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...
War continues, US inflation rose again and Starmer had another nightmare week
IN WAR NEWS…
IRAN – The week saw a rapid series of escalations and de-escalations. Israel launched retaliatory airstrikes on Iran after Iran fired missiles at northern Israel, before both sides halted counter-strikes following pressure from Trump. The US then launched its own strikes after Iran downed an American helicopter, followed by a fresh wave of attacks that destroyed two water storage reservoirs and left 20,000 people without water. This was the most serious US attack since the April ceasefire. Trump subsequently called off more strikes, claimed the two sides had reached “a great settlement” and that the agreement would be finalised in the next few days. Whether this holds remains to be seen, but it is the closest the conflict has come to resolution since the initial attack on February 28th, when Trump predicted the whole thing would last five weeks.
DEFENCE – The Franco-German joint fighter jet project is dead after clashes between Dassault Aviation and Airbus’s German division over work share, governance and intellectual property proved impossible to resolve. A German-led group of eight aerospace and defence companies called Team Gen 6, led by Airbus, is now planning a European alternative.
Switzerland is wondering whether it should switch from the US Patriot air defence system to the French-Italian SAMP/T alternative because Patriot deliveries have now been delayed from 2027 to 2032 or later. Lockheed Martin cannot confirm when US allies will receive their deliveries, with supply constrained by the Iran war – and this is despite their current commitment to triple capacity. Ukrainian arms maker Fire Point has developed a cheaper surface-to-air missile that can be produced at scale from August and shipped from 2027.
Talking of production delays, Mitsubishi Heavy Industries is struggling to keep up with an $82bn order backlog amid the global AI and defence spending surge.
TRUMP THINGS
Trump is pressuring new Fed chair Kevin Warsh to cut interest rates to 1% or lower, a demand that came directly after a strong US jobs report prompted markets to expect rates to rise rather than fall. Inflation rates have to strike a balance between controlling rising inflation (in which case interest rates are increased to curb borrowing, which in turn slows spending down) and stimulating job growth (in which case interest rates tend to be cut in order to make borrowing – and therefore investing in extra employees – cheaper). The argument here would be that if jobs are stable or strong (which is what happened here), then taming inflation becomes the priority – and that means interest rates should go up. Trump wants the opposite – he wants interest rates to go down because it tends to stimulate the stock markets, which makes him look good.
A nationwide poll showed that 68% of registered voters disapprove of his handling of inflation and cost of living, with around two-thirds blaming his policies for higher grocery prices.
A federal judge ruled that Trump’s $100,000 annual fee for H-1B highly skilled worker visas is unlawful, describing it as an unauthorised tax whose obvious purpose was revenue-raising rather than protecting American workers. Surely not 😁?!?
Trump also suggested he may not renew the trade deal with Mexico and Canada when it comes up for review on July 1st. If he doesn’t, it’ll have to be reviewed annually.
The president recently floated the idea of the government taking equity stakes in AI companies but critics point to conflicts of interest and the risk to taxpayers if the sector falters.
IN REGION/COUNTRY NEWS…
AMERICAS
US – US inflation rose for the third consecutive month to 4.2% in May, its highest level in three years. Trump claimed responsibility for oil sitting at $85 a barrel but a more plausible explanation is that China’s crude oil imports have dropped dramatically since the start of the Iran war by an amount equivalent to the combined daily consumption of Italy and France! Analysts say this cannot continue indefinitely and China will probably need to increase purchases in the coming months.
Former Treasury secretary Janet Yellen warned about the US fiscal deficit approaching 6% of GDP, its highest level outside of wartime – and raised concerns about threats to Fed independence due to ongoing pressure from the President for the Fed to do what he wants.
The Pentagon put Alibaba, Baidu and BYD back on to its Chinese military companies blacklist, citing alleged connections to China’s People’s Liberation Army via the country’s military-civil fusion programme. The companies are obviously objecting to their inclusion.
ASIA
CHINA – China’s factory gate prices rose at their fastest rate since July 2022 in May, driven largely by higher global energy prices.
Exports grew by 19.4% in May as shipments to the US boomed year on year. China continues to make progress despite Trump’s efforts to limit its growth, though confidence and the property sector remain stubbornly weak.
EUROPE
The ECB raised eurozone interest rates for the first time since 2023, lifting its main deposit rate from 2% to 2.25% in response to Iran-war-driven inflation. Markets are now pricing in three more rises before next spring. It remains to be seen whether other central banks will follow.
THE UK
Starmer threatened to demand resignations from any ministers who back Andy Burnham as a potential leadership rival, signalling a tense political atmosphere heading into the summer.
