Watson’s Weekly 23-05-2026

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 DEFENCE NEWS…

Defence companies and marine contractors are deploying unmanned mine-clearing systems in and around the Strait of Hormuz as part of a broader effort to make the shipping lane safer. Companies including Kraken Technology Group, SRT Marine, Textron Systems and Thales are all offering their various hardware and software offerings. Still, minehunting remains a very difficult business and confidence will take time to return even if the Strait opened tomorrow. Modern mines tend to be laid on the seabed and are activated when sensors detect ships passing overhead and the Strait’s relatively shallow waters mean they can shift with changing seabed conditions. For commercial traffic to resume, risks will have to fall to acceptable levels and mine detection technology will play a key role in getting there.

TRUMP THINGS

Trump delayed signing an executive order on AI because he “did not like” aspects of the plan, specifically provisions for the government to vet models for national security and cyber risks, saying he did not want anything getting in the way of America’s lead over China. This clashes with public concern about AI safety, but Trump has form on ignoring public opinion, with the Iran war being the most obvious example.

The Department of Justice stated that US tax authorities will be banned from pursuing claims against Trump, his eldest sons and the Trump Organisation as part of an agreement for the president to drop his $10bn lawsuit against the Internal Revenue Service.

The Republican candidate bankrolled by the president beat the incumbent Thomas Massie in a Kentucky primary. Massie had been one of Trump’s most prominent Republican critics, clashing with him over the Iran war, the Epstein files and his “Big Beautiful” fiscal legislation. Another critic bites the dust.

REGION AND INDIVIDUAL COUNTRY NEWS

THE AMERICAS…

THE US – the US has decided to cut troop numbers in Europe. This comes after the sudden cancellation last week of the deployment of 4,000 US troops to Poland. JD Vance framed this as “encouraging Europe to take more ownership” and the Pentagon is preparing a new plan for US troop deployment in the region. The practical upshot is that US troop levels in Europe are now at their lowest since before the Ukraine invasion.

ASIA…

CHINA – the Putin-Xi summit in Beijing got underway, giving Putin a welcome opportunity to distract attention from growing problems at home and on the war front.

INDIA – PM Modi has been forced to give up on protecting consumers from high oil prices. The government has spent a great deal subsidising fuel and fertiliser prices since the Iran war began but Modi says this is no longer sustainable. State-owned fuel retailers increased petrol and diesel prices twice in less than a week as a result.

IN THE MIDDLE EAST…

SAUDI ARABIA – the government has stopped issuing new contracts for western consultancies and delayed some payments. McKinsey, BCG and the Big Four accountancy firms are all likely to suffer, given the major operations they have built up in the region. Saudi Arabia has been a massive money-spinner for international consultants since Prince Mohammed announced his raft of Vision 2030 mega-projects, but rumblings about expensive foreign consultants have been growing for a while.

LIV Golf is fighting for survival following the PIF’s announcement last month that it would pull financial support at the end of the current season. The plan now is to bring in investors while also getting the league’s roster of golfers to provide support in exchange for a majority stake. If this falls apart, a formal bankruptcy process could be initiated.

IN EUROPE…

RUSSIA – things are getting increasingly tense as the effects of the Ukraine war hit home. The FSB has been conducting widespread internet shutdowns across the country since May last year, with Moscow’s mobile internet shut off for 19 days in March with no explanation. This has had real repercussions on ordinary Russians unable to make card payments, use maps or get taxis via their mobiles. Criticism on social media is rising and Putin’s approval ratings are falling.

SPAIN – the rightwing populist party Vox had a strong result in Sunday’s regional election in Andalusia, Spain’s most populous region, in what was the ruling Socialist party’s worst ever electoral defeat. Although the conservative People’s Party won, it fell short of a majority, putting Vox in a kingmaker position.

TURKEY – a court dismissed the leader of Turkey’s biggest opposition party, effectively kneecapping Erdoğan’s main opponent. Investors sent Turkish shares down 6% in protest. Erdoğan is clearly keen to maintain his grip as the Iran war takes a serious toll on a country that imports almost 75% of its energy needs.

IN THE UK…

Inflation slowed to 2.8% according to the latest ONS data, below the 3% economists had expected and its lowest reading since March 2025. The fall was partly down to the reduction in the household energy price cap, although this also suggests the full effects of the Iran war have not yet filtered through yet.

