Friday 20/06/25

In Israel-Iran war news, Gulf monarchies hold rival Iran close as Israel conflict rages (Financial Times, Chloe Cornish and Andrew England) we see that Saudi Arabia, the UAE and other states are in constant contact with Tehran trying to avoid getting swept up in the war given that they host American bases that could be subject to retaliation if the Americans go all-in with the Israelis and that they don’t want Iran to close the Strait of Hormuz. They have expressed support for Iran and condemned Israel’s attacks. Donald Trump says talks with Iran could happen ‘in the near future’ (Financial Times, Aime Williams, George Parker, David Sheppard, Leila Abboud and Najmeh Bozorgmehr) shows that the president is giving himself a buffer regarding whether or not to enter the war. How Trump can offer Iran a way out (Financial Times, Richard Haas) provides an excellent summary of what’s gone on so far and suggests that Iran could accept a diplomatic deal that would necessitate it handing over all the elements of its nuclear programme and agree to regular inspections by the International Atomic Energy Agency (IAEA) – but in return it wouldn’t have to suffer from wide-ranging economic sanctions and the US could withdraw its threat to attack. This sort of agreement has been reached before in 1988 with Ayatollah Khomeini, so perhaps successor Ayatollah Khamenei will do the same. The alternative is that the US enters the war and surrounding countries gets dragged in. As a result, US forces’ effective response to military challenges elsewhere will become diluted. * SO WHAT? * Unless Fordow is completely destroyed, Iran will forever intensify its efforts in making nuclear bombs because it will be justified by the Israeli threat – and that will have the effect of destabilising the whole region.

In response to all this, Gulf companies prepare contingency plans amid fears of conflict spillover (Financial Times, Chloe Cornish and Ashley Armstrong) highlights a “sharp increase” in inquiries from companies in the Gulf region for risk advisory groups like Control Risks, Kroll and International SOS about what actions they should take in the event of Israel-Iran war escalation while Tanker rates double as shipowners steer clear of Strait of Hormuz (Financial Times, Robert Wright) highlights rising shipping costs thanks to shipowners not wanting to use the waterway and Biofuel prices jump as Israel-Iran conflict drives hunt for oil alternatives (Financial Times, Susannah Savage) shows the effect on biofuel prices as companies seek out cheaper energy sources due to crude price rises.

Elsewhere, Russia on brink of recession, says economy minister (Financial Times, Max Seddon) cites Russia’s economy minister acknowledging the effect of the Ukraine war on the economy three years on from Putin ordering the invasion. Putin jacked up defence spending by 25% last year and higher spending has powered two years of GDP growth on the trot after a 4% fall in 2022. * SO WHAT? * This has led to chunky wage rises and a tight labour market but this year has seen a cooling off and the ministers said that “we’re basically already on the brink of falling into recession”. All of this is putting more pressure on Russia’s central bank governor, Elvira Nabiullina, to accelerate interest rate cuts to reduce high borrowing costs and stimulate the economy. She cut rates by 1 percentage point to 20% earlier on this month.

Then in Canada imposes tariffs on steel and aluminium to curb imports (Financial Times, Ilya Gridneff) we see that Canada’s PM Carney announced measures to protect the country against a flood of steel and aluminium imports, adding that he could increase taxes on the US based on how talks with Washington go by July 21st. The new measures are clearly aimed at defending against an influx of cheap Chinese steel.

Meanwhile, Switzerland cuts interest rates to 0% (The Times, Mehreen Khan) shows that the Swiss National Bank cut interest rates from 0.25% to zero – its sixth cut in a row. The move was widely expected and it indicated that further cuts could be made, taking it into negative territory which it last saw in 2015-2022. The decision to cut was prompted by falling inflation and a rising Swiss franc.

Back home, Bank of England keeps interest rates at 4.25% but hints at cuts to come (The Guardian, Phillip Inman and Heather Stewart) shows that the Bank of England left rates unchanged while the markets are now pricing in two more cuts going into the end of the year. Given weak underlying GDP growth, there will be pressure on the Bank to do what it can to stimulate the economy.