Starmer’s defence secretary and Armed Forces minister then resigned and he finally signed off on the long-delayed four-year Defence Investment Plan. The government is looking to fund around £15bn in new defence spending through cuts to other departments, with energy and transport most likely to be targeted rather than tax rises or additional borrowing although Reeves indicated she is open to raising taxes to fund defence spending.
IN COMMODITIES NEWS…
OIL – Oil prices jumped on fresh Iran hostilities although OPEC+ agreed to increase production quotas for the fourth successive month. The practical problem remains getting oil to customers while the Strait of Hormuz is disrupted.
Rising petrol prices are making EVs look increasingly attractive, with UK petrol prices up around 20% since the start of the year! The total cost of running an EV now falling below that of a traditional car.
GOLD – Gold fell to a six-month low of around $4,022 per troy ounce, putting it on track for its worst quarterly performance in a decade. The price has fallen by over 20% since the Iran war started, driven by profit-taking from central banks and speculators following a very strong run. It’s worth remembering that gold was the world’s biggest reserve asset by value at the end of last year, having overtaken US Treasuries.
METALS – Tin is emerging as an AI beneficiary because it’s the material that holds together racks, power modules and networking switches in AI infrastructure. Almost 75% of the world’s tin is mined in just three countries – China, India and the DRC.
Prices for industrial metals including copper and aluminium are likely to stay higher for longer due to strong datacentre demand. Copper is almost at its all-time high and aluminium is at its highest level in four years! The Iran war has also raised mining operating costs by pushing up the price of diesel.
IN ENERGY NEWS…
Trump’s Iran war has accelerated demand for Chinese cleantech, with sales of solar cells and battery-powered vehicles surging as countries seek greater energy independence. BYD and CATL had suffered earlier in the year from subsidy phase-outs and fierce price competition but the war stimulated demand once more. The longer the conflict drags on, the longer this is going to continue.
IN INVESTMENT, BUSINESS & EMPLOYMENT NEWS...
IN INVESTMENT NEWS/TRENDS…
There is a growing debate about whether we are in an AI and clean energy bubble or at the beginning of a new investment super-cycle. The case for a genuine super-cycle rests on AI being a transformative technology requiring vast energy to scale, on a clean energy revolution gaining pace and on industries needing to spend heavily to upgrade processes, infrastructure and human capital. The “bubble” argument suggests that company valuations are reaching crazy levels when judged against traditional metrics and that if financing runs out, the bubble will burst and stock market disaster will strike.
IN MARKETS – US markets have been powered by earnings strength rather than rising valuations or speculation, according to Goldman Sachs. Wall Street analysts have been upgrading S&P 500 earnings estimates in both 2026 and 2027 and upgrades have been outpacing downgrades in every sector. The five biggest hyperscalers are expected to spend $755bn on capital investment this year alone. A concern for investors is the concentration of the S&P 500, with its ten biggest companies now accounting for 41% of the index’s market cap, the tightest concentration in decades.
South Korea’s KOSPI dropped over 8% in a tech sell-off that triggered a trading halt, with Samsung and SK Hynix both falling by over 10%, following the NASDAQ’s 4.2% fall last week. The weakness could be linked to investors raising cash ahead of the SpaceX IPO rather than any change in fundamentals.
IN IPOs – SpaceX priced its IPO at a $1.78tn valuation, making it the world’s biggest ever IPO at triple the size of the previous record! The order book is more than three times covered, with strong demand from asset managers, Gulf sovereign wealth funds, hedge funds and retail investors. SpaceX secured special dispensation to skip the usual one-year seasoning period for index inclusion, meaning tracker funds will be compelled to buy its shares when it joins benchmark indices. Musk retains 80% of voting power through special shares and is eligible for a $1tn pay deal if the valuation reaches $7.5tn. It is interesting to note that American university endowments are set to make billions from the listing because they’ve got a lot of it! OpenAI also filed for a Wall Street listing that could value it at over $1tn, just days before the SpaceX debut.
IN M&A – Tate and Lyle agreed to a £2.7bn takeover by US rival Ingredion, creating a major global ingredients business.
Italian bank Intesa mounted a $35bn bid for Monte dei Paschi di Siena, just one day after a rival approach from Banco BPM.
Software buyout deals fell to their lowest level since the pandemic, with value dropping to $50bn in the first five months of 2026 versus $88bn in the same period last year, as AI uncertainty makes it harder to pick winners among software companies.
GSK agreed to buy US cancer biotech Nuvalent for $10.6bn, its biggest deal since 2014, helping offset the 2028 patent expiry of its HIV drug dolutegravir. Biotech deals have totalled almost $211bn so far this year – and I think that there will be more to come.
VodafoneThree is considering buying TalkTalk’s consumer division. There are other potential buyers in the mix, though!
