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IN TRUMP NEWS
We look at what he said, what he did and what the impact was of his inauguration
OK, so you may have noticed that some bloke called Donald celebrated getting a new job yesterday. He invited a few people over for a natter and some nibbles and said a few things that were quite memorable 😁. The key moments in Donald Trump’s big speech (Financial Times, Joe Miller) gives you a summary of his speech where he promised to prioritise America, criticised “the establishment”, attacked immigrants, moved to expand oil and gas exploration, scrapped the EV mandate, endorsed a plan to colonise Mars and made a bunch of wild promises like renaming the Gulf of Mexico to Gulf of America, Alaska’s Denali to Mount McKinley and “take back” the Panama Canal. Donald Trump vows new ‘golden age’ for US as he moves to unwind Joe Biden era (Financial Times, James Politi) highlights his imminent dismantling of policies from the previous administration and reversal of the “crisis of trust” in the government. He rescinded a load of Biden’s executive orders, promised to end wars in Ukraine and the Middle East whilst also building “the strongest military the world has ever seen”. He is sending troops to the Mexican border “to repel the disastrous invasion of our country” but didn’t go as far as announcing new tariffs immediately (which is what many were bracing themselves for). Donald Trump signs order to withdraw US from World Health Organization (Financial Times, Alexandra White, Zehra Munir, Peter Wells, Josephine Cumbo, William Sandlund and Oliver Ralph) heralds one of a number of dramatic developments along with Donald Trump says he will withdraw US from Paris climate accord (Financial Times, Aime Williams and Myles McCormick) in a blow to global efforts to slow down global warming and Donald Trump says China tariffs could hinge on TikTok deal (Financial Times, Hannah Murphy, Myles McCormick and Joe Leahy) shows that the new president is going to use TikTok as a bargaining chip with China as he signed an executive order to keep it online for 75 days (he said that he’d impose import taxes on up to 100% if China didn’t sell at least 50% of TikTok to a US company). Donald Trump threatens 25% tariff within days for Mexico and Canada (Financial Times, James Politi, Steff Chavez and Aime Williams) highlights more belligerence as he said he’d impose chunky tariffs on the two countries from February 1st and Donald Trump jolts markets with threat of tariffs against Mexico and Canada (Financial Times) shows the immediate effect of his threats as the Mexican peso fell 1.1% versus the dollar while the Canadian dollar weakened by 0.9% although Dollar slides as Donald Trump shies away from immediate trade tariffs (Financial Times, Harriet Clarfelt, Ian Smith and Mari Novik) observes that the dollar weakened because it was expecting the taxes to come in straight away. Meanwhile, Divided EU relieved to avoid Donald Trump’s tariffs (Financial Times, Andy Bounds and Laura Dubois) shows that European leaders were relieved that they manage to swerve any of Trump’s ire and aggression re taxes, at least for now. It it interesting to note, though, that Italian PM Meloni was the only leader from the EU invited to the inauguration (although a number of far-right leaders from Belgium, Germany, Spain and France were also invited!). Overall, though, Donald Trump’s tariff threats signal new era of global trade disruption (Financial Times, James Politi, Steff Chavez and Aime Williams) says that everyone’s going to be on their toes now as the freewheeling and powerful president is about to disrupt the world’s economy.
Aside from all this, Trump-backed crypto venture to extend token sales after raising $1bn (Financial Times, Nikou Asgari) heralds a major milestone for World Liberty Financial, a digital assets venture endorsed by Trump and his three sons, as it hit a target of raising $1bn via the sale of 21bn tokens (it had originally targeted sales of 20bn at the launch in October). The company said that it would make another 5bn tokens available “due to massive demand and overwhelming interest”. Meanwhile, What’s the value of Trump’s new memecoin? (Financial Times, Lex) says that $TRUMP hit a $10bn valuation by Monday, meaning that it is the world’s third most valuable memecoin after Dogecoin and Shiba Inu. $MELANIA hit a valuation of $2bn, just behind Fartcoin which is valued at $2.5bn. However, it points out that the small print says that the memecoin is “not an investment”, but more of a “message of support” and that, ultimately, it is a sign that Trump wants to take crypto mainstream. The article comes to the same conclusion I did yesterday – that it will effectively be a live opinion poll (I said it would be a “barometer”). This means that it is bound to be a bumpy ride for speculators – it boomed by 1,000% yesterday and then lost a third of the gains, according to CoinMarketCap. Clearly this will be great when things are going well, not so much if they aren’t.
