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 BIG PICTURE NEWS...
Trump threatens and relents while Iran pushes back and the world reacts
IN WAR NEWS…
WHAT HAPPENED – Trump talked a good game about positive diplomatic developments to end the Iran war (but prepared to deploy some troops from the Army’s 82nd Airborne Division to the Middle East) and then extended the talks deadline following his most recent “or else” threat about him potentially bombing Iran’s key infrastructure. He said that the energy shock will be “short-lived”.
From Iran’s side, the country threatened to retaliate if the US/Israel attacked its power plants and then said that non-hostile ships were OK to travel up the Strait of Hormuz unmolested as the hard line leaders showed that they would not give in easily to US pressure.
All the while, Putin is thought to be making $760m a day from oil so it’s no wonder that he’s supplying drones to Iran, no doubt to make the war last longer!
WHAT WERE THE IMPLICATIONS? Well the OECD reckons that US inflation will surge to 4.2%, largely because of the impact of rising energy prices and that the UK will suffer the biggest hit from the war among the G20 countries.
On a broader basis, the Iran war could derail the AI boom because of the high energy demands of datacentres and because the materials go into component parts for datacentres (like helium, for example) are facing bottlenecks. It could cause a food crisis as fertiliser shortages look likely and sulphur flows are being hit (bad for fertilisers but sulphur is also used for the processing of copper, cobalt and nickel – all of which are used in EV batteries). Oil and gas company deal-making has been put on hold because of the uncertainty (although some projects that are already underway are moving forward). The IEA reckons that the current Iran energy crisis is “worse than the 1970s and Ukraine war combined“ and while the repercussions are spreading around the world, it’s possible that Canada and Norway could come to the rescue.
On an individual company basis, EasyJet said that bookings were falling, Next warned that prices could rise (but they’re OK for the moment) and some global companies are thought to be re-evaluating their presence in the Middle East while Millennium, the hedge fund, is already moving some staff to Jersey.
IN TRUMP THINGS…
IMMIGRATION – Trump threatened to send ICE agents to US airports this week to ease long wait times caused by a partial government shutdown, which itself is being caused by Democrats refusing to fund the Department of Homeland Security in a protest against its heavy-handed immigration enforcement tactics. The impasse was eventually solved at the end of the week.
LEGAL ACTIONS – a US federal judge just blocked the Trump administration from punishing Anthropic for not allowing unfettered use of its tech in warfare, taking the company’s side in its assessment that the government’s designation of it as a “supply chain risk” could “cripple” Anthropic. He’s also getting bogged down by legal actions regarding his new tariffs.
THE NEXT TARGET – Trump seems to be gearing up for his next target to get the Venezuela treatment, Cuba, by cutting off its fuel supplies. The country was already in trouble. There’s a food shortage and if the power grid collapses, water supplies could be in trouble.
IN REGIONAL/INDIVIDUAL COUNTRY NEWS…
IN THE US – Lawmakers are pushing for “immediate action” by the US commerce department on the “large-scale diversion of advanced American AI chips to China” via south-east Asia. This could have a significant impact on Nvidia’s chip exports!
IN EUROPE…
IN ITALY – Meloni was defeated earlier in the week when she held a referendum on a governance overhaul for magistrates and judges. This is a set-back, but she’s achieved a lot in office thus far. Parliamentary elections must be held by December 2027.
IN DENMARK – the ruling party “won” the election but it was its worst performance since 1903 so Danish PM Mette Frederiksen will have to put a coalition together.
IN THE UK…
Inflation held steady at 3% – but this does not reflect the Iran war shock and is still considerably higher than the 2% target.
Some economists reckon that markets are wrong to predict interest rate rises this year. At the moment, markets are pricing in four interest rate increases by the end of 2026 but many economists reckon it will just stay where it is. Of course, this all depends on how long the war goes on for…
The government is now looking at ways to limit how high petrol prices can go as part of the whole cost-of-living thing but petrol station bosses vehemently rejected claims that they were scamming customers. Let’s face it, most of the price of petrol goes into the government’s pocket so this does look like a case of the pot calling the kettle black. Despite all the oil price drama, ministers continue to reject calls by the Offshore Energies UK industry group to boost North Sea oil and gas production. That being said, the government then banned Chinese wind turbine maker Ming Yang from building a £1.5bn factory in the Scottish Highlands over national security concerns!
An emergency ban is being put on crypto donations and a limit on donations from Britons living abroad of £100,000. This annual cap will be brought in pretty much immediately. The rationale is that the government wants to shut out foreign influence on UK politics.
Advisers are warning that HMRC is “unlikely to be lenient” on expats who’ve left Dubai. Britons could face major liabilities for both income tax and capital gains tax if they become UK tax residents.
IN BUSINESS, EMPLOYMENT & CONSUMER NEWS...
IN BUSINESS NEWS/TRENDS…
PRIVATE CREDIT – it’s worth mentioning that the private credit segment has more than quadrupled in size since 2010 but a growing number of private credit companies have had to stop or restrict clients from taking money out of their funds – with Apollo Global Management being the latest to join that list this week.
