Tuesday 11/03/25

In war and defence news, Ukraine will need to make some territorial concessions for peace deal, Marco Rubio says (Financial Times, James Politi and Jim Pickard) shows that US Secretary of State Marco Rubio is managing expectations and says that a compromise on territory is going to be necessary to get any kind of deal over the line. Talks between Washington and Kyiv are due to start today in Saudi Arabia. Meanwhile, UK to convene ‘coalition of the willing’ for fresh talks on Ukraine peace force (Financial Times, George Parker and Leila Abboud) shows that Starmer is continuing efforts to unite support for a peace deal in Ukraine. He will be hosting an online meeting of representatives of a group of mainly European and Commonwealth countries  this Saturday. The agenda will be centring around how to support Ukraine in the event of a ceasefire. There will be a lot of talks going on this week about Ukraine! Germany’s Greens vow to block Friedrich Merz’s flagship spending package  (Financial Times, Laura Pitel and Anne-Sylvaine Chassany) shows that Germany’s disgruntled Greens are determined to block chancellor-elect Friedrich Merz’s plans to create a €500bn infrastructure fund and revision of the country’s debt limits to fund defence. They know they can spoil his plans by stopping him get the two-thirds super majority he needs in parliament next Tuesday to push this through. The CDU and SPD said that talks with the Greens were ongoing but they will also need to win over the liberal FDP as well! Even if all that goes Mertz’s way, Germany’s second chamber needs to be won over as well with the same majority – so it’s not a given! Britain is dependent on US weapons. We now face a terrible choice (Daily Telegraph, Matt Oliver) follows on from what I was saying yesterday about the UK’s exposure to US-made weapons, outlining a potentially frightening scenario where Russia invades an eastern European country, Trump is unwilling to clash with Putin and decides to switch off all updates, rendering our air force useless. * SO WHAT? * America’s reliability as an ally has now, for the first time, been called into question and our exposure to American hardware and tech – across all of our armed services – is causing a lot of concern. A lot of our equipment is “interoperable” with American platforms, which helps us work with American forces, and pretty much all of the intelligence we gather has to be run by the Americans because they have the systems to get the most out of it. America makes the “plumbing” that supports NATO, so at the moment we’re all in trouble. It will take years, a lot of money and a complete change in the way our armed forces operate to wean ourselves off the US enough to achieve some semblance of independence. Trump has single-handedly rendered decades of solid relations void and I think it unlikely that any country will trust America in the way that they have done in the past. There is no going back. European defence companies should do very well indeed out of this shift – if they are allowed to.

Risk of ‘Trumpcession’ rising, economists say, as global markets fall (The Guardian, Richard Partington) shows that Trump’s ongoing threats and his will-he-won’t he approach to tariffs has been translating into nervy markets amid increased likelihood of a Trump-led recession, or “Trumpcession”. Goldman Sachs analysts nudged up their forecasts of the possibility of a US recession from 15% to 20% while Morgan Stanley cut its forecast for 2025 GDP growth from 1.9% to 1.5%. * SO WHAT? * I know this is going to sound mega-cynical of me but I think that even if the US falls into recession, Trump will somehow do his best to fudge the numbers. The numbers were “adjusted” before under Biden’s watch, so I’m sure that Trump won’t be above this either! There will have to be an obvious weakening for the Americans to admit that they are in recession IMO.

‘Whatever you charge, I’m charging’: Donald Trump forces India’s hand on tariffs (Financial Times, John Reed, Andres Schipani and Haohsiang Ko) highlights the continuation of Trump’s steamrollering negotiation style, this time with India’s PM Modi. Trump says that India has agreed to cut its tariffs considerably and the two countries appear to be close to signing a “grand” bilateral deal. Modi has already pledge to buy more oil and gas but Trump wants more. * SO WHAT? * Since India became independent in 1947, it has continued to have some of the world’s highest average tariffs but its place in a fast-evolving world has changed considerably since then. It has evolved into an economic powerhouse and has to adapt to its new place amid the shifting geopolitical sands. Agriculture is likely to be a particularly sensitive area for tariffs, though, given that almost 50% of Indians work in this area. Negotiations are ongoing…

As the world continues to react to Trump/Musk-led disruption, Elon Musk blowback lights a rocket under European space companies (Financial Times, Lex) shows that concerns about

Musk’s Starlink have prompted a surge in interest in alternatives including Luxembourg’s SES and Anglo-French satellite operator Eutelsat. * SO WHAT? * Although Starlink beats everyone regarding capacity, coverage and tech, America’s changing stance on Europe is forcing everyone to reconsider their options and be much more wary. Funnily enough, Trump and Musk could be the making of the European operators!

In individual company reactions to all the tariff disruption, Top shipping broker Clarksons says war and Trump tariff fears have hit revenues (The Guardian, Jasper Jolly) shows that the world’s biggest ship broker, FTSE250-listed Clarksons, has blamed Trump’s shenanigans for hitting its revenues. Investors sent the share price down by a whopping 20% while Delta warns on profit as economic ‘uncertainty’ dents US demand (Financial Times, Peter Wells and Claire Bushey) highlights an example of an American company that’s been impacted. The airline cut sales and earnings forecasts for Q1, blaming a downturn in consumer and corporate confidence. This profit warning contrasted sharply with the positive outlook it had just two months ago.

