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SPACs are a popular investment vehicle for defense and space companies.
The appeal of "flexible capital" and a quicker route to market in a time when investor interest is surging for the space and defense industry has led to an increase of early-stage companies seeking backdoor listings. These listings are different from traditional initial public offering because they involve mergers between special?purpose acquisitions companies (SPACs) -- shell firms who raise money 'through an IPO, and then merge with a privately held company to make it 'public. SPAC mergers allow companies to negotiate private valuations and secure funding before going public. This gives them more certainty about fundraising and reduces their reliance upon favorable market conditions. Experts say that many smaller defense and aerospace companies relying on government contracts, with their unpredictable development cycles, will find SPACs an easier way to access public markets. Kat Liu, Vice President of IPOX, said that a SPAC merger could be a flexible option for companies who have government contracts, strategic backing or a growth pipeline but do not yet have the scale, margin or predictability to generate revenue. As smaller companies look to become public, they can also benefit from the wave of mega-deals. Last month, Ursa Major, a U.S.-based defense company that develops propulsion for missiles and rasssls, signed a SPAC agreement worth $2.3 billion. Ursa Major CEO Chris Spagnoletti said that the SPAC transaction will provide capital to close this gap. Spagnoletti explained that a traditional IPO would mean taking the timing of the market, rather than our customers. "We didn't want to be set up by the defense window next year," Spagnoletti stated. Public market capital allows us to expand domestic production when customers demand more capacity, faster and better pricing. According to SPACInsider, six defense or space-related companies announced SPAC mergers this year. This represents about 10% of the total deals. In 2025, there were only three. TRUMP, SPACE, DEFENSE AND DEFENSE According to LSEG, besides the?SPAC merges, seven other defense and aerospace companies have also gone public via IPOs in 2026. This indicates that issuers want to take advantage of the booming market. Space is a popular sector, largely due to the?increased government and commercial expenditure on satellite networks and communication, and the listing of Elon Musk’s SpaceX. Earlier this week, it was reported that the hypersonic flight firm Stratolaunch is preparing to go public. Private investors are also showing a strong interest in this sector. Sierra Space's valuation grew by more than 50% to $8 billion in its March funding round. The Trump administration has also placed national security at the forefront as it seeks to reinforce U.S. defences and replenish stocks depleted by weapons shipments to allies, and munitions that were used in the Iran conflict. The President Donald Trump proposed an increase of about $1.5 trillion in the U.S. Defense budget for 2027, compared to the budget enacted in 2026, which was $901 billion. Drones are playing a greater role in conflict in Ukraine and Middle East, which is changing the nature of warfare. Startups increasingly rely on newer technologies and low-cost systems to compete with traditional contractors who have held the majority of government contracts for decades. The sector has attracted prominent political connections. Eric Trump is the son of U.S. President Trump is an investor of Space-Eyes - a company that makes anti-drones. It has also backed drone manufacturer XTEND. Trump's son Donald Jr. has been involved in several defense and space investments. This shows the growing relationship between the Trump family and the industry. However, early-stage defense and aerospace companies can be vulnerable to disruptions due to fragile supply chains, delays in orders and reliance on a small group of government clients. SPACS OFFER FLEXIBLE ROUTES SPACInsider CEO Kristi Martin said that nine?SPACs currently seek defense or space targets. With about $2.35bn held in trust, more deals may be forthcoming. Quantum Space, Elroy?Air and others announced SPAC agreements in June. Quantum Space, which develops spacecraft to support orbital mobility, satellite servicing, and refueling and is backed up by over $88 million of secured government contracts, won a multi-year, $46 million contract with the U.S. Army for developing an autonomous hybrid-electric airborne system. SPAC mergers can offer greater flexibility and faster access to capital. However, existing shareholders may be diluted, especially when private equity is involved. Analysts see that the risks are manageable. "SPAC investors do not necessarily need to see profit or revenue to invest in a promising start-up," said Matt Kennedy. He is a senior strategist at Renaissance Capital. Renaissance Capital provides IPO research and ETFs. The 2-year chart is much better looking despite the fact that a few big-name SPACs mergers have dropped from their recent peaks - such as Rocket Lab, Intuitive Machines and AST SpaceMobile.
