FINANCIAL TIMES
-Donald Trump has announced that Nippon Steel has abandoned its plan to buy US Steel but will invest heavily in the Pittsburgh producer. The president said the prospect of an investment in US Steel was "very exciting" and would meet Nippon officials next week to mediate and arbitrate the deal. Trump has not changed his mind about opposing Nippon's $15B acquisition of US Steel. The United Steelworkers union, which was the biggest opponent to the proposed acquisition, remained concerned about Nippon Steel. Details of the investment have not been finalized.
-Japanese Prime Minister Shigeru Ishiba has held a face-to-face meeting with US President Donald Trump at the White House. The meeting aims to establish a new golden era for relations between Japan and the US, while also showcasing the country's shared military alliance. Ishiba is the first Asian leader to hold such a meeting since Trump's inauguration. Trump expressed his love for Japan during the meeting, highlighting the importance of the relationship between the two nations.
-US President Donald Trump has temporarily halted measures to cease a tariff exemption on low-cost shipments from China, allowing them to remain in place until adequate systems are in place to process and collect tariff revenue. The de-minimis provision, which exempts shipments under $800 in value from tariffs and rigorous customs checks, was cancelled in an executive order last week. China retaliated with tariffs of 10 to 15% on US liquefied natural gas, coal, crude oil, and farm equipment. Trump is expected to hold a call with Chinese leader Xi Jinping to avoid an escalation in trade tensions.
-In the weekend essay, economist Nobel Prize laureate economist Daron Acemoglu, envisions a fictional account of the next 25 years of US history: the future of nations can be unpredictable, but the fortunes of nations can change dramatically. Politics has consequences, and it's important to think creatively about the consequences and how we might look to those living with them. As an economist, Acemoglu imagines assessing American history in 2050. The premise of the imagined account is that the US appeared unstoppable in the early 21st century, leading in artificial intelligence and aiming to outperform Western European rivals. However, in the early 2030s, Acemoglu sees the US economy as shrinking, even falling behind Europe.
-US President Donald Trump has withdrawn Joe Biden's security clearance, halting his daily intelligence briefings. This move was a payback for Biden's removal of Trump's security clearance following the January 6 attack on the Capitol. Trump has already revoked the security clearance and protective detail for John Bolton, his former national security adviser, and Anthony Fauci, the immunologist who led the country's response to the Covid-19 pandemic. Biden's secret service protection remains in place. Trump campaigned on promises to target his political enemies in government, including the intelligence community and law enforcement. The FBI recently sued the Trump administration to prevent it from publicly naming staff involved in a probe into the January 6 Capitol attack.
-Palantir, a $264B data intelligence company, has been able to profit from a "revolving door" of executives and officials between the company and high-level positions in Washington and Westminster, creating an influence network that has guided its extraordinary growth. The US group, whose billionaire chair Peter Thiel has been a key backer of Donald Trump, has enjoyed an astonishing stock price rally on the back of strong rise in sales from government contracts and deals with the world's largest corporations. Palantir has won over $2.7B in US contracts since 2009, including over $1.3B in Pentagon contracts.
-The Department of Government Efficiency, led by Elon Musk, has infiltrated major agencies, fired or suspended civil servants, and gained access to sensitive data. Doge officials have installed themselves within the federal government, including the US Treasury, state and health departments, and the Federal Aviation Administration. USAID, a $40B agency, has been closed, with contracts cancelled and its workforce reduced from 10,000 to 600. Doge staffers have audited trillions of dollars in remittances and had access to social security numbers, bank account details, and health records of US citizens.
-Nuevo Laredo, a border trade hub and a drug battleground, is a significant issue for US President Donald Trump. With 3M trucks a year passing through the city, it has become so dangerous that executives from Monterrey avoid it. As part of a deal to avoid Trump's threat of 25% tariffs on Mexican imports to the US, Sheinbaum agreed to send 10,000 extra National Guard troops to the border to curb illegal opioid fentanyl exports. This was a top priority for Trump, as it sparked concerns about Mexico's export-oriented economy. The city's security situation has led to many executives opting to fly instead of driving.
