Author: business

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Earlier this week, the London Stock Exchange Group’s indexing business FTSE Russell announced some subtle but interesting changes to its rule book. Index methodology might not be everyone’s cuppa, but give it a try.

From September onwards, its various UK indices will admit companies with dollar and euro-denominated shares, rather than just the sterling-denominated ones permitted by the current regime.

FTSE Russell will also make it easier for companies to be admitted quickly into its flagship UK indices. Before, companies needed a £2bn market cap to be eligible for a “fast entry”, but this will be lowered to £1bn, and the relative ranking requirement will also be relaxed

Here’s the new wording of FTSE Russell’s Fast Entry Threshold rule:

If an IPO company ranks 225th or above based on the close price on the first day of unconditional dealings; and has an investable market capitalisation of GBP 1bn; then the company, if otherwise eligible, will be placed in the FTSE 100 or FTSE 250, as appropriate (ranking at or above the index review auto-include thresholds, of 90th or 325th, respectively), after the close on its fifth day of trading. Concurrently, the lowest rank constituent will be deleted from the applicable index and associated membership changes implemented.

Can these moves halt the LSExodus and restore the London’s capital markets vim of yore? No, obviously not. C’mon. The great stock market listing migration is driven by yawning valuations differentials and the multinational operations of many modern companies. Slight rule book fiddles aren’t enough to dent those forces.

Nor are these revolutionary moves. FTSE Russell will still require a company to be of “UK nationality” and be listed on the LSE to make it into the FTSE 100 or 250. At the moment there isn’t a single company that would be affected by allowing dollar or denominated securities to be included in the FTSE benchmarks.

FTSE previously did allow euro and dollar listings, but scrapped this in 2014 because “negligible exposure to non-Sterling traded securities at that time led to unnecessary currency risk within the derivative markets”. Companies could still list in dollars or euros after that, they just weren’t eligible for main market inclusion.

Even the new Fast Entry Threshold would only have affected 11 companies historically, and only three of them would under the revised rules have been eligible for the FTSE 100 at the time of their listing. (Royal Mail, Worldpay and ConvaTec).

However, it could help at the margins, and shows that the LSE is capable of moving beyond blaming the financial media and pension funds in its effort to regain its mojo. Moreover, it has plenty of other levers and knobs it could twist and pull that cumulatively might add up.

Speeding up index inclusion will make the process a bit more attractive to companies, and facilitating dollar and euro listings could potentially entice a few companies whose businesses are anyway international. As David Sol, global head of policy at FTSE Russell, said in the methodology review statement:

We regularly look at the methodology of our indices to ensure they continue to represent the underlying market and sectors. This includes our recent review of the FTSE UK Index Series, where the companies included are inextricably intertwined with the companies that list on the London Stock Exchange. Whilst there will be no immediate impact on the index composition, these two changes will give the FTSE UK Index Series a timely and more accurate representation of companies that can list in London today and in the future.

But for Alphaville the really interesting thing is how this once again highlights how tricky the indexing business is. The whole thing is a minefield of metaphysical questions.

What makes a “UK company”? As FTSE Russell points out in its accompanying FAQ, about 86 per cent of all revenues generated by companies in the FTSE 100 actually come from overseas. What makes a tech company? Amazon is often classified as a “consumer discretionary” stock, and therefore doesn’t appear in tech ETFs, while Meta and Alphabet do, despite being classified as “communication” stocks. Is Brookfield a Canadian or US company? It recently moved its headquarters to New York to secure US index inclusion, but its parent and centre of gravity remains in Toronto.

These are all super-nerdy, mega-niche questions, but in a world where benchmarks matter more and more, they can end up having a fairly sizeable impact.

Further reading:
— Index providers are massively dull — and massively profitable (FTAV)
— The index providers are quietly building up enormous powers (FT)
— ‘Volmageddon’ fine may hint to era of stricter index regulation (FT)

Nat Dyer is an author.

In December 1703, following a stunning English and Dutch naval victory over the French fleet, a well-connected and cunning English diplomat, John Methuen, convinced the King of Portugal to sign a trade deal. It eliminated tariffs for English woollen cloth entering Portugal and gave Portuguese wine preferential treatment in England. In the decades that followed, trade boomed between the two countries in both commodities.

This exchange of English cloth and Portuguese wine would become the stuff of legend.

