Blog

Western Brands Face Competitive Russian Markets as They Consider Return

MOSCOW (Reuters) – Washington’s push to swiftly end the conflict in Ukraine has sparked speculation that Western brands may want to return to Russia, but from fashion to cars, the markets they vacated now look more competitive than three years ago.

As Ukraine marked the anniversary of Russian troops flooding across its border, U.S. President Donald Trump suggested that the conflict could end within weeks, though it is not yet clear how. Western sanctions that complicate cross-border payments and trade flows would probably need softening for companies to return in large numbers. Those that do take the plunge will find markets now dominated by domestic – or in the case of cars, Chinese – brands.

Henderson, a men’s clothing chain that listed on Moscow Exchange in late 2023, said the departure of foreign retailers had given it a development boost, mainly by making better locations within shopping centres available. That has helped the company grow its sales three times faster than the overall 8% annual growth of the menswear market, even though Western brands are still available in some places.

“The market itself has not changed significantly, as the majority of foreign brands (60-80% of global manufacturers, according to our estimates) did not leave,” Henderson’s press office said in response to Reuters questions.

“(They) just transformed sales channels, using the services of local, multi-brand stores to sell products, or by changing the signage on their stores and introducing new trademarks.”

Consumer goods are not under sanctions, but as many companies refused to do business with Russia, Moscow legalised grey imports through third countries that allow retailers to sell foreign goods without the trademark owner’s permission.

BATTLE FOR SPACE

The difference is that shopping malls’ prime locations, in the past reserved for Western flagship stores, are now taken by Russian rivals.

“The best spots, where Western brands used to be stationed, are already filled,” said Pavel Lyulin, vice president of the Shopping Centres Association of Russia, Belarus and Kazakhstan. “These are long-term contracts, so every such venue will be battled for.”

Moscow is unlikely to greet returning brands with open arms. President Vladimir Putin on Friday said Russian manufacturers must be treated preferentially if foreign firms return. Kirill Dmitriev, Putin’s special envoy on international economic and investment cooperation, last week said he expected a number of U.S. companies to return as early as the second quarter of this year, without giving further details.

More than a thousand Western companies have exited Russia since Moscow sent troops into Ukraine. Some left because of costs and disruptions brought by sanctions and payment issues while others, particularly retailers, in protest against Russia’s actions. The retail sector has yet to fully recover, with shopping centres still welcoming 20% fewer visitors than in 2019, according to Lyulin. But Russian shoppers have taken to local brands.

“In the very beginning, it was really hard because the Russian retail market for clothing and footwear was underdeveloped,” Moscow resident Anna, 29, told Reuters on one of the Russian capital’s main shopping streets.

“But now, absolutely not. Our local brands produce things that are absolutely no worse (than Western ones).”

Stockmann, a retailer which sells foreign and domestic clothes and acquired Hugo Boss’ Russian business last year, has noted an increase in domestic brands’ sales, Darya, a salesperson in one of the company’s Moscow stores, said.

MORE CHOICE

Moscow resident Anastasia Efremova told Reuters that Russian brands had raised prices, but otherwise the impact had been minimal.

“I am talking not only about clothing or cosmetics but also about spare car parts, for instance,” Efremova, 38, said. “There were fears we would not be able to buy something for cars, but everything is in stock.”

Foreign carmakers helped grow Russia’s car market when they began building factories in Russia in the early 2000s. The sudden departure of automakers like Renault, Volkswagen and Nissan left a gap that was filled primarily by Chinese competitors, which now account for more than 50% of new car sales compared with less than 10% before the start of the conflict.

Domestic carmakers account for about 30% of sales, up from closer to 20% before February 2022. For now, Western companies are ruling out imminent returns. Executives from Arla Foods, maker of Lurpak Butter, and InterContinental Hotels last week said there were no plans to re-enter the Russian market for now. France’s Renault said returning under the terms agreed when exiting in 2022 was “very unlikely”.

Russian brands will want to defend the market share they gained and feel confident they are strong enough to compete should international players come back, said Valeria, a salesperson in a central Moscow

Google and Salesforce Enter $2.5bn Cloud Partnership

Salesforce has entered into a $2.5bn cloud contract with Alphabet’s Google to integrate its customer relationship management software, Agentforce AI assistants, and Data Cloud solutions with Google Cloud. This seven-year agreement will see Salesforce leverage Google’s cloud services to enhance its AI capabilities, Bloomberg reported.

