Category: Protected – UOL Spring 2023

1. In MACRO & “GREEN” NEWS, Putin arrives in China, Argentina’s inflation moderates, the UK’s economy outpaces the Eurozone’s, the Dutch far-right form a government, Labour lays out its stall, the Bank of England gets a poor report card, AI start-ups aim to tackle climate change, Calpers channels money into green investments, aviation chases green fuel and M&S takes initiative with packaging
2. In TECH NEWS, Microsoft’s emissions jump, data centres prompt Big Tech spending, Google uses AI for the good, PolyAI attracts a nice valuation and Raspberry Pi heads for flotation
3. In CONSUMER GOODS, RETAIL & LEISURE NEWS, Burberry profits weaken, Gail’s goes to Waitrose, TUI delivers and Eurostar gets bullish
4. In MISCELLANEOUS NEWS, China makes big plans for a real estate solution, we look at some M&A developments and difficulties facing UK universities
5. AND FINALLY, I bring you some incredible ab control!

So Putin arrives, Argentina’s inflation cools, the UK’s economy outpaces Europe’s, the Dutch far-right moves forward, Labour lays out its plans, the Bank of England gets a poor report and we look at the latest green developments…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

Vladimir Putin arrives in China to shore up close ties with Xi Jinping (Financial Times, Joe Leahy) shows that Putin arrived in Beijing on a state visit aimed at cementing his existing relationship with Beijing and bolstering support for his war effort. No doubt we’ll hear more over the coming two days but this meeting comes at a very sensitive time what with instability in Europe, elections in the US and UK and shifting relationships in Asia and the Middle East.

Meanwhile, Inflation moderates in Argentina even as annual rate hits 289% (The Times, Jack Barnett) shows that monthly inflation fell to 8.8% from over 25% 😱 in December! On an annualised basis, inflation in the country increased to 289% in April, so it’s clear that President Milei’s austerity measures have yet to kick in although perhaps the monthly figure is a sign that things are going to change. * SO WHAT? * Milei was elected on a ticket of extreme economic reform (he became infamous for being associated with “chainsaw economics” and vowed to abolish the country’s central bank!) so the clock has been ticking since his December inauguration. Milei’s austerity measures have been a hit with investors and lenders but they probably won’t win him many friends among his citizens because they have put downward pressure on employment and wage growth!

In Europe, Dutch far right to form coalition government (Financial Times, Andy Bounds and Daria Mosolova) showed that Geert Wilders’ far-right party has managed to form a coalition government in the Netherlands as the political pendulum in Europe continues to swing from the left to the right. We’ll just have to see whether this all hangs together! Meanwhile, Eurozone economy grows half as fast as UK (Daily Telegraph, Tim Wallace) cites the latest release from Eurostat which shows that the eurozone economy is growing at half the rate of the UK’s as it turns out the Eurozone’s GDP grew by 0.3% versus our 0.6%.

Back in the UK, Keir Starmer unveils six election ‘first steps’ for a Labour government (Financial Times, Jim Pickard) shows what a Labour government might have in store for us all if they get elected. They have already outlined Labour’s “five missions” of stabilising the economy, reducing NHS waiting times, establishing a state-owned energy company, addressing antisocial behaviour and recruiting more teachers. It has now added a sixth policy – the launch of a Border Security Command that will try to turn voters swayed by immigration. Labour are currently a whopping 20 points ahead of the Conservatives in the polls. * SO WHAT? * This is all good but things could well be different if Starmer gets the keys to No.10 and looks under the hood. Still, these are all fine promises but we’ll just have to see a) how practical they are and b) how they’ll be funded.

Bank ‘too distracted putting out fires’ to improve its forecasts (The Times, Jack Barnett) cites the conclusions of former Fed chief Ben Bernanke in the report that he presented to MPs yesterday. Bernanke was the Fed’s chief between 2006 and 2014 and had been commissioned to do a review of the Bank of England and find out why it’s been so useless at forecasting inflation. Whatever his recommendations are, let’s hope they work because at the moment they might as well use a dartboard 🤣.

Then in “green” news developments, AI start-ups take aim at climate change (Financial Times, Javier Espinoza) we see that French start-up Sinay uses AI to analyse ocean data to help the maritime industry reduce its environmental impact while Danish start-up Electricity Maps tracks the carbon density of corporate electricity usage and Spanish start-up Mitiga uses AI to evaluate the risk of natural disasters. Overall, though, European climate tech start-ups in areas including electric mobility, nuclear fission and alternative proteins have sucked up 43% of global venture capital investment in climate tech, an increase from 29% in 2022 according to data platform Dealroom. * SO WHAT? * This sounds great but obviously they are going to have to survive the long term! Also, there are distinct downsides, from an environmental point of view, of AI – the main one being the sheer amount of power (see the Microsoft story in the next section!) and water it needs, not to mention the potential for accelerating the spread of climate disinformation.

Meanwhile, Calpers to direct $25bn to green private market investments (Financial Times, Josephine Cumbo and Attracta Mooney) shows that America’s biggest public pension plan, Calpers, has announced plans to put over $25bn into green-related private market investments over the next six years. It is looking at the private equity, real estate and infrastructure markets mainly in Asia and Europe. * SO WHAT? * This perhaps explains the company’s unease with Exxon’s aggressive position on climate-focused investors! It is worth noting that this will make Calpers one of the world’s biggest investors in climate solutions despite ESG investing generally falling out of favour.

In other developments, Aviation sector sees greener fuel as crucial to net-zero goals (Financial Times, Slyvia Pfeifer) shows that there is a growing demand for Sustainable Aviation Fuel (SAF) as the aviation industry tries to find ways of becoming greener. At the moment, aviation accounts for 2-3% of global carbon dioxide emissions and the industry’s visibility means that it is under particularly heavy scrutiny from policymakers and environmentalists alike. The industry has pledged to hit net zero emissions by 2050 via a mix of new fuel tech (including SAF and hydrogen) whilst making aircraft and engines more efficient. * SO WHAT? * SAF can emit up to 80% less CO2 over its lifetime than traditional aviation fuel but the key thing is that existing engines can use it. Indeed, the industry body IATA reckons that SAF will account for between 24% and 70% of the reductions needed (that’s a pretty wide prediction 🤣) by 2050. The key here is being able to produce enough SAF in a commercially viable way. Currently it accounts for less than 0.1% of global jet fuel volumes but is at least triple the price! At the moment, it is made from waste such as cooking oil and plants but there are hopes that technological advances will enable the manufacture of synthetic SAF by combining CO2 from the air with “green” hydrogen, which comes from water using renewable energy. Icelandic start-up IðunnH2 is aiming to have a commercial scale SAF facility online by 2028. The establishment of other facilities around the world is likely to hinge on how much assistance is given by respective governments to provide a long-term safety-net.

Then in M&S teams up with recycling tech group to trace plastic packaging (The Guardian, Sarah Butler) we see that M&S is working with recycling tech group Polytag to help it track what happens to its drinks bottles, cartons and other plastic packaging. The Polytag system prints an invisible tag onto containers which can be scanned by electronic readers at recycling centres and products with the tags will start to appear on the shelves in the next three months. This will be the first full-scale use of the system after bits of it have been tested at other retailers. * SO WHAT? * Retailers are preparing to have to pay new fees towards the disposal of plastic packaging next year under the government’s delayed Extended Producer Responsibility (EPR) programme where retailers have to monitor and report the amount of packaging they sell. The fees that they have to pay will hinge on this data. This sounds like a good idea in theory, but it’ll be interesting to see whether this actually works in practice.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Microsoft’s emissions jump, data centres prompt Big Tech spending, Google uses AI for the good, PolyAI gets a nice valuation and Raspberry Pi heads for an IPO…

Microsoft’s emissions jump almost 30% as it races to meet AI demand (Financial Times, Camilla Hodgson) shows that Microsoft’s emissions have increased considerably since 2020 as the company built more data centres that are needed for the computer power that AI and cloud computer systems need. The emissions are being driven by the race between Microsoft, Amazon and Google as to who can build the most comprehensive infrastructure. Data centres are bad for emissions because they  * SO WHAT? * Infrastructure development has been building up so quickly that there are now increasing concerns as to how national energy grids can cope with the expected increase in energy needs from AI and whether renewable sources will be able to keep up. In order to assist with this, Microsoft said this month that it would finance some of Brookfield Asset Management’s renewable electricity projects to the tune of around $10bn so that it can hit its clean energy goals AND its AI ambitions. Data centres have turned Big Tech into big spenders (Financial Times, Lex) makes the interesting point that post-pandemic cost-cutting is now morphing into a rise in spending on data centres as Big Tech races to erect ever-higher barriers to entry. McKinsey research suggests that power consumption for US data centres will more than double between 2022 and 2030 and capex is accelerating but Big Tech companies are going to have to see some return on their massive expenditure as cost-cutting won’t be enough to save their margins.

Meanwhile, Google turns to AI to protect users from mobile phone thefts (Financial Times, Stephanie Stacey) shows that Google is planning to use AI to detect when Android smartphones have been taken and quickly lock the screen as thefts of mobile phones increases. The idea is to make it less attractive for criminals to steal phones and profit from sensitive financial information and personal data. The “theft prevention lock” will be rolled out later this year on devices that are running on later Android operating systems. Apple rolled out its antitheft features in its Stolen Device Protection update earlier this year. * SO WHAT? * Apparently this is a growing phenomenon as British police are now facing the highest recorded level of “theft from the person” offences in 20 years. Incidents of the crime rose by 18%

in 2023 alone! It’s good to see that tech companies are acting accordingly given how central these devices have become to our daily lives. Perhaps ten years ago, losing your wallet or having it stolen would have been a nightmare. These days, having your phone stolen is far worse…

Then in PolyAI secures near $500mn valuation in boost to UK’s AI ambitions (Financial Times, Stephanie Stacey) we see that London-based PolyAI, which produces AI voice assistants for call centres, has hit a valuation of almost $500m thanks to its latest fundraising round that raised $50m from investors including Nvidia, Khosla Ventures and Point72 Ventures. PolyAI’s tech will officially fill gaps in call centres using customer support AI assistants that can guide customers through complex inquiries in a conversational manner, although you’d think that in time the tech will replace the humans. * SO WHAT? * PolyAI made over $10m in revenues in 2023 and looks set to triple that this year. A report published in January by the UK’s Institute of Customer Service in January said that customer service satisfaction levels had fallen to their lowest levels since 2015, partly because of frustration with automated chatbots. However, I’d say this report is – IMHO – likely to be biased because its whole reason for the existence of this organisation is to promote customer service 🤣! Klarna, for instance, is very pleased with the performance of its chatbot that it developed with OpenAI (but it’s probably biased as well – so maybe the truth is somewhere in between!).

Then in Raspberry Pi prepares for London listing (Financial Times, Tim Bradshaw and Jonathan Wheatley) we see that the British maker of cheap-and-cheerful mini computers is planning on floating on the LSE, in a nice little boon for the embattled stock market. Raspberry Pi was valued at $579m in November when Arm took a 3.4% stake. The listing is likely to take place in early June and will be useful as currency to help retain staff in a currently competitive tech jobs market. Raspberry Pi is a subsidiary of the Raspberry Pi Foundation, a charity that promotes computer science to young people. The Foundation has a 73% stake in the company and will continue to be a shareholder after the offering. * SO WHAT? * Raspberry Pi’s IPO should prove a tasty mouthful for London (Financial Times, Lex) reckons that its target valuation looks pretty reasonable in comparison to its peers, so it’s likely that the flotation will be a success. The LSE has come been under fire for being light on flotations and losing tech companies to the NYSE. Raspberry Pi’s IPO ticks both boxes. OK so it’s not a behemoth, but it’ll do for now!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Burberry weakens, Gail’s goes to Waitrose, TUI delivers and Eurostar’s confidence grows…

Profits fall as Burberry finds itself out of fashion (The Times, Isabella Fish) shows that Burberry is now feeling the pinch from stubbornly high inflation and flagging (for Burberry) markets in China, the Americas and Europe. It already announced its second profit warning in three months in January and yesterday it saw its revenues slip even further. It was downbeat about trading in the first half, warning that wholesale revenues would weaken by about 25% over the time period as it wrestled for control of distribution. The share price has fallen by 56% in the past year while the FTSE100 has risen by 8% overall. * SO WHAT? * All the usual excuses have been wheeled out to explain the company’s dire performance – the “tourist tax”, inflationary pressures, low consumer confidence in key markets etc.etc. – but rivals including Prada and Hermès have faced the same issues and come up smelling of roses. That being said, Richemont, LVMH, Kering and Mulberry have also had a tough time as well. I guess it just has to ensure that it streamlines its operations and makes products that customers really want! With the improving global economic environment you would have thought that prospects will improve.

In Gail’s spreads wings with Waitrose in-store bakery at CanaryWharf (The Times, Emma Taggart) we see that Gail’s is going to be opening its first in-store bakery in Waitrose’s Canary Wharf branch from June 6th! Customers will be able to buy Gail’s baked goods and coffee in addition to using their click-and-collect services. This sounds like a good move and will be a nice addition to the Waitrose experience! This deepens the relationship between the two as Waitrose introduced Gail’s bakery areas in 64 of its stores last year.

In leisure news, TUI delivers record sales with strong demand for summer holidays (The Times, Dominic Walsh) shows that Q2 sales at Europe’s biggest tour operator hit an all-time high thanks to strong demand for package holidays. The results came in above market expectations as holidays in Greece, Turkey and the Balearics continued to be big sellers. It’s looking to expand its hotels business (and will launch its first hotel under its new deluxe brand The Mora on Zanzibar next month), its cruise business continues to go from strength to strength and the company kept its full year forecasts unchanged. It’s looking pretty good for them at the moment!

Then in Eurostar plans up to 50 new trains and more services to tap ‘huge’ demand (Financial Times, Philip Georgiadis) we see that Eurostar is planning on buying 50 new trains and it thinking of increasing the number of international routes from London to lean into “huge demand” for rail travel across Europe. The new trains would replace older ones and increase the size of the fleet by a third from 51 to 67 trains as it aims to add to its current services between London, Paris, Amsterdam and Brussels. * SO WHAT? * This is so interesting to see as it wasn’t that long ago that the company was forced to stop using two stations – Ebbsfleet and Ashford – in order to avoid bankruptcy as it reined things in over the pandemic. It’s also interesting because it reflects new confidence in both business and leisure travel. That being said it will have to keep on its toes as it has competition in the form of the Channel Tunnel which is also considering launching train services between the UK and Europe. At the moment, 400 trains used the tunnel every day – but it has capacity for 1,000! Let’s hope things get very competitive so prices come down 😁!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

China has a real estate solution, we look at M&A developments and difficulties facing UK universities…

In a quick scoot around some of today’s other interesting stories, China plots to buy millions of unsold homes amid property crisis (Daily Telegraph, Szu Ping Chan) highlights a potentially interesting development for China’s massively indebted real estate sector – that the ruling Communist Party is thinking of committing up to $280bn a year for five years to buy distressed properties and then offer them at discounted rents to families. The properties would be banned from being sold on the open market. This is said to be in the early stages, but it sounds like a pretty dramatic way of addressing China’s real estate problems!

In M&A news, Axiata, Sinar Mas Plan Merger of Telco Units in Indonesia (Wall Street Journal, Ying Xian Wong) shows that Malaysian telecoms giant Axiata and Indonesian conglomerate Sinar Mas are in talks to merge their telecom operations in Indonesia that could produce a combined entity worth around $3.6bn. They will not necessarily go through with a merger but they have signed a non-binding memorandum of understanding. It’ll be interesting to see whether any other companies decide to throw their hats in the ring!

Nearer home, Royal Mail set to be taken over by Czech billionaire for £3.5bn (Daily Telegraph, James Warrington) shows that the company is getting closer to an imminent takeover as its board said it would potentially accept Daniel Kretinsky’s bid. If it went ahead, it would be the first time that Royal Mail would be under foreign ownership in its 500 year history! Hmm. I don’t think this is going to be popular, but we’ll just have to wait to see how this goes! Then in Compass to halt share buybacks and use cash for acquisitions (The Times, Dominic Walsh) we see that Compass Group is looking to keep its powder dry in order to make opportune bids for other companies. * SO WHAT? * This is a big

statement IMO and is further evidence of rising business confidence that will power an M&A boom. Its half-year results were solid and it made the very interesting observation that rising prices of food outside the office was prompting more employees to use the company canteens that Compass offers!

Then in UK migration policy risks undermining university sector, business warns (Financial Times, Michael O’Dwyer) we see that business leaders have warned the PM that his migration policies could damage the UK university sector, potentially risking outside investment as companies value “the positive impact that international students have on our skills base”. The Migration Advisory Committee is trying to persuade ministers not to abolish the graduate visa programme which allows foreign students to live and work in the UK for up to two years after graduation. As if that’s not bad enough, England’s universities face ‘closure’ risk after student numbers dive (Financial Times, Peter Foster) highlights the funding crisis that universities are facing because the number of student applications is falling. 40% of England’s universities expect to be in deficit in the 2023-2024 academic year with more showing low levels of cash flow. As things stand currently, over 50 UK universities are cutting both costs and jobs due to the ongoing fall in overseas student numbers and the decade-long freeze on the annual £9,250 in tuition fees paid by domestic students. The Russell Group of universities reckons that universities are losing an average of £2,500 a year per student – but they also think that this will rise to £5,000 by the end of the year. * SO WHAT? * This sounds like an absolute nightmare. Overseas students pay a large premium on tuition fees versus domestic students – so if the domestic students can’t pay any more (because of the £9,250 cap) and the number of overseas students is dropping, universities are going to have a disaster on their hands. I suspect this is going to be one of those things that the new government is going to be left to deal with.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

If only I had ab control like this! This guy is incredible!

1. In BIG PICTURE NEWS, Putin visits China, Biden tries to outdo Trump, new US tariffs will hit clean tech, Pill sounds caution about UK rate cuts, Vietnam promises more energy, UK fusion gets shut out and Blackrock gets big in crypto
2. In TECH NEWS, Google unveils a new AI assistant, Sutskever resigns from OpenAI, Selipsky resigns from AWS, SMIC warns of a chip price war, Tencent booms and Sony profits jump
3. In CAR-RELATED NEWS, China EV makers aim to conquer the world (ex-US), Stellantis is to sell cheap Chinese EVs and we look at how to improve the economics of charging
4. In MISCELLANEOUS NEWS, Anglo American announces a break-up plan, Currys returns to sales growth, Greggs feels the heat, Revolution’s plans are put on hold and HSBC and Deloitte grads take a hit
5. AND FINALLY, I bring you a handstand competition and a joke for lawyers…

So Putin visits China, Biden tries to outdo Trump, a bitter Pill sounds caution, Vietnam promises more energy, UK fusion gets excluded and BlackRock gets big in crypto…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

Putin to visit China as Beijing plays key role in supporting Russia (Financial Times, Max Seddon, Joe Leahy and Wenjie Ding) shows that Putin is to visit China tomorrow and Friday in his first foreign trip since he was sworn in as president for his fifth term last week. This will be the 43rd meeting between the two leaders. The US is getting increasingly antsy about how much China is helping Russia’s war effort and has threatened secondary sanctions for supplying Moscow’s defence industry. Russia will be hoping that China will replace Europe as the main destination for its gas exports since its exclusion following the invasion of Ukraine.

Joe Biden and Donald Trump battle to prove who can be toughest on China (Financial Times, James Politi) shows that the two presidential candidates seem to be trying to outdo each other over who can be tougher on trade with China. Biden announced $18bn worth of tariffs on Chinese imports ranging from EVs to solar cells yesterday while Trump has promised to hit all Chinese goods with taxes of 60% or more if he gets the top job. Why Washington’s new tariffs on Chinese clean tech goods matter (Financial Times, Aime Williams) shows that although this is designed to protect workers in America’s swing states, the repercussions of this action will be felt much further afield. Biden is effectively keeping all of Trump’s tariffs and adding more of his own, targeting strategic industries. For instance, he is going to quadruple the tariff rate on Chinese EVs to 100%, double them on solar cells to 50% and more than triple the rate on Chinese lithium-ion batteries to 25%! * SO WHAT? * The effect of the new tariffs is likely to slow EV adoption as costs for US manufacturers are going to rise as the country is “heavily dependent” on Chinese EV batteries. China may well retaliate and, given that it has the power to restrict access to resources, materials and technologies that are key for the American economy, the trade war could escalate further – and Europe will get caught in the crossfire. Brussels is either going to have to implement its own tariff regime or suffer a massive influx of Chinese product.

Meanwhile, back home, Rate cuts thrown into doubt amid rising wages and jump in US inflation (Daily Telegraph) shows that the Bank of England’s chief economist, Huw Pill, says that workers’ wages are increasing too quickly to cut rates. The latest data from

the ONS, published yesterday, showed that regular pay increased by 6.2% in March versus the previous year led by a 6.2% rise in public sector pay. * SO WHAT? * This would imply that interest rates might not be cut just yet but then again the Bank of England last week hinted at a summer cut. The Bank of England has been so useless at predictions for some time now that maybe they’ve wheeled Pill out to cover their 🍑rses in case an early cut blows up in their face. Meanwhile, there are signs that the labour market is slowing down – so that might take some of the heat out of wage rises.

In energy news, Vietnam pledges more energy supply as chip race heats up (Financial Times, Lien Hoang) shows that the country is committing to increase energy supplies in order to attract overseas tech companies to manufacture there. At the moment, manufacturers are looking at setting up facilities within Asia but outside China (because of ongoing US-China trade tensions) and Vietnam is vying for their business along with others including India and Malaysia. * SO WHAT? * There’s already a 500-megawatt project due later this year that will provide electricity to northern Vietnam, which is where all the chip companies are. Four chip research centres are planned and the government is working with 36 universities to train at least 50,000 engineers!

Then in EU rebuffs UK attempt to continue collaborating on nuclear fusion experiment (Financial Times, Andy Bounds and Michael Peel) we see that Brussels has blocked UK attempts to keep collaborating with the world’s biggest nuclear fusion experiment, the “Iter” project, unless it rejoins its civil atomic programme, Euratom. The UK left Euratom as part of Brexit and had looked at continuing with Iter as an outside partner (Australia does this) but the EU’s not having any of it. * SO WHAT? * London left Euratom because it thought it was too expensive. We have our own fusion ambitions that are managed by the Atomic Energy Authority and there are plans to build the world’s first commercially viable fusion power plant in Nottinghamshire. Who needs who more?? I guess we’ll just have to wait to find out.

In crypto news, BlackRock closes in on crown of world’s largest bitcoin fund (Financial Times, Will Schmitt and Brooke Masters) shows that BlackRock has come a long way in its initial scepticism of cryptocurrencies to the extent that it is now getting close to running the world’s biggest bitcoin fund! Its ETF now has $16.7bn of assets since its launch four months ago, which means that it is “only” $1bn short of market leader Grayscale which started ten years ago! * SO WHAT? * This just highlights rising investor interest and the rapid growth of digital assets generally just seven years after CEO Larry Fink described bitcoin as “an index of money laundering”. If you can’t beat ’em, join ’em, eh Lazza?!?! Fink now describes himself as “very bullish on the long-term viability of bitcoin” 🤣! BlackRock has benefitted the most from the SEC’s decision in January to approve ETFs that invest directly in bitcoin. Fidelity’s done OK as well as it now has the third biggest crypto ETF fund. Interestingly, both BlackRock and Fidelity have benefitted from big outflows from Grayscale.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Google announces a new assistant, AI chiefs leave, SMIC warns of a price war, Tencent booms and Sony puts in a decent performance…

In AI news, Google releases ‘Project Astra’ assistant in latest AI advance (Financial Times, Stephen Morris and Madhumita Murgia) shows that Google’s parent, Alphabet, unveiled a new AI assistant yesterday at its annual developer conference that can answer real-time questions across video, audio and text. The “multimodal” AI assistant, called Project Astra, is powered by an improved version of its Gemini model. The prototype assistant responded to voice commands based on what it sees via a phone camera or when using smart glasses. Google wants to add Astra’s functionality to its Gemini app and across other products this year. The AI race continues!

It seems that there’s some personnel movement going on in AI at the moment as OpenAI co-founder and chief scientist Ilya Sutskever departs (Financial Times, George Hammond) shows that OpenAI’s co-founder is leaving, six months after an unsuccessful attempt to remove Sam Altman as CEO. Altman and Sutskever are publicly talking in glowing terms about the company and each other but you’ve got to wonder how the last six months have been! Sutskever, OpenAI’s chief scientist, hinted yesterday that he would be launching a new project but didn’t give any further details. Amazon Web Services chief steps down amid AI race with rivals (Financial Times, Camilla Hodgson) shows that the head of the e-tailer’s cloud business, Adam Selipsky, is unexpectedly stepping down to “move on to his next challenge” on June 3rd and will be replaced by Matt Garman, the current VP of sales, marketing and global services at AWS. * SO WHAT? * AWS is a major profit driver for Amazon and Sepisky has overseen a major acceleration of sales growth. I wonder whether we’re going to be seeing more senior management changes as money pours into AI and top management is tempted by other projects (perhaps with even bigger prospects?).

Elsewhere, China’s SMIC warns of fiercer price war for less advanced chips (Financial Times, Cheng Ting-Fang and Lauly Li) highlights concerns from SMIC, China’s biggest chip maker, about a growing price war in the domestic market for less advanced chips as well as an imminent global oversupply thanks to new production capacity coming online in the next few months. Chinese chipmakers have been ramping up production to help Huawei and others who have been targeted by US sanctions at the same time as other countries looking to boost their own output for security reasons. This sounds concerning not only for the prospects for domestic business but also for prospects overseas as China could just flood international markets with these cheap chips.

Then in Tencent Profit Jumps as High-Margin Businesses Grow (Wall Street Journal, Sherry Qin) we see that Chinese tech giant Tencent managed to report a chunky 62% increase in its profits for Q1 thanks to major growth in its high-margin business (short videos and mini games embedded in WeChat). There may be another catalyst waiting in the wings in the form of a new game called “Dungeon and Fighter Mobile” which will be released on May 21st in China. This, along with other releases, could give a useful boost to gaming revenues for Q2…

Meanwhile, Sony Group Profit Jumps on Stronger Game, Movie Earnings (Wall Street Journal, Kosaku Norioka) shows that the company reported a 34% increase in net profit thanks to decent performances from their game and movie divisions. The company said that it was going to do a ¥250bn share buyback over the next year and a five-for-one stock split that will come into effect on October 1st. Investors are going to like this a lot!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

China EV makers aim high, Stellantis aims to sell cheap Chinese EVs and we look at how to improve the economics of charging…

With America Off-Limits, China EV Makers Aim to Conquer Rest of World (Wall Street Journal, Yoko Kubota and Sha Hua) is an interesting article that takes a look at the prospects for Chinese EV makers in the wake of Biden’s dramatic jacking-up of tariffs on Chinese car imports. * SO WHAT? * As far as the Chinese makers are concerned, it’s not going to make much difference as the US market is of negligible size to them at the moment but it will make a difference to their efforts elsewhere (particularly Europe) as they are likely to focus their efforts on emerging markets and expanding plans to localise production where possible, particularly in countries that are more receptive to Chinese EVs.

Back home, Vauxhall owner to sell cheap Chinese electric cars in Britain (Daily Telegraph, Matt Oliver) shows that Stellantis is going to be selling cheap Chinese EVs in the UK as part of a joint venture with Chinese carmaker Leapmotor. It is going to launch a supermini and SUV in mainland Europe from September and in the UK from March next year. It’ll be interesting to see how this goes down in the UK as Chinese EVs are very competitively priced – and this is one of the main sticking points for potential buyers.

