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Congress has passed a new law granting President Joe Biden new powers to seize Russian dollar assets to aid Ukraine, sparking a debate over the potential consequences for foreign demand for U.S. Treasuries and the role of the dollar. The REPO provision, added to a $95bn aid package, allows the president to transfer Russian government assets to a Ukraine reconstruction fund. Concerns have been raised about the impact on American bond markets and the erosion of the dollar's position as the world's dominant currency. Russia has vowed to retaliate against any seizure of its assets, potentially leading to a confiscation of U.S. individuals' assets in Russia. The legislation also includes increased scrutiny of Chinese banks' transactions with Iran, which may further stoke concerns about the use of the dollar as a geopolitical tool. While de-dollarization may be considered by U.S. rivals, the dollar's status as a global store of value remains strong due to the size and liquidity of marketable Treasuries and an independent legal system.

 

Bloomberg

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The U.S. Chamber of Commerce has filed a lawsuit against the U.S. Federal Trade Commission (FTC) to strike down the agency's ban on employers requiring workers to sign noncompete agreements. The Chamber argues that the FTC lacks the authority to enact such rules. The lawsuit claims that the ban will lead to legal costs for companies and hinder the economy by preventing start-ups and small businesses from protecting their investments and confidential information. The FTC and supporters of the ban argue that noncompete agreements suppress workers' wages and hinder job mobility. The FTC estimates that banning noncompete agreements could increase worker earnings by up to $488bn over the next decade and lead to the creation of over 8,500 new businesses annually. Legal challenges to the rule are expected to delay its implementation. The Chamber may seek an injunction to temporarily block the ban. The lawsuit follows the first legal challenge to the FTC rule by tax service firm Ryan LLC.

 

Reuters

China is revising its anti-money-laundering law to crack down on financial crimes, including cross-border gambling and underground banks. The draft revision is being reviewed by the Standing Committee of the National People's Congress. The aim is to align China's practices with global standards and strengthen its framework for preventing monetary misdeeds. The revision is in preparation for the fifth review by the Financial Action Task Force, an international organization that sets standards to combat money laundering and terrorism financing. The revised law will require financial institutions to establish and enhance internal control mechanisms, carry out due diligence with customers, and save their identity information and transaction records. It will also bolster the supervision and management of anti-money-laundering operations. The revision is based on a "risk-centric" principle and aims to protect national security and perfect the anti-money-laundering system. The fifth review is expected to be challenging for China and its financial industry, and Chinese financial institutions are advised to use the review period to examine weak links and upgrade their operations.

 

South China Morning Post

Amnesty International has warned of a near breakdown of international law due to flagrant rule-breaking, multiplying armed conflicts, and rising authoritarianism. The organization's annual report highlights the disregard for international rules and values by powerful governments including the United States, Russia, and China. Agnes Callamard, Amnesty's secretary general, described the level of violation as "unprecedented." The report emphasizes the increasing backlash against women's rights and gender equality, as well as the potential threats posed by unregulated technological advancements. Amnesty International is calling for urgent action to protect human rights and uphold international law.

 

U.S. News

Child labor is a hidden risk in supply chains and it is being exacerbated by climate change. A new AI-driven tool, the Child Labor Index, scores companies based on disclosure levels, public perception, and supply chain exposure to child labor. The tool aims to raise awareness among investors and help them monitor risk in their portfolios. According to the International Labour Organization, poverty induced by climate change leads to increased reliance on child labor, particularly in agriculture. Environmental disasters push families into poverty, forcing children to work in farms. The AI technology eliminates human bias and assigns scores based on data from news sources and corporate disclosures. The tool is expected to be commercially available later this year.

 

Bloomberg

The European Parliament has approved rules to ban the sale, import, and export of goods made using forced labor in the EU. The move was driven by concerns about human rights in China's Xinjiang province. The United States enacted a similar law in 2021 to protect its market from products potentially tainted by human rights abuses in Xinjiang. National authorities in the EU will be able to investigate suspicious goods, supply chains, and manufacturers. If a product is found to have been made using forced labor, it will no longer be allowed to be sold in the EU market.

 

Reuters

Shipping volumes through the Red Sea have plummeted due to the conflict in the Middle East, causing disruption to global trade flows. Ship traffic through the Suez Canal in Egypt, a major trade artery, has fallen by two-thirds over the past year. The war between Israel and Hamas, along with attacks on ships by Iran-backed Houthi rebels in the Red Sea, has led shipping companies to divert vessels on longer and costlier routes. Crossings in the Bab-Al Mandab strait, another key waterway, have collapsed by 59% in the year to April.

 

The Times

The International Sustainability Standards Board (ISSB) has announced research projects to focus on disclosure about risks and opportunities in the areas of biodiversity, ecosystems, and human capital. The research will address investor needs and build on relevant preexisting initiatives, including the Sustainability Accounting Standards Board standards and Climate Disclosure Standards Board guidance. The ISSB aims to establish its own standard setting by assessing current disclosure limitations, identifying solutions, and areas in need of standard setting. ISSB chair Emmanuel Faber stated that there is a growing need among investors for improved disclosures in biodiversity, ecosystems, and human capital. The ISSB's current priority is supporting the implementation of its inaugural Standards, while the research projects will be another key area of focus. The ISSB expects to publish a summary of the feedback on its agenda consultation in June, along with its response to feedback and its two-year work plan.

