Thursday 23/01/25

The Trump repercussions continue in Trump tells Putin to reach Ukraine ‘deal’ soon or US will increase sanctions (Financial Times, James Politi and Christopher Miller) where the new president made a warning to the Russian leader in a Truth Social post yesterday. * SO WHAT? * This is the first time Trump has made a statement about Russia/Ukraine since he took office but you do wonder how effective further sanctions are going to be given that trade between the two countries has evaporated since Russia invaded Ukraine in 2022. Administration officials reckon that Putin could be squeezed by putting further pressure on the country’s energy sector (but that could have implications for countries who accept Russian oil exports, so there is a fine balance to be had). Trump has said that he expects to meet Putin soon and the Russian’s have said Putin is ready to meet. This ain’t Putin’s first rodeo so I doubt that such a broad statement on a minnow of a social media platform is even going to register. Bringing an end to the conflict in Ukraine will be a stern test for someone who talks a good game – and the world is watching. Putin’s not just going to roll over.

Then in US equities gain as tech stocks add to Trump bump (Financial Times, George Steer, Mari Novik and Ian Smith) we see that the S&P hit a new high in trading yesterday, powered by strong Netflix results and ongoing reaction to Trump’s “America First” policy announcements. The NASDAQ also powered to within a whisker of its mid-December intraday high. Investors are certainly loving Trump so far!

Elsewhere, China pushes insurers to buy stocks (Financial Times, Cheng Leng, William Sandlund and Thomas Hale) highlights a move by six state authorities to invest more in China’s domestic stock market as part of an overall move to restore confidence in the economy. From this year, state-owned insurers will be “encouraged” to put aside at least 30% of new premium income every year to Chinese shares and mutual fund managers will also be “encouraged” to boost their holdings by 10% per year over the next three years. * SO WHAT? * I guess that this should be a positive for China’s stock market as this “encouragement” will definitely be followed. However, I think that there’s a danger here that the insurance companies will effectively pump up the market artificially and end up buying the same “safe” stocks in order to get the authorities off their backs whilst “staying safe”. Also, if this “encouragement” is ever withdrawn for any reason, the stocks affected will revert to what they actually SHOULD be worth. As I keep saying, rather than drip-feeding stuff like this into the market over a period of time I really believe that the Chinese government should announce a number of bold initiatives at the same time to jolt the economy out of its rut. That way I believe the it’s more likely that sustainable momentum could be created.

Back home, Six interest rate cuts by middle of next year, says Goldman Sachs (The Times, Jack Barnett) shows that the bods at Goldman Sachs reckon that the Bank of England could cut interest rates six times by the middle of 2026 to 3.25% as it tries to play a part in encouraging economic growth. This contrasts with markets which are expecting just two cuts this year and many economists who believe that the Bank will cut them every quarter over 2025, including one at its next meeting on February 6th.

In the meantime, Reeves says growth eclipses net zero as Heathrow runway decision looms (The Guardian, Heather Stewart) shows that the chancellor is trying to get on the front foot regarding economic growth in what she’s been saying at Davos, which many are interpreting to mean that she’s going to green light a third runway at Heathrow despite this going against the wishes of climate secretary Ed Miliband. She kept saying that the government’s “No 1 mission” was growth and not net zero. Rachel Reeves hints at scrapping regulators in drive for growth (The Times, Mehreen Khan, Richard Fletcher and James Hurley) also reflects further feistiness by the chancellor as she appears to be turning her attention to regulators and streamlining their number in order to remove obstacles to economic growth. She said that many impose “overlapping burdens” on businesses meaning that the system is overly risk averse and stifles growth as a result. This week, the chairman of the Competition and Markets Authority left his post after the government deemed the CMA as being not focused enough on growth. No doubt this is a sign of things to come…

Amidst all this, Generations divided over state of economy (The Times, Emma Taggart) cites the latest consumer sentiment index from the BRC which shows that household confidence in the state of the economy has fallen to a new low. There seems to be a real demographic divide here, though, as those aged 18-27 expect the economy to get better in the next three months while

two-thirds of those aged 60-78 reckon it’ll get worse. This sounds particularly depressing for retailers…

I thought I’d mention Rachel Reeves gives UK car lenders an unexpected jump-start (Financial Times, Lex) because it makes the interesting point that even if her intervention into the car loans mis-selling scandal doesn’t completely absolve the lenders, the mere fact that the government was prepared to intervene shows that she is serious about financial deregulation. This could be very powerful for the financial sector and potentially, investment. The devil will be in the detail though!

Then in commodities news, Record cocoa prices prompt buyers to delay orders, says Swiss chocolate maker (Financial Times, Susannah Savage and Madeleine Speed) spells bad news for chocolate lovers as the tripling of cocoa prices over the last year thanks to extreme weather and disease hitting harvests means that chocolate buyers are having to postpone orders and renegotiate prices. * SO WHAT? * We have got to this place thanks to three consecutive seasons of global cocoa deficits – and that dismal run looks likely to continue. Higher prices have been passed on to customers but that can’t continue forever.

