Mission Grey Daily Brief - June 10, 2024
Global Briefing
The world is witnessing a complex interplay of geopolitical and geoeconomic dynamics. From the ongoing war in Ukraine to the far-right gains in the EU elections, the global landscape is undergoing significant shifts. Here is today's global briefing:
Ukraine-Russia War
Russia's military offensive in Ukraine's northeast Kharkiv region has stalled, with Ukrainian forces inflicting heavy losses on Russian troops. With billions of dollars in new military aid from the US and Europe, Ukraine's hand is being strengthened. However, Russia continues to launch attacks on Ukrainian cities, targeting energy infrastructure. The war has entered a stalemate, and Ukraine and its allies face the challenge of sustaining resistance.
Far-Right Gains in EU Elections
The far-right has made significant gains in the European Union parliamentary elections, dealing defeats to French President Emmanuel Macron and German Chancellor Olaf Scholz. In France, the far-right National Rally party dominated, prompting Macron to dissolve the parliament and call for snap elections. In Germany, the far-right Alternative for Germany surged past the governing coalition. These elections will shift the EU to the right and may hinder its ability to pass legislation.
Belgium's Political Landscape
Following the Flemish nationalist parties' win in the federal election, Belgium is facing complex coalition talks. The AKP-MHP rivalry, which forms the ruling bloc, may intensify, raising questions about an early election.
China-Russia Relations
Amid tensions with the West, Russia is seeking to strengthen its ties with China. Kremlin spokesperson Dmitry Peskov stated that Turkey could become a member of BRICS, an idea that China and Russia have differing views on.
Kenya's Intervention in Haiti
Kenya has deployed police officers to Haiti to assist in restoring law and order amid the country's gang crisis. This intervention, led by the Multinational Security Support (MSS) mission, aims to protect critical infrastructure, manage borders, and conduct anti-gang operations. However, the mission faces challenges due to community distrust and resistance from Haitian gangs.
Armenia's Economic Challenges
Armenia's goods exports declined by 14.3% in the first quarter of 2024. Additionally, the country is facing a decrease in tourist flow. These economic setbacks come amidst efforts to restore Armenia's railway infrastructure, which was damaged by floods.
Indonesia's Mining Permits
Indonesia's President Joko Widodo has sparked controversy by granting mining permits to religious groups, including the country's largest Muslim organization, Nahdlatul Ulama. This move has been criticized as transactional politics, with some arguing that it undermines environmental sustainability.
New Caledonia's Unrest
People in New Caledonia are disappointed that the recent riots have been overshadowed by the upcoming Parliament elections and the Olympic Games. The European elections will go ahead as scheduled, with additional security deployed. However, the French media has stopped reporting on the territory, leading to feelings of abandonment among the locals.
Bulgaria's Political Turmoil
Bulgaria is facing its sixth parliamentary election in three years, with no party expected to win a majority. The country has been plagued by unstable governments and economic reforms remain stalled.
US-France Relations
US President Joe Biden concluded a state visit to France, celebrating the strong alliance between the two nations. Biden and French President Emmanuel Macron discussed their support for Ukraine and addressed the conflict between Israel and Hamas. Biden also honored US war dead at a cemetery, marking a contrast with former President Trump, who had skipped a similar visit.
Further Reading:
A long, hot summer for Türkiye - Yetkin Report
Biden heralds close US-France ties as he’s treated to a state visit - CNN
Bulgaria holds another snap election, more instability seen ahead - ThePrint
EU elections, Olympics overshadow New Caledonia crisis - Cook Islands News
French far right obliterates Macron's party in EU election - POLITICO Europe
How Kenya can succeed in troubled Haiti - Nation
Macron Dissolves Parliament, Calls Snap Elections In France On June 30 - NDTV
Themes around the World:
Industrial Diversification and Export Competitiveness
Vietnam’s economy is diversifying with competitive sectors such as textiles, electronics, wood products, and food processing driving export growth. The country aims to increase localization rates and develop domestic industrial clusters to reduce dependence on imported materials. Sustainable production and ESG compliance are becoming essential for maintaining access to major global markets, enhancing Vietnam’s role in international supply chains.
