Watson’s Weekly 1-11-2025

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…

• Israel launched a strike on Gaza after accusing Hamas of breaching ceasefire conditions. I’d say that Trump was too quick in trying to claim the Nobel Peace Prize! The drama continues…

IN TRADE & TARIFF NEWS…

• Trump met with Xi this week in South Korea when he stopped off on his Asian tour. Trump talked a good game about progress but all he got was an agreement to sell some more soybeans and relax exports of Nvidia’s microchips. Meanwhile, China continues to hold all the cards with its stranglehold on rare earths and Trump seems to back down every time he makes a threat and the reciprocal action gets serious. World stock markets rallied on hopes of a thaw but there’s a long way to go yet.
• Trump said that he’s cut the 20% fentanyl tariffs on China that were originally imposed to force Beijing to limit the export of chemicals used to make the synthetic opioid that is central to the current opioid crisis.
• Trump raised tariffs on Canada by 10% in retaliation to the anti-tariff ad sponsored by the Ontario government. It had the desired effect as Ontario premier Doug Ford said that the ad campaign would be suspended as PM Mark Carney sought to re-engage in trade negotiations with its neighbour.

IN INDIVIDUAL COUNTRY NEWS…

IN THE AMERICAS…

• IN THE US – the Fed cut interest rates by 0.25% for the second month in a row but Fed chief Jay Powell said it wasn’t a given that there would be another cut at the next meeting despite the market thinking that there is a 90% of this happening! This might have been helped by US inflation hitting 3% for the first time since the start of the year, which was below market expectations. The ongoing government shutdown could cost the country dearly, according to the latest estimates by the congressional budget office. However, their estimates are so wide-ranging as to be pretty useless. Meanwhile, IMF forecasts suggest that US debt is set to overtake Italy and Greece in terms of percentage of GDP.

IN ASIA…

• IN CHINA – the latest official data showed that factory activity slowed down for the seventh month in a row. China has been relying on manufacturing and exports to drive economic growth to make up for the drag of its problematic real estate sector, so this isn’t great.
• IN JAPAN – Trump and Japan’s new PM Sanae Takaichi met and signed two agreements – one calling on both governments to “take further steps for a new golden age” and the other securing and investing in the supply, mining and processing of rare earths. Japan’s central bank kept interest rates on hold and the Yen weakened because it delayed a hoped-for interest rate rise.
• IN SOUTH KOREA – Trump gave South Korea the green light to build nuclear-powered submarines in Philadelphia, something that has not been on the table before because of concerns over proliferation. It’s interesting to note that South Korea’s KOSPI index is the world’s top-performing major stock index as it has climbed by over 66% this year thanks to a combination of big inflows of foreign investment, exposure to AI, reforms in corporate governance and booming exports.

IN EUROPE…

The ECB kept interest rates on hold despite concerns that inflation could rise, which would mean that the Bank would have to increase interest rates. This is the third meeting in a row that they’ve been left unchanged.

• IN RUSSIA – the Kremlin is apparently getting increasingly concerned about the possibility of a coup at a time where the economy is showing cracks. Businesses have been hit by high interest rates, government borrowing costs have boomed and pockets of protests have been breaking out. Financing its war in Ukraine is getting increasingly painful, especially since the US is putting pressure on its oil exports.
• IN THE NETHERLANDS – the liberal D66 party made major gains in the parliamentary elections and the gains it’s made suggest that there’s a swing away from the far-right. It’s not all over yet though because there’s a coalition to be put together…