How to crack the economics of EV charging (Financial Times, Brooke Masters) is an interesting article that identifies the current

problems with the current state of the charging network – relative lack of charging points and the time it takes to charge. Owners of public chargers are often unable to cover the cost of installation and operation because they don’t get used enough, so there isn’t really much of an incentive to boost the number of charging points – Musk’s dramatic recent move to sack all his Supercharger employees is a rather stark result of this. This article suggests that charger operators need to rethink their current strategy (install equipment everywhere all at the same time) and concentrate their fast charger installations where they can have the most impact. They also need to make the most of the fact that EVs don’t have to be attended while they are charging so you have potential customers just hanging around looking for something to do! * SO WHAT? * I maintain that investing money in stand-alone charging networks will ultimately be a fruitless money pit because improvements in battery tech will mean that range anxiety will disappear and there won’t be as big a need to have so many. I think it makes more sense to put chargers at the very least in existing petrol stations (because this is where people EXPECT to refuel). This could ultimately be a winner for petrol station operators who could potentially benefit from EV drivers wanting to kill time whilst charging is in progress so they could be offered more services. More chargers could also be sited at supermarket car parks and hotels where people expect to be for a while anyway. I don’t think that digging up roads so you can charge at every lamp post is the answer…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Anglo American announces a break-up, Currys spices up, Greggs feels the heat, Revolution’s in limbo and HSBC and Deloitte grads take a hit…

In a quick scoot around some of today’s other interesting stories, Anglo American to cut De Beers loose in radical break-up plan (The Times, Emma Powell) shows that the under-pressure miner Anglo American has outlined a plan to break up its operations to fend off a takeover approach from rival BHP. It would look to spin out or sell its De Beers diamond business to concentrate more on copper and iron ore. It said that it would also look to demerge its Amplats platinum business, sell off its steelmaking coal business and look at options for its nickel business. Anglo American needs a speedy break-up to make up with investors (Financial Times, Lex) applauds the moves to streamline its convoluted structure and commodities mix that would make it a copper specialist. * SO WHAT? * It looks at the moment like BHP will find it hard to put together a much improved offer and if it tried a hostile takeover, things could get very tricky. For now, Anglo American has outlined something that its shareholders can actually get behind.

Elsewhere, Currys shows its value with return to sales growth (The Times, Isabella Fish) shows that sales growth has come

back and Currys were confident enough to increase full year forecasts as its Nordic business showed signs of getting back on track. The company had been subject to a takeover bid less than two months ago that ultimately collapsed so I’m sure this good news will have been very welcome! Greggs feels the heat from rising wage costs (The Times, Isabella Fish) shows that the high-street baker announced a jump in Q1 sales but highlighted the effect of higher wage costs on its financials. The company is looking to open more outlets in supermarkets, petrol stations and travel locations and it left its full-year targets unchanged.

Meanwhile, Revolution plans put on hold (The Times, Alex Ralph) shows that the future of Revolution Bars remains in limbo as it has yet to get an offer for the whole company (although it has received offers for parts) and New visa rules force HSBC and Deloitte to withdraw UK job offers (Financial Times, Simon Foy and Ortenca Aliaj) highlights a rather unfortunate phenomenon of these companies having to withdraw job offers to foreign grads in the UK after rules changed on the earnings threshold for skilled worker visas (the thresholds have been raised from £26,200 to £38,700 and to £30,960 for people under the age of 26). KPMG cancelled contracts for some foreign grads last month for the same reason. What an absolute nightmare for those affected.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

Doing a handstand for any length of time is impressive – but who do you think can last the longest out of a calisthenics practitioner, a YouTuber, a gymnast, an acrobat or a body builder?? Find out here!

I thought I’d leave you today with a dad joke I heard recently:

I had a great meal at an Indian restaurant the other night.

I was so impressed, I asked for the recipe – and they gave it to me!

I can’t tell you what’s in it, though – I signed a naan disclosure agreement 🤦‍♂️

1. In MACRO & COMMODITIES NEWS, the City gets excited about the UK, BHP gets its latest offer rejected and we look at why everyone’s getting so hung up on copper
2. In TECH NEWS, Microsoft is to face EU competition charges, Hunt has $1tn tech dreams, Apollo and Intel consider building a chip plant in Ireland, Permira takes Squarespace private, OpenAI rolls out updates and SoftBank reports solid performance
3. In RETAIL NEWS, Temu’s US growth slows, Walmart announces layoffs, GameStop booms again, Heathrow lays into the tourist tax and Asda aims to build a new “town centre”
4. In MISCELLANEOUS NEWS, EVs emerge as the top company perk, superfans offer opportunity and housebuilding slows
5. AND FINALLY, I thought I’d bring you a mesmerising pancake…

So banks get bullish on the UK, Anglo American rejects another offer and everyone chases copper…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

City’s revised forecasts show economy racing ahead (The Times, Jack Barnett) shows that a number of City banks and consultancies have jacked up their UK GDP forecasts following last week’s ONS release showing that the economy had expanded by 0.6% in Q1. It doesn’t sound like much, but it is the fastest growth we’ve had for three years! Wages are rising faster than inflation, confidence is returning, it looks like the Bank of England will cut interest rates next month, the housing market looks like it’s bottoming out and the IPO pipeline is building ahead of imminent rule changes (according to the London Stock Exchange). The cherry on the top would be Hunt deciding to cut taxes as a pre-election gambit but it doesn’t sound like he’s got much slack to play with – still, there are more reasons to be positive than negative at the moment it seems!

Anglo American rejects fresh £34bn takeover approach from BHP (Daily Telegraph, Michael Bow) shows that former has rejected a second takeover bid from rival BHP whilst promising to provide shareholders with a workable growth plan that it can follow on its own. The second bid was priced at a level 9.7% higher than the initial bid, but Anglo maintains that this still “significantly undervalues” the group. BHP still has until May 22nd to make a final bid. Why the World Has Gone Cuckoo for Copper (Wall Street Journal, Julie Steinberg) takes a look at why everyone’s so interested in copper at the moment (this is why BHP is trying to buy Anglo American, for instance – to get more exposure to copper). Basically, copper is used in a wide variety of green tech – from solar panels, wind turbines, power cables to energy storage systems! As a result, demand for copper is expected to increase – which is why copper futures are up by 20% this year! The US government in particular is concerned about potentially being caught short regarding copper supply (presumably it doesn’t want to repeat the experience it’s had with lithium, for instance, where the Chinese have pretty much sewn up supply) and has made a number of infrastructure investments and even taken a stake in First Quantum Minerals’ Zambian mines worth up to $3bn. * SO WHAT? * It’s good that the US government is putting its money where its mouth is regarding copper, but it will still be up against China fighting for assets! Let’s hope we don’t see a repeat of what happened with lithium…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Microsoft gets into more trouble, Hunt dreams of a British $1tn tech company, Apollo and Intel enter talks to finance an Irish chip plant, Permira goes for Squarespace, OpenAI releases updates and SoftBank booms…

Microsoft set to face EU competition charges over Teams software (Financial Times, Javier Espinoza) shows that the European Commission is not satisfied with Microsoft’s recent move to unbundle Teams from Office (and other software) in Europe. This would be an escalation of a case that dates back to 2020 after Slack, which is now owned by Salesforce, put in a formal complaint about Microsoft’s Teams (that it was using its dominance in productivity software to push something for “free” that should be a separate service). Charges could come in the next few weeks and if Microsoft is deemed to have breached EU competition law, it could face fines of up to 10% of its global annual turnover. * SO WHAT? * This is just another example of regulators around the world clamping down on Big Tech – something that we’re going to be seeing a lot more of as new laws, like the Digital Markets Act, come into force!

I’ve included Jeremy Hunt bets on creating a $1tn ‘British Microsoft’ (Financial Times, Michael O’Dwyer and Harriet Agnew) by way of light relief because apparently our chancellor believes that the UK can make its own $1tn tech giant that would be capable of rubbing shoulders with the likes of Microsoft or Google. He wants the UK to be “the world’s next silicon valley”. * SO WHAT? * I think this is pure fantasy. We already had a world leading tech company in Arm and allowed it to be sold to SoftBank in 2016! This is a company with a virtual monopoly in smartphone chips – and we let it slip through our fingers gladly! TBH I think that the main obstacle to growing a British Microsoft is the way we fund companies. I think that there is a risk that if there is anything even remotely good, some US tech company has the money to buy it without really batting an eyelid. Also, investors over here can be more conservative than those in the US – but then again you could point to Baillie Gifford’s massively successful punt on Tesla when it bought shares at $6 a pop. I think that there has to be a real concerted effort by the government to fund such companies and really look after them if they are serious about making strides towards this dream. Anything less just won’t do IMO because I don’t think we can rely on investors to provide the necessary financial firepower.

Then in Apollo and Intel enter talks to finance $11bn chip plant in Ireland (Financial Times, Antoine Gara, Michael Acton and Jude Webber) we see that US chip giant Intel has entered into exclusive talks with private capital group Apollo Global about financing an $11bn chipmaking plant in Ireland. * SO WHAT? * Intel is in the middle of a multi-year overhaul of the business in a bid to regain the lead in chips from TSMC and Intel. As part of this, the company is looking to spread chip production outside Asia. It is already building a new government-subsidised plant in Germany. The Apollo side of this is also quite interesting – it is getting

increasingly active in providing complex investment-grade loans and this month it told its shareholders that it expected to originate over $200bn in debt over the next few years, concentrating on new infrastructure including digital communications networks, data centres, renewable energy and semiconductors (basically, all the hot areas right now!). It is able to do this because its insurance business has over $500bn in assets.

Meanwhile, Permira to take website builder Squarespace private in $6.9bn deal (Financial Times, Maria Heeter, Antoine Gara and Alexandra White) shows that London-based PE firm Permira has agreed to buy website building software company Squarespace for $44 a share in cash, a 15% premium to Squarespace’s closing price on Friday, just three years after it floated! * SO WHAT? * If this goes through, it will be one of the biggest-ever deals supported by non-bank lenders, providing a further example of how popular this type of funding is becoming these days. Permira itself is also involving private credit funds Blue Owl and Ares Capital, who are stumping up $2.65bn in financing. I wonder what they are going to do with the company! Its share price has dropped by about 20% since its listing in 2021 and I do wonder about “DIY” website companies given that there are some decent players in the space and the frenzy of lockdown has calmed down somewhat.

OpenAI rolls out AI updates to GPT-4 as it seeks to get ahead of Google (Financial Times, George Hammond) shows that OpenAI has launched updates to its GPT-4 model as Big Tech groups continue to jostle for AI supremacy. It stopped short of calling it GPT-5, but the new developments include the ability to interpret voice, video, images and code as well as it being much faster. The firm’s CTO demonstrated live voice translation across languages which, interestingly, sent shares in language-learning tool Duolingo down by about 5% in response. Google’s got its annual developer conference this week, so we’ll see what it has got up its AI-sleeve! * SO WHAT? * OpenAI is the pace-setter in AI, but then Google, Meta, Anthropic and Mistral are among the companies to have been working hard to narrow the gap. OpenAI is due to publish an update on the status of GPT-5 later this year while CEO Sam Altman says that it will be “materially better” than GPT-4.

Meanwhile, Arm owner SoftBank reports £1.2bn profit as it shifts towards AI (The Guardian, Jasper Jolly) shows that Japanese tech investor SoftBank managed to make a profit for the second quarter in a row although it wasn’t enough to offset losses over the rest of its financial year. It managed to make chunky gains on its investments, including Arm and DoorDash. SoftBank’s Arm should give Son a hand in AI (Financial Times, Lex) shows that SoftBank is clearly doubling down in investments in AI – it was part of a $1.05bn funding round for UK self-driving start-up Wayve Technologies last week – but it’s not all going to be plain sailing because although it dominates CPUs for smartphones, catching up with the likes of Nvidia on GPUs used in data centres and AI (something that Arm announced that it will be moving into) will be another kettle of fish entirely. If it can get Arm fully engaged in the AI revolution then it will be able to reap some chunky rewards!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Temu slows, Walmart cuts headcount, GameStop booms, Heathrow complains about the tourist tax and Asda wants to create a “town centre”…

Temu Cools on the U.S. After Shelling Out Billions (Wall Street Journal, Raffaele Huang and Shen Lu) shows that bargain app Temu, having poured a ton of money into expanding in the US, is now looking to scale back and seek out other areas for growth! It is now turning more of its attention to Europe and other countries and now expects less than a third of its sales to come from the US this year versus a whopping 60% last year! * SO WHAT? * What a massive – and sudden turnaround – less than two years after it became the US’s second most popular shopping app after Amazon.com. Although Temu is at pains to say this change in heart has nothing to do with TikTok’s travails in the US market, you would have thought that it will have a LOT to do with it considering it was as recent as February that we saw Temu’s massive advertising blitz in the Super Bowl. Given this about-face, you would have thought this could have major implications for ad revenues for the likes of Meta and Google, who benefited greatly from Temu spending freely.

In other US retailer news, Walmart to Lay Off and Relocate Workers (Wall Street Journal, Sarah Nassauer) shows that the retailer announced that it is going to be cutting hundreds of corporate jobs and “asking” most of those working from home to move back into the offices. * SO WHAT? * This is another nail in the coffin for WFH and is a reflection of the ongoing cost-cutting drive at the company.

In GameStop shares double as ‘Roaring Kitty’ returns to social media (The Guardian, Callum Jones) we see that shares in the video gaming chain doubled in trading yesterday on the return of “Roaring Kitty”, the influencer who sparked the meme stock frenzy

in lockdown in the company. He popped up on X for the first time since 2021 but was vague about future plans. * SO WHAT? * The stock eased back to end the day up by “only” 74%, but the underlying business of GameStop is still poor – and it recently announced a terrible quarter! It sounds like things are starting to get dangerous again as the herd starts to move!

Meanwhile, in the UK, Travel fees and tax-free shopping ban are hurting Britain, says Heathrow (Daily Telegraph, Christopher Jasper) shows that Heathrow Airport is now throwing its hat in the ring along with a lot of luxury retailers in criticising the scrapping of VAT for international visitors. The company said that this move is “curtailing the UK’s global connectivity”. That being said, the airport reported that it was heading towards having its busiest year on record after passenger numbers rose by 4.8% last month, adding that it had its busiest day since October 2019 on April 19th 2024!

Then in Asda to build ‘new town centre’ in London (The Times, Tom Howard) we see that Asda is looking to venture into property development by redeveloping a ten-acre site it owns in Park Royal. This will still need planning approval but Asda wants to build a new shop and up to 1,500 flats, a third of which will be affordable, in partnership with Barratt Developments. There will also be new restaurants, coffee shops, gyms and shop units. * SO WHAT? * OMG! ANOTHER supermarket is now fiddling around with a potentially expensive foray into property development! Waitrose did precisely this (and it seems to have fallen flat). WHY doesn’t Asda just stick to its knitting and make its supermarkets better?!? This sounds like a very expensive project that will just suck in money while what Asda REALLY needs to do is rejig its offering and forge a distinct identity to fight back against the German discounters!!! What an absolutely awful idea this is!!!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

EVs become the hot ticket (for company perks), superfans present an opportunity and housebuilding slows…

In a quick scoot around some of today’s other interesting stories, ‘Easier than pensions’: why electric cars are the hot company perk (Financial Times, Peter Campbell and Emma Jacobs) takes a look at a current bright spot for EVs – more employers are allowing staff to lease EVs for their personal use via salary sacrifice schemes, enabling them to get big savings on tax and national insurance schemes. Such schemes cut the cost of the car significantly whilst also making the company and staff look good. * SO WHAT? * This is significant. The SMMT observed that, of the 85,000 EVs sold in the UK in the first three months of this year, a whopping 80% were classed as “fleet” (aka company cars) while the remainder was from plebs like me and you. Third party providers, including Octopus and Tusker, are doing very well from managing the admin of leasing arrangements. Interestingly, salary sacrifice can also be used on used vehicles. Although this is great at the moment, once an incentive like this disappears, demand suddenly crashes – however, for now at least, this is a ray of sunshine for EVs!

In ‘Superfans’ offer rich pickings for music industry (The Times, Tracey Boles) we see that the music industry is increasingly looking into ways of monetising “superfans” as streaming revenues start to top out. Superfans are willing to splash out on early access to music, tickets and merch and the companies want to tap into this! * SO WHAT? * Goldman Sachs reckons that the “superfan market” could be worth more than $4bn a year in revenues and music companies including Universal and Warner are looking at providing superfan experiences!

Then in Wet weather and costly mortgages fuel fall in housebuilding (The Times, Ben Martin) we see that the number of new homes registered for construction fell by a whopping 20% year-on-year in Q1, according to the latest stats from the National House Building Council. * SO WHAT? * It is likely that higher mortgage costs were to blame, but then if you think that interest rates are going to come down from here, it’s likely that the situation will improve.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

I have to say that I am a massive fan of street food – particularly those small places that only have one or a few items but just do those really well! This guy is amazing 😲! It almost seems a shame to eat his artwork!

1. In MACRO, OIL & BUSINESS TRENDS NEWS,  China goes for growth, Spain gets a reprieve, US shale faces accusations, China and ESG ETF closures increase, China pushes Hainan, Miniso has big ambitions, Saudis get frustrated with management consultants, takeover interest in UK companies rises, business parks empty and office rents rise
2. In EMPLOYMENT, CONSUMER & RETAIL TRENDS, we see the end of The Great Resignation, wage rises raise inflation concerns, longer-term mortgages raise retirement concerns, sake hits the UK and Fever-Tree aims at Aperol Spritz
3. In CAR NEWS, Chinese EVs ratchet up the pressure, Tesla turmoil prompts uncertainty and motorbikes head the same way as cars
4. In MISCELLANEOUS NEWS, Alibaba becomes a leading AI investor, Apple faces newspaper ire, Musk defends X, Arm aims at AI and Didi wants to have another crack at the UK
5. AND FINALLY, I thought I’d bring you an annoyingly catchy song and skilful dance…

So China goes for growth, Spain experiences relief, US shale faces accusations, China & ESG ETFs face closures, China pushes Hainan, Miniso expands, the Saudis get frustrated, takeover interest in UK companies rises, business parks empty and office rents rise…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

WHAT A LOT OF INTERESTING NEWS THERE IS TODAY!!! Normally, Monday is a bit of a slow one – but not today! So strap in for a fun ride 🎢

China fires starting gun on $140bn debt sale to boost economy (Financial Times, Cheng Leng) shows that Chinese authorities have launched plans to sell a ton of long-dated bonds in order to raise money to stimulate its economy. They originally announced a bond sale in March but the new  differs from normal government bonds because the money they raise will be for specific purposes (funding long-term projects and decreasing the debt burden of local governments). Previous instances of special sovereign bond issuance include the sale in 1998 to recapitalise state banks, the sale in 2007 to set up its sovereign wealth fund and in 2020 to control Covid and bolster infrastructure investments.

Staying with the theme of China growth, How China is fortifying its economy for war with the West (Daily Telegraph, Ben Marlow and Melissa Lawford) highlights China’s move to insulate its economy from outside influences, particularly since it watched with some concern the ability of the US and its allies to freeze the Russian central bank’s dollar assets in the wake of the Russian invasion of Ukraine. It is now engaged in efforts to disengage itself from Western financial channels whilst also building up its military on a “scale not seen since World War Two”, according to US Navy Admiral John Aquilino. It is also shifting its relationships with other regions – the Middle East in particular. China is pouring money into the Gulf on a massive scale – between January and September last year, Chinese businesses invested $16.2bn in Saudi Arabia, according to fDi Market – a record high – versus $1.3bn in 2022. Such investments are helping to strengthen China’s financial resilience. The People’s Bank of China has been buying gold every month since October 2022 and now has a stockpile worth $170bn. It has also been selling off US Treasuries (between February 2022 and now, it reduced its holdings by 37% – considerable since it took almost ten years for it to shrink its holdings by 22% prior to that). China has also been experimenting with a digital yuan – something it insists isn’t a bid to compete with international currencies, but in reality could potentially chip away at the supremacy of the dollar (although it would have to be successful in the domestic market before being able to “go international”). At the very least it will give China alternative financial channels that it can use in the event of sanctions. * SO WHAT? * As things stand currently, there’s still a lot that China needs to do to de-couple itself from the West whilst digging itself out of its gaping real estate debt hole but it has arguably done more to reduce its reliance on the West than the West has done to reduce its reliance on China. Yes, there have been efforts to diversify manufacturing away from China whilst still remaining in the region (to places like India and Vietnam) but the fact of the matter is that, for instance, 95% of the goods that Apple sells are currently made in China. All the while, Beijing has been increasing the frequency of war drills around Taiwan and expanding its nuclear arsenal. At the moment, it seems that the West would have more to lose from Chinese sanctions than China would from Western sanctions…

Meanwhile, over in Europe, Socialist win in Catalonia draws line under separatist turbulence (Financial Times, Barney Jopson) highlighted victory for PM Pedro Sánchez’s Socialists in the Catalan regional elections yesterday, showing that support for pro-independence parties had weakened. Still, the Catalan arm of the Socialist party didn’t win enough votes to govern alone, so it will scrabble around for coalition partners. * SO WHAT? * This results goes some way to vindicate Sanchez’s often controversial approach regarding the separatists. The Socialists need support from at least some of the pro-independence parties to stay in government.

In commodities news, US shale companies accused of collusion over oil price (Financial Times, Jamie Smyth and Myles McCormick) shows that the US shale oil industry is about to face at least 10 class action lawsuits alleging that they colluded over shale oil production, which led to rising US retail petrol prices. ExxonMobil, Occidental Petroleum and Diamondback Energy are among those who will face the actions that were dragged into the spotlight last week by FTC allegations that the former boss of Pioneer Natural Resources tried to collude with OPEC to drive up oil prices! It sounds like things are going to get messy…

In business trends news, China and ESG ETFs closures soar in the face of political backlash (Financial Times, Steve Johnson) shows that a) more US-listed China-focused ETFs have shut down since the beginning of this year than in any previous full year and b) that the shutdown of ESG-focused ETFs is on track to break previous records as investors avoid China and the whole ESG

minefield. * SO WHAT? * This is particularly notable given the overall eagerness for ETFs, an asset class that has seen 58 consecutive months of net inflows. I thought that Nate Geraci, president of financial adviser The ETF Store made a very interesting observation – that “the lack of interest in China-focused ETFs has been more performance-driven, whereas the waning interest in ESG ETFs is more politically oriented”, which would imply that money will flow back faster to China ETFs than ESG ones.

Then in China targets tropical Hainan for world’s biggest duty-free area (Financial Times, William Langley) we see that China is looking to turn the tropical island province of Hainan into the world’s biggest duty-free shopping zone. The island, which is roughly the size of Belgium, is going to get a a separate customs system as early as next year, which will help to simplify taxes on luxury purchases. Hainan is likely to be very popular because shoppers in most Chinese jurisdictions have to pay high taxes on foreign luxury goods. Beijing is basically trying to keep more shoppers in China itself and stimulate consumer demand, which has been somewhat lacking recently. * SO WHAT? * Hainan first got duty-free shopping in 2011 as part of Beijing’s efforts to boost growth and narrow the gap with richer inland provinces, but things grew from there until it got another boost during the pandemic when international travel was banned. As consumers have stayed closer to home, opting for shorter domestic trips and buying the less high-end products on offer in duty-free outlets, Hainan has prospered. While some western luxury groups have suffered from weaker performance in Chinese markets, Hainan saw a 60% increase in duty-free sales over the lunar new year in February versus the previous year! Western companies are now taking note and looking to invest there. Will this take the shine off more traditional destinations such as Hong Kong and Macau??

Staying with Chinese retail, Fast-growing Chinese retailer Miniso shifts expansion focus overseas (Financial Times, William Langley, Gloria Li and Cheng Leng) highlights the ambitions of Chinese low-cost retailer Miniso, which sells lifestyle products, as it aims to open around 600 overseas stores this year in a bid to chase growth outside its stagnant domestic market. The company is helped by the falling cost of goods produced in China’s factories, which makes their wares more competitive abroad. By the end of last year, Miniso had 4,000 outlets in China and almost 2,500 overseas, mainly concentrated in Asia. * SO WHAT? * This sounds quite interesting but there’s always going to be a cloud hanging over Miniso given ongoing sluggish domestic performance as consumer demand remains weak – not to mention any impact from ongoing US-China trade sanctions. It is interesting to note that Miniso makes over 10% of its sales online, with the rest coming from its physical stores. Given the ongoing pressure on domestic budgets, it sounds like a good time to expand.

Meanwhile, Consulting firms’ grip on Saudi economy sparks local misgivings (Financial Times, Ahmed Al Omran and Chloe Cornish) is quite an amusing story about how frustrated Riyadh is getting with its reliance on management consultants – particularly foreign ones! The likes of Deloitte, EY, KPMG, PwC and more specialist firms have become instrumental in running the country and their involvement has become particularly prominent since Vision 2030 was announced back in 2016 as an overarching strategy to wean the kingdom off oil revenues. * SO WHAT? * Saudi Arabia has become a massive earner for consultants – the consulting market grew by 18.2% in the kingdom last year – against 13% growth in the Gulf region overall and just 3.5% globally.  The expectation is that, despite Saudi frustration, demand will continue to grow. It does seem to me like the whole region is seen as having massive growth potential by many professional service firms – including lawyers.

Back in the UK, Takeover interest in UK companies hits highest since 2018 (Financial Times, Ivan Levingston) shows that the value of bids for London-listed companies this year has reached its highest level since 2018 – over $78bn – and the targets have been from across the spectrum. * SO WHAT? * The overall value of global M&A increased by 30% in Q1, according to data from the LSE. When you consider that UK companies are cheaply valued versus global peers, that interest rates look like they’ll be coming down (making debt cheaper), that the dollar continues to be strong and that there is the prospect of a change in government you would have thought that there is a tsunami of M&A to come! If you then couple that with an imminent simplification of the listing rules for the London market it does seem likely that deal activity is going to increase. That being said, geopolitical risk and uncertainty about the global economy could temper full-on party-time!

Meanwhile, in commercial property trends, Business parks left empty as office workers prefer city centres (The Times, Tom Howard) cites the latest stats from CoStar which show that business parks have a higher vacancy rate than office space in city centres. Interestingly, it was thought that business parks would be popular with workers as many wanted to avoid public transport but then as the pandemic receded, demand for city centre office space rose because of the “buzz”! * SO WHAT? * Some business parks have much higher vacancy rates than this and, as a result, landlords are now looking to change use for the buildings, potentially into warehouses or car showrooms.

Following on from this, Rush for quality drives up office rents (The Times, Jessica Newman) cites a report by BNP Paribas Real Estate which shows that office rents in the UK’s biggest cities have increased by their highest annual rate since 2001 despite the whole WFH thing and lack of high-quality office space. It certainly seems like companies and employees alike are getting more fussy about their working environment!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

We see the end of The Great Resignation, wage rises raise inflation concerns, longer-term mortgages raise retirement concerns, sake hits the UK and Fever-Tree takes aim at Aperol Spritz…

In employment trends news, After the great resignation, workers decide to stay put (The Times, Tom Howard) we see that the Covid era “Great Resignation” is inevitably turning into the “Big Stay”, according to the latest stats from the CIPD, which reflects lower staff attrition and fewer job moves this year. Average wage hikes when jumping ship have also shrunk from the 15% two years ago to around 5% now. The report also showed that only 30% of survey respondents expected to increase their staff numbers over the summer – the smallest proportion since early 2021 when Britain went into its second lockdown. It is worth noting that public sector employers were twice as likely as private companies to shed jobs over the next quarter – unsurprising, considering the financial constraints that councils in particular are operating under. That being said, employers expect to increase wages by 4% this year, which is still above pre-pandemic levels – which leads me onto Wage rises in past year ‘have matched growth since 2008’ (The Times, Jack Barnett), an article that cites another report by the Resolution Foundation which shows that living standards in the UK has risen as much over the last year as they had since 2008 thanks to a sharp increase in pay and falling inflation! The report says that real wages has increased by 2.1 over the year to February, which is the same rate of increase recorded between 2008 and last year! It does, however, conclude that if things continue the way they have done, this wage growth will eventually translate into higher prices, meaning higher inflation. Talk about party-poopers!

