Wednesday 22/05/24

1. In BIG PICTURE NEWS, the EU trading deficit with China shrinks, the UK tries to mend fences with the UAE, the IMF gets bullish about UK interest rate cuts, the Bank of England signals a cut will be next, the government advises stockpiling, factory output rises, an Anglesey nuclear power station is on the cards, Adani faces more allegations, metal prices rise and ether gets a boost
2. In TECH NEWS, Microsoft pushes Copilot, traders brace themselves for Nvidia and Amazon has a change of heart
3. In RETAIL & CONSUMER NEWS, US retailers cut prices, Lululemon has a management restructure, B&Q’s owner is downbeat and Nestlé reformulates its food
4. In MISCELLANEOUS NEWS, we see a data centre-driven real estate frenzy, whether China’s real estate plan will actually work, Cazoo’s failure, Nio’s progress, Grant Thornton’s streamlining, Pixar’s cuts and AstraZeneca’s grand plan!
5. AND FINALLY, I bring you a filet mignon that isn’t a filet mignon…

So we look at the EU’s shrinking trade deficit, the UK mending relationships with the UAE, the IMF talking BoE interest rate cuts, government stockpiling, rising factory output, a new nuke, more Adani dodginess, rising metal prices and a surprise boost for ether…

Hello everyone! Although this is clearly a current edition, I am NOT officially publishing Watson’s Daily this week as I am taking this week “off” to build a library of extra materials. I just needed some time to write and film them whilst also formulating new social media content. Watson’s Daily will return on Tuesday 28th May. You may not see the changes instantly, but I shall let you know when the big “switch-over” takes place. I think you will love what’s to come! The reason why I’m publishing this edition today is because I’m trying to change the process of me writing it and am experimenting with different methods.

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

In EU trade deficit with China shrinks to lowest level since 2021 (Financial Times, Martin Arnold) we see that the EU’s trade deficit with China has reduced to its lowest quarterly level since Q2 of 2021 thanks to stable machinery export flows from Europe to China and falling levels of Chinese imports. * SO WHAT? * This is quite interesting timing given that the EU is bracing itself for a slew of Chinese imports and is looking to increase import tariffs, blaming state subsidies that they say give Chinese companies an unfair advantage. Separately, the EU trade surplus with the US hit a new high as Europe benefitted from increasingly shutting China out.

Back home, UK launches charm offensive with UAE after relations sour (Financial Times, Chloe Cornish, Lucy Fisher, Andrew England and Jim Pickard) shows that our deputy PM, Oliver Dowden, made a secret trip last week to the UAE in order to smooth out a diplomatic relationship that has soured in recent years. The relationship has hit the skids most recently because of British objections to the recent blocking of a UAE-linked bid to buy the Telegraph and a perceived United Nations snub when the UK called a meeting of the UN Security Council to talk about the ongoing war in Sudan. The UK is looking to raise billions of pounds of investment and is thus attempting a charm offensive with Gulf states.

On the economic front, Bank could cut interest rates three times this year, says IMF (The Times, Mehreen Khan) highlights the IMF’s latest fiddling around with its forecasts which now say that our faster-than-expected fall in inflation has now put us on target for a “soft landing” to the extent that the Bank of England has the room to cut interest rates three times by the end of the year! Meanwhile, Bank of England governor predicts ‘quite a drop’ in UK inflation in April figure (Financial Times, Sam Fleming and George Parker) shows that the governor reckons falling energy costs will help, adding that the next move in interest rates will be down. Rate cut hopes rise as inflation ‘nears 2%’ (The Times, Jack Barnett) shows that the Monetary Policy Committee will therefore be put under more pressure to cut rates at its next meeting in early June as, in a separate release, we saw that food price inflation has hit its lowest point since October 2021.

