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...
The dirty ceasefire continues, the Mandelson thing just won't go away and Putin closes a key oil pipeline
IN WAR NEWS…
ACTIONS – the US Navy seized an Iranian ship after it breached the blockade and Iran accused it of violating international law by doing it.
Both sides are boasting about having the upper hand, but the fact is that nothing’s changing and it’s all driving up shipping prices elsewhere as other routes are getting used.
CONSEQUENCES – concerns are increasing about the Hormuz disruption morphing from an energy crisis into a food crisis as falling fertiliser availability will hit crop yields and push food prices up.
Lufthansa has cancelled 20,000 flights between May and October in order to save on fuel costs and UK airlines are appealing for a jet fuel plan to cover the summer period.
Meanwhile, Trump’s war is pushing the UAE closer to alliances with China. The UAE is always walking a tightrope between keeping the US and China sweet but it sounds like it is leaning more towards China at the moment given what Trump is doing in the Gulf.
The bosses of HSBC, Barclays, Lloyds, NatWest and Santander were all asked to attend an emergency summit with Rachel Reeves this week to talk about the impact of the Iran war and how to limit it.
IN TRUMP THINGS…
We see that the main political fundraising group supporting Donald Trump, Maga Inc, has managed to put together an unprecedented sum of money – almost $350m – to help defend the Republicans’ control of Congress in the November midterm elections. The prospects aren’t looking great at the moment so this ridiculous amount of money could well come in handy!
IN INDIVIDUAL COUNTRY NEWS…
THE US – Labor Secretary Lori Chavez-DeRemer became the third cabinet member to leave the Trump administration within the last two months after Homeland Security Secretary Kristi Noem in March and Attorney General Pam Bondi in April.
Meanwhile, Trump’s nominee to be the next chairman of the Federal Reserve, Kevin Warsh, has said that be won’t be Trump’s “sock puppet” and promised to uphold the independence of America’s central bank. Well that’s reassuring…
CHINA – the country sent warships out to test “operational capabilities” at the same time that Japan joined the annual display of military strength by the US and Philippines in a large scale exercise. This is the first time Japan has joined this event and is evidence of the Japan PM’s punchier military stance. Tensions between China and Japan have been rising for months.
JAPAN – the country lifted the ban on lethal arms exports for the first time since WW2, effectively giving companies like Mitsubishi Heavy Industries and Kawasaki Heavy Industries the green light to become major suppliers of missiles, aircraft and ships.
SOUTH KOREA – the world’s 12th biggest economy is suffering acutely thanks to the ongoing situation in the Strait of Hormuz. The country imports 90% of its energy needs and 70% of its crude oil and 20% of its LNG usually come via the Gulf so measures have started to be put in place in preparation for shortages. It’s getting pretty dramatic and could be a sign of things to come elsewhere…
RUSSIA – a report by the Kremlin-aligned Centre for Macroeconomic Analysis and Short-Term Forecasting (CMASF) highlighted a potential banks crisis because it reckons that more than 10% of a banks’ loan books are unlikely to be repaid. This could become a problem because the Kremlin has been covering the costs of its war with Ukraine by pouring huge amounts of cash into Russian companies via its banks.
THE UK – inflation accelerated in March to 3.3% as the energy shock started to kick in while UK public sector borrowing came in above market forecasts for the month – and it could get worse because of the effects of the war. A bunch of economists, this time at the EY Item Club, reckon that Q2 and Q3 are going to see no GDP growth and potentially “flirt” with recession.
Starmer’s having a nightmare currently because that Mandelson thing reared its head again this week and it’s chipping away at his already vulnerable reputation.
The UK is looking to do deals with the EU on steel and EVs as part of the increasing alignment with Europe. Higher tariffs are due to kick in in July to stop the influx of cheap Chinese imports – but as things stand right now, we’ll be paying them as well unless we can come to some agreement!
