Monday 03/03/25

UK and France aim for new Ukraine peace deal involving initial 1-month truce (Financial Times, George Parker, Ben Hall, Henry Foy and Leila Abboud) shows the UK and France trying to pick up the pieces after Friday night’s devastation at the White House between the suit-wearers and the bloke who’s country is under siege. Starmer held a summit in London yesterday where the overall message was that Europe would stand behind Ukraine and both Starmer and Macron are getting behind a deal that would involve the US providing cover for European troops. The leaders are suggesting a truce for one month that would help establish confidence on both sides. Details are still being discussed.

Ugly showdown or lovefest, Trump is all about the message (Financial Times, Jemima Kelly) is an interesting article which observes that Trump is all about the optics, keeps everyone on their toes by being unpredictable and is 100% focused on getting his message across. Nigel Farage once said that “you should always take Trump seriously, but not necessarily always take him literally”, but the problem is that it’s difficult to tell when you should take him literally! He has surrounded himself with excellent communicators who are all “on-message” and no-one is able to oppose him right now. It will be interesting to see how long this momentum lasts as Trump really is making the most of this honeymoon period in office.

Then in Putin ally pushes deal to restart Nord Stream 2 with US backing (Financial Times, Max Seddon, Henry Foy and Felicia Schwartz) we see that an ex-spy and good buddy of Putin, Matthias Warnig, is looking to restart the Nord Stream 2 gas pipeline to Europe with the backing of US investors, something that would have been unthinkable until recently. Warnig ran Nord Stream 2’s parent company for Gazprom until 2023. European officials are aware of the efforts and have expressed concern on the matter. * SO WHAT? * In theory, if this plan went ahead, the US would have a massive say over energy supplies to Europe but in order to go ahead, the US would have to lift sanctions on Russia, Russia would have to agree to start-up sales it shut-down during the war and Germany would have to allow the gas to flow to buyers in Europe. So far, no-one has made any kind of comment regarding these talks but I would not be surprised if things moved this way. If gas DID start to flow again, I wonder whether Europe (and especially Germany) would get addicted to cheap Russian power again…

Meanwhile, Israel halts aid to Gaza as Hamas rejects revised ceasefire proposal (Financial Times, Neri Zilber) highlights a deterioration in the ceasefire  as Israel cut off all humanitarian aid to Gaza because Hamas rejected a new proposal for an extension to the ceasefire. * SO WHAT? * Both sides have been accusing each other regarding violations of the deal and have not agreed on terms that would extend the truce. US Secretary of State Marco Rubio just authorised the delivery of $3bn in military assistance to Israel, reversing the “partial arms embargo” implemented by Biden’s administration. What a contrast between America’s attitude to Ukraine and Israel!

Given Trump’s penchant for a tariff, I thought I’d mention Track One Car Part’s Journey Through the U.S., Canada and Mexico—Before Tariffs (Wall Street Journal, Vipal Monga, Santiago Perez, Roque Ruiz and Emma Brown) because it provides a handy visual representation of how often just one engine part travels across national borders, showing just how much tariffs are going to hit manufacturers. The structure of the tariffs is going to be key here but if they are charged every time they cross the border, there’s going to be a lot of trouble! If you can get access to this, it’s definitely worth having a look!

Then in Cryptocurrencies rocket as Trump unveils US strategic reserve (The Times, Mehreen Khan) we see that cryptocurrencies boomed just a few minutes after Trump named the first five digital tokens that will make up a US strategic “crypto reserve”. * SO WHAT? * XRP, cardano, solana, bitcoin and ethereum all saw their values boom on the news after recent weakness. This is all part of Trump’s bid to “make sure the US is the Crypto Capital of the World”, according to his post on Truth Social. Questions still remain about how this reserve is going to work and whether the government is going to guarantee investor losses. I would suggest that if it does the latter, crypto will go moonbound…

‘Trump hasn’t done anything’: Shoppers’ hopes for inflation dashed (The Times, Louisa Clarence-Smith) highlights American consumer sentiment as Trump’s entry to the White House has thus far failed to yield benefits to the ordinary person shopping for groceries in the form of lower prices (on the campaign trail he said “Starting on day one, we will end inflation and make America affordable again” and followed that up in his inaugural address when he said he would “rapidly bring down prices”). Consumer spending accounts for over two thirds of US economic activity – and it dropped unexpectedly in January, the first fall since March 2023. Americans delay home improvements in latest blow to US housing market (Financial Times, Patrick Temple-West) drives home this message of overall concern as residential modelling/home construction companies like Jeld-Wen Holdings, AO Smith and BlueLinx have all suffered from a drop in demand for US home improvements. This is due to tariff concerns and Trump’s clampdown on undocumented workers prompting consumer caution which has prompted sluggish activity in the property market, which in turn has led to poor performance in DIY-related companies. * SO WHAT? * Trump’s administration needs to deliver for the less affluent as well as the rich but his policies are inflationary. I would have thought that there will be more pain to come…

