With $14 Billion U.S. Steel Deal in Limbo, Nippon Steel Seeks Community Support
Japanese steelmaker’s vice chairman visits Pittsburgh area and says company is ready to ‘share all the fruits of our technology’
Nippon Steel has launched a charm offensive to win support for its planned acquisition of U.S. Steel in a bid to counter the deal’s staunchest critics.
U.S. Steel shareholders overwhelmingly approved the company’s $14.1 billion takeover in April, but the deal remains bogged down by federal regulatory review and a raft of opposition. Leaders of the United Steelworkers union, some members of Congress and Cleveland-Cliffs, U.S. Steel’s main rival, have panned the purchase. President Biden has expressed skepticism about it.
Takahiro Mori, vice chairman of the Tokyo-based steelmaker, met this past week with business executives and government leaders in the Pittsburgh area, which includes U.S. Steel’s headquarters and its Mon Valley Works operation. Mori hosted a dinner and a presentation for about 150 people that lasted more than two hours.
“This transaction is about growth,” Mori said in an interview. “We’re going to share all the fruits of our technology.”
The company said it would invest at least $1.4 billion to improve the performance of U.S. Steel’s older mills, which also include operations in Indiana. Nippon Steel spends more than $500 million a year on research and development, compared with about $40 million by U.S. Steel, according to the companies. Mori said Nippon Steel’s chief technology officer will visit the Mon Valley Works as part of the planning for production improvements.
Residents of some of the small towns surrounding the Mon Valley plants have complained for years about air pollution and a lack of investment in maintenance. Mori has pledged to use hydrogen energy to reduce Mon Valley’s carbon-dioxide emissions from burning coal in blast furnaces.
Elaina Skiba, borough manager of Glassport, Pa., said she and other community officials have been skeptical about the acquisition and concerned about the future for the Mon Valley operation, but she left the presentation with more confidence in Nippon Steel’s plans.
“Nippon has no intention of closing this mill,” she said. “They want it to succeed. They’re not going to put this kind of money on the table to close it.”
Mori is planning several stateside visits this summer, but didn’t meet with union leaders in the latest visit. The union is seeking commitments from Nippon Steel on specific plant upgrades and has been dissatisfied with the Japanese company’s attempts to maintain the current labor agreement with U.S. Steel.
The union said Mori’s visit was a “desperate last gasp” by the two companies to save the deal and accused Nippon Steel of trying to escape its obligations under the union’s contract with U.S. Steel.
The union endorsed Cleveland-Cliffs’ attempt to buy U.S. Steel last year. In turn, Cleveland-Cliffs Chief Executive Lourenco Goncalves is backing the union’s opposition to the sale to Nippon Steel. He said recently that the deal is dead without the union’s support.
Nippon Steel is seeking to close its purchase by year’s end, pushing back the deadline by a few months. It has said it would refrain from plant closings and layoffs through the end of U.S. Steel’s union labor agreement in 2026.
Slowing market
A weakening American steel market threatens to add uncertainty to Nippon Steel’s investment plans. Falling steel demand and low prices would ratchet up the pressure on the company to conserve cash and reduce expenses.
Manufacturing activity has receded in some steel-consuming industries, including parts of the construction industry, commercial trucks, farm machinery and home appliances. Contributing to the downturn is the absence in recent years of panic buying caused by Covid-related supply bottlenecks, Russia’s war in Ukraine and other market shocks that drove up prices.
Some steel mill executives describe reluctant buyers as being on a diet. The U.S. spot-market price for hot-rolled coiled sheet steel was $750 a ton on Friday, down nearly 30% from a year earlier, according to S&P Global Commodity Insights. The benchmark price sank to $690 in September when a strike against U.S. automakers chilled steel buying, but went as high as nearly $2,000 a ton in 2021.
A decline in shipments hurt U.S. Steel’s first-quarter performance, with sales falling 7% from a year earlier and net income shrinking 14%.
Mori said a soft American steel market wouldn’t sidetrack spending to improve U.S. Steel. Nippon Steel executives have been dealing with a yearslong slump in Japan, where the company is the country’s largest steel producer.
Japan’s estimated steel consumption—which includes domestic steel production and imports minus exports—sank 17% from 2019 to 2023, according to the Japan Iron and Steel Federation. Nippon Steel has closed some plants in Japan in response to falling demand.
