Thursday 30/01/25

OK, so Fed defies Trump by keeping interest rates on hold (Daily Telegraph, Matthew Field) shows that the Fed did not cave to Trump’s pressure to cut rates – and the Fed’s chief went even further by saying that interest rates will probably remain higher for longer. They stay at the 4.5%, ending a run of three cuts on the trot. Donald Trump lashes out at Federal Reserve after central bank keeps rates steady (Financial Times, Claire Jones and Harriet Clarfelt) reflects, somewhat unsurprisingly, the president’s displeasure at things not going how he wanted as he said “If the Fed had spent less time on [diversity, equity and inclusion], gender ideology, ‘green’ energy, and fake climate change, inflation would never have been a problem”. He’s obviously talking out of his 🍑rse because none of that has got anything to do with inflation, but I guess he just used the opportunity to push his own agenda. Meanwhile,  Donald Trump scraps plan to freeze federal loans and grants after backlash (Financial Times, Steff Chavez) shows that Trump decided to ditch his order to freeze billions of dollars in federal domestic funding just one day after he announced it after massive backlash. In true Trumpian style, he blamed everyone but himself as he said that he wanted to “correct any confusion that the media has purposely and somehow, for whatever reason, created”. Payments for Social Security, Medicare and Medicaid won’t now be affected after all. This mishap didn’t stop him from having another go at making a bit of money for himself in Trump Media targets crypto investments with push into financial services (Financial Times, Nikou Asgari and Stephen Gandel) as it turns out that the president’s Truth Social platform has plans to launch a financial services business, called Truth.Fi, that will put up to $250m into crypto and other assets. It aims to “focus on investments in American growth, manufacturing, and energy companies as well as investments that strengthen the patriot economy”. Truth Social is run by Trump Media and Technology Group. The conflicts of interest here are just astounding…* SO WHAT? * It seems to me that Trump is waging a long-term war on “traditional” media because he doesn’t completely control it. If he can put enough of a wedge between conventional media and his own (and related) platforms it means that he can continue to feed his supporters with what they want to hear (“it’s them vs us”, “they are just telling us lies”, “it’s fake news” etc.) and insulate them in his own reality. The fact that he is able to continue with these outside interests unfettered is truly astounding but he is allowed to get away

with it all the same. If something bad happens with crypto and it tanks as a result, things could turn nasty quickly and a lot of people will get burned. Failing that, though, he may well make his supporters better off because he is uniquely placed to make the laws which ensure that he will be able to paper over any cracks that may occur.

Trump bump recovers after investors’ AI panic — but can it last? (The Times, Lauren Almeida) shows us that the panic that resulted in the massive sell-off that occurred on Monday, when the DeepSeek news came out, has largely subsided to the extent that the S&P 500 is currently less than 1% lower than it was five days ago!

Back home, Rachel Reeves urges Heathrow airport to fast-track third runway (Financial Times, Philip Georgiadis, Lucy Fisher and Jim Pickard) shows that the chancellor continues to press her third runway agenda but Scepticism in Whitehall that Heathrow plan can be reconciled with climate targets (The Guardian, Heather Stewart, Jessica Elgot and Helena Horton) shows that MPs are of the opinion that you can either have a third runway or meet your climate obligations – not both. Energy secretary Ed Miliband and London mayor Sadiq Khan are digging their heels in on this and ‘The only winners are lawyers’: Heathrow braces for long journey to third runway (Financial Times, Philip Georgiadis, Jim Pickard, Clara Murray and Gill Plimmer) suggests that the sheer number of hurdles that this project is likely to face means that the only winners from this will be the lawyers who will earn massive fees from this.

Then in Bank of England warns of risks in relaxing mortgage limits (Financial Times, Martin Arnold) we see that the governor of the Bank of England warned MPs yesterday that government-backed proposals that will effectively encourage riskier mortgage lending could result in more defaults and repossessions. * SO WHAT? * This is an obvious point and I guess  I thought that the Bank’s exec director for financial stability, strategy and risk made a good point when he said that relaxing mortgage limits without increasing the supply of new homes will just mean that house prices will go up even further and “make things even more difficult for households to get on the housing ladder”. 

