🎙️ Fed Day

Happy Fed Day, folks.

✅ No surprises, as the Fed did exactly what most expected at its latest meeting: Pause interest rate hikes after ten consecutive increases.

But markets are forward-looking, so investors are already trying to determine what comes next.

To that point, Fed officials hinted that unless upcoming data releases firmly show a significant slowdown in inflation rates, then they’ll likely resume raising rates again at their next meeting in July.

— Shawn

Here’s the rundown:

Today, we'll discuss the three biggest stories in markets:

• Why the I-95 road collapse may push prices higher on the East Coast

• A big shake-up for the U.K.’s telecom industry

• Inside Europe’s step toward regulating A.I.

All this, and more, in just 5 minutes to read.

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CHART(S) OF THE DAY

IN THE NEWS

🚧 I-95 Collapse Could Mean Higher Prices on East Coast (Forbes)

I-95. Its mere mention is enough to send chills down any commuter’s back. In fact, one stretch of it in Virginia was recognized as America’s worst traffic hot spot, which as a Virginia resident myself, I (Shawn) can attest to.

And now East Coast drivers have another reason to loathe the interstate highway: A bridge collapse on I-95 in Philadelphia will raise goods prices with “no question,” according to U.S. Transportation Secretary Pete Buttigieg.

• The over 1,900-mile (3,000+ kilometers) road runs from Maine to Miami, acting as a vital trucking route for transporting supplies to major coastal hubs.
  

• As Buttigieg explained in a press conference, “part of what goes into the cost of everything that we pay for at the store is the cost of shipping, and if a route is disrupted…that finds its way into the cost of goods.”

On Sunday, a tanker-truck fire caused the collapse of a portion of the highway. Per the American Trucking Associations, truckers will instead have to traverse a 40-mile-long detour with some 60 traffic lights. Experts expect the repair to take months, tapping emergency funding for engineering and construction needs.

• The disrupted corridor in Philadelphia is also a key access point to the Philadelphia International Airport and Philadelphia Port with its foreign trade zone and wholesale produce market — the world’s largest enclosed refrigerated space of its kind.

Why it matters:

The stretch of roadway around the collapse carries around 160,000 vehicles per day, with about 8% of those being commercial trucks, reports Bloomberg.

• Buttigieg added, “Obviously, that’s a lot of America’s GDP moving along that road every single day” and called the incident a “major disruption.”

Of course, the impact on summer travel could be substantial, too.

• A spokesperson for AAA commented that this "will have a ripple effect throughout the region” this summer for travelers as the Fourth of July looms. Last year, AAA reported that nearly 48 million people across the U.S. traveled for the holiday.
  

• "At the end of the day, there's no substitute for I-95 being up and running in full working condition," Buttigieg said.

📱 Vodafone and Three Merge to Create the Largest Mobile Network in the U.K. (Bloomberg)

Major shake-ups are coming to the U.K.’s telecom industry: Vodafone and the Hong Kong-based conglomerate CK Hutchison agreed to merge their U.K. mobile businesses.

• That would form the largest wireless company in the country, pending regulatory approval, before the end of 2024.

The combined group will be owned 51% by Vodafone and 49% by Hutchison. Vodafone, the U.K.'s third-largest mobile operator, and Hutchison, the fourth-largest, will have the option to acquire Hutchison's stake for complete control of the merged business after three years, depending on whether it reaches a $20.9 billion valuation (including debt).

• The agreement would combine Vodafone’s domestic business with CK Hutchison’s Three U.K., resulting in a telecom giant boasting roughly 28 million customers.
  

• The companies jointly stated plans to assume $7.6 billion in debt supporting the merger.

Regulators zoom in: The deal will undergo rigorous examination by regulators, who have historically opposed transactions that decrease the number of telecommunication networks from four to three in major markets.

• According to analysts at New Street Research, the antitrust investigation by the U.K.'s Competition and Markets Authority (CMA) could take up to 18 months.

Why it matters:

Although the (CMA) said it was more open to consolidation in the sector last year, in 2016, the CMA and the European Commission blocked the attempted takeover of O2 by Three — the U.K.’s other largest mobile network operators — due to concerns that it could increase prices.

• To garner support from politicians, unions, and competition regulators, the two groups have committed to investing over $14 billion in the U.K. for ten years, aiming to establish "one of Europe's most advanced standalone 5G networks."

The merger will unite the two smaller mobile operators in the U.K., consolidating them into a single, more dominant player.

• “For Vodafone, this transaction is a game changer in our home market,” stated Vodafone's Chief Executive.

But the deal is already facing resistance from trade unions expressing concerns about potential job losses, increased consumer bills, and alleged security risks associated with CK Hutchison's proximity to China.

🚨 Europeans Take Major Step Toward Regulating A.I. (NYT)

Another day, another major A.I. headline. The European Union is taking a bold step toward regulating artificial intelligence.

On Wednesday, the European Parliament, a main legislative branch of the E.U., passed a draft law called the "A.I. Act," which would restrict its riskiest uses. The draft law comes amid some fears that A.I., rapidly developing globally, could harm humanity if not controlled properly.

• For starters, the law would curtail facial recognition software use and require makers of A.I. systems such as ChatGPT to disclose more about the data used to create their programs.
  

• It's one step in a long process, with the final version of the law not expected until later this year. The timing presents an interesting juxtaposition in itself, given A.I. – and our understanding of its role – is expected to change drastically over that period.

Still, the EU is much further along than the U.S. in regulating A.I. and has debated the topic for more than two years, long before last year's release of ChatGPT and before A.I. became the buzzword it is today.

Europe's bill includes new transparency requirements for generative A.I., a term that describes algorithms such as ChatGPT used to create new content, including audio, video, and text.

• Importantly, makers of generative A.I. systems would also be required to put safeguards in place to prevent the systems from generating illegal or hate-filled content.
  

• For example, that could be a significant step in mitigating A.I.-generated meetings between leaders or A.I.-generated images of a bomb or fire that never happened.

Why it matters:

Policymakers have been scrambling to understand the fast-changing technology that has alarmed even its creators, who warn that its consequences are widespread and unknown. A.I.-generated deep fakes are moving faster than regulation can.

• The White House has released policy ideas, including rules for testing A.I. systems before they're publicly available and protecting privacy rights. In China, draft rules would require chatbot makers to adhere to the country's strict censorship rules.

• One leader summed up the push for new A.I. laws as "an important landmark," saying that "fast-moving and rapidly repurposable technology is of course hard to regulate, when not even the companies building the technology are completely clear on how things will play out. But it would definitely be worse for us all to continue operating with no adequate regulation at all."

Those remarks bring back memories of discussions in the 1990s about whether (and how) to regulate the Internet. For years, policymakers worried about false or misleading information spreading too quickly or being used to do irrevocable harm. As with questions around internet regulation, it remains to be seen how effective A.I. regulation will be in curtailing its risks.

MORE HEADLINES

🏦 Regional banks could face years of trouble

🍻 Bud Light loses its title as America’s top-selling beer

🏠 Why economists say housing inflation could soon fall

🎶 Paul McCartney uses AI to create “final” Beatles song

See you next time!

That's it for today on We Study Markets!

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