Monday 12/10/26

Houthis show military reach with deadly missile strikes on Riyadh (Financial Times, Charles Clover) highlights the growing power of Yemen’s Houthi rebels following their lethal missile strikes on Riyadh’s King Khalid International Airport, the most recent of which killed 12 people and wounded over 300. The Houthi’s have also hit Saudi oil infrastructure and taken more territory along the Red Sea coast over the last few weeks. Oil chiefs pull out of Riyadh energy congress after airport missile strike (Financial Times, Ahmed Al Omran) reflects the unsurprising reaction as a number of senior oil execs – including those from ExxonMobil, TotalEnergies and BP – cancelled plans to attend the World Petroleum Council meeting in Riyadh, which started yesterday. Air Travel Emerges as Dangerous Front Line in Global Conflicts (Wall Street Journal, Benjamin Katz) shows that commercial air travel has now been dragged further into wars around the world as airports, planes and airspace is increasingly being targeted by missile and drone attacks. Governments around the world are telling citizens to avoid Riyadh airport and some are warning airlines that flying over all or large parts of Saudi Arabia is no longer safe. Meanwhile, Airline bosses warn of major cuts with ‘tough winter’ ahead (Daily Telegraph, Patrick Galbraith) highlights another major issue for airlines – the price of jet fuel. The price of jet fuel has more than doubled over the last year – and it’s all related to the wars and the blocking of the Strait of Hormuz. A number of airlines are already cutting flights and delaying payments on leased aircraft. The situation is so bad that some airlines could go bust this winter season.

US hits commercial tanker in Gulf of Oman as tensions flare (Financial Times, Steff Chávez and Najmeh Bozorgmehr) throws yet more chaos into the pot as the US strike came just two days after Trump stated that US forces wouldn’t attack Iran before the midterms. It involved a fighter jet hitting a Panama-flagged commercial tanker, disabling the vessel’s propulsion. US Central Command said that the vessel was trying to cross regional waters and continued on its journey despite warnings.

Then in US threatens to block arms for Ukraine over attacks on Russian refineries (Financial Times, Christopher Miller, Henry Foy and Abigail Hauslohner) we see that the Trump administration is threatening to stop arms sales to Ukraine – and intelligence sharing – unless they stop hitting Russia’s energy infrastructure, although the White House refused to confirm or deny this. This came as Trump claimed that “Effective immediately, there is an ENERGY CEASEFIRE in the War between Russia and Ukraine. Bother parties have agreed. Do not break it!”. No-one – including Ukraine or the Europeans – knew about this beforehand!

Trump faces Republican opposition to his diesel deal with Russia’s Putin (Financial Times, Abigail Hauslohner) highlights resistance from leading Democrats and Trump’s own party to his decision to buy millions of tons of diesel from Moscow. They say that in making this deal, he is breaking the law. The agreement with Putin was made on Friday and he boasted that it would cut fuel prices “for Americans, especially our Great Farmers, Ranchers and Truckers”. However, Can Russia meet Trump’s diesel demands? (Financial Times, Anastasia Stognei and Verity Ratcliffe) says that Russia’s promise to deliver 300,000 tonnes of diesel immediately, 500,000 tonnes in November and then another 1m tonnes in December isn’t really going to touch the sides – but the good news is that it’s not actually going to make all that much difference to Russian coffers in the scheme of things. Yes, it’s going to boost finances for Putin’s war effort, but not by all that much. Trump’s deal with Putin will have little impact on US diesel prices, experts say (The Guardian, Simon Goodley) torpedoes Trump’s claim that “Diesel prices for Americans and, indeed, the world, will be COMING DOWN, IN RECORD NUMBERS, AND FAST!” because experts say that the quantities involved and the time it will take to get to the US will be “too little, too late” to make a dent in current high prices. US prices have shot up by almost 70% since the beginning of the Iran war. In the meantime, Russia steps up bid to kill European defence chiefs, spy agencies warn (Financial Times, Sam Jones, Laura Pitel and Sylvia Pfeifer) shows that Western intelligence agencies are warning defence bosses that they are at increased risk of assassination. Assassinations of European civilian targets has previously been considered a no-go area, but apparently that is now not the case. The Kremlin has ordered the broadening of sabotage and “hybrid” operations in Europe in a bid to weaken support for Ukraine. Trump seems to be OK with financing that.

