TheChek News Flow

A rare ‘bear steepening’ trade is pressuring governments and worrying investors

Wall Street is really worried about bonds. It might be time to buy some.

On Friday, a jobs report that blew past expectations pushed yields on 10-year Treasurys to 4.772%, the highest close since Nov. 1, 2023, and those on 30-year paper to 4.962%.

What is spooking markets, however, is that much of the recent rise in yields doesn’t appear to reflect expectations of stronger economic growth. Rather, it might be the result of investors applying a higher discount or “term premium” to hold long-term bonds, estimates by the Federal Reserve suggest. Some analysts attribute this to the possibility of Donald Trump’s promised tariffs derailing the global economy and leading to a jump in inflation, while his tax cuts bloat budget deficits further.

Movements in term premiums are usually strongly correlated across the globe, and the consequences are being felt more starkly in weaker economies overseas, especially in Britain. There, 30-year yields are trading around 5.4%, a 27-year high. U.K. Treasury chief Rachel Reeves, who has made a public pledge to appease bond markets while also attempting to set out some moderate growth ambitions in her latest budget, is under strong pressure.

France is also in the hot seat: The government is shackled by a parliamentary deadlock, and now has borrowing costs firmly above those of Greece.

In a further sign of trouble, the pound and the euro are falling, with the latter sliding close to parity with the U.S. dollar. The S&P 500 and the Stoxx Europe 600 ended Friday down 1.5%, and 0.8%, respectively.

But counterintuitively, bonds may ultimately prove to be the safest place amid the storm.

For one, the fiscal doomsayers are probably wrong: Countries that print their own currency can’t truly be pushed to default. More important, inflation-linked Treasurys have sold off too, belying the idea that markets see a hot economy and tariffs as a serious inflationary problem.

It might all have to do with interest rates after all. Since December, the Fed has squashed expectations of a prolonged rate-cutting cycle. As a result, the whole middle part of the Treasury yield curve—from two to five-year maturities—has become positively sloped for the first time since 2022. Only the very short end, from three months to one year, remains inverted, reflecting the one or two cuts that markets suggest might still happen this year.

The reason alarm bells are ringing is that longer-term bonds have sold off even more—a “bear steepening” trade, in Wall Street lingo. Three out of four times, yield curves steepen for the opposite reason, historical data shows: A fall in short-term yields driven by central banks cutting rates very fast. Bear steepenings following a period of inverted yield curves are rare, and mostly are reminiscent of the “stagflation” periods of the 1970s and 1980s.

But this gets to the core of the matter. Today’s situation, in which central banks have been able to aggressively raise rates without harming the economy, then slowly cut them while launching hawkish messages, is nearly unprecedented.

Keeping this in mind, what is happening to bonds makes sense. Fixed-income investors have ruled out a “hard landing” for the economy, and have been persuaded by officials that returns on cash probably won’t dip below 3.5% for the foreseeable future. They have thus started demanding a larger reward to lock up their money for longer.

This term premium still isn’t huge: It is reportedly adding 0.6 percentage point to 10-year yields, when the historical average is 1.5 percentage points. The steepness of most of the yield curve remains mild by historical standards.

So why did stock markets react so negatively on Friday? One key factor might be stretched valuations. After years of technology-led rallies, the S&P 500 has become so expensive that, even if analysts’ optimistic outlook for 2025 is realized, its one-year forward earnings yield has fallen to 4.6%—the same as the yield of a 5-year Treasury. This explains why equity holders are increasingly seeing bonds as competition, especially for medium-term investment horizons.

To be sure, this doesn’t rule out the possibility that yields could rise further, or that high yields themselves could have a negative impact on economic growth, especially abroad.

Were growth and corporate earnings to truly suffer, though, central banks would need to change course and go into stimulus mode. Guess which asset class gains in that scenario: Bonds.

Stephen Miran, nominated to advise Trump, has suggested high tariffs could be the price allies pay for U.S.’s defense umbrella

To serve as an economic adviser to Trump, it helps to share his belief that tariffs make the U.S. richer. Not many economists meet that criterion.

Stephen Miran has made just that case. Miran, nominated to chair Trump’s Council of Economic Advisers, has written that the U.S. could be better off with average tariffs of around 20% and as high as 50%, compared with the current 2%.

Miran’s views are worth studying, and not just because he’s going to advise Trump. He has described tariffs as a tool, and international intervention to weaken the dollar as another, that could address a longstanding global tension: the U.S.’s economic and military support for other countries have contributed to an overvalued dollar, wide trade deficit and hollowed-out industrial base.

“Sweeping tariffs and a shift away from strong dollar policy can have some of the broadest ramifications of any policies in decades, fundamentally reshaping the global trade and financial systems,” Miran wrote in a November report for Hudson Bay Capital, where he is senior strategist.

