Thursday 22/10/26

Trump envoy proposes Ukraine talks and summit with Putin and Xi (Financial Times, Katya Arenina, Amy Mackinnon, Max Seddon and Fabrice Deprez) highlights apparent progress on Russia/Ukraine, but we’ve seen this all before so I’ll believe it when I see it. Supposedly, there will be talks between Russia, Ukraine and America ahead of a potential summit between Trump, Putin and Xi next month. Witkoff has been to Russia nine times so far as “special envoy” and achieved precisely nothing so I’m not holding out much hope. You never know though – the estate agent might come up with something…

In Europe, France’s borrowing costs hit 5% for first time since 2002 (Financial Times, Ian Smith, Leila Abboud and Laura Dubois) highlights a milestone that Macron probably never wanted to hit as long term borrowing costs hit a new high after civil unrest and political squabbles in the country. Borrowing costs were at 3.2% in February, so this is bad. France has one of the biggest budget deficits in the eurozone and a higher-than-average debt at 108% of GDP. It’s currently trying to pass a budget, which is proving to be extremely tricky!

It’s not going all that much better over here! UK inflation and borrowing top forecasts in blow to John Healey (Financial Times, Valentina Romei) cites the latest numbers from the ONS which show that inflation rose by 3.5%, which was higher than expected, versus the 3.1% figure in August. This is its highest level in almost a year – and then we heard that government borrowing came in way above expectations in September. This doesn’t bode well for the upcoming Budget. Tax hikes and spending cuts to come then??

UK approves development of Jackdaw gasfield in North Sea (Financial Times, Rachel Millard, Jim Pickard and Simeon Kerr) shows that the government has decided to green light the development of Jackdaw but the approval of the bigger Rosebank oilfield is still undecided. Energy secretary Miatta Fahnbulleh made the announcement yesterday along with the creation of a new Energy Wealth Fund which will invest tax revenues from the North Sea into renewables and low-carbon energy. I wonder what will happen here if Scotland wins independence…

Scott Bessent shrugs off ‘systemic’ AI risks at closed-door investor conference (Financial Times, Amelia Pollard and Claire Jones) shows that the US Treasury secretary is continuing to toe the party line as he said in a meeting yesterday that he didn’t see a “systematic problem” with the AI boom and dismissed current investor concerns about the vibe being similar to what immediately preceded the dotcom bust. * SO WHAT? * I don’t think you can 100% believe anything this guy says because although he was very successful in the past as a hedge fund manager (which means that he should know what he is talking about), he is now working from the government and will be very much drinking the Kool-Aid, so all he’s going to do is emphasise the Trump message. FWIW, I was a few years into my career as a stockbroker when the dotcom bubble happened and I remember how antsy everyone was getting because there was so much hype about sky-high internet valuations. Valuations were getting so ridiculous that you couldn’t really argue with fund managers using the usual metrics – you just had to recommend buying on momentum (i.e. “the valuations are looking very toppy but everyone’s still buying so if you don’t buy now you could miss out on the upside”). I would say that this time around I feel that there is more substance to the valuations whereas in many cases for companies trying to partake of the dotcom boom, all the assumptions were built on sand. I also think that there are more ways to monetise AI so even if valuations are difficult to justify now, the tech moves so quickly that I think it’s possible to catch up with expectations at least to some extent!

Bearing in mind Bessent’s relaxed attitude towards AI, Amazon warns new cyber flaws detected using AI are being ‘broadly exploited’ (Financial Times, Tom Wilson and Rafe Rosner-Uddin) shows that the world’s biggest cloud computing provider announced vulnerabilities in the PHP programming language that underpins about 70% of the world’s websites because the most widely used website building platform, WordPress, relies on it to function. These vulnerabilities could potentially allow a hacker to take control of a website’s server without needing a password or login credentials. Flaw in PHP computer language leads to shutdown of websites around world (The Guardian, Robert Booth and Aisha Down) said that the likes of Wikipedia, Slack and much of Facebook were just some of the companies affected and that patches were quickly made and distributed. Staying with hacking, Fridge hackers exploited ‘basic security flaws’ at French retailers (Financial Times, Adrienne Klasa) shows that the recent hack of fridges in French supermarkets was down to weak passwords and a lack of basic cyber defences, according to national cybersecurity agency ANSSI, and not vulnerabilities in the firmware of outdated versions of the compromised fridge software. I guess that this is both good news (in that the vulnerability is easily rectifiable) and bad (that this could just be the beginning of more sophisticated attacks). * SO WHAT? * I think that this is concerning but it’s so difficult to know how serious the situation really is. All we can do is sit back and hope that tech companies do the right thing…

