Speak Your Mind 2 Cents at a Time
Sammy Hudes of the Canadian Press reports BCE cuts quarterly dividend, signs fiber deal with PSP Investments:BCE Inc. cut its quarterly dividend payment to shareholders and announced a partnership deal with the Public Sector Pension Investment Board to help accelerate the development of fibre infrastructure in the U.S.
BCE chief executive Mirko Bibic said Thursday the dividend cut comes as the company faces intense price competition against a backdrop of macroeconomic and geopolitical instability.
The company said it will now pay a quarterly dividend of 43.75 cents per share, down from 99.75 cents per share. The decision cuts BCE’s annualized dividend to $1.75 per common share from $3.99.
“As we debated this, deliberated at the board, certainly having taken and having listened to the perspectives of investors over the last few months, we decided that resetting the dividend ... was the most responsible way to address our capital allocation strategy,” Bibic said in an interview.
“Essentially the new dividend level allows us to de-lever and invest for growth.”
Inflation and the prospect of a global recession are weighing on consumer confidence, the company said, while reductions in BCE’s share price have resulted in higher capital costs. BCE’s board also considered factors such as an “unsupportive regulatory environment given recent CRTC decisions” and a slowdown in immigration to Canada.
Bibic said there have been “significant changes” in the economic and operating environments since the fall of 2024 that the company needs to address.
While last quarter began with wireless prices stabilizing, the latter half of that period saw more fluctuations. That, along with the “overall macro environment” affected Bell’s ability to boost subscriptions, Bibic said.
BCE had a net loss of 9,598 postpaid mobile phone subscribers in its first quarter, compared with 45,247 net activations during the same period a year earlier.
The company cited a “less active market,” slowing population growth due to federal immigration policies, and its own focus on “higher-value subscriber loadings.” Bibic said there were 25,000 net new customers on the main Bell brand in the quarter, which was down 9,000 year-over-year.
The company said customer churn — a measure of subscribers who cancelled their service — was stable at 1.21 per cent. BCE’s mobile phone average revenue per user was $57.08, down 1.8 per cent from the prior year.
The dividend cut came as BCE reported net earnings attributable to common shareholders of $630 million or 68 cents per diluted share for its first quarter, up from $402 million or 44 cents per diluted share a year earlier.
On an adjusted basis, BCE says it earned 69 cents per share in its latest quarter, down from an adjusted profit of 72 cents per share in the same quarter last year.
Operating revenue totalled $5.93 billion, down from $6.01 billion a year ago.
Meanwhile, Bibic told analysts on a conference call that BCE’s previously announced deal to buy U.S. fibre internet provider Ziply Fiber for about $5 billion in cash is expected to close in the second half of 2025.
Under a plan announced Thursday, Ziply Fiber will become a long-term partner to Network FiberCo, jointly owned by PSP Investments and BCE, as the exclusive internet service provider to locations passed by Network FiberCo.
BCE through Ziply Fiber will hold a 49 per cent equity stake in Network FiberCo, while PSP Investments will own 51 per cent. PSP Investments has agreed to a potential commitment in excess of US$1.5 billion.
“We anticipate that more institutional investors will now consider investing in BCE to diversify their Canadian telecom positions, which should provide support and counterbalance the selling pressure from dividend seekers selling over the coming weeks,” said Desjardins analyst Jerome Dubreuil in a note.
Network FiberCo will be focused on “last-mile fibre deployment” outside of Ziply incumbent service areas in the Pacific Northwest, enabling Ziply to potentially reach up to eight million total fibre passings.
Bibic said that would make BCE the third-largest fibre internet provider in North America, essentially doubling the number of locations where it already serves fibre customers in Canada.
“There’s clearly long-term growth potential in this critical space,” Bibic said.
Earlier this year, BCE said it would scale back plans for the build of its fibre internet footprint in Canada, as a response to regulatory rules implemented by the CRTC surrounding internet resell access.
Bibic said Thursday the company will continue to advocate to the telecom regulator and new federal government when it comes to competition policy. He reiterated that BCE’s largest competitors should not have the ability to resell fibre services through Bell’s network.
“We’re continuing to build fibre, we’re just doing it at a slower pace than we anticipated,” he said in an interview.
“Large players should invest in their own networks. That increases competition and it increases network resiliency, and it’s the best way to ensure that all Canadians, including rural, are connected.”
Earlier today, BCE and PSP Investments issued a press release announcing a strategic partnership to create Network FiberCo:
MONTRÉAL, May 8, 2025 – BCE Inc. (TSX: BCE) (NYSE: BCE), Canada’s largest communications company1, and Public Sector Pension Investment Board (PSP Investments), one of Canada’s largest pension investors, today announced the formation of Network FiberCo, a long-term strategic partnership to accelerate the development of fibre infrastructure through Ziply Fiber, in underserved markets in the United States.
As a premier wholesale network provider, Network FiberCo will be focused on last-mile fibre deployment outside of Ziply Fiber’s incumbent service areas, enabling Ziply Fiber to potentially reach up to 8 million total fibre passings.
PSP Investments has agreed to a potential commitment in excess of US$1.5 billion.
Leadership Perspectives
“Today’s announcement represents a pivotal step in BCE’s fibre growth strategy. By bringing PSP Investments’ financial resources and acumen to Ziply Fiber, we are creating a scalable, capital-efficient platform to fund U.S. fibre footprint expansion. This strategic partnership will improve free cash flow generation and strengthen EBITDA accretion over the long term, reinforcing our commitment to delivering long-term value for shareholders while maintaining financial discipline.”
Mirko Bibic, President and CEO, BCE and Bell Canada
“PSP Investments is pleased to partner with BCE, a long-standing Canadian champion of innovation and connectivity, to support the development of fibre infrastructure in Ziply Fiber’s target markets, which benefit from secular tailwinds. This commitment by PSP Investments will generate inflation linked and downside protected returns, which will contribute to fulfilling our mission to support the retirement of people who protect and serve Canada. PSP Investments has been an investor in Ziply Fiber, and this partnership, leveraging our global infrastructure experience, aligns perfectly with our strategy and strengthens our diversified portfolio.”
Deborah Orida, President and Chief Executive Officer, PSP Investments
“This strategic partnership aligns perfectly with Ziply Fiber’s mission to improve connectivity in the communities we serve. We’re combining our operational expertise with BCE’s scale and PSP Investments’ financial strength to accelerate fibre deployment, enhance customer experiences, and drive sustainable growth.”
Harold Zeitz, CEO, Ziply Fiber
Key Highlights of the Strategic Partnership
Ownership Structure: BCE through Ziply Fiber will hold a 49% equity stake in Network FiberCo, with PSP Investments owning 51% through its High Inflation Correlated Infrastructure Portfolio (HICI), contingent on closing of BCE’s acquisition of Ziply Fiber.
Fibre Expansion Goals: Network FiberCo will develop approximately 1 million fibre passings in Ziply Fiber’s existing states and will target development of up to 5 million additional passings, which will enable Ziply Fiber to reach up to 8 million total fibre passings.
Optimized Capital Efficiency: Network FiberCo will have its own non-recourse debt financing, which is anticipated to be the majority of its capital over time. BCE and PSP Investments will proportionately fund equity required by Network FiberCo to support fibre expansion.
Complementary Skill Set: The operational capabilities of BCE combined with PSP Investments’ significant infrastructure investing experience will enable Network FiberCo to capture the substantial growth anticipated and deliver the target fibre passing for Ziply Fiber.
Strategic Rationale
The U.S. fibre broadband market represents a transformative growth opportunity, with penetration rates well below Canada’s and efficient construction costs enabling large-scale deployment. Network FiberCo’s scalable platform supports both organic fibre expansion and potential acquisitions while enhancing returns through its capital-efficient structure.
Driving Sustainable Growth
BCE’s proposed acquisition of Ziply Fiber marks a strategic entry into the U.S. broadband market, securing a leading management team and operating platform with significant long-term growth potential. This disciplined reinvestment unlocks value through an expanded and diversified fibre footprint while benefiting from economies of scale.
Ziply Fiber has achieved significant fibre broadband subscriber growth and adjusted EBITDA growth in 2024, validating the strategic rationale and demonstrating its ability to generate meaningful and sustainable long-term cash flow.
Ownership and Operations
Upon, and contingent on, close of the previously announced acquisition of Ziply Fiber, BCE will assume 100% ownership of Ziply Fiber’s existing operations. Ziply Fiber, as a BCE subsidiary, will continue to operate its existing network and execute its in-footprint fibre-to-the-home build strategy. Ziply Fiber will become a long-term partner to Network FiberCo, jointly owned by PSP Investments and BCE, as the exclusive Internet service provider to locations passed by Network FiberCo.