Miran wrote the report “A User’s Guide to Restructuring the Global Trading System” before he was named in late December as Trump’s choice to chair the CEA, the White House’s in-house economic think tank.

The report, Miran wrote, reflected his views, not Trump’s, and is intended not as policy advocacy but to “understand the range of possible policies that might be implemented.”

Miran, 41, earned his Ph.D. in economics from Harvard University in 2010 and he has since worked in financial markets and is a fellow at the conservative Manhattan Institute.

While novel, his arguments—including for tariffs—are grounded in orthodox economics. Miran is not a contrarian who assumes “all academics must be wrong,” said David Cutler, a Harvard economist who served in the Clinton administration and was one of Miran’s Ph.D. advisers. He’s “guided by the theory and evidence.”

That doesn’t mean his proposals would work. His report acknowledges a high risk that they won’t: “There is a path by which these policies can be implemented without material adverse consequences, but it is narrow.”

Economists agree that trade enables a country to both consume and produce more, and tariffs leave it worse off. Yet in the decades after Adam Smith made the definitive case for free trade in 1776, economists identified conditions under which a country might be better off imposing a tariff.

Suppose an importer is a monopsonist—a dominant enough buyer to influence the price it pays (just as a monopolist influences the price at which it sells). It could impose a $10 tariff on an imported widget, and its price, instead of rising $10, would stay the same because the exporter lowered its own price by $10 to avoid losing market share.

So consumers are unscathed. Even if they pay a bit more, that might be more than offset by tariff revenue. The rate that maximizes this net benefit is called the “optimal tariff.” Miran cites research by Arnaud Costinot of the Massachusetts Institute of Technology and Andrés Rodríguez-Clare of the University of California, Berkeley, that a tariff of around 20% is optimal, and up to 50% could still leave the U.S. better off.

This represents an argument for higher tariffs as a goal in and of themselves, in contrast to some Trump allies’ defense of tariffs as a negotiating tactic.

An optimal tariff policy is explicitly “beggar-thy-neighbor”: one country benefits only by hurting another. Since World War II, as the world pursued reciprocal tariff reductions, “it’s hard to find real life examples of countries motivated to pursue it in a systematic, and deliberate, way,” said Doug Irwin, a trade historian at Dartmouth College.

Optimal tariff theory has some real-world drawbacks. It doesn’t seem borne out by Trump’s tariffs on China. In an interview, Costinot noted that studies found the tariffs were mostly passed through to American importers. (Miran’s report disputed those studies.)

f other countries retaliate, as China, the European Union, Mexico and Canada did in 2018, the tariff is no longer optimal: Both sides lose. “Retaliatory tariffs by other nations can nullify the welfare benefits of tariffs for the U.S.,” Miran acknowledged.

To deter retaliation, he wrote that the Trump administration could “declare that it views joint defense obligations and the American defense umbrella as less binding or reliable for nations which implement retaliatory tariffs.” In other words, the U.S. might not defend Japan, South Korea or a fellow NATO member that retaliated.

Another problem: Tariffs only leave the U.S. better off if import prices barely rise. But in that case, consumers have no incentive to switch from imported to domestic goods, which nullifies Trump’s aim of boosting American manufacturing.

Yet another caveat is that tariffs might not reduce the trade deficit because the dollar rises in response, which makes imports cheaper and exports less competitive.

As an alternative to tariffs, Miran said the U.S. could weaken the dollar through a “Mar-a-Lago Accord,” modeled on the 1985 Plaza Accord in which the U.S. and its allies jointly acted to drive down the dollar. “After a series of punitive tariffs, trading partners such as Europe and China become more receptive to some manner of currency accord in exchange for a reduction of tariffs,” he wrote. Or, the U.S. could impose a user fee on buyers of Treasury debt.

If this triggers selling of long-term bonds, the Federal Reserve might have to buy them to limit upward pressure on long-term interest rates, Miran wrote. The Fed is more likely to cooperate with the Treasury on currency and bond interventions in return for independence on monetary policy, he wrote. (Trump has demanded more say on monetary policy. Miran has elsewhere proposed the president and state governors have more control over the Fed’s governance.)

A major question is whether a threat to withhold the defense umbrella from countries that don’t cooperate would be effective. The U.S. has no defense alliance with Mexico, Vietnam or China which account for half the U.S. trade deficit.

On Tuesday, Trump declined to rule out military force to pry Greenland from Denmark, and that he would use “economic force” to annex Canada. Both are fellow NATO members. Allies may conclude from Trump’s repeated threats against them that the U.S. defense guarantee no longer exists. Russia and China may draw the same conclusion, and seize the opportunity to increase aggression against their neighbors.

Miran himself dryly acknowledged “potentially volatile…consequences.”