Supply Chain Resilience and De-risking Strategies
Companies globally are restructuring supply chains to reduce reliance on China and the US, adopting 'China plus 1' and 'America plus 1' models. This involves relocating manufacturing to Southeast Asia and seeking alternative funding sources, aiming to mitigate geopolitical risks but increasing operational complexity and costs.
Energy Security Vulnerabilities
Australia holds critically low fuel reserves, with only 28 days of petrol, diesel, and jet fuel in storage, failing to meet the International Energy Agency's 90-day stockpile requirement. This exposes the country to severe supply chain disruptions, threatening logistics, retail, and healthcare sectors. The reliance on imports and refinery closures heightens geopolitical and operational risks for businesses and national security.
Trade Finance Market Growth
Saudi Arabia's trade finance market is expanding, projected to grow from USD 111.38 billion in 2019 to USD 134.85 billion by 2026 at a CAGR of 2.63%. Diverse financial instruments like letters of credit, supply chain financing, and factoring support sectors including petroleum, food, transport, and manufacturing, facilitating international trade and investment flows.
Political and Social Stability Risks
Despite economic reforms, South Africa faces rising political instability, social unrest, and organized crime challenges. Weakening ANC dominance and fracturing patronage networks contribute to governance risks, which may deter investment and disrupt business operations. Persistent service delivery protests and union pressures on electricity pricing further complicate the socio-political environment.
Limits of Taiwan's 'Silicon Shield'
Taiwan's semiconductor dominance, termed the 'silicon shield,' is a strategic deterrent against Chinese aggression. However, this protection has limits due to China's potential incentives to seize chip production, global investments in indigenous semiconductor industries, demographic challenges, and environmental constraints. The shield's efficacy depends on broader geopolitical calculations beyond economic interdependence.
Stock Market Overheating Risks
The Bank of Japan warns of overheating in Japan's stock market, with the Nikkei index surging nearly 24% in 2025. Increased foreign hedge fund activity and leveraged trading in government bonds raise volatility risks. Potential sharp corrections could impact financial institutions and investor confidence, necessitating close monitoring of asset price bubbles and credit conditions.
Iran's Resistance Economy and Self-Reliance
Facing chronic sanctions, Iran has developed a 'resistance economy' emphasizing self-sufficiency, indigenous technological development, and alternative financial channels. This strategy has fostered domestic innovation in sectors like pharmaceuticals and defense, reducing dependence on Western imports but also limiting integration with global markets.
Rare Earth Minerals Supply Chain Risks
China's dominance in rare earth element mining and processing, combined with export controls and US tariff responses, threatens critical supply chains for technology and defense industries. This dynamic pressures companies to seek alternative sources, invest in strategic reserves, and navigate increased costs and regulatory complexities.
International Trade and Geopolitical Tensions
Global trade tensions, notably between the US and China, indirectly affect France by influencing investor sentiment and market dynamics. While recent conciliatory signals have eased some pressure, ongoing geopolitical risks contribute to economic uncertainty, affecting export-dependent sectors and supply chain stability within France's open economy.
Internal Political Fragmentation and Governance Paralysis
Iran’s theocratic regime exhibits growing internal divisions and competing factions, leading to policy paralysis amid escalating crises. Leadership disputes and ineffective crisis management consume political capital, hindering coherent economic and diplomatic strategies. This instability undermines investor confidence and complicates engagement with Iranian authorities for international businesses.
Stock Market Rally and Emerging Market Appeal
South African equities are experiencing their longest monthly rally since 2013, driven by domestic economic optimism, global monetary easing expectations, and reduced trade tensions. Strong performance in banking, technology, and telecommunications sectors reflects improving investor sentiment, although global policy uncertainties remain potential downside risks.
Stock Market Volatility and Sector Rotation
Australian equity markets have experienced volatility with sharp gains in critical minerals and defense stocks following U.S.-Australia deals, offset by declines in gold, retail, and technology sectors. This reflects investor sensitivity to geopolitical developments, commodity price swings, and interest rate expectations, influencing portfolio strategies and capital flows.