Meanwhile, in consumer trends news, Rise in ultra-long mortgages ‘poses risk to UK retirement prospects’ (The Guardian, Hilary Osborne) research by former LibDem pensions minister Steve Webb has shown that homebuyers are facing increasing pressure to “gamble” with their retirement prospects to get on the housing ladder by taking on ultra-long mortgages that go beyond the state pension age. * SO WHAT? * It seems to me that, although there are potential consequences to finances later on in life, making your life here and now more bearable by reducing monthly mortgage payments via longer-term mortgages is eminently understandable. I think that the way we fund retirement and mortgages needs to change to take into account increasing lifespans and working practices as I don’t think it’s

enough to just increase the retirement age and hope for the best. I also think that something needs to be done to encourage people to have children because it is the people at the younger end of the employment spectrum whose taxes fund those at the other end. This will necessitate tax incentives and the funding of childcare costs among other things. Unfortunately, this is a ticking timebomb that society cannot afford to ignore.

Meanwhile, in developments in booze, Sake takes UK by storm as Japan’s national drink goes mainstream (The Guardian, Alice Fisher) shows that sake is gaining in popularity as a viable beverage option – and not just at Japanese restaurants! Although China and the US are currently the biggest consumers of sake (presumably outside Japan!) the UK market it growing. Waitrose has reported that searches for sake on its website have increased by a whopping 241% year-on-year, Wagamama has just added sparkling sake to its menu and trad wine merchant Berry Bros & Rudd have started to sell sake “en primeur” (before it is bottled, a purchasing practice popular with wine collectors). * SO WHAT? * I think that this is a pretty interesting development! There are so many varieties of sake that you can have hot and cold, with or without food – and the possibilities are endless. I know that drinks companies like Diageo often “land” on a drink and then market it to the hilt as The Next Big Thing and after many years of gin – is sake going to be the thing that everyone starts to drink?? BTW, for those of you who’ve not had it before, a note of caution – it may seem harmless (especially when it is served in the traditional small cups) but I can tell you now – it is POTENT. You will be fine one minute and on the floor the next as it has a delayed effect on you – so watch out!

Then in Fever-Tree mixes it up with challenge to Aperol Spritz (The Times, Dominic Walsh) we see that Fever-Tree is teaming up with one of the leading makers of French rosé wine, Maison Mirabeau, to get a slice of the lucrative spritz market! Fever-Tree will launch a pale pink rosé spritz today that is made from a blend of its raspberry and orange blossom soda and Mirabeau’s Forever Summer rosé wine and it is recommended to be served in a glass three quarters filled with ice and topped with raspberries. Its lower ABV of 8% versus, say the 12/13% for a typical rosé, means that it is likely to attract younger buyers who are increasingly reaching for low-or no-alcoholic drinks. * SO WHAT? * This sounds like great timing to me as I’d suggest that Aperol Spritz has kind of had its day IMO and perhaps the market is ready for a new post-pandemic summer tipple! Good on Fever-Tree for branching out from gin…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Chinese EVs turn the screws, Tesla’s troubles have knock-on effects and motorbikes face electrification…

China’s EV sector to test offshore markets after Zeekr’s strong US IPO (Financial Times, Edward White, Gloria Li, Cheng Leng and Jennifer Hughes) highlights the success of Zeekr’s IPO which saw the share price climb by a chunky 34% in trading on Friday. This was the biggest IPO of a Chinese company in the US since 2021! * SO WHAT? * This is great news for the maker, which is owned by China’s Geely, but the fact remains that the outlook for Chinese EVs outside China is uncertain in terms of likely taxes and backlash that will occur to protect US and European makers. A slew of US IPOs of Chinese companies is waiting in the wings and I’m sure this will further test investors’ risk appetite given that a potential Trump election win (which will probably involve a China crackdown) is in the offing.

Elsewhere, Tesla Turmoil Means Make-or-Break Moment for EV Charging (Wall Street Journal, Jennifer Hiller) shows that the EV charging industry is now at a crossroads following Tesla’s recent dramatic ditching of its entire Supercharger division (whilst still maintaining a commitment to installing chargers, albeit at a much slower pace). At the moment, there’s no obvious contender to take on Tesla’s charging mantle although Ionna – a $1bn joint venture

comprising BMW, GM, Honda, Hyundai, Kia, Mercedes-Benz and Stellantis – has committed to a target of rolling out 30,000 chargers in North America. Although it got federal regulatory approval in February it has yet to open a single site! * SO WHAT? * I guess that Tesla’s move shocked everyone and so they are still reeling! However, that won’t last forever and I’m sure others will step in. The likes of Walmart and BP could be among those to step up their efforts in this area although I’d have to say that I would think oil companies are the best bet here given their deep pockets and a need to show that they are doing something tangible to reduce their impact on the environment. Longer term, I think that charging networks are a money pit because improved battery life and charging times will render them obsolete. Oil companies literally have more money to burn, so I would have thought they would be better placed to get involved.

And then Sales of new petrol motorcycles set to be banned from 2040 (Daily Telegraph, Matt Oliver) highlights a proposed new rule that the sale of new petrol-fuelled motorbikes will be banned from 2040 as part of the government’s net zero crackdown. It’s not clear yet whether the government has signed off on it yet, but it looks like it will happen. My reaction – whatever! 2040 is miles away! Anyway, the rule hasn’t been passed yet, so we’ll have to see what happens…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

We look at the latest trends in tech while Didi considers another go at the UK…

In a quick scoot around some of today’s other interesting stories, Alibaba leverages cloud business to become a leading AI investor in China (Financial Times, Eleanor Olcott and Ryan McMorrow) shows that Alibaba has been using its dominance in cloud computing infrastructure to become a leading investor in generative AI start-ups as it tried to replicate the success of Microsoft’s investment in OpenAI. It has been buying stakes in Moonshot, Zhipu, MiniMax and 01.ai and comes at a critical time for the company as it tries to fight rising competition from ByteDance and PDD Holdings in the e-commerce market…

Then in Newspaper groups warn Apple over ad-blocking plans (Financial Times, Daniel Thomas and Tim Bradshaw) we see that British newspaper groups are warning Apple against implementing a “web eraser” tool in its next iOS 18 software update that will remove ads or other unwanted content. * SO WHAT? * The News Media Association represents 900 national, regional and local titles and it is very concerned about the potential effect this would have on digital ad revenues. Mind you, given the effect that Apple’s privacy changes implemented a few years back had on the entire digital ad industry for social media platforms, you can understand the concern!

Elsewhere, Elon Musk launches global battle over government ‘censorship’ of X (Financial Times, Hannah Murphy and Benjamin Parkin) shows that Musk is now fighting back against “takedown” requests in Brazil, India and Australia after authorities demanded the removal of content that they deemed illegal or harmful. FWIW, I think that this is just a Musk delaying tactic as X tries to exist in a world with tightening social media controls and less resources (which was his fault, as he sacked a load of moderators!).

Meanwhile, Arm ready to flex its muscles with AI chips (The Times, Dominic Walsh) highlights Arm’s plans to properly jump on the AI bandwagon as it aims to develop AI chips that will be ready to launch in 2025. It is setting up an AI chip division and aims to have a prototype ready by next spring. About time!

Then in Chinese Uber rival revives UK launch plans (The Guardian, James Titcomb) we see that Uber’s Chinese rival, Didi, is looking at having another go at launching in the UK three years after it had to suspend plans to do so. Didi Global has bought operating licences in cities including Rotherham, Rochdale and Salford in the last few months in preparation for a move here.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

I just keep hearing this song and it’s annoyingly catchy – but the dance looks like fun! Well done to the guy for not spilling his beer – who said guys can’t multi-task?!?

1. In MACRO & COMMODITIES NEWS, the UK exits recession, the Bank of England leaves interest rates unchanged, Sweden cuts them, Trump allegedly tries to do a deal with the oil industry, Calpers considers its vote in the Exxon saga, oil companies face hurdles going stateside and the Anglo American saga drags on
2. In BUSINESS & CONSUMER TRENDS NEWS, China’s trade hits growth again, Chinese tech migrates to the Middle East, the US pours money into tech, HSBC sides with China and tourists swerve Britain for tax-free shopping
3. In TECH & MEDIA NEWS, Asia cracks down on Big Tech, TikTok makes AI updates, we look at Arm’s valuation and Warner takes a hit
4. In MISCELLANEOUS NEWS, BYD wants Europe, Ferragamo revenues are dented and Gordon Ramsay is to open a sky-high restaurant
5. AND FINALLY, I thought I’d show you how to choose the right dried pasta…

So the UK exits recession and keeps interest rates unchanged, Sweden cuts rates, Trump allegedly proposed a deal with big oil, Calpers is considering its vote, oil companies face issues going stateside and the Anglo American drama continues…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

UK exits recession with 0.6% first-quarter growth (Financial Times, Valentina Romei) cites the latest ONS release which says that the UK economy has now exited recession with better-than-expected 0.6% growth over Q1. This is pretty impressive when you consider that the Eurozone posted 0.3% growth and the US 0.4% growth over the same time period! This was driven by a 0.7% increase in services output and a 1.4% increase in manufacturing output. A rare bit of good news for Sunak (but it’s probably not going to save him)…

Bank of England signals summer cut as it holds rates at 5.25% (Financial Times, Sam Fleming, Delphine Strauss and Mary McDougall) shows that our central bank kept interest rates unchanged but indicated that it would start cutting them this summer if it saw more evidence of weakening inflation. That being said, Hunt urges Bailey not to cut interest rates too quickly (Daily Telegraph) shows that the chancellor is mindful of cutting rates too early, saying that he “would much rather that they waited until they’re absolutely sure inflation is on a downward trajectory than rush into a decision that they have to reverse at a later stage”. Poor labour market data causes problems for Bank of England (Financial Times, Delphine Strauss) shows that a cut is not necessarily a done deal because the Bank of England can’t really rely on the UK’s labour market data at the moment (the ONS’s labour force survey is seen as being volatile and unreliable due to a drop in the response rate). The ONS said that it’s changing the methodology but that it will take a while to feed through – meanwhile the Bank of England is kind of flying blind 😲! Meanwhile, Bank now expects inflation to fall faster (The Times, Jack Barnett) highlights the Bank of England’s projections that inflation will actually fall faster than it had originally forecast and fall below its 2% target for a whole year! Are the Bank of England’s external rate-setters pointless? (Financial Times, Louis Ashworth) provides an interesting insight into who and how interest rates are decided. Did you know that there are nine people in the Monetary Policy Committee? It’s made up of five internal (i.e. they work at the Bank of England) members and four external ones (who don’t). A majority wins but the governor gets the deciding vote if everyone is split. Generally speaking the internal members tend to move together historically and pretty much always vote with the majority whereas external members dissent much more regularly. The upshot of all this is that the votes of the external members have not really mattered!

Elsewhere, Europe must close productivity gap with US to lift growth, says Riksbank chief (Financial Times, Richard Milne) shows that Sweden’s central bank, the Riksbank, decided to cut interest rates on Wednesday – for the first time in eight years – from 4% to 3.75%. Clearly this is in contrast to what’s going on in the US at the moment where there is even debate as to whether the Fed will increase interest rates to combat inflation. The pressure is very much on the ECB now to cut rates!

In commodities news, Trump ‘offered to block electric car rollout’ as he asked oil bosses for $1bn (Daily Telegraph, James Titcomb) shows that Trump allegedly offered to shred Joe Biden’s

pro-EV agenda if oil industry execs put $1bn into his re-election campaign. He called recently introduced EV rules “ridiculous”. Also, the Biden administration has frozen permits for the export of LNG on environmental concerns but apparently, Trump told gas execs that he’d overturn the freeze as soon as he got into office! * SO WHAT? * It looks like Biden and Trump differ very much in their approach to environmental issues and Trump is clearly not shy about raising money! This could prove to be a particular nightmare for automakers in particular as they have to plan years in advance – and so any reversal in EV policies could be very painful for them.

Staying on the subject of oil, Calpers weighs vote against Exxon CEO in protest over climate lawsuit (Financial Times, Attracta Mooney, Josephine Cumbo and Myles McCormick) shows that Calpers, the biggest public pension plan in the US, is looking at whether to vote against Exxon chief Darren Woods’ re-election to the company board in protest at the lawsuit the company filed against Follow This and Arjuna Capital, two climate-focused investors. The two investors want to force Exxon to do more to cut greenhouse emissions and now Exxon is continuing to drag them through the courts even though they subsequently withdrew their proposal. * SO WHAT? * This is definitely one to watch as, effectively, ExxonMobil is trying to silence activist investors. The presence of such forces can act to balance out any extreme moves by company management so an attack on their very existence could have major consequences. Michael Cohen, chief operating investment officer at Calpers, observed that “There doesn’t seem to be anything other than an agenda of sending a message of shutting down shareholders’ ability to speak their mind”. Although Calpers only has a 0.2% equity stake in Exxon worth about $1bn as at March 31st, it does have influence.

I thought I’d mention Crossing the Atlantic is no easy fix for Europe’s oil majors (Financial Times, Lex) given what I was talking about in the podcast yesterday (about Shell’s “threat” to ditch the LSE and list stateside) and why heading across the Pond isn’t necessarily the answer. Oil companies who at least contemplate the switch argue that they will get higher valuations – for instance, Shell, Total and BP trade at at average 32% discount versus US-listed ExxonMobil and Chevron. The key difference is that European majors being a lot more aggressive about the energy transition – and that costs MONEY! For instance, a chunky 30% of Total’s capex will be spent this year on its lower carbon, integrated power business. Chevron is only allocating 12.5% of its capex in this area. While European majors are spending 20-30% of group capex on low carbon growth annually, US peers (who aren’t doing this) have more money to allocate to shareholder distributions, which keeps valuations higher because more investors want to hold the stock as a function of potentially getting a nice bump from dividends and/or share buy backs. The conclusion here is that although the valuations are indeed higher over in the US, there are specific reasons for it – so a stateside move should be made for strategic reasons (e.g. more of their business is over there) rather than valuation ones.

In mining, Anglo American’s South Africa investors open to improved BHP bid (Financial Times, Harry Dempsey, Rob Rose, Nic Fildes and Leo Lewis) shows that the miner’s key South African shareholders could be tempted by a higher offer from BHP. This is particularly interesting given that the government, which is a major shareholder, is against the takeover because it will involve the sale of two South African subsidiaries. Anglo American needs to switch on its defence against BHP (Financial Times, Lex) takes a look from Anglo’s side and that the clock is now ticking for it to defend itself. It may decide to dispose of De Beers in addition to Amplats and Kumba (the latter two’s disposal is a requirement of the current deal) and other mining assets so that it could concentrate more on copper. A formal bid is due by May 22nd under UK takeover rules, so it’ll be interesting to see how this pans out.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

China trade grows, Chinese tech heads to the Middle East, the US pours more money into tech, HSBC cheerleads for China and tourists swerve the UK…

In China’s trade returns to growth on back of AI equipment imports (Financial Times, Edward White) we see that trade is now growing for China thanks to a surge in imports of key equipment for the development of AI. The value of China’s imports of automatic data processing equipment shot up by 50% year-on-year in the first four months of 2024. All of this helped China trade return to growth (in dollars) in April versus contraction in March. China’s government is relying on manufacturing growth to help drag it out of the economic rut that the real estate sector has been largely responsible for dragging it into. On the subject of tech, China tech is seeking growth in the Middle East (Financial Times, Lex) highlights an interesting trend that is emerging of tech groups, including food delivery giant Meituan, moving to Saudi Arabia as part of their global expansion plans. This is particularly notable in Meituan’s case because this will be its first overseas expansion out of China. Alibaba is teaming up with local companies in Saudi Arabia and the UAE, Tencent is looking to expand its cloud business there and Shein has been increasing its presence there as well. One of the reasons for this trend is that Chinese tech will face much less political scrutiny – and now China is the biggest trading partner for most Middle Eastern nations. * SO WHAT? * The Chinese government is obviously very keen to stimulate the economy but sluggish domestic demand means that it makes sense for Chinese companies to look overseas. Although they might hit various hurdles in the US and Europe for geopolitical reasons, expansion for Chinese companies in the Middle East makes sense given that Saudi Arabia is looking to grow beyond fossil fuels and has the massive funds needed to develop things like AI. This may also help Saudi oil exports to China as relations continue to deepen.

Meanwhile, The great American innovation engine is firing again (Financial Times, John Thornhill) is a really interesting article which shows that the US tech industry is on the verge of receiving a major wave of funding from the US federal government, which will in turn unlock another wave of private sector investment and innovation. * SO WHAT? * The US is keen to consolidate its global tech leadership whilst at the same time limiting China’s progress (by limiting chip exports, for instance). The Inflation Reduction Act, which was passed in 2022, has already stimulated big

investment in climate tech and the Biden administration is keen to strengthen its current capabilities in the biotech and quantum sectors as well. It will be sensitive to the fact that it squandered its lead in areas including telecoms infrastructure equipment and batteries and will not want to repeat this. AI is now leading the way and the money is now pouring in. It is thought that generative AI will not only make US companies more competitive, it will also be a boon to the economy. However, US restrictions on advanced chip exports to China will also hit US companies and a Trump win in the presidential elections could also mean a lot of uncertainty.

Elsewhere, HSBC pushes Sunak to ease China crackdown (Daily Telegraph, Michael Bow) shows that the bank is appealing to the government to rein in new national security rules that aim to restrict China’s influence in the UK. The Foreign Influence Registration Scheme, which is part of the National Security Act, puts countries into categories – and putting China in the “enhanced tier” would give the government the power to force HSBC and others to publicly disclose their China activities. Funnily enough, Standard Chartered and Prudential – who also have Asia-heavy business models – are also lobbying for China to be kept out of the enhanced tier. * SO WHAT? * If their pleas are ignored, companies will have to publish details about their commercial dealings with China, which many fear could make doing business in China more difficult. This sounds to me just like Mercedes-Benz and VW sticking up for China because they have their Chinese businesses to protect! Given what’s at stake for them, it’s understandable.

Then in consumer trends news, Thousands of tourists desert UK for Europe’s tax-free retailers (The Times, Emma Taggart) cites research from Global Blue which shows that 34,000 tourists who would have come to the UK went to Europe last year because of the tax-free shopping. France, Italy and Spain have all benefited since the VAT scheme was scrapped in January 2021. * SO WHAT? * You do wonder whether Sunak could reintroduce VAT-free shopping in the UK as his swansong in office to provide a bit of summer feelgood. Retailers (particularly the luxury ones) have been harping on about this for ages so why not go out with a bang, Rishi?? Who knows, with inflation tamed, interest rates potentially falling, an impending wave of M&A and the summer stretching ahead before us (where we SHOULD be benefitting from tourists at the Paris Olympics popping over) why wouldn’t you??

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Asia cracks down on Big Tech, TikTok makes AI changes, we look at Arm’s valuation and Warner has issues…

Big Tech regulatory crackdown spreads to Asia and Australia (Financial Times, Kana Inagaki, Christian Davies, Song Jung-a and Nic Fildes) is a really interesting article which shows that Japan, South Korea and Australia are all tightening rules that are designed to restrict the market power of Big Tech. This follows similar regulatory crackdowns in the EU and US. For instance, in Japan, new rules (which aren’t as restrictive as those in the Digital Markets Act) are aimed at protecting choice for customers – by making it easier to switch between mobile operating systems, for instance – while officials in South Korea are bringing in legislation to regulate online platforms. * SO WHAT? * Tech groups such as Apple and Google are going to be in for a rough ride as their power in both hardware and software is tested. And it seems that there isn’t anywhere to hide!

In TikTok to automatically label AI-generated user content in global first (Financial Times, Madhumita Murgia Hannah Murphy) we see that TikTok will be the first social media platform to label some AI-generated content automatically. * SO WHAT? * This is clearly a hot topic as everyone is fretting about the spread of online disinformation and deepfakes and TikTok, given how much pressure it’s under at the moment, will want to show that it is being proactive. It seems that there is momentum gaining for ways to ensure we know what’s real and what isn’t online.

In yesterday’s podcast, I said that while I have been sceptical of Arm’s outperformance since its IPO (I think that its involvement in AI has not been as big thus far as everyone has been thinking) I am starting to change my mind and warm to the fact that the prospect of in-phone AI might be up Arm’s sleeve (sorry about that). Well Second thoughts on chip designer Arm (The Times, Lauren Almeida) is a good article which first of all explains how Arm makes its money (around 99% of smartphones currently run on processors using Arm’s IP and every time a chip is sold that includes some of its designs, the company collects a 1 and 2% royalty!) and highlights that Arm’s AI premium is not really justified as it benefits far less from AI than other chipmakers like Nvidia. Although investors are hoping that Arm will be able to increase royalty payments but they are taking a lot on faith. Arm still remains exposed to a slowdown in the smartphone industry. * SO WHAT? * While I think that this article makes some excellent points, I would say that the hype that is currently building around AI-enabled mobile phones could be the catalyst that smartphones have needed – and that if that is the case, Arm should be well placed to benefit from a boom in sales!

In media news, Hollywood strikes and poor ad sales hit Warner Bros (The Times) we see that Warner Brothers Discovery posted a bigger-than-expected fall in revenues yesterday thanks to a sharp dip in advertising sales at its cable TV division and the impact of last year’s Hollywood strikes by actors and writers. * SO WHAT? * While this is disappointing, this situation won’t last forever. Ad sales can indicate the direction of economies so everyone will be watching closely for when they start to turn up!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

BYD aims to dominate Europe, Ferragamo feels China weakness and Gordon Ramsay is to open a sky-high restaurant…

In a quick scoot around some of today’s other interesting stories, BYD targets overtaking Tesla as top electric vehicle seller in Europe by 2030 (Financial Times, Mari Novik, Peter Campbell, Arjun Neil Alim and Kana Inagaki) shows that BYD wants to leapfrog the likes of VW, Tesla and Stellantis to become the region’s biggest EV seller by the end of this decade. No wonder the European carmakers (well, those who don’t have businesses in China to protect!) are fearful!

Meanwhile, Salvatore Ferragamo Revenue Dragged by Weakness in China Market (Wall Street Journal, Andrea Figueras) shows that Ferragamo falls firmly into the “luxury losers” camp as it

announced lower revenues in Q1 thanks to weaker sentiment in China and poor performance of its wholesale business. Fellow luxury losers include the likes of Kering, whereas winners include Prada and Puig.

Then in Gordon Ramsay to open UK’s highest restaurant as revenues soar (The Times, Dominic Walsh) we see that the sweary chef is planning on opening the UK’s highest restaurant and bar at 22 Bishopsgate in London. Ramsay will be creating five “culinary experiences” on four floors under a 20-year lease. 22 Bishopsgate is being described as a “vertical village” with amenity and social spaces, an innovation hub, a wellbeing retreat, a spa and a 1,500-space commuter park and cycle hub. The bar and restaurants will occupy floors 58 to 61! Wow!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

I got a sense of déjà vu with this because I think I might have posted a video like this fairly recently. However, I thought this one was really good and has quite interesting explanations of how to choose the right dried pasta! Enjoy!

1. In MACRO, MARKETS & CRYPTO NEWS, Sunak has one final job, the IPO pipeline is building up and FTX is ready to compensate
2. In TECH & MEDIA NEWS, Intel cuts its outlook, Arm underwhelms, Informa does a deal with Microsoft, Shopify drops and Uber hits a speed bump while Disney and Sky offer more streaming options
3. In CAR NEWS, VW sticks up for China, Tesla is “under investigation for fraud”, Toyota continues to play catch-up and Cazoo faces administration
4. In MISCELLANEOUS NEWS, the housing market stutters, the jobs market reaches a turning point, Direct Line is under the weather, Airbnb gets wary and AstraZeneca signals the end of an era
5. AND FINALLY, I thought I’d show you what A&E would look like if it was based on homeopathy…

So Sunak slips into his role as fall guy, London’s IPO pipeline is improving and FTX looks like it’ll be able to compensate after all…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

The Tory right has one last job for Rishi Sunak (Financial Times, Robert Shrimsley) is an interesting article which sums up the situation that Sunak is facing after his party took a massive pasting at last week’s local elections. Basically, the rebels in his party have now given up removing him as leader because they did so badly that getting a new one in would be like rearranging the deckchairs on the Titanic. All that remains now is for Sunak to be the fall guy for everything that is going wrong and those on the right of the Conservative party are likely to revel in blaming him for everything. * SO WHAT? * FWIW, I think that Sunak was on a hiding to nothing after the whole Truss-Kwarteng debacle. At least he, along with Hunt, managed to steady the ship at the time – but then disaster just piled on top of disaster. At the end of the day, I think that the government will look back and see that it ultimately failed because a) it was the author of its own downfall (Brexit, partygate, Truss-Kwarteng, HS2, immigration/Rwanda, the list goes on) and b) it had to deal with things that were out of its control (Covid, Russia/Ukraine, war in the Middle East, commodity prices etc.). If Keir Starmer loses the general election now, Labour will question its reason for existence. I don’t mention the LibDems, BTW, because I don’t think they are a serious force in this election PARTICULARLY because the leader, Sir Ed Davey, has been doomed by having been the postal affairs minister at the time of the Post Office scandal. You just wonder whether it really is worth Sunak soldiering on until the end of the year or whether he should just cut his losses, limit the amount of time his critics can whinge about him and call an early election.

In happier news, London Stock Exchange says IPO pipeline is ‘building up’ (The Times, Emma Taggart) cites the LSE as saying that its pipeline of upcoming IPOs is “building up” ahead of the FCA’s imminent major overhaul to existing UK listing rules (it’s the most extensive re-write of the primary market rules in 40 years!). Companies are apparently waiting for the new rules to come into force before listing. * SO WHAT? * The rules are getting this revamp to make London a more attractive place for IPOs and are expected to be issued in the next few weeks. The Treasury and the City alike have been getting increasingly alarmed by the dearth of listings, so they are now trying to do something about it. Interestingly, the CEO of the LSE said that “There is more in the pipeline than there has been for some time”. Investment banks will be praying that the companies go through will those IPOs! I do think it’s possible that some companies might hold back until after the UK general election although perhaps it looks so much like Labour is going to win that they might just go ahead anyway.

I thought that Bankrupt crypto exchange FTX says it will be able to repay creditors full $11bn (The Guardian, Alex Hern) was also worth mentioning because it turns out that, once the exchange has sold off all remaining assets, it could raise over $16bn – way more than the $11bn it owes the creditors! John Ray III, known for overseeing the dismantling of Enron, took over as CEO after Sam Bankman-Fried abruptly left. * SO WHAT? * This is a great outcome, but although Ray will no doubt take as much credit as possible, he was undoubtedly helped by the fact that bitcoin was worth about $20,000 when FTX collapsed – and since then it’s value has more than tripled! Although the creditors may get back the money they lost, they may actually feel somewhat short-changed given that they were effectively forced to sell their crypto holdings at the prevailing price at the time of the collapse, missing out on the major gains since then. SBF will no doubt try to use this somehow to get a shorter sentence (although he didn’t have anything to do with it!).

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Intel reins things in, Arm underwhelms, Informa does an AI deal with Microsoft, Shopify falters, Uber hits a speed bump, Disney and Warner offer a bundle and Sky wants streaming to boost subscriptions…

Intel Lowers Sales Outlook After China Chip Licenses Revoked (Wall Street Journal, Asa Fitch) follows on from what I said in yesterday’s Watson’s Daily about the US government revoking export licences allowing Intel and Qualcomm supply Huawei with semiconductors in that the company decided to cut its revenue forecasts for the current quarter. However, it would still fall within the previously stated range and the company left its full year guidance unchanged. * SO WHAT? * While the US side is restricting the selling of certain chips, Beijing has already recently told telecoms carriers to stop using foreign chips by 2027. The tit-for-tat sanctions tirade continues…

Staying with chips, Arm revenue forecast fails to dazzle (The Times, Robert Miller) shows that investors were underwhelmed yesterday by the company’s full-year revenue forecasts coming in below expectations. * SO WHAT? * I think that, after a storming Q4 last year when Arm struck four major licencing agreements, things were bound to get a reality check. Is the company under-promising so that it can over-deliver? Given that it is so powerful in the mobile phone segment, I would have thought that it would be supremely well-placed to benefit from the potential surge in interest in a new generation of “AI-inside” mobile phones!

