TheChek News Flow

Darren Jones says Britain should not look at the incoming US president ‘as a risk’

A senior Treasury minister has predicted that Donald Trump will not impose heavy tariffs on the UK, as Labour insists it can do business with the incoming US administration.

When asked if the UK had a plan to deal with potential trade tariffs from the incoming Trump government, Darren Jones, chief secretary to the Treasury, said: “I don’t think we’re going to be in that scenario.”

“We shouldn’t be looking at president-elect Trump’s inauguration as a risk, or a bad thing for the UK. It could be an enormously positive thing with lots of opportunities,” he told Sky News on Sunday.

Sir Keir Starmer’s centre-left administration in London is seeking a functional working relationship with the new government in Washington.

Trump was swept back into the White House promising to apply steep tariffs to imports to the US from its trading partners, including a blanket 20 per cent tariffs on all goods.

Members of his cabinet have, however, in the past called Trump “inflammatory and ignorant”, “an absolute moron”, “a profound threat”, “the worst president in history” and “a racist, misogynistic, self-confessed groper”.

Starmer’s party angered Trump’s inner circle when around 100 Labour officials went out to the US to campaign for the Democrats earlier this year.

The prime minister has since gone out of his way to strike a pragmatic note, telling the Financial Times on Friday that he had a “constructive” relationship with the new president.

But Sadiq Khan, Labour mayor of London, threatened to disrupt those conciliatory efforts on Sunday when he warned of “resurgent fascism” on the eve of the incoming US president’s inauguration.

Khan wrote on Sunday in the Observer newspaper that the west was in a “perilous moment” with the rise of the “far right” in many countries.  

“European nations are coming under the influence of extreme nativist parties that are hostile to democratic institutions, immigrant populations and fact-based journalism,” he wrote. 

“In Germany, the AfD is on course for a breakthrough in next month’s federal elections. In France, the National Rally is topping presidential polls. And, of course, in the US, Donald Trump is back.”

The last time Trump was in the White House there was public enmity between him and Khan, whom he dubbed a “stone-cold loser” for criticising his presidency.

Priti Patel, shadow foreign secretary, said: “It’s really not for politicians in other countries to start making disrespectful and disparaging comments about president-elect Trump,” speaking to Sky News.

Patel is expected to attend Trump’s inauguration, along with fellow Conservatives including former prime ministers Boris Johnson and Liz Truss.

Ahead of the Trump’s inauguration on Monday, the Tories are vying for his ear along with Reform UK, which has set out more rightwing policies on issues such as net zero and immigration and whose leader Nigel Farage is close to the new president.

By contrast only one Labour politician has been invited to the event: Lord Maurice Glasman, an academic who said at the weekend there was a “real genuine working class enthusiasm” for Trump.

Jones said he doubted that Trump would block the appointment of Lord Peter Mandelson, former business secretary, as UK ambassador to the US against a backdrop of speculation that he could challenge the appointment.

“I mean . . . I think someone said something at Mar-a-Lago and it’s probably being propagated by some politicians that would like to cause a bit of a nuisance,” he said.

One Labour official said there had been “no sign or indication from Trump himself that this is at all likely”.

Kestra Medical Technologies and Heartflow make non-invasive cardiac tests for patients with heart conditions

Two Bain-backed cardiac medical device makers are gearing up to go public this year, in a sign that the drought in listings of medical technology companies could be set to end, according to people familiar with the matter.

Kestra Medical Technologies and Heartflow, which both manufacture non-invasive cardiac tests for patients with heart conditions, have recently hired advisers to prepare for initial public offerings, which could come as soon as the first half of this year, three people said. The timeline on the IPOs could slip, they added.

Kestra, which is based in Washington state, has tapped Bank of America to lead on a public listing, while Heartflow, based in Mountain View, California, is working with JPMorgan, the people said. Heartflow, Bain Capital, BofA and JPMorgan all declined to comment. 

High interest rates and the poor performance of several medical technology groups that listed during the frothy pandemic IPO market led public investors to sour on medical device makers, but sentiment seems to have shifted.

Two medical technology groups going public should be a boon for a sector that has suffered from a dearth of public listings in recent years. Only four medical device makers have listed in the US since the start of 2022, according to data tracker Dealogic. 

Heartflow’s public listing would be an especially bullish sign for the sector because of its size. In 2022, Heartflow narrowly called off a reverse listing using a special acquisition vehicle, which would have valued it at $2.8bn. Heartflow’s lead product is the first non-invasive device that can be used to diagnose coronary artery disease, which affects about 16mn Americans, according to official estimates.

