Category: Protected – Watson’s Weekly

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

• IN WAR NEWS – Israel intensified its momentum in the Middle East by broadening its attacks to the Houthi rebels in Yemen. Although the US and allies continued to call for restraint the calls fell on deaf ears. The human cost is devastating. The impact on global supply chains is likely to be damaging but it’s too early to tell the extent of it, particularly as the situation is changing on a daily basis.
• IN THE US – Fed chief Jay Powell talked about further interest rate cuts – but specifically that they will be more of the usual 0.25 percentage magnitude rather than the racier 0.50 percentage point cut they made at their most recent meeting. Trump got a double-boost this week thanks Israel ignoring Biden’s overtures to show restraint (this makes Biden look weak) and dockers on the east coast of the US going on strike for the first time since 1977 (this makes it look like Biden’s lost control of the economy) but then a few days later, the dockers decided to suspend their strike after coming to an agreement. This must have been a relief to the Harris/Biden camp so close to the elections!
• IN ASIA – last week’s stimulus resulted in the Shanghai Composite Index’s best weekly gain since 1996! This sounds great but I’m not yet convinced that this will be the long-term stimulus that China’s economy needs. Meanwhile, the incoming Japanese PM called an October election. This will be a year earlier than scheduled but I guess doing it this way will give the winner a better mandate where they can better get their teeth stuck into the job in hand.
• IN EUROPE – Eurozone inflation dipped below the ECB’s 2% to 1.8% in September, which makes it more likely for the ECB to make its third interest rate cut in four months at its next meeting on October 17th. Economists at Goldman Sachs, JP Morgan, BNP Paribas, T Rowe Price and Danske Bank think that the ECB will make a 0.25 percentage point cut at its next meeting. PM Starmer and ECB chief von der Leyen met up to reset post-Brexit relations and agreed to have an annual summit starting from early next year to facilitate this. We’ll just have to wait to see how this pans out! Meanwhile, there was another victory for the far-right – this time it was the FPÖ party in Austria who won the parliamentary elections by a larger-than-expected margin. The march of the populists continues…then French premier Michel Barnier announced tax rises and spending cuts in an effort to narrow the public deficit.
• IN THE UK – the winter fuel allowance debate continued, but in the meantime it seems that DIY stores including B&Q, have seen a boom in sales of heat-saving equipment. The UK jobs market seems to cooling down, according to the latest data, while private sector growth also lost momentum. The Bank of England warned of a potential market correction as company valuations currently look pretty stretched but it also hinted at more “aggressive” interest rate cuts to come, which hit sterling. Later in the week, chancellor Reeves hinted that there would be a lot of capital spending in the Budget although she didn’t give any real detail.

IN COMMODITIES…

• IN OIL – prices of Brent and WTI rose after Iran’s retaliatory missile attack on Israel. Meanwhile, OPEC+ members were warned by a Saudi minister to stick to production quotas otherwise it would open its taps to put downward pressure on the oil price.
• Olive oil price rises could slow down as the drought in Spain is easing. Given that 80% of Britain’s olive oil comes from here – plus the fact that olive oil prices have shot up by a whopping 183% between December 2019 and August this year – the improving situation will be most welcome!

IN ENERGY…

• Most households in Britain are going to benefit from lower energy bills at the start of next year thanks to high levels of gas storage and LNG supplies. The energy price cap is to fall to £1,697 a year in January, which is below the £1,717 that will take effect from this week.
• It seems that AI’s insatiable hunger for electricity is prompting more interest in nuclear energy, but in the short term it seems that the Sizewell C nuclear project could be hit by more delays thanks to investment delays. And in terms of how that power is connected to where it needs to go, the government is considering planning process reforms that could cut the time to build power lines to five years. At the moment, it takes up to 14 years to identify the need for a new transmission line and building it.

IN BUSINESS TRENDS…

• China paranoia persists and now defence tech start-ups are having difficulties in developing weapons to counter China – but without Chinese components! China is the dominant supplier of batteries, motors, sensors, rare-earth materials and a plethora of other components used by US defence companies and it’s expensive – but necessary – to untangle companies from their reliance on Chinese components.
• Business confidence has fallen to a three-month low, according to a survey by Lloyds Banking Group. It seems that businesses are still cautiously optimistic, but clarity is needed from the government before anyone can do anything.
• The IPO market looks likely to be pretty quiet for the rest of the year as everyone waits to get the US presidential election out of the way (and then we’re heading into Christmas/New Year where activity pretty much dies anyway). 2024 has been pretty good but prospects for next year could be even better! Geopolitical events could still dampen enthusiasm but at the moment it seems that markets aren’t really showing too much concern about what’s going on in the Middle East and Ukraine.
• The RTO trend seems to be gathering pace, which is good news for office property companies who’ve had a pretty miserable few years. Office vacancies in places like London and New York are still high versus pre-pandemic levels but the situation is improving.

IN EMPLOYMENT TRENDS…

• Data from Adzuna shows that the UK jobs market is normalising as vacancies are falling. Competition is returning to normal levels, which would imply that wage inflation will calm down – and that will make it easier for the Bank of England to justify further interest rate cuts.
• Deloitte partners trousered £1m each, on average, for the fourth year running despite a slowdown in revenue growth. This loss in momentum was down to poor demand for advisory  services but I think that deal flow has been picking up and any recent “downsizing” has been an exercise in clearing the decks before the next “rush” (which is likely to happen from next year IMO, geopolitical events permitting). It was interesting to note that Barclays said this week that it would be focusing on advisory and equity capital markets (which says to me that they think IPO activity is going to heat up).

IN INVESTMENT TRENDS…

• Apollo said that it wants to double assets by 2029 as its private capital business continues to grow. This sounds great but I really think that the regulators need to get involved because I don’t think it’s fair (or safe) to let this lot grow unfettered while banks have their hands tied behind their backs. Also, firms like Apollo also borrow from banks, so if they go down because they’re taking on too much risk the banks will go down as well…

IN NEWS ON DEMAND…

• Auto sales in the US weakened slightly in Q3 versus the same period a year ago and still fall short of pre-pandemic levels while European carmakers brace themselves for more tough times ahead. There’s a major contrast in EV sentiment in China versus what’s going on everywhere else! NIO just got a $1.9bn investment from its parent and a group of Chinese investors while the latest figures from the Department of Transport have shown that EV demand has now hit a four-year low.

IN NEWS ON EVs…

• Tesla saw a rebound in Q3 deliveries and they were roughly in line with market expectations. Delivery numbers were boosted by strong performance in China – but total deliveries so far this year lagged the numbers we saw over the same time period last year.
• The SMMT published an open letter appealing to the government to cut VAT on new EVs and public charging points while Ford UK urged them to put EV sales targets on pause for a year to give time for demand to catch up. Car manufacturers are highly unlikely to hit EV targets at the moment – and they are going to have to pay huge fines as a result.
• Stellantis announced a profit warning and cut profit estimates as it continues to struggle with the EV transition – and, as if that wasn’t bad enough, it also had to announce a recall of 200,000 plug-in hybrids following reports of fires in vehicles that were parked with the ignition turned off (something we saw recently in South Korea)! Meanwhile, the production freeze for the electric Fiat 500 has been extended due to poor demand.

IN CAR SECURITY NEWS…

• Especially since the Americans have been calling Chinese in-car tech into question we’ve seen debate spark up again as to whether it really is a security risk or not. Chinese in-car tech is at the cutting edge and it seems that connected cars do pose real security risks but then again I guess that’s the price we pay for convenience.

AND IN INDIVIDUAL COMPANY NEWS…

• Aston Martin announced yet another profit warning. The company’s burned through five CEOs in five years, so let’s see whether the latest one will be given time to turn the company around. The company is due to report its Q3 numbers on the morning of the Budget!

IN CONSUMER TRENDS…

• India looks like it could be a major growth market for posh Swiss watches! While Swiss watch exports fell overall this year, exports to India actually increased by 20% in value, year-on-year, in the first seven months of 2024. Some of this will be due to an agreement to scale back customs duties on Swiss watches over the next seven years, but there’s also a major longer-term driver in the form of the youthful population and growing middle classes.
• A European consumer recovery looks imminent thanks to falling inflation, rising real wage levels, high levels of savings and recovering consumer confidence. Interest rates probably need to fall a bit more from current levels to unleash this recovery though.
• Weight-loss drugs appear to be changing the appearance of gyms! Until now, cardio machines have been taking over, but now free weights, medicine balls and other bits are making a comeback as weight-loss drug-takers try to mitigate side effects of the drugs which also promote muscle loss as well as fat loss! This sounds like great news for gyms (= more members) – but particularly makers of gym equipment (kitting out those gyms!), no?

IN RETAIL TRENDS…

• UK shop prices are falling at their fastest rate since 2021. Clothing and furniture led the way in price deflation and were enough to drown out the uptick in fresh food inflation.
• Luxury brands are pushing $1,000 “micro” handbags in a bid to tempt middle-income shoppers back. This segment of customers may not buy the most expensive items, but they do buy big volumes as a collective group.

IN RETAILER NEWS…

• LVMH garnered a lot of column inches this week! It effectively bought a stake in Moncler by buying a 10% stake in Double R, an investment vehicle controlled by Moncler’s chief exec and sold the streetwear brand Off-White to Bluestar Alliance. We then heard that LVMH signed a 10-year sponsorship deal with F1 starting from next year. This is going to be epic for LVMH as this deal will give it a broad platform to display its wares.
• Frasers Group made a cheeky £83m takeover bid for struggling luxury handbag maker Mulberry. It already has a 37% stake, but it needs to convince the biggest shareholder, Challice, otherwise it’s just going to fail. Unsurprisingly, the bid was rejected.
• Amazon is going to increase the number of ads on Prime Video from next year in order to made more money from its ad-funded streaming services. Amazon’s subscriber numbers have been pretty steady since it introduced advertising to its Prime Video platform earlier this year – and I guess that this has emboldened the company to do more.
• AO World agreed to buy musicMagpie for £10m. God knows why 🤣. This company has been an absolute turkey! It floated in 2021 at a £200m+ valuation. Talk about a comedown!
• IN SUPERMARKETS, Tesco raised its profit forecasts and is making bullish noises about Christmas. I interpret this as another sign that the government’s message of doom-and-gloom is 🐂💩. Meanwhile Booths, aka the “Waitrose of the north”, managed to narrow annual losses after sales breached the £300m market for the first time in its history. Meanwhile, the CEO of Sainsbury’s had a moan about the lack of clarity surrounding Rachel Reeves’s proposed tax rises, saying that it is prompting caution among shoppers, particularly regarding big-ticket items.
• IN APPAREL – JD Sports said that it was on track to hit its annual profit targets despite a slowdown in demand for Nike products. Talking of which, Nike posted its biggest drop in sales since the pandemic and it also spooked investors by withdrawing its scheduled annual revenue forecast announcement and postponing its investor day. The new CEO has clearly got a lot to sort out – but thankfully he is a long-time returning veteran, so you would have thought he will be able to get back up to speed relatively quickly.
• M&S is thinking about taking over a massive distribution warehouse in the centre of England in order as it continues to see more success in online sales of fashion and homeware. The fact that it is even considering such a move would suggest that things are going pretty well and that it’s confident about the outlook!

IN LEISURE NEWS…

• Greggs announced an uncharacteristic slowdown in sales over Q3 but regulars will be relieved to hear that it had “no plans to put up prices for this year”. The company left full-year numbers untouched, which suggests that they think they can pull it all back in the colder months!
• A new law governing tips came into force this week. Basically it forces restaurants/hospitality venues to give 100% of the tips to the staff, however they are paid. Good news for staff, but perhaps this adds to the headaches for the business owners who have already been grappling with the impact of the higher minimum wage. This could mean that some venues increase prices to customers.
• Guinness World Records announced that it’s going to open a London entertainment venue in 2026 which will offer over 60 games and competitions that will encourage kids and adults to break records! Sounds like fun!

IN AI NEWS…

• OpenAI reckons that AI agents will become mainstream by 2025 as tech groups, including Google and Apple, continue to develop them for their respective users.
• DeepMind and BioNTech are now building AI lab assistants that can help planning experiments and more accurately predict their outcomes – which can all help to speed up drug development.
• The new minister for AI and digital government said that she expects a resolution to the copyright disputes between British AI companies and creative industries “by the end of the year” either via an amendment to existing laws or the introduction of new legislation.
• The CEO of SAP warned the EU against over-regulating AI, saying that this could put the block at a disadvantage to the US. The same arguments were trotted out by financial institutions for years (that over-regulation would stifle innovation), but then the financial crash happened. After that, a ton of rules came into force – but innovation is still continuing and banks are still making loads of money so being pre-emptive may not actually be all that bad!
• OpenAI managed to raise $6.6bn at its latest funding round but it still has to address issues such as governance, its structure and its business model. It’s interesting to note that, in order to get a slice of the action, investors in OpenAI had to promise that they wouldn’t fund rival start-ups. They could do this because the funding round was hugely over-subscribed.