In other UK news, Government tells Britons to stockpile as part of emergency planning (Financial Times, Lucy Fisher and Laura Onita) highlights the launch of a new campaign by the UK government to encourage the public to get ready for emergencies. We will be encouraged to stockpile tinned food, batteries and bottled water although retailers are likely to warn against bulk-

buying items in response to this call. The new campaign (“Prepare”) will have its own website advising the purchase of a number of items but is keen to learn from the panic buying we saw in the early days of the pandemic. * SO WHAT? * Given geopolitical issues, particularly Russia’s constant sabre-rattling, this sounds like a sensible thing to do. Japan’s really good at this sort of thing (earthquake practice is just a fact of life, for instance, and everyone has emergency kits and go-bags) but I’m sure it will take quite a while to get Brits to be prepared – hence the campaign, I guess. No doubt critics will say this is overkill…

Factory output rises for first time in 18 months (The Times, Jack Barnett) cites the latest monthly stats from the CBI which say that factory output volumes increased for the first time in 18 months in the latest quarter in a sign that the UK economy is recovering. It is expected to continue to increase in the next quarter but at a slower pace. Another sign that the UK economy is improving??

In energy news, Britain’s third new nuclear power station to be built in Anglesey (Daily Telegraph, Jonathan Leake) shows that the government has designated Wylfa on Anglesey as its preferred site for Britain’s third giant new nuclear power station, which it hopes will generate 7% of the UK’s electricity when it is fully up and running. Wylfa had previously been home to a much smaller nuclear power station which operated from 1972 to 2015 but the proposed new one will generate triple the output of its predecessor. It’s also possible that the side could also include one or more SMRs. EDF, Westinghouse and Kepco are all competing for the project. * SO WHAT? * This is all very interesting, but these things take YEARS to build and massive cost-overruns are rife. I do wonder these days whether these mega-nukes will be superseded by the improving technology of SMRs although I’d also suggest that a combination of better renewable power sources, better power storage and the prospect of commercially viable power via nuclear fusion will mean that we’ll have to rely less and less on this type of nuclear power.

In commodities news, Adani suspected of fraud by selling low-grade coal as high-value fuel (Financial Times, Dan McCrum, Chris Cook and John Reed) shows that the Adani Group is facing serious allegations of passing off low-quality coal as much more expensive cleaner fuel, adding to the controversy already surrounding the conglomerate. Documents secured by the Organized Crime and Corruption Reporting Project suggest that Adani may have fraudulently profited from damaging the environment with his dodgy coal. * SO WHAT? * This is not going to be a good look for either Adani (whose company is trying to rebrand itself as a major renewable energy player) or PM Narendra Modi, who is heading towards elections that could give him a third term in office. Modi is seen to be very close to Adani, so could potentially be tainted by association. It’ll be interesting to see whether this story is going to be buried by the interested parties or whether this proves to be the accusation that tips Adani over the edge.

In commodities news, Rush of fund manager interest drives metals prices to fresh highs (Financial Times, Harry Dempsey and Sally Hickey) shows that copper and gold were lifted by increased investment inflows from algorithmic traders, specialist commodities investors and macro funds. Copper breached the $11,000 per tonne level, its highest ever level, while gold and silver prices hit new highs. * SO WHAT? * Metals movements have been behaving quite weirdly over the last year or so – there was strong demand last year that led to low inventories, and yet prices actually FELL. This year, prices have rebounded – but supplies are increasing! It is thought that this has been driven by investors in the futures markets rather than by any fundamentals.

Then in crypto news, Ether jumps 16% on US ETF approval speculation (Financial Times, Philip Stafford) shows that the price of the world’s second-biggest cryptocurrency leapt by over 16% on hopes that the US SEC will allow stock market funds to invest in it. Many traders had expected the SEC to outright delay or reject the first ether ETF by a Thursday deadline. If they approve it, this could be pretty darn big news!

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!

