Hungary ousts longtime prime minister Viktor Orbán

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0:18Good morning from the Financial Times. Today is Monday, April 13th, and this is your FT News Briefing. A new era dawns in Hungary after voters oust their strongman prime minister in a landslide election. Plus, oil prices jump as the U.S. vows to block Iranian ports, and Wall Street's biggest banks are expected to report a banner first quarter this week. This is set to be one of the record quarters, and that's because there's been so much volatility from the start of the year. I'm Victoria Craig, and here's the news you need to start your day.

1:05Hungarians handed their longtime leader, Viktor Orban, a crushing defeat in Sunday's election.

1:25In a speech, Orban conceded that the election results are painful, but thanked his supporters and congratulated the opposition. The prime minister's concession came after just more than half the ballots were counted, but the victory for his rival, Peter Maziar, was decisive. It left him with a clear majority in parliament after voters turned out in record numbers at the end of a bitterly contested race. Our correspondent Martin Dunai is in the capital, Budapest. He spoke to me from a rally just after the opposition leader claimed victory. I started by asking him what the mood was like on the ground.

2:01The mood is difficult to describe. It was electric. It was crazy. Never in the post-communist history of Hungary have people voted in such numbers in any election.

2:16Tysa, the name of Magyar's party, is an abbreviation for respect and freedom, but it's also the name for Hungary's second largest river, which is prone to flooding. One of the main chants of the party has become, Tysa is flooding, And this is what people have begun to chant spontaneously as the results begin to come in.

2:43It's predictably very emotional. People are hugging, kissing, crying, screaming. Mojdar has promised that he would be, obviously, the prime minister of 10 million people, not just the voters that voted for him. So hopefully this deep division that hurt Hungary for so long will ease now and probably even go away. And what will Magyar's immediate priorities be now? Magyar attracted voters as effectively as he did, largely because he focused on bread and butter issues that have hurt a lot of people. In the last few years, wages have remained stagnant, but prices have skyrocketed. Hungary at one point had the highest inflation in the European Union.

3:27And social services like health care, education, public transit have lagged far behind regional peers such as the Czech Republic or Poland. Contrasting to that came the issue of corruption and very visible, incredible riches of the crony elite connected to Orban, which began to bother Hungarians a lot more than it used to before when relative prosperity affected ordinary people as well. Now that is not the case, and therefore corruption is no longer tolerated. Martin, this was a decisive victory for the opposition. What happens next? Because right now, from what it looks like, the numbers indicate a two-thirds majority.

4:10Majar will have a much easier time to unpick the system that Orban has built over 16 years. Orban has changed the judicial system. The media system was one of the first things that he enshrined in a two-thirds majority law back in 2010-11. And similar ways you can go through many ways of life, many sections of society where the urban government had a kind of control that was difficult or impossible to challenge by civil society or even the opposition. Much of that system is rooted in laws that need a two-thirds majority in parliament to change. Without such a majority, it would have been incredibly difficult to unpick this system.

4:55But now, it would just be a matter of rewriting those laws and creating a new system. Now, Magyar has promised that he is not going to recreate another government that has a chokehold in all levers of power. So there's at least a promise at this point that the overbearing power of the Hungarian government is not coming back. Not only is this a huge change for Hungary, but also for the European Union. Do you think we can expect a quick thawing of relations with the bloc now? There's going to be a massive turnaround in Hungary standing in the European Union. Magyar has promised to free up some 20 billion euros worth of European Union funds that have been held up because of corruption concerns, but also to sort of be much more constructive on issues like AT Ukraine.

5:49And in general, Orbán has been so antagonistic in his approach with the European Union, that the expectation in Brussels has always been that any change will be an improvement over that. But this change with the two-thirds majority that is looking likely for Madar is likely to be massive. An election outcome with plenty of implications for us to watch over the next several days and weeks. The FT's Martin Dunai in Budapest for us.

6:22global oil prices surged eight percent to back above a hundred dollars a barrel at the start of trade in asia today it comes as new threats over the strait of hormuz reignite fears that oil supply bottlenecks will fuel a global energy crisis in a social media post on sunday morning u.s president donald trump said america's navy will quote block any and all ships attempting to enter or leave the Strait of Hormuz. The U.S. military later followed that up by announcing it will begin implementing a blockade of all maritime traffic entering and exiting Iranian ports at 10 a.m. Eastern Time today, but said it will not disrupt ships in the Strait going to and from non-Iranian ports.