• IN REAL ESTATE NEWS – Nationwide figures showed that UK house prices hit their highest annual growth since 2022 while Zoopla figures showed that UK house sales in September rose at their fastest rate for three years. I would have thought that this momentum is likely to continue given the higher multiples of salary being accepted by lenders when calculating the size of loans.
• An epic legal battle between insurers and owners of $10bn-worth of aircraft stranded in Russia after its invasion of Ukraine started this week in the High Court. Get the popcorn ready – this is going to be a big case!
• Diageo decided to scrap its proposed sale of Pimm’s as demand for the summer mixer gets its 🍑 kicked by Italian rival Aperol. I think that Pimm’s needs a marketing revamp, perhaps more of an effort to make it appeal more internationally – and then the sale can be revisited.

My favourite “AND FINALLY” video this week was the one with the epic street performer! This guy is amazing!

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

This was the week of devastating Israeli attacks, Labour sheepishness and the Can of Ham test…

• IN WAR NEWS – Israel escalated the Middle East conflict by launching a sustained wave of airstrikes on what it said were Hizbollah targets, the US and Allies called for a 21-day ceasefire but this was ignored. The carnage continues. In the meantime, from a commercial perspective, I think that this means higher freight rates for longer (potentially a positive for companies like Maersk) and more warehousing as companies decide to hold more inventory (good for warehouse operators) to ensure robust supply chains in the face of more geopolitical uncertainty. It may also mean that prices for end consumers will remain higher for longer (which means inflation could be higher for longer) and it may result in more near-shoring in the longer term as companies look to produce more of their goods closer to their end markets so they are less affected by developments like this.
• IN THE US – Harris set out her pro-business policies in a speech in Pennsylvania, a swing state, to appeal to the private sector and differentiate herself even more from Trump. Starmer paid a visit to “recommit” Britain to internationalisation at the UN General Assembly whilst also catching up with US and European leaders.
• IN CHINA – the PBoC announced a number of key interest rate cuts and other measures to boost growth but there was scepticism as to whether this was really going to be enough and a few days later Beijing announced more stimulus measures.
• IN EUROPE – the latest Ifo survey highlighted the fifth consecutive month of GDP contraction in Germany and there are increasing concerns about the effect a Trump victory would have on Germany’s exporters. Meanwhile, France is considering raising taxes on businesses and the rich in an effort to address “one of the worst deficits in our history”. The EU has now put France in an “excessive deficit procedure” and demanded that it comes up with a plan to cut the deficits over the next few years.
• IN THE UK – the government came under pressure for all the gloomy rhetoric about the economy as chancellor Reeves paved the way for a capital spending increase, while KPMG published a report which suggests that the UK economy will grow twice as fast as expected this year and even the OECD was bullish about our GDP prospects! Later in the week, though, it sounded like the chancellor was thinking about watering down her planned tax raid on “non-doms”, presumably given reports of their potential exodus. She’s got a lot of other things to consider, though, like how to shrink the gap between public and private sector pay, how to reduce our electricity bills (we’ve currently got the highest electricity prices of anywhere in the developed world!) and how to resolve labour shortages in sectors like agriculture. The government felt pushback on the proposed cut in the number of people who get access to the winter fuel allowance and the overall feeling of the conference was less buoyant than you’d think after getting in power after 14 years in the political wilderness.
• IN ARGENTINA – the poverty rate has broken through 50% and is now at its worst level for two decades thanks to new president Javier Milei’s drastic spending cuts since being in office. Opposition parties say austerity is making things worse and Milei’s popularity has taken a beating. People will need to see the benefits of his actions sooner rather than later or he will not last long…
• IN AUSTRALIA – inflation has fallen to its lowest level in three years – to 2.7% in the year to August versus the 3.5% it was at in July – but the central bank’s governor is not getting too excited about it and said that it was only temporary. She said that the bank would need to see more evidence of sustained lower inflation before easing monetary policy.

IN OIL NEWS…

• Saudi Arabia decided to abandon its unofficial $100 a barrel price target in order to justify increasing production. The oil price fell as a result, hitting the share prices of oil producers including Shell and BP.

IN NUCLEAR POWER…

• America’s NuScale was ditched in the bidding to build Britain’s first mini-nuclear plant, leaving four companies (including Rolls-Royce) still in the running. This week, 14 of the world’s biggest banks and financial institutions pledged increased support for nuclear power – and, given huge demand for it, this is very good news (if they follow through on this!).

• IN CHINA PARANOIA – the US proposed a ban on Chinese software and components in vehicles. If this actually came to pass, it would effectively ban all Chinese vehicles from the US market. The US has already slapped a 100% import tax on Chinese EVs. Meanwhile the Minerals Security Partnership, a coalition comprising of 14 countries and the European Commission, are pushing to help private industry support critical minerals’ projects in order to push back against China’s dominance in this area. European steelmakers have been joining forces to appeal to Brussels to tackle the flood of cheap Chinese steel that’s being dumped on the market. China is on track to export a whopping 100m tonnes this year, more than any year since 2016!
• IN CHINA PUSH-BACK – Geely is just one of the Chinese carmakers looking at expanding production in Vietnam as producers look to broaden their footprint outside China in order to get around ever-tightening sanctions. Elsewhere, China’s tech self-reliance is continuing as Huawei’s Qingyun L540 laptop’s components show that domestic suppliers are catching up with US companies, whose components are affected by export restrictions.
• CORPORATE MIGRATION TO THE MIDDLE EAST – US-based investment manager Nuveen is the latest financial services company to set up shop in the Middle East as it looks set to open in Abu Dhabi. It is the second investor with over $1tn in assts to move to the financial hub this month!
• THE NO-ALCOHOL BEVERAGE TREND CONTINUES – Data from IWSR shows that sales of low-alcohol beer in the UK boomed by more than any other market in 2023 thanks to the overhaul of alcohol duties! Overall, though, the future for non-alcoholic beverages looks bright because although they make up just 1% of global alcohol sales, margins are good and more younger people are drinking them.

IN COMMERCIAL PROPERTY…

• US property investment trust Realty Income has become one of Britain’s biggest retail owners over the last five years as it keeps snapping up unloved retail properties. The company has a team of quant analysts in the US who crunch the data, they pick out properties with at least a 7% yield and they buy!
• The 21-storey tower at 70 St Mary Axe, aka the “Can of Ham”, is being put up for sale by its current owner Nuveen as it tests market appetite after trying once before to sell it in 2022 for about £400m, but failed. The building, close to Liverpool Street Station, was completed in 2019. It’ll be interesting to see how the sale goes as many will be trying to gauge the state of the market.
• Work has just started on Britain’s first purpose-built skyscraper lab in Canary Wharf. It will have 23 floors and is expected to be completed in 2027. This is part of an effort to make the district less reliant on the financial services industry!

IN RESIDENTIAL PROPERTY…

• The UK housing market is rebounding, according to research from Savills which shows that the housing market is now bigger than its average pre-pandemic size thanks to first-time buyers returning to the market.
• Angela Rayner’s planning revolution will yield four million homes that will be built on green belt land as she changes definitions and pushes forward to make a dent in the housing shortage.
• Nationwide has gone a bit crazy as it said this week that it would allow first-time buyers borrow six times their earnings just weeks after rivals Halifax and Lloyds said they would allow first-timers to take out loans worth 5.5x their household annual income. It is, at the same time, cutting its mortgage rates and increasing its maximum loan sizes. My initial reaction is that this is potentially quite risky but then again property prices have gone bananas to the extent that young people may find it impossible to buy without outside help. I guess the argument is that if they can afford massively inflated rents then it makes sense that they can afford mortgage payments!

IN AI NEWS…

• Sam Altman is in line to get a 7% stake in OpenAI, which could be worth over $10bn, as the company looks to evolve from its not-for-profit status to a company that makes profits. One option is to become a public benefit corporation that will enable it to make profits whilst having a structure that helps it to benefit wider society. It makes sense for OpenAI to make the switch given that more companies are putting more money into it – they are going to want to see a return on their investment, after all! Meanwhile, the company’s CTO, Mira Murati, became the latest senior exec to quit. I guess this is just part of such a company’s evolution!
• The UK is finalising an investment summit to be held here on October 14th, but it’s not invited Elon Musk (presumably because of all that rubbish he spouted about civil war in the UK when we had the riots).

IN HARDWARE NEWS…

• Meta announced some new AR glasses, the launch of its next-gen Ray-Ban smart glasses and the latest version of its LLM.
• Raspberry Pi unveiled its maiden results since flotation – and they were good! Although Raspberry Pi was hit by supply chain issues during the pandemic it has since largely recovered and it now believes that sales will rise in the second half thanks to new product launches.

ELSEWHERE…

• Ubisoft’s shares plummeted by a whopping 17% as it disappointed the market by reining in its forecasts delaying the release of the latest instalment of its Assassin’s Creed game by three months. It decided to do this following weaker-than-expected sales of its new Star Wars Outlaws game.
• French satellite operator Eutelsat is looking to strike up industrial and commercial partnerships to finance the next generation of satellites for the OneWeb broadband constellation if it doesn’t manage to hammer out an agreement about Europe’s satellite communication network roadmap with the European Commission.

IN RETAIL NEWS…

• Luxury group Hermès, having ridden out the luxury storm, is now looking to evolve and thinks that a shift into haute couture is the right move in order to continue to insulate it from economic and geopolitical gyrations. I’m sceptical but I think a lot will depend on how this is marketed to its potential customers.
• H&M disappointed the market by saying that it would undershoot profit targets this year thanks to costs denting its Q3 earnings. What a contrast to rival Inditex’s success!
• UK retailers “face turbulent few months” as consumer optimism has weakened, according to the latest BRC data. It seems to me that we’ll be in limbo at least until we know what the Budget actually contains!
• In terms of individual retailers, Co-op managed to return to profitability in the first half but DFS fell into loss because of weaker sales and shipping delays while Card Factory saw anaemic first half profits thanks to the increase in the minimum wage and higher shipping costs.

IN LEISURE NEWS…

• Mitchells & Butlers – the operator of All Bar One, Harvester and Toby Carvery – had a decent summer of trading although poor weather and August riots took the edge off. Still, it outperformed the competition and all of its brands still managed to grow! It was positive about the full year.

• IN BANKS NEWS – there was a big kerfuffle this week about Commerzbank potentially being taken over by UniCredit. The German government had been caught napping as it had sold off a chunk of its Commerzbank stake to the Italian bank, not realising UniCredit’s true intentions! What a naive bunch of muppets! Citigroup signed a $25bn deal with Apollo to make a more concerted push in private credit – a rapidly growing area of business. Meanwhile HSBC took a pasting thanks to its exposure to defaults in commercial property loans in Hong Kong for the first half of this year.
• Northvolt had a bad week. It announced a 20% headcount reduction and then learned later in the week that it would be served with an investigation notice by Swedish prosecutors over the death of one of its workers. It’s not looking good for the European EV manufacturer.
• Tui said that its annual profits would rise by at least 25% thanks to customers spending more on winter breaks to sunny destinations like Egypt, Cape Verde, Thailand and Mexico. Tui says that winter bookings have had a “promising start” and demand for more expensive holidays has increased.
• News Corp’s REA raised its offer to buy Rightmove but Rightmove rejected it, saying that the approach was lowballing its actual valuation.

My favourite “AND FINALLY” video this week was the one with the unusual running challenge! This looks very scary to me!

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

This was the week of exploding pagers, another Trump assassination attempt and automotive strife…

• IN WAR NEWS – Israel launched an attack on Hizbollah via exploding pagers. This shocked everyone around the world, caused chaos and makes it more likely that other countries will get involved in the Middle East conflict. Clearly there is huge human cost here but in terms of “commercial” impact, it is likely to keep freight rates higher for longer and I suspect that security will have to get tighter at airports etc. because if this tech has gone under the radar of Hezbollah, it’s conceivable that terrorists could use it on commercial flights, for instance.
• IN US NEWS – Donald Trump survived another (less effective) assassination attempt and speculation built up ahead of the Fed meeting on Wednesday about whether they’d go for a 0.25 percentage point cut or a 0.50 percentage point one. In the end, the Fed cut them by 0.50 percentage points and this sent the S&P to a record high. Re other pre-presidential election developments, Trump launched a crypto company called World Liberty Financial that would “leave slow and outdated big banks behind”, various celebs got behind their preferred candidates (but it doesn’t actually make much of a difference) and the decision on whether the Nippon Steel acquisition of US Steel should go ahead has been delayed until after the election.
• IN CHINA – Taiwan’s defence minister is getting concerned about the increase in Chinese military activity but also the prospect of Trump becoming President as it looks likely that he might withdraw military support (or at least de-prioritise it) if gets back to the White House.
• IN JAPAN – the Bank of Japan decided to leave interest rates unchanged at 0.25% (but that was widely expected)
• IN THE UK – the Bank of England left interest rates unchanged at 5% as there are still lingering concerns about lower rates potentially stoking inflation.

