Category: Observation

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EU gives greenlight to the world’s first significant law on artificial intelligence

Human and humanoid

On Tuesday 21st May 2024, European Union member states reached a consensus on the world’s first significant law to regulate artificial intelligence, a move echoed by institutions globally to implement controls on the technology.

The EU Council announced it has granted final approval for the AI Act, a pioneering regulation designed to establish the first extensive framework for artificial intelligence.

The EU Commission is authorized to impose fines on companies violating the AI Act, up to 35 million euros ($38 million) or 7% of their annual worldwide turnover, whichever is greater.

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OpenAI and Reddit strike a deal

Reddit

Reddit’s shares have surged following the announcement of a partnership with AI start-up OpenAI

Through this deal, OpenAI, the creator of the ChatGPT chatbot, will gain access to Reddit’s content and introduce AI-driven features to the platform.

OpenAI has also secured agreements with various publishers, reports suggest, including the Associated Press and the Financial Times, in the past few months.

This move underscores Reddit’s strategy to diversify its revenue streams beyond advertising.

Additionally, the partnership emerges amidst increasing legal actions by copyright holders against AI companies for utilizing their content.

Sony, the world’s largest music publisher, reportedly issued letters to Google, Microsoft, and OpenAI inquiring about the potential use of its songs in AI system development.

Furthermore, Google formed a partnership in February, granting the tech behemoth access to Reddit’s data for AI model training.

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U.S. debt and deficits are generating concerns about potential threats to the economy and financial markets

Debt burden

The federal debt reportedly reached $34.5 trillion, marking an increase of approximately $11 trillion since March 2020.

This surge has sparked discussions among government and financial leaders, with a notable Wall Street firm questioning whether the associated costs could threaten the stock market’s upward trend. The Congressional Budget Office projects that the public debt will soon surpass any previously recorded levels relative to GDP.

Federal Reserve Chair Jerome Powell has emphasized the urgency for elected officials to address this issue promptly.

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China is a major and critical world supplier and full decoupling may be impossible

Cargo shipping containers

Chinese firms are becoming increasingly optimistic about a rise in trade exports, as there is little evidence of global companies completely decoupling from China, Allianz Trade reports.

More than one in ten Chinese exporters, ranking as the second-largest exporter of goods to the U.S. following Mexico, anticipate an increase in exports.

While a total decoupling of supply chains from China may not occur, the option for diversification remains open.

The global economy is so interlinked it is virtually impossible to decouple China

See report here.

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China’s Baidu has exceeded revenue expectations, thanks to a resurgence in advertising and the expansion of its cloud services

Baidu

Baidu, one of China’s leading search engine firms, surpassed analysts’ revenue forecasts for the Q1 on Thursday 16th May 2024.

This was predominately due to a recovery in advertising revenue and a surge in demand for its AI-driven cloud products.

The company announced a revenue of 31.51 billion yuan ($4.37 billion) for the quarter ending 31st March 2024, exceeding the average analyst projection of 31.21 billion yuan, according to a latest dataset.

Shares of Baidu listed in the U.S. saw an approximate 3% increase in premarket trading.

The tech giant has been actively enhancing its sales efforts focused on AI-centric products and services.

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Does the recent precious metal rally in gold, silver and platinum have further to go? Some analysts think so

Precious metal rally

Precious metal prices received a significant uplift on Thursday 16th May 2024 following the release of better-than-expected U.S. inflation data, which increased the likelihood of rate cuts by the Federal Reserve, again.

Gold prices reached their highest point in over three weeks on Thursday too, while silver achieved its highest price in over three years, and platinum ascended to a peak close to its one-year high.

According to strategists in a recent comment, gold prices might soon approach the $2,400 again, silver could rise to as much as $30 per ounce, and platinum has the potential to hit $1,130 per ounce.

Silver price per ounce 16th May 2024 – chart snapshot

Gold price per ounce 17th May 2024 – chart snapshot

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Google Unveils AI Chatbot Gemini 1.5 Flash as competition from OpenAI heats up

AI Chatbot Gemini

Google is advancing the frontiers of artificial intelligence (AI) with its new release, Gemini 1.5 Flash, which is set to transform our online information interactions.