Additional Transaction Details
The transaction is expected to close in the second half of 2025, subject to customary closing conditions and the closing of BCE’s previously announced acquisition of Ziply Fiber.
Analyst Call Details
BCE will hold a conference call with the financial community at 8:00 AM ET today, May 8, 2025 to discuss its Q1 2025 results and speak to the Network FiberCo strategic partnership. Media are welcome to participate on a listen-only basis. To participate, please dial toll-free 1-844-933-2401 or 647-724-5455. A replay will be available until midnight on June 8, 2025 by dialing 1-877-454-9859 or 647-483-1416 and entering passcode 7485404. A live audio webcast of the conference call will be available on BCE's website at BCE Q1-2025 conference call.
About BCE
BCE is Canada’s largest communications company1, providing advanced Bell broadband wireless, Internet, TV, media and business communication services. To learn more, please visit Bell.ca or BCE.ca.
Through Bell for Better, we are investing to create a better today and a better tomorrow by supporting the social and economic prosperity of our communities. This includes the Bell Let's Talk initiative, which promotes Canadian mental health with national awareness and anti-stigma campaigns like Bell Let's Talk Day and significant Bell funding of community care and access, research and workplace leadership initiatives throughout the country. To learn more, please visit Bell Let’s Talk.
About PSP Investments
The Public Sector Pension Investment Board (PSP Investments) is one of Canada's largest pension investors with C$264.9 billion of net assets under management as of 31 March 2024. It manages a diversified global portfolio composed of investments in capital markets, private equity, real estate, infrastructure, natural resources, and credit investments. Established in 1999, PSP Investments manages and invests amounts transferred to it by the Government of Canada for the pension plans of the federal public service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force. Headquartered in Ottawa, PSP Investments has its principal business office in Montréal and offices in New York, London and Hong Kong. For more information, visit investpsp.com or follow us on LinkedIn.
Earlier today, Charles Bonhomme, Senior Advisor External Communications and Media Relations, sent me a few background points on this deal:
Recall that BCI, CPP Investments and PSP Investments exited Ziply Fiber back in November 2024 when BCE acquired it.
At the time, I provided a background on Ziply Fiber and explained how the syndicate put in US$2.45 billion in total (including debt) and sold Ziply to BCE for US$3.6 billion (CAD $5 billion) five years later for a decent return.
In this latest deal, BCE and PSP Investments announced the formation of Network FiberCo, a long-term strategic partnership to accelerate the development of fibre infrastructure through Ziply Fiber, in underserved markets in the United States.
On LinkedIn, PSP Investments posted these comments from CEO Deborah Orida:
She notes how this commitment by PSP will generate inflation linked downside protected returns and that they have been an investor in Ziply Fiber and therefore know the company well.
The press release states PSP Investments has agreed to a potential commitment in excess of US$1.5 billion.
That's a significant commitment and I think it's a wise one as Network FiberCo will help Ziply Fiber accelerate its growth in US broadband markets it is serving.
Keep in mind, both the US and Canada are experiencing strong growth in fiber-to-the home-adoption, driven by increased demand for faster internet speeds and the need to modernize infrastructure.
Think about how often you stream movies or shows from Netflix, Disney or another provider and think about how all that demand for streaming gets through to households.
That is why Ziply Fiber is growing very rapidly, providing fast fiber speeds to meet this growing demand.
A lot of analysts criticized BCE's acquisition stating it was too risky but I think they did the right long -term move here and now with PSP Investments as its strategic partner in Network FiberCo, they will provide the needed support for Ziply Fiber to accelerate its growth.
Again, this mega deal shows how Canada's large pension funds can work with large strategic corporations to help them grow and the telecom sector is a great area because it requires a massive amount of capital.
What does BCE get? A strategic partner in PSP that will provide significant and stable capital and strong knowledge of the communications infrastructure space. It can use its balance sheet more effectively with PSP as a partner to accelerate the growth of this strategic asset in the US.
And despite the big cut in the dividend, BCE shares had a strong day:
That tells me most investors were expecting the cut and are happy about it.Now, I realize a lot of investors, especially seniors, aren't happy to hear the dividend has been chopped in half (14% to 7%) but BCE CEO Mirko Bibic said the new dividend will allow them to "de-lever and invest for growth."
With the decline in immigration and the stock way off its 5-year high, I don't think BCE has much of a choice because growth will be hard to come by.
As far as PSP Investments, I foresee more strategic partnerships with large corporations in areas like this where they can realize stable inflation-linked, downside-protected returns and commit significant capital.
This deal definitely fits in their mandate and in a slowing economy, it makes a lot of sense.
Below, Mirko Bibic, president and chief executive officer of BCE and Bell Canada, joins BNN Bloomberg to discuss Q1 2025 earnings results.
Also, Dan Rohinton, portfolio manager at iA Global Asset Management, shares his analysis of BCE Inc. earnings results and the decision to cut its dividend.
Listen to his comments on how PSP has bought in for the majority of the fiber buildout with this new joint venture and how it comes out as the winner in this deal.
Authored by Nick Giambruno via InternationalMan.com,
All of this points to something big on the horizon, driven by two key catalysts.
We’re entering a pivotal moment—one where the economic, monetary, and geopolitical landscape is shifting.
These changes aren’t random or isolated; they are the result of deep structural pressures that have been building for decades.
While the signs have been there for some time, recent developments make it clear that the system can no longer hold as-is. A reset is not only possible—it’s likely. And two key forces are pushing us there faster than most realize.
The first is the long-ignored, but now unavoidable, debt crisis.
The second is the Trump administration’s strong belief that an overvalued dollar has hollowed out the US economy, weakening exports, offshoring jobs, and undermining American industry.
Let’s break down these two powerful catalysts driving the next great monetary reset—starting with the one that has silently eroded America’s financial foundation for decades: the debt.
Catalyst #1: The Debt Crisis Has ArrivedThe financial decline of the US government has been unfolding for decades, creating a false sense of security. Many people have grown complacent—they’ve heard warnings about the debt crisis for years, yet nothing seemed to happen.
But last year, a crucial tipping point was reached: For the first time, interest payments on the federal debt surpassed the defense budget. It’s on track to overtake Social Security, which would make it the largest single item in the federal budget.
While the US government has an unmatched ability to extend the illusion of solvency, history is clear—even the most powerful empires cannot escape financial collapse once they can no longer service their debt.
A moment of reckoning is coming—and soon.
Historian Niall Ferguson put it bluntly:
“Any great power that spends more on debt service (interest payments on the national debt) than on defense will not stay great for very long.
True of Habsburg Spain, true of ancien régime France, true of the Ottoman Empire, true of the British Empire, this law is about to be put to the test by the US beginning this very year.”
In other words, debt kills empires.
The hard truth?
Cutting spending is meaningless unless it includes chainsaw-like reductions to entitlements, national defense, and the welfare state—while also reducing the national debt to lower interest costs.
In other words, the US would need a leader willing and able to:
Return to a limited constitutional government
Shut down the 750 military bases abroad
End entitlements
Dismantle the welfare state
Repay a large portion of the national debt
However, that’s a completely unrealistic fantasy. It would be foolish to bet on that happening.
Here’s the bottom line.
The US government cannot and will not even slow the rate of spending growth, let alone reverse it. This is a well-established trend that has been building for decades. At this point, it’s impossible to change course.
It’s like trying to stop an avalanche after it has already gained unstoppable momentum.
No matter what happens, the federal debt will not level off—it will continue expanding exponentially until it reaches a full-blown crisis. That crisis is closer than most realize.
That’s why there is an excellent chance this debt disaster will explode under Trump’s watch—though it is not entirely his fault.
Simply put, it’s game over. The federal debt charade is at the end of the line.
When governments are trapped, they reset the system.
That’s what happened in 1933 with gold confiscation, in 1971 when Nixon ended the gold standard, and at several other pivotal moments in American history. Now, history is repeating itself—and another major reset appears to be on the horizon.
The Trump administration has no other option—and all signs suggest they are preparing for what comes next.
Catalyst #2: A Strong Dollar Creates Economic InstabilityThe Trump administration sees the dollar as dangerously overvalued, blaming it for America’s worsening economic imbalances.
A strong dollar makes US exports uncompetitive, while making foreign imports relatively cheap, accelerating the offshoring of jobs and the hollowing out of American industry and manufacturing.
After the worst inflation surge in over 50 years, the idea that the dollar is “too strong” might sound absurd.
But the reality is that the dollar has soared against other fiat currencies like the euro, yen, yuan, pound, and the rest of the world’s government-issued confetti.
