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UK foreign secretary David Lammy has said EU and UK security is “indivisible”, as he joined a meeting of EU foreign ministers on Monday to discuss the prospect of deeper defence co-operation between London and Brussels.

Prime Minister Sir Keir Starmer has vowed to improve EU-UK ties in the wake of Labour winning power in July, indicating that a security pact with Brussels, covering areas such as defence and energy co-operation, would be at the heart of that new initiative.

Lammy said his attendance at the Luxembourg meeting of 27 EU ministers was a “historic moment that marks our EU reset . . . The UK and Europe’s security is indivisible”.

Russia’s full-scale war against Ukraine has upended Europe’s security approach and sparked deep concern in Brussels about the state of the EU’s defence capabilities, prompting many of its member states to call for closer ties with the UK, one of Europe’s most important military players.

Starmer met European Commission President Ursula von der Leyen in Brussels this month, where they agreed to hold regular EU-UK leaders’ summits, and committed to begin “strengthening our shared security and stability”.

Josep Borrell, the EU’s chief diplomat, said the talks would “lay the foundations of a stronger bond between the UK and the European Union”.

“We are convinced in these dire moments . . . that a strong continent requires a strong partnership,” he added.

Borrell and Lammy had a short bilateral meeting on Monday morning ahead of the foreign affairs council, with Lammy set to join all 27 ministers over lunch.

Lammy’s attendance makes him the first British foreign secretary to participate in a regular meeting since the UK left the EU in January 2020, although former foreign secretary Liz Truss joined an emergency EU foreign affairs council in March 2022 called in response to Russia’s invasion of Ukraine.

Aside from possible areas of joint co-operation, the talks with Lammy are expected to cover the conflict in the Middle East, and western efforts to continue supporting Ukraine.

“I think we’re all going to very warmly welcome him,” Dutch foreign minister Caspar Veldkamp said of Lammy’s attendance.

“We’re not going to repeat Brexit discussions . . . but what is very important in this world full of turmoil, war and uncertainty is that we stand together as EU and UK,” he added.

Veldkamp said the Netherlands would like to see “very intensive” security and defence co-operation with the UK: “The UK has a lot to offer in this field in terms of military capabilities, diplomacy, intelligence.”

If Labour scraps the inheritance tax (IHT) relief on Alternative Investment Market (AIM) stocks “it could be as damaging for smaller companies as Liz Truss was for the gilt market”.

Rumours are now circulating that chancellor Rachel Reeves could remove the IHT break on AIM stocks, which let shares be passed on tax free if held for at least two years before an individual dies, in the approaching budget on 30 October.

The AIM was launched in 1995 and has helped more than 3,988 companies raise over £130bn.

The AIM is a sub-market of the London Stock Exchange (LSE) that is designed to help smaller companies access capital from the public market.

Chelsea Financial Services and FundCalibre managing director Darius McDermott told Money Marketing that IHT fund managers often invest in AIM stocks and that if this benefit is removed “it takes away one of the main buyers of the market”.

According to national accountancy group UHY Hacker Young, the amount of initial public offerings (IPOs) on the AIM has fallen to its lowest level since the global financial crisis.

There were just eight IPOs this year (to the end of September 2024).

This is a decrease from 12 last year and the lowest number since the five recorded in 2007/08.

Only £88.6m was raised through AIM IPOs in 2023/24, compared to £8.83bn raised during the market’s peak year of 2006/07.

McDermott said doing damage to the market now “might make it unfit for purpose” and that the budget is the “main deterrent” for investing in AIM at the moment.

Labour have stated the party wish to kickstart economic growth, but “if you want growth, then you need funding for smaller companies”, McDermott added.

He explained that if Reeves does this it “eats into people’s risk budget”, with smaller companies already holding more risk but “having the potential to make greater returns”.

McDermott believes there is a decent chance Reeves will take this benefit away from the AIM market, “which is not good for smaller companies” and predicts she may announce that by this November no IHT benefits will be available.

He also said that one of the benefits of AIM is that it is cheaper and involves less reporting but it is less liquid than the main market.

However, there are critics of AIM that believe it is “no longer fit for purpose”.

