Mission Grey Daily Brief - November 01, 2024
Summary of the Global Situation for Businesses and Investors
The 2024 US presidential election is gripping the world's attention and could have a significant impact on the global economy. The Russian President Vladimir Putin is taking advantage of a distracted and divided United States to push for pro-Kremlin electoral outcomes in Georgia and Moldova and bring North Korean soldiers to Russia to fight Ukraine. China's military incursions into Taiwan's ADIZ and crossings of the median line in the Taiwan Strait have skyrocketed, creating a dangerous new normal. China has imposed sanctions on the US drone supplier to Ukraine, Skydio, banning Chinese companies from providing critical components to the firm. Attackers set fire to the headquarters of a Bangladesh party that supported the country's ousted leader Sheikh Hasina on Thursday night. US airstrikes targeted multiple sites in Syria, killing up to 35 Islamic State militants. The UN General Assembly has condemned the US economic embargo of Cuba for a 32nd year.
US Presidential Election
The 2024 US presidential election is gripping the world's attention and could have a significant impact on the global economy. The vote, held on 5 November, could also have major consequences on international issues ranging from the climate crisis to the reorientation of global supply chains. The Republican candidate is former President Donald Trump and the Democratic candidate is current Vice President Kamala Harris. In China, where election news is filtered through heavily censored state and social media, the focus has been more on spectacle than substance – with a sense that no matter who wins, the tensions of the US-China relationship will remain. People in China have seen their economic prospects dim as the country has struggled to fully rebound following its stringent pandemic controls amid a wider slowdown and property market crisis, among other challenges. Interest in the candidates and their policies appears muted compared with past US elections.
Russia-Ukraine War
The Russian President Vladimir Putin is taking advantage of a distracted and divided United States to push for pro-Kremlin electoral outcomes in Georgia and Moldova and bring North Korean soldiers to Russia to fight Ukraine. New NATO Secretary General Mark Rutte confirmed this week that North Korean military units have been deployed to Russia’s Kursk region for potential battle with Ukrainian troops, who have seized territory there. Pentagon officials estimate that as many as ten thousand North Korean soldiers have been sent to Russia for military training, among them the country’s elite special forces. Even as Russia escalates militarily against Ukraine, it has deployed disinformation, influence operations, and money in Moldova and Georgia, working to turn back pro-Western majorities in both countries that favour eventual integration into the European Union (EU) and other Western institutions.
China-Taiwan Tensions
China's military incursions into Taiwan's ADIZ and crossings of the median line in the Taiwan Strait have skyrocketed, creating a dangerous new normal. Crossings of the median line have become increasingly common since August 2022, when then-House Speaker Nancy Pelosi controversially visited Taiwan, and China has been steadily erasing it altogether. In a recent drill surrounding Taiwan, 111 Chinese warplanes crossed it, marking a single-day high. A nation's ADIZ extends far beyond its territorial airspace, but the area is closely monitored for national security purposes. When Chinese aircraft enter Taiwan's de facto ADIZ, it dispatches combat air patrol (CAP) aircraft in response. In 2021, the Chinese military flew 972 aircraft into Taiwan's ADIZ, and that number nearly doubled in 2022. 1,703 aircraft were recorded in 2023. And 2024 looks to have a record-breaking number, with over 2,000 aircraft documented as of September. They're also no longer limited to a corner of the ADIZ.
