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EU ministers scramble to find a response to Middle East carnage

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This article is an on-site version of our Europe Express newsletter. Premium subscribers can sign up here to get the newsletter delivered every weekday and Saturday morning. Standard subscribers can upgrade to Premium here, or explore all FT newsletters

Good morning. Austria’s far-right Freedom party (FPÖ) is projected to win a historic electoral victory in yesterday’s parliamentary election with just under 29 per cent of the vote. As our Europe editor writes, victory for the FPÖ, which has embraced increasingly hardline and extremist policies on immigration and the war in Ukraine, further consolidates pro-Russian, anti-establishment forces in central Europe.

Today, I reveal EU crisis talks on how to respond to a rapidly unravelling situation in the Middle East, and our Rome bureau chief reports on the surge of pro-Trump, pro-Russian rhetoric in Italy.

Carnage

EU capitals are organising an emergency meeting of foreign affairs ministers to respond to the rapidly escalating conflict in the Middle East, as Israel’s assault on Lebanon and the Hizbollah militant group ramped up during a weekend of devastating missile attacks.

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Context: Israel’s bombardment of Lebanon over the past fortnight has killed more than 1,000 people. On Friday, a massive missile strike on southern Beirut killed Hizbollah’s leader Hassan Nasrallah. Israel also widened the conflict with attacks on Iran-backed Houthis in Yemen yesterday.

EU diplomats and officials, whose calls for a ceasefire and de-escalation have been ignored by Israel, were last night working to arrange a virtual meeting of the bloc’s foreign affairs council, people familiar with the talks said, with some pushing for a discussion as soon as today.

Separately, the European Commission yesterday released €10mn in additional humanitarian aid to Lebanon, which it said would provide “the most urgent needs such as protection, food assistance, shelter and healthcare”.

The new tranche takes the EU’s total humanitarian aid to Lebanon this year to €74mn.

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Israeli Prime Minister Benjamin Netanyahu this weekend insisted that Israel’s “work has still not been completed” and that his armed forces would continue to attack Iran-backed militants until it had succeeded in “changing the balance of power” in the region.

“There is no place in Iran or the Middle East that the long arm of Israel cannot reach,” Netanyahu said.

EU capitals have in recent days repeated their pleas for citizens still in Lebanon to evacuate as soon as possible, and some are drawing up contingency plans for emergency evacuations.

Chart du jour: Downward slope

Line chart of Purchasing managers' index showing Eurozone PMI has fallen below the crucial level of 50

The ECB is expected to cut rates again next month, according to economists’ predictions, in response to a string of recent indicators pointing to the Eurozone’s slowing growth.

Billboards in Rome

Italian Prime Minister Giorgia Meloni has been a staunch supporter of Ukraine’s battle against Russian aggression. But not all Italians share her zeal, writes Amy Kazmin.

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This weekend, deputy premier Matteo Salvini expressed hope that Donald Trump would win the upcoming US presidential elections — to bring a quick end to conflict.

Context: The EU has stood firmly behind Ukraine in its fight against Russia, but pro-Russian voices have slowly grown and could be encouraged by Trump’s re-election. Czech former premier Andrej Babiš has also expressed his support for Trump. A comeback for him in elections next year could cement Europe’s illiberal flank led by Hungary and Slovakia.

Salvini, who is a longtime Putin admirer, echoed those sentiments.

“Because for me war is horrible, I hope the Republicans win,” Salvini said. “This is my personal opinion . . . Whoever will contribute to the end of the conflict that brings death, destruction and hunger to Russia and Ukraine, I will be happy.”

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He also said Italian weapons sent to Ukraine “cannot be used to unleash World War III bombing and killing in Russia”. Rome has donated SAMP-T air defence systems to Kyiv.

Meanwhile, mysterious billboards have gone up in a dozen Italian cities over the past days proclaiming “Russia is not an enemy” and urging Rome to halt military support for Kyiv. Authorities are investigating who put them up.

Beniamino Irdi, a senior fellow at the Atlantic Council, said Russia and its supporters were eager to stoke public opposition to support for Ukraine.

“The Russians have been fighting two wars — one is the military effort on the ground, and the other is the cognitive and propaganda campaign against the west,” Irdi said. “Italy is one of the hottest fronts because it is perceived by Russia as a weak link in the chain.”