In Crypto executives fear investor backlash over Trump memecoins (Financial Times, Nikou Asgari, Arjun Neil Alim and Stephen Morris) we see another aspect of the recent rush to $TRUMP and $MELANIA memecoins – that crypto chiefs at various companies are getting increasingly frustrated by their introduction because they think that it trivialises crypto as a whole and highlights concerns about conflicts of interest because “Trump can set crypto policy”. It is interesting to note that a lot of the trading activity in the 200m traded Trump coins has actually been on obscure Asian-based exchanges like BiKing, Gate.io and Megabit and not in the US, according to data from CoinMarketCap. * SO WHAT? * When even the Detroit pastor who spoke at the president’s inauguration launches his own memecoin saying “I need you to do me a favour and go and get that coin in order for us to accomplish the vision that God has called us to do on earth”, you just know that something is wrong 🤣! Mind you, I’m sure that the fact that memecoins have zero cash flow, business model or practical use and are prone to wild price swings won’t stop people trying to trade them to make money! Zero protection for retail investors and Trump being the one that makes all the rules is surely far from an ideal recipe for success…

Then in energy-related news, AI’s thirst for power delivers a nuclear renaissance in Trump’s America (Daily Telegraph, Matt Oliver) highlights the energy reality of the AI boom as a decommissioned nuclear power plant, The Palisades plant on the shores of Lake Michigan, is being brought back into service. * SO WHAT? * This represents the first recommissioning ever attempted in America but other plants are also being raised from the dead at Three Mile Island in Pennsylvania and Duane Arnold in Iowa as the reality of AI’s thirst for energy means that extreme measures need to be taken. The Palisades could potentially be back online as soon as this autumn but the wider picture that the IEA is painting suggests that demand for electricity in the US is set to rise by around 25% over the next decade after two decades of broadly flat consumption. Yes, some of this will be down to the electrification of transport and industry but a lot of it will be thanks to the burgeoning used of data centres used to train AI which need to run 24/7 and continue to grow in size. McKinsey reckons that power consumption from data centres will increase from 4.3% of all power in the US to 11.7% and demand from data centres alone could equate to the entire yearly output of over 70 nuclear power plants by 2030. I’d say that fusion can’t come fast enough…

Meanwhile, back home, Wind power collapses to less than 1pc of UK electricity (Daily Telegraph, Jonathan Leake) shows that the stillest weather since 2015 have meant that wind power generated just less than 1% of Britain’s electricity supply, leaving us to rely on getting electricity from France, Norway, Belgium and Denmark via undersea cables. This also meant we had to rely on our aging fleet of gas-fired power stations to provide 60% of our electricity. It’s particularly painful when this lack of wind occurs in winter, when demand is strongest. * SO WHAT? * As per what Ralph and I said on the most recent podcast (part two of our “Themes for 2025”, which I’ll be releasing today) energy demands are rising and supply needs to be constant. Renewable power generation, whilst obviously valuable and desirable, is just not sufficient enough for our current needs, let alone rising needs from AI. We need a MIX of sources to give us what we need WHEN we need it.

Luxury brands look to US consumers to drive recovery (Financial Times, Adrienne Klasa) is a really interesting article which shows that the luxury industry seems now to be pivoting to the increasingly buoyant US market in order to to chase growth. Last week, we saw Richemont beating quarterly expectations, which prompted renewed optimism in the sector that had a tough 2024. The US market is now looking increasingly attractive, particularly as the Chinese consumer slump has continued thanks to an ongoing housing crisis and sluggish stock market performance. Lacoste to make ‘aggressive’ push into lucrative US sportswear market (Financial Times, Adrienne Klasa) suggests further evidence of this trend as the company’s CEO announced punchy targets to double sales at its US business by opening new stores and moving into concessions in a number of “big box” retailers. Lacoste is privately owned. * SO WHAT? * A possible fly-in-the-ointment could be Trump’s threats regarding wide-ranging import taxes – and if that is the case, LVMH has the most exposure to the US market. Still, the prospects for 2025 are certainly looking up. It’ll be interesting to see what laggards like Kering and Burberry decide to do.

In consumer goods news, Adidas outruns profit forecast thanks to its retro trainers (The Times, Emma Taggart) highlights a better-than-expected annual performance with profits manifesting a successful turnaround thanks to the enduring popularity of old faves like the Samba and Gazelle. The company saw growth from both its lifestyle and performance ranges. * SO WHAT? * It certainly looks like Adidas is coming back strongly after the last few years that were marred by the whole Yeezy scandal.

