Watson’s Weekly 17-01-2026

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…

• IN IRAN – tensions rose over the weekend as Donald Trump signalled that the US was considering military operations in Iran. He said he was prepared to “rescue” Iranians and would hit the country “very hard where it hurts”. Unrest inside Iran continued to intensify despite a harsh security crackdown. Iran’s president said the government was open to listening to concerns but blamed “rioters”, the US and Israel for stoking unrest. These protests represent the biggest domestic challenge to Iran’s Islamic regime in years. US military intervention would be far more complex in Iran than in Venezuela so diplomacy is seen as the most likely way forward. By the end of the week, it seemed that tensions had “de-escalated”, according to governments in the region.
• IN VENEZUELA – Trump has vowed to cut off Cuba’s oil supply from Venezuela unless Havana strikes a deal with him. He also threatened to block ExxonMobil from operating there after its CEO described the country as “uninvestable”. Trump wants western oil companies to invest at least $100bn to rebuild Venezuela’s oil sector. On the other hand, SLB, the world’s largest oilfield services company, looks set to benefit first, with talks under way to expand operations alongside Chevron and others. Also, the first Venezuelan crude sale went to Vitol, whose senior trader donated heavily to Trump’s campaign. We also saw that opposition leader María Corina Machado handed Trump her Nobel Peace Prize medal but won no concessions, as he continues to deal with Maduro’s government – and not her. There’s a lot of scepticism from oil companies about getting on board Trump’s oil gravy train given the failure of previous American interventions elsewhere and the long term reliability of any deals signed now.

IN TARIFF NEWS…

• Trump announced a 25% tariff on countries doing business with Iran. This is likely to hit China, India, Turkey and Pakistan particularly badly.
• The White House also unveiled tariffs taking a 25% cut of Nvidia and AMD chip sales in China in the latest example of Trump’s highly transactional approach.

IN TRADE NEWS…

• Maersk decided to resume shipping through the Red Sea and Suez Canal. This suggests confidence that the Gaza ceasefire will hold. The move could speed up global trade but may also expose shipping overcapacity and put pressure on freight rates.

IN TRUMP THINGS…

• RE TRUMP’S ASSAULT ON THE DEFENCE INDUSTRY – investors have been left uneasy about Trump’s suggestion that defence companies should be barred from paying dividends or buying back shares and instead be forced to reinvest in production. Thus far, he hasn’t provided any real detail on how performance would be judged or penalties enforced. Trump’s focus on defence giants perhaps reflects concerns that the US could run out of key missiles within days of a war with China. Maybe that’s why he said last week that he wanted to increase US defence spending by 50% by 2027. Meanwhile, the Pentagon announced a $1bn investment in the missile motor unit of defence group L3 Harris, aimed at boosting supplies for systems such as Patriots, Tomahawks and THAADs. That unit will be spun off in an IPO expected in the second half of 2026.
• RE GREENLAND – tensions continued. Britain is in talks with Nato allies about increasing its Arctic presence, while NATO’s silence on Trump’s Greenland threats has rattled European allies. Talks between the US, Denmark and Greenland subsequently took place for the first time since Trump floated the idea of buying Greenland in 2019. While there was “fundamental disagreement” and no breakthroughs, the three sides agreed to form a working group and agreed to meet within weeks. Meanwhile, several Nato countries – including Germany, the UK and France – have committed to providing more permanent troop deployments in Greenland, officially framed as solidarity with Denmark rather than a response to Trump. Troop numbers appear to be more of a token effort at this stage.
• RE IMMIGRATION – the administration is sending hundreds more federal agents to Minnesota to deal with protests following the killing of an American citizen by an ICE agent. And while we’re on the subject of immigration, the US will pause immigrant visa processing for nationals of 75 countries, including Russia and Iran, from January 21st. The move is ostensibly designed to limit applicants deemed likely to rely on welfare and applies to immigrant visas only. Entering the US continues to get harder.
• RE TRUMP’S PURSUIT OF JAY POWELL – prosecutors launched the criminal investigation into Federal Reserve chair Jay Powell over the $2.5bn renovation of the Fed’s headquarters. To me, much of this — from Venezuela to Greenland to Powell — feels like distraction amid weakening poll numbers. The probe has united Fed officials, alarmed even senior Republicans, and drawn criticism over threats to central bank independence, with echoes of the inflationary mistakes of the 1970s. Global central bankers have rallied behind Powell, praising his integrity. The unnecessary drama continues…
• RE ENERGY – the administration is pushing a plan that would force big tech companies to fund their own power plants via long-term contracts. It’s another sign that Trump is wary of the strain data centres place on power grids and the political fallout from rising household utility bills.

