Here Are Five Things You Need To Know Before You Start Your Day

It is a hopeful week for UK tech stocks, Taiwan is pushing the US for a tax deal, and AI experts are considering putting a hold on development for now. Here is what you need to know.

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The Tax Burden

It is the opinion of Taiwanese officials that if Joe Biden wants to attract the world's sophisticated chipmakers, he needs to offer a better deal to them if he is going to want to reduce the burden of double taxation, as it has done for many other countries. As Treasury Secretary Janet Yellen said, the US would do its best to find a solution to the “very significant problem,” but a deal of that sort would likely upset China. China has warned that a possible meeting with House Speaker Kevin McCarthy, which has been mooted and has already been scheduled, would be seen as a "provocation" by Chinese authorities. Unfortunately, Taiwanese President Tsai Ing-wen is likely to take the case to its logical conclusion. 

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The Bull Market

Investing in American technology stocks in an uptrend was a sure way to boost Asian stocks, as the US tech stocks reached a bull market after a rally on Wall Street. Amidst hopes of a peak in interest rates and a continued easing of bank turmoil, investors in Japan and Hong Kong were seeing gains in the futures of the S&P 500 and Nasdaq 100, which both gained 1.4% after a December low of 20%, cemented its 20% rebound. By the end of the year, investors now expect the US interest rates to be at around 4.3%, approximately 70 basis points lower than where they are at this time last year.

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The Intelligence Gap

According to artificial intelligence experts and leaders in the field, such as Elon Musk and Steve Wozniak, developers need to put a halt on the training of powerful artificial intelligence models in order to develop safety protocols that everyone can follow. The petition that was signed by over 1,100 industry representatives called on AI developers to take a six-month break from training AI systems that were more powerful than ChatGPT for the next six months. The technology has also created a market for so-called "prompt engineers," a type of engineer that does not normally need a computer science degree. These rapidly emerging jobs can pay upwards of $335,000 a year to those who participate in it.

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The Cost of Failure

Based on information gathered from people with knowledge of the matter, the Federal Deposit Insurance Corporation has decided to transfer a larger-than-usual portion of the costs related to recent bank failures to the nation's largest banks, in light of the nearly $23 billion debt. As a result of the recent collapses of Silicon Valley Bank and Signature Bank, the Federal Deposit Insurance Agency is planning to propose a special assessment to the industry in May. The assessment is intended to strengthen a $128 billion deposit insurance fund that is likely to take a beating. JPMorgan, Bank of America, and Wells Fargo could already be on the hook for multibillion-dollar bills.

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Taking a risk

If you take a closer look at the latest US financial crisis, you may be surprised at the cause. Those of you still living in a world where they think in terms of the 2008 crash may find it surprising. Silicon Valley Bank did not collapse because of dodgy loans to impecunious homeowners. The bank was struck down because of a stash of what are generally considered the safest securities on Earth: US Treasury bonds. Those who anticipate Uncle Sam's good nature will probably continue to be good for the cash - the only question is, what will happen to its bond price at a time when the repayment of the bonds is expected years in the future. Read our Big Take and we'll explore what caused SVB's downfall in more detail.

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Last but not least, here is what Garfield is interested in this morning:

As the US economy continues to show resilience, the Federal Reserve is being pushed to reduce interest rates quickly. In spite of the continued stress on the financial system, financial conditions are rebounding rapidly toward neutral, despite the continued strains on the banking system. In the long run, if Wall Street does not undergo any new turmoil for a long period of time, it will be more likely to become an easy street once again, like it did during the early weeks of this year.

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Inflation is still elevated, and there are sufficient other tools to deal with banking woes, according to Fed St. Louis President James Bullard, who has advocated more rate hikes. Until this week's quarter-end is over, the latest expectations for a policy pivot are likely to unwind the way previous ones were in February, leaving plenty of scope for business surveys and then the US payrolls report on Easter Friday to add new turmoil.