American steel consumption slipped 7% during the same period, according to the American Iron and Steel Institute.
Presidential campaign issue
Nippon Steel has the economics worked out on the deal, but the politics is a work in progress.
Biden, who won Pennsylvania in the 2020 election, has signaled opposition to foreign ownership of U.S. Steel, though he hasn’t explicitly said he would block the deal, which is now under national-security review by a Treasury Department-led committee.
The presumptive Republican presidential nominee, Donald Trump, has publicly criticized the deal, which could become an important issue in Pennsylvania, seen as a battleground state in the presidential contest.
The Justice Department is also reviewing the merger for market-concentration concerns. Nippon Steel is part owner of a steel mill in Alabama with the steel company ArcelorMittal.
“We are confident that we will be able to clear the issue if we are properly screened,” Mori said.
Nippon Steel said the deal reflects confidence in the U.S. steel market in the long run. The American market features some of the highest steel prices in the world, helped in part by tariffs on lower-cost imports. Domestic steel demand in recent years has been underpinned by spending on factory and warehouse construction and government-funded technology and infrastructure projects.
“It’s kind of an ideal place,” said Martin Englert, an analyst for Seaport Research Partners.
The purchase of U.S. Steel would double Nippon Steel’s overseas steel production capacity and profit. The company’s long-range goal is to raise its overall production capacity to 100 million metric tons a year.
Technology for slashing nuclear power plant waste wins Swiss backing
‘Nuclear transmutation’ could cut highly radioactive waste by 80%, says national body
Switzerland has endorsed a long sought-after technology known as “nuclear transmutation” to dramatically reduce the amount of radioactive waste from atomic power plants.
Nagra, the Swiss national body that manages nuclear waste, said it had spent several months exploring the method proposed by Geneva-based start-up Transmutex and had concluded that the technology could cut the volume of highly radioactive waste by 80 per cent.
Storing highly radioactive material for hundreds of thousands of years has always been a huge and expensive problem for the nuclear industry.
While more than 20 countries, including the US, France, the UK and South Korea, agreed at the UN COP28 climate negotiations last year to triple nuclear energy capacity by 2050, there is currently no long-term storage site in operation.
Finland is building the world’s first such facility, which it says will safely guard waste for 100,000 years.
“Transmutex is trying to solve the problem we have had for a long while in nuclear, which is not safety, actually, but waste,” said Albert Wenger, an investor at Union Square Ventures, which is financing the start-up.
Nuclear transmutation is the conversion of one element into a different form, known as an isotope, or another element altogether. Transmutation has been a concept of fascination since the days when alchemists tried in vain to turn base metals into gold.
The idea of using the technique for managing nuclear waste has been a subject of interest for decades. Several countries have launched significant programmes to explore transmutation, according to the Nuclear Energy Agency of the intergovernmental OECD.
Transmutex proposes to use a particle accelerator coupled to a reactor to combine subatomic neutron particles with thorium, a slightly radioactive metal. This produces a uranium isotope that then fissions, releasing energy. Unlike uranium, thorium does not produce plutonium, or other highly radioactive waste.
“If it can be demonstrated to work, you basically get the best of both worlds,” said Jack Henderson, chair of the nuclear physics group at the UK’s Institute of Physics and a researcher at the University of Surrey. “You are able to reduce the level of radioactivity produced by burning up some of the longer-lived isotopes produced in your reactor — and you get energy out at the same time.”
Franklin Servan-Schreiber, chief executive of Transmutex, said transmutation was the “first technology that has been taken seriously by a nuclear waste agency to reduce the amount of nuclear waste”.
He said it could be used on 99 per cent of the world’s nuclear waste and would reduce the time it remains radioactive to “less than 500 years”.
“This is very significant because you can guarantee waterproof storage for 1,000 years,” he said. He added that the process also reduced the volume of waste by 80 per cent.
Servan-Schreiber said the idea behind the process had been conceived by Carlo Rubbia, the former director-general of the Cern particle physics laboratory.
A potential obstacle to the viability of transmutation is the cost of set-up. The price of building a reactor coupled with a particle accelerator is unclear, but the Large Hadron Collider at Cern cost about $4.75bn.
The study undertaken by Nagra and Transmutex found that the technology could “dramatically reduce the volume of high-graded radioactive waste and reduce the lifetime for a very significant part of that waste category tremendously,” said Matthias Braun, head of Nagra.