The Real Broad Dollar Index tracks the dollar’s value against a trade-weighted basket of currencies from 26 major US trading partners. As the chart below illustrates, the dollar has been on an upward trajectory for over a decade and now sits near an all-time high.
President Trump has consistently stressed the importance of leveling the playing field for American industry in global trade. However, a strong dollar directly undermines his goal of revitalizing US manufacturing. It makes American exports less competitive internationally and incentivizes companies to shift production overseas.
In short, the Trump administration believes the US must weaken the dollar against foreign currencies to boost American exports and bring manufacturing back to the US.
So, what can they do?
One historical precedent is the Plaza Accord of 1985.
In the early 1980s, after former Fed Chair Paul Volcker raised interest rates above 17%, the US dollar skyrocketed against foreign currencies. While this helped control inflation, it eventually hurt US exports and domestic industry.
Recognizing the problem, the Reagan administration took action. The US government convened a meeting with finance ministers from Japan, the UK, France, and Germany—its largest trading partners—at the Plaza Hotel in New York City. They agreed to a coordinated devaluation of the US dollar and committed to keeping exchange rates within a controlled range to prevent further volatility.
While a multilateral approach has worked in the past, it’s uncertain whether US trading partners will agree to the scale of devaluation Trump envisions. Trump doesn’t just want minor adjustments—he wants a permanent shift in favor of US industry.
A unilateral response may become the only option if other countries refuse to cooperate.
In my view, the notion that weakening the US dollar is a cure-all for America’s economic problems is misguided. It’s the equivalent of believing that prosperity comes from eroding the savings of everyday Americans while driving up their cost of living. It’s not just flawed—it’s ridiculous.
If the Trump administration truly wants to restore competitiveness, it must slash regulations and other burdens that make American products less attractive than their foreign counterparts.
If weakening a currency truly made a country more competitive, then Argentina and Zimbabwe would be global economic powerhouses.
Currency devaluation props up a handful of inefficient, politically connected industries and enables a reckless government to keep spending, but it does so by impoverishing everyone else in the process.
No country has ever achieved and sustained wealth solely through a weak currency. Yet, this is precisely what those in power seem to believe. And they appear to be moving toward a reset that fundamentally realigns the US economy and trade system.
The Reset Is Coming—Here’s What You Need to Know Before It HitsEverything you’ve just read points to one conclusion: a major monetary reset is coming—and it’s accelerating fast.
What will it look like? Who wins? Who loses? And most importantly—how can you protect yourself and come out ahead?
I break it all down in an exclusive new report:
Inside, you’ll discover:
Click here to download the PDF report now.
Because by the time the reset becomes obvious… it’ll be too late to react.
Tyler Durden Thu, 05/08/2025 - 13:05Update(1252ET): While there's been no official confirmation, a Pakistani official has described major aerial engagements above Jamu and Kashmir Thursday. Newsweek writes based on a CNN report:
Some 125 Indian and Pakistani fighter jets battled for over an hour in one of the biggest dogfights in recent history, according to a Pakistani security source quoted by CNN.
If the numbers of aircraft were confirmed, it would make it one of the largest air battles since World War Two.
According to more of the unverified claims:
The "dog fight" between Pakistani and Indian fighter jets, which Pakistani officials say downed five Indian planes, was one of the "largest and longest in recent aviation history," a senior Pakistani security source told CNN. The Pakistani claim has not been corroborated and could not be immediately verified by Newsweek.
What is certain is that the last 24 hours have seen intense artillery fire exchanges, as well as drone strikes and intercepts, amid a ratcheting situation between the nuclear-armed rivals.
Former Indian official implies Jammu Kashmir is under attack. https://t.co/DAbUrF4HF0
— FJ (@Natsecjeff) May 8, 2025
Purported video footage of Kashmir amid blackout and anti-air fire overhead...
#Confirmed
— Ashutosh Singh (@reach_ashutosh) May 8, 2025
Pakistan launched multiple rockets targeting the Stavari area and Jammu Airport. A blackout has been reported across Jammu and Kashmir. The Indian Army was fully prepared and had anticipated such a move. It appears Pakistan is recklessly pushing itself toward… pic.twitter.com/StLu7kVMmf
China, the US and Russia are watching closely, also given the weapons being pitted against each other:
A top Chinese-made Pakistani fighter shot down at least two Indian military aircraft on Wednesday, two US officials have told the Reuters news agency, marking a major milestone for Beijing’s advanced fighter jet.
One US official, speaking on condition of anonymity, said there was high confidence that Pakistan had used the Chinese-made J-10 aircraft to launch air-to-air missiles against Indian fighter jets, bringing down at least two.
* * *
In the latest developments along the war-ready Indian-Pakistan border, the Pakistani military says it has downed 25 Indian drones over its territory, while India in in turn is announcing it thwarted a Pakistani drone and missile attack on its military.
The official Pakistani death toll after the Wednesday missile 'retaliatory' attacks on Punjab province and Pakistan-administered Kashmir yesterday is at least 31 killed and dozens more wounded. Heavy artillery fire across the Line of Control (LOC) has remained steady, but the kind of feared wider and out of control all-out war has yet to be sparked. Islamabad is now claiming to have killed scores of Indian troops.
Shell hits the main town of Poonch district in Indian-administered Kashmir, AFP
On the other side, the last 48 hours of hostilities has resulted in at least 13 people killed in Indian-administered Kashmir, with others wounded due to Pakistani fire.
India's 'Operation Sindor' to avenge the 26 tourists killed last month's terror attack has been called an 'act of war' by Pakistani leaders. Islamabad has denied any involvement in supporting or harboring the gunmen, amid repeat Indian accusations.
As for the newest major Indian drone attack, it mainly targeted the second-largest city of Lahore, and India's government hailed that the operation successfully took out air defense radars at several locations. However, Pakistani Defense Minister Khawaja Asif rejected this, saying there was no damage, amid an ongoing fog of war where it's hard for international observers to confirm much.
But as for a much bigger claim which has yet to be confirmed or substantiated, Al Jazeera reports that "Attaullah Tarar, the Pakistani information minister, has said the country’s armed forces have killed 40 to 50 Indian soldiers in the exchanges along the Line of Control dividing Indian- and Pakistan-administered Kashmir." The assertions were made before legislators in the National Assembly.
Indian Foreign Secretary Vikram Misri's latest words suggest New Delhi is still seeking to prevent escalation, claiming that all our air strikes were against "carefully selected terror targets" and that Indian drones and shelling have only hit sites connected to "incidents of cross-border terror in India and terrorist infrastructure."
#BREAKING
— Nabila Jamal (@nabilajamal_) May 8, 2025
Drones shower in #Pakistan
India strikes back after Pak provokes at LoC
Pakistan targeted Indian military posts on May 7–8. 16 Indian civilians including 5 children killed in Pak shelling
India hit back, taking out Pak air defence radars near Lahore
India warns:… pic.twitter.com/MZpzbRJN0O
And provocatively, he alleged that Pakistan has been "using religious sites as a cover to train terrorists" - which strongly suggests India's assaults on Pakistan-administered Kashmir will continue, given the presence of armed Islamist factions. Much of this was directed at rejecting Pakistan's claim that Indian air strikes have damaged the vital Neelam-Jhelum dam.
But the question of disinformation, and the motive for India's 'counterterror' strikes, have been called "domestic theater" by one regional analyst:
Yet as tensions between the nuclear-armed neighbors escalate hour by hour, with Pakistan accusing India of launching a wave of drones into its territory on Thursday, military and geopolitical analysts question whether India’s approach serves as a deterrent against armed groups eager to target it. They argue that New Delhi’s actions are more symbolic and aimed at addressing its domestic audience rather than tactical advancement in the so-called “fight against terror”.
"This is all a domestic theatre," said Ajai Sahni, executive director of South Asia Terrorism Portal (SATP), a platform that tracks and analyses armed attacks in South Asia. "The Indian strikes [in Pakistan] have no deterrent value."
A steady spread of the border conflict...
Source: @detresfa_
Markets in India and Pakistan have again closed in the red, with India's benchmark stock market indices - the Sensex and Nifty - having fallen around half a percent in trade.
Pakistan's Karachi Stock Exchange was halted Thursday, with the benchmark KSE100 index losing more than 6% in trade. Amid the deep uncertainty the Indian rupee has slipped more than a percent against the US dollar.
Tyler Durden Thu, 05/08/2025 - 12:52A bloc of 32 House Republicans is pressuring their party’s leadership to uphold strict fiscal constraints as Congress moves to draft the sweeping legislative package underpinning former President Donald J. Trump’s domestic agenda.
