Wednesday 16/04/25

Trump factor sparks trading boom for top Wall Street banks (The Times, Ben Martin) shows that both Citigroup and Bank of America have joined rivals banks Goldman Sachs, JP Morgan Chase and Morgan Stanley in reporting a major trading boom in Q1 thanks to market volatility caused by clients responding to Trump’s policy shifts. Carmakers lifted by Trump hint of tariff exemption (The Times, Tom Saunders) shows that carmakers perked up as Trump admitted that they needed “a little bit of time” to shift production to the US and said that he was “looking at something to help car companies”, which they interpreted as meaning a suspension/reduction of the 25% import tariffs was imminent. He didn’t give any further details though. Despite all this, Wall Street isn’t pricing in recession risk (Financial Times, Lex) suggests that there’s a lot more downside for markets to go because although they’ve suffered a lot of late, this recent downturn has come from historically high valuations and there’s the possibility that the market is not yet fully pricing in the prospect of recession. * SO WHAT? * Uncertainty on tariffs and policy has led to companies cutting their earnings guidance in the short-to-medium term while headcount reductions and pauses in investment are also being considered. At the end of the day, whatever your view on Trump’s policies, more certainty is needed for businesses to function. They need to know what they’re dealing with and have some visibility so they can plan. At the moment, this is pretty much impossible. FWIW, I think that it would be great if Trump could say something along the lines of “that’s it for tariffs until the end of my term” after the dust settles when he concludes all the bilateral trade discussions over the coming weeks and months. At least then businesses can make informed decisions and get on with their lives rather than worrying about what’s coming next from Washington…

Trump continues to be on the offensive, though, in Donald Trump threatens to scrap Harvard’s tax-exempt status (Financial Times, Andrew Jack) where the president has doubled-down in his spat with Harvard Uni and Donald Trump threatens to hit critical minerals with tariffs (Financial Times, Aime Williams and Demetri Sevastopulo) highlights Trump’s desire to wean the US off imported critical minerals as he directed the commerce department to study their supply chains and come up with how to increase American production. He has threatened new tariffs on critical minerals imports not long after China suspending exports of a number of heavy rare earth metals and rare earth magnets. * SO WHAT? * If the situation ramps up from here, a shortage of minerals and rare earths won’t just affect military applications – companies in energy, auto manufacturing and other areas could also suffer greatly.

Donald Trump pledges to cut drug prices for Americans (Financial Times, Hannah Kuchler and Steff Chavez) shows that the president remains steadfast in his commitment to cut drug prices

for Americans and signed an executive order to that effect, sending shivers down the spine of Big Pharma. According to research by RAND, the US paid around 3.2x more for branded drugs than other developed countries in 2022 (this is the most recent data available) and the new order will tell the FDA to allow more states to import medicines directly from countries with cheaper prices. The order also directs the FDA to streamline the drug approval process.

In terms of tariff reaction, Xi Jinping urges Vietnam to oppose Donald Trump’s tariff ‘bullying’ (Financial Times, A.Anantha Lakshmi, Edward White and Demetri Sevastopulo) shows China’s leader putting pressure on Vietnam to join forces to oppose America’s “unilateral bullying” during his tour of south-east Asia this week while China reportedly orders its airlines to halt Boeing jet deliveries amid US trade war (The Guardian, Lauren Almeida) shows that the Chinese government has asked carriers to cease purchases of Boeing jets and aircraft-related equipment from American companies, according to a report from Bloomberg News. In the meantime, China defies Donald Trump’s tariffs with strong first-quarter growth (Financial Times, Joe Leahy and William Sandlund) reflects an apparently robust performance for China’s economy which grew by a solid 5.4% in Q1 this year, according to China’s National Bureau of Statistics. * SO WHAT? * This came despite Trump’s tariffs but there’s not been enough time yet for their effect to filter through. China has set what many see as an ambitious GDP growth target of 5% for this year and policymakers maintain that this will be achieved via stimulus measures. Many economists remain doubtful of that, though, as they continue to cut their forecasts.