Switzerland voted in a 2017 referendum not to replace its existing four nuclear reactors but Servan-Schreiber said the results gave “credence to this technology for other countries”, adding that he was in talks with at least three countries over a possible deal.
BlackRock encouraged Anglo to extend talks with BHP
FTSE 100 group rebuffed third takeover proposal for mining megamerger
Anglo American was pressed by key shareholders including BlackRock to extend talks with BHP over its proposed £38.6bn mining megamerger.
Shareholders were crucial in convincing the FTSE 100 group to begin negotiations with its Australian rival, according to people familiar with the matter. This week, Anglo received a third proposal valuing it at £31.11 per share — a level in the ballpark of “fair value” for some shareholders.
Anglo, however, rejected this “final” offer from BHP on Wednesday, but surprised the market by extending talks by another week, keeping hopes of the deal alive. BHP has until 5pm on Wednesday to make a formal bid or walk away.
BlackRock, which owns a 9.6 per cent stake in Anglo, was among a handful of investors that encouraged meaningful negotiations with BHP, the people close to the situation added.
Much of BlackRock’s stake is held via passive funds tracking an index but the world’s largest asset manager holds a large sway in the sector through Evy Hambro, its chief investment officer for natural resources and a veteran of the mining industry. It also holds 6.9 per cent of BHP.
BlackRock and Anglo declined to comment.
Two other significant shareholders, Ninety One and Sanlam Investments, told the Financial Times they also backed the decision to extend, despite concerns about a deal structure that requires Anglo to spin off its stakes in its South African platinum and iron ore units.
“We’ve been advocates of what’s in the best interests of Anglo shareholders and wanted them to at least have a discussion with BHP,” said one shareholder.
The investor said that they were keen that the company weighed up the merits of the BHP bid relative to Anglo’s own proposal to break itself up.
Dawid Heyl, portfolio manager at Ninety One, which owns 1.8 per cent of Anglo, said that “we think an agreed deal would be a good outcome, and it looks like it could be heading that way”.
He added that £31 is “coming into the range of the sort of premium you’d expect for a change of control at a company”.
The deadline extension — which coincides with South Africa’s general election — marked a turning point in proceedings, with Anglo showing the first signs of willingness to engage.
However, its executive team, led by Duncan Wanblad, believes its own plans to hive off four major units will create more value than a takeover.
The distance between the two sides and the national election could mean negotiations are extended again.
The two sides are trying to bridge estimates of the risks involved in conducting two demergers and a change of control at one of South Africa’s most iconic companies.
A number of Anglo shareholders still oppose the deal. Old Mutual, which owns 2.2 per cent, was not convinced the final offer had the knockout premium needed for its backing.
“It still suffers from the problem that whatever happens, you’re tied into a fixed rate waiting for them to unbundle Kumba and Amplats, which could take 18-months to two years,” says Old Mutual analyst Ian Woodley. “At least with Anglo’s plan, you could get a value for Anglo which, if copper soars as some think it could, would be more fairly reflective.”
Woodley adds that for a deal to be achieved, “the question is — will BHP be willing to amend the structure?”
The structure needs altering or BHP must pay up more, people close to Anglo say.
But people familiar with BHP’s thinking insist there is no more wriggle room on the structure or price — only smaller, creative structures to better share the risks.
Andrew Snowdowne, equity analyst at Sanlam, which owns 0.6 per cent of Anglo, said that “we do think more needs to be allowed for a deal premium,” as he called the decision to extend talks “prudent”.
South African government-owned Public Investment Corporation (PIC), the second largest Anglo shareholder, said on Wednesday that any deal would require a “meaningful revision” to account for “material risks” for shareholders.
More US high-grade borrowers at risk of downgrade as economy slows
Proportion of investment-grade companies at risk of falling to junk now exceeds those likely to be upgraded
A rising share of the $8.9tn high-grade US corporate bond market is at risk of being slashed to junk status, with rating agencies’ expectations of downgrades exceeding upgrades for the first time since the end of 2021.
The proportion of the lowest-quality investment-grade bonds that rating agencies have on so-called “negative watch” or “negative outlook” — meaning their ratings are more likely to be downgraded — stood at 5.7 per cent this week, according to analysis by BofA Securities, including names such as Paramount Global and Charter Communications. That is almost double the level of 2.9 per cent at the start of this year.