There will be a ban on smartphones in schools in England “unless there is a legally justifiable reason for schools not to do so” and comes hot on the heels of the final draft of the tobacco and vapes bill that cleared the House of Lords on Monday this week.
IN COMMODITIES – the BP board got some knock-backs by investors at its AGM as they voted against the company’s plans to ditch its existing climate reporting and against the proposal to replace in-person annual shareholder meetings with online-only events.
US oil refiners are benefiting from the Iran war thanks to high diesel and jet fuel prices in addition to plentiful supplies of cheap North American crude oil. The likes of Valero Energy, HF Sinclair, Marathon Petroleum and Phillips 66 are now operating close to full capacity in order to take full advantage.
There’s a big difference at the moment between the most-watched measure of oil prices (Brent Futures) and the price of what it costs right now (Brent Dated). Usually, they move largely in line with each other but at the moment, Brent Dated is much more expensive. It looks like the market is just assuming that things will calm down although right now prices are pretty crazy.
IN ENERGY NEWS…
Putin is going to shut down the Druzhba pipeline within days in a move that will put pressure on Europe. This is particularly bad for Germany because the pipeline supplies 17% of the crude oil processed by the PCK refinery in Germany which provides around 90% of the fuel used by Berlin’s cars.
The EU is now thinking about relaxing its opposition to Arctic oil and gas drilling as it faces increasing pressure on energy supplies.
Back in the UK, Reabold Resources has just been awarded a licence to carry out “gentle fracking” in the West Newton field near Hull, but instead of supplying about 10% of the UK’s annual needs, the company has opted instead to use the energy to “mine” bitcoin! How very dare they!
IN INVESTMENT, BUSINESS & EMPLOYMENT NEWS...
IN INVESTMENT NEWS…
M&A – Evoke, the British gambling company that owns William Hill and 888, is in takeover talks with US casino operator Bally’s Intralot. Bally’s has until 5pm on 18th May to put in a proper offer.
There’s speculation that Estée Lauder is going to buy Spanish beauty group Puig as it’s asked JP Morgan to structure a finance package.
SpaceX is to looking to buy code-editing start-up Cursor – in a deal potentially worth up to $60bn – as part of its overall effort to catch up with its AI rivals just months ahead of a much-anticipated IPO. It’s not a done deal yet, though.
DEMERGER – ABF announced that it will demerge Primark from its food business following 65 years of ownership, which will propel the apparel retailer into the FTSE100. The demerger will happen by the end of 2027 and is likely to be one of the biggest ever demergers in the FTSE100. This has always struck me as a very odd combination and it makes a lot of sense strategically IMO!
IN BUSINESS TRENDS…
UK business activity increased by more than expected in April, according to the latest PMI survey which monitors activity in the manufacturing and services sectors. It may have been boosted by companies bringing forward purchases in anticipation of war-related price hikes.
PREDICTION MARKETS – Polymarket is looking to raise $400m in its latest funding round, which would give it an implied valuation of up to $15bn. The platform has seen a huge rise in volumes recently. That being said, there was some bad press for the company this week as a US soldier faced serious charges for using classified information to make bets on the platform and France’s weather forecasting service, Météo-France, reported suspiciously-timed bets on the “Highest temperature on Paris” market.
PROFESSIONAL SERVICES – top British law firms are doing their best to hang on to their business with mainland China at a time when their US counterparts are all leaving, but little appears to have come from this so far while the UK is relaxing rules that were implemented after the 2008 financial crisis to ensure that staff were “fit and proper” and accountable for any failures. I guess that the regulator’s had enough time to see what works, what doesn’t and what hinders.
IN EMPLOYMENT TRENDS – Big Tech announced big cuts this week. Meta said that it would cut 10% of its workers and not fill 6,000 positions that had been planned and Microsoft offered 7% of its US staff voluntary redundancy for the first time – both of which were to keep expenditure in check to a certain extent whilst pouring vast sums of money into building AI capability.