The cloth and wine example was used by the stockbroker-turned-economist David Ricardo in 1817 to explain why freer international trade benefited all countries, as long as they specialise in what they make most efficiently. Ricardo’s principle of comparative advantage has been praised by generations of Nobel winning economists as one of the profession’s greatest insights. Paul Samuelson called it a “beautiful” and the “unshakeable” basis for international trade. Paul Krugman, while shaping the pro-globalisation consensus in the 1990s, wrote that Ricardo’s idea was: “utterly true, immensely sophisticated — and extremely relevant to the modern world.”

Ricardo has come in useful again and again. When, White House economist Greg Mankiw got in political hot water in 2004 for saying that offshoring American jobs was “probably a plus for the economy in the long run” he lent on the 200-year-old theory. As The New Yorker explained, economists still rely on Ricardo’s “extremely powerful” insight: the story of “England exchanging its surplus cloth for Portugal’s surplus wine, to the benefit of consumers in both places.”

 If only the public and politicians could grasp the counter-intuitive logic of Ricardo’s “difficult” idea, Krugman had suggested, then opposition to free trade would disappear. The problem, Mankiw wrote, was that the public were “worse than ignorant” about good trade policy.

Now, with Trump’s will-he-won’t-he trade wars and tariff brinkmanship, similar voices have been heard again. What we need in the age of Trump, economist Justin Wolfers, wrote recently — betraying a quasi-religious devotion — is “a sermon about Ricardian comparative advantage and gains from trade.”

Yet, curiously, too few economic theorists have interrogated the actual, messy history of trade.

Gold, cloth and chains

All major economic powers — Britain, Germany, and yes the USA, and China — rose to their position while protecting their industries with high tariffs. Even a quick look at economists’ favourite example of win-win trade between England and Portugal reveals a radically different picture.

As I describe in my book Ricardo’s Dream, the classic English and Portuguese exchange was about politics and power, not just economics. The naval victory, at the Battle of Vigo Bay in 1702, was so important because the ailing Portuguese Empire was caught in a geopolitical bind between the rising northern powers of England and France. John Methuen signed two military treaties with the Portuguese before he sealed the commercial deal. With the Cloth and Wine Treaty, Portugal bought not just products but protection.

The deal helped ruin Portugal’s own textile manufacturing, as Methuen predicted, and even its increased port exports left a huge trade deficit with England decade after decade. The trade between the two countries was balanced with a commodity almost never mentioned by trade theorists: gold from Brazil.

The Portuguese had struck gold in its South American colony in the 1690s. The Brazilian Gold Rush lasted most of the 18th century and doubled world production. More than half of this gold ended up in London (enriching, among others, Sir Isaac Newton). The gold flows were no secret. Even Adam Smith, Ricardo’s fellow classical economist, wrote: “Almost all of our gold, it is said, comes from Portugal” or more accurately from “the Brazils”. And, yet, the connections are rarely made.

 One more product, excluded from the conventional story, comes into view when we look at how the gold was mined. It is a product no longer legally traded: human beings. Brazil’s gold rush relied on huge numbers of enslaved Africans, transported in chains across the Atlantic. Brazilian gold supercharged the transatlantic slave trade and, as contemporaries observed, turned the West African Gold Coast into a “slave coast”.

That’s not all. Much of the English cloth — in some years around 85 per cent — that landed in Portuguese ports was re-exported to Africa to be exchanged for captive men, women, and children. In the global historical view, the trade in English cloth and Portugal wine appears to be an appendix, and facilitator, of the transatlantic triangular trade.

But, Ricardo’s famous model excluded questions of power, empire, and exploitation from the beginning. As Matthew Watson, professor of political economy at Warwick University, has written, Ricardo’s theory is “a mathematical facade behind which the actual historical social relations of production of the real England and Portugal are deliberately taken out of the equation”. These are “explicitly oppressive social relations of production based on slave labour and the imperial policing of national hierarchies”. Those who hold on to the old story of English cloth and Portuguese wine have the wool pulled over their eyes.

 Of course, other episodes of international trade paint a much rosier picture: of how trade has expanded peoples’ worlds, their access to products, and the flow of news and culture. Yet, the English and Portuguese history does fit into a pattern of so-called unequal treaties that Britain imposed on nominally independent states — such as Siam (Thailand), China and Persia — in the 19th century. The political economist Ha-Joon Chang has written that this first period of economic globalisation was “‘made possible, in large part, by military might, rather than market forces”.

