Good morning, happy Friday and welcome to FirstFT. In today’s newsletter:
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US corporate profits hit record high as wage growth lags
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Europe rebuked over ‘sea of red’ military gaps
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Saudi Arabia shakes up flagship real estate project
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A pilgrimage to Spain for the world’s best steak
You can listen to today’s top news stories with the FT News Briefing podcast.
US corporate profits have hit a record high while workers’ slice of the pie has sunk to historic lows, fuelling discontent among many Americans and a growing political backlash.
Pre-tax earnings hit an annualised $4.8tn in the second quarter, or 18 per cent of national income, according to Bureau of Economic Analysis data, the highest share since the aftermath of the second world war. Employees’ share from wages and benefits fell to 60 per cent, the lowest level since the 1950s.
The earnings bonanza has driven US equities to record peaks as the AI boom fuels Big Tech’s profits and Donald Trump’s war in Iran bolsters fuel prices and oil companies’ margins. But this windfall is deepening inequality. Bumper returns largely benefit richer Americans, who receive much of their income from investments, while middle- and lower-income households rely more heavily on pay cheques.
The contrast underscores a divide that has become a political faultline in America, with voters increasingly saying they are unhappy with the direction of the economy as they shift to more populist politics on both ends of the political spectrum.
Here’s what else we’re keeping tabs on today and over the weekend:
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Economic data: Germany publishes August labour market figures.
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UK: The Home Office releases official immigration statistics.
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Jackson Hole: US Federal Reserve chair Kevin Warsh will deliver a speech at the annual gathering in Wyoming.
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Results: Asda, Bank of China, Bertelsmann and Northam Platinum report earnings.
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Iceland: The government holds a referendum on Saturday on resuming EU accession talks, which were abandoned in 2013.
Five more top stories
1. The US has rebuked European allies whose military capability gaps have been described as “a sea of red” in Nato’s colour-coded assessments, as the Trump administration weighs how quickly to withdraw weapons and troops from the continent. Elbridge Colby, the Pentagon’s policy chief, told some countries to move faster on buying critical conventional weapons.
2. The EU’s closest economic partners are warning Brussels that its increasingly protectionist industrial policies risk shutting them out of a single market they have spent decades integrating with. Switzerland, Norway, Iceland and Liechtenstein say “Made in Europe” policies are straining their close trading relationships with the bloc.
3. Exclusive: Saudi Arabia has replaced the chief executive of a $50bn flagship Riyadh real estate mega-project, in the latest sign of a shake-up of the portfolio of subsidiaries owned by the country’s sovereign wealth fund. Sabah Barakat, a veteran of the kingdom’s Public Investment Fund, has taken over as acting CEO of New Murabba from Michael Dyke, who had been head of the project for less than three years.
4. Alphabet has agreed to pay £260mn to settle a UK class-action lawsuit claiming the technology giant levied “unfair” charges on software downloaded from the Google Play app store. Google’s parent company did not admit liability as part of the settlement.
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Anthropic: The AI lab is launching a research system that allows its software to control devices to conduct experiments, its first tool designed to operate in the physical world.
5. Novo Nordisk and Eli Lilly are stepping up efforts to combat the threat of counterfeit weight-loss medicines in the UK, as sky-high demand prompts an influx of duplicates to the market. The drugmakers are using court orders and public campaigns to fight against unlicensed products.
UK faces £4bn hit to fiscal headroom
Chancellor John Healey could suffer a hit of several billion pounds to the public finances, analysts have warned ahead of his first Budget in October, as lower immigration forecasts dent the outlook for economic growth. Slower adult population growth as a result of lower net migration means a smaller economy and less tax revenue, compounding fiscal pressure from the war in Iran.
We’re also reading . . .
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Marine Le Pen: The French far-right leader has pledged sweeping cuts to public spending if she wins next year’s presidential election, as she seeks to reassure business leaders who are wary of her party.
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Liechtenstein: Prince Alois is expanding his authority while loosening checks within Europe’s wealthiest ruling family.
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Beyond beaches: Hotel groups are moving from Europe’s crowded coastal strips to rural destinations as a tourist surge creates growth opportunities.
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Parthenon Marbles: The UK prime minister has retreated from his longstanding calls for the 2,500-year-old sculptures to return to Greece, now saying that their future is a matter for the British Museum to resolve.
Chart of the day
Global issuance of zero-interest convertible bonds is on track for a record year, as AI companies attract investors willing to forgo coupon payments in exchange for exposure to the sector. Companies have issued $72bn of such debt so far this year, according to data group Dealogic, putting issuance on course to overtake the previous record of $73bn set for the whole of 2025.
Take a break from the news . . .
Jiménez de Jamuz, a small village on the plains of León in northern Spain, was never on anyone’s holiday wishlist. But a restaurant serving what has been lauded as the world’s best steak helped turn the place into a cult destination for carnivores.
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