A US nuclear-powered ballistic missile submarine is expected to make a port call in South Korea for the first time since 1981. The visit was agreed upon by US President Joe Biden and South Korean President Yoon Suk Yeol as part of the Washington Declaration to enhance the "regular visibility" of strategic assets in the Korean peninsula.
Uncertainty over the US debt ceiling is set to continue as traders brace for April inflation data for the eurozone, with European markets predicted to open lower. UBS Group AG is poised to release its financial statement detailing the $17bn hit it took from the takeover of Credit Suisse Group AG. Meanwhile, BlackRock is requesting its staff return to the office at least four days a week as pandemic restrictions are lifted globally. The recession in Japan has lifted as the country rebounds post-pandemic to offset global economic challenges, while Warren Buffett increased his influence in Capital One Financial Corp.
The G7 leaders are meeting in Hiroshima for their annual summit, which will focus heavily on the threat China’s economic coercion poses to the seven countries. The use of that coercion – punitive trade measures – has raised concern throughout Asia-Pacific and Europe, with some countries including Japan, Australia and South Korea having faced trade restrictions following disputes with Beijing over issues related to Taiwan and the origins of Covid-19. The G7 is reportedly preparing a statement of concern over such practices and may suggest ways to co-operate – but members are deeply divided over how to manage their business ties with China.
Under President Joe Biden's Inflation Reduction Act, the US Internal Revenue Service (IRS) is set to receive $80bn over the next 10 years, a move that should aid the agency in auditing high-income taxpayers and securing more tax income for the government. The IRS recently posted new guidelines and has hired a new commissioner, Danny Werfel, who has said a primary objective is to acquire expertise such as accountants and lawyers needed to pursue high-wealth individuals and large corporations that are not paying their taxes. The overhaul will be done in stages over several years.
How the debt ceiling showdown could play into China’s hands and weaken US global power
CNN
23-05-17 04:16
US President Joe Biden’s visit to Asia has been cut short by a debt showdown with Republicans, as he was forced to return home to deal with negotiations over the country’s borrowing authority. Despite leaving for the G7 summit in Japan on 27 April, Biden decided to return to Washington earlier than scheduled, with fears over a crisis that could see the US defaulting on its debts by 1 June. The shortening of the Asia-Pacific trip comes at a time when China has been challenging American power in the region, leading analysts to suggest that it will be an embarrassment for the US. Any default by the US would be a propaganda victory for China, while also undermining US claims to global leadership. Such a scenario would have serious repercussions across the financial markets worldwide, rocking the US and Chinese economies, which are interlinked.
Biden had been hoping to use his trip to bolster US claims as a key regional power, however, the shortened itinerary will only deepen concerns that US domestic political instability will threaten US global staying power. Republicans have been pushing for huge spending cuts in exchange for lifting the government’s borrowing authority, a stance that has resulted in talks between each party in Washington to come to an impasse. There are also concerns surrounding Republicans’ absolutist stance on negotiations, which may have been exacerbated by former President Donald Trump’s comments downplaying the impact of a default during a recent CNN town hall.
Biden to leave Wednesday for shortened overseas trip to Japan
CNN
23-05-17 09:07
US President Joe Biden’s trip to Asia has been cut short due to the impasse over raising the US debt ceiling, which has the potential to cause an unprecedented first-ever default if it is not resolved by November. The debt issue contrasts with Biden’s plan to strengthen American alliances, tackle China’s influence, and show his stamina for another term in office. Biden is heading to Japan, but will miss out on the pre-planned second half of his trip, which included visiting Australia and Papua New Guinea. Meanwhile, a summit of the Quad leaders scheduled to take place in Sydney has been cancelled as Biden will not be attending. There remain concerns of a global economic meltdown if the borrowing limit stalemate is not resolved. Additionally, it could go against the functional democracy kind of image that Biden has sought to present to the world in his attempt to counter the rise of authoritarian regimes.
Gulf stock markets rose in early trading despite concerns around the US government's debt-ceiling negotiations. Saudi Arabia's benchmark index added 0.2%, and Dubai's main share index advanced 0.7%. Family-owned businesses contribute 60% to the United Arab Emirates Gross Domestic Product and 80% of its workforce. The Qatari benchmark climbed 1.3%, with most stocks on the index reporting positive returns.
Leaders from Japan, South Korea and the US will discuss strengthening ties as a response to North Korea and Chinese assertiveness during a meeting today on the sidelines of the Group of Seven (G7) summit in Hiroshima. Top of their agenda will be North Korea's growing nuclear and missile threat, with tensions increasing after a string of missile tests, including five ballistic missile launches last month. The three countries have doubled down on deterrence measures, such as the linking of radars for tracking North Korean missiles, and will discuss details of the real-time intelligence-sharing plans during their meeting in Hiroshima. They will also discuss economic security, strengthening supply-chains and "friendshoring" while looking to reduce dependence on China for critical materials. Earlier this month, officials from Tokyo and Seoul held their first consultation on economic security.
Stellantis, a major car manufacturer with brands including Vauxhall, Peugeot and Citroen, has warned it may close British factories unless the UK government renegotiates its Brexit agreement with the European Union. The carmaker has committed to making electric vehicles in the UK, but says it is impossible to source enough components locally to meet new rules requiring 45% of component value to originate from the UK or EU. The regulations are required to avoid a ten percent export tariff on EVs. The company warned manufacturing would become “unsustainable” if it could not secure competitive prices, potentially resulting in factory closures.