In a letter sent Wednesday to Speaker Mike Johnson and Majority Leader Steve Scalise, the lawmakers, led by Representative Lloyd Smucker of Pennsylvania, vice chair of the House Budget Committee, demanded that any reconciliation bill adhere to the House’s budget resolution and “must not add to the deficit.”
The group includes several members of the tax-writing Ways and Means Committee and a number of conservatives aligned with the House Freedom Caucus, including its chairman, Representative Andy Harris of Maryland.
Their insistence arrives at a critical moment, as Republicans rush to finalize the multi-committee legislative package set to cement Trump’s priorities on taxes, border security, and energy. The Agriculture, Energy and Commerce, and Ways and Means Committees are all expected to begin marking up portions of the package next week.
At the heart of the fiscal standoff is a demand that any proposed tax cuts - set at a maximum of $4.5 trillion under the budget resolution - be reduced if Republicans fail to meet a $2 trillion spending cut benchmark. Smucker’s amendment to the resolution requires that any shortfall in spending cuts be matched with proportional reductions in tax relief. A $1 trillion gap, for example, would mean no more than $3.5 trillion in tax cuts.
That formula has inflamed tensions within the GOP’s ranks, particularly among members of the Ways and Means Committee. Its chair, Representative Jason Smith of Missouri, has said as much as $5.5 trillion in tax cuts is needed to realize Trump’s vision, including making the 2017 Tax Cuts and Jobs Act permanent. Yet some of the most vocal calls to scale back that figure are now coming from within his own committee.
"Under the House’s framework, the reconciliation bill must not add to the deficit," wrote the lawmakers, Politico reports. The letter continues;
"A $2 trillion reduction in spending may sound substantial. However, it equals only 2.3 percent of projected federal outlays over the next decade and only reduces the rate of growth in spending. Even with those savings, annual spending is expected to grow from $7 trillion to $10 trillion over the next 10 years, and debt will exceed $50 trillion by 2035."
The fiscal constraints are also complicating other politically sensitive elements of the package. Republicans on the Agriculture Committee are sparring over how far to cut food assistance programs, while members of Energy and Commerce are debating the scope of Medicaid reductions. Hard-right conservatives are urging aggressive cuts to achieve budgetary goals, while moderates—particularly from swing districts—warn that such moves could endanger benefits for millions.
Blue-state Republicans, many of whom also serve on Ways and Means, remain embroiled in a separate but related battle over the state and local tax (SALT) deduction, pushing for income caps or broader eligibility thresholds.
That said, according to Punchbowl News, the SALT Republicans 'have more leverage than you think.'
Let’s put this plainly: A handful of SALT members are willing to tank the reconciliation package and President Donald Trump’s domestic agenda if they don’t get a SALT deal they like.
“It is a hill I am willing to stake my entire congressional career on,” Rep. Nick LaLota (R-N.Y.) said. LaLota said he’d be “pressing the red no button” if the SALT cap isn’t high enough.
Here’s Rep. Mike Lawler (R-N.Y.), who represents a swing district and is eyeing a gubernatorial run:
“I’ve been very clear with leadership and the administration from the very beginning — if there is not a fix for SALT, there is no bill. If nothing passes, SALT comes back unlimited, so it is on leadership to offer a number and negotiate from there. We are not negotiating against ourselves.”
Remember: This entire reconciliation package is a snake pit for moderate House Republicans. Some have privately argued to us that they’d be better off voting against it because of the cuts to Medicaid, SNAP and social programs. But SALT is also an acute and immediate problem that Republicans are nowhere close to solving.
Meanwhile, Smucker’s coalition has injected another hurdle into an already fraught process. “The House budget resolution assumes that enacting President Trump’s agenda, including extending the 2017 tax cuts, will generate $2.5 trillion in additional revenue through economic growth,” the group wrote. “This means that all additional tax cuts or increases in spending above this level must be offset.”
With competing priorities and a tight self-imposed timeline, Republican leaders face growing pressure to reconcile ideological divides within their conference. Whether they can thread the fiscal needle without splintering the party remains to be seen.
Tyler Durden Thu, 05/08/2025 - 12:45While commenting to reporters after signing the first (of many) trade deal with the UK, President Trump told Americans that they "better go out and buy stocks now" as he looks forward to signing his "big beautiful bill."
REAL BREAKING NEWS!!!!
— JORDAN (@Bombj123) May 8, 2025
Trump says “time to buy a lot of stock” because when his tax cut bill passes it’s going to make America powerful again pic.twitter.com/AvJytH5GKA
And they did...
This comment followed his now ubiquitous shot across The Fed's bow:
*TRUMP: FED'S POWELL IS ALWAYS LATE
*TRUMP: EVERYONE IS CUTTING BUT THE FED
*TRUMP: IF POWELL WOULD LOWER RATES, IT WOULD BE LIKE JET FUEL
*TRUMP: US DOING WELL EVEN WITHOUT FED CUT
The Nasdaq has joined the S&P 500 and has now erased all of the post-Liberation Day losses.
Tyler Durden Thu, 05/08/2025 - 11:50During the first 100 days of his administration, President Trump has consistently put the interests of billionaires and corporations over working people. This is most evident by the Trump administration already halting or dismissing nearly 90 investigations against lawbreaking corporations, according to a recent report by Public Citizen. One of the biggest beneficiaries of this is tech billionaire Elon Musk.
Before Inauguration Day, federal agencies had at least 32 open investigations into Musk’s companies. Since then, Trump has appointed Musk as a special government employee to lead the so-called Department of Government Efficiency (DOGE), which is slashing government programs and jobs and targeting many agencies that are investigating his companies. His actions in this role have led to the end of many, if not all, of these investigations. The end of these investigations will not only boost Musk’s bottom line, but they will also make U.S. workers less safe. The following are examples of how Musk has benefited from the Trump administration halting investigations into Tesla, Neuralink, and SpaceX.
The Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) began auditing Tesla in 2024 to ensure adherence to equal employment laws for federal contractors. Tesla has been widely cited as creating a hostile work environment, with rampant racial bias and instances of sexual harassment. The OFCCP can levy fines of millions of dollars if they find wrongdoing and even ban contractors from bidding on future projects—an important enforcement mechanism because federal taxpayer dollars shouldn’t be going to companies that break the law and exploit workers. However, Trump signed an executive order effectively eliminating the OFCCP during his first week in office, effectively halting their investigation into Tesla and ensuring that U.S. workers will be subject to unlawful treatment.
In 2022, the inspector general at the U.S. Department of Agriculture (USDA) launched an investigation into Neuralink, a Musk-owned company developing brain-computer interfaces. But one of Trump’s first executive actions included illegally firing inspectors general from 17 federal agencies, including at the USDA. Though the content of the investigation was unclear, it was most likely due to the botched experiments that led to the deaths of multiple mammals, including monkeys. Numerous employees have complained that Musk has pressured the company into moving too quickly, not only leading to the unnecessary deaths but also compromising the research.
One of the first agencies the Trump administration attempted to dismantle is the U.S. Agency for International Development (USAID). While at first it was unclear why Musk and DOGE had their sights set on eliminating an agency focused on foreign aid, recent reports have shed light on Musk’s connection with USAID. In May 2024, the USAID inspector general announced it was investigating USAID’s relationship with Starlink (a subsidiary of SpaceX), which it had paid to provide internet services to Ukraine civilians. While the details of the investigation are not public, there is evidence Russia had access to Starlink, which was not supposed to be possible. However, the investigation will likely be dropped as the Trump administration moves forward with shutting down USAID.
Just before Trump took office, the Department of Transportation (DOT) announced it was investigating Tesla over its self-driving technology. Tesla has the largest number of crashes per driver of any car on the road—making it one of the least safe cars in America. Musk has frequently said that Tesla’s software and AI technology is its most valuable part, and a government investigation demonstrating that the software was not as good as advertised could have had far-reaching consequences for the company and for Musk’s wealth. Now, instead of being investigated, Trump is loosening rules on self-driving cars, benefiting Tesla and putting other U.S. drivers and pedestrians at risk.
These are just a few of the many examples of how the Trump administration has sided with billionaires at the expense of working people. Musk stands to gain significantly from Trump shutting down investigations into his various businesses, and it seems very clear new investigations will not be opened into Musk’s activities. This means that if workers in his factories are discriminated against, if his rockets continue to pollute the environment, or if he continues to violate election law, he will not face any consequences. Further, as head of DOGE, Musk has unfettered access to Americans’ sensitive and personal data, potentially giving him an advantage to future federal government contracts. While Musk’s days as a special government employee are numbered, it’s clear that U.S. workers, the environment, and the rule of law have all suffered to line the pockets of the richest man in modern history.
