Mission Grey Daily Brief - October 28, 2024
Summary of the Global Situation for Businesses and Investors
The world is facing a growing risk of a global conflict as regional crises in the Middle East and Ukraine escalate. Israel's attack on Iran could draw the US into a regional war, while Russia's invasion of Ukraine has led to North Korea's involvement, testing Western resolve. The failure to contain the war in Ukraine is encouraging seismic geopolitical shifts, such as the China-Russia "no-limits" partnership. Meanwhile, tensions in the South China Sea are rising as China condemns a US arms sale to Taiwan. In Venezuela, migration surges after Nicolás Maduro's election victory, and in Japan, the ruling coalition fails to secure a majority in the Lower House elections, leading to political instability.
Israel-Iran Conflict
The Israel-Iran conflict is escalating, with Israel launching airstrikes on Iranian military targets and Iran warning against further attacks. The US has failed to secure a ceasefire in Gaza, and Israel is pushing the envelope, ignoring US pleas for restraint. The Biden administration's containment strategy is failing, and the war in Ukraine is drawing in Russia, creating a growing risk of a global conflict.
Russia-Ukraine War
The Russo-Ukrainian War is approaching its third year, with Russian strikes killing civilians across Ukraine and Ukrainian sappers facing a deadly minefield. North Korea's involvement is testing Western resolve, and the EU and G7 members have reached a consensus on $50 billion in financial assistance to Ukraine. However, failure to contain the war is encouraging seismic geopolitical shifts, such as the China-Russia "no-limits" partnership.
South China Sea Tensions
Tensions in the South China Sea are rising as China's aggressive policing of disputed territory has led to clashes with Vietnam, with Chinese authorities boarding a Vietnamese fishing boat and attacking the crew. This comes amid China's condemnation of a US arms sale to Taiwan, threatening countermeasures to defend its sovereignty.
Japan's Election Results
Japan's ruling coalition has failed to secure a majority in the Lower House elections, leading to political instability. The biggest winner was the main opposition Constitutional Democratic Party of Japan, which made substantial seat gains in the chamber. The outcome reflects voters' outrage over the governing party's financial scandals and economic headwinds. The yen has slid past ¥153 after the election, and oil prices have dipped.
Further Reading:
Bullied by China at Sea, With the Broken Bones to Prove It - The New York Times
How the Israeli Attack on Iran Could Seed a New World War - The Intercept
Iran-UAE ties tested by Tehran's housing project on disputed island - Al-Monitor
Joe Biden’s big blunder: how the war in Ukraine became a global disaster - The Guardian
Live news: Yen slides past ¥153 after Japan election while oil prices dip - Financial Times
Overseas media report Japan's election results as breaking news - NHK WORLD
This is what’s at stake as Japan holds rare unpredictable election - The Independent
Wall Street and tech royalty fly to Saudi event amid Mideast war - Fortune
Themes around the World:
Juros altos e virada monetária
A Selic foi mantida em 15% e o BC sinaliza cortes a partir de março, condicionados a inflação e credibilidade fiscal. Volatilidade eleitoral e pass-through cambial podem atrasar a flexibilização, afetando financiamento, consumo e valuation de ativos.
Policy execution and compliance environment
India continues “trust-based” tax and customs process reforms, including integrated systems and reduced litigation measures, while maintaining tighter enforcement in strategic sectors. Multinationals should expect improved digitalized compliance but uneven on-ground implementation across states and agencies.
US–Taiwan security funding uncertainty
Taiwan’s proposed multi‑year defence budget and large US arms purchases face domestic legislative bottlenecks, risking delivery delays. For investors, this increases tail-risk volatility, influences sovereign and counterparty risk pricing, and may affect project timelines in strategic sectors.
Infrastructure Investment and Modernization
Private investment in infrastructure has surged, with R382.5 billion committed in 2025, but public sector investment lags. Major projects in digital networks, ports, and logistics are underway, yet persistent bottlenecks and underinvestment threaten supply chain efficiency and export competitiveness.
US-China Decoupling and Supply Chain Realignment
US-China trade relations have deteriorated, with tariffs and technology restrictions prompting companies to diversify supply chains. China’s exports to the US dropped 20% in 2025, but rerouting through third countries maintains indirect flows, complicating decoupling efforts and global sourcing strategies.
Carbon competitiveness policy uncertainty
Industrial carbon pricing (OBPS and provincial systems) remains central to decarbonization incentives, but is politically contested. Potential policy shifts create uncertainty for long-horizon projects in steel, cement, oil and gas, and clean tech, affecting capex, compliance costs, and supply contracts.