-A study by three US finance experts has found that US public pension funds are losing billions of dollars in gains each year to speculators who front-run their periodic trades to rebalance stock and bond portfolios. The research found that some traders take advantage of the funds' "predictable" moves to realign allocations by making similar trades in advance, thereby worsening the price retirement funds get. The lost value each year amounts to at least $16B, or about $200 per retiree. Pension funds are aware of the problem but have been slow to fine-tune their rebalancing practices. The front-running is not considered illegal because the trades do not rely on inside information. The lost upside from rebalancing has posed a fresh challenge to US pensions, which are already struggling with anaemic returns and trillions of unfunded liabilities.
-Airbus has rescheduled plans to fly a hydrogen-powered aircraft by 2035, a setback for the aviation industry's goal of achieving net zero emissions. The decision was made in response to a statement by French labor unions, which claimed the aircraft's entry into service had been delayed by five to ten years. Airbus has stated that "2035 remains the ambition" for the aircraft, despite European airlines scaling back their ambitions for hydrogen's role in reaching net zero by 2050. The company acknowledged the challenge of developing a hydrogen ecosystem, including infrastructure, production, distribution, and regulatory frameworks, and noted that progress on key enablers, particularly hydrogen produced from renewable energy sources at scale, is slower than anticipated. Airbus has been more optimistic about hydrogen's potential to help decarbonize emissions from flying than its US rival Boeing.
-The US economy created 143,000 jobs in January, falling short of forecasts, but a drop in the unemployment rate and strong earnings growth bolstered the strength of the labor market. The unemployment rate dropped to 4.1% in January, bolstering the Federal Reserve's case for slow interest rate cuts. The two-year Treasury yield jumped 0.08 percentage points to a two-week high of 4.29%, while the 10-year yield added 0.05 percentage points to 4.49%. The S&P 500 index of blue-chip US stocks closed almost 1% lower, and the tech-heavy NASDAQ Composite dropped 1.4%.
NEW YORK TIMES
-President Trump has directed Elon Musk to focus on the Pentagon in his budget-slashing initiative, highlighting Musk's growing role in the federal bureaucracy. Musk's cost-cutting team has inserted itself into at least 17 federal agencies in the first three weeks of the new administration, according to The New York Times. Both Musk and Trump have defended the disruptive actions of his young aides, even as some have come under scrutiny for their past actions. One Musk aide, Marko Elez, resigned after The Wall Street Journal revealed racist posts on X. Musk called for the Journal reporter to be fired and said he was reinstating Elez, a move both the president and vice president said they supported.
-Elon Musk has been conducting a series of sweeping changes in the federal government, with his team, the Department of Government Efficiency, gaining significant attention. These young aides, who have been invited to join him in his stately office suite, have become his enforcers, sweeping into agency headquarters with black backpacks and ambitious marching orders. Unlike their 20-something peers in Washington, who are accustomed to doing the unglamorous work ordered up by senior officials, these aides have been empowered to break the system. As Musk continues to disrupt the federal bureaucracy, civil servants have witnessed the sudden intrusion of these young members of the billionaire's team. The aides have been tasked with sweeping into agency headquarters with black backpacks and ambitious marching orders.
-President Trump has announced plans to take control of the John F. Kennedy Center for the Performing Arts in Washington, announcing plans to dismiss several board members and appoint himself as chairman. Trump stated that he aims to make the Kennedy Center "Great Again" and would immediately terminate individuals from the Board of Trustees, including the Chairman, who do not align with his vision for a Golden Age in Arts and Culture. He also announced that a new board will be announced soon, with an "amazing" Chairman, Donald Trump. This move was not surprising to the arts and culture world, but was not surprising to Trump's supporters who have been discussing his desire to become the center's chairman.
-A federal judge has ordered the Trump administration to temporarily halt some aspects of its attempt to shut down the US Agency for International Development. Judge Carl Nichols issued a restraining order, pausing the administrative leave of 2,200 USAID employees and a plan to withdraw nearly all of the agency's overseas workers within 30 days. He also ordered the temporary reinstatement of 500 agency employees already on administrative leave. The ruling comes on a lawsuit filed by the largest union representing federal workers and the union representing Foreign Service officers. The pause in the administration's plans will allow for expedited legal arguments.
-A federal order freezing the $5B Biden-era program to build electric vehicle (EV) charging stations has caused confusion among states, which had been allocated billions of dollars by Congress for the program. Some state officials have halted work on the charging stations due to the Trump administration's memo, while others plan to continue building. Ohio, where Gov. Mike DeWine has welcomed federal money to build 19 EV charging stations, is uncertain about how or whether the state will build more. In interviews, some state officials said they had stopped work on the charging stations due to the memo, while others said they intended to continue.