As Globacap co-founder and CEO Myles Milston said, “AIM has been in decline for a long time. The lack of liquidity and funding, low trading volumes and erratic share price movements are putting firms off from listing and forcing many to delist.”

Milston added, “The UK government’s PISCES framework is an acknowledgement of this shift and a better replacement.”

The Private Intermittent Securities and Capital Exchange System (PISCES), is one part of a set of measures designed to encourage businesses to grow and list in the UK and large investors to back them.

PISCES exchanges will be run by commercial providers and overseen by the Financial Conduct Authority.

Milston said: “It [PISCES] will enable private companies to access the funding and liquidity they need while avoiding the complexity and expense of going public. Investors will be able to realise their gains sooner, as it will be easier for them to find buyers for their shares.

“It’s clear LSEG also think this, which is why they have been driving the development of PISCES. AIM’s demise clearly signals the market’s direction – towards the rise of private markets.”

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It’s now almost exactly a quarter-century since the economists Barry Eichengreen and Ricardo Hausmann first argued that the “original sin” of the developing world was borrowing in overseas currencies like the dollar.

For centuries, this led to periodic financial crises. But countries like China, India, Brazil, Mexico and smattering of other smaller developing countries such as Chile and Poland have worked hard to develop their own local bond markets over the past two decades. This is arguably one of the under-appreciated developmental success stories of the past generation.

As Goldman Sachs highlights in a new report on “lessons from two decades of EM fixed income investing”, EM local bonds are now a $7tn asset class, vastly outstripping the ca $1.2tn EM dollar bond universe.

(zoomable version)

Of course, progress is not uniform. Many smaller emerging markets remain dependent on overseas borrowing, and probably always will, as they lack the scale to build healthy local debt markets.

And as we’ve noted before, the growing international involvement in local bond markets comes with downsides The currency mismatch risk has simply migrated from borrowers to lenders. That’s better, but it doesn’t eliminate the dangers of financial crises.

But after weathering a lot of major shocks over the past two decades, what was once a risky asset class has now grown up.

Goldman Sachs notes that while local-currency EM bonds have had a cruddy decade, they actually did no worse than developed market bonds when the Fed started jacking up interest rates, and have now recovered more of the lost ground. Likewise with dollar EM bonds.

(zoomable version)

Goldman has made the report public for us, so you can read the whole thing here. But here are its main points:

1. What have we learnt from two decades of performance? A more mature asset class, with less outperformance but more resilience. Growing up is not all it’s made out to be. After a blistering start in the 2000s, returns across EM fixed income have been more modest over the past decade. But while that outperformance has faded, EM fixed income has demonstrated an impressive resilience in the face of several large shocks, including the Global Financial Crisis, the Covid pandemic and the subsequent inflation surge.

2. In what macro/markets environment does EM fixed income flourish? Differentiated risk betas with a high yield. EM debt offers a high yield — indeed, a higher yield than for many other sovereign fixed-income assets — but uniquely embeds positive cyclical exposure. At the same time, EM fixed income tends to benefit more from global rate relief than other cyclical fixed-income assets. So the best periods often tend to be a combination where rates are stable or easing and growth prospects are being re-rated higher.

3. What role can EM fixed income play in broader portfolios? Hard currency EM, in particular, allows for higher returns primarily for somewhat higher volatility/risk tolerance portfolios. For local currency EM, however, the more differentiated risk exposure compared with other non-US Dollar fixed income portfolios implies that there are benefits of holding GBI-EM even in portfolios that target lower volatility outcomes.

4. To hedge or not to hedge? Mind the currency risk. For EM local debt investors, management of FX risk has been a key consideration, especially through long persistent periods of Dollar strength. Hedging Dollar risk has been important to total returns in EM and DM. But for EMs, hedging currency exposure completely comes at the cost of giving up cyclical upside.

MCDONALD’S is axing six items as part of a major menu shake-up in days.

The changes will happen at the same time as the fast-food giant launches new never-before-seen drinks to its menu and brings back several fan favourites.

1

As part of the menu update McDonald’s fans will be saying goodbye to several items this Wednesday.

Among those to be leaving menus will be the popular Chicken Big Mac.

Fans will also be bidding farewell to the Philly Cheese Stack.