Unveiled at Google I/O 2024, this latest model enhances sophisticated features with rapid performance and efficiency. The new AI Chatbot was unveiled on 15th May 2024.

The unveiling comes a day after OpenAI announced its newest artificial intelligence (AI) model, GPT-4o.

Google Gemini 1.5 Flash

The Gemini 1.5 Flash is engineered for exceptional speed, processing queries with reduced latency, which makes it perfectly suited for real-time applications.

Context Understanding

Similar to its forerunner, Gemini 1.5 Pro, Flash is adept at contextual understanding. It is capable of interpreting user prompts through multiple modalities such as text, images, video, and speech.

Smaller Scaled Version

Google also introduced a scaled-down version called Gemini 1.5 Nano, which runs locally on devices.

AI quick answers

A prominent feature of Gemini 1.5 Flash is the AI Overviews integration. These ‘precis’ summaries deliver rapid responses to intricate inquiries. Users are presented with a topical overview and pertinent links for additional research. The AI Overviews feature is currently being introduced to U.S. users, with worldwide availability anticipated by the end of the year.

Future of Google search

Gemini 1.5 Flash is Google’s latest endeavour to improve search experiences. Whether it’s for research, planning, or brainstorming, this AI model simplifies the process. With the advent of generative AI, Google Search is becoming increasingly potent, enabling users to effortlessly access reliable information.

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Meme stock craze is back and creates volatile behaviour again!

Memes

Shares of GameStop and AMC surged by approximately 60% in premarket trading on Tuesday 14th May 2024, signalling a potential continuation of gains as the meme stock crazes makes an unwelcome comeback.

Shares of the video game retailer GameStop surged 59% higher in late trade while the movie theatre chain AMC’s shares rose over 64%. Other so-called ‘meme stocks’ were also set to open significantly higher on Tuesday.

GameStop’s shares soared more than 100% and experienced multiple halts due to volatility after Roaring Kitty made a comeback on X. His tweet, a simple image of a man leaning forward in a chair, marked his first post in three years and was enough to spur the ‘wild traders’ into blind action.

Although GME had already begun rallying before, the surge yesterday was extreme and reminiscent of the original meme stock frenzy involving WallStreetBets and Melvin Capital. Ultimately, it closed up 74%. With GME’s short interest at 24% prior to the surge, it’s likely that a significant portion of the movement was due to short-covering, as well as some hedge funds having calls on their shorts.

Trend-following and momentum strategies may have contributed to the rise. Retail investors appear to be growing more bullish and willing to take on greater risks. The surge seems to lack a fundamental basis, as GME’s last earnings report was notably very poor. N

However, not all meme stock involvement is blindly speculative.

But it is just a game to some!

What is a meme stock?

A meme stock refers to the shares of a company that have gained viral popularity due to heightened social following. This social ‘following’ is usually due to activity online, particularly on social media platforms

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OpenAI launches new AI model – and it talks, sees and hears!

Chatbot GPT-4o

OpenAI has just unveiled its latest flagship model, GPT-4o. This remarkable model can reason across audio, vision, and text in real time.

Multimodal interaction

GPT-4o accepts any combination of text, audio, and image as input and generates corresponding outputs in any of these modalities. It’s a step toward more natural human-computer interaction.

Fast response time

GPT-4o can respond to audio inputs in as little as 232 milliseconds, with an average of 320 milliseconds – similar to human conversation speed.

Improved language understanding

It matches GPT-4 Turbo performance on English text and code, with significant improvements in non-English languages. Plus, it’s 50% cheaper in the API.

Vision and audio understanding

GPT-4o excels in understanding images and audio compared to existing models.

Training

Unlike previous Voice Mode (which used separate models), GPT-4o is trained end-to-end across text, vision, and audio. This means it processes all inputs and outputs using the same neural network.

Exploring capabilities

OpenAI is still exploring what GPT-4o can do and its limitations. It’s a promising step toward more versatile AI interactions.

More here on the OpenAI website

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Scientists create ‘world’s purest silicon’ – it has the power to change the world

Purest silcon created

Scientists have recently achieved a remarkable breakthrough by creating pure silicon, which could pave the way for quantum computing

The world’s purest silicon

Researchers have developed an ultra-pure form of silicon, known as silicon-28 (Si-28), which is fundamental for ‘silicon-spin qubits’ in quantum computers. This advancement addresses a major challenge in quantum computing: the ‘fragile quantum coherence.’

