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Good morning from the Financial Times.
Today is Monday, March 31.
And this is your FT News briefing.
Germany's spending push is driving up European borrowing costs.
And CoreWeave's IPO is testing the market's faith in AI.
Plus, black market traders in Gaza have created a big business selling cash.
That means that regular people are paying right now rates of 30 % for hard currency.
I'm Kasha Bursalian, and here's the news you need to start your day.
Germany wants to spend more money on defense, but that might make it harder for other European governments to do the same.
It all has to do with higher Bund yields.
They've gone up quite a bit this month.
And since Germany's bond market acts as Europe's benchmark, higher borrowing costs there usually mean higher borrowing costs elsewhere.
Like in France and Italy, both countries have higher debt loads than Germany, meaning they've got less fiscal wiggle room.
That might make it more difficult to finance new military spending.
The artificial intelligence company Coreweave became the biggest tech startup to publicly list in more than a year on Friday, but its IPO was a lot smaller than expected and its first day of trading a bit rocky.
My colleague Tabby Kinder has been keeping a close eye on Coreweave's moves and she's here to talk to me about it.
Hey, Tabby. Hi. All right.
So, for the uninitiated, what exactly is Coreweave?
So Coreweave is an AI data center business basically, lots of companies that are building AI models need access to NVIDIA's graphics processing units, which are the chips that all of AI are powered on.
All the AI models you've heard of like chat GPT, they've all been built using in NVIDIA chips.
So Coreweave takes those chips, it puts them into data centers, And then it leases that computing capacity to companies that are building AI models.
And leading up to Friday, why was CoreWeave's IPO such a big deal?
I mean, what was riding on the listing?
So the CoreWeave IPO was the first big tech IPO that we've seen in a while since Arm, which itself is a chip company, had IPO back in 2023.
So people were really interested to see how CoreWeave would perform and how much money would be able to raise in order to see if other tech companies, other startups that have been private for so long now would be able to go out after them.
How exactly did CoreWeave's IPO go?
It was definitely a bit rocky.
It was a tricky process.
They had originally kind of had conversations with investors and their bankers that would have valued the company at about $35 billion.
They originally wanted to raise about $4 billion at the IPO.
But by the time the roadshow started, those numbers had come down quite dramatically.
So on the day, they only raised 1 .5 billion and the valuation ended up being about 23 billion.
So it was much smaller than they had anticipated.
And that had reflected some concerns about Coreweave's business model and also some kind of broad and macro environment issues.
Well, yeah, explain that business model just a little bit more.
What was spooking investors about it?
Yeah. there's a few things about CoreWeave that make it quite an unusual business.
I mean they're really reliant on just one big supplier, Nvidia, and then just a handful of tech companies that are big enough to be building the sorts of AI models that need this much compute.
So, for example, they're really exposed to contracts with Microsoft. They also have built the business using huge amounts of debt, which, you know, isn't a bad sign in itself.
but it does raise questions for public market investors, considering whether this is a kind of safe investment, particularly for the first big tech IPO in a couple of years.
All right, so Khoury's debt burden is a concern, but also its reliance on Nvidia and big clients like Microsoft. That's all raising a lot of questions.
What does Friday signal then for the wider IPO environment in the U .S.?
People were talking about it as, you know, the opening of an IPO window.
But it doesn't look good.
I mean, the first day of trading was rocky.
And so today, which is the first full day of trading, we'll see how the shares perform over the day.
There are still obvious questions in the markets about volatility, there's been so much turbulence around investor appetite for AI at the moment.
So I think a lot of companies will be weighing Corweave's performance will be a lot of other factors affecting markets right now when they are considering whether to go public.
Tabby Kinder is the FT's West Coast financial editor.
Thanks Tabby. Thanks Kasia.
China's export boom has triggered a record number of disputes at the World Trade Organization.
Beijing has been relying on overproduction lately for two reasons.
One, to keep up economic growth, and two, to help off -set weak consumer demand at home.
