Good morning and welcome back. In today’s newsletter:

• Tesla trims car line-up in pivot to AI as annual revenue falls for first time

• Keir Starmer tells Xi Jinping UK wants more ‘sophisticated’ ties with China

• Prada cuts ties with over 200 suppliers after labour abuse audit

• How shopping chatbots might transform online retail

We begin with US earnings, as Tesla says it will ditch some car lines and turn to AI while reaction was mixed on Meta and Microsoft’s AI spending plans.

Tesla shifts gear: Tesla yesterday said it will scrap its Model S and X vehicles and invest $2bn into Elon Musk’s xAI as the company turns its focus from cars to AI and robotics, after reporting its first fall in annual revenue. Tesla shares rose as much as 4.8 per cent after market but pared their gains as Musk and senior executives spoke to analysts later on Wednesday.

Meta and Microsoft: The social media company’s share price went up as much as 10 per cent in after-hours trading after reporting record revenues, despite saying its capital expenditures could nearly double to $135bn this year as part of its AI spending plans.

However Microsoft shares went the other way as investors were spooked by a 66 per cent surge in data centre spending and slower than expected cloud growth, despite strong demand for AI services boosting profits by almost a quarter.

The software group’s stock slipped 6 per cent in after-hours trading on Wednesday as another big jump in AI-related spending soured the market reaction to record profit and revenue figures.

• More US news: The Federal Reserve kept interest rates on hold for the first time since July, as chair Jay Powell said the central bank was in no rush to cut them.

Here’s what else we’re keeping tabs on today:

• Bilateral talks: Russian President Vladimir Putin holds talks with United Arab Emirates’ President Sheikh Mohammed bin Zayed al-Nahyan in Moscow. German Chancellor Friedrich Merz hosts Lithuanian Prime Minister Inga Ruginienė in Berlin.

• Results: Apple, Blackstone, Deutsche Bank, ING, Mastercard, Nasdaq, Nokia, Roche and SAP report earnings. See The Week Ahead for a fuller list.

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Five more top stories

1. UK Prime Minister Sir Keir Starmer met Chinese President Xi Jinping today as the leaders sought to strengthen trade relations after years of strained ties. The two are expected to sign a border-security pact to share intelligence to tackle people-trafficking gangs. Read the full report.

2. The EU and UK would both pay a heavier price than the US in a tit-for-tat trade war if US President Donald Trump were to revive his tariff threat against Europe over Greenland, research found. The study highlights the economic risks if European leaders opt to retaliate.

• European security: Germany plans to develop its own space-based missile detection capability, as the continent seeks to cut its reliance on the US for defence.

3. Russia’s energy revenues last year fell by about a fifth from 2024, as widening discounts collided with weak global prices, intensifying the strain on the Kremlin’s wartime economy. The shift highlights how the Trump administration’s sanctions are having an effect on the country’s oil sector.

4. Exclusive: Prada has ended its relationship with more than 200 suppliers for compliance breaches over the past five years, as the luxury brand conducts a “zero tolerance” audit in response to allegations of labour abuse in the industry’s supply chain. Silvia Sciorilli Borrelli has more from Milan.

5. The world’s biggest mining companies have added close to half a trillion dollars to their valuations this year, fuelled by a surge in the prices of precious and base metals triggered by heightened geopolitical tensions. Read the full report.

The Big Read

US retail groups Walmart and Amazon are taking different approaches to shopping chatbots. While the technology promises greater speed and convenience for online buyers, it also poses a threat to some existing revenue streams.

We’re also reading . . . 

• Unregulated drugs: Chinese sellers of untested injectable therapies — marketed as cure-alls for everything from sleep to anti-ageing — are using ecommerce platforms to target overseas customers.

• Markets and morality: New research sheds light on how commerce can shape the culture of communities, writes Soumaya Keynes.

• Tequila hit: An immigration crackdown is squeezing sales at Jose Cuervo maker as Hispanic consumers in the US stay at home.

• Military threat: The US is building up a “beautiful armada” in the Middle East as Trump weighs strikes on Iran. Read the visual story.

Chart of the day

Partner profits at the UK’s mid-tier accounting firms have risen to record levels and are catching up with the Big Four, underlining the pressure on the sector’s top players to retain senior professionals. Profit per equity partner hit an average of £565,000 in 2024 across the five largest mid-tier firms that report comparable figures, according to FT analysis.

Take a break from the news . . . 

In the first of an FT Globetrotter series on world libraries, novelist Charlotte Mendelson explores a London institution. The British Library not only holds the history of humanity but represents a curious cross-section of the UK capital.