The backlash

In the 1980s, fears of the rise of a new protectionism pushed policymakers to create a vast web of bilateral, regional, and global trade agreements. Political parties whether on the right or left embraced a very specific type of globalisation, which was sometimes seen as a universal law akin to gravity. “Free trade” became a dogma that was used, in part, to tilt the global trading system in favour of large multinational corporations and Wall Street, giving them new rights and powers and plumping their profits. CEO pay skyrocketed while regular, working people often lost out, for example, the millions of Americans who lost their livelihoods with the China Shock — after China joined the WTO in 2001 and flooded the US with cheap products.

All the while, economists touted the benefits of trade as long as their models showed that the winners could theoretically compensate the losers, regardless of whether it happened or not. Another aspect excluded from economists’ models was global power competition, making them increasingly less relevant to a political class fixated on a resurgent China. 

Fuelled in part by the backlash to globalisation, Donald Trump won the White House and is now back for a second time. He has made good on his promise to turn away from free trade surrounding himself with advisors such as, Peter Navarro, who has argued that: “Ricardo is dead!” Navarro, of course, is not worried about how the West exploited the wealth of its formal and informal colonies but how in the 21st century the USA has, in his eyes, been unfairly taken advantage of by China’s state capitalism. America’s turn to tariffs is a recognition of its fragility, not strength. Progressives will disagree with many of his solutions, but Navarro is surely right that “the economics profession must do a much better job than David Ricardo of modelling trade in the real world.”

 Now, Trump is speaking loudly and hitting allies and enemies alike with a big stick labelled ‘tariffs’. He has mobilised a real, justified complaint against hyperglobalisation to promote a highly divisive and potentially damaging policy. Along the way, he has made the power and politics of trade policy, so often concealed or denied, plain for all to see.

 The constitutional wrecking ball of Trump’s first few weeks of his second term have rightly outraged many. But on the issue of tariffs, a desire to return to the ”old Ricardian verities” and argue that they are always and everywhere bad is a road to nowhere. Trying to counter Trump with ‘fairy tale’ economic theories that helped fuel his rise is like trying to put out a house fire with matches. Opposition to Trump’s harmful and damaging policies requires a more solid footing.

 We need a new, genuinely progressive economics with its eyes focused on the real world and its history, rather than abstract models built on unreality. This has begun to emerge in the past decade. There is a growing acceptance that whether tariffs are good or bad depends on context, that there is a difference between targeted and across-the-board tariffs, and that new forms of protectionism could reduce inequality or ecological destruction.

 Much turns on whether economics can continue to evolve into a field of study that is, to borrow a line, genuinely true, sophisticated, and relevant to the modern world.

@natjdyer.bsky.social

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Dataviz was more-or-less invented in the back half of the 18th century by William Playfair, who was born near the village of Liff just outside Dundee.

If you’ve not read his Wikipedia entry, do. There’s murky spycraft, counterfeiting, extortion, propaganda, sibling rivalry, land speculation, a bank run, a debtor’s prison, and a cameo at the storming of the Bastille. Playfair’s life is among the most interesting ever lived, and what survives of him is charts. There’s a lesson in that.

In honour of Playfair, these are this week’s lines:

Email us your guesses for what those lines represent, remembering to put QUIZ in the subject line. One correct entry will be drawn at random for the prize of an exclusive FTAV quiz-winner T-shirt.

We usually name correspondents who get all the answers so if you don’t want that to happen, or would rather we use a pseudonym or whatever, be sure to tell us. The deadline for entries is Monday’s first light over the Bracken House roof garden and the judge’s decision is final.

Ajay Rajadhyaksha is global chair of research at Barclays. Micheal McLean is a public policy analyst at the bank.

After two years when the US economy seemed to thump everyone else, the narrative is starting to shift.

US stocks are now negative for the year (and are getting hammered by European equities!) the dollar rally has stalled, and bonds have rallied. And this isn’t just a market tantrum; data have started to soften too. The latest bit of bad news was yesterday’s ISM reading, soon followed by more bad tariff news.