The collaboration will enable Salesforce customers to build Agentforce agents using Gemini and deploy Salesforce on Google Cloud. Google Cloud CEO Thomas Kurian said: “Salesforce’s selection of Google Cloud as a major infrastructure provider means enterprise customers can now deploy some of their most critical applications on our highly secure, AI-optimised infrastructure — with minimal friction. Our mutual customers have asked us to be able to work more seamlessly across Salesforce and Google Cloud, and this expanded partnership will help them accelerate their AI transformations with agentic AI, state-of-the-art AI models, data analytics, and more.”

The expanded partnership builds on existing integrations, allowing for bi-directional data usage between Google BigQuery and Salesforce via zero-copy technology. In September 2023, Salesforce and Google Workspace joined forces to create AI assistants for Slack and data visualisation service Tableau. The latest deal will provide customers with enhanced data, AI, trust, and action capabilities, facilitating the deployment of autonomous agents in businesses.

Key components of the deal include secure and unified data access, offering enriched metadata for deeper insights. This approach breaks down data silos, enabling an integrated experience without sacrificing choice. The partnership also aims to ensure responsible AI development with built-in guardrails, bias detection, and toxicity controls. The agreement will facilitate seamless integration of automation, analytics, and applications across platforms to streamline workflows and enhance organisational efficiency. This approach will aid businesses to maximise the impact of AI agents by connecting them to existing tools and systems.

Salesforce president and chief engineering and customer success officer Srini Tallapragada said: “Through our expanded partnership with Google Cloud and deep integrations at the platform, application, and infrastructure layer, we’re giving customers choice in the applications and models they want to use.”

Apple Shareholders Vote to Retain Diversity Policies Amid Conservative Backlash

Apple shareholders have voted to maintain the company’s diversity, equity, and inclusion (DEI) policies, defying a proposal by a conservative group to scrap the program. The decision at Apple’s annual meeting reflects a broader debate over the value of DEI initiatives, which gained prominence following the Black Lives Matter movement in 2020.

The proposal, submitted by the National Center for Public Policy Research, argued that recent legal changes could lead to an increase in discrimination cases if Apple continued its DEI policies. However, Apple defended its approach, stating that it had an active oversight effort to avoid legal risks and that the proposal would inappropriately restrict management’s ability to operate.

Apple’s DEI efforts include supporting historically Black colleges and universities in the U.S. and initiatives aimed at teaching coding skills to indigenous populations in Mexico and pursuing criminal justice reform in Australia. The company has previously rejected proposals to disclose more about racial and gender pay gaps.

Apple CEO Tim Cook emphasized the company’s commitment to hiring the best talent and fostering a culture of collaboration. He acknowledged the evolving legal landscape but assured that Apple’s core values of dignity and respect for everyone would remain unchanged.

The vote comes amid a growing conservative backlash against DEI programs in major U.S. companies, including Meta and Alphabet. Former President Donald Trump has criticized corporate DEI programs as discriminatory and suggested that the U.S. Department of Justice could investigate whether such efforts violate the law.

In related news, Apple announced plans to invest $500 billion in the United States over the next four years, drawing praise from Trump. The company also faced a proposal to assess the risks of its work with AI, which shareholders voted against, while all management proposals were approved.

Stock Market Concerns Over Tariff Uncertainty May Be a ‘Red Herring’

The stock market is trading near record highs, but the vibes feel off. Last week’s sell-off brought out a laundry list of possible triggers, ranging from weak manufacturing data to rising inflation expectations to, of course, the impact of tariffs on consumers and across the economy.

But according to Neil Dutta, head of economics at Renaissance Macro, talk about the last item on that list simply covers up what the first two suggest: The US economy is slowing down. In an email on Monday, Dutta flagged four concerning developments for the economy that are largely the inverse of what led him to be among the leading voices on Wall Street arguing in favor of a “no landing” scenario back in 2022.

The consumer is softening as income growth falls, housing is weak, government spending is slowing, and Wall Street expects the US economy to continue growing at around 2.5%, in line with each of the last three years. “If 2023 was about being surprised to the upside, there is more risk in 2025 of being surprised to the downside,” Dutta wrote.

“Much of what we see in the financial press — tariffs, uncertainty — is a red herring, an ex-post rationalization for an economic slowdown that was already in motion.”

Late last month, Fed Chair Jay Powell said the US economy was in “quite a good place” when outlining the Fed’s rationale for pausing rate cuts. This assessment also helps explain why Powell seemed content not to push back on market expectations paring back their bets for further cuts.

Asked about the impact of tariffs on the economy, Powell said “significant” shifts around tariffs, immigration policy, fiscal policy, and regulations each created “additional uncertainty” for the economic outlook.

