Tuesday 01/07/25

Senate races to pass Donald Trump’s flagship tax bill as deadline looms (Financial Times, Lauren Fedor) shows that Trump’s “big, beautiful bill” got closer to getting over the line but it’s still not a done deal as there are Republican sceptics that need convincing and When will Congress pass Donald Trump’s ‘big, beautiful bill’? (Financial Times, Myles McCormick and Alex Rogers) sets out a number of hurdles that need to be overcome to get this thing done by the July 4th deadline. Such hurdles include concerns over the effect on America’s ballooning debt and cuts to Medicaid for people on low incomes. Also, once the bill passes the Senate, it’s still got to go back to the House – and it only got past the House by a single vote in May. Even if the bill misses the July 4th deadline, it’s no biggie. Meanwhile, Late tweaks to Trump tax bill create green power winners and losers (Financial Times, Martha Muir) shows that new revisions to the BBB will punish clean energy companies that use too many Chinese components but slightly positive for domestic residential solar providers.

Elsewhere, Canada scraps digital tax to restart US trade talks (The Times, Tom Saunders) shows that Canada has had to abandon the tax just hours before it was supposed to kick in following Trump’s dramatic termination of trade talks on Friday over its implementation. Carney needs Trump to return to the negotiating table to get a broader trade deal done.

Back home, Rachel Reeves set to cut cash Isa allowance (Financial Times, Emma Dunkley and Jim Pickard) shows that the chancellor is expected to cut the annual tax-free cash Isa allowance next month in an effort to encourage investment into British companies (the current limit is £20,000). This would be the biggest overhaul of the ISA regime since it started in 1999 under Gordon Brown. Meanwhile, Pension pots of savers at risk from new UK rule, industry experts warn (Financial Times, Mary McDougall) highlights the upcoming pension schemes bill, due to become law next year, which would give regulators the power to force defined contribution (DC) schemes to invest a minimum amount into private markets. * SO WHAT? * There’s a lot of debate going on at the moment about this broader move to push investments into domestic and growth assets. The fund managers are whinging about this being more restrictive and potentially damaging to returns (presumably because it will give them less of a free hand) while the government wants to encourage more investment in domestic assets. Both sides are right in that returns probably won’t be AS good as they might be due to the restrictions (but you never know, they might actually be better if the stockpickers do their job properly!) and, from the government’s side, it’s frustrating to watch these fund managers sitting on wads of cash that domestic companies don’t get a sniff of. As for the cash ISA thing, maybe I’m being unfair but I wonder whether a reduction in the cash ISA limit will just mean that people just splurge it on bitcoin or other riskier investments in the hope of more exciting returns. Still, for many, this will all be somewhat academic as household incomes continue to get squeezed and the amount of money left over for savings keeps shrinking!

In UK caps steel imports to stop dumping by foreign producers (The Times, Robert Lea) we see that business and trade secretary Jonathan Reynolds has decided to restrict steel imports following pressure from British steelmakers, starting from today. * SO WHAT? * The idea of this is

to protect us from dumping of product here as steelmakers around the world (but particularly from China) try to divert what would have gone to America. The decision was welcomed by UK steel, the industry trade body.

In currency news, US dollar has worst first half in more than 50 years amid Trump tariffs (The Guardian, Graeme Wearden) highlights dollar weakness so far this year as it’s fallen at its steepest rate against a basket of currencies since 1973. It has now fallen by 10.8% in the first six months and has been sold off by investors concerned about the effect of Trump’s economic policies. Over the same time period, the Euro has gained about 5%!

In commodities news, Silver, the precious metal ready to outshine gold (Financial Times, Lex) brings our attention to a shiny metal that isn’t gold because it’s also enjoying an impressive run as more investors see it as a safe haven asset in a world of Trump-driven uncertainty and wars. They don’t usually rise in line with each other but its increasing use in a growing number of industrial applications means that demand continues to rise. This means that it is a double-play on being a safe haven asset and a reflection of growth sectors.

Then in markets, Hong Kong’s bull market leaves China behind (Financial Times, William Sandlund and Haohsiang Ko) follows on from what I said yesterday about Hong Kong’s IPO boom and points out that Hong Kong’s market is outperforming mainland China’s by its biggest margin since 2008! This has been thanks to rising investment flows from the mainland and thirst for tech companies such as Alibaba and Tencent which aren’t listed on the mainland. Also, mainland markets have been held back because of their greater exposure to poor performances in heavy industry, property and energy. I would have thought that this outperformance in Hong Kong will make flotations even more attractive going forward…

Google agrees deal to buy power from planned nuclear fusion plant (Financial Times, Tom Wilson) is an interesting article that highlights Google’s commitment to buy 200 megawatts of electricity from Commonwealth Fusion Systems’ planned power station in Virginia in the 2030s. CFS hopes that the 400MW facility will be the first fusion power station to be connected to the grid. * SO WHAT? * CFS is thought to be one of the most advanced privately-held nuclear fusion companies racing to develop a commercially viable electricity supply. At the moment, it’s building a demo plant in Massachusetts which is scheduled to be turned on in 2027. It is hoping that the plant that would supply Google will be ready by the early 2030s. This is another step forward in the advance to a nuclear fusion-powered future…

As if to emphasise the urgent need for the rapid advancement of power generation even further, Smelters say they are losing power battle with Big Tech (Financial Times, Camilla Hodgson and Jamie Smyth) shows that US and European policymakers’ efforts to reshore metals processing are being stymied by rising demand from Big Tech who are willing to pay much more for their electricity so they can power their data centres. One industry described the current situation as “not Alcoa versus China, but Alcoa versus Google”. Something is clearly going to have to give here if America is serious about boosting its heavy industry capability…

In Home Depot agrees $5.5bn deal for building product supply group GMS (Financial Times, Gregory Meyer and Oliver Barnes) we see that the US hardware retailer is going to buy building products distributor GMS, beating a rival consortium of investors. It will become part of Home Depot’s SRS Distribution subsidiary which it bought last year for a whopping $18.25bn last year. Is this a sign of more M&A to come??