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Airline companies urge greater competition for used jet engine parts
Following a European settlement regarding turboprops, global airlines have asked jet engine manufacturers to make it easier for independent companies to provide reconditioned components to airlines. The International Air Transport Association's call, which represents around 300 airlines, is just the latest in a long-running battle over engine shortages and competition. The European Commission concluded its antitrust investigation last month into Pratt & Whitney Canada's alleged anticompetitive behavior after the company agreed to lift the restrictions on used parts. After meeting certification standards, independent suppliers can now easily access dismantled engines. These can be stripped down for their parts and then reassembled to compete with new engines. Pratt & Whitney Canada agreed to change the contractual clauses that restricted the supply and use of engine sections for the?harvesting used parts'. Nick Careen, IATA senior vice president operations, safety, and security said: "That will certainly help the ATR or Dash-8 (turboprop) aircraft operators." In a phone interview, he said: "Now is the time to expand this into the main markets for (jet) engines because that's where the gold lies and where the greatest challenge is." Pratt & Whitney Canada welcomed the agreement reached with the European Commission last month. Parent company RTX had no immediate comment. Since the COVID-19 pandemic, airlines have accused engine manufacturers of restricting competition and increasing prices. Engine manufacturers argue that they take enormous technology and financial risk to develop each new generation of engines, and must recoup these investments over time in order to maintain innovation. Manufacturers vary in their willingness to allow other shops to be involved in the aftermarket. The debate over used parts is also affecting a three-way fight over engine supplies, which has been one of the biggest headaches for industry this year. By repairing more parts from existing fleets, you can reduce the pressure on new aircraft by allowing them to purchase more brand-new parts. IATA estimates that the shortage of engine parts and maintenance capability cost airlines nearly $6 billion in last year. Aviation executives?at an international conference of the International Society of Transport Aircraft Trading held in Copenhagen on Sunday said that they expect engine delays will continue for a while. Jennifer Moulton said that it would take some time to resolve this issue. Pratt & Whitney announced in July that the engine maintenance disruption is easing. IATA has extended an agreement to French-U.S. Engine Maker CFM International, Pratt's main competitor in the aftermarket, earlier this year.
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Second judge blocks Trump's restrictions on voting by mail
On Sunday evening, a second federal judge moved to?block the Trump administration from implementing new U.S. Postal Service regulation that would tighten the requirements for mail-in votes, although the U.S. Supreme Court has yet to?consider the administration's?request to overturn an?order blocking this rule. The Washington-based U.S. district judge Carl 'Nichols made his decision as Trump's Republicans fight to retain control of both houses of Congress during the November 3 midterm elections. Trump has been calling for voting restrictions by mail for years, despite his false claim that voter fraud was to blame for his defeat in the 2020 presidential election. Nichols granted the Democratic Party's request for a?preliminary?injunction to block the rule. The?party called it an?unlawful interference by the federal government in election administration. The judge who was appointed by Trump in his first term as president wrote that "no statute" gave the Postal Service authority to issue the key parts of this rule.