IN THE UK…

• The OBR is on the verge of downgrading its productivity forecasts by 0.3 percentage points, greatly increasing the chance of big tax rises in the Budget. Fears are increasing about Reeves repeating the “once in a parliament” £40bn Budget raid.
• Supermarkets warned the chancellor that tax rises could push food prices up (they are particularly concerned about a mooted surtax on business rates that hinge on property size).
• Reeves is looking at scrapping the windfall tax on UK oil and gas in order to encourage oilfield development and unlock investment. The mood music certainly seems to be pointing that way…
• And while we’re on the subject of Rachel Reeves, it emerged that she breached housing rules by unlawfully renting out her family home without a licence. She used a lettings agency to rent out her family home after they moved into a flat in Downing Street when Labour won the election. This is a rather cynical way of looking at it, but it’s possible that Starmer could use this as an excuse to sack her if her Budget measures continue to get negative feedback. Getting someone new in would make it easier for the PM to go in a new direction.
• We heard that the FCA is going to make a further break with EU rules and allow anonymity for short sellers betting on a drop in a UK company’s share price. At the moment, EU rules mandate that all short positions above 0.5% of a company’s share capital be disclosed publicly but it looks like the FCA wants to move away from this and use a US-style lighter touch, allowing short-sellers anonymity. This is all part of trying to revive the appeal of the LSE.

IN COMMODITIES NEWS…

IN RARE EARTHS – the European Initiative for Energy Security called for the EU to invest in the critical minerals sector following China’s recent restriction of key material exports. At the moment, EU policymakers are trying to develop stockpiling strategies but it has limited mining and refining capacity.

IN OIL – Trump’s pre-election call to “drill, baby, drill” just isn’t happening because since he came to office, oil production has fallen, not risen! American shale companies are now facing low oil prices, a global oversupply and rising costs because of Trump’s trade tariffs. This means that there is now zero incentive for US shale oil companies to expand. Russia’s Lukoil unveiled plans to sell its international assets following the “introduction of restrictive measures against the company and its subsidiaries by some states”, in a clear reaction to America’s new sanctions. Lukoil is a private company and it will have to sell its international assets by November 21st otherwise it’ll get caught up in sanctions.

IN GOLD – the price fell below $4,000 as some said that that the commodity is entering a “correction” phase. However, it seems to me that the drivers of the gold price have not gone away – there’s still high government debt, geopolitical instability and nervous investor sentiment – so I wouldn’t be surprised to see it get back on track again.

IN COPPER – prices hit record highs this week due to the cumulative effect of Trump’s tariffs, disruption at big mines and a slew of disappointing forecasts from big producers which have heightened fears of a supply shortage. Demand is expected to rise, so the situation’s not likely to change anytime soon…

IN COCOA – companies using chocolate in their products have had to get creative with their recipes to maintain the taste but not use as much cocoa, the price of which has been high for a while now. That being said, chocolate makers are hopeful that 2026 will be a better year as next year’s crop is looking good so far. Prices are still high versus historical levels but at least they are now down from their peak.

IN ENERGY…

• IN NUCLEAR – the US government and Westinghouse struck a major $80bn deal to build a fleet of nuclear reactors funded by a trade agreement with Japan. The costs involved are considerably lower than the prices we’re seeing with Sizewell C at the moment, but then again it’s possible that they will ratchet up over time!
• IN WIND – the UK government is cutting down the predicted efficiency of wind turbines by over 25%, which is going to make Ed Miliband’s net zero plans look very shaky. The pressure’s piling on to delay net zero targets or lean more on fossil fuels!
• IN CRYPTO NEWS – the FCA’s decision to allow the sale of crypto funds to retail investors has prompted a stampede from providers to offer products at knock-down prices to get the business. British crypto company KR1 announced ambitions to transition from the small cap Aquis exchange to the LSE’s main market in a push to broaden its appeal to institutional investors. Elsewhere, Coinbase saw its Q3 sales rise thanks to an increase in trading volumes. Revenues came in above market expectations.

