Today’s News

The Big Picture

• Trump discusses “regime change” in Iran. For weeks, there has been a ratcheting up of rhetoric by the US President alongside an increased US military presence in the Middle East. Over the weekend he discussed regime change while also ordering the USS Gerald R Ford aircraft carrier to leave the Caribbean (where it had supported the operation against Venezuela) and sail to the Middle East. (FT)
  
  

• Corporate taxes divide France. Earnings season in Paris has been dominated by one topic: the decision by Parliament to make last year’s one-one levy on profits, a permanent tax increase. President Macron had cut the corporate tax rate from 33% to 25%, but the left-leaning Parliament increased the tax rate to 35% for companies above €3bn in revenue and 30% for those above €1.5bn. This tiered structure is similar to Australia - 25% for companies with less than $50m in revenue, 30% for everyone else. (FT)
  
  

• US to roll back steel and aluminium tariffs. The Trump administration imposed tariffs of up to 50% on imports of the metals coming into the US. Now, less than a year later, US trade representatives have said they will be softening the tariffs although it remains unclear to what level. (FT)
  
  

• US inflation continues to drop. Annual inflation for January was 2.4%, down from 2.7% in December, and an 8-month low. This down-trend in inflation is firming expectations for more interest rate cuts this year. (CNN)
  
  

• Russian inflation remains high. The Russian central bank is also cutting rates, dropping half a percentage point to 15.5%. This cut comes despite inflation in Russia remaining a high 5.6%. (Reuters)

Companies in the news

• China dumps BHP’s flagship iron ore. Sales of BHP’s Jimblebar Fines iron ore dropped 80% in January, as the mining giant and Chinese authorities dispute pricing and Chinese ports stockpile iron ore. Last week iron ore dipped below US$100 a tonne, and analysts expect this Chinese pressure could drop the price closer to US$90 by the end of 2026. (AFR )
  
  

• Earnings season sees big falls for notable companies. On Friday, Nick Scali dropped 22%, Cochlear dropped 19%, Webjet Group dropped 26% and Austal dropped 22%. Four Australian companies in four different industries, united by one common fact: investors are fleeing at any sniff of bad news this reporting season. (Capital Brief)
  
  

• Electric Vehicle slump cost car-makers billions. As electric vehicles fall out of favour in the US and the Trump administration removes tax credits for EVs, the Big 3 US automakers (Ford, Stellantis and GM) have together written off more than $50 billion in investment in their EVs. (WSJ)
  
  

• SpaceX to protect Elon after going public. The company is reportedly planning a dual-class share structure that would allow Elon Musk to maintain control of the company even without owning a majority of shares. This structure is not uncommon for founder-led companies, used by News Corp, Meta and Alphabet amongst others, and is not a surprise given Elon’s history of being removed from companies he leads (Zip2 and PayPal). (Bloomberg)

  
  

• Do Alibaba, BYD and Baidu aid the Chinese military? That is the questions the US government was pondering after the Pentagon briefly added the three companies to a list of companies supporting the Chinese military before removing them minutes later. The confusion saw Alibaba and Baidu shares drop 5%. (FT)

What the…?

AI dominates earnings season. There is one topic that is front of mind for investors as companies share their results, and it appears that companies are leaning in to it. Mentions of AI have exploded this reporting season.

Analysts from investment bank Jarden as keeping count. Commonwealth Bank’s investor presentation mentioned AI roughly 65 times - an impressive feat. But the clubhouse leader at this stage of reporting season is Macquarie Group, that managed to squeeze 82 mentions of AI into its investor update. (AFR)

Today’s Insight

Essentials: Why we invest (& you should too)

This is an excerpt from the Essentials Series where we cover some of the reasons to invest. (Spotify | Apple | YouTube)

Bryce: Well, that brings us to, I think, the first component of investing that is really important to understand because it is so powerful and will really, I guess, help us get to this point of financial freedom, which is the power of compounding.

Ren: This is what makes investing work. This is what makes it powerful. And this is what our brains don't understand. We struggle to think how things can grow exponentially, but that is what compounding does. So very simply to bust the jargon, compounding is about your money making money and then the money that you've made also making money. The more money you make, the more money it then makes. And that's how small regular investments can grow into something really big.

Bryce: Let's put it in simple example. You invest $1,000 and it makes 10%. That's a $100 return. You then reinvest that amount, which is $1,100. It then makes 10%, which is a $110 return. So you then have $1,210 and the journey continues. And then in year three, you make 10% again and you make $121.

Today in Equity Mates