China Sanctions US Drone Supplier to Ukraine
China has imposed sanctions on the US drone supplier to Ukraine, Skydio, banning Chinese companies from providing critical components to the firm. Skydio is currently looking for alternative suppliers because of the sanctions, which have also blocked the supply of batteries from the company's sole supplier. The company has asked the Biden administration for help. US officials are concerned that China could undermine US supply chains and make it harder to supply drones used for intelligence gathering in Ukraine. Skydio's crisis highlights the risks faced by US companies dependent on China and comes as foreign businesses worry about China's use of security laws to detain local workers and conduct corporate raids. On 11 October, China imposed sanctions on several US companies, including Skydio which is a private company, in response to Washington's approval of the sale of combat drones to Taiwan. Skydio was recently awarded a contract with Taiwan’s National Fire Agency. The sanctions were imposed before Skydio could find alternative suppliers. One of the sources said that the Chinese authorities had visited Skydio's suppliers, including Dongguan Poweramp, a subsidiary of Japan's TDK that makes batteries for drones, and ordered them to stop working with Skydio. On 30 October, Skydio notified its customers that it was limiting the number of batteries it ships with its drones due to Chinese sanctions and warned that new suppliers are not expected to come on stream until spring. Skydio is discussing the situation with companies in Asia, particularly in Taiwan. One source said that US officials had reached out to Asian allies to discuss ways to support the company. Skydio has also been in contact with Taiwan's Vice President Hsiao Bi-khim on the issue. The San Mateo-based company serves corporate and government clients, including the US military. It said it has sent more than 1,000 drones to Ukraine to gather intelligence and help record Russia's war crimes. Skydio said its newest model, the X10, was the first US drone to pass Ukraine's electronic warfare tests, which makes it harder to jam, and Kyiv has ordered thousands of such drones. China's actions come as the US Congress is considering a bill to ban Americans from using drones made by DJI, the Chinese company that dominates the global commercial drone market.
Further Reading:
Americans are going to the polls. Here’s how the US election works - World Economic Forum
China imposes sanctions on US drone supplier to Ukraine - Ukrainska Pravda
China’s watching the US election – but doesn’t see much hope for better ties - CNN
Luxembourg grain company still profiting despite Ukraine war - Luxembourg Times
Putin is making the most of a distracted and divided United States - Atlantic Council
UN General Assembly condemns the US economic embargo of Cuba for a 32nd year - Toronto Star
Themes around the World:
Escalating Sanctions Enforcement Network
Washington expanded pressure with sanctions on 35 shadow-banking entities and individuals, part of roughly 1,000 Iran-related actions since February 2025. The measures heighten secondary-sanctions exposure for banks, traders, insurers, and China-linked counterparties handling Iranian commerce.
EV Transition Policy Uncertainty
Germany’s auto transition remains advanced but uneven: over 20% of surveyed firms are fully oriented to e-mobility and nearly 40% are advanced. However, abrupt policy shifts, charging gaps, and debate over EU CO2 rules weaken planning certainty across automotive value chains.
Semiconductor Capacity Globalization
TSMC and other firms are accelerating overseas expansion, including major U.S. investment commitments, reshaping Taiwan’s industrial footprint. This diversifies geopolitical risk, but could redirect capital, talent and supplier ecosystems away from Taiwan’s domestic manufacturing base.
Corporate Governance Reform Backlash
Japan is weighing tighter shareholder-proposal rules as activist campaigns reach record levels, after proposals targeted 52 companies last year. The shift could temper governance pressure, affect capital allocation, and alter expectations around buybacks, restructuring, and shareholder engagement.
Energy Revenue Volatility Persists
Oil and gas remain central but increasingly unstable for planning. January-April oil-and-gas revenues fell 38.3% year on year to RUB 2.3 trillion, while April export revenue still reached about $19.2 billion, exposing counterparties to sharp fiscal and pricing swings.
Energy Shock And Inflation
Thailand’s oil and gas net imports equal roughly 7% of GDP, leaving businesses exposed to Middle East-driven fuel shocks. The central bank cut growth forecasts to 1.5% and expects 2026 inflation near 2.9%, raising logistics, power, and operating costs.
Weak Growth, Volatile Demand
UK GDP rose 0.6% in Q1, yet forecasts for 2026 growth were cut to about 0.8% as energy shocks weigh on sentiment. Businesses face uneven demand, weaker discretionary spending and rising unemployment risk, complicating sales forecasts and inventory planning.
Labor Localization Compliance Tightens
Authorities are tightening Saudization through the updated Nitaqat program and Qiwa contract rules, targeting 340,000 additional localized jobs over three years. Stricter full-time, wage and contract requirements raise compliance costs, workforce planning complexity and visa constraints for foreign employers.