On the other hand, Puma Launches Cost-Saving Program After 2024 Profit Falls Short of Expectations (Wall Street Journal, Michael Susin and Mauro Orru) shows that things aren’t going so great with rival sporting-goods company Puma thanks to rising costs and underwhelming sales growth. It hopes to remedy this by launching a cost-savings programme. Puma is due to post its full results with 2025 forecasts on March 12th. Unfavourable comparisons with its German arch-rival will certainly hurt…

In leisure news, EasyJet halves losses on Christmas travel boost and lower fuel costs (Financial Times, Philip Georgiadis) shows that the budget short-haul airline announced a meaningful reduction in losses at the start of the winter season with strong demand for Easter in prospect. It did have to discount prices in the current quarter, though, as it had launched new routes but it doesn’t expect to have to keep doing that. Things are continuing to look positive for the airline despite consumer budgets continuing to be squeezed!

Then in Wetherspoons banks solid Christmas before costs rise in April (The Times, Jessica Newman) we see that the pub chain posted a solid first half performance but is wincing at the prospect of big cost rises in April when the recent Budget changes kick in. The chairman remains positive about “a reasonable outcome for the year”.

OpenAI spars with Elon Musk over $500bn Stargate project (Financial Times, George Hammond and Myles McCormick) shows that OpenAI countered Musk’s criticism of Stargate, the new $500bn AI infrastructure project I mentioned yesterday, that it doesn’t actually have the finances in place to execute the project. He said that SoftBank had only scraped together $10bn so far but Sam Altman said he was wrong. * SO WHAT? * That’s rich criticism coming from a man who has become an expert at making big claims first and then finding the money later 🤣. No doubt Trump is going to enjoy pitting these two genius billionaires against each other. Maybe Altman should launch his own memecoin to raise funds…

In other AI news, Microsoft secures deal to restore Amazon rainforest and offset AI emissions (Financial Times, Kenza Bryan) shows that Microsoft has signed a deal to buy 3.5m carbon credits from Re.green, a Brazilian start-up that buys up farming and cattle land and then restores it by planting native tree species. The idea is that it can offset at least some of its expected AI-driven boom in greenhouse gas emissions. * SO WHAT?  * I guess that this is a good thing although it does smack somewhat of an axe-murderer promising to balance out their bloodthirsty activities by running prisoner outreach programmes or even tobacco companies giving money to cancer charities. Still, it is better than nothing and at least they are acknowledging what they are about to do…

In hardware, Samsung unveils new AI-powered smartphone in fight against Apple (Financial Times, Michael Acton) shows that the South Korean maker unveiled the S25 AI-powered smartphone to take on Apple’s latest offering. * SO WHAT? * Samsung released its first AI smartphone, the S24, in January last year way ahead of Apple’s first offering in October last year, so this puts Samsung ahead again. Even so, Apple still has the biggest share of the US smartphone market with about 53%. The launch is a welcome positive for a company that’s been under a lot of fire recently. Whether or not the AI features actually add any real value on a day-to-day basis remains in question…

Then in Electronic Arts Cuts Fiscal-Year Outlook on Weakness Across Soccer Titles (Wall Street Journal, Connor Hart) we see that EA had to downgrade its own forecasts thanks to fewer users playing its football-themed games. Also, its “Dragon Age” franchise produced an underwhelming performance. This is a blow for a company that was actually talking pretty positively going into the end of last year…

In a quick scoot around some of today’s other interesting stories, Stellantis plans US investments worth more than $5bn (Financial Times, Ian Johnson and Kana Inagaki) shows that the car manufacturer is going to be latest company to suck up to Trump as it announced plans to invest over $5bn in the US in order to strengthen its US manufacturing footprint while Polestar seeks new suppliers after US ban on Chinese software in electric vehicles (Financial Times, Kana Inagaki) observes that Geely-backed Polestar is going to have to find non-Chinese suppliers in order to at least have some chance of a future in the US thanks to a US government ban on Chinese software in new high-tech vehicles. As things stand at the moment, the CEO says Polestar still intends to expand in the US and Musk’s ‘pure arrogance’ is turning buyers off Tesla, says rival (Daily Telegraph, James Warrington) suggests that it will target disgruntled Tesla owners.

Back home, Trainline shares hit by UK plans for state-backed rival (Financial Times, Philip Georgiadis) shows that shares in Trainline dropped by a chunky 8.5% in trading yesterday following an announcement by the government that it would launch a state-backed rival. * SO WHAT? * I would personally ignore this. Even if it ever saw the light of day, I think it would take ages to develop and would be treated with a lot of scepticism. No doubt with the geniuses in Whitehall in charge there would be massive cost overruns as well. The last time the government announced this in 2021, Trainline’s shares cratered by 40%. The government then officially gave up on the project in December 2023. It sounds like a pointless exercise to me at a time when money can be better spent elsewhere.

Have you ever had a go on monkey bars? I am pretty rubbish at them I must admit. However, this guy isn’t – watch him have a go at trying to conquer 152 of them!!! I reckon I’d only be able to do 7 tops 🤣🤣🤣