IN REGIONAL / INDIVIDUAL COUNTRY NEWS

GLOBALLY – it seems that the world is increasingly scrambling to decouple from the US. Attempts to placate Trump have proven unreliable, forcing countries to rethink trade and security relationships. There is no precedent for a dominant power voluntarily retreating from leadership and the uncertainty is driving some remarkable shifts. South Korea, Germany, Australia, Poland and Canada are openly discussing nuclear weapons, the UK is exploring a “reset” with Europe, and Canada is reprioritising ties with China given that nearly 75% of its exports go to the US. Europe has struck a free trade deal with Mercosur, China wants to join the Trans-Pacific trading bloc and central banks are buying more gold, reducing demand for dollars. Over time, countries may decide Trump appeasement simply isn’t worth it, gradually weakening America’s global influence as alternatives emerge although that’s going to take a very long time.

THE AMERICAS

• CANADA – Canada’s prime minister met Xi Jinping in Beijing this week to repair ties, marking the first such visit since 2017. With Trump’s hostility towards Canada growing, Mark Carney is seeking to deepen relations with China as part of a plan to double exports to non-US markets over the next decade.

ASIA

• CHINA – China’s trade surplus hit a record $1.2tn in 2025, smashing expectations as exports boomed despite Trump’s trade war. For the first time, the surplus breached $1tn as China diverted exports that would have gone to the US to Europe and south-east Asia instead. This helped it to expand its global manufacturing market share. Although China’s export strength is impressive, weak domestic demand is still a concern.
• JAPAN – stocks surged to record highs after PM Takaichi hinted at holding a snap election. Investors piled into the “Takaichi trade”, betting on further stimulus that weakens the yen and boosts equities despite Japan’s debt-to-GDP ratio standing at a whopping 232%! Takaichi is seeking a stronger mandate to push through policy, taking advantage of her popularity among the electorate.

IN EUROPE

• The EU wants to secure a so-called “Farage clause” in Brexit reset talks, which would require the UK to compensate the bloc if a future government reneges on any agreement. While controversial, it cuts both ways and negotiations are ongoing.
• IN RUSSIA – concerns that lower oil prices will cripple Russia may be overstated. Despite pressure on revenues, Russia’s low debt-to-GDP ratio (just below 20%) and manageable annual spending deficit (about 3.5%) give it room to cope in the short term, particularly after years of adapting to sanctions.

IN THE UK

• UK borrowing costs fell to their lowest level since December 2024, easing pressure on public finances and putting Reeves on track to reduce the deficit below 2% by 2029-30. The economy also grew by a better-than-expected 0.3% in November in a rare piece of good news! Labour revived plans for Northern Powerhouse Rail with a £45bn pledge, though scepticism remains over delivery.
• Starmer has backed away from mandatory digital IDs for workers, allowing alternative forms of identification. It adds to a growing list of U-turns that risk undermining government credibility. Talking of which, Reeves also hinted that recent pubs-related tax U-turns could be extended to other hospitality firms in yet another example of the government backing down! The business rates system also came under fire for being fundamentally flawed, discouraging investment and expansion.
• Concerns were raised about the UK’s over-reliance on Chinese clean-energy supply chains, potentially putting 90,000 jobs at risk, though diversification would be costly and slow. On a brighter note, contracts for eight new offshore wind farms were awarded, boosting net-zero ambitions.

IN COMMODITIES NEWS…

• OIL – Trump’s move to control Venezuelan oil is worrying OPEC, potentially shifting power to buyers and capping prices, although some producers may benefit as China looks elsewhere to source its oil.
• GOLD & OTHER METALS – gold surged to record highs above $4,600 as investors sought safety amid Trump’s attacks on the Fed. Silver, copper and tin also hit new peaks – a rare simultaneous rally reflecting mounting global uncertainty.

IN BUSINESS TRENDS…

• UK business sentiment ended 2025 on a weak footing. A BDO survey showed confidence dropping sharply to its lowest level in almost five years, while the latest KPMG-REC data contradicted Starmer’s upbeat claim that people were about to feel richer again. Both permanent and temporary hiring fell in December. Manufacturers are also sounding the alarm – a Make UK survey found that 90% of firms expect employment costs to rise this year and 66% anticipate higher energy bills. That being said, although the unemployment rate rose to 5.1% in the three months to October – the highest rate in almost four years – the number of economically active people increased by 643,000 in the first nine months of 2025 compared with a rise of just 280,000 in unemployment. This suggests an increase in labour supply, which could be an early positive signal. So maybe things aren’t all bad??
• It looks like the vegan boom is collapsing. What began in the mid-to-late 2010s – most memorably with Greggs’ vegan sausage roll in 2019 – is clearly losing momentum. NIQ data shows fewer households buying plant-based meat alternatives, as flexitarians drift back towards animal protein. Supermarkets and restaurants have been reining things in and veganism seems to have lost its mass appeal.

