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Bangs for the bucks

Europe will struggle to meet its target of “defence readiness” by 2030, the EU’s institutional auditor has warned, given that surging defence spending has not been met with structural changes in how countries invest in their militaries.

Context: Russia’s 2022 invasion of Ukraine and US President Donald Trump’s mercurial attitude to Nato have prompted an overhaul of European defence policy, with capitals rushing to re-arm.

A report by the European Court of Auditors (ECA), the EU’s independent financial watchdog, warns that despite an almost 80 per cent jump in combined EU defence spending between 2020 and 2025, progress is stymied by national governments taking individual decisions and failing to co-ordinate weapons priorities and purchases.

“Capability planning in the EU largely follows a bottom-up approach, with individual countries identifying their own needs,” the ECA said. “The lack of an effective top-down EU planning process, coupled with insufficient co-ordination among different EU and national funding streams, could lead to fragmented investment, duplication or capability gaps.”

“If not implemented well, increased funding can also result in implementation risks and bottlenecks of materials, key components or skilled staff, making it difficult to use the funds,” the ECA added.

Brussels has rolled out €150bn in cheap loans for defence spending and also tweaked its rules on how countries can spend EU cash.

But analysts bemoan the dearth of cross-border defence projects and the failure to share industrial production and divide critical weapons systems across the bloc. Many governments still promote national defence monopolies to protect jobs.

“While the EU has launched several initiatives for member states to work together and pool their defence efforts . . . the goal of defence readiness by 2030 remains challenging,” said Marek Opioła, the ECA member who led the audit.

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Overhaul of bond positions suggested to Ministry of Finance aims to boost returns

The manager of Norway’s $2.3tn sovereign wealth fund has proposed an overhaul of its government bond portfolio that could see it slash its holdings of US Treasuries by about $80bn, as it looks to other types of debt to try to boost returns.

Norges Bank Investment Management said in a letter to the country’s finance ministry on Tuesday that it recommended reducing the weighting of government debt in the fund’s benchmark bond index from 70 per cent to 50 per cent.

The proposals would cut the fund’s global government bonds allocation by about $106bn, according to FT estimates, with most of this reduction coming in Treasuries. Just under 26 per cent of the overall fund is invested in fixed income.

The proposal comes amid mounting concerns over rising government debt levels and a global bond sell-off this year, as the US war with Iran fuels inflation fears. Treasury secretary Scott Bessent has intervened in the Treasury market multiple times this summer, but yields still stand at multiyear highs.

A lower Treasury allocation for Norway’s Government Pension Fund Global would be offset by purchases of riskier fixed-income products, particularly debt such as mortgage-backed securities.

These MBS are largely backed by government agencies, meaning Norway’s exposure to the risk of a US government default is only being reduced modestly. They do, however, offer slightly higher yields than Treasuries because of the risk that mortgages are repaid early.

“A government [bond] share of 50 per cent will be sufficient to cover the liquidity needs, including in periods of turbulence in financial markets . . . [while] the remaining part of the bond index should provide exposure to more sources of risk premiums,” the letter said.

The agency MBS is “guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae, and the credit quality is close to that of US government bonds”, it added.

The letter, signed by Ida Wolden Bache, governor of Norges Bank, and Nicolai Tangen, chief executive of NBIM, was sent in response to questions earlier this year from the finance ministry about the role and weighting of the fund’s bond portfolio.

The fund’s US dollar exposure would be “essentially unchanged” despite the proposals, said a NBIM spokesperson. According to the letter, the fund’s dollar exposure would fall by 0.5 percentage points. Its US allocation is below the weighting used in most global indices.

The proposals come after comments by finance minister Jens Stoltenberg in April that the fund had “no plans to reduce our exposure in the US”, even though some Norwegian lawmakers had suggested the fund was overexposed to US assets.

“There have been some questions [about] ‘should we reduce’; that’s a political decision,” Stoltenberg told the FT in April. “But I don’t foresee any big changes.”

NBIM’s proposal is to cut the fund’s exposure to US Treasuries by 12.2 percentage points, while increasing its holdings of non-government US fixed income by 11.4 percentage points, the letter said. This would lead to a reduction of almost $80bn in its allocation to Treasuries, according to FT estimates.

The portfolio’s allocation to UK gilts would be unchanged while its position in Japanese government bonds would rise by 2.8 percentage points under the plans.

The fund, which has more than $2tn in assets amassed through sales of the Scandinavian country’s vast oil resources, is invested in foreign markets and is used to smooth out short-term fluctuations in the nation’s budget and to save for future investment in its economy.

The NBIM spokesperson said the letter was only “advice” that formed part of broader recommendations to the finance ministry from an “Expert Council”, due by January. The ministry will make its final recommendations to parliament in the spring of 2027.

