Good morning and welcome back to FirstFT. If this email was forwarded to you click here to receive it every day in your inbox. On today’s agenda:
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The junk bond market freeze
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Why Wall Street got Trump so wrong
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A warning for Europe from the FTC’s chair
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Israel’s new security plan
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And the best places to swim and snorkel in Florida
America’s risky corporate borrowers have been shut out of the bond market since Donald Trump’s tariff blitz, in a freeze that is reverberating across Wall Street and which threatens a tentative rebound in dealmaking.
Why has the junk bond market seized up? Highly indebted companies with low credit ratings are seen as riskier for investors to loan money to and the rise in borrowing costs in other debt markets, such as the US government bond market, has pushed up borrowing costs for these companies. Lowly-rated companies have failed to sell any debt in the $1.4tn US high-yield bond market since Trump’s so-called liberation day on April 2.
What has been the effect on companies? It threatens to hit private equity firms that frequently rely on the junk bond market to fund their takeovers, and dealmaking amid a looming threat of recession. Banks have also been redrawing loan terms for their buyout clients in a bid to shield themselves from losses. The market for new investment-grade bonds has also sputtered. “Everything has been on hold,” said Bob Kricheff, the head of multi-asset credit at investment firm Shenkman Capital Management. “Nobody is trying to price a deal in this environment.” Read the full story.
Join our live Q&A tomorrow on the changing trade, economic and geopolitical relationship between the US and its allies. Pose your questions to FT journalists here and don’t forget to submit your question for the special edition of FirstFT to mark the first 100 days of Trump’s second term in the White House. Here’s what else we’re keeping tabs on today:
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Economic data: Monthly US import and export prices are released as well as Federal Reserve Bank of New York’s Empire State manufacturing index. Peru’s state statistics agency releases monthly economic growth data and Brazil updates its inflation index.
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Monetary policy: Federal Reserve Bank of Richmond President Thomas Barkin speaks at an event at the University of North Carolina in Pembroke. Separately, Fed Board Governor Lisa Cook is expected to attend an event at the Cal Alumni Club of Washington DC.
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Results: Bank of America, Citigroup, Johnson & Johnson, United Airlines and Brazil’s Vale are among the companies reporting. See our Week Ahead newsletter for the full list.
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Harvey Weinstein: The former movie mogul faces a new trial on sexual assault charges in New York for allegedly assaulting an unnamed woman at a lower Manhattan hotel in 2006.
Five more top stories
1. Exclusive: A top US official has warned European allies that they need to choose between US and Chinese technology, as governments and companies in Europe consider whether Starlink — owned by Elon Musk’s SpaceX — is a reliable partner after Washington threatened to switch off its services in Ukraine. Read the full report.
2. LVMH shares tumbled today in Paris, leading to declines across the luxury goods sector after the owner of Louis Vuitton and Christian Dior reported a bigger-than-expected fall in sales owing to subdued demand in China and the US. LVMH is the first of the large luxury goods groups to report first-quarter earnings. Here’s more on what the company said.
3. Meta’s acquisitions of Instagram and WhatsApp helped give it “monopoly power”, the US Federal Trade Commission told a court yesterday at the start of a blockbuster trial that could force the $1.5tn tech giant’s break-up. The case is expected to give the clearest signal yet about the Trump administration’s stance on antitrust policy — and its appetite to take on Big Tech.
4. Donald Trump’s administration said it would freeze more than $2.2bn in funding for Harvard University, after it became the first major US higher education institution to publicly resist pressure from the government. The move by the Trump administration raises the stakes in a deepening confrontation between the White House and elite institutions in the US.
5. El Salvador’s President Nayib Bukele said he would not return a man wrongly deported to his country from the US in a move that is likely to complicate the stand-off between Donald Trump and the American judiciary. Bukele, Trump and top US officials claimed there was no basis for repatriating Kilmar Armando Abrego Garcia, whom they accuse of being a member of the MS-13 gang.
Today’s big read
The US and China are locked in a dangerous trade stand-off, with the world’s two largest economies trading tit-for-tat blows as Donald Trump demands Beijing seek a deal from his administration. China relies on the US as an almost irreplaceable market for its manufactured goods, but experts warn that Washington should not underestimate Beijing’s capacity to resist Trump’s coercive tactics. How far can China use its leverage over the US without damaging itself even more?
We’re also reading . . .
Map of the day
A hyper-aggressive Israeli military doctrine is reshaping the Middle East after Hamas’s devastating October 7 2023 attack from Gaza. No longer content with border walls and early warning systems, Israel is seizing territory from its neighbours, building buffer zones and bombing perceived threats as far away as Beirut and Damascus in massive displays of force. Here’s a look inside the country’s new security plan.
Take a break from the news
FT Globetrotter has produced an insider’s guide to the best spots to sail, fish, kayak, snorkel and swim in and around Miami.
Read the full article here