Monday 02/06/25

In trade news, China accuses US of ‘severely violating’ trade truce (Financial Times, Ryan McMorrow) reflects anger from China which is now threatening strong measures to protect its interests. There had been a tentative trade truce agreed between the two in Geneva early last month but a sticking point appears to have been reached over rare earth exports. Meanwhile, Donald Trump’s steel tariffs prompt anger and warnings of ‘catastrophic’ job cuts in Canada (Financial Times, Ilya Gridneff) highlights concerns that Trump’s doubling of tariffs to 50% will decimate Canada’s steel industry. Trump announced the new tariffs on Friday last week. Given that Canada is the America’s biggest supplier of steel and aluminium, accounting for almost 25% of US steel imports in 2023 and about 50% of aluminium imports last year, you can see how disastrous this could be. * SO WHAT? * This is a nightmare for Canada. PM Carney was elected on an anti-Trump ticket and the US president’s increasingly belligerent talk is going to irk their northern neighbours more and more – but at the same time, they need to find alternatives in order to survive economically. Canada’s ministers and provincial leaders are going to be meeting today to discuss ways of weaning themselves off over-reliance on the US. As I keep saying, one of the sad things to emerge from Trump’s term so far is that the decades of trust that many countries have built up with it over the decades have evaporated in a matter of months. I doubt they will ever return to the same levels as current panic on how to wean economies off excessive reliance on America will lead to long term measures being taken that will ultimately mean less trade with the country.

In energy news, Tide is turning in Europe and beyond in favour of nuclear power (The Guardian, Jillian Ambrose) is an interesting article that highlights intensifying efforts to bring more nuclear power into the mix in Europe, particularly following last month’s major power blackout across the Iberian peninsula, the cause of which remains largely unexplained. The power cut caused many to question the capability of renewables to provide enough consistent power, particularly as power consumption continues to rise. As far as Spain is concerned, the government had planned to phase out its seven nuclear power stations by 2035, but given that the country’s power grid relied on renewable energy for around 70% of its power when the blackout hit you can see why people are questioning the reliability of renewables. * SO WHAT? * Initially, PM Sánchez strongly denied that over-reliance on renewables was to blame but clearly the cracks in the renewables argument are starting to show. Even Germany, which went full-on renewables in the aftermath of Fukushima, is now looking at bringing retired nuclear plants back online and considering SMRs and nuclear fusion while Taiwan is also going to vote soon on whether to restart a nuclear reactor that was shut down last week. One of the main concerns is that the sharp rise for power prompted by AI demand (and let’s not forget the surge in demand that will result from EV take-up as the years pass by) will leave everyone short, hence the panic. Trump unveiled a raft of executive orders last month that will deliver 10 large nuclear reactors by 2030. This doesn’t mean that renewables should be forgotten though! Also, I really believe that power storage is a vital part of smoothing out power delivery to make renewable energy more efficient in the longer term.

In oil news, Opec+ to boost oil output for third consecutive month (Financial Times, Tom Wilson) shows that Opec+ announced another big increase in oil output for July and Airline ticket prices ‘to come down’ as cost of jet fuel falls (The Times, Tracey Boles) gives us an example of one of the effects of falling oil prices. Fuel prices are one of the aviation industry’s biggest costs, so this could have a real impact.

In mining news, How to break China’s stranglehold on critical minerals (Financial Times, Lex) suggests that governments need to put more money into the mining and refining of copper, lithium, cobalt and rare earths; find newer, cheaper ways of extracting the minerals (which could be helped by the use of AI) and/or more effort should be put into finding alternative tech that doesn’t use these minerals or utilises less of them. Yes, subsidising the development of critical mineral extraction and refinement doesn’t coincide with the theory of leaving things to market forces – but look where that has got us. This is surely a price to pay to ensure the security of supply.

Meanwhile, Anglo American’s $11bn platinum spin-off makes London market debut (Financial Times, Leslie Hook and Camilla Hodgson) alerts us to the market debut today in London of Anglo American’s platinum business. The newly spun-off business, which used to be called Anglo American Platinum (“Amplats”) is now called Valterra. It is the world’s most valuable platinum producer and is on a bit of a roll at the moment thanks to rising platinum prices (they reached a tw0-year high last week). The company’s primary listing is in Johannesburg. * SO WHAT? * This spin-off is going to leave Anglo American as a more streamlined group and could make it more attractive as a potential bid target.

Elsewhere, IG is first UK-listed firm to offer retail trading of crypto (The Times, Ben Martin) highlights the online trading firm’s plans to allow retail clients to trade in digital assets, including bitcoin and ethereum. It is going to start a new service that will enable them to do so this week. * SO WHAT? * Given that research by the FCA shows that about 12% of UK adults owned a cryptocurrency last year, up from 4.4% in 2021, it sounds like this move is inevitable! IG will offer  trading in 38 digital tokens to retail clients.