The Atlanta Fed’s GDP tracker now suggests a 2.8 per cent economic contraction in the first quarter, after disappointing retail sales, personal spending, consumer confidence and manufacturing data. The nowcasting model has probably been skewed by a surge in imports ahead of tariffs coming into force, but we’re clearly seeing an economic slowdown, which could morph into something more malign.

However, the economic bulls can push back with one simple argument — look, new tax cuts are coming!

After all, the signature legislative accomplishment of the Donald Trump’s first term was the large tax cut in the Tax Cut and Jobs Act (TCJA) of 2017-18. And in recent months, the president has promised not just to extend the expiring TCJA but also to give new tax cuts on tips, overtime pay, Social Security earnings, SALT relief, etc.

Moreover, the House just passed a budget resolution, the first step to a budget reconciliation bill. The Senate has also gotten into the act, with Majority Leader John Thune calling for not just extending the TCJA, but making those cuts permanent. Even if the economy is softening, it seems only a matter of time before Congress rides to its rescue.

Except — the reality on the legislative ground is a little different.

Consider the just-passed House budget resolution. This isn’t a tax bill; it’s a framework that lays out targets for tax cuts ($4.5tn) funding increases ($300bn, mainly for immigration enforcement) and spending cuts ($2tn). Individual committees in the House are then supposed to hit those targets. For example, the Energy and Commerce committee (which oversees Medicaid spending among others) is supposed to come up with $880bn in spending cuts.

Based on this budget resolution, the House can add $4.5tn to the deficit via tax cuts. But House committees have to also come up with $2tn in spending cuts. The original draft didn’t include so many spending cuts, but Republican fiscal hawks on the Budget Committee insisted that they would stop the bill unless those were added. Crucially, every dollar below $2tn gets offset one-to-one by a dollar lower in tax cuts.

Add it all up — $4.8tn in tax cuts and border funding increases and $2tnn in spending cuts elsewhere — and Congress is aiming to increase the deficit by a maximum of $2.8tn. All these numbers are over a decade — from fiscal year 2025 to 2034.

But here’s the problem.

The Joint Committee on Taxation (JCT) estimates that simply extending all expiring tax cuts will add $4tn to the deficit over a decade. But extension is simply a continuation of the status quo — just ensuring that today’s tax bills don’t go up next year. Meaning no new fiscal stimulus. And yet, the current budget resolution targets deficits of $2.8tn. In other words, Congress (currently at least) is not only not planning for large new fiscal stimulus; it is at present targeting a $1.2tn fiscal drag.

There’s also the question of where the $2tn in spending cuts will come from. The Energy and Commerce committee is supposed to come up with almost half these cuts. Medicaid cost the US government $912bn last year and provided health coverage to 67mn people. The natural assumption is that this is where there will be large spending cuts, simply because that’s where there’s large spending.

But the president has ruled out major cuts to Medicaid (in addition to Social Security and Medicare), which begs the question — how do you find $2tn in spending cuts given that defence, interest costs and the troika of Social Security + Medicare + healthcare (Medicaid, Children’s Health Insurance Program and the Affordable Care Act) is what the US government spent almost all of last year’s $6.9tn on?

Separately, what about the new tax cuts that the president has promised? The non-partisan Committee for a Responsible Federal Budget estimates that to fund all of Trump’s tax wishes could add as much as $11.2tn to the deficit over the next decade. A far cry from the $2.8tn deficit increase — and even that just passed the House with the barest 217-215 majority.

In recent days, the Senate has suggested making tax cuts permanent by amending the budget resolution so the Congressional Budget Office (CBO) and Joint Committee on Taxation is told to consider current policy, not current law when ‘scoring’ the bill. This is sausage-making at its finest. Basically, the CBO/JCT no longer has to account for the $4tn or so that it would cost to extend the tax cuts, if the “current policy” guideline is used.

But this is semantics. It doesn’t change the fact that the deficit will still go up by trillions simply if TCJA is extended. Republican House members worried about the deficit still know that the debt clock will rise at a worrying pace — telling the CBO to ignore it doesn’t change the numbers. Notably, the idea of using current policy was also considered at the time of writing the House budget resolution, but didn’t garner enough political support.

There’s one final wrinkle to consider. The assumption we’re making is that all these numbers are over a decade — because that’s what the current language specifies (and a 10-year window is the usual protocol). But the House budget resolution could theoretically be amended so that deficits go up by $4.5tn over (say) five years instead of 10. If so, it opens the door to large new tax cuts.

