Paid Not to Build
Washington pays a utility to cancel wind projects while the war premium pays out, and US money starts buying Europe outright.
Washington is paying RWE, a German utility, $1.2 billion to cancel wind projects in the United States. Take the label off and it is a price decision. Removing future power supply while demand from data centres climbs does one thing to the electricity bill, and electricity is now an input into almost everything else you pay for, from food logistics to the servers behind every subscription you hold. Being paid 1.2 billion dollars not to build something is a business model I would have liked to hear about earlier.
The same week, BP's profit more than doubled as Middle East fighting pushed crude higher, and the majors booked large spring windfalls on it. The war premium pays out to the incumbents while the replacement supply gets cancelled. My read is that the cancellation is the more durable half, because a windfall reverses the day the shooting stops and a killed project does not come back to life on good news. TotalEnergies buying Shell's European onshore wind and solar arm points the same way: the same capacity in Europe, fewer companies deciding what gets built next.
Your reasonable objection: a buyout fund taking over a budget airline is a business story, not yours. Normally true. But Apollo agreed to take easyJet for about €6.6 billion, and days earlier France cut the level at which it screens foreign takeovers of sensitive companies from 25% to 10%. Europe has traded at a discount to the United States for years, and discounts attract buyers holding dollars. When those buyers take companies private, the shares leave the public market, so a broad European fund, which there is a fair chance you own some version of, is left with a shorter menu priced by whoever is still willing to sell.
Russia, meanwhile, became one of the world's largest sellers of gold over the past twelve months. A government that sells the metal rather than issuing debt is telling you which market still takes its calls.
Whether the European discount is a bargain you get to take or a franchise being bought out from under public markets turns on how France applies that 10% trigger to the first deal after easyJet.
A Defended Yen Reprices Borrowed Money
Washington and Tokyo propped up the yen together, and the real consequence sits in the cost of borrowing rather than the exchange rate.
Tokyo defended the yen this week without selling a single Treasury, and the structure is the story. The United States and Japan intervened jointly, which is rare, and both sides said they are prepared to repeat it.
Normally a country pushing its own currency up has to raise the cash by selling foreign assets. For Japan that means US Treasuries, the government bonds the rest of the world prices everything else against. Selling them in size pushes American yields up, and higher American yields raise the cost of money for every borrower on the planet, including the companies inside whatever fund you hold. Done this way, Japan spent its own dollar reserves rather than liquidating Treasuries, Washington bought alongside it, and the finance ministry flagged access to the Federal Reserve's dollar repo facility for the next round, so the yen got its support and the Treasury market got no supply shock.
The part that reaches your money is the funding leg. For years the yen was the cheapest money in the world to borrow, and a large share of what sits inside emerging market funds, higher yielding currency positions and leveraged strategies is financed with borrowed yen. Think of that trade as borrowing where money is cheap to buy something that pays more somewhere else. It only works while the currency you owe stays weak. A yen two governments will defend on the record puts two-way risk back into the repayment side, the cost of the borrow rises, positions get trimmed, and the selling lands on whatever those borrowed yen bought. The level is the headline. The funding is the trade.
You are probably thinking what most people think when a government buys its own currency: this never works, the market wins in the end. For one country acting alone, that is largely right, and plenty of finance ministers have the scars. But the target here is not a level, it is the free one-way bet, and removing that does not require winning any particular fight.
What I am watching is the size and timing of the second operation, because whether cheap yen funding is still quietly holding up the assets you own is answered by that follow-up rather than by this week's move.
The Fronts Nobody Closed
What to watch next week, ranked, starting with whether the Middle East strikes keep the energy premium alive.
Next week opens with fronts nobody has declared closed. Israel struck south Lebanon and Gaza within days of Hamas agreeing to disarm, at least 13 people were killed in the Gaza strikes, and Houthi attacks killed at least 30 Yemeni government forces. I would rank that sequence first, ahead of everything else on the list, because it sets the oil price, oil sets the next inflation readings, and those readings set what any central bank can plausibly do this autumn. A risk premium leaves a price far more slowly than it enters one.
Below it, in rough order of how much each can move a price. The Saudi Arabia, Turkey and Pakistan mutual defence pact, and whether it acquires any operational content: one signatory holds nuclear weapons, and Gulf energy infrastructure now sits behind that guarantee, which changes how the worst case gets priced rather than how the base case does. France's new 10% screening threshold meeting its first live deal after easyJet. Malta's tax refund mechanism, which lets companies such as Crocs route profits through the island and recover most of the tax paid, and which survives the global minimum tax only until someone formally tests it. It is the same arbitrage you run when you choose where to be resident, just at corporate scale. Last, Spain's border controls against Italy, and whether the escalation stops at two capitals.
A quiet week on the strikes and the war premium starts leaking out of crude, which softens the next inflation prints and hands policymakers room they do not currently have. Another round and the premium re-anchors, energy stays an inflation input, and every rate cut being penciled in for later this year slides to the right.
So how much of the energy premium in your bills, and in the yield on anything you lend to, is war and how much is supply? The count of quiet days answers that before any minister does.