Elsewhere, Informa strikes AI deal with Microsoft (Financial Times, Daniel Thomas) shows that the UK publishing and exhibitions company has just struck a deal with Microsoft worth over $10m in its first year to allow access to its data to train Microsoft’s AI models. The agreement will run from 2024 to 2027. * SO WHAT? * This is the latest deal to be struck between an AI developer and a media group – and these deals are proving to be nice little earners if media groups can get them. It almost seems to me like being able to get such a deal is becoming a badge of quality – that the AI giants are willing to throw companies a bone if they think that the content is good enough! Being cynical, I would have thought that the TRULY big deals won’t announce any financials whereas the smaller ones will. Meanwhile, Informa has managed to bounce back from its Covid nightmare and said that its business is doing well across all major regions. It’s boosted its 2024 share buyback programme by around 50% and has nudged up revenue and profit forecasts for the full year. What a recovery!

Then in Shopify Stock Slumps to Record Drop as Revenue Outlook Weakens (Wall Street Journal, Adriano Marchese) we see that Shopify decided to cut its sales and margin forecasts for the current quarter as it expects weakness in Europe, negative impact from a stronger dollar and higher marketing costs. Investors didn’t take this well and sent the share price down sharply by its biggest ever one-day drop (19%!). Presumably, they were particularly surprised given that Q1 performance had been better-than-expected but it seems that giants such as Temu and Shein are hoovering up online shopping dollars.

In Uber’s results hit by legal costs after decade of regulatory battles (Financial Times, Camilla Hodgson) we see that Uber underwhelmed versus expectations in Q1 thanks to legal costs incurred over its decade-long battle with regulators – including a $178m charge to settle a class-action lawsuit brought by taxi drivers in Australia. Uber and other ride-hailers are continuing to battle with regulators regarding the status of drivers (are they employees or are they contractors), among other things. * SO WHAT? * This is a bit of a downer considering that it was only a few months ago that it trumpeted its first ever annual profit! The company is looking to get further growth from broadening the services it provides, like grocery delivery in the short term and self-driving vehicles in the longer term.

Then in media news, Disney and Warner to Offer Bundle of Their Streaming Services (Wall Street Journal, Joe Flint) shows that the two companies are going to be joining forces to offer a bundle of their streaming services in a bid to simplify choices in an ever-more fragmented streaming market. The new package will offer Disney+, Hulu and Warner’s Max service in both ad-free and ad-supported formats. Meanwhile, Sky turns to streaming to shore up sports subscriptions (Daily Telegraph, James Warrington) shows that the media company is on the verge of launching a new sports streaming service to boost subscription demand. It will show up to 100 events across a variety of sports on the Sky Sports+ service. Customers will be able to access it via live streams and a mobile app in addition to a new dedicated channel. * SO WHAT? * First of all, I think that the Disney and Warner thing is quite ironic as it seems we are now going full circle from the big satellite and cable bundles of yore, through to individual studios going their own way following “the Netflix era” and now back to bundling again! I really think that, in order to make money from a broader base, bundling HAS to be a part of the strategy – as has advertising, on an increasing basis. The Sky thing sounds intriguing but I guess the success will all depend on the pricing.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

VW wants Brussels to go easy on China, Tesla faces another investigation, Toyota continues to lag and Cazoo faces administration…

Volkswagen warns Brussels against raising tariffs on Chinese electric cars (Financial Times, Mari Novik, Kana Inagaki, Arjun Neil Alim and Peter Campbell) shows that VW is saying that Brussels should not increase tariffs on Chinese EVs because it would risk “retaliation” against other international brands. VW brand chief Thomas Schafer went as far as saying “I don’t believe in tariffs. I want everybody to compete on the same terms”. His “concerns” echo those of Mercedes-Benz boss Ola Källenius who, back in March, called for Brussels to cut tariffs on Chinese EVs. WHAT AN ABSOLUTE CROCK OF 💩 IMHO 🤣. It is worth noting here that VW used to have an almost 20% market share of car sales in China – a number that has plummeted to under 5% currently! You can see why they want to suck up to China now. * SO WHAT? * This is actually so transparent as to be amusing. You could even make a headline out of this: “German carmakers desperately hoping to boost their business in China reject tariffs on Chinese EVs shocker!”. Crudely put, those still trying to hang on to business in China are saying that there shouldn’t be tariffs and those who don’t have a China business (or who are giving up/have given up) are all for tariffs on Chinese EV imports to Europe. As things stand currently, Chinese EVs are subject to a 10% tariff when imported to Europe while European carmakers currently pay 15% when exporting to China.

Tesla’s problems continue in Tesla ‘under investigation for fraud’ over self-driving claims (Wall Street Journal, James Titcomb) as the Department of Justice is now investigating whether Tesla has committed wire and securities fraud by overstating the capabilities of its self-driving systems. We then see Will Tesla’s EV Charging Slowdown Supercharge Competitors? (Wall Street Journal, Jinjoo Lee) ponder whether Tesla’s recent drastic actions on its Supercharger business will spur competitors into action to fill the Tesla-shaped void! EV charging stocks including ChargePoint and Blink Charging have seen some pretty chunky share price rises since the move. * SO WHAT? * The answer to the question – at the moment anyway – appears to be that although charging companies could potentially speed up installations by employing ex-Tesla employees the fact remains that profitability is going to be hard to come by in the short-term as the business itself is incredibly cash-hungry. There is even debate as to whether

this business will ever be profitable on a longer term basis. I’ve often said that I think that charging and related networks will get less and less important over time as rapidly improving battery and battery storage tech will consign any range anxiety to the past. They may well make money for the next few years as EV adoption increases but then I would expect a sharp drop-off.

In other car-related news, Toyota’s hybrid surge still leaves it playing catch-up on battery EVs (Financial Times, Lex) highlights Toyota’s laggard status in the world of EVs and the massive success that has resulted as many consumers have ditched the idea of full-electric and gone hybrid instead. However, behind this recent success lies the fact that Toyota still has a way to go to catch up with rivals in the EV space. It still needs to catch up because EV take-up in China is strong – and this is a key market for Toyota. * SO WHAT? * Toyota’s share price has almost doubled in the last year, powered by the success of hybrids and the company’s valuation is now comfortably above that of VW. However, in order to maintain (or better) this, the company still needs to catch up in EVs and overcome recent scandals involving problems at subsidiary Daihatsu and the manipulation of safety test results.

Then in an example of karma coming back to bite you, Used car dealer Cazoo poised to enter administration (Daily Telegraph, Matthew Field) shows that online car supermarket Cazoo is on the cusp of insolvency after it failed to attract emergency funding. The online car supermarket was founded by former Zoopla chief Alex Chesterman has now filed a notice to appoint administrators at the High Court. What a massive fall from grace from when it was valued at $8bn on its New York flotation in 2021. * SO WHAT? * The value destruction here is an absolute disgrace and it follows other SPAC-backed flotation heroes-to-zeroes Arrival and Babylon. I know it sounds a bit extreme but I think that the humungous great failure by an arrogant management (remember how Chesterman slagged off UK investors as being incapable of “understanding” the true value of his company when he waltzed off to New York??) should be severely punished because it leaves plenty of innocents (workers mainly but also shareholders) in its wake. However, it probably won’t be. This just goes to show how incredibly risky SPACS have been (but that didn’t stop plenty of early investors and investment banks getting fat from them!). If you can’t jump through regulatory hoops for a “regular” listing then maybe you just aren’t ready yet…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

The housing market falters, the jobs market reaches a turning point, Direct Line takes a hit, Airbnb gets cautious and AstraZeneca closes an important chapter…

In a quick scoot around some of today’s other interesting stories, Housing market stutters in traditional hotspots (The Times, Tom Howard) cites the results of the latest RICS survey which show that the housing market’s recovery is “stuttering slightly” although estate agents remain optimistic overall about the market. Meanwhile, Labour market ‘close to turning point’ (The Times, Jack Barnett) cites the latest research from KPMG and REC which shows that the number of workers available to take up new jobs increased sharply over the last month as businesses reined in their hiring activity. This suggests that the labour market is cooling off which implies that there will be less upward pressure on inflation – and if that is the case, then it makes it more likely that the Bank of England will cut interest rates, which in turn should help to stimulate the economy 😅.

In individual company news, Bad weather and a drop in motor customers hit Direct Line (The Times, Ben Martin) shows that worse-than-expected weather (increasing claims at its home insurance division) and the decline of motor customers hit the troubled insurer but the CEO had a top management shake-up last week and says that trading at the start of 2024 has shown some positive signs.

In Airbnb wary of slowdown after early Easter sparks jump in profits (Financial Times, Camilla Hodgson) we see that Airbnb’s profits more than doubled in Q1 but the company is more downbeat about the prospects for Q2. It does, however, expect growth to pick up again in the middle of the year with a strong summer in prospect.

AstraZeneca withdraws Covid vaccine after drop in demand (The Times, Alex Ralph) marks the end of an era for the pharma giant as it announced that it would be withdrawing its Covid-19 vaccine worldwide due to a “surplus of available updated vaccines”. Wow! The end of an era!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

Today I thought I’d show you what A&E might look like if it was based on homeopathic principles in this classic Mitchell & Webb sketch! Will you be ordering the tasty beverages they have at the end the next time you go to the pub??

1. In BIG PICTURE NEWS, global debt hits new highs, rampant Argentinian inflation necessitates 10,000 peso notes, Sweden is expected to cut rates and taxpayers are to fund HS2 in London after all
2. In CAR NEWS, Chinese dealerships ditch foreign brands, Musk sends a fixer to China, UK carmakers appeal for help in the EV snub and Ford is ready to restrict the sale of petrol models
3. In TECH & MEDIA NEWS, Microsoft makes a “secret” AI tool for US spies, Apple unveils a new powerful chip, the US tightens the ban on supplying chips to Huawei, TikTok fights back, Reddit beats expectations and Ofcom pressures the tech industry while Disney plans for the future
4. In MISCELLANEOUS NEWS, the UK construction sector grows, house prices steady in April, student accommodation becomes a cash cow and UBS profits from its rival’s misfortune
5. AND FINALLY, I thought I’d show you that Big Brother is watching you on London Underground…

So global debt rises, Argentinian inflation necessitates a new note, Sweden is expected to cut interest rates and taxpayers look set to foot the HS2 bill in London…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

Global debt surges to new record high in blow for world economy (Daily Telegraph, Szu Ping Chan) shows that global debt has climbed to new highs, according to the Institute of International Finance (IIF) due to China and India’s massive borrowing despite a backdrop of high interest rates and ongoing geopolitical tensions. Among other things, China has ongoing problems with its massively indebted property sector and India keeps having to shell out to deal with natural disasters every year.

Then in Sky-high inflation forces Argentina to circulate first 10,000-peso notes (Financial Times, Ciara Nugent) we see that Argentina’s central bank has had to release the country’s first 10,000 peso notes into circulation in an effort to reduce the need for people to carry around large bundles of cash after their currency collapsed (its value has fallen by 95% over the last five years). The previous largest note was 2,000 pesos (which came into circulation last year but is still quite rare) but the most common note is 1,000 pesos. 10,000 pesos is currently worth about $11. * SO WHAT? * Cash is popular in Argentina but this means that citizens have to carry big wads around with them to make even small payments. President Javier Milei took office in

December and is currently trying to curb inflation and stabilise Argentina’s currency. He has launched a major push on austerity and the monetary authority has cut its interest rate five times since Milei took the hot seat bring the rate down from 133% in December to “just” 50%. He’s got his work cut out for him! Meanwhile, there are plans for a 20,000 peso note to be in circulation by the end of the year…

In Europe, Sweden expected to cut rates in test of divergence from Fed (Financial Times, Richard Milne and Martin Arnold) shows that Sweden’s central bank, the Riksbank, will be announcing its interest rate decision today. Two thirds of economists in a Bloomberg survey believe that the bank will cut interest rates by 0.25% from 4% at the meeting, something that could lift Sweden’s economy out of its current rut. * SO  WHAT? * This could be seen to be an early indicator of whether Europe will diverge from the US policy of higher interest rates for longer. Swiss, Czech and Hungarian central banks have already made cuts, so a cut from Sweden could highlight gathering momentum. As things stand currently, the ECB has hinted that it could cut interest rates at its next policy meeting on June 6th. Although this sounds great from a European point of view, the danger is that if European interest rates fall faster than they do in the US, this would weaken the euro versus the dollar, which would push up import costs and stoke higher inflation.

Back in the UK, Taxpayers set to fund HS2 tunnel under London despite Sunak pledge (Financial Times, Gill Plimmer and Jim Pickard) shows that HS2 is about to get the go-ahead to dig a 4.5mile tunnel under London within weeks with tunnel boring machines due to start work in 2025. It is likely to be paid for with £1bn of taxpayers’ money. * SO WHAT? * This move will bring an end to uncertainty about whether the high speed railway line will actually reach its Euston terminus from Old Oak Common, as originally planned. The issue here is that Sunak had promised to make the private sector pay/contribute more.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

China dealerships go domestic, Musk sends a fixer to China, carmakers urge action in UK to revive EV sales and Ford considers the restriction of petrol models…

China’s dealers ditch foreign-branded petrol cars for homegrown EVs (Financial Times, Gloria Li) shows that Yongda Auto, China’s fourth-biggest dealer chain by revenue, is just one example of a car dealer that is ditching foreign brands in order to concentrate on domestic makers’ EVs that are selling like hotcakes! The company has already terminated business with internal combustion engine-focused mid-range foreign brands like Chevrolet. Rival dealership Haipeng Group has also gone down the same road. * SO WHAT? * It is worth noting that the number of internal combustion engine (ICE) car dealerships in China have fallen by 2.7% year-on-year in 2023 versus a 17.2% increase in EV dealerships, according to the latest data from the China Automobile Dealers Association. Chinese dealerships that still rely on the sale of ICE car sales for the majority of their revenues have been seeing their profits fall off a cliff! For instance, Chinese dealership chain Sunfonda Group, which only has one EV outlet out of its 43 dealerships, posted a painful-sounding 41.3% fall in gross profit over 2023 which it blamed on the “macroeconomic environment” and “fierce competition” in the market.

Then in Elon Musk Dispatches Tesla’s ‘Fireman’ to China Amid Slowing Sales (Wall Street Journal, Raffaele Huang) we see that Musk is sending his chief fixer (nicknamed the “fireman” due to his ability to both firefight and hit high targets!) over to China to sort out Tesla’s struggling business in the world’s biggest car market. Tom Zhu is credited with making Tesla’s Shanghai factory into one of the company’s top performers. * SO WHAT? * Clearly Musk is treating the recent China slowdown seriously and although authorities approved the “Full Self-Driving” (FSD) software feature, the state-run newspaper China Daily said

yesterday that Beijing had not approved widespread use of the FSD service yet. That being said, Tesla is still set to go ahead with its new partnership with Baidu to deploy its FSD features whilst also trying to get permission to transfer data gathered by Tesla cars in China to the US. This is a bone of contention between the two sides as China is concerned about such a transfer being a potential national security threat.

Meanwhile, Worried carmakers call for urgent UK help to reignite waning interest in electric vehicles (The Guardian, Gwyn Topham) shows that car makers are pushing for urgent action to spark the migration to EVs due to waning demand. Although UK car registrations grew by 1% in April year-on-year, the majority of this could be accounted for by fleet sales – private buyer sales fell by a whopping 18% versus last year. The SMMT said that sales of Battery Electric Vehicles (BEVs) would fall short of government targets of 22% of all new cars and pushed for the government to re-introduce incentives and do more about the charging network. The UK currently has one standard charger for every 35 plug-in cars despite a serious ramping up of charger installations over the last year. What a contrast to the situation in China above! As if to further illustrate the point, Ford ready to restrict UK sales of petrol models to hit EV targets (Financial Times, Mari Novik, Kana Inagaki and Peter Campbell) shows that Ford is preparing to cut the number of petrol models it sells in the UK in order to hit our tricky EV targets and avoid massive fines. This could push prices up for consumers. The company also said that plans to only sell electric cars in Europe by 2030 will be pushed back given that current sales were “below expectations”. * SO WHAT? * The pressure is building and it is understandable that car makers don’t want to be forced to sell their vehicles at a loss. Whether the government will cave to the industry’s demands will remain to be seen but I’d be surprised to see a return of incentives, particularly as there’s a danger that a sudden mass adoption might cause problems with the grid and frustration among drivers about an insufficient charger network.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Microsoft develops AI for spies, Apple unveils a new chip, the US clamps down on chip supply to Huawei, TikTok fights back, Reddit beats expectations, Ofcom wants more protection and Disney looks to the future…

There’s a certain irony to Microsoft creates top secret AI tool for US spies (Daily Telegraph) given that Microsoft’s new LLM is being splashed all over the newspaper (so not exactly “top secret” 🤣) but it is interesting to note that the company has developed something that is safe enough for American spies to use because it is completely independent from the internet. * SO WHAT? * This is the first time that an LLM has been fully separated from the internet and worked. Most LLMs up till now need cloud services to learn and interpret data patterns – so this is a very interesting development!

In tech hardware news, Apple unveils ‘outrageously powerful chip for AI’ in latest iPads (Financial Times, Tim Bradshaw) highlights Apple’s unveiling of its new M4 chip for its latest iPad Pro devices just months after it introduced the M3 chip in new Macs in October. The company touted it as a big step forward over previous chip and described the M4 as “an outrageously powerful chip for AI”. Meanwhile, US revokes licences for supply of chips to China’s Huawei (Financial Times, Demetri Sevastopulo) shows that the Biden administration has now revoked export licences letting Intel and Qualcomm supply Huawei with semiconductors as Washington decides to turn the screws on the Chinese telecoms company. This will restrict the supply of chips for Huawei’s laptop computers and mobile phones. * SO WHAT? * This is just the latest tightening of restrictions from the US and presumably comes in response to Huawei managing to develop its own advanced chips in response to existing sanctions – ones that it used in its popular Mate 60 Pro smartphone. Talk about closing the barn door after the horse has bolted!

Meanwhile, in media news, TikTok and ByteDance sue US to block law forcing sale of the app (The Guardian, Kari Paul) shows that TikTok and its parent company ByteDance have decided to sue to block the law signed by Biden just weeks ago that would force a ban of the app in the US unless it was sold. ByteDance argues that the law is unconstitutional and violates free speech. Cue massive lawyers fees!

Then in Reddit beats expectations in first results as a public company (Financial Times, Hannah Murphy) we see that Reddit surpassed market expectations and hiked up its forecast in its first earnings announcement since its flotation. This had been powered by solid user growth and the success of the company’s nascent advertising business. * SO WHAT? * This is great news for the company but it did caution that there would be more uncertainties in the second half of the year, noting that the US election in November could have an impact on the ad market. The company believes that improvements its search function and the expansion of its third party developer network will present “huge opportunities” for the future.

In Ofcom adds pressure on tech industry to protect children online (Financial Times, Cristina Criddle) we see that the UK media regulator has outlined over 40 measures that online services will have to implement to keep under-18s safe and meet legal requirements. The proposed code is designed for the protection of kids and will form part of the UK’s Online Safety Act, which was passed in October. The Act will give Ofcom major powers to enforce big fines and criminal liability for tech companies that fail to protect under-18s and will apply to all internet services that can be accessed by children. This will encompass social media networks and search engines. * SO WHAT? * IT’S ABOUT BLIMMIN TIME!!! Fortunately, Big Tech companies seem to be keen to comply and are being proactive about making the relevant changes. The codes will now go into a consultation period and then be finalised within a year. Once that happens, there will be a three month period where companies have three months to go through risk assessments before they have to start following the rules.

Disney shares fall 9.5% despite first profit in core streaming business (Financial Times, Christopher Grimes and Anna Nicolaou) reflects a surprising share price move despite it achieving its aim months ahead of schedule due to cost cutting and the popularity of some of its programmes. That being said, it seems that investors were concerned about a potential slowdown in its theme parks after the initial post-pandemic frenzy. Disney’s streaming success could point to next chief (Financial Times, Lex) looks ahead to 2026 when current CEO Bob Iger – who was brought out of retirement to turn the company around – will be replaced. The suggestion here is that if you believe that streaming is an inevitability, the next CEO should come from this part of the business to guide it in future.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

UK construction rebounds, house prices steady in April, student accommodation proves to be a money-spinner and UBS profits from its rival’s misfortunes…

In a quick scoot around some of today’s other interesting stories, UK construction sector grows at fastest pace in a year (The Times, Jack Barnett) we see that the UK construction industry expanded at its most rapid pace in over a year in April thanks to a rebound in commercial real estate and civil engineering output which managed to offset the ongoing weakness in housebuilding. The rise in the S&P Global and CIPS construction sector PMI rose to its highest level since February 2023 and came in above analyst expectations. * SO WHAT? * This could be interpreted as being another small sign that the UK economy is gathering momentum after briefly slipping into recession last year.

Meanwhile, UK house prices steady in April as higher mortgage rates bite (The Guardian, Julia Kollewe and Larry Elliott) shows that house prices in the UK held steady in April after falling in March thanks to higher mortgage rates pushing buyers to target smaller properties, according to Halifax. The company’s head of mortgages observed that homebuyers are gaining in confidence after “a period of relative stability” despite borrowing costs being relatively high. Then in another area of real estate, How pension funds turned student accommodation into a cash cow (Daily Telegraph, Melissa Lawford) shows how pension funds are

pushing out private landlords of student accommodation with superior offerings in this Purpose Built Student Accommodation (PBSA) segment. A massive injection of cash from such funds has led to such developments housing about a third of the UK’s two million undergrads! Legal & General Investment Management (LGIM) reckons that the rise of the PBSA sector has been fuelled by buy-to-let landlords exiting the market and that this will continue. Aviva Investors is now getting into the sector, as are Axa Investment Managers, sovereign wealth funds like GIC, high net worth individuals and family offices. They are all attracted to reliable returns and the mismatch between supply and demand. * SO WHAT? * This is probably good now, but you do wonder what will happen in future given how powerful these companies are going to become! Also, if there is a shift over time in the balance of overseas-t0-domestic students there may be a ceiling on rental charges. For the moment, though, it looks like a money-spinner!

Then in UBS profits surge after rescuing rival bank (The Times, Ben Martin) we see that UBS managed to beat its own forecasts and those of the market in its latest quarterly results. Share buybacks and rising confidence in the bank that was forced to absorb troubled rival Credit Suisse will embolden investors – as will the performances of its wealth management and investment banking divisions.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

Watch out when you’re on the Tube! You never know who is watching you 🤣!

1. In MACRO & CRYPTO NEWS, global trade is expected to grow sharply, the EU and France appeal to China, the Bank of England remains divided, a Labour government could be a boost, the SNP gets a new leader and Robinhood warns of a lawsuit
2. In CONSUMER & EMPLOYMENT NEWS, spring sales are dampened, Pandora benefits from lab diamonds and employers rein things in
3. In REAL ESTATE NEWS, Savills does a U-turn on house prices, the London exodus runs out, there’s doubt about a lab rescue and Heineken plans a pub refresh
4. In MISCELLANEOUS NEWS, EV taxes are imposed, a British driverless car start-up raises $1bn, Qualcomm is to get an AI boost and Boeing slips up yet again
5. AND FINALLY, I thought I’d bring you some plane passenger initiative…

So global trade is expected to rise sharply, the EU and France appeal to China, the Bank of England feels the pressure, a Labour win could boost markets, the SNP gets a new leader and Robinhood warns of a lawsuit…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

Global trade growth set to more than double this year (Financial Times, Sam Fleming, Valentina Romei and Martin Arnold) shows that the OECD, IMF and WTO are all forecasting a sharp rebound in trade this year after a very meh 2023 that suffered from high prices, high interest rates and anaemic demand. Nice.

Meanwhile, EU and France press Xi for more balanced Chinese trade ties (Financial Times, Sarah White, Alice Hancock and Joe Leahy) shows that the French and Europeans are trying not to p!ss China’s president off too much with the prospect of slapping big taxes on Chinese imports. At the same time, China is being urged to curb support for Russia in the Ukraine war. President Xi is in Paris at the moment for talks over the next few days with much to discuss! * SO WHAT? * The EU will want to press its case for protecting industries and Xi will want to limit any fallout. This is going to be one very delicate balancing act on both sides! I would say that the main areas for concern from the European standpoint will be EVs, batteries, solar panels and other green-energy related products which have already flooded (or are just about to flood) the market.

Back in the UK, BoE likely to flag future rate cuts as divided policy committee meets (Financial Times, Sam Fleming) shows that the Bank of England is widely expected to leave interest rates unchanged at 5.25% when the MPC meets on Thursday this week.

Having said that, there have been signs that some of the interest rate-setting group are up for rate cuts despite this meaning the prospect of diverging with their US counterparts, who are experiencing unexpectedly strong and persistent inflation.

Following the Conservatives’ disastrous performance in the local elections last week, Labour will boost ‘appetite’ for London stock market, says City broker (Daily Telegraph, Eir Nolsøe) puts a positive spin on the prospect of a Labour government as it suggests that a Labour win will be a boon to the London stock market as it will offer a break with the political instability of the last few years. A lot of this has been self-inflicted (partygate, Truss-Kwarteng etc. most recently, but also Brexit and Scottish independence) although some of it has been due to global factors that have been beyond its control (Covid, wars etc.). * SO WHAT? * If you combine more stability (a government with an action plan and four years in power), the prospect of falling interest rates and  cheap valuations of British companies, sentiment (and markets) could rebound. The election is very much Labour’s to lose. Sunak is going to need a miracle to stay in office.

Then in John Swinney appointed new leader of Scottish National party (Financial Times, Simeon Kerr) we see that the SNP has a new leader. He has got a lot to do to unite his party and fend off the challenge of Scottish Labour after a ton of scandals. I think that the recent implosion of the SNP presents Starmer with a big opportunity to make inroads in Scotland…

Meanwhile, in the world of crypto, Robinhood warns of SEC lawsuit threat over crypto business (Financial Times, Will Schmitt) shows that the retail brokerage has warned of an imminent lawsuit from the SEC over its crypto business in the ongoing US regulatory clampdown on digital assets. Robinhood has around 23m customers, $119bn in assets under custody and cryptocurrencies accounted for $135m of its $785m in transaction-based revenues last year. * SO WHAT? * It looks to me like this is more of a pain for the company rather than a disaster and it is worth saying that Robinhood’s share price has increased by about 47% since the beginning of this year. It is due to report its Q1 results tomorrow.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Wet weather dampens sales, Pandora benefits from synthetic diamonds and employers rein things in a bit…

In consumer trends news, Wet weather and early Easter damp UK spring sales (Financial Times, Valentina Romei) shows that UK retail sales and spending dropped in April thanks to wet weather and Easter being earlier than usual, according to the latest figures from the BRC. * SO WHAT? * This would suggest that consumer sentiment isn’t quite there yet and that the end is not yet in sight after a tricky last couple of years for retailers. This means that concerns still remain over the UK economy although, more broadly, expectations are that the economy will rebound as wages are now outpacing inflation after a long period where they were lagging.

Then in Young consumers drive sales boom in lab-grown diamonds, says Pandora (Financial Times, Richard Milne) we see that Pandora, which is the world’s biggest jewellery maker by volume, said that young consumers have been powering the boom in lab-grown diamonds that have dented sales of mined ones. Lab-grown diamonds are typically a third of the price of mined ones and Pandora became the first major jeweller to ditch selling mined diamonds in 2021. Lab-grown diamonds have identical optic and chemical characteristics of the mined ones. * SO WHAT? * The success of lab-grown diamonds has helped Pandora

outperform its peers and grow revenues outside of what it has been generally known for – selling charms for bracelets and necklaces. While diamond miner De Beers moaned last month about its output falling by 23% in Q1 while natural rough diamond prices have cratered by 25% in the last two years, Pandora’s CEO observed that close to 50% of all stones in the US are now lab-grown – and Pandora is in prime position to benefit! Its revenues increased by 18% in Q1 and it was confident enough to raise its sales growth forecasts for the full year. A sparkling performance!