Quantum computers tend to accumulate errors quickly due to slight environmental changes, affecting their dependability.

Quantum bits, or qubits, are analogous to classical computer bits but are extremely sensitive to environmental interference.

Technical

Current quantum computers, even when cooled to near absolute zero, can only maintain error-free operation for a very short time.

This new technique generates qubits by embedding phosphorus atoms into crystals of pure, stable silicon. A concentrated silicon beam then directs onto a silicon chip, replacing impurities with pure silicon.

As a result, the impurity levels in silicon have been significantly reduced, from 4.5% to a mere 0.0002%.

David Jamieson, a project co-supervisor from the University of Melbourne, mentioned that the team achieved this level of purity using a standard piece of equipment – an ion implanter – that’s typically found in semiconductor fabrication laboratories.

Richard Curry, a professor at The University of Manchester where extensive research took place, believes that this advancement could accelerate the development of operational quantum computers. Processes that might have taken a decade to complete could now be accomplished in potentially half that time or less.

Potential impact

Practical quantum computers have the potential to revolutionize numerous fields

  • Energy Optimization: They can solve intricate problems related to energy.
  • Artificial Intelligence: Quantum computers may significantly boost AI capabilities.
  • Drug Discovery: They could expedite drug development and molecular simulations.
  • Communication: They can enhance encryption and communication protocols.

The creation of the world’s purest silicon represents a significant step forward in the development of large-scale quantum computers.

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UK interest rate held at a 16-year high as Bank of England holds rates at 5.25%

On hold

The decision comes as inflation, which measures price rises over a period of time, remains above the Bank’s 2% target at 3.2%. But bank says cuts are coming.

Is the 2% target still a sensible benchmark?

The 2% inflation target set by central banks has been a widely adopted benchmark for monetary policy.

History

The 2% inflation target became prominent in the 1990s and early 2000s. Central banks, such as the Federal Reserve and the Bank of England, have aimed to maintain inflation at this level.

The Federal Reserve has typically pursued an inflation rate of about 2% since 1996.

In January 2012, then-Fed Chairman Ben Bernanke formally established the 2% target, and subsequent Fed chairs have continued to endorse this rate as the preferred level of inflation.

Why the 2% target?

Price stability

The 2% inflation target was selected as it provides a balance between preventing problematic inflation and avoiding damaging deflation. Does it work?

Avoiding deflation

Deflation, characterized by falling prices, can hinder economic growth. Central banks target a 2% inflation rate to avert deflation and ensure stability.

Creditor-Debtor compromise

The 2% inflation target represents a balance between creditors’ preference for lower inflation and debtors’ inclination towards higher inflation.

Challenges

Changing economic environment

In recent years, the global economy has encountered distinct challenges, including sluggish growth, technological upheavals, and demographic changes. Consequently, there is a debate on whether the 2% inflation target requires reassessment.

Persistently low inflation

Despite the efforts of central banks, inflation has persisted below the 2% mark in numerous advanced economies, sparking debates over the potential need to modify the target.

Trade-offs

Aiming for a 2% inflation rate can occasionally clash with other policy objectives, like employment or financial stability. It’s crucial for central banks to judiciously manage these competing priorities.

Revision

Several central banks are revising their strategies. For example, the European Central Bank (ECB) has adopted a more adaptable inflation target, permitting temporary exceedances to balance out extended periods of below-target inflation.

The Bank of England also considers broader economic factors when setting policy, rather than rigidly adhering to the 2% target.

IIn summary, although the 2% inflation target has been a helpful benchmark, central banks are progressively willing to adjust their strategies in response to evolving economic conditions. The current debate focuses on striking an optimal balance between stability, growth, and adaptability.

Central banks saw this period of inflation as ‘transitory’ – it wasn’t. It could be argued that their lack of action led to a bigger inflation problem overall.

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Why are mortgage rates still going up?

Home loans increasing

Mortgage rates are still going up due to expectations that the Bank of England might not cut borrowing costs as much as expected. 

Higher-than-expected inflation figures at this point, have led to increased forecasts for UK interest rates, prompting lenders to raise the cost of new mortgage deals.

