Trump ousts Waltz after Signal blunder

Good morning. Here's what happened overnight and what you need to know today.

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1.

Heads roll: Donald Trump has ousted US national security adviser Michael Waltz after just 102 days in the role, following backlash over his accidental inclusion of a journalist in a Signal chat discussing sensitive military operations. Trump announced Waltz would be nominated as US ambassador to the United Nations, and that Secretary of State Marco Rubio would take over as interim national security adviser while retaining his current role. Rubio becomes the first to hold both positions since Henry Kissinger. Waltz’s deputy, Alex Wong, is also being removed. Trump had reportedly already grown frustrated with Waltz over his hires and ideological clashes, and the Signal incident dominated headlines as one of the administration’s first major embarrassments. Waltz had been under criticism from Trump’s allies, including far-right activist Laura Loomer, and had clashes over his more hawkish views. The shake-up comes just two weeks before Trump’s first major foreign trip and amid tense negotiations with Russia and Iran. Politico reported Steve Witkoff, Trump’s longtime friend, is a potential replacement. (Capital Brief)(WSJ)(Bloomberg)(NYT)

2.

Production squeeze: US manufacturing activity shrank in April at the fastest pace in five months, with the ISM manufacturing PMI falling to 48.7 from 49.0. While still in contraction, the PMI came in above expectations of 48. That tempered concerns about economic weakness and drove US Treasury yields higher, with two-year yields rising 10 basis points to 3.7% as traders reduced rate-cut bets and shifted toward trades favouring steady Fed policy into 2025. Output dropped sharply, with the production index plunging over 4 points to 44—the steepest contraction since 2020. Input prices surged to 69.8, the highest since June 2022. Orders fell for a third month, backlogs declined faster and employment remained weak despite a slight uptick. The downturn follows hopes of a recovery under a less stringent regulatory outlook, but sweeping tariffs from the Trump administration are now disrupting operations. Firms report delayed shipments, pricing pressure and squeezed margins. Meanwhile, unemployment benefits increased by 18,000 to 241,000 in the week ending 26 April, ahead of forecasts. (Capital Brief) (US DoL)(ISM)

3.

Earnings drive: US stocks rallied overnight, led by gains in Microsoft and Meta Platforms, after their better-than-expected earnings helped ease concerns over artificial intelligence spending and tariffs. Microsoft jumped over 7.6% on a strong growth forecast for its Azure cloud business, after briefly surpassing Apple to become the world’s most valuable company. Meta also climbed after reporting strong advertising revenue. The Nasdaq rose 1.52%, the S&P 500 gained 1.18%, and the Dow added 0.61%.Qualcomm fell almost 9% after forecasting a revenue hit from the trade war, and McDonald’s dropped 1.9% following a surprise decline in first-quarter global sales, and Eli Lilly sank more than 11% after CVS removed its obesity drug Zepbound from some reimbursement lists. Meanwhile, Apple and Amazon are reporting earnings after the market close amid uncertainty around Trump’s tariffs. (WSJ)(Bloomberg)

4.

Nvidia tussle: The US is weighing a potential easing of restrictions on Nvidia Corp. sales to the UAE, with President Donald Trump possibly announcing the start of work on a bilateral chip deal during an upcoming trip to the Gulf, Bloomberg reported citing unnamed sources. The UAE, which has unveiled plans to spend up to USD1.4 trillion on energy, semiconductors, AI infrastructure and manufacturing over the next decade in the US, has pushed for easier access to Nvidia chips. Nvidia shares climbed after the news. Sources also told Reuters CEO Jensen Huang urged the Trump administration to change AI export regulations and raised concerns with US lawmakers about Huawei’s growing AI chip capabilities. Meanwhile, Microsoft is preparing to host Elon Musk’s Grok AI model on Azure, according to The Verge, while his Neuralink brain implant company said the FDA granted “breakthrough” status for its speech restoration device. (Bloomberg)

5.

Independent Fed: US Treasury Secretary Scott Bessent said the US bond market is telegraphing the Federal Reserve ought to lower interest rates, noting “two-year rates are now below fed funds rates” and calling it “a market signal that they think the Fed should be cutting”. Two-year yields were at 3.70% Thursday afternoon (Friday morning AEST), compared with a benchmark federal funds rate of 4.33% and the Fed’s target range of between 4.25% to 4.5%. Fed policymakers have suggested they’re not yet ready to lower rates due to inflation and likely price pressure from President Donald Trump’s tariff hikes. Former Treasury Secretary Lawrence Summers said reasoning from two-year yields to Fed decisions is “pretty analytically unsound” and that any such comments from a Treasury Secretary are “a problematic choice”. Bessent’s comments come as Elon Musk threatened to sic his DOGE on the Reserve, citing their recent USD2.5 billion ($3.9 billion) blowout renovations. (Capital Brief) (Reuters)(Bloomberg)

6.

Ads algorithm: TikTok generated more than $678 million in revenue from Australia in 2024, on the back of a rapidly growing local advertising operation, despite ongoing US policy uncertainty tied to national security concerns. Audited accounts filed with the Australian Securities and Investments Commission on Wednesday, seen by Capital Brief, show the global short-form video platform’s Australian group revenue surged 80% to $678.9 million in the 12 months to 31 December. TikTok Australia is the local subsidiary of the platform’s Beijing-headquartered parent company, ByteDance. The local accounts show a group profit of $31.1 million, nearly triple the $11.3 million booked a year earlier. The company paid $11.1 million in tax. In Australia, TikTok reported advertising revenue from “external customers” of $474.3 million for the 2024 calendar year, up from $320.9 million the previous year. (Capital Brief)

7.

Dual duel: Rio Tinto shareholders rejected a proposal from activist hedge fund Palliser Capital to review the miner’s dual-listing structure, with only 19.3% voting in favour—just below the 20% threshold for broader consultation. London-based Palliser, backed by proxy advisors ISS and Glass Lewis, argued that unifying Rio’s UK and Australian listings could unlock USD28 billion ($43.8 billion) in value for London shareholders, who hold 77% of the stock. Rio countered that past reviews found unification would be value-destructive due to high tax costs, wasted franking credits and a potential share price fall. Palliser vowed to continue pushing for reform, calling Rio’s position flawed and citing BHP’s successful unification as a precedent. “We simply could not accept Rio Tinto’s anomalous and illogical findings that unification offers no advantages whatsoever.” Palliser Capital founder and CIO James Smith said. (Capital Brief)(Rio Tinto)(Reuters)(AFR)

8.

Exposed engines: General Motors slashed its full year guidance to between USD10-USD12.5 billion ($15.6-$19.5 billion), a markdown from its January guidance of USD15.7 billion on tariff uncertainty. CEO Mary Barra said that GM’s new guidance includes a current tariff exposure of USD4-USD5 billion and that it will pause around USD4 billion in planned share repurchases until it has “more certainty” around the global operating environment. Harley Davidson also pulled its 2025 outlook, citing a lack of clarity around US trade policy and weakening economic conditions, while Mercedes-Benz said it will shift production of a “core segment vehicle” to the US as Trump’s tariffs raise costs. GM’s revised guidance comes despite the White House signing orders to soften the impact of 25% tariffs on autos and auto parts earlier this week, preventing multiple levies from piling on top of each other and creating offsets for US-made vehicles. Rolls-Royce reaffirmed its guidance on a solid start to the year despite tariff uncertainty, and said its next-generation plane engine was progressing smoothly. (Capital Brief)(Bloomberg)(WSJ)