breakthrough in a year-long stalemate, would conserve an additional 3 million acre-feet of water through 2026, when current guidelines for how the river is shared expire. About half the cuts would come by the end of 2024. That’s less than what federal officials said last year would be needed to stave off crisis in the river but still marks a notable step in long and difficult negotiations between the three states. The 1,450-mile (2,334-kilometer) river provides water to 40 million people in seven U.S. states, parts of Mexico and more than two dozen Native American tribes. It produces hydropower and supplies water to farms that grow most of the nation’s winter vegetables. (Associated Press)
A fake image of what was claimed to be an explosion near the Pentagon spread on social media Monday morning, with markets fluctuating around the time the posts appeared online. The image showed a large cloud of black smoke of what verified Twitter users said was next to the Pentagon. The tweet was originally shared on Twitter by the user OSINTdefender, a Twitter account that describes itself as an “Open Source Intelligence Monitor.” The post has since been deleted. Another account that tweeted the image was a verified account impersonating a Bloomberg news feed. That account, called @BloombergFeed, has since been suspended. The photo was also spread by RT, a Russian state-media Twitter account with over 3 million followers. Following the fake Pentagon photo, another image displaying a building purported to be the White House in black smoke started to circulate on Twitter. (Politico)
Turkey’s nationalist third-party presidential candidate has thrown his support behind Recep Tayyip Erdoğan, providing the country’s longtime leader a boost before this weekend’s runoff election. Erdoğan was already heading into this Sunday’s election with strong momentum after he clinched 49.5 per cent of the vote in the first round. (Financial Times)
China firms plagued by payment delays, with big cash-flow risks, survey finds. The average corporate-payment delay fell last year as companies offered longer credit terms, according to survey by Coface between December and March. Construction projects faced the longest payment delays, even as Beijing eased restrictions on financing for the sector following a years-long crackdown. (South China Morning Post)
Coronavirus: new Chinese vaccines on the way, but so are more waves of Covid, experts say. China will soon have two new vaccines to target the most dominant strains of Covid-19 in the country, according to Zhong Nanshan, one of the nation’s top respiratory disease experts. Zhong told the Greater Bay Area Science Forum in Guangzhou that the vaccines targeting Omicron subvariants had received preliminary approval and were expected to be available soon. As many as four other new vaccines were also expected to be approved soon, but he did not give further details about them or when they would be launched. (South China Morning Post)
The golden age of liquidity comes to an end. One of the Fed's most notorious financial statistics is its "$400 emergency expense" question. This year, however, the answers to that question show something important. For the first time since the survey began, the proportion of Americans who say they would cover a $400 emergency expense completely using cash or its equivalent dropped from the previous year. That's in large part a function of pandemic-era cash assistance programs ending. The Fed also asked the same question with a $500 number and got almost identical results. (Axios)
Economy
Jamie Dimon warns souring commercial real estate loans could threaten some banks: Commercial real estate is the area most likely to cause problems for lenders, JPMorgan Chase CEO Jamie Dimon told analysts. “The off-sides in this case will probably be real estate. It’ll be certain locations, certain office properties, certain construction loans,” Dimon said. “You’re already seeing credit tighten up because the easiest way for a bank to retain capital is not to make the next loan,” he added. (CNBC)
Slow Return to Work Pummels Office Stocks: Vacancies climb and rents sink amid a stalled return-to-office rate. (Wall Street Journal)
JPMorgan Chase is planning an “unmatched” spending spree on new initiatives this year of more than $15bn, a sign of how the largest US bank is planning to grow even bigger. The bank said at its investor day on Monday it planned to spend $15.7bn on new initiatives in 2023, which would include hiring, marketing and investment in technology. This would be $2bn more than it spent last year. “Our capacity for investment is unmatched,” said Marianne Lake, co-head of the bank’s consumer and community division. Her business unit is expected to spend $7.9bn on new investments, an increase of $800mn from 2022. Our competitors have not and cannot invest at the levels that we do.” (Financial Times)