In Solar bankruptcies mount as Congress slashes green energy funds (Financial Times, Martha Muir and Amelia Pollard) we see that Trump’s de-greening agenda is starting to take effect as two major clean energy firms filed for bankruptcy this month – residential solar provider Sunnova and financing firm Mosaic. * SO WHAT? * These two companies are the biggest casualties so far of Trump’s proposed spending bill that will dramatically cut clean energy tax credits. It’s not looking good for the industry at all…

Pernod Ricard to restructure business to cut costs in market slump (Financial Times, Adrienne Klasa and Madeleine Speed) highlights a new initiative by the drinks maker to streamline its business in response to the weakening global market for alcohol. It said that it will centralise some functions and administration, which is bound to lead to some job cuts. The brands will be divided into two – one that will comprise of its whiskey, champagne and cognac brands while the second one will be made up of other spirits and aperitifs. The exact headcount reduction has not been announced yet because the company’s still trying to work it out. * SO WHAT? * Pernod Ricard is not alone in suffering from increasingly thrifty consumers and changing habits regarding alcohol. I’ve already said that Diageo is suffering as “the kids” are doing karaoke sober and it’s difficult to see how this is going to change any time soon. I am expecting related retailers like Majestic to be suffering as well but I haven’t heard much about this recently…

In other business trends news, UK manufacturing poised for funding boost to reduce energy costs (The Guardian, Rob Davies and Jasper Jolly) shows that UK manufacturing is likely to get support from the government as ministers discuss policies that target high-electricity-use businesses in particular as well as manufacturers more broadly. Energy intensive industries have long complained about having to pay more for their electricity than their European counterparts whilst also facing difficulties in recruiting skilled employees. * SO WHAT? * This movement on energy costs will be welcomed but it’s still likely that energy costs will be higher than they are on the Continent because our electricity prices are based on the cost of wholesale gas, which makes up a bigger proportion of our energy mix. Still, it’s a move in the right direction…

In investment news, Spacs are hot again, and even Goldman wants a piece of the action (Financial Times, Craig Coben) highlights the return of Goldman Sachs to the world of SPACs that it profited from hugely until 2022 when it abruptly exited the market. * SO WHAT? * SPACs are staging a comeback and it’s interesting to see how forgiving the market has become about

reputational risk when fees are on the table. At this point last year, there were $2bn-worth of SPAC-backed deals – but so far this year, we have seen $11bn worth. OK so this is still way short of the peak of $172bn in 2021, but it is still a considerable rebound of activity from last year! At the moment, deal sizes are smaller and investors are being quite picky but you would have thought that activity will pick up – pending the impact of Trump tariffs and geopolitical developments, of course. SPACs are still pretty controversial, leading to them acquiring the nickname of “Shell Promoters Acquiring Cr@p” 🤣. Now that Goldman is dipping its toes back in the water, there is no doubt that others will follow it just because of the FOMO!

In Britain’s biggest bank to cut UK investments in snub to Reeves (Daily Telegraph, Louis Goss) we see that Lloyds Bank’s pensions division, Scottish Widows, is looking at cutting its exposure to UK equities and switch it out to better-performing markets. This flies in the face of the chancellor who is trying to get British pension funds to invest more in British assets. It did not sign up to the Mansion House Accord which is a document signed by 17 of Britain’s biggest workplace pension providers to invest at least 5% of funds held in defined contribution schemes into UK stocks by 2030 – and now it’s planning to cut its exposure to UK stocks in its highest growth fund from 12% to 3%! It’s also looking to cut UK investments in its most conservative fund from 4% to just 1% and aims to complete these changes by January 2026. * SO WHAT? * This is a bold move and if it goes badly it will be very embarrassing. Given investor reaction to Trump shenanigans going on across the Atlantic – that they are pulling money out of the US and putting it elsewhere – you would have thought that British stocks should at least see some uplift although it seems that more of it is winging its way to Europe. Also, given that everyone else has promised to push UK stocks, you would have thought that would provide some underpinning at the very least! Something definitely needs to be done about the outflow from the LSE though in order to address confidence issues….