But that approach also has major problems.

First, if $2tn in spending cuts are incredibly difficult to manage even over a decade (given that the US doesn’t want to touch all the things it actually does spend money on), it’s virtually impossible to squeeze into five years.

Second, if the fiscal hawks are worried about adding $2.8tn to the deficit over a decade, presumably they will be even less thrilled about doing the same over five years.

Markets cheered a few days ago when the House passed the budget resolution. But it doesn’t actually provide for net new stimulus. And there’s a long way to go — and many hurdles to overcome — before it comes close to becoming law. So no one should expect large fiscal stimulus to cushion any looming economic setback.

Letter in response to this article:
Federal VAT could cut the deficits better than tariffs / From Nic Hein, Washington, DC, US

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Won’t somebody please think of the children? Specifically about tariffs’ effects on their parents’ pocketbooks??

The US is putting 25-per-cent tariffs on goods from Canada and Mexico starting on Tuesday, along with another 10 percentage points of tariffs on China. That news was big enough to overshadow the Trump Administration’s weekend promise to create “strategic reserve” for alt-coins. (That’s another post.)

For those of us who have only looked at economic policy after the 1930s, a tariff is a levy on goods coming into the US. If commodities are priced on the margins (they are) and if companies pass on their cost increases to customers (they mostly do), tariffs start looking like pieces of paper that says “Make Prices Higher” for everything that’s imported, or that’s made of imported goods.

That’s a lot of stuff, especially because this round of tariffs is aimed at Canada, China and Mexico:

Financial markets made it clear that investors do not love this. Stocks fell sharply, and retailers’ shares were hit, with Dollar Tree down 5.6 per cent and Dollar General off 3.1 per cent. This is presumably because the US executive branch’s Make Stuff More Expensive Plan, if it persists, will mean Americans won’t be able to buy as much stuff.

While this bodes poorly for automakers, as MainFT has covered in depth, there’s a decent chance that prices won’t rise immediately on durable goods. This is because producers seemed to use that extra month of tariff delays to rush imports of inventory and materials. As an aside, Jason Furman had a helpful explanation today about why that boost in imports is probably dragging down the Atlanta Fed’s GDPNow figure into spooky recession territory.

But for our US readers who like to eat healthy, or have children, there is a more urgent concern: Tariffs on fresh produce, like berries, which can not be ordered in bulk and held in a warehouse for months.

Kids love berries. Berries are already expensive. Most kids love strawberries. And Mexico was the source of nearly 99 per cent of imported strawberries available in the US in 2022, according to the latest data from the Census Bureau.

While the US has a pretty robust domestic strawberry-growing business, imports still made up nearly 19 per cent of available supply from 2018-2020, according to the USDA.

For all berries that aren’t strawberries, we get about 51 per cent of our imports from Mexico and Canada, according to the Census Bureau.

A whopping 62 per cent of available blueberry supply was imported in 2018-2020, according to the USDA. While blueberries are imported from a wider range of countries, roughly a third came from Mexico and Canada in 2020:

In other words, we’re talking about a 25-per-cent price increase on roughly one-fifth of available blueberries and strawberries in the US.

For vegetables — equally important for kids, if less loved — nearly 70 per cent of imports come from Canada and Mexico. (This is going by the somewhat puzzling NAICS category that excludes potatoes, sugar beets and corn, but includes melons.)

Again, fresh produce markets are fundamentally commodity markets, meaning they’re definitely priced on the margins. Because of this, it’s tough to argue the tariffs won’t matter for prices at the grocery store.

These unfriendly maths could also help explain US President Donald Trump’s decision to take another step towards agricultural autarky Monday, with this post threatening tariffs on exports of agricultural products.

But there are pretty clear problems with any US attempt to fully replace some of that supply . . . for example, the blueberry-growing seasons in Michigan or Oregon probably don’t extend through January and February, when it is summer in Peru.

To take a step back: US officials keep saying they want Americans to have more kids. If so, it could help to make it a little less expensive to do that. No need to worry about car seat requirements! It’d be fine to just avoid unnecessary berry price increases. We might be able to put chicken coops in our backyards, but growing berry bushes is a different matter altogether.

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The intensity and hostility of the Oval Office clash between Donald Trump, JD Vance and Volodymyr Zelenskyy has left many observers taken aback. For those of us who have spent careers in investment banking, however, the scene had a familiar ring.

