A downed drone
A Russian fighter jet struck a U.S. surveillance drone over the Black Sea, U.S. officials said, hitting its propeller and causing its loss in international waters. Russia denied that there had been a collision, saying the drone’s own maneuvers caused it to crash.
If a collision is confirmed, it would be the first known physical contact between the two nations’ militaries as a result of the war in Ukraine.
U.S. officials said the drone’s operators brought the craft down in the Black Sea after the collision, which the U.S. military said was the result of “reckless” actions by Russian pilots. The U.S. aircraft was conducting “routine operations in international airspace,” an Air Force general said.
A White House spokesman said that there had been similar “intercepts” by Russian aircraft in recent weeks, calling them “not an uncommon occurrence,” but that this was the first to result “in the splashing of one of our drones.” He called the behavior of the Russians “unsafe and unprofessional.”
Context: Russia’s invasion has turned the Black Sea, which is dominated by the Russian Navy, into a battle zone. Ukraine has attacked Russian naval vessels there, most notably in April, when a Ukrainian missile sank the Moskva, the flagship of Russia’s Black Sea fleet.
Response: The State Department summoned Russia’s ambassador in Washington to receive the U.S.’s formal objection over the drone downing.
U.S. economy seems to stabilize
Markets closed up yesterday, after investors seemed to shrug off the recent collapse of two midsize banks and the threat of a crisis appeared to wane. Fresh inflation data, largely in line with expectations, also added to the sense of relief.
Stocks: The S&P 500 jumped 1.7 percent yesterday. Midsize banking stocks, which had plummeted on Monday, rebounded.
Banks: The Justice Department opened an investigation into the collapse of Silicon Valley Bank, my colleagues report.
Inflation: It eased to 6 percent on an annual basis, which matched an expected slowdown. But in February inflation rose over the prior month.
Now, all eyes are on the Federal Reserve.
Some of the inflation details were worrying, including the costs of housing and other goods and services. Generally, that would indicate that the Fed would keep raising rates in hopes of cooling down the economy.
The State of the War
- On the Front Lines: From Kupiansk to Bakhmut, Russian forces are attacking along a 160-mile arc in eastern Ukraine in an intensifying struggle for tactical advantage before possible spring offensives.
- Plotting a Political Advance: Recent statements by Yevgeny Prigozhin, the leader of the mercenary Wagner Group, suggest he wants to move past his standing as a military leader and play a larger role in Russian society.
- War Crime Cases: The International Criminal Court intends to open two war crimes cases tied to the Russian invasion of Ukraine. The cases accuse Russia of abducting Ukrainian children and of deliberately targeting civilian infrastructure.
- Ukrainian Refugees in the U.S.: The Biden administration said that thousands of Ukrainians who fled to the United States in the first months of the war would be eligible to extend their stay.
But higher interest rates raise costs for companies, and were at the root of the banking stress. Fewer or smaller rate increases could help stocks to rebound after the deep uncertainty set off by the banking crisis.
In other business news: Meta will lay off another 10,000 people, roughly 13 percent of its workforce.
Xi reins in the economy
Xi Jinping is dealing with China’s economic problems the same way that he has approached issues for most of his decade in power: by getting the Communist Party more involved.
At the annual gathering of China’s national legislature, which ended Monday, Xi introduced a series of sweeping changes to the regulatory framework that would allow the party to assert more direct control over financial policy and bank regulation.
China’s economy, which is growing near its slowest pace in decades, is teetering from a real estate sector in crisis. Xi needs bankers to comply with his vision and allocate capital in the ways that China wants its money spent, without jeopardizing the financial system.
Heads are already starting to roll. Last month, Tian Huiyu, the former head of one of China’s biggest commercial lenders was charged with abuse of power and insider trading. And Bao Fan, a prominent investment banker, vanished.
Challenges: The financial sector is struggling to respond to the shaky balance sheets of local governments — overrun with debt after paying for “zero Covid” policies — and banks that lend to them.
Related: China will start issuing visas to foreign tourists again today, Reuters reports.
Analysis: On “The Ezra Klein Show,” Dan Wang, an expert on U.S.-China competition, explores how China’s growth trajectory halted.
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Around the World
Amy Wax, a tenured law professor at the University of Pennsylvania, has said publicly that “on average, Blacks have lower cognitive ability than whites” and that the U.S. is “better off with fewer Asians.”
The university is now grappling with a conundrum: Is she exercising her right to free speech, or should she be fired?
Lives lived: Dr. Jiang Yanyong, who helped expose China’s SARS crisis in 2003, was celebrated as a hero, then punished for denouncing the Tiananmen Square crackdown. He died at 91.
Masatoshi Ito introduced the American convenience store 7-Eleven to Japan, starting a retail revolution there. He died at 98.
ARTS AND IDEAS
A new chatbot
OpenAI unveiled an update to ChatGPT, its revolutionary chatbot, just four months after the program stunned the tech world with its ability to answer complex questions and mimic human emotions. The update, called GPT-4, ups the ante in the lucrative AI arms race.
My colleagues tested GPT-4. It’s more precise, but it has a few of the old quirks.
Developments: It can achieve impressive scores on standardized tests like the SAT, summarize complex news articles and wow doctors with its medical advice. It can answer questions about images; for example, if it’s given a photo of the inside of a fridge, it can suggest recipes based on what’s inside. Its jokes are almost funny.
Challenges: GPT-4 still makes things up, a problem that researchers call “hallucination.” It can’t really talk about the future.
“Though it’s an awfully good test taker,” my colleagues write, GPT-4 “is not on the verge of matching human intelligence.”
Society: Chatbots are shifting the way we learn and work. But even the most impressive systems tend to complement, not replace, skilled workers. Morgan Stanley Wealth Management is building a system that will serve information from company documents to financial advisers.
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