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Good morning from the Financial Times.
Today is Wednesday, April 23rd. This is your FT News briefing.
Elon Musk says he will be focusing more of his attention on Tesla, and the IMF is trying to figure out how to deal with the global trade war.
Plus, BP is under pressure from an activist investor.
It's going to be very difficult for BP to substantially increase its oil production in the short term to be able to generate the sort of cash that Elliot is looking for.
I'm Marc Filippino and here's the news you need to start your day.
Tesla's profits hit a major speed bump in the first quarter.
They missed analysts' expectations and dropped to their lowest level since 2020.
The company's electric vehicles sales have plummeted that's thanks to a weak product line and consumer backlash against CEO Elon Musk's involvement in US politics.
Tesla could also get hit by US President Donald Trump's trade war.
The company has warned that it could be a target for retaliatory tariffs.
But Musk might not be in consumers' crosshairs for long.
He said during yesterday's earnings call that his work at the so -called Department of Government Efficiency is quote, mostly done and that he will be devoting more time to Tesla.
The company shares rose close to 8 % while Musk was talking.
Top finance ministers from around the world are in Washington, D .C.
this week. The International Monetary Fund and the World Bank are having their spring meetings.
And the IMF is warning about a, quote, significant slowdown in global growth due to some trade policy decisions just a few blocks away at the White House.
The FT's Clare Jones is covering it all from Washington.
Hi Clare. Great to be here, Marc.
So yesterday the IMF released its forecast for global economic growth and the top line is, how do I put this?
Not good. Can you give me the specifics, Clare?
So yeah, basically as a result of the global trade war that's been started by the Trump administration, everything is going to look a little bit worse for the global economy this year.
Back in January the fund was predicting that the global economy had to expand by 3 .3 % this year which is pretty decent by recent standards.
Now it's predicting 2 .8 % growth.
If you look at the situation for the US economy which has really been the stellar performer out of all of the advanced economies this year.
The situation is a lot worse than it was in January.
But the thing to understand about these numbers is as bad as they are They could get even worse The scenarios that the IMF is using here assume what was the case as of April the 4th at that point Trump had announced a pause in the reciprocal tariffs He announced on a liberation day if going forward We see the sorts of tariffs that were mentioned on April the 2nd actually introduced, then expect the outcome for the global economy to be far worse than these numbers show.
Okay, so the big narrative here is that the global economy and especially the US economy will suffer because of Trump's tariffs.
What else are the World Bank and the IMF concerned about here?
I think there are a couple of things.
I mean, don't get me wrong.
The drive in fact that behind all of this is the global trade war.
But there are other things on agenda here as well.
One of them is central bank independence.
The day before these forecasts were released, we saw another post on Truth Social from Donald Trump criticising Jay Powell for being too late to cut rates.
Last week, we got suggestions from one of his chief economic advisors that it is something Trump is looking into actually firing Jay Powell.
I think officials at the Fund don't want to mention the Fed and the case of the US specifically, but they are really emphasizing the point that without central bank independence, we'll get an awful lot more instability in the global economy, and in global financial markets.
I don't know if this matters in the eyes of the IMF, but yesterday, for what it's worth, Trump said he has no intention of firing Powell.
Claire, these meetings, the IMF and the World Bank meetings run through Saturday.
What's on the schedule that you're paying attention to?
Well, a big highlight is going to be today when we're going to see Scott Besson's speech. We expect Besson to say quite a bit about the U .S.'s position on the IMF and the World Bank going forward. The relationship between the IMF and the World Bank and its biggest shareholder is being quite fractious.
There's even been concerns that the U .S. could pull out of the fund and the World Bank altogether.
It doesn't look like that's happening, but will be on the lookout today.
About what the Treasury Secretary says, about what sort of steps he wants to see from the IMF, and from the bank in order for it to reform.
Claire Jones is the FT's US economics editor.
Thanks so much, Claire.
Thanks, Mark. The FT has learned that Russian President Vladimir Putin offered to stop his invasion of Ukraine at the current front line.
This was part of peace talks held earlier this month.
Putin told Trump's special envoy Steve Wyckoff that Moscow could also give up control of parts of four Ukrainian regions.