Mets Owner Steve Cohen Had an Even Better Year Off the Field

Hedge fund Point72 to return as much as $5 billion in profits to investors and raise fees

Steve Cohen’s New York Mets lost to a playoff rival to end their 2024 baseball season. The billionaire’s hedge fund, meanwhile, topped the competition.

Cohen’s Point72 Asset Management generated a return in 2024 of about 19% in its flagship fund, according to people familiar with the matter. It outperformed funds from Citadel, Millennium Management and other peers as well as indexes tracking the broader hedge-fund industry. In 2023, Point72 gained 10.6%.

That run left Point72 with one of Wall Street’s good problems: having too much investor cash to deploy. The firm has told clients it would hand back to them between about $3 billion to $5 billion in profits in early 2025, the people familiar with the matter said. It managed $35 billion in assets in mid-2024.

Investors were satisfied enough with recent returns to OK an increase in fees. Rather than charge a fixed management fee, firms like Point72 pass on some or all of the costs of running their funds to investors, an amount that can vary year to year.

Going forward, Point72 clients will foot the bill for certain costs that Cohen previously covered, the people familiar with the matter said. The change will likely boost the expenses investors bear by a few tenths of a percentage point of fund assets.

At the top of today’s hedge-fund hierarchy are large multimanager firms like Point72, Citadel and Millennium that divvy up money across scores of specialized teams and constrain risk-taking to produce more dependable returns. They have also come to account for a disproportionate share of hedge-fund jobs, and their trading has an outsize footprint in the stock market.

Citadel’s main fund gained 15.1% in 2024, people familiar with the matter said. Millennium gained 15% and Balyasny Asset Management, another big multimanager firm, gained 13.6%, the people said. A composite hedge-fund index compiled by research firm PivotalPath was up 10.8% for the year, while the total return of the S&P 500 index was 25%.

Many pension plans, foundations and other hedge-fund investors prefer the steadier performance of multimanager firms to boom-or-bust hedge funds where home-run years can be followed by strikeouts.

Cohen, worth about $21 billion according to Forbes, has plowed much of his hedge-fund fortune into the Mets. He purchased the team for about $2.5 billion in 2020 and spared no expense to upgrade its roster to compete for a World Series title. Once a publicity-shy figure, Cohen now shares his thoughts on the team and messages with fans on the social-media platform X, where he has nearly 300,000 followers. Many affectionately call him “Uncle Steve.”

After the Mets lost to the Los Angeles Dodgers in last year’s playoffs, Cohen signed superstar outfielder Juan Soto to a 15-year, $765 million contract. It was the richest deal for a player in sports history.

A few months ago, Cohen decided to stop trading his own portfolio to focus on running and building out Point72. He recently hired a former Blackstone executive, Todd Hirsch, to lead an expansion into private credit, among the fastest-growing corners of Wall Street.

Point72 also launched a stand-alone stock-picking fund in October dedicated to artificial-intelligence companies that Cohen planned to stake with $150 million of his own money, according to an investor presentation reviewed by The Wall Street Journal. The fund, called Turion after AI theorist Alan Turing, will hold stocks for longer and be more exposed to market swings than Point72’s main fund. Turion gained about 14% in the final three months of 2024.

Multimanager firms are so flush with capital that finding opportunities to put that money to work has become more challenging. Millennium and others are allocating billions of dollars to outside hedge funds, while Citadel in prior years also decided to hand back billions to clients.

L’Oréal returns to anti-wrinkle injectables with Galderma deal

French beauty group acquires 10% stake in newly listed dermatology company

L’Oréal has acquired a 10 per cent stake in newly listed dermatology company Galderma, in a move that takes the beauty group back into the market for anti-wrinkle injectables and fillers after 10 years in traditional cosmetics.

The French beauty company acquired the stake for an undisclosed sum from a consortium led by Swedish private equity group EQT. The consortium, which has owned Galderma for five years, recently took the company public and remains a shareholder.

Nicolas Hieronimus, chief executive of L’Oréal, said the deal “allows us to explore partnering in the fast-growing aesthetics market, a key adjacency to our own pure beauty play”.

Galderma, which sells everything from acne treatments to aesthetic injectables and fillers designed to eliminate wrinkles and alter facial features, said it had formed a scientific partnership with L’Oréal to develop anti-skin ageing technologies.

Analysts estimate the stake to be worth €1.7bn.

Based in Zug, Switzerland, Galderma was established in 1981 as a joint venture between Nestlé and L’Oréal. In 2014, Nestlé bought out L’Oréal’s 50 per cent stake, and the company was acquired by the consortium led by EQT for $10bn in 2019.

“L’Oréal is moving left-field [with] beauty tech/devices and now injectables, in a notable shift away from traditional cosmetics, perhaps a sign of a view on the future of the beauty wallet,” wrote Molly Wylenzek, analyst at Jefferies, adding that L’Oréal probably took the stake with a view to “higher ownership and control over time”.