7:04The president's announcement came after U.S. and Iranian delegations failed to reach a peace agreement in marathon negotiations over the weekend. Trump also ordered the Navy to intercept ships that pay tolls to Iran in order to pass through the essential waterway, warning no one who pays an illegal toll will have safe passage. Iran has tried to impose such fees as it seeks to maintain control of the strait. The U.S. wants transit to continue without limits. Speaking of tolls, we have an excellent deep dive into the history of taxing waterways. You can find that link in the show notes.

7:44Market volatility caused by the war in Iran has stoked plenty of anxiety among investors, but it's also likely to have resulted in one of the best ever quarters for trading at Wall Street's biggest banks. We'll find out for sure when they report first quarter earnings results this week. Akilah Quino is the FT's U.S. banking correspondent, and she joins me now to chat about what we're expecting. Hi, Akilah. Hi. So Goldman Sachs is going to kick off reporting season for us today. What are we likely to see from all of these titans of Wall Street for the first quarter? This is set to be one of the record quarters.

8:19And that's because there has been so much volatility from the start of the year with the U.S. intervention in Venezuela to the war in Iran and what that did to oil prices and stock prices. and the five largest U.S. banks, that's J.P. Morgan, Goldman Sachs, Morgan Stanley, Citi and Bank of America, they're expected to have combined trading revenues of more than $40 billion in the first quarter. That's 13 % higher than the figure in the first quarter last year after the inauguration of President Donald Trump when there was uncertainty about trade policy and things like that. And it's also higher than the trading revenue after Russia's invasion of Ukraine in 2022.

9:05So yeah, it's set to be a pretty extraordinary quarter for trading. Yeah, I think that illustrates just how volatile things have been in the aftermath of the war in Iran and in Venezuela, as you say. But away from the impact of conflict, there's also been a lot more deal making so far this year after a pretty long lull. Is that setting up for a good quarter in investment banking. Yes. So, so far that should remain strong. So there was a big slump in dealmaking for years that kind of finally ended at the end of last year. And that was partly to do with a looser regulatory environment in the US.

9:44And so we've seen a lot of the deals that had been announced last year or kind of came through this quarter. But the situation that we about and the geopolitical conflicts that have boosted trading desks, they could end up becoming a sort of liability on the deal size or, you know, negatively impacting deal making if the war in Iran were to continue for months and months and investors kind of switched to a risk of mentality and deal makers decided to hold off with M &A or even with public listings when the stock market It is up and down a lot. That's not great for public listing. So this should be a strong quarter still, but there will be a lot of focus on the outlook for the rest of the year and whether that will impact your making.

10:31And I think the last thing is the shakiness of private credit has also been a dominant theme that we've been covering a lot over the last several months. What are you looking for on that front when it comes to this wave of earnings results this week? That's a really interesting one. And it's been a focus over the last two quarters because private credit jitters and high profile defaults started happening in September last year. And so every quarter banks have been disclosing a bit more about what exactly their exposure is to that sector. And I think one of the issues here is that banks have to disclose what they lend to non-deposit financial deposit institutions.

11:14So that's non-bank lenders. And so that includes private credit funds, but also a bunch of other lenders like mortgage lenders and car lenders and private equity. So I think investors are looking for a breakdown of what exactly banks are lending to who when it comes to the private credit sector. So we can expect probably a bit more detailed disclosures and a lot of questions about credit quality and things like that. I know you're going to be busy digging through all of these earnings results this week, Akilah. Akilah Kino is the FT's U.S. banking correspondent. Thanks so much for your time. Thanks for having me.

11:57Before we go, Meta is making an AI version of Mark Zuckerberg. Four people familiar with the project tell the FT that the company is developing photorealistic AI-powered 3D characters. It's all part of a push to catch up with rivals like OpenAI and Google. The Meta chief's AI character will interact with employees in his place. If this sounds at all familiar, that's because, well, it is. The company created a 2D avatar of Zuckerberg when it was going to go full steam ahead on building a virtual realm that it called the metaverse. The company, though, has since wound down that ambition and swapped it out for AI.

12:36You can read more on the Zuckerberg bot and all of the stories in today's podcast for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

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