Still, the Fed chair appeared largely unbothered. In Dutta’s view, however, the Fed’s slowdown in rate cuts has created a “passive tightening of monetary policy [that] is the dominant risk and that has important implications for financial market investors.” In other words, by pausing rate cuts into a slowing economy, the Fed is de facto raising rates.

Going forward, Dutta expects long-term rates and stocks to fall as rate cuts and an economic slowdown are priced in and the job market further slows.

Whether it be tariffs, an overheated AI trade, or other pockets of froth in the stock market, the current market moment is not lacking for risks in the months ahead.

What’s notable in Dutta’s call is that he doesn’t dredge up some obscure piece of alternative data the market hasn’t yet priced in or outline an involved three-leg parlay of sentiment, valuations, and positioning. Rather, it looks at the basics: how much people get paid, how much it costs to live, and what the government is doing to help. And none of the trends are great.

US-China Decoupling Fears Drive Slide in Chinese Tech Shares

President Donald Trump’s move to further decouple economic ties between the US and China rattled global investors, who had bet on a sustained rebound in Chinese stocks. The Hang Seng Tech Index (HSTECH.HK) slid 1.6% on Tuesday, taking its two-day loss to nearly 3%. The Nasdaq Golden Dragon China Index slumped 5.2% on Monday following the US leader’s sweeping directive to limit investments between the world’s two largest economies.

Geopolitical risks have taken center stage again as investors fear that Trump’s renewed scrutiny of Chinese companies will worsen trade relations. The impact was more pronounced in US-listed stocks due to worries of a revival of 2022 — when bilateral tensions pushed Chinese firms to the brink of a mass delisting from US exchanges.

At the same time, investors in mainland China have viewed any drop in shares as an opportunity to buy. They added another HK$22 billion ($2.8 billion) of Hong Kong stocks on Tuesday, doubling down their bets on China’s artificial intelligence sector as a priority for President Xi Jinping.

“US investors tend to take profit much quicker especially since Chinese investors have more visibility around the tech and AI developments in China,” said Ken Wong, an Asian equity portfolio specialist at Eastspring Investments. “US investors have a much smaller appetite to ride the momentum at this point given how Chinese markets have performed over the past few years.”

The wide performance gap between Alibaba’s securities in the US and Hong Kong is the latest sign of diverging investor sentiment. In the US, its ADRs plunged 10%, while in Hong Kong, shares trimmed losses to less than 4%. Alibaba’s ADRs traded at a 7.6% discount to its Hong Kong listing on Monday, the widest since May 2022, Bloomberg-compiled data shows. That compares to around 0.1% discount on a five-year average.

AI Euphoria

Before this week’s slowdown, Chinese internet megacaps were on a tear as DeepSeek gave investors confidence on the industry’s growth potential. A bulk of that rally has been driven by mainland traders. They extended buying for the year to nearly HK$240 billion as of Tuesday close. A report that Trump’s team was looking to toughen restrictions on Chinese chipmakers likely emboldened the buying, as mainland investors envisioned the move will accelerate Beijing’s bid for tech self-sufficiency.

US investors were unnerved by Trump’s directive to review the ownership structure of foreign companies on American exchanges and prevent pension plans from investing in businesses of foreign adversaries. Analysts interpreted the orders as taking aim at China and potentially calling into doubt the “variable interest entity” structure that underpins many Chinese listings in the US.

For market watchers, the decoupling worries are a long time coming. An analysis of filings by 14 US pension funds with investments in Chinese stocks showed that the majority have reduced their holdings since 2020. The ex-China theme has continued to gain traction for emerging-market investors. Last year saw 24 ex-China emerging market equity fund launches, a new annual record, and up from 19 in 2023, data compiled by Bloomberg show.

Despite the day’s swings, the Hang Seng Tech Index (HSTECH.HK) has gained more than 27% for the year. Wall Street analysts have been saying the once-shunned sector is at a turning point, especially in the wake of President Xi’s high-profile meeting with Chinese tech business leaders.

“This is without doubt a buying opportunity for southbound investors like us, especially as the drop in ADRs does not impact the changed narrative around China tech,” said Zeng Wenkai, managing director at Shengqi Asset Management Co. “I would compare China’s AI rally to the mid-to late 2023 rally for Nvidia (NVDA) so it has much more of the journey to go.”

Stock Market Today: Nasdaq, S&P 500 Slide as Tech Lags After Trump Backs Tariff Plans

US stocks experienced a downturn on Monday, with investors closely monitoring President Donald Trump’s tariff policies and eagerly awaiting this week’s earnings from tech giant Nvidia (NVDA). The Dow Jones Industrial Average (^DJI) remained relatively unchanged, following its worst week since October. The S&P 500 (^GSPC) declined by 0.5%, while the tech-heavy Nasdaq Composite (^IXIC) fell by 1.2%.