In contrast, the percentage of these bonds on “positive watch” — meaning they are more likely to be upgraded — stood at 5.3 per cent, down from 7.9 per cent in early January.
While the share of bonds at risk of downgrade is still relatively small compared with the total, the shift highlights the challenges facing pockets of corporate America as economic growth slows by more than expected this year in the face of high borrowing costs.
BofA noted that while investment grade credit fundamentals are “generally strong, the risk of downgrades [of some bonds] to high yield has increased recently”.
The broad shift in rating dynamics comes after a year in which upgrades from junk to investment grade — known as “rising stars” — drastically exceeded moves in the opposite direction — so-called “fallen angels” — as the US economy defied fears of a recession to rank as the world’s fastest-growing advanced economy.
Data from Goldman Sachs shows that net rising stars totalled $119bn in 2023, the highest figure in records going back to at least 2010.
In comparison, this year’s net rising stars stand at just $20bn, according to Goldman’s figures, signalling a normalisation away from dramatic volumes of upgrades.
Helping drive the greater share of bonds on negative outlook than positive outlook this year are a number of big companies with large amounts of borrowing. BofA highlights Paramount and Charter as two such names.
Strategists at the bank noted that Boeing, with a $46bn capital structure, was recently cut to the lowest rank of investment-grade and put on negative outlook by Moody’s. However, BofA’s analyst sees a downgrade to junk as a “low probability event”.
Moody’s said in April that “the negative outlook captures the material degree of execution risk in Boeing’s plan to restore compliance and higher quality to its commercial aircraft assembly operations.”
Large volumes of new bonds entering the high-yield market can cause changes in pricing, leading to spreads — the premiums over government yields paid by borrowers to issue debt — rising. Currently the entire double-B universe is worth just $667bn, according to Ice BofA data, down from an all-time peak of more than $830bn in late 2021.
However, investor demand for credit has been particularly strong this year. Cash-laden buyers, keen to lock in attractive yields before the Federal Reserve begins to cut US interest rates from their current 23-year highs, are coming off the sidelines to scoop up corporate paper.
Analysts suggested that this should mean any new supply is more easily absorbed than it would be in less favourable market conditions.
“Usually, when there are big downgrades, it’s negative for spreads,” said Yuri Seliger at BofA. But this time “it will probably be not as bad as it was before.”
Barron’s Weekend Summary: China's cheap electric vehicles (EVs) pose no threat to US automakers like Tesla, Ford, and GM
Cover:
-China's cheap electric vehicles (EVs) pose no threat to US automakers like Tesla, Ford, and GM, but better vehicles might pose a problem. The Seagull, a cute four-door hatchback priced at $10,000, is a popular choice among Chinese automakers. The Biden administration raised tariffs on Chinese EVs to prevent them from crushing the US auto industry. A 100% import penalty will be imposed on EVs like the BYD Seagull, while select batteries and battery components will be hit with a 25% levy. Donald Trump has pledged even higher tariffs. The penalties effectively block Chinese companies from bringing their cars to America and prompt US auto makers to invest in domestic EV component manufacturers. China is now the largest market for new cars and EVs, and even US auto executives, including Tesla CEO Elon Musk, extol Chinese automotive quality and innovation. However, cheap vehicles pose no threat to US manufacturers, and American automakers must use the time to design and build affordable electric vehicles or risk seeing history repeat itself.
Interview:
-Solita Marcelli, now the chief investment officer for UBS Global Wealth Management, has experienced numerous career crises. She began her career as a technology equity analyst in the early 2000s, and soon joined JP Morgan's emerging markets fixed-income team. The global financial crisis roiled the bond market, and the Covid pandemic hit just three months after her hiring. Marcelli learned the importance of staying close to businesses and entrepreneurs, as data often offers insufficient information for decision-making. Conversations with UBS' high-net-worth clients, including restaurant franchise owners and furniture company executives, have confirmed her bullish view of U.S. stocks, especially technology shares, but also increased her focus on hedging positions. Marcelli's soft-landing economic forecast and market outlook are discussed in a Barron's interview.