IN COMMODITIES NEWS…

• Coffee prices look set to rise because of poor harvests in Brazil (drought) and Vietnam (typhoon) but also because farmers are switching to growing durian (a very smelly fruit by all accounts!) as its popularity is growing – and it’s more profitable than growing coffee!
• BHP said that rapid growth in AI will hit copper supplies in the coming years as demand for copper for data centres will boom significantly. At the moment, they are weak because of sluggish demand from China and over-production.

IN BUSINESS TRENDS…

• IN CHINA-RELATED TRENDS – PwC has halted work on its $140m Hainan campus as part of a strategic review but I guess it has to question its commitment to China going forward given the increasingly hostile business environment. Meanwhile, Mercedes-Benz sold out of its luxury Chinese EV JV to BYD, its partner since 2010. BYD has reiterated its commitment to the brand, Denza.
• Brexit has hit trade in the UK (yes, it’s an academic report that tells us what we already know). TBF, this does put some figures on the impact but I think this is just another thing to consider as the UK tries to “normalise” the relationship with Europe.
• Almost half of the UK’s biggest law firms posted record double-digit revenue rises over 2023 in the industry’s best performance since before the 2008 crisis. When M&A kicks in properly I would have thought this will improve even more!

IN CONSUMER TRENDS…

• US consumer spending actually came in above analyst expectations for August despite an apparent slowing down in the jobs market.
• Italy continues to attract rich Europeans trying to flee higher tax regimes despite doubling its flat tax on the foreign income of rich expats to €200,000 a year in August from €100,000. The new rate only applies to newcomers who established tax residency in Italy after the change was approved while existing participants will still be on the old rate.
• UK consumer confidence has cratered according to the latest GfK Consumer Confidence index which shows that consumer confidence dipped sharply in September, negating all the positive momentum gained this year as people worry about what they’re going to be in for in the forthcoming “painful” Budget.

IN EMPLOYMENT TRENDS…

• Amazon ordered workers to return to the office (RTO) for five days a week from early next year. Staff have had to be in the office at least three days a week since May 1st 2023. Unsurprisingly, this has gone down like a lead balloon with staff but has been regarded with interest by companies at other firms and it represents a major shift in the tech industry that has largely embraced hybrid working.
• UK bosses reckon there will be full RTO within three years, according to a study by KPMG. They have also managed to get a concession from the government (thus far) to retain the right to put new hires on 6-month probation and it sounds like employers are increasingly de-prioritising workplace diversity.
• There was a lot of talk about employee welfare this week. The Mindful Business Charter, a mental health charity, is urging law firms to monitor the sleeping patterns of employees who might be struggling with their mental health but I wonder whether this will actually make things even more stressful. JP Morgan appointed a banker to oversee juniors’ wellbeing as concerns continue to rise about working conditions on Wall Street. Meanwhile, Deloitte announced that it would offer equal parental leave in an effort to help more women climb up the corporate ladder. From the beginning of next year, new fathers and mothers will get 26 weeks of fully paid leave. I think this is great – for big firms that have decent-sized teams that can cope with this – but I think it could be a nightmare for SMEs who won’t be able to cope with such long absences.

• Power shortages could scupper the government’s plans to build a load of data centres as the grid currently can’t cope. The West London cluster , which has the biggest concentration of data centres outside the US, is at full capacity and cannot connect any more sites. New capacity is going to take a few years to come online and fourteen data centre projects have been put on hold until extra capacity is added.
• BP is selling its US onshore wind energy division, BP Wind Energy, in its push to streamline the business and focus on its solar operation, Lightsource BP.
• Rolls-Royce won a bid to build SMRs in the Czech Republic, its first order from a European government. Details are being negotiated, but this should be good news for its ongoing bid to get an order from the UK government.
• One of Europe’s biggest solar panel manufacturers, Meyer Burger, is looking to cut headcount by 20% in order to return to profitability but the future looks bleak for a company that is finding it increasingly difficult to compete with Chinese manufacturers.

IN BATTERY NEWS…

• European EV battery maker Northvolt is fighting for survival but the Swedish government continues to refuse to bail it out by taking a stake. If Northvolt dies, this will become yet another industry that China will win.

IN EV NEWS…

• Italian PM Meloni backed European carmakers who are concerned about the massive emissions fines they’ll have to pay from next year despite EV sales cratering in Europe. The situation is no better in the UK as used EV prices are plummeting due to lack of demand and oversupply from fleet buyers flooding the market while pressure is building on the government to rein in its pre-election promise of reinstating the 2030 petrol car deadline.

IN INDIVIDUAL CAR COMPANY NEWS…

• Mercedes-Benz cut its full-year forecasts, blaming deterioration in the global macro environment.
• VW is considering cutting 30,000 jobs in order to save money. This follows on from recent talk of factory closures and shows just how dire VW’s situation has become.

• IN CHIPS NEWS – Intel announced cost-cutting plans to jolt the chipmaker out of its current rut but then it announced a deal with Amazon’s AWS to build custom-made AI chips for it, which should be a nice little earner. Microsoft asked for more clarity about the AI chip supply restrictions to the Middle East, something that’s particularly sensitive for Microsoft given its increasing links to the region.
• IN SOCIAL MEDIA NEWS – Meta is facing a massive EU antitrust fine for alleged anti-competitive practices in its free Facebook Marketplace services. A decision on this is due next month. Meanwhile, it announced measures to let parents see who their kids are messaging as part of a broad raft of incoming safety changes that will be introduced to combat concerns over online grooming and sextortion. Snap announced that it was developing some new AR glasses, but TBH they look ridiculous, are very heavy and probably cost loads as the company was very cagey about how much the R&D bill was. Brazil fined X for its “wilful, illegal and persistent” efforts to get around the ban that was recently imposed in the country. Musk said it was inadvertent but judge Moraes said it was deliberate. The drama continues…
• IN MEDIA NEWS – Warner Music announced that it would be cutting 13% of staff as opposed to the 10% it had previously identified as it tries to free up more money to invest in music. Elsewhere, S4 Capital saw its share price hit an all-time low as it reported a sharp drop in revenues for the half year. Ad spend is often seen as a leading economic indicator but I would suggest that, in this case, many advertisers could be holding back ahead of the US presidential election.

• IN RETAIL TRENDS – dollar stores in the US continue to expand their footprint despite increasing competition from online retailers like Temu. In the UK, London retailers continue to appeal to the government to bring back UK tax-free shopping for tourists because they are losing revenues.
• IN INDIVIDUAL COMPANY NEWS – Next warned of store closures after it lost a court case on equal pay but it sounded bullish about overseas opportunities. AllSaints reported another record year of revenues and profits in its 30th year of operation and Shein faces increased political scrutiny ahead of a planned London IPO. In grocery retail, Asda’s co-owner Mohsin Issa stepped back and will be replaced by current chairman Lord Stuart Rose and an exec at TDR (until they find a suitable CEO) for the day-to-day, Tesco is mooting the idea of using AI to “help” customers make healthier choices in their shopping (although I really don’t think this sounds like a good idea) and Ocado raised its sales outlook for the year as it gained more customers. Elsewhere, B&Q’s owner, Kingfisher, reported weak sales of kitchens and bathrooms in the UK but said that there were signs of recovery.

IN LEISURE NEWS…

• Pret a Manger’s sales broke the £1bn barrier thanks to its global expansion. 25% of its sales are now outside the UK and it has made impressive gains in the US in particular. I’m quite sceptical about its fortunes given that there are pretty low barriers to entry to this business and alternatives abound. Maybe it can see growth if it seeks to build up more of a presence in railway stations and airports, a tactic that is going very well for Boots!

• IN FINANCIALS – JP Morgan looks like it’s going to take over Apple’s credit card business from Goldman Sachs (GS is getting out of this area) and Revolut announced a 2025 India launch in its latest efforts to diversify its revenues outside Europe. In investment trends, BlackRock and Microsoft announced a $30bn fund to invest in AI infrastructure and it was interesting to see that India has now overtaken China in allocation for the MSCI All-Country World Index, a common stock market benchmark. This is a indicator of India’s relatively positive momentum versus China’s economic sluggishness.
• IN REAL ESTATE NEWS – the Earls Court Development Company (ECDC) has now formally submitted plans to develop the more than 40-acre site in a first phase that is due to complete by 2030 as well as subsequent stages that will run into the 2040s and Mayor Sadiq Khan submitted plans for Oxford Street to be pedestrianised. His plans had been rejected before but the new government may look on them more favourably. In residential property news, Rightmove stats show that asking prices for UK homes are rising and ONS data shows that house prices in London underperformed the rest of the UK in July. In the rental market, research from Hamptons shows that average rents in the north and the south of the country are converging while rents overall are soaring due to lack of supply and ongoing demand.
• IN INDIVIDUAL COMPANY NEWS – Boeing has decided to freeze hiring as it reacts to strikes, Philip Morris has decided to sell inhaler maker Vectura for £150m just three years after it bought it for £1bn as it just never got traction and Roche had disappointing data from its weight-loss drug-in-development as it had high rates of vomiting as one of the side effects. Elsewhere, British merchant bank Close Brothers is going to sell its wealth business for £200m to raise funds in anticipation of a possible fine that might result from the current FCA investigation into alleged mis-selling. Some say this could be the next PPI. In the US, FedEx cut its full-year outlook due to weaker-than-expected demand and Nike’s CEO stepped down to be replaced by a Nike returner, presumably paying the price for Nike’s poor performance over the last few years.

My favourite “AND FINALLY” video this week was of the turtle on a skateboard! But of course!

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

This was the week when Trump lost to Harris on TV, when Apple unveiled upgraded gadgetry and when Northvolt made a dramatic announcement…

• IN THE US – inflation fell unexpectedly over August on an annualised basis to its lowest level for three years. The bet now is not if they cut interest rates at the next meeting, it’s more how deeply will the cut go? Meanwhile, there was a lot of chat about the TV debate between Trump and Harris – and it looked like Harris won (although that’s not how Trump saw it 🤣!). Trump said that he doesn’t want to do another one before the election. Meanwhile Trump’s running mate JD Vance kept up the xenophobic rhetoric.
• IN EUROPE – the ECB cut interest rates from 3.75% to 3.5% in a widely anticipated move. It remained cagey about the timing of any further cuts.
• IN THE UK – the economy showed no growth for the second month in a row, according to the latest ONS release. Still, the OECD decided to up its growth forecasts for the UK after stronger-than-expected performance in the first half. There are mounting concerns about the country’s debt and UK councils apparently face a £4.3bn ‘black hole’ in financing next year.

IN OIL NEWS…

• Prices of Brent crude and WTI fell out of their year-long trading range as investors got increasingly nervous about slowdowns in the world’s biggest economies. The IEA’s monthly oil market report confirmed this drop off in demand and although it thinks prices will soon start to recover, they will do so at a slow pace.
• The IEA continues to believe that global oil demand will peak by the end of this decade, which is in sharp contrast with OPEC+’s rather more bullish projections (but what do you expect from a bunch of rich oil producing countries?!?).

IN BUSINESS TRENDS…

• IN ACCOUNTANCY – PwC addressed ongoing issues in its China business by parachuting in one of its most senior UK partners to run the business but at the end of the week China’s finance ministry and securities regulator slapped PwC with $62m in fines and a six-month suspension of operations in the country as punishment in its role in the audits of China Evergrande. Also, PwC’s operations in mainland China will be suspended for six months and its Guangzhou office was shut down by the finance ministry. Meanwhile, accountancies are cracking down on office attendance as PwC said it would monitor this more closely while Deloitte is now tightening the net on remote work. Talking about Deloitte, the company is now bringing back face-to-face interviewing for final stage interviews given rising concerns about the rising instances of cheating in virtual assessments.
• IN BANKING – HSBC announced a major hiring spree as it looks to grow its UK wealth division and replicate the success it’s seen with its Asian wealth division. It’s already got 400 bankers in this part of the business but it wants to hire across the UK in order to double assets under management to around £100bn over the next five years. Santander is now insisting on its UK workers being in the office three days a week. It sounds to me like many white-collar jobs are increasingly trending towards 3-4 days in the office per week…
• Foreign companies are increasingly getting cold feet about doing business in China thanks to rising barriers to market access, low growth and tough competition.

IN EMPLOYMENT TRENDS…

• The global jobs market is changing in the overall shift to renewable energy. It will have a big impact on skills (retraining is likely to be required), pay (highly skilled vs lower skilled) and unionisation (many renewables areas are under-unionised currently).
• UK wage growth is lost momentum over the quarter, according to the latest figures from the ONS. This could help to justify another interest rate cut from the Bank of England although it doesn’t seem to be as eager to pull the trigger as the Fed and the ECB.