The popular Mozzarella Dippers and Galaxy Chocolate McFlurry will also be leaving restaurants.

That’s not all.

Two drinks are being axed from menus too – Twix Caramel McFlurry and the Twix Latte.

Here is the full list of items being axed from menus at 11am this Wednesday and their prices:

• Philly Cheese Stack – £5.29
• Chicken Big Mac – £4.79
• Mozzarella Dippers – £2.39
• Galaxy Chocolate McFlurry – £2.19
• Twix Caramel McFlurry – £2.19
• Twix Latte – £2.69

New menu items

McDonald’s often updates its menu and the latest items will be added on October 16.

The new menu includes the never before seen Toasted Marshmallow Latte.

The coffee-based drink includes toasted marshmallow flavoured syrup and dusting, which is perfect to satisfy any sweet tooth.

It is only available in a large size and costs £2.19.

For those who don’t like coffee the fast-food chain is also introducing a hot chocolate version of this drink.

The Toasted Marshmallow Hot Chocolate has the same flavoured syrup and dusting and costs £2.19.

Fans of the Mozzarella Dippers will be excited to try the brand-new Cheese Bites.

The mozzarella and emmental flavours hit your taste buds as soon as you bite into one of the bite-sized pieces.

This pairs perfectly with the smoky caramelised onion flavoured breadcrumb coating.

They come in a portion of five for £2.49 or a sharebox of fifteen for £6.79.

McDonald’s will also upgrade one of its popular breakfast items this autumn.

The iconic McDonald’s Hash Brown will be available in a new mini size with the same crunchy exterior and soft fluffy inside.

The Sun got an exclusive invite to try them before anyone else ahead of their public debut this week.

They cost £1.49 for five or £2.99 for a sharebox of 15.

The home of the Big Mac will also bring back several fan favourites including the McCrispy Deluxe, Galaxy Caramel McFlurry and Toffee Apple Pie.

The burger was first seen on the McDonald’s menu last August and was a hit from the beginning.

It featured a crispy chicken fillet with shredded lettuce, Roma tomatoes and mayo.

The burger costs £5.99 on its own, or £7.79 as part of a medium meal.

Other popular treats making a comeback are the Halloween M&M’s McFlurry and Galaxy Caramel McFlurry.

They will cost £2.19 each, or £1.59 for the mini version.

Coming back for the second time is the Toffee Apple Pie.

The crispy pastry is filled with a spiced apple compote and toffee sauce and is complete with toffee pieces.

It costs £1.99.

Other launches

McDonald’s is also bringing back the McRib this week after an almost 10-year hiatus.

The fast food giant is bringing back the pork-based burger across its UK restaurants from October 16.

The McRib was last seen on menus temporarily in early 2015 and combines a pork patty with BBQ sauce, pickles and onions.

Fans will be able to pick one up for £4.49 or for £6.19 as part of a medium extra value meal.

We were one of the first to try it ahead of its launch.

Meanwhile, in August the home of the golden arches brought the famous Grimace Shake to the UK.

It was inspired by the fast food chain’s purple Grimace mascot and went viral stateside when it was launched last year.

The drink features a vibrant purple colour and has a blueberry-flavoured syrup blended with a creamy milkshake base.

A medium drink costs £2.69 while a large version is £2.99.

McDonald’s Monopoly 2024

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This is an audio transcript of the FT News Briefing podcast episode: ‘US banks ride “soft landing” high’

Kasia Broussalian
Good morning from the Financial Times. Today is Monday, October 14th, and this is your FT News Briefing.

[MUSIC PLAYING]

Russian oil tankers are sailing past western sanctions. And we’re in the middle of earnings season for US banks. Plus, in Argentina, strict currency controls seem to have staying power. I’m Kasia Broussalian and here’s the news you need to start your day.

[MUSIC PLAYING]

A shadow fleet of oil tankers from Russia is thriving. So much so that its capacity to transport oil has grown by over 70 per cent since last year, that’s according to a new report out today. And the increase is in spite of a crackdown on shipping companies and insurers who have essentially allowed Moscow to get around western sanctions. Now, these were first put in place to limit Russia’s ability to generate revenues for its war in Ukraine. And they haven’t been that successful. Now, on top of that, the report also highlights the environmental risks of the fleet. These ships are old and because of the sanctions, under-insured. So oil spills and accidents are more likely to happen.