In employment news, Employers ‘cutting hours and hiring less to offset minimum wage rise’ (Daily Telegraph, Eir Nolsoe) cites the CEO of Reed, one of Britain’s biggest recruiters, as saying that employers are currently cutting back on hours and reining in hiring plans in reaction to the recent 9.8% increase in the National Living Wage. The increase has come at a delicate time for companies that are already suffering with inflationary pressures. * SO WHAT? * I would have thought that we are going to see things go sideways until the next government now in terms of any major initiatives because they will surely lack bite because most people will believe that they could be changed (or ditched) after the next election. Businesses will be hoping that an economic uptick will bring in the revenues so that they can pay their staff the higher wages.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

We look at current developments in residential and commercial property…

In residential property news, Savills says UK house prices will rise this year in U-turn on earlier forecast (The Guardian, Hilary Osborne) shows that property company Savills has reversed the forecast it made in November last year when it said that it expected the average price of a home to drop by 3% in 2024. Now it thinks that increased competition among mortgage lenders has prompted more activity in the market to the extent that Savills now expects prices to rise by 2.5% in 2024! * SO WHAT? * It’s certainly looking more possible now but I guess we’ll have to see what rivals say as well. Separately, it is also interesting to note moving patterns, as per Fewer Londoners leave for the country as pandemic-era exodus eases (Financial Times, Joshua Oliver) which cites Rightmove statistics which show that the exodus from London to the ‘burbs has slowed down considerably. The stats say that the number of house-hunters looking to move out from London has reverted to the pre-Covid norm of about a third versus the peak of a half in August 2021. I would have thought that the return-to-office trend will have put paid to the exodus to a great extent. 

In commercial property news, Lab space cannot breathe life into London’s office market (Financial Times, Lex) is an interesting article which refers to Canary Wharf’s efforts to diversify from predominantly finance tenants to attracting life sciences companies. The rationale here is that labs attract high rents (about £130 per sq ft versus prime offices at £100 per sq ft) but there are a few problems: firstly, building costs are higher and secondly that there’s only so much demand. There are already a number of projects that are underway and due for delivery this year and next so going in this direction is going to be a bit of a gamble.

Meanwhile, Heineken to pump £39m into reopening and revamping UK pubs (The Guardian, Jane Croft) shows that the world’s second largest brewer is going to come to the rescue (to some extent) of British pubs by spending a ton of money on reopening 62 UK pubs and upgrading “tired” ones in suburban areas in order to attract consumers who are working from home. It already owns 2,400 pubs via its Star pub and bars division, so this is kind of a drop in the ocean – but it’s still a positive move! * SO WHAT? * It does sound like there’s a mood shift going on in this sector at the moment after the mass closures we’ve been seeing in the last few years during and since Covid. JD Wetherspoon has indicated an interest in opening more pubs and Greene King announced last week that it would be spending £40m on a new brewery in East Anglia. Fingers crossed for better times!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

EV taxes get imposed, a British driverless start-up raises a ton of money, Qualcomm looks set to benefit from AI and Boeing slips up AGAIN…

In a quick scoot around some of today’s other interesting stories, Governments slap taxes on EVs as $110bn fuel duty shortfall looms (Financial Times, Jamie Smyth and Amanda Chu) shows that global policymakers in the UK, New Zealand, Israel and most US states are among those imposing new taxes on EVs to make up for the shortfall in revenues they normally get from fuel duties on petrol-powered cars. There is an array of different taxes. * SO WHAT? * EV fans (particularly owners!) will moan that they are being hit by punitive taxes and warn that this will slow the take-up of EVs because it will make one of the key advantages of ownership much less attractive. Things don’t seem to be going well for EVs at the moment what with price wars, Tesla’s shutdown of its Supercharger division and moves on taxes like this. I wonder whether governments just think that their respective charging infrastructures aren’t enough and that they might as well make some money from EV owners rather than nothing. This is all very well at the moment but the danger is that if measures become too punitive and the attractions of going electric get much narrower, development of the charging infrastructure may also slow down – which will make the situation even worse (until battery tech advances to an extent that range anxiety becomes a thing of the past).

In other car-related news, British driverless car start-up raises $1bn (The Times, Katherine Prescott) shows that Wayve has just

raised a massive sum of money from SoftBank, Nvidia and Microsoft to help develop its AI software that will make any vehicle hands-free. * SO WHAT? * Wayve’s approach to driverless differs from other approaches up till now as Wayve’s tech “teaches” driverless vehicles how to drive from real life videos versus “just” feeding computers with huge numbers of rules to cover every eventuality. This sounds great from a finance perspective, but this will also give the company access to the computer power needed to process all this data!

Elsewhere, Qualcomm’s Smartphone Future Looks Brighter With AI (Wall Street Journal, Dan Gallagher) shows that AI-enabled smartphones and PCs are likely to boost Qualcomm’s fortunes as it makes modem chips used in the iPhone and other wireless devices. The prospect of on-board AI means that there will be a need for more advanced processors. * SO WHAT? * This is kind of ironic in the sense that Apple has been doing its level best to cut Qualcomm out of the supply chain over the last few years – but Apple’s push into AI could deepen the need for Qualcomm’s tech!

Then in Boeing calls off Starliner spacecraft launch after problem with valve (Financial Times, Claire Bushey) we see that Boeing has slipped up again – this time the launch of a Boeing spacecraft has been called off due to an issue with a component. Boeing’s CST-100 Starliner spacecraft was supposed to be launched from Cape Canaveral to take two astronauts to the International Space Station. When will Boeing’s nightmare end???

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

When you’re at the airport, have a little bit too much luggage and don’t want to pay the extra for going over your allowance you have to improvise like this guy! It reminded me of what I did back at uni when I went to Japan to study. Unfortunately, the luggage allowance was the same for whether you were going for a few weeks on holiday (25kgs) or, like me, for a year. Picture a much younger Peter Watson, then, stepping out onto the tarmac at Narita airport on an August morning with the temperature hitting 35°C and 100% humidity wearing a t-shirt, a polo shirt, a cricket jumper, a suede jacket, hiking socks, tracksuit bottoms, jeans, heavy walking boots and an extremely heavy rucksack bursting at the seams with my Japanese dictionaries (yes, hard copy), notes,

1. In MACRO, COMMODITIES & ENERGY NEWS, Turkey stops trade with Israel over Gaza, the OECD sticks the boot into the UK, Shell beats profit forecasts, Gazprom has its worst loss in decades, US cattle prices fall and Ørsted warns of the high price of renewables
2. In TECH NEWS, Apple’s revenues fall, Chinese AI start-ups chase OpenAI and TikTok’s feistiness continues
3. In M&A NEWS, Sony and Apollo make Paramount an all-cash offer, Nightcap considers a bid for Revolution Bars, Mayer Brown is to spin off its China business, Special Opportunities REIT looks to list in London and investors look to other ways to access IPOs
4. In MISCELLANEOUS NEWS, Lloyd’s insurers count the cost of Baltimore, Maersk’s profit falls, Goldman Sachs removes the bonus cap, Peloton’s latest CEO exits and Novo Nordisk gets fat from weight-loss drugs
5. AND FINALLY, I thought I’d bring you some holiday inspo😁…

So Turkey supports Gaza, the OECD hits the UK, Shell booms, Gazprom doesn’t, US cattle prices fall and Orsted warns of the high cost of renewables…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

In Turkey halts trade with Israel over Gaza conflict (Financial Times, Adam Samson and James Shotter) we see that Turkey has announced that it has suspended trade with Israel in protest at the “humanitarian disaster” in Gaza as tensions between the two nations worsens. Ankara’s trade ministry said that trade will only resume when Israel “allows an uninterrupted and sufficient flow of humanitarian aid to Gaza”. President Erdogan has been increasing his criticism of Israel over the last few months, most recently calling PM Netanyahu the “butcher of Gaza”, as he has faced significant pressure domestically to intensify anti-Israel measures. It’s not clear yet whether other countries will do something similar but I guess the longer this goes on, the more likely this will be.

UK will be worst performer in G7 next year, OECD forecasts (The Guardian, Phillip Inman) highlights the Paris-based thinktank as being the latest big organisation to offer a damning assessment of the UK’s economic prospects (the IMF loves sticking the boot in as well). It justified its forecast downgrades for UK growth this year by pointing to high inflation rates and the ongoing effects of inflation. It says that the UK will be the worst performer in the G7 in 2025 while the US and Canada will be at the top of the leaderboard. It reckons that the Bank of England will delay the first interest rate cut until the autumn. On the flipside, the OECD is getting more optimistic about the prospects for the global economy and the Paris-based organisation expects a recovery in the Eurozone. I guess time will tell!

In the world of oil, Shell $7.7bn profits beat forecasts (The Times, Emma Powell) highlights the oil major’s Q1 profits outperformance versus market expectations thanks to a strong performance in oil trading and a recovery in refining margins. It then cheered investors further by announced a $3.5bn share buyback that will happen over the next three months (something that should support/put a floor under the share price). This is the seventh quarter in a row where the company has announced buybacks in the $3bn-$4bn range. What a contrast with Gazprom plunges to worst loss in decades as sales to Europe collapse (Financial Times, Max Seddon and Anastasia Stognei) which shows how sanctions have hurt the Russian energy giant. Until Russia invaded Ukraine, Europe was its main source of income. It has since had difficulties adapting to the “new normal” as European countries have been more successful than expected at finding alternative sources of gas. According to EU data, Russia accounted for 40% of Europe’s gas imports in 2021 (pre-invasion) but in 2023, this dropped to 8%. Gazprom has managed to offset some of the loss in gas sales by decent sales of oil but it’s still in shortfall.

Then in US cattle prices drop as traders fear bird flu outbreak could knock demand (Financial Times, Susannah Savage) we see that cattle prices have been falling as the US government scrambles to limit the spread of a bird flu outbreak among America’s herd. Bird flu has been found in dairy herds in nine states, with one dairy worked testing positive in Texas. The USDA remains confident in the country’s meat and dairy supplies but traders are being more circumspect, believing that the news could hit demand. Last week, Colombia banned the import of beef products from some US states in response to current events. Will others follow?

Meanwhile, in energy news, Ørsted boss warns on high prices for renewable energy (Financial Times, Rachel Millard and Malcolm Moore) shows that the boss of Ørsted believes that high interest rates will keep costs of renewable energy high, although things seem to be improving after the wind developer’s nightmare 2023. Energy consultancy Wood Mackenzie said in a recent report that a 2% increase in US interest rates could push up the overall cost of a renewable energy project by a whopping 20%! This perhaps explains why it abandoned two major US projects last year. Renewable energy is great but it quite literally comes at a (high) cost!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Apple’s revenues drop, Chinese start-ups race towards AI supremacy and TikTok soldiers on…

In Apple’s revenue falls less than feared despite rocky start to the year (Financial Times, Michael Acton) we see that Apple’s share price went up after its quarterly revenues fell by less than the market had expected and spoke of its positive outlook for the year. Sales of its iPhone were down 10% from the previous year and China sales were particularly weak but its services business – which includes the App Store, Apple TV and Apple Pay – saw a revenue increase of 14% to a new record! Analysts are hoping that new gadgetry with new features (particularly in AI) will boost sales later in the year (a new iPad is due out in May, for instance). The company also announced a massive $110bn share buyback, which was bigger than expected. AI iPhones could liven up Apple sales (Financial Times, Lex) is positive about the effect that an iPhone with generative AI capabilities would have if it came along. * SO WHAT? * I’m not sure what an AI-enabled iPhone would be capable of but I am sure that it will prompt renewed interest in a mature segment. Maybe we’ll see more at the WWDC in June…

Meanwhile, Four start-ups lead China’s race to match OpenAI’s ChatGPT (Financial Times, Eleanor Olcott) shows that Zhipu AI, Moonshot AI, MiniMax and 01.ai are leading the pack of over 260 companies trying to repeat the success of US rivals such as OpenAI and Anthropic. Each of these companies has been valued at between $1.2bn and $2.5bn in the last three months and they are fighting with each other to access the best talent. Zhipu, Moonshot and 01.ai have developed chatbots that focus on office workers and students. * SO WHAT? * As things stand currently, there isn’t yet a clear leader or “killer app” in China and it’s difficult at the moment to differentiate between the providers, but the Chinese are definitely on it!!! If you have access to the FT, you should definitely read the full version as it is a very interesting read on the current Chinese players!

TikTok is having an eventful time at the moment! Universal Music ends boycott of TikTok with new licensing deal (Financial Times, Daniel Thomas) shows that the the two sides have agreed to a new licensing deal, ending the boycott of TikTok which started in January. This means that that music from some of the world’s top artists has been returning to the platform. The new deal includes new promotional and commercial agreements and “industry-leading protections” over the use of generative AI. The financial terms of the deal have not been disclosed. Meanwhile, TikTok ban will accelerate the ‘splinternet’ (Financial Times, Lex) takes a look at the threat facing TikTok as it faces a US ban if owner ByteDance doesn’t sell it by early 2025. It reminds us of China’s Kunlun Tech being forced to sell dating app Grindr to San Vicente Acquisition after the US regulators deemed it to be a security risk – but of course TikTok is on a whole new level in terms of size! The article also makes the interesting observation that the internet is getting increasingly fragmented due to concerns about data privacy and security. In 2016, Russia blocked access to LinkedIn, India banned TikTok in 2020 and this year China banned WhatsApp. Then in TikTok Tells Advertisers It Won’t Back Down as U.S. Ban Looms (Wall Street Journal, Katie Deighton) we see that TikTok remains defiant as it told hundreds of ad execs at a presentation yesterday that it would fight the potential ban of its app in court. * SO WHAT? * The overarching conclusion here is that although it would be a pain for ad buyers not to have TikTok available, the fact of the matter is that they spread their ad spend relatively evenly among digital platforms such as Instagram Reels and YouTube shorts so if TikTok did disappear it wouldn’t be a disaster.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Sony and Apollo team up for a Paramount bid, Nightcap considers saving Revolution, Mayer Brown looks to separate its China business, a REIT considers a London listing and investors look at other ways to invest in IPOs…

In M&A news, Sony, Apollo Make $26 Billion All-Cash Offer for Paramount (Wall Street Journal, Jessica Toonkel and Miriam Gottfried) shows that the media/tech giant and PE firm are poised to spoil the party in the pursuit of Paramount Global. The all-cash offer is a starting point and is non-binding and would wrest initiative away from Skydance Media which has been in exclusive talks with Paramount – an arrangement that ends today! Paramount shares closed up by 13% in trading yesterday as investors got excited about a bidding war.

Back home, Nightcap considers deal for struggling rival Revolution Bars (The Times, Jessica Newman) shows that the bar operator that owns the Blame Gloria and Barrio Familia brands is having exploratory talks about a potential takeover of the troubled hospitality group which owns 58 bars and 22 gastro pubs. Nightcap currently has a portfolio of 46 bars in the UK. All options are being considered at the moment including a whole or partial sale. Talks are at the very early stages at the moment though. Danish nightclub operator Rekom has also expressed an interest in Revolution Bars.

Although not a merger or acquisition (more of a “sort of” disposal), City law firm to spin off Chinese arm amid growing tensions with the West (Daily Telegraph, Adam Mawardi) shows that City law firm Mayer Brown is looking to split out its China operations, the latest professional services firm to do so as US-China tensions continue. The firm will hive off its Hong Kong, Shanghai and Beijing offices from its global network and be

rebranded as Johnson, Stokes and Master – the name it had before it merged with Chicago-based Mayer Brown in 2008. Dentons, Latham & Watkins, Winston & Strawn and Linklaters are among the law firms that have either separated out, slimmed down or shut down their operations in China. This just seems to be the cost of doing business there these days!

Back in the UK, Property trust pursues £500m London listing in rare boost for the City (Daily Telegraph, Hannah Boland) shows that newly-established real estate investment trust Special Opportunities REIT is considering a London flotation in June, in a rare bit of good news for the London Stock Exchange. * SO WHAT? * This will be the first property trust to list on the London market since October 2021 and would be the biggest float by a REIT in over a decade! Special Opportunities REIT wants to use the funds to snap up real estate assets such as logistics facilities and data centres.

I thought it was worth mentioning IPOs: more than one way to cook an egg (Financial Times, Lex) because although everyone has been voicing concerns about the lack of flotations in the London market, investors have other ways that they can participate in IPOs generally (although not all IPOs are a roaring success – last year over half of the US IPOs saw their share prices fall on the first day!). The previously well-trodden path of your typical IPO would be company comes to market, it’s priced at a 20% discount to peer valuations, investors get a “bargain” and the advisers on the deal get a fat fee for their troubles. Everyone wins. Nowadays, it’s not quite so easy and performances can vary wildly. In order to spread the risk investors can buy into IPO-focused ETFs like the First Trust IPOX Europe equity opportunities ETF or if they are OK with more risk, then they can go for UK-listed investment trusts like Chrysalis Investments and Augentium Fintech which focus on potential IPO candidates.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Lloyd’s counts the cost of Baltimore, Maersk sees profits dented, Goldman ditches the bonus cap, Peloton’s boss leaves and Novo Nordisk just keeps on going…

In a quick scoot around some of today’s other interesting stories, Lloyd’s insurers acknowledge losses from Baltimore bridge crash (The Times, Ben Martin) shows that two of the biggest participants in the Lloyd’s of London insurance market – Hiscox and Lancashire – have said hat they are going to take hits from the disaster although the latter insurer said that the impact “will be within expectations of this type of event”. The whole industry is continuing to count the costs of the collapse of the Francis Scott Key Bridge. The loss is likely to eclipse the $1.5bn of losses absorbed by the industry in the wake of the Costa Concordia shipwreck off Italy 12 years ago.

Staying with the marine theme, Maersk profits sink as Houthi Red Sea attacks take toll (The Times, Robert Lea) shows that profits at AP Moller-Maersk dropped considerably thanks to the disruption of the Houthi attacks in the Red Sea. That being said, the company reckons that losses for the year will actually be better than previously guided as volumes have been trending above expectations. Still, Maersk doesn’t see any imminent end to the disruption.

Elsewhere, Goldman Sachs to scrap cap on bonuses for hundreds of UK staff (The Guardian, Kalyeena Makortoff) highlights Goldman’s scrapping of the bonus cap that will allow its top performers to earn up to 25 times their annual salary! This came months after UK regulators confirmed that they’d be scrapping the cap that had been imposed by EU rules. Unsurprisingly, other banks are planning to go down the same road. Interestingly, this change won’t apply to the company’s EU-based bankers. * SO WHAT? * Although commentators love to jump on this (because people hate bankers 😼 who get paid massive amounts of money!), the fact of the matter is that, from an employers’ point of

view, having a greater proportion of employee remuneration as being variable gives them more flexibility to pay more in the good times and cut costs drastically in the bad. I would have thought that there is going to be an influx of European bankers as a result of this! Everyone’s going to have to follow suit as well as you wouldn’t want to be the only investment bank in town with a salary cap!

In Peloton chief Barry McCarthy steps down (Financial Times, Alexandra White) we see that Peloton chief exec Barry McCarthy is stepping down as the company launches its latest restructuring plan that involves cutting 15% of the workforce. McCarthy was ex-Netflix and Spotify and was brought in in 2022 to take over from former chief and founder John Foley in 2022. * SO WHAT? * Peloton has never reached its pandemic-era highs and I would reiterate that I think it should swallow its pride and do its best to sell itself to a tech company (like Apple, where it could link up to its wearables) or to a premium gym chain (where it could offer a better all-round experience to gym users). This way it could leverage its online classes (and perhaps some of its “hardware”) and take advantage of a “sugar daddy” that will give it access to a better balance sheet. If it doesn’t find a partner I really think that the company will disappear into obscurity. Recurring revenues in the form of subscriptions are great – but you’ve got to hang on to the audience!

Meanwhile, Growing demand for weight-loss drugs fattens Novo Nordisk profits (The Times, Tom Howard) shows that Novo Nordisk reckons that its profits this year will be better than it (and the market) had initially thought as its weight-loss jab Wegovy continues to go from strength to strength. * SO WHAT? * Novo Nordisk has become Europe’s most valuable company thanks to its development of the drug semaglutide. This drug now accounts for 75% of Novo’s annual sales and trades under the name Ozempic for diabetes and Wegovy for weight loss. This remains a massive market! Will others catch up??

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

I know we’re just in spring at the moment but looking a bit further ahead I thought you might like some holiday inspo for if you find any water slides 😁! This guy is pretty phenomenal!

1. In BIG PICTURE NEWS, US interest rates look like they’ll be higher for longer, Sunak faces a reckoning, councils suffer, UK manufacturing falters and UK universities face more course closures
2. In RETAIL, CONSUMER GOODS & LEISURE NEWS, Mulberry sales fall, Next surges, Mango plans more UK stores, Flutter shareholders vote for New York and Viking has a decent debut
3. In CAR-RELATED NEWS, Chinese EV makers post higher sales, Tesla’s move away from charging freaks companies out and Aston Martin makes more promises
4. In MISCELLANEOUS NEWS, Johnson & Johnson wants to make a deal, OnlyFans faces investigation and UK house prices fall
5. AND FINALLY, I bring you what looks like a very satisfying beverage…

So US rates look like they’ll be higher for longer, Sunak faces a reckoning, councils face more tough times, UK manufacturing falters and UK universities may have to cut courses…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

In Federal Reserve chair Jay Powell signals interest rates will remain higher for longer (Financial Times, Claire Jones and Kate Duguid) we see that the Fed has indicated that there won’t be any imminent interest rate cuts due to “a lack of further progress” in getting inflation down to the central bank’s 2% target. This is being interpreted as meaning that there won’t be any cuts until the second half of the year at the earliest. It added, however, that it was not yet considering potential additional rate rises – which I guess is something (but not much!). The Fed kept interest rates unchanged at the 5.25%-5.5% range, their highest level for 23 years where they’ve remained since summer last year!

In the UK, Rishi Sunak’s political fate hangs on results of local elections (Financial Times, George Parker and Lucy Fisher) highlights the importance of today’s local elections and says that the PM will be particularly keen for two high-profile Conservate mayors (Andy Street in the West Midlands and Lord Ben Houchen in Tees Valley) to keep their posts. If both or either of them are defeated, this could potentially prompt some kind of Conservative revolt and/or an election. Sunak will have to wait until Friday lunchtime to know the result from Tees Valley and until Saturday for West Midlands.

UK manufacturing back in contraction (The Times, Jack Barnett) cites the latest S&P Global and CIPS PMI which showed that the UK’s manufacturing sector contracted more slowly than expectations in April. * SO WHAT? * March showed a very slight

brush with expansion, so April’s slight contraction is disappointing to an extent, but given that it wasn’t as bad as had been expected I guess you can take that as a positive! Activity was sluggish thanks to a slowdown in client spending that occurred in the wake of disrupted trade flows in the Red Sea. Uncertainty about the direction of the UK economy and companies running down their inventories were also cited as reasons behind the weakness.

In the public sector, Warning of more council bankruptcies as debt doubles (The Times, Jack Barnett) cites NIESR research which shows how local government debt has almost doubled to £119bn since 2010 due to councils increasing their borrowing to make up for central government funding cuts in the 2010s austerity years – something that was also facilitated by borrowing restrictions being loosened at this time. * SO WHAT? * Councils used the money to finance capital investments, mainly in residential and commercial property developments but they were hit by the double whammy of rising debt costs (higher interest rates) and investment projects not generating enough income. Some councils have already gone bust but there are many more who are on the edge. Without help, they will also go bust. Food for thought for whoever forms the next government…

Meanwhile, UK universities warn of more course closures and job cuts without state help (Financial Times, Peter Forster and Anna Gross) shows that UK universities will have to increase course closures and cut jobs unless the government gets involved. Unfortunately, cuts have hit institutions most likely to serve disadvantaged students the most. * SO WHAT? * UK universities have expanded rapidly over the last decade but are struggling with a freeze in tuition fees for domestic students (which will continue to be in place for at least the next two years), higher operating costs and a drop-off in higher-paying international students. Universities are crying out for more funding but the government says that they are providing too many courses that don’t offer a decent return for students’ money and that they’ve become over-reliant on Chinese students in particular. According to analysis by the Russell Group of research universities, the freezing of tuition fees means that universities are losing £2,500 a year on average per student – and that will go up to £10,000 by the end of the decade if things don’t change!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Mulberry sees sales fall, Next is robust, Mango plans more UK shops, Flutter holders vote for New York and Viking’s IPO is buoyant…

In Mulberry sales decline as wealthy shoppers slow spending (The Guardian, Rupert Neate) we see that the luxury British brand famous for its handbags that can cost over £1,600 a pop reported a 4% drop in annual sales, becoming the latest luxury brand to report a slowdown in a trading update yesterday. The company painted a downbeat picture of the outlook, saying that the UK and China markers will continue to be challenging. The company’s share price has cratered by almost 60% this year alone and yesterday’s update prompted further weakness. * SO WHAT? * The company is one of many to blame weakness on the lack of VAT-free shopping but I suspect that it’s more to do with the possibility that its core clientele aren’t in the same income bracket as those who shop at other luxury brands. I’ve always said that for most of us Mulberry is expensive and DOES have luxury cachet – but to those who shop a lot at luxury stores, I’d say that it’s probably high-middle or possibly low top-end. This puts it firmly in the category of customers who are still feeling the pinch (albeit less than those further down the earnings curve). If you wanted to put a positive spin on this you could say that brands in this space may bounce back quite strongly when economies recover thanks to pent-up demand being unleashed.

Meanwhile, Next shrugs off wet weather to spring back with a growth spurt (The Times, Isabella Fish) shows that the company has managed to once again go against the herd as it posted better-than-expected sales growth over Q1, despite the wet weather hitting high street retailers generally. It also kept its full year guidance unchanged although it expects weaker sales growth in Q2 versus Q2 last year, when the weather was particularly warm. * SO WHAT? * It seems that there is a general expectation that rising disposable incomes and economic confidence will help Next perform well over the year. What a contrast to rivals such as Superdry and Ted Baker.

In Mango to open 20 new stores in the UK (The Times, Isabella Fish) we see that the Spanish fashion retailer is planning to open more shops in the UK as it continues its rapid global expansion.

Mango’s core customers are urban women over the age of 30, although Mango “Man” (no, not a new fruity Marvel character) made up 11% of the group’s turnover in 2023. * SO WHAT? * This is another example of a company that has managed to cope in difficult circumstances. I just wonder whether all this weather/VAT talk is just an excuse for not offering attractive enough product! Will it become the next Inditex/Zara??

In leisure sector news, Flutter shareholders vote to move listing from London to New York (The Guardian, Jack Simpson) shows that the LSE is about to see another company go stateside as 98% of investors in the owner of Paddy Power voted in favour of moving its primary listing to New York. The switch is expected to become effective by the end of this month. * SO WHAT? * Everyone seems to be tearing their hair out every time a company flits across the Pond but let’s face it, when Flutter is forecast to generate almost 40% of its revenues from the US market this year, such a move does make sense! It’s just that the LSE has had a bad run what with building materials company CRH making the move last year, Tui heading to Frankfurt and pressure increasing on other firms to abandon London (apparently Ocado could be next). I think this is a fad that will stop when markets make a sustained recovery. If you believe all the hype about UK companies being overvalued, then surely London is the place to be, no?

Then in Cruise line Viking has buoyant debut in year’s second-largest US IPO (Financial Times, Jennifer Hughes, Antoine Gara and Eri Sugiura) we see that cruise operator Viking Holdings had a successful IPO yesterday. Its launch price was $24 a share which gave the company a market cap of $11.2m. Demand was so strong that the price of the deal was increased twice before it actually launched! It was the second biggest listing in the US this year after the IPO in February of Arc’teryx owner Amer Sports. * SO WHAT? * This is just the latest example of rising confidence in the markets and gives private equity firms in particular hope that they will finally be able to crystallise the value of the some of the companies in their bloated portfolios after a two-year dearth of activity on the markets. This is interesting timing as the cruise industry is emerging as one of the fastest-growing tourism sectors – the Cruise Lines International Association said that demand for cruises has risen by 20% since 2019!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Chinese EV makers boom, Tesla’s supercharger move shocks others and Aston Martin makes more promises…

China EV Makers Post Higher April Sales Amid Price War (Wall Street Journal, Jiahui Huang and Ben Otto) shows that BYD, NIO, XPeng, Geely’s Zeekr and even newcomer to the segment Xiaomi saw strong EV sales in April while hybrid vehicle specialist Li Auto lagged its rivals. Prices were cut deeply in April and feelgood from the Beijing Auto Show, with all the new model releases that brought, also helped to boost sales. It’s interesting to see how EVs are outperforming hybrids – it’s the opposite over here! Still, competition remains fierce and downward price pressures remain.

