Watson’s Weekly 10-05-2025

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/DEFENCE NEWS…

• India launches military strikes on Pakistan in response to the deadly attacks on tourists in Indian-administered Kashmir on April 22nd. Pakistan vowed to retaliate. The US doesn’t appear to be all that interested in mediating – but someone should because both sides have nukes!
• The US now wants the UK to be more focused on the Euro-Atlantic region and back off from the Indo-Pacific region in a reversal of the emphasis of the Biden administration. Meanwhile, France and Germany held talks about setting up a joint security council. This sounds like a positive development given America’s recent shift.

IN TARIFF NEWS…

• Trump chose a new target this week – the film industry! He is talking about slapping 100% tariffs on films made abroad. This would hit the industry hard after it is still recovering from the havoc wreaked by the pandemic and could be disastrous for key production hubs like the UK. Trump has a point in that places outside America have benefited from offering generous tax breaks but it seems strange that he’s attacking an industry which is actually in surplus. Duncan and I talk about this in Episode 931 of the podcast 🎙️. This is the first time he’s attacked a service industry and it’ll be difficult to tax given how complicated the financing is. You do wonder how this might affect the recently-announced Universal Studios project in the UK. Talking about theme parks, Disney announced plans for a new park in Abu Dhabi but no dates were mentioned.
• IN TARIFF CONSEQUENCES – Mattel said it would increase prices and it withdrew its full year forecasts, Ford’s Q1 performance dropped sharply and it also suspended its guidance for the full year while research from EY showed that there was a big increase in UK-listed profit warnings last month versus April 2024 thanks to tariff uncertainties and general economic disruption. Listings and M&A have also been delayed. Leaders of major European and UK companies are counting the cost of the US trade war and more of them are scrapping or suspending their forecasts because of all the uncertainty. On a more individual basis, research by the Society of Pension Professionals shows that some people are having to put off their retirement plans because their pension pots could take a hit of up to 20% as a direct result of the effect of Trump’s tariffs on the market. This is just one example of how “macro” news filters through to the real world!

IN TRADE NEWS…

There are a lot of talks going on at the moment!

• The US and China are set to hold their first trade talks since Trump launched his trade tariff broadside against China that decimated markets. The two sides are to meet in Geneva this coming weekend.
• The UK and India struck a trade deal after three years of negotiations! It involved easing labour restrictions between the two countries and a reduction of whisky, gin and car tariffs.
• The US and UK signed the first trade deal with Trump since he instigated his trade war. Much was made of this “landmark” deal, but we’re still worse off than before he came to power. It’s a win for PM Starmer, though, because now he’s bagged two high-profile trade deals in a week. Next up – the EU. I guess the key here will be how “good” this deal is versus what other countries manage to get. FWIW, I think that we need to pay attention to any deal – and attached conditions – with China because I think that will set the tone for everyone else. Overall, the deal was good for cars, a bit of aerospace and possibly pharma with a bit of agricultural. Details are to be hammered out.

I wonder whether Trump’s overall plan has been to shock everyone into a reset, showing what the “worst-case scenario” could look like to get them to the negotiation table and then agree individual deals which he will claim as a victory. I guess this takes the faff out of negotiating multi-party trade deals and gives Trump ultimate flexibility because he can change his mind if he doesn’t like what he sees. If this is the case, then I think it will work – but the cost will be that no-one will trust the Americans any more.

IN TRUMP THINGS…

• The battle against Harvard continues as Trump’s administration is going to shut off Harvard’s eligibility for new federal government research grants. You do wonder how long Harvard will be able to survive this onslaught.
• Trump proposed raising income taxes on the wealthy in order to help finance broader tax breaks being discussed in Congress. This is notable because such a move is more akin to what the Democrats would do. Discussions are ongoing.

IN INDIVIDUAL COUNTRY NEWS…

• THE US – the Fed voted unanimously to keep US interest rates unchanged in the 4.25-4.5% range. Its interest rate setting group, the FOMC, justified this by saying that “Uncertainty about the economic outlook has increased further”
• CANADA – new PM Mark Carney paid his first visit to the White House and reiterated that Canada was “not for sale”, to which Trump replied “Never say never” 🙄.
• GERMANY – Friedrich Merz lost the vote needed to become chancellor on his first go, but kept everyone back for a second vote – which he managed to win. This just goes to show that he’s still got a lot of work to do to unify his party and his country! Duncan and I talk about Merz’s dramatic day on Episode 932 of the podcast 🎙️.
• THE UK – the Bank of England cut interest rates by 0.25 percentage points to 4.25% in its fourth cut since August last year. This was widely expected but two members of the MPC had voted to cut by 0.5 percentage points. Markets are currently pricing in more cuts…

IN CRYPTO…

• Trump’s crypto-friendly stance is garnering rising interest from European and Asian crypto companies. Deribit, OKX, Nexo, Wintermute and DWF Labs are among those interested in a US presence.
• …and then Coinbase announced that it would buy Deribit in a cash-and-shares deal worth $2.9bn.
• Meanwhile, it’s interesting to note that “insiders” seem to be making an awful lot of money by trading memecoins like $MELANIA. The FT has been looking into this and I suspect it’s going to find a lot of interesting things!