Back in America, US affordability tracker: the data that could decide the 2026 midterm elections (Financial Times, Eva Xiao, Ian Hodgson and Joel Suss) shows some very interesting stats! Everyone is facing a cost-of-living crisis at the moment and this data provides an insight into the challenges that are facing American consumers – petrol prices have risen by 42.4%, electricity by 12.5%, beef by 17.9% and coffee by 23.6% although egg prices have fallen by 41.5%. Trump claims that falling egg prices reflect falling prices across the board – but that is a lie. Trump is failing to arrest decline in popularity, FT poll shows (Financial Times, Ian Hodgson) cites the latest FT poll which shows that only 25% of registered voters approve of the president’s handling of the economy and employment while around 20% approve of his handling of inflation. Over two-thirds of respondents reckon the economy is going in the wrong direction. * SO WHAT? * The sum total of all this suggests to me that Trump is getting increasingly out of control. His invasion of Iran and lack of planning for the aftermath has plunged the world’s economy into reverse just as it was emerging from the Covid years, he’s financing Putin’s war machine to appease American farmers and truckers ahead of midterms, he’s talking mass-bribery to pay voters to vote for him and he’s continuing to make billions in crypto investments for himself and his friends whilst everyone else is watching their spending power shrink. And yet his opponents, the Democrats, are still useless. The sooner “the Allies” become more self-sufficient the better.

In China’s growing debt burden limits space for economic stimulus (Financial Times, Joe Leahy) we see that China’s growing debt mountain is limiting the government’s ability to launch a big stimulus to spark domestic demand and power growth. A new study from the Conference Board shows that debt servicing payments alone could account for 19.2% of the central government’s general public budget this year – a significant increase from the 12% in 2014. This is especially true at the local government level. China’s economic growth slid to 4.3% in Q2, which is below the official full year growth target of 4.5 – 5%. It has been hit by weaker retail sales and a big drop in fixed-asset investment.

Back home, Russia ‘interfered’ in 2016 Brexit vote, says Andy Burnham (Financial Times, Jim Pickard) smacks of Burnham warming up the electorate for renewed efforts to cosy up to Europe as he said in an interview that Russia interfered in the Referendum and that voters in France and Germany need to be particularly mindful of similar interference in their respective political processes. Andy Burnham to step up UK business outreach amid fears of Budget tax rises (Financial Times, Ashley Armstrong, Laith Al-Khalaf and Jim Pickard) shows that the PM is going to try and work his charm on business this week as he’s got meetings lined up with tech entrepreneurs, venture capitalists, the chiefs of big FTSE companies and business lobby groups but City of London hits out at Andy Burnham’s plan to scrap non-compete clauses (Financial Times, Martin Arnold and Kieran Smith) suggests that he’s not going to get much love from the City as he is planning to end the use of non-compete clauses in employment contracts. Hedge funds, investment banks and wealth managers are among those who use non-compete clauses all the time as a way to make the poaching of their key players as difficult as possible. Burnham waters down ‘Made in Britain’ defence drive (Daily Telegraph, Matt Oliver) shows that the PM’s trying to give himself some wiggle room with regard to buying military equipment because it looks like he’s going to use a wider definition of what constitutes a “British” defence company to include US and European-owned businesses that have facilities and staff in the UK. Burnham sidelines Starmer’s AI data centre project (Daily Telegraph, James Titcomb) shows that the future of the AI Energy Council, a cross-departmental project to increase electricity supplies for AI infrastructure, is in the balance at the moment as Burnham has been pretty quiet about it and has thus far had a more cautious approach. Keir Starmer had been much more pro-AI and keen to get inward investment. * SO WHAT? * TBF to Burnham, he’s having to get up to speed extremely quickly given his rapid rise to the top job. I think it’s good that he’s trying to give everyone a chance to plead their case because thus far he’s not really done anything apart from calm the party faithful and launch a few populist measures like cheaper bus fares and Your First Home, which aren’t really going to move the needle all that much. He’s going to have to play a game of priorities as his fiscal headroom is shrinking by the day and it seems that no-one’s going to help him – not the Americans or the Europeans at this stage.

Slowing deals are another flashing red sign for equity markets (Financial Times, Lex) observes that although the S&P 500 hit an all-time high last week, dealmaking has been somewhat lacking, considering. * SO WHAT? * Usually, raging bull markets whip up sentiment and get those animal spirits going – but it seems that there’s been a tapering off of late. A number of high-profile listings including OpenAI, Oura and SB Energy have been postponed because of uncertain market conditions and declining consumer confidence. Viewing the S&P 500 as a reflection of corporate America can be misleading – tech makes up 40% of the index which has hugely outperformed the broader Russell 2000. In Q3 we saw that global M&A fell below the psychologically important $1tn level. Interestingly, M&A specialists like Evercore have been feeling the pinch and apparently Perella Weinberg is in the process of selling itself to a diversified rival. Bigger banks have been coping better because they’ve been able to ride out market volatility (which is generally bad for dealmaking) thanks to increased trading revenues. Deals haven’t dried up completely, though – but the rising cost of debt and geopolitical uncertainty certainly seem to be having a detrimental effect. Until that changes, you would have thought that the slowdown will continue.

