
Mission Grey Daily Brief - February 19, 2025
Summary of the Global Situation for Businesses and Investors
The US and Russia have begun peace talks in Riyadh, Saudi Arabia, to end the war in Ukraine and restore relations, without the presence of Ukraine or European allies. This meeting is a significant shift in US foreign policy and raises concerns about the future of European security and the potential for a peace deal that may not be favourable to Ukraine and European allies. British couple Craig and Lindsay Foreman have been charged with spying in Iran, arrested by the Islamic Revolutionary Guard Corps last month. Mexico is threatening to sue Google over the "Gulf of America" name change in its map service following President Donald Trump's order. India and Qatar have formalised a new strategic partnership, with Qatar announcing a $10 billion investment in India, covering sectors such as hospitality, food security, technology, and logistics. India and the US are dealing with the arrival of 112 illegal Indian immigrants in Amritsar, transported in a US military plane.
US-Russia Peace Talks: Implications for Ukraine and Europe
The US and Russia have begun peace talks in Riyadh, Saudi Arabia, to end the war in Ukraine and restore relations, without the presence of Ukraine or European allies. This meeting is a significant shift in US foreign policy and raises concerns about the future of European security and the potential for a peace deal that may not be favourable to Ukraine and European allies. US Secretary of State Marco Rubio and Russian Foreign Minister Sergey Lavrov met in Riyadh to discuss a potential settlement to the nearly three-year-long war in Ukraine, despite the absence of Ukrainian officials. The meeting is expected to focus on thawing relations between the two countries, whose ties have fallen to their lowest level in decades. It is meant to pave the way for a meeting between Trump and Russian President Vladimir Putin.
Kyiv's absence at the talks has rankled many Ukrainians, and European allies have expressed concerns they are being sidelined. French President Emmanuel Macron vowed to work with all Europeans, Americans, and Ukrainians to achieve a strong and lasting peace in Ukraine. Kremlin spokesman Dmitry Peskov stated that Putin has repeatedly expressed readiness for peace talks, but a comprehensive settlement is impossible without considering security issues in Europe.
The meeting in Riyadh highlights Saudi Arabia's role in diplomacy, with Crown Prince Mohammed bin Salman seeking to be a major diplomatic player and burnishing his reputation after the 2018 killing of Washington Post journalist Jamal Khashoggi. Saudi Arabia has maintained close relations with Russia throughout the war in Ukraine, both through the OPEC+ oil cartel and diplomatically. Saudi Arabia has also helped in prisoner negotiations and hosted Ukrainian President Volodymyr Zelenskyy for an Arab League summit in 2023.
The recent US diplomatic blitz on the war has sent Ukraine and key allies scrambling to ensure a seat at the table, amid concerns that Washington and Moscow could press ahead with a deal that won't be favourable to them. Kyiv's participation in such talks was a bedrock of US policy under Trump's predecessor, Joe Biden, whose administration also led international efforts to isolate Russia over the war. White House officials have pushed back against the notion that Europe has been left out, noting that administration officials have spoken to several leaders.
Kyiv has insisted it will not accept the outcome of any discussions if Kyiv does not have a say in its own future. European allies have expressed concerns they are being sidelined, with France calling an emergency meeting of European Union countries and the UK to discuss the war. Sir Keir Starmer has called for the US to provide a 'backstop' for any deal in Ukraine, and European leaders have <co: 10,
Further Reading:
British couple charged with spying in Iran
Mexico Threatens to Sue Google Over ‘Gulf of America’ Change
PM Modi's Efforts Strengthen India-Qatar Ties As Both Nations Announce Strategic Partnership
Russian delegation arrives in Saudi Arabia for talks with U.S. to end Ukraine war
Third Batch Of 112 Illegal Indian Immigrants Lands In Amritsar In US Military Plane
Top Russian, US officials are discussing improving ties and ending the Ukraine war — without Kyiv
Trump’s new world: US and Russia begin Ukraine peace talks
US and Russia meet without Ukraine for first talks on ending war
Themes around the World:
Advancements in Payment Systems and Fintech
Turkey's cards and payments market is rapidly evolving with increased adoption of contactless payments, fast payment systems, and fintech-bank collaborations. Initiatives like BKM-Kentkart partnership and FAST Request-to-Pay service enhance transaction efficiency and financial inclusion. These developments create opportunities for digital commerce growth but require regulatory oversight to mitigate operational risks.