In employment news, UK jobs market sees modest growth in new postings (The Times, Helen Cahill) cites the latest data from REC which shows “some resilience” in the UK jobs market although Recruiter Hays warns global slump in hirings will halve its profits (The Guardian, Lauren Almeida) highlights how the volume recruiter is still in the doldrums as it warned that profits could halve thanks to a sharp drop in demand for permanent staff. This gloomy mood seems to be prevalent across the whole recruitment industry at the moment…

In Elon Musk’s X to offer investment and trading in ‘super app’ push (Financial Times, Hannah Murphy and Daniel Thomas) we see that users will “soon” be able to trade on X as it moves towards Musk’s aim of making X the “everything app” as per WeChat in China. CEO Linda Yaccarino said that “You’ll be able to come to X and be able to transact your whole financial life on the platform” and that X was also looking at introducing an X credit or debit card potentially by the end of this year.

Then in Tesla’s robotaxi ambitions face a reality check after launch (Financial Times, Richard Waters) we see that Tesla’s ride-hailing service will launch this weekend with rather less fanfare than had been expected in Austin, Texas , as there will only be about 10 cars and they will be geo-fenced to avoid the city’s trickiest intersections and come with teleoperators that can take over in the event of any problems. * SO WHAT? * A lot of Tesla’s stellar valuation is based on the promise of a robotic and automated future and although this launch is a few years late, it is at least a first step – but it’s still got LOADS to prove. Although Google’s Waymo is more established

with about 1,500 driverless taxis in four US cities, Tesla has some important advantages up its sleeve – that its Cybercab is purpose-built and will sell for way less than $30,000. Waymo’s, on the other hand, is loaded with expensive sensors and users a Jaguar with a list price of over $70,000. At the moment, Waymo is ahead in terms of the level of autonomy it can achieve. However, Tesla could potentially scale up quite quickly if it wanted to. We’ll just have to see how this goes!

Meanwhile, Analysts are downbeat on Tesla but investors are still buying (The Times, Emma Powell) shows that earnings estimates from analysts have been steadily pared back since January and even Musk himself cut profit forecasts for this year thanks to the effect of his controversial political rants, lack of new car models and tightening competition. Still, as I said above, there’s a lot of hope for Tesla’s involvement in the robotic revolution and maybe we are reaching a crossroads for the firm…

In a quick scoot around some of today’s other interesting stories, France to double stake in Eutelsat as Europe looks for rival to Elon Musk’s Starlink (Financial Times, Peggy Hollinger and Leila Abboud) highlights intentions of the French government to more than double its stake in satellite operator Eutelsat that will consolidate its hold of OneWeb, Europe’s answer to Musk’s Starlink. The state’s current stake of 13.6% will rise to almost 30% and will reduce the UK’s 11% stake in Eutelsat to 7.9%. * SO WHAT? * This is important given worries about relying too much on Starlink – and it comes just one day after the French military agreed a 10-year deal to buy satellite comms service from OneWeb. Eutelsat has been a bit of a money pit but given America’s

somewhat changeable stance on defence (particularly in Europe) it is imperative that an alternative to Starlink be nurtured for all of our sakes!

Back home, UK consumer confidence up but fragile amid tariff and Middle East concerns (The Guardian, Julia Kollewe) cites the latest GfK consumer confidence survey which says that confidence among UK consumers has improved but is still subject to concerns about petrol prices and the effects of war in the Middle East. * SO WHAT? * This heralds a bit of a rebound from last month, where sentiment hit its lowest level since November 2023.

AI continues to serve up some incredible creations! Here is a very weird video of world leaders as you’ve never seen them before…