The markets are shrugging off chaos

0:01Good morning from the Financial Times. Today is Friday, August 15th, and this is your FT News briefing. Presidents Donald Trump and Vladimir Putin meet for a summit in Alaska. Dubai faces competition as the finance hub of the Middle East. And why investors aren't freaking out about Trump. A lot of people that I speak to in markets are saying, this doesn't make sense, right? I'm Josh Gabor-Dwyan, and here's the news you need to start your day.

0:36Russian President Vladimir Putin and U.S. President Donald Trump are set to meet in Alaska today as part of a hotly anticipated summit. A reminder, if you missed it, Ukraine's President Volodymyr Zelensky is not invited. There's been a lot of back and forth, setting expectations between the two presidents who will be there, though. Yesterday, Putin told his top officials that the U.S. was making a, quote, energetic and sincere effort to end the conflict in Ukraine. For his part, Trump said he wasn't certain the meeting would result in an immediate ceasefire.

1:14For years now, Dubai has tried to build a financial center in the desert that could rival New York and London. The Emirates struggled during the global financial crisis, but it started to thrive during COVID. That growth has come with some growing pains though, and now Dubai faces competition in its own backyard. Chloe Cornish is our golf business correspondent. She's based in Dubai, and she joins us now to talk about what's going on there. Hi, Chloe. Hey, Josh. Okay, let's start with all the growth that Dubai has been through first. How exactly does Dubai want to be seen by the world? This amount of growth has genuinely taken a lot of people in Dubai by surprise.

1:55And now you've got a situation where the Dubai International Financial Center, which is this offshore financial center that's based in Dubai, has its own rules, which is very attractive to banking. It is having to build more towers, more office space to make room for all of these people who have arrived. The infrastructure of the city is starting to feel a bit strained by all of the newcomers. So you're seeing a lot more traffic jams around the Dubai International Financial Center. House prices and the cost of rent has absolutely skyrocketed. And so there are questions about whether or not salaries have kept up with that kind of increase in cost of living and whether, in fact, Dubai has become a bit of a victim of its own success in attracting so many people so fast.

2:40Yeah, those do sound like reasons that might push people to look elsewhere. Doesn't Dubai have kind of a bit of a reputation problem as well? Dubai is a low-tax jurisdiction, and it has had to tackle an image of being a hub for sanctions busting and money laundering. It's a very open economy. It sits near Iran. There's a lot of people coming and going here. It also has a lot of these free zones, which are very untransparent. But the concern hasn't been so much around its international financial center, which has generally been able to keep itself insulated from those kinds of reputational risks.

3:21But it's been very aware that those things like financial crime could pose a problem to it. And it's been quite alive to those issues. And who are the main competitors that are trying to challenge Dubai for that position of kind of global financial center in the Gulf? One of the competitors for Dubai is right next door. It's the Emirate of Abu Dhabi, which has the United Arab Emirates' greatest concentration of wealth. They've got about$1.7 trillion worth of sovereign wealth in Abu Dhabi. And that's really irresistible to the likes of hedge funds and asset managers who are hoping to get a piece of that action.

4:01And then the other potential major competitor to Dubai is Zuriad in Saudi Arabia, the capital of the kingdom. And Saudi Arabia has a much bigger domestic economy. It's the region's biggest domestic economy. So for many businesses, it feels like the right place in the Gulf to go and grow. What's Dubai been doing to fight off that competition and to kind of make itself unique and appealing? Dubai's got a really big first mover advantage. It started this process much earlier than the others, decades earlier than the others did. And so that kind of gravity that it has still has a big impact. Then it's also tried to look at new technologies as well, like cryptocurrency.

4:44It's one of the few places that has a full regulatory system that can govern cryptocurrency. currency. It's trying to be quite quick about changing regulation to make itself more attractive to folks like hedge fund managers. So it's definitely not resting on its laurels. Interesting. And Chloe, what do you think all this tells us about today's geography of finance? I think maybe Dubai's success at bringing a lot of international financiers here tells us that the financial geography of the world is changing a bit. If at one time, your sort of Western hemisphere centres like London and New York were really dominant, they're still massive, of course, and they're still very dominant.

5:34But it seems like there's more room, more interest in finding other locations as well, that people can live and work that's not necessarily one of those traditional financial centers. Chloe Cornish is the FT's Gulf Business Correspondent. Thanks, Chloe. Thanks.