-Hamas is set to release three Israeli hostages in exchange for Palestinian prisoners, marking the latest in a series of steps in a cease-fire deal with Israel that has been in place for nearly three weeks. The three hostages were abducted during the Hamas-led attack on October 7, 2023, which ignited the Gaza war. In the first phase of the cease-fire, Hamas has pledged to release at least 33 hostages in exchange for over 1,500 Palestinians jailed by Israel. In three previous exchanges, about 18 hostages have been freed for more than 550 Palestinian prisoners. Israel was expected to release around 180 Palestinian prisoners on Saturday. Under the deal, at least some of the prisoners to be released are serving life sentences for committing deadly attacks. The truce has halted over a year of devastating warfare that began with the attack on Israel, which killed around 1,200 people and taken 250 others hostage.
-Canada's Prime Minister Justin Trudeau has expressed his concerns over President Trump's repeated statements of wanting to annex Canada and make it the 51st state. Trudeau stated that he does not view Trump's statements as in jest and believes annexation is a serious threat. He also suggested that the Trump administration knows about Canada's critical minerals and may be even why they keep talking about absorbing it. Trudeau's comments were made at a gathering of company executives and business leaders in Toronto, and while the media was asked to leave the room, the Toronto Star and the CBC were able to hear and record the comments.
-President Trump has ordered the halt of all foreign assistance to South Africa and emphasized the priority of resettling white "Afrikaner refugees" into the US due to the country's government's actions that "racially disfavored landowners." He stated that the US would not provide aid to South Africa and that American officials should focus on helping "Afrikaners in South Africa who are victims of unjust racial discrimination." Trump accused the South African government of engaging in "massive Human Rights VIOLATION" and promised a full investigation and the cut off of aid. The order was seen as supporting long-held conspiracy theories about the mistreatment of white South Africans in the post-apartheid era.
NEW YORK POST
-US Immigration and Customs Enforcement (ICE) agents arrested 11,000 illegal migrants in the first 18 days of the Trump administration, a third of the total busts the agency made last year under former President Joe Biden. The arrests were part of President Trump's mass deportation offensive, which included the arrest of a previously deported Mexican cartel hitman, Fernando Vasquez-Mendoza. Vasquez-Mendoza was identified as a hired killer working for the Cartel del Golfo, a Mexican drug trafficking organization and criminal syndicate. The federal immigration authorities also arrested several members of the Venezuelan prison gang Tren de Aragua and multiple child sex offenders.
-Bud Light, a beer brand, has not fully recovered from the controversy surrounding its partnership with transgender influencer Dylan Mulvaney, according to former Anheuser-Busch President of Operations Anson Frericks. The company's sales were down 29.9% year-over-year for the week ending January 20 compared to the same period last year, according to the latest numbers provided to FOX Business by Bump Williams Consulting, which analyzed NielsenIQ data. Frericks noted that the partnership impacted stocks and that the brand's efforts to recover with Super Bowl ads would not relieve the pain. Frericks also pointed out the dilemma Bud Light faces regarding its vision. Customers are asking them what Bud Light will be moving forward, whether it will be more than Shane Gillis and fun in football or if it is Dylan Mulvaney.
DeepMind claims its AI performs better than International Mathematical Olympiad gold medalists
An AI system developed by Google DeepMind, Google’s leading AI research lab, appears to have surpassed the average gold medalist in solving geometry problems in an international mathematics competition.
The system, called AlphaGeometry2, is an improved version of a system, AlphaGeometry, that DeepMind released last January. In a newly published study, the DeepMind researchers behind AlphaGeometry2 claim their AI can solve 84% of all geometry problems over the last 25 years in the International Mathematical Olympiad (IMO), a math contest for high school students.
Why does DeepMind care about a high-school-level math competition? Well, the lab thinks the key to more capable AI might lie in discovering new ways to solve challenging geometry problems — specifically Euclidean geometry problems.
Proving mathematical theorems, or logically explaining why a theorem (e.g. the Pythagorean theorem) is true, requires both reasoning and the ability to choose from a range of possible steps toward a solution. These problem-solving skills could — if DeepMind’s right — turn out to be a useful component of future general-purpose AI models.