Experts have suggested that it would be challenging to find businesses that could meet the 45% local component requirements. The production of a battery alone typically represents 40% of an EV’s value. Sir Keir Starmer, leader of the opposition Labour Party, has described the threat as an “existential crisis” for the UK car industry, warning of “800,000 jobs” at risk. The head of the Society of Motor Manufacturers and Traders, Mike Hawes, has called for greater investment in battery production in the UK.
Other companies, including Nissan, have expressed concerns regarding local content regulations. Last year, Nissan and Tesla both warned of the increased costs they may face as a result of rules that will require them to relocate factories or double down on supply chain and procurement strategies to avoid punitive export tariffs.
Greenpeace has said that the UK relies too heavily on lithium battery manufacturing and argued that the move away from the low-carbon market would result in greater global reliance on a small handful of multimillion-dollar mining companies, “where the human and environmental costs are generally high”.
US President Joe Biden has cancelled plans to visit Papua New Guinea (PNG), after announcing that he will focus on debt limit talks at home. Biden was expected to make a brief three-hour stopover as part of his tour of the region, making it the first visit by a US president to any Pacific Island nation. His planned trip coincided with a meeting of the Indian prime minister and Pacific Islands leaders to discuss economic cooperation, which will still take place. China has begun to exert influence in the Papua New Guinea region though providing infrastructure and services.
Democrats in the US House of Representatives are preparing to file a discharge petition to raise the country's debt limit if necessary, according to House Democratic Leader Hakeem Jeffries. The move is designed to bypass regular procedures. Jeffries said he was hopeful a bipartisan deal to avoid a default could still be reached, but that "all legislative options" needed to be explored. A discharge petition requires signatures from a majority of House members.
Most Gulf stock markets rose despite concerns over the U.S. government's debt-ceiling negotiations. In Saudi Arabia, the benchmark index gained 0.6%, whereas the Qatari index outperformed the region to finish 2% higher. Emirati markets rose, with Dubai rising 1.6% after four sessions of losses and Abu Dhabi rising 0.5%. In Egypt, the blue-chip index declined, with international investors continuing to be sellers due to global concerns and a declining risk appetite.
The US Federal Reserve (Fed) is unlikely to change its main interest rate despite an anticipated recession, according to a Reuters poll of economic analysts. Of 116 polled, 60.8% forecast that the interest rate would remain steady at 5.00%-5.25% through to the end of 2023, while 14 respondents expected it to rise. Recent market predictions had suggested at least a 50 basis point cut would be seen by the end of Q3 2023. Although a majority of analysts also predicted a US recession in 2023, three-quarters did not expect an interest rate reduction.
The US Federal Reserve is expected to keep interest rates on hold despite a predicted recession this year, according to a poll of economists. A number of policy makers have said they will maintain or raise the federal funds rate, despite the 34 of 46 respondents who predicted a US recession in 2023. The uncertainty surrounding the ongoing debt limit crisis will increase the risk of a default, according to the poll.
House Speaker Kevin McCarthy believes that the United States will not default on its debt now that congressional leaders and President Joe Biden's administration are negotiating. McCarthy defended Republican proposals such as spending caps and work requirements, stating that both would help the US economy. He also confirmed that there would not be a discussion on taxes in the current negotiations with the White House on raising the US debt ceiling.
Texas magistrate judge Irma Carrillo Ramirez has been announced as the Biden administration's nominee to the 5th US Circuit Court of Appeals after being recommended by Texas' two Republican senators. If confirmed, she would be the first Hispanic woman and only active Hispanic judge on the court. Her nomination is seen as an example of how Democrats and Republicans can work together to advance judicial nominees. Republicans have previously been accused of exploiting the "blue slip" tradition to stall nominations, a practice that Democrats are urging the Senate to do away with.
Biden off to Japan for Group of Seven summit, says there’s ‘work to do’ on global stage
The Toronto Star
23-05-17 17:05
US President Joe Biden has warned that there is “work to do” on the global stage, amid high-stakes negotiations in Washington over a federal default and geopolitical concerns over Russia’s invasion of Ukraine and China’s assertiveness in the Pacific. Although Biden pledged to remain in contact with negotiators in the capital while travelling overseas, his trip has already been cut short. Speaking before leaving the White House, Biden stated that he had made “clear America is not a deadbeat nation”, amid concerns that a federal default would not just spark a deep recession but could also weaken its standing on the international stage.
President Joe Biden has gone to Japan for a summit with allied powers focusing on issues such as Russia's invasion of Ukraine and China’s actions in the Pacific. As he departed Washington on Wednesday, talks were ongoing to head off a federal default. Biden is pledging to remain in contact with negotiators in Washington while conducting international diplomacy. Biden had also planned to visit Papua New Guinea and Australia amid the showdown over raising the federal debt limit, but has scrapped these plans. The president is expected to attend the annual G7 summit in Hiroshima to discuss global economic issues, climate change and development.
The US and Palau have reached an initial agreement to renew the Compact of Free Association agreement, a key strategic pact that sees the US provide Palau with defence and economic support in exchange for exclusive access to areas of the Pacific. The renewal follows a similar agreement reached with Micronesia on Monday as part of an effort to counter China's attempt to expand its influence in the region. However, President Biden called off a visit to the region to attend the signing ceremony due to the US debt ceiling crisis, which analysts suggest is a blow to US credibility in the area. The renewal with the Marshall Islands is also due to be signed.
House Speaker Kevin McCarthy believes a deal to raise the US debt ceiling limit is possible by Sunday, the day President Joe Biden has scheduled a news conference on the issue. McCarthy stated the deal is "do-able," potentially averting a default that could have severe worldwide consequences.
