(The opinions expressed here are those of the author, a

columnist for Reuters.)

By Mike Dolan

LONDON, May 23 (Reuters) - A look at what matters in

U.S. and global markets today from Mike Dolan, Editor-At-Large,

Finance and Markets

Even though some calm returned to U.S. bond and stock markets

overnight after this week's wave of fiscal policy anxiety, the

dollar has continued to slide - with sterling leading the pack

to its best levels against the greenback in three years.

It's Friday, so today I'll provide a quick overview of

what's happening in global markets and then offer you some

weekend reading suggestions away from the headlines.

Today's Market Minute

* U.S. Senate Republicans said on Thursday they will seek

substantial changes to President Donald Trump's sweeping tax and

spending bill after it narrowly won approval in the House of

Representatives, in a sign that significant hurdles remain for

the package.

* The dollar headed for its first weekly fall in five weeks

against major currencies on Friday and long-dated Treasury

yields stayed elevated, as U.S. debt concerns that have mounted

for years started driving moves in currencies and global debt.

* The German economy grew significantly more in the first

quarter than previously estimated due to export and industry

frontloading ahead of U.S. tariffs, according to a second

estimate published on Friday.

* Japan's new agriculture minister pledged on Friday to quickly

move rice from government stockpiles to store shelves where they

would be offered at prices significantly lower than current

levels, seeking to stem a consumer shift to cheaper, foreign

brands.

* Yields of government bonds with the longest maturities have

risen sharply - not just in the United States, where the chaotic

first months of Trump's second term in the White House are

causing investors to demand better returns on their bond

holdings, but also in Japan and Britain.

* Oil prices dropped for a fourth consecutive session on Friday

and were set for their first weekly decline in three weeks,

weighed down by renewed supply pressure from another possible

OPEC+ output hike in July.

* Global investors admit to flying blind in markets roiled

by erratic U.S. trade rhetoric and chaotic economic forecasting,

saying that placing long-term bets is harder now than at any

time since the 2020 COVID-19 crisis.

Dollar keeps tumbling

Trump's signature fiscal package of tax and spending - which is

expected to lift U.S. debt piles by another $3.8 trillion or so

over the coming decade - finally passed in the House of

Representatives on Thursday. But only by one vote.

The bill now has to go to the Senate, which is likely to seek

changes. A Republican majority 53-47 should eventually see it

pass, but any changes will require the bill to return to the

House for a new vote.

The bill allows for a $4 trillion rise in the U.S. debt

ceiling. If it's not passed by July, it's estimated that the

government will start running out funds in August.

After an initial spike to 19-month highs after the vote,

U.S. long-term Treasury yields retreated again. But

30-year yields remain above 5% on Friday and nerves persist

about the market reaction to baked-in deficits and rising

debts.

Interest payments accounted for one out of every eight

dollars spent by the U.S. government last year, more than the

amount spent on the military, according to the non-partisan

Congressional Budget Office. That share is due to grow to one

dollar in six over the next 10 years as an aging population

pushes up the government's health and pension costs.

The steadying of the bond market on Thursday was helped by

dovish comments from Federal Reserve Governor Christopher

Waller, who said if there is some clarity on the tariff front,

it might allow interest rates to come down in the second half of

the year.

"If we can get the tariffs down close to the 10% and then

that's all sealed, done and delivered somewhere by July, then

we're in good shape for the second half of the year," Waller

told Fox Business. "Then we're in a good position to kind of

move with rate cuts through the second half of the year."

There was some further relief for those wary of political

influence on the Fed too. A U.S. Supreme Court ruling on a legal

battle over Trump's firing of two federal labor board members

contained a line that raised the bar for any attempt to fire Fed

Chair Jerome Powell at will.

"The Federal Reserve is a uniquely structured, quasi-private

entity that follows in the distinct historical tradition of the

First and Second Banks," a majority of justices said in the

court's ruling.

The Federal Reserve Act of 1913 that created the nation's

third and still existing central bank stipulates that Fed

officials may be dismissed only "for cause," not for political

or policy disagreements.

There was also some better news on the economic front, with May

U.S. business surveys coming in more upbeat than forecast and

weekly jobless claims broadly stable.

But as U.S. Treasuries and stock futures held the

line on Friday ahead of the long Memorial Day holiday weekend,

the dollar continued to weaken - with the index slipping

close to two-week lows.

The latest leg of the dollar decline was as much to do with

developments overseas.

Germany updated its GDP readings for the first quarter to

show an expansion twice that of original estimates, while

British retail sales also beat forecasts for April.

With more hawkish noises from the Bank of England of late

about further rate cuts in Britain, sterling led the

advance of major currencies against the dollar and hit its

highest since February 2022.

Japan's core inflation, meantime, accelerated at its fastest

annual pace in more than two years in April - raising the odds

of another Bank of Japan interest rate hike by year-end.

BOJ Governor Kazuo Ueda said on Thursday the central bank will

closely monitor market moves as yields on super-long Japanese

government bonds reached record highs this week.

Weekend reads

* BRAIN DRAIN?: U.S. administration attacks on science in U.S.

federal institutions and moves to defund some universities have

raised speculation about researchers and academics moving

overseas. Europe appears keen to attract them. Heather Grabbe

and Daniel Gros at the Brussels-based think tank Bruegel propose

a 'Project Einstein' initiative to mobilize European Union funds

to attract U.S. scientific talent, pointing out that up to a

fifth of researchers at top U.S. universities previously studied

in Europe.