DeepSeek threatened with ‘aggressive countermeasures’ in ChatGPT row (Daily Telegraph, James Titcomb, Hannah Boland and Matthew Field) shows that OpenAI is trying to take the initiative back from DeepSeek by threatening it with “aggressive countermeasures” after accusing it of using ChatGPT to develop its own system. I referred to the phenomenon of “distillation” in yesterday’s Watson’s Daily where smaller models “suck knowledge” from bigger models and clearly OpenAI is not happy. Meanwhile, US officials are looking at the potential national security implications and the US navy has apparently told staff not to use the DeepSeek app. * SO WHAT? * The discussion on the DeepSeek impact continues to rage! Beware tech bosses bearing dusty economic paradoxes (Financial Times, Lex) refers to the “Jevons paradox” I referred to yesterday and that the resuscitation of this theory has proved to be a convenient comeback for the tech bros who got caught off guard. It goes on to make the point that even if this theory plays out, not everyone is going to benefit from its equally and it depends on whether the party concerned is a consumer, maker, broker or enabler of AI. AI consumers should benefit whatever because they used it as a building block and now face the prospect of it getting cheaper (think companies like Salesforce, ServiceNow etc.). Brokers won’t be too phased because customers will still want computing power (think Alphabet, Microsoft and Amazon’s collective cloud businesses). Enablers may suffer initially because there may be a pause or a slackening off in demand as everyone reassesses their needs and expectations. Makers may suffer the most in this food chain because they’ve poured billions of dollars into something that can apparently be executed much more cheaply (think Meta Platforms, OpenAI etc.). The AI ecosystem after DeepSeek (Financial Times, Robert Armstrong) also takes a look at how the AI food chain will react and adapt to the impact of DeepSeek – electricity companies may see the concentration of demand broaden as there could be more, but smaller, data centres than fewer bigger ones. Also, more chip companies (i.e. not just Nvidia) may benefit from the DeepSeek ‘quake because people may now see that there’s value in making non-GPU chips as networking chips (Broadcom), memory chips (Micron) and power management chips (Monolithic) are all still used in data centres. On the subject of chips, Nvidia shares resume fall despite gains in European chip stocks (Financial Times, George Steer, Tim Bradshaw, Mari Novik and Arjun Neil Alim) shows that share price volatility continued for Nvidia as investors continue to re-

evaluate the company’s longer term earnings potential. DeepSeek sticks a fork in utility investors’ socket (Financial Times, Lex) suggests that forecasts for how much power is needed to power data centres will have to be revised down while SoftBank in talks to invest up to $25bn in OpenAI (Financial Times, Arash Massoudi, David Keohane, George Hammond and Stephen Morris) shows that the Japanese tech investor remains steadfast in its commitment to OpenAI as it enters into talks that could make it OpenAI’s biggest financial backer!

This week has a been a big one as far as tech firm results are concerned! ASML shares bounce as orders signal demand for AI equipment (Financial Times, Tim Bradshaw) shows that the chipmaking equipment manufacturer said that orders for its most advanced machines had a boom over the last quarter, Microsoft reports strong fourth-quarter earnings amid uproar over DeepSeek’s AI (The Guardian, Edward Helmore) shows that the tech giant beat market expectations on its quarterly earnings, Meta posts robust fourth-quarter earnings amid DeepSeek mania (The Guardian, Johana Bhuiyan) highlights Zuck’s bullish expectations for “a really big year” as Meta posted results coming in above market expectations while, separately, Meta’s Mark Zuckerberg explores purchase of Washington, DC, property (Financial Times, Hannah Murphy and George Hammond) highlighted Zuck’s ongoing efforts to ingratiate himself into Trump’s inner circle.

Does DeepSeek offer Apple’s faltering AI strategy a lifeline? (Financial Times, Michael Acton and Tim Bradshaw) is a really interesting article which contends that the company’s late arrival to the AI party may have proved to be a positive after all because the DeepSeek ‘quake has potentially shown that Apple may be able to close the gap with rival Google by taking advantage of it being a major distribution platform. However, it is debatable as to whether its new Apple Intelligence features have helped to sell more phones. Apple’s quarterly results are due out later today.

