—— VISA, Mastercard to Cap Fees; Cocoa Breaks $10,000 Record; Biden Gains Ground in Six Key States; Joe Biden Proposes Higher Taxes; US Consumer Confidence Weakens; Canada Goose Cuts 17% of Roles; Fed’s Operating Losses Swelled to Record
1. VISA, Mastercard to Cap Fees
Visa Inc. and Mastercard Inc. have reached a landmark agreement to cap credit-card swipe fees, ending a nearly two-decade-long legal battle. This deal, pending court approval, is expected to save US merchants around $30 billion over five years.
The settlement allows retailers to impose surcharges on customers using Visa or Mastercard credit cards and employ pricing strategies to steer consumers towards lower-cost cards.
The legal dispute over swipe fees, which began around 2005, has been a contentious issue, as these fees significantly contribute to banks’ profits and fund rewards programs.
Merchants have become more outspoken in their opposition to credit card swipe fees in recent years. These fees, typically around 2% of a purchase, amounted to over $100 billion last year.
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2. Cocoa Breaks $10,000 Record
Cocoa futures have surged to unprecedented levels, surpassing $10,000 per metric ton, marking a historic rally that has already doubled prices this year.
The surge is attributed to poor crops in key West African cocoa-growing regions, putting the world on track for a third consecutive annual supply deficit. This situation is driving concerns about the availability of cocoa beans and raising worries about escalating costs for chocolate production.
Additionally, pressures are mounting in the financial market, where some traders have sold futures to hedge against physical holdings. However, with the rising market, these traders may face cash demands to meet margin calls on losses from derivatives, potentially leading to the closure of short positions and further fueling the rally.
On Tuesday, cocoa futures surged by as much as 4.5% to reach $10,080 per ton in New York, a level that was previously considered unimaginable just a few months ago.
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3. Biden Gains Ground in Six Key States
President Joe Biden has made significant gains against Republican Donald Trump in six out of seven key swing states, marking his strongest position yet in a monthly Bloomberg News/Morning Consult poll. This shift comes after a period of mostly consistent leads for Trump over the past five months and follows Biden’s State of the Union address, which rallied Democrats and alleviated concerns about his age.
Notably, Biden has gained ground in Wisconsin, where he now leads Trump by one point compared to trailing by four points in February, and in Pennsylvania, where they are now tied after Trump previously held a six-point lead. They are also tied in Michigan.
While it’s uncertain whether this improved showing is a temporary bump or the beginning of a more lasting change in the race, Biden still trails the presumptive GOP nominee in four crucial states.
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4. Joe Biden Proposes Higher Taxes
Joe Biden has unveiled a budget plan for 2025 totaling $7.3 trillion, which would push US debt beyond 100% of gross domestic product (GDP). The plan aims to increase spending while also generating $3 trillion in savings over a decade through higher taxes. This budget proposal is part of the administration’s effort to sharply contrast itself with former President Donald Trump’s economic policies ahead of the November presidential election.
While Trump had prioritized renewing tax cuts implemented during his presidency in 2017 and limiting government spending, Biden’s plan involves raising taxes on large corporations and the wealthiest households. Additionally, it includes measures such as offering tax credits to families with children and maintaining funding for social programs.
Many of the provisions outlined in Joe Biden’s budget plan are expected to face challenges in Congress, particularly because Republicans, who oppose many of his policies, control the House of Representatives.
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5. US Consumer Confidence Weakens
In March, US consumer confidence hit a new low as Americans grew increasingly pessimistic about future economic conditions. According to the Conference Board, the consumer confidence index fell to 104.7, just below the downwardly revised February figure of 104.8. This marks the lowest level since November and missed economists’ expectations of 107.
Expectations for the next six months also dropped to their lowest level since October, with Americans expressing more pessimism about future labor and business conditions, as well as income expectations. Despite these concerns, inflation expectations for the next 12 months saw only a slight increase in March, rising by 0.1 percentage point to 5.3%.
Additionally, the perceived likelihood of a recession over the next year decreased.
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6. Canada Goose Cuts 17% of Roles
Canada Goose Holdings Inc. is reducing its global corporate workforce by 17% as it aims to support long-term growth amid a slowdown in sales. The luxury parka retailer’s decision to cut jobs comes after two quarters of single-digit sales growth following periods of more than 20% increases.
With its shares plummeting 75% over the past year and dropping as much as 3.7% in Toronto trading on Tuesday, the company is focusing on efficiency and margin expansion while investing in key initiatives, according to CEO Dani Reiss.
Although the retailer did not specify the exact number of positions to be eliminated, it had 4,760 employees as of April 2023, according to Bloomberg data.
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7. Fed’s Operating Losses Swelled to Record
In 2023, the Federal Reserve experienced its largest operating loss ever, exceeding its earnings by $114.3 billion. This loss has led the US central bank to forgo remittances to the Treasury, given the prevailing elevated interest rates.
Interest expenses, which include reserves balances at the Fed’s reverse repo operations, nearly tripled to $281.1 billion in 2023, as per audited financial statements released on Tuesday. In contrast, the Fed’s interest income earned on its portfolio of assets amounted to $163.8 billion last year, down from around $170 billion in 2022.
Normally, after covering its operating expenses, the central bank is required to send the revenue earned on its securities portfolio to the Treasury, helping offset federal deficits.
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The content of this article comes from various financial news media such as The Wall Street Journal, Financial Times, and Bloomberg.