Investment Flows Favoring the US
Major financial executives affirm the US will continue to attract the majority of global investment flows, citing its deep, liquid markets and innovation leadership, particularly in AI. Despite concerns over government debt and trade tensions, the US remains a preferred destination compared to Europe and Asia, influencing global capital allocation strategies.
Investor Sentiment and Market Preferences
Foreign investors remain optimistic about Brazil but shift preferences towards financial and defensive sectors, avoiding commodity stocks and small caps. Local investors favor diversified portfolios with exposure to major banks and utilities. Market volatility is expected to persist due to political uncertainty and economic policy debates.
China's Economic Slowdown and Growth Challenges
China's Q3 2025 GDP growth slowed to an estimated 4.7-4.8%, below government targets, reflecting weak domestic demand, property sector distress, and deflationary pressures. This slowdown threatens global commodity demand, investment flows, and financial markets, forcing Beijing to balance stimulus measures with financial stability concerns amid ongoing geopolitical tensions.
Fiscal Deficit and Public Debt Concerns
Mexico's fiscal deficit remains elevated, projected at 4.1% of GDP in 2026, with public debt nearing 59% of GDP. Increased spending on social programs, debt servicing, and Pemex support constrains fiscal space. The IMF recommends more ambitious fiscal consolidation and tax reforms to stabilize debt, essential for maintaining macroeconomic stability and investor confidence in Mexico's sovereign creditworthiness.
Private Market Investment Optimism
Private market investors exhibit growing optimism in India, anticipating stronger liquidity and exit opportunities across asset classes, particularly in real assets and infrastructure. Favorable capital markets, lower financing costs, and increased use of continuation vehicles and secondaries indicate a maturing investment environment, despite geopolitical risks and global economic uncertainties.
Digital Infrastructure and Technological Growth
Brazil is advancing its digital infrastructure with significant investments, including the construction of major data centers like TikTok’s. This expansion supports the digital economy and attracts Asian and global technology investors, enhancing Brazil’s competitiveness in the technology sector and fostering innovation-driven growth.
Inflation and Economic Uncertainty
Australia faces persistent inflation at the upper Reserve Bank target band, influenced by global trade wars and energy relief policy changes. The IMF warns of dual challenges from inflation and rising unemployment, complicating monetary policy. These economic pressures affect business costs, consumer demand, and investment decisions within Australia and internationally.
Asset Manager Adaptation to Rating Changes
Large asset managers like BlackRock and State Street have modified investment rules to avoid forced sales of French bonds following downgrades. By adjusting index criteria, they maintain exposure to French debt, mitigating potential market disruptions. This adaptation reflects evolving risk management strategies amid sovereign credit uncertainties.
Stock Market Rally and Investor Optimism
The Nikkei 225 and Topix indices have surged to record highs, fueled by investor enthusiasm for Takaichi's pro-growth policies and corporate governance reforms. Foreign ownership of Japanese equities has increased significantly, reflecting confidence in Japan's political stability and economic prospects, making Japan an attractive destination for global investors seeking diversification beyond the US.
Labor Market and Skilled Workforce Shortage
Germany is grappling with a critical shortage of skilled labor amid demographic shifts, with a shrinking young workforce and increasing retirements. This exacerbates structural economic challenges, constrains industrial productivity, and pressures social welfare systems, necessitating urgent reforms in education, immigration, and labor policies to sustain competitiveness.
US-China Geopolitical Tensions
Escalating US-China tensions significantly impact Taiwan's investment climate and supply chains. Taiwanese investors and companies are diversifying away from US exposure, seeking alternative funding and manufacturing bases in Southeast Asia and the Middle East. This geopolitical risk drives a gradual economic decoupling, increasing inflationary pressures and complicating global trade dynamics.
