Saudi Arabia and US in talks for defence pact

Good morning, happy Friday and welcome back. In today’s newsletter:

• Riyadh and Washington in talks for defence agreement

• Trump to meet Putin in Budapest

• Ferrari decelerates deliveries to the UK

• Swiss court ruling on Credit Suisse AT1 bonds

We begin in the Middle East, where Saudi Arabia is discussing a defence deal with the Trump administration similar to a US-Qatar pact last month that pledged to regard any attack on the Gulf state as a threat to American “peace and security”.

What we know: Riyadh is hoping a deal can be sealed when Crown Prince Mohammed bin Salman visits the White House next month, amid expectations it will be “robust” and include enhanced military and intelligence co-operation, people familiar with the matter said.

When asked about the potential defence pact, a senior Trump administration official said: “There are discussions about signing something when the crown prince comes, but the details are in flux.”

Why it matters: Saudi Arabia — which has long sought a US defence pact — spent months negotiating a defence treaty with the Biden administration, but the push was derailed by Hamas’s October 7 2023 attack and the war in Gaza. Negotiations have continued with the Trump administration to secure a standalone deal, but experts contend sticking points remain.

Here’s what else we’re keeping tabs on today and at the weekend:

• Trump-Zelenskyy meeting: The US president is expected to discuss potential sales of US-made Tomahawk missiles to Kyiv with his Ukrainian counterpart Volodymyr Zelenskyy at the White House.

• Results: American Express, Fifth Third Bancorp, Huntington Bancshares, SLB, State Street, Truist Financial and Yara report earnings.

• Central banks: Bank of England governor Andrew Bailey tomorrow speaks at a G30 event in Washington alongside European Central Bank president Christine Lagarde and US Treasury secretary Scott Bessent.

• Bolivia: The country holds a presidential election on Sunday.

How well did you keep up with the news this week? Take our quiz.

Five more top stories

1. Donald Trump announced he would meet Russian President Vladimir Putin in Budapest for talks seeking to end the war in Ukraine. The US president posted the news on social media after a lengthy phone call with his Russian counterpart. He later said the meeting in Hungary would take place “within two weeks or so”.

• Trump-Putin relations: A summit in August in Alaska reshaped how the presidents approach each other and nudged the US leader towards Ukraine.

• More US news: The US Department of Justice has indicted John Bolton, Trump’s former national security adviser, in the latest legal blow against a critic of the president.

2. Exclusive: Ferrari has reduced the number of cars it sells in the UK to stem declining residual values of its luxury vehicles, spurred by an exodus of wealthy individuals after the country changed its tax rules. Read the Financial Times’ interview with auto group chief executive Benedetto Vigna.

3. Exclusive: German tax authorities are pursuing Asos for unpaid customs duties in a legal dispute that is increasing pressure on the UK fast-fashion retailer. Read more details of the case.

4. Investors in the $2tn leveraged loan market have warned that the abrupt collapse of First Brands Group is an early sign of trouble for a market where hasty deals have become commonplace. Read more on the bankruptcy’s impact on the collateralised loan obligations market.

5. Exclusive: Crispin Odey has polled former staff in a push to canvass support ahead of a high-stakes libel claim against the FT over its reporting of his conduct with women. Read the full report.

FT Investigation

At least 30 individuals or companies that donated to Trump’s causes have benefited from White House moves, according to an FT analysis. There is no evidence of bribery or illegal conduct, but the volume of favourable outcomes for donors raises the question of whether a culture of quid pro quo exists at the heart of the administration.

We’re also reading . . . 

• Biggest loser: Europe’s dual dependence on US digital services and China’s critical mineral processing industry leaves it highly vulnerable, writes Misha Glenny, rector of the Institute for Human Sciences in Vienna.

• Credit Suisse AT1 saga: This week’s Swiss court ruling over the wipeout of $17bn of bonds raises questions over its impact on UBS, writes Jerôme Legras, managing partner at Axiom Alternative Investments.

• South African inequality: Critics are saying that post-apartheid Black economic empowerment policies have benefited only a few.

• AI’s cross-ownership: Anyone engaged in the frenzy over artificial intelligence needs to watch out for the hairball of interconnections, writes Gillian Tett.

The AI Shift: John Burn-Murdoch and Sarah O’Connor explore how AI is transforming the world of work in our new weekly newsletter. Sign up here.

Chart of the day

Since 2015, the wages of low-income workers in the UK (the poorest tenth of earners) have risen considerably faster than those on median incomes and those in the highest-earning quartile (25 per cent). And the upcoming Budget promises more woe for the middle class.

Take a break from the news . . . 

Retirement housing may not seem the sexiest branch of architecture. Yet “hopeful and imaginative” homes for elders have handed Witherford Watson Mann the UK’s most prestigious architectural award for its modern rendition of almshouses that tackles a housing shortage and loneliness.