Authored by Sam Dorman via The Epoch Times,
President Donald Trump’s administration has invoked the state secrets privilege as a federal court probes for information surrounding Kilmar Abrego Garcia’s deportation to El Salvador.
U.S. District Judge Paula Xinis revealed the invocation on May 7 in an order requesting briefing from the administration. “The Court requires formal briefing of the Defendants’ invocations of privilege, principally the state secrets and deliberative process privileges,” she said in an order. Her order referenced a court document not publicly available.
The state secrets privilege generally allows the executive branch to protect sensitive national security information from being disclosed in civil suits. The Justice Department invoked it in March in a similar case that more broadly challenged the administration’s use of the Alien Enemies Act to deport individuals to El Salvador.
In that case, the administration said it had deported individuals as part of three flights in March—one of which was carrying Abrego Garcia, a Salvadoran illegal immigrant and suspected member of MS-13, a criminal gang designated as a terrorist organization.
U.S. District Judge James Boasberg held a hearing on the same day as Xinis’s order and requested information on how the administration and El Salvador were handling deportees.
Both he and Xinis have indicated they could hold the administration in contempt for not following court orders. Questions have abounded in recent weeks as to the deportees’ status and how much control the administration had over individuals already removed to El Salvador.
The administration has provided some information through updates to judges, including declarations from government officials.
For example, State Department official Michael Kozak told Xinis on April 21 that the Salvadoran government had informed an ambassador that Abrego Garcia was being held at a penitentiary facility in Santa Ana.
“The Salvadoran government responded on April 21 that Mr. Abrego García is being held at the Centro Industrial penitentiary facility in Santa Ana, ‘in good conditions and in an excellent state of health,’” Kozak said.
Salvadoran President Nayib Bukele notably told reporters during a meeting with Trump in the Oval Office last month that he couldn’t return Abrego Garcia if the United States didn’t want him. According to an interview published by El Grand Continent on May 6, Salvadoran Vice President Félix Ulloa said his country was providing a “service” to the United States.
“So we don’t see this as an issue of international law or international conflict insofar as what we’re doing is providing a service,” he said.
“The status of the detainees or the people who come here isn’t assessed by El Salvador; it’s assessed by the state that requests the service.”
He also said, “We’re providing what we might call prison accommodation. It’s like if a person comes to El Salvador for medical treatment; we have medical tourism for people who come here for dental treatment.”
During Boasberg’s hearing, Department of Justice attorney Abhishek Kambli argued that the administration couldn’t return those deported if El Salvador refused a request to do so. The administration has similarly told Xinis that its hands were tied in returning Abrego Garcia after she issued an order requiring the government to “facilitate” his return to the United States.
After a Supreme Court ruling allowing Xinis to require facilitation, she set up a process of discovery whereby attorneys could probe the administration for whether it followed her order.
Her most recent order scheduled a hearing for May 16 to discuss the publicly unavailable document that she referenced in revealing the administration’s invocation of the state secrets privilege. She’s also weighing a request by multiple news organizations to intervene and unseal court records.
During his May 7 hearing, Boasberg seemed skeptical in response to Kambli’s comments before the court and asked him about various statements members of the administration had made. More specifically, he asked about Trump stating he could secure the return of Abrego Garcia by picking up the phone. He seemed to be referring to an interview with ABC wherein Trump said he “could” get Abrego Garcia back.
The administration, however, has said that Abrego Garcia was a member of the MS-13 gang and would be re-deported if he entered the country again. Abrego Garcia’s attorneys have denied this claim, while Xinis has cast doubt on the evidence behind it.
Kambli suggested to Boasberg on May 7 that Trump was referring to the influence he could have on the Salvadoran government—something he distinguished from the idea that the United States had constructive custody.
The cases have raised multiple legal questions, including about the nature of due process for illegal immigrant deportees and when a president can invoke the Alien Enemies Act.
So far, multiple federal judges have said they thought Trump misapplied the law, specifically doubting that Tren de Aragua’s activity could be considered a foreign invasion under the Act.
The Supreme Court declined on April 7 to rule on that question.
Boasberg, however, indicated on May 7 that he was inclined to agree with the other judges, asking Kambli whether the government’s position was that all those federal judges were wrong.
Tyler Durden Thu, 05/08/2025 - 11:40So, are CEOs all talk?
After a brief spike last week, initial jobless claims are back in their four year range at 228k - at the same level as in Q4 2021...
Last week's spike - largely driven by New York - has now been erased - largely driven by New York...
Continuing claims fell back below the 1.9 million American Maginot Line once again...
Continuing jobless claims across The Deep TriState are back up near post-DOGE highs...
But initial claims across the three states have stopped rising as various lawsuits halt layoffs across federal agencies.
Tyler Durden Thu, 05/08/2025 - 08:41Ahead of an expected trade deal between US and UK, the Bank of England cut rates by 25bps to 4.25% (as expected) this morning.
However, the divided decision surprised markets by showing a more cautious-than-expected approach toward easing monetary policy.
Five members of the BOE’s Monetary Policy Committee voted for a quarter-point cut, while two wanted a larger half-point reduction.
Another two voted to hold rates steady.
The committee held its guidance that easing should continue to be “gradual and careful” in light of volatility in the global economy caused by Trump’s sweeping tariffs.
“Inflationary pressures have continued to ease so we’ve been able to cut rates again today,” Governor Andrew Bailey said in a statement accompanying the decision.
“The past few weeks have shown how unpredictable the global economy can be. That’s why we need to stick to a gradual and careful approach.”
Today’s guidance may have disappointed market expectations partly because investors had overstated the role tariffs would play in the bank’s decision-making, economists at ING suspect.
They wrote:
“While the added uncertainty and weaker outlook for global growth will become a headwind, the reality is that the direct impact of US tariffs so far looks very limited -- particularly if Britain is granted sizable carveouts from US President Donald Trump’s sectoral tariffs later today.”
The pound is stronger following the BoE, but has been choppy since the initial FT headlines and later confirmation that a trade deal is imminent:
Gilt yields remain up across the curve, with the increases skewed towards the short end given its sensitivity to monetary policy.
The Fed's lack of rate-cut (following China's cut and now BoE's cut), prompted a further outburst from President Trump
“Too Late” Jerome Powell is a FOOL, who doesn’t have a clue. Other than that, I like him very much! Oil and Energy way down, almost all costs (groceries and “eggs”) down, virtually NO INFLATION, Tariff Money Pouring Into the U.S. — THE EXACT OPPOSITE OF “TOO LATE!” ENJOY!
Notably, amid the panic in the US over tariffs and (hyped) inflation, BoE policymakers had worried that tariffs could push prices higher but are now more confident that those risks will be avoided.
The BOE now estimates tariffs will lower U.K. inflation by 0.2 percentage points in two years.
Finally, traders are still pricing in another two rate cuts from the BoE this year.
If that comes to pass, that would result in 100 basis points of easing in 2025 - pretty much bang in line with the guidance from Governor Bailey late last year.
credittrader Thu, 05/08/2025 - 08:32US equity futures storm higher, and are back to their post-Liberation Day highs on positive trade news (Imminent "comprehensive" trade agreement with UK the first of his promised deals; removal of chip export restrictions) and a neutral Fed (economy has strength to wait to see trade war impact hit hard data) even as China again reiterated that the US should cancel unilateral tariffs ahead the first official meeting between the countries this weekend amid reports the US is considering exempting child-related goods from its 145% tariffs on China. As of 8:00am ET, S&P futures rose 0.9% while Nasdaq futures are 1.2% higher, both near session highs. Elsewhere FTSE +40bps, DAX +1.2%, CAC +1%, Shanghai +28bps, Hang Seng +37bps, Nikkei +41bps. Intel rose more than 3% in premarket trading, while peers such as Nvidia and Micron also gained on news Trump will rescind restrictions regulating the export of semiconductors to various countries. Outside of tariffs, Norway and Sweden central banks left rates unch (expected) while we get the BoE this morning (25bps cut expected). US Bond yields are 4-5bp higher across the curve and USD is poised to have its best day 6 sessions with DXY +50bp. Today’s macro data focus is on jobless claims, NY Fed 1-year inflation expectations, and labor costs.