5:57China has been pretty assertive about the way that it controls rare earth materials, and it seems to be cranking up the pressure. Now, Chinese authorities are telling foreign companies to stop stockpiling the materials they need for electric car batteries and other critical technology. And officials are limiting how many exports they approve. The idea is to prevent foreign companies from building up rare earth inventory. Beijing has been known to use rare earths as leverage, including most recently as a way to hit back against Trump's tariffs. After Trump's so-called Liberation Day, China's tightening up of rare earth supplies actually led to shortages globally.

6:37So rare earths are said to be a major part of the trade negotiations between Washington and Beijing.

6:49First, there was the tariff deadline, and then Trump firing the head of the U.S. Bureau of Labor Statistics, things that, at other times, might cause investors to pause or even retreat from the U.S. markets altogether. But markets have remained remarkably calm. In fact, they've rallied again and again, hitting new record highs. My colleague Katie Martin writes our FT Markets column and is the host of the FT's Unhedged podcast. She joins me now to talk through why investors just aren't getting spooked. Hello, Katie. Hey, how are you doing? Good. We don't usually ask why something isn't happening, but in this case, I wonder if you could run through some recent events that didn't elicit any response from investors, the ones that you were surprised by.

7:34Yeah, it's kind of the number one rule of writing about things is that you don't write about things that are not happening. But it is really quite weird. So you look at the news flow in terms of stuff that you would imagine would be like really important for markets. Like, as you mentioned, the president fired the head of the Bureau of Labor Statistics because he didn't like, guess what, the labor statistics. And he's put a loyalist in her place. He's also appointed somebody into a role at the Federal Reserve who's got some quite out there ideas about ways to completely reform the Fed. These are quite grim developments.

8:12And the markets are like, well, nevertheless, you know, earnings are looking pretty good in the tech sector. So let's just kind of carry on. And a lot of people that I speak to in markets are saying, this doesn't make sense, right? Katie, is this just a case of the glass being half full rather than half empty? I mean, are there things that investors are clinging to that would explain why the markets have rallied instead? Well, yeah, the main thing is that corporate America, particularly in the tech sector, is still doing fine, actually. And so if you want to look at the world through rosier glasses, you can definitely do that.

8:50And in fact, you can do that because of some bad spots in the economic data, weirdly. So, for example, Trump got rid of the previous head of the Bureau of Labor Statistics because jobs data has been softening. And we've seen through CPI inflation numbers that came out earlier this week that inflation is stuttering a bit. We're not seeing a massive rise in prices on the back of tariffs coming into force, which is what a lot of people thought would happen. So if you have slightly tame inflation, and if you have a jobs market that's looking a tiny bit wobbly, then that is a recipe for cutting interest rates over the coming months, potentially.

9:33That's actually not a bad recipe for continuing to buy U.S. stocks. But there were some hopes early on, right, that the market would keep Trump in check. Why hasn't that happened? Part of the issue there is that over the course of this year, Trump has rolled back some of his more radical policies. You know, we're all pretty familiar with the taco trade, right? Trump always chickens out. Market participants think every time you get a really spicy policy announcement, people sort of look around and think, nah, he's going to chicken out of this one. He's going to pull back. My point is that he's not chickening out quite as often as he used to since that big rollback after the Liberation Day tariffs on April 2nd.

10:20He doesn't always chicken out, but the market is trading as if he does. Okay, if the market isn't reacting badly to these big destabilizing events, isn't that kind of good? Okay, you can see it like that. You can see it as good and you can actually, on a positive note, you can really see it as a sign of resilience in US and global markets. But a couple of things. First of all, the longer that markets remain benign while Trump keeps cranking up the pressure on key institutions, the further he will think he can push it. So the reason that he backed away after the April 2nd tariff announcements is because markets really fell out of bed.

11:01The other is that if you mess about with core US economic statistics, lead investors to think that they are biased or politicized, and lead investors not to trust them as much as they previously did. And if further down the road, we get to the point where interest rates are not set according to the parameters that we've all become used to over the past 30 years or so, then we've got a situation in which you can have a lot of volatility, a real lack of trust, and some fairly ugly moves in markets. Katie Martin writes the FT's Market Column and is the host of the FT's Unhedged podcast. Thanks, Katie.

11:42Pleasure. You can read more on all of these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back next week for the latest business news. The FT News Briefing was produced this week by Katya Kumkova, Sonia Hudson Fiona Simon Ethan Plotkin Mark Filipino and me Josh Gabbard-Doyant our show was mixed by Blake Maples Kelly Gary Sam Giovinko and Kent Millitzer and we had help this week from Michael Lello David Da Silva Peter Barber and Gavin Kalman our acting co-head of audio is Topher Forges and our theme music is by Metaphor Music

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