Kestra — which manufactures a wearable monitoring and defibrillation device aimed at patients with ventricular arrhythmia, a condition that causes the lower chamber of the heart to beat abnormally — raised $196mn in a funding round last July, according to PitchBook. The funding target and listing price of both possible IPOs could not be established.

Last October, seizure monitoring device maker Ceribell, which was also advised by BofA, went public, raising just over $180mn in an upsized IPO, in an early signal that investors were warming to the prospect of listings by medical technology companies. Ceribell’s share price stood at $21 as of market close on Friday, giving it a market value of $753mn, about 24 per cent above its listing price.

The last boom in medical technology IPOs came during the pandemic. Between the start of 2020 and the end of 2021, 16 companies went public in the US, compared with just four companies over the following three years, according to Dealogic.

The IPOs planned for this year would be a victory for the companies’ venture backers. Along with Bain, Kestra is backed by T Rowe Price and Omega Funds, while Heartflow’s investors also include Baillie Gifford and Wellington Management.

Bain, which has a total of $185bn in assets under management, is one of the biggest private equity investors in fast-growing healthcare technologies, a marketplace often dominated by West Coast venture capital funds. It has invested nearly $7bn in 70 such companies since 2016, including Cerevel, which was sold last year to pharmaceutical company AbbVie for nearly $9bn. 

- Yoon lamented that the court did not recognize the "just purpose" of his martial law decree on Dec 3rd last year.

- His arrest could mark the start of an extended period in custody

- He also urged his supporters to express their frustrations peacefully

- Yoon's lawyer said Yoon was shocked at the violent incident at the Seoul Western District Court after he was formally arrested.

- Yoon's lawyer also said Yoon's arrest was "the epitome of anti-constitutionalism and anti-rule of law."

- Yoon insists his martial law decree was legitimate

- Acting Pres Choi (Yoon's former Finance Minister until late Dec) expressed "strong regret" about the riot, and asked for heightened security.

With a TikTok ban looming in the United States, Perplexity AI is the latest bidder hoping to give the video app a new corporate home.

CNBC first reported on Perplexity’s interest. A source with knowledge of the offer confirmed to TechCrunch that Perplexity (whose CEO Aravind Srinivas is pictured above) has submitted a bid to merge with TikTok US.

The source also confirmed other details about the bid — that it would create a new entity combining Perplexity, TikTok US, and new equity partners; that most investors in TikTok’s parent company ByteDance would be able to retain their equity; and that by merging, Perplexity hopes to bring more video to its AI search engine.

A law requiring ByteDance to either sell TikTok or see it banned in the US is set to take effect on Sunday, January 19. That will be President Joe Biden’s last day in office, and officials from his administration have said that it will leave the actual implementation of the ban “to the next Administration.”

Meanwhile, President-elect Donald Trump, who will be inaugurated on Monday, said he would “most likely” give TikTok a 90-day extension, and TikTok’s CEO posted a video thanking Trump for his efforts.

However, TikTok said that without more explicit assurances of non-enforcement from the Biden administration, it will be “forced to go dark” on Sunday.

Despite a number of buyers expressing interest in TikTok, ByteDance has said repeatedly that it does not intend to sell. (The company described a report that the Chinese government is open to an acquisition by Elon Musk as “pure fiction.”) CNBC reports that Perplexity is hoping it can overcome those reservations by proposing a merger rather than a sale.

The consensus on a strong dollar may be too complacent

There are at least three reasons why the greenback might not follow the script currently signalled by markets

One common thread running through the 2025 year ahead outlooks from banks and asset managers was a near-consensus view that the dollar would strengthen further in the coming 12 months. Like much else in the incoming Trump administration’s agenda, the talk around the value of the greenback has been at times contradictory.

Donald Trump himself, together with many of his key trade policy advisers, has long argued that a strong dollar has made American exports pricey, encouraged imports and cost American manufacturing jobs. Others appointed to key jobs, though, such as Scott Bessent, nominated for the post of Treasury Secretary, have publicly taken a more traditional stance and supported a strong dollar.

Whatever the new administration might desire, the markets seem reasonably certain that the result will be a stronger dollar rather than a weaker one. The dollar has risen by around 8 per cent since late September when investors began to price in a rising likelihood of a Trump victory in November. A stronger dollar has been a key component of the Trump trade which gripped Wall Street last year. Broadly put, the Trump trade is an assumption that the new president will follow through on all the aspects of his agenda which markets approve of, while being restrained by his wider party from anything they are less keen on.