IN OIL NEWS…

• Oil prices weakened thanks to renewed concerns of global oversupply as OPEC+ announced production increases for the second month in a row.
• US oil output may have peaked as two big American shale producers – Diamondback Energy and Coterra Energy – announced that they would reduce capex as a result of ongoing sluggishness in oil prices.

IN ENERGY NEWS…

• Danish wind power developer Ørsted announced that it has decided to cancel plans for the Hornsea 4 project, one of the UK’s biggest offshore windfarms, because of booming costs in its supply chain. Milliband’s plans for net zero look even shakier than they already did and his suggestion for car parks across the UK to be turned into solar farms sounds a bit desperate.

IN CONSUMER TRENDS…

• UK consumer confidence hit its lowest level since December 2022 according to a Which? survey. Despite this, Britons have been snapping up holidays to the US as European and Canadian travellers are avoiding it, leaving more availabilities and the ability to enjoy a weaker dollar.
• Those exposed to US travel/leisure are getting very nervous about the outlook. Expedia is already seeing weaker demand to and from the US, something that rivals such as Booking and Trivago are also experiencing. Marriott Hotels have cut their full year outlook in expectation of a drop in travel demand although Q1 was OK. Rivals Hilton and Airbnb and airlines including Southwest, American Airlines and Delta have all become more pessimistic of late. Duncan and I talk about the concerns of America’s leisure sector players in Episode 932 of the podcast 🎙️.
• The FCA is on the verge of easing mortgage lending rules in order to make it faster, cheaper and easier to get a mortgage. It will also ditch guidelines for lenders dealing with interest-only mortgages and related advice. Banks cheered the new developments.

IN EMPLOYMENT NEWS…

• The European Commission is looking at making it easier for UK professionals to work in the bloc and vice-versa. A UK-EU summit is due on May 19th.

IN BUSINESS TRENDS…

• Resellers like ThredUp and RealReal look set to benefit from the growing appetite for used clothes and Trump’s tariffs making everything more expensive. That being said, both of the companies I just mentioned rely on consignments, which have high operating expenses. They are also in competition with Facebook Marketplace. I have mentioned recently TJX (owner of TK Maxx) as another potential beneficiary of the trends I just mentioned…

IN TECH & MEDIA NEWS…

• IN AI – OpenAI ditched plans to become a for-profit company and will remain under the control of a non-profit board. Altman denies this happened because of Musk pressure, but it’ll be interesting to see whether we get more detail as to why this occurred because it’s a pretty big U-turn! Elsewhere, Anysphere (which owns “vibe coding” app Cursor) closed its latest funding round which has given it a current implied valuation of $9bn and in the UK, the SRA approved a new AI law firm called Garfield Law which uses AI instead of lawyers to offer super-cheap legal services for businesses and individuals.
• IN CHIP/HARDARE NEWS – the US is on the verge of ditching a rule that the previous administration implemented to restrict exports of AI chips. The rule was supposed to come into force on May 15th but the Trump administration said that it was too complicated, rendering it “unenforceable”. Trump’s chums want to overhaul the rule instead. British chip designer Arm is the latest company to be hit by tariff uncertainty and said that it would be unable to provide guidance for annual revenues. Meanwhile, satellite images appear to show that Huawei is building a production line for advanced chips. China’s homegrown expertise in this area continues to advance…
• IN OTHER TECH NEWS – Alphabet’s share price took a hit as it emerged that Apple is looking at AI alternatives to Google’s search engine. Perplexity is one of the ones it’s looking at. This is bad for Alphabet because it pays Apple billions to be its default browser – and that helps to power its ad business. Talking of advertising, Applovin reported higher profits and sales over Q1 thanks to the ongoing growth at its ad business. Some analysts reckon that Applovin could be the next TikTok because of its powerful AI that can harvest data on app users and use it to target their ads. On the flipside of this, advertising company S4 put in a poor Q1 performance after issuing two profit warnings over the last year. The main reason for this is that tech clients are continuing to spend their money on AI rather than marketing. Meanwhile, TikTok is currently on a mission to convince advertisers that it continues to have a bright future in the US despite all the shenanigans surrounding its potential sale.