Those considering purchasing their first home or relocating have probably been monitoring the recent rise in mortgage rates closely. In the past few weeks, numerous lenders have increased the interest rates on new fixed mortgage deals, thus making borrowing costlier. Existing homeowners planning to remortgage this year might have anticipated falling rates, not an upward trend.

So, what’s driving this trend?

Borrowing costs are increasing

Mortgage rates typically reflect the actions of the Bank of England, especially changes to its benchmark interest rates, commonly referred to as the base rate. An increase in the base rate makes borrowing costlier. Swap rates, which are essentially agreements to exchange interest rates between parties for a specified duration, have a considerable impact on fixed-rate mortgage agreements. Consequently, as lenders face higher borrowing costs, fixed-rate mortgages tend to increase. With several recent rises in the base rate, mortgage rates have escalated accordingly.

Lenders’ strategies

Lenders are exercising caution in managing their customer base. The recent increases in rates do not reflect a rapid cycle as observed in the previous two years. Rather, lenders are strategically adjusting their rates. Earlier in the year, a mini price war among lenders led to favorable interest rates for borrowers. Nonetheless, these rates have subsequently increased, with lenders adopting a more conservative approach to pricing. For instance, the average interest rate for a two-year fixed deal rose from 5.55% at the end of January to 5.93% more recently.

Lenders don’t want too many customers

Mortgage brokers emphasize that the recent changes do not signify a new cycle of rapidly increasing rates, such as those experienced over the past two years.

Current mortgage rates remain below the peak of last summer and are not escalating as sharply as they did following the mini-budget of 2022. Nevertheless, some borrowers were expecting rates to consistently decrease throughout the year.

Two more key factors have created the current bump in the road.

  • Firstly, the global economic outlook has not been as positive as many would have hoped. The U.S. central bank again said it would keep interest rates unchanged, because the rate of rising prices (inflation) had proved more persistent than expected.
  • Secondly, lenders tend to move in a pack. A mortgage provider wants to set its rates to be competitive, but not too low to be suddenly inundated with custom and unable to cope with the demand.

For home buyers and owners, the financial landscape has shifted slightly; obtaining a mortgage now is somewhat more costly than it was a year ago.

According to Rightmove, the average monthly mortgage payment for a typical first-time buyer’s property, based on a standard five-year fixed, 85% loan-to-value mortgage, has risen to £1,117 from £1,056 the previous year.

Those facing the end of their two-year or, especially, five-year mortgage deals may see their monthly payments increase by hundreds of pounds, as their previous rates could have been below 2%.

Expectations and inflation

Market expectations are crucial. The Bank of England’s Monetary Policy Committee (MPC) affects mortgage rates through its decisions. The MPC recently indicated that rate cuts would not occur as soon or as frequently as once anticipated, due to persistent inflation and other economic considerations. As a result, mortgage rates have been gradually increasing.

To summarize, the escalation in mortgage rates is attributed to several factors, including higher borrowing costs, the conservative tactics of lenders, and the anticipations of the market. It is crucial for prospective homebuyers and current homeowners to keep a vigilant eye on these trends to make well-informed decisions.

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IMF warns U.S. and China trade divisions threaten a ‘reversal’ for global economy

U.S. & China trade tensions

Tensions between Washington and Beijing have intensified, with the U.S. ramping up trade restrictions and sanctions on China due to national security concerns.

Since Ukraine’s invasion, there has been a roughly 12% drop in trade between the blocs, and foreign direct investments have decreased by 20% compared to those within the bloc’s constituents.

If these divisions persist, the IMF forecasts that the economic impact on global GDP could be as high as 7% in the worst-case scenario.

A senior International Monetary Fund official cautioned on Tuesday, 7th May 2024, that the rift between the U.S. led Western and China-aligned economic blocs endangers global trade cooperation and economic growth.

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Gold bars from vending machines – whatever next – coffee at Royal Mint?

Gold bars

Buy gold bars from South Korea’s convenience stores and vending machines

South Korean convenience stores are now the latest attraction for gold enthusiasts. Instead of the typical snacks and beverages, customers can now buy gold bars.

Convenience store gold bars

GS Retail, one of South Korea’s largest convenience store chains, introduced gold bars in vending machines at select locations in September 2023. These machines offer five different sizes, ranging from a tiny 0.13-ounce bar to a bigger 1.3-ounce bar.