While we’re on the subject of restricting redemptions, UBS decided to suspend withdrawals from its European real estate fund for up to three years after a recent jump in redemption requests as investors brace for economic fallout from the Iran war. I got a sense of déjà vu here as we last saw this gating of funds in the aftermath of the Truss-Kwarteng budget and Covid!
The European missile champion MBDA – which is jointly owned by Airbus, BAE Systems and Leonardo – has reported a boom in interest from Gulf nations who want to strengthen their air defences so it’s going to hike overall output by 40% this year. Staying with defence, VW is in talks with Rafael Advanced Defence Systems, Israel’s Iron Dome maker, about a deal that could result in a switch in production at one of the company’s factories from cars to missiles! If this works, this could set a precedent perhaps for other carmakers who have been having a tough few years falling behind the Chinese in EVs.
IN EMPLOYMENT TRENDS…
City investment manager Octopus Investments announced that it is looking to cut about 20% of its staff as it ramps up its spending on AI whilst also streamlining the business.
IN CONSUMER TRENDS…
The latest GfK household sentiment index shows that the Iran war is, unsurprisingly, having a negative effect on consumer confidence. It’s now fallen to its lowest level since April last year.
The government is now reviewing the current thresholds where parents get funded childcare. Eligible working families have been able to get 30 hours of funded childcare from the term after their child is nine months old until they start school but the thresholds have not changed since the Conservatives introduced them in 2017. Given the latest cost-of-living crisis, many people will be watching this very closely.
IN TECH NEWS...
IN AI – the Siemens CEO said that Europe could risk “disaster” if it prioritised AI independence over building faster with existing tools. He’s probably right but I think they could try to do both at the same time!
It was a bit of a week for OpenAI! The company announced an end to the Disney deal and the Sora video app to concentrate on core areas and put its erotic chatbot plans on ice “indefinitely” while it announced plans to double its workforce in order to sell to businesses.
Arm shares got a major boost as it outlined a shift in strategy from designing chips for other companies to producing its own “AGI CPU” which could rival its customers’ offerings – including those of Nvidia, Google and Amazon. Investors took it well but I think that it could be a bit dangerous going down this route. One of the reasons behind its success is that it makes chips for others and isn’t a competitive threat. It’s effectively built itself up over the years to be the “Switzerland of chips” – but that’s going to be different now. Will it work??
IN HARDWARE – UK iPhone users will have to confirm that they are 18 or older in order to use all available services. This will be included in a software update. NB ID will be confirmed by various methods – but not by debit card.
Dyson said that it saw revenues fall last year thanks to Trump’s tariffs and weakening consumer confidence – but profits were actually up thanks to cost cuts that partly came from job losses.
IN SOCIAL MEDIA NEWS…
A New Mexico jury found Meta to be liable for failing to protect young people from online dangers and said that it had misled consumers about the safety of its platforms and putting kids in harm’s way. The jury ordered the maximum penalty for each violation – which came to $375m – but Meta made 160 times that in revenues for the most recent quarter.
Later on this week in a landmark legal case, this time in Los Angeles, the court decided that Meta and Google were indeed designed to be addictive to kids and that the companies failed to warn users about the dangers. Interestingly, Snap and TikTok had settled for undisclosed amounts before the trial.
IN AUTOMOTIVE NEWS...
Honda and Sony decided to ditch plans to jointly develop and launch an up-market EV, which would have been called Afeela. It was supposed to have gone on sale later this year and be built in Ohio. The two Japanese companies had formed a joint venture called Sony Honda Mobility but now this joint venture will be under review.
The government has decided to provide a new £1bn grant to help companies switch to electric trucks and vans. It will run until 2030 and means that companies could save up to £81,000 per lorry.
According to the latest stats from Autotrader, enquiries on its website for EVs have shot up as petrol prices have climbed. NB this is enquiries, not sales – and carmakers have said that they don’t expect huge sales because the price of electricity is going up as well!
IN REAL ESTATE NEWS...
PRICE TRENDS – the latest ONS data shows that London house prices fell for the sixth month in a row and at the fastest pace since February 2024.
The data also showed that the affordability of property has fallen much faster than property prices themselves. England’s housing is now at its most affordable since 2015!
MORTGAGE TRENDS – Borrowers can now get a five-year mortgage for less than a two-year mortgage as markets indicate that UK interest rates could go higher in the short term because of the Iran war. Mortgage lenders are having trouble pricing their mortgages given market volatility at the moment.
IN MISCELLANEOUS NEWS...
IN M&A NEWS – Poste Italiane launched €10.8bn bid for Telecom Italia, Singapore agreed to buy UK’s Access Self Storage for £1bn, Danone bought Huel in a €1bn deal, Estée Lauder confirmed that it’s in merger talks with Spanish beauty firm Puig but China is dragging its feet on approving the $2bn Manus sale to Meta because China’s regulators are looking at whether the acquisition violates Beijing’s investment rules.
European banks are now facing threats from the Iran war, AI and private credit – although banks with trading arms (like UBS and Barclays) could benefit from market volatility. How much they suffer all depends on how long the war goes on for!
The two-and-a-half year CMA investigation in the vet industry ended and there will be a clampdown on prescription fees and the ownership structure of practices among other things. It could have gone further but it now looks like the big groups are just going to get bigger…