• 3G Capital bought Skechers in a $9bn deal. It looks good for Sketchers because they get a bit more certainty in a time of tariff uncertainty and it’s probably good for 3G Capital because it may have got a good price because of the uncertainty. Skechers’ share price is still 20% below levels reached four months ago despite 3G paying a premium to the 30-day average. Also, it only makes a third of its sales in the US, so has relatively little exposure compared to some rivals.
• DoorDash announced a formal all-cash offer for Deliveroo in a deal worth £2.9bn. This is quite an interesting deal given that there is very little operational overlap. It seems that the sector is consolidating – earlier this year, Prosus agreed a €4.1bn deal to take Just Eat Takeaway private.
• ABF is in talks with PE firm Endless to merge their bread brands. If the two got together, combined sales would be higher than those of Warburtons, a private and family-owned business.

• Ferrari demand in the US is still “hot” despite tariff-prompted price rises. The US is Ferrari’s biggest market and makes about 25% of its sales are there. Thus far it said that it has not received any cancellations in its order book.
• Ford announced price rises for the Maverick, the Bronco Sport and the Mach-E as a direct result of the tariffs. The announcement comes just days after it withdrew its 2025 outlook and against the backdrop of a fall in Q1 net income and sales.
• Rivian cut its forecasts for vehicle deliveries and increased its forecasts for capex for the full year in reaction to Trump’s tariffs.
• Chinese carmaker Geely decided to take its Zeekr EV unit private just one year after it listed on the NYSE. Geely blamed the “increasingly complex economic environment”.
• Amazon’s self-driving start-up, Zoox, plans to increase production next year ahead of the commercial rollout of its fleet of robotaxis in the US.
• Uber swung into a Q1 profit from making a loss a year earlier, but this still fell short of Wall Street expectations. Separately, Uber announced a JV with China’s Pony AI to roll out robotaxis in Middle Eastern markets.

• Berkshire Hathaway’s Warren Buffett announced his resignation as the company’s CEO and will hand over the reins to current vice-chair Greg Able. Wouldn’t it be amusing if someone with the surname “Willing” became co-CEO. That way you could say that there were two people Willing and Able to replace Bufffet. I thank you 🤦‍♂️. Anyway, this is a massive deal because Buffett is such a massive legend. Duncan and I talk about this in Episode 931 of the podcast 🎙️.
• There was an interesting FT article this week about how China’s COMAC, that is trying to take on the might of Airbus/Boeing with its C919 airliner, is still heavily reliant on US suppliers for key components. This is clearly problematic given the current China tariff situation. This could severely scupper its growth.
• IN PROPERTY/CONSTRUCTION – IWG (the owner of brands including Regus and Spaces) announced record sales in March, new signings and openings are proceeding apace and it reiterated its full-year guidance. Meanwhile, data from StuRents (often seen as “the Rightmove for student lettings”) shows that student dorm reservations have dropped for the next academic year in all of the UK’s biggest university towns and cities bar three! There’s still time for this to pick up but it’s worth monitoring. Meanwhile, UK construction activity has fallen for the fourth consecutive month, putting even more pressure on Rayner’s housing plans. It was also interesting to see that the ABI has expressed worries that some of Britain’s houses could be built in flood zones over the next five years, making them uninsurable.
• Wegovy maker Novo Nordisk decided to cut profit forecasts as prescriptions in the US, which is its biggest market, seem to have peaked as they haven’t changed since February. Ironically, its success has led to WeightWatchers filing for bankruptcy protection to cut its debt burden.
• Next raised guidance for the full year for the second time in two months thanks to unusually warm weather. Next continues to outperform expectations!

⚠️ DON’T FORGET – I recorded two podcasts over the last week with Carla Hoppe, the founder of Wealthbrite. The first one was about things you should pay attention to in business/financial markets news that have direct relevance to your personal finances, and the second one was about what you should pay attention to if you want to buy a property. These are both VERY relevant topics at the moment! I hope that you find these podcasts useful! ⚠️

*** ON ANOTHER NOTE, I recorded a podcast on Friday with Carla Hoppe, founder of Wealthbrite. In this episode, we talk about how commercial awareness crosses over with personal finances. Click here to listen 🎙️! ***

My fave video this week was the one about how to pronounce Irish names!