The most sought-after option is the diminutive 0.13-ounce gold bar, with a price tag of approximately $225. It’s the younger demographic – individuals in their twenty’s and thirty’s – who are eagerly acquiring these lustrous assets. They possibly view gold as a secure refuge in the face of worldwide inflationary pressures and heightened global geopolitical tensions.

GS Retail has reported total sales of gold bars amounting to $19 million in the past nine months, concluding in May. The rising popularity of these bars has led the company to increase the number of stores offering them, aiming to reach 50 locations by the end of the year.

CU collaboration

In a competitive move, CU, the nation’s premier convenience store chain, has partnered with the Korea Minting and Security Printing Corporation (KOMSCO) to sell mini gold bars ranging from 0.1 to 1.87 grams. These diminutive bars have been on sale at CU stores since April.

The pricing of these mini gold bars is tied to fluctuating international gold prices, updated daily. Evidently, even these small quantities of gold are attracting keen interest from young consumers.

Accessibility and fun

The soaring popularity of gold bars in South Korea can be attributed to their accessibility. With convenience stores at every corner, purchasing gold has become as simple as walking in and making a selection.

A representative from Inha University reportedly noted that while some may purchase gold bars as a serious investment, others might buy them for the novelty and ease of access. Imagine the allure of picking up a gold bar along with your daily groceries.

To sum up, convenience stores in South Korea have become modern-day treasure chests, where gold bars are sold next to daily necessities. Whether for investment purposes or for a bit of indulgence, these shiny objects are creating a buzz in the country known for K-pop and kimchi.

So, next time you visit a Korean convenience store, don’t miss the chance to check out the shiny vending machine – it could present a golden opportunity.

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FTSE 100 in record territory

The FTSE 100 soared past 8300, reaching a new record high amid busy trading as London markets reopened after the bank holiday.

A catch-up trading session is evident, with mainland-listed stocks having a robust session on Monday 7th May 2024 and continuing to rise. The FTSE reached around 8335 in intraday trading.

Wall Street also experienced another positive session, with the Dow Jones climbing for the fourth consecutive day following the Federal Reserve’s less aggressive stance, and the S&P 500 gaining too. Despite mixed results, earnings have bolstered risk appetite. The low U.S. job count has encouraged traders/investors to take heart that rate cuts will be on the agenda again soon, even if they are now late.

Bank of England

Attention will now turn to the Bank of England (BoE), which faces a decision on whether to guide the market towards a rate cut – the first in four years – or to exercise more patience. The consensus is that it’s premature for a cut this week, with August 2024 being the more likely date, although the Monetary Policy Committee’s (MPC) opinions vary.

Last month the Deputy Governor of the BoE, indicated his readiness to vote for a rate cut with little additional evidence of declining inflation, highlighting the ‘downside risks’ to the BoE’s February inflation forecast. In contrast, the Bank of England’s Chief Economist, expressed a more cautious stance in April regarding the initiation of rate cuts.

Inflation

Inflation is on a downward trajectory, expected to return to 2% in the next few months. CPI decreased from 3.4% to 3.2% between February and March 2024, and core inflation dropped from 4.5% to 4.2%. However, the BoE is likely to await April’s data before taking any decision.

Persistent wage growth of around 6% indicates continued strength in the labour market. Financial markets anticipate a Bank of England rate cut by August 2024, but it is believed the BoE may be prepared to act as early as June 2024, aligning with the anticipated policy move by the ECB.

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Apple reportedly developing AI microchips for data centres

Apple

Apple, renowned for its innovative consumer electronics, is reported to be branching into artificial intelligence (AI).

Recent reports suggest the company is developing a project dubbed ‘Project ACDC,’ (Apple Chips in Data Centre) with the goal of creating specialized AI chips for data centres.

The AI race

AI applications are becoming ever more essential in our daily routines, prompting tech giants to vie for dominance in this arena. Apple, previously trailing behind its rivals in AI, is now channelling substantial investments to bridge the gap. Project ACDC marks Apple’s strategic endeavour to position itself as a key contender in AI processing.