THE LEADERSHIP BATTLE – what a mess. Wes Streeting and Andy Burnham are jockeying for position in a challenge to Starmer’s leadership. Streeting has advocated Brexit reversal while Burnham has been vowing to reverse privatisation and austerity while promising to keep to current fiscal rules. A YouGov poll of Labour members showed Burnham would beat Starmer in a head-to-head by 59% to 37% and would easily beat Streeting by 80% to 10%, while Starmer insists he will fight on. Bond markets do not like the prospect of a Burnham-Rayner combination, perceiving them as more likely to tax and spend, while Streeting is seen as closer to Starmer’s centrist position. Reform UK has picked local plumber and councillor Robert Kenyon to challenge Burnham in the Makerfield by-election.

COST-OF-LIVING – the chancellor announced a package of measures badged as the “Great British summer savings” scheme. These include a cut in VAT from 20% to 5% on tickets for attractions and kids’ meals over the summer, free bus rides for under-16s in August, suspended import tariffs on some foods including chocolate and biscuits and a rise in the tax-free mileage rate for drivers. The mooted food price cap idea was swiftly abandoned after a furious backlash from retailers and a public rebuke from Bank of England governor Andrew Bailey while Starmer announced that the scheduled increase in fuel duty would be postponed until the end of the year. However, what the chancellor gives with one hand she takes with the other, as plans emerged to impose VAT of 20% on airport fees charged to airlines, adding roughly £5 to the existing standard charge, and to scrap a tax loophole allowing oil and gas companies to offset UK profits against foreign losses. Starmer postponed the scheduled 5p increase in fuel duty until the end of the year rather than letting it go ahead in September.

COMMODITIES

OIL – Oil prices fell by almost 6% on hopes of a partial opening after two China-bound supertankers crossed the Strait of Hormuz safely.

The broader picture remains gloomy however. Almost 80 countries have now been forced to introduce emergency measures to protect their economies and JP Morgan analysts reckon that commercial oil inventories in OECD countries could fall to “operational stress levels” by early June. Jet fuel and diesel inventories have already dropped below five-year lows.

US oil exports have been impressively strong but American stocks are now falling rapidly, raising the possibility of export bans, although the administration says things will not get that far.

Trump extended a waiver on Russian oil sales for a second time since March to rein in fuel price rises, giving Putin a welcome boost. The UK also relented on Russian oil sanctions to avoid supply problems, causing uproar among the Conservatives. The decision is particularly embarrassing given that Labour MPs had just voted against UK oil and gas licences. Even so, Shell’s boss is pushing the government to encourage North Sea drilling as a boost to the faltering economy.

IN ENERGY – Swiss group FlexBase is developing a giant underground battery system on the German border using UK maker Invinity Energy Systems’ vanadium flow batteries to provide 1.5 gigawatt-hours of storage, equivalent to the electricity needed to power around 200,000 UK homes for one day. Vanadium flow batteries differ from lithium-ion in that they store energy in liquid electrolytes in external tanks and can charge and discharge many times per day without significant degradation over periods of up to ten hours, versus the one-to-two hours that lithium-ion batteries can manage.

IPOs – SpaceX filed with the SEC for a flotation on NASDAQ next month and it looks set to be the first trillion-dollar US market debut and the world’s biggest ever flotation. The proposed valuation of $1.75tn is about four times what it was six months ago and reflects the “genius premium” that investors assign to Musk’s companies, a premium that has evolved into something immune to conventional economic wisdom and wider geopolitical conditions. NASDAQ’s new “fast entry” rules mean SpaceX’s stock will go straight into Wall Street indexes upon flotation, compelling index tracker funds to buy and likely driving significant inflows.

OpenAI looks to be on the verge of a flotation that could value it at around $1tn. The resolution of Musk’s legal case against the company, in which a jury unanimously found Sam Altman and Greg Brockman not liable, removes a cloud that had been hanging over OpenAI and paves the way for its market debut.

M&A – NextEra and Dominion Energy announced a $67bn deal to combine, forming the biggest electricity producer in the US. The deal is fundamentally about AI and how it is transforming the usually mundane utilities sector.

Anglo American agreed to sell its Australian coal mining business to Dhilmar for $3.9bn, completing a long-sought divestment as part of a broader business streamlining.

Uber increased its stake in Delivery Hero to 19.5%, becoming its biggest shareholder, though it said it has no current plans to take full control while leaving the door very much open.

Merger talks between Estée Lauder and Puig ended. Investors powered Estée Lauder’s shares up by 11.5% in response.

M&A activity in the midcap FTSE250 is showing genuine signs of life, with Tate and Lyle bid for by Ingredion for £2.7bn and Spire Healthcare mulling over a £1bn offer from its second-biggest shareholder.