In currency news, Dollar bearishness reaches highest level since 2006, says survey (Financial Times, Emily Herbert, Ian Smith and George Steer) cites Bank of America’s Global Fund Manager Survey which shows that a net 61% of respondents reckon that the dollar will depreciate over the next 12 months – the highest level of pessimism about the currency since May 2006. It also showed that a net 53% of global investors plan to reduce their exposure to US equities – another record high. On the other hand, Russian rouble crowned world’s best-performing currency as dollar declines (Daily Telegraph, Chris Price) cites data compiled by Bloomberg which shows that Russia’s currency has strengthened by 38% against the dollar since the start of this year! It has even outperformed gold, which has “only” gained 23% over the same time period! The rouble has strengthened at least partly because of the record-high interest rates of 21% as the Bank of Russia tries to fight inflation, but also because foreign companies are banned from withdrawing assets from the country.

Job vacancies plunge below pre-Covid levels as bosses freeze hiring (Daily Telegraph, Eir Nolsoe) cites a release from the ONS which shows that the number of job vacancies has dipped below pre-Covid levels for the first time as measures announced in the chancellor’s first budget prompted a hiring freeze. Meanwhile, the unemployment rate stuck around the 4.4% mark. This is all before the effects of Trump’s tariffs will have had time to filter through so I’d imagine that many businesses are now bracing for impact!

On the other hand, UK wage growth rises in February (The Times, Mehreen Khan) cites more data from the ONS which shows that wage growth increased in the three months to February – so before the implementation of the higher employer NICs and increase of the national living wage. * SO WHAT? * The combination of slowing vacancies and rising wages puts the Bank of England in a difficult position regarding what to do next about interest rates. If it cuts interest rates to spark a sluggish economy, inflation could rise and be powered further by rising wages – but if it

increases them, the economy could slow down further as people rein in spending and borrowing.

Re consumer trends, I thought that If you see ‘cheap Nike’ made in China on TikTok, is it real? (The Times, Isabella Fish) was interesting because it highlights an emerging trend where influencers are urging people to “cut out the middleman” and buy from Chinese suppliers directly in order to beat the tariffs. A lot of videos targeting US consumers have gone viral but the brands themselves “urge customers to be aware of potentially counterfeit products and misinformation” and reiterate that they should only buy from reputable sources. * SO WHAT?  * It’s difficult to judge the veracity of these claims and whether the items mentioned on social media are real or fake. Still, it does highlight the wider question about what American consumers are going to do when faced with hugely jacked-up prices because of all the tariffs. Also, the items won’t be completely tariff-free anyway as consumers will have to pay taxes when they receive the goods.

In a quick scoot around some of today’s other interesting stories, Nvidia to take $5.5bn hit as US clamps down on exports of AI chips to China (Financial Times, Michael Acton and Demetri Sevastopulo) highlights bad news for Nvidia as the company said in a filing late on Tuesday that the H20 chip, which has been tailored for the Chinese market to get around export controls, will now be covered by the requirement to get a special licence to sell to customers in China. * SO WHAT? * This is another example of the Trump administration putting pressure on Beijing. Bernstein analysts said on Tuesday that the H20 chip accounted for about $12bn of the $17bn revenue that Nvidia earns in China so this is a serious issue.

Omnicom Gives More Cautious 2025 Outlook as Tariffs Create Uncertainty About Ad Spending (Wall Street Journal, Megan Graham) shows that the advertising giant has a cautious outlook because it’s not sure how tariffs are going to affect marketing budgets. Surely they’ll get weaker – but it’s a question of how much weaker! That being said, it was interesting to note that rival Publicis Groupe actually kept their year-end forecasts unchanged after a stronger-than-expected quarter. The question is whether clients will increase spending to put them ahead of their competitors in a tough market or just rein in spending across the board…

Hermès overtakes LVMH for luxury’s top spot after weak sales spark sell-off (Financial Times, Adrienne Klasa) highlights a pretty amazing moment as Hermès overtook the mighty LVMH to become the world’s most valuable luxury company yesterday! This happened as LVMH’s share price had a big drop following disappointing Q1 results. * SO WHAT? * Rivals including Prada and Kering saw their shares weaken while Hermès’s share price remained pretty much level, highlighting the success of Hermès’s concentration on the uber-wealthy. I think this is a particularly notable feat because LVMH is a collection of some very powerful brands whereas there is only one Hermès brand!

Then at the other end of the scale, B&M sales in France offset fall in Britain (The Times, Isabella Fish) shows that B&M’s performance may be saved because strength in the French business will mitigate sluggishness in the UK market. Its full-year results are due out in June 4th and it looks like they won’t be too bad although it must be said that they are likely to fall short of the previous year.

This is a prime example of how wisdom can trump youthful exuberance 💪. Never underestimate the power of a crazy old man 🤣!