Watson’s Weekly 03-05-2025

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

IN WAR NEWS…

• Trump criticised Putin about dragging his feet on Ukraine, the US and Ukraine signed a natural resources deal that will give Washington access to Ukraine’s minerals and natural resources. In the meantime, the EU is cooking up a “Plan B” for if the Americans abandon Ukraine.
• There’s a dangerous standoff developing between India and Pakistan following the recent killing of 25 tourists and a resident last week in Indian-administered Kashmir. Both sides have nukes and the Americans don’t seem to be bothered about helping mediate the situation. Let’s hope the two sides sort it out between themselves otherwise this could go very badly.

IN TARIFF NEWS…

• THE TARIFFS THEMSELVES – Trump softened the car tariffs he was threatening but still GM suspended share buybacks because of the tariff uncertainties.
• TARIFF CONSEQUENCES – US ports and air freight managers are seeing demand fall because of tariff uncertainty, foreign companies in China are getting hit with double the tariffs and CEOs of American companies are slashing spending because of all the drama clouding the outlook. McDonald’s, Hershey and Amazon were among the companies sounding increasingly worried about the outlook, Shein has already jacked up prices considerably because of the closing of the de minimis loophole while other e-tailers are dreading it as well. China’s manufacturing activity is already shrinking as a result of the tariffs.
• TARIFF REACTIONS – drugmaker AstraZeneca announced that it would be shifting more production to the US in order to mitigate at least some of the impact of Trump’s trade tariffs

IN TRUMP THINGS…

• Paramount Global and Trump’s team are now in discussions to settle a lawsuit about a broadcast to do with the election. It sounds like Paramount’s controlling shareholder, Shari Redstone, just wants to reach a settlement and move on while Trump’s camp are pushing for more.
• Trump sacked his national security adviser Mike Waltz and his deputy over the embarrassing Signal private messaging app security leak (aka “Signalgate”) a month ago, but he has also been nominated to serve as US ambassador to the UN!
• Trump announced that he would impose secondary sanctions on buyers of Iran’s oil and ban them from doing business with the US.

IN MUSK THINGS…

• Private sector firms are now trying to fill the research gaps left by all the DOGE cuts of federal grants. The shortfall looks like it’ll be too big to bridge for private entities.

IN MARKETS NEWS…

• Trump’s first 100 days have been disastrous from a markets perspective. The S&P’s 7.9% drop since he came to power has been the worst first 100 days’ performance since Richard Nixon was replaced by Gerald Ford in 1974. Tariffs, uncertainty and a huge shift in the geopolitical world order have characterised his term so far.

IN INDIVIDUAL COUNTRY NEWS…

• IN THE US – the economy shrunk by 0.3% in Q1. Trump maintains that “when the boom begins, it will be like no other. BE PATIENT!!!” This fall has been accompanied by a major weakening of consumer sentiment that is now at its lowest level since the 1990 recession.
• IN CANADA – Mark Carney won the election thanks to anti-Trump sentiment but he’s going to have to make nice given how important the US is to Canada as a trading partner. Perhaps the UK could take up some of that slack.
• IN GERMANY – it feels like there’s a real turnaround going on as its market is rising, corporate confidence is rising and a consumer survey said that Germans are at their most positive since last August!
• IN THE UK – the EY Item Club group of economic forecasters reckon that our growth is going to slow sharply and Morgan Stanley predicts that the Bank of England will cut interest rates by 0.25 percentage points at each of the next five meetings, meaning that they’ll be down to 3.25% by November. On the plus side, the London Stock Exchange shows that market volatility caused by tricky macro conditions is helping the exchange to rake it in as it makes money from every trade.

IN CURRENCY NEWS…

• The Swiss franc is surging as investors continue their “flight to safety” to such an extent that the Swiss franc is now its highest level against the dollar since 2015! Will Switzerland’s central bank have to lower interest rates or even revert to zero-or-less interest rates??

IN ENERGY NEWS…

• A massive power outage spread across Spain, Portugal and parts of southern France but no-one seems to know how it happened. The move towards net zero was blamed by some, given the volatility of many renewable power sources, and Spain’s PM Pedro Sanchez came under a lot of pressure to explain what happened.
• Chinese and South Korean battery makers are now battling for supremacy in batteries that are used to store power on electricity grids. Power storage is, IMO, at least as important as power generation because it will mean that we can all hang on to more of the power that we generate and reduce the volatility of supply that could have caused what happened in Spain, for instance.
• Talking of renewables, Vestas warned that there could be a “big discrepancy” between ambitious targets set for the industry and the actual situation on the ground. Planning obstacles seem to be a recurring theme here.
• British nuclear fusion pioneer First Light Fusion has decided to give up on building its first nuclear fusion reactor and will instead supply other nuclear power companies with one of its inventions, called an “amplifier”, which contains a nuclear fuel capsule and increases the power of fusion reactions. It’s a shame but they’re still in the game, so it could be worse!