Tech Trader:
-The world is investing heavily in Nvidia's artificial intelligence (AI) factories, with investors pushing its stock above $1,000 and data center builders increasing their spending five-fold in the company's latest quarter. The expected return on investment (ROI) for AI is unknown, but it is estimated to be 50%. Corporations and countries are refitting $1T worth of data centers with accelerated computing from Nvidia, with data centers earning $5 over four years for every dollar invested in Nvidia computing and networking products. However, real calculations of ROI are difficult due to the secrecy of competing firms and the newness of AI learning models. Marketed products based on OpenAI's ChatGPT or Google's Gemini are few, and Microsoft charges $10 to $30 a month for its Copilot virtual assistant. Netflix, Amazon, and Google use AI internally to determine what they present to their searching audiences, but this is a cost of doing business, not individually priced products.
The Trader:
-Memorial Day is here, but the market outlook is uncomfortably hazy. Despite recent volatility, the Dow Jones Industrial Average is up over 3% this month, while the S&P 500 index and NASDAQ Composite have gained 5% and 8%, respectively. However, the past week's wild swings, including Nvidia's strong earnings, have not prevented the Dow from losing over 2%. This coming week will not offer much to change the narrative, with earnings releases from Costco Wholesale, Salesforce, HP Inc., and Dell Technologies. Investors will also be able to digest the latest consumer confidence report, the Federal Reserve's Beige Book, weekly jobless claims, and a revision of first quarter gross-domestic product. The government's personal income and outlays report for April, which includes the latest PCE price index reading on inflation, will be released on Friday. Dan Genter, CEO and chief investment officer of Genter Capital Management, suggests that the Fed won't be easing monetary policy anytime soon, as the core number is expected to rise 2.8% year over year, unchanged from the previous month.
-Keurig Dr Pepper's shares have only gained 2.9% this year, underperforming larger rivals Coca-Cola and PepsiCo, which are both up about 7%. However, this could change as new management aims to shake up the underperforming coffee business. Keurig Dr Pepper owns Dr Pepper and other beverage brands, including 7UP, Hawaiian Punch, Snapple, and Yoo-Hoo, which are part of the company's U.S. "refreshment beverages" business. Sales rose more than 4% in the first quarter due to price increases. However, the company also owns the Green Mountain Coffee Roasters line of single-serve K-Cups for Keurig coffee makers, where sales fell more than 2% due to lower pricing and a decline in K-Cup pod shipments. Tim Cofer, previously the CEO of Central Garden & Pet and a 25-year veteran at Mondelez International/Kraft Foods, is expected to push coffee initiatives started by his predecessor, Bob Gamgort, to reignite growth in the business.
Features:
-Target's reputation as Walmart's more posh counterpart has made it a reliable shopping destination for middle-class Americans and a boon to the company's financial performance. However, with inflation squeezing household budgets, the company's cultivated aura of big-box exclusivity may be hurting its financials more than it is helping. As customers are looking for better value to stretch a dollar, they are finding it other places. Target's fiscal first-quarter earnings report showed a missed earnings estimate and a year-over-year sales decline, while competitor Walmart beat expectations due to its growing market share gains among higher-income customers. Target may need to take a page out of Walmart's book and position itself as a value-centric retailer to win back shoppers.
-GE Vernova stock has seen a significant increase, with its shares up 34% since being spun off from GE in mid-March. The company's shares have risen 8.6% on Friday, indicating a strong performance from the two GE companies. The Dow Jones Industrial Average has risen 0.1% on Friday, while the S&P 500 is up 0.7%. This indicates that low valuations and lower expectations remain a significant factor on Wall Street. Wall Street is raising price targets for GE Aerospace and GE Vernova, the power generation-related business, as both stocks have been successful since GE broke up. JP Morgan analyst Mark Strouse raised his price target for GE Vernova to $173 a share, keeping a Buy rating on the shares. GE Vernova stock closed at almost $164 a share on Wednesday, about $1 above Strouse's former price target. Aerospace, the former GE's business portfolio, is expected to be the better business, with strong margins and unassailable market share.
Europe:
-The European Central Bank (ECB) is expected to lower borrowing costs at its next meeting on June 6. The central bank, responsible for setting interest rates for 20 euro-using countries, has historically been slower to pivot than the Federal Reserve or the Bank of England. Euro-zone inflation held steady at 2.4% in April, near the 2% target, and ECB President Christine Lagarde has communicated that a cut is likely in June. However, moving first to control inflation and start the rate-cutting process brings risks, including currency weakness. Lower rates typically diminish a currency's relative value by making foreign investment less attractive. The euro has already fallen 1.6% to $1.09 in 2024 as the market believes the ECB will cut before the Fed.