Indeed, this past summer, DeepMind demoed a system that combined AlphaGeometry2 with AlphaProof, an AI model for formal math reasoning, to solve four out of six problems from the 2024 IMO. In addition to geometry problems, approaches like these could be extended to other areas of math and science — for example, to aid with complex engineering calculations.
AlphaGeometry2 has several core elements, including a language model from Google’s Gemini family of AI models and a “symbolic engine.” The Gemini model helps the symbolic engine, which uses mathematical rules to infer solutions to problems, arrive at feasible proofs for a given geometry theorem.
Olympiad geometry problems are based on diagrams that need “constructs” to be added before they can be solved, such as points, lines, or circles. AlphaGeometry2’s Gemini model predicts which constructs might be useful to add to a diagram, which the engine references to make deductions.
Basically, AlphaGeometry2’s Gemini model suggests steps and constructions in a formal mathematical language to the engine, which — following specific rules — checks these steps for logical consistency. A search algorithm allows AlphaGeometry2 to conduct multiple searches for solutions in parallel and store possibly useful findings in a common knowledge base.
AlphaGeometry2 considers a problem to be “solved” when it arrives at a proof that combines the Gemini model’s suggestions with the symbolic engine’s known principles.
Owing to the complexities of translating proofs into a format AI can understand, there’s a dearth of usable geometry training data. So DeepMind created its own synthetic data to train AlphaGeometry2’s language model, generating over 300 million theorems and proofs of varying complexity.
The DeepMind team selected 45 geometry problems from IMO competitions over the past 25 years (from 2000 to 2024), including linear equations and equations that require moving geometric objects around a plane. They then “translated” these into a larger set of 50 problems. (For technical reasons, some problems had to be split into two.)
According to the paper, AlphaGeometry2 solved 42 out of the 50 problems, clearing the average gold medalist score of 40.9.
Granted, there are limitations. A technical quirk prevents AlphaGeometry2 from solving problems with a variable number of points, nonlinear equations, and inequalities. And AlphaGeometry2 isn’t technically the first AI system to reach gold-medal-level performance in geometry, although it’s the first to achieve it with a problem set of this size.
AlphaGeometry2 also did worse on another set of harder IMO problems. For an added challenge, the DeepMind team selected problems — 29 in total — that had been nominated for IMO exams by math experts, but that haven’t yet appeared in a competition. AlphaGeometry2 could only solve 20 of these.
Still, the study results are likely to fuel the debate over whether AI systems should be built on symbol manipulation — that is, manipulating symbols that represent knowledge using rules — or the ostensibly more brain-like neural networks.
AlphaGeometry2 adopts a hybrid approach: Its Gemini model has a neural network architecture, while its symbolic engine is rules-based.
Proponents of neural network techniques argue that intelligent behavior, from speech recognition to image generation, can emerge from nothing more than massive amounts of data and computing. Opposed to symbolic systems, which solve tasks by defining sets of symbol-manipulating rules dedicated to particular jobs, like editing a line in word processor software, neural networks try to solve tasks through statistical approximation and learning from examples.
Neural networks are the cornerstone of powerful AI systems like OpenAI’s o1 “reasoning” model. But, claim supporters of symbolic AI, they’re not the end-all-be-all; symbolic AI might be better positioned to efficiently encode the world’s knowledge, reason their way through complex scenarios, and “explain” how they arrived at an answer, these supporters argue.
“It is striking to see the contrast between continuing, spectacular progress on these kinds of benchmarks, and meanwhile, language models, including more recent ones with ‘reasoning,’ continuing to struggle with some simple commonsense problems,” Vince Conitzer, a Carnegie Mellon University computer science professor specializing in AI, told TechCrunch. “I don’t think it’s all smoke and mirrors, but it illustrates that we still don’t really know what behavior to expect from the next system. These systems are likely to be very impactful, so we urgently need to understand them and the risks they pose much better.”
AlphaGeometry2 perhaps demonstrates that the two approaches — symbol manipulation and neural networks — combined are a promising path forward in the search for generalizable AI. Indeed, according to the DeepMind paper, o1, which also has a neural network architecture, couldn’t solve any of the IMO problems that AlphaGeometry2 was able to answer.
This may not be the case forever. In the paper, the DeepMind team said it found preliminary evidence that AlphaGeometry2’s language model was capable of generating partial solutions to problems without the help of the symbolic engine.
