Tuesday 06/10/26

Donald Trump eases red diesel limits in attempt to quell fuel inflation (Financial Times, Myles McCormick) highlights Trump’s move to address the whole diesel problem (for the moment at least) – he signed an executive order last night allowing red diesel (tax-exempt dyed fuel) to be used on public roads and highways for the rest of the year. It’s normally for off-road use on farms and construction sites and is exempt from the federal diesel tax. * SO WHAT? * This sounds like a reasonable solution for now – and it’s definitely better than a diesel export ban! That was actually averted on Friday as European countries agreed to release big volumes of diesel from its stockpiles.

It’s all going on in Europe at the moment! Germany and France agree on last-resort tool against trade threats (Financial Times, Anne-Sylvaine Chassany and Andy Bounds) shows that the two biggest economies in the EU have put forward a last-resort trade instrument that can immediately cut off access to the EU market when invoked. This marks a more protectionist stance as the bloc tries to push back against the influx of Chinese EVs (see below as well!) and US tariffs. Merz and Macron want Brussels to strengthen the bloc’s trade toolbox to counter rising “weaponisation of trade, systematic market distorting-practices and global macroeconomic imbalances”. * SO WHAT? * An EU meeting is going to be held next week and the proposal is supposed to help form consensus. It’s all very well to talk about this stuff but unless countries like China and the US actually believe that the EU will implement proper retaliatory measures, they are going to be pretty useless.

Meanwhile, French central bank head warns country at risk of being ‘strangled by interest rates’ (Financial Times, Leila Abboud and Sarah White) cites the governor of the Banque de France saying that the country could get mired in interest rates if it doesn’t take drastic action to sort out its public finances and win back investor confidence. Embattled Pedro Sánchez seeks political lifeline in snap Spanish election (Financial Times, Barney Jopson) highlights the Spanish PM’s decision to call snap elections on November 29th to take advantage of anger at the state of housing to defeat conservative and far-right opposition. A number of corruption scandals have been swirling around him of late so this could prove to be a useful distraction and rallying point.

Back home, UK reviewing whether to impose tariffs on Chinese car imports to align with EU (The Guardian, Lisa O’Carroll) shows that the UK is considering the imposition of tariffs on Chinese car imports to align with the EU and give ourselves a better chance to be included in the “Made in Europe” legislation, known as the Industrial Accelerator Act. We are currently an outlier

in that we don’t put import taxes on them at the moment and our business secretary, Jonathan Reynolds, even said just a few weeks ago that we couldn’t do it. Drivers face higher EV prices as ministers mull Chinese car tariffs (Daily Telegraph, Hans van Leeuwen and Christopher Jasper) says that the tariffs could even reach up to 45% on Chinese-made EVs. * SO WHAT? * This is a really tricky one. What’s better/less bad – angering the Chinese and being punished or angering the Europeans and being punished??  This is going to be difficult to navigate because we will surely get clobbered either way. However, if we aren’t part of the “Made in Europe” scheme our automotive industry will surely die (or at least be on life support)…

UK private sector continues to grow despite rising oil prices (The Times, Jack Barnett) cites the latest PMI for September which shows that the private sector has managed to weather inflationary pressures caused by the Iran war and that business activity remained strong over the last month. * SO WHAT? * This is kind of impressive given all the outside challenges but I just don’t think it can last while the Iran war continues and borrowing costs remain at nosebleed-inducing levels.

Global pension funds cut US equities over AI concentration risk (Financial Times, Calum Kapoor and Emma Dunkley) follows on from what I was saying yesterday about investors looking to diversify away from too much AI exposure and cites a report from consultancy Marsh which said that more global institutions are planning to cut their exposure to US equities than increase it. This is mainly due to the concentration of a small number of tech names that have super-stellar valuations.

Oil stockpiles are ‘scarily thin’, warns Saudi energy boss (Daily Telegraph, Melissa Lawford) cites some bloke who knows a bit about oil (the president and chief exec of Saudi Aramco 😁) highlighting the dire state of oil reserves at the moment following the announcement on Friday by the G7 to release 100million barrels of crude and fuel. He said that “existing buffers have cushioned the blow, but they are finite. Emergency reserves might buy us a winter: they cannot fix long-term supply”. I think we already knew this, but what he said does indeed underline the severity of the situation.

Then in Euro slides to 17-month low against dollar (Financial Times, Ian Smith and William Sandlund) we see that the euro weakened versus the dollar yesterday thanks to worries about French debt compounding the situation in oil prices.

In OpenAI bots threat triggers UK security review (Daily Telegraph, Matthew Field) we see that OpenAI confirmed to Whitehall officials that one of its rogue bots made an unsanctioned attempt to access official UK data. The government said that there was no breach and that no personal data was accessed but it has launched a security review. * SO WHAT? * This is just the latest example in a string of hacks but I guess that it’s good OpenAI is owning up to it. I’d say that owning up when the damage isn’t that bad is one thing – but if there is a serious breach with serious consequences then we may see a different reaction…

Reflection AI boosts US ambition to compete with Chinese ‘open’ models (Financial Times, George Hammond and Joe Miller) highlights a US AI start-up that’s backed by Nvidia and the Trump administration that has unveiled its first open-weight model, called Beam. Developer Reflection AI said that this open-weight model is at least as good as leading Chinese competitor Z.ai’s GLM-5.2. Reflection AI has partnered up with the Pentagon and the US Department of Energy and has raised over $4bn since it launched in 2024, getting a valuation of $25bn. * SO WHAT? * This is important because most of the attention has been on “closed” models like OpenAI’s ChatGPT and Anthropic’s Claude while China’s open models – that can be customised and are much cheaper to operate – are gaining ground because of their value, but also because they can be tweaked to fit business usage better. Interestingly, Treasury secretary Scott Bessent called for American companies to develop more open-weight models at a congressional hearing last month because he wanted to reduce the dominance of the likes of ChatGPT and Claude and encourage innovation. If Beam proves to be a success, it could prompt a price war between the top labs. This could get interesting because some American corporates are currently using Chinese open-weight models and I can imagine that this practice could be quite vulnerable if the government decides to clamp down.

