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The White House is currently reassessing the terms of the US CHIPS and Science Act, which was designed to enhance domestic semiconductor production with $39 billion in subsidies. The review, influenced by President Trump's executive orders, aims to renegotiate some of the deals, potentially causing delays in funding disbursements. Companies like GlobalWafers, expecting significant grants, are awaiting clarity on how these changes might affect their agreements. The administration's focus includes revising conditions such as the use of unionized labor and childcare provisions, which were part of the original contracts. The Semiconductor Industry Association has expressed readiness to collaborate with the new administration to refine the program's requirements, ensuring that the U.S. maintains its competitive edge in semiconductor technology. Meanwhile, major recipients like Intel, TSMC, Samsung, and SK Hynix, who have significant operations in China, are also under scrutiny for their overseas expansion plans post-receiving CHIPS Act funds.
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Monday's market meltdown has led to a significant reevaluation of Wall Street's expectations for the US economy and the ongoing bull market. Previously, consensus was for above-trend growth in 2025, but recent economic indicators and forecasts from major financial institutions like Morgan Stanley and Goldman Sachs have lowered GDP projections to around 1.5% to 1.7%. This shift comes amidst discussions of potential market drawdowns, with RBC Capital Markets suggesting a possible 'growth scare' that could see the S&P 500 decline by 14-20% from its peak. Despite these concerns, no major firm is predicting an outright recession, focusing instead on the rate of economic change rather than absolute levels. The market's reaction to these developments has been volatile, with investors and strategists adjusting their year-end targets for the S&P 500, although still maintaining a generally optimistic outlook with median forecasts suggesting a 17% increase by year-end.
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Gold prices have regained some ground, climbing above $2,900 an ounce, as the global market selloff that had previously rattled Wall Street began to lose steam. Despite ongoing concerns about the US economy, particularly due to President Trump's trade policies and potential recession signals, gold has seen an 11% increase this year, reaching successive record highs. This surge is attributed to fears of economic disruption, central banks' gold purchases, and expectations of further interest rate cuts by the Federal Reserve, which typically benefits non-yielding assets like gold. However, while investment in gold-backed ETFs has been strong, physical demand in key Asian markets like India and China has been lackluster. Analysts from Standard Chartered Plc suggest that despite the weak physical market, gold prices are expected to reach new highs, supported by increased flows into ETFs to counterbalance the decline in physical demand.
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Japan's trade minister, Yoji Muto, recently concluded a series of high-level meetings in Washington aimed at securing an exemption for Japan from the impending U.S. tariffs on steel, aluminum, and potentially automobiles. Despite Japan's significant economic contributions to the U.S., including job creation through investments, Muto was unable to obtain a commitment from U.S. officials to exclude Japan from these tariffs, which are set to impact Japanese exports significantly. The discussions took place just before the tariffs were due to be implemented, highlighting the urgency of the situation. Japan, a country heavily dependent on exports, particularly automobiles, faces potential economic strain as the U.S. is its largest market for these products. Amidst these trade tensions, Japan has been reinforcing economic ties with other nations, like Britain, to advocate for fair trade practices. The ongoing dialogue between Japan and the U.S. focuses on establishing a "win-win" relationship, with additional talks on energy cooperation, including LNG development in Alaska.