“[The] results support ideas that large language models can be self-sufficient without depending on external tools [like symbolic engines],” the DeepMind team wrote in the paper, “but until [model] speed is improved and hallucinations are completely resolved, the tools will stay essential for math applications.”
Activist hedge fund Elliott builds stake in struggling BP
US investor could force UK oil company to refocus on core fossil fuels business after foray into green energy
Activist hedge fund Elliott Management has built a stake in struggling UK oil major BP, according to two people with knowledge of the move.
The exact size of Elliott’s stake could not be learned but the $70bn assets under management hedge fund has adjusted its activist strategy in recent years to increase the size of its individual bets, while reducing the number of situations it focuses on.
BP’s shares have fallen nearly 9 per cent over the past year, compared with a 6.5 per cent rise for rival Shell, and investors have complained about the company’s financial underperformance, high levels of debt and lack of strategic clarity.
For the past several weeks, speculation has been rife in the London market that BP is vulnerable to a takeover bid or to an activist shareholder.
Pressure from the US investor could push BP to refocus on its core oil and gas business after years of building up a sprawling empire of green energy projects.
One BP investor suggested that Elliott could call for a full break-up or for the company to retrench from some of its weaker businesses and relist in the US.
Other activist funds have recently looked at amassing a stake in BP, but the size of the £70bn company has deterred them. One US activist that considered a move said BP’s board had been “asleep at the wheel” and had a “muddled strategy”. It added: “BP’s upstream business on its own justifies its entire market value.”
Both BP and Elliott declined to comment.
BP reports quarterly results on Tuesday, and will update investors on its medium-term strategy on February 26.
Murray Auchincloss, the company’s chief executive, delayed the update and moved it from New York to London after having undergone an undisclosed medical procedure.
Elliott’s stake was first reported by Bloomberg.
Elon Musk said he’s not interested in acquiring TikTok
Elon Musk recently said he is “not chomping at the bit to acquire TikTok.”
Musk made those remarks during an interview at the WELT Economic Summit on January 28. A video of the interview was published today.
The interview came after President Donald Trump delayed a law requiring parent company ByteDance to sell TikTok or see it banned in the United States. At the time, there were reports that the Chinese government was open to a deal in which Musk (a key Trump ally) would acquire the app. Trump even told reporters that he’d like to see Musk or Oracle chairman Larry Ellison acquire TikTok; he’s also signed an executive order to create a sovereign wealth fund that could purchase a stake in the app.
But Musk claimed that he wasn’t interested, flatly stating, “I have not put in a bid for TikTok.”
“I don’t have any plans for what would I do if I had TikTok,” he said in the interview. “I guess I would look at the algorithm and try to decide: How helpful or useful is this algorithm? And what can we do to shift the algorithm to be more productive and ultimately be beneficial to humanity?”
He added that he doesn’t “use TikTok personally” and is “not that familiar with it.” And he described his acquisition of Twitter (now X) as an anomaly in his career: “I usually build companies from scratch.”
Musk’s comments on TikTok came nearly 20 minutes into the interview, which initially focused on his plans for his Department of Government Efficiency (DOGE) under the Trump administration. Musk and his allies have subsequently taken control of federal agencies and gained access to large troves of sensitive data.
“With respect to government, really the challenge is overcoming bureaucracy,” he said. “I think bureaucracy is perhaps the penultimate boss battle. The ultimate boss battle is defeating entropy … The second hardest battle is defeating bureaucracy. That’s how difficult it is to improve government.”
The Tequila Boom Is Over. The Tequila Price War Has Begun.
Threat of tariffs adds uncertainty to brands like Casamigos and Patrón, which are struggling to retain drinkers
America is losing its taste for top-shelf tequila.
Sales of the Mexican liquor soared over the past decade, making it the second-most popular spirit in the U.S. after vodka. But demand for tequila has cooled, and drinkers are looking for cheaper pours.
High-end brands including Diageo’s Casamigos and Bacardi’s Patrón have been lowering prices for more than a year, according to an analysis by equity research firm Bernstein. Until recently, a 750 milliliter bottle of Casamigos Blanco typically sold for more than $45, according to industry tracker IWSR. Now it sells for as little as $40, depending on the location.
U.S. sales volume of tequila, mescal and other agave-based spirits were roughly flat in 2024, according to IWSR. Sales fell in ultra-premium tequila, priced between $45 and $99.99, and grew in the middle tiers priced between $22.50 and $44.99.