IN INVESTMENT TRENDS…

• Multi-manager hedge funds saw their first outflow of funds for seven years as the cooling of interest in them across a range of asset classes would suggest that investors are tiring of the fat fees and not particularly stellar returns.
• The gold price continues to rise and looks like it’ll continue to do so as investors are increasingly using it as a safe haven from ongoing shifts in the geopolitical landscape – be it trade wars, actual wars, the rise of the populists, fears about the fragility of some economies etc.

IN TECH NEWS…

• IN AI-RELATED NEWS – there is a theory that the AI frenzy is actually masking a sector that is otherwise not doing that well as AI-related names are doing extremely well while others are not and continue to suffer from the over-hiring and overspending of the boom years. It was also interesting to hear that BP has signed a deal with Palantir Technologies to use its AI-powered software to help with its oil and gas exploration operations. Meanwhile, chancellor Reeves announced an £8bn investment by Amazon’s AWS in data centres in the UK and we also heard that UK data centres will now be officially designated as Critical National Infrastructure by the government, meaning that they will be given greater protections from cyber attacks and IT outages in order to boost investor confidence in the UK. Meanwhile, there was a lot of chat about OpenAI raising at least $5bn in its latest funding round that would give it an implied valuation of $150bn – and later in the week it launched a new model that has a more human-like reasoning capability and spends more time thinking before it responds to questions.
• IN REGULATION – the Data Protection Commission is now investigating Google regarding whether it has breached GDPR rules by handling sensitive user data in a reckless way when training its AI models. Elsewhere, Apple lost its appeal in the European Court of Justice which overturned an earlier ruling and came to the conclusion that the Republic of Ireland had “granted Apple unlawful aid” in the form of $13bn in unpaid taxes.
• IN HARDWARE – Apple launched the iPhone 16 and other mildly upgraded gadgetry (with AI functionality to come) while Huawei brought out the world’s first commercially available tri-fold phone.

IN SOCIAL MEDIA NEWS…

• The Australian government is looking at imposing a minimum age for the use of social media somewhere between 13 and 16 which could mean that kids will no longer be able to access sites like TikTok and Instagram! It looks like this move will get broad support – and stick – because even opposition parties are behind it (elections are due next year).
• Brazilians protested against the X ban imposed by a Supreme Court judge over a week ago. Meanwhile, it looks like Elon Musk could be forced to answer to Parliament to give evidence about X’s operations regarding the dissemination of “hateful material” on X and other platforms.

IN MEDIA NEWS…

• According to Ofcom stats, online platforms have overtaken TV channels as the most popular sources for news thanks to a “generational shift” in media consumption habits.
• Hedge fund founder Paul Marshall bought The Spectator for £100m. Now all eyes will be on who will buy (big) sister publication The Telegraph, which was originally going to be bought by an Abu Dhabi-backed fund, but was blocked.

IN RETAIL NEWS…

• IN OVERALL TRENDS – American dollar stores like Dollar General and Dollar Tree are not doing as well as they should because of the onslaught of the likes of Temu and Shein, who are turning the heads of their traditionally cash-strapped customer base. There has been comment that the Chinese e-tailers are a danger to Amazon but Amazon’s got various highly lucrative revenue streams whilst the dollar stores are wholly reliant on retail. Meanwhile, we’re now heading into the “Golden Quarter”, the last three months of the year where most retailers’ profits are made. UK retailers could benefit from being an economy that’s one of the fastest growing in the G7, consumer confidence that’s at a three-year high, the (likely) positive effect on spending that falling interest rates will have and a buoyant housing market. On the flipside, there’s nervousness ahead of the Budget but then again it will be the first time the final quarter won’t have a general election, a pandemic or very high inflation to contend with!
• IN INDIVIDUAL COMPANY NEWS – Aldi posted record sales growth despite market share slipping and it’s set to open 23 new stores by the end of this year. Given the slippage, there’s talk that Aldi is now maturing after years of being in growth mode. John Lewis unveiled a positive set of numbers and said that it’s on track to “significantly” grow profits this year but there was bad news for Boohoo as it continues to lose ground to the likes of Shein and Temu and announced the closure of its US warehouse just one year after opening it. Meanwhile, Zara’s parent Inditex announced strong sales despite a tricky start to the summer and B&Q is diversifying its revenues by using some of its space as mini-fulfilment centres for online orders. Customers continue to shop in the front of the store, but the back of the store now picks and packs items for home delivery or click-and-collect, creating a hybrid model.

IN LEISURE NEWS…

• Greece is cracking down on excessive tourism by unveiling a set of measures that could include the restriction of short-term holiday rentals and cruise ship traffic. Clearly the government will have to get the balance right between the sentiment of locals and the needs of its hospitality industry as economists reckon that tourism contributes over 25% to the Greek economy.
• Indian tourists could be the next group to power travel spending in the coming years, perhaps even replacing Chinese tourists as a major driver. The middle classes are becoming more numerous and they like to travel!

• IN CHINA-RELATED TRENDS – foreign carmakers are losing ground in the China market as they face increasing competition from local makers and they are now using production capacity there to export abroad. They are getting increasingly nervous, though, about retaliatory tariffs in China. Chinese makers such as XPeng are looking at dominating autonomous driving. Competition is intensifying in driver-assistance software among companies such as XPeng and Huawei and they are using AI to accelerate the process.
• IN BATTERY NEWS – European EV battery maker Northvolt announced that it would be mothballing part of a Swedish gigafactory and close another in response to sluggish demand for EVs. Announcements about other projects will come in time. If Northvolt fails, it will be another green technology battle that will have been lost to the Chinese (solar panels is a previous area where they have won). The sluggish demand for EVs was further illustrated by Stellantis’ decision to suspend production of the Fiat 500e due to insufficient orders! Meanwhile, BMW’s share price hit a four-year low after the announcement of a recall of 1.5m vehicles and VW announced the end its commitment to provide job security for thirty years, which was originally due to expire in 2029. Ouch.

• IN REAL ESTATE-RELATED NEWS – housing secretary Angela Rayner struck a £150m deal with Barratt Developments and Lloyds Banking Group to build new garden towns in an initiative dubbed the Made Partnership. It’ll run for 20 years and £150m will be allocated to get the ball rolling. Meanwhile, Rightmove noted that more larger homes are being put on the market as owners try to beat widely-expected changes in CGT in the forthcoming Budget while the latest RICS survey showed that house prices have risen for the first time since October 2022 as expectations of a strengthening market – powered by falling interest rates – increase.
• Novo Nordisk said that its Liraglitude drug, which is in the same family as its Ozempic and Wegovy treatments, is OK for 6 to 12 year olds. If things continue to progress, it could be the first obesity treatment available to this age group.
• Rightmove rejected a proposed £5.6bn takeover from Australia’s REA. It sounds like this isn’t over yet, though!
• Campbell’s Soup Company is planning on changing its name to The Campbell’s Company to reflect the fact that it also makes things other than soup! It’ll need to get shareholder approval at this year’s AGM though.

My favourite “AND FINALLY” video this week is of the super-cute dog that’s clearly enjoying being pampered 😍! The dog actually looks like it’s smiling!

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

This was the week when Starmer attempted to reset relations with the EU, when the CEO of Telegram was arrested and when everyone went crazy for an Oasis reunion…

• IN THE US – the US economy grew faster than expected in Q2, which is a nice boost for Team Kamala, and Joe Biden and Xi Jinping set up a phone call as a tentative step towards mending US-China relations. Meanwhile, China continues to weigh up which presidential candidate is going to be least bad for relations between the two countries.
• IN EUROPE – a fatal knife attack involving a Syrian immigrant perpetrator put immigration back at the top of the agenda in Germany and boosted AfD’s popularity, while in France, Macron refused to endorse a leftwing government. Meanwhile, PM Starmer had a trip to Europe to mend relations but was warned that he should not try to side-step Brussels if he really wanted to do so properly.
• IN THE UK – speculation continues as to what taxes the government will be raising in the forthcoming Budget and it seems that fears of a rise in Capital Gains Tax is prompting a wave of asset selling. Interestingly, a recent YouGov survey showed that over half of Britons disapprove of the Labour government so far.

IN COMMODITIES NEWS…

• IN OIL – the UK government has decided to palm off the North Sea situation onto the courts as it decided not to challenge the legal bid to block the development of the Rosebank oilfield in the North Sea. Environmentalists argue that developing it would violate the UK’s obligation to hit net zero targets. In the meantime, Shell announced that it would be cutting headcount by a whopping 20%, mainly in Britain and the Netherlands.
• It seems that the glory days of energy trading are over as Gunvor’s earnings halved in the first six months of 2024 due to a lack of volatility and mining giant BHP outlined a downbeat outlook for commodity prices mainly due to ongoing sluggish demand from China.

IN BUSINESS TRENDS NEWS…

• Supply chains continue to evolve thanks to a series of unusual events over the last few years (Covid, Ukraine War, Suez blockage, Houthi rebels in the Red Sea etc.) and it now means that the “just-in-time” system of yesteryear needs to be backed up by more near-shoring and stockpiling.
• China has decided to hit back on all the sanctions by restricting shipments of key semiconductor materials, prompting concerns about western production of advanced chips and military optical hardware.
• Data from three real estate agencies seems to show that office vacancy rates in the hubs of Shenzhen, Beijing, Guangzhou and Shanghai are 20% upwards – a rate that’s higher than it was in June 2022! Also, rents are at least 10% lower than they were two years ago. Vacancy rates are expected to rise.
• Back in the UK, business confidence remained at an eight-year high, with construction being particularly worthy of mention as it reckons it will benefit from the government’s ambitions regarding housebuilding.

IN EMPLOYMENT TRENDS…

• SMEs are getting hit by rising wages, something that may get worse under a Labour government that is poised for an overhaul of workers’ rights. This is likely to increase overheads.
• Saudi Arabia is putting pressure on City firms with presence in the Kingdom to hire a greater proportion of local staff (the previously mandated level was 50% – it will now be 70%), which is making recruitment – which was already difficult – very tricky!
• Banking workers’ union Accord is calling on financial services groups to invest in major reskilling programmes to help the workforce adapt to an AI world. Citigroup said in a recent report that half of banking jobs could be at risk from automation.

IN INVESTMENT TRENDS NEWS…

• Unilever is walking back its commitments to plastic waste reduction and paying living wages in another example of companies reneging on their ESG promises. So it’s not only oil companies that are doing this!
• Vanguard has also watered down its commitment to back ESG measures as it voted to put in place precisely zero environmental or social shareholder proposals in 2024! This comes not long after we saw BlackRock behaving in a similar fashion. It seems like they are just trend followers like everyone else – and not the trailblazers they like to think they are.
• Investors are pulling money out of India after a period where it benefited from investors moving money out of China. Foreign ownership of Indian stocks is now at its lowest level for 11 years but locals continue to pour their savings into the market. Who will crack first??

IN TECH NEWS…

• IN AI-RELATED NEWS – Apple is in talks to invest money in OpenAI, which is holding its latest funding round. Word is that this funding round will give OpenAI an implied valuation of over $100bn. Nvidia shares have taken a pummelling in trading despite revenues more than doubling as expectations were high. The company has become a victim of its own success as it has a history of smashing expectations.
• Cybersecurity firm CrowdStrike had to cut guidance for the full year and it also outlined a downbeat assessment of the current quarter. This was bound to happen given that it was at the centre of one of the worst computer outages ever.

IN MEDIA NEWS…

• Meta’s chief Zuckerberg pushed back (very belatedly) against pressure from the US government to sensor anti-vax posts on his platforms during the pandemic. However, it does seems like Big Tech founders in particular are squealing at the prospect of tighter content curbs from regulators around the world.
• Telegram’s CEO was arrested in Paris on charges of “failing to prevent criminal activity” on his platform. Musk was obviously up in arms about this (perhaps because he could be next!) and this could have wide implications.
• Meanwhile, X faces a ban in Brazil as it has failed to comply with court orders. Musk is crying censorship while the judge said that he wants to protect democracy from misinformation and hateful content.
• Billionaire Edgar Bronfman decided to drop his bid for Paramount and get out of the way of Paramount’s previously agreed deal with Skydance.