Emerging Markets:
-Georgia's Prime Minister Irakli Kobakhidze has said an EU commissioner warned him of an assassination bid over a controversial law. Kobakhidze claimed on Thursday that the Commissioner was Olivér Várhelyi of Hungary (though probably not a supporter of Viktor Orban). The bill requires NGOs and media outlets with over 20% of their funding from abroad to register as bodies "pursuing the interests of a foreign power". Critics argue the measure mirrors Russian legislation used to stifle dissent, while Brussels warns it is incompatible with Tbilisi's longstanding bid for European Union membership. The ruling party has faced accusations of derailing the country from its EU membership path and leading it back towards the Russian orbit. The party insists it is committed to EU and NATO membership, which are enshrined in the country's constitution and supported by over 80% of the population. The party has repeatedly accused Western countries of attempts to drag Tbilisi into Russia's war on Ukraine. Kobakhidze called a "horrific threat", he quoted the commissioner as saying: "You've seen what happened to (Robert) Fico and you must be very careful."
--China's economy and property market are facing challenges due to a slump in housing prices since 2021, which has led to a freeze on spending. Consumer sentiment and real estate are suffering, with new home prices falling for a tenth consecutive month by 0.6%, the fastest decline since November 2014. China recently unveiled "historic" policies to rescue the housing sector, including measures to boost property prices, asking local governments to buy unsold homes from distressed developers, and easing rules on purchases. However, analysts say that local governments are vastly in debt across the country, making some of these steps likely to be ineffective.
Commodities:
- Commodities are experiencing a decline, with gold and silver experiencing their largest decline in a month. Copper is also down for its second consecutive session. This comes after a surge in prices this year, reflecting higher demand and tighter supply. Gold has already reached 22 record highs this year, while silver reached its highest value in over a decade earlier this week. Copper hit a record price of $5 a pound on Tuesday. In the agricultural market, inventories are tight for wheat due to production declines in Russia, the world's largest exporter. Soybean and corn prices have come under pressure, but analysts are watching for a spate of bad weather across the Midwest that could raise prices again. The commodity bull market is alive and well, with more upside. Retail investors should stick to the classic 60/40 portfolio of stocks and bonds, as commodities are speculative assets and are almost entirely at the mercy of supply and demand.
Streetwise:
-Alphabet is integrating generative artificial intelligence into its core search business, which could potentially change the rules of getting noticed online. Audience engagement experts have long explained that algorithms, relevance ranking, and clicks are important, but with AI, clicks might become less important. Google claims they won't, but it's unclear if they're talking from both sides of their Google hole. For example, Google's search results for a user asking which sneakers are best for a 51-year-old man might include paid links, product listings, pictures, and prices. However, Perplexity.ai, a small start-up, is taking on Google's near-monopoly in search. The company offers bullet points on how to complement a user's mature style, emphasizing cushioning and avoiding flashy colors, and specific model recommendations, but no endless list of links, paid or not.
Weekend Papers Summary
FINANCIAL TIMES
-Blackstone CEO Stephen Schwarzman has endorsed Donald Trump as a "vote for change" and a "vote for change" for the US president. This comes as Republican megadonors who had previously been critical of the former president are uniting behind him. Schwarzman had previously broken with Trump after the January 6 Capitol Hill insurrection and supported Trump critic Chris Christie in the Republican primary. He cited the dramatic rise of antisemitism as a reason for returning to Trump's camp and believed President Joe Biden's policies were misguided. Schwarzman's announcement could signal the start of more Wall Street money flowing to Trump, who has been tapping finance, technology, and energy billionaires for cash infusions as he lags behind Biden in the fundraising race.
-Taiwan experienced domestic political turmoil less than a week after new president Lai Ching-te took office, despite growing military pressure from China. Tens of thousands of people protested against opposition efforts to expand parliament's powers, which would severely constrain the president's administration. China's military conducted a second day of exercises around Taiwan, which it has called "punishment" of Lai, a staunch defender of his country's de facto independence. Beijing regards Taiwan as part of its territory and threatens to annex it with force if Taipei refuses indefinitely to submit. The People's Liberation Army sent fighters, bombers, and naval ships into areas off Taiwan's east coast, while China's coast guard conducted law enforcement patrols east of Taiwan, including simulated ship inspections.