Tax cuts and deregulation will boost profits and equity market returns while the resulting higher deficits will be bad, but not disastrous, for US Treasuries. Markets expect the yield on American government bonds to rise relative to a no-Trump counterfactual but implicitly assume that the rise will not be enough to rattle the stock market. A rising interest rate differential with other advanced economies though will, by the logic of the Trump trade, be enough to push the dollar higher. The threat of higher tariffs, which would result in fewer dollars leaving America, has added to the dollar’s lustre since November.

The consensus view, then, is that the dollar will remain strong even if the new president occasionally takes to social media to loudly groan about it. There are, though, at least three reasons to worry that this consensus is complacent.

Tariffs are the first. Economic theory suggests that in the short-run new tariffs can indeed lead to a strengthening currency. The currency of the trading partner subject to new restrictions often depreciates to offset, at least partially, the value of the tariffs. This was broadly the case with China’s renminbi in 2018-19. But in the longer run tariffs are associated with fewer imports and exports and an overall weaker economy. That weakness eventually leads to lower interest rates and hence a weaker currency. Tariffs might give the dollar a short-term fillip but weaken it in the medium to longer run.

Secondly, it is worth taking seriously the notion that when Trump says he wants a weaker dollar, he actually means it. The threat of much higher tariffs on America’s major trading partners could well prove to be merely the opening gambit in an attempt to corral those trading partners into some form of multilateral agreement to lower the dollar’s value. There can be little doubt that the author of The Art of The Deal would not delight in hosting a summit at Mar-a-Lago to preside over negotiations. Of course, the mechanics of such a deal would prove tricky. The Plaza Accord of 1985, at which the finance ministers of the US, the UK, West Germany, France and Japan met to discuss international exchange rates, is sometimes held up as a model. But the world economy is a very different place nowadays. The five participants 40 years ago represented around 45 per cent of global GDP, at purchasing power parity, between them compared with more like 25 per cent today.  

The other major threat to the dollar’s value can be found outside the traditional realm of economic policy. Work by the economists Barry Eichengreen, Arnaud Mehl and Livia Chitu in 2017 examined the geopolitical underpinnings of international currency values. In general, countries hold a greater share of their reserves in the currency of a country providing them with a security guarantee. By this argument the US’s provision of security to its allies helps to hold up the value of the dollar and keeps US borrowing costs lower than they would otherwise be. If those security guarantees start to be unwound, then the dollar’s share in international reserves could begin to fall, providing a further headwind.

The dollar has had a strong run since September but many of the views underpinning those gains may prove to be wishful thinking.

EU should welcome Chinese car factories, says Mercedes chief

Ola Källenius urges Brussels to drop protectionist approach in form of punitive tariffs on China EVs

The EU should encourage Chinese carmakers to open more plants in the bloc as part of a deal to drop punitive tariffs on imported Chinese electric vehicles, the boss of Mercedes-Benz has said.

Ola Källenius, who is also president of EU car industry body Acea, said China had asked European carmakers to invest domestically to access its market decades ago, and that approach could form part of a solution to the trade dispute.

“Nobody disagrees about the fact that the level playing field is a legitimate discussion. The question is, what tool do you use?” Källenius told the Financial Times in an interview. “Don’t accelerate protectionism because . . . we have much to lose.”

In October, Brussels imposed tariffs of up to 45 per cent on Chinese EV imports after a big surge in sales, alleging they received unfair subsidies, and opened several anti-dumping and anti-subsidy investigations. Beijing responded with anti-dumping tariffs on brandy and investigations into pork and dairy products.

German carmakers have been the most vocal opponents of protectionist measures as they fear retaliatory moves from Beijing and weakened interest from the country’s consumers at a time when they have already suffered a sharp decline in sales due to the rise of Chinese brands.

They have also struggled to compete against more affordable and advanced Chinese EVs from companies such as BYD.

When German carmakers sought to establish themselves in the emerging Asian economy in the 1980s they agreed to form joint ventures with Chinese partners. Källenius said it was a decision for EU policymakers whether to come up with a reciprocal arrangement.

“When we came to China . . . there was a call upon us by the policymakers: industrialise here if you want to capture the market. From my understanding, European policymakers have said the same, vis-à-vis the Chinese,” he said.

“I think those are legitimate conversations, but that means that you would actually open up markets and create as much as possible a level playing field and then let the best market actor win.”

