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Good morning and welcome back to the working week. On today’s agenda:
Executives lobby for change to the finance bill
US-China trade talks begin in London
Qualcomm agrees to buy chip designer for $2.4bn
Trump’s crackdown on LA protesters
And Cape Town at a crossroads
Dozens of executives from some of the world’s largest companies will travel to Washington this week to push for change to part of Donald Trump’s budget bill which, they say, raises taxes on foreign investments in the US threatening millions of American jobs.
Why the lobbying drive? Critics say Section 899 of the bill could cause a drop in corporate investment and a retreat from US assets by international investors. The threat of higher taxes has unsettled the Global Business Alliance, which represents companies including Shell, Toyota and LVMH. “I think there is growing momentum to get rid of this provision in the Senate,” said Jonathan Samford, president of the GBA.
How does Section 899 work? The measure targets countries with what the US calls “unfair foreign taxes”. These include most EU countries, the UK, Australia, Canada and others around the world. For foreign investors, Section 899 would increase taxes on dividends and interest on US stocks and some corporate bonds by 5 percentage points every year for four years. It would also impose taxes on the American portfolio holdings of sovereign wealth funds, which up to now have been exempt. Read more on the lobbying effort as the finance bill continues its passage through the Senate.
Here’s what else we’re keeping tabs on today:
US-China talks: A new round of trade negotiations is set to start in London. The talks begin as figures released today show China’s exports to the US plunged last month by the most since the beginning of the Covid-19 pandemic.
Apple developer conference: Investors are downbeat about the potential for big AI announcements at the iPhone maker’s flagship event, which kicks off today in California.
UN ocean summit: Trump’s push for deep-sea mining has cast a shadow over the conference on ocean protection, which starts in Nice. The FT has published a special report to coincide with the start of the conference.
Five more top stories
1. US semiconductor group Qualcomm has agreed a $2.4bn deal to buy chip designer Alphawave. The deal will advance Qualcomm’s ambitions in artificial intelligence by expanding its intellectual property portfolio in data centre and 5G networking but marks another high-tech departure from the London market. Read more on Qualcomm’s plans for Alphaware.
2. The boss of WPP has quit as the UK’s largest advertising group struggles with an industry-wide upheaval caused by artificial intelligence. During Mark Read’s tenure, WPP’s share price halved and last year it lost its position as the world’s largest ad agency by revenue to France’s Publicis. Here’s more on the forces shaking up global marketing.
3. Exclusive: Hedge funds are circling more than a dozen distressed companies in France, as a string of economic shocks pushes growing numbers of businesses towards painful restructurings. One banker said the vast majority were private equity-owned and were being “monitored . . . due to leverage or liquidity issues”.
4. The US has expressed concern over China’s plan to build a large embassy in London that security officials believe would pose a risk to sensitive communications infrastructure serving the financial services district. The 20,000 sq m compound would be more than 20 times the size of Beijing’s current embassy in the UK capital and would be China’s biggest embassy in Europe.
5. Brazil is hoping to sell its first sovereign debt in the Chinese market as soon as this year and is also keen to re-enter the euro-denominated bond market, a senior minister told the FT. The leftwing administration in Brasília is planning the so-called panda bond — debt issued in Chinese renminbi by a foreign borrower — as it seeks to consolidate links with Beijing.
The Big Read
For the first time in decades, the National Guard has been deployed against citizens on domestic US soil against the wishes of a state’s governor. Pete Hegseth, defence secretary, threatened to send in marines to quell unrest that would require invoking the Insurrection Act. Critics say Donald Trump has clearly shown a willingness to test the boundaries of executive power with his actions over the weekend as law enforcement officers and protesters clashed in Los Angeles. Supporters of the president say the government must not “surrender to insurrection”. Is the escalation of tensions in LA part of a wider strategy?
We’re also reading . . .
Chart of the day
US companies with risky credit ratings are rushing to sell junk bonds ahead of an expected resurgence of trade tensions in July that could depress demand for corporate debt. But the “spreads” between lending to high-risk companies and the US government have not returned to the historic lows of late last year and that is worrying some bankers.
Take a break from the news
Cape Town is at a crossroads: those flocking to live in South Africa’s second city are powering the economy, but also driving up house prices and exacerbating a strained market and local infrastructure. For a city surrounded by ocean and mountains, the expansionist path forwards is a complex one, writes Mary Holland.