INVESTMENT NEWS / TRENDS…

• IN IPO NEWS – Czechoslovak Group – one of Europe’s largest ammunition makers – is preparing for a potential €30bn listing in Amsterdam, which will be a useful test of investor appetite for defence stocks.
• IN M&A NEWS – Netflix is reportedly considering upgrading its $72bn bid for Warner Bros Discovery’s studios and HBO Max into an all-cash offer while Paramount Skydance continues to push its own proposal.
• Elsewhere, OpenAI has agreed a $10bn infrastructure deal with chip start-up Cerebras to secure computing power through to 2028 as it looks to diversify its hardware supply. Coca-Cola has meanwhile abandoned plans to sell Costa Coffee after failing to secure its £2bn asking price, highlighting how tough conditions remain in the crowded coffee market.

IN EMPLOYMENT TRENDS…

• Germany’s defence sector continues to hire aggressively, led by firms such as Airbus and Rheinmetall, while drone specialist Helsing has expanded headcount dramatically. However, hopes that displaced automotive workers would move across at scale have yet to materialise in a meaningful way.
• McKinsey is trialling the use of its AI chatbot, Lilli, in graduate recruitment, testing candidates on how effectively they can work with AI. I think that this is a sign of where hiring is heading. Surely using AI effectively in the workplace will be a key skill to have!
• Meanwhile, Sadiq Khan has warned that AI could drive “mass unemployment” in London, particularly in white-collar and entry-level roles. Some believe that the fears are overblown. My view is that the impact will be significant but gradual – and in many areas could actually increase the value of human-first services.
• Anthropic’s new Claude Cowork chatbot shows how vulnerable remote “laptop jobs” may be, as AI tools increasingly replicate routine white-collar tasks.

IN FINANCE NEWS…

• BANKS – US credit card stocks fell after Donald Trump called for a 10% cap on interest rates, well below the current average of around 20%. Capital One and American Express were among those hit after Trump said the cap should run for a year from January 20th. Banks warn that such a move would restrict credit availability, particularly for lower-income borrowers, while Lex suggests Trump may be applying pressure to force banks to justify high rates rather than actually imposing the cap, which would be hugely disruptive.
• JPMorgan reported weaker Q4 profits due to a charge linked to taking over Apple’s credit card programme and softer investment-banking fees, although strong trading revenues took the edge of some of this. Even so, JPMorgan’s share price has doubled over two years and capital markets activity remains strong. Having said that, Goldman Sachs and Morgan Stanley bucked the trend with strong Q4 results as dealmaking surged.
• ASSET MANAGERS – Meanwhile, BlackRock beat profit forecasts, lifted its dividend and expanded buybacks as assets hit a record $14tn on strong inflows.

IN TECH NEWS…

• AI – Microsoft has warned that China is winning the AI race outside the West. Brad Smith said Chinese AI firms are overtaking US rivals in attracting users across Asia, Africa and parts of central Europe, helped by lower-cost “open” models and generous state subsidies. DeepSeek, in particular, is gaining traction in emerging markets and is expected to launch a new model before the lunar new year. The AI industry is increasingly splitting into two camps: open-model players such as DeepSeek and tightly controlled ecosystems like OpenAI, Google and Anthropic.
• Competition for users is clearly intensifying. OpenAI is expected to run another Super Bowl advert, following its debut paid campaign last year, as part of a wider push to attract users. With 60-second slots costing around $16m, it underlines how AI companies are increasingly turning to traditional advertising as rivalry heats up.
• Regulatory pressure is also rising. The UK government is set to criminalise the creation of sexualised non-consensual AI images, while Ofcom will gain new powers to act against platforms hosting such content. Adding to the controversy, xAI is being sued by the mother of one of Elon Musk’s children over alleged fake sexual images created without consent. Oh the irony!
• Meanwhile, Google is pushing personalisation. Its Gemini chatbot will start using emails, search data and YouTube history to deliver more tailored responses, initially for US premium users before wider rollout. While this raises privacy concerns, many users may welcome better answers if data is handled securely.
• AI hype remains strong. German customer-service AI start-up Parloa raised $350m, tripling its valuation to $3bn, with major clients already on board. Customer service is emerging as one of the first AI use cases delivering clear financial benefits.
• HARDWARE – Apple has chosen to sit out the AI model arms race and instead position itself as kingmaker by partnering with Google’s Gemini to improve Siri. This potentially sidelines OpenAI, which has been working with Apple in its “Apple Intelligence” projects.
• SOFTWARE – Alphabet hit a $4tn valuation on AI optimism after news that Gemini will power parts of Siri, highlighting how central AI has become to big tech valuations.