Nike announced that it would cut 1,400 workers as part of a broader effort to streamline its global operations.
KPMG announced that it would cut 10% of US audit partners after a poor take-up of its voluntary retirement programme. The company said that this is because it wants to align the number of partners with the size of the audit business.
According to FT research, higher earners and the most experienced employees are adopting AI in their workflows much faster than lower earners and it also showed that men are more likely than women to use AI tools.
IN CONSUMER & RETAIL NEWS...
IN CONSUMER TRENDS…
IN THE UK – optimism in the UK economy hit its lowest point since the Winter of Discontent in 1978 which was the precursor to Margaret Thatcher’s Conservatives winning the general election, according to a poll by Ipsos. This plummet in confidence was also reflected in the latest GfK survey. The OECD said that taxes on UK workers had risen at the fastest rate in the developed world in the latest edition of its annual report while a report by IG Group found that more people are getting caught in the £100,000 tax trap, which is making people refuse bonuses, promotions and pay rises so they don’t fall over the tax cliff edge because they don’t want to lose their benefits. In one example, a parent in London with two kids under the age of three at nursery school would need to earn over £149,000 to keep the same level of disposable income after childcare as a parent in the same position earning £99,999. For those who do have some spare money knocking around, the government’s new campaign to get ordinary people investing kicked off this week with a CGI squirrel called “Savvy”. The timing is questionable given that we’re facing another cost-of-living crisis.
At the more affluent end of the scale, the annual Wealth Report from estate agency Knight Frank concluded that the UK is lagging the US and European countries in attracting the richest people following changes to non-dom status made by the chancellor. Separately, the latest numbers from the OBR showed that some of the most affluent neighbourhoods in London – including Mayfair and Knightsbridge – have seen substantial house price falls.
IN RETAIL NEWS…
Both Sainsbury’s and WH Smith are getting more cautious about the outlook as they voiced their concerns about effects from the Iran war.
IN CONSUMER GOODS NEWS…
Posh jacket brand Moncler put in a decent sales performance in Q1, outperforming expectations thanks to popularity in Asian markets. This is impressive given recent weaker performances from other luxury names like Hermès and LVMH.
L’Oréal announced decent results this week and said that it was because customers are seeking out “affordable luxury” in times of economic turmoil. Investors had been bracing themselves for fallout from the Iran war so this was a pleasant surprise for them.
IN TECH NEWS...
AI – Anthropic and Amazon agreed a $100bn AI infrastructure deal where Anthropic agreed to spend over $100bn on chips and computing power from Amazon in its bid to bulk up capacity to train and run its model Claude over the next decade. The race for chips and infrastructure continues to be relentless!
Anthropic is investigating allegations of unauthorised access to its widely feared Claude Mythos model. If it gets into the wrong hands, the consequences could be disastrous.
The head of the restructuring practice at elite law firm Sullivan & Cromwell had to apologise in writing to New York federal judge Martin Glenn on Saturday for a number of serious mistakes made in a court filing made on April 9th. The filing contained multiple “hallucinations” made by AI software.
CHIPS – Intel had a decent March quarter, beating market expectations thanks to rising demand for its CPUs, which it specialises in. It had been falling behind in the AI boom because demand had been centred on GPUs, but demand for AI agents is now kicking in – and they use CPUs. Intel also got a lift because Elon Musk said that his companies will use Intel’s latest tech in his “Terrafab” project.
SK Hynix reported another record quarter, seeing a fivefold jump in earnings! It has benefitted from AI being a “structural shift”.
HARDWARE – Apple’s CEO Tim Cook announced his successor, John Ternus, who will take over as CEO in September as he steps up to become executive chair. Cook has had an eventful 15 years in the hot seat and has grown it tenfold. Staying on as executive chair is good for the company given Cook’s diplomatic skills.