Boots is in sale talks with the Weston family behind Primark as well as Australian pharmaceutical group Sigma Healthcare.
Frasers Group made an all-cash offer to buy the 74% of Hugo Boss it does not already own for €2.7bn.
IN MONEY-RAISING NEWS – Neura Robotics raised $1.4bn at a $7bn implied valuation to develop industrial AI applications in Europe.
IN BUSINESS NEWS/TRENDS…
Brazil is emerging as a potential major rival to China in rare earths, holding the world’s second biggest reserves and developing ambitions to process them domestically. China controls over 90% of global processing and magnet production despite holding around 50% of reserves. Brazil has declined to join a US-led minerals bloc and says it is open to any investors, which could prove to be a valuable bargaining chip.
Reeves is pushing companies to accelerate AI adoption by asking employers to share data with a new AI Economics Institute (the AIEI) that will also track AI’s effects on employment. Critics note that the institute is unlikely to be entirely impartial given its government backing but the initiative is broadly seen as a step in the right direction.
IN EMPLOYMENT TRENDS…
Walmart argued that AI will help rather than replace workers, although you would have thought that last month’s layoffs in its tech and product teams would have at least been partly due to AI, no??
Jeff Bezos, whose new $41bn AI lab Prometheus focuses on manufacturing and engineering, argued AI will create a labour shortage and generate more jobs than it destroys. Anthropic’s Dario Amodei has taken the opposite view, warning of a jobs crisis that could require higher capital gains taxes to fund universal basic income.
Meta is launching a free five-week Workforce Academy that trains workers for guaranteed datacentre construction jobs.
Wix.com is cutting 20% of its staff and scaling back parts of its business.
UK employers are hiring more temporary workers as permanent hiring falls, reflecting a lack of confidence echoed by trends at recruitment firm Hays.
A growing number of employees are ditching full-time roles to become freelancers, a trend employers say has been driven by government policies making permanent employment more expensive.
IN EDUCATION NEWS…
Meanwhile, overseas students at Cambridge face fees of at least £450,000 for a medicine degree as top English universities raise international undergraduate fees substantially.
IN CONSUMER, RETAIL & LEISURE NEWS...
IN CONSUMER TRENDS NEWS…
US – Campbell’s reported weaker demand for snacks and although it didn’t blame this on weight-loss drugs, it is a likely factor! Many other consumer goods companies have felt such an impact (and some have already tried to alter recipes and provide healthier alternatives). The trend is increasingly being priced into expectations for the food and beverages sector as the proportion of people using weight-loss treatments continues to rise.
CHINA – China’s “silver economy” is gaining attention as a growth driver as over 30% of the population is projected to be over 65 by the mid-2030s. Policymakers are looking to this demographic for growth as the property market remains weak. China’s birth rate continues to decline sharply.
EUROPE – European drivers are cutting fuel consumption in response to higher petrol prices, echoing similar trends already seen in the US as the energy price shock from the Iran war begins to change behaviour at the pump.
THE UK – UK national debt is approaching £3tn and some projections suggest it could breach 96% of GDP in the coming years, a level not seen since the 1960s when Britain was still paying off World War Two. The UK currently has the second lowest debt ratio in the G7 but the combination of higher debt and toxic politics is likely to hold back growth.
IN RETAIL NEWS…
UK discount retailers’ combined market share has grown since 2019 but the sector has been losing momentum overall since 2022, if you exclude Aldi and Lidl. Rising utility bills, food costs and petrol prices could push consumers back towards discounters – something that happened in the previous cost-of-living crisis.
Supermarkets took an estimated £800m sales hit last year from weight-loss drugs, with customers on the treatments cutting grocery spend by an average of £418 per household in the year after starting treatment. Some 6.3% of British households now have at least one member using the treatments, up from 2.3% in 2024, with snacks and chocolate hit hardest.
WH Smith issued its second profit warning in a few months and is now asking shareholders for £100m to bolster its balance sheet thanks to a combination of an accountancy scandal in its US business and airport footfall that has been decimated by the Iran war.
IN LEISURE NEWS…
HOSPITALITY – The World Cup, starting this Thursday and running for six weeks, is expected to provide a meaningful boost to hospitality and gambling. Games in the US, Canada and Mexico make kick-off times awkward for Europeans, but more matches are on terrestrial television and licensing hours have been extended. Pub operators including Marston’s and Fuller’s have invested in fan experience and have high hopes. Deliveroo, Just Eat and Domino’s are also expected to benefit.
ITV describes its World Cup coverage as the most lucrative sports event it has ever aired, with ad revenues running around 30% ahead of Euro 2024, with 30-second slots in England games potentially costing up to £300,000.
Prediction markets have already taken nearly $2bn in World Cup bets, close to being the biggest market of this type in history with five weeks still to go.