L’Oréal shares were down 1 per cent in early trading on Monday, amid broader turbulence in global stock markets. The deal comes after Galderma’s investors, which also include the Abu Dhabi Investment Authority and Singapore’s GIC, took the company public in Switzerland in March.

The initial public offering for Galderma raised about SFr2.3bn ($2.7bn) at a price of SFr53 a share. Most of the proceeds from the IPO were intended to repay and refinance Galderma’s debts.

Shares in the company have since risen to about SFr67. Galderma’s market capitalisation is roughly SFr16bn.

About half of Galderma’s annual sales are in its injectable aesthetics products, according to Bernstein, with the rest derived from skincare brands such as Cetaphil and prescription drugs for skin conditions. Galderma generated more than $4bn in net sales in 2023.

Since becoming chief executive in 2021, Hieronimus has carried on the group’s appetite for acquisitions with bigger coups such as a $2.5bn deal for luxury skincare brand Aesop last year, and has said the group could do more.

Buying into the fast-growing injectables market positions L’Oréal well to benefit from the two big trends in beauty markets, medicalisation and premiumisation, said Bruno Monteyne, analyst at Bernstein. “Most of L’Oréal’s market outperformance comes from the mix being in the right place at the right time. Injectable aesthetics are the fastest growing area of beauty, hence the logic,” he said.

L’Oréal has begun to feel the pressure from slowing demand in its key Chinese market, with sales of cosmetics and skincare products there falling in the second quarter.

In the period, its dermatological unit, home to brands often found in pharmacies such as CeraVe, la Roche-Posay and SkinCeuticals, also underperformed analysts’ expectations with slowing sales growth, after several years in which it drove earnings at the company.

Baby boomers and ‘Ozempic face’ drive injectables craze

People ‘want to look what they feel like, not what they may look like’ says dermatology giant Galderma

Baby boomers and users of weight loss drugs suffering from “facial sagging” are flocking to injectable aesthetic treatments and boosting sales, according to dermatology group Galderma. 

The Swiss company, which was spun out from Nestlé in 2019 and went public last year, has seen its share price soar as the popularity of products designed to smooth wrinkles and improve facial features gathers pace. 

“I think there’s been a dramatic shift in what older looks like,” chief executive Flemming Ørnskov said in an interview with the Financial Times, nodding to the fact that more people are living healthily for longer.

The company had seen a “significant uptick” in consumers aged 60-plus opting for aesthetic treatments. “People are living another 10 to 15 years and they want to look what they feel like, not what they may physically look like if they hadn’t taken care of themselves,” Ørnskov added.

Galderma is the world’s second largest player in the $9bn market for neuromodulator injections and fillers after US firm AbbVie. The former are toxins that relax muscles in the face to reduce wrinkles, and the latter, gel-like injections used to make skin look plumper.

Weight loss drugs such as Ozempic are also a significant driver of sales, Ørnskov said, with many dermatologists reporting that patients are seeking out treatment for so-called “Ozempic face” in regions where there is a higher penetration of drugs using GLP-1s such as the Middle East and North America. 

“If they lose eight to 10 kilos or more, they start showing facial sagging,” said Ørnskov. “There, people will need to use a filler.”

Galderma’s most popular filler for weight loss drug users is a product called Sculptra, which was initially developed for HIV patients who experienced rapid weight loss, he added.  

At its initial public offering in March last year, Galderma raised approximately SFr2.3bn ($2.7bn) at a price of SFr53 a share. Shares in the company have more than doubled to SFr108.50 a share.

Galderma’s net sales grew 9.2 per cent to $3.2bn in the nine months to September 2024, driven by its two largest divisions, dermatological skincare — which includes everyday skincare brands like Cetaphil — and aesthetic injectables. Its third prescription treatment division, has lagged behind, with sales growing 2.9 per cent in the period.

US sales, which make up 40 per cent of the group total, grew 2.5 per cent in the first three quarters, compared to 14.5 per cent in the rest of the world as a result of subdued consumer demand in the market.

The company is hoping to boost US sales with the launch of its new product, Nemluvio, which treats atopic dermatitis, and recently received approval from the US Food and Drug Administration. Approximately 7 per cent of people in the US suffer from eczema, the company said.

Despite the US slowdown, Galderma said it was starting to close the gap with its key competitor in the injectables category, AbbVie, which invented the famous Botox brand and holds the leading market position in the category. 

According to Jefferies analysts, AbbVie’s Botox and Galderma’s Dysport are the leading neuromodulators with Dysport used in 80 per cent of US doctors’ practices compared to Botox’s 20 per cent.

Galderma says Sculptra is now the second largest filler brand in the US. It has just launched a new filler specifically designed for people who want to look like they have better bone structure, for example men who want the appearance of a stronger jaw. 