Musk’s SpaceX wants the Trump administration to push back against EU satellite businesses because he believes that the EU Space Act, a wide-ranging set of new rules governing space businesses, “would impose burdensome obligations on foreign operators” whilst simultaneously prioritising European companies. The irony is that he brought it on himself by going rogue on Ukraine, but hey…Amazon’s ambitions to rival Starlink were dented as a Blue Origin rocket was forced by the US FAA to halt operation of its flagship rocket and investigate why it did not deploy the satellite it was carrying in a launch on the weekend. Amazon might have to use rival SpaceX to launch its own satellites until this is solved.
HACKING – Chinese hackers are allegedly using devices that feed into the Internet of Things to create botnets that compromise military and civilian systems. One theory is that this is being done in order to hinder the US in response to a potential Chinese invasion of Taiwan.
Anthropic is currently in talks with the UK government about rolling out its Claude Mythos model to key British businesses Banks and financial institutions are particularly keen on getting access. Separately, Anthropic has agreed a deal with the law firm Freshfields to build specialist legal AI tools that could subsequently be sold to rival law firms. Anthropic will use Freshfields’ legal expertise to develop the tools while Freshfields will roll Claude out to all offices globally and get early access to future Anthropic models (except for Mythos).
IN AUTOMOTIVE NEWS...
EVs – in a sign of how far advanced the Chinese are, foreign carmakers are using Chinese tech to claw back market share in the China market! According to data from Shanghai consultancy Automobility, foreign carmakers’ market share in China has halved from 64% in 2020 to 32% currently – so drastic action clearly has to be taken! There’s still a way to go yet in China re market penetration of EVs because they are very popular in the big cities, but less so in other areas. Perhaps a reduction in range anxiety could help – and CATL has just announced that it has developed a battery that can charge in 6 minutes and go for an astonishing 1,500km!
Tesla announced a spending boost of $25bn this year as he wants to pour more into driverless taxis, trucks, robots and a massive new chip factory. The company’s Q1 profit rose by 17%, rebounding from poor Q1 performance last year. Its car sales staged a major comeback in Europe thanks to a combination of government subsidies and the sudden rise in fuel prices resulting from the war. Speculation that SpaceX and Tesla will eventually become one company continues to do the rounds. It strikes me that investors usually want to have neater exposure to clear and differentiated stories (which is why the demerger of ABF and Primark seems to be a popular idea) but they probably won’t mind a Musk “conglomerate” because they just want overall access to his genius, whatever form that may take. The risk there, of course, is that the fortunes of this mega-company will rest on the longevity and health of just one man as there doesn’t seem to be anyone who can take his place.
Back home, the government has promised to pass legislation this summer that will allow motorists to run power cables through a charging “gully” built into the pavement outside their home without having to go through the faff of getting planning permission. This could be good news for increased EV take-up in the UK.
IN MISCELLANEOUS NEWS...
IN REAL ESTATE – the latest survey from Rightmove shows that the UK property market is actually proving to be more robust than expected in the face of higher mortgage rates and weakening consumer confidence because average asking prices rose by 0.8% in April. That being said, Foxtons suffered a 35% drop in income from house sales thus far in 2026, so perhaps Rightmove’s stats are slightly delayed? Housebuilder Crest Nicholson saw a massive sell-off of its shares (they were down by 35%) on its profit warning announcement due to “macro uncertainty” prompted by the Iran war that has hit consumer confidence.
The active ingredient in Ozempic and Wegovy, semaglitude, is facing more patent expiries around the world. In India, it expired late last month and its generic medicine makers are producing like crazy to service a vast market. Domestic competition is likely to be fierce, so I would say that the real opportunities are going to be overseas (when the patent expires).
Boeing managed to deliver more plans over a quarter than Airbus for the first time since 2023 despite its reputation for dodgy quality. I would have thought that this was helped by state airlines from various countries putting in orders to suck up to Trump in trade terms. They will also have benefitted from rising defence spending.