Tuesday 28/07/26

Oil prices fall as US pauses strikes on Iran over strait of Hormuz (The Guardian, Jasper Jolly) highlights the latest reaction to the latest twist in the Iran war as traders wagered that the pause in US attacks could signal a de-escalation in the conflict, particularly as Trump said that he was having “good talks” with Iran.

France and Spain brace for more extreme heat as wildfires rage (Financial Times, Leila Abboud, Barney Jopson and Ian Johnston) shows that the tragedy is still ongoing as wildfires continue to burn with no end in sight as they face forecasts for even higher temperatures. Some light rainfall helped to steady things a bit overnight. Bordeaux and Madrid remain in danger. * SO WHAT? * The human and environmental costs are already sizeable but from an economic and political point of view, the premierships of both Macron and Sánchez will be under extreme scrutiny for how they react to this. Macron, for instance, is pretty much a goner but if he can pull something out of the bag here he might be able to make some ground against the nationalists of Le Pen and chums. Both countries are facing pressure from the extreme right so actually this could be an opportunity for the incumbent leaders to do a good job for their respective citizens. I’m not hopeful, though – look at what happened with Delcy Rodríguez in the aftermath of the Venezuelan earthquakes. I would suggest that there is going to be less room for excuses regarding a poor response considering the number of wildfires we’ve seen across Europe over the last few years.

Staying with Europe, Germany’s Friedrich Merz sacks transport minister in turbulent cabinet shake-up (Financial Times, Anne-Sylvaine Chassany) shows that Germany’s chancellor has been having a bit of a cabinet reshuffle over the last week, partly prompted by frustration at the slow pace of investment from a €500bn infrastructure fund. Merz is desperately trying to deliver growth from a country whose GDP has largely gone sideways over the last seven years. Given that the country’s manufacturing industry is currently going down the toilet, you can understand his sense of urgency.

Back in the UK, the new PM faces a bulging in-tray. He’s making some positive noises in employment, as per Andy Burnham aims to cut welfare bill by getting young people into work (Financial Times, Chris Smyth and Jennifer Williams), which says that he’s going to tell schools to adapt their curriculum to the needs of local employers as part of a wider effort to cut the welfare bill and in manufacturing, as per Chips and drones to be at heart of Andy Burnham’s push to ‘reindustrialise’, AI minister says (Financial Times, Chris Smyth and Anna Gross) which pushes the idea of AI-powered drones as being a saviour for modern reindustrialisation. There’s pressure on the PM to stick to commitments to carbon neutral targets by leading climate scientists in PM urged to uphold climate pledges made as mayor and ban new North Sea oil drilling (The Guardian, Sandra Laville) in the face of rumours over the weekend that the new PM is going to approve new drilling in the North Sea and then there’s the reality of Number of millionaires in UK falls to lowest since financial crisis (The Times, Mehreen Khan) which cites research from the Adam Smith Institute (a centre-right think tank) which says that the number of millionaires in the UK fell by 7% year-on-year and is now at its lowest level since 2008. Its “millionaire tracker” uses data from the ONS and measures the number of adults living in Britain who have a net worth of at least £1m, including assets such as property, pensions, cash and investments. It peaked in 2021 and has since fallen sharply due to the value of net assets being dented by rising interest rates and falling savings rates. This is just another thing for Burnham’s government to consider because people need to be feeling good and feeling confident in order to spend money and keep the wheels of the economy turning. Although Reeves’s tax hikes and the abolition of non-dom status has been cited as reasons for this, it’s worth noting that HMRC figures show that there’s no clear correlation. Everyone is trying to second-guess what Burnham’s going to do about inheritance tax and capital gains tax in particular. * SO WHAT? * This is all very well but the key will be in the execution. Burnham clearly needs time to find out what the reality of the situation is in order to form robust plans, but his rapid ascension to the top job means that he’s got to fill in the blanks as he goes. Not ideal given the current state of the country.

AI stock sell-off deepens as investors dump chipmakers (Financial Times, Song Jung-a and David Keohane) highlights the continuation of the AI stock sell-off, particularly in the South Korean and Japanese markets, as the naysayers came out of the woodwork to say “I-told-you-so”. Korea’s KOSPI has dropped by a whopping 25% over the last month – but it’s still 46% higher than it was at the same time last year. Japan’s NIKKEI is now down by almost 15% since its June high. Those who missed the boat on the most recent AI wave may well be considering an entry point to AI stocks while those who timed it well and crystalised their gains may be looking at getting a second bite at the cherry…

Meanwhile, Big Tech credit risks rise sharply as AI spending soars (Financial Times, Michelle Chan and Ramsay Hodgson) highlights the behaviour of one indicator, prices for credit default swaps, as reflecting rising fears over AI company debt. * SO WHAT? * CDSs are used to bet against the corporate debt of the likes of Oracle, SpaceX, Alphabet, Amazon, Meta, Broadcom and Nvidia and their prices have been rising as hyperscalers have been pouring money into massive data centres and cutting edge AI models. It is also worth noting that Meta’s latest borrowing cost for its $12bn Texas data centre is now approaching levels of junk-related bonds. The pressure continues to build on AI companies to make all the money that they say they are going to…