The letter proposed adapting the Bloomberg Global Aggregate bond index, a widely followed benchmark, into a gauge split roughly in half between government bonds and other forms of developed-market debt, such as mortgage-backed securities and bonds issued by development banks.

“The reason behind this change is to achieve a diversification of return sources,” the spokesperson said.

The letter also proposes following other large sovereign funds in weighting government bonds in proportion to the market value of their outstanding debt, rather than the GDP of the issuers.

Ultra-luxury timepieces now account for three-quarters of the sector’s growth

After three years of turbulence, Swiss watchmakers are searching for signs that the worst is over. Wars, tariffs, a soaring gold price, the strong Swiss franc and weaker luxury demand have all taken their toll. Now, export values have stabilised and volumes are rising again.

But recovery is an increasingly difficult concept to apply to the Swiss watch industry as a whole. While some manufacturers are cutting production and relying on state support to protect jobs, makers at the very top of the market are struggling to keep up with demand. A tiny fraction of watches now accounts for most of the industry’s growth.

“This year has presented a lot of challenges and there is a lot of uncertainty in the industry,” says Yves Bugmann, president of the Federation of the Swiss Watch Industry (FH). “I hope that the situation will improve over the next few months.”

In the first half of the year, Swiss watch exports were worth SFr12.2bn ($15.1bn), down 0.6 per cent year-on-year. But the headline figure disguises growing polarisation.

Last month, Swiss watch industry consultancy LuxeConsult published a report based on FH data showing that 75 per cent of the market’s value growth had been added by watches accounting for only 1.3 per cent of volumes. “Growth of ultra-luxury was spectacular,” says Oliver Müller, LuxeConsult’s founder and author of the report. “And it shows where the whole market is going.”

The picture was less comfortable lower down the market. Watches priced between SFr25,000 and SFr50,000 were the hardest hit, falling 8.3 per cent, while “accessible luxury” watches priced between SFr7,500 and SFr12,500 rose just 0.5 per cent, helped by steel models from Rolex, Omega and Cartier. “The brands have to adapt to a new situation in which it became very complicated for retailers to continue to replenish their stocks,” says Müller.

At the same time, first-half export volumes rose 2.3 per cent, driven largely, according to Müller, by Swatch Group brands Longines, Tissot, Hamilton and Swatch.

The uptick was unexpected. Annual Swiss watch exports fell from 17mn units in 2023 to 14.6mn in 2025, according to FH data. Many brands and suppliers have sought to protect jobs and skills through RHT, Switzerland’s state-backed short working hours scheme.

The industry’s problems haven’t curtailed the rush of new watch brands. This week, House of Brands has revived Gallet after a hiatus stretching back to the 1980s, following its reintroduction of Universal Genève in the spring. In July, former Audemars Piguet chief executive François-Henri Bennahmias announced N3W5, which is due to launch its first watches next autumn. And earlier this year, Niton, another defunct dial name, was resurrected by former Girard-Perregaux executive Leopoldo Celi.

Bennahmias, whose watch company will sit under the umbrella of his The Honourable Merchants Group, believes the market is ripe for disruption. “Four years ago, the watch industry was on fire and even the lousiest brands were selling,” he says. “Now, the market is down, but is this a sign people don’t have money? No. They’re tired of the same things. To get on people’s radar, you have to do something out of the ordinary.”

Georges Kern, chief executive of House of Brands, agrees. “There’s fatigue with the existing brands,” he says. Gallet, also a sister brand to Breitling, will sell watches priced between £2,220 and £5,300, considered the gateway to luxury watches. “Saying there’s no business at this price point is nonsense,” Kern continues. “We’re not surfing on a wave any more, so you have to take market share from others, which means you need to be better than them. The retailers are happy to have something new. They don’t want the 20th version of something they already have.”

While establishment watchmakers are battling to protect volumes, many of the younger independents making short-run pieces are struggling to keep up with demand. Three years ago, industry veteran and former Hublot supremo Jean-Claude Biver created a company in his own name with his son Pierre. With a focus on high-end horology and hand-finishing, Biver watches can carry price tags up to SFr500,000.

“We arrived at the right moment,” says Pierre, now Biver’s chief executive. “The market came down after Covid, but it wasn’t a bubble bursting. There was a plateau and results are back up again now. That’s brought collectors confidence, but for independents launching now, they are faced with a bigger challenge because the market is looking for brands that feel safe.”

That, says Biver, is fuelling demand for watches made by independent sector totems such as FP Journe, Kari Voutilainen and Rexhep Rexhepi, a view borne out by recent auction results. In June, Phillips sold an FP Journe Chronomètre à Résonance for $13.9mn, making it the fifth most expensive watch ever sold. Biver will make around 100 watches this year. “We are limited not by desire but by our capacity,” says Pierre.