IN RETAIL NEWS…

• Chinese retailer PDD, which owns Pinduoduo and Temu, announced that its revenues had fallen short of expectations thanks to tighter competition both at home and abroad. Investors freaked out and the stock dropped by 29%! Temu’s global expansion is losing momentum as it seems to be at the end of its rapid growth phase.
• In the US, shoppers are still going to the mall but they’re getting more picky while those on lower incomes are still suffering in the ongoing cost-of-living crisis – as evidenced by Dollar General’s downbeat outlook for the year. Meanwhile, Walmart has decided to open up its warehousing, delivery and returns services to third-party merchants in a move that echoes a similar strategy at Amazon, where over 60% of its sales on its website are for goods sold by third-parties. Walmart’s offering will be called Walmart Fulfilment Services and will launch on September 10th. Gap announced higher sales for Q2 and was quite upbeat about its prospects in Q3 as its turnaround continues.
• In the UK, the latest BRC figures show that footfall for August increased versus July while retail prices fell for the first time in almost three years, mainly thanks to clothing retailers having to sell their summer stock at a discount. That being said, Kurt Geiger said that it managed to increase sales by almost 10% last year thanks to customers buying “affordable luxuries” and its ongoing US expansion. Sainsbury’s announced that it is going to invest £130m in buying 10 outlets from Homebase and converting them into large supermarkets in its biggest expansion in over ten years!

IN CONSUMER GOODS NEWS…

• Lego announced record profits (although China performance was weak) and announced aims to have all of its products made entirely from renewable or recycled materials by 2032 by using plastic resin sourced from renewable or recycled materials.
• Birkenstock reported its highest ever quarterly sales as the whole “ugly” footwear trend continued. Birkenstock, Hoka, Asics and On Running have all benefited from this whole chunky shoe trend. The question is how long can this go on for??

IN LEISURE NEWS…

• Qantas announced a drop in profits as air fares continue to ease and Ryanair expects fares to continue to fall this winter by about 5%.
• Bingo halls are surfing the “experiential” leisure trend with the likes of Dabbers Social Bingo, Buzz Bingo and Rank Group (which owns Mecca Bingo halls) all benefiting. Although this sounds great, I’ve seen this happen before when money’s been tight so I would expect this to be a phase. Still, there’s a lot of money to be made in the meantime!
• Pubs are pushing back against a potential ban on smoking in outdoor areas including pub gardens, restaurant terraces and children’s playgrounds. We’ll have to see how this plays out, but if it does come into force I think it’s likely that hospitality venues will suffer.
• Everyone went mad about an Oasis reunion and tour. Apart from the band themselves, those that stand to benefit include promoters like SJM and Live Nation (which owns Ticketmaster).

• IN DRIVERLESS NEWS – Uber is going to fund British driverless car start-up Wayve and enter into a partnership where it’s AI software is going to be integrated into Uber’s network. Wayve’s software helps cars to “learn” driving by using videos and data from real life and it’s thought that this helps them to adapt better to the driving environment.
• IN EV-RELATED NEWS – GM has become the latest car maker to pull back on its EV commitments as it has decided to postpone production at its planned $3.5bn battery plant in Indiana, which it’s working on with Samsung SDI, by about a year to 2027. GM and rival Ford Motor have decided to delay or cancel various EV models given slower-than-expected demand. Hyundai has become the latest company to increase its investment in hybrid cars as the demand for 100% electric continues to tail off. The company said that it would double its hybrid range to up to 14 models in response to rising demand, especially in North America. Elsewhere, Polestar continues to struggle and BYD managed to post a rise in profits on strong EV sales. Meanwhile, research by Field Dynamics showed that there are still big “charging deserts” in the UK and figures from the SMMT show that car production dropped in July.

• IN FINANCIALS – LSE research shows that deal activity has been rising and Barclays boosted the half-year bonus pool, which would back that up. Meanwhile, Klarna said it wants to halve its workforce by increasing its use of AI and insurance and investment group Prudential managed to post first-half profits that came in above market expectations despite China weakness.
• IN REAL ESTATE-RELATED NEWS – Lloyds Bank just raised its borrowing limit multiple for first-time buyers from 4.49x to 5.5x household income in a move designed to help more people get on the property ladder and a report from Zoopla says that it looks like the housing market is heading for a brisk autumn. A report by Hamptons and Countrywide showed that first-time buyers made up 48% of house hunters in London this year – the highest proportion since at least 2010 – but we also saw ONS data which showed that the number of new houses built last year was disappointing.
• Eli Lilly launched a cheaper version of its Zepbound weight-loss drug which is half the price of its original injectable pen. Demand continues to be super-strong!

My favourite “AND FINALLY” video this week is the one with the incredibly talented chocolate artist!

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

*** HI THERE! Really sorry, but there appears to be a glitch in Watson’s Weekly for the first time ever! Basically, for some reason, there’s something funny happening with the links. 99% of them are behaving normally but you’ll notice that a few of them when you click on them you’ll have to click on a different part of the link to get you through to the relevant Watson’s Daily article. I’ll have to have a look at this but I just thought I’d let you know so that you know there’s nothing amiss your side! Apologies for that! All the best   Peter ***

This was the week when France announced a spending freeze, when PwC faced a China ban and when Waitrose announced extension plans…

• IN THE US – Kamala Harris’s economic policies got a lukewarm reception and were criticised by some as just being a list of gimmicks while Trump described them amounting to “communist price control”. Measures announced included hiking corporate tax, a ban on price-gouging in the food sector, a major boost in the housing supply and more tax breaks for families with kids and homebuyers. Meanwhile, the Fed looks highly likely to cut interest rates at next month’s meeting.
• IN EUROPE – we see that the Paris Olympics had a positive impact on the Eurozone but France announced a spending freeze and Germany’s manufacturing sector is still in a rut, which isn’t good because a) it’s the biggest economy in the Eurozone and b) it makes up a major part of Germany’s GDP.
• IN THE UK – public borrowing and income tax receipts boomed while private sector business activity grew by more than expected in August and by the fastest rate in four months. Meanwhile, chancellor Reeves is under pressure as she considers raising taxes and cutting spending in her October budget.
• IN MARKETS NEWS – global markets seemed to have made a full recovery after having a serious wobble recently and the MSCI cut the number of Chinese stocks from its global indices at its latest quarterly review, including stocks from countries such as India in their place.

IN COMMODITIES NEWS…

• IN OIL – investment in the North Sea is losing momentum as oil majors lose interest in investment because of the increasing tax burden they have to shoulder.
• IN GOLD – we’ve seen that Western investors are now buying into gold after a long period of Chinese buyers powering the gold price upwards. Westerners are buying ahead of expected US interest rate cuts while Chinese have been putting money into gold because they are seeking a safe haven from their embattled economy.
• IN COPPER – we heard that the CEO of Antofagasta, one of the world’s biggest copper producers, reckons that copper prices will recover from lows and be powered longer term by the move to net-zero (one of its uses is in EV batteries).

IN CRYPTO NEWS…

• US crypto manager Bitwise Asset Management closed a deal to buy London-based ETC Group as it dips its toes into European waters for the first time. This comes just months after US retail broker Robinhood bought European crypto exchange Bitstamp for $200m in June.

IN BUSINESS TRENDS NEWS…

• IN ASIA-RELATED BUSINESS TRENDS – China has started an anti-subsidy investigation into European dairy imports, presumably in a tit-for-tat move following the EU’s recent decision to slap a load of taxes on imports of EVs from China. In the same vein, PwC is bracing itself for a ban (and big fine) on doing business in China for six months for its part in the collapse of property developer. Meanwhile, it seems that China is becoming an increasingly tricky place to make money for foreign carmakers and Vietnam continues in its efforts to attract investment as companies and industries try to diversify away from China but stay in the region.
• IN ENVIRONMENT-RELATED TRENDS – clean fuel start-ups are collapsing as investors are increasingly focusing on profitability rather than growth and BlackRock’s support for ESG measures seems to be losing momentum in a backlash following the last few years of greenwashing and “woke capitalism”.
• IN INSOLVENCY TRENDS – a report from the UK’s Insolvency Service showed that more companies fell into insolvency in the year to the end of July than was recorded in the same period in 2008-9 at the time of the financial crisis. Falling consumer spending thanks to the cost-of-living crisis proved to be particularly painful for the retail and hospitality sectors. Across the Pond, a report from Carta showed that start-up failures in the US have rocketed up by a chunky 60% over the past year as founders run out of cash that flowed freely in the tech boom of 2021-2022. Carta said that the current rate of bankruptcies is over seven times higher than it was when it started tracking them in 2019!

IN EMPLOYMENT TRENDS…

• One of Britain’s biggest recruitment agencies, Hays, saw annual profits more than halve and it doesn’t see signs of improvement in the jobs market any time soon although the latest stats from job site Adzuna showed that vacancies increased for the first time this year, with the number of job ads rising by 1.1% in July. Elsewhere, a group of unionised vets went on strike in the first industrial action affecting the vet sector in the UK, UK unions are now pushing for “pay restoration” from the government after years of under-investment and it looks like deputy PM Angela Rayner’s crackdown on workplace harassment is going to bring the end of the office party as it will put more burden on employers to ensure they’ve taken “all measures” to prevent the sexual abuse of staff.

IN CONSUMER TRENDS…

• It looks like US consumers are really seeking out the bargains as Target, TJX and Walmart all did well over the latest quarter thanks to their cheap-and-cheerful offerings! It was also interesting to see signs of a recovery in demand for non-food items.

IN RETAIL NEWS…

• IN SUPERMARKETS – Walmart continues to differentiate itself from rivals as it broadens its revenues streams (e.g. a third-party online marketplace, digital advertising and membership schemes), Waitrose announced its first raft of new store openings since 2018 and Asda’s owners are under increasing pressure as it continues to lose sales and market share, according to the latest stats.
• 7-Eleven’s parent company, Japan’s Seven & i Holdings, announced that it had received an acquisition offer from the Canadian owner of Circle K, Alimentation Couch-Tard, which boosted Seven & i’s share price by 23% initially.
• JD Sports announced strong results, mainly thanks to a solid performance in the US market, which helped to offset falling sales in the UK over Q2.
• LVMH-owned Sephora announced job cuts in China as another sign of difficulties in the beauty sector over there. The sector has become increasingly tricky over the last few years thanks to improving domestic competition and the availability of cheaper products on platforms such as Alibaba and Tmall.
• Shein is considering selling shares directly to retail investors if it does an IPO in the UK. This is quite an unusual step for a deal of this size (the shares usually only go to institutional investors) and I wonder whether the company is considering this because it thinks that they will be more willing to pay a higher price (because they don’t really look at valuations)…
• Ted Baker shut its remaining UK stores as a potential licensing deal with Frasers Group hit a bump.

IN LEISURE NEWS…

• IN RESTAURANTS – data from the Hospitality Market Monitor showed that the UK’s casual dining sector is staging a bit of a comeback after a horrendous few years and McDonald’s announced that it would be opening over 200 additional outlets in the UK and Ireland over the next four years. This represents its biggest expansion since 2002.
• IN TRAVEL/TOURISM – the latest research from the CEBR think-tank shows that there is still a shortfall of foreign visitors to Britain versus pre-pandemic levels although passenger numbers at Gatwick edged up over the first half of the year. Short-haul has been particularly strong while long-haul has been slower to recover. London City Airport got permission to expand. This is expected to result in a near-40% increase in passenger numbers at the airport in one of the government’s first infrastructure decisions.
• Consumers are really appreciating experiences as data from the Hospitality Market Monitor highlighted the increase in the number of new hospitality venues – the first quarterly increase since mid-2022! The increase in the number of themed “competitive socialising” bars has been particularly notable (up by 28.9% in June versus the previous year!). Elsewhere, Universal is seeking out incentives from the government to build a theme park in Bedford. Given the likely economic benefit to the area and the country as a whole, I’m sure there will be some pretty chunky incentives on offer from our government!

IN AI-RELATED NEWS…

• OpenAI joined opposition to the California AI safety bill which is a piece of legislation (which is called SB 1047) that is intended to make AI safer for users. The California State Assembly is due to vote on the bill by the end of the month.
• The tech industry is now looking at suitable sites for data centres to power AI – and this is now including old power stations and industrial sites because they have the necessary area and are designed to take a lot of power.
• It seems that AI’s “killer apps” at the moment are AI-powered coding assistants which provide a significant boost for software engineers. The likes of Replit, Anysphere, Magic, Augment, Supermaven and Poolside AI (and others) have managed to attract almost $1bn of funding since the beginning of 2023. Using AI-assisted coding means that you can build more tech more quickly, so it is easy to see the value in this area. Meanwhile, the gaming industry continues to benefit from AI as it can help to create high quality visuals in a fraction of the time it normally takes and South Korea is at the cutting edge of AI in the classroom as it’s planning to use it in screen-based textbooks that can adapt to a user’s abilities.
• On the other hand, Research from Arize AI shows that 56% of America’s biggest business see AI as a potential risk to their business – a massive jump from the 9% it was at in 2022. Legal, regulatory and cyber security AI risks were cited as areas of concern.

IN OTHER TECH NEWS…

• AMD agreed to buy ZT Systems, which makes data centre equipment, in a deal worth $5bn in a move to try and close the gap with Nvidia.