Luxury sector at risk from rising social tension due to inequality, says Prada: The heir to the Prada luxury group has said the biggest risk facing the luxury industry is rising social tension due to inequality, as he prepares to take over the Italian family-controlled company. “The biggest risk to luxury is too much social tension between rich and poor,” Lorenzo Bertelli told the Financial Times’ Business of Luxury Summit in Monaco. (Financial Times)
Americans without college degrees are more likely to be denied credit than those who finished college, finds a new report shared first with Axios from left-of-center think tank Third Way. The report highlights the different economic worlds these two groups move in, and comes at a time when the White House and Democratic party are trying to regain a foothold among voters without college degrees — or, as the New York Times put it, "bridge the 'diploma divide'." (Axios)
Technology
Bill Gates says top AI agent will replace search, shopping sites: Gates said the technology race to win is the development of the top artificially intelligent agent, poised to disrupt search-engine, productivity and online shopping sites. "You’ll never go to a search site again," he said. "You’ll never go to Amazon." Speaking at AI Forward 2023, an event in San Francisco hosted by Goldman Sachs Group Inc (GS.N) and SV Angel, Gates said it would disappoint him if Microsoft were not in the running, though there was a 50% chance the top player to emerge will be a startup. (Reuters)
OpenAI is exploring collective decisions on AI, like Wikipedia entries. ChatGPT's creator OpenAI is testing how to gather broad input on decisions impacting its artificial intelligence, its president Greg Brockman said. At AI Forward, an event in San Francisco hosted by Goldman Sachs Group Inc and SV Angel, Brockman discussed the broad contours of how the maker of the wildly popular chatbot is seeking regulation of AI globally. One announcement he previewed is akin to the model of Wikipedia, which he said requires people with diverse views to coalesce and agree on the encyclopedia's entries. Another idea that Brockman discussed is that governments around the world should coordinate to ensure AI is developed safely. (Reuters)
Meta has been fined a record-breaking €1.2 billion ($1.3 billion) by EU regulators for violating EU privacy laws by transferring the personal data of Facebook users to servers in the US. The move highlights ongoing uncertainty about how global businesses may legally transfer EU users’ data to servers overseas. The EU regulator said the processing and storage of personal data in the United States contravened Europe’s signature data privacy law, known as the General Data Protection Regulation. The fine is the largest ever levied under GDPR. (CNN)
Samsung won’t be swapping out the default search engine on its smartphones from Google to Microsoft’s Bing any time soon, according to people familiar with the matter. Samsung, the world’s largest smartphone maker, has suspended an internal review that had explored replacing Google with Bing on its mobile devices, the people said. The potential switch would have swapped out Google as the go-to search engine on Samsung’s “Internet” web-browsing app, which comes preinstalled on the South Korean company’s smartphones. (Wall Street Journal)
Longtime Andreessen Horowitz venture capitalist Jeff Jordan is stepping back from active investments. The fifth-ever general partner at a16z who joined in 2011, Jordan said in a blog post that he would continue to work with his existing portfolio and board positions on the firm’s behalf, but would not write new checks. A managing partner at the firm, Jordan, 64, was also known for investments in home-rental business Airbnb, social media site Pinterest and grocery delivery unicorn Instacart, among others. The Midas List fixture was No. 57 on the 2023 list of the world’s top venture capitalists, his eleventh consecutive appearance. (Forbes)
Micron expects loss of sales after China flags ‘network security risks’. (Financial Times)
Smart Links
Natural gas prices in Asia fall to pre-Ukraine war levels on China shift. (Nikkei Asia Review)
JPMorgan sees rise in corporate defaults in Latin America. (Reuters)
Walmart will offer pet telehealth in latest bid to compete with Amazon. (CNBC)
TikTok sues Montana over its controversial new law banning the app. (TechCrunch)
Jamie Dimon Has No Plans to Step Down as JPMorgan CEO Anytime Soon. (Bloomberg)