Sony Music steps up fight against streaming fraud (Financial Times, Daniel Thomas) shows that the music group is intensifying its fight against streaming fraud as it battles a boom in AI-generated songs that impersonate well-known artists. The company said that the AI deepfake

problem is  “happening at scale, harms artists, misleads fans and undermines the ethical use of AI”. Suno is a common culprit for AI music generation and DistroKid has been a key distributor of such songs. In the same vein, Giorgia Meloni seeks to trademark her voice to counter AI deepfakes (Financial Times, Amy Kazmin and Giuliana Ricozzi) shows that Italy’s Prime Minister has gone a step further than most by applying to the EU’s intellectual property office to trademark her voice to get ahead of any AI-generated deepfake shenanigans ahead of the country’s general elections next year. Many entertainers, including Taylor Swift, have applied to trademark their voices but Meloni is the first high-profile politician known to have actually done so. There have been a lot of fake videos knocking around that falsely show her promoting investment schemes. * SO WHAT? * While written copyright is arguably easier to detect (although it’s not perfect) because you’ve got something in black-and-white that you can point at, I think that music is more difficult. This sounds like a good thing to do but what happens to “ordinary” people if they try to do the same thing to protect themselves?? Or do you just have to be famous? If so, how famous do you have to be? I am sceptical of how effective this is going to be in practice…

Then in Norway is first to propose temporary ban on AI glasses in public places (Financial Times, Richard Milne) we see that Norway has become the first major country to suggest a temporary ban of the use of AI glasses in certain public areas as privacy concerns rise over the tech. It’s wanting to introduce a temporary ban in public places including parks, beaches, schools and kindergartens. An expert group will also be set up to put together some permanent rules. * SO WHAT? * I can understand what the objections are but I think that there is an element of using a sledgehammer to crack a nut here. I recommended Ray-Ban Metas to a blind friend of mine and they have transformed his life. What happens to him? Also, not everyone who wears them has bad intentions. I still think that they are the best wearable to replace the mobile phone because of their portability – so if that is the case, what happens then??

BT to buy broadband supplier TalkTalk in £400m rescue deal, saving 900 jobs (Financial Times, Lauren Almeida and Mark Sweney) shows that BT did, in the end, manage to buy TalkTalk out of administration in a £400m rescue deal as its second offer was accepted. It bought TalkTalk and its wholesale business PlatformX Communications (PXC) on a debt-free basis but rival Virgin Media O2, predictably described it as a “stitch-up” that would further boost BT’s dominant position. What does the £400m rescue takeover of TalkTalk mean for BT? (The Times, Emma Powell) shows that the deal will hand BT 1.5m customers and one million wholesale connections whilst consolidating its already-dominant position in the market. This would normally prompt competition concerns but the deal looks likely to be approved by the government because it’ll be deemed to be in the wider public interest.

Morrisons becomes takeover target after Sainsbury’s approach (Daily Telegraph, Tom Haynes) is a story that’s made quite a lot of the papers this morning but although the

Sainsbury’s interest earlier this year was mildly interesting, what’s more interesting is that it’s clearly open to some kind of deal and that could bring potential buyers out of the woodwork for Morrisons. * SO WHAT? * There’s speculation that Sainsbury’s might have another crack but surely Asda must be in there with a shout, don’t you think? It would be a merger of weaklings (which doesn’t normally go well) but this combo would surely be a breeze versus a Sainsburys-Morrisons deal…

And while we’re on the subject of supermarkets, Lidl gains £650m boost from cost of living crisis (Daily Telegraph, Tom Haynes) cites the latest Worldpanel figures which show that the German discounter continues to take market share as it benefits from the cost-of-living crisis. It grew at twice the rate of Tesco and Sainsbury’s.

In a quick scoot around some of today’s other interesting stories, Wall Street banks launch record $60bn chip deal for Broadcom and Anthropic (Financial Times, Michelle Chan) heralds the launch of a new debt package that will fund Anthropic’s lease of Google semiconductors. This is the biggest ever chip financing deal. Bank of America, Citigroup and Morgan Stanley – who are funding the deal – are now contacting other banks to buy portions of the debt. * SO WHAT? * This is going to be a very interesting bellwether for the current state of AI appetite…

In other banker-y type things, Citi to speed up promotion path for junior bankers as hiring war heats up (Financial Times, Ramsay Hodgson) shows that Citigroup is going to speed up its investment banking analyst programme to make it two years long rather than three so that juniors can get to the rank of associate faster. The idea of this is to stop (or slow down) poaching of their talent by PE firms.

Then in Gulf bank eyes stake in City stockbroker (Daily Telegraph, Tom Saunders) we see that the Bank of Bahrain and Kuwait (BBK) is currently in talks to buy a 20% stake in Panmure Liberum, the City stockbroker. Panmure and Liberum merged in 2024. Panmure Liberum already has a partnership with BBK where it provides investment banking services to BBK’s clients.

Average five-year fixed mortgage rate hits 6% for first time in three years (The Guardian, Hilary Osborne) cites the latest figures from Moneyfacts which show that the average cost of a five year fixed has now broken the 6% barrier. This is not surprising given the current direction of interest rates!

I’m not sure about the design of these, but it’s fascinating to see a craftsman at work!