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Mission Grey Daily Brief - November 17, 2024

Summary of the Global Situation for Businesses and Investors

The global situation is dominated by tensions between the US and China, the ongoing war in Ukraine, and the G20 summit in Brazil. President-elect Donald Trump's hawkish stance towards China has raised concerns among US companies, who fear retaliation from China and disruption to their supply chains. Meanwhile, Russia's war in Ukraine continues to wreak havoc, with recent missile and drone attacks targeting Ukraine's power grid and causing widespread damage and casualties. The G20 summit in Brazil is set to be dominated by discussions on the war in Ukraine and the implications of Trump's return to the White House. Japan and Ukraine have signed a security information-sharing pact, boosting cooperation and highlighting the importance of international collaboration in addressing global challenges.

US-China Relations

The incoming Trump administration's hardline stance towards China has raised concerns among US companies, who fear retaliation from China and disruption to their supply chains. Trump has threatened to impose tariffs on Chinese imports, which could force companies to find alternative sources of supply and lead to higher prices for American consumers. The Chinese government could respond with a range of measures, including economic changes, diplomatic actions, and security measures. The risk of public backlash in China, driven by rising nationalism, is also a concern, as Chinese consumers have boycotted international brands in the past.

Russia-Ukraine War

The war in Ukraine continues to wreak havoc, with recent missile and drone attacks targeting Ukraine's power grid and causing widespread damage and casualties. Ukraine's energy operator DTEK has announced emergency power cuts, and the country is facing a precarious winter due to major energy shortfalls. Kyiv has implored its Western allies for help to rebuild its energy grid and supply its forces with more aerial defence weapons. However, there are concerns that Western support may wane following the imminent return of Trump to the White House.

G20 Summit in Brazil

The G20 summit in Brazil is set to be dominated by discussions on the war in Ukraine and the implications of Trump's return to the White House. Security considerations are high, particularly after a failed bomb attack outside Brazil's Supreme Court in Brasilia. Brazil's left-wing President Luiz Inacio Lula da Silva will use the summit to highlight his position as a leader championing Global South issues, while also being courted by the West. The summit will also address other issues, such as the fight against hunger and taxing the world's super-rich.

Japan-Ukraine Security Pact

Japan and Ukraine have signed a security information-sharing pact, boosting cooperation and highlighting the importance of international collaboration in addressing global challenges. The pact aims to enhance cooperation in areas such as security, defence, and intelligence sharing, and demonstrates Japan's commitment to supporting Ukraine in its fight against Russian aggression. This development underscores the growing importance of international partnerships in addressing complex geopolitical issues and promoting global security.


Further Reading:

BREAKING NEWS: Japan, Ukraine sign security info-sharing pact to boost cooperation - Kyodo News Plus

In a meeting with Biden, China's Xi cautions US to 'make the wise choice' to keep relations stable - Fox News

In final talks, Biden to press China's Xi on North Korea's ties with Russia - ABC News

In their final talks, Biden is expected to press China’s Xi on North Korea’s ties with Russia - The Boston Globe

Russia launches massive drone, missile attack targeting Ukraine’s power grid - FRANCE 24 English

Russia launches one of the fiercest missile and drone attacks at Ukraine's infrastructure - Yahoo! Voices

U.S. companies could be caught in the crosshairs if China retaliates to fight Trump - CNBC

Wars, looming Trump reign set to dominate G20 summit - Seychelles News Agency

World Fears a Wider Trade War. Malaysia Sees an Opportunity. - The New York Times

Zelensky says Ukraine-Russia war will ‘end sooner’ with Trump as president - The Independent

Themes around the World:

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Direct US-Thailand Flight Initiatives

The government’s plan to establish direct flights to the US, supported by regained FAA Category 1 status and enhanced visa clearance services, aims to boost tourism, trade, and investment. This strategic aviation policy positions Thailand as a regional hub, improving connectivity with a major market and facilitating economic growth through increased bilateral exchanges.