What unfolded in that meeting mirrored a strategy used by some leaders in finance: the use of rhetorical dominance as a substitute for substantive dialogue. It’s a tactic wielded in meeting rooms and on conference calls when actual arguments are in short supply. Designed to shut down opposition, it reinforces the pecking order, and remind the other parties of their place. The repeated demands for gratitude, the warning not to “litigate” the issues “in front of the American media,” the reminders of Ukraine’s weakness — these kinds of statements aren’t meant to foster real debate; they’re meant to stifle disagreement.

Every investment banker has seen this in action. And these tactics sometimes pay off. Most banking veterans can recall times when the bullies got the promotions while the collaborators were sidelined. These apex predators don’t climb the ranks by fostering fresh ideas or building consensus; they ascend by tightening their grip on their fiefdoms and wielding power with ruthless efficiency.

Early in my career, I proposed a carefully structured block trade, only to have it summarily shot down by senior managers who, as it later turned out, had incurred unrelated trading losses they didn’t care to disclose. Instead of a straightforward explanation, they deployed the standard arsenal: “We’ve beaten this issue into the ground and there’s nothing left to discuss”, “We’ve backed you so many times before”, “You’re not being a good partner.” The message was clear: Drop it or risk losing crucial allies for future deals. Shut up and take the L.

So I made the awkwardly mortifying call to the client, walking back the nonbinding price indication I had previously given (an indication I had cleared internally with the same senior leaders). Days later, a competitor executed the exact same trade at a sharper price, earning an eight-figure fee and lavish client praise. I could only seethe in silence. Internally, no one acknowledged the blunder. Even now, many years later, the memory stings. Could I have pushed harder? Maybe. But that would have been career seppuku.

On another occasion, a commitment committee call to approve a convertible bond underwriting took a turn when a senior banker — clearly set against the deal for no discernible reason — started peppering my colleague with rapid-fire questions. She handled each one with aplomb and precision, but his frustration only grew. Finally, he snapped, “Please stop lecturing me about this stuff. I was doing convertibles before you were even born.” A long, airless silence followed. That was the moment we all knew the deal was dead. The rationale didn’t matter. What mattered was that we had failed to pay homage to him early enough. He hadn’t just appointed himself gatekeeper — he had anointed himself high priest, and the temple doors were staying firmly shut.

Just about everyone I know across the City and Wall Street has similar stories, often much more lurid, yet only on rare occasions will the exchanges result in an HR complaint. There’s no profanity, no explicit misconduct — but just enough residual unpleasantness to leave the recipient feeling undermined and victimised, partly because there’s no clear avenue for redress. Similarly, while Trump and Vance may have been harsh towards Zelenskyy, they can plausibly argue they relied on forceful rhetoric rather than outright abuse.

Of course, many senior banking leaders don’t operate this way. In fact, most of the people I reported to over the years valued informed debate and constructive pushback. And it wasn’t always a black-and-white case of dominance or dialogue — some leaders would run roughshod over those they saw as weak or out-of-favour while showing respect, even deference, to others perceived as stronger or able to defend themselves. This is much like Trump’s contrasting treatment of Zelenskyy and Emmanuel Macron; the American president tolerated disagreement from the French president in their meeting far more than from his Ukrainian counterpart.

When rhetorical dominance prevails, it creates a self-perpetuating cycle. A leader surrounds himself (it’s usually, though not always, a man) with sycophants, discourages challenging perspectives, and creates an environment where subordinates spend more time deciphering his whims and wishes than developing sound strategies. The resulting atmosphere of confusion and obsequiousness undermines institutional effectiveness, and yet, paradoxically, the leader’s grip tightens. 

This approach might deliver short-term wins — bigger compensation pool allocations, more headcount, internal victories — but the long-term consequences are steep. Morale withers. Market share erodes. Innovation dries up. Key considerations are overlooked. Meanwhile, the architects of this culture keep rising, leaving others to clean up the wreckage.

To be fair, there are moments in investment banking when decisiveness has to trump endless debate. When dealing with politically savvy colleagues (and most bankers excel at internal politics), excessive consultation can stall necessary reforms, derail change, or compromise strategy. As an erstwhile mentor once told me, “Sometimes you have to steamroll people to get things done.” I’d like to think that when I led teams, I relied on my powers of persuasion rather than naked appeals to my own authority — but at times my patience wore thin, and decisions had to be made, cutting off discussion and dialogue.