The Swiss group was formed in 2019 when Nestlé sold its skin health division to an investor consortium led by private equity firm EQT for $10bn, after the food giant concluded that it did not fit alongside its chiefly nutrition-focused portfolio. 

Nestlé previously ran the skincare unit as a joint venture with L’Oréal but took full control in 2014, in exchange for €2.6bn of its shares in the French cosmetics group. 

In August L’Oréal reacquired a 10 per cent stake in the company. Analysts said the move indicated a renewed interest in the aesthetics injectables category, which has far outperformed other consumer categories. 

AI is taking the US in a strange new direction

It will drive the market to new heights and boost growth, but bring with it more political and social disruption

I’ve been sceptical that artificial intelligence will radically remake labour markets in the short term, in part because so much hype comes from the tech industry itself. But in the last couple of months, I’ve encountered some very diverse use cases for AI that have me thinking differently.

First, a psychiatrist in New York told me how mental health professionals are beginning to use AI to track clients’ word choices across sessions. Word choice can be an important factor in understanding mental illness and making diagnoses. Previously, this was dependent on a therapist’s own memory and perceptions. Now, AI-driven analytics will be, in his words, a “game changer” in terms of how effectively patients can be diagnosed and treated.   

Second, an investor told me about a company in the US, Axon, that is leveraging AI and proximity data. One product, called Draft One, allows police in places such as Lafayette, Indiana to download body-camera images, then push a few buttons to create a first draft of the “incident reports” that currently take up roughly 40 per cent of their time. While other attempts at high-tech policing have come with unforeseen challenges (such as algo-racism), markets are keen. Axon’s stock is up 730 per cent over five years.

Finally, weary after a long business trip, I recently got a massage in Anchorage, Alaska. My masseuse, who had dropped out of high school, had managed to turn her difficult life around in dramatic ways and wanted to write a memoir to inspire others. Discovering that I was a writer, she asked me to read her book proposal, which turned out to be as good if not better than many I’ve seen in high-end literary slush piles. Her co-author was ChatGPT.

Consider how many such anecdotes — reaching across geographies and industries — there are, alongside the fact that productivity in the US is finally on the rise after flatlining during Covid.

There may be multiple reasons for that, from low-wage immigration that allowed more skilled workers to move up the ladder into better jobs, to cyclical gains post-pandemic. But most experts agree that greater implementation of cutting-edge technologies such as AI is clearly playing some role in driving up productivity.

As a recent Apollo economic outlook note put it: “The US is experiencing a surge in corporate and research spending on the back of the AI revolution — a dynamic not seen in other developing nations or even China.”

There are three key lessons to take from this.

First, scepticism about how frothy the US market in general, and technology stocks in particular, are is entirely understandable. But it’s hard to see how Europe and many other countries would outperform relative to the US if we are heading back to a period of technology disruption that is similar, if not exponentially more dramatic, than what we saw in the 1990s.

Back then, investors will remember, the US pulled ahead of Europe in terms of technology deployment and, as a result, in economic and market growth. AI would seem to be putting that trend on steroids today.

That leads me to lesson two: the fortunes of countries, companies and individuals often diverge in periods of technological change. The term “jobless recovery” was coined after the 1990-91 recession, because while stock prices, corporate margins and GDP growth surged, employment growth lagged behind for longer than expected. While unemployment is low in the US today, it is notable that workers in areas ripe for disruption by AI — such as software development or middle management gigs — seem to be getting more redundancy notices.

It obviously takes time for job markets and people to adapt to technological change. Yes, as the economists will tell us, new technologies eventually create new jobs. But as historians, sociologists and social workers can attest, that doesn’t mitigate the pain of those going through such big shifts. Nor does it prevent the disruptive political convulsions that can result.

The disruptions to manufacturing jobs, which represent only a little over 10 per cent of employment in the US and many EU countries, brought us Donald Trump and European populism. We are about to see up to 85 per cent of the labour market disrupted to some extent by AI. What will that mean?

For a start, says Nobel laureate and MIT professor Daron Acemoglu, today, as in the past, “it’s likely that the short- to midterm gains from AI will be distributed unequally, and will benefit capital more than labour.” This brings us to lesson three: people on most rungs of the socio-economic ladder are anxious about the future of work. If the AI enthusiasts are right, it’s difficult to see whose job won’t be affected by the technology. That anxiety has big consequences.

Jim Clark, founder of the recently launched New York-based Future of Employment and Income Institute, tells me that “economic anxiety changes behaviour, and that can create major political shifts”. Think about the Luddites, for instance, whose name is still given to the backlash against tech, or, on the upside, the social welfare state, which came out of the industrial revolution in Germany.