*** NEWS JUST IN – Nationalist candidate Karol Nawrocki wins knife-edge Poland election (Financial Times, Raphael Minder) shows that PM Donald Tusk’s government has taken a major hit as the right-wing opposition’s candidate just won the presidential election in dramatic fashion. This is bad news for Tusk’s reform agenda and will probably weaken Poland’s standing in the EU. Nawrocki now joins Hungarian PM Orbán as a European MAGA cheerleader ***

In business news, Private sector gloom amid rising wage costs and trade fears (The Times, Isabella Fish) cites the CBI’s latest “growth indicator” which shows that the outlook for the UK’s private sector has fallen to its weakest level since September 2022 thanks to rising wage costs and concerns over global trade. * SO WHAT? * This is not a great sign going into the summer but then again we saw recently that the Lloyds Bank business barometer showed a bounceback in business confidence from April so there seems to be a mixed picture out there!

In residential property news, Return of 100% mortgage gathers pace as lenders target first-time buyers (Financial Times, Akila Quinio) highlights the return of the 100% mortgage as April Mortgages and Gable Mortgages just launched no-deposit products – and others are expected to follow with more low-deposit or no-deposit offerings. April, for example, launched a no-deposit mortgage to people with a salary of £24,000 or more for a 10 or 15-year fixed rate but they come at a cost. The rates offered by Gable and April are 5.95% and 5.99% versus the average rate on a five-year mortgage being 5.09%. * SO WHAT? * The last time such mortgages were offered was just before the 2008 financial crisis! This should be a real boon to renters who have

decent, stable jobs and solid credit histories but haven’t been able to scrape together a deposit due to the higher cost of living. Given the the average deposit needed to secure a property in the UK is over £60,000 and over £100,000 in London you can see how this might be somewhat attractive! Looser lending rules may help more first-time buyers (The Times, Tom Howard), which highlights the effects of the change of guidance to lenders from the Bank of England where lenders don’t have to be so stringent with their stress-testing of borrowers, will also no doubt be a great help to those who want to get on the housing ladder. I would have thought that both of these moves combined will really fire up demand particularly at the entry end of the market.

Last week, I mentioned the ongoing rise in food price inflation and Restaurants remove ‘king of fish’ from menus as prices soar (Daily Telegraph, Daniel Woolfson) looks at one aspect of that – fish! The article mentions turbot as a major victim of higher prices as one top chef observed that the fish cost £18 per kilo before the pandemic, but it now costs up to £65! However, rising prices have affected all fish – not just the posh stuff – and it’s all been down to higher labour, shipping and energy costs as well as the reduction of fishing quotas by a number of governments. Ouch!

In a quick scoot around some of today’s other interesting stories, BYD plans EV assault on Japan’s $18bn Mr Bean minicar sector (Financial Times, Harry Dempsey) shows that BYD is now setting its sights on Japanese car makers by taking on the low-priced “kei” car segment next year. Sales of these boxy mini-cars make up about 40% of the world’s fourth biggest car market, so there are potentially rich pickings to be had! The “kei” segment has traditionally been dominated by the likes of Toyota, Honda and Nissan. * SO WHAT? * In theory, this sounds like a real winner, but support for domestic makers in Japan should not be underestimated – foreign brands represent less than 6% of the Japanese car market. I would have thought that this would be even more intense given Nissan’s ongoing woes.

In news nearer to home, Britain to build up to 12 attack submarines as it moves to war-ready footing (Financial Times, Charles Clover and George Parker) highlights an announcement that the government is going to make later on today as we move towards a state of “warfighting readiness”. This is expected to signal the start of a major rearmament programme. In addition to the submarines, there will be investment in long-range missiles, cyber defence and at least six new munitions factories. The falling size of the British army is still something that needs addressing though, particularly as its main role as an expeditionary force fighting overseas adversaries will be shifting towards home defence and cyber warfare.

In Britain’s golden chance to attract top US talent (Financial Times, the editorial board) we see that British universities have so far been slow to try to attract American academics as the approach so far has been patchy and badly co-ordinated. Stronger financial incentives need to be offered, particularly as moving to Britain is particularly expensive. * SO WHAT? * Obviously, any schemes will have to badged in such a way as to not attract Trump’s ire but given that we are native English speakers over here, we should have a natural advantage in attracting American students. Other nations will also be after America’s disgruntled academics so the effort here needs to improve very quickly – or risk losing out.

Then in AstraZeneca unveils drug to treat mutating breast cancer before it starts to grow (Financial Times, Hannah Kuchler) we see that the pharmaceutical giant has announced promising results for a breast cancer drug that could stop mutating tumours dead in their tracks before they start growing. This could be an important part of the company’s aim to become the “number one cancer company globally” by sales, up from its current position as number three.

Elon Musk’s Starlink lined up to solve train Wi-Fi rage (Daily Telegraph, Christopher Jasper and Matthew Field) shows that Starlink satellites are being considered as a potential solution for the rubbish WiFi on British trains. A six month trial began in Scotland last month. This could be a much better option than installing masts and could be more reliable.

I thought this was an interesting video because it shows you what a masseur sees when they are sorting out a knot! This one looks pretty big to me and I’m not sure how the person being massaged isn’t screaming in pain 🤣. Maybe they’ve edited that bit out!