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Geopolitical Risks from North Korean Cyber Schemes

North Korea's use of stolen U.S. identities to secure remote IT jobs funds its weapons programs and threatens U.S. companies' intellectual property and national security. The DOJ's crackdown highlights vulnerabilities in cybersecurity and workforce integrity, underscoring risks to sensitive technology sectors and the need for enhanced enforcement.

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Supply Chain Resilience and Real Estate Dynamics

Regional conflicts have created dual pressures on Egypt’s real estate sector: increased demand as property is viewed as a safe haven, alongside rising construction costs due to energy price volatility and supply chain disruptions. Developers are adopting cautious sales strategies and emphasizing project execution quality to manage risks, signaling a complex environment for investment and operational planning in construction and related industries.

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Artificial Intelligence Regulation and Competition

The U.S. faces a critical juncture in AI leadership amid fragmented state regulations. A proposed 10-year moratorium on state-level AI mandates aims to foster national competitiveness against China’s unified AI strategy. This regulatory uncertainty affects innovation, investment, and the ability of U.S. businesses to scale AI technologies critical for economic growth and global influence.

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Energy Independence and Industrial Strategy

Amid geopolitical tensions and volatile fossil fuel prices, the UK is prioritizing energy independence through clean energy investments linked to economic resilience and national security. The new industrial strategy includes significant capital investment (£113bn), reforms in procurement, and sectoral plans targeting net zero, clean energy, and energy-intensive industries, aiming to reduce reliance on unstable global energy markets.

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EU-US Tariff Negotiations

Germany urges a swift, simplified tariff agreement with the US to alleviate burdens on key industries like chemicals, pharmaceuticals, automotive, and steel. The looming threat of increased US tariffs risks prolonging recessionary pressures in Europe, disrupting supply chains, and complicating investment strategies. A timely resolution is critical to stabilizing transatlantic trade relations.

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Energy Sector Investments and Partnerships

Strategic energy deals, such as Azerbaijan's SOCAR acquiring a 10% stake in the Tamar offshore gas field, highlight Israel's growing energy sector integration with regional partners. These investments enhance energy security, diversify supply chains, and strengthen geopolitical alliances, impacting international trade and energy markets.

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Shekel Appreciation and Currency Dynamics

The Israeli shekel has strengthened significantly against major currencies, driven by improved geopolitical conditions and investor confidence. This appreciation reduces import costs and inflationary pressures but may challenge export competitiveness. Currency stability also influences cross-border trade, investment flows, and multinational corporate strategies operating in Israel.

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Political Instability and Governance Risks

South Africa's political landscape is marked by elite power struggles, coalition tensions, and selective accountability, undermining democratic legitimacy. Corruption and cadre deployment persist, affecting policy continuity and investor confidence. This political uncertainty poses risks to governance, reform implementation, and the broader business environment.

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Iran-Eurasian Economic Integration

Iran's active pursuit and implementation of a free trade agreement with the Eurasian Economic Union (EAEU) aims to deepen regional economic cooperation. This integration opens new trade corridors, diversifies markets, and enhances investment opportunities, positioning Iran as a strategic partner in Eurasian economic dynamics despite geopolitical challenges.

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U.S. Trade Policy and Tariff Impacts

President Trump’s tariff policies continue to influence global trade dynamics, causing companies to reassess sourcing and supply chain strategies. The administration’s aggressive stance on tariffs, including threats of high duties on imports from key partners, creates uncertainty for international investment and trade relations, affecting profitability and operational planning for multinational corporations.

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Regional Research and Innovation Cooperation

Indonesia is advancing regional collaboration by proposing nine research partnerships within ASEAN to boost innovation and technology development. This strategic move enhances Indonesia’s global positioning, fosters knowledge exchange, and supports sustainable economic growth through science and technology integration in regional supply chains.

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Japan's Rare Earth Ambitions Amid Supply Constraints

Japan aims to strengthen its position in rare earth element production as China tightens control over global supplies. Despite a recent US-China agreement, supply uncertainties persist, affecting Japan's manufacturing sectors reliant on these materials. Success in this area could reduce dependency, stabilize supply chains, and enhance Japan's strategic industrial competitiveness.