Metals Tariffs Hit Manufacturing
U.S. tariff changes now apply 25% duties to the full value of many metal-containing goods, sharply raising costs for exporters. Ontario and Quebec are particularly exposed, with passenger vehicle exports down over 46% and rolled steel products down more than 60%.
Policy uncertainty around BEE
Ongoing court challenges and business criticism of Black economic empowerment rules underscore regulatory uncertainty. Firms warn ownership and procurement requirements could affect contracts, manufacturing decisions and supplier structures, complicating market entry, compliance planning and long-term capital allocation.
Trade Diversification Gains Momentum
Jakarta is accelerating trade agreements with the EU, Canada, the UK, the EAEU, and the US to offset export slowing and geopolitical uncertainty. Officials are targeting EU market access with zero tariffs from January 2027, while EAEU preferences could cover over 98% of Indonesia-Russia trade.
Gas Supply And Energy Costs
Egypt has shifted from gas exporter toward importer as domestic output weakened, raising energy vulnerability. Monthly gas import costs reportedly jumped from about $560 million to $1.65 billion, while new discoveries and drilling plans may help medium term but not eliminate near-term industrial cost pressure.
Export competitiveness under pressure
Exporters report that high domestic inflation combined with relatively controlled depreciation is making Turkey more expensive. In March, exports fell 6.4% year on year while imports rose 8.2%, weakening competitiveness in textiles, apparel, leather and other price-sensitive manufacturing sectors.
Renewables And Green Hydrogen Push
Egypt is accelerating renewable manufacturing and green hydrogen projects, including wind-turbine localization and the Obelisk ammonia venture. This supports long-term industrial decarbonization and export potential, but investors must still monitor execution risks around financing, infrastructure, water supply, and offtake.
Foreign Investor Confidence Under Pressure
Major Chinese investors have formally complained about tighter regulation, export earnings retention, visa restrictions, forestry enforcement, and alleged corruption. The concerns highlight rising policy unpredictability and compliance risk for foreign manufacturers, miners, and infrastructure operators dependent on long-term capital commitments.
Technology Substitution Accelerates
Beijing is deepening indigenous substitution by requiring chipmakers to use at least 50% domestic equipment for new capacity and by excluding foreign AI chips and selected cybersecurity software from sensitive sectors, narrowing opportunities for overseas technology suppliers.
Judicial reform uncertainty persists
Judicial reform remains a material deterrent to capital deployment after low-turnout court elections and proposed redesigns. Investors continue to flag weaker legal predictability, politicization risks, and slower dispute resolution, raising contract-enforcement, compliance, and transaction-structuring costs for foreign businesses.
Non-Oil Growth Resilience
Non-oil activities now contribute about 55% of GDP, with 2025 non-oil growth around 4.9% and April PMI returning to 51.5. For international firms, diversification improves sector opportunities, though demand remains sensitive to delayed spending and regional instability.
Sanctions Evasion Reshapes Energy Trade
Russia is expanding shadow shipping for oil and LNG, including at least 16 LNG-linked vessels and sanctioned tankers carrying 54% of fossil-fuel exports in April. This sustains trade flows, complicates compliance, raises shipping-risk premiums, and heightens sanctions-enforcement exposure for counterparties.
B50 Biodiesel Strains Palm Balance
Indonesia’s planned B50 biodiesel rollout from July 2026 could absorb an extra 1.5–1.7 million tons of CPO this year and up to 3.5 million annually. That supports energy security but may tighten edible oil supply, lift prices and constrain exports.
Inflation and rate risks rising
Consumer inflation rose to 3.48% in April, with food inflation at 4.2%, while oil and currency pressures are building. The RBI kept the repo rate at 5.25%, but businesses should prepare for tighter financing conditions, margin pressure, and weaker domestic demand.
China Plus One Manufacturing Gains
Thailand is attracting capital-intensive manufacturing as companies diversify beyond China, particularly in advanced electronics, AI-linked hardware, and regional production platforms. This improves supply-chain resilience for multinationals, but increases exposure to geopolitical balancing between US and Chinese commercial interests.