In terms of opinion on the new dawn of Trump 2.0, Optimism but not confidence as Trump takes control (Financial Times, Oren Cass) observes that although there seems to be a lot of optimism about a shift in gears after Biden being a dead man walking for so long, there isn’t all that much certainty about how exactly the administration will move forward. It will have to deal with AI expansion (and the massive investment in infrastructure that will need), trade relationships with China and reversing out of previous policy mistakes. Optimism is currently based not only on the quality of his senior appointments but on the strength and depth of his bench and a playbook that has been four years in the making (with the informed experience of his previous stint in the White House). Everyone just wants to get to know the detail now! It’s what Trump won’t do that is worrying (The Times, William Hague) emphasises just how powerful Trump is with a fervent support base emboldened by his ability to survive bullets and criminal proceedings, among a whole host of other challenges. He controls all branches of government, has experience and is committed use his power to its fullest extent. On the positive side, he’s already had a hand in the ceasefire in Gaza, could hasten peace in Ukraine (although not in the 24 hours he had originally promised) and be instrumental in bringing stability to the Middle East (unless he pushes Iran so much that they opt to use nuclear weapons). On the negative side, Trump’s trade policies could plunge the world into recession as tariff policies bite and his erratic and moody nature will make predicting his moves very difficult. It is also interesting to see what he is not doing as well – he’s not going to work with the WHO, won’t regulate cryptocurrencies, won’t worry about the safety of AI and isn’t inclined to do much about reining in America’s debt burden. The fact that he’s not going to double-down on climate initiatives despite LA burning doesn’t bode well for the planet and his lack of appetite to regulate crypto could well result in a massive boom turning into a huge bust. Piling on more debt and letting social media do what it wants unchecked could also be storing up future problems. Everything will, of course, depend on the detail.
The rest of the world looked on and reacted to Trump’s appointment as Bank of Japan looks to raise rates in shadow of Donald Trump’s inauguration (Financial Times, Leo Lewis) shows that speculation is mounting that Japan’s central bank will choose to raise interest rates this Friday from 0.25% to 0.5% as long as the markets don’t go too crazy, Ørsted announces further writedown on its US offshore wind business (Financial Times, Rachel Millard) shows that the Danish wind farm developer has decided to make more writedowns on its troubled US business just hours after Trump’s inauguration although the company said that it remained “committed to the US market for the long term”. Trump promised, in his election campaign, to stop wind projects from the start of his presidency. Elsewhere, Houthis to limit attacks on international shipping off Yemen (Financial Times, Oliver Telling) shows that Houthi militants promised shipowners, insurers and authorities that they would lift sanctions on ships that were not registered in Israel or wholly owned by Israeli individuals or entities. * SO WHAT? * Although this will provide some relief to the parties involved, I would have thought that they will want to wait and see how any peace deal hangs together first before they take the Houthis’ word! Still, I guess it’s a move in the right direction and will ultimately free up supply chains.
As far as impact on the UK is concerned, Pound rises sharply after Trump’s tariff ‘delay’ (The Times, Tom Saunders) shows that sterling experienced its sharpest one-day gain against the dollar for over a year thanks to the new president not imposing tariffs immediately while Donald Trump turbulence will test Labour (Financial Times, Stephen Bush) highlights an uncertain time for British politics because it’s not clear how much of a help or a hindrance it will prove to be to be aligned with Trump. I would also suggest that Labour very publicly putting all their eggs in one basket by supporting Kamala Harris in the presidential campaign – and subsequently getting those eggs on their faces – is not going to endear us to him either. We’ll just have to wait for events to unfold for now…
IN UK NEWS
Reeves approved looser limits on mortgage lending and backed a third Heathrow runway, hospitality and retail face more headwinds, Britain overtakes Germany and investors buy up shopping malls
In non-Trump news today, it seems that our chancellor is trying to get on the front foot after being subject to a lot of criticism recently in Rachel Reeves backs plans for looser limits on mortgage lending (Financial Times, Sam Fleming and Martin Arnold), where she’s backed plans put forward by the FCA on how to enable more mortgage risk-taking by banks to help get more people on the housing ladder and Reeves to back third runway at Heathrow in battle to grow economy (Daily Telegraph, Christopher Jasper), where she has put her support behind plans to expand Heathrow in a wider effort to show that the government really is growth-minded. In addition to this, the government looks like it’ll be approving a second runway at Gatwick and potentially a doubling of capacity at Luton! This will be an interesting one for debate by environmentalists.