In premarket trading, Mag 7 stocks climb as the Trump administration plans to rescind some Biden-era AI chip curbs as part of a broader effort to revise global semiconductor trade restrictions (Nvidia +1.6%, Alphabet +1.9%, Meta +2%, Tesla +1.3%, Apple +1%, Amazon +1.6%, Microsoft +0.9%). Cryptocurrency-exposed stocks rise as Bitcoin approaches the $100,000 mark for the first time since February as global trade tensions show signs of easing. AppLovin climbs 14% after the AI-powered advertisement platform reported first-quarter results that beat expectations. Arm Holdings tumbled 9% after giving a disappointing sales forecast for the current quarter, stoking concerns about a tariff-fueled slowdown for the chip industry. Here are some other notable premarket movers:
Global markets were lifted after Trump administration’s plan to rescind some Biden-era curbs on chipmakers and news of a trade agreement with Britain, which followed news that US and Chinese officials will meet this weekend to discuss trade. Investors are waiting to see if crippling levies mooted by Trump will be negotiated down, averting lasting damage to economic growth and corporate profits.
"The fear has been of higher prices, company profit margins being squeezed, and the economy going into recession as a result of higher tariffs," said Kenneth Broux, a strategist at Societe Generale. “If you start unwinding all of that, it’s got to be bullish for risk assets.”
In the UK, gilt yields rose about five basis points, reversing an earlier slide, after the BOE reduced interest rates to 4.25% in a decision made before the US trade deal was announced. However, the BOE upgraded its annual growth forecast for 2025 while two officials voted not to cut rates this time due to inflation risks and a recent easing in financial conditions.
For Neil Birrell, chief investment officer at Premier Miton Investors, the split BOE vote “goes to show the scale of the uncertainty that exists amongst a key group, namely the actual setters of policy. It’s going to be difficult to make a call on future policy on the back of that.”
Meanwhile, while there was little international fallout from the conflict between India and Pakistan, investors were monitoring signs of escalation. Pakistan’s main equity index shed as much as 8.8%, while India’s Nifty 50 Index lost as much as 01.1%. The Indian rupee slid over 1% against the dollar.
The trade headlines also lifted Europe’s Stoxx 600 index by about 0.9%, as tech, industrials and travel are the best-performing European sectors. Chip stocks including ASML were among the top gainers. Siemens Energy rose after it said the impact of tariffs was going to be limited, while Danish container giant Maersk declines after cutting its forecast amid trade war. Britain’s domestically focused FTSE 250 index rose to a two-month high. Here are the biggest winners:
Earlier in the session, stocks in Asia declined, on course to end a four-day run of gains, as earnings caution in Japan outweighed optimism over signs of easing trade tensions. The MSCI Asia Pacific Index fell 0.6%, reversing an earlier 0.3% gain. Japanese firms Nintendo Co. and Toyota Motor Corp. were among the biggest drags, with the carmaker expecting a $1.3 billion profit hit in just two months on tariffs. Nintendo projected weaker-than-expected initial sales of the Switch 2. Trading was halted in Pakistan after its benchmark KSE-30 Index slumped on intensifying military conflict with India. Indian stocks were slightly lower. Markets were in the green in Hong Kong, China and South Korea as signs of progress in trade negotiations supported sentiment. The confirmation of US-China trade talks starting this weekend, and Thursday’s report that the US is about to announce a deal with the United Kingdom, boosted optimism that the global tariff war has entered a de-escalation stage. Foreign investor flows into Asian stocks excluding China and Japan reached $3 billion so far this week, according to Bloomberg-compiled data.
In FX, the dollar was 0.2% higher against a basket of peers, benefiting also from the Federal Reserve’s signal that it’s in no hurry to ease monetary policy. The Fed held interest rates steady as expected on Wednesday, and warned that higher tariffs could raise inflation and unemployment. The pound climbed after the Bank of England cut interest rates as expected, but stuck to signaling “gradual and careful” moves in the coming months.
In rates, treasuries are cheaper across the curve as US stock futures rally; rate-sensitive two-year Treasury yields rose about five basis points as traders trimmed the odds of a July cut to around 80%. US yields are 3bp-4bp higher across maturities with intermediate tenors leading losses, flattening 5s30s spread by 1.5bp and unwinding a portion of Wednesday’s steepening move. 10-year at 4.30%, just off day’s high. Supply also a factor, with an auction of 30-year bonds ahead at 1pm New York time. Gilt futures fell to session lows after Bank of England cut rates to 4.25% as expected in a three-way split. UK front-end yields cheaper by about 5bp, flattening the gilt curve after the BOE rate decision. The week’s Treasury auction cycle concludes with $25 billion 30-year new issue, following strong demand for 10-year notes Tuesday. WI 30-year yield near ~4.795% is about 2bp richer than last month’s, which stopped through by 2.6bp. Investors will now monitor weekly jobless data, which is expected to show claims slipped marginally in the latest week to 230,000.
In commodities, oil climbs 1.4% higher to near $58.86. Bitcoin rose toward the $100,000 mark for the first time since February. Spot gold falls about $10 to near $3,350/oz.
Looking ahead, the US economic calendar includes 1Q nonfarm productivity and weekly jobless claims (8:30am), March wholesale inventories (10am) and April New York Fed 1-year inflation expectations (11am)
Market Snapshot
Top Overnight News
A more detailed look at global markets courtesy of Newsquawk
APAC stocks were mostly higher amid some trade optimism and following the mildly positive handover from Wall St where price action was choppy in the aftermath of the FOMC meeting as the Fed kept the FFR at 4.25-4.50%, as expected, and noted that risks to the economic outlook increased further, while Fed Chair Powell reiterated a wait-and-see approach and ruled out a pre-emptive cut during the presser. ASX 200 marginally gained amid strength in gold miners, industrials and tech but with the upside capped by weakness in the top-weighted financial sector after Big 4 bank ANZ's earnings. Nikkei 225 was underpinned by recent currency weakness and trade deal optimism, although a return to the 37,000 level remained elusive. Hang Seng and Shanghai Comp remained positive following the previous day's PBoC's policy loosening, but with further upside in the mainland limited after recent comments from US President Trump, who was unwilling to lower tariffs to get China to the table.
Top Asian News
European bourses (STOXX 600 +0.3%) opened mostly firmer and have traded with an upward bias throughout the European morning. European sectors are mixed; Tech takes the top spot, joined closely by Industrials whilst Healthcare lags. Tech benefits from post-earning strength in Infineon (+3%) - despite missing on headline metrics and highlighting that it sees 2025 rev. slightly lower Y/Y due to tariff impact. US equity futures (ES +0.8%, NQ +1%) are broadly in the green, in-fitting with the broader risk tone as markets await Trump’s trade announcement.
Top European News
FX
Fixed Income
Commodities
US Event Calendar
DB's Jim Reid concludes the overnight wrap
In a Trump 2.0 world it often seems like the news flow doesn't really get going until after the US market closes and today is another example of that as overnight Mr Trump has teased that a "major trade deal" will be announced today at 10am DC time (15:00 BST). This must be the very big announcement he flagged on Tuesday. The media are all lining up behind the deal being with the UK. Given that full trade deals take years to negotiate, this will likely be a framework and it will be interesting to see whether the 10% baseline tariff stays as that will provide an important template for negotiations with other countries and a good guide to the long-term tariff strategy of the US.
Asian equity markets and European/UK futures are responding positively to the news that comes a couple of days before trade talks between Washington and Beijing over the weekend. Across the region, the Hang Seng (+1.10%) is leading gains with the CSI (+0.75%) and the Shanghai Composite (+0.38%) also higher. Elsewhere, the Nikkei (+0.28%), the KOSPI (+0.49%) and the S&P/ASX 200 (+0.21%) are also edging higher. S&P 500 (+0.84%) and NASDAQ 100 (+1.16%) futures are building on a strong close that we will discuss below. Euro Stoxx futures are +0.80% and FTSE futures +0.75%. Sterling is around half a percent higher.
This news has slightly overshadowed the Fed last night, where as widely expected, the FOMC kept the fed funds rate on hold for a third meeting running at 4.25-4.50%, while sticking to a patient tone amid heightened uncertainty. The prepared statement noted that uncertainty had “increased further” as risks of both “higher unemployment and higher inflation have risen”. In the press conference Chair Powell acknowledged opposing pressures on its dual mandate stemming from larger-than-expected tariffs announced so far and offered little guidance on the policy path ahead. Powell emphasized the elevated uncertainty but also noted that the economy remains resilient and repeated that policy is well positioned to respond, while pushing back on the idea of pre-emptive rate cuts. Our US economists continue to expect the next rate cut to come in December, with risks tilted towards earlier cuts if unemployment rises more sharply. See their full reaction here.