Microsoft pushes Copilot, traders get ready for Nvidia and Amazon wants a delay…

Microsoft enhances ‘Copilot’ in race with Google to create AI-powered assistants (Financial Times, Camilla Hodgson and Michael Acton) shows that Microsoft has just unveiled an enhanced AI-powered assistant that can work without human instructions and will be able to support the work of entire teams within an organisation, not just individuals, where it could, for example, create and designate tasks to specific people. * SO WHAT? * These updates, which were announced at the company’s annual developer conference, show how much Microsoft wants to push Copilot and comes just days after Google unveiled a range of AI capabilities, which themselves followed upgrades from Meta and OpenAI. Upgraded Copilot tools will be available to business customers in preview form later this year!

Meanwhile, Traders brace for big swings in Nvidia shares (Financial Times, George Steer) shows that traders are bracing themselves for big share price swings in Nvidia’s share price today when the company reports its Q1 earnings. Given Nvidia’s size and share price volatility, it can have a big say in the mood and direction of the whole market! Mind you, Amazon changes plans to order Nvidia ‘superchip’ to await updated model (Financial Times, Camilla Hodgson, Tim Bradshaw and Michael Acton) shows that the decision by Amazon’s cloud computing division, AWS, to delay its “superchip” (“Hopper”) order to wait for the more powerful new model (“Blackwell”) might cause nerves among investors who are finding it increasingly difficult to buy into the sustainability of Nvidia’s massive growth rates. * SO WHAT? * Nvidia may become a bit of a victim of its own success here as it’s had such a long winning streak that any whiff of disappointment could cause a sharp sell-off. It consistently seems to over-deliver, but I do wonder whether Amazon’s decision might prompt others to take similar actions, which would cause a slowdown in take-up of the Hopper chips. I also wonder whether the Hopper chips could be redesignated as OK to sell to China given that they will no longer be the most advanced chips.

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!

US retailers cut prices, Lululemon has a restructure, B&Q is downbeat and Nestlé tries to adapt to the Ozempic phenomenon…

US retailers trim prices as shoppers show signs of inflation fatigue (Financial Times, Gregory Meyer) shows that US retailers, such as Target and Walmart, are cutting prices in a sign that retail prices are steadying, if not falling, after years of increases. Target said it would cut prices of 5,000 items this summer as it warned of a 3-5% drop in same-store sales in its Q1 results while Walmart said it had already cut prices of a large number of grocery products. * SO WHAT? * Despite other signs of a strong economy, Americans are still feeling pretty frustrated as 71% of respondents to the latest FT-Michigan Ross survey said that they thought that economic conditions were negative overall. Clearly Biden has a mountain to climb in trying to convince voters that the economy isn’t in a tricky state. 

Then in Lululemon Restructures Product and Brand Teams, Chief Product Officer Exits (Wall Street Journal, Stephen Nakrosis) we see that the apparel company announced yesterday that it would be putting in place a new integrated design structure whilst announcing the exit of its Chief Product Officer, Sun Choe. There

is a major management reshuffle going on as, I presume, the company wants to be as ready as it can be to take advantage of any economic upswing.

In the UK, B&Q profits fall as homeowners delay renovations (The Times, Simon Freeman) shows that B&Q owner Kingfisher reported disappointing quarterly results and sounded cautious about its prospects for the full year because even though it should do better in a recovering housing market it pointed out that there was a “lag between housing demand and home improvement demand”. Spring trading has also been disappointing so far.

Then in Europe, Nestlé reformulates its food for Ozempic and Wegovy users (Daily Telegraph, Hannah Boland) shows that Nestlé is launching a new range of protein-enriched pastas and pizzas aimed at those taking weight-loss drugs, a category of customers that research suggests consumer up to 30% fewer calories as a result of taking weight-loss drugs such as Wegovy and Ozempic. * SO WHAT? * I have to say I’m not quite sure how well these foods are going to do but this does show how seriously consumer goods companies are taking the effect of the threat of weight-loss drugs on how much of their wares that consumers are going to buy.

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!