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Business Confidence Amid Economic Uncertainty

Despite macroeconomic headwinds, including inflation, rising operational costs, and global trade disruptions, UK finance, tech, and legal sectors exhibit cautious optimism. Firms focus on operational resilience, selective hiring, and strategic growth, though broader economic confidence remains low, reflecting challenges in navigating volatile fiscal policies, protectionism, and geopolitical instability.

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Political Stability and Security Legacy

Egypt’s post-2013 political stabilization efforts have reinforced national security and cohesion, crucial for sustaining economic growth and investor confidence. The government’s ongoing counterterrorism and border security measures mitigate regional spillover risks, underpinning a stable environment for business operations amid Middle East volatility.

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Anti-Customs Evasion and Local Industry Protection

Egypt has formed a specialized committee to combat customs evasion, which undermines local manufacturers, state revenues, and product quality. The initiative involves inter-ministerial coordination to strengthen enforcement, improve market integrity, and support domestic industry growth. Enhanced regulatory oversight is expected to improve competitiveness and attract more reliable investment.

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Homelessness and Social Vulnerability

A rising homelessness crisis, with over 7% of the homeless population being children, reflects deep social challenges. This exacerbates poverty and inequality, potentially increasing social unrest and reducing workforce productivity, which can deter investment and complicate business operations in South Africa.

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UK Energy Independence and Industrial Strategy

The UK government emphasizes energy independence through clean energy investments as a strategic priority for economic resilience and security. The Industrial Strategy White Paper links green energy to national security, aiming to reduce fossil fuel dependency amid geopolitical risks. This shift impacts investment flows, manufacturing competitiveness, and long-term supply chain sustainability.

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Middle East and African Conflict Impact

Ongoing wars in Sudan and the Middle East, particularly the Israel-Iran conflict, have significant regional security implications. South African leaders emphasize Africa’s role in peace efforts, with potential disruptions to regional stability affecting trade routes, investment confidence, and supply chains. These conflicts also influence South Africa’s diplomatic priorities and international engagements, including hosting G20 meetings.

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France’s Labour Market and High-Paying Sectors

France’s top-paying jobs concentrate in aviation, corporate management, healthcare, legal, and finance sectors, with executives earning up to €200,000 annually. This wage structure influences talent attraction, labor costs, and competitiveness. Understanding these dynamics is crucial for investors and companies planning operations or expansions in France’s high-value industries.

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Indonesia's Energy Subsidy Vulnerability

Rising global oil prices due to Middle East tensions significantly strain Indonesia's state budget through increased energy subsidies. With subsidized fuel prices fixed below economic levels, any oil price increase directly inflates subsidy burdens, potentially reaching tens of trillions of rupiah, risking fiscal deficits, weakening the rupiah, and forcing budget reallocations or subsidy adjustments.

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Rise in American 'Golden Visa' Applications

Amid economic and political uncertainties, wealthy Americans increasingly seek residency or citizenship abroad through investment programs. This trend reflects concerns over domestic instability, asset protection, and global mobility, potentially impacting capital flows, domestic investment, and the U.S. talent pool, while signaling broader confidence issues in the U.S. economic and political environment.

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Economic Recovery and Sovereign Risk Reduction

Recent improvements in macroeconomic stability, structural reforms, and IMF engagement have led to a significant reduction in Pakistan's sovereign default risk, positioning it as a leading emerging market in risk improvement. This progress signals renewed investor confidence but remains fragile amid geopolitical and climate-related uncertainties.

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Inflationary Pressures from Energy Costs

Rising oil prices due to Middle East tensions are driving inflation concerns in Australia, with potential increases in petrol, airfares, and consumer goods. This inflationary environment influences Reserve Bank monetary policy, interest rates, and overall economic growth prospects.