Niton’s owner Celi, whose watches start at SFr44,750, expects annual production never to exceed 500 pieces. “Small specialist brands are where the volumes will be diluted,” he says. “Big brands doing most of the volumes, that’s not the future.”

The market is also being reshaped geographically. Before the pandemic, China and Hong Kong were key markets for the Swiss watch industry, but both have since shrunk. Exports to China are down 7.1 per cent this year.

This autumn, Switzerland is due to sign a trade agreement with China that will reduce almost all export tariffs to zero. “It could give us a boost,” says Bugmann. “We paid SFr100mn a year in customs duties [to China] that will be eliminated over the next few years.”

We’re not surfing on a wave any more, so you have to take market share from others

Georges Kern, chief executive of House of Brands

Kern is less convinced it will change demand. “It’s only 3.5 per cent,” he says of Chinese tariffs, noting that brands with global distribution constantly balance pricing to accommodate regional currency and tariff fluctuations. “Nobody will decrease prices in China. Brands will enjoy a higher margin there.”

Meanwhile, the US has become the industry’s largest market. Exports for the seven months to July are approaching SFr3bn, close to 20 per cent of the total and almost as much as the next three largest markets combined. “I expect the US to show good performance for the next few months,” says Bugmann.

Many brands are now spinning the globe for signs of life. South Korea and Mexico are growing strongly, but it is India that is outperforming the market, albeit from a low base. Exports are up 30 per cent this year. Another Swiss trade deal means tariffs on most goods exported to India will drop to zero by 2031. “India today is as significant as any major European market,” says Kern.

But the industry’s longer-term challenge may have less to do with geography than value. Prices have risen sharply since the pandemic even as volumes have fallen, leaving consumers increasingly selective about what they are prepared to buy.

“Consumers are more and more aware of the comparison between quality and price,” says Pierre Biver. “Rolex and Cartier are able to produce some of the best quality at their price point. Someone buying at over one hundred thousand, they still want quality for what they’re paying. The challenge is how do you put enough value in the products?”

The pressure is particularly acute among suppliers and manufacturers still dependent on RHT. Bennahmias argues the scheme can preserve jobs in the short term but cannot resolve overcapacity. “It’s putting a band-aid on something that’s more important than a cut, but without it people won’t have jobs,” he says. “With this erosion of the supplier network, we’re putting the entire industry at risk.”

Kern says he stopped using RHT before the summer. “I think we’ve reached the bottom,” he says. “Companies have to adjust capacities and then take market share.”

There are other signs that consumers have not lost their appetite for watches altogether. Prices on the secondary market are rising: online marketplace Chrono24 said its price index increased 5.5 per cent in the first half of 2026, led by Cartier, Tag Heuer and Tudor.

Manufacturers are also taking a greater interest in the used market. Rolex’s certified pre-owned business, launched in late 2022, is growing, while Audemars Piguet is expected to introduce a programme of its own this autumn. “It will be another boost to the secondary market,” says LuxeConsult’s Müller. “It brings trust, and trust brings more transactions.”

Yet with prices still climbing — Rolex has raised them twice this year — and volumes uncertain, the shape of any recovery remains difficult to predict.

“With the exceptions of Rolex and Cartier, brands are squeezed, which is why they are moving upmarket,” says Luca Solca, head of luxury goods research at Bernstein.

“For new brands to succeed, they will need to have something unique to say with a focus at the high end. But the market is crowded and not growing very much, so I don’t see how new entrants could survive. It would be a rare exception that does,” he adds.

Bennahmias is more confident. “There is no bad or good time to launch,” he says. “There is always room to launch new things.”

“Watches are an eternal symbol of wealth and power,” says Pierre Biver.

The ‘Deeply Nerdy’ Founders Behind Nvidia’s $13 Billion Bet on Hugging Face

The startup began as an emoji-named app for teens before becoming a crusader for open-source AI

A trio of nerdy Frenchmen came to New York to build a sassy chatbot for teens. A decade later, their startup has grown into an artificial-intelligence platform that is a pillar of the tech ecosystem, and a linchpin in the strategy of the world’s most valuable company.

Nvidia NVDA 1.80%increase; up pointing triangle agreed on Thursday to buy their AI company, called Hugging Face, for roughly $13 billion, doubling down on the chipmaker’s effort to challenge the dominance of proprietary AI models from OpenAI and Anthropic. With the deal, Nvidia is helping foster the ecosystem Hugging Face built for so-called open-weight AI tools that can be downloaded and tweaked by anyone.

But when Clément Delangue and Julien Chaumond first arrived at the Manhattan offices of venture capital fund Betaworks for its “BotCamp” startup program in the sweltering summer of 2016, their goal was more modest. They wanted to build a general-purpose chatbot that wasn’t boring like Apple’s Siri. It was more than seven years before the launch of OpenAI’s ChatGPT.

