Friday 03/07/26

Strait of Hormuz transits increase as US-Iran ceasefire holds (Financial Times, Alice Hancock) shows that transits have more than quadrupled over the past week as confidence in the 60-day ceasefire appears to be growing. Oil price falls to lowest level since start of US war with Iran (The Times, Mehreen Khan) also reflects this confidence as the oil price fell below the pre-war level of $72 a barrel and, while we’re on the subject of confidence, Surging Wall Street profit forecasts fuel fears of ‘earnings bubble’ (Financial Times, Ian Smith, Emily Herbert, Ramsay Hodgson and Kate Duguid) shows that Wall Street expectations for profit growth are currently rising at their fastest pace since the post-pandemic rebound – something that’s making investors increasingly nervous about an “earnings bubble” and the inevitable aftermath when such a bubble bursts. US employers added just 57,000 new jobs in June, lower than expected (The Guardian, Gaya Gupta) takes the edge off that a bit, though, as the latest release from the Bureau of Labor Statistics showed that employers added about half the number of jobs that the market had been forecasting.

In the UK, Currys chief urges Burnham to slash Reeves’s jobs taxes (Daily Telegraph, Tom Hayes) highlights pressure on Prime-Minister-in-waiting Andy Burnham to “make it less

expensive, less risky and less difficult to employ people”. The CEO of Currys said that Reeves’s changes meant that “the cost of employing a part-time colleague went up by 13pc overnight”. * SO WHAT? * She jacked up employer National Insurance Contributions and then proceeded to implement above-inflation increases in the minimum wage, the effects of which were compounded by more onerous conditions in the Employment Rights Act. He called for changes in commercial property taxes that are putting retailers at a disadvantage to online players in addition to urging a swifter implementation of the de minimis rule. I suspect other retailers and the hospitality industry will want to jump onto this bandwagon and see if their collective lobbying will force change with a new Burnham regime.

Then in Polish energy giant plots fleet of 14 nuclear reactors across Britain (Daily Telegraph, Jonathan Leake) we see that the Warsaw-based consortium SGE is looking to invest £35bn in 14 nuclear reactors across three sites in Britain that would generate up to 11% of the UK’s total electricity supply! If the plans are implemented as is, the reactor fleet could supply electricity to the UK grid within eight years, powering eight million homes. It all sounds great, but it’s still theoretical at the moment and would put it in competition with Rolls-Royce’s fleet of SMRs.

Altman’s AI safety proposal: let us win, or everybody loses (Financial Times, Lex) follows on from the story I mentioned yesterday about Sam Altman calling for a US-led organisation to set global AI standards which expresses my conclusion more bluntly! It says that his proposal would give a massive advantage to an American oligopoly that just happens to include his own company! There is a major hole in the rationale for this – China. For anything like what Altman is proposing to be effective, China has to be part of it – and it’s hard to see China volunteering to restrict its progress with piffling things like safety. However, there are a couple of other issues – that such an organisation may inadvertently amplify weaknesses in the system and focus on the wrong risks. Also, cobbling together rules via committee takes time – and AI moves very quickly (possibly too quickly). * SO WHAT? * Unfortunately, such an organisation could prove to be the least bad option because if it is not created, there is a risk that there will be fragmentation and that countries will impose their own restrictions that will fail to stop bad actors and malicious technologies. But it means that America’s lead will be confirmed and perpetuated.

In Anthropic moves to close loopholes that allow Chinese access to Claude (Financial Times, Eleanor Olcott and Cristina Criddle) we see that the AI company is closing loopholes that have allowed Chinese companies, including Ant Financial, from accessing tools such as Claude Code via various work-arounds. The workarounds aren’t illegal but they do breach Anthropic’s terms of service. * SO WHAT? * Continued access by Chinese companies of American LLMs shows that they still value them – and it seems that Anthropic’s coding tools are particularly popular.

On the data centre side of things, Giant Devon data centre plan sparks fears of ‘insane’ water usage (Daily Telegraph, Patrick Galbraith) shows that farmers are resisting plans to build an AI hub in Great Torrington that would take up the space of four average-sized UK farms and be 40metres high. They say that the data centre, which would be the biggest one in Britain, will spoil the countryside and strain local water supplies. They say that water supplies are already problematic. The company leading the project, Xlinks, says that it will use rainwater to cool the data centre and not draw water from the nearby River Torridge. They add that it’ll create at least

650 jobs and bring up to £3.6bn into the economy. Thus far, no land has been sold and no planning permission has been sought. * SO WHAT? * OK, so this is just one example, but I can imagine that we’re going to see more and more examples of resistance as the prevalence of data centres grows. I suspect that lawyers in particular are going to have a field day both in advising those pushing AI data centres and advising those who want to defend their land!

Sony is first console giant to stop making physical games (Financial Times, David Keohane) heralds a historic moment as the company has announced that it will stop producing new physical games from January 2028, marking the end of an era. Sony said that it was doing this because consumer trends were evolving such that the demand for digital media “significantly outpaces physical discs”. * SO WHAT? * Purists were obviously furious about the development but when you realise that digital sales have accounted for over 80% of games sold by Sony in recent quarters then it’s unsurprising! Also, according to one analyst, the cost of the physical packs, shipping and retailer margins can account for over 20% of the sticker price.