[MUSIC PLAYING]

We’re in the middle of another earnings season for US banks. JPMorgan Chase and Wells Fargo both beat expectations when they reported on Friday. The big investment banks, including Bank of America and Goldman Sachs, published later this week. To get the details and some insights, I have my colleague Josh Franklin here. Hey, Josh.

Joshua Franklin
Hi there.

Kasia Broussalian
So break down those two reports from Friday for me. What are some of the top line numbers?

Joshua Franklin
So I think the headline for JPMorgan and Wells Fargo that we saw on Friday was better than expected. Profits were down of both banks, but less than analysts and investors were fearing they would be. And I think a big part of that comes down to credit and loan losses being less severe than analysts were fearing they would be. As we kind of get past this period when a lot of people during the pandemic were sitting on large amounts of savings that have now been spent down and also now borrowers dealing with higher interest rates. And that was all really reflected in how their stocks performed. JPMorgan shares were up around 4.5 per cent on Friday, Wells Fargo was more than 5 per cent. And overall, one of the benchmark banking indexes hit the highest level since before the regional banking crisis with the collapse of Silicon Valley Bank in 2023.

Kasia Broussalian
All right. So that sounds pretty decent. And now these are the first reports since the Federal Reserve cut interest rates back in September. And that plays a big role in something called net interest income. What’s the outlook there given that rates are, you know, now falling?

Joshua Franklin
Yeah. And that’s been really one of the big concerns for bank investors is the extent to which lower interest rates would start weighing on big bank profits in particular, because these big banks have really benefited from being able to charge more for loans over the last two years without having to pay as high rates for savers on their deposits. And there was kind of a bit of a mixed bag in there for the banks. JPMorgan raised their guidance for net interest income in 2024. Wells Fargo cut their outlook for the final three months of the year. But Wells did lift their outlook for 2025, so being a bit more optimistic on things. JPMorgan didn’t give any outlook for what they expected to get from lending income in 2025, which was a little bit of a frustration on the earnings call. And even Jamie Dimon, the CEO of JPMorgan, told his CFO, next time, let’s just give them the damn number because they were getting so many questions about what net interest income was going to look like in 2025.

Kasia Broussalian
So we’re just halfway through this earnings season, the big investment banks, they report later this week. What are you looking for to better understand the health of the US banking sector overall?

Joshua Franklin
Well, I think we’re going to get like a different complexion of it. So we’ve got Goldman Sachs and Morgan Stanley reporting, and that’s gonna give us a little bit more of a flavour of the corporate world, a level of corporate confidence in terms of their willingness to do deals and appetite there. And I think that’s gonna continue to show pretty, from pretty anaemic levels 12 months ago, it’s gonna show pretty good year on year growth. The big theme is just how much of a recovery we’re seeing there and how sustained that’s gonna be.

Kasia Broussalian
Josh Franklin is the FT’s US banking editor. Thanks, Josh.

Joshua Franklin
Thanks very much.

[MUSIC PLAYING]

Kasia Broussalian
Concern is ramping up about inflation in Europe, but not in the way that you might expect. Economists are worried about it getting too low now thanks to weak economic growth and lower consumer price pressures. It’s a bit of a whiplash, right? Just last year, the European Central Bank raised interest rates to a record high and needed to bring down inflation that had really taken off after the pandemic. But it looks like things might be cooling too much. Eurozone inflation dropped to 1.8 per cent last month below the ECB’s 2 per cent target. And that’s giving some people a bit of déjà vu. Keeping inflation at 2 per cent has historically been kind of an issue for the bank. The ECB next meets on Thursday and investors are predicting it’ll drop rates by a quarter point. That would be sooner than originally anticipated.

[MUSIC PLAYING]

It’s almost been a year since a chainsaw wielding, sideburn rocking, libertarian economist took Argentina by storm. Javier Milei promised to slash spending, get inflation in line and crucially, lift currency controls when he became president. Michael Stott has been checking in on Milei’s progress and he’s here to talk to me about it. Hey, Michael.

Michael Stott
Hey, Kasia.