Even so, Hospitality firms ‘to incur £1bn costs from employer NICs on 774,000 more workers’ (The Guardian, Sarah Butler) highlights big consequences for the hospitality industry from last year’s Budget, according to industry body UKHospitality, unless the government delays or alters the tax changes it announced in that Budget while Business rates bills to more than double from April (The Times, Isabella Fish) cites research by Colliers, a professional services business which shows that business rates bills for retail, hospitality and leisure companies will rise sharply, thanks to the government’s decision to slash business rates relief from 70% to 40% from the beginning of April. Some will find their business rates bills rising overnight by 140% or more as a result! * SO WHAT? * The previous government had originally introduced the rates relief scheme in November 2022 to help cushion the blow for these firms and gave eligible properties with 75% business rates relief a cap of up to £110,000 per business. You would have thought this could push a number of businesses over the edge, which is particularly cruel given how much they’ve suffered in the last few years.
In investment news, Britain topples Germany to become Europe’s top investment spot (Daily Telegraph, Szu Ping Chan) cites PwC’s annual survey of global chief execs which shows that Britain has overtaken Germany to become the most attractive place to do business in Europe despite the current bad feeling between businesses and the government because of the Budget. * SO WHAT? * This is notable because it’s the first time the UK has been placed so highly since PwC started the survey almost thirty years ago! While this is relatively good news for the UK, it also shows just how much confidence execs have lost in other major economies due to political instability on the Continent.
Then in Investors return to retail space with £2bn shopping mall spree (The Times, Isabella Fish) we see that cheap prices and a resurgence in popularity with retailers and consumers has led to rising confidence and a major rebound in UK shopping centre investment volumes in 2024, according to a report by property group CBRE. It was pretty amazing to see that UK institutional investors, real estate investment trusts and sovereign wealth made up 70% of activity. This represents a real change from recent years which have seen the dominance of more “opportunistic” investors. * SO WHAT? * This switch is important because opportunist investors can be “in-and-out” quickly, but the “new” wave of investors tend to be long-term in nature. This suggests that what we are seeing is a trend and not a blip. Although many lost interest in the segment because of the rising popularity of online shopping and the collapse of major retailers (e.g. Debenhams, BHS, Topshop etc.) who had previously been big tenants there is surely mileage at least in the top “destination” malls. Landsec observed that rents for “prime” shopping centres dropped by a third from the 2016 peak but they are now on the way up again.
IN CAR-RELATED NEWS
European makers brace for 2025, Reeves moves to protect lenders in car finance mis-selling and a UK charging firm sounds a cautious note
European carmakers braced for tough 2025 despite ‘firework’ of launches (Financial Times, Kana Inagaki and Ian Johnston) heralds an important year for carmakers as Europe will be bringing 160 new models to market (most of which will be electric) but they will be nervous because of the backdrop of sluggish demand as consumer budgets continue to feel the strain. European industry body ACEA reckons that its members could be forced to pay €16bn in fines in 2025 for not hitting EV sales targets if the rules weren’t delayed. * SO WHAT? * I think that a solution to this is a lot trickier than it looks, although IMO delaying the fines is the best way forward. Consumers are worried about two things: the cost of the car itself and the charging network. If their current car works OK, then there is no reason to sell and switch to EV, particularly if they perceive EVs to be “expensive”. A quick fix would be to offer some kind of tax incentive to buy the cars – but the problem is that we’ve seen on many occasions that once these incentives disappear, sales fall off a cliff. Car companies have to make production plans years in advance so I think that introducing juicy incentives only to snatch them away a year or two later is not a good idea because that then leaves the makers with a glut. Unless the lawmakers get involved here I really think that they are going to be shooting themselves in the foot and really hurt their own carmaking industries.