The White House dispute has, at least temporarily, scuppered the agreement between the US and Ukraine to develop Ukraine’s natural resources. While Trump and Vance may not have mastered the art of the deal, they have perfected the art of stifling dissent and ostracising anyone who defies their authority — an expertise still alive and well on Wall Street.

Only one reader got both hints (almost) for last week’s charts quiz, despite our attempts to hit you over the head with them.

Sure, even with lithium’s increased geopolitical importance, it might’ve been ambitious to think someone would know the CME launched a spodumene futures contract last year.

But 1) the post’s subhed was a line from Nirvana’s “Lithium”, 2) the picture was from Nirvana’s “Lithium”, and 3) we changed the beginning date on the chart so the line didn’t actually start until the futures contract launched.

More readers submitted correct guesses about the PNUT shitcoin, which is one of the dumbest lines to be used on an FTAV quiz.

Anyway, here are your chart answers to review:

This is the stock chart for Snap, which has been mentioned offhand as a potential acquisition target for AppLovin.

This is the CME’s new spodumene futures price (continuous, via FactSet).

And this is the market capitalisation of the Peanut the Squirrel shitcoin (PNUT).

Big congrats to Erik Johnsson, who has outquanted the rest of you. Unclear whether he got the Nirvana references, though. Better luck next week.

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Yes, we’re going to write about portfolio trading, again. Our previous posts have mostly focused on how a big deal it has become in the US, but a new Barclays report shows it’s now a growing phenomenon in Europe as well.

Barclays has previously estimated that a big fat portfolio trade now hits the US fixed-income market every seven minutes, with volumes topping $1tn annually. Portfolio trading now accounts for as much as a quarter of investment-grade corporate bond trading, and a sixth of junk bond trading.

Calculating the same in Europe is tricky because of the lack of any consolidated tape of bond trades (though that’s about to change) so the UK’s bank’s analysts used an algorithmic approach to identify probable portfolio trades and get a rough estimate.

Barclays found that total annual volumes probably topped €250bn in 2024. In frequency, that equates to a portfolio trade happening every 20 minutes on average, down from every 33 minutes just two years ago.

It has become particularly prevalent in investment grade, euro-denominated corporate bond market, where portfolio trading now accounts for 11 per cent of all trading volume. In sterling bonds and euro high yield it has reached a 9 per cent and 7 per cent market share respectively.

Most portfolio trades identified by Barclays happened on electronic platforms like Tradeweb, and involved about 60 bonds worth a total of €40mn on average.

That’s lower than the $50-60mn average in the US, but this is maybe less than you you’d expect, given how much larger and more liquid the US corporate bond market is, and how developed portfolio trading is becoming there.

Zornitsa Todorova, head of thematic fixed income research at Barclays, reckons that portfolio trading volumes in Europe will roughly double to account for about 20 per cent of all dealer-to-client volumes within the next three years.

How big a deal is all this? Well, pretty big if you’re a bond fund manager.

Index-tracking fixed income vehicles often use portfolio trades to rejig their exposures, but it has become a hugely valuable tool for active managers as well, as Todorova highlights. Her emphases below:

Our analysis attributed the majority of portfolio trading volumes in Europe to active investors, though we found that passive investors do use PTs to rebalance portfolios at month-end and to manage inflows and outflows intra-month by buying or selling a ‘slice’ of their holdings that closely resembles the index they track. In addition to these use cases, active managers also frequently use PTs to adjust their portfolios towards specific credit risk dimensions, such as rating, sector or maturity, along with hedging and de-risking.

The fact that active investors are the marginal consumers of PT liquidity is significant for several reasons. Unlike passive investors, who track an index, active investors, in particular open-end mutual funds, frequently trade bonds and depend on liquidity to efficiently enter and exit positions. These investors set marginal prices when they trade, influencing bond spreads and market depth. Their activity also impacts liquidity risk premia, as bonds with lower liquidity command higher yields.

Portfolio trading has the potential to transform credit markets in several ways: by adding more volume to the market, it improves liquidity, lowers the barrier to entry for new investors, and enables new strategies, such as systematic credit.

Further reading:
— ETFs are eating the bond market (FTAV)