Reuters World News - Somali pirates, the Fed and Intel’s plan

Episode Date: March 21, 2024

The Federal Reserve fuels a Wall Street rally after signalling it’s still on track for three rate cuts in 2024. Somali pirates re-emerge, piling pressure onto the global shipping crisis. And President Joe Biden eyes a potential political win in Intel’s new $100-billion factory plan. Visit the Thomson Reuters Privacy Statement for information on our privacy and data protection practices. You may also visit megaphone.fm/adchoices to opt out of targeted advertising. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today, stock markets hit new records as the Federal Reserve sticks to three rate cuts in 2024. But the latest economic predictions show U.S. central bankers are becoming more hawkish. President Biden pushes a big investment by chipmaker Intel in Arizona, where independent voters are in play. And Somali pirates are back, exacerbating the crisis facing global shipping. It's Thursday, March 21st. This is Reuters World News, bringing you. everything you need to know from the front lines in 10 minutes every weekday. I'm Carmel Crimmons in Dublin. And I'm Christopher Waljaspers in Chicago. All three major stock indices hit new record

highs following the news that the Federal Reserve is still planning three rate cuts this year. But that's becoming less of a sure thing. The economic outlook is uncertain, however, and we remain highly attentive to inflation risks. Fed Chair Jerome Powell says that efforts to combat inflation are working, but it's proving stickier than anticipated. And nearly half the Fed's board of governors is leaning towards fewer rate cuts this year with the board projecting stronger GDP growth in 2024. Our reporter Howard Schneider was at the Fed. Howard, why were investors so positive on this news?

Well, I think a couple things happened here. One, the Fed thinks it can cut rates. see inflation edge slowly, slowly back to its target and actually upgrade the outlook for GDP. They see the unemployment rate really doing nothing, ending the year at 4%. So add that up, you've got a strong economy, continued slowing inflation and some rate cuts. It's kind of sweet, you know, all told. Powell's comments often reveal the way the board is leaning. And with such a narrow split, nine governors leaning towards fewer cuts and 10 still on board with

the three cuts this year. Did Powell give any indication of the Fed's plans for the rest of the year? Yeah, I think the thing that might be concerning is that if there's a bias here, it's a bias towards higher rates for longer. The median, the point where half's on one side, half's on the other, did stay at three cuts for the year. But the distribution shifted a little bit, and man, that is teetering right at the brink of going down to two cuts. And then if you keep getting these sticky inflation reports. And Powell spoke to January and February, both of which were stronger than expected. And he said, you know what, we're not changing the underlying story of continued disinflation, but this didn't give us any greater confidence that we're really around the bend.

So is there a scenario in which the Fed doesn't cut rates at all in 2024? You've got some fairly prominent forecasters out there, the likes of Joe Davis, the chief economist of Vanguard, Torsten Slocke and Apollo, who've said they don't. think the Fed's going to be able to cut at all this year on the grounds of inflation just being persistent. Fresh off criticism from top Senate Democrat Chuck Schumer, Israeli Prime Minister Benjamin Netanyahu held a video conference with GOP senators on Wednesday, vowing to continue his campaign against Tamas. The meeting underscores just how partisan support for Israel has become in D.C. Republicans have accused Schumer of trying to overthrow

the Israeli leader. Vietnam's president is out after just one year in office. Fofan Fong is the latest top official to step down amid a corruption crackdown by the Communist Party. The reshuffles at the top have deepened political instability in Vietnam and risk hurting business sentiment. And in Ireland, a surprise leadership changed too. I knew that one part of leadership is knowing when the time has come

to pass on the baton to somebody else and then having the courage to do it. and emotional Leo Veratker announcing his resignation as Prime Minister for personal and political reasons. The 45-year-old says his government stands a better chance of re-election with another leader. We looked at how political change in Dublin may affect the debate over Irish unity in a special podcast last weekend. Check out the link to that pod in the description for today's episode. Reddit begins publicly trading shares today. The social media sites IPO faced several hurdles, but is expected to raise more.