“It won’t always give you the right answer, but it will always give you a funny one,” Delangue, the chief executive, said during a demonstration that summer, in which the app traded selfies with Chaumond, the chief technology officer. “And of course, it’s always very sassy.”

The name of the app—Hugging Face—was a placeholder they had put on their application for the program, based on the title of their favorite emoji. They intended to change it later but never did.

The following spring, Thomas Wolf, a physicist turned patent lawyer, joined the founders as the chief science officer.

“They’re deeply nerdy. They’re deeply into science,” John Borthwick, managing partner of Betaworks, now an investor, said in an interview.

Raised in northern France, Delangue has long been engaged in digital collaboration and open systems. As a teenager, he sold motorbikes on eBay and later worked for the company, according to a profile on the website of Sequoia Capital, one of Hugging Face’s investors.

As a university student, he developed a platform for students to share notes and insights from their classes with others, according to a TEDx talk he gave in Paris in 2012.

Delangue was already working in product and marketing for startups in New York when he and Chaumond—a mathematician who had worked for startups and the French government—teamed up. They pursued a shared interest in natural-language processing, a type of computer program that they thought could be used to make a chatbot, and Chaumond flew from Paris to New York.

“It was the first time we worked together IRL for more than a day at a time,” Chaumond wrote.

They took an online class at Stanford with Richard Socher, a proponent of natural language processing, and formed a study group on the topic. Wolf was in the class, too, Socher said.

“I was very impressed by them. I thought they asked clever questions,” said Socher, who is now founder and chief executive of AI startup Recursive. He sometimes goes tree-climbing on Bay Area hikes with Delangue.

A major turning point for Hugging Face came in 2018, when Google released a new version of its transformer, the neural network technology at the heart of modern generative AI models.

Wolf told his co-founders he would take the weekend to make an open-source version of it accessible in the most popular language for AI researchers, Delangue said in a 2024 podcast episode. By Monday, the Hugging Face version had gone viral, and six months later it became a new business model.

“We think we need to pivot,” Delangue recalled telling investors.

As AI models grew in size, developers started to need a new platform to host them. Hugging Face built one. It effectively made a sharing platform for AI models that’s similar to what Microsoft’s GitHub is for code from software developers—a role that has grown as the AI revolution has taken off.

Today, there are millions of open-weight models on Hugging Face.

The company made news in July when it shared that it had been hacked by an autonomous swarm of AI agents, which it later discovered had escaped from an internal cybersecurity test at OpenAI. The company tried to dissect the attack logs using proprietary AI models, but was unable to because of security guardrails, so instead turned to an open-weight model from a Chinese developer.

Since the incident, Delangue has been outspoken about the need to preserve and promote access to high-quality, open-weight AI models so that potential cyberattack targets can effectively defend themselves. Nvidia has been, too.

Borthwick said he thinks the Nvidia investment makes sense for Hugging Face’s goal to democratize agentic AI beyond the 18 million developers currently on the platform. “Nvidia is enabling that growth by this acquisition,” he said.

Delangue said Thursday on CNBC that he approached Nvidia over the summer to pursue a deal. He saw that the world was facing a choice between a path where proprietary models like those from Anthropic or OpenAI dominate the field, and another where open-weight models proliferate.

“There’s a path where open-source AI is available to everyone, and everyone can actually become like an owner, a builder of AI and not just renting it or using it from other people,” Delangue said. “We needed to double down on open-source AI to really distribute the technology as much as we can all over the world.”

Novartis and BMS have both paused their autoimmune CAR-T programmes, three deaths from immune overreaction on one side, ICANS on the other. Two implications for Abivax.

1/ Competitive. Cell therapy was the structural long-term threat to chronic oral maintenance in immunology: one infusion, immune system reset for life, terminal value of any daily oral capped. That threat now moves out by years and the burden of proof shifts back onto the cell therapy camp. Limit of the read-across: none of the paused studies is in UC or Crohn's (lupus, MS, RA, myositis), so this is thematic rather than head to head.

2/ M&A. Novartis had eight autoimmune trials running and over 500 patients enrolled. If the intent was to build an immunology franchise organically, that route just became materially more expensive in time and in risk, which raises the relative appeal of acquiring a de-risked oral asset. Two cautions. A company handling a possible clinical hold and a fatality investigation typically slows major BD rather than accelerating it, and the Lilly angle from January remains the better documented one. We read this as improving the conditional attractiveness of a deal, not as lifting deal probability outright.

3/ The symmetric point. The episode raises investor and regulator sensitivity to any safety signal in a non-life-threatening autoimmune indication. That is a headwind to the malignancy debate on obefazimod, not a tailwind.

Key variable: platform specific or class wide. Novartis compresses cell expansion to roughly a day, BMS says five with stabilisation before infusion and disputes any equivalence. If the finding is manufacturing specific, the competitive leg weakens.