That being said, Nvidia in talks to acquire US ‘open’ model start-up Reflection AI (Financial Times, George Hammond, Michael Acton, George Steer and Arash Massoudi) shows that the tech giant is looking at either buying Reflection AI or investing more money in it. Nvidia is already one of Reflection’s biggest shareholders and has invested $800m in it so far. A deal between the two could be announced in the coming weeks! * SO WHAT? *  Only last week we saw Reflection AI announce its newest model, Beam. I would have thought this would be great for both sides – Nvidia gets exposure to open-weight models and Reflection AI gets a sugar-daddy to finance its ongoing development.

Also, Amazon in Talks to Buy AI Startup Decart for Around $7 Billion (Wall Street Journal, Kate Clark and Lauren Thomas) shows that the e-tailing giant is looking to acquire AI start-up Decart. Decart enables developers to switch between different AI chips, something that’s becoming increasingly important as companies are having to use more than one type of chip as they continue to expand.

EU ‘safeguards’ hybrid car sector from Chinese imports under new deal (Financial Times, Andy Bounds and Joe Leahy) shows that the EU has reached a tacit agreement with the Chinese to impose a quota on imports of hybrid cars from China without prompting a full-on trade war. The deal was agreed on Friday and China has promised not to retaliate. This sounds like a decent outcome to me because things could have got really nasty…

Meanwhile, Volkswagen boss backs EU plan to bolster domestic European industry (The Guardian, Jasper Jolly) shows that the VW boss is supportive of the “Made in Europe” initiative, which makes a lot of sense since VW is probably suffering the most out of everyone. The Industrial Accelerator Act will restrict subsidies and public procurement to products with the

majority of their materials coming from within the EU. Scrap ‘delusional’ electric car sales targets, Renault boss says (Daily Telegraph, Matt Oliver) adds fuel to the fire as the boss of Renault UK wants ministers to rein in the original net zero targets in the Zero Emission Vehicle (ZEV) mandate because demand just isn’t keeping up with it. Ministers are currently reviewing it. Under the current targets, the headline requirement is for 33% of cars sold to be electric this year – and it keeps rising every year until it hits 80% in 2030. * SO WHAT? * I think that if the UK and Europe wants to HAVE a car industry it really needs to review the targets that were made years ago under very different circumstances. If they leave them unchanged, manufacturers that are already under pressure from the flood of Chinese vehicles will just wither and die – and it will all have been avoidable.

In a quick scoot around some of today’s other interesting stories, Demand for tracker mortgages jumps as rates on fixed deals rise (Financial Times, Emma Dunkley) cites the latest Bank of England data which highlights a significant rise in the take-up of tracker mortgages. Given that the market expects four interest rate increases by the end of July 2027, this sounds somewhat punchy. That being said, mortgage brokers are saying that this would still make them cheaper than a lot of fixed-rate deals…

Then in Why Sweden is abandoning its cashless society (Daily Telegraph, Lily Shanagher) we see that the country’s aim to be completely cashless by 2030 has been tempered by Russia’s invasion of Ukraine. In July, the Riksbank – Sweden’s central bank – said that essential shops such as grocers and pharmacies with staffed checkouts have to accept physical cash as Sweden wants to protect itself from Russian hybrid attacks. Cash circulation in Sweden is the lowest as a share of GDP in the world as it has developed its own mobile payment system, called Swish.

In UK universities withdraw offers from international students to avoid blanket ban (Financial Times, Chris Smyth, Wilf Vall and Amy Borrett) we see that British universities are revoking large numbers of offers to international applicants from countries including Nigeria and Pakistan as they are more worried about the repercussions from the government’s visa crackdown than any blowback from would-be students. * SO WHAT? * International students can only apply for a

study visa after getting an offer from university – and that means that the visa application gets withdrawn if the offer is subsequently revoked. Universities where over 5% of prospective international students given offers get their visa applications rejected could now face a ban from recruiting them. This is tough for the universities considering that overseas applications are already falling due to tighter visa restrictions and international competition.

Elsewhere, Britain loses one pub every day as rising costs bite (The Times, Jessica Newman) cites findings from the British Beer and Pub Association which show that more pubs will close by the end of the year as 295 have shut down between January and September. The industry has been hit by a rise in NICs, the lowering of the threshold where it becomes payable, increased business rates and food price inflation as well as customers having less money to spend. They are just one of many industries trying to bend Burnham’s ear at the moment…

Then in an interesting twist on WFH, Secretaries told to ‘spy’ on lawyers in WFH crackdown (The Times, Jonathan Ames) shows that senior partners at City law firm Rahman Ravelli have ordered secretaries to “spy” on the firm’s lawyers to make sure they are coming into the office. Law firms have differing policies regarding flexible working but it seems that most want their lawyers to be at their desks for at least three days a week…

Are you watching Celebrity Traitors at the moment?? If so, you’ll enjoy this – but even if you don’t watch the programme this is still good!