IN OIL & GAS NEWS…

• It looks like Elliott Management’s decision to stir things up at BP (to make them ditch – or at least severely reduce – their green ambitions) is proving to be more problematic than it had probably hoped given OPEC’s recent production decisions and the uncertainty of the world economy.
• US LNG shippers are complaining that they can’t comply with Trump’s rules on Chinese-built ships docking at US ports because this will jack up costs enormously. Apparently, there are no US-built vessels that are capable of shipping LNG!

IN GOLD NEWS…

• Chinese investors piled into gold ETFs at a record rate in April, further highlighting the “flight to safe haven assets” like gold and Swiss francs (as per what I said above!).

IN BUSINESS TRENDS…

• Somewhat incredibly, UK business confidence hit its highest level since the October Budget, according to the latest survey from the Institute of Directors as business leaders expressed relief about the delay to Trump’s reciprocal tariffs.

IN EMPLOYMENT TRENDS…

• Recruiters including Pagegroup, Robert Walters and SThree are having a torrid time at the moment despite the jobs market being tight. It’s because a) candidates are tending to remain in their current roles for fear of being the first to be binned if their new employer decides to cut headcount, b) employers are imposing a hiring freeze and c) employers are “labour hoarding”, where they’re keeping employees on their books “just in case” of an uptick.

IN CONSUMER TRENDS…

• America’s middle-income consumers are feeling the pinch and that’s translating into weaker results for US corporates because people just aren’t buying as much “stuff”.
• The number of Europeans flying to the US is falling due to “consumer uncertainty”. Virgin Atlantic has already seen a slowdown while IAG, the owner of British Airways, is due to report on the situation next week.
• IN THE UK – food inflation is at its highest level for 11 months as businesses passed on the April rise in NICs to customers. In property, Rightmove stats say that monthly rents are hitting record highs (£1,349 pcm outside London and £2,698 in the capital) but UK house prices have been weakening despite UK mortgage lending hitting a four-year high.

IN RETAIL NEWS…

• Trump had a spat with Jeff Bezos because it looked like Amazon was going to highlight the cost of US tariffs in order receipts. This was furiously rejected by the White House and Bezos backed down (or at least said that this was not going to happen on the main site anyway, just on “Amazon Haul”). This is yet another example of dissent being swiftly punished.
• Amazon is putting pressure on its suppliers to cut prices to protect its own margins against the tariff onslaught. I talk about this with Duncan on Episode 928 of the podcast this week 🎙️.
• Gymshark took a hit to its profits last year thanks to investment in new stores and it now looks like Trump’s tariffs will further dent the performance of is growing US business. Other British retailers like Boden, Lush and Fortnum & Mason are also feeling the exposure to new trade policies.
• Ikea’s new Oxford Street store opened this week after a lot of delays! This is good news for Oxford Street that has been suffering somewhat since Covid and I talk a bit more about this with Duncan on Episode 928 of the podcast this week 🎙️.
• Online marketplace eBay announced higher quarterly profits and revenues over Q1. It’s too early to tell how it will be affected by Trump’s tariffs at the current time.
• Shein is looking at a US restructuring as the “de minimis” loophole that it has been benefiting from for so long is going to close. It looks like its proposed London IPO is off as two corporate comms companies that it hired to support its flotation haven’t had their contracts renewed.
• M&S’s cyber attack nightmare is continuing and has wiped almost £700m off its valuation. It turns out that the company was already aware of the risks of such an attack but clearly it didn’t do enough to defend itself despite that. Disruption is expected to drag on for weeks. Meanwhile, Harrods became the latest retailer to be hit by a cyber attack but it seems that it hasn’t been as badly affected as M&S has.

IN CONSUMER GOODS NEWS…

• Coca-Cola sales were under pressure from Trump’s “America First” policies and suffered from the boycott of American products in Muslim countries (because of their stance on Israel) and places like Canada and Denmark (because of the tariffs and Trump’s talk of making Canada its 51st state).
• Adidas warned that Trump’s tariffs would mean that footwear prices would go up. Like many other companies, it decided not to raise its outlook for sales and profits this year.
• LVMH’s weakest division, Moët Hennessy, is going to cut employee numbers by 10% but it didn’t mention a timetable.

IN LEISURE NEWS…

• IN ACCOMMODATION – Airbnb saw its revenues rise in Q1 but thinks that they’ll weaken in Q2 because of economic uncertainty, Marriott announced plans to buy Citizen M hotels to broaden its “affordable luxury” offering. Profits at Premier Inn’s owner, Whitbread, fell thanks to higher costs and weaker bookings. It was mildly optimistic about bookings, though, as Europeans could avoid the US and do shorthall, staying in places like the UK instead.
  IN ENTERTAINMENT – Live Nation said it was on track for a record concert season as concertgoers continue to pay up for more shows in bigger venues.
• IN CASUAL DINING/TAKEAWAY NEWS – Starbucks saw a sharper-than-expected fall in quarterly global sales as the turnaround is taking time, Greggs is seeing a slowdown but is considering overseas expansion and founder of Deliveroo, Will Shu, could get a £172m payout if DoorDash succeeds in taking the company over. DoorDash has until May 23rd to make a firm offer.

