Evening Briefing: Europe

The best times may already be over for investors buying into the European equities rally. Our survey of 18 strategists found the Stoxx Europe 600 Index is expected to drop by the end of the year as trade risks hobble sentiment.

One of the biggest looming hazards is the escalating tiff between China and the US. The International Monetary Fund today warned of “significant downside risks” to global growth due to those frictions. US President Donald Trump also acknowledged the danger, calling high tariffs between the two countries unsustainable.

Policymakers are closely watching how tensions play out between the world’s two biggest economies. This week, US Treasury Secretary Scott Bessent criticized a top Beijing trade official, accusing him of arriving in Washington uninvited and acting in an unhinged manner.

While the European Central Bank continues to suggest monetary policy is in a good place, fiscal rifts in some member states are also impacting shares. Italy’s government plans to ask banks and insurers to contribute about €11 billion ($12.8 billion) to its budget, impacting corporate profits and sending stocks lower. Rheinmetall and other defense companies also weakened on the back of Trump's announcement of a second summit with Vladimir Putin, aimed at bringing a rapprochement between Russia and Ukraine. European assets are also being bruised by concern over US banks. —Jonathan Tirone

What You Need to Know Today

China ousted two of the country’s most senior military officials from the Communist Party as President Xi Jinping widens his anti-corruption drive. The decision suggests a massive shake-up at the the People’s Liberation Army amid an unprecedented purge after Xi axed officials at the Rocket Force for graft that’s believed to have degraded Chinese missiles’ capabilities. The internal moves unfolded as Beijing flexed its power overseas, China warning the UK there will be consequences if its sprawling new embassy in central London is blocked from moving forward.

Members of the People's Liberation Army (PLA) rehearse on Chang'an Avenue at Tiananmen Square ahead of a military parade. Photographer: Qilai Shen/Bloomberg

Billionaire French oil heirs are eying property deals across the Atlantic. The Perrodo family office’s search for US residential property reflects the firm’s growing status as a major real estate and private equity investor. The family office, based in London’s exclusive Mayfair neighborhood, has recently backed a growing array of private equity, venture capital and food industry partners, including firms specializing in high-end cars and British pubs. It was created a dozen years ago by the three children of the late founder of oil and gas producer Perenco to help oversee the family’s fortune, which has grown to at least $7.3 billion.

Porsche is in talks with Michael Leiters, the former head of McLaren Automotive, to take over as chief executive officer and turn around the struggling 911 maker. The 54-year-old German native could rejoin Porsche at a time of upheaval, with the once-dependable profit center for parent Volkswagen having lowered its financial outlook four times this year. After a blockbuster initial public offering three years ago, Porsche briefly became Europe’s most valuable carmaker. Profitability has slid since then, with the company forecasting an operating return on sales of no more than 2% this year. Porsche also ditched a plan to produce its own batteries due to weak EV demand.

The UK’s electricity grid saw a 25% jump in payments to balance supply and demand so far this year as the country seeks to replace fossil-fuels generation with more volatile renewables. Even as wholesale natural gas prices fall, bills remain historically expensive, driven increasingly by the cost of balancing the system and government policies designed to cut carbon emissions from the electricity grid. Stubbornly high bills are a prime target for the government as it tries to tame inflation that’s hurting the economy.

British beef’s pride of place on UK supermarket shelves is under threat as falling livestock numbers, record prices and stretched household budgets push grocers to seek out cheaper cuts from overseas. It’s a case of demand outpacing supply. England’s cattle population is now at the lowest level since records began in 1984, according to agriculture statistics, while falling slaughter levels mean beef production is forecast to fall 4% this year. That’s happening against the backdrop of a major political dispute, after the Labour government decided to impose inheritance tax on farms for the first time in more than three decades.

Cuts of British beef inside a supermarket. Photographer: Simon Dawson/Bloomberg

Dublin’s office woes are hitting private equity firms. Investors including Blackstone, Brookfield and Henderson Park are seeing bets on the Irish capital’s tech-heavy office market sour. Data show Dublin’s vacancy rate has doubled in the last six years, exceeding the 10% reached in Paris and 8% in London and Lisbon. That has precipitated a dramatic drop-off in new development that may lead to rents rising in the future but is little comfort to the private equity firms that bet on the Irish capital in the latter part of the low interest rate era.

Destination golf is coming to a chilly corner of northern Scotland. Inverness, the nation’s northernmost city with a population of less than 50,000, is developing into a destination of choice for those wanting successive days of high-end golf, premium dining and quality accommodation. Improved travel connections and a marketing push to get more vacation companies to add the Highlands to their golf-inclusive packages have now lured more tourism dollars to one of the more remote corners of Europe.

The bothy/shelter by the fourth greeen of the Old Petty course Photographer: Cabot Highlands

On the first episode of The Mishal Husain Show, a new podcast from Bloomberg Weekend, Mishal is joined by Canadian Prime Minister Mark Carney. Just seven months into the job of running a country at the forefront of the disrupted world, Carney talks to Mishal about trade battles, President Putin's miscalculations, and what he's learned from President Trump. Make sense of the world with one essential conversation every weekend with The Mishal Husain Show, available on Apple, Spotify or wherever you get your podcasts.