But China's international trading partners aren't exactly thrilled to have all these goods flooding their home markets.
So they targeted the country with nearly 200 cases at the WTO last year.
That's double the previous year.
India, the U .S., and the European Union were the ones who filed the most complaints.
There's a hard currency shortage in Gaza, and it's forcing Palestinians to take drastic measures.
With the majority of banks closed or destroyed, cash has become king in the enclave. It's the only thing that a lot of shopkeepers will accept.
My colleague Malaika Tapper has been looking into the black market that this has created.
Hey, Meleika. Hey, how are you?
Doing well, thanks.
So first, explain the cash crunch just a bit more.
What sort of impact is it having and what factors are really driving it?
So I think the first thing to understand is that the economy has become so cash based during the war, people have no choice but to find a way to get cash.
But ironically, money is actually really expensive right now.
The main reason for that is that Israel has not allowed any cash to enter the Strip since October 2023 when the war began.
Before the war, the Palestine Monetary Authority, which acts as a central bank, would request permission from Israel to bring in regular shipments of fresh money to replenish bank's deposits, but that has not happened in almost a year and a half.
Now, compounding that is the fact that airstrikes have damaged or destroyed a lot of the banks and widespread theft has also decimated over half of the bank's deposits, meaning that they don't really have liquidity to allow people to make withdrawals.
got it. So it's really these two big things.
The first thing is that there's not any new type of currency coming into the enclave, but on top of that, the infrastructure has really been decimated.
And what's filled the void is this black market that I mentioned.
How does it work exactly?
Like who controls whatever cash is left?
Essentially, the cash that remains in Gaza is largely concentrated in the hands of profiteers who are the sort of merchants, importers, and wholesaler class within the enclave. They are essentially profiting twice off of the imports and goods that they sell.
Basically, traders will buy goods from abroad with a bank transfer and then sell them within and Gaza for cash.
So they make profit then.
They then sell that cash to money brokers for huge commission fees like 24, 25, 26%.
So they profit again there.
Then those cash brokers sell the hard currency onto regular people who need money to survive for even higher fees so that they can also profit.
That means that regular people are paying right now of 30 % for hard currency.
Yeah, 30 % just sounds incredible.
But can you give me an example of the steps someone in Gaza would have to take in order to get this type of cash?
So last week, I talked to Mohammed Attiyeh, who is a 44 -year -old father of six in the northern town of Bedlahya, and he works for the Palestinian Authority in the West Bank, which means that he actually receives a salary into his bank account every month, but in order to access that salary, he has to go through this black market system.
So as Israel issued an evacuation order for his neighborhood, people were fleeing all around him, but in order to leave with his family, he knew he would need some cash.
And in order to do that, he had to find a cash broker, wire him the money, then bike over to him and take that money from him.
So he sent about 2 ,500 shekels and only got 70 % of it in cash.
And are there ways around these exorbitant fees?
There's no way around it.
People are forced to pay it.
In fact, many people that I speak to, they say those exact words.
They say, we have no other way because things like as simple as a donkey cart to transfer your belongings from your home to the place where you're fleeing, they only take cash, right?
And one of the dangers looming over Gaza right now is the fact that people are facing starvation.
Nothing has entered the enclave since the beginning of March. So as goods are running out, prices are getting higher and higher and things are becoming unaffordable for most. Meanwhile, cash is also becoming more and more unaffordable and the situation will become that much more dire.
Malika Tapper covers the Middle East for the FT. Melaike.
Thank you. The space race got a serious new entry yesterday.
We have engine ignition.
The German -based rocket startup Izar attempted a vertical launch into orbit from Andoia Space Center in Norway.
It was the first time a company had tried to do that from Western Europe.
The vehicle has cleared and is now starting the pitch over maneuver.
Now, it wasn't quite out of this world.
The Spectrum rocket actually tipped over about 30 seconds in and then crashed back down to Earth.
Still, ESA declared the launch a success, saying even a half -minute flight counts as a major milestone.
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 tomorrow for the latest business news.
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