Meanwhile, Tesla Is Pulling Back From EV Charging, and People Are Freaking Out (Wall Street Journal, Jennifer Hiller, Sean McLain and Ryan Felton) shows that Tesla’s dramatic announcement about its Supercharger division is, predictably, causing a bit of a kerfuffle in the charging industry and is a serious blow to already-waning EV demand. * SO WHAT? * Tesla had won a reputation for being able to build charging stations

cheaper and faster than rivals, which made the move even more surprising. We’ll just have to wait to see if anyone fills the void – if they don’t, this could be a real downer for EV demand.

Then in Aston Martin’s losses almost double amid plunging SUV sales (Daily Telegraph, Matt Oliver) we see that shares in the luxury car maker dropped by up to 14% in trading yesterday as it unveiled an almost doubling of losses in Q1. This was a result of a 10% fall in overall sales, which was itself thanks to a 63% fall in the number of its SUVs sold to dealerships. The company is going to start ramping up production of its new Vantage, its upgraded DBX SUV and introduce a couple of other models which means that its lineup will be completely refreshed by the end of the year. * SO WHAT? * Exec chairman Lawrence Stroll kept banging on about this being a year of transformation but the pressure is well and truly on as Aston Martin is a serial disappointer. That being said, it’s possible that sales were weaker as would-be buyers decided to wait for the model refresh, so Stroll may be proved right eventually!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Johnson & Johnson wants a deal, OnlyFans gets investigated and UK house prices weaken…

In a quick scoot around some of today’s other interesting stories, Johnson & Johnson proposes $6.5bn deal to settle talc cancer lawsuits (Financial Times, Oliver Barnes) shows that Johnson & Johnson has come up with an improved settlement for over 50,000 ovarian cancer claimants to draw a line under the long-running litigation. The payout would be made over the next 25 years and settle all current and future claims. * SO WHAT? * This represents J&J’s third attempt to reach a knock-out figure. J&J has repeatedly denied that its talc-based products caused cancer but Johnson & Johnson talc settlement shows limits of bankruptcy tactics (Financial Times, Lex) highlights this latest move as being positive for certainty and the claimants themselves, who will get a payout. Investors will also be relieved to see a line drawn under the whole thing. Clearly the suffering continues for those affected and their loved ones.

Then in OnlyFans investigated over fears it has exposed children to pornography (Daily Telegraph, James Warrington) we see that OnlyFans is now being investigated by Ofcom due to concerns that the website has enabled children to watch pornography by not doing enough to enforce age verification on its site. Ofcom is also looking into whether the website failed to provide complete and accurate information when it responded to two previous requests in 2022 and 2023. The regulator said that it will given an update of its progress in August.

Meanwhile, UK house prices fall unexpectedly for second month in a row (The Guardian, Jack Simpson and Rupert Jones) cites the latest stats from Nationwide which show that interest rate wobbles and more expensive mortgages blunted the excitement of the spring home-buying season. House prices are now around 4% below what they were at the summer 2022 peak. * SO WHAT? * Major lenders including Barclays, HSBC and NatWest increased prices of their fixed rate mortgages last week as economists pushed back their forecasts for when the Bank of England will start to cut interest rates. Nationwide put its prices up this week. There’s still all to play for in the spring buying season but this has taken some of the shine off proceedings.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

I’ve been talking a lot recently about chocolate and coffee – so I thought why not combine the two in a very satisfying beverage! I find this compelling viewing!

1. In BIG PICTURE NEWS, Biden looks to loosen marijuana rules, the EU exits recession and investigates greenwashing, food importers brace for cost increases, council funding looms large, a lithium miner eyes Durham and cocoa prices drop suddenly
2. In RETAIL, CONSUMER GOODS & RESTAURANTS NEWS, Amazon sees sales surge, Adidas sees profits boom, Puig goes for a chunky IPO valuation, fast-food giants acknowledge price-strapped customers and Starbucks undershoots expectations
3. In CARS NEWS, Musk fires his entire supercharger team and a major vehicle-carrier warns of a new wave of car imports
4. In MISCELLANEOUS NEWS, eight newspapers sue OpenAI and Microsoft, Huawei takes Apple market share, Binance’s CZ gets a four month sentence and UK mortgage approvals rise
5. AND FINALLY, I bring you an amazing bike stunt…

So Biden eyes marijuana, the EU bounces back and investigates greenwashing, food importers count the cost of Brexit, council funding worries persist, lithium mining could come to Durham and cocoa prices tumble…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

In Biden administration plans to loosen marijuana rules (Financial Times, Oliver Barnes, James Politi and Stefania Palma) we see that Biden’s gang is aiming to reclassify cannabis as a less harmful drug – downgrading it to being on a par with substances such as ketamine. Although cannabis would still be illegal, the criminal penalty for possession and distribution in most states would be reduced. This is, bizarrely, a priority for the government in order to attract the youth vote ahead of the November election. * SO WHAT? * The proposal to change the policy still has to survive a public comment period before it comes into effect – but it would signal the biggest shift in US drug policy in a generation! Federal laws have lagged state laws for some time as cannabis is now legal for recreational used in 24 states and for medicinal use in 39 jurisdictions. It would provide a MASSIVE boost to the US legal cannabis industry – and the share prices of Canopy Growth and Tilray Brands shot up by 53% and 41% respectively!

In Europe, Eurozone exits recession as ‘big four’ economies beat forecasts (The Guardian, Larry Elliott) shows that the eurozone has rebounded from its brief technical recession thanks to a better-than-expected performance by the economies of Germany, France, Italy and Spain over Q1. The data published by Eurostat reflected the best growth performance since Q3 of 2022. It came in at 0.3% versus market expectations of 0.2% and was driven by lower energy prices, weakening inflation, rising real wages and hopes for interest rate cuts. Separate data showed that headline Eurozone inflation remained unchanged in April at 2.4% while core inflation (which takes out energy prices and food prices because of their volatility) actually decreased from 2.9% to 2.7%. Time for the ECB to cut interest rates??

Then in EU investigates ‘greenwashing’ at 20 airlines (Financial Times, Philip Georgiadis and Kenza Bryan) we see that the European Commission has launched an investigation of 20 airlines for potentially “misleading greenwashing practices”, including stated benefits of offsetting emissions from flying. None of the airlines were named but the ones involved are from Belgium, the Netherlands, Norway and Spain. * SO WHAT? * I guess we’ll just have to wait for the outcome on this but you would have thought that there are reasonable grounds here. It’s good that the EC is taking the airlines to task and there may be big fines to pay at the end of it. The thing is that flying makes up about 4% of the EU’s greenhouse gas emissions but it is seen to be one of the hardest sectors to decarbonise due to the lack of alternatives to jet fuel.

Food importers in UK say new Brexit checks could add 60% to costs (The Guardian, Jack Simpson) shows that the UK government yesterday introduced new post-Brexit checks on animal and plant products entering from the EU. Importers of food from the EU into Britain have said that their costs could rise by up to 60%, something that will have to be reflected in higher prices to customers. It’s also likely that it’ll put some shops out of business. The UK has implemented a Common User Charge (CUC) of up to £145 per consignment – but logistics companies say that there is a lack of clarity on what constitutes a consignment. Is it a “lorry load”, for instance, or does it apply to the different batches of products within the load that come from different suppliers as well? * SO WHAT? * It is likely that this is going to cause a lot of confusion, add extra costs and decimate some businesses as a result. However, as with many new initiatives of this ilk, panic often occurs at the beginning because it is something new. That being said, the situation needs to be monitored because you never know – it may not end up being as bad as everyone thinks (although TBH, it looks like a bit of a disaster as far as I’m concerned!).

In ‘What will change?’: council funding woes loom over UK local elections (Financial Times, William Wallis) we see that the local councils funding crisis is not going away as income falls and costs keep rising. English councils are facing an overall deficit of £4bn over the next two years, according to the Local Government Association. * SO WHAT? * There are some extremely difficult challenges for incoming councillors whatever way the nation votes tomorrow in the elections for 102 English councils and 10 regional mayors. More cost-cutting looks inevitable unless there is a massive change in the way councils are funded – but that doesn’t look like changing any time soon. I think that the economy’s performance has to show sustainable signs of meaningful growth before this can happen. In the meantime, I think it’ll be a case of make-do-and-mend…

In commodities news, Lithium miner submits plans to drill in Durham (Daily Telegraph, Jonathan Leake) shows that Weardale Lithium has announced plans to mine 10,000 tonnes of lithium a year from rocks underneath a County Durham beauty spot. If this turns out to be viable, it means that the UK could cut its complete reliance on imports which mainly come from Australia and South America. * SO WHAT? * This is the second area of the UK that could potentially yield commercially viable lithium deposits – Cornish Lithium, for example, is already looking at deposits in Cornwall that could also yield about 10,000 tonnes a year.

Then in Traders left with a bitter taste as price of cocoa plummets (The Times, Emma Powell) we see that the price of cocoa futures have dropped by 16% since last week after almost tripling in value this year alone. Cocoa prices have been driven up because poor yields in west Africa – Ghana and Ivory Coast combined supply about 60% of the world’s crop – have reduced supply at a time when demand is growing. There was no explanation as to what was behind the fall, so this may be a temporary thing. Fun fact: it takes between five and seven years to regrow a tree to the point that it can yield cocoa beans for harvesting.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Amazon’s sales rise, Adidas outperforms, Puig aims high, fast-food players acknowledge the plight of consumers and Starbucks underperforms…

In Amazon Sales Surge as Company Focuses on AI (Wall Street Journal, Sarah E. Needleman) we see that Amazon.com posted record Q1 sales as its cloud computing business benefitted from the AI boom. Q1 revenues hit an all-time high, outperforming market expectations. Amazon Web Services (AWS) saw sales rise by over 17% over the period while its operating profit increased by almost 84%. * SO WHAT? * The company continues to spend big in AWS infrastructure and generative AI investment. It announced a new AI-powered shopping assistant called Rufus earlier this year that it says will enhance the shopping experience. Things certainly seem to be looking up for this company – even its ad business saw revenues grow by 24%!

In consumer goods news, Adidas Posts Better-Than-Expected Profit (Wall Street Journal, Nina Kienle) shows that Adidas posted net profit that came in above market expectations for Q1 thanks to improved inventory levels, lower sourcing costs and a better business mix. It saw growth in Europe, emerging markets and China – all of which helped to mitigate a fall in North America. It confirmed its outlook for the full year. Sounds pretty decent to me!

Then in Jean Paul Gaultier Owner Puig Brands Prices IPO at Upper End of Range (Wall Street Journal, Andrea Figueras) we see that Puig Brands has priced its IPO at the high end of its previously stated range ahead of its listing this Friday. This means that the company would be worth €13.92bn at a price of €24.50 a share. Puig owns brands including Jean Paul Gaultier, Carolina Herrera, Paco Rabanne and Nina Ricci. It is trying to raise up to €3bn from this IPO. * SO WHAT? * It seems that this IPO was multiple times oversubscribed across the price range, implying strong demand from shareholders. It’s really interesting to see the mixed fortunes in the luxury segment at the moment. Given the popularity of this offering it seems that investors are undeterred by wobbles from rivals like Kering.

In the restaurant segment, Food and drinks giants flag price pressure on low-income consumers (Financial Times, Madeleine Speed and Stephen Gandel) shows that McDonald’s, Coca-Cola, Nestlé and PepsiCo have all observed that many low-income consumers are increasingly unable to absorb price rises and are switching to cheaper options and/or cutting their consumption. * SO WHAT? * Overall, US consumers have proved to be relatively robust as more affluent customers are continuing to buy more premium goods. Banks are also starting to see growing economic pressure on lower-income consumers as delinquency rates rise and many have become more cautious.

Then in Starbucks Shares Plunge After Sales, Earnings Miss (Wall Street Journal, Heather Haddon) we see that the coffee shop giant reported a major slowdown in visits and underwhelming sales and profits over Q1. The chain’s execs are looking to speed up service in the morning hours to meet customer demand because they’ve noticed that they are losing people due to long wait-times and menu item unavailability. The company is also planning the launch of some new food and beverage options to tempt customers back, particularly in the afternoons. It added that operating challenges would take some time to overcome. * SO WHAT? * I really do like GOOD coffee and I have to say that I think that coffee these days – particularly at current prices – really is a luxury. If you had two coffees a day from places like Starbucks, you could EASILY spend about £10 a day (and this is without you buying anything to go with it), £50 a week or a whopping £200 a month! This is a significant amount (think how many groceries you could buy with that amount of money!!!) and as there ARE alternatives if you’re strapped for cash (perhaps taking the Nespresso option and putting it in a flask at home, for instance) so I would have thought that Starbucks will only start to do appreciably better when economies recover.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Musk fires his entire supercharger crew and the influx of car imports looks imminent…

Elon Musk fires Tesla’s entire supercharger team (Financial Times, Stephen Morris, Arjun Neil Alim and Peter Campbell) highlights some pretty drastic action as Musk just shut down the entire division (comprising of about 500 staff!) that runs the Supercharger business! Tesla’s Supercharger network is one of the largest charging networks in the world and has been one of the reasons why Tesla has kept its lead of rival carmakers for so long. * SO WHAT? * Although it’s clearly been a major success thus far, Musk’s action calls into question the future of the charging business. Musk announced last month that he’d be cutting headcount by over 10% while revenues declined. Supercharger sites under construction would be finished and “some” new locations would be added. This strikes me as very strange given that the network has been such a money-spinner for Tesla, particularly as more car companies have been signing up to use this network over the last few years (after years of it being exclusive to Tesla owners). Mind you, I have said for a long time that although charging networks will be “hot” for a number of years to come as EV take-up increases, I don’t think that they are

viable for the long term because I believe that improvements in battery technology will mean longer ranges and less need for charging. Putting in such a network is expensive and in the long run (maybe 10-20 years?) could be rendered unviable because of technological improvements. Maybe this is perhaps factoring into Musk’s thinking…

Then in A new wave of car imports set to hit terminals as new vehicle-carriers come on line (Financial Times, Robert Wright) we see that the CEO of Wallenius Wilhemsen, the world’s biggest car-carrier, says that an expected surge in the number of car-carrying ships will flood ports with vehicles, leading to congestion at terminals getting even worse. The recent influx of vehicle exports from China has caused bottlenecks at many European car import terminals. The number of car-carrying ships is expected to increase capacity by 42% but it is thought that terminal operators will not increase port capacity at the same rate – and this means that port congestion is only going to get worse. * SO WHAT? * Given the drop in demand for EVs worldwide, you do wonder whether too many ships have been bought. Also, it’s possible that rising tariffs could also mean that previous sales projections will prove to be over-optimistic. Only time will tell, but it’s not looking ideal at the moment.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

OpenAI and Microsoft get sued by eight newspapers, Huawei eats Apple’s lunch, Binance’s former chief gets four months and UK mortgage approvals boom…

In a quick scoot around some of today’s other interesting stories, Eight US newspapers sue OpenAI and Microsoft for copyright infringement (The Guardian) shows that The New York Daily News, Chicago Tribune, Denver Post and other newspapers are suing OpenAI and Microsoft, accusing the companies of scraping their copyrighted content without permission or payment. This follows on from the New York Times suing the same companies for the same reason back in December. * SO WHAT? * It’s interesting to see this given news of OpenAI’s recent agreement with the FT and you do wonder whether the company is picking and choosing the news sources that it REALLY needs to be nice to. Funnily enough, I think that if it picks DECENT newspapers unlike a lot of the rubbish that is out there, ChatGPT will actually get a lot better IMO…

Huawei steals market share from Apple despite Western sanctions (Daily Telegraph, James Titcomb) shows that Huawei’s profits have boomed more than six-fold whilst managing to take market share from Apple in the process! It reported a £2.1bn profit in Q1 – a 564% increase versus Q1 last year! * SO WHAT? * This performance happened in spite of US sanctions and was powered by the popularity of a new high-end smartphone it launched in August that was made largely with home-grown microchips. Huawei has also been developing advanced AI chips in order to catch up with Nvidia. This just goes to show that

sanctions only work for so long – in the long run I do not doubt that China will catch up and overtake western tech capabilities and the irony is that the west will have been the author of its own undoing! I think that this also highlights the need for US and European policy-makers to make sure they don’t clip the wings of tech innovation by over-regulating.

Elsewhere, Binance founder becomes world’s richest prisoner after receiving four-month sentence (Daily Telegraph, Matthew Field) shows that the founder of Binance, Changpeng Zhao, just became the world’s richest prisoner after being sentenced to four months in jail after pleading guilty of money laundering and breaking sanctions laws. Prosecutors had pushed for three years inside, but clearly CZ’s money bought him a decent team of lawyers 🤣! Apparently, once he gets out, he said he will develop education technology for underprivileged kids. In contrast, rival and former chief exec of FTX, Sam Bankman-Fried, was sentenced to 25 years in prison for a multi-billion dollar fraud. Binance faltered initially on the whole money laundering thing but has regained its place as the world’s most popular crypto exchange.

Back home, Mortgage approvals rise in busier housing market (The Times, Jack Barnett) cites stats from the Bank of England which showed that mortgage approvals rose in March to their highest level since the whole Truss-Kwarteng debacle in 2022. This was pretty much in line with what the market was expecting as a gradual reduction in mortgage rates since the beginning of the year has tempted buyers back to the market.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

There are times when I’ve gone through tunnels and idly wondered whether this would be possible – but have a look at this guy on a bike! This is absolutely amazing!

1. In MACRO, BUSINESS & CONSUMER TRENDS NEWS, China’s factory activity increases, German inflation remains stubbornly high, Scotland’s in a kerfuffle, ad jobs are hit by spending cuts, Getir goes back there and non-food shop prices fall
2. In TECH & MEDIA NEWS, Apple poaches Google staff, the FT signs a deal with OpenAI and Meta faces EU investigation
3. In RETAIL & LEISURE NEWS, Frasers Group hoovers up MatchesFashion assets, Vinted gets minted and McDonald’s doubles down on China
4. In MISCELLANEOUS NEWS, Tesla gets a China boost, Ford faces safety issues, house sales rise, rents hit new highs and WeWork comes up with a way to shut out Neumann
5. AND FINALLY, I bring you an example of making the moment count…

So China gets a boost, German inflation stays sticky, Scotland’s in a spin, ad jobs disappear, Getir goes back home and non-food shop prices slow down…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

In China’s high-tech output drives growth in factory activity (Financial Times, Joe Leahy and William Sandlund) we see that China’s factory activity has expanded for the second month in a row, according to the latest PMI, led by rising high-tech manufacturing output. * SO WHAT? * This is good news for an economy that is continuing to suffer from sluggish consumer demand and ongoing debt problems in the real estate sector. President Xi is due to do a tour of Europe next week where he will meet leaders including France’s Macron. This should be quite interesting as the EU is currently conducting a number of investigations into whether Chinese state subsidies have given companies and industries an unfair advantage versus European counterparts in a number of areas.

Then in Sticky German inflation curbs investors’ ECB rate cut expectations (Financial Times, Martin Arnold) we see that German inflation increased by more than expected in April thanks to strong food and energy prices. Consumer prices rose by 2.4% in the year to April, up from 2.3% a month earlier. Economists polled by Reuters had expected a flat reading. * SO WHAT? * Given that Germany is the biggest country in the EU, this unexpected rise in inflation will make it harder for the ECB to justify an interest rate cut as sceptics will say that this shows that inflation is yet to be tamed. I thought that the economist at ING, Carsten Brzeski, made a good point when he said that this rise in inflation was “a good reminder of how difficult the last mile of bringing inflation sustainably back to 2 per cent will be for the ECB”. Still, as things stand currently, the expectation is that the ECB will start to cut rates at their meeting in June.

Closer to home, Scotland’s business leaders cry out for a helping hand (The Times, Greig Cameron) shows that Scotland is now in a kerfuffle after the resignation yesterday of its First Minister Humza Yousaf. Business leaders are calling for the next person in the hot seat to prioritise the economy, cut taxes and make more efforts to attract inward investment. * SO WHAT? * If this isn’t a golden opportunity for Labour in Scotland I don’t know what is! After years of scandals and failure with the SNP you would have thought that Labour will be in pole position to benefit.

Then in Ad land faces job crunch as companies scale back spending (Daily Telegraph, Lucy Burton) we see that the number of job postings in advertising, marketing and PR dropped by 11% in March versus the previous month, according to jobs search engine Adzuna. * SO WHAT? * This is notable because it was the biggest fall of any sector over the same period as companies cut their marketing budgets. You’ll be sick of me saying this by now but the health of the advertising sector is often seen as a bellwether – and leading indicator – of the economy because ad spend is cut quickly in a downturn but is one of the first things to rebound in an upturn. Given the positive data we’ve been seeing recently and the overall uptick in confidence I would expect to see a bounce-back in the not-too-distant future.

Meanwhile, Delivery firm Getir to quit UK, Europe and US and focus on Turkey (The Guardian, Sarah Butler) shows that grocery courier Getir is going to shut down in the UK, Germany, the Netherlands and the US to go back home to concentrate on its domestic market in Turkey. * SO WHAT? * This just goes to show how competitive the marketplace is – and it also reflects a weakening demand for rapid home deliveries. I think that the whole idea of people HAVING to get their food order within 20 minutes was always a bit tenuous because I think that its need is questionable if you live in a metropolis but very handy if you live in the middle of nowhere. Unfortunately, you can only get this service in a metropolis because of where their warehouses are – and I think this is one of those things that is very much something that booms when the economy booms because people become cash-rich and time-poor. Most of Getir’s rivals have sold up or shut down and the ones that remain have really reined things in, culling rider numbers and selling off warehouses. Now Tesco has Whoosh, Sainsbury’s has Chop Chop and Ocado has Zoom. Of the “specialists”, only Gopuff (Bristol, Manchester, Liverpool, Newcastle, Birmingham, Leeds and Cardiff) and Zapp (London) remain. IMO even if they do incredibly well in an upturn they are ALWAYS going to be vulnerable in a downturn given that they are very much a luxury.

Then in consumer trends news, UK non-food shop prices fall in April, industry data shows (Financial Times, Valentina Romei) we see that prices of non-food items in UK supermarkets have actually dropped year-on-year for the first time since 2021, according to the latest figures from the BRC! Overall annual shop price inflation has fallen from +1.3% in March to +0.8% this month. However, non-food items came in at -0.6% in April versus +0.2% in March – the lowest reading since October 2021 and the first negative reading since December 2021. * SO WHAT? * This SHOULD be good news for household and reflects the trend of the OFFICIAL inflation reading, which includes services, energy and travel (the BRC figures don’t include these) which fell to a two-and-a-half year low of 3.2% in March.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Apple poaches Google staff, the FT signs a deal with OpenAI and Meta faces an EU investigation…

In Apple targets Google staff to build artificial intelligence team (Financial Times, Michael Acton) we see that Apple has poached a number of AI experts from Google, according to FT analysis of LinkedIn Profiles, and created a secret European lab in Zurich in order to take on rivals in developing new AI models and products. The Zurich lab (known as “Vision Lab”) evolved from the acquisition of two local AI start-ups – VR group FaceShift and image recognition company Fashwell. Maybe we’ll get more on AI developments at the company’s Worldwide Developers Conference in June but current thinking is that Apple’s emphasis in AI is to make advances such that everything can be self-contained on the phone rather than be powered by cloud services in data centres.

Then in The Financial Times and OpenAI strike content licensing deal (Financial Times, Madhumita Murgia) we see that the FT has struck a deal with OpenAI so that the latter can train AI models on the FT’s archived content. The deal will also enable ChatGPT to respond to questions with summaries from FT articles that then link back to FT.com. * SO WHAT? * This is the fifth deal of its type to be struck by OpenAI over the last year after agreements with Associated Press, Axel Springer, Le Monde and Prisa Media but financial terms have not been disclosed. This is good news for quality because an AI model is only as good as the content that is fed into it. As you all know, I am a massive fan of newspapers but the FT in particular – so this is a positive development. However, when I first saw this I thought “Oh no – will this kill Watson’s Daily?” but then actually I thought no it won’t! There are a couple of reasons for this – firstly, in writing Watson’s Daily, I’m trying to help you change the way you consume the news by actively thinking about it rather than letting it wash over you (which is what happens with most people – and as a result they forget loads).

Watson’s Daily gives you the facts and then tells you why the story is important. Over time, the hope is that you start thinking like that too – and that will help you enormously in terms of your knowledge – but it will also help you to think more proactively about the future implications of current events. ChatGPT can’t do this because it is just going to answer your questions. Secondly, there is a specific method in choosing the stories which involves a “scientific” approach and a more holistic view, which also encompasses the experience I’ve had as a stockbroker selling ideas to a very demanding client base over a number of years. The stories do not appear at random – although it may perhaps appear that way at times! You would have to put very specific prompts into ChatGPT to get this and even they might not work well enough. However, I DO think that ChatGPT will be brilliant for asking questions like “why are interest rates important” or getting clarification of other concepts. Better quality underlying training materials will improve answers. I also wonder how current the information is going to be and whether there will be a delay. When I typed in “Why are interest rates important?”, I got a pretty good answer. However, when I typed in “Why did Humza Yousaf resign?” the answer started with “As of my last update in January 2022, I can’t provide real-time information or access current news.” – but maybe this will change. I would have thought there will be some sort of delay otherwise there would be no point in buying the FT and the newspaper would be shooting itself in the foot!

Then in Facebook owner faces EU investigation over spread of Russian propaganda (Daily Telegraph, Matthew Field and James Titcomb) we see that Brussels is aiming to launch an investigation into Meta’s handling of Russian disinformation as we head towards European parliamentary elections, the UK general election and the US presidential election. * SO WHAT? * Policymakers have accused Putin of using social media as a “weapon of mass manipulation”. The European Commission is concerned that Meta hasn’t done enough to stop Putin’s disinformation campaign and is now investigating Meta for suspected breaches of the Digital Services Act which could lead to billions of euros in fines. Russian disinformation group “Doppelganger” emerged earlier this month as an entity that has been targeting French and German Facebook users.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Frasers Group buys up assets, Vinted gets minted and McDonald’s wants more China presence…

In retail news, Frasers Group snaps up assets from collapsed MatchesFashion (The Times, Isabella Fish) we see that Frasers has bought the brand and IP of MatchesFashion out of administration, for an undisclosed sum, that excludes its stock and employees. The stock will be sold off by administrator Teneo to raise some money for creditors. Frasers bought Matches from Apax Partners less than three months ago for just £52m but decided to place it into administration last month for continually missing targets. * SO WHAT? * There is an argument here that the future of luxury online marketplaces is bleak given that shoppers have been returning to physical outlets since the pandemic. Farfetch only just avoided collapse last year when it managed to secure a last-minute $500m rescue deal and Net-a-Porter is currently up for sale. I keep banging on about the importance of the retail experience – and when you go high end, experience becomes much more important.

In the more “normal” part of the market, Secondhand fashion seller Vinted moves into profit after 61% sales rise (The Guardian, Sarah Butler) highlights the online secondhand fashion

retailer Vinted’s 61% increase in sales, making it profitable for the first time! It has managed to do this via expansion into Denmark and Finland and into the higher-end used fashion website Rebelle, which it bought in 2022. * SO WHAT? * This sounds like a great idea and feeds into the whole concept of sustainability but then rivals Depop and RealReal reported losses last year. Then there’s the elephant in the room, eBay, which recently removed all seller fees for pre-owned fashion. I think this is going to be a tricky market in the short term but when economies perk up I’d suggest that people will return to “buying new”.