IN MEDIA NEWS…

• Meta’s Facebook and Instagram platforms have been used by drug dealers and the like to advertise their wares despite claims that the platforms enforce a strict ban on such activities. It certainly shows that there is a real need for regulators to get tough to stamp this out.
• Walmart has become a serious player in advertising – its US advertising business has grown by 30% over the last year! One key differentiator that Walmart has over others is that, because it’s a retailer, it can track what people actually buy. It sounds like Walmart’s only just getting started!

• IN EV NEWS – although the EU implemented new tariffs on EV imports from China, Tesla managed to escape the worst of them, but they’ve still got to be approved by the EU’s 27 member states at the end of this month. Ford decided to cancel plans to make an all-electric large SUV, which was due to be the successor to its F-150 Lightning electric pick-up truck. Sluggish EV demand and increased competition from Chinese makers were cited as being among the reasons.
• IN DRIVERLESS – US regulators closed an investigation into GM’s Cruise self-driving system and then we heard that Uber announced a partnership with Cruise which will see the latter’s cars being used by the former from next year in an undisclosed location! This deal is similar to the one signed with Cruise rival Waymo in the city of Phoenix.

• IN REAL ESTATE-RELATED NEWS – China’s $70bn property rescue plan has got off to a slow start (i.e. it’s not really helping the situation) while in the UK, the market looks mixed. Rental property affordability is at its worst since at least 2017 but that’s at least partly due to loads of London landlords selling up. Meanwhile, Barratt is pushing ahead with its proposed takeover of Redrow despite the CMA’s reservations.
• A survey of execs concluded that management consultants were largely useless 🤣. They’ve culled tons of employees over the last year or two (so they should be a lot leaner than they were) and are now pivoting towards advising companies on how to implement AI.

My favourite “AND FINALLY” video this week is this one with dogs behaving amusingly 🐕 (or indeed dog owners editing videos amusingly 🤣)!

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

This was the week when Japan’s Prime Minister resigned, when Mars bought Kellanova and when X was involved in a lot of drama…

• IN THE US – Kamala Harris edged ahead of Trump in a survey about who voters trusted more on the economy, Trump ranted about Harris trying “to be more Trump than Trump” in what he described as “the greatest interview ever” with Musk on X and he promised an “economic boom” if he got elected. Meanwhile, the ruling Democrats got a boost as inflation in the US dropped unexpectedly to its lowest level since March 2021. IMO, Harris will maintain momentum as long as the economy chugs along OK but if things slide, Trump will definitely press this as a weakness. This makes interest rate cuts more likely.
• IN CHINA – we saw that China’s industrial production growth slowed down slightly in July. Given that Xi is trying to get the industrial sector to pull China out of its current rut, this isn’t ideal (but it’s not yet disastrous).
• IN JAPAN – PM Fumio Kishida bowed to pressure and announced his resignation. The fact that markets took this pretty much in their stride just shows how ineffectual most politicians are in Japan with regard to the economy. Contrast this “meh” reaction with the market gyrations following Truss’s disastrous time in power.
• IN THE UK – inflation growth rose, but not by as much as markets were expecting, so that was a relief. The key here is that although the headline rate was up, underlying services sector inflation (which has proven to be stubbornly high thus far) fell by more than expected. Meanwhile, the latest figures from the ONS showed that GDP growth over the latest quarter perked up in line with market forecasts, a nice boost for chancellor Reeves heading into the Budget at the end of October. Talking of Reeves, it looks like she’s trying to get a PFI-style deal sorted for a new £9bn Thames crossing, getting the private sector to become more involved in public infrastructure projects.

IN MARKETS NEWS…

• Markets generally fell back to levels pre-panic this week. Where’s all that clever-sounding talk of the unwinding of the Japanese “carry-trade” now, eh?? They were also helped by better data from the US on jobs and retail spending.
• The rouble took a hit after Russia’s currency hit its lowest level since late May after Kyiv launched its biggest attack within Russian territory since the war started in 2022. The rouble has lost ground to the dollar for five consecutive trading sessions since the attack started.

IN BUSINESS TRENDS NEWS…

• Companies are getting increasingly nervous about doing business in China thanks to a waning of interest in foreign brands and intensifying competition combining in a toxic mix. We also saw the latest balance of payments data from the State Administration of Foreign Exchange which shows that investors pulled a record $15bn of cash out of China over Q2, which reflects investor concerns.
• There was a lot of news about students this week! The UK student housing crisis looks like it’ll benefit specialist developers like Unite Group and Empiric – and, in fact, we heard at the end of the week that Empiric decided to whack up student accommodation rents by 10%! A lot of UK universities are in financial trouble at the moment and are being advised to cut costs. Their situation isn’t being made any easier as international student numbers are still below previous highs.

IN CONSUMER TRENDS…

• IN TERMS OF WAGES – German wages are soaring at their fastest rate since records began, which is prompting some to question the need for the widely-expected interest rate cut next month at the ECB’s meeting. In the UK, though, wages growth slowed down to its lowest rate in two years while unemployment also fell unexpectedly sharply.
• IN TERMS OF SPENDING – the latest Kantar data showed that grocery price inflation in Great Britain actually increased for the first time in 17 months. Rather than signifying disaster, this could just mean that prices are normalising after 17 consecutive months of price decreases.
• IN TERMS OF TAXATION – it looks like calls for the super-rich to pay more in taxes appears to be gathering momentum. 19 former heads of state signed a joint letter calling for higher taxes on the super-rich just a few weeks ago. Even a recent meeting of the G20 finance ministers agreed that more needed to be done to tax the global super-rich.

IN CONSUMER GOODS NEWS…

• Mars made a $36bn offer to buy savoury snack-maker Kellanova but it could prove costly, particularly as the popularity of weight-loss drugs may mean that people just snack less overall.
• Canadian cannabis company Tilray bought four craft beer brands from Molson Coors in a deal that’s expected to close this month. It has been growing its beer business and this latest acquisition will help to boost its presence in key markets. It’s still hungry for more, apparently!
• Carlsberg raised guidance for the full year but missed profit and revenue expectations. China weakness was cited as a factor, something echoed recently by Anheuser InBev and Heineken.

IN RETAIL NEWS…

• Walmart posted strong quarterly sales and the company was confident enough to raise full year guidance. It is worth noting that Walmart even saw a slight rebound in its general (i.e. non-food) category, which has been falling for 11 quarters!
• Home Depot announced disappointing quarterly results, but that’s to be expected given the lacklustre property market. It’s doing all the right things at the moment, so it’s just a case of hunkering down until the good times roll once more!
• Alibaba posted weaker-than-expected profits and revenues for the latest quarter amid tough domestic competition, a tricky economy and nervous consumers.
• Amazon got the go ahead from the CAA to test-fly drones beyond a human controller’s line of sight in the UK, which could be a precursor to using them to make home deliveries. Realistically though, I can’t see drone home delivery for quite some time given how complicated it’s likely to be. FWIW, I think its use is going to be pretty niche…
• Asda’s sales slowed down and it was the only major UK supermarket to see a downturn in trading. I think that the Issa brothers/TDR Capital acquisition back in 2021 has proved to be an expensive disaster and if nothing is done, Asda’s just going to fall into obsolescence. I think Chairman Rose needs to clear out all the senior management failures and start again. At least he knows what he’s doing (TDR Capital clearly don’t, not from a retailer’s perspective anyway).

IN LEISURE NEWS…

• Starbucks unceremoniously kicked out its failing CEO and replaced him with a shiny new one in the form of the super-successful CEO of Chipotle, Brian Niccol, who dragged the burrito chain out of the rut it found itself in a few years back. Clearly this guy’s got form in turnarounds – something that is badly needed at Starbucks.

• There was a lot of drama at X this week! EU Commissioner Thierry Breton warned Musk in an open letter that he had “due diligence obligations” regarding the spreading of “content that promotes hatred, disorder, incitement to violence, or certain instances of disinformation” under the terms of the Digital Services Act which Musk batted aside and the EU itself criticised as not being officially sanctioned.
• xAI launched its latest LLM, Grok-2 which, according to LMSYS, is able to mix it with the likes of Meta, Anthropic, OpenAI and Google despite xAI only being 18-months old! Talk about a catch-up!
• IN TERMS OF SOCIAL MEDIA CONTENT – the UK is looking at appropriate measures to take against social media platforms that overstep the mark in the wake of the recent riots. It is now looking at bringing in controversial new powers to force tech companies to remove “legal but harmful” content, which had been abandoned in 2022 due to strong resistance from the tech industry and advocates of free speech. This could enable Ofcom to crack down on the spread of the sort of misinformation that helped incite recent rioting. In the meantime, the 2023 Online Safety Act is being put to the test at the moment in cases that involve offences prohibiting the spread of false information.
• Apple announced that it’s going to open up the tech behind Apple Pay and Apple Wallet to third-party developers – for a fee, of course! This has come as a result of regulators in the US and EU pressuring the company to open up access.
• The US DoJ is looking at the potential break-up of Google following last week’s judgment that its power in search amounts to an illegal monopoly. It sounds bad, but TBH I think that “traditional” search is going to give way to AI anyway, so it may not actually be that bad in the end for Google.

IN MEDIA NEWS…

• Hot on the heels of the recent news about Disney seeing weaker spending at its theme parks, the company announced plans for tens of billions of dollars to be invested in theme parks (which is part of the “Experiences” division that also includes cruises and videogames) to address the issue. This is important given that the Experiences division made up a whopping 69% of the company’s operating income in fiscal 2023.

• IN PLANNING – it looks like councils and public bodies in England will be getting more powers to buy greenbelt land without overpaying. Landowners who refuse to sell will be subject to Compulsory Purchase Orders (CPOs) that would force them to hand over land if a site is to be used for a “quality housing scheme” that is in the public interest.
• IN COMMERCIAL PROPERTY – data from CoStar shows that offices in the UK are selling for 18% less than owners were hoping for. This represents the biggest discount since the financial crisis 15 years ago! Demand for top-end eco-friendly offices is extremely tight, but offices that don’t meet these standards and require upgrading to meet them are not so popular for buyers, hence the discounts.
• IN RESIDENTIAL PROPERTY – PE firm Blackstone just offloaded 3,000 shared ownership homes to the UK’s biggest private pension fund, USS, in the biggest affordable housing deal of its kind. Meanwhile, the latest research from Savills shows that the share of first-time buyers getting help from the Bank of Mum and Dad (“BOMAD”) is at its highest level since 2012, with 57% of buyers getting some help from relatives over the course of 2023.
• IN DEVELOPER NEWS – Balfour Beatty’s profits took a beating due to the costs related to a US military housing scandal while Bellway ditched its proposed acquisition of Crest Nicholson at the last minute. No doubt everyone will now be thinking that Crest Nicholson has something unattractive buried somewhere that Bellway didn’t like in its due diligence.

• IN AUTOMOTIVE-RELATED NEWS – the latest figures show that BMW is within touching distance of Tesla’s crown of being number one in Britain’s electric car market! The latest figures show that, so far this year, BMW has sold more electric cars than it did in the entirety of 2023! It was really interesting to hear that an American start-up called Natron Energy is about to invest $1.4bn in building its first big plant in North Carolina. The company is focused on making sodium-ion batteries which are cheaper to make and safer than lithium-based batteries that currently power EVs. Will this help to wean the West off reliance on China??
• IN FINANCIALS NEWS – cyber insurers like Beazley are the biggest winners from the massive recent IT outage because a lot of companies weren’t covered (so they won’t have to pay out as much as they would have done if they had!) and now that everyone’s seen the damage it can do, they will probably rush to get some cyber cover! In banks, the tables are turning as Revolut is now being courted by the government because the latter wants the former to list in the London instead of New York – a reversal of Revolut’s courting of the government prior to getting a UK banking licence last month!

My favourite “AND FINALLY” video this week – by far 🤣 – was the one with the kids in the car arguing which parent was better 🥰!