Brussels is also planning to impose criteria requiring Chinese businesses to have factories in Europe and share technological knowhow. BYD plans to build vehicles in Hungary, while CATL has recently agreed to build a €4.1bn lithium battery factory in Spain with Stellantis.

Kallenius said tariffs would hurt the industry and Brussels should compromise with Beijing on a deal to remove them, adding that China had become an integral part of the global automotive supply chain, including raw materials, advanced chips and components. 

“We just want to caution policymakers to say, don’t forget what made us so successful in this complicated world,” he said.

Last week Acea sent a letter to EU leaders urging them not to retaliate against US president-elect Donald Trump’s threatened tariffs.

Mercedes-Benz is one of Germany’s top three carmakers alongside VW and BMW, with significant operations in both China and the US.

Geely and BAIC, which is controlled by the Chinese state, own a fifth of shares in Mercedes-Benz. The carmaker also relies on the Chinese market for about 30 per cent of its global sales.

Broadcom chief eyes AI opportunity after confronting VMware backlash

Hock Tan is positioning the tech group’s $69bn software acquisition as a ‘sovereign’ alternative to Big Tech’s cloud services

When Broadcom, the $1tn tech group, bought VMware in 2023, the software company’s customers could choose between thousands of different products to help them manage their data centres.

During the year after the $69bn deal closed, Broadcom slashed that number to five.

The original plan was for just four VMware bundles, according to Hock Tan, Broadcom’s chief executive. But after a backlash from some customers to a series of changes to its software licensing model, a fifth option was added.

“One of the commitments we made was to make VMware easier to use and to make the whole availability of the product much simpler,” Tan told the Financial Times in an interview. “Maybe going down to four was a bit too much . . . but we certainly do not need 8,000.”

It is the kind of manoeuvre that has won Tan — who told investors last month the deal would deliver a “significantly” greater boost to earnings than the $8.5bn it initially expected — a reputation for ruthlessly effective dealmaking and merger integration, as he hunts for Broadcom’s next big acquisition.

Tan is now positioning VMware as the main alternative for companies who do not want to hand over all their data to US cloud providers, especially in Europe, as rapid adoption of artificial intelligence is forcing a rethink of how data centres are run.

VMware’s virtualisation system hides the underlying complexity of the various servers, storage and switches that make up a data centre, effectively allowing businesses to run it like a software platform. Tan argues this helps customers spend less on hardware and makes their infrastructure more resilient and secure.

Ever since Amazon Web Services invented the modern cloud computing business more than 20 years ago, companies have been forced to weigh the convenience of effectively outsourcing their IT operations to a large online provider, against the control, ownership and complexity of running their own data centres.

As businesses scramble to assess and deploy the new wave of AI tools that have emerged in the wake of ChatGPT’s breakout success in the past two years, that element of control has become more important, Tan argues. “The key thing in AI is you use your [own] data, you train your data . . . so you keep your data on [your own] premises,” he said.

Sensitivity over data protection has become all the more acute in Europe, where more stringent data rules and a series of regulatory interventions against Big Tech groups is fuelling the concept of “sovereign” data centres. This is where customer or corporate information is stored in a data centre, either by companies themselves or a local cloud provider.

For customers in Europe “particularly”, Tan said, VMware was “an alternative . . . to public cloud”. He added: “I’m not surprised we faced noise.”

For much of 2024, that “noise” was pretty loud. Broadcom spent much of last year embroiled in a firestorm over how it sold VMware’s tools.

Some customers claimed that Broadcom’s shift from one-off, upfront license fees for VMware’s products to an annual subscription had increased their costs several times over.

In September, AT&T, the US telecoms group, even filed a lawsuit accusing Broadcom of an “attempt to bully AT&T into paying a king’s ransom for subscriptions AT&T does not want or need”. However, the companies reached a settlement two months later.

Chief among Broadcom’s agitators in Europe was the trade group Cloud Infrastructure Services Providers in Europe, which counts Amazon among its members alongside several smaller players. In April, CISPE accused the company of “massive and unjustifiable hikes in prices” that “ threatens the economic viability of many cloud services used by customers in Europe”.

Despite estimates from IT consultancy Forrester that 20 per cent of VMware customers would leave in the wake of the changes, Tan insisted its customer churn rate had “not dramatically” changed: “The people who are complaining are the minority — who knows what agenda they may have.”

Complaints about the move to subscriptions came from “short-sighted customers [who] tend to forget they paid the [software] license many years ago and don’t think about amortising” its costs over time, he said.

“So when initial anger cooled off and customers have a chance to understand the value that is being delivered . . . after a while, they come back,” Tan added. “We are actually quite pleased with the outcome of what we’ve seen so far.”