Investors, business leaders and politicians should take this to heart. What’s good for markets and even GDP growth today may not be good for politics or society tomorrow — at least not without big policy shifts to help buffer the coming disruptions.  

Trump’s second term threatens US leadership on global health

Wellbeing of billions could be hit if administration cuts funding and spurns scientific best practice

Donald Trump’s return to the US presidency threatens to shake up and, in

some cases, undermine Washington’s commitments to global efforts to improve public health, according to multiple organisations and officials.

The plans by Trump’s transition team to again trigger a withdrawal from the World Health Organization reflected a wider suspicion of international bodies, they said, casting doubt over US contributions to scientific research, infectious disease control and pandemic preparation.

John-Arne Røttingen, chief executive of Wellcome Trust, one of the largest foundations funding health research, said: “US health leaders bring tremendous technical expertise, leadership and influence and their potential loss from the world stage would have catastrophic implications, leaving the US and global health weaker as a result.”  

Experts are also concerned that the second Trump administration will spurn scientific best practice, spreading disinformation globally. They cite Trump’s nomination of Robert F Kennedy Jr, a prominent anti-vaccine campaigner, as health and human services secretary.

Discouraging vaccination campaigns would threaten “millions of lives worldwide”, said Peter Maybarduk, access to medicines director at Public Citizen, a US-based consumer advocacy group. “Disinformation could roll back one of humanity’s chief accomplishments of the past 100 years.” 

A person close to the Trump transition team said: “I don’t think President Trump much cares what self-titled global health experts say. The American people resoundingly voted against the elites and those shoving their know-better attitude down the throats of the American people.”

Health experts have already warned that Trump plans to start the process of leaving the WHO on the first day of his administration on January 20, completing unfinished business from his first term and potentially crippling

vital programmes.

People close to the stalled negotiations for a WHO-brokered pandemic preparedness treaty are also worried that the new administration will sign that treaty’s death warrant.

The US is the largest funder of WHO and the Global Fund to fight HIV, tuberculosis and malaria. It bankrolls homegrown programmes such as Pepfar, which tackles HIV in more than 50 countries.

A reduction of US funding would come at a bad time for non-profit organisations, which are already battling cuts from other rich-country donors as the memory of the Covid-19 pandemic fades.

Gavi, the vaccine alliance, is trying to raise at least $9bn for its next five-year funding cycle and the Global Fund is asking for pledges to its replenishment round by October. Dianne Stewart, the Global Fund’s head of donor relations, said funding for health was either “shrinking or stagnant”. 

Some NGOs will also be hit by the expected re-enactment of the “global gag rule”, which stops US funding to organisations that provide or promote abortion services. In Trump’s first administration, it led Marie Stopes International and the International Planned Parenthood Foundation to decline funding.

US domestic agencies, such as the National Institutes of Health and the Centers for Disease Control and Prevention, fund scientific research globally.

Dr Bernard Ogutu, chief research officer at Kenya Medical Research Institute, which receives support from the NIH, CDC and US army, said the threat of reduced funding was a “double tragedy” as many countries including Kenya, were suffering a “meltdown” of their economies.

Kennedy’s nomination has caused particular concern in Australia, which provided experts and equipment to help counter a 2019 measles outbreak that killed dozens of children in the Pacific island nation of Samoa.

Having met anti-vaccine activists in Samoa earlier that year, Kennedy was accused of amplifying distrust as authorities tried to rebuild confidence in the vaccination programme. Two children had died the previous year after the measles, mumps and rubella (MMR) jab was mistakenly mixed with a muscle relaxant. Kennedy denied any responsibility for the subsequent measles outbreak.

The risk of more deadly episodes like the Samoa measles outbreak would rise if the Trump administration attacked the credibility of childhood jabs such as the MMR vaccine, experts warn.

It was “hugely concerning” that vaccine sceptics such as Kennedy in the Trump administration appeared “unable to interpret or acknowledge the robust scientific evidence”, said Margie Danchin, a paediatrics professor and vaccinologist at Melbourne university.

For now, global health organisations are hoping to avoid Trump’s attention. Some are privately rallying sympathetic Republicans in Congress, compiling reports arguing that overseas funding also helps protect Americans.

Bjørn Lomborg, president of the Copenhagen Consensus Centre think-tank, has urged Trump’s health team to focus on “smarter spending” to improve the effectiveness of US aid.

Improved care for newborns and mothers was one area where targeted spending could make a big difference, he said. About 2.3mn children a year die in their first month and 300,000 mothers die in childbirth each year, according to UN figures. 

“That’s exactly the strength of Trump. He’s not afraid to piss off a lot of people and say ‘we’re going to do the smarter stuff first’,” he added. 

If the US does cut health funding, it is not obvious who will fill the gap. Lawrence Gostin, professor of global health at Georgetown Law, said European leaders had told him that neither the EU nor individual countries were likely to step up.

