Thursday 11/01/24

1. In BIG PICTURE NEWS, EY reckons elections will hold markets back, the Bank of England could hit its inflation target pretty soon, Sunak announces Post Office scandal legislation, HS2’s real costs come out, the government announces our power generation roadmap and crypto gets a boost
2. In RETAIL & RESTAURANT NEWS, M&S is on track to overtake Waitrose, Sainsbury’s takes an Argos hit and Greggs is on a roll
3. In REAL ESTATE-RELATED NEWS, Persimmon gets a boost and rent rises slow thanks to “accidental landlords”
4. In MISCELLANEOUS NEWS, China tries a gaming chip get-around, misinformation is judged to be an imminent AI danger but a DeepMind spin-off aims to turbo-boost drug discovery times
5. AND FINALLY, I bring you some wholesome family fun…

So elections could hamper markets, the Bank of England is on track to hit target, Sunak acts on the Post Office scandal, HS2’s real costs sound painful, the government lays out a power roadmap and crypto gets a boost…

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Elections in UK and US will hit stock market, warns EY (Daily Telegraph, Adam Mawardi) shows that elections on both sides of the Atlantic this year will prove to be a limiter on stock market performance and could potentially hold back an uptick in listings until 2025, according to research by EY. Basically investors don’t like uncertainty – and new governments/administrations can upend things somewhat. * SO WHAT? * This isn’t a particularly insightful opinion but it is worth noting as a reminder. TBH, the effect of imminent elections can vary wildly depending on how different the current opposition is to the lot in charge now and how strongly pre-election polls point to victory for one party (if it’s finely balanced then there’s more uncertainty and therefore more nervousness in the market). Regarding the impact on flotations, it depends on what the companies in question do and how desperate they are for funding. For instance, if the company in question is a small defence company looking to come to market, you would have thought that will do OK given that wars are ongoing and defence budgets around the world continue to trend higher than they have in recent years. It won’t matter who’s in power as to whether that does well or not. However, if it is a company that’s involved in more politically sensitive areas then such IPOs may be best avoided until elections are over. It seems to me that markets don’t take that much notice until we’re a month or two out from election date – so until then I wouldn’t expect too much of an effect. Thinking cynically, investment banks – and others in the IPO food chain – will be DESPERATE to get some deal flow going after lean pickings last year, so there is that to consider as well!

Then in Bank of England’s inflation target may be hit by April (The Times, Jack Barnett) we see that a senior economist at Deutsche Bank said that inflation is heading towards beating the Bank of England’s inflation target of 2% as soon as April just as Andrew Bailey, the governor of the Bank of England, said that the economy has entered 2024 in a better state than he had expected. One of the main reasons would be a big drop in energy bills. If inflation does dip below 2% by April it will be interesting to see how the government takes credit for it and uses it as ammo in its bid for another term in office…

In Rishi Sunak announces legislation to overturn Post Office scandal convictions (Financial Times, Rafe Uddin, Jim Pickard, Lucy Fisher and George Parker) we see that the PM has reacted to public outrage and announced unprecedented emergency legislation to quash all of the convictions at the same time. Sunak promised to deliver “justice and compensation” for the 700 people convicted between 2000 and 2014 of theft or false accounting that was a result of a glitch in Fujitsu’s Horizon software. He pledged an “upfront payment of £75,000” for 555 sub-postmasters pursued in civil cases by the Post Office as an initial shot. Fujitsu could face ‘financial sanctions’ over Post Office scandal (Financial Times, Lucy Fisher and Rafe Uddin) shows that ministers are after blood and that the Japanese IT company may well have to pay some of the compensation bill if it was identified as “culpable for this scandal”. I think that a lot of people are already pointing the finger of blame at politicians for allowing such a horrendous miscarriage of justice but ‘All parties had a role to play’: Britain’s MPs admit failure over Post Office scandal (Financial Times, Anna Gross and Rafe Uddin) does a really good job of showing that politicians of all parties did a bad job – not just LibDem leader Sir Ed Davey, who failed to act on allegations of the Post Office wrongly accusing sub-postmasters of theft and false accounting. The drama continues…

While we’re on the subject of government, I don’t think that many of you will be surprised by UK HS2 high-speed railway’s estimated cost soars to £67bn (Financial Times, Gill Plimmer) as the chair of HS2, Sir Jon Thompson, told MPs yesterday that, yes, in fact the scheme’s costs have risen to as much as £67bn versus the estimate of £49-£56.6bn cobbled together at 2019 prices. What a money pit!

Then in UK government sets out plans for ‘biggest nuclear power expansion in 70 years’ (The Guardian, Jillian Ambrose) we see that the government has laid out a roadmap to build out a fleet of nuclear reactors that will be able to generate 24GW by 2050 (according to my calculations, that’s enough to power almost 20 Back To the Future DeLorean cars 😁). One or two nuclear reactors will be approved every five years from 2030 to 2044 along with other projects. * SO WHAT? * This is much-needed considering that Britain’s nuclear output fell to its lowest level in over 40 years last year!