On a broader scale, Trump is making Europe great again (Financial Times, Gideon Rachman) observes that Trump seems to be, unwittingly, bringing Europe closer thanks to his threats on tariffs and the viability of NATO. There are three key areas to monitor – defence, European debt and bridge-building between the UK and the EU. Recent poll results are pretty shocking – 78% of British see Trump as a threat to the UK, 74% of Germans and 69% of French. In another poll, France was seen as a “reliable partner” by 85% of Germans and Britain stood at 78% while the US got just 16%. Although everyone now sees the US as a threat (or at least no longer reliable), we are going to have to delay the weaning off of American military support to Europe for as long as possible whilst also preparing for it as quickly as possible. The issuance of debt will not only raise money to boost defence spending, it will also bolster the chances of the euro becoming a proper alternative to the dollar as a global reserve currency. Given Trump’s moves, countries will be keener than they have ever been to buy alternatives to US Treasuries. Regarding the bridge-building between the UK and EU, Starmer and Macron have already worked closely on Ukraine – and if you add Merz into the mix, this could be a pretty good trio. Another interesting consequence of Trump’s disruption could mean that America might suffer a brain drain of researchers as he puts pressure on US universities. * SO WHAT? * Europe has been brought together in the past by geopolitical shocks – by the end of the second world war, the end of the cold war and now we are witnessing the end of the transatlantic alliance. This is a chance for Europe to get its act together. FWIW, it seems to me that there is a real impetus for change and, as we saw in the pandemic, if countries get together in a common cause amazing things can be achieved pretty quickly.

Over in Canada, Mark Carney takes on Trump’s America (Financial Times, The Editorial Board) discusses the current situation in Canada where a former central banker with no political experience has not only become prime minister but could also win an election that his party looked certain to lose. However, Carney’s tough guy act will be a red rag to Trump (Daily Telegraph, Ben Marlow) says that while Carney’s belligerent chat might be good for votes, it won’t be good for diplomacy for when he wants to do deals with America given how vindictive Trump can be. * SO WHAT? * Carney hasn’t called an election yet, but he probably wants to in order to feed into the anti-Trump sentiment that is rising in the US’s northerly neighbour. His rallying call of “Canada never, ever, will be part of America in any way, shape or form” is surely designed to feed into the current mood and will be something that will be very much at the forefront of voters’ minds when an election is called. However, although he clearly has economic know-how, he will have to convince an electorate that he has the political skill to go toe-to-toe with Big Cheeto. 

Then in Ontario hits power exports to US with 25% surcharge as trade war escalates (Financial Times, Zehra Munir, Jamie Smyth and Amanda Chu) we see that Canada’s biggest province has slapped its own 25% tariff on US power exports which will impact 1.5m homes and businesses in Michigan, Minnesota and New York.  Ontario premier Doug Ford said that this would increase monthly bills for Americans by around $100. He added that “until the threat of tariffs is gone for good, Ontario will not relent”. He then added that if things with the US escalate further, he will “not hesitate to shut the electricity off completely”.

In retail trends news, Valentine’s Day proves a gift for UK retailers, as consumers hold back on big-ticket items (The Guardian, Phillip Inman) shows that an uptick in gift-buying for Valentine’s Day gave retailers a boost last month, according to the latest figures from the BRC. Consumers are still holding off buying big ticket items though. Still, total UK retail sales increased by 1.1% year-on-year in February, which is better than the 12-month average growth rate of 0.8%. * SO WHAT? * It seems to me that you could interpret this as consumers still WANTING to spend but just holding back because of the broader economic backdrop. Interestingly, the latest YouGov/Cebr consumer confidence index showed that households were actually quite upbeat despite a wonky start in January and separate figures from ManpowerGroup showed that a number of sectors were beginning to employ new staff after a months-long hiring freeze. Defence and public sectors were “bucking the hiring trend while other sectors hold back”.

There’s bad news for meat-lovers in Steak prices to soar as restaurants battle cattle shortage (Daily Telegraph, Daniel Woolfson) as restaurant owners and butchers are warning that there

will be major price rises coming as the demand for red meat is rising amid cattle shortages across Europe and the UK. One restaurant owner is talking about raising steak prices by up to 40% and charging an extra £2 for a burger that currently costs £13. Prices are also rising in the supermarkets as well. The situation has been blamed on economic uncertainty and changes in farming subsidies. Jake Schogger – if you’re reading this, it doesn’t sound good for our combined Christmas do this year 😭😭😭

Then in ‘Fewer job cuts’ despite budget fears (The Times, Richard Tyler) we see that official figures from the Insolvency Service show that businesses have actually made fewer people redundant over the last 12 months than in the year before despite sluggish economic growth. On the other hand, the number of employers indicating major redundancies has increased to its highest level since October 2020. Concerns from the increased NICs and minimum wage continue to weigh on the minds of employers…

In a quick scoot around some of today’s other interesting stories, Novo Nordisk shares fall on latest trial results for new obesity drug (Financial Times, Michael Peel) highlights a rare bit of bad news for the company that makers Ozempic and Wegovy as it had another set of disappointing trial results for its latest obesity drug. Basically, the efficacy just isn’t living up to expectations.

In OpenAI strikes $12bn deal with CoreWeave (Financial Times, George Hammond, Tabby Kinder and Antoine Gara) we see that the AI giant has signed a five-year deal with cloud computing provider CoreWeave who will supply the computing power needed to train and run OpenAI’s AI models. * SO WHAT? * This will be a major boon for CoreWeave’s proposed $35bn public listing. OpenAI is doing this to wean itself off reliance on Microsoft, its biggest partner.

Elsewhere, Lloyd’s of London expects £2.3bn losses from California wildfires (The Times, Tom Saunders) cites the insurance market’s latest estimate of the cost of the wild fires which will dent it but not too badly, Unilever to hire influencers to sell mayonnaise and Marmite (Daily Telegraph, Hannah Boland) highlights a major plank in the new boss of Unilever’s strategy to drum up sales – spend more on using influencers – and KPMG to merge dozens of partnerships in overhaul of global structure (Financial Times, Stephen Foley and Ellesheva Kissin) shows that the accountancy firm wants to streamline its operations to boost growth and prevent audit scandals.

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