Then in McDonald’s Supersizes China Bet as Corporate America Pulls Back (Wall Street Journal, Newley Purnell) we see that the fast-food company is planning to almost double the number of its restaurants in China by the end of 2028 after recently dropping $1.8bn to buy back a bigger portion of its business there. China is currently McDonald’s fastest growing market and its second-largest in terms of store numbers. * SO WHAT? * You can understand why McDonald’s is keen to expand here, but I have to say that, given what happened with its business in Russia when Russia invaded Ukraine – and the evasive action it had to take thereafter – you would hope that it would have some kind of emergency plan in place for if China invaded Taiwan and how that might look.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Tesla gets a China boost, Ford faces issues, UK house sales rise, rents hit new highs and WeWork finds a way to cut Neumann out…

In a quick scoot around some of today’s other interesting stories, Tesla clears China’s data rules, paving way for self-driving cars (The Times, Jessica Newman) shows that Musk’s China trip has worked a treat as the China Association of Automobile Manufacturers said that the company’s Model 3 and Model Y cars, produced at Tesla’s Shanghai factory, had passed the requirements of China’s data security rules and Tesla also announced an agreement with Baidu, for its mapping licence for data collection on China’s public roads – all good news for Tesla’s self-driving tech. Staying with cars, Regulator Investigates Ford’s Hands-Free Driving System After Fatal Crashes (Wall Street Journal, Ryan Felton and Denny Jacob) shows that the US automotive safety regulator has launched an investigation into the safety of Ford Motor’s hands-free driving system after two recent crashes that resulted in three fatalities. Both incidents involved Ford Mustang Mach-E SUVs. This just goes to show it’s not just Tesla that gets done for this!

In real estate-related news, UK house sales rise 12% in April (Financial Times, Valentina Romei) cites the latest data from Zoopla which shows that lower mortgage rates are powering a market rebound, causing UK house sales to rise for the seventh month in a row in April! Meanwhile, Average rents in Great Britain climb to record high (The Guardian, Rupert Jones) cites Rightmove as saying that average rents have reached record levels both within and outside London with annual rental growth in Reading and Coventry running at almost 20% and those in London rising by 8.5%. This has been blamed on demand outstripping supply. Ouch.

Then in WeWork agrees restructuring deal that shuts out Adam Neumann’s comeback bid (Financial Times, Sujeet Indap) we see that the company’s senior creditors are about to take control of the reorganised WeWork after injecting $450m into the company, effectively bringing an end to founder Adam Neumann’s efforts to buy it back.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

Unfortunately, in life, we don’t always get a chance to shine. That’s why it’s important to grab every opportunity and run with it – take this guy for instance! Gotta love the joy here!

1. In AUTOMOTIVE NEWS,  European makers embrace Chinese tech, Musk makes a pit stop in China, the EU ponders car tariffs on Chinese car imports, luxury cars succumb to a weakness and car insurance rises
2. In CONSUMER TRENDS NEWS, the cost-of-living crisis hits leisure spending, job vacancies fall, business travel returns and Gucci suffers from fakery
3. In IPO AND M&A NEWS, CVC shares jump on debut and Darktrace gets taken out
4. In MISCELLANEOUS NEWS, new aeroplanes pile up, cheap solar boosts desalination and Pedro Sanchez makes a big decision
5. AND FINALLY, I bring you the right way to drink an espresso…

So Europeans learn from the Chinese, Musk pops over to China, the EU ponders car tariffs and car insurance rises…

Don’t miss our next news roundup for April, IT’S TODAY at 5pm with Jake Schogger of the Commercial Law Academy. HERE’S THE LINK TO REGISTER! See you there!

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

In ‘Everything has changed’: Foreign auto groups embrace local technology in China (Financial Times, Edward White) we see that more brands are announcing tie-ups with Chinese automotive manufacturers to access Chinese tech in the domestic market. Toyota last week announced a new partnership with Tencent on developing services for domestic customers, using the tech company’s AI and cloud-based software in its cars. Nissan announced a similar deal with Baidu that will use the latter’s AI tech in its vehicles. Meanwhile, Hyundai announced that it would develop batteries with China’s CATL, which announced a new product that would give EVs a 600km range from just a 10-minute charge! * SO WHAT? * Thus far we’ve been more used to VW announcing tie-ups with Chinese makers but these three deals show how non-Chinese manufacturers are rapidly coming to the conclusion that in order to crack the Chinese market, you need to offer advanced Chinese technologies. It also just goes to show how advanced Chinese cars are versus their more “established” counterparts. Foreign carmakers’ sales in China hit a record low market share of 40% in March, according to figures from the Shanghai consultancy Automobility.

Staying with China, Elon Musk makes surprise visit to China as Tesla battles electric car slowdown (Daily Telegraph, Matt Oliver) shows that Musk popped over to China for a surprise visit on the weekend to have a meeting with premier Li Qiang in a bid to deploy fully driverless car technology. It is thought that Musk is looking to get permission to move driving data collected by his company in China out of the country to be processed in the US, allowing Tesla to better train its “autopilot” driverless car software which would then hasten the possibility of the “full self-driving” version for use in China. * SO WHAT? * As things stand at the

moment, Chinese laws ban the transfer of domestic data out of China – but if his bid works, it would help Tesla enormously in China. If it works well there, you would have thought that this would then accelerate deployment in other markets. FWIW, I can’t see this happening. The authorities in China have already banned state employees from owning Teslas due to “security concerns” so I’d be amazed if they allowed data to be transferred outside China.

Meanwhile, EU would need 50% tariffs to curb imports of Chinese electric cars (Financial Times, Andy Bounds) cites analysis by researchers at Rhodium Group which says that although they expect the EC to impose import duties on Chinese EVs of 15-30% following an investigation that expected to conclude in the next few weeks, it actually needs to impose taxes of around 50% to stop the influx of cheap Chinese EVs. Chinese EV imports already attract a 10% tariff but when you consider that BYD’s Seal U sells for €20,500 in China and €42,000 in the EU, you can see why there’s still plenty of margin for the Chinese to play with. * SO WHAT? * Imports of EVs from China, if you include those from non-Chinese manufacturers who make cars there, jumped from $1.6bn in 2020 to $11.5bn in 2023 – during which time the market share of Chinese brands more than quadrupled to 8% last year! The Chinese say that import tariff hikes are protectionist but there’s been such a huge investment in factories that Chinese carmakers NEED to export in order to get a decent return. The US has already imposed tariffs and restrictions so the Chinese have been targeting the EU. The drama continues…

Chinese companies fuelling theft of luxury cars with cheap GPS-jammers (Daily Telegraph, Matt Oliver) is an interesting article which shows that cheap Chinese phone signal jammers are helping to push up the rate of vehicle thefts because they allow thieves to steal vehicles and then block signals from tracking devices making it harder for them to be located. Use of such devices is illegal but they can easily be bought online for around £24 upwards! Perhaps this is one of the reasons behind Average cost of UK car insurance rises by one-third in a year, analysis finds (The Guardian) where the latest figures from the Association of British Insurers (ABI) show that the average price of comprehensive motor insurance in the UK was 33% (or £157) higher in Q1 of this year than it was a year ago. Insurers continue to face rising costs as the average claim reached a record of £4,800 over the same period. * SO WHAT? * There was no mention here of the pricing of insurance for EVs, but given the costs associated of fixing them (due more to rules of storing them as opposed to the cost of parts etc) I would have thought their growing adoption will have a sizeable effect on future premiums.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

The cost-of-living hits leisure spending, job vacancies fall, business travel makes a comeback and Gucci suffers from fakes…

Britons avoid the pub as cost of living weigh on leisure spending (Financial Times, Eri Sugiura) cites research by Deloitte which shows that Britons are electing to spend less money in pubs and bars than at any time since the end of lockdown as the cost-of-living continues to weigh on many households. * SO WHAT? * Fortunately, consumers are generally feeling more optimistic about spending overall as another report published by Deloitte earlier this month showed that consumer confidence hit a two-year high in Q1 of 2024. This would perhaps suggest that there is pent-up demand underneath the surface that is waiting to be released! Maybe another government campaign (like the infamous “Eat out to help out” one!) could help to unlock this.

Meanwhile, Fewer job vacancies boost hopes for interest rate cuts (The Times, Mehreen Khan) cites the latest figures from Adzuna which show that job vacancies fell again last month – by 17% –  in further evidence of a cooling labour market. * SO WHAT? * The ratio of job vacancies to unemployed is just one metric that is monitored when trying to work out the tightness (or not) of the labour market. As things stand, this latest snapshot would suggest that the labour market is loosening, meaning that wage growth should slow down (competition for jobs is increasing), which in turn means that there is less impetus for the Bank of England to raise interest rates/keep interest rates steady.

In terms of how consumers are choosing to spend their money, Gucci offers a gaudy warning about the future of high fashion (The Times, Isabella Fish) shows that one of the reasons behind

Gucci’s recent weakness could be due to it getting an unwanted reputation for being one of the most globally counterfeited brands. It may also be suffering due to consumers preferring “quiet” luxury that isn’t as in-your-face as Gucci, something that consumers are finding more with Prada and Hermès. Gucci has also been hit by richer clientele preferring more exclusivity of other brands and “aspirational” consumers being squeezed more by economic pressures. Kering, Gucci’s parent, says that a turnaround is currently in progress and it will take time for new creative director Sabato de Sarno to have an impact.

In business trends news, Welcome Back, Road Warriors: Business Travel Returns (Wall Street Journal, Alison Sider and Chip Cutter) shows that business travel is climbing back towards pre-pandemic levels in the US. It seems that more people are wanting to meet in person again at trade events and conferences and airlines have reported sizeable increases in revenues from corporate accounts in Q1 with Delta, United and Alaska Air seeing revenues and sales rise by 14% and 22% respectively over the period led by tech companies and professional services firms. Hilton Worldwide Holdings remarked that the robust economy and strong employment have helped bolster business travel activity so the extent that demand from SMEs has already exceeded 2019 levels. * SO WHAT? * It certainly seems that business travel has bounced back in the US. In a particularly amusing irony, the CEO of Marriott International said that he couldn’t find enough space in the group’s hotels to hold a recent analyst meeting in New York, so had to hold it in Miami Beach instead! Although Zoom/Teams etc are great in many ways I still think that there’s a lot of room for in-person interaction.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

CVC booms and Darktrace gets taken out…

In CVC shares jump in trading debut after long-awaited IPO (Financial Times, Will Louch) we see that shares in the European PE firm CVC Capital Partners started trading at over €17 on Friday, which was above the €14 offer price. The €2bn offering was covered many times (i.e. demand for the shares was a lot more than the number of shares on offer). * SO WHAT?* OK, so the IPO was priced to sell but then it really does seem that momentum is continuing to build for IPOs! The proceeds from the IPO will help CVC’s growth and the fact that there are now shares will no doubt come in useful for attracting investor cash and talent.

Meanwhile, “another one bites the dust” in Darktrace exit snuffs out another light on the London market (Financial Times, Lex) as the UK’s only quoted cyber security name accepted a £4.3bn offer from US PE firm Thoma Bravo last week, taking it private and off the London Stock Exchange. * SO WHAT? * Thoma Bravo is one of the biggest software-focused investors in the world and should be well-placed to support Darktrace’s strategy, particularly in the US. It will also be able to act as a sort of sugar-daddy that can give it capital and M&A expertise to make other acquisitions in the cyber security space.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

New planes pile up, cheap solar helps desalination and Pedro Sanchez makes a big decision…

In a quick scoot around some of today’s other interesting stories, Record backlogs for new aircraft as deliveries plunge (The Times, Emma Taggart) shows that the backlog for new aircraft reached a record high in Q1 as the industry was hit by delivery delays and capacity problems, according to the latest data from ADS Group (ADS is the trade group that represents the British aerospace, defence, security and space sectors and has over 1,300 members). * SO WHAT? * Aircraft orders have been bouncing back after the nightmare of the pandemic but further demand will no doubt depend on major international events, including the outcomes of the US and UK elections as they could affect regulation.

Then in Cheap solar gives desalination its moment in the sun (Financial Times, Lex) we see that ever-cheaper solar power is helping to make energy-intensive technologies more affordable.

One example of this is desalination, which provides drinking water to some of the driest places in the world. * SO WHAT? * Around 97% of the world’s water is in seas and oceans, so there is plenty of “raw material” to tap into but the cost of turning seawater into potable water via older thermal plants that use heat to turn salt water into steam has been quite high. Newer desalination plants, which use a different process, require less energy and can be powered by cheap solar plants to the extent that this is now a more viable option for dry coastal areas in places like Egypt, Algeria and Morocco. Desalination is also cheaper than building infrastructure to transport water long distances. Companies like Saudi Arabia’s ACWA Power, Spain’s Acciona and France’s Veolia should be well-placed to take advantage of a desalination plant boom!

Then in Pedro Sánchez says he will remain in office as Spain’s prime minister (Financial Times, Barney Jopson) we see that Spain’s PM said that he is going to continue in office and not resign after all following recent revelations that his wife has been caught up in a corruption scandal. I have no doubt that things are going to get more heated from here!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

I showed you a video on cappuccino etiquette last month and I thought you might be interested in this – how to drink espresso properly! My fave coffee drink is a double espresso – but it’s got to be good because I limit myself to two coffees a day and I don’t want to waste one of those opportunities with rubbish 👍Watch out how you pronounce “espresso” though – some people might find mispronunciation somewhat grating 😮

1. In MACRO, MARKETS & MINING NEWS, Biden takes a hit, the Bank of Japan keeps interest rates unchanged, markets drop on US disappointment and we take a closer look at the BHP deal
2. In TECH NEWS, the US pushes for more China chip bans, Intel disappoints, Microsoft benefits from its AI push, Alphabet breaks $2tn, Musk’s xAI gets a Sequoia boost and LG Electronics’ profits rebound
3. In EV NEWS, Stellantis moans about EV quotas, global battery production rises (but not fast enough), South Korea warns of China’s EV supply chain dominance and Toyota puts big money into its Indiana facility
4. In MISCELLANEOUS NEWS, luxury is looking good as Hermès puts in a solid performance, WH Smith expects a busy summer, consumer confidence rises, Canary Wharf Group suffers and we look at the effect of the decision on non-compete clauses
5. AND FINALLY, I bring you an example of Finnish bus driving…

So markets react to US disappointment, the BoJ sticks and we take another look at the BHP deal…

Don’t miss our next news roundup for April, it’ll be on Monday 29th April at 5pm with Jake Schogger of the Commercial Law Academy. HERE’S THE LINK TO REGISTER! See you there!

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

In Joe Biden dealt blow as investors scale back bets on pre-election rate cut (Financial Times, Claire Jones, Martha Muir and Harriet Clarfelt) we see that a mood-boosting interest rate cut in the run-up to the November presidential election is looking increasingly out of reach as stronger-then-expected inflation figures (core PCE was up by 3.7% in Q1 versus market expectations of 3.4%) and underwhelming GDP growth numbers (up at an annualised rate of 1.6% in Q1 versus market expectations of 2.4%) prompted investors to place bets on a post-election interest rate cut. Stock markets fall after sharp US growth slowdown (The Guardian, Callum Jones) highlights investor disappointment in the US economy’s performance.

Elsewhere, Yen tumbles after Bank of Japan holds near-zero interest rates (Financial Times, Kana Inagaki and Leo Lewis) shows that the Yen dropped to its lowest level in 34 years after the Bank of Japan decided to keep interest rates unchanged at the 0-0.1% range despite pressure building recently for the central bank to raise interest rates further. There is now an expectation that the BoJ will increase rates in July.

Back in the UK, after recent excitement about the FTSE100 hitting a new high, A fresh FTSE high is not yet reason for UK enthusiasm (Financial Times, Lex) suggests that the index is currently benefitting from having more exposure to defensive and cyclical sectors than tech (e.g. energy, financials, industrial, materials and healthcare) as tech hype has a wobble. * SO WHAT? * There are some caps on potential upside at the moment, though. For instance, despite valuations of UK companies being low currently, presenting investors with relative bargains, UK equity fund outflow is still continuing – something that could prove to be a drag on further FTSE100 upside. That being said, there are some interesting potential catalysts waiting in the wings – more share buybacks (because of rising corporate confidence), private equity buying (particularly as they are now starting to be able to shift their portfolios around), overseas companies buying British ones (because of their low valuations) and the likely reform to pension and savings.

Following on from what I was saying yesterday about the potentially massive BHP takeover of rival Anglo American, How a global race to secure copper supplies sparked a £31bn bid for a FTSE giant (Daily Telegraph, Matt Oliver) takes a look at the lead-up to the deal and the desire that drives it (to get more exposure to copper) while South Africa could be a thorn in BHP’s side as it makes £31bn Anglo American bid (Financial Times, Monica Mark, Rob Rose, Joseph Cotterill and Lukanyo Mnyanda) shows that BHP is going to have to convince the South African state entity Public Investment Corporation (PIC) in order for the deal to go through (Anglo American rejected the bid officially, pushing for a higher price), particularly because the deal that BHP has tabled is dependent on selling off two of Anglo American’s most valuable South African assets (the Kumba Iron Ore and Amplats businesses) and BHP will have to dig deeper for Anglo American’s copper (Financial Times, Lex) suggests that the offer will have to be increased to get over the line.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

The US wants more chip-related restrictions, Intel disappoints, Microsoft and Alphabet boom, Musk gets a Sequoia-shaped uplift and LG Electronics rebounds…

US wants allies to cut chip-related China exports amid Huawei alarm (Financial Times, Demetri Sevastopulo, Kana Inagaki and Andy Bounds) shows that the Americans are at it again! They are now putting pressure on allies in Europe and Asia to put further restrictions on exports of chip-related tech and tools to China due to increasing concerns about Huawei’s development of advanced conductors. The US wants Japan, South Korea and the Netherlands to tighten existing restrictions – including banning engineers from their countries servicing chipmaking tools at advanced chip fabs in China. * SO WHAT? * This is all very well, but these companies are businesses, not charities. Will Washington pony up and buy more from affected companies to make up for any lost business? I guess that the various incentives in place at the moment (via funding related to the Chips Act and the Inflation Reduction Act) go some way towards that, but I doubt that this will fully satisfy.

Staying with chips, Intel disappoints investors as it struggles to catch up in AI race (The Times) highlights investor disappointment with Intel’s announcement of Q2 forecasts coming in below market expectations. This was thanks to weak demand for its traditional data centre and PC chips. * SO WHAT? * It seems that rising demand for Graphics Processing Units (GPUs) which are used in AI applications has actually reduced the demand for Central Processing Units (CPUs), which is what Intel specialises in. Intel NEEDS to jump on that AI hype train asap!

Talking of which, Microsoft’s push into AI is paying off (The Times, Katie Prescott) shows that Microsoft’s Q3 revenues came in above Wall Street estimates yesterday thanks to gains from its

exposure to AI via its cloud services and business software products. Meanwhile, Google owner worth more than $2 trillion after announcing first dividend (Daily Telegraph, James Titcomb and Matthew Field) highlights Alphabet’s share price boost after it announced that it would pay a dividend for the first time after reporting a chunky 15% increase in revenues for Q1. * SO WHAT? * It seems to me that Microsoft is playing AI very well with its exposure to OpenAI, but also with its cloud services and other initiatives like Copilot. Although Google is making the right moves, it does seem to be lagging on AI and the question remains for ALL AI players of how they are going to be monetising their hugely expensive efforts in this area.

Meanwhile, Sequoia commits to backing Elon Musk’s xAI start-up (Financial Times, George Hammond) shows that the VC firm – famed for its early-stage investments in companies like Google, YouTube and Apple – has committed to investing in Elon Musk’s AI start-up xAI. Musk has been on a six month charm offensive to get investors to finance xAI – hopefully to the tune of $6bn. * SO WHAT? * This latest endorsement will be useful in Musk’s quest to attract more investors. It is unclear as to how much Sequoia has put into the pot at this stage but Musk is going to need a lot of money very quickly in order to catch up with the likes of OpenAI, Anthropic, Microsoft and Google as the building and operating of LLMs sucks up a lot of money. Musk co-founded OpenAI in 2015 with Sam Altman but Musk left OpenAI’s board in 2018 due to differences related to the direction of the company – so Musk does have form with AI.

Elsewhere, LG Electronics Posts Profit Turnaround on Steady Revenue Growth (Wall Street Journal, Kwanwoo Jun) shows that the South Korean company managed to report a bounce-back in profits over Q1 in its home-appliance and vehicle component business. It also provided further reason for cheer as it now expects a gradual recovery in global demand for consumer electronics as the year progresses!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Stellantis complains, global battery production grows, South Korea sounds a warning and Toyota pours more money into the US…

In Stellantis boss slams ‘terrible’ UK electric vehicle policy (Financial Times, Peter Campbell) we see that the CEO of Stellantis complained about the UK’s existing quota regime which forces manufacturers to raise EV sales targets on an annual basis. He says that they are unrealistic due to being “double the natural demand of the market”. If this practice continues, this would imply that carmakers would have to sell vehicles at a loss to avoid fines. The CEO suggested that one way of making the target easier to hit was to allow electric van sales and EV exports to count towards the targets, arguing that this would not cost the taxpayer anything (unlike subsidies, for instance). EV sales targets are expressed as a percentage of overall sales – so this year, 22% of their sales have to be EVs, next year this rises to 28% and then it goes all the way up to 80% by 2030! * SO WHAT? * The current scheme is designed to force the market away from petrol and diesel cars towards battery-powered ones by 2035 – but the main problem is that EV demand is now falling just as sales targets are tightening. I would not be surprised to see a relaxing of the rules if things carry on as they are.

In battery news, Global battery rollout doubled last year – but needs to be six times faster, says IEA (The Guardian, Jillian Ambrose) highlights the latest findings in a report by the IEA which shows that new batteries totalling 42 gigawatts were plugged into electricity systems around the world last year – more

than doubling total capacity versus the previous year. However, it also warned that huge amounts of energy storage would be needed globally by the end of the decade to ensure smooth clean energy transition. Battery production costs still have a way to fall…meanwhile, China’s EV supply chain dominance risks ‘collapse’ of US subsidies, warns South Korea (Financial Times, Christian Davies and Song Jung-a) shows that China’s control of over 99% of the global market for battery-grade graphite and 69% of the market for synthetic graphite for use in battery anodes will make it virtually impossible for any EV makers to qualify for subsidies from the Inflation Reduction Act, which aims to completely cut out any Chinese parts from the US EV supply chain. South Korea is expressing concerns about this ahead of the restrictions coming into force on January 1st 2025 – but is also mindful of the effect of subsequent administrations changing the rules again, which would present huge difficulties. They are pushing for exemptions to the “foreign entities of concern” (aka FEOC) rules and/or some kind of transition period. * SO WHAT? * Surely the Americans are going to have to bend a bit for this otherwise the whole thing just become impractical. However, this does show just how dominant the Chinese have been allowed to become…

Then in Toyota Makes $1.4 Billion EV Investment in Indiana Facility (Wall Street Journal, Sabela Ojea) we see that the Japanese car making giant announced a big infrastructure investment in its Indiana plant, deepening its electrification efforts in the US. * SO WHAT? * Since 2021, Toyota has poured $18.6bn into its US manufacturing operations to advance its electrification efforts. Toyota has been a noticeable laggard in EVs (although it has been a trailblazer in hybrids), so I guess this is better late than never!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Luxury soldiers on, WH Smith expects, consumer confidence rises, Canary Wharf Group suffers and the market digests the decision on non-competes…

In a quick scoot around some of today’s other interesting stories, Hermes Posts Sales Growth Across All Markets (Wall Street Journal, Andrea Figueras) shows that Hermès managed to grow sales across all of its regions in Q1, beating analysts’ forecasts. This luxury Armageddon leaves investors spoilt for choice (Financial Times, Lex) highlights a few of the reasons for a divergence in performance of luxury brands. Kering, for instance, is in a bit of a transition period with its main brand Gucci (so it’s a bit of an anomaly) while Hermes’ exposure to the ultra-rich is proving to be particularly beneficial. After a few hugely profitable years, it seems that average growth rates for the luxury industry are returning to longer-term norms.

Meanwhile, Consumer confidence is recovering as living standards improve (The Times, Jack Barnett) cites the latest GfK survey which shows that falling inflation and tax cuts have helped to boost consumer confidence this month. In retail, WH Smith looks ahead to busy summer (The Times, Jessica Newman) shows that although the company’s travel business (shops at airports, railway stations and hospitals) boosted half year sales, investors had hoped for more. Still, the company expects a strong performance over summer.

In real estate news, Working from home wipes almost £1bn off value of Canary Wharf offices (Daily Telegraph, Lucy Burton) shows that the value of Canary Wharf Group (CWG) offices fell by almost £1bn over the last year as the district lost some of its lustre and the spectre of WFH continues to loom large (although not as large as it did before). While the City of London continues with its efforts to attract companies to new, smaller offices in the Square Mile, CWG is trying to adapt by converting some buildings into lab space and make itself into a life sciences hub.

In employment news, Ban on non-compete agreements sends shockwave across Wall Street (Financial Times, Amelia Pollard, Brooke Masters and Joshua Franklin) shows that the FTC’s recent decision to ban non-compete clauses in contracts has resulted in Wall Street businesses scrambling to restructure contracts and find other ways to tie-in expensive key personnel! * SO WHAT? * Such contracts have been commonplace at big banks, brokers, asset managers and hedge funds for years so the ruling that will effectively invalidate existing contracts for most employees and all new contracts starting in August has caused a bit of panic! This is going to affect “gardening leave” and deferred bonuses (employers won’t be able to cancel them) – and at the moment it looks like it will free affected employees to go to rivals, prompting an exodus to the best employers! This could also lead to higher compliance costs and a sudden rise in lawsuits between employers and leavers. Will this change lead to more humane working conditions??

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

There’s bus driving and then there’s Finnish bus driving! You’ll see what I mean when you see this 😮 It looks like a lot of fun (for the driver – perhaps less so for any passengers)!

1. In MACRO, MINING & ENERGY NEWS, Spain’s PM considers resignation, Indonesia raises interest rates, BHP suggests a takeover of Anglo American and the UK generates a record low proportion of fossil fuel-generated electricity
2. In TECH NEWS, China searches for its own ChatGPT, the EU investigates Nuctech, the CMA looks into Big Tech’s AI deals, call centre days look numbered, Meta’s shares fall on AI spending concerns and IBM buys HashiCorp
3. In LUXURY & CONSUMER GOODS NEWS, Moncler and Prada put in decent performances, Burberry looks increasingly like a takeover target and Reckitt Benckiser shines
4. In MISCELLANEOUS NEWS, Suez trade drops sharply, car production falls, Lloyds Bank takes a hit to profits and Boeing burns through cash
5. AND FINALLY, I bring you some very clever videos…

So the Spanish PM considers his future, Indonesia hikes its interest rates, BHP suggests a mega-deal and UK energy uses less fossil fuel…

Don’t miss our next news roundup for April, it’ll be on Monday 29th April at 5pm with Jake Schogger of the Commercial Law Academy. HERE’S THE LINK TO REGISTER! See you there!

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

In Spanish PM considers quitting as wife faces corruption investigation (Financial Times, Barney Jopson) we see that Pedro Sánchez said yesterday that he’s thinking about resigning after a judge launched a preliminary investigation into his wife on accusations of corruption. The PM’s cancelling all public duties for the next few days and will make a decision on his future on April 29th. The allegations state that Sánchez’s wife received favours from private businesses that won government contracts and got public funds. * SO WHAT? * This sounds very serious. It seems to me that Sánchez is the glue that’s just about holding together a dodgy coalition – and if he goes, everything is up in the air, potentially clearing a path for the far-right to exert their influence. More instability will not be good from one of the EU’s biggest economies.

Then in Indonesia raises interest rates to support sliding rupiah (Financial Times, A. Anantha Lakshmi) we see that Indonesia’s central bank has just raised its benchmark interest rate in order to bolster its currency, which has hit four-year lows against the dollar. It increased its seven-day reverse repo rate by 0.25% to

6.25%, which is its highest level since 2016. The market was expecting the bank to leave interest rates unchanged. * SO WHAT? * It’s interesting to see the effect that US rate expectations have in other countries. If Fed chief Powell decides to INCREASE interest rates it could cause quite the kerfuffle around the world as the dollar would likely strengthen – and as many countries have dollar-denominated debt, the price of servicing their debt will increase.

