Happy Wednesday and welcome to your morning wrap of the latest political and business headlines from around the world.
We begin in the United Kingdom, where Prime Minister Sir Keir Starmer is battling for his political life, as he stares down growing disunity from within his party.
The BBC reports that a fourth minister has resigned, with health minister Zubir Ahmed stepping down overnight. His resignation letter said it was clear the public had “irretrievably lost confidence in you as prime minister”.
Ahmed joins more than 80 Labour MPs who have urged the PM to quit immediately or draw up a timetable to leave. It is just short of the 81 MPs needed to trigger a leadership contest. The move against Starmer comes after Labour performed badly in local elections last week, losing votes to parties on both sides of the political spectrum, which was taken to signal a loss of confidence in the government.
Meanwhile, 110 Labour MPs signed a statement backing Starmer, saying “this is not the time for a leadership contest”. Deputy Prime Minister David Lammy said “no one seems to have the names to stand up” against Starmer.
A report from The Guardian suggested that Wes Streeting, the UK’s health secretary, could be positioning himself to make a bid. Starmer is due to meet with him in due course. Earlier, Starmer told a cabinet meeting that he would “get on with governing”.
To the United States, where inflation has hit its highest level in nearly two years.
The consumer price index (CPI) rose a seasonally adjusted 0.6% for April, putting the annual rate at 3.8% – its highest since May 2023. The monthly rate increase was expected but the annual increase was 0.1% above expectations.
Excluding volatile food and energy prices, the core CPI increased 0.4% and 2.8%, respectively, well above the Federal Reserve’s target of 2%.
As expected, energy prices jumped 3.8% over the month and accounted for more than 40% of the headline gain, due to the war in Iran. However, inflation is a problem beyond the conflict, as shelter costs and household furnishings prices were also up.
The bad news for workers was that real average hourly wages fell 0.5% for the month and fell 0.3% on an annual basis.
The hot inflation print sent a shiver through US markets, with the S&P 500 and the tech-heavy Nasdaq down 0.4% and 1.27% respectively. The Dow Jones Industrial Average had reversed course to be up 0.14%. Meanwhile, US 10-year bond yields rose 5 basis points to 4.465%.
“Inflation is the key drag on the US economy now,” Navy Federal Credit Union chief economist Heather Long said in a note quoted by CNBC. “This is hurting Americans. There is a real financial squeeze underway. For the first time in three years, inflation is eating up all wage gains. This is a setback for middle-class and lower-income households, and they know it.”
The print raises questions for the Federal Reserve, as incoming chair Kevin Warsh has advocated for lower rates, but that position will be difficult to maintain given the sudden burst of inflation.
Surging energy prices due to the conflict in the Middle East helped push up headline inflation in the US.
In other news, a Dutch hospital has quarantined 12 staff members as a preventive measure after bodily fluids from a hantavirus patient were handled without observing strict protocols, Reuters reported. They will be quarantined for six weeks, and the risk of infection is deemed to be very low.
Nine cases of the virus linked to the MV Hondius have been confirmed, while two others are suspected, according to the World Health Organization. The last passengers from the cruise ship were evacuated yesterday.
In business news, Blue Owl – the group at the centre of doubts over private credit – has seen inflows all but dry up at its flagship credit investment fund for retail investors, the Financial Times reported. The group’s near-US$20b Blue Owl Credit Income fund reported just US$26m in new investments on May 1, about a 50% decline from the prior month and a 95% decrease from this time a year ago.
The fund has faced pressure in recent months amid falling returns and broad investor worries over a potential surge in loan defaults.
Earlier this year, investors requested to redeem more than 20% of their cash from the fund, causing Blue Owl to partially limit redemptions. The lack of inflows will put further pressure on the fund’s liquidity, although Blue Owl has said it has ample cash resources and expects many loans to be paid down in coming quarters.
Finally this morning, EBay has rejected a US$56 billion takeover bid from the much smaller GameStop, calling the proposal “neither credible nor attractive”, Reuters reported.
GameStop, which is roughly four times smaller than EBay, surprised many when it announced the hostile bid last week, saying it would fund the deal through a combination of cash and stock. It also said it had a letter from Canadian TD Bank to provide $20b worth of financing.
In rejecting the bid, EBay chair Paul Pressler said the board was confident the company, under current management, was well-positioned to drive sustainable growth. GameStop has yet to comment.