Data centres drive a frenzy, China’s plan looks insufficient, Cazoo fails, Nio progresses, Grant Thornton streamlines, Pixar makes cuts and AstraZeneca outlines an ambitious plan…

In a quick scoot around some of today’s other interesting stories, AI plus Big Data means a European real estate frenzy (Financial Times, Lex) is a really interesting article on how the sudden rise in demand for bigger and more powerful data centres is creating a major frenzy in property leasing. in Europe. Landlords are lapping this up with 15-year leases as demand from Big Tech booms. * SO WHAT? * Building a data centre costs about six times more than it does to build a traditional logistic shed because of the need to install back-up generators and cooling, among other things. I would suggest that this means that there are high barriers to entry, meaning that the big property players will benefit the most. It’ll be interesting to see if there is any consolidation within the sector as smaller players are hoovered up by larger ones…

China has finally unveiled its property rescue plan. Will it be enough? (Financial Times, Thomas Hale and Joe Leahy) refers to last week’s announcement of a $41bn fund that is going to be used to support government purchases of unsold housing that is intended to address China’s ongoing real estate problems head-on. * SO WHAT? * Many observers are saying that although the plan sounds pretty substantial, it won’t be enough to address the problem fully. Beijing also announced other measures on Friday to rejuvenate the embattled property market – ditching minimum mortgage rates and lowering first-time buyers’ downpayments.

In Cazoo goes under after $8bn flop (The Times, Helen Cahill) we see that the used car business has now gone into administration just three years after its New York stock market debut. Teneo are now handling the insolvency. What a sorry end toa business that was once so hot!

The race to be China’s Tesla has an unexpected leader (Financial Times, Lex) is an interesting article that highlights Nio’s lead in the domestic market as it is now seeing the benefits of its investment in charging stations and battery-swapping technology. Analysts had been sceptical of the latter being able to generate meaningful returns but the company now has over 2,200 fast-charging stations and 2,400 battery-swapping stations, giving in one of the biggest networks in China! Battery-swapping is gaining

in popularity and its charging stations reached profitability last year. * SO WHAT? * Charging is, and will continue to be, key to the speed of growth for EV take-up. I maintain that battery-swapping is the way forward if at all possible because I believe it is best for the environment longer-term (you can swap batteries in and out easily which means that, potentially, the cars themselves can last longer) and lessens the risk of putting a lot of money and effort into a network that is rendered obsolete when improvement in battery technology means that range anxiety is eliminated.

In Grant Thornton Laying Off 350 U.S. Employees as It Prepares to Close Private-Equity Sale (Wall Street Journal, Mark Maurer) we see that the accounting firm is getting closer to selling a chunk of its US unit to private equity firm New Mountain Capital, pending regulatory approval. It will be notifying employees about it this week, but this will equate to about 3.5% of the US workforce. * SO WHAT? * Grant Thornton has, like lots of other professional services firms, suffered from weaker demand of late following a massive boom over the pandemic. They, like rivals, have been trimming their headcount in readiness for the next economic upswing.

Pixar to Cut 14% of Workforce in Shift Away From Streaming Series (Wall Street Journal, Robbie Whelan) shows that the animation studio famous for hits such as The Incredibles and Toy Story is cutting about 14% of its workforce as its parent company, Disney, looks to cut costs and cut back on content that’s made for streaming. * SO WHAT? * It is looking to focus on making feature films as part of overall plans to make the streaming business break even by September. After the failures of Elemental and Lightyear, the studio will be pinning a lot of hopes on the upcoming Inside Out 2.

Then in AstraZeneca aims to nearly double revenues to $80bn by 2030 (The Guardian, Julia Kollewe) we see that the UK’s biggest drugmaker has set out ambitious plans to hit big revenue targets by 2030 via treatments for cancer, rare diseases and other conditions thanks to the release of 20 potential blockbuster drugs by the end of this decade. It will be relying on its strong position in emerging markets for growth. Mind you, if the obesity and diabetes pill it licenced from China’s Eccogene in November works, then this could also be a major boost!

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…

Apologies to the non meat-eaters out there – but when I saw this I was taken aback somewhat! Have a look at how Guga makes a $1 “filet mignon” – this is pretty bizarre! It actually looks pretty convincing…