IN BUSINESS NEWS…

IN WORLD TRADE – There is growing concern that Iran’s blockade of the Strait of Hormuz is inspiring other countries to consider charging for passage via other strategic waterways. Iran has caused global chaos with relatively modest means and some countries are openly discussing the tollbooth idea. Any narrow waterway is now potentially at risk, including the Taiwan Strait, the Malacca Strait and Gibraltar. If everyone starts to monetise their choke points, insurance, energy and freight costs will all rise and the cost of goods will go up for all of us.

The US and China agreed to establish a board of trade to promote “strategic stability” and a board of investment to “optimise the bilateral economic relationship”, with Xi due to go to Washington in the autumn.

EU lawmakers struck a deal to implement a trade pact that was signed with the US a year ago. The EU had been dragging its feet for various reasons but it’s now going ahead. This should avoid a big tax increase on exports from Europe.

The UK confirmed the much-anticipated free trade agreement with Gulf states via the Gulf Cooperation Council. The deal, two years in the making, is thought to be worth up to £3.75bn a year to the UK economy in the long run, or about 0.1% of GDP. It is particularly good news for services, which account for around 80% of UK GDP and over 50% of exports to the GCC, as they will get guaranteed market access under the terms of the agreement.

LOGISTICS – Gulf freight rates are booming because of the Strait of Hormuz bottleneck and things are getting so desperate now that businesses are now transporting product by land. Trucks can only take a fraction of the capacity that large container and cargo ships can take, though.

IN UK BUSINESS TRENDS – Business investment growth in the UK has fallen way behind the pace of investment in the US in Q1 compared to Q4 of 2019. A combination of a government that has lost its mojo, a zombie leader and a weakening economy makes the outlook grim for whoever comes next. If Burnham wins, the likelihood of significant tax hikes is very high.

UK business activity fell for the first time in more than a year in May according to the latest S&P flash PMI, worse than the market was expecting and signifying a net contraction.

Investec is planning to push into private banking for wealthy individuals in the UK, transitioning from a specialist lender to a full-service bank for high net worths. This is becoming a crowded space, with NatWest buying Evelyn Partners for £2.5bn and Revolut also building in this area.

EMPLOYMENT TRENDS

UK firms are halting investments and hiring as energy, fuel and supply chain costs squeeze mid-sized businesses from all directions, according to the latest BDO survey.

ONS figures showed that UK unemployment unexpectedly rose to 5% while wage growth slowed down significantly. UK youth unemployment was particularly high as stats show that 16.2% of workers aged 16 to 24 were unemployed in Q1. This is the highest level since January 2015! A study by the Institute for Fiscal Studies confirmed this, concluding that youth unemployment has hit levels last seen during Covid. If a new government raises taxes further on businesses, the situation will only deteriorate. Businesses are already reeling from higher NICs and minimum wage increases and there is very little slack left in the system. The retail and hospitality sectors have suffered particularly badly given their greater exposure to younger and less well-paid workers and with the uncertain political backdrop likely to persist, there is little sign of improvement on the horizon.

IN AI-RELATED JOB TRENDS – Standard Chartered plans to cut almost 8,000 back-office jobs by 2030 as it prioritises AI over humans.

The NHS is thinking about scaling back its recruitment drive in favour of AI-assisted patient treatment, a fundamentally different approach from the 2023 plan that projected headcount growing from 1.4m to 2.3m by the mid-2030s.

Big Four accountancy firms are now posting more job ads for AI specialists than auditors, with AI-related roles making up almost 7% of vacancies in English-speaking countries in 2025, more than triple the figure in 2022.

Meta is cutting a further 10% of staff and Intuit is cutting 17% of its workforce to fund big AI bets.

CONSUMER TRENDS

US consumers are limiting how much fuel they buy as pressure at the pumps grows.

British consumers are proving slightly less gloomy than last month according to the GfK index, though the same survey shows households are dipping into savings to cover day-to-day costs, which cannot go on forever. Petrol prices have hit a new Iran war high, with the average litre of unleaded now at 158.52p, a level not seen since December 2022. Household energy bills are forecast to surge by £200 a year from July. Those seeking a bargain on a new car are increasingly looking at Chinese brands. The number of Chinese car dealers in Britain has shot up from 95 in May 2024 to 440 today, with BYD and Chery-owned Omoda particularly prominent.

RETAIL NEWS

Urban Outfitters posted record Q1 sales powered by its Free People business. Its other divisions also contributed to this record performance!

Target reported its strongest quarterly sales rise since early 2022 but was cautiously optimistic about the outlook, warning that a consumer wobble was possible before year end.

M&S is winning over shoppers but not yet investors, with food going well and fashion making progress but not yet generating the investor conviction that rivals like Next enjoy.

IN CONSUMER GOODS…

Chanel is opening new stores in China as new designer Matthieu Blazy is generating a lot of excitement, which is particularly impressive given the struggles of luxury rivals.