Diageo said that to meet different consumer needs, it is now positioning Casamigos at a lower price point than its Don Julio brand. Pricing for Casamigos “got out of whack from where it needed to be,” in part because of out-of-stock problems during the Covid-19 pandemic, Chief Executive Debra Crew said.
“In stores where we have actually implemented the right pricing strategy, we are seeing improvements,” she said Tuesday on a call with analysts.
The move by consumers away from pricey tequila marks a reversal of a yearslong trend. Until recently, many consumers had been trading up to more expensive wine and spirits. Tequila, once associated with sugary margaritas and eye-watering shots, grew in popularity thanks to celebrity endorsements, increased interest in craft spirits and a shift toward drinking less but better.
Spurred by these trends, Diageo in 2017 agreed to pay up to $1 billion to buy Casamigos, the tequila brand co-founded by actor George Clooney.
President Trump’s threat of a 25% tariff on Mexican imports—currently on hold for a month after a deal he struck with Mexican President Claudia Sheinbaum—has added more uncertainty for tequila makers and importers. Tequila and mescal must be made in Mexico, just as sparkling wine can be labeled as Champagne only if it is made in a certain region of France.
Diageo on Tuesday withdrew its medium-term sales forecast and said U.S. tariffs on goods from Mexico and Canada could amount to a $200 million hit on its annual operating profit. Imports from the two countries represent about 45% of Diageo’s U.S. sales. The company’s shares are down more than 5% since Monday’s close.
Max Murphy, founder of Tozi Imports, an importer and distributor of Mexican mescal, gin and wine, said Trump’s promise in January to enact tariffs in February made it difficult for him to plan for the year.
His Woburn, Mass., company normally places its biggest orders in January and February so that the wine and spirits can be shipped before temperatures begin climbing in May. Murphy held off on placing orders this year because he wasn’t sure if or how new tariffs would affect his company.
“It’s just my wife and I,” Murphy said. “And if all of our inventory suddenly jumps 25%, there’s a good chance it could put us out of business.”
Tequila until recently has been a bright spot for the alcohol industry, which is struggling to retain drinkers. U.S. alcohol sales are declining because of consumer health concerns, expanding legalization of cannabis and a generational shift toward less alcohol consumption. The U.S. government is considering lowering the recommended limit of drinks a day that people can safely consume.
The looming tariff threat could give tequila makers a temporary bump in sales.
Knowing that prices could soon rise, Brian Harrison in January stocked up on his favorite tequila and splurged on a couple of fancy bottles he hadn’t tried before. Harrison, a 35-year-old systems engineer at a technology company, said he worries what tariffs could mean for the tequila industry.
“I know one of the best things I can do,” Harrison said, “is keep buying it.”
Cover:
-The first three weeks of President Donald Trump's second term have been marked by mixed signals in the stock market, with tens of millions of Americans believing Trump is God's gift to their country and tens of millions more loathe him. This has made defining Trump "impartially" difficult or rendering that word obsolete. In the 18 days since Trump took office, the S&P 500 has seen a 1.4% increase, compared to an average 0.9% return for all presidents' first 18 days in the White House since 1929. Shares of companies such as Baker Hughes, Netflix, JPMorgan Chase, and Walmart were among the 213 stocks making 52-week highs on Thursday, reflecting that Americans who voted for Trump are mostly happy with him. This makes sense, as they voted for a Disrupter in Chief, not someone to break bread with Mitt Romney, Chuck Schumer, or even the Business Roundtable. Another boost to the market may be belief in the "Trump put," which presupposes that if stocks tank in response to policy moves made by the president, he will retract said policy.
Interview:
-The Economic Policy Uncertainty Index is at its highest level since 2020, and many equity valuations and bond yields are at their highest levels. However, CEO George Gatch of J.P. Morgan Asset Management, a unit of JPMorgan Chase, believes that timing markets is the wrong move. Gatch spoke to Barron’s and he suggests that time in markets is more important than timing markets. Gatch, a 39-year J.P. Morgan veteran, has experienced market cycles and a regulation- and technology-driven revolution in asset management, leading to new investment strategies and products, including many that bundle traditional and risk-mitigating assets. J.P. Morgan Asset Management, which oversees $3.6 trillion in global assets, has many more such products on the drawing board.
