Hungary looks to Trump for sanctions exemption

What's driving the markets this week? What's on investors' minds as they look ahead? Find out in 10 minutes or less on the Markets Podcast from Goldman Sachs. Listen now. Good morning from the Financial Times. Today is Friday, November 7th, and this is your FT News Briefing. The world's richest man has been awarded the largest pay package in history, and Hungary's prime minister is set to meet with U.S. President Donald Trump today.

Plus, UK Chancellor Rachel Reeves laid the groundwork for tax rises without upsetting bond investors. If she had come out and said, look, I had to break a promise to somebody and it's going to be to the bond market, then all hell would have broken loose. I'm Mark Filippino and here's the news you need to start your day.

Tesla held arguably its most important shareholder meeting yesterday, and all the attention was on this single proposal. On the 2025 CEO Performance Award to our founder and CEO Elon Musk. With over 75% voting in favor. Approved. That was the final vote at the meeting, which took place in the company's Texas Gigafactory. It gave a one... trillion-dollar pay deal to Elon Musk. The billionaire CEO had threatened to quit if the proposal failed.

Musk contended he needed the pay deal to increase his control of Tesla to at least a quarter. That's up from 16%. And he argued it would protect the electric vehicle maker from activist investors as it builds a, quote, army of humanoid robots. Now, Musk does need to hit some targets in order to get this pay package, like boosting earnings 24-fold.

Despite the overwhelming support for the $1 trillion pay package, some investors who sent in pre-recorded messages on various other proposals used it as an opportunity to voice discontent on Musk's pay. One even called it.

Outrageous. Hungary wants an exemption from new US sanctions on Russian oil. And its prime minister, Viktor Orban, is headed to the White House today to try and secure one. The Hungarian leader will sit down with U.S. President Trump to make his case. EU officials say Orban views the restrictions as a major threat to his re-election bid. Trump says he backs the campaign 100%. Here to tell us more is the FT's Brussels bureau chief, Henry Foy. Hi, Henry. Hey, Mark.

So remind us what exactly these sanctions are and why they're such a big deal for Hungary. So these are the measures that Trump announced this autumn, where he said, we need to finally crack down on countries that are buying Russian oil and therefore helping to fund Vladimir Putin's

war against Ukraine. They come into force in a couple of weeks on Lukoil and Rosneft, which are these two big Russian oil companies that account for a large chunk of exports. And essentially, when they come into force, unless Hungary gets an exemption... That will stop Hungary doing what it's been doing since the start of the invasion, buying pipeline Russian oil, which almost every other country in Europe has stopped doing.

And it is seen as one of the biggest weak links in this kind of Western attempt to try to shut off funding to Russia through the sale of hydrocarbons. How exactly will Orban plead his case to Trump today? Orban is a kindred spirit with Trump, and he sort of tries to position himself as Trump's closest political ally in Europe. And that's going to be sort of the base of where he comes from. He's going to turn up in the White House and say, look, you and me.

We're the same kind of politicians. Ignore those liberals. Ignore the woke European leaders who keep telling me I should stop buying Russian oil. And stick with me. I support you politically. I'm with you on all of the social issues and the campaign rhetoric that you've been rolling out in office. And you've got to make sure I get reelected so you've got a cheerleader in Europe.

What are the consequences for Orban if Trump doesn't back him to the extent that he wants him to? In the worst case scenario, he's going to have a massive problem when it comes to getting oil. So that's... a price shock, going to definitely put up inflation, and it's going to hurt his re-election chances. But I think more importantly, it will massively shatter this image that Orbán has created, that because he's close to Donald Trump, Hungary's okay.

that image will be shattered if Trump says, look, you're my mate, we both agree on certain social issues, but I'm not going to help you out on the oil. So Henry, what do we know about Trump's stance on a sanctions exemption? Because this issue falls in a really interesting foreign policy space.

Orban has been close to both Trump and Putin. This kind of issue has really put Orban's position in a spotlight because he claims he's very close to Trump, but at the same time, Orban is the most... pro-Putin leader in the European Union and in NATO, and has constantly said, we need to stop sanctions on Russia, we need to talk peace with Putin and engage with him again, we need an economic...

future with Russia. So he finds himself in a bit of a bind here where somebody is going to let him down. And if he doesn't get these exemptions on Russian oil, he's going to not be able to get any more cheap Russian oil from Putin. and he's going to be shown to not be as close to Trump as he keeps claiming he is. Looking longer term, are there other options for countries like Hungary if the US doubles down on sanctions, or is this pretty much it?

I mean, Mark, there actually is an option for Hungary today. There's a pipeline which runs from the Adriatic Sea, so from the West, where you could get shipborne oil, which is how most other European countries have pivoted away from pipeline Russian oil since February 2020.

2022. Hungary says that pipeline's not big enough, it's not trustworthy enough, it's not gone through enough testing, and they can't rely on it enough. Experts are divided over whether that's true or not, but there are many, many other alternatives out there. The rest of Europe's managed it, and people are pretty sure that Hungary can. It'll just cost them a bit more. Russian oil is cheap, and that's one of the reasons why Orbán wants to keep it.

they actually make a lot of money on refining it and then selling the products to other countries, given that they're paying less for it because it's Russian. That's the FT's Henry Foy. Thanks so much, Henry. Thanks a lot, Mark.