Impact of Oil Price Volatility on Economy
Declining oil prices, currently around $69 per barrel, have pressured Saudi Arabia's fiscal balance, leading to budget deficits and increased sovereign debt issuance. This volatility challenges public finances and underscores the urgency of economic diversification to reduce dependence on oil revenues and stabilize government spending.
Expanding Turkish Influence in Africa
Turkey is actively increasing its diplomatic, economic, and military presence across Africa, positioning itself as a strategic partner to counter Chinese and Russian influence. This includes infrastructure projects, cultural ties, and defense cooperation, offering new trade and investment opportunities but also geopolitical complexities for international stakeholders.
Australian Stock Market Volatility
The ASX 200 has experienced significant fluctuations driven by global bond yield changes, domestic GDP surprises, and sector-specific earnings reports. Volatility impacts investor confidence, capital flows, and corporate financing conditions, thereby influencing Australia's attractiveness for international investors and the stability of supply chains.
Canada-U.S. Economic Interdependence
Despite political tensions and tariff disputes, Canadian businesses and investors maintain strong economic ties with the U.S., investing heavily south of the border. This interdependence underscores the challenges of economic sovereignty and highlights the importance of U.S. market dynamics in shaping Canadian trade and investment strategies.
Political Instability and Market Impact
Government crackdowns on opposition parties and judicial interventions have triggered market volatility, including stock sell-offs and bond yield surges. Political risks undermine investor confidence, influencing capital flows, currency stability, and sovereign financing strategies.
Foreign Direct Investment Surge and Factory Leasing
Vietnam attracted $24.09 billion in registered FDI in early 2025, up 27.3% YoY, with manufacturing dominating. A notable trend is the preference for leasing ready-built factories, which accelerates project deployment and reduces upfront costs. This model supports industries requiring agility, such as electronics and medical equipment, reinforcing Vietnam's position as a competitive manufacturing hub amid global supply chain realignments.
China-Pakistan Economic Corridor (CPEC) Relaunch
The planned Phase II relaunch of CPEC aims to boost industrial and agricultural development through infrastructure and Special Economic Zones. Despite past setbacks due to political and security challenges, renewed geopolitical alignment and improved macroeconomic indicators offer a window for success. Effective execution and funding clarity are essential to attract investment and enhance trade connectivity.
Bond Market Volatility and Yield Spreads
The yield spread between French and German 10-year bonds has widened to 80 basis points, reflecting investor concerns over France's fiscal and political outlook. Rising yields increase France's cost of borrowing, potentially crowding out private investment and affecting cross-border capital allocation, with implications for Eurozone financial stability and currency markets.
Foreign Investment and Stock Market Dynamics
Foreign investors are increasingly active in Saudi equities, accounting for 41% of buying despite overall market declines. Rock-bottom valuations and reforms easing foreign ownership attract global capital. However, domestic institutional selling and weak oil prices create short-term risks, with expectations of market recovery as economic momentum persists.
Monetary Policy and Ruble Volatility
Russia's central bank maintains high interest rates (around 18%) to combat inflation, but this policy strengthens the ruble excessively, hurting exporters and economic growth. Experts call for rate cuts to 12-14% to stimulate recovery. Ruble volatility affects trade competitiveness and budget revenues, complicating financial planning for businesses and government alike.
Robust Saudi Debt Capital Market
Saudi Arabia accounted for 18.9% of emerging markets' US dollar debt issuance in H1 2025, raising $47.93 billion through bonds and sukuk. The Kingdom leads the GCC in fixed income market growth, driven by ambitious Vision 2030 projects, deficit funding, and diversification efforts, attracting both domestic and international investors seeking stable returns.