Banking Sector Credit and Funding Dynamics
Credit demand in Saudi Arabia's banking sector outpaces deposit growth, pushing loan-to-deposit ratios above 100%. Banks increasingly rely on capital market issuances and syndicated loans, including foreign funding, to meet financing needs. Regulatory measures like countercyclical capital buffers are being introduced to mitigate risks amid rapid credit expansion linked to Vision 2030 projects.
Challenges in Taiwan's New Southbound Policy
Taiwan's strategic pivot to Southeast Asia under the New Southbound Policy faces obstacles including U.S. tariffs and Chinese influence in the region. Taiwanese firms relocating production to ASEAN countries encounter higher-than-expected operational costs and tariff burdens, complicating efforts to reduce dependence on China and diversify supply chains.
Foreign Direct Investment Expansion and Shift
FDI inflows reached $18.8 billion by September 2025, the highest in five years, with new registered capital up 15.2%. Notably, investment sources are diversifying beyond traditional partners to include the US and China, focusing on high-tech production, renewable energy, and industrial infrastructure, signaling Vietnam's evolving investment landscape and technological upgrading.
Rare Earth Elements and Strategic Resources
Turkey's vast rare earth element reserves in Eskişehir have attracted global attention amid China's export restrictions, risking $150 billion in global production losses. These strategic minerals are critical for defense, renewable energy, and technology sectors. Turkey's development of these resources could shift supply chains, attract Western investment, and enhance its geopolitical leverage in global technology markets.
Trade Tensions and Market Volatility
Renewed U.S.-China trade tensions and U.S.-Canada disputes have heightened market volatility, affecting investor sentiment and equity valuations. Tariff threats and geopolitical risks disrupt supply chains and global trade flows, prompting investors to adopt defensive strategies and reassess exposure to Canadian equities and commodities.
US Tariffs and Trade Tensions
US-imposed tariffs averaging 19% on Thai exports and escalating US-China trade tensions pose significant risks to Thailand's export-driven economy. These tariffs, coupled with a strong baht, reduce Thailand's competitiveness in global markets, pressuring manufacturers and complicating trade negotiations with the US.
Nickel Industry IPO and EV Battery Supply Chain Expansion
Anugrah Neo Energy Materials plans a $300 million IPO to fund expansion in nickel mining and processing, targeting electric vehicle battery materials. Indonesia's dominance in global nickel supply positions it strategically in the EV supply chain, attracting significant investment and reinforcing its role in the global green economy transition.
Economic Collapse and Inflation Crisis
Iran faces a severe economic downturn marked by hyperinflation, recession risks, and a collapsing rial currency. The reimposition of UN sanctions targeting its Central Bank and oil exports exacerbates financial instability, undermining domestic purchasing power and investor confidence. This economic fragility threatens to disrupt supply chains and deter foreign investment, intensifying social unrest and operational challenges for businesses.
Economic Corridor and Industrial Localization
The New Economic Corridor initiative integrates localization, industry, mining, and export strategies to position Saudi Arabia as a global manufacturing hub. Investments in infrastructure, industrial cities, and incentives promote downstream petrochemical industries, pharmaceuticals, and advanced technology sectors, enhancing competitiveness and attracting high-value foreign investment.
Strategic Infrastructure and Technology Investments
The government prioritizes removing bottlenecks in renewable energy, industrial projects, and semiconductor manufacturing, with around 3,000 projects under review. These investments aim to support sustainable growth, technological advancement, and integration into high-value global supply chains, reinforcing Vietnam's position as a strategic manufacturing hub.
Won Currency Volatility and Intervention
The Korean won has depreciated to multi-month lows against the US dollar amid heightened geopolitical risks and investor risk aversion. The government and Bank of Korea have engaged in verbal interventions to stabilize the currency, which affects foreign investment returns, inflation, and corporate borrowing costs, influencing overall economic stability.
Indian Debt Market Dynamics and RBI Policies
India's bond market gains prominence with RBI's monetary easing, including a 100 bps repo rate cut in 2025, attracting foreign portfolio investments. Liquidity infusion measures and inclusion in global bond indices enhance market depth, while RBI's variable reverse repo rate auctions balance liquidity, supporting government borrowing and corporate fund-raising at lower costs.