The Bank of England thinks inflation may have peaked, but policymakers are waiting until December to be sure there's not another flare-up. Governor Andrew Bailey cast the deciding vote yesterday to hold the benchmark interest rate at 4%. He has become a crucial swing vote in the divided policy setting committee. Minutes from the meeting suggest a December cut is more likely than not.

The central bank says that the stubbornness of inflation is because of the one-off effects of energy prices, tax increases, and a rise in water bills. But some worry structural changes in wages and price setting could continue to stoke inflation.

The UK Chancellor, Rachel Reeves, is widely expected to unveil new tax rises later this month. That would break a manifesto pledge the Labour Party made when they took power last year. Reeves hinted at the changes in a press conference earlier this week.

Are you willing to lose the next election if it puts the public finances right? We've got to do the right things. The problem of the last 14 years is that political expediency always came above the national interest. And that is why we are in the mess that we are in today. The run-up to Labor's budget has been politically messy, but despite the turmoil surrounding the budget, UK bond markets have been pretty calm. Here to tell us why is the FT's Katie Martin. Hi, Katie.

Hey, hey, how are you going? Not bad. So the tax rises suggest the government needs to, of course, raise cash, which you might expect would spook the bond markets, right? The UK Chancellor, she's in a very, very difficult spot. She needs to do one of three things to raise money or to balance the books. She needs to either cut spending pretty hard or she needs to raise taxes pretty hard. or she needs to borrow more money from the bond markets. Cutting spending just...

on a large scale, just isn't politically going to work. She can't really borrow more from the bond markets though, because the bond markets are already sending a message that, look, we're maxed out. And if you want to borrow lots more, it will cost you so much that it would really hurt. So pretty much the only option she's left with is to raise taxes. And that's politically problematic as well. And markets have taken this.

like nothing ever happened. Why though? I mean, why are bond markets pretty chill about this thing that you would expect them being pretty upset about? Well, so when I've been speaking to UK government bond investors, they've all been sending out a pretty consistent message, which is, listen. Rachel Reeves, we know you're going to raise taxes, even though you said you weren't going to. Let's just get this all over and done with.

The bond market has been sending a very clear signal by the fact that bonds have been gaining in price, not falling over recent weeks, that investors just do not anticipate a big wave of yet more borrowing. from the government to try and balance the books. If she had come out and said, look, I had to break a promise to somebody and it's going to be to the bond market, then all hell would have broken loose. Why do politicians have to worry so much about bond markets, for lack of a better phrase?

throwing a tantrum. Now, look, you can argue that bond markets writ large shouldn't have this power to seal off options for politicians. But it's a bit like shouting at the weather, right? It's just a fact of life. If you want to borrow lots and lots more money to fund all the stuff you have to do as a government, then bond investors are going to demand a higher rate of return to buy that debt. And that means that your borrowing cost goes up.

It sounds like the government has worked really hard on understanding what the limits of the bond market are and how to avoid tripping over these tripwires. So bond markets so far unruffled by Reeves' plan. Are she and Labour in the clear? Are they in the clear? Look, UK politics is a bit of a kind of viper's nest. So whether she's in the clear politically, I don't know. But the thing that is going to get her is not the markets by the look of what they're doing at the moment.

There's still a few weeks to go before the budget. It is possible that the Chancellor could still step on a rake between now and then or on the day, which is November the 26th. But for now, the markets are saying, if anyone's going to get you, it's not going to be us. That's the FT's Katie Martin in London. Thanks, Katie. Pleasure.

A little update to a segment we ran earlier in the week about Pfizer, Novo Nordisk, and their bidding war over the drug startup Metzera. We told you about Pfizer filing a lawsuit against Novo. The lawsuit alleged the Danish drugmaker's merger with Metzera would violate anti-competition laws. But here's the interesting part. During our conversation with FT reporter Oliver Barnes, he said this about the lawsuit.

This could all be a prelude to Pfizer coming back with a sweetened offer in the next 24, 48 hours. And sure enough, they did. Pfizer offered to match Novo's $10 billion deal. But then Novo turned around and offered an even sweeter deal. We don't know the actual dollar amount, though. Metzera's share price, for what it's worth, is up 53% since Novo went public with its unsolicited bid last week.

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 next week for the latest business news. The FT News Briefing was produced this week by Lulu Smith, Misha Franco Duval.

Victoria Craig, Sonia Hudson, and me, Mark Filippino. Our show is mixed by Alex Higgins, Kent Militzer, and Kelly Gary. We had help this week from Peter Barber, Michael Lello, Gavin Coleman, and David DeSilva. Our acting co-head of audio is Topher Forges, and our theme song is by Metaphor Music. Legacy systems keeping you up at night? That's not insomnia, that's inertia. ThoughtWorks and AWS help banks modernize where it matters most, building speed and trust that actually compound.

Sleep better knowing the future is finally running on time. The latest episode of the Next 5 podcast is all about the M&A market. I speak to Brian Salzberg at FTI Consulting. There's a few different variables that drive M&A, right? The first one really has to do with the cost of capital and it's really a huge difference when you have to borrow. money when that is five plus percent. And Massimo Battaglini at Prismian Group.

There's been a lot of volatility in the market in the last six months, so this is what might impede or hinder the pace of M&As. Listen to the full episode of The Next Five wherever you get your podcasts. Enjoy.