Just as the Federal Reserve feels confident enough to pause interest rates, even if temporarily, its counterpart across the pond decides shock therapy is in order.
The Bank of England delivered a half-point hike on Thursday, double the quarter-point that was expected, to bring its benchmark to the highest since 2008. The decision was the biggest monetary-policy surprise in years.
The reason—U.K. inflation is still north of 8% and doesn’t look like it will come down as swiftly as hoped. The Fed is in a much different situation, with U.S. inflation having dropped to about 4%.
But a closer inspection suggests the two countries aren’t that different. There’s plenty of blame to go around for the U.K.’s dire predicament—BOE Governor Andrew Bailey is getting roundly criticized—but a lot of the country’s excess inflation compared with peers comes down to the timing of energy subsidies that dragged out the hit from spiking natural-gas prices. A few months from now, U.S. and U.K. inflation rates should look a lot more similar.
Both the U.S. and U.K. have seen the drivers shift to wages and the services sector—areas where it’s trickier to break the spiral of ever-increasing prices. Once the dampening effects of higher energy prices last year drop out of inflation rates, the U.S. headline rate could suddenly stop falling—and that could happen well above the Fed’s target.
If that’s what happens, Fed Chairman Jerome Powell could find himself in Bailey’s shoes—and may also reach for the big guns of jumbo rate increases to get out of the jam.
Global stocks are headed for their worst week since March. That suggests investors are getting nervous—and maybe they should be.
—Brian Swint
*** Join Mansion Global’s Leslie Hendrickson today at noon when she leads a discussion with Brad Hintze, executive vice president for global marketing at Crestron; India Stoughton, freelance reporter; and JC Murphy, president of Savanton about demand for smart-home technology, concerns about privacy and the different ways artificial intelligence is making everyday tasks more convenient. Sign up here.
Try your hand at the Barron’s crossword puzzle and sudoku games, now running daily along with a weekly digital jigsaw based on the week’s cover story. To see all puzzles, click here.
***
TikTok’s COO Departure Sets Up Leadership Shuffle
TikTok’s chief operating officer and top U.S. executive V. Pappas is leaving the company after nearly five years, to focus on unspecified entrepreneurial passions. The departure marks a key U.S. leadership transition at the China-based video-sharing company amid high-profile challenges in its largest market.
- Pappas told employees: “To our amazing community of creators, employees, & people who have made TikTok ‘the last sunny spot on the internet’, it has been an absolute privilege to serve you all.” Pappas leaves amid “some of the industry’s most unprecedented challenges.”
- As TikTok’s top public advocate, Pappas oversaw the platform’s rapid growth to become one of the U.S.’s most popular social media apps amid lawmakers’ concerns about its Beijing-based owner ByteDance and questions that user data and algorithms are subject to the Chinese government.
- When TikTok asked Pappas, a former YouTube executive, to become its U.S. general manager in 2018, the app was little known beyond teenage users. Pappas helped TikTok creators expand their audiences and earn money for their content.
- Pappas’ role expanded in 2020 when then-CEO Kevin Mayer quit after three months on the job. Pappas stepped in as interim head of TikTok, with a mandate to help it survive politicians’ calls to ban the app. Pappas testified in Congress about the company’s ties to China.
What’s Next: Pappas will remain a strategic advisor to the company, he told employees along with TikTok CEO Shou Chew.
Walt Disney
veteran Zenia Mucha will become TikTok’s new chief brand and communications officer, and Adam Presser, Chew’s chief of staff, will become the platform’s head of operations.
—Janet H. Cho and Eric J. Savitz
***
Five Titanic Explorers Dead in Submersible’s Catastrophic Implosion
Five adventurers died in a catastrophic implosion of their submersible ocean vessel as they were voyaging to the deep Atlantic resting place of the shipwrecked ocean liner Titanic, a tragic ending to an urgent rescue effort that has been playing out for days.
- The Coast Guard found debris that may have been part of the vessel, which was made by OceanGate. The company’s CEO Stockton Rush was piloting the expedition. The vessel, called Titan, had made the journey to the area before.
- Four passengers along for the expedition included British businessman Hamish Harding, British-Pakistani businessman Shahzada Dawood and his teenage son Suleman, and French maritime expert Paul-Henri Nargeolet.
-
“We grieve the loss of life,” Washington-based OceanGate said. The company is building a new deep-sea tourism business for missions that were once just done by scientists and governments. It isn’t unlike what Blue Origin and
Virgin Galactic Holdings
are doing in selling short trips to space. - A U.S. Navy acoustic detection system designed to find enemy submarines first picked up the Titan implosion after it set out on its mission, The Wall Street Journal reported. Titan lost contact with the outside world on Sunday less than two hours after starting its dive.
What’s Next: Investigations of the ocean floor using remote-operated vehicles would continue, Coast Guard Rear Adm. John Mauger said, but he didn’t give a time frame for when they would conclude.