The role of AI microchips

Traditionally, data centres have depended on general-purpose processors, like Intel Xeon or AMD EPYC, to manage diverse workloads. AI workloads, however, demand unique features such as extensive parallelism and high computational throughput. Specialized AI chips are crucial to meet these demands.

Apple’s AI chips, designed specifically for data centre servers, aim to efficiently expedite AI tasks. These chips will facilitate capabilities such as natural language processing, image recognition, and recommendation systems. With the development of its own AI chips, Apple seeks to secure a competitive edge in the AI technology race.

Collaborating with Taiwan Semiconductor Manufacturing Co.

Apple is said to be partnering with Taiwan Semiconductor Manufacturing Co. (TSMC) to design and produce AI chips. TSMC, a top semiconductor manufacturer, is recognized for its cutting-edge process technology. Although the release timeline for these chips is not specified, their development underscores Apple’s dedication to AI.

WWDC 2024 expectations

Rumors indicate that Apple may reveal AI-based features enabled by its new chips at the Worldwide Developers Conference (WWDC) in June 2024. Should this be accurate, it could mark a significant milestone for Apple’s AI initiatives.

In conclusion, Apple’s Project ACDC signifies an aggressive move towards AI supremacy. With ongoing investments in generative AI, we can anticipate significant advancements in the near future.

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UK Ministry of Defence suffers hack and data breach

The breach involved a third-party payroll system used by the MoD

The compromised system contained names and bank details of both current and past members of the UK armed forces.

While the full extent and consequences of the breach are still under investigation, preliminary results reportedly indicate that no data was extracted during the incident.

It appears that a minimal number of addresses might have been compromised.

The Ministry of Defence (MoD) responded quickly by disconnecting the external network, which is managed by a contractor.

Affected service members will be informed as a precautionary measure and will be provided with expert advice.

Hacker’s ID not revealed

The hacker’s identity has not been revealed, but it is significant that in March, the UK and the U.S. charged China with conducting a worldwide campaign of “malicious” cyber-attacks.

These assaults targeted the Electoral Commission watchdog in 2021 and involved online “reconnaissance” of MPs’ and peers’ email accounts. The limited response to these events highlights the persistent cybersecurity challenges and the importance of constant alertness.

As the inquiry progresses, the MoD is expected to implement additional security measures to safeguard sensitive data, measures that ideally should have already been established.

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UK predicted to have slowest growth of richest nations in 2025

Slow growth in UK

Forecasts indicate that the UK economy will experience sluggish growth among the largest developed nations in 2025.

The Organisation for Economic Co-operation and Development (OECD) has projected a 1% increase in the UK’s gross domestic product (GDP) for 2025, which lags behind the growth rates of other G7 nations, including Canada, France, Germany, Italy, Japan and the US.

The OECD, a globally recognised think tank, has described the UK’s economic outlook as ‘sluggish‘ for the current year. The organization attributes the lackluster performance to the cumulative effects of consecutive interest rate hikes in the UK.

Additionally, the OECD has cautioned that persistent elements of high inflation and the uncertainty surrounding the Bank of England’s interest rate decisions may deter investment.

The latest forecast for the UK economy predicts a 0.4% growth for this year, a revision downward from the OECD’s earlier estimate of 0.7% growth. Consequently, Germany is the only G7 country projected to have slower growth than the UK this year.

Year on year economic growth predictions for G7 nations from the OECD

Year on year economic growth predictions for G7 nations from the OECD
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World’s largest cargo ship docks in UK port

Largest cargo ship

The world’s joint-largest cargo ship, the MSC Loreto, recently docked at Britain’s biggest and busiest container port.

  • Ship Name: MSC Loreto
  • Sister Vessel: The MSC Loreto shares the title of the world’s largest cargo ship with its sister vessel, the MSC Irina.
  • Length: 400 metres (approximately 1,312 feet)
  • Gross Tonnage: More than 238,000 tonnes.
  • Container Capacity: Capable of holding 24,346 standard containers, which is currently the record number.
  • Port of Arrival: The MSC Loreto arrived at the Port of Felixstowe in Suffolk from Le Havre, France.
  • Operator: The vessel is operated by the Swiss-headquartered Mediterranean Shipping Company (MSC).
  • Next Destination: The ship is due to set sail for the Algerian capital of Algiers on the country’s Mediterranean coast.