Rates initially saw a moderate rally following the Fed decision, but this then reversed as Powell emphasised a wait-and-see approach. The next rate cut is now 80% priced by the July meeting while the amount of Fed cuts priced by December declined by -3.1bps yesterday to 78bps, though this move had already played out pre-FOMC. 2yr Treasury yields were little changed (-0.6bps to 3.78%), while 10yr yields declined -2.6bps to 4.27%. This morning in Asia, Treasury yields have reversed higher again with 2yr (+2.3bps) and 10yr (+1.9bps) yields settling at around 3.80% and 4.29% respectively as we go to print.
Equities saw a muted response to the Fed decision, but the S&P 500 managed to post a +0.43% gain by the close thanks to a late rally following a Bloomberg report that the Trump administration is planning to rescind Biden-era AI chip curbs as part of a broader move to revise semiconductor trade restrictions. The reporting helped the Philadelphia semiconductor index rise +1.74% on the day, with Nvidia +3.10% higher.
However, the overall Mag-7 underperformed (-0.26%) as Alphabet (-7.26%) and Apple (-1.14%) lost ground following comments by a senior Apple executive that the company was “actively looking at” revamping its Safari web browser to focus on AI-powered search engines. The comments came amid a DoJ lawsuit against Alphabet that could threaten the companies’ partnership that makes Google the default offering in Apple’s browser. In addition to highlighting the anti-trust cases against big tech, the news is a reminder that while the Mag-7 stocks have benefited immensely from AI optimism, their existing business models also face risks from AI-driven disruption.
Ahead of the Fed’s decision, European markets experienced a risk-off move, with the STOXX 600 (-0.54%) posting its biggest decline in four weeks. The moves occurred across the continent, and even the FTSE 100 (-0.44%) moved lower, ending its record winning run of 16 consecutive gains. A remarkable stat. Let's see what today's trade deal does for the UK. Otherwise, France’s CAC 40 (-0.91%) saw a particular underperformance, losing ground for a third day running, and Germany’s DAX was down -0.58%. And the risk-off tone was echoed on the rates side, as yields on 10yr bunds (-6.6bps), OATs (-6.4bps) and BTPs (-7.9bps) all took a sharp turn lower. The moves also got a boost from the latest decline in oil prices, with Brent crude down -1.66% on the day to $61.12/bbl. The peak this year was $82.03/bbl on January 15.
Looking forward, central banks will stay in the spotlight today, as the Bank of England are announcing their own policy decision. It’s widely expected they’ll deliver a 25bp cut today, which would take the Bank Rate down to 4.25%, and continue the pattern of quarterly rate cuts that we’ve had since August. As with the Fed, it’s their first decision since Liberation Day, so all eyes will be on the new forecasts, and our UK economist thinks that meaningful changes are likely. He expects them to cut their growth projections as the unfolding trade shock hits GDP. And he also sees the inflation forecasts being revised lower thanks to stronger sterling and lower energy prices.
Finally on the geopolitical side, there’s been increasing market attention on the situation between India and Pakistan. In terms of the latest, Pakistan said yesterday that they would retaliate against India’s air strikes, and Pakistan’s KSE-100 equity index closed -3.02% lower. By contrast, Indian equities have been much less affected, and the NIFTY 50 index was up +0.14%. This morning, the NIFTY 50 (-0.04%) is fairly flat. The situation has raised fears about an escalation between the two counties, and it represents another example of how the Global South is likely to prove increasingly important for the global backdrop.
To the day ahead, and one of the main highlights will be the Bank of England’s latest policy decision, along with the subsequent press conference with Governor Bailey. Separately, the Bank of Canada will release their Financial Stability Report, and we’ll hear from Governor Macklem too. Elsewhere, US data releases include the weekly initial jobless claims, as well as nonfarm productivity for Q1.
Tyler Durden Thu, 05/08/2025 - 08:24Just two days before U.S. Treasury Secretary Scott Bessent is set to meet his Chinese counterpart for the first round of trade talks in Switzerland, Boeing revealed a new order for widebody jets from a Chinese state-owned airline—presumably a calculated gesture of goodwill ahead of negotiations.
Boeing announced that China Airlines has become the "newest 777X customer with an order for 10 777-9 passenger and four 777-8 Freighter airplanes."
"In addition to the firm order, which was booked in March 2025 and was posted as unidentified on Boeing's orders and deliveries website, the airline has options to purchase five 777-9s and four 777-8 Freighters," the plane manufacturer said, adding, "With this order, China Airlines joins an exclusive group of global airlines that have ordered the passenger and freighter variants of the 777X family."
About one month ago, when the U.S. and China unleashed a tit-for-tat tariff war, eventually placing 145% levies on Chinese goods entering the U.S. and a 125% rate on U.S. goods entering China, Juneyao Airlines delayed the delivery of a widebody aircraft from Boeing. This delay was suspected to be part of Beijing's non-tariff countermeasures (including limiting Hollywood film imports, etc...).
Boeing's order announcement comes days before Bessent, who has become the point person in trade negotiations, will sit down with top Chinese trade negotiators in Switzerland to begin the first round of a fair trade.
"The negotiations will begin on Saturday," Bessent said in testimony before the House Financial Services Committee on Wednesday.
During a Fox News interview, Bessent emphasized: "We don't want to decouple" with China, adding, "What we want is fair trade."
The key takeaway: China Airlines' order of Boeing 777Xs looks like a kind gesture of goodwill ahead of this weekend's trade talks. Though the order was officially booked in March, Beijing could have easily delayed or canceled it if preliminary trade talks (at U.S. Treasury) were headed in the wrong direction. Instead, the timing suggests momentum may be building toward a breakthrough.
Goldman chief economist Jan Hatzius recently outlined what a potential breakthrough in U.S.-China trade talks might entail.
All good news so far...
Tyler Durden Thu, 05/08/2025 - 08:05
Authored by Spencer Morrison via American Greatness,
India is taking President Trump up on his offer for reciprocal free trade, proposing zero-for-zero tariffs on specific goods like pharmaceuticals, steel, and automobile components.
This has electrified President Trump’s base—the reciprocal tariffs are working! India’s coming to the table!
Sorry to burst your bubble: America will not benefit from free trade with India—or any other Third World country.
Why?
One word:
Externalities.
President Trump would be wise to remember that tariffs are not about moving factories from China to India—they’re about moving factories back to America.
Hunting UnicornsReal international free trade—much like real communism—has never been tried. Why? It’s impossible.
The reality that economists & libertarians refuse to recognize is that different countries are different. And not just different in a nominal sense—different in real and practical ways that prevent economic integration.
First, America and India have different levels of economic development that cannot be reconciled without seriously rebalancing the factors of production.
The average annual wage in America is $63,000, while the average annual wage in India is just $2,500—the average American earns 25x more than the average Indian. Labor is often the largest input cost for making products, accounting for approximately 30–35% of the cost of American manufacturing—and it’s an even higher proportion in many service industries.
If America and India traded freely, India’s low wages would undercut America’s labor market—either Americans will need to accept lower wages domestically, or the factories will relocate to India to take advantage of dirt-cheap labor.
How do we know this will happen? The exact same thing happened after China joined the World Trade Organization (WTO) in 2001.
In 2001, the average annual wage in America was $30,846, while the average annual wage in China was just $1,127—the average American earned 27x more than the average Chinese. What happened when American workers competed with Chinese workers? American factories moved to China, and wages stagnated.
The pace of offshoring was harrowing. Since 2001, more than 60,000 factories have moved abroad, killing over 5 million manufacturing jobs. This has decimated America’s industrial capacity and hollowed out local communities. And no, robots and automation had nothing to do with this process, in case you were curious.
In fact, the process has been going on even earlier than 2001. America has run global trade deficits every year since 1974. The cumulative value of these deficits is $25 trillion, after adjusting for inflation. This has decoupled wages for American workers from their productivity—even though workers produce more value, they aren’t paid for it. Why? Because the wages are suppressed by competition with cheap foreign labor.
Notice how the price differentials respecting America and China in 2001 and America and India today are almost identical. Why do we think the result will be different this time around?
From India With LoveIn addition to obvious market asymmetries like the price of labor, the cost of doing business in India is lower because of externalities. Essentially, there are many costs of doing business in America that are baked into the final price of a product, such as the costs of environmental remediation, labor standards, and upholding higher quality control standards.
These costs are not baked into the price of Indian products. Instead, the costs of pollution or abusive labor standards are externalized to the environment or society at large.
But of course, we always pay the piper. Rather than pay 10 cents more per spatula, we live with plastic trash from India floating up on American beaches or mercury poisoning the fish we eat—we may not pay the price at the store, but we certainly pay it with our health and with our soul—all for the sake of “cheap” goods.
Often, foreign goods are not actually cheaper than American goods: they simply do not reflect the full cost of production. For this reason, America cannot produce goods as cheaply as China or India—not unless we are willing to destroy our standard of living—not unless we are willing to sacrifice our environment—not unless we are willing to outlaw morality in the name of business and sell our very soul for profit.