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What to watch today

  1. French far-right leader Marine Le Pen goes on trial over accusations of embezzling EU funds.

  2. UK minister for EU relations Nick Thomas-Symonds meets commission executive vice-president Maroš Šefčovič in Brussels.

  3. Mario Draghi discusses his EU competitiveness report in conversation with Bruegel, from 1230.

Now read these

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Are you enjoying Europe Express? Sign up here to have it delivered straight to your inbox every workday at 7am CET and on Saturdays at noon CET. Do tell us what you think, we love to hear from you: europe.express@ft.com. Keep up with the latest European stories @FT Europe

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Singapore to ‘mop up’ finance business leaving Hong Kong: report

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Singapore to 'mop up' finance business leaving Hong Kong: report

SINGAPORE — Japan, India and Singapore are poised to be winners in Asia as Chinese markets continue to be challenged by geopolitical risks, according to a report published last week by research and analysis outfit the Economist Intelligence Unit.

The report assessed prospects for Asian financial hubs amid mounting challenges in international markets as trade disputes between the U.S. and China drag on, while Chinese authorities tighten their grip on Hong Kong.

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Money

Home REIT sells further 200 properties at auction ahead of wind down

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Home REIT sells further 200 properties at auction ahead of wind down

The company as now sold 1,208 properties since August 2023.

The post Home REIT sells further 200 properties at auction ahead of wind down appeared first on Property Week.

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Travel

Virgin Atlantic moving to dynamic pricing for reward seat redemptions

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Virgin Atlantic moving to dynamic pricing for reward seat redemptions

Flying Club members will be able to redeem points against any Virgin flight, but pricing will “vary in line with demand, in a similar way to standard tickets”

Continue reading Virgin Atlantic moving to dynamic pricing for reward seat redemptions at Business Traveller.

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Aston Martin and Stellantis shares slump after profit warnings

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Aston Martin and Stellantis shares slump after profit warnings
Getty Images An Aston Martin on an English country roadGetty Images

Luxury carmaker Aston Martin’s share price sank more than 20% after it said profits will be lower than expected this year.

The company, famed for its links to fictional superspy James Bond, has been hit by supply chain issues and falling sales in China.

The share price of Stellantis, the owner of brands such as Peugeot, Citroen, Fiat and Jeep, also plummeted on Monday after a profit warning.

Carmakers across Europe have been suffering lately, with disappointing sales and increased competition from abroad taking a heavy toll on earnings.

Aston Martin is a prestige brand which makes upmarket cars in relatively small quantities.

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Last year, it sold 6,620 vehicles, with about a fifth of those going to the Asia-Pacific region.

However, the company says it has been hit by a fall in demand in China, where a slowing economy has affected sales of luxury cars.

It has also been affected by problems at a number of suppliers, which have affected its ability to build a number of new models.

As a result, Aston says it will make about 1000 cars fewer than originally planned this year.

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Sales, which had originally been forecast to rise, are now expected to be lower than in 2023, and earnings will fall short of current market expectations.

Adrian Hallmark, who became Aston Martin’s chief executive a few weeks ago, said it had become clear that “decisive action” was needed to adjust output.

But he added that he was “even more convinced than before” about the brand’s potential for growth.

Industry giants suffering

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Meanwhile, Stellantis has become the latest large-scale carmaker to revise its financial forecasts, thanks to a deterioration in the industry outlook.

The company has been struggling with weak demand in the US, a key market, where it has been forced to offer discounts in order to shift unsold stock.

It has also been facing increased competition from Chinese brands, which have been expanding aggressively abroad.

As a result, it sais it expects its profit margins to be significantly lower than previously thought this year.

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The announcement sent its shares tumbling. By lunchtime on Monday, the price was down more than 14%.

The problems at Stellantis and Aston Martin reflect a wider malaise in the European car industry.

On Friday, Volkswagen issued its second profit warning in three months, while it has also suggested it might have to close plants in Germany for the first time in its history.

Its German rivals Mercedes-Benz and BMW have also downgraded their profit forecasts in recent weeks.

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Among the common issues are falling sales in China – until recently a highly lucrative market for expensive and profitable high-end models – coupled with growing competition from Chinese brands in other markets.

EV sales falter

Sales of electric cars, which manufacturers have invested huge sums in developing, have been faltering badly in Europe.