Meanwhile, US regulator’s shock move over Bitcoin (The Times, Martin Strydom) shows that the US SEC last night gave a long-awaited and much-anticipated approval for the first bitcoin ETFs. The SEC has received applications to provide ETFs from institutions such as BlackRock, Ark Investment and Fidelity and some products are expected to start trading today! * SO WHAT? * This is a huge leap forward for the cryptocurrency and brings it further legitimacy. Given that Bitcoin only had a bit of a blip on this news it would seem that a lot of the anticipation is already in the price as it rose by 70% over the course of last year. This is a big deal.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

M&S could beat Waitrose, Sainsbury’s feels an Argos drag and Greggs is hot…

In retail news, M&S predicted to overtake Waitrose after seasonal boost (Daily Telegraph, Daniel Woolfson) cites the latest Nielsen IQ data which shows that M&S is set to overtake Waitrose in market share after a strong Christmas performance. M&S really is powering forward at the moment – it seems like there’s no stopping them at the moment after a year where it re-entered the FTSE100 after a few years in the wilderness!

Meanwhile, Argos slump hits Sainsbury’s festive cheer (Daily Telegraph, Daniel Woolfson) shows that poor performance at Argos took the shine off Sainsbury’s Christmas boost. Anaemic consumer electronics sales from Argos and disappointing

clothing sales from Tu were uppermost in investors’ minds yesterday rather than the 8.6% rise in grocery sales. * SO WHAT? * The CEO remained relatively upbeat considering and said that the company would lay out an updated strategy next month. It’ll be particularly interesting to see how its Nectar scheme will be part of this as the CMA is currently investigating supermarkets’ use of loyalty card schemes which make it difficult to compare prices.

Then in Greggs shares jump after bumper year for sales (Financial Times, Euan Healy) we see that the baker’s shares jumped by 9% in trading yesterday thanks to strong growth and the announcement that it will open up to 160 additional stores this year! It has seen consistent volume growth and has been helped by being made more widely available via channels such as Uber Eats. It is an oft-used cliché but Greggs really are on a roll!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Persimmon gets a boost and rent rises slow down…

Builder Persimmon buoyed by easing mortgage rates (Daily Telegraph, Riya Makwana) shows that housebuilder Persimmon announced that it had sold more homes than expected over 2023 thanks to falling mortgage rates boosting buyers. The chief exec was upbeat about the ongoing effect of falling mortgages costs but remained cautious about this year’s prospects. * SO WHAT? * Although affordability is still an issue (remember, a lot of people out there are on super-long 35 year mortgages now so they can make the monthly payments), I would have thought things would get better for the housebuilders this year given that it seems that inflation is peaking out, which would imply that interest rates will

start to come down this year. And if THAT happens, mortgage rates will continue to fall.

On the rental side of things, Rent rises slow as ‘accidental landlords’ flood the market (Daily Telegraph, Riya Makwana) cites an observation by estate agent Winkworth that more rental properties are coming onto the market because some homeowners are putting off selling in what they deem to be a weak market, and renting their properties out instead. * SO WHAT? * More rental properties on the market means that rent rises will slow down (and eventually fall), which will be very welcome news for renters!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

China gets creative on AI chips, AI misinformation is judged to be an imminent danger but a DeepMind spin-off wants to use AI to accelerate drug discovery…

In a quick scoot around some of today’s other interesting stories, Chinese companies resort to repurposing Nvidia gaming chips for AI (Financial Times, Qianer Liu) shows that Chinese companies are now starting to repurpose standard chips from PC gaming products to develop AI tools thanks to US restrictions on supplying them with the most advanced chips. Nvidia gaming graphics cards are being stripped of their core components in factories and workshops and repurposed in new circuit boards! * SO WHAT? * Desperate times require desperate measures. AI is chip-thirsty so I guess the Chinese are just doing what they can to get around the US sanctions. The ones who are buying these repurposed components have generally been state enterprises and small AI labs that weren’t able to stockpile enough Nvidia chips before the door slammed shut.

AI-driven misinformation ‘biggest short-term threat to global economy’ (The Guardian, Larry Elliott) cites some of the concerns of the World Economic Forum as 2024 shapes up to be an important year in terms of elections. The WEF’s annual risks report highlights concern by 30% of respondents to its survey that there is a high risk of a global catastrophe over the next two years while risks of disinformation and polarised societies is likely to dominate the outlook for 2024. * SO WHAT? * This puts even more pressure on those trying to contain AI but I have to say that I don’t think they are going to be moving fast enough. What really needs to happen is for people to stop believing everything they see on social media – but I don’t think that’s going to happen any time soon either!

On the other hand, DeepMind spin-off aims to halve drug discovery times following Big Pharma deals (Financial Times, Cristina Criddle, Hannah Kuchler and Madhumita Murgia) shows that AI can be used as a force for the good as Isomorphic Lab could potentially halve the time it takes to discover new drugs. The company just signed deals with Eli Lilly and Novartis who will pay a lump sum up front and then extra on performance. Wouldn’t this be great if it really works!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

Sadly, I didn’t have the joy of siblings growing up as I am an only child! However, here’s some wholesome family fun caught on camera. Totally pointless but quite amusing…