No. Reducing the cost of business to compete with India on price is simply not desirable. Nor is it possible.
Remember, even if America allowed manufacturers to externalize all costs, our economy is structurally distinct from India’s. In America, private corporations dominate the market. Although these corporations are large, and many are owned by the same few investment firms—like BlackRock—they remain private entities.
This is not the case in India, where the state is crafting a cohesive industrial policy designed to industrialize the country. Part of this policy appears to be to piggyback on America’s consumer market when it comes to strategic industries, like steel or pharmaceuticals—just like China.
Ultimately, the only way to protect America’s market from asymmetrical competition from countries like China or India is to price in these externalities by imposing protective tariffs. This is discussed in detail in my book Reshore: How Tariffs Will Bring Our Jobs Home & Revive the American Dream.
The Shock and Awe of RealityDifferent countries have different levels of economic development, legal systems, tax structures, histories, geographies, languages, cultural and business norms, and demographics. All of these differences can create market asymmetries that are simply not relevant domestically.
At best, free traders can reduce tariffs and other visible trade barriers, like taxes, transportation costs, and legal disharmonies. However, they cannot uproot the sort of cultural norms and political corruption that make doing business in India—or China, or Mexico, or Italy—different than doing business in America.
Ultimately, America’s interests are not served by moving industry from China to India. The industry needs to come home. Let’s not make the same mistake with India that we did with China—say no to free trade and raise the tariff walls.
Tyler Durden Thu, 05/08/2025 - 06:30A new survey of 1,000 first-time homebuyers reveals the complex and often stressful reality of entering the housing market. Rising housing prices, high interest rates, and market uncertainty have created a tough environment for newcomers, many of whom must stretch their budgets or make lifestyle compromises just to get a foot in the door, according to a new survey from Raleigh Realty.
The survey shows a clear generational divide in homeownership. The majority of first-time buyers are Gen X or Baby Boomers, while only 4% are Gen Z. For younger adults, especially Gen Z, the barriers to entry remain high. Those who do purchase tend to be higher earners—63% of Gen Z buyers make more than $75,000 annually. In contrast, many Baby Boomers bought their first homes with more modest incomes, suggesting that affordability has deteriorated over time.
Income still plays a central role in homeownership access. While many first-time buyers earn between $50,000 and $75,000, a significant portion earn less, especially among older generations. Gen Z stands out again here, with relatively few buyers earning below $50,000. This trend reflects broader concerns among younger people about financial stability, shaped by growing up during the 2008 housing crash and entering adulthood amid pandemic-era economic turmoil.
Flexible work has had a strong impact on home buying decisions. A third of first-time buyers work remotely or in hybrid roles, and this flexibility often enables them to relocate in search of more affordable housing or better quality of life. Gen Z leads in remote work adoption, with more than 40% working fully in-office, while Baby Boomers represent the largest group not in traditional employment, instead relying on retirement income or alternative sources.
Despite media narratives about falling housing prices, very few first-time buyers made purchases in the last year. Most bought their homes three to four years ago, during or shortly after the pandemic housing surge. The steep drop in 2023 home sales reflects wider economic conditions, including high inflation and reduced affordability.
Single-family homes remain the overwhelming favorite among first-time buyers, with 90% choosing this option regardless of income. Even those earning less than $50,000 opted for standalone houses over condos or multi-family units. However, most chose existing homes rather than new construction, likely due to cost or availability.
For many, the journey into homeownership was taken solo or as a couple. Half of respondents were married, while 40% were single. Only a small percentage bought homes with friends, siblings, or unmarried partners. These results reflect traditional patterns of household formation and financial independence.
Most buyers moved quickly once they started looking for a home. About 70% closed within six months, and 35% found a home in three months or less. But speed didn’t reduce stress—90% of first-time buyers found the process difficult. The top source of stress was affordability, which overwhelmed concerns about mortgage approval, taxes, or maintenance.
Financial strain led many buyers to make compromises. Nearly one in five settled for smaller homes, less desirable locations, or properties needing repairs. Stretching the budget was another common trade-off. Baby Boomers were most willing to go over budget, while Gen Z was most likely to compromise on location.
Concerns about job stability were widespread. More than half of buyers worried they wouldn't be able to make mortgage payments if they lost their job, with the highest anxiety levels among Gen Z and Millennials. Baby Boomers, by contrast, were more confident in their financial resilience, likely due to retirement savings or paid-off homes.
Contrary to popular belief, most first-time buyers didn’t receive financial help. About 73% paid for their homes without family assistance. Among those who did receive help, contributions varied, with 52% getting $10,000 or less. Just 16% received over $20,000, and only a small share received help from government programs.
The Raleigh Realty report says that even though mortgage approval is a common concern, most buyers didn’t apply for financing until after they began house hunting. Over half only applied to one lender. The majority selected lenders based on interest rates, while others went with banks they already used or those recommended by real estate agents.
Despite all these financial concerns, most buyers reported feeling satisfied after purchasing. While only 12% said they bought their dream home, 73% felt that homeownership brought them closer to the American dream. Lower-income buyers tended to report the highest satisfaction, possibly because expectations were more modest.
Few first-time buyers plan to move soon. Only 9% expect to sell their homes within five years, while nearly half intend to stay for at least a decade. A long-term mindset seems to dominate, with 30% planning to remain for 20 years or more.
Home improvement is a common post-purchase goal. Around 60% of buyers expect to invest $1,000 to $10,000 in upgrades during the first year, and nearly one in three plan to spend even more. These projects are seen as essential for adding value or addressing compromises made during the purchase process.
Younger buyers are also more likely to explore income-generating strategies. Around 40% of Gen Z and 30% of Millennials have taken on a second job to manage homeownership costs. Many also rent out parts of their property or use short-term rental platforms. In contrast, only 14% of Baby Boomers supplement their income in this way.
Emergency savings are more common among first-time buyers than the general population. Around 79% reported having some form of savings, with most holding over $1,000 and 17% saving more than $20,000. Younger buyers may be more motivated to save due to fears about job loss or economic instability.
In summary the full survey results show that while homeownership is still viewed as an important milestone, today’s first-time buyers are navigating a complex and stressful landscape. Income, generational experience, and work flexibility all influence outcomes, and most buyers are willing to make sacrifices to achieve the goal of owning a home.
Tyler Durden Thu, 05/08/2025 - 05:45Authored by Kyle Anzalone via The Libertarian Institute
Hamas is using some of the thousands of unexploded bombs that now litter Gaza as weapons against the invading Israeli forces. Most Hamas munitions are created from cannibalizing dud bombs dropped by Israel.
According to Israeli media, the country’s military estimated early this year that there were at least 3,000 unexploded bombs in Gaza. An Israeli officer explained that the munitions will be used by Hamas. “The situation we’ve reached is not normal. Tens of tons of explosives are lying in Gaza, waiting for Hamas,” they said.
The true number of unexploded bombs could be higher. The IDF has dropped about 40,000 bombs on Gaza since October 7, 2023. A typical dud rate is 10%; however, the Israeli military still uses some Vietnam-era missiles that could push the rate of bombs that fail to explode to 20%.
Haaretz estimates that the value of unexploded bombs is in the tens of millions of dollars.
A former Israeli official explained to The New York Times in January 2024 that Hamas makes most of their munitions from bombs dropped on Gaza that do not detonate.
“Unexploded ordnance is a main source of explosives for Hamas,” said Michael Cardash, the former deputy head of the Israeli National Police Bomb Disposal Division and an Israeli police consultant. “They are cutting open bombs from Israel, artillery bombs from Israel, and a lot of them are being used, of course, and repurposed for their explosives and rockets.”
The armed wing of Hamas, the al-Qassam Brigades, has teams trained to recover the unexploded bombs, including 2,000-pound weapons. It also has the ability to break down the Israeli munitions and repurpose them as rockets, RPGs, and IEDs.
Salvaged Israeli bombs have been turned into lethal munitions by Hamas since October 7. In December 2023, remnants of an unexploded Israeli bomb were used to kill 10 soldiers, while Haaretz reports that in January, an IDF tank was destroyed by a Hamas IED created from an undetonated bomb.
While Israel has laid waste to the Strip over the past 19 months, US and Israeli intelligence have acknowledged that Hamas has retained most of its tunnel network and has recruited at least as many fighters as it has lost.
Tel Aviv recently announced a mass call-up of its reserve forces and expanded military operations in Gaza to the full occupation of the territory.
Tyler Durden Thu, 05/08/2025 - 05:00
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