MSCI downgrade and market access
MSCI flagged Indonesia’s equity market “investability” risks, freezing index changes and threatening a downgrade. Authorities raised minimum free float to 15% and discussed disclosure reforms. Persistent volatility can raise funding costs, complicate exits, and deter portfolio and FDI inflows.
Sticky Inflation and Consumer Impact
Despite cooling headline inflation, tariffs and supply disruptions keep US inflation above the Fed’s 2% target. Households face an average tariff burden of $1,800–$2,100 annually, disproportionately affecting lower-income groups and dampening consumer sentiment, with implications for retail and investment.
Domestic demand fragility and policy swings
Weak property and local-government finance dynamics keep domestic demand uneven, encouraging policy stimulus and sector interventions. For foreign investors, this raises forecasting error, payment and counterparty risk, and the likelihood of sudden regulatory actions targeting pricing, procurement, or competition.
Arbeitskräfteknappheit und Migration
Demografie verschärft den Fachkräftemangel. 2025 waren rund 46 Mio. Menschen erwerbstätig; Beschäftigungswachstum kommt laut BA nur noch von Ausländern, deren Anteil stieg auf 17%. Gleichzeitig bleiben Visaprozesse bürokratisch. Das beeinflusst Standortentscheidungen, Lohnkosten und Projektlaufzeiten.
Critical minerals export leverage
China’s dominance in rare earths and magnet refining (about 70% mining, ~90% processing) increases vulnerability to licensing delays or curbs. US-led “critical minerals bloc” initiatives may accelerate decoupling, raising compliance, sourcing, and price-volatility risks.
Energiepreise, Gasvorräte, Versorgung
Gasspeicher fielen Anfang Februar unter 30%, teures LNG und Transportengpässe erhöhen Preisrisiken. Parallel stützt der Staat Strompreise (rund 30 Mrd. € 2026). Für energieintensive Branchen bleiben Standortkosten, Vertragsstrukturen und Hedging zentral für Investitionen und Produktion.
Competitive Dynamics and Asian Market Pressure
French and European battery firms face increasing competition from Asian manufacturers, especially Chinese players with aggressive expansion and lower costs. This dynamic is reshaping supply chains, pricing, and strategic alliances in the second-life battery sector.
EV manufacturing shift and competition
Thailand’s EV ramp-up is rapid: 2025 BEV production +632% to 70,914 units; sales +80% to 120,301. Chinese-linked supply chains expand as legacy OEMs rationalize capacity. Opportunities rise in batteries, components, and charging, alongside policy and localization requirements.
Auto sector retooling amid trade
Canada’s auto industry is heavily integrated with the U.S.; trade renegotiation and tariff exposure are delaying parts of roughly C$46B in announced investment and complicating EV transition plans. Plant idlings, retooling, and rules-of-origin shifts raise operational and sourcing risk.
EU Energy Ban Accelerates Market Shift
The EU will fully ban Russian LNG and pipeline gas imports by 2027, with oil phase-out planned. This accelerates Europe’s diversification, reshapes supply chains, and compels Russia to seek alternative buyers, affecting global energy pricing and business operations across sectors.
Cryptocurrency as a Sanctions Evasion Tool
Iran’s central bank has purchased over $500 million in USDT (Tether) to defend the rial and facilitate trade, reflecting a shift toward digital assets to bypass financial restrictions. This strategy highlights both the regime’s adaptability and the increasing complexity of compliance for international firms engaging with Iran.
Critical Infrastructure and Energy Upgrades
Taiwan is investing in power grid upgrades, renewable energy, and digital infrastructure to support its expanding high-tech and data center sectors. These initiatives are vital for business continuity, supply chain reliability, and long-term competitiveness.
Defense budget politics and capability delivery
Parliamentary standoffs over a roughly US$40bn defense plan and proposed cuts create uncertainty around procurement timelines, mobilization readiness, and resilience investments. Heightened political risk can affect ratings, contractor pipelines, and business continuity planning for critical suppliers.
Hydrogen and ammonia export corridors
Saudi firms are building future clean-fuel export pathways, including planned ammonia shipments from Yanbu to Rostock starting around 2030 and waste-to-hydrogen/SAF partnerships. These signal emerging offtake markets, new industrial clusters, and long-lead infrastructure requirements for investors.