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

This was the week of immigration riots, a major markets sell-off and a big setback for Google (and ultimately, Apple)…

• IN THE US – it seems that the Democrats have closed the gap with the Republicans in the presidential race as Harris’s emergence has given their campaign new pep. Talking of which Kamala Harris announced her new running mate, Minnesota governor Tim Walz. It’s all smiles and rainbows now but signs of a wobble in the US economy could make things harder for Harris to get elected because it could cause the Democrats’ stewardship of the economy into question and last week’s worse-than-expected jobs data prompted Goldman Sachs to raise its estimates on the chances of the US slipping into recession.
• IN CHINA – we saw that Chinese inflation rose faster than expected in July, according to the latest official data. It looks like this is probably because of higher prices as consumers remain pretty cautious about spending at the moment. Also, China’s export growth lost momentum while imports rose, according to the latest official figures from Chinese customs authorities.
• IN EUROPE – the EU has inched ever-closer to a trade deal with South America – something that has been in the works for the last two decades! Will this be a case of better-late-than-never??
• IN THE UK – Chancellor Reeves went on a three day visit to New York to drum up business/investment and Canada to get ideas about consolidating UK local government pension funds (Canada has done this for quite some time), which she thinks will give them a bigger pool of money that will enable bigger and more sustained investment in UK assets and infrastructure (although, ironically, the big Canadian funds are often criticised for investing more in non-Canadian assets!). The good economic news keeps on coming – and although it came too late to benefit Sunak and chums, the ONS said that the UK economy emerged from the pandemic in better shape than had initially been thought and it upgraded its GDP growth figure for 2022. Updates for 2023 and 2024 estimates will be incoming in September. The flipside of this is that there is a risk that a strengthening UK economy might mean higher interest rates for longer to calm services sector inflation in particular. On the subject of employment, the government is looking to ditch anti-strike laws (which I think will store up problems for the future) while, at the moment, wage growth is slowing down according to the latest report by KPMG and REC. The government is also looking at potentially restricting overseas hiring in some high-skilled areas, in a departure from the policy we’ve seen until now. There were anti-immigration riots this week as tensions flared between right-wing extremists, who mobilised using platforms including X and Telegram, and supporters of migrants. It has all been powered by ignorance because immigrants, contrary to popular belief, do not take up much in the way of resources, the majority of them are here on proper visas, their effect on crime is miniscule and they actually contribute more to the NHS than they take out. In other developments, the UK is going to introduce a bill to regulate ESG agencies in a crackdown on the whole sustainable ratings industry. It’s about blimmin’ time!!!
• IN BANGLADESH – we see that the long time PM of Bangladesh, Sheikh Hasina resigned ran away to India following weeks of anti-government demonstrations. Unrest continues…

IN MARKETS NEWS…

• Markets tumbled this week as investors got spooked by last week’s disappointing US jobs data and the surprise interest rate rise implemented by the Bank of Japan. There was talk about the sell-off being due to the “unwinding of the carry trade” but I think that was a load of old ⚽🔒🔒, particularly as Japanese interest rates are still very low compared to pretty much everywhere else. Markets bounced back, but I’m sure that this has shaken many investors from their summer stupor (at least for the moment).

IN COMMODITIES NEWS…

• IN LITHIUM – mining giant Rio Tinto is backing Aussie start-up, ElectraLith, that is developing a lithium extraction technology that could enable access to new reserves of the key EV battery ingredient that would reduce the world’s reliance on China. Meanwhile, the world’s biggest lithium producer, Albermarle, is now pushing for governments for more help to break the dominance of China in the supply and refining of lithium, a key ingredient in EV batteries. This action has been prompted by the recent collapse in the price of lithium, meaning that non-Chinese producers (whose production costs are higher than China’s) are suffering particularly badly.
• IN COAL NEWS – investors voted overwhelmingly for Glencore to keep its coal business and not spin if off to list in New York. It seems that being in the black is valued more highly than being green…
• IN OIL – Saudi Aramco opted to pay out record dividends despite shrinking profits. However, don’t read too much into this as Saudi Aramco is an unusual company in that the government owns 81% of it and its sovereign wealth fund owns 16%, which makes it a bit of a piggy bank for the state 🤣. Normal drivers don’t really apply here!

IN BATTERY NEWS…

• China’s battery industry faces consolidation as demand for EVs both domestically and abroad continue to weaken. There’s probably a lot of scope for it given that there are currently about 50 Chinese EV battery groups producing in China’s domestic market alone.
• A Mercedes-Benz EV – that wasn’t charging at the time – caught fire in a South Korean underground car park causing massive amounts of damage as the fire took eight hours to extinguish. I would have thought this will be bad for EV insurance premiums (surely they’ll go up after this?) and South Korean EV makers like Hyundai (which is a pain because Hyundai is at the forefront of this category) and it will give everyone another reason not to buy an EV.

IN VEHICLE NEWS…

• Lucid got an additional $1.5bn from Saudi Arabia’s sovereign wealth fund, the PIF (which already owns about 60% of the company). This will come in very handy as we all know that EV start-ups burn cash like crazy. It’s good that it has such a deep-pocketed sugar daddy to rely on – particularly given weak demand for EVs at the moment.
• In China, sales of EVs have now surpassed those of traditional cars for the first time, according to the latest figures from the China Passenger Car Association. At least some of this was down to a government programme pushing more aggressive incentives to encourage the replacement of cars.
• In the UK, the SMMT showed that carmakers have cut their forecasts for EV sales this year thanks to ongoing sluggish demand. Although the number of EV registrations trended higher in July, sales to private customers continued to fall. On the plus side, the latest data from the SMMT shows that sales of used EVs in the UK have been rising thanks to weaker prices.

IN TECH NEWS…

• Google hired the founders of chatbot start-up Character.AI but you do wonder whether this is going to attract the attention of the regulators down the road as it does look very much like a takeover in all but name!!!
• OpenAI lost another co-founder, this time John Schulman, to Anthropic – the latest OpenAI employee to jump ship. Staying on the subject of OpenAI, Elon Musk has decided to sue OpenAI again, alleging that the company manipulated him (Musk) into co-founding the AI company. He only recently withdrew a similar lawsuit without explanation. There is something very weird going on with Musk at the moment IMO.
• Meanwhile, the CMA launched an investigation into the Amazon/Anthropic deal to decide whether it was anti-competitive. It will decide whether or not to progress to a “Phase 2” investigation by October 4th.
• IN CHIPS NEWS – Intel looks unlikely to turnaround any time soon despite the drastic cuts announced last week because it’s still suffering from a combination of Intel’s spending, poor demand for PC chips and customers opting to buy Nvidia’s chips instead of theirs. Meanwhile, next-gen chips from Nvidia
• IN APPLE-RELATED NEWS – Apple has made additional App Store changes in a bid to avoid EU fines, changing its EU business terms for the fourth time in four months to comply with the DMA. Basically, Apple is going to open up the iPhone to competitors’ app stores and payment methods, allowing developers to direct users outside its App Store. There was also bad news for Apple as it turns out that investor Warren Buffett sold pretty much half of his stake in the company over Q2 and Google lost a lawsuit (more of this below), meaning that Apple may lose some very handy income which may actually open opportunities for Google’s rivals.
• IN GOOGLE-RELATED NEWS – Google lost its landmark US antitrust case (this was about having too much power in search) and was judged to be “a monopolist, and it has acted as one to maintain its monopoly” by the DoJ. We await the “punishment” while Google says that it will appeal the decision. Repercussions could be wide-ranging and may potentially encourage competition. Also, an investigation by the FT showed that Google and Meta did a dodgy marketing project that circumvented Google’s own rules about targeting minors online. Google did a marketing project for Meta designed to target 13-to-17-year-old YouTube users with ads promoting Instagram. Interestingly, the FT confronted both companies with its findings and the project, that was due to be rolled out more widely, has now been ditched. Will this be swept under the carpet?? It sounds pretty darn serious to me!

IN MEDIA NEWS…

• Disney’s results were mixed. On the one hand, Disney made its first ever streaming profit (and we saw that it plans to jack up the price of its most of its streaming plans later this year) but then its parks business suffered because US consumers are reining in spending.
• Warner Bros Discovery made a big write-down of its cable TV business. It was so big, in fact, that it pushed the company into loss. Paramount also made a big write-down of its channels and it also announced a 15% in its US workforce as a consequence of its recently-announced merger with Skydance.

IN SOCIAL MEDIA NEWS…

• X announced that it was going to sue the Global Alliance for Responsible Media for the “illegal boycott” of its platform. It also shut down its San Francisco HQ and pushed back against accusations that it stoked the UK riots. I think that Musk is either a) going mad, b) becoming so outrageously arrogant that he thinks he is above everyone, c) is stirring because he’s got some new car/initiative to push and/or there’s something bad going on in the background and he wants to distract attention because IMO why would you SUE your customers for making a decision they are entitled to make?? Also, he must be in denial if he thinks that X didn’t have any role to play in the riots. How would he feel if he lived here and was targeted because of this? Would he be such a defender of free speech if he or his family were targeted, enabled by his own social media platform?? I think he’ll eventually drop the GARM lawsuit as it seems to me he’s just trying to make a point. I also think that if he keeps behaving like this, he’s going to alienate people – and that’s not good for business. Sales of Tesla’s cars are already looking pretty ropey…
• Telegram (as in the social media platform, not the old fashioned method of communication 🤣) saw usage boom during the riots as extremist groups took advantage of the platform’s “hands off” approach to content moderation. Telegram seems to be the extremists’ communication platform of choice when things get rough. It gained a lot of notoriety in the Capitol Hill riots of 2021. This is going to sound mega-cynical but given all the tensions around the world right now, I wonder whether Telegram is going to see a surge in usage. The only thing, though, is how you would monetise a platform like that. As an advertiser, would you want to be associated with such a platform?? Maybe if you sell weapons, ammo etc…

IN CONSUMER NEWS…

• The US consumer spending slowdown is hitting travel and leisure groups – theme parks (e.g. Disney and Comcast-owned Universal Studios), Airbnb rentals, hotels and airlines are feeling the slowdown particularly keenly.
• Consumers in the US and China continue to rein in spending because of the cost-of-living crisis and real estate problems/increasing economic concerns respectively.
• Consumers in Muslim countries are boycotting major global brands because of their stance on Gaza – and the likes of Coca-Cola, KFC, Starbucks, Mondelez and Pizza Hut are getting hammered.
• Consumers tripled spending in pubs thanks to the Euros but overall spending fell in July. It was also interesting to note that 100% dry bars (i.e. no alcohol) are having a tough time surviving at the moment, mainly because customers don’t buy as many drinks per visit. Although they may be great for certain groups, I think this is ultimately a fad and that conventional venues will just provide more non-alcoholic options.

IN RETAIL NEWS…

• Prada continues to win in the luxury slump and its Miu Miu brand is doing really well at the moment.
• Cornish fashion brand Seasalt is doing really well at the moment and benefited from an expansion of its shop portfolio in its annual results.

IN LEISURE NEWS…

• I’ve already touched on this above but although Airbnb had a strong Q2, it announced disappointing Q3 revenue forecasts thanks to a slowdown in its domestic market.
• The UK Domino’s decided to pull back its full-year forecasts as the cost-of-living hit customers’ pockets. Domino’s had a disappointing start to the year but things have actually been picking up since the middle of May.

• IN CONSTRUCTION & REAL ESTATE NEWS – the latest construction sector PMI showed that the sector grew at its fastest pace since May 2022 in its fifth consecutive month of growth, which sounds encouraging! UK estate agents expect residential property prices to continue to rise and housebuilder Persimmon is also getting more confident about the market’s prospects. In commercial property, the strong demand for high-spec office property continues.
• IN FINANCIALS NEWS – French bank SocGen said that it wants to sell its UK and Swiss private bank businesses in an effort to streamline operations, Barclays has become the latest bank to ditch the bonus cap and insurer Beazley managed to double its first half profits despite concerns about the effect of the Crowdstrike outage and investment manager Abrdn announced early signs of recovery thanks to a slowdown in client money outflows and improving profitablity.
• IN PHARMA NEWS – Eli Lilly announced a strong set of results thanks to the success of its diabetes and weight loss drugs and it also announced an investment into isotope supplier Ionetix, which makes an isotope that is a key ingredient in many radiopharma drugs. In contrast, its weight-loss drug rival Novo Nordisk is suffering at the moment thanks to supply chain bottlenecks, so it had to cut its full year forecasts.
• IN PRO SERVICES NEWS – there was some debate as to whether AI could transform the traditional billable hour given that the use of AI can save a lot of time (and resource!). Will it result in more firms employing a flat fee structure?? In accountancy, 30 Chinese companies ditched PwC as an auditor and then Evergrande’s liquidators launched a legal action against the Big Four accountant for its role in the real estate giant’s downfall.
• Uber managed to return to profitability as its Q2 results beat market expectations thanks to decent performances from its core ride share and food delivery businesses. The company is also pretty confident about the outlook.

My favourite “AND FINALLY” video this week was this weirdly addictive music video!