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US rail fuel surcharges for grain have reached record levels, pinching farmers during harvest season
The railroad fuel surcharges on U.S. grain shipment have more than doubled in the last year. This has impacted the entire farm belt, increasing transportation costs at a time when many farmers are also struggling with higher production costs. According to U.S. Department of Agriculture statistics, the average fuel surcharge on grain shipments rose to 48 cents per mile for rail cars in the second?week of September. This is a?153% increase compared to the weighted averaging rate a year ago. Surcharges are used by railroads to recover the majority of fuel costs and add them to long-haul rates. According to the USDA report of September 10, surcharges for corn and soybeans shipping accounted for 11%, up from 5%, in total costs. Farmers are facing a particularly difficult time, as corn and soybean harvests have just begun. The U.S. War with Iran is driving crude oil and refined products prices higher. Diesel fuel surcharges will become a larger part of grain transportation costs as demand for transportation increases. When railroads pass on excess costs to?shippers such as grain elevators who buy from farmers and then ship grain by rail the basis for growers is usually weaker, meaning that they get a lower price for their crops when they sell them. Gary Millershaski is a Kansas wheat and sorghum producer and the chairman of U.S. Wheat Associates, a group that promotes exports, reported the basis of his local grain elevator at around 70 cents below Chicago Board of Trade K.C. Hard wheat futures are usually 40 cents below the Chicago Board of Trade K.C. Millershaski stated, "We don?t even like to look at that because it upsets us." Brent oil futures soared above $104 per barrel last week. This was the highest price since mid-May. The increase in Brent oil prices is due to fears about an escalating Iran conflict. Diesel fuel, the fuel that locomotives use, has reached a new record price of $6 per gallon. Frayne Olson is a crop economist at North Dakota State University and said that the rapid changes in fuel prices have caused "absolute conniptions" and fits. When you consider an industry in which your profit margins are a few cents per bushel or less, it makes a big difference. Olson stated that many?corn and soybean growers do not have access to inland waters and rely on railroads for long-distance transportation of crops to processors, terminals for export and feeding operations. Everyone is very quick to increase fuel surcharges, but very, very slowly to lower them. This just gives them an opportunity to raise freight rates which further exacerbates our problem," said Steve Compton a Kansas farmer. Fuel surcharges will be added to long-haul tariffs for railroads BNSF and CSX. Union Pacific, Canadian Pacific Kansas City, Canadian National and BNSF are also imposing fuel surcharges. CSX, Norfolk Southern and BNSF declined to respond to comments. BILLIONS OF DOLLARS FOR BUSHELS A spokesperson for Canadian Pacific said that railroads use surcharges to reduce their exposure to fuel price fluctuations. Surcharges are tied to the U.S. On-Highway Diesel Fuel Index. The index is up by about 60% over the past year. They are triggered when fuel costs equal or exceed a strike-price that ranges in general between $2.30 per gallon and $3.25. Surcharges increase as the index increases. Surface Transportation Board, which regulates the industry, reports that railroads collected fuel surcharges of $2.93 billion during the second quarter. This is an increase of more than 90% compared to the previous year's period. This covered approximately 90% of the diesel costs. Canadian National's spokesperson said that surcharges ensure rates are fair and reflect current operating costs. Analysts expect railroad surcharges will remain "higher" for the remainder of the year. Archer-Daniels-Midland and other major shippers have not reported negative impacts from surcharges, according to their latest financial reports. ADM, for example, increased its forecasted profit by 10% last month as a result of rising oil prices. Grain elevators owned by ADM or privately held Cargill factor in fuel and freight surcharges to the cash price, which can sometimes lower the prices farmers receive for grains. ADM and Cargill declined to comment. Olson explained that during periods of high export demand, the transportation costs can shift and be passed onto buyers on key markets like China. If Union Pacific purchases Norfolk Southern, transportation costs may increase. The railroads claim that this deal could improve service and streamline freight movement. Farm groups are concerned that the merger will hurt the cash price of grains. Daniel Munch is an economist at the American Farm Bureau Federation (the leading U.S. agricultural lobby). Attorneys General from major grain-producing states concur. In a letter sent to the STB on August 11, officials from Iowa, Kansas and Montana, among other states, wrote: "There is absolutely no reason for a railroad to be so large that it will take money away from farmers, shippers, and consumers across the nation."