 

Accounting Today

Several major U.S. technology companies, including Salesforce, Microsoft, Zoom, Dell, and Intel, have severed business relationships with networking equipment firm Sandvine after it was blacklisted by the U.S. government. The U.S. Commerce Department added Sandvine to an Entity List in February, banning it from obtaining U.S. technology due to its provision of "mass web-monitoring and censorship" technology to the autocratic Egyptian government. The move poses significant challenges for Sandvine, as components from Dell and Intel are integral to its products. Sandvine sells deep-packet inspection technology, which can be used for internet traffic monitoring and censorship.

 

Bloomberg

Cisco Systems has said that hackers have subverted some of its digital security devices to break in to government networks globally. The company's Adaptive Security Appliances, which combine various digital defense functions, were found to have vulnerabilities that were exploited by a group of hackers known as "UAT4356." Cisco described the group as a "sophisticated state-sponsored actor" and urged customers to update their software immediately. The breaches date back to earlier this year. Cisco also warned that the hackers were interested in attacking network devices from Microsoft and other vendors. The Cybersecurity and Infrastructure Security Agency (CISA) has not confirmed evidence of this activity affecting U.S. government networks.

 

Reuters

Christopher Prewitt, CTO at Inversion6, emphasizes the critical integration of cybersecurity within a business's risk management framework amidst the digital transformation and rising cyber threats. He advocates for a cybersecurity-centric approach, led by a Chief Information Security Officer (CISO), to ensure that cybersecurity initiatives are aligned with a company's strategic objectives and adequately resourced. Prewitt underscores that cybersecurity is not just a technical issue but a board-level concern that affects operational, financial, and reputational aspects of a business. By elevating cybersecurity to a central role in risk management, organizations can enact comprehensive strategies that include technical controls, robust policies, employee training, and proactive incident response plans. This approach also ensures compliance with stringent data protection laws and industry regulations, ultimately protecting business assets and maintaining their reputation in the increasingly digital marketplace.

 

Forbes

BlackRock has solidified its position as a frontrunner in climate transition funds, achieving a 25% growth in assets last year. The firm leads the pack in ESG funds, particularly through investments in companies pivotal to the shift toward a low-carbon economy. This surge in interest has placed BlackRock at the forefront, especially in Europe, where it claims four of the top five best-selling climate funds. BlackRock's CEO, Larry Fink, has been vocal about the significance of the energy transition and its transformative impact on the markets. While Europe remains a leader in climate strategies, there is a rising interest in America, with U.S. transition funds growing by 133% to $8.8bn. The firm's dominance in the climate transition sector is likely to persist as investors increasingly prioritize companies' plans for transitioning to lower carbon operations and demand robust management of climate-related risks. Moreover, passive funds that follow climate transition and Paris-aligned benchmarks have also seen substantial growth, reflecting a broader investor shift towards prioritizing transition strategies and channeling funds into climate-focused investments.

 

Bloomberg

Banks are showing interest in financing sustainable aviation fuel (SAF) projects, despite facing risks such as feedstock supply uncertainty and changing policy mandates. Siddhartha Shrivastava, head of new energies in Asia at SMBC, stated that the bank is open to SAF projects and is currently advising on debt raising for several projects. SAF, made from waste oils and agricultural feedstock, has the potential to significantly reduce carbon emissions from air travel. However, the global supply of SAF currently meets only 1% of the aviation industry's requirements. Neville Hargreaves, a vice president at a sustainable fuel technology firm, highlighted the difficulty in obtaining funding for SAF projects. The key risks for lenders include feedstock supply and uncertainty related to volume and offtake. Despite these challenges, banks are optimistic about financing SAF projects to support the aviation industry's goal of carbon neutrality by 2050.

 

Bloomberg

Home appliance maker Whirlpool is cutting 1,000 salaried jobs globally in an effort to trim up to $400m in costs this year. The company expects to incur about $50m of restructuring charges. Whirlpool had about 59,000 employees globally as of last year. The company reported a 3.4% drop in first-quarter net sales to $4.49bn.

 

Wall Street Journal

New orders for key U.S.-manufactured capital goods increased moderately in March and data for the prior month was revised lower, the Commerce Department reported Wednesday, suggesting that business spending on equipment likely remained weak in the first quarter. The value of core capital goods orders, a proxy for investment in equipment excluding aircraft and military hardware, increased 0.2% last month after a downwardly revised 0.4% advance in February. Core capital goods orders gained 0.6% year-on-year in March. Bookings for all durable goods — items meant to last at least three years and including orders for commercial aircraft — rose 2.6%, also following a downward revision. The median estimate in a Bloomberg survey of economists called for a 2.5% increase.  “Not so encouraging news from the durable goods front dampens hope of an acceleration in equipment spending,” said Nationwide financial markets economist Oren Klachkin. “This continues to be a soft spot in an otherwise strong economy.”

 

Bloomberg

Market Watch

Reuters

A new study reveals that mental illness costs the U.S. economy $282bn annually, which is equivalent to the average economic recession. This estimate is about 30% larger than previous attempts to calculate the overall cost of mental illness in the U.S. The study shows that mental illness affects people's consumption, savings, portfolio choices, and also labor supply, generating enormous annual costs. People with mental illness spend less money, are less likely to invest, and may choose less demanding jobs. The study also suggests that improving mental health services and providing treatment to young adults with mental illness could have significant economic benefits. However, reducing out-of-pocket costs for mental health services does not substantially reduce the number of people with mental disorders. The study highlights the need for policies that expand and improve mental health care to address the societal costs of mental illness.

 

U.S. News

Nicolai Tangen, chief executive of Norway’s $1.6tn oil fund, says Europe is less hard-working, less ambitious, more regulated and more risk-averse than the U.S. – and the gap is getting wider.

 

Financial Times