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China's Strategic Belt and Road Expansion

China is deepening geopolitical and economic ties through infrastructure projects like the China-Iran rail corridor, enhancing trade routes that bypass maritime chokepoints such as the Strait of Malacca. These initiatives bolster China’s energy security, regional influence, and resilience against Western sanctions, while also exposing supply chains to geopolitical risks from regional conflicts.

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Global Trade Relations and US Engagement

Pakistan is actively negotiating trade agreements with the US to recalibrate economic ties and reduce high tariffs. Efforts include expanding imports of US goods and attracting investment in sectors like mining. Successful deals could improve trade balances, enhance market access, and boost foreign direct investment, critical for economic growth.

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Cybersecurity and Defense Sector Opportunities

Heightened geopolitical risks and cyber threats from Iran and proxies have increased demand for cybersecurity and defense technologies. Companies specializing in AI-driven intelligence, cyber defense, and secure communications are positioned for growth, attracting investor interest as governments and businesses prioritize infrastructure protection and military modernization.

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US Critical Minerals Supply Chain Diversification

The Quad countries (US, Japan, India, Australia) have launched an initiative to diversify critical mineral supplies, reducing dependence on China amid concerns over economic coercion and supply disruptions. This strategic collaboration aims to secure resources vital for clean technologies and defense, reshaping global supply chains and geopolitical alignments in the Indo-Pacific.

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Impact of Middle East Conflicts on Oil Prices

Escalating conflicts in the Middle East, including Iran’s missile attacks and threats to close the Strait of Hormuz, have caused oil price surges. This volatility threatens to increase operational costs for UK businesses, raise inflation, and disrupt supply chains, prompting calls for de-escalation and strategic energy policies to mitigate economic shocks.

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Transatlantic Relations and NATO Commitments

Germany faces challenges in maintaining strong transatlantic ties amid U.S. political unpredictability, including Trump’s influence on NATO engagement. Germany’s defense spending is set to increase to 3.5% of GDP, reflecting commitments to NATO, which will affect government budgets, defense procurement, and strategic alliances critical for business confidence and security.

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Cartel Leadership Sanctions and Security Risks

The US sanctioned top leaders of the Jalisco New Generation Cartel (CJNG), linking them to violent crimes and drug trafficking. These measures aim to disrupt cartel operations but underscore persistent security challenges in Mexico that impact supply chains, investor risk assessments, and cross-border trade stability.

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Supply Chain Disruptions in Agricultural Imports

Political tensions with Turkey, Iran, and Pakistan have disrupted India's apple imports, leading to supply shortages and price increases for domestic producers in Kashmir and Himachal Pradesh. Border closures and import risks highlight vulnerabilities in agricultural supply chains, impacting food prices, trade flows, and domestic market stability during peak harvest seasons.

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Economic Uncertainty and Business Confidence

Despite economic headwinds including inflation, rising operational costs, and geopolitical instability, UK finance and tech professionals show cautious optimism for 2025. Businesses are adopting selective hiring and operational resilience strategies to navigate fiscal challenges, while concerns over government policy and global protectionism persist, influencing investment and growth decisions.

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BRICS Expansion and Global Economic Realignment

The growing BRICS coalition, including new partners like Vietnam, signals a shift in global economic governance and trade alliances. Australia's trade and investment strategies must adapt to this evolving multipolar landscape, where cooperation on technology, sustainable development, and infrastructure investment among emerging economies influences global market dynamics.

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Social Unrest and Strikes

General strikes and protests, such as those affecting Brussels airports and French pension reforms, signal social unrest risks. Such disruptions can impact logistics, supply chains, and business continuity, requiring contingency planning and risk mitigation by companies operating in France and the wider EU.

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Middle East Conflict Impact on Oil Prices

The escalating conflict between Iran and Israel, coupled with US military actions, has caused significant volatility in global oil prices, with spikes over 25% and fears of supply disruptions via the Strait of Hormuz. This volatility directly affects Australia's fuel costs, inflation, and economic stability, posing risks to supply chains and consumer prices.