Manufacturing Sector Resilience and Challenges
Despite overall economic contraction, Germany's manufacturing sector showed signs of resilience with six consecutive months of output growth and a surge in new orders. However, job cuts in manufacturing indicate efforts to boost productivity amid cost pressures. Falling input prices due to lower oil prices and a strong euro have helped, but ongoing tariff impacts and global uncertainties temper optimism.
Monetary Policy and Inflation Trends
Turkey's Central Bank is actively managing interest rates amid high inflation, which stood at 32.6% annually in August 2025. Recent rate cuts have boosted stock market optimism and foreign investment, but inflation remains above targets. Monetary policy decisions in coming months will critically influence economic stability and investor confidence.
Strategic International Partnerships and Deals
Egypt secured major agreements with China, Russia, and international energy firms, focusing on renewable energy, petrochemicals, healthcare, and energy exploration. These partnerships enhance technology transfer, infrastructure development, and economic diversification, reinforcing Egypt's role as a regional hub and attracting substantial foreign capital.
Vietnam as Global Supply Chain Hub
Vietnam is rapidly replacing China as a key manufacturing and assembly hub due to U.S.-China trade tensions. Northern regions like Bac Ninh attract Chinese manufacturers relocating operations to avoid tariffs. Despite rising costs, Vietnam benefits from tariff advantages and growing investments from global electronics and automotive firms, strengthening its role in global supply chains.
Investment Climate and Market Sentiment
Despite tariff-induced volatility and foreign portfolio outflows, India remains a top investment destination due to strong fundamentals, government reforms, and resilient domestic demand. Equity markets face near-term risks from earnings pressures and private capex lag but benefit from monetary easing, fiscal stimulus, and a sovereign credit rating upgrade, supporting medium-term investor confidence.
Foreign Portfolio Flows and Bond Market Dynamics
Despite political unrest, Indonesia's sovereign bonds remain favored over regional peers like India due to expectations of sustained rate cuts and fiscal discipline. Foreign investors have injected significant capital into Indonesian bonds, attracted by higher yields and stable macroeconomic fundamentals, though recent events have triggered short-term outflows and yield volatility.
Market Volatility Amid U.S. Monetary Policy Uncertainty
Political pressure on the U.S. Federal Reserve, including the unprecedented dismissal attempt of Governor Lisa Cook by President Trump, has increased market volatility. Mexican financial markets have reacted cautiously, with fluctuations in the S&P/BMV IPC index and peso stability reflecting investor concerns over future interest rate decisions and inflation outlooks.
Diplomatic Efforts and International Relations
Iran's diplomatic maneuvers, including resistance diplomacy and engagement with Security Council members, aim to mitigate sanctions impact and garner international support. However, internal political divisions and strained relations with Western nations complicate these efforts, influencing the geopolitical risk environment for investors and trade partners.
Global Trade Tensions and Tariff Impacts
US tariff policies, including those affecting Chinese imports, create a complex environment for Japanese exporters. While tariffs pose headwinds for companies reliant on China, Japan may gain market share due to shifting trade dynamics. These tensions necessitate strategic adjustments in supply chains and export strategies, influencing Japan's role in global trade networks.
Investor Sentiment and Market Dynamics
Thai institutional investors exhibit cautious optimism fueled by anticipated global monetary easing, yet remain wary of geopolitical tensions and domestic political risks. Equity markets show mixed performance with foreign investors net selling, reflecting concerns over political clarity and economic stimulus effectiveness, influencing capital flows and market volatility.
Vietnam Real Estate Market Growth
Vietnam's real estate market is expanding steadily, fueled by urbanization, infrastructure development, and rising foreign direct investment. Trends include decentralization to satellite cities, sustainability integration, and digital mortgage solutions. This sector's growth supports economic diversification but requires careful risk assessment amid evolving regulatory and demographic factors.
Bond Market Volatility and Yield Spreads
The yield spread between French and German 10-year bonds has widened to 80 basis points, reflecting investor concerns over political and fiscal risks. Elevated borrowing costs increase debt servicing burdens, potentially crowding out public investment. Market volatility may deter foreign investment and exacerbate fiscal pressures, with credit rating agencies poised to reassess France's sovereign rating.