IN INVESTMENT NEWS…

• It turns out that many of OpenAI’s recent $1.5tn-worth of deals have been done without the involvement of outside bankers and lawyers, instead opting to rely on in-house execs to get them done. Meanwhile, the recent structural overhaul will enable the all-powerful Sam Altman to raise cash from pretty much whoever he wants. By straddling both the for-profit and non-profit arms of the company, he will have a free hand in picking which models host his AI models and developing new products and devices.
• Big Tech companies including Google, Meta and Microsoft have just been throwing money at AI infrastructure over the last quarter and Zuckerberg in particular is going all in. We’ll just have to wait to see whether it will all be worth it!
• Nvidia announced that it would invest $1bn in Nokia as the two companies committed to work together on incorporating AI into telecoms networks. They will also collaborate on data centre infrastructure.
• IN M&A – Nelson Peltz offered to buy London-based money manager Janus Henderson via his Trian group, which already owns about 20% of Janus Henderson. Janus Henderson will now weigh up the offer.
• IN IPOs – Shawbrook had a solid IPO this week on the LSE, setting the stage for the next “big” listing – that of Princes Group. Meanwhile, OpenAI is thought to be getting ready for a $1tn stock market flotation, the passage of which has been smoothed by successful talks between Sam Altman and the Californian Attorney General.

IN TECH NEWS…

• Apple hit a $4tn valuation thanks to strong demand for its latest phone – and it reckons that there’s more to come this quarter!
• Amazon reported its strongest quarterly growth in almost three years thanks to a particularly strong performance from AWS but it also announced that it would cut 14,000 corporate jobs as it stated the need to be “organised more leanly”.
• IN CHIP NEWS – Nvidia became the first company in the world to hit a $5bn valuation, the equivalent of Germany’s annual GDP! It also announced a new interconnect product, called NVQLink, that links quantum processors to the AI supercomputers they need to operate effectively. Nvidia supplier SK Hynix announced that it had already sold next year’s production of chips while Samsung also put in a strong Q3 performance thanks to the AI boom driving chip demand. This is especially welcome for Samsung because it’s just come out of a period of four consecutive quarters of decline. Elsewhere, Qualcomm launched a new AI chip to rival Nvidia, sending its share price up strongly. Saudi Arabia’s Humain, the AI company backed by the kingdom’s PIF sovereign wealth fund, is going to be Qualcomm’s first customer.
• IN AI NEWS – OpenAI’s restructuring into a for-profit and non-profit entity helped to power Microsoft’s valuation above $4tn because Microsoft owns a hefty chunk of OpenAI. California-based Character.ai has become the first large AI company to ban under-18s from talking to chatbots on its platform. It said that it would phase access out completely by November 25th.There are increasing calls for something to be done about teen access to limit the incidence of self-harm and suicide.
• IN DATA CENTRES – there was another example of a tech company bringing its own power as Google announced a partnership with NextEra Energy to reopen the Duane Arnold Energy Centre, a nuclear power plant that closed five years ago, to power its data centre in Iowa.
• IN SOCIAL MEDIA – Grindr got an offer by existing shareholders to take it private, Reddit saw strong revenues for Q3 thanks to higher advertising revenues (this was in stark contrast to veteran agency WPP that had seen ad revenues fall) and it looks like a final deal on TikTok is nearing, but we’re not quite there just yet!

IN MEDIA NEWS…

• Universal Music agreed a deal with AI music generator Udio about the use of its songs. Udio will launch a new platform that’s trained on licensed songs and subscribers to the platform will be able to use them to create remixes and customised tracks.
• Virgin Media O2 announced a partnership with Starlink in what is the first deal of its kind that will enable customers to automatically connect phones via satellites where there is no standard mobile signal. The new service is due to launch in the first half of next year and will be called O2 Satellite.

IN EMPLOYMENT TRENDS…

• UK job vacancies dropped to their lowest level this year, according to data from Adzuna. Employers are just battening down the hatches in expectation of a Budget nightmare.
• Ministers are going to meet up next week to see what they can do to end the illegal gig economy where illegal immigrants have been able to work for delivery companies (and other gig companies) because they’ve been classed as self-employed contractors, and therefore not been subject to stringent work eligibility checks.

