Mission Grey Daily Brief - February 23, 2025

Summary of the Global Situation for Businesses and Investors

As the third anniversary of the Russia-Ukraine war approaches, the Ukrainian people are rallying around President Volodymyr Zelenskyy, who has been denigrated by US President Donald Trump and Russian President Vladimir Putin. Trump's false claims that Zelenskyy is a dictator and started the war have been criticised by Democrats and Republicans in the US Congress, and even some of Zelenskyy's harshest domestic critics have begun defending him. Meanwhile, Russia is preparing to declare victory in the war, and preparations are underway for a face-to-face meeting between Trump and Putin. In other news, Hamas has freed three more Israeli hostages as part of a fragile ceasefire deal, and Swedish authorities are investigating a damaged cable in the Baltic Sea, which has heightened fears of Russian sabotage and spying in the region.

Ukraine-Russia War

The Russia-Ukraine war is approaching its third anniversary, and the Ukrainian people are rallying around President Volodymyr Zelenskyy, who has been denigrated by US President Donald Trump and Russian President Vladimir Putin. Trump's false claims that Zelenskyy is a dictator and started the war have been criticised by Democrats and Republicans in the US Congress, and even some of Zelenskyy's harshest domestic critics have begun defending him. Trump's harsh words for Zelenskyy have drawn criticism from Democrats and even some Republicans in the US Congress, where defending Ukraine from Russia has had bipartisan support. However, Vice President JD Vance admonished Zelenskyy for publicly warning Trump about falling for Russian disinformation.

Trump's false claims have caused a political rift with the US, as Ukrainian forces, outnumbered and outgunned, increasingly struggle to hold back Russia's slow but steady advances. Trump has also signalled his desire to rapidly bring the fighting to a close on terms that Zelenskyy and many in the West say are too favourable to Russia. Reports have emerged of US and Russian officials meeting in Saudi Arabia to discuss a possible ceasefire without input from Ukraine.

Meanwhile, Russia is preparing to declare victory in the war, and preparations are underway for a face-to-face meeting between Trump and Putin. Senior US officials have suggested Ukraine will have to give up its goals of joining NATO and retaining the 20% of its territory seized by Russia. No Ukrainian officials were present at the Saudi meeting, and European allies have also expressed concerns that they are being sidelined.

Israel-Hamas Ceasefire Deal

Hamas has freed three more Israeli hostages as part of a fragile ceasefire deal, which has paused over 15 months of war but is nearing the end of its first phase. The latest hostage release, to be followed by the freeing of hundreds of Palestinians imprisoned by Israel, is going ahead after tensions mounted over a grisly and heart-wrenching dispute triggered this week when Hamas initially handed over the wrong body for Shiri Bibas, an Israeli mother of two young boys abducted by militants.

The dispute over the body's identity raised new doubt about the ceasefire deal, and negotiations over a second phase, in which Hamas would release dozens more hostages in exchange for a lasting ceasefire and an Israeli withdrawal, are likely to be even more difficult. The six hostages being freed are the last living ones to be released under the ceasefire's first phase. The new releases brought a moment of joy and relief for families, but with the ceasefire's future uncertain, fears remain over the fate of the remaining hostages seized during the Oct. 7, 2023, attack by Hamas that killed 1,200 in Israel and ignited the war.

Damaged Cable in the Baltic Sea

Swedish authorities are investigating a damaged cable that was discovered in the Baltic Sea, according to Swedish news agency TT. The breakage is the latest in a string of recent incidents of ruptured undersea cables that have heightened fears of Russian sabotage and spying in the region. Late last month, authorities discovered damage to the undersea fiber-optic cable running between the Latvian city of Ventspils and Sweden’s Gotland. A vessel belonging to a Bulgarian shipping company was seized but later released after Swedish prosecutors ruled out initial suspicions that sabotage caused the damage.

The most recent break was found off the island of Gotland, south of Stockholm, in the Swedish economic zone, TT reported Friday. The cable runs between Germany and Finland. Prime Minister Ulf Kristersson said on the social media platform X on Friday that the government takes all reports of damage to infrastructure in the Baltic Sea very seriously.

Russia-Ukraine War and Business

The Russia-Ukraine war has had a devastating impact on both countries, with hundreds of thousands killed or wounded, tens of thousands missing, and millions fleeing the country. The war has also had a significant impact on the global economy, with rising energy prices and supply chain disruptions.

For businesses, the war has created significant uncertainty and risk, particularly for those with operations in the region. The war has also disrupted global supply chains, particularly for energy and food, which has led to higher prices and reduced availability.

To mitigate these risks, businesses should diversify their supply chains and consider alternative sources of energy and food. They should also monitor the situation closely and be prepared to adapt their operations as needed.