OpenAI hacking incident is ‘warning shot’ on cyber security, Microsoft’s AI chief warns (Financial Times, Cristina Criddle and Rafe Rosner-Uddin) is an interesting article that cites Mustafa Suleyman, chief exec of AI at Microsoft and DeepMind co-founder, as saying that the recent hacking spree by a rogue OpenAI model has served as a warning regarding the increase of AI-enabled cyber attacks. The whole panic surrounding AI-powered cyber attacks ramped up considerably with the release of Anthropic’s Mythos back in April and has been gathering momentum ever since, with last week’s attack on Hugging Face being the latest big episode. There is concern that, in OpenAI’s desperation to catch up with Anthropic that corners have been cut – with devastating consequences. Microsoft released its own cyber security model yesterday – the nattily-titled MAI-Cyber-1-Flash which scored higher than Anthropic and OpenAI’s best offerings. * SO WHAT? * Although the sensible thing to do would be to have some kind of pause and amnesty with regard to AI development, so that the ethics and guardrails can catch up, I just don’t think it’s possible. I think of it like when the atomic bomb was discovered – it can’t be un-discovered – so lawmakers and tech crusaders need to act quickly and ensure safety as quickly as possible because the consequences could be dire, particularly as AI creeps into more areas of our lives. Meanwhile, AI companies spend record sums on Washington lobbying (Financial Times, Michael Taffe) highlights just how willing – and how well-financed – the AI companies are to ensure they have the ear of the right influential people to push their agenda. Lobbying efforts have largely been about doing as much as possible to deter regulation on things like the release of new models, which I would suggest is highly concerning!

In the world of chips, Chinese chip champion CXMT soars 466% in market debut (Financial Times, William Sandlund and Eleanor Olcott) highlights the massive success of the Chinese

chip-maker’s debut on the Shanghai exchange. As a result, it briefly became China’s most valuable company. It is the world’s fourth-biggest maker of memory chips and China’s largest producer of DRAM (these are the chips used in devices like servers and cameras). The company will be using the money raised to boost production as well as R&D. CXMT’s roaring IPO isn’t the bubble signal it might appear (Financial Times, Lex) observed that such a success was not a surprise as IPO under-pricing is common in China (for example, chip testing company Semight Instruments shot up by an astounding 900% on its market debut earlier this year) but on a longer-term view, demand for CXMT’s chips could break out of the traditional boom-bust chip cycle because new uses and chip configurations are being discovered all the time and the need for more and more memory continues.

In Bezos to launch 5,000 satellites to tackle smartphone not-spots (Daily Telegraph, Matthew Field) we see that Amazon is going to launch over 5,000 satellites to address patchy mobile phone coverage around the world – in direct competition with Musk’s Starlink. Thus far, the company has launched just 390 satellites out of the more than 3,000 it had originally planned and its service is still years behind Musk’s. It had been looking to do a full commercial launch of its satellite broadband network by the end of this year but it has experienced numerous delays and problems. * SO WHAT? * It’s great that someone is trying to give Musk a run for his money, but Amazon is still American and runs the risk of being unfavourably influenced by the White House. A European effort is needed and although the UK’s Vodafone is planning to offer space mobile signals, it’s working with yet another American company – AST Space Mobile.

Elsewhere, Palantir tool has not cut hospital discharge delays, says study (Financial Times, Amy Borrett) cites analysis by the Health Foundation think tank which concludes that the use of Palantir’s patient discharge tool has driven “no noticeable improvement” in performance. This runs contrary to claims by NHS England which widely quoted a 15% drop in long-stay discharge delays at hospitals who used the Federated Data Platform. * SO WHAT? * This is obviously concerning, but what are the real alternatives actually like?? Is Palantir the best or is it just the least worst? Is there a proper home-grown alternative? There are now calls for an independent audit of the impact of the FDP. This is definitely something that Burnham’s new crew is going to have to get to grips with, particularly as there were calls by Labour MPs last month to exercise a 2027 break clause in the contract that Palantir signed in 2023 for £330m.

Then in British unicorn Humanoid points to way forward for European tech (Financial Times, Lex) we see that British start-up Humanoid last week became Europe’s first pure-play robotics “unicorn” as its latest fundraising meant that it now has an implied valuation of just under $1.4bn. Yes, this is a mere pimple on the backside of Chinese and American robotics companies like Unitree Robotics and FigureAI in terms of scale but this latest development does reflect a potential way forward for European tech as Humanoid is using a European supply chain – including companies like Bosch and Schaeffler – to make its products. Go us and go Europe! We’ve got a lot of catching up to do…

Nvidia bets $5bn on Ilya Sutskever’s AI breakthrough (Financial Times, Tim Bradshaw and Cristina Criddle) highlights a major investment by the chip giant into the OpenAI co-founder’s AI start-up, Safe Superintelligence (aka SSI). This was announced yesterday as part of a long-term partnership that will mean SSI gets the cutting edge Vera Rubin hardware. The money will help SSI build the computing capacity to build on claims of a recent research breakthrough. This will also ramp up its computing power tenfold over the next 12 months. * SO WHAT? * Although SSI now has an implied valuation of $32bn, following a funding round last year, very little is known about what SSI is actually doing! It has still yet to reveal what it’s working on – so will it be a case of the Emperor’s New Clothes or something properly meaningful? Sutskever is regarded of being one of the leading AI researchers of his generation so I guess everyone’s giving him the benefit of the doubt!