Back in the UK, Weak UK consumer spending is denting business mood, says CBI (The Guardian, Graeme Wearden) cites the latest growth indicator from the CBI which reflects UK private sector activity falling in the three months to February at a faster rate than it fell in the quarter to January. Private sector firms also reckon that activity will continue to fall over the current quarter. A separate survey by BDO showed that mid-sized companies were most concerned about restrictions on international expansion and ever-higher labour force costs. * SO WHAT? * There seem to be mixed messages here. For the most part, businesses (especially those exposed to lower paid workers) are saying how concerned they are about growth and then, on the other, they’re saying that they are optimistic about their prospects! I think this means that we are perhaps reaching a turning point where indicators are catching up with each other…

Elsewhere, Prada edges closer to buying Versace for about €1.5bn (Financial Times, Silvia Sciorilli Borrelli, Arash Massoudi and Ivan Levingston) shows that Prada is currently looking most likely to buy Versace from Capri Holdings for around €1.5bn after months of on-off talks. Capri, which also owns brands including Michael Kors and Jimmy Choo, initially sought a price of €3bn but has been looking to sell Versace for a while. * SO WHAT? * OK so it’s not a done deal yet, but if if went ahead it could be quite interesting to bring Versace’s in-your-face flair to Prada’s “demure”.

Ugly shoes can keep hitting their stride (Financial Times, Lex) highlights the current weakness of brands such as Hoka, Ugg and Teva (brands owned by Deckers Brands), On Holding and Birkenstock after a couple of really stellar years. Investors have sold the shares despite decent sales and underlying demand being solid. * SO WHAT? * The main problem here is that over a third of the footwear sold in the US comes from China, which is about to get clobbered by more tariffs. Have investors been too pessimistic here given ongoing decent demand for this footwear??

Then in Forget McDonald’s. This Chinese Fast-Food Chain Is Now the World’s Biggest. (Wall Street Journal, Stu Woo) we see that China’s Mixue has just topped McDonald’s for the title of world’s biggest food and beverage chain by number of locations! It has outlets across Asia and Australia and has more than doubled the number of its locations to 45,000 stores in just three years – and intends to keep going! The bubble tea chain floated in Hong Kong today and boomed on its market debut. It wants to expand globally but currently 90% of its stores are in China.

AI companies race to use ‘distillation’ to produce cheaper models (Financial Times, Cristina Criddle and Melissa Heikkila) highlights an interesting trend prompted by the DeepSeek shock, that even AI giants like OpenAI, Microsoft and Meta are looking closely at the successful “distillation” process used by DeepSeek. The idea is to use this process to create AI models that can be cheaper for consumers and businesses to buy/use. In “distillation”, companies take a bigger “teacher” LLM to teach their smaller “student” LLM which transfers the knowledge of the bigger one to the smaller one but at a much lower cost. The big models suck up loads of data and computing power but with distillation, developers and businesses can get the same capability but

at a much lower price which pushes costs way down and allows developers to run AI models quickly on devices. OK so the capability is not as good, but when you consider the cost-benefit, distillation is a no-brainer…

Then in Microsoft to shut down video-calling pioneer Skype (Financial Times, Rafe Uddin and Tim Bradshaw) we see that an important chapter in video conferencing is closing down 14 years after Microsoft bought the company for $8.5bn. The service will be retired in May and it will start migrating customers over to the free version of its Teams app. Microsoft launched its Teams chat and video calling app seven years ago. Evolution, eh?

In a quick scoot around some of today’s other interesting stories, Europe’s biggest battery storage project goes live in Scotland (The Times, Emily Gosden) shows that Zenobe’s site at Blackhillock, between Inverness and Aberdeen, is going live and promises to absorb any surplus wind power to supply 200 megawatts of electricity. It’s due to be expanded to 300 megawatts by next year which means it’ll be able to supply every home in Scotland. * SO WHAT? * Zenobe’s project will “significantly reduce the amount of wasted clean energy” and will lower household bills. We need more of this as I believe that it’s as important to be able to hang on to electricity as it is to generate it in the first place in order to smooth demand of a notoriously volatile energy source.

Then in Centuries-old leasehold system to be abolished in England and Wales (The Guardian, Kiran Stacey) we see that the housing minister has promised to abolish the ancient leasehold system in England and Wales and make it easier for homeowners to jointly own the buildings that they live in. Some freeholders and building managers have been accused of charging for services that don’t exist and failing to make repairs that leaseholders have paid for. A white paper on this will be published today with various suggestions on how to improve things but we’ll have to see how this goes as it’s not the first time promises have been made on this and not come to anything…

This looks like a very simple recipe, although it does require a bit of chopping! Looks good though, don’t you think?? The fuller version is here (and it gives you the quantities etc)…