—Liz Moyer
***
Elon Musk and Mark Zuckerberg Call for Cage Fight
Tensions between
Tesla
CEO Elon Musk and
Meta Platforms
CEO Mark Zuckerberg have been growing since Zuckerberg pledged to create a rival to Musk’s social media platform Twitter. Now that rivalry has reached its climax: The two men have challenged each other to a cage fight.
- Zuckerberg, 39, has taken up the martial art jiu jitsu, something Musk was reminded of by a follower on Twitter, to which Musk responded that he’d be up for a cage match. Zuckerberg, reacting on his own social media platform Instagram, asked Musk for a location.
- Musk suggested the “Vegas Octagon.” It could be a reference to the Las Vegas venue used for Ultimate Fighting Championship bouts. Musk, 51, teased about his “walrus” move, which involves getting on top of an opponent and doing nothing.
- BetUS has Zuckerberg at -400 and Musk at +250. That means a $400 bet on Zuckerberg yields a $100 profit, while $100 on Musk yields a $250 profit. Zuckerberg recently completed a challenge including a mile run, 100 pull-ups, 200 push-ups, 300 squats, and another mile run wearing a weighted vest.
-
Musk and Zuckerberg wouldn’t be the first CEO pair to settle a score in the ring. In 1992, then-CEOs of
Southwest Airlines
and Steven Aviations resolved a trademark dispute with an arm-wrestling competition that was called “Malice in Dallas.” The Southwest guy lost.
What’s Next: If the cage fight actually does happen, it could be a dose of publicity for UFC, which is merging with
WWE
in a deal headed for completion in the second half of this year. The merged company is to be called TKO Group Holdings.
—Janet H. Cho and Al Root
***
Job Vacancies Offering Remote Work Are Shrinking
Job seekers hoping for a remote or hybrid work schedule should try to get hired soon, because the work-from-home winds are shifting. The share of U.S. jobs offering the option to work remotely at least one day has declined to 12.19% in April, from 13.08% in October, researchers discovered.
- While remote work exploded during the Covid-19 pandemic, the number of job postings saying employees can work from home one or more days a week is not increasing at the same pace as before, the National Bureau of Economic Research in Cambridge, Mass., reported.
-
Employers nationwide are trying to coax workers back to the office, with some, such as
Amazon,Apple,
Goldman Sachs,
Twitter, and Tesla, telling everyone to come back. In San Francisco, the share of jobs postings offering remote work dropped to 27% in April, from 31.9% in October. - In Boston, the share of job openings mentioning remote work options fell to 21.4% in April, from 25.38% in November. In Wichita, Kansas, the percentage fell to 6% in April, from 15.6% in September. In Phoenix, it slipped to 15.3% in April, from 20.95% last October.
-
Remote-work vacancies can vary widely even within industries. Among selected U.S. aerospace firms, both
Boeing
and
Lockheed Martin
allow hybrid or fully-remote work in more than 50% of their management job postings, while
Northrop Grumman
allows less than 25%, and SpaceX allows almost none.
What’s Next: U.S. survey data suggests that going forward, workers will spend one quarter of their work days working remotely, five times the prepandemic rate, the report said. Professional, scientific, and computer-related occupations are more likely than others to offer hybrid or fully remote work, compared with 2019.
—Janet H. Cho
***
Do you remember this week’s news? Take our quiz below to test your knowledge. Tell us how you did in an email to [email protected].
1. The People’s Bank of China cut its benchmark lending rates for the first time in 10 months in its latest attempt to boost the economy. China’s one-year loan prime rate is now:
a. 3.55%
b. 3.65%
c. 3.75%
d. 3.85%
2.
Airbus
announced the biggest plane order in history, for 500 narrow-body jets, at this week’s Paris Air Show. Which of these carriers placed the order?
a.
Air China
b.
Cathay Pacific
c.
Qantas
d. IndiGo
3. Tesla has an agreement from this auto maker to adopt its charging technology, bringing it another step closer to becoming the industry standard after also signing on
Ford Motor
and
General Motors
:
a.
Stellantis
b.
Toyota
c. Rivian
d.
BMW
4. The Agriculture Department approved a new product by food start-ups Eat Just and Upside Foods, which will soon introduce it in restaurants in Washington, D.C., and San Francisco. What is it?
a. Genetically modified lamb
b. Cultivated chicken
c. Plant-based bison burgers
d. None of the above
5. The number of homes for sale fell in May to their lowest point since real estate firm
Redfin
started tracking the data in 2012. What was the inventory of homes for sale?
a. 1.4 million
b. 2.0 million
c. 2.4 million
d. 3.0 million
Answers: 1(a); 2(d); 3(c); 4(b); 5(a)
—Barron’s Staff
***
—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner
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