Defence giants provide record backing for military start-ups (Financial Times, Aaron Kirchfeld and Sylvia Pfeifer) highlights the increasing phenomenon of so-called “defence primes” – companies with longstanding relationships with western governments and militaries like Lockheed Martin and BAE Systems – getting involved in a record $4.1bn in venture capital rounds so far this year. * SO WHAT? * This is all about adapting to the fast-changing world of modern warfare and making sure they stay relevant to the demands of current and future battlefields. It is worth noting that in this year’s Farnborough air show, about half of the exhibitors were from the

defence sector. Civil aerospace usually dominates this event. Dealogic numbers show that the value of global defence-related deals has already exceeded $40bn this year, meaning that it’s on the way to beating the previous full-year record of $59bn in 2019.

Meanwhile, DCC, one of FTSE 100’s biggest energy firms, agrees £5.75bn takeover (The Guardian, Jillian Ambrose) shows that private equity firms KKR and Energy Capital partners are about to buy one of the biggest energy businesses listed on the LSE, DCC Energy. The board has actually recommended the offer despite misgivings from the company’s founder and biggest shareholders. Another British company bites the dust at the hands of the Americans! They really are on a shopping spree…

Then in Vodafone raises profit guidance as billionaire Xavier Niel takes stake (Financial Times, Kieran Smith) we see that the telecoms company jacked up its profit guidance yesterday when it reported record quarterly revenues in its first announcement since French billionaire Xavier Niel said he was taking a stake of the business earlier this month. Analysts reckon Niel will make big cost cuts at Vodafone to expand retail market share and increase profits. * SO WHAT? * Vodafone has been slimming down on the one hand by jettisoning underperforming overseas assets whilst bulking up on the other, with its acquisition of Three. I guess the Niel reckons there’s more mileage to be had here.

In a quick scoot around some of today’s other interesting stories, Johnson & Johnson settles US talcum powder lawsuit for $5.5bn (Financial Times, Patrick Temple-West) shows that the drugmaker announced yesterday that it would pay out up to $3bn in 2027 and the rest from 2028 onwards to settle the long-running litigation regarding whether its talcum powder caused ovarian cancer. It looks like this will be spread between about 76,000 people. * SO WHAT? * This is a massive win for J&J who had proposed an $8.9bn settlement in 2023. The company has been under a cloud for over a decade because of the uncertainty of the case. J&J is facing a similar lawsuit in the UK. Unsurprisingly, the company’s share price has shot up in response as the company draws a line under the whole thing.

Elsewhere, Shein slumps to loss ahead of planned Hong Kong listing (Financial Times, William Sandlund and Eleanor Olcott) highlights disappointing Q1 numbers thanks to US and EU trade tensions, Dior rebound helps LVMH’s fashion business return to growth (Financial Times, Adrienne Klasa) shows that Dior’s performance dragged its parent back to growth thanks to a recovery in demand courtesy of Dior’s new creative director Jonathan Anderson and Porsche to Cut 5,000 More Jobs After Sales Collapse in China (Wall Street Journal, Stephen Wilmot) highlights more German manufacturing gloom as the sports car maker scrambles to cut costs in order to turn the company around. Porsche’s fortunes have been hit by weak China performance,

US tariffs and the relative failure of its foray into EVs.

Back in the UK, ‘Weekday games were amazing’: pubs toast extra £150m in World Cup sales (The Guardian, Rob Davies) cites the latest figures from the British Beer and Pubs Association (BBPA) which show that late opening hours and England’s progress in the World Cup has been a major boon for the pub industry, outstripping the effect that the Euros had in 2024 when England reached the final. The peak day for sales was England’s game versus Mexico. The industry certainly needed the boost!

Then in CPS hires more trainee lawyers in bid to compete with Big Law (Financial Times, Suzi Ring) we see that the Crown Prosecution Service is going to offer 50% more legal trainee placements to get would-be lawyers in England and Wales to go in-house before being tempted by high-paying jobs in the private sector. The CPS is currently struggling with a massive backlog of cases and needs the capacity! This is surely going to be tricky when you consider that CPS legal trainees get paid £34,000 in London for their two-year training contract that goes to £50,000 on qualification while trainees at top corporate law firms start on about £60,000 a year, rising to over £150,000 when they get qualified.

Gotta love that dinner lady energy 😁! This is absolutely brilliant 👏👏👏