Image 400 metres for just a moment – that’s 4 trips for Usain Bolt up and down 100 metre athletics track or, about 40 double decker buses parked end to end.

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Are U.S. banks at risk of failure?

Banks at risk?

The fragility of U.S. banks: A looming financial crisis or an event unlikely to unfold?

Amid escalating interest rates and economic instability, an alarming report has surfaced, suggesting that a considerable number of U.S. banks are on the verge of collapse. This potential looming crisis is attributed to various elements that have jeopardised stability.

Hundreds of small and regional banks across the U.S. are feeling stressed.

A recent publication on the Social Science Research Network indicates that up to 186 banks in the United States may be at risk of collapse or at least severe financial damage due to a significant amount of uninsured deposits and the effects of monetary tightening.

The Federal Reserve’s policy to raise interest rates has resulted in considerable asset reductions of these banks. The study emphasizes the susceptibility of banks that depend largely on uninsured depositors, who hold account balances above the FDIC‘s insurance limit of $250,000.

The precarious situation could worsen due to a potential domino effect. Should a substantial number of uninsured depositors suddenly withdraw their funds, it ‘might’ prompt a banking crisis, endangering even insured deposits. It is estimated that nearly $300 billion in insured deposits could be at risk in such an event. Remember the financial crises of 2008/2009 – it wasn’t that long ago.

Silicon Valley Bank

The collapse of Silicon Valley Bank, for example, highlights the risks associated with rising interest rates and significant withdrawals of uninsured deposits. The bank’s failure to fulfill its obligations resulted in its shutdown, which had an impact on the financial sector.

Although the number of FDIC insured institutions on the so-called ‘Problem Bank list‘ has decreased, the current economic climate has reignited concerns about the stability of smaller banks, particularly those with assets under $10 billion.

These banks face threats from commercial real estate loans and the repercussions of rising interest rates, which could lead to unrealised losses and strain their capital reserves.

As the situation unfolds, it becomes clear that without government intervention or strategic recapitalisation, the U.S. banking system could approach a crisis. This potential crisis could affect not only the banks but also the wider economy and the communities they serve.

Therefore, vigilant oversight and proactive measures are crucial to maintain the stability of the U.S. and the global financial system and protect depositors’ interests.

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Binance founder Changpeng Zhao sentenced to 4 months

Cryptocurrency trading

Changpeng Zhao (CZ), the founder of Binance, who admitted to money laundering offences in November 2023, received a four-month prison sentence on Tuesday 30th April 2024.

U.S. prosecutors had suggested a sentence of 36 months for Zhao. As part of his deal with the Justice Department, the cryptocurrency billionaire resigned from his position as CEO of Binance.

The billionaire is reportedly expected to see his massive crypto fortune remain intact. His wealth is likely to continue to climb even as he serves time in prison.

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BYD profits and sales fall

Electric vehicle

Chinese automotive giant BYD has experienced a decline in profits amid a slowdown in electric vehicle (EV) demand and a price war in the largest car market globally.

The company reported earnings of $630 million (£502 million) for the first quarter, a drop of over 47% from the previous quarter.

Competing with Elon Musk’s Tesla for the title of the world’s top EV seller, BYD recently fell behind as Tesla regained the lead earlier this month.

In the first quarter, BYD’s sales of battery-only vehicles fell to just over 300,000, a decrease from the last quarter of 2023’s record high of 526,000 units.

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WEF president warns about global debt levels

Global debt burden

Borge Brende, the president of the World Economic Forum (WEF), recently issued a stark warning about global debt levels.

Speaking at the ‘Special Meeting on Global Collaboration, Growth and Energy for Development‘ in Riyadh, Saudi Arabia, (see WEF website), he highlighted that global debt ratios are approaching levels not seen since the 1820s.

The WEF president also reportedly emphasized the risk of ‘stagflation‘ for advanced economies. He cautioned that without appropriate economic measures, the world could face a decade of low growth.

The current global growth estimate stands at around 3.2%, down from the 4% trend growth seen for decades. Brende urged governments to address the mounting debt situation and implement prudent fiscal measures to avoid triggering a global recession. 

He also noted the persistence of inflationary pressures and suggested that generative artificial intelligence could offer opportunities for developing nations. The International Monetary Fund (IMF) concurs with this concern, reporting that global public debt reached 93% of GDP last year, still 9% higher than pre-pandemic levels. 