Then in Spotify deletes streams of chart-topping song after suspicious Kalshi bets (Financial Times, Stephanie Stacey) we see that the streaming giant has removed over half a million streams of a song by singer-songwriter Malcolm Todd, that was first released in 2024, which shot up to number one on the platform’s daily US chart. In the prior week, traders on Kalshi only gave Todd a 2.5% chance of having a number one songs on Spotify USA before the end of June! Spotify removed streams of the song “Earrings” because it believed the sudden rise in “popularity” was prompted by bots that played the track on repeat. Spotify acted too slowly and Kalshi paid the traders, who are estimated to have made 20 times their initial outlay. * SO WHAT? * I think that this whole prediction markets thing is so open to manipulation on a huge scale I still cannot believe this is unregulated. In the meantime, it seems that crime pays and if you’ve got the wherewithal and a bit of imagination you can make a lot of money because you’re impossible to trace! I bet that Malcolm Todd is pleased in this case because everyone will be streaming his song to know what the fuss is all about 🤣🤣🤣.

In consumer news, Credit card defaults hit highest level since financial crisis (Daily Telegraph, Emma Taggart) cites the latest Bank of England data which shows that credit card defaults have hit their highest level in the three months to June since Q3 of 2009. This reflects ongoing pressure on household budgets while Phone and laptop prices on the rise, Currys chief warns (The Times, Guy Taylor) shows that this is likely to continue as prices of our favourite gadgetry is set to rise (TBF, Apple has already warned us of this!) although Manchester and Stansted airports hit record passenger numbers (The Times, Robert Lea) shows that we’re not yet ready to forego holidays as the two airports have reported record numbers. * SO WHAT? * Although dire warnings have been made about the effect of Trump tariffs and the repercussions of his wars in the Middle East, it feels like the economic impact is not quite as bad as previously thought. OK, so there has definitely been an impact but many are still spending. It does make me wonder whether Burnham could start taxing holidays more as the implication would be that if you have enough money to splash out on a holiday then you can pay the Treasury a bit of that (although that would be a VERY controversial opinion!).

3,000% bonuses but a growing wealth divide: South Korea grapples with its AI chip boom (The Guardian, Raphael Rashid) is an interesting article that highlights unusual goings-on for some consumers in South Korea at the moment. It all centres around chip production, which the country is heavily involved in. Semiconductor workers at the likes of SK Hynix and Samsung are suddenly getting six-figure bonuses (that are multiples of their salary) and ordinary investors who’ve bought shares of chip makers are seeing huge investment returns. * SO WHAT? * This is all behind the current boom in luxury spending but the problem is that this is only benefitting a

small part of the population and is serving to widen the wealth divide. Meanwhile, the country has one of the highest rates of elderly poverty in the developed world and housing and living costs are rising. Perhaps luxury players like LVMH and Kering urgently need to rethink their South Korea strategy to take part in this wave – but I would also suggest that the government comes up with a way of sharing this new-found wealth more equally with the nation as a whole (after all, state subsidies really helped the tech companies to become what they have) otherwise jealousy and inequality could get worse and you get an uprising on your hands. It is worth considering that if you excluded Samsung and SK Hynix from the Kospi (those two companies make up over 50% of the index) the economy is actually going sideways…

Then in employment news, Germany bans workers from calling in sick (Daily Telegraph, Hans van Leeuwen) shows that tough new rules being brought in to kick-start the country’s economy include one whereby German workers will have to go to a doctor in person to get a sick note on the first day they are ill. Until now, workers could get a note by phoning the doctor and only doing so on their third day off work. It has been deemed that the number of sick days is too high. * SO WHAT? * Employers love this but unions hate it. Doctors are obviously opposed given that they could suddenly get swamped with unnecessary appointments. To put this into context, Germans take about 15 working days of sick leave per year. It’s lower than France and most Nordic countries but higher than Sweden, the Netherland, Denmark, Poland and Italy. In the UK it’s just over 4 days. Merz needs to do something drastic – and this is no doubt achieving that! This is all part of a package of long-awaited summer reforms!

In a quick scoot around some of today’s other interesting stories, Chinese energy group’s shares triple in Asia’s biggest IPO this year (Financial Times, William Sandlund) shows just how popular the floatation of China Resources New Energy was yesterday! ‘China’s Instagram’ targets male users as RedNote readies for IPO (Financial Times, Eleanor Olcott, Wenjie Ding and Cheng Leng) highlights RedNote preparing itself for its own flotation – an IPO that will be the biggest offering of a Chinese internet company in five years! It’s aiming for a Hong Kong listing.

Meanwhile, in M&A news, Lockheed in lead to buy naval tech group Ultra Maritime in $3.5bn deal (Financial Times, Oliver Barnes, Aaron Kirchfield, Ivan Levingston, Antoine Gara and Arash Massoudi) shows that the American defence group is looking like it could buy the Advent-owned naval tech company Ultra Maritime while Gymshark founder in talks to buy back stake from General Atlantic (Financial Times, Aaron Kirchfield, Ivan Levingston and Ashley Armstrong) shows that Ben Francis is looking to buy back the 21% stake that private equity firm General Atlantic bought back in 2020 for £200m in a bid to tighten his control on the company. He’s currently in talks with banks about how to finance the deal.

In other news, Tesla deliveries rise 25% as Europeans seek escape from high fuel prices (Financial Times, Kana Inagaki) cites the latest figures from the European car industry body, ACEA, which confirm a market-expectation-beating recovery in the sales of Tesla vehicles in Q2 in Europe, PwC chooses Canary Wharf for new London base (The Times, Jessica Newman) provides yet more evidence of the continued attractions of Canary Wharf as an office destination as it signed a deal to rent 350,000 sq ft of space at One Eden, which is a 17-storey building that’s about to undergo a major refurb before the accountancy moves in and Blue Owl hit by $4.7bn of redemption requests as investor exodus persists (Financial Times, Eric Platt) shows that private credit redemptions aren’t slowing down as it had even more redemption requests for Q2. The momentum here just shows no sign of stopping – although I would argue that market conditions do feel more buoyant at the moment and that means that private credit players may have better exit opportunities.

I think think that this is one of the best impressions of the footballer Erling Haaland that I have ever seen 🤣