Back home, WH Smith cuts sale price of high street stores (The Times, Isabella Fish) shows that the retailer has agreed to accept £12m less than it was promised by PE buyer Modella Capital for its high street business. It will now receive up to £40m gross rather than the expected £52m. Modella pushed for better terms after a period of “softer trading”. * SO WHAT? * I know that this is going to sound a bit harsh but this shows a) how desperate WH Smith are to offload their high street business and b) that you probably shouldn’t trust Modella Capital if they make you an offer! The high street business is dire IMO and is in need of a top-to-bottom overhaul. As for Modella, I guess that if things have got so bad that you have to sell to them, there’s not really much you can do because they have the money.

Consumers continue to face tricky times in UK disposable income falls at fastest rate since 2023 (Financial Times, Valentina Romei) as the latest figures from the ONS show that UK household disposable income fell at its steepest rate since 2023 in Q1, coming at a time when economic growth is expected to slow down. Dry weather pushes up UK food inflation as harvests suffer (Financial Times, Valentina Romei) cites the latest numbers from the BRC which show that the annual rate of food inflation was 3.7% in June. Dry weather hitting fruit and veg harvests have driven prices upwards. The Met Office even said that this spring was the warmest and sunniest spring in the UK ever recorded! * SO WHAT? * This has been great for strawberries and tomatoes but not so much for things like wheat and barley. Tough times indeed! This does not bode well for the next few months leading into the autumn Budget where many expect taxes to rise…

Then in Mortgage approvals rise for the first time in four months (The Times, Mehreen Khan) we see that figures for May recovered following recent stamp duty changes and interest rate cuts. * SO WHAT? * The question is whether buyers will dwindle given ongoing pressures on household finances and the prospect of higher taxes being implemented in the autumn Budget a few months hence.

Oracle shares hit record high on $30bn cloud contract (Financial Times, Rafe Uddin) highlights the database giant’s chunky share price uplift of 4% on news that it won a $30bn cloud computing contract that is, on its own, worth three times the annual revenue it gets from its fastest-growing data centre division! The revenue will start rolling in in 2028 but the company didn’t disclose who the customer was. * SO WHAT? * Oracle has been a bit of a latecomer to the cloud computer party but demand for data centre infrastructure has shot up, helping it to benefit from capacity constraints at rivals including Microsoft.

AI doctor four times better at identifying illnesses than humans (Daily Telegraph, James Titcomb) brings attention to Microsoft’s AI diagnosis system that it says correctly identifies ailments up to 86% of the time versus just 20% on average (😱!) for British and American physicians! Microsoft touted this as being the basis of “medical superintelligence”. * SO WHAT? * Wow! If this is right, this is pretty amazing. This would suggest that things are only going to get

better in future! I wonder whether AI will eventually take over diagnosis and doctors as we know them now would evolve into the humans who then treat the conditions identified…

Children face lifetime social media bans for sharing classmates’ nudes (Daily Telegraph, James Titcomb) is an eye-catching title isn’t it! This highlights proposals from Ofcom that could punish kids who share nude images of their classmates with a lifetime social media ban. It would mean that cyberbullies could be permanently excluded from social networks. Platforms would have to make sure that users couldn’t just sign up under a new name and carry on. * SO WHAT? * It’s good that we’re looking to crack down on cyber bullying but I just wonder how enforceable this is all going to be. A lot of whether something like this works will depend hugely on the actions of the platforms. There is a danger that it may well drive this behaviour underground and result in a mushrooming of alternative platforms that aren’t so willing to protect their users.

In a quick scoot around some of today’s other interesting stories, US air taxi start-up Joby in successful flight testing in Dubai (Financial Times, Sylvia Pfeifer) shows that Joby Aviation is edging ever-closer to launching its first commercial service – potentially at the end of this year after completing test flights in Dubai! Its air taxis is designed to transport a pilot and up to four passengers at speeds of up to 200mph. * SO WHAT? * This sounds like fun – and very much a Dubai thing – but I remain sceptical as to their wide-spread adoption in cities like London and New York. I am willing to be wrong though!

Back home, Nissan to axe hundreds of UK jobs (Daily Telegraph, Louis Goss) shows that Nissan is planning to cut about 4% of the workforce at its Sunderland plant as it battles to boost profits while demand for EVs continues to slide. This facility is the biggest car factory in Britain and Nissan’s only factory in Europe. It is also Sunderland’s biggest employer. Nasty. On the plus side, a Nissan spokesman said that “Our Sunderland plant remains at the forefront of our electrification strategy”.

Given the heatwave many of us are experiencing at the moment, I thought that this method of cooling the interior of your car down quickly would be useful for all of us! It’s all down to fluid dynamics – so it’s got to work!