The daily business briefing: May 31, 2018
The Fed releases a proposal to ease rule against risky bank trading, Trump expected to hit EU with tariffs, and more
Trump expected to hit EU with steel, aluminum tariffs
Barring an unlikely last-minute deal, President Trump will follow through with his threat to impose tariffs on steel and aluminum from the European Union by Friday. The 25 percent tariffs on imported steel and a 10 percent levy on aluminum will likely be met by swift retaliatory EU tariffs on motorcycles, bourbon, peanut butter, orange juice, and other exports from America, as well as further damage already raw U.S.-European relations. In late April, Trump delayed the tariffs on the EU, Canada, and Mexico until June 1 to allow space for trade negotiations, but his envoys are frustrated that the EU isn't offering concessions. Trump is not expected to slap the tariffs on Canada and Mexico this week.
Fed unveils plan to ease rule against risky bank trading
Federal bank regulators on Wednesday released a proposal to ease the Volcker Rule, which bars banks from making risky trades for their own profit with customers' money. The Federal Reserve and other regulators said the rule, part of the 2010 Dodd-Frank law, would remain in place in spirit, but that they would simplify regulations to make it easier for banks to comply and for the government to enforce it. The proposed changes would impose the toughest restrictions on 18 banks that do the most trading, while applying less stringent requirements on other institutions. "Our goal is to replace overly complex and inefficient requirements with a more streamlined set of requirements," Fed Chairman Jerome Powell said at a Fed governors' meeting.
Tesla fix prompts Consumer Reports to flip and recommend Model 3
Consumer Reports said Wednesday that it had changed its mind and would to recommend the Tesla Model 3, reversing a decision against backing the electric-car maker's first mass-market vehicle due partly to its braking distance. Consumer Reports said that Tesla had managed to improve the Model 3's braking distance by roughly 20 feet using a remote software update, the first time a car company has managed to make such a quick fix. The change put the stopping range of the Model 3, which is critical in Tesla's plan to reach profitability, within the standard range for vehicles in its class. Tesla CEO Elon Musk said via Twitter that he appreciated Consumer Reports' input and that changes to address other complaints were in the works. Tesla shares rose by 2 percent on the news.
Stocks struggle as fresh trade tensions follow rally
Stocks rebounded strongly on Wednesday after dropping sharply the day before, as fears over Italy's political turmoil eased, but U.S. stock futures struggled for footing early Thursday on fears that expected tariffs on European steel could stoke trade tensions. On Wednesday, the Dow Jones Industrial Average and the S&P 500 rose by 1.3 percent, and the Nasdaq Composite gained 0.9 percent. U.S. 10-year Treasury yields hit 2.84 percent, lifting financial shares that had been dragged down over fears that Italy's snap elections could mark a step toward a Brexit-like break with the eurozone. "The fact that the market is shrugging off Italy's political drama suggests that maybe it was a crowded trade that was being unwound and not something more serious," said Michael Antonelli, equity sales trader at Robert W. Baird & Co. "Anything coming from the left field can shatter markets nowadays, so we have to brace for a long summer grind."
Virginia senators back Medicaid expansion after years of GOP resistance
The Virginia Senate voted Wednesday to join 32 other states and the District of Columbia by expanding Medicaid after five years of Republican resistance. The plan still has to get through the House of Delegates. The legislation would make government health insurance available to 400,000 low-income Virginia residents. If the legislature signs off, the decision will mark a win for ObamaCare and for Gov. Ralph Northam (D), a pediatrician who campaigned promising to get more people access to health care. Four Republicans broke ranks with their party in the 23-17 vote. "I came to the conclusion that 'no' just wasn't the answer anymore," said state Sen. Ben Chafin (R), whose rural district has health-care access problems.