Tech Trader:
-Big Tech companies like Amazon, Microsoft, and Google parent Alphabet have reported impressive numbers, but their stocks fell due to slight cloud misses. Meta Platforms' stock soared, but it has no public cloud to rain on the parade. The earnings reports indicate that the breathtaking pace of capital expenditures for AI data centers will continue in 2025, raising the bar across Big Tech, especially for the cloud. Amazon, which pioneered the public cloud category with Amazon Web Services, sees roughly 20% annualized growth from its AWS cloud business, down from over 50% five years ago. Google and Microsoft may be experiencing a similar trend, with Google Cloud Platform and Microsoft Azure growing 30% annually but suggesting growth may be decelerating. Cloud softness feels particularly acute, with tech companies spending heavily to build out artificial-intelligence capabilities.
The Trader:
-Renewables were not included in President Trump's "energy emergency" executive order, despite being the fastest-growing and cheapest sources of electricity in several parts of the country. Trump's rhetoric and actions have impacted clean-energy projects, leading to some companies pulling out of them. He issued a 90-day pause on federal permits and paused loans and grants issued by the Biden administration, upending existing projects. A judge has stopped the order from taking hold for now, though the spending pause may come back. However, there have been some hopeful signs in the renewables space, with French energy giant TotalEnergies stating the US is still an attractive market and plans to continue investing in renewables. Enphase Energy, which makes technology for controlling solar panels on homes, beat analysts' earnings expectations and reported a 6% increase in US revenue. CEO Badri Kothandaraman believes that Trump and the Republican Congress will not completely do away with support for solar, especially given Elon Musk's positive comments. Enphase is also producing a significant share of its products in the US and plans to double down on manufacturing. Wind power is also optimistic, although Trump's distaste for wind has been well-documented. Offshore wind projects are in trouble, but onshore wind installations are on track to increase 31% this year. Shell has withdrawn from a significant East Coast wind project and New Jersey has canceled a solicitation for offshore wind power. However, onshore wind installations are expected to rise 31% this year, with less reliance on federal environmental permits and leases.
-The stock market has been experiencing a downward trend, with the S&P 500 index dropping 0.2% this week, while the Dow Jones Industrial Average and NASDAQ Composite fell 0.5%. The market appeared unaffected by newsworthy announcements from the new administration, such as the dismantling of the US Agency for International Development and Trump's plan to occupy and rebuild Gaza. However, tariff news shook investors, with threats against Canada and Mexico and Trump promising reciprocal tariffs against countries imposing levies on US goods. Headline whipsaws have become commonplace since the start of the year, and investors are getting "chopped up by chasing headlines." The news outside of the administration is not particularly bullish at the moment. In between the tariff talk, corporate and economic news was mostly downbeat, with Amazon and Alphabet announcing disappointing guidance and monthly jobs numbers slightly weaker than expected.
Features:
-Trump's plans to impose higher tariffs have sparked concerns about rising prices, potentially affecting the Federal Reserve's goal of reducing inflation to 2%. Fed officials predict a soft-landing scenario where inflation subsides without a recession, but if confidence falters, inflation pressures could rise. The Trump administration has levied a 10% tariff on imports from China and plans to impose 25% duties on products from Mexico and Canada if no agreement is reached. The latest data shows a decline in consumer sentiment and a surge in inflation expectations, which could pose challenges for central banks in restoring price stability without causing harm to the labor market.
-Chinese AI platform DeepSeek has sparked a frenzy among the Chinese government, media, rival tech firms, and the country's rapidly expanding AI user base. The start-up claims its new version matches OpenAI's best model at a fraction of the cost and without access to advanced semiconductor chips. Based in Hangzhou, China, DeepSeek made its models open source, allowing anyone to harness and alter the product for their own use. Competitors are racing to show they have cutting-edge models, but their stocks have risen and their forecasts have brightened. This is partly due to the unproven assertion that DeepSeek used less advanced Nvidia chips and spent a mere $6 million in its final training round.
Europe:
-The Bank of England (BOE) has cut interest rates, following a decline in economic growth outlook, a move different from the Federal Reserve's approach. The UK central bank lowered its key rate to 4.5% from 4.75%, as expected, but two policymakers voted for an even larger half-point cut. This pushed the pound down against the US dollar, sending it 0.9% lower to $1.238. The BOE said a gradual and careful approach to the withdrawal of monetary policy restraint is appropriate. Catherine Mann, a hawkish member of the rate-setting panel, supported a bigger cut, while Swati Dingra, who has a record of supporting lower rates, dissented. The BOE decision follows a quarter-point cut from the European Central Bank in Frankfurt.
