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Win for Biden as curtain comes down on debt ceiling drama


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Good evening.

“Another win for the seriously underestimated Joe Biden” was the FT editorial board’s view on the ending of the political stand-off over the US debt ceiling that could have triggered a default in the world’s largest economy.

The deal, passed last night in the Senate with bipartisan support, raises the US borrowing limit until 2025 and caps government spending for the next two years. It comes to the palpable relief of investors and corporate America, which had feared a repeat of the showdown in 2011 when the brush with default resulted in a downgrade of the US’s triple A credit rating and a sharp sell-off in equities.

This time however the deal led the benchmark S&P 500 to hit a nine-month high overnight while also lifting European equities and oil prices.

A self-inflicted disaster may have been avoided, the FT says, but at some point the system is likely to miscalculate and self-detonate. “The sooner the debt ceiling is abolished, and replaced with sensible measures to target debt sustainability, the better,” it concludes.

Attention now turns back to the fight against inflation, but new data today has underlined the scale of that challenge, with US jobs growth almost twice as strong as forecast, making it more likely that the Federal Reserve will continue to raise interest rates.

The non-farms payroll numbers, one of the last big data releases before the Fed announces its next move, showed 339,000 new posts created in May. The unemployment rate rose slightly more than expected from 3.4 per cent to 3.7 per cent while wage growth edged down, albeit remaining at an elevated annual level of 4.3 per cent.

Employment and wage growth are key drivers of inflation, particularly in services, and officials have been watching for a slowdown in these measures to show price pressures were slowing.

Loretta Mester, president of the Cleveland Fed, said this week there was no “compelling” reason to wait before implementing another rate rise should data confirm more must be done to bring inflation under control, pushing back against those who argued the central bank should skip an increase at its next meeting.

The deal on the debt ceiling has also “relieved a big piece of uncertainty” she added.

Need to know: UK and Europe economy

Brussels urged the UK to join a trade agreement between European, Middle Eastern and North African countries to ease the risks of post-Brexit car tariffs. A think-tank urged prime minister Rishi Sunak not to enter a car “subsidy race” with the US and the EU.

UK house prices fell further in May as rising mortgage rates hit homebuyers and prompted owners to repay loans. Separate Bank of England data confirmed record numbers of households were paying back mortgage debt.

Eurozone inflation fell more than economists expected to 6.1 per cent, its lowest level since Russia invaded Ukraine over a year ago, boosting hopes that the European Central Bank might stop raising interest rates this summer.

The EU is working on a four-year multibillion-euro financing plan for Ukraine after allies criticised the bloc’s haphazard and unpredictable financial support for Kyiv. Ukrainian president Volodymyr Zelenskyy stepped up pressure for his country to join Nato.

Mehmet Şimşek, a former Merrill Lynch economist, is set to return as Turkey’s finance and treasury minister, a move likely to go down well with investors at a time of intense strain on the country’s economy.

Need to know: Global economy

Top Canadian pension fund CDPQ became the latest western investor to pull back from China.

The Bank for International Settlements, the umbrella body for central banks, said financial regulators needed to “up their game” to prevent future bank failures.

A leaked draft of the World Health Organization’s new plan for future pandemics shows we haven’t learnt from Covid-19, writes Mariana Mazzucato, who chairs its Council on the Economics of Health for All.

Brazil’s top foreign policy adviser Celso Amorim said the west must take “into account” Russian president Vladimir Putin’s security concerns, arguing that a belligerent stance against Moscow risked provoking a wider conflict.

Need to know: business

Goldman Sachs warned of a “tougher environment” as it announced more lay-offs, highlighting the increasingly gloomy outlook on Wall Street as dealmaking and the market for initial public offerings falter.

Tesla is opening up its proprietary charging network to rival marques in a decision that will shake up the nascent roadside industry.

Saudi Arabia is planning a second lithium processing facility in a sign of how supply chains to process the metal for batteries are slowly developing outside China.

Ever wondered what happened to that old laptop you dropped off at a retailer for recycling? We put trackers into old machines to find out and got some interesting insights into the UK’s informal trade in waste.

Investors are starting to turn to artificial intelligence to guide their dealmaking, raising questions over the traditional roles of human relationships and judgment. Analysts estimate that AI and data analytics will be used in more than three-quarters of venture capital and early-stage investments by 2025.

BHP, the world’s largest miner, has to pay $280mn to reimburse 30,000 workers for loss of public holiday payments over a 13-year period.

Science round up

A group of chief executives and scientists from companies including OpenAI and Google DeepMind warned the threat to humanity from the fast-developing technology rivalled that of nuclear conflict and disease. Sci-fi writer Ted Chiang talks about the limits of AI in his Lunch with the FT.

China sent its first civilian into orbit as it prepares to launch a manned mission to the Moon by 2030 and achieve what President Xi Jinping has called the country’s “eternal dream” of becoming a space power.

A top Chinese scientist said the country had investigated whether Covid-19 might have originated in a Wuhan laboratory — the first admission from a senior official that Beijing took the so-called lab leak theory seriously after years of denials.

German start-up Proxima Fusion has secured initial funding to develop a revolutionary fusion energy machine that it hopes can provide a source of abundant, emissions-free power.

Technological progress over the past decades is in no small part due to computer chips getting tinier, but have we finally reached the limits of what is possible? A new Big Read investigates.

Diagram giving an idea of the scale of nanometre-sized objects on a silicon chip by comparing them with a virus, a strand of DNA and a garden ant

Something for the weekend

Try your hand at the range of FT Weekend and daily cryptic crosswords.

Interactive crosswords on the FT app

Subscribers can now solve the FT’s Daily Cryptic, Polymath and FT Weekend crosswords on the iOS and Android apps

Some good news

Scientists have discovered how to make more accurate predictions of genetic mutations that cause disease in humans after applying AI techniques to a database of DNA from apes, monkeys and lemurs.

Owl monkeys in a tree
Owl monkeys in Argentina. The project used the genetic information of primates to analyse the DNA of 454,000 human participants in the UK Biobank project © Emilio White & Owl Monkey Project

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