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The yields on UK gilts have reached new multi-year records
British government bond yields climbed again in the early trading on 'Monday. They reached new multi-year peaks across a range of maturities as oil prices rose in response to an accelerating deterioration in supply in the Middle East. According to LSEG, the 30-year gilt 'yield' reached its highest level since march 1998 at 5.951%. It last stood 2 basis points higher on the day. The 5-year yield reached its highest level since July 2008, and rose 6 basis points in one day. Investors have 'doubled down' on their bets that rising oil prices would force the BoE to tighten policy over the next 12 months. The move further erodes the buffer between Britain’s existing 'budget plans' and fiscal rules that Finance Minister John Healey pledged to adhere to as he prepares his first budget due next month. Short-dated gilts have underperformed similar bond markets in other?major countries -- a familiar pattern on days when the oil and gas price surges, reflecting Britain's dependence on imported energy. The oil prices increased by about 3% Monday after the Saudi Arabian government and Iranian forces launched attacks against civilian and energy infrastructure in Saudi Arabia. These attacks, coupled with Iranian attacks on Gulf ships, compounded the supply concerns that had been raised following the closure a major?Saudi pipeline. Sahil Mahtani is the director of Ninety One Investment Institute, a manager of assets. The market wants to compensate for the inflation risk in Britain by substantially higher amounts. "That's the part of the saleoff that the government can't?ignore as imported." Investors priced in 90% of the possibility that the BoE would implement two quarter-point increases in interest rates by the end of the year compared to only 10% last week. The economists polled unanimously agreed that the BoE would hold its interest rates at 3.75% during Thursday's meeting.
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East Timor delays the start of Greater Sunrise gas production
The Greater Sunrise Natural Gas Project has pushed its earliest production start back by?two year to '2034, East Timor’s?petroleum? minister said. This tightens up a timeline that is already plagued with decades of delays. East Timor Minister of Petroleum & Mineral Resources Francis da Costa Monteiro said at the Gastech Conference in Bangkok that production at the multibillion-dollar gas field will begin in 2034-2035. East Timor's Australian partner,?Woodside, forecasted last year that the project would be producing gas between 2032 and 35. This was the first time both parties had announced a timeline. Timor-Leste is the poorest nation in Southeast Asia. It needs to export LNG from the Timor Sea to show investors that the bets made on LNG are profitable and to attract them to other gas reserves. Monteiro stated that "Timor-Leste can play a significant role in the region, and even a global one." He said that Sunda Gas is working on commercialising the Chuditch Gas discovery. Monteiro stated that the 'last round of negotiations regarding the Greater Sunrise gasfield' were finalised in last week and Timor-Leste hoped to reach a final decision on investment by 2029.
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Maersk and Hapag-Lloyd will sail more container vessels through the Suez Canal
Maersk, the shipping group, announced on Monday that it will resume four of its joint container services with Hapag-Lloyd in Germany. They are gradually returning to using this shortcut between Asia and Europe. Most shippers abandoned the Asia-Europe trade route through the Suez Canal earlier this decade after Houthi attacks in the Red Sea forced ships to take the longer trip around Africa. In a statement, Maersk of Denmark said that the Suez Canal was a "vital maritime corridor" between East and West. It is also a major driver for efficient global supply chains. The company added that "by transferring the AE5, AE11 and AE12 services to the transSuez corridor, instead of sailing around Cape of Good Hope," we would be able to offer customers more efficient transit times. Maersk stated that the two companies would continue to'monitor the situation in Middle East closely. Any changes in their'services in the Gemini network will be dependent?on a lack of an escalation of conflicts in the area. Maersk and Hapag Lloyd announced in early July and again in August that they would resume certain services connecting Asia, Europe and the Mediterranean through 'the Suez Canal. Last year, the two companies formed the Gemini network to reduce their shipping costs and increase schedule reliability.