than $748 million near the top of its range. Elon Musk's brain chip company says its first patient can now play online chess with his mind. Here's Nolan Arbao talking about the experience. The cursor moving, basically it was like using the force on the cursor and I could get it to move wherever I wanted, just stare somewhere in the screen and it would move where I wanted to, which was such a wild experience. The 29-year-old is paralyzed below the shoulder after a diving accident. Los Angeles Dodgers star Shohei Oitani's interpreter has been fired by the team over theft

allegations. Ipe Miz Ujara is accused of using funds from the baseball player to pay off gambling debts. He didn't immediately respond to a Reuters request for comment. Soldiers board a boat at the seaport of Basasso in Puntland, an autonomous region of northeastern Somalia. Their job, to protect vessels from pirates following a resurgence of attacks. After lying dormant for a decade, Somali pirates are back, raising the risk factor for shipping companies already contending with drone and missile strikes from Houthi rebels in the Red Sea.

Jonathan's been looking at the story. Jonathan, what kind of attacks are Somali pirates carrying out? The type of attacks we're seeing are very different to what occurred 10 to 12 years ago when Somali piracy was at its height. What we're seeing now are very much pinpointed attempts to try and target smaller ships in much more remote locations. The type of ships that they're looking to target are much smaller craft, such as fishing vessels, fishing dows, and smaller cargo ships as well. The difference to Somali gangs is that they take very much of a business model. It's about snatching ships, holding crews hostage and getting ransom money.

That essentially is their model, as opposed to the Houthis, which are very much aimed. at targeting, destroying, sinking or damaging ships. What's the impact of all of this? We've seen rates certainly ticking higher for the broader Red Sea area. Rates are now for additional warist premiums hundreds of thousands of dollars for a seven-day voyage. The expectation is that those rates will stay relatively around the levels we're seeing now, but it certainly adds a lot of cost onto a voyage. It's not just the cost of insurance, it's also the cost of transiting through the Suez Canal.

that's half a million dollars there alone. Fuel costs, so you're looking at $3 million plus for a voyage, which is pretty steep for a single ship. The Somali authorities are trying to combat this as best as they can. They're very stretched. They don't have enough resources. The big problem really, and the big question is what's going to happen with international naval forces,

because international naval forces are being pressed to deal with the threats from Houthi's, albeit defensive responses. That means that there potentially aren't enough forces, warships, physical manpower to be able to tackle a surge in Somali piracy. We will enable advanced semiconductor manufacturing to make a comeback here in America after 40 years. President Biden in Arizona touting a new plan from Intel to spend $100 billion across four U.S. states. The company is looking to build and expand factories in Ohio, New Mexico, Oregon, and Arizona after securing nearly $20 billion in government spending.

Combined, it will create nearly 20,000, 20,000 construction jobs, many of which will be union jobs. The funds come from the 2022 Chips and Science Act to boost the domestic semiconductor industry and reduce reliance on China and Taiwan. Stephen Nellis covers the tech industry. Stephen, I couldn't help but notice, Biden's announcing this plan in Arizona.

A state he really needs to win in order to secure another four years in the White House. So there's no way to completely separate this money from politics. It's not an accident that President Biden is going to show up and talk about this in Arizona, which has become a swing state, when most of the other states that will receive funding under this bill are actually probably not going to be swing states. Oregon is solidly blue. Ohio has become solidly red. And I think what the president will want to show is that we are for the first time in decades in the United States doing active industrial policy.

This is about building factories and creating jobs. So the retail politics of this are quite obvious. Build factories, build jobs, run on the economic record for President Biden. How does this move fit into the larger fight for dominance in microchips? For decades, the United States is actually the leader in manufacturing. the smallest and fastest and most energy efficient chips. However, that lead has essentially been lost to Taiwan, and there are a lot of questions over how sustainable it is

to have all the world's chips coming out of Taiwan. So the goal of the Chips Act here was to bring a lot of that manufacturing back to the United States, and it's been the flip side of the coin where the U.S. has tried to boost its own chip manufacturing industry. It hold back China's industry with a bunch of export controls and other measures designed to slow China down.

That's it for today's episode of Reuters World News. We'll be back tomorrow with our daily headline show. If you want to stay ahead of what's happening in the news, listen in for 10 minutes every weekday. And don't forget to subscribe on your favorite podcast player or download the Reuters app.