• Microsoft beat Wall Street expectations for quarterly sales and profits due to ongoing demand for its cloud computing services and it also promised to shield its European operations from Trump interference. It wants to offer “digital stability” and offered to “uphold Europe’s digital resilience”.
• Apple managed to beat forecasts as concerned consumers stocked up on iPhones ahead of the tariff-powered price rises but the company estimated that it would take a $900m hit in the June quarter because of the tariffs. On another note, there was a very good article that explained in detail why iPhones can’t be built in the US. Clearly this is going to be very problematic for Apple given that the iPhone is still its core product – unless Trump somehow grants it special exemptions.
• IN AI – brands are becoming increasingly interested in optimising their appearances on AI chatbots such as ChatGPT because search seems to be shifting from “traditional” search engines these days. Are we seeing the ushering in of a new post-Search Engine Optimisation era??
• Sam Altman’s eyeball-scanning project, Worldcoin, will now be available in the US. Basically, it takes your biometric data in return for crypto tokens. The venture has yet to make a profit and it has faced resistance in a number of countries over security and privacy concerns.
• IN HARDWARE – IBM announced a commitment to invest $150bn in US manufacturing over the next five years, including $30bn for R&D for its mainframe and quantum computers. Amazon managed, at last, to launch its first batch of 27 satellites to kick off its broadband internet constellation, Project Kuiper. The idea is to become a credible alternative to SpaceX’s more established Starlink constellation.
• IN STREAMING & SOCIAL MEDIA – Spotify added another 5m paying subscribers over Q1 this year, which was more than the company had expected but its share price weakened due to a tricky outlook. Elsewhere, Meta outperformed market expectations with its Q1 results and raised capex forecasts for the full year in order to splash out on “additional data centre investments” to power its AI advance.

• IN BATTERIES – European battery makers including French Automotive Cells, Verkor and PowerCo are racing to help hit a target of Europe making 90% of EV batteries on the continent by 2030. I don’t believe they’ll succeed given how far ahead Chinese companies like CATL and BYD are and how much investment it would take to get these companies on level pegging, but I hope they prove me wrong!
• IN CAR MAKER NEWS – Chinese makers are now rethinking their European expansion ambitions because they’ve come up against some serious speed bumps in the form of tariffs of up to 45% on Chinese EVs imported to the EU. The EU tariffs have already had an impact – Chinese carmakers’ group share of new EVs in Europe fell from about 50% pre-tariffs to 30% post-tariffs. There was a bit of a kerfuffle about Tesla as rumours emerged that the company’s board were looking for a new CEO but then it was forced to deny it (Duncan and I talked about this on Episode 929 of the podcast 🎙️). Even if Musk is not able to return “full time” to Tesla, it’s better to have some access to him than none! Meanwhile, Aston Martin slashed car exports to the US until it gets more clarity about Trump’s tariffs.

• IN FINANCIALS – IN BANKS – Morgan Stanley is now thinking about offering crypto trading on its ETrade platform, given the increasingly pro-crypto backdrop of Trump’s administration, Spain’s antitrust watchdog just approved BBVA’s €11bn hostile takeover bid of Sabadell, Lloyds Banking Group saw its profits slip in anticipation of a rise of bad loans resulting from Trump’s tariffs and Barclays got a Q1 boost from investment banking revenues. There was an interesting article on chatbot Rogo that aims to take the donkey work out of investment banking. It’s already been road-tested in a few investment banks and it could well reduce the number of junior bankers…IN PRIVATE EQUITY – big investors are now having to use “net asset value loans” that use their stakes in PE funds as collateral to borrow money. This is because PE firms are having difficulty offloading assets onto a market that isn’t doing much on the IPO front. Meanwhile, KKR reported its first quarterly loss since 2022 because of the shocking performance of its Global Atlantic insurance business…ELSEWHERE, the FCA is calling on Big Tech to stop finfluencers flipping between social media accounts to continue promoting unauthorised financial schemes or businesses.
• The UK foreign office has now warned senior British lawyers that they could face sanctions by the Trump administration for giving advice to the International Criminal Court on Israel’s behaviour in Gaza.
• Andersen, the tax and consulting business that rose from the ashes of disgraced accounting firm Arthur Andersen has filed for an IPO in the US with the  SEC.
• UPS announced plans to cut 20,000 jobs (it currently employs about 490,000) after deciding in January to reduce the number of packages it delivers for Amazon. Amazon had accounted for about 12% of UPS’s revenue. Like many other companies recently, it decided not to update the forecasts for the full year because of Trump tariff uncertainty.

My fave video this week was the one about Steve’s Lava Chicken…weird, yes, I know…