Themes around the World:

US Government Shutdown Impact

The historic 40+ day US government shutdown in 2025 caused significant economic drag, furloughing 750,000 federal employees and disrupting services. While markets absorbed the shock with resilience, the shutdown undermined consumer confidence, delayed regulatory processes, and increased fiscal uncertainty, affecting global trade and investment sentiment. Recurrent shutdowns risk eroding US governance credibility and complicate international cooperation.

Geopolitical Relations and Trade Agreements

The UK’s pursuit of new trade agreements beyond the EU, including with the US and Asia-Pacific countries, reshapes its global trade landscape. These agreements influence tariff structures, market access, and strategic partnerships.

Public Perception of US Influence

Australian public opinion shows increased concern over US interference, reflecting a nuanced view of alliance dynamics amid geopolitical tensions. This shift influences political and economic policy considerations, including defense spending and foreign investment controls, affecting Australia's strategic positioning and trade relationships in a complex international environment.

Market Optimism Amid Volatility

Global markets show cautious optimism fueled by dovish Federal Reserve signals and easing US-China trade tensions. However, geopolitical uncertainties, including Taiwan-related risks and regulatory challenges, sustain volatility. Investors are balancing growth prospects with risks, focusing on sectors like AI, technology, and infrastructure amid evolving monetary policies.

Currency Volatility and Financial Stability

The Ukrainian hryvnia experiences significant volatility due to economic pressures and conflict-related uncertainties. Currency fluctuations impact import costs, debt servicing, and profitability for multinational corporations, necessitating robust financial risk management strategies.

Trade Policy and Export Controls

Taiwan's trade policies and export control regulations, especially regarding sensitive technologies, affect international business operations. Changes in these policies can influence market access and compliance requirements for multinational corporations.

Infrastructure Modernization and Logistics

Investments in transport and digital infrastructure aim to enhance logistics efficiency and connectivity. However, ongoing infrastructure bottlenecks and project delays can disrupt supply chains and increase operational costs, impacting Germany's role as a central hub in European trade networks.

Labor Market Dynamics and Workforce Skills

Labor reforms and workforce skill development programs influence productivity and operational efficiency. Challenges in labor availability and costs affect manufacturing and service sectors, impacting competitiveness and investment decisions.

German Economic Outlook and Growth Prospects

The Bundesbank forecasts a slight economic growth rebound in Q4 2025, driven by stabilizing exports and services. However, competitiveness challenges and subdued labor markets limit gains. This cautious outlook influences investor sentiment, trade dynamics, and policy decisions impacting Germany's role in global markets.

Infrastructure Development Initiatives

India's focus on upgrading infrastructure, including transportation networks, logistics hubs, and digital connectivity, is pivotal for efficient supply chains. Government initiatives like the National Infrastructure Pipeline (NIP) aim to boost investment in infrastructure, thereby reducing costs and improving the reliability of business operations across sectors.

Export Growth Despite US Tariffs

Mexico's exports grew 5% in 2025 despite US-imposed tariffs, driven by US companies accelerating purchases to avoid higher costs. The US-Mexico-Canada Agreement (USMCA) provides Mexico a tariff advantage over other countries, particularly China and Canada. However, upcoming USMCA renegotiations pose risks to this advantage, potentially affecting Mexico's export competitiveness and economic stability.

Australian Equity Market Volatility

Australia's share market has experienced significant declines due to global risk aversion, tech valuation concerns, and inflation fears. Key sectors like financials, materials, and technology have been hit hard, reflecting investor caution amid uncertain global economic conditions and monetary policy outlooks, affecting capital flows and corporate investment strategies.

Energy Supply Vulnerabilities

Ukraine's energy infrastructure remains vulnerable due to conflict and geopolitical pressures, affecting energy exports and imports. Disruptions in natural gas transit to Europe and domestic energy shortages influence industrial productivity and raise operational costs for businesses dependent on stable energy supplies.

Trade Relations and U.S. Tariff Impact

U.S. protectionist measures and retaliatory Canadian tariffs have strained bilateral trade, reducing competitiveness of Canadian exports in key sectors like autos and agriculture. This has contributed to capital flight and weakened foreign direct investment, highlighting the fragility of Canada's economic reliance on the U.S. market and the urgency to diversify trade partnerships.

Technological Adoption and Innovation

Advancements in technology and innovation ecosystems in Mexico drive competitiveness in manufacturing and services. Adoption of Industry 4.0 technologies enhances productivity and supply chain resilience, attracting technology-driven investments and fostering integration into global value chains.

Agricultural Export Strength

Uruguay's economy heavily relies on agricultural exports, including beef, soybeans, and dairy products. Strong global demand for these commodities supports trade growth, but exposes the country to price volatility and climate-related risks impacting supply chains.

Environmental Regulations and Sustainability

Increasing environmental regulations and sustainability initiatives impact manufacturing practices and supply chain management. Compliance costs and opportunities for green investments influence corporate strategies and stakeholder relations.

Geopolitical Stability and Security Concerns

Australia's geopolitical positioning in the Indo-Pacific region involves navigating security alliances and regional tensions. Stability in this context affects investor confidence and the security of trade routes critical for business operations.