IN MEDIA & SOCIAL MEDIA…

• IN MEDIA –YouTube has overtaken the BBC in audience size for the first time, raising fresh questions about the viability of the licence fee and the BBC’s future funding model. The BBC is also seeking to have Donald Trump’s $10bn lawsuit thrown out.
• IN ADVERTISING – Google is rolling out personalised shopping ads within its AI tools, marking a shift away from traditional sponsored search.
• IN SOCIAL MEDIA – calls are growing louder for tougher rules on children and social media, while X has scaled back Grok’s controversial image features after a backlash. Musk insists the problem lies with users but the controversy may have stoked his notoriety!

IN RETAIL NEWS…

• UK retail had a pretty underwhelming “golden quarter”. Food retailers such as Tesco, M&S and Sainsbury’s performed well, but fashion and general merchandise struggled badly amid heavy discounting, weaker footfall and fierce competition. Only a handful of names, like Next, emerged as clear winners, while others such as Primark and Argos disappointed. Claire’s Accessories and LK Bennett could even disappear.
• In the US, Abercrombie and Urban Outfitters posted decent year-end sales but still saw their share prices fall because the numbers came in below market expectations. Investors remain cautious about how consumers will behave in the months ahead.
• JD Sports is planning to let shoppers make one-click purchases via AI platforms such as ChatGPT and Microsoft Copilot, initially in the US. This feels like a sign of where retail is heading as more companies look to monetise chatbot-led shopping journeys.
• M&S continues to look like it’s doing many things right after recovering from last year’s cyber attack and intense competition. It feels as though the retailer is back on track and potentially stronger for having navigated recent challenges.
• There was rare good news for department stores with Fortnum & Mason reporting bumper profits as shoppers splurged on “affordable treats” over Christmas.
• LUXURY – European luxury groups are facing stiffer competition in their biggest markets as local brands gain ground in both the US and China. Chinese labels and American brands like Ralph Lauren and Coach are performing well, forcing European houses to rethink pricing, refresh products and better appeal to Gen Z shoppers.
• Russell & Bromley’s owners are considering selling the business after struggling to fund a turnaround, raising the prospect of high-street closures.

IN LEISURE NEWS…

• AIRLINES – Delta expects earnings to jump by around 20% as it focuses on premium and corporate travel, though rivals are chasing the same customers. Boeing has also beaten Airbus on order numbers for the first time this decade despite all the former’s well-documented quality control issues!
• PUBS – the government’s latest Budget U-turn may help pubs, but profitability remains dire. Ultimately, pubs need customers through the door. Stonegate is restructuring to cut costs, which looks like a sensible move in tough trading conditions.

• IN REAL ESTATE – UK estate agents are feeling more optimistic about home sales than at any point since October 2024, according to the latest RICS survey. Falling interest-rate expectations and the fading of Budget-related uncertainty are expected to lift buyer confidence and support housing activity this year. There is also debate about the effect an unintended side effect of spending heavily on weight-loss drugs – that it could adversely affect how much mortgage applicants can borrow! Some brokers warn that £200–£300 per month on such medication may be treated as a committed outgoing in mortgage affordability checks, potentially reducing a first-time buyer’s borrowing capacity by up to £20,000! Definitely food for thought.
• IN AUTOMOTIVE NEWS – the automotive industry is pushing back against plans to introduce a per-mile tax on EVs from 2028. AutoTrader reckons that it could deter nearly half of potential buyers, particularly those from lower-income households, at a time when EVs still carry a price premium over petrol cars. McLaren has received a $2bn cash injection from its Abu Dhabi owner, strengthening its position after cutting inventory and tackling quality issues. With backing in place, expansion beyond supercars now looks likely.
• IN PHARMACEUTICALS – Pharma dealmaking is expected to accelerate as patents covering around 12% of industry revenues near expiry. Merck’s talks to buy Revolution Medicines underline the trend. Meanwhile, AbbVie struck a $100bn investment deal with the Trump administration in exchange for pricing and tariff concessions – a sign that big-ticket political bargains may become more common.

My favourite video of the week was the one with the competitive firefighter! He made something very difficult look very easy!