The IMF projects that global public debt could approach 100% of GDP by the end of the decade.

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Darktrace has been sold to a private equity firm

Deal

Private equity firm Thoma Bravo has agreed to acquire Darktrace in a $5.32 billion (£4.25 billion) cash acquisition.

This translates to roughly $7.75 (£6.20) per share, which is a 44% premium over the company’s average share price as calculated over the last three months.

Darktrace, headquartered in Cambridge, focuses on cybersecurity, employing self-learning AI to counteract and automate reactions to cyber threats via its Darktrace ActiveAI Security Platform. The company caters to approximately 9,400 clients globally.

Thoma Bravo’s acquisition of Darktrace adds to its cybersecurity portfolio, which is currently estimated at around $45 billion in value. 

The loss of Darktrace from the London Stock Exchange (LSE) was described as ‘disappointing news.’ There have been calls for greater pro-business reforms to help maintain London’s attractiveness for technology companies.

Darktrace was established in 2013 by Invoke Capital, an investment firm led by Autonomy’s founder Mike Lynch. He now holds a 3.9% stake in Darktrace, positioning him to gain just over $200 million from its sale. His wife holds an additional 2.9%.

Concurrently, Lynch is entangled in a fraud trial in San Francisco. He is reportedly facing accusations of being the ‘driving force’ behind significant fraud at Autonomy.

Autonomy was the software company he co-founded and eventually sold to Hewlett-Packard for $11 billion (£8.6bn) in 2011.

The acquisition represents a significant development in the cybersecurity industry.

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Recent U.S. data is indicating inflation is proving stubborn and isn’t going away anytime soon

Inflation has become a persistent challenge for the Fed

The battle against inflation persists, gradually impacting the U.S. economy and presenting substantial challenges for the Federal Reserve.

Despite concerted efforts to control it, inflation remains stubbornly remains, leaving policymakers in a dilemma – to stimulate economic growth or to curb spiraling prices.

Let the data speak

Recent data presents a concerning scenario. Indexes from the Commerce Department, used by the Federal Reserve as indicators of inflation, reveal that prices are rising at a rate significantly exceeding the central bank’s annual target of 2%. Consumer spending persists, encouraged by the excessive amount of money circulating in the financial system.

However, this spending spree isn’t sustainable, and consumers are dipping into their savings to fund purchases. The personal savings rate has plummeted to its lowest level since October 2022. Borrowing is up and debt is far too high!

The Federal Reserve’s primary inflation gauge, the personal consumption expenditures price index, rose to 2.7% in March, encompassing all items. The crucial core index, excluding the more volatile food and energy prices, remained constant at 2.8%. These figures highlight the ongoing inflationary pressures.

Fed’s dilemma

The Federal Reserve is navigating a precarious inflation situation. Should it shift towards rate reductions prematurely, there’s a risk that inflation might surge back in 2024. Conversely, persistent inflation could compel central bankers to not only sustain the present rates but also ponder additional increases. The aspiration for a gentle economic descent is at stake.

Outlook

Forecasters anticipate inflation to dip below 2.5% in 2024, yet challenges persist. The Federal Reserve faces the difficult task of steering the economy towards stability and controlling inflation expectations. With the central bank’s policy meeting on the horizon, speculation abounds regarding their forthcoming strategy.

Will they maintain the current interest rates or implement more assertive measures? Their decision is set to influence the economic outlook for the foreseeable future.

Conclusion

U.S. inflation continues to be a persistent challenge, and the Federal Reserve’s efforts are ongoing. The path forward demands cautious steering, as policymakers must achieve a fine equilibrium to sustain economic stability while simultaneously curbing inflation.

And remember, the Fed said inflation was ‘transitory’.

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Synthesia creates AI avatars that can convey human emotions

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AI startup Synthesia on Thursday 25th April 2024 announced its ‘Expressive Avatars’. These are AI-generated digital avatars that can express human emotions including happiness, sadness, and frustration.

Synthesia, supported by the tech giant Nvidia, reportedly secured an investment of $90 million in 2023, reaching a valuation close to $1 billion.

This video was created using the Synthesia platform, it took just two minutes to create.