The Trend Toward Narrower Trade Pacts; St. Louis Fed's Bullard Says Recession Concerns Exaggerated

The Trend Toward Narrower Trade Pacts; St. Louis Fed's Bullard Says Recession Concerns Exaggerated By James Christie

Good day. As economic and political tides turn against sweeping trade deals, governments are turning to narrower, less controversial pacts, Daniel Michaels of The Wall Street Journal writes. Outside the U.S., he notes, countries have continued striking free-trade agreements, and these deals increasingly emphasize issues other than tariffs. The same is true for the U.S.'s international economic diplomacy. Meanwhile, Federal Reserve Bank of St. Louis President James Bullard said Friday he didn't believe regional banking woes will be a shock to the U.S. economy that will lead to a recession. He also said that "The imminent demise of the U.S. economy is greatly exaggerated," adding the Fed may have to grind higher with interest rates to bring inflation down to its 2% target.

Now on to today's news and analysis.

Top News In Trade Diplomacy, Free Trade and Tariffs Take a Back Seat

In just the past year, the Biden administration has opened talks with Japan, the European Union, and more than 20 countries from India to Peru on cross-border economic links. Terms that generally aren't part of these discussions: "free trade" and "tariffs."

Welcome to the new world of trade deals . It's no longer about slashing duties, but a host of other issues-from digital copyright to air quality and technology and product standards-often brokered in government-level agreements rather than full-blown treaties.

Fed's Bullard Doesn't See Banking Woes Leading to a Recession

The base case for the U.S. economy is slower growth and a softer labor market , not a recession, St. Louis Fed President James Bullard said, noting "The imminent demise of the U.S. economy is greatly exaggerated."

Pro Take: Airfares Are Still Soaring, and Pandemic Fallout May Keep Them Aloft By Bob Fernandez

Airfares soared on planeloads of cabin-fevered travelers after lockdowns ended. On a tear since April 2021, airfare inflation peaked last fall at 43%, according to the U.S. consumer-price index, easing to 18% in March.

That pullback was a bit of good news for the Federal Reserve, which has been raising interest rates over the past year to try to rein in inflation, with a quarter-percentage-point move most recently last week. Even so, headline inflation is running more than double the Fed's 2% target, with airline fares feeding into that. Read more .

U.S. Economy Jobs Report Shows Hiring Remained Robust in Slowing Economy

Employers added 253,000 jobs in April, the best gain since January, and job growth was revised lower in February and March. The unemployment rate fell to 3.4% last month, matching the lowest reading since 1969.

Thousands of Jobs Were Added in April Even in Industries With Layoffs

Tech Workers Aren't as Rich as They Used to Be

For years, tech jobs were a ticket to riches. Much of that wealth has evaporated with tech companies' boom-time gains as the stock market rout froze initial public offerings, putting startup employees' windfall hopes on hold indefinitely .

Biden, Lawmakers Look to Break Impasse on Debt Ceiling

Top Democrats and Republicans are racing to try to find a politically acceptable way to raise the nation's borrowing limit in the coming weeks, diving into talks that President Biden has avoided during months of impasse.

Key Developments Around the World Taiwan's Trade Clash with China Could Benefit the U.S.

Taiwan has begun preparing for a rise in economic tension with China, stepping up efforts to encourage businesses to look for investments in the U.S. and elsewhere as firms from the island face a sprawling Chinese trade probe .

Pollution Reveals What Russian Statistics Obscure: Industrial Decline

Pollution emitted by Russian factories and detectable by satellites in outer space reveals an industrial sector that, for the most part, has declined even further as the war in Ukraine has continued.

Financial Regulation Roundup Coinbase Tries Novel Defense in SEC Fight

With the SEC preparing an enforcement action threatening much of its business, crypto exchange Coinbase is trying a novel defense. It says regulators bear some responsibility for letting the company go public in the first place.

New York Attorney General Seeks Broader Authority to Police Crypto

A bill would give the attorney general's office broader powers over crypto firms operating in the state, while codifying the New York State Department of Financial Services' authority to oversee the state's digital asset licensing regime .

SEC Issues $279 Million Whistleblower Award, Its Largest Ever

The Securities and Exchange Commission said it has awarded nearly $279 million to a whistleblower who helped the regulator and other agencies bring enforcement actions , its largest award ever.