-Meta and Elon Musk's xAI are vying for a partnership with chatbot-maker Character.ai, as tech groups seek to secure partnerships and investments in top AI start-ups in Silicon Valley. Facebook owner Meta recently held early discussions over a tie-up with Character.ai, which uses large language models to generate conversation in the style of various figures and personas. The groups discussed their top researchers working closely on initiatives such as pre-training and developing models. The fledgling group, backed by Silicon Valley venture firm Andreessen Horowitz, has also held exploratory talks with xAI over a similar partnership. However, the talks have not resulted in any deal being struck. Meta has already incorporated AI persona chatbots across Instagram, Facebook, and WhatsApp, including several that take on celebrity characters.
-A group of US Democrats, including senators Jeff Merkley, Bernie Sanders, Elizabeth Warren, and congresswomen Alexandria Ocasio-Cortez and Jan Schakowsky, have expressed concern over the appointment of Mukhtar Babayev as the president-designate of the UN COP29 summit. Babayev, the minister of ecology in Azerbaijan, spent over two decades at Socar before joining President Aliyev's cabinet. The letter to US secretary of state Antony Blinken and Biden climate envoy John Podesta urged the UN to update its conflict of interest guidelines to prevent similar situations from happening again. The letter echoes a call by over 100 US lawmakers and European parliament last year for the withdrawal of Sultan al-Jaber, the head of state-owned oil company Adnoc, as president-designate of COP28.
-Israel has been ordered by the International Court of Justice to halt the assault on the Gazan city of Rafah immediately. The UN's top court deemed the humanitarian conditions in Rafah, which has become a refuge for over 1 million civilians since the war began last year, "disastrous" and that Israel's efforts to protect them had been inadequate. This order reflects Israel's mounting diplomatic isolation as the war in Gaza continues, with the prosecutor at the International Criminal Court seeking arrest warrants for Netanyahu and defense minister Yoav Gallant, and three European states pledging to recognize Palestine. The week of setbacks also highlights how international opinion has hardened since Israel sent its forces into Rafah earlier this month, despite warnings from aid groups and pleas from the US not to do so.
-The UN's top court has ordered Israel to halt its military offensive in Rafah, a southern Gazan city that has become a refuge for over 1 million civilians since the war between Israel and Hamas began last year. Despite international pressure, Israeli forces entered Rafah earlier this month, insisting it was necessary to defeat Hamas. The International Court of Justice deemed Rafah's conditions "disastrous" and ordered Israel to stop. The court also ordered Israel to reopen the Rafah crossing between Gaza and Egypt for urgent basic services and humanitarian assistance, and to allow investigators into the enclave.
-With six weeks to go until another general election, Labour is about 21 points ahead of the ruling Conservatives in the opinion polls — leaving some Labour MPs in a mild state of disbelief at the speed of turnaround that Keir Starmer has achieved since he became party leader in early 2020. Critics have dismissed Starmer as a stodgy figure with a nasal voice who is yet to capture the imagination of the British public. Many supporters want the party to put forward a more positive message — and rely less on popular revulsion against the Conservative government.
-Labour is 21 points ahead of the Conservatives in opinion polls, leaving some MPs disbelieved at the speed of turnaround since Tony Starmer became party leader in early 2020. Critics dismiss Starmer as a stodgy figure and argue that the party should present a more positive message and rely less on popular revulsion against the Conservative government. Many supporters want the party to focus on a more positive message.
- Eli Lilly is investing $5.3B in a new Indiana manufacturing site to increase production of its diabetes and weight loss drugs. The investment brings the US drugmaker's total investment to $9bn, following the construction of Mounjaro and Zepbound. The company's diabetes and weight loss injector pens are currently facing shortages due to high demand. The sales of GLP-1s, the new class of drugs, have propelled Eli Lilly to the world's largest pharmaceutical group by market value. Analyst projections suggest that the new class could create a market worth over $100B by the end of the decade. Eli Lilly was valued at $768B at market close on Thursday. CEO David Ricks said the announcement was the largest manufacturing investment in the company's history and the single largest investment in synthetic medicine API manufacturing in US history.