Emerging Markets:
-No update
Commodities:
-Gold prices have risen to a record price of just under $2,900 an ounce, indicating that investors remain on edge despite the recovery from President Donald Trump's tariffs. UBS analysts raised their gold forecast for the next 12 months to $3,000 an ounce, citing gold's enduring appeal as a store of value and hedge against uncertainty. The US has postponed tariffs on Mexico and Canada, and China's relatively constrained retaliation for new tariffs levied against it, providing some relief for markets. However, analysts predict that significant tariffs against the US neighbors won't last long and that tariffs on China will be gradually increased. Gold has room to rise due to elevated uncertainty, an extension of the global rate-cutting cycle, and strong investor and central bank demand. International tensions will remain regardless of U.S. trade policy, with the ongoing Russia-Ukraine war, Middle East conflict, and Trump's efforts to curb Iran's oil exports. Lower interest rates make gold more appealing as they reduce the returns investors forgo by holding assets that don't pay interest.
Streetwise:
T-Mobile stock has seen a 54% increase in a year and 694% increase over the past decade, surpassing Amazon.com, Meta Platforms, and Alphabet and Apple. The 2020 merger between T-Mobile and Sprint may have turned the industry into a lucrative triopoly, but antitrust issues may have played a role. T-Mobile's frothy stock price of 23 times this year's projected earnings might be worth it, but parent Deutsche Telekom offers a cheaper way in. A decade ago, Verizon Communications and AT&T controlled 72% of US national cell service, with T-Mobile and Sprint splitting the rest. T-Mobile was slowly gaining market share due to better deals and Sprint's stagnation. The growth mismatch between T-Mobile and Sprint led to T-Mobile running low on wireless spectrum, while Sprint had plenty. In 2018, T-Mobile announced its intention to buy Sprint for $26.5B, but antitrust regulators challenged the deal. In 2019, T-Mobile had to sell its Boost prepaid cellphone service and some spectrum to Dish to create a new, fourth industry competitor.
Lebanon forms new cabinet after three-year hiatus
New government will seek to enact reforms in order to tap much-needed aid from donor countries
Lebanon formed a new cabinet on Saturday after an almost-three-year hiatus that left the country reeling during an economic crisis and a 14-month war between Israel and Hizbollah.
Prime Minister Nawaf Salam said the government would enact financial and economic reforms and “be a space for constructive joint work, not for bickering”. Lebanese cabinets are made up of diverse factions rather than a single ruling coalition, so disputes are commonplace.
The new government includes businessmen, veteran ministers and some new faces. Salam, appointed to form a cabinet less than a month ago, has sought to form a grouping that has the international credibility to carry out reforms and to reduce the influence of Hizbollah and its ally the Amal Movement.
Lebanon’s donor countries have made badly-needed reconstruction aid conditional on the appointment of a cabinet capable of reforming the dysfunctional state and sidelining Hizbollah, which has been badly weakened by its war with Israel.
White House Special Envoy Morgan Ortagus said on Friday that the US would not accept Hizbollah being represented in government.
Amal has retained control of the crucially important finance ministry via the appointment of longtime MP and former economy minister Yassine Jaber.
In Lebanon’s sectarian power-sharing system, the prime minister must be a Sunni Muslim, the president a Maronite Christian and the speaker of parliament a Shia Muslim. The cabinet is divided along sectarian lines.
Salam had insisted on naming one of the Shia ministers himself, leading to a showdown over the past four days as he and longtime parliament speaker Nabih Berri, head of Amal, clashed over candidates for the post.
The appointment of behavioural economist and former economy official Fadi Makki as a Shia minister could give Salam at least one Shia ally in the chamber if Hizbollah and Amal later boycott the cabinet, as has happened in the past.
The cabinet will now require a parliamentary vote of confidence to formally take charge, but it has been decades since parliament withheld its approval.
The new cabinet faces the decision of whether to include a reference to the right of the Lebanese to resist Israeli occupation — in practical terms a reference to Hizbollah’s weapons — in its ministerial statement, which forms the government’s platform. The last time a ministerial statement did not endorse the resistance by name was 1996.
Although the war between Hizbollah and Israel ended with a ceasefire in November, Israel continues to strike Lebanon, including a drone strike on Saturday that killed at least three people, according to state news.