Dr Martens beat market expectations with a profit turnaround, delivering a particularly strong performance in the US and a positive outlook, suggesting recovery is genuine rather than temporary.

Deckers Outdoor saw Q4 sales increase thanks to the ongoing success of its Hoka brand, which just serves as a reminder of how far the struggling Nike has to go in order to turn things around.

LEISURE NEWS

Ryanair warned that prices are weakening going into the summer season due to higher fuel costs and a trend towards last-minute bookings. It was unable to provide full-year guidance given the poor visibility. This echoes the experience of many airlines and travel companies.

AI – Chinese AI groups are pulling ahead of US rivals in video generation, with ByteDance and others training their systems on massive libraries of short-form video. While OpenAI, Google and Anthropic still dominate large language models in areas including coding, they are behind on video quality and usability. This will have a big impact on the advertising industry as it enables brands to generate video at unprecedented scale.

Anthropic is going to brief members of the Financial Stability Board on vulnerabilities in the global financial system’s cyber defences following a request from Bank of England governor Andrew Bailey. A co-ordinated approach to the vulnerabilities exposed by the Mythos model is sorely needed. Separately, Anthropic is also on track for its first profitable quarter, with Q2 2026 revenue expected to come in more than double Q1. The company is unlikely to remain consistently profitable given the ongoing expense of computing power, but there are rumours of a potential IPO.

CHIPS – Nvidia’s stellar results were met with an underwhelming investor response, partly reflecting a view that Nvidia is becoming a more mature stock and partly because of growing scepticism about the sustainability of AI’s breakneck growth rate.

Google is teaming up with Blackstone to create an AI cloud group backed by $5bn of the latter’s cash, aiming to bring 500 megawatts of data centre capacity online next year and become a genuine rival to Nvidia. Separately, Google also announced new autonomous AI agents, coding tools and a new lineup of smart glasses developed with Samsung, Warby Parker and Gentle Monster, along with a personal assistant called Spark.

SOFTWARE – London mayor Sadiq Khan blocked the Met Police’s £50m Palantir contract on value-for-money grounds. Palantir remains controversial given its links to ICE operations in America and the Israeli military.

IN MEDIA NEWS…

Publicis agreed to buy US data company LiveRamp in a $2.2bn all-cash deal at a 30% premium, deepening its push into AI marketing.

A study by Queen Mary University in London found that almost 90% of financial influencer posts contain more negative than positive quality features, echoing previous research. Finfluencers have helped democratise financial information but tend to over-emphasise high-risk areas like crypto and forex trading.

Spotify struck a licensing deal with Universal Music Group allowing fans to listen to AI-generated covers and remixes of songs from participating artists as a paid add-on and announced new functions including early access to tickets for top listeners and tools allowing artists to sell subscriptions directly via the platform.

IN AUTOMOTIVE NEWS – JLR and General Motors are among those eyeing a £900m MoD contract to build thousands of new 4×4 military trucks to replace the aging Land Rover fleet. First deliveries are expected in 2030 covering around 3,000 vehicles across the three armed services. JLR is presumably in pole position.

Stellantis unveiled a new five-year plan involving 60 new models and €60bn of investment in products and technology. It’s certainly got an uphill task!

IN REAL ESATATE NEWS – research by a tax firm showed that property taxes make up 3.7% of the UK economy, the highest proportion of any major economy! This is bad news for the government because if investment slows and real estate loses momentum, tax receipts fall too.

The share of properties bought by landlords between January and April hit 13.3%, its highest since 2016, with nearly a quarter of those purchases being properties sold by other landlords. The Renters’ Rights Act has accelerated some landlords’ exit while others have used the opportunity to acquire more stock. Landlords are concentrating on the north where yields are strong but not the south where they are weak, meaning rents in the south are likely to continue rising.

UK housebuilders have had a nightmare since Labour came to power. The larger builders should be OK given they have more cash than debt but Crest Nicholson and Vistry have specific financing issues that need addressing. The sector should be speeding up to meet housing needs but is instead slowing down.

IN BANKS NEWS – Halifax could disappear from UK high streets as Lloyds Banking Group reviews its branding strategy. Bank of Scotland is expected to survive as the group’s only retail brand in Scotland. A phase-out of the Halifax brand could start as early as July, with the final decision expected alongside Lloyds’ new five-year strategic plan at the end of July.

Monzo announced plans to expand into more European countries after pre-tax profits jumped by almost 50% thanks to higher lending and fee income.

My fave video of this week was the one on the quirks of the English language! I often think how lucky I am to be a native English speaker!