AIR TRAVEL – Airline executives at the IATA summit said jet fuel shortages are unlikely but industry profits could halve and some carriers may not survive the fuel price shock. Jet fuel prices are expected to rise by 70% by end of 2026 and fare rises are described as inevitable. British Airways has already warned it will raise prices if fuel costs stay high.
Emirates is offering travel insurance and guaranteed repatriation flights to tempt passengers back to Dubai, where daily airport transfers have fallen from 100,000 pre-war to around 40,000 currently.
Wizz Air is threatening to cut UK routes if Air Passenger Duty rises go ahead. At the moment, APD is £15 for an economy class ticket to most European destinations so it can be a significant chunk of a cheap airline ticket – hence the threat!
IN TECH & SOCIAL MEDIA NEWS...
IN TECH NEWS…
The EU’s new digital sovereignty legislation is causing concern among UK tech companies (including Synthesia) who fear being cut out of European markets. The EU legislation is designed to encourage European tech champions and could cut out British companies.
Industrial companies including Caterpillar and Nucor are emerging as AI beneficiaries because of datacentre build-out demand. Another example of an AI beneficiary that wasn’t immediately obvious, Ford’s share price surged by around 20% in May after it announced a pivot from EVs into battery storage for datacentres.
AI – OpenAI is planning its biggest ever overhaul of ChatGPT, aiming to become a superapp combining coding tools and AI agents while shifting focus towards profitable business users. OpenAI has also filed for a Wall Street listing potentially valuing it at over $1tn.
Anthropic released a “safe” version of its Claude Mythos model called Fable 5, designed for software writing and debugging as well as complex research and image analysis. Unlike the original Mythos release in April, which went only to a handful of governments and organisations, this version is available to the general public.
IN DATACENTRES – SpaceX signed a $30bn deal to lease computing capacity to Google at $920m per month. This came not long after a similar deal was announced with Anthropic – but let’s hope this time that the deal sticks because the Anthropic one was walked back quite quickly.
A UK data centre project in Wales risks collapse because the government has been very slow to grant permission to connect to a nearby battery plant. British data centre company Era4 said that the situation is getting so bad that it might have to look at other sites outside the UK.
Oracle announced $70bn in data centre spending in the coming year.
CHIPS – Apollo and Blackstone raised $35bn in a private credit deal to finance Anthropic’s expansion plans.
HARDWARE – Apple unveiled a long-overdue overhaul of Siri, now called Siri AI, aimed at competing with ChatGPT and Claude. Apple argues it can access personal information without compromising privacy, differentiating it from rivals. A beta version arrives next month with a full rollout in autumn.
SOFTWARE – Palantir is suing Sadiq Khan over his decision to block a £50m Met Police contract. The Met commissioner warned the decision will cost 700 frontline officers as planned job reductions made possible by Palantir’s software will no longer be achievable. A cross-party parliamentary committee has flagged a clear mismatch between Palantir’s activities and UK values.
IN SOCIAL MEDIA NEWS…
The European Commission ordered Meta to restore WhatsApp access for rival tech companies building AI assistants, following concerns Meta was using its control of the platform to prioritise its own AI services. Meta said it would appeal.
IN AUTOMOTIVE NEWS...
IN AUTOMOTIVE NEWS…
EVs – BYD’s founder said the company aims to overtake Toyota as the world’s biggest carmaker within five years, powered by battery technology advances and fast charging. BYD plans to invest almost £1.8bn in European flash-charging infrastructure.
GM is developing sodium ion battery technology in partnership with US start-up Peak Energy to challenge Chinese dominance in energy storage. Sodium ion batteries use cheaper and more abundant materials than lithium and they function across extreme temperatures without an active cooling system. Cooling systems use tons of energy.
Renault has capped its defence revenue at 5% of total sales as it expands into drone manufacturing alongside its car business. Mercedes-Benz signed a deal with Tytan Technologies to provide vehicles for a mobile air defence system targeting small drones, using Sprinter vans and a military G-Class SUV.
Driverless vehicle start-up Wayve is exploring whether its early backers could trade shares on the London Stock Exchange’s private securities platform, Pisces, potentially providing a boost to the LSE’s tech credentials.
IN MISCELLANEOUS NEWS...
REAL ESTATE – The latest RICS survey reflects a subdued market although some estate agents are cautiously optimistic that activity may be beginning to stabilise. Conditions have not improved meaningfully but estate agents say that there are tentative signs which suggest that things have stopped getting worse.
PHARMACEUTICALS – AstraZeneca reported positive mid-stage trial results for its leading weight-loss drug, which would suggest that it is beginning to close the gap on rivals Eli Lilly and Novo Nordisk in a fast-growing market.