Legal Risks for Businesses in Occupied Territories
Finnwatch warns companies operating in Israel and occupied territories face legal and ethical risks linked to alleged violations of international law and human rights abuses. Businesses may be implicated in complicity if due diligence is inadequate. This scrutiny could lead to reputational damage, legal challenges, and calls for divestment, impacting supply chains and investment decisions in the region.
Capital Market Development and Reforms
The Egyptian government is incentivizing large stock listings and expanding financial instruments, including derivatives and market maker mechanisms, to deepen liquidity and broaden investor base. New leadership at the Egyptian Exchange and fintech initiatives aim to enhance market efficiency and accessibility, supporting private sector growth and attracting both local and international investors.
Legal and Ethical Risks for Businesses
Finnwatch's guidance warns companies operating in Israel and occupied territories of potential complicity in international law violations amid rising violence and humanitarian concerns. This elevates legal and reputational risks for multinational firms, urging enhanced due diligence and potentially influencing corporate strategies, supply chains, and investment decisions in the region.
Market Volatility and September Risks
September historically brings heightened market volatility, exacerbated by political tensions, tariff uncertainties, and Federal Reserve policy ambiguity. Investors face risks from rising Treasury yields, tech sector corrections, and geopolitical events, leading to cautious portfolio adjustments and potential sell-offs amid concerns over economic growth and fiscal policy.
Unresolved Korea-US Trade Agreement Risks
Ambiguities in the Korea-US trade deal, especially regarding investment commitments and profit-sharing, raise risks of future disputes. Experts warn that differing interpretations could lead to new US demands or trade tensions. Maintaining balanced relations with both the US and China is critical for South Korea to navigate geopolitical and economic complexities.
Surging Rice Prices and Inflation Pressure
Rice prices in Japan soared over 90% year-on-year due to supply shocks from extreme weather and panic buying. Inflation remains above the Bank of Japan's 2% target, prompting expectations of interest rate hikes. Rising food costs strain consumer spending and political stability, influencing monetary policy and import strategies.
Structural Challenges in Domestic Economy
South Korea faces structural headwinds including weak construction activity, elevated household debt, and overcapacity in steel and petrochemicals due to Chinese oversupply. These factors constrain domestic demand and industrial competitiveness, complicating efforts to sustain growth and requiring targeted policy interventions.
Investor Sentiment and Market Volatility
Political turmoil has heightened risk premiums on French government bonds, with yields surpassing Italy's for the first time in EU history. The rising cost of debt reflects investor anxiety over fiscal management and political uncertainty, causing volatility in bond and currency markets. While equity markets show resilience, bond market stress signals caution for international investors and lenders.
Supply Chain Disruptions from Political Instability
Political instability and government changes in Russia, exacerbated by the Ukraine conflict, have disrupted supply chains through sanctions, export controls, and regulatory volatility. These factors increase compliance risks, raise costs, and create uncertainty for international businesses sourcing from or operating in Russia, necessitating adaptive legal and operational strategies.
Corporate Sector Inertia
Pakistan's private sector shows significant potential but remains constrained by policy neglect, subsidies, and risk aversion. This results in limited foreign direct investment and weak innovation, hindering competitiveness and growth. The corporate culture favors capital conservation over creation, leading to talent flight and missed opportunities in global markets, impacting long-term economic dynamism.
Environmental and Regulatory Challenges
Brazil faces international scrutiny over Amazon deforestation and environmental policies, affecting its global image and trade relations. Regulatory tensions, such as disputes over agricultural moratoriums, pose risks to commodity exports and sustainability commitments, potentially influencing foreign investment and access to environmentally conscious markets.
Impact on French Financial Sector and Stock Market Volatility
French banks and financial stocks have suffered significant losses amid the political crisis, with major institutions like Societe Generale and BNP Paribas experiencing sharp declines. The CAC 40 index has underperformed relative to European peers, reflecting heightened risk premiums. Market volatility has increased, driven by uncertainty over fiscal reforms and government stability, affecting investor sentiment and capital flows in France's financial markets.