And now to another big story everyone was talking about yesterday – the potential merger of Tesla and SpaceX! Rockets, robots and risk: Elon Musk’s $3.6tn gamble to merge Tesla and SpaceX (Financial Times, Ryan McMorrow, Sujeet Indap and Stephen Morris) highlights preparations for “AI singularity” by Musk crunching his empire together. He said that there was no guarantee that it would actually happen, but if it did, the combined entity could be worth around $3.6tn at current prices, which would catapult it into the world’s top five most valuable companies next to Nvidia, Apple, Alphabet and Microsoft. It would still have to overcome significant hurdles including shareholders and regulators, though. SpaceX and Tesla Are Joined at the Hip. A Merger Would Make It Formal. (Wall Street Journal, Becky Peterson and Corrie Driesbusch) points out that the two have always been close (well, Musk has run them both

concurrently for the last two decades – so it’s not surprising!) as they have often shared resources and personnel. In recent months, they have joined forces to work on AI. What Elon Musk stands to gain from a Tesla-SpaceX merger (Financial Times, Lex) concludes that the main thing that Musk would get out of such a mega-merger would be a lot more power! There would also be huge financial and tech synergies as it would be the mother of all vertical integrations. Musk’s SpaceX ambitions may be ‘dangerous’ for Europe, warns EU lawmaker (Financial Times, Barbara Moens and Kieran Smith) cites a senior European lawmaker as saying that the current overhaul of telecom laws must not make it easier for SpaceX to take control of the European mobile and broadband telecoms market and To replace Starlink, Europe will have to reawaken its animal spirits (Financial Times, Lex) suggests that it’s going to take more than throwing money at the problem for Eutelsat’s OneWeb in Europe to go anywhere near closing the gap with America’s Starlink in capability. It’s going to have to think smarter. OneWeb has just 600 Low Earth Orbit (LEO) satellites in space versus over 10,000 for Starlink. Europe also has another alternative called IRIS² – which brings together European satellite operators SES, Eutelsat and Hispasat – but they aren’t launching anything until 2029. Also, Vodafone, Telefónica, Orange and Deutsche Telekom recently indicated that they could combine to buy part of the spectrum to provide mobile satellite coverage for European domestic use. There will also need to be government incentives for the likes of Airbus, Thales and Leonardo to combine their space capabilities while telecoms companies could be freer to merge in order to get stronger even if that reduces competition. What recently went on in Ukraine should be a warning to us all. Europe has to catch up…

Meanwhile, Tesla beats earnings projections after Musk floats SpaceX merger plan (The Guardian, Dara Kerr) shows that, amid all the merger talk, the company posted a decent set of Q3 results, coming in above market expectations, although it has not been immune to increased competition from Chinese makers. Musk Says Tesla Aims to Begin Humanoid Robot Sales Next Year (Wall Street Journal, Christopher Otts and Owen Tucker-Smith) gives us an update on the Optimus humanoid robots – that he expects to be ready to start shipping them to outside companies by the end of next year. He added that Tesla’s fleet of robotaxis would soon be a substantial revenue driver.

In Nscale boss seeks to reassure staff amid AI market fears (Financial Times, Kieran Smith) we see that the data centre developer has had to react quickly to reassure staff as to the sustainability of the AI boom. Founder and chief exec Josh Payne said that he understood concerns, particularly as Microsoft had pulled out of a key project, but emphasised that finances for projects were still intact. Nscale has most recently been targeting a valuation of $30bn-$35bn. * SO WHAT? * This is just my opinion but I wouldn’t be surprised if the whole thing collapsed. This has real echoes of Northvolt to me…I think that Microsoft pulling out is going to be a major problem.

Then in streaming, Don’t underestimate Netflix’s power to flip the script (Financial Times, Lex) says that although Netflix is going through a bit of a rough patch at the moment, membership is still growing and it is doing the right thing by focusing on content. I would have thought that it’s just gone through a quieter-than-normal patch of hits. I am sure that another Squid Game equivalent (or a few of them) is what Netflix needs right now!

Buyout firm EQT acquires German diagnostics group in €10.8bn deal (Financial Times, Florian Müller) highlights one of the biggest take-private transactions in Europe this year in EQT’s purchase of Qiagen. It’s an all-cash offer and has been made at a chunky 40% premium to Qiagen’s share price prior to the offer. * SO WHAT? * It seems that PE firms’ acquisition appetite is alive and well given the recent €10.7bn takeover led by CVC of Italian pharma company Recordati in addition to EQT’s £10.7bn acquisition of professional services firm Intertek this year.

In LSEG nears $3.5bn deal to buy credit data specialist Octus (Financial Times, Ivan Levingston, Alexandra Heal, Nikou Asgari and Antoine Gara) we see that the London Stock Exchange is on the verge of an acquisition from Permira in a move that would strengthen its financial data services offering. If it goes ahead, it could mark the company’s biggest takeover since its $27bn purchase of Refinitiv back in 2019. Octus is expert at credit data including leveraged finance, private assets and bankruptcy markets.

In a quick scoot around some of today’s other interesting stories, EssilorLuxottica’s old-fashioned spectacles offset smart glasses slowdown (Financial Times, Silvia Sciorilli Borrelli) shows that the Ray-Ban maker put in a strong performance as its traditional eyewear sales mitigated a slowdown in its smart glasses business.

Then in EBay to Cut 9% of Workforce in Latest Round of Layoffs (Wall Street Journal, Kelly Cloonan) we see that the online marketplace announced plans to make some deep cuts in what will be its second round of layoffs. This will hit about 1,000 employees. There’s a lot of this going around at the moment unfortunately…

I wonder how good these cheese crackers really are? I mean, they look good but will they be that much better than Ritz Crackers or Mini Cheddars??