Since then, the US has floated the idea of recognizing Russian ownership of the Crimean peninsula.
Russia seized Crimea in 2014.
Putin's proposal is the first formal clue that Moscow could step back from its aggressive demands to end the war.
Those demands would have essentially ended Ukraine's existence as a functioning state.
Activist investor Elliot Management has upped its stake in BP to 5%.
The oil major made the announcement yesterday.
The move puts the hedge fund's stake in the company on par with Vanguard, one of BP's biggest investors.
The oil company has been struggling for the past five years and Elliott is now turning up the heat.
Here to explain is the FT's energy editor, Malcolm Moore.
Hi Malcolm. Hi Mark.
So talk to me a little bit about Elliott management's plans here.
So BP has already set out its vision for the future.
And Elliott thinks that BP's vision for the future is inadequate and wants it to go a lot further and a lot faster.
And essentially what they want is a lot more cash from BP.
BP last year produced about $8 billion of free cash flow.
That's the cash you have left over after paying your expenses.
And that's also the cash that you then used to buy back shares and pay dividends.
Elliott wants that number to hit 20 billion by 2027.
You know, BP's target is for it to grow.
But Elliott's target is about 40 % on top of what BP is projecting.
well it sounds like it's got quite a ways to go especially given that free cash flow number that you cited 8 billion versus the 20 billion that Elliott wants it to get to how is the company doing well it's been under new management for about 18 months now so if we go back to 2020 February 2020 BP's then chief executive Bernard looney really came out and set a really ambitious this sort of green energy agenda promised that BP was going to actually reduce the amount of oil and gas that it produced.
It's fair to say that that strategy has not gone well, BP acknowledges this.
They sprayed a lot of money around across all sorts of different projects.
They didn't really make any money out of any of them.
And as a result, investors have really sort of lost their patience with the company.
And so in the last year or so, their quarterly results, there have been a series of misses.
All for quite reasonable reasons, but essentially investors now looking at the company and why they should buy BP and not Exxon or Shell or someone else.
So if you'd bought shares in BP and Shell 5 years ago, you would have got a 62 % higher return from your Shell shares than you would have from your BP shares.
Wow. Okay. So what sort of challenges does the oil major face as it tries to get back on track?
I mean, I think the issue is that in the short term BP is going to struggle to really put through the scale of cost reductions that Eliot is asking for.
So BP reckons that over the next three years they can save four to five billion dollars of costs.
Eliot reckons there's another five billion on top of that that they can save. That's a huge, I mean, BP does have a lot of employees, I guess they could start cutting jobs but really what they would be doing is sacrificing their future growth along the way.
I guess the other thing is that if you basically say, right, you have to sell everything, then you're telling everyone that fire sale is underway.
Are they going to get the sort of value that you would expect for the assets that they have?
And then, you know, oil and gas projects take a long time.
These are not short term things.
It's going to be very difficult for BP to substantially increase its oil production in the short term to be able to generate the of cash that Elliot is looking for.
I'm not going to lie this sounds pretty grim and not like the type of behavior that you normally expect from an oil major.
Yeah I mean it's not looking hugely optimistic mark at the end of February BP announced that it was going to have a radical shake -up from the point when BP announced its big new strategy, the pivot back to oil and gas the moment they hoped was going to revive the shares The shares are down 18 % since then.
You know, there's a real possibility and there's lots of rumors and chatters that someone in the market is gonna come along and take BP out.
The management's gonna have a tough job here to try and get the share price back on track.
Let's see FT's Malcolm Moore.
Thanks, Malcolm. Thanks, Mark.
Before we go, I want to tell you about our sister podcast, Tectonic.
They have a new season that just started.
And it's all about how emerging technologies like drones and artificial intelligence are changing the way wars are fought.
The first two episodes of this season of Tectonic are already out.
You can hear a little flavor of what's to come after the show.
You can read more on all these stories 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.
What will the wars of the future look like?
From the frontlines in Ukraine to America's defense tech startups, drones, robots, and AI systems are becoming the new weapons of war.
I'm John Thornhill, and in a new season of Tectonic from the Financial Times, I'll be finding out how new technologies are changing the way wars are fought.
Listen wherever you get your podcasts.
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