Tesla Caps Roller-Coaster Year With Mixed Fourth-Quarter Earnings (Wall Street Journal, Becky Peterson) shows that the company suffered weaker operating margins and automotive revenues over the period but actually benefited from stronger demand for its energy-storage products and improved sales of regulatory credits. Musk tried to get everyone excited about his push to make Tesla the world’s most valuable company by pushing forward in robotics and self-driving vehicles. * SO WHAT? * I would have thought that automotive revenues are going to continue to feel the pressure as competition continues to rise and, potentially, sales could suffer from owners being turned off by Musk’s political meddling.

Back home, UK ministers plan to subsidise EV loans to drive sales (Financial Times, Jim Pickard, Kana Inagaki and Sam Fleming) shows that MPs are looking into the possibility of guaranteeing consumer loans to encourage EV sales. They think that government underwriting of these loans could help to reduce monthly payments, which would in turn make EVs seem more affordable and therefore attractive to buy. * SO WHAT? * The car industry is keen to get any help but clearly nothing’s about to be executed yet. If the government’s going to get involved, I think it has to act quickly because dithering on their part will only make potential buyers sit on their hands until they get a clearer idea of what may be available. After all, depreciation on EVs

tends to be horrendous, so you want to make sure that you get the best deal possible in the first place!

In other car-related news, UK car production falls to lowest level since 1954 (The Guardian, Jasper Jolly) highlights the sorry state of UK car production at the moment thanks to ongoing demand weakness and the industry shift to EV production. * SO WHAT? * I don’t see the situation getting better any time soon as things stand, although the flood of new models this year may prompt more interest!

Then in US rival agrees £1.2bn deal for British car parts firm in new hit to UK stock market (The Guardian, Joanna Partridge) we see that American firm Axle and Manufacturing has made a takeover offer for FTSE250 car parts maker Dowlais worth £1.2bn, which will see yet another British company disappear from the LSE. Dowlais supplies 90% of the world’s carmakers and employs about 30,000 people around the globe. * SO WHAT? * There was an uptick in transatlantic deals over the course of 2024 and, given the strong dollar, attractive valuations of British companies and rising corporate confidence in America I would have thought that there will be more from where this came from!

In a quick scoot around some of today’s other interesting stories, Household water bills in England and Wales to rise by average of 26% this year (Financial Times, Gill Plimmer) cites Water UK’s projections that household water bills in England and Wales will see their biggest increase since the sector was privatised 36 years ago. The amount bills will go up by will depend on the company. Southern Water’s customers could rise by a whopping 47% while Thames Water’s customers could see a 31% increase, for instance. Not great for consumers!

Meanwhile, Shoplifting in the UK hit £2.2bn last year, survey shows (Financial Times, Laura Onita) cites findings of a report by the BRC which show that theft reached its highest ever levels despite high-street brands spending record amounts of money to prevent it. Incidence of violence and abuse tripled versus 2020 levels (presumably that was pre-pandemic, otherwise that wouldn’t be a fair comparison would it!). Interestingly, John Lewis and Waitrose last year said that “greed not need” was behind the rise and organised crime seems to be behind a lot of it. * SO WHAT? * This is just another cost that already-suffering retailers could do without, something

that Morrisons warns Budget will mean deeper cuts (Financial Times, Laura Onita) reminds us of as Morrisons became the latest retailer to warn that it will have to double-down on cost-cutting plans following the Budget.

Then in financials news, Barclays tightens working-from-home rules (Financial Times, Akila Quinio, Ivan Levingston and Ortenca Aliaj) shows that Barclays has become the latest bank to tighten its WFH requirements and asked most of its 85,000 employees to come to the office for an additional day (although most of its client-facing staff come in five days a week now anyway).

Then in Lloyds Banking Group to shut another 136 UK high street branches (The Guardian, Kalyeena Makortoff) we see that the UK lender announced its latest raft of branch cuts yesterday as analogue banking continues its terminal decline. Branches of Lloyds, Halifax and Bank of Scotland will be affected as the inevitable switch to digital banking continues.

I’ve only been skiing three times in my life (so far – you can always live in hope!). I found this descent quite mesmerising! It’s quite scary and yet compelling all at the same time 😨⛷️