Tourism Sector Recovery Post-Pandemic

The rebound of France's tourism industry stimulates economic activity and foreign exchange earnings. This recovery impacts hospitality supply chains and related service sectors, presenting opportunities and challenges for global investors and operators.

Energy Supply and Pricing Volatility

The UK is experiencing significant fluctuations in energy prices due to geopolitical tensions and supply constraints. This volatility affects manufacturing costs and operational budgets, prompting companies to reassess energy sourcing strategies and invest in renewable alternatives to mitigate risks and ensure sustainable operations.

Geopolitical Risks and Regional Security Concerns

Turkey's increasing military and ideological involvement in South Asia, including support for Pakistan and Kashmiri separatists, complicates its relations with India. These geopolitical tensions introduce risks for bilateral trade and investment, potentially affecting regional stability and Turkey's broader international economic engagements.

Financial Market Sentiment and Euro Impact

Weakening German business sentiment pressures Eurozone bond yields and influences EUR/USD dynamics. Market expectations of ECB and Fed monetary policy adjustments, combined with economic data releases, shape investor behavior, affecting capital flows, currency stability, and cross-border investment strategies.

Technological Innovation and Digitalization

France's focus on digital transformation and innovation fosters growth in tech sectors and enhances productivity across industries. Government initiatives supporting startups and R&D investments attract foreign investors and facilitate integration into global digital supply chains.

Labor Market Dynamics and Talent Retention

Economic pressures and emigration trends influence Russia's labor market, affecting talent availability and wage dynamics. These factors impact operational costs and human resource strategies for foreign enterprises.

Foreign Direct Investment Trends

FDI inflows into Thailand are influenced by regulatory frameworks, incentives, and geopolitical shifts. Recent policies aim to attract high-tech and green investments, impacting sectors like renewable energy and digital economy, which are pivotal for sustainable growth and innovation.

Political Environment and Regulatory Framework

Domestic political developments and regulatory reforms shape the business climate, affecting legal certainty, contract enforcement, and ease of doing business. Political stability and transparent regulations are critical for attracting sustained foreign investment and ensuring operational continuity.

Fintech Market Growth and Financial Inclusion

Thailand's fintech sector is rapidly expanding, projected to grow at a CAGR of 15.84% through 2033, driven by digital payments, blockchain, AI, and open banking. This growth enhances financial inclusion, especially in rural areas and SMEs, supporting the digital economy and offering new investment opportunities in financial technology.

Infrastructure Development Projects

Massive infrastructure projects, including NEOM and the Red Sea Development, are transforming Saudi Arabia's logistics and tourism sectors. These initiatives improve supply chain efficiency and create new avenues for international trade and investment.

Environmental Policies and Sustainability Initiatives

Growing emphasis on sustainability and environmental regulations influences corporate practices and investment decisions. Compliance with green standards is increasingly vital for accessing international markets and meeting stakeholder expectations.

Political Uncertainty and Economic Fragility

Thailand faces significant political uncertainty with potential government caretaker periods post-election, leading to policy inertia. This uncertainty, coupled with economic fragility, dampens business confidence, investment, and long-term planning, risking slower GDP growth and subdued market dynamics in 2026.

Supply Chain Resilience Initiatives

Japan is actively diversifying its supply chains to reduce dependence on China, focusing on Southeast Asia and domestic production. This shift aims to enhance resilience against geopolitical shocks and global disruptions, influencing multinational companies' operational strategies.

Cross-Strait Political Tensions

Ongoing political tensions between Taiwan and China pose significant risks to international trade and investment. Heightened military activities and diplomatic strains could disrupt supply chains, increase operational costs, and deter foreign investment, necessitating strategic risk mitigation for businesses engaged with Taiwan.

Won Currency Depreciation and Economic Impact

The South Korean won has depreciated to its lowest real value since the 2009 financial crisis, trading near 1,470 per dollar. This weak currency raises import costs, inflation, and consumer price pressures, affecting household spending and overall economic momentum. Structural factors like capital outflows and overseas investments exacerbate volatility, challenging monetary policy and economic stability.

Digital Trade and Technology Adoption

Egypt ranks among the highest-potential markets for global digital trade, with 96% of corporates prioritizing cloud computing and 60% embracing digital assets like blockchain. Strong demand for digital infrastructure and harmonized trade standards positions Egypt to accelerate competitiveness and integration into international digital commerce ecosystems, transforming trade and investment landscapes.

Political Stability and Governance

Egypt's political environment, marked by government stability but occasional social unrest, influences risk assessments for investors. Governance quality affects regulatory predictability, contract enforcement, and overall business climate.

Environmental and Sustainability Regulations

Stricter environmental regulations and sustainability commitments are influencing business operations, particularly in sectors like mining and agriculture. Compliance costs and operational adjustments may affect profitability but also open opportunities for green investments and sustainable supply chains.