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Emirates reports winter bookings on certain routes up after summer rebound
Emirates, the Gulf carrier, said that its winter bookings were 'up on the year' on some routes, and it is expanding to new destinations. This comes after a successful summer, which was "above expectations", as airlines in the region recovered from the Iran War. Emirates said in a press release that South Africa, Brazil and India, along with Nepal, were countries where the demand "is currently?tracking forward from last year". The report noted a shift in the way customers make travel decisions, with more people making them closer to departure. Fuel prices and flight disruptions in the Middle East and beyond were affected by the Iran war earlier this year. Middle Eastern carriers have had their networks disrupted by the conflict, but are gradually resuming operations. DUBAI ATTRACTS STRONG INBOUND TRADE, AIRLINE SAYS Emirates stated in a statement that the airline is currently operating around 93% its capacity before disruptions. It added that more than 8,6 million passengers were carried between July and August. Seat load factors of more than 75% were recorded on all flights to and from West Asia, Europe, Middle East, Americas, and Africa during the summer. Dubai's business hub and tourism hub, the Gulf, continued to attract a large number of visitors, including residents, in the months leading up to the new academic year. Dubai Airports, which recorded a drop of more than 30% in traffic during the first half of the year, announced last week that it expects the annual passenger traffic will reach "around 70 million" by the end of the year. Emirates announced on Monday that it will begin flying to Helsinki in October and is adding capacity on routes such as Accra and Hanoi.
FOREX Dollar rallies amid rising oil prices and AI concerns
U.S. Dollar rose to two-week-high on Monday, as conflict in the Middle East drove up oil prices and sent investors into the safe-haven currencies. This weighed particularly 'on the recently buoyant yen.
The dollar was boosted by the warnings of CEOs of frontier companies about AI's potential dangers. Meanwhile, rising bets placed on the Federal Reserve raising rates on Wednesday also helped the U.S.
The U.S. Dollar Index, which tracks currency against six major counterparts, rose last week by almost 0.5%, to 99.59. This is its highest level since September 2.
The euro dropped to its lowest level in a month, $1.153. This is a drop of more than 0.5%. Meanwhile, the British pound slid?0.4%, to $1.348.
Brent crude rose 3% to $108 per barrel, unnerving investors. Global bond yields also returned to multi-year highs.
Concerns about energy supplies were heightened by the Houthi attacks on Saudi Arabia, the world's largest exporter. The kingdom had shut down its main pipeline to bypass the Strait of Hormuz.
The diplomatic efforts to resolve the U.S. - Iran war have appeared to be in a stalemate. A meeting between Tehran, and other Gulf countries has been postponed. Supply concerns were exacerbated by attacks on ships in the area.
Francesco Pesole is a currency strategist with ING. He said, "Gulf developments are still concerning and some?AI related headlines are weighing down on equities. This environment should support the dollar."
The Japanese yen fell sharply, losing some of its recent gains driven by increasing bets about Bank of Japan rate increases.
The U.S. Dollar was up 0.7% last week against Japan's currency, at 154.61yen. This is up from the almost seven-month-low below 153.
CENTRAL BANKS ARE UNDER PRESSURE
This week, the key question on the markets is whether the U.S. Fed hikes interest rates this Wednesday as a response to the surge in energy prices which has driven diesel to new records and helped to push up inflation in August more than was expected.
Money?Markets on Monday indicated a 90% chance of an interest rate hike. This is up from 60% a week earlier, according to CME Group’s FedWatch tool.
The U.S. Dollar has risen modestly this week as MUFG's senior currency analyst, Lee Hardman, expects the Fed to tighten monetary policy.
Hardman also said that the Fed might be reluctant to raise rates too aggressively during an election year. This could limit the dollar's gains.
Bond yields have reached multi-year highs or multi-decade levels in the U.S. Europe and Japan due to rising bets that rates will rise. The impact of the rate hikes on the FX markets has been limited so far, as the yields have largely moved together.
The markets are almost certain that the Bank of Japan is going to raise interest rates this Friday. They will be searching for any clues as to whether there will be more.
Speculators are now taking a net-long position on the yen. This is the first time they have done so since February.
After the European Central Bank raised rates last week, traders expect that the Bank of England will keep borrowing costs at current levels on Thursday. However, they now anticipate a rate hike later this year as well as more in 2027.
(source: Reuters)