* STAR WARS: Trump's Golden Dome missile defense concept revives

a controversial, decades-old initiative that could upend norms

in outer space and reshape relations between the world's top

space powers. Reuters correspondent Joey Roulette explains how

the announcement of Golden Dome, a vast network of satellites

and weapons in Earth's orbit set to cost $175 billion, could

escalate the militarization of space.

* REGLOBALISATION WITHOUT AMERICA?: In a critique of unfolding

U.S. protectionism and how world leaders should respond, IMD

Lausanne professor and CEPR's VoxEU founder Richard Baldwin

includes one low-probability but not impossible scenario -

reglobalisation without America. "The US continues to wall

itself off with high trade barriers and the world gets on

without it" is how Baldwin describes one of three scenarios,

adding: "The WTO evolves into a clearing house for cooperation

on climate, digital trade and 21st-century challenges.

Multilateralism survives, maybe even thrives."

* BONDED WAREHOUSES: Companies importing goods into the United

States from China are rushing to convert warehouses into

facilities that are exempt from Trump's tariffs until they are

ready to sell the merchandise. Reuters' Richa Naidu and Arriana

McLymore report on how there are already more than 1,700 bonded

warehouses: facilities where imported goods can be held without

immediate payment of customs duties. Fees are only paid when the

goods leave the warehouse, allowing businesses to manage funds

effectively during trade war uncertainty.

* LASTING IMPACTS: The U.S. and global economies may well endure

Washington's tariff war without disaster, argues Nobel laureate

and Stanford professor Michael Spence on Project Syndicate. But

longer-term effects of the Trump administration's other policies

are likely to be more significant and far-reaching - and will

'probably be only partly reversible'. "Whatever its flaws, the

US was regarded for decades as a reliable global actor, whether

in trade and finance or foreign policy and security. No more."

* AI EMPIRE: Concentration of artificial intelligence

infrastructure in a handful of Big Tech giants poses big

challenges to consumer choice, innovation, resilience, security

and financial stability, argue Bank for International

Settlements economists Leonardo Gambacorta and Vatsala Shreeti.

In a paper summarized on VoxEU, they say excessive Big Tech

influence over AI development risks exacerbating inequalities,

harming consumer welfare and creating systemic vulnerabilities.

* IMF MIA?: Rising global imbalances and inappropriate macro

policies around the world led to this brewing global trade war

and the International Monetary Fund has been 'missing in action'

in demanding redress, argues Desmond Lachman at American

Enterprise Institute in a column on Project Syndicate.

"Globalization is in real danger of breaking down, and one of

its premier institutions is nowhere to be found."

* DURATION AND ORIGINAL SIN: Global mutual funds' sensitivity to

duration risk cuts across emerging market governments' ability

to borrow at long maturities in their own currencies, to an NBER

paper by Hyun Song Shin at the BIS, Fed board economist Carol

Bertaut and American University's Valentina Bruno. "Even though

emerging markets have largely overcome 'Original Sin' by issuing

sovereign bonds in local currency, the portfolio holdings of

global investors have ebbed." Long maturities mitigate rollover

risk for borrowers - but if investor reactions amplify market

disruptions, long maturities may introduce new vulnerabilities

affecting the availability and cost of finance.

* FLYING PIGS: Dr. Mike Lemmon's pigs, each valued between

$2,500 and $5,000, were supposed to be on a plane bound for

Hangzhou from St. Louis in April to take up residence at Chinese

hog farms. Instead, as Reuters Heather Schlitz relays in her

report on the tariff hit to lucrative niche export markets, many

went to a local Indiana slaughterhouse for less than $200 each

after the Chinese buyer canceled the order within a week of

Beijing's retaliatory tariffs against the United States.

* COW BONDS: Sandra Palleiro traveled 600 km (370 miles) from

Uruguay's capital, Montevideo, to find 61 cattle she owns, at

least on paper. But, like hundreds of other investors, she can't

find them. Reuters' Lucinda Elliott reports on how the missing

bovines were part of a "cow bond" scheme that collapsed, causing

one of Uruguay's biggest financial scandals.

Chart of the day

The German economy grew twice as fast in the first quarter as

previously estimated, according to updated data on Friday.

Quarter-on-quarter, the economy grew by 0.4% - putting the

annualized expansion at more than 1.6%, its fastest in three

years. By contrast, the U.S. contracted slightly - leading to a

German outperformance for the first time since 2022. Both

outcomes were heavily influenced by frontloading of imports to

the United States ahead of expected tariff increases. While some

of that may fade, the outlook for Germany received a significant

boost from the new government's plans for a trillion-euro fiscal

boost and its lifting of the self-imposed 'debt brake' for the

first time in 14 years. Financial markets have already rushed to

reflect the changing fortunes. Germany's main DAX

equity index has risen 20% so far this year while Wall Street's

S&P500 is down 1% for the year to date.

Today's events to watch

* U.S. April new home sales (1000 EDT); Mexico April trade

balance (0800 EDT); Canada March retail sales (0830 EDT)

* Federal Reserve Board Governor Lisa Cook, St. Louis Fed

President Alberto Musalem and Kansas City Fed President Jeffrey

Schmid all speak; European Central Bank board member Isabel

Schnabel speaks; Bank of England Chief Economist Huw Pill

speaks

* U.S. corporate earnings: Workday

Opinions expressed are those of the author. They do not reflect

the views of Reuters News, which, under the Trust Principles, is

committed to integrity, independence, and freedom from bias.