USMCA review and stricter origin
The 2026 USMCA joint review is moving toward tighter rules of origin, stronger enforcement, and more coordination on critical minerals. North American manufacturers should expect compliance burdens, sourcing shifts, and potential disruption to duty-free treatment for borderline products.
E-Auto-Förderung und Autowandel
Die Regierung reaktiviert E-Auto-Subventionen (1.500–6.000 €, ca. 3 Mrd. €, bis zu 800.000 Fahrzeuge). Das stabilisiert Nachfrage, beeinflusst Flottenentscheidungen und Zulieferketten. Gleichzeitig verschärfen EU-Klimaziele und Konkurrenz aus China Preisdruck, Lokalisierung und Technologietransfer-Debatten.
BOJ tightening and yen swings
Rising Japanese government bond yields and intervention speculation are increasing FX and funding volatility. Core inflation stayed above 2% for years and debt is about 230% of GDP, raising hedging costs, repatriation risk, and pricing uncertainty for exporters and importers.
Technology Sector Volatility and AI Investment
Major US tech firms are ramping up AI investments, but market performance is diverging due to supply chain disruptions and tariff uncertainty. Long-term AI adoption promises sectoral transformation, yet near-term volatility affects global tech partnerships and investment strategies.
Nickel governance and reporting gaps
Regulators disclosed a major Chinese-linked nickel smelter failed to submit mandatory investment activity reports, weakening oversight of capital, production, taxes, and environmental compliance. This heightens governance and ESG due-diligence needs for counterparties in Indonesia’s nickel downstreaming ecosystem.
Privatization and Infrastructure Modernization
The government is advancing privatization of key assets, including airports and state enterprises, through transparent, open bidding. These efforts aim to improve operational efficiency, attract foreign investment, and modernize infrastructure, with significant interest from Gulf and Turkish investors.
Acordo UE–Mercosul e ratificação
O acordo foi assinado, mas o Parlamento Europeu pode atrasar a entrada em vigor em até dois anos por revisão jurídica. Para empresas, abre perspectiva de redução tarifária e regras mais previsíveis, porém com incerteza regulatória e salvaguardas ambientais.
Regulatory and Geopolitical Frictions Rise
Escalating trade disputes, tariffs, and new cybersecurity rules in the EU and India target Chinese firms and supply chains. These frictions increase operational uncertainty, compliance costs, and market access risks for international investors and exporters.
Trade compliance and reputational exposure
Scrutiny of settlement-linked trade and corporate due diligence is intensifying, including EU labeling and potential restrictions. Companies face heightened sanctions, customs, and reputational risks across logistics, retail, and manufacturing, requiring enhanced screening, traceability, and legal review.
Photonics and optics capacity
Finland’s optics and photonics base—supporting high-end XR headsets and sensing—attracts scale-up capital, including semiconductor-laser manufacturing expansion. This improves component availability for simulation devices, yet exposes firms to specialized materials dependencies and export-sensitive dual-use scrutiny.
Energy tariffs and circular debt
Power-sector reforms, including proposed tariff revisions and circular-debt containment, remain central to macro stabilization. Tariff resets can lift inflation but may reduce industrial cross-subsidies. For investors, the key risks are energy cost predictability, outages, and contract enforcement.
Tariff rationalisation amid protectionism
Recent tariff schedules cut duties on many inputs, improving manufacturing cost structures, while maintaining high protection on finished goods in select sectors. This mix changes sourcing decisions, compliance requirements, and effective protection rates, influencing export orientation versus domestic-market rent-seeking.
Energia e sanções: diesel russo
Importações de diesel russo voltaram a crescer (média 151 kbpd em janeiro), atraídas por descontos e restrições de mercado da Rússia. Empresas enfrentam risco reputacional e de compliance, além de incerteza comercial com EUA e volatilidade de oferta.
Climate Policy and Infrastructure Investment Uncertainty
US climate and infrastructure policy shifts, including reversals of clean energy initiatives, create uncertainty for global investors. Geopolitical competition over infrastructure standards and data systems is intensifying, impacting long-term planning for sustainable business operations.
Fiscal consolidation and tax uncertainty
France’s 2026 budget targets a ~5% of GDP deficit and debt around 118% of GDP, relying on higher levies on large corporates and restrained spending. Political fragmentation and 49.3 use heighten policy volatility for investors, pricing, and hiring.
Carbon Market Regulation and Opportunities
Brazil is preparing to launch a regulated carbon credit market by 2030, unlocking significant investment in forest conservation, renewable energy, and agriculture. This regulatory shift will drive demand for carbon credits, impacting polluting industries and boosting international climate finance flows.