In Reeves intervenes in UK car finance mis-selling case to protect lenders (Financial Times, George Parker, Alistair Gray and Akila Quinio) we see that the Treasury took the unusual step of asking to intervene in the upcoming Supreme Court case that could limit car loan providers from massive payouts in a landmark mis-selling case. The Treasury argues that it wants to limit
damage to the motor finance and car finance industry and ensure that people will still be able to access decent loans – important when you consider that around 80% of new vehicles bought in the UK are on finance. * SO WHAT? * The share prices of Lloyds Banking Group and Close Brothers had a mini-rally on the back of this news (they are the banks most exposed in this area) but obviously we’ve not reached a final conclusion yet. A compensation bill of £44bn (according to HSBC research) could be hanging in the balance here! I guess the danger is that if lenders are on the hook for a hefty compensation bill, they’ll just have to charge customers more for finance in future – and that might put them off buying cars at a time when the industry needs sales!!!
Then in UK charging firm warns over changes to electric car sales amid ‘difficult’ market (The Guardian, Jasper Jolly) we see that Pod Point, which is majority-owned by EDF Energy, said that proposed changes to relax sales quotas may slow sales down even more, particularly in the private EV market. The company sounded a very downbeat note yesterday, which sent its share price down by a third, saying that it was unlikely to hit sales forecasts. * SO WHAT? * There are a lot of factors at work here. Consumers feel the pinch, charger companies aren’t seeing the revenues they were hoping for and car makers are worried about the prospect of massive fines for not hitting arbitrary sales targets that were decided years ago when the situation was very different. As I said before, I think that the way forward is to delay the fines – not the quotas – and give the makers some breathing room. That way they will still be incentivised to sell the cars, charger firms will prosper and we’ll still have a European automotive industry!
IN MISCELLANEOUS NEWS
Huawei moves to snatch Nvidia's thunder, Musk whinges about X in China, it turns out that weight-loss drugs cut the risk of Alzheimer's and we take a look at eToro
In a quick scoot around some of today’s other interesting stories, Huawei seeks to grab market share in AI chips from Nvidia in China (Financial Times, Eleanor Olcott) shows that Huawei is trying to get a bigger share of the Chinese market for AI chips that is currently dominated by Nvidia by helping domestic companies switch to their own chips for “inference” tasks (tasks where LLMs generate a response to a prompt) while Nvidia’s chips concentrate on training the LLMs. Huawei is betting on inference being a better source of future demand, particularly if model training slows down. Sounds good, but we’re not going to see whose right for a while yet!
In Elon Musk complains about China ban on X as Donald Trump prepares TikTok reprieve (Financial Times, Ryan McMorrow and Joe Leahy) we see a rare instance of Musk criticising the Chinese as he said that it was unfair that TikTok was allowed to operate in the US, but X was not allowed to operate in China. * SO WHAT? * Musk has been very careful about how he’s talked about China given its importance to Tesla, but I guess he’s been emboldened by the ascendance to power of his new BFF, Trump. There’s clearly a lot more to be discussed here!
Weight-loss drugs reduce risk of Alzheimer’s, large study shows (Financial Times, Clive Cookson and Michael Peel) is a really interesting story which cites a study of 215,000 US military veterans with diabetes which shows that taking popular weight loss drugs reduces the risk of developing Alzheimer’s by 12% – although it increased the likelihood of getting arthritis by 11%. * SO WHAT? * Clearly this is good news – and there may be even more good news in the pipeline as the US prices for Ozempic and Wegovy could fall considerably as Biden’s outgoing administration included the drugs in the next round of Medicare negotiations.
Meanwhile, IPO hopeful eToro grabs market bull by the horns (Financial Times, Lex) gives us a little bit more colour about the Israel-based company that has decided it wants to list in New York rather than London, despite the UK currently being its biggest market. Put simply, it probably wants to emulate the likes of Robinhood Markets and Coinbase who have grown exponentially! It’ll be interesting to see whether this captures the imaginations of investors!
...AND FINALLY...
...in other news...
Although the guy in this video sounds a bit dismissive about this “classic” itinerary for someone going on holiday to Japan, it does include a lot of the important bits (although I’d argue that you need to spend more time in Tokyo as there’s so much to it!). I think this is a decent checklist if you’ve never been there before (although if it were me I’d ditch Osaka if there wasn’t enough time and go to see the waterfalls and the temples in Nikko instead)👍
Some of today’s market, commodity & currency moves (as at hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!
FTSE 100 * | Dow Jones * | S&P 500 * | Nasdaq* | DAX * | CAC-40 * | Nikkei ** | Shanghai ** |
Oil (WTI) p/b | Oil (Brent) p/b | Gold Per t/oz | £/$ | €/$ | $/¥ | £/€ | $/₿ |
(markets with an * are at yesterday’s close, ** are at today’s close)