The market’s attempt to recover from Friday’s steep declines was short-lived, as concerns about Trump’s tariff plans continued to weigh on investor sentiment. During a press conference, President Trump indicated that tariffs on Mexico and Canada would proceed as scheduled once a one-month delay expires next week. This announcement intensified selling in the final hour of trading.

Investors are now turning their attention to Nvidia’s earnings report, scheduled for Wednesday, to gauge how the AI chipmaker plans to navigate the looming tariff threat. Additionally, the demand for AI technology from major tech companies and the risks posed by China-based DeepSeek’s lower-cost alternatives are also under scrutiny.

Nvidia’s stock price dropped by 3%, and Microsoft (MSFT) also saw a decline following an analyst report suggesting a pullback in data center construction. In contrast, Apple (AAPL) shares rose slightly after the company announced a $500 billion investment plan in the US, including the establishment of a manufacturing facility in Houston and the creation of 20,000 new jobs.

Other key events this week include the release of the January Personal Consumption Expenditure (PCE) index on Friday, which is the Federal Reserve’s preferred measure of inflation. Reports on US GDP, the housing market, and consumer confidence are also expected in the coming days.

Citadel Securities Plans to Enter Crypto Trading Amid Trump’s Support

Citadel Securities, the market-making giant led by Ken Griffin, is planning to become a liquidity provider for cryptocurrencies, capitalizing on President Donald Trump’s endorsement of the industry. This move signifies a shift from the firm’s previous cautious approach to crypto market-making.

Citadel Securities has largely avoided crypto exchanges popular with retail investors due to the lack of regulations in the US. However, the firm aims to join the roster of market makers on various exchanges, including those operated by Coinbase Global Inc., Binance Holdings, and Crypto.com. Initially, Citadel plans to establish market-making teams outside the US, pending regulatory approval.

The firm has collaborated with brokerage firms like Charles Schwab and Fidelity Investments to create EDX Markets, an institution-only crypto exchange that went live in 2023. This platform offers trading in crypto products exclusively for institutional investors.

Citadel Securities and other financial firms are advocating for regulators to establish rules for investing in digital assets, aiming to create a clear path for institutional involvement. If the US government implements these regulations, Citadel is prepared to provide liquidity for digital assets, similar to its operations in other asset classes such as equities and fixed income.

Under the Trump administration, the financial industry anticipates increased activity in digital assets. Trump has pledged to make the US the “crypto capital of the planet” and has taken steps to overhaul rules that hindered activity during President Joe Biden’s tenure. The US Securities and Exchange Commission has also launched a task force on crypto, led by Hester Peirce, a long-time advocate for the industry.

Citadel Securities, which has expanded from a small group alongside Griffin’s hedge fund to a global trading powerhouse, has stayed away from crypto market-making. However, other firms like Jane Street Group and Jump Crypto have been active in crypto trading, though they scaled back their US operations amid regulatory scrutiny in 2023. Both firms continued to engage in crypto market-making overseas.

Palantir Technologies Inc. shares experienced a significant downturn last week, with a four-day drop marking the largest decline since 2022. This downturn follows news that Defense Secretary Pete Hegseth plans to reduce projected US military spending by 8% over the next five years, potentially impacting Palantir’s revenue, which is heavily reliant on the US government. Despite the stock’s recent volatility, Palantir remains one of the best-performing components of the Nasdaq 100 Index this year, up about 28%.

Palantir’s stock fell 4.6% on Monday, contributing to a more than 20% drop over the four-day period. The data-analysis software company has seen substantial growth, rising over 300% in the past year and adding nearly $190 billion in market value. However, the company’s significant exposure to US government revenue, particularly from the US Army, has raised concerns amid plans for budget cuts.

Analysts are divided on the impact of these cuts. Some, like Tim Pagliara of Capwealth Advisors, believe the stock’s valuation remains high and that there is considerable execution risk and uncertainty. Others, such as Jack Ablin of Cresset Wealth Advisors, argue that Palantir’s unique software approach will enable it to gain more IT budget dollars at the Pentagon, and that the cuts could be a positive growth catalyst.

Palantir’s stock is currently trading at more than 170 times estimated earnings, making it the most expensive component of the S&P 500 Information Technology Sector. Despite this, more than half of the analysts tracked by Bloomberg have hold ratings on the shares, with six recommending a buy and five suggesting to sell. The stock is roughly 4% above the average 12-month price target, indicating a relatively low projected return among tech companies.