According to data from the European Automobile Manufacturers Association, sales of battery-powered cars were down nearly 44% in August compared to the same period a year ago, while their share of the market dropped to 14.4%, compared to 21% in 2023.

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The decline has followed the removal or reduction of incentives for electric car buyers in a number of European markets, including France and Germany.

On Friday, EU nations are due to vote on plans to impose steep tariffs on imports of electric vehicles from China.

The measures are designed to protect local producers from unfair competition. The European Commission claims Chinese manufacturers benefit from illegal subsidies from the Chinese government – and believes tariffs will create a level playing field.

But the plan is controversial, and has received a mixed reception from manufacturers.

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Money

FCA and BoE open applications for Digital Securities Sandbox

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Victims to stage protest outside FCA’s headquarters

The Financial Conduct Authority and the Bank of England have opened applications for their Digital Securities Sandbox (DSS).

In a statement released today (30 September), the FCA and the Bank urged firms that are innovating in financial market infrastructure to apply.

They said the DSS will “reshape” how they regulate by allowing firms to test legislative changes in real-world scenarios before the changes are implemented.

DSS gives firms the opportunity to explore new technologies in traditional financial markets.

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The new tech includes distributed ledger technology (DLT), a system for storing and managing information distributed across participants in a network.

It has the potential to improve efficiency and reduce costs in wholesale markets, benefitting industry and investors.

“We believe the DSS could also lead to a quicker, more effective and collaborative way of delivering regulatory change,” the statement said.

“The DSS supports innovation, helps protect financial stability and strengthens the UK’s leading position as a global and vibrant financial centre, built on globally respected high standards.”

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The authorities said there is a range of support available to firms to help them through the application process.

Firms can arrange pre-application meetings to better understand the DSS requirements.

The DSS is open to legally established firms of all sizes and at all stages of development.

The firms could be an existing financial institution that is already authorised or recognised under current regulation or a new entrant to the market.

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Find out more about the support available here.

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Business

Frasers Group makes £83mn offer for Mulberry

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Mike Ashley’s Frasers Group has made a conditional offer for Mulberry, valuing the UK luxury brand at £83mn, after a “wholly unsatisfactory” response to an initial approach at the weekend.

Frasers, which owns about 37 per cent of Mulberry’s shares, said it had been taken by surprise when Mulberry proposed on Friday to raise almost £11mn from existing shareholders, including its largest investor — the Singapore-based Ong family that holds a 56 per cent stake.

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Frasers said it had not been aware of the plan, which was designed to prop up the luxury group’s balance sheet, until “immediately prior to its announcement”, and would have been willing to fund it on potentially better terms.

Frasers has offered 130p per share, a premium of 11 per cent to the closing price on Friday, and said it was “the best steward to return Mulberry to profitability”. The board provided a “holding response” to its conditional offer on Sunday, a move that Frasers considered inadequate. Mulberry shares rose 11 per cent on Monday.

Mulberry said on Friday that it needed to raise cash to give it financial flexibility, after falling to an annual pre-tax loss of £34mn, from a £13mn profit the previous year, on a 4 per cent drop in revenue to £153mn.

Frasers said that as an existing shareholder it would “not accept another Debenhams situation where a perfectly viable business is run into administration” after Mulberry noted a “material uncertainty related to going concern” in its annual report.

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Debenhams went into administration in 2020, having rejected a last-ditch rescue plan by Frasers — then called Sports Direct — which was a shareholder as part of an acrimonious battle with Debenhams’ board for control of the business.

Mulberry declined to comment on Monday. Frasers has until October 28 to either make a formal offer or walk away.

In July Mulberry appointed Andrea Baldo, the ex-boss of Ganni, as its new chief executive, replacing Thierry Andretta, who left with immediate effect, after the company became the latest luxury brand to warn of a slowdown in spending among affluent shoppers.

In 2020, Frasers, the retail conglomerate controlled by sportswear tycoon Ashley, bought a stake in Mulberry, which is a significant supplier to House of Fraser, the department store group also owned by Frasers following its collapse in 2018.

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Ashley’s group also has a stake in Hugo Boss and owns upmarket department store chain Flannels.

Clive Black, head of consumer research at Shore Capital, said: “No doubt there will be much emotion and potential shenanigans around this illiquid stock that has had to face into well-versed UK luxury market headwinds in recent times.

“Quite whether the two large and dominating shareholders can come to an agreement will be at the heart of the next steps.”

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