External Buffers and Currency Stability
Foreign-exchange reserves have improved from roughly $14.5 billion to above $17 billion, supporting imports and debt servicing. Yet exchange-rate flexibility remains policy priority, leaving businesses exposed to rupee volatility, hedging costs, pricing adjustments, and imported-input uncertainty.
Fiscal stabilization supports confidence
Moody’s says government debt may have peaked at 86.8% of GDP in 2025 and could decline to 84.9% by 2028. Narrower deficits and stronger tax collection support macro stability, though high interest costs still limit policy flexibility and public investment.
China Competition Recasts Supply Chains
German industry faces intensifying competition from China in autos, machinery, chemicals, and emerging technologies. Analysts estimate China’s industrial push could subtract 0.9% from German GDP by 2029, accelerating diversification, localization, and strategic supplier reassessment across value chains.
Reshoring Without Full Reindustrialization
Manufacturing investment and foreign direct investment into US facilities are increasing, but evidence suggests much production is shifting from China to third countries rather than back to America. Businesses still face labor shortages, infrastructure bottlenecks and long timelines for domestic capacity buildout.
Housing Tax Overhaul Reshapes Capital
The 2026 budget restricts negative gearing to new homes from July 2027 and replaces the 50% capital gains discount with inflation indexation. Treasury expects slower house-price growth, modestly higher rents and changing investment flows across property, construction and consumer sectors.
Middle East Shock Transmission
War-related disruption around the Strait of Hormuz is lifting Pakistan’s fuel, freight, food, and fertiliser costs while threatening remittances and shipping flows. For internationally connected firms, this increases transport volatility, import bills, and contingency-planning requirements across supply chains and operations.
Energy Export Capacity Expansion
Pipeline and export infrastructure are becoming strategic priorities as Canada seeks to diversify beyond the U.S. Proposed projects could add more than 550,000 bpd immediately and over 1 million bpd longer term, improving trade optionality while reshaping energy investment decisions.
US Auto Tariff Escalation
Washington’s move to lift tariffs on EU cars and trucks from 15% to 25% threatens Germany’s export engine. Estimates point to €15 billion in near-term output losses, rising to €30 billion, forcing pricing, sourcing, and production-location reassessments.
Critical Minerals Investment Momentum
Copper exports jumped 55% year on year in April to US$760.6 million, underscoring Brazil’s growing role in energy-transition and electrification supply chains. This creates opportunities in mining, processing and infrastructure, while raising scrutiny over local value addition, permitting and ESG performance.
External Vulnerability To Oil
Middle East conflict risks are raising Pakistan’s exposure to imported energy shocks, with officials modeling crude at $82-$125 per barrel. Higher oil, freight, and insurance costs could weaken the current account, raise inflation, and disrupt trade planning for import-dependent sectors.
Reserve Rebuilding And FX Flexibility
The State Bank has rebuilt buffers, with reserves around $16-17 billion and exchange-rate flexibility still central to shock absorption. For foreign businesses, this improves near-term payment capacity, but currency volatility and tighter monetary conditions remain material risks for pricing and repatriation.
External Shocks Weaken Demand
Middle East conflict disruptions, higher energy prices and shipping strain are softening the UK outlook. Forecasts suggest GDP growth could slow to 0.8%, inflation exceed 4%, and unemployment rise, reducing discretionary demand and complicating market-entry, pricing and inventory decisions.
War Economy Distorts Markets
Military expenditure now dominates resource allocation, supporting output while undermining civilian sectors. Defence spending is estimated around 7.5% of GDP, absorbing labour, credit and industrial capacity, which distorts prices, suppresses private investment and reduces predictability for international commercial operators and investors.
FDI Surge and RHQ Shift
Foreign investment inflows rose fivefold since 2017 to SR133 billion in 2025, while more than 700 multinationals have moved regional headquarters to Riyadh. This deepens competition, expands supplier ecosystems and makes Saudi Arabia increasingly central to Gulf market-access strategies.