IN CONSUMER TRENDS…

• IN THE US – despite recent signs that consumers are in difficulties at the moment, the latest figures from Visa say otherwise! Visa’s revenue increased in the latest quarter thanks to decent consumer spending, which drove payment volumes higher. Both discretionary and non-discretionary spending rose in the US while e-commerce spending also increased while travel spending rose to pre-Covid levels. Consumer spending increased at the fastest rate for Visa’s highest-earning customers.
• IN THE UK – consumers are really noticing price rises in their grocery shop and shrinkflation is continuing. Private rent is now so expensive that it’s taking up 44% of the average monthly wage and there was an interesting article in the FT saying that even if the government hits its target of building 1.5m new hopes this parliament, it’s not a given that people are going to want to buy them because of affordability issues.

IN RETAIL NEWS…

• Next has done it again – it’s going to upgrade its full-year profit forecasts in anticipation of a decent Christmas quarter! This will be the fourth time the company has increased its forecasts in eight months!

IN CONSUMER GOODS NEWS…

• Crocs had a lacklustre Q3 but it says it’s positioning itself for subsequent growth. It’s cut promotions and inventory, will launch new products and spend more on marketing.
• Puma announced that it would be cutting 900 jobs as the company engages in efforts to close the gap with Nike and Adidas. This is in addition to the 500 jobs cuts it already made this year.

IN LEISURE NEWS…

• Chipotle cut its sales forecasts for the third time this year thanks to rising costs pushing budget-conscious customers away. Consumers continues to cut down their spending on dining out.
• Turnaround efforts at Starbucks are starting to come through as sales for the latest quarter were flat, which is good news after six consecutive weaker quarters.

IN AUTOMOTIVE TRENDS…

• The US looks like it will lose more ground to China as it continues to de-emphasise EV development. According to research by US Clean Investment Monitor, EV-related investments fell by almost a third over the quarter versus the same time period a year ago.
• GM announced that it would be laying off over 3,300 EV workers in the US as it de-emphasises the importance of EVs in its business mix.

IN TRAD CAR NEWS…

• Mercedes-Benz saw its profits fall thanks to a combination of restructuring costs, sluggish China demand, US tariffs and the potential impact of car finance mis-selling in the UK. That being said, it did keep its full year forecasts unchanged, presumably because it lumped all the bad stuff into this quarter.
• Aston Martin saw its losses balloon by 800% as it felt the full force of Trump’s tariffs and weaker demand in China.
• VW warned of a €5bn tariff hit thanks to higher costs and falling US sales. Rivals have managed to minimise the potential US tariff cost impact by taking steps to expand production in the US but VW reckons that it’ll continue to feel repercussions from these tariffs despite a trade deal between the US and EU.
• Nissan said it would pool its carbon emissions with BYD to avoid EU penalties in a deal reminiscent of Tesla in the old days…

IN EV NEWS…

• BYD saw its profits fall by 33% thanks to weak domestic demand. This highlights the need for the company to push hard in overseas markets!
• Tesla had to recall thousands of Cybertrucks because their headlights had been falling off! Separately, Tesla’s chairwoman urged shareholders to support the suggested $1tn pay package for Musk in order to retain his services.
• EU carmakers are getting increasingly concerned about what’s happening at Nexperia and want clarity. Makers are currently eating into stockpiles of chips, but that’s not going to last forever and could end up halting production if nothing’s done.

• The FDA said that it will accelerate approvals for generic versions of complex biological medicines. Crudely speaking, the FDA has the power to approve drugs. This could be very damaging to pharma companies who rely on getting exclusivity to make money as that window looks like its going to get smaller…
• Novartis agreed to buy rare disease-focused biotech Avidity Biosciences for a 46% premium to the company’s closing price on Friday. At $12bn, it is the company’s biggest acquisition in over ten years!
• A bidding war is breaking out as Novo Nordisk butted in to Pfizer’s attempt to buy US biotech Metsera for $7.5bn. Metsera had already agreed to the Pfizer deal but likes what it’s hearing from Novo Nordisk. It makes a treatment that helps prevent patients getting “Ozempic face”.

My fave video this week was the one that I wish was true and not AI-generated! Do you think it’s AI-generated??