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THE NEW YORK TIMES
- Israel continues its assault on Rafah despite an international court order to stop it, aiming to balance not angering American allies while achieving strategic aims. Both Israelis and Americans characterize this as a "limited operation," allowing the Israelis to proceed more cautiously than in other parts of Gaza. However, as the fighting pushes civilians towards areas with inadequate housing or medical aid, and the closing of the Rafah border crossing diminishes humanitarian aid delivery, critics abroad condemn the toll on civilians and are unconvinced by Israel's restraint. The International Court of Justice ordered Israel to halt its offensive in Rafah, but Israel insists it will not halt its military operation.
- Egypt has agreed to allow fuel and humanitarian aid to enter Gaza via Israel, reopening a vital channel for relief in the devastated Palestinian enclave. The agreement was reached during a telephone call between President Biden and Egyptian President Abdel Fattah el-Sisi. Fuel and aid will enter Gaza through an Israeli-operated crossing, Kerem Shalom, which has been one of two main land crossings into Gaza for months. The other crossing, between Egypt and Rafah, has also been the main way for sick and wounded Gazans to flee the war.
-Donald J. Trump returns to his Manhattan penthouse apartment after his criminal trial, which he built in the early 1980s. This is the silver lining for Trump, as he spends his first sustained period in Manhattan since moving to Washington in 2017. Despite facing 34 felonies and facing criticism from his old life, Trump enjoys being back in his penthouse apartment, which he considers home and a permanent reminder of the easiest period of his life. This period was the greed-is-good era, where Trump sold himself nationally as a titan of industry, despite a small real estate portfolio. He alludes to 1980s cultural touchstones, such as "60 Minutes," Time magazine, and boxer Mike Tyson, as he recalls the era.
-The Chinese Communist Party has been using extensive surveillance to prevent discontent and activists. During the coronavirus pandemic, this surveillance reached unprecedented scale, tracking nearly every urban resident to prevent infections. President Xi Jinping aims to make this control permanent and push it even further, aiming to embed the party deeply in daily life so that no trouble, even minor or apolitical, can arise.
-Hillary Clinton criticized her fellow Democrats for their decades-long failure to protect abortion rights, stating that they underestimated the growing strength of anti-abortion forces until the landmark Dobbs decision in 2022. She argued that Democrats had spent decades in a state of denial that a right enshrined in American life could fall, and that faith in the courts and legal precedent had made politicians, voters, and officials unable to see clearly how the anti-abortion movement was chipping away at abortion rights, restricting access to the procedure, and transforming the Supreme Court. Clinton said that most Democrats and Americans did not realize they were in an existential struggle for the future of the country.
-The migrant crisis has significantly impacted the hotel landscape in New York City, with the conversion of hotels to shelters causing a sharp decrease in room supply. This has led to a record high in tourist demand, which is projected to match pre-pandemic levels. Factors such as inflation, Airbnb short-term rentals loss, and expected decline in new hotel construction have also contributed to the nightly cost of an average room. The average daily rate for a hotel stay in New York City increased to $301.61 in 2023, up 8.5% from $277.92 in 2022. About 135 of the city's 680 hotels entered the shelter program, with many congregating in Midtown Manhattan, Long Island City in Queens, and near Kennedy International Airport. Participating hotels are paid up to $185 a night per room, but not a single one has converted back into a traditional hotel.
THE NEW YORK POST
- President Biden plans to address former President Donald Trump's Manhattan criminal trial in a "White House setting" when the jury delivers its verdict. His message will be tailored to the outcome of the trial, but he intends to stress that the US legal system worked and Americans should respect the process. Biden will deliver remarks whether the 77-year-old former president is convicted, acquitted, or the jury cannot agree on a verdict. Closing arguments in Trump's trial over alleged hush money payments made to porn star Stormy Daniels are set to commence on Tuesday, and it is believed that the jury could reach a verdict as early as next week.
-Silicon Valley venture capitalists, including David Sacks, Chamath Palihapitiya, Marc Andreessen, and Shaun Maguire, are turning against President Joe Biden and supporting former President Donald Trump. This change is a significant shift in the industry, which has traditionally supported Democrats. The moguls are disillusioned with Biden's policy proposals, such as a 25% "billionaire tax" and antitrust crackdowns by the Federal Trade Commission. Keith Rabois, an early PayPal executive, stated that it is impossible to support Biden.