Despite the elevated valuation and concerns over budget cuts, some analysts remain confident in Palantir’s long-term potential, particularly with the Pentagon. Capwealth Advisors’ Pagliara believes that a military focused on efficiency and adaptiveness will spend more on tech and AI, potentially allowing Palantir to buck any budget-cut trends.

Microsoft Cancels US Data Center Leases, Raising AI Capacity Concerns

Microsoft Corp. has canceled some leases for US data center capacity, according to TD Cowen, raising broader concerns over whether it’s securing more AI computing capacity than it needs in the long term. The US brokerage wrote Friday, citing “channel checks” or inquiries with supply chain providers, that Microsoft has voided leases in the US totaling “a couple of hundred megawatts” of capacity — the equivalent of roughly two data centers — canceling agreements with at least a couple of private operators. TD Cowen said its checks also suggest Microsoft has pulled back on converting so-called statements of qualifications, agreements that usually lead to formal leases.

Microsoft in a statement on Monday reiterated its spending target for the fiscal year ending June, but declined to comment on TD Cowen’s note. Exactly why Microsoft may be pulling some leases is unclear. TD Cowen posited in a second report on Monday that OpenAI is shifting workloads from Microsoft to Oracle Corp. as part of a relatively new partnership. The tech giant is also among the largest owners and operators of data centers in its own right and is spending billions of dollars on its own capacity. TD Cowen separately suggested that Microsoft may be reallocating some of that in-house investment to the US from abroad.

“While we have yet to get the level of color via our channel checks that we would like into why this is occurring, our initial reaction is that this is tied to Microsoft potentially being in an oversupply position,” TD Cowen analysts Michael Elias, Cooper Belanger and Gregory Williams wrote. Microsoft shares were little changed in premarket trading on Monday.

A potential lease pullback by Microsoft raises broader questions about whether the company — one of the frontrunners among Big Tech in AI — is growing cautious about the outlook for overall demand. The company has said it expects to spend $80 billion this fiscal year on AI data centers, and on a late January earnings call, Chief Executive Officer Satya Nadella said Microsoft has to sustain spending to meet “exponentially more demand.”

“While we may strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions,” a Microsoft spokesperson said in the company’s statement. “Our plans to spend over $80 billion on infrastructure this FY remains on track as we continue to grow at a record pace to meet customer demand.”

European stocks tied to the energy sector dropped on the report, which may suggest Big Tech companies will need less power to run their data centers. Schneider Electric SE and Siemens Energy AG slid.

Critics have consistently pointed out a dearth of practical, real-world applications for AI, even as Microsoft, Meta Platforms Inc., Alphabet Inc. and Amazon.com Inc. have pledged to spend billions on the data centers needed to train, develop and host AI services. Wall Street stepped up its questions about the massive outlays after the Chinese upstart DeepSeek released a new open-source AI model that it claims rivals the abilities of US technology at a fraction of the cost.

Microsoft executives have played down concerns about AI overcapacity. It’s spending more than it ever has in its history, outlays that mostly go to the chips and data centers required to fuel power-hungry AI services. Rivals have also doubled down on their AI spending commitments. In recent weeks Amazon, Alphabet and Meta have pledged to spend $100 billion, $75 billion and up to $65 billion respectively on AI infrastructure. Chinese e-commerce giant Alibaba Group Holding Ltd. said this week it would invest more than 380 billion yuan ($53 billion) over the next three years as it seeks to become a leader in the field.

TD Cowen’s analysts wrote that their channel checks had unearthed a number of signs that Microsoft is gradually retreating. They learned that Microsoft had let more than a gigawatt of agreements on larger sites expire and walked away from “multiple” deals involving about 100 megawatts each. (Data center capacity is often stated in terms of the power they need to stay up and running.)

TD Cowen said Microsoft used facility and power delays as justification for the termination of leases. That was a tactic rivals such as Meta previously employed when curbing capital spending, the firm wrote.

“To me this all looks and sounds like business as usual,” Mizuho Securities analyst Jordan Klein said in a note. “A company this large and with $80 billion of annual spend has the right to move in and out of data center leases, many of which were never officially signed.”

Large cloud hyperscalers typically use a mixture of leased and owned data centers across many locations, Klein said, so investors should expect some degree of “tweaking” of plans. Microsoft’s alliance with OpenAI may also be evolving in ways that mean the software giant won’t need the same kind of investments. In January, OpenAI and SoftBank Group Corp. announced a joint venture to

The generated text has been blocked by our content filters.