Ant License in Limbo as China Shakes Up Regulatory System

Chinese fintech giant Ant Group's transformation into a fully regulated company has been held up by a reshuffle of China's financial-regulatory system, according to people familiar with the matter.

Forward Guidance Monday (all times ET)

10 a.m.: The Conference Board Employment Trends Index for April; U.S. wholesale trade sales and inventories for March; ECB's Lane at New Paradigm Workshop - Resetting the Economy After the Crises

2 p.m.: Federal Reserve Senior Loan Officer Opinion Survey on Bank Lending Practices

Tuesday

4 a.m.: ECB's Lane at IMF event Europe's Balancing Act: Taming Inflation Without a Recession

12 p.m.: New York Fed's Williams speaks at Economic Club of New York

Research U.S. Inflation Forecast to Have Remained Strong in April

Economists at Bank of America expect no break from inflation in the U.S. when the consumer-price index numbers for April come out Wednesday. They forecast in a note a headline annual price increase at 5%, same as in March. For core inflation, they expect a "strong 0.3% print" on month and the 12-month reading to inch down from March's 5.6% to 5.5%. "Demand is softening for goods and supply chain conditions have improved notably, but prices have proven to be more rigid than we previously anticipated," they write. "We suspect more demand destruction is needed to drive outright deflation in core goods ex used cars." They also anticipate monthly shelter inflation at 0.5%, down from March's 0.6%.

-Paulo Trevisani

Robust Canadian Wage Growth Fueling Bet on Summer Rate Rise

Traders are starting to price in the probability of a summertime interest rate increase by the Bank of Canada following labor data that suggested annual wage growth remains elevated, economist David Rosenberg of Rosenberg Research tells clients in a note. The closely-read market strategist writes that April's Canadian employment report, showing a 41,000 job gain and wage growth of 5.2%, suggests the labor market remains tight. The BOC "is unlikely to be pleased with this development, " Mr. Rosenberg writes. On Thursday, BOC Gov. Tiff Macklem warned inflation could get "stuck materially" above its 2% target unless wage growth eases.

-Paul Vieira

EU Crypto Regulation Could Influence Laws Worldwide

New European Union laws governing crypto assets could have an influence on similar legislation around the globe, S&P Global Ratings says. The legislation will result in a unified European market for crypto and other digital assets, and "will improve regulatory visibility for market participants and establishes the region at the forefront of digital finance regulations," according to S&P. The laws build on the EU's wider digital finance initiative and may have a positive effect on the adoption of crypto assets, according to S&P.

-Stephen Nakrosis

Commentary Slowing Jobs Juggernaut Gives Fed Breathing Room

Job growth in the U.S. will need to moderate further to get to the point where the Federal Reserve stops worrying that labor market strength is adding to inflation problems, Justin Lahart writes.

Banks Are in the Grips of Investor Crisis of Confidence

If a bank as established as Silicon Valley Bank or First Republic can face a lethal tidal wave of withdrawals from accounts that lack deposit insurance, it is clear that a bank can very quickly become unsound, Telis Demos writes.

The Regional Bank Selloff Visualized

As India Overtakes China in Population, Will Its Stock Market, Too?

Is India's stock market a better long-term bet than China's? Some economists think so, now that India is on track to become the world's most populous nation. Demography, they believe, is destiny, Mark Hulbert writes.

Mr. Hulbert is a columnist whose Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at [e-mail].

Basis Points A private gauge of China's service sector declined in April but stayed in expansion territory, as consumers shifted to close-contact services after Beijing lifted Covid-19 restrictions. The Caixin China services purchasing managers index fell to 56.4 in April from 57.8 in March, Caixin Media Co. and S&P Global said Friday, marking the fourth consecutive month the Caixin services PMI has been above the 50 mark separating expansion from contraction. (Dow Jones Newswires) China's foreign-exchange reserves rose for a second straight month in April amid eased capital outflows, official data showed Sunday. China's hoard of foreign exchange, the largest in the world, rose by $20.89 billion to $3.205 trillion in April, the People's Bank of China said. (DJN) Australian business conditions remained resilient in April, despite a series of interest-rate increases over the past year, keeping the door open for further policy tightening by the Reserve Bank of Australia in the coming months. (DJN) Industrial production in Germany contracted more than expected in March, driven by a decline in automotive production, suggesting weak demand as high interest rates weighed on spending. (DJN) Feedback Loop

This newsletter is compiled by James Christie in San Francisco.

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05-08-23 0715ET