US Steel becomes a national security concern
Obstacles continue to multiply for US Steel’s proposed sale to Japan’s Nippon Steel for $14 billion.
Lawmakers and others in Washington are questioning the wisdom of allowing an American industrial icon to fall into foreign hands. Behind this there is some protectionist concern (and a play on the concerns of unions) before an election year.
Criticism of the agreement is bipartisan:
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In a letter sent Tuesday to Treasury Secretary Janet Yellen (who chairs CFIUS, the interagency committee that reviews investments for national security reasons), three Republican senators recommended blocking the sale. “National steel production is vital to the national security of the United States,” wrote JD Vance of Ohio, Josh Hawley of Missouri and Marco Rubio of Florida.
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Sen. Joe Manchin, the West Virginia Democrat weighing a third-party presidential bid, call the transaction a “major blow to the American steel industry that has been instrumental in making us the world’s superpower.”
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Sen. Bob Casey, a Pennsylvania Democrat running for re-election, called the transaction “a bad deal for Pennsylvania and for Pennsylvania workers,” while his colleague John Fetterman pledged to “do everything you can to block it.” Senator Sherrod Brown of Ohio, who is also up for re-election, also criticized the sale.
Behind these concerns is concern about domestic steel production., which is increasingly considered a vital national interest. American steelmakers have battled cheaper, state-subsidized competitors from places like China, which accounts for more than half of global production.
Former President Donald Trump sought to protect the U.S. steel industry by imposing a 25 percent tariff on most imports. And President Biden has taken steps to limit foreign competition and increase demand for domestically produced steel.
Steelworkers are also an important political group. The industry is a major employer in political battlegrounds like Pennsylvania and Ohio. And the American Steelworkers Union has come out against the Nippon Steel transaction. (He has supported the sale of US Steel to a national rival, Cleveland-Cliffs.)
However, a national security review may have limits. Japan is a close ally of the United States and Biden may not want to upset a partner he has been courting to counter China. Rejecting the deal “would immediately create a major problem with our Japanese allies given the importance of collaboration on other critical issues such as China and semiconductor production and supply chains.” Michael Leitertold CNN, who heads the CFIUS practice at law firm Skadden Arps.
The administration is not showing its hand: Karine Jean-Pierre, White House press secretary, said Biden was aware of the agreement, adding that it could face regulatory reviewwithout giving more details.
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Israel reportedly offers a new pause in its war in Gaza. He proposed stop, for at least a week, would be in exchange for Hamas releasing more than three dozen hostages, according to Axios. The news comes as discussions resume at the UN Security Council on a resolution on aid to Gaza after a vote was delayed.
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Southwest reaches a labor agreement with its pilots. The provisional agreement, reached after three years of negotiation, is valued at 12 billion dollars, according to the pilots union. Details about the contract were not disclosed, although Southwest pilots have sought to match the steep pay increases and improvements in working conditions achieved by their counterparts at other airlines.
The disconnect between the Federal Reserve and the markets
The S&P 500 is about half a percentage point away from a record high Wednesday morning, as investors bet that a wave of interest rate cuts is coming next year.
But the Fed’s double talk is clouding the rally. In recent days, several senior central bank officials have sought to walk back comments made by its chairman, Jay Powell, last week. He surprised Wall Street when he said the Federal Reserve expected to make three interest rate cuts next year, ending a period of tight credit.
Raphael Bostic is the last to counterattack. Bostic, the president of the Atlanta Federal Reserve, said Tuesday that there was no “urgency” to reduce borrowing costs. His reasoning: Inflation could still remain stubbornly high for the next six months. Loretta Mester, John Williams and Austan Goolsbee, their counterparts in Cleveland, New York and Chicago, have made equally cautious comments.
For good measure, Bostic predicted no more than two rate cuts next year, and none in the first six months. On Tuesday, futures market traders They were betting five.
The disconnect creates some drama around this week’s inflation report. Wall Street will closely watch the personal consumption expenditures report, the Federal Reserve’s preferred inflation gauge. A disappointing reading could add volatility to the markets.
Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, warned investors in a research note on Monday that there has been little progress lately in bringing core inflation, which excludes food and fuel prices, closer to the target of 2 percent of the Federal Reserve. “Core inflation is not even close to ‘mission accomplished,’” she wrote.
Supply chain problems in the Middle East could create inflationary pressure. Traffic through the Red Sea and Suez Canal, a vital trade route, has slowed due to attacks on ships in the Red Sea by Houthi rebels, posing another risk to the global economy. Some logistics giants are prepared to weeks of interruption. Global oil prices rose on Wednesday, as did shipping rates in recent days.
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In related economic news: FedEx, a barometer of the health of the economy, lowered its sales forecast on Tuesday, expecting weaker demand in the coming year. The stock fell more than 9 percent in premarket trading.
A two-wheeled unicorn runs out of road
Bird, an electric scooter company that was one of the start-ups the fastest to become a unicornannounced on Wednesday that it had filed for bankruptcy protection.
To help it continue operating, the company said, it had secured $25 million in financing from Apollo Global Management and its second lien lenders. Michael Washinushi, Bird’s interim CEO, will remain in his role as the company pursues a turnaround plan that could involve asset sales.
The shine of this once bustling part of the urban mobility sector has begun to fade. Micromobility.com, formerly known as Helbiz, was removed from the list from Nasdaq on Tuesday and another rival, Tier Mobility, made its third round of layoffs last month.
Bird has long positioned itself as a partner in helping cities become greener. It was started in 2017 and expanded rapidly, fueled by big-name Silicon Valley investors including Sequoia Capital and Accel Partners. It raised over $500 million in venture funding and went public via a SPAC in 2021.
But Bird’s losses piled up, and the company was removed from the list from the New York Stock Exchange in September. This came after he admitted to the SEC that he had overstated his income for more than two years; its founder, Travis VanderZanden, left in June.
Bird scooters can be found in more than 350 cities, from Rome to San Francisco. (The company’s Canadian and European businesses are not part of the bankruptcy, Bird noted, and will continue to operate as normal.) Many complaints about abandoned rental scooters cluttering sidewalks and parks. Paris banned electric scooter rentals this year, a first for a European capital, although it still allows privately owned electric scooters.
Betting on FTX becomes a ‘crazy’ operation
The price of Bitcoin has more than doubled this year and is approaching $43,000 on Wednesday. That’s not the only hot stock in crypto.
Speculators are driving rapid trading of creditor claims (essentially a promissory note) attached to FTX, the collapsed crypto exchange founded by convicted fraudster Sam Bankman-Fried. “The market is crazy,” said Thomas Brazilel, partner at investment firm 117 Partners. “It’s so hot.”
The Times’ David Yaffe-Bellany and Matthew Goldstein explain what’s at stake.
The initial despair over FTX’s failure has given way to a strange afterlife for the failed exchange: a trading frenzy that has intensified in recent weeks as major financial firms search for opportunities in the rubble of one of the worst business collapses in decades. The FTX story has come full circle, as investors who once used the platform to place risky crypto bets are now betting on the company’s prospects in bankruptcy court and funneling any profits back into the crypto market’s resurgence.
For speculators, the math is simple: They’re betting that if they buy a $10 million claim for, say, 50 cents on the dollar, they’ll pocket substantial profits if the bankruptcy estate ultimately returns more than $5 million. In total, between $1 billion and $1.5 billion in FTX claims have changed hands since the bankruptcy began, according to Xclaim, a company that connects buyers and sellers.
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