Kasia Broussalian
So tell me more about Milei’s time in office. What sort of progress has he been making on the economy?

Michael Stott
It’s a mixed picture, Kasia. I mean, I’ve just been in Buenos Aires. We had an interview with Milei and we got a sense of the country as it is now. Inflation has come down quite dramatically from the peak that it hit when he took office. He has also balanced the budgets. But there’s been a recession, too. Poverty rates have gone up. People are really feeling pain and the currency controls are gonna take quite a lot longer. He said that this was not the time to lift them and that he had several conditions that he wanted to see met first. So it’s a mixed picture.

Kasia Broussalian
Yeah. And tell me more about those currency controls. What’s the history with them?

Michael Stott
Yeah. So the currency controls were imposed actually by a centre right government back in 2019. Amid an economic crisis, there was a loss of confidence in the peso. And what they mean is that if you want to buy dollars in unlimited amounts, you’ve got to go to the black market to get them. There’s very strict controls on how many dollars you’re allowed to buy that you can move out of the country. And it was an emergency measure, but they’ve stayed ever since 2019 because the confidence in the peso has not returned. And it’s a high-risk gamble for Milei to lift them. Ideologically, he wants to lift them. He’s a libertarian. He wants economic freedom. But if he lifts them and dollars flat out, the peso’s value could crash. And then there’s a whole other burst of inflation. And his biggest achievement so far is undermined. So he’s very concerned about trying to find a balance there and looking for the right moment to do it.

Kasia Broussalian
Got it. And what are those conditions that Milei wants to see first and what would lifting controls actually do?

Michael Stott
So lifting the controls would help foreign investment. It would give foreign companies confidence that if they invested in Argentina, they could get their money out again. But Milei wants inflation to come down further. It’s still very high, and he wants to see banks lending their pesos out to companies instead of parking them in the central bank. That’s something as well he would see as a sign of money being put to work in the real economy instead of stored up somewhere where it might suddenly turn into dollars. So he’s looking for those sorts of things to happen before he lifts the controls.

Kasia Broussalian
And is this a setback for Milei? Like how much are these controls tied to him declaring, you know, essentially mission accomplished on the economy?

Michael Stott
It’s definitely a setback for him because he’s been so clear about his belief in total economic freedom. So he has to lift them at some point. The problem is that in a way, the longer he delays lifting them, the more the demand for dollars builds up in the system because multinational companies, for example, can’t send their profits back abroad. Some economists are quite concerned that he’s creating a bit of a hostage to fortune by waiting so long.

Kasia Broussalian
All right. But in the meantime here, I can’t help but think about how Argentineans, they’re really struggling. So how long do you think they’ll be willing to put up with Milei’s shock therapy?

Michael Stott
It’s a very drastic economic adjustment, one of the most drastic anywhere in the world. I think what’s helping Milei so far is that he’s doing, on the one hand, what he promised to do in the election campaign. He promised pain, he promised to chainsaw, that’s what people are getting. So he’s being honest in that sense and setting expectations. The other thing that’s helping him is a lack of alternatives. Frankly, the previous government was completely discredited by the huge economic mess it left behind. And nobody else has really articulated any serious alternative to what Milei is doing. The big question, of course, that nobody knows the answer to is how long that patience will last, and it could snap quite quickly at some point.

Kasia Broussalian
Michael Stott is the FT’s Latin America editor. Thanks, Michael.

Michael Stott
Thank you, Kasia.

[MUSIC PLAYING]

[CLIP OF A COUNTDOWN PLAYING]

Kasia Broussalian
SpaceX, the company run by Elon Musk, launched its rocket into the atmosphere on Sunday morning.

[CLIP OF A LAUNCH PLAYING]

But it wasn’t like most take-offs. The excitement was less about what was going up than what might be coming back down.

[NEWS CLIP PLAYING]

Everyone was watching to see if something called a booster would fall from the starship and land directly into the arms of the launch pad. And it worked.

[NEWS CLIP PLAYING]

The catch is crucial in order for SpaceX to reuse its rockets. So pulling it off was a major technical achievement.

[MUSIC PLAYING]

You can read more on all of these stories for free when you click the links in our shownotes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.