VMware is just the latest in a series of multibillion-dollar software deals made by Tan in recent years, alongside CA and Symantec.

But Broadcom’s origins are in semiconductors and networking equipment, and investor excitement about its business making AI custom chips for the likes of Google and Meta propelled its valuation to more than $1tn for the first time last month.

Tan said he would consider more deals in either chips or software, despite Broadcom’s $142bn hostile takeover attempt of rival chipmaker Qualcomm in 2017 being blocked by then-US president Donald Trump. Tan later announced he would relocate the company’s headquarters from Singapore back to the US while standing beside Trump in the Oval Office.

Tan said it was “too early to tell” if Trump’s second term would make dealmaking easier in the US, adding: “The US is only part of the game. We live in a global market.”

José María Álvarez-Pallete replaced with defence executive Marc Murtra after Gulf kingdom’s STC becomes shareholder

Telefónica’s board has pushed out its long-standing chair José María Álvarez-Pallete in a dramatic move that follows the arrival of Saudi Arabia’s STC as a shareholder in the Spanish telecoms group.

Telefónica announced on Saturday that it had fired Álvarez-Pallete and replaced him with defence executive Marc Murtra “in view of the company’s new shareholding structure” and the desire of some shareholders for a “new stage” in leadership.

The Spanish government had a decisive role in the move, which came after an investor shake up that began with the announcement by telecoms group STC that it was acquiring 9.9 per cent of Telefónica in 2023.

STC is majority-owned by Saudi Arabia’s sovereign wealth fund and the move stunned Spain as the first investment in one of its biggest companies by the Gulf state.

In response, the Spanish state increased its own stake in Telefónica to 10 per cent as a counterweight.

Álvarez-Pallete was called to a meeting at the offices of Prime Minister Pedro Sánchez on Friday to be told he would be ousted, according to one person familiar with the situation.

Telefónica’s board met to agree the decision on Saturday afternoon. It chose to pluck Murtra from another company part-owned by the state — Indra, a defence group known for its radar systems, where he was chair.

STC has said it wants to collaborate with Telefónica, praising the Spanish group’s “best-in-class infrastructure assets” and cutting-edge technology in areas such as cognitive intelligence and the internet of things.

STC’s investment in Telefónica marks a strong return for the company to invest abroad after a period of retreat since its first foray when it acquired stakes in telecoms in India, Indonesia and Malaysia more than 15 years ago. The company has exited most of these investments but kept a stake in Malaysia’s Maxis.

However, as Saudi sovereign wealth fund PIF sought quick growth as part of the kingdom’s strategy to diversify its economy in recent years, STC has begun to look for opportunities to expand beyond its core market in the Gulf region where they operate telecoms in Kuwait and Bahrain in addition to Saudi Arabia. Tawal, an STC subsidiary, acquired tower infrastructure worth €1.22bn from United Group in 2023 for assets in Bulgaria, Croatia and Slovenia.

Telefónica, which has a market capitalisation of €22bn, is viewed as a strategic company because it is involved in national security issues and cyber defence, but it is also seen by some investors as a lumbering bureaucracy.

During Álvarez-Pallete’s nine years at the helm, Telefónica’s shares dropped by roughly 50 per cent at a time when the European telecoms sector was struggling. Last year it lost its position as the largest telecoms provider by customer number in Spain when Orange and MásMóvil merged.

The ousted chair, who worked at Telefónica for 26 years and led the company since 2016, had travelled to Saudi Arabia at least once to discuss Telefónica’s future with STC executives.

STC does not have a seat on Telefónica’s 15-member board but it is expected to seek to fill a current vacancy with one of its candidates.

In September 2023, the Saudi group revealed it had built a 4.9 per cent stake in Telefónica and purchased derivatives that gave it exposure to another 5 per cent of the company’s shares. It requested Spanish government permission to increase its stake to 9.9 per cent through the derivatives and that was granted in November.

After its move, Sepi, a Spanish state holding company, acquired a 10 per cent stake in Telefónica. The investment arm of the Caixa Foundation, which is close to the government and tied to the lender CaixaBank, also raised its stake to 10 per cent. Long-standing shareholder BBVA, another bank, owns 5 per cent of Telefónica.

As well as being fired, the company said Álvarez-Pallete had agreed to the board’s request that he resign as a director. The board said it unanimously expressed its “deepest gratitude” to him “for the many services rendered and for his extraordinary effort, dedication and contribution during his long professional career in the group”.