In mining news, BHP proposes takeover of Anglo American in mining mega-deal (Financial Times, Harry Dempsey, Arash Massoudi, James Fontanella-Khan, Ivan Levingston and Nic Fildes) shows that the world’s biggest mining company is looking to buy Anglo-American in an all-stock deal that could become one of the industry’s biggest transaction for years! The rationale behind this is for BHP to get more exposure to copper due to the expectation that demand for it will skyrocket in the transition away from fossil fuels. Anglo American owns some of the most sought-after copper mines in Peru and Chile but its poorly-performing diamond division has been a drag on its overall performance. Anglo’s board is considering the proposal but I’m sure that this deal will get the full treatment from the competition regulators if it moves forward any further although BHP was suggesting that the deal would require this disposal of two Anglo American units – Anglo American Platinum (aka “Amplats”) and Kumba Iron Ore. We’ll just have to wait and see.

Then in Share of electricity generated by fossil fuels in Great Britain drops to record low (The Guardian, Jillian Ambrose) we see that the proportion of electricity generated in GB by burning fossil fuels fell to a record low of just 2.4% earlier this month, according to analysis of data from National Grid’s electricity system operator (ESO). The ESO is going to commence the “groundbreaking and world-leading” step of running a zero-carbon electricity grid for GB in short bursts next year. * SO WHAT? * This is pretty amazing considering that 15 years ago, gas and coal power plants made up 75% of the electricity mix, with renewables accounting for just 2% – versus renewables accounting for 40% last year!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

China searches for its ChatGPT, Nuctech gets scrutinised, Big Tech AI deals attract CMA attention, call centre days look numbered, Meta takes flak for AI spend and IBM buys HashiCorp…

In AI news today, China’s search for an answer to ChatGPT is just beginning (Financial Times, Lex) shows that the search for China’s supreme chatbot is gathering steam. SenseTime has been involved in this area for years and it continues to come out with new upgrades (its latest version, SenseNova 5.0, was unveiled in Shanghai on Tuesday and the company’s share price boomed by 30% the next day!). SenseTime is ahead of rivals not only because it was among the earliest to get government approval for general public use but because it already has ten years’ worth of R&D patents in AI. * SO WHAT? * SenseTime is pretty interesting as its share price is down by a whopping 90% since its 2022 peak and on some valuation metrics it is very cheap versus global peers. It is probably trading at this discount because of the ongoing US-China tensions (SenseTime was blacklisted by the US in 2019, leading to a ban on investment in the company which also scuppered investment from other countries) but it can rely on a diversified revenue base to power its development. There are obviously other Chinese AI companies trying to be the nation’s ChatGPT but this one seems to have a pretty good base.

Meanwhile, EU conducts ‘dawn raid’ on Chinese security equipment supplier (Financial Times, Henry Foy, Joe Leahy and Andy Bounds) shows that Brussels raised the Warsaw and Rotterdam offices of Chinese security equipment supplier Nuctech under the auspices of new anti-foreign subsidy powers. The company, which makes baggage security scanners, is being investigated for potentially benefitting from unfair trading practices. From state contracts to a dawn raid: how Europe turned on China’s Nuctech (Financial Times, Laura Dubois, Alice Hancock, Henry Foy and Joe Leahy) highlights just how big a deal this dawn raid is given that it has won over 160 public tenders in Europe over the past ten years despite constant warnings about risks to national security for its products. One of the potential security risks is Nuctech potentially being able to access internal customs systems linking scanner images with shipment data, allowing them to get a complete picture of movement into and out of Belgium, for instance. * SO WHAT? * This is the first time that Brussels has used these new anti-foreign subsidy rules in anger and, needless to say, it hasn’t gone down well with China’s commerce industry, who say that the raid was motivated by protectionism. It’ll be interesting to see how China will retaliate as I suspect this won’t be the last such raid on a Chinese tech company…

Meanwhile, Regulator eyes tech giants’ deals with AI firms (The Times, Katie Prescott) shows that the UK’s CMA is currently collecting views on whether partnerships between Microsoft and Mistral and Amazon and Anthropic in addition to Microsoft’s hiring

of key people from Inflecion AI should count as being mergers or being anti-competitive. It has already launched an investigation into whether Microsoft’s partnership with OpenAI could be considered a merger by stealth! * SO WHAT? * TBH, I think they are right to do this because, let’s face it, a lot of these partnerships do look like take-overs in everything but name. However, there is a fine line to be walked here because if the UK wants to be seen as the place where AI deals can be done – unlike the increasingly stringent EU – investigations like this may be problematic and push innovation elsewhere.

I thought that AI could kill call centres, says Tata Consultancy Services boss (Financial Times, Benjamin Parkin and Chris Kay) is an interesting article which cites the CEO of Indian IT company Tata Consultancy Services as saying that he thought that AI could replace call centres in as short a timeframe as one year! * SO WHAT? * I really believe that this will happen! Klarna has already said that its AI=powered chatbot can do the work of 700 full-time agents, which I also pointed out at the time as sounding the death knell for call centres. This could have a devastating effect in countries including India and the Philippines, who have benefited hugely from a boom in call centres and outsourcing. I think that retraining is of paramount importance here in order to avoid a spike in unemployment. It will, however, be good news for companies who can reduce outsourcing costs significantly because of AI.

In Mark Zuckerberg defends Meta’s AI spending spree as shares tumble (Financial Times, Hannah Murphy), we see that Zuck has sparked concerns among investors about how much money he will need to spend on turning Meta into “the leading AI company in the world”. Also, he said that operating losses for the Reality Labs division (Meta’s VR and AR division) would “increase meaningfully” year-on-year. His remarks sent shares plummeting by over 15% in after-hours trading yesterday and Meta proves AI hype has its limits (Financial Times, Lex) shows that slowing revenues and rising costs are turning sentiment on the company and trying investor patience. * SO WHAT? * I think that the problem is, much as it is with Zuck’s ambitions for the metaverse, that development is going to suck up a ton of money and there’s no timeline as to when that investment is going to turn into meaningful revenue streams. The areas which it wants to do business are dominated with rivals that have deep pockets so I guess if you want to play at the table, you have to pay the price – something that investors seem to be getting increasingly uncomfortable with.

Then in IBM to Buy HashiCorp in $6.4 Billion Deal (Wall Street Journal, Ben Glickman) we see that IBM has put forward an offer to buy cloud software company HashiCorp for $35 per share in cash, giving them access to the company’s 4,400 clients. The deal is still subject to regulatory approval and is expected to close by the end of the year. It looks like yet another chunky deal is in the bag! More good news for all those in the M&A food chain…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Moncler and Prada do well, Burberry doesn’t and Reckitt Benckiser shines…

In Moncler Sales Beat Forecasts Amid Solid Demand in China (Wall Street Journal, Mauro Orru) we see that sales came in above expectations for Q1 thanks to decent performance in China – which I’d say is pretty impressive given that some rivals (including LVMH and Kering) are seeing weakness there! Mind you, Prada Posts Higher Revenue Despite Luxury Slowdown (Wall Street Journal, Andrea Figueras) highlights another success story as the Italian luxury fashion giant posted an increase in revenues for Q1 despite a tricky market. Retail sales grew across all regions, but particularly in Japan. Meanwhile, Burberry ‘a takeover target’ after share price plunge (Daily Telegraph, Lucy Burton) shows that Burberry’s continued weakness (its share price has fallen by almost 20% since the beginning of this year) is making it look increasingly like a potential takeover target, particularly as M&A activity appears to be picking up. It is one of the worst performers on the FTSE, is a rarity in the luxury industry as it

operates as a single brand rather than as part of a bigger group and is looking weak just as consolidation is taking place (Tapestry – which owns Coach and Kate Spade etc – is looking to buy Capri Holdings – which owns Jimmy Choo, Michael Kors and Versace). Investment banks will no doubt be circling!

Then in consumer goods news, Reckitt shares rally on better-than-expected sales (The Times, Alex Ralph) we see that the company put in a strong performance as sales and volumes came in above market expectations as sales growth in its hygiene and health business offset weakness in its nutrition business. * SO WHAT? * This all sounds positive but there is a cloud hanging over the company in the form of litigation risk in the US. There are fears that it could be exposed to multi-billion dollar liabilities from lawsuits in the US over its Enfamil premature baby formula after an Illinois jury awarded $60m in damages to a mother who said her premature baby died after consuming the product. Reckitt rejected the verdict and has moved to appeal for now.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

Suez trade drops, car production falls, Lloyds bank takes a hit and Boeing burns cash…

In a quick scoot around some of today’s other interesting stories, Suez trade plunges after war forces ships to reroute (The Times, Jack Barnett) cites ONS data which shows that shipping volumes, somewhat unsurprisingly, fell by 59% over the year to April thanks to conflict in the Middle East. According to supply chain consultants Drewry, average container prices have shot up from $1,390 in early October to $2,719 in April – although that is down from a recent peak of almost $4,000 in January. * SO WHAT? * It’s interesting to see all this in black and white but overall it seems that businesses have generally bounced back. Delivery times have obviously increased but they haven’t increased by all that much and are starting to fall.

Car production drops by a quarter as factories change gear (The Times, Robert Lea) shows that car production fell by 27% last month, bringing an end to the six month winning streak of growing

output. The latest figures from the SMMT reflect the adjustment to new electric models. Over a third of UK vehicle production is now made up of EVs.

Elsewhere, Lloyds profits hit by rush of homeowners refinancing mortgages (Daily Telegraph, Michael Bow) shows that Lloyds Bank profits have taken a knock by an influx of homeowners refinancing their mortgages as households wanted to take advantage of falling rates. Higher levels of mortgage refinancing in Q1 resulted in more turnover in its mortgage business, hitting its profitability.

Then in Turbulent year sees Boeing burn through $2m an hour (The Times, Robert Lea) we see the costs of Boeing 737 Max turbulence in Q1 as the company burned through $3.9bn. It is trying to address quality issues but in the meantime, deliveries are falling – which is hitting income. I guess that the litany of disasters means that this loss isn’t exactly surprising! The drama continues…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

When I saw this video, it reminded me of a classic Honda ad – which then reminded me of this OK Go! video! These videos are so clever and must have taken a huge amount of time to plan and execute! Respect!

1. In MACRO & COMMODITIES NEWS, the US Senate passes a $95bn aid bill, the Bank of England’s chief economist sounds cautious, UK borrowing is higher than expectations, we look at UK election timing options, Ithaca buys Eni assets, De Beers’ output falls, farmers expand cocoa planting and Tianqi Lithium warns of losses
2. In EMPLOYMENT, CONSUMER & RETAIL NEWS, the US regulator bans non-compete clauses, UK grocery prices slow down, Asda sees a fall in sales, JD Sports expands in the US, ABF gets upbeat and Kering gets downbeat
3. In CAR NEWS, GM raises its profit outlook and Tesla doubles down on affordable EV
4. In MISCELLANEOUS NEWS, Congress approves a ban on TikTok, Spotify’s profits boom, Mattel falls short and Sunak champions investing in defence
5. AND FINALLY, I bring you a really expensive way to chop carrots…

So the US approves funding, the Bank of England’s chief economist gets cautious, UK borrowing exceeds expecations, we look at UK election timing, Ithaca buys Eni assets, diamonds have a wobble, farmers turn to cocoa and Tianqi Lithium warns of losses…

Don’t miss our next news roundup for April, it’ll be on Monday 29th April at 5pm with Jake Schogger of the Commercial Law Academy. HERE’S THE LINK TO REGISTER! See you there!

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

In US Senate passes $95bn bill including aid for Ukraine (Financial Times, James Politi) we see that the US Senate has finally approved a bill for aid to Ukraine, Israel and the Indo-Pacific region, in a boost for Biden. It seems that the bill got broad support with 79 senators voting for and 18 against.

Back in the UK, Bank of England’s chief economist dampens hopes of summer interest rates cut (Phillip Inman) shows that Huw Pill is warning against cutting interest rates too early to make sure that inflation is well and truly out of the picture, putting himself at odds with the tone of recent utterings of the governor of the Bank of England. Markets responded to this by pushing back expectations of the first interest rate cut from August to September. Meanwhile, UK borrowing overshoot raises doubts about tax cuts (The Times, Jack Barnett) cites the latest ONS data which shows that the government borrowed £6.6bn more than expected last year which means that chancellor Jeremy Hunt’s hopes for dishing out tax cuts in the run-up to the election less likely or unlikely (btw, this was a story from yesterday but it came out while I was writing – so didn’t make it into the final edition of Watson’s Daily!). Talking of elections, Summer or autumn? Rishi Sunak’s election date dilemma (Financial Times, George Parker, Delphine Strauss and Jim Pickard) takes an interesting look at the case for calling for an election in the summer and the case for holding one in the winter! Technically speaking, though, the very latest possible date for a general election is January 28th 2025 but most people expected that the general election will happen in the summer or the winter. A summer election could occur in the event that the Conservatives get battered in the May 2nd local elections because it would give Sunak detractors less time to get their act together. If they go better than expected, he could decide to lean into the momentum. Many believe that an autumn election is more likely, however, because the Conservatives are way behind on the polls right now and that waiting until the end of the year will increase the likelihood of a combination of falling interest rates and rising spending power making the electorate feel better about themselves and the economy. Sunak could also used the Conservative party conference in Birmingham in early October as a way to rally the troops.

Meanwhile, in commodities news, Ithaca Energy agrees £750mn deal for most of Eni’s UK oil and gasfields (Financial Times, Rachel Millard) shows that the London-listed company has agreed to buy almost all of Eni’s UK oil and gasfields that will transform it into one of the North Sea’s biggest producers, which could more than double its existing output. Eni will keep a 38% stake in the enlarged group and the deal is expected to complete in Q3, subject to regulatory approvals. * SO WHAT? * Ithaca has grown quickly over the last two years, buying North Sea rival Siccar Point in 2022. This deal will boost its capabilities significantly and having Eni as a major shareholder will bolster its financial strength and technical capabilities.

Then in De Beers’ diamond output drops after slow recovery triggers production cut (Financial Times, Harry Dempsey) we see that output for the diamond business of Anglo American dropped by a whopping 23% in Q1. The twin impacts of a reining in of luxury spending and the increasing prevalence of lab-grown diamonds combined to slow a recovery in demand. * SO WHAT? * Although De Beers said that it had seen signs of recovery in Q1, Diamond market shows serious cracks from man-made stones (Financial Times, Lex) suggest that the impact of cheaper laboratory grown diamonds (LGD) is going to be long-lasting – in 2023, synthetic diamonds accounted for more than 10% of the global diamond jewellery market. If you couple that with the fact that there is currently an oversupply of gems, the prospects for diamond prices aren’t great.

Elsewhere, Latin American cocoa farmers rush to expand planting as prices spike (Financial Times, Lex) shows that booming prices for cocoa are prompting farmers in Ecuador, Brazil, Peru and Colombia to rush to buy seedlings and increase the acreage for cocoa in their crop. New York cocoa futures hit a record $12,191 per tonne last week – up from $3,000 just a year ago – so you can see why the farmers are keen! * SO WHAT? * Interestingly, Ghana and the Ivory Coast supply two-thirds of the world’s beans but in both places, governments have fixed prices to insulate against volatility. Unfortunately, although this protects them from a slide in prices, it means that they can’t participate in the upside – and that means that they are not incentivised to invest in their plantations and improve yields. On the other hand, producers in Latin America don’t have such an arrangement and obviously want to adapt to what’s going on in the market. For them, more than 80% of the price of the crop goes to the producer directly! The danger, though, is that by the time the new plants bear fruit, the prices may have come back down again.

In Tianqi Lithium Shares Dive After Warning of Wider Losses (Wall Street Journal, Jiahui Huang) we see that Tianqi Lithium shares dropped by a whopping 19% in early trade on Wednesday in Hong Kong and by 10% in Shenzhen, the daily limit, after the Chinese lithium producer warned about widening losses caused by weak product prices and a tax dispute in Chile. * SO WHAT? * Prices for lithium carbonate, a key raw material for EV batteries, have fallen by around 60% since their peak in July last year. The main reason for this has been falling demand for EVs in China. Ouch.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

The US regulator bans non-competes, UK grocery prices slow down, Asda loses ground, JD Sports expands in the US, ABF is upbeat while Kering goes downbeat…

In employment trends news, Employee non-compete agreements barred by US regulator (Financial Times, Stefania Palma and Amelia Pollard) shows that the US FTC has voted to ban non-compete agreements in order to avoid wage suppression and promote innovation. Non-compete agreements limit employees’ ability to quit their job and go to a rival employer or set up a rival business. The FTC said that around 30m workers have such restrictive contracts and that they are responsible for putting a lid on wages and limit new ideas. In response, the US Chamber of Commerce announced that it would sue the regulator saying that it did not have the constitutional and statutory authority to enact the rule, accusing the FTC of a “blatant power grab”. * SO WHAT? * I think this could get pretty nasty. I guess that there are some industries and businesses (like AI, for instance) where you can understand the need for non-competes. Losing someone to a rival could be extremely painful and potentially devastating for a business (especially if it’s small). However, there are plenty of other areas where non-competes just smack of desperation and sheer spite. I’m sure there will be many watching with interest as this unfolds, but although I would be surprised to see ALL non-competes banned, I can see the ban being implemented for SOME jobs and industries in order to stop employers abusing their position.

In consumer news, Grocery price rises in Great Britain slow as cost of toilet rolls, butter and milk falls (The Guardian, Julia Kollewe) highlights good news for shoppers as grocery price inflation slowed down to 3.2%, its lowest level since November 2021. This is the 14th drop in a row and is notably lower then the annual rate of 4.5% this time last month, according to retail market research group Kantar. A combination of spending on promotional items along with falling prices of various categories helped take the heat out.

In retail news, Asda only Big Four supermarket to suffer fall in sales (Daily Telegraph, Matthew Field) shows that Asda was the only supermarket in the “Big Four” to see a drop in grocery sales over the last quarter, according to stats from Kantar. There are suggestions that Asda were unable to offer customers the best prices given the massive debts the Issa brothers incurred in acquiring Asda back in 2021, but this has been denied. Meanwhile, the supermarket has embarked on a strategy where it has been price matching products with Aldi and Lidl since January – but it appears that this is not working as yet. * SO WHAT? * I have to say that I think price matching is a lazy strategy. It is also indirectly advertising rivals as being a cheaper place to shop whilst also displaying that the company has zero imagination. Maybe the Issa brothers are so distracted by the company’s finances that they are not spending time thinking about strategy and a company identity. I’ve said before that I think that Asda USED to be a supermarket you’d go to if you wanted competitive prices. It has since been eclipsed in this area by Aldi and Lidl –

and done nothing about it. IMO, it can still reclaim this “bargain” reputation but it’s going to have to come up with something to differentiate it from its rivals. Aldi and Lidl have their middle aisles and Lidl has the in-store bakery. What about Asda?? Could they bring back services that other supermarkets have been abandoning (in-house bakeries, fishmongers etc) perhaps? What about exclusive in-store partnerships with other brands? I think a proper roadmap is needed here otherwise Asda could sink into oblivion.

Meanwhile, JD Sports strikes $1.1bn deal to expand into US (Daily Telegraph, Michael Bow) shows that the footwear and athleisure retailer has managed to buy Alabama-based chain Hibbetts, which stocks basketball shoes and sneakers from brands like Nike and Adidas. * SO WHAT? * This is particularly interesting because it makes a change from American companies buying up British assets but it also furthers the retailer’s push into the US market. It will be the biggest takeover JD Sports has ever done and double the number of its US stores at a stroke! Given that the US is the world’s biggest and most profitable market for sportswear, valued at $120bn versus the UK market being worth $10bn, you can see the attractions!

In Primark owner AB Foods predicts ‘significant growth’ in profits (The Times, Isabella Fish) we see that the company is expecting “significant growth” for full year profits and cash generation, which is a more positive assessment than when it last pronounced its expectations back in January. The group – which in addition to running over 400 Primark stores is a leading producer of cane sugar and sugar beet – has seen its margins dented over the last few years thanks to rising costs but it seems that things are now calming down to more normal levels. Primark put in a particularly strong performance thanks to brisk demand for performance wear, leisure and knitwear in addition to a collection with Rita Ora. It continues to commit to the expansion of click-and-collect and not to home delivery!

At the luxury end of the market, Shares in Gucci owner Kering sink after profit warning (Financial Times, Adrienne Klasa) shows that shares in the French luxury group dropped by over 8% in response to it stating that it experienced a chunky fall in profits in the first half of 2024 as sales at its main brand Gucci fell. * SO WHAT? * This latest bit of bad news came shortly after the company issued a profit warning last month due to weaker sales, notable given the fact that rivals LVMH and Hermès have been experiencing decent growth and rising margins. Gucci is the main driver here as it makes up about half of group sales and about two-thirds of the profits and is in the midst of a turnaround with a new leadership. There are early signs of an improvement in performance thanks to new designer Sabato de Sarno but that has yet to gain full traction. Until Gucci recovers, the pain will continue. The company expects to see another weak quarter before things start to recover in the second half.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

GM does well, Tesla commits to lower-cost cars and Nissan commits to solid state…

In GM Raises Profit Outlook for 2024 After Strong First-Quarter Earnings (Wall Street Journal, Mike Colias) we see that General Motors felt confident enough to upgrade its profit outlook for the year as it benefited from rising demand for petrol-powered pickup trucks and SUVs whilst reining in investment in things like robotaxis. It unveiled a 24% increase in Q1 profit as a result! Sales were strong in its domestic market – and they more than offset considerable weakness overseas. China remains particularly problematic, which isn’t great as it is the biggest car market in the world.

After all the recent negative newsflow, all eyes were on Tesla and Tesla Accelerates Rollout of More-Affordable EVs as Profit Drops Sharply (Wall Street Journal, Rebecca Elliott) highlights the EV maker’s commitment to churning out less expensive vehicles. Musk said that Tesla was accelerating the launch of new models – including the much-hyped more affordable $25,000 model – and committed to “solve autonomy”, with ambitions to operate its own fleet of robotaxis, which might be called Cybercabs (although the official name has not yet been announced). Mind you, Robotaxis are not the solution to Tesla’s problems (Financial Times, Lex) is doubtful about the imminent arrival of autonomous taxis and says that emphasis of this on the earnings call was more about drawing attention away from the company’s falling sales and rising inventory levels. I couldn’t agree more!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

TikTok moves closer to a ban, Spotify booms, Mattel falters and Sunak endorses defence investing…

In a quick scoot around some of today’s other interesting stories, US Congress approves bill banning TikTok unless Chinese owner ByteDance sells platform (Financial Times, Demetri Sevastopulo) shows that the Senate voted overwhelmingly to approve legislation that will ban US app stores from carrying TikTok in 270 days unless ByteDance sells it. TikTok is likely to try to block the legislation. * SO WHAT? * A ban from app stores would mean that the app would no longer be able to get updates which would eventually render it obsolete. TikTok continues to deny that the Chinese government has any control over the app. The drama continues…

In Spotify hits record quarterly profit as premium subscribers stream in (The Times, Jessica Newman) we see that Spotify’s record quarterly profits were powered by an increase in the number of premium subscribers and a clampdown on costs. It wanted 2024 to be the year of monetisation and the company says that it is now delivering on that. What’s next, I wonder!

In Mattel Sales Miss Forecasts as ‘Barbie’ Boost Wanes (Wall Street Journal, Ben Glickman) we see that the toymaker’s sales fell by 1% in Q1 as the “Barbie boom” faded. On the plus side, the

company managed to narrow losses in Q1 via cost-cutting and tightening up on toy inventories – all of which enabled margin expansion. * SO WHAT? * It sounds like the company made the best of a bad job but it also seems to me like the company needs to come up with some kind of mid-term plan in order to get things back on the growth track.

Back home, Investing in defence companies is ethical, says Sunak (The Times, Patrick Hosking) shows that the Treasury and Investment Association declared yesterday that funds that invest in defence companies will still be able to classify themselves as “ethical” or “sustainable”. The joint statement was made to support the UK defence industry that has suffered from the ESG trend that has starved them of cash and comes just hours after the FCA said it was going to do a clampdown on “greenwashing”. * SO WHAT? * A number of funds run for/by charities will clearly object to this but I guess needs must here. The defence industry has suffered for a long time from investors shunning it but things have now changed. FWIW, I’ve always thought that ESG was a bit of a con because it is hugely open to interpretation and effectively pushed up valuations of companies and industries that were deemed to be “green” despite such credentials being difficult to prove. ESG is an area that sounds easy enough as a concept – but it is fiendishly complicated to keep track of, particularly if companies’ “green-ness” evolves over time!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

…in other news…

Do you find chopping up carrots and cucumbers in the usual way too mundane? Well here’s a video that will show you how to spice things up a bit! It looks like Tesla has you covered for those camping trips when you want to prepare crudités 🤣

1. In MARKETS & M&A NEWS, the FTSE hits a record high, investors start pricing in a US rate increase, the FTC attempts to scupper a deal and City advisers rake in the Nationwide fees
2. In TECH NEWS, TikTok faces pressure on both sides of the Atlantic while Chinese tech workers get hit by the “curse of 35”
3. In CAR NEWS, Tesla continues to suffer as EU sales slide
4. In MISCELLANEOUS NEWS, consulting firms continue to streamline, the Bank of England warns about shadow banking, Revolut keeps pushing, Thames Water wants bills to go higher and Orkney looks to power cruise ships
5. AND FINALLY, I ask whether you can pass the “old man” test🤣…

So the FTSE sees a record high, US investors price in a rate hike, the FTC sues and City advisers rake in the fees…

Don’t miss our next news roundup for April, it’ll be on Monday 29th April at 5pm with Jake Schogger of the Commercial Law Academy. HERE’S THE LINK TO REGISTER! See you there!

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

FTSE 100 closes at record high as sterling weakens (Financial Times, Stephanie Stacey) highlights yesterday’s record high of 8,023.9, which was broad-based. It came as the dollar continued to strengthen versus the pound – and as the companies in the index earn the majority of their revenues in foreign currency, they tend to benefit from a weaker exchange rate. Despite this, UK stock valuations are still at a major discount to their US rivals after years of underperformance. Meanwhile, Investors price in growing chance of another Federal Reserve interest rate rise (Financial Times, Kate Duguid and Harriet Clarfelt) shows that traders are now increasingly coming to the conclusion that the Fed might actually increase interest rates further to tame stubbornly strong inflation. * SO WHAT? * The options market is now pricing in a 20% chance of a US interest rate increase sometime withing the next 12 months (at the start of this year, the market was pricing in a less-than 1-% probability). At the moment, the main expectation is for one or two 0.25% cuts this year –

which is significantly down from the six or seven predicted in January. It’s quite amazing to think that there’s a real possibility that we could see a divergence of interest rate movements on both sides of The Pond!

In M&A news, FTC sues to block $8.5bn deal between the makers of Michael Kors and Coach (Financial Times, Stefania Palma) shows that the FTC has has decided to go to court to block US luxury goods group Tapestry’s $8.5bn acquisition of Capri Holdings – a group that could potentially create “an American LVMH”. The antitrust regulator says that the acquisition could damage competition among the group’s brands which include Capri’s Michael Kors and Tapestry’s Kate Spade and Coach. The companies responded by saying that they operate in a highly competitive and fragmented sector. Capri also pointed out that the FTC was the only regulator that did not approve the transaction.

Back in the UK, City advisers rake in £80m from Nationwide’s planned £2.9bn Virgin Money takeover (Daily Telegraph, Michael Bow) shows that City advisers, including Goldman Sachs and JP Morgan (who represent Virgin Money) look set to receive £30.5m in advisory fees while UBS (which represents Nationwide) is set to get £15.5m. Nationwide is also forking out £12.07m on legal fees and £1.4m on PR advice. A decent chunk of Nationwide’s expenses (around £10m) relate to paperwork filed with the Prudential Regulation Authority (PRA) and Competition and Markets Authority (CMA)! * SO WHAT? * It looks to me like M&A is back! Goldman Sachs and Morgan Stanley have been particularly vocal on their thoughts that the market is starting to light up again – something that will be of great comfort to all those in the M&A food chain!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!