The prospect of China dominating global bodies could worry Trump, but Beijing also remained “ambivalent” about agencies such as the WHO, argued Jeremy Youde, a political scientist at Portland State University.

Gostin said “China has a very different idea of global health and multilateralism than the US”.

The Gates Foundation, a major force in global health and the WHO’s second largest funder, has not yet promised to increase its donations.

For Ayoade Alakija, a global health specialist and chair of Switzerland-based diagnostics NGO Find, the potential US retreat is a “clarion call” for leaders of developing nations to invest in their own countries.

Healthcare was “under threat from a multilateral perspective”, she said. “We saw it during Covid and you could almost say that at least Trump is honest [in thinking]: ‘I don’t really care about you all’.”

Polish chemicals company Grupa Azoty explores sale of German fertiliser business

Move to shore up finances as group struggles with cheap competition from Russia and Belarus

Poland’s largest chemicals company, Grupa Azoty, is exploring a sale of its German fertiliser business to shore up its finances as it continues to struggle with cheap competition from Russia and Belarus. 

In an interview with the Financial Times, chief financial officer Andrzej Skolmowski said the state-controlled company could return to positive ebitda this year, but he acknowledged that Azoty still faced a liquidity shortfall and debt problems. In October, Azoty reported a third-quarter loss of 226mn zlotys (€53mn), compared with a loss of 743mn zlotys in the same period a year earlier.

While Azoty’s problems have been particularly acute, other European chemical companies have also struggled with weak demand and high energy prices. In September, Dutch company OCI sold its methanol business as part of a break-up plan. Last year, ExxonMobil and Sabic also closed some of their European ethylene facilities while US group LyondellBasell put its entire European operations under review.

In 2018, Azoty strengthened its position as one of Europe’s largest producers of fertilisers by buying German company Compo for €235mn. While no final decision has been taken, Skolmowski said Compo could be divested. 

“Compo was acquired a few years ago in a different situation for Grupa Azoty and currently we think much more from the cash point of view,” he said. “I don’t want to talk about the price of Compo because it depends of course on the offer.” 

Azoty’s woes have also prompted the Polish government of Prime Minister Donald Tusk to demand much tougher EU restrictions on Russian and Belarusian exports of potash.

The EU has already imposed sanctions on this key fertiliser ingredient since Russia’s full-scale invasion of Ukraine in 2022. While tougher measures were discussed in November, the Poland-led drive for higher tariffs faces stiff resistance from southern EU countries and some other member states worried about production costs for their farmers. 

Skolmowski argued that support for EU fertiliser producers should be “part of our food security”.  

After Tusk’s election win over the Law and Justice (PiS) party and return to office in late 2023, Skolmowski was one of a handful of senior managers to be reappointed to Azoty with the task of turning it around. 

Azoty has 11.5bn zlotys of debt, compared with none in 2015 when PiS came to power and replaced the management of Azoty and other state enterprises.

Almost one-third of this debt relates to an unfinished polymer production project near the north-western town of Police, which also includes port infrastructure. In September Azoty started talks with Orlen, Poland’s national oil and gas company to help it complete Police, which is Azoty’s largest-ever project.

While Orlen could help with Police, it also added to Azoty’s problems when it expanded into fertilisers under the previous government, Skolmowski said. “We have a surplus of fertilisers in our small market and even knowing that, another state-owned company decided to increase capacity.”

Azoty’s restructuring will “for sure” require job cuts among its 14,500 employees, Skolmowski said, but the numbers “will depend on which part of our business will stay and in which reconfiguration”. 

After Azoty’s listing in 2009 on the Warsaw stock exchange, the Polish government helped it thwart a hostile takeover attempt by Russian competitor Acron in 2012.

Acron is owned by Viatcheslav Kantor, who still has a 19 per cent stake in Azoty. However, he was put on an EU sanctions list after Russia’s invasion of Ukraine in 2022 and the Polish government froze his stake in Azoty.

“I have to be honest, he’s done nothing against the company directly as a shareholder but we compete with Acron in the markets,” Skolmowski said.

US activist Boaz Weinstein wants to be ‘white knight’ of UK stock market

Saba Capital founder says aim of his firm’s takeover of seven investment trusts is a new strategy to help small investors

US hedge fund boss Boaz Weinstein has said he wants to be a “white knight” for UK investors and the London stock market by buying into the £266bn investment trust sector.

The founder of New York-based Saba Capital is campaigning to take over seven UK investment trusts. Weinstein told the Financial Times that if he was successful, he would combine their assets and sell holdings in expensive US stocks to buy shares in UK companies and other UK investment trusts.

“We’re the white knight,” Weinstein said. “We’re not the American taking assets to the US, we’re coming to help small UK investors.

“If we’re successful and become the fund manager, then US equities like Tesla could be sold and equities of UK investment trusts will be bought.”

Investment trust shares have suffered in the general gloom about the London market: a number of companies have left the market or moved their primary listing from the UK to the US, and there have been few IPOs.

According to the Association of Investment Companies trade body, the average share price discount to net asset value for UK investment trusts is 15.4 per cent — close to the biggest since the 2008 financial crisis.

Weinstein said Saba Capital would offer a “new product . . . an investment trust in the UK that will largely hold other investment trusts. So it will create demand worth billions of pounds.”

His comments provide more detail about Saba’s plans for the trusts, which the firm is attempting to take over in one of the biggest coups the 150-year-old sector has faced. The plan is to merge the trusts into a new vehicle and use the combined assets to buy stakes in other trusts, if shareholders agree.

The trusts are currently run by Baillie Gifford, Janus Henderson, Manulife and Herald Investment Management. Referring to the Baillie Gifford US Growth trust, Weinstein said: “It means there will be one less Baillie Gifford fund on the London Stock Exchange — it’s not like M&S has delisted, the [current] trust is a shell of Tesla and Nvidia. Instead, you’ll end up with ours on the LSE.”

James Budden, a director at Baillie Gifford, said: “This is a case of twisted logic — there are hundreds of trusts listed on the LSE. If Saba goes round merging them into their fund, there will be fewer companies and less assets invested and less options and choices for investors.”

Saba is planning to become the investment manager of the trusts if their shareholders agree to replace the boards with the firm’s nominated candidates, which include Weinstein.

But its approach has been criticised as “opportunistic” with some fund managers expressing concerns that retail shareholders will not vote. One existing manager notes that shareholders can be left in a vehicle that is completely different from the one they originally bought.

“If they’re apathetic, maybe [the trusts] should have treated them better,” Weinstein said.

Total value of large private equity deals in Europe increased at twice the rate of the rest of world in 2024

Private equity groups ramped up activity in Europe last year, taking advantage of the continent’s economic woes to snap up big companies at depressed valuations.

The total value European buyout deals worth more than $1bn increased at more than twice the rate of the rest of the world, a Financial Times analysis of Dealogic data shows.

Some $133bn of large deals were struck on the continent in 2024, a 78 per cent increase on the previous year. That compared with a 29 per cent increase in the rest of the world, to $242bn.

The data are the latest evidence that private equity firms are feasting on Europe’s wealth of cheap companies.

Big transactions included a $6.9bn consortium agreement for investment platform Hargreaves Lansdown and a $5.5bn deal by Thoma Bravo to take private cyber security company Darktrace in the UK, and firms including Brookfield agreeing to take a $3.8bn stake in the French renewable energy developer Neoen.

A challenging economic outlook — with weak growth forecasts, political turmoil and geopolitical threats — and the strength of the US dollar has encouraged US private equity funds to target specific countries within Europe, according to Neil Barlow, a partner at law firm Clifford Chance.

“Certain more stable economies within Europe, such as the UK, the Nordics and Germany [have become] a focal point for private capital providers”, he said.

European stock exchanges, including the London Stock Exchange, have been grappling with an exodus of companies, as businesses relocate their listings to the US or go private with the backing of buyout firms.

The value of European so-called take-private deals which involved a majority stake of more than $1bn jumped by 44 per cent to $52bn last year, the Dealogic data show, with 15 such deals compared with 10 the year before.

European equities have traded at lower valuations than those listed in the US for the past decade. But the gap has been widening, and the Stoxx Europe 600 now trades at a record discount to the US’s S&P 500.

However take-privates made up a smaller proportion of the total value of big buyout deals in 2024 than the year before.

There have been a number of big transactions where ownership has flipped between different private equity firms, or where the composition of a consortium of private capital owners has shifted.

In December, the investment arm of Goldman Sachs Asset Management agreed a more than €2bn deal to acquire Dutch drugmaker Synthon from UK buyout firm BC Partners.

Earlier in 2024, Swedish buyout group EQT agreed to sell a stake in schools business Nord Anglia to a consortium of investors who valued the business at $14.5bn, while EQT retained control.

Smaller deals did increase faster in the rest of the world compared with Europe, however. Buyouts where the majority stake was worth between $50mn and $1bn grew only 1 per cent in Europe last year, against 16 per cent in the rest of the world.

Richard Hope of private markets firm Hamilton Lane said it was “no surprise” that the continent had recorded slower growth than the rest of the world for smaller deals.

“The volume market in Europe is the sub-€1bn space”, he said, adding that the lower end of the market was suffering from “the macro headwinds present in the region”.

Alexis Maskell of private equity firm BC Partners said that the buyout market in Europe was “both fragmented and very diverse but . . . you can source market leading, but relatively under-the-radar, companies larger than $1bn”, typically “at a discount to their peers in the US”.