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

This was the week when everyone reacted to Trump getting shot, when chip stocks took a beating and when Netflix hit record revenues…

• IN THE US – everyone was reeling from the assassination attempt on Trump! Basically, most people (including Biden disciples) reckon Trump is nailed on for the win, so bitcoin jumped (Trump is bitcoin-friendly, apparently) and TSMC shares fell (because Trump is not particularly supportive about continuing to defend Taiwan). Donations for Trump’s campaign flooded in and he picked his running mate, Ohio senator JD Vance. A Trump/Vance maganomics agenda could result in trade wars, tax cuts for American businesses and individuals, a rolling back of climate commitments and the promotion of fossil fuel production. Meanwhile, the pressure continued to build on Biden to give up by increasingly high-profile individuals while the Fed made noises about an interest rate cut. The market is expecting a September cut.
• IN CHINA – official figures showed that the country’s GDP growth rate lost momentum in Q2 but there’s still time for it to make up ground to hit its “around 5%” full year GDP growth target.
• IN EUROPE – Ursula von der Leyen got a second terms as EC president, the ECB left interest rates unchanged but German manufacturing output was disappointing, according to the latest figures from Eurostat. It dragged down the performance of the rest of the bloc as a result.
• IN THE UK – the IMF upgraded growth forecasts for the UK but cautioned that interest rates will stay high unless service sector inflation falls. Economists at various investment banks upgraded their UK growth forecasts following the conclusion of the Euros football tournament and the government’s agenda was set out in the King’s speech. There were some areas that weren’t covered – there were no bills covering the regulation of AI, none giving 16-year-olds the right to vote and nothing on social care. Still, I guess it’s early days. Among other things, Labour is getting started with the process of nationalising railways and Starmer is looking to improve relationships with Europe. For now, it looks like hopes of an imminent rate cut from the Bank of England are receding because although the headline inflation figure of 2% is pretty good, service sector inflation remains stubbornly high.
• IN SOUTH AFRICA – President Ramaphosa did his first state of the nation address as head of a coalition government. He made largely pro-business noises about committing to the country’s economic revival and investing heavily in infrastructure. We’ll have to wait to see whether he executes this successfully!

IN ENERGY NEWS…

• Italian PM Meloni is planning on reintroducing nuclear energy 35 years after the country shut down its last nuclear power plant via investments in small modular reactors that could be operational within 10 years and help the country to cut its reliance on imported fossil fuels.
• The Labour government has committed to accelerate investment in green energy by streamlining the planning process (among other things!) and setting up Great British Energy. It will take quite some time to see the fruits of these efforts but at least they are going the right way!

IN COMMODITIES NEWS…

• Anglo American has decided to make additional production cutbacks at its De Beers diamond business. Prices have fallen because of high inventory levels but they have also weakened because of slower demand from Chinese customers and, I would suggest, the rise of synthetic diamonds.
• The prices of cotton futures have dropped to their lowest level since October 2020, which is less than half of the decade-high peak they reached in May 2022 thanks to a major rise in production in Brazil. Meanwhile, global demand has decreased thanks to higher take-up of man-made petroleum-based fabrics like polyester, which cost less and are cheaper to produce than cotton.

IN BUSINESS TRENDS NEWS…

• Fears of a trade war with China have increased as the WTO criticised China’s lack of transparency in how it subsidises industry in its latest report. It voiced particular concerns about the EV, semiconductor and steel industries.
• Shipping continues to be disrupted thanks to ongoing attacks on merchant vessels by Yemeni Houthi rebels in the Red Sea and resulting impact on traffic in the Suez Canal. Maersk, the world’s second-biggest container shipping line, reckons that the situation will continue to stretch capacity.
• The world’s biggest industrial property company, Prologis, highlighted an interesting trend as it raised its annual forecasts – that the slack in warehouse demand is being taken up by warehouses being converted into highly lucrative AI data centres!

IN EMPLOYMENT TRENDS…

• The UK job market is cooling down, according to the latest figures from the ONS. Annual pay growth is slowing down while unemployment is going sideways. That being said, wages are rising faster than inflation at the moment (that hasn’t always been the case over the last few years!) so there is still a danger that inflation could remain stubbornly high.
• The WFH trend is continuing as research from CBRE shows that just 43% of white-collar workers are commuting to work at least three times a week (mind you, that’s up on 37% this time last year!) while 71% make the commute two days or more. This should be good news for companies that supply office workers (e.g. Compass Group, which runs a lot of work canteens).
• Employers are getting a bit nervous about Labour’s promises to overhaul workers’ rights because they think it’ll make recruitment more expensive and potentially less flexible. Mind you, if reforms had been made maybe Amazon workers would now be unionised – but they aren’t now because the GMB union didn’t get enough votes in the ballot held this week.
• Microsoft cut its Diversity & Inclusion team because of “changing business needs” and no longer sees the function as being “business critical”. I guess that companies fell over themselves to have this in the wake of the #BlackLivesMatter and #MeToo movements and I suspect that leaders think they can get the same guidance from outside contractors rather than having a dedicated function in house.

IN EV NEWS…

• IN SALES – dealerships are hopeful that the transition to EVs will get more people buying new cars more often as they have faster replacement cycles. Meanwhile, in the UK, sales of used EVs are going up as prices are coming down as early adopters are flooding the market.
• The UK’s charging network is growing at a rate of a new one every 25 minutes, according to a report by ChargeUK. The vast majority of the UK’s 1m chargers are home chargers and at businesses whereas just 65,000 of that number were public chargers, so there is still a long way to go!
• Serbia has promised to prioritise the supply of lithium to European car manufacturers over Chinese ones when it develops one of the world’s biggest deposits of lithium in the north-west of the country. This could be a major boon to Europe’s EV industry as it could produce 17% of EU demand.
• As things stand, the UK has no plans to impose tariffs on EV imports from China, which puts us on a different path to the EU. Cue a massive influx of Chinese EVs on UK roads!

IN CONSUMER NEWS…

• UK retail spending is rising, according to the latest figures from Kantar. It was interesting to see that sales at supermarkets boomed with the Euros football frenzy but grocery price inflation fell to its lowest level since September 2021.

IN RETAIL NEWS…

• A lot of luxury brands are having problems at the moment. Some aspirational brands including Versace, Burberry, Marc Jacobs and Bottega Veneta are offering discounts of up to 50% as China’s middle-classes continue to rein in the spending. Burberry has brought in a new CEO to sort things out – but they are not alone in experiencing difficulties. Hugo Boss had to cut its full-year forecasts and Richemont also cited China weakness as a factor in its poor performance. UK retailer Frasers Group also said it had experienced weakness in luxury sales but seemed to be pretty blasé about it, saying that they were confident things would bounce back.
• Ocado announced upgraded cashflow and earnings forecasts, but then again it has built a reputation over the years of over-promising and under-delivering.
• Hotel Chocolat announced plans to open 25 new stores with the backing of its relatively new owner Mars, the confectionary company that bought it last year for £531m.

• Given all the hype, it is worth considering why AI might not succeed as much or as quickly as everyone thinks it will. It’s in the early stages of development, there isn’t any obvious “killer app” at the moment, it’s not a given that the returns will justify the enormous capex it’s sucking in at the moment, the impact of AI is still unclear and we don’t really know yet whether it really will be as transformative as the hype would suggest.
• China is making progress towards the creation of a socialist AI as the Cyberspace Administration of China (CAC) is batch-testing LLMs from the likes of ByteDance, Alibaba, Moonshot and 01.AI to see whether their LLMs “embody core socialist values”. I have to say that I think this is great news for the Americans in particular because I think that AI is only as good/useful as the information it feeds on. If that is restricted in any way then I think this will limit its long-term usefulness (or at least it won’t be as good as AI that is developed more freely using more information sources).
• Bitcoin miners are trying to benefit from AI by converting their data centres into more AI-friendly ones. Rewards for bitcoin mining recently halved and AI is now the hot ticket with demand for facilities outstripping demand. This is great for both sides – the miners get access to higher and more stable revenues and the AI lot get faster access to the computing power they need!
• Chip stocks took a pasting this week thanks to the market’s perception of Trump’s increased chances of winning the presidency because he is noticeably lukewarm on committing to the defence of Taiwan. There are concerns about whether exports of advance chips/chip-making equipment to China will get tighter as well.
• IN CHIP NEWS – TSMC raised its full-year forecasts as it bet on a prolonged AI boom. TSMC accounts for over 90% of the world’s most advanced chip production but the fragile geopolitical situation can’t be ignored. Meanwhile, OpenAI and Broadcom entered talks about developing a new AI chip (but don’t get too excited – that’s likely to be miles away if it ever happens!) as OpenAI understandably wants to broaden its supply chain (it’s very Nvidia-heavy at the moment!).
• Meta has decided not to release its AI model in the EU as it says  that regulators in the bloc are too “unpredictable”. This just highlights growing tensions between regulators who want to protect users and competition while Big Tech wants to innovate and break things. The EU’s AI Act will come into force next month while the DMA and GDPR also look to protect user privacy.
• Microsoft is now facing investigation by the CMA regarding its deal with AI start-up Inflection. Microsoft hired the founder of Inflection and a number of his colleagues to run its new AI division whilst it also signed deals with Inflection to access its AI models, something that was seen by many as an acquisition in all but name. Regulators want to discourage Big Tech buying up promising smaller tech companies because of its detrimental effect on competition.
• That being said, Alphabet is in talks to buy cyber-security start-up Wiz for $23bn in what would be its biggest ever acquisition. This will be the latest push by Alphabet into cyber security after it bought Mandiant two years ago for $5.4bn.
• The SEC is being urged to investigate NDAs at OpenAI as whistleblowers are saying that they are too restrictive. This could get quite interesting given the sensitivity surrounding the development of AI…
• IN HARDWARE NEWS – both Apple and Samsung saw phone shipments rise in Q2 although their overall share of the market fell thanks to growing competition from Chinese rivals. Meanwhile, labour troubles at Samsung could take the edge off its Q2 performance and potentially benefit rivals like SK Hynix if employees decide to jump ship.

IN MEDIA NEWS…

• Netflix announced record revenues thanks to a combo of hit shows and the success of the ongoing crackdown on password-sharers. New subscriber numbers came in above Wall Street expectations and Netflix lifted its revenue forecasts for the full year.
• French ad giant Publicis announced better-than-expected Q2 results which prompted it to raise its full-year earnings guidance as well. The fortunes of ad agencies can act as a useful lead economic indicator, so a recovery in ad spending overall is quite a positive sign for the global economy.

• IN FINANCIALS NEWS – Goldman Sachs reported a big rise in profits thanks to the rebound in dealmaking activity. Morgan Stanley also benefited from this as well as higher revenues from trading. Mainstream banks with less exposure to investment banking and trading have been suffering because savers have been moving their money elsewhere to get better returns.
• IN IPO NEWS – European IPO market activity has risen over the first half of this year and although London’s IPO market has been quite muted so far, the pipeline is said to be strong. Meanwhile, Shein’s expected IPO on the LSE will put the FCA to the test given that it’ll have to tread a fine line between “getting the business” and maintaining standards. Klarna continues to gear up for a New York listing, probably in the first half of next year. It’s not clear what valuation that it will be seeking, but details of all that sort of thing will be hammered out nearer the time.
• IN M&A NEWS – sunglasses giant EssilorLuxottica bought US streetwear brand Supreme from VF Brands for $1.5bn. It sounds like EssilorLuxottica plans to expand Supreme’s eyewear line by launching Supreme-Meta smart glasses following the success of its Ray-Ban Meta glasses. Even more intriguingly, Meta is thought to be considering a multi-billion euro investment in EssilorLuxottica. It’s been trying to “break into” wearables for years what with that big acquisition of Oculus a while back. If you could mix EssilorLuxottica’s style, brands and licences with Meta’s connectivity and Supreme’s coolness, I think that could be a killer combo…elsewhere, Pernod Ricard sold most of its international wine brands to Australian Wine Holdco to focus on its premium spirits and champagne business. Pernod Ricard will maintain its US and French wine brands.
• IN REAL ESTATE – Property developers are bracing for a “green belt gold rush” as the new government is keen to cut red tape and relax planning restrictions. This is great but developers will still have to contend with high mortgage rates and environmental regulations. Consumers themselves will also have to deal with high interest rates, although they are expected to start to fall this year. Meanwhile, Rightmove research suggests that the UK housing market is poised for a boom thanks to expectations of interest rate cuts, which will result in mortgage rate cuts. I guess this was reflected in the latest ONS data which showed that house prices in London and the South East have jumped for the first time since May and April 2023 respectively, implying that the housing market slump has ended. In commercial property news, there were some interesting plans submitted for a remodelling of HSBC’s famous Canary Wharf skyscraper for when the bank departs in 2027. This is all part of Canary Wharf Group’s plans to make the whole area less finance-heavy.

My favourite “AND FINALLY” video this week was the “tricky challenge” one! Have you tried it yet??

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

This was the week of disappointment for France’s far-right, of Apple having to conform and of the biggest overhaul of listing rules in the UK in a generation…

• IN THE US – the pressure continued to mount on Biden to step aside for an alternative presidential candidate, he launched a new offensive for his campaign, and promised to “complete the job” despite stumbling with his words – this time at a press conference – as Europeans sidled up to Trump’s foreign policy team at the fringes of the NATO summit in Washington, hedging their bets regarding the next White House occupant. In the meantime, experienced party members and donors are getting increasingly anxious about Biden staying in place as Trump opens up a lead in the polls.
• IN CHINA – speculation is building ahead of the Communist Party’s third plenum next week (there are usually seven plenums over the five-year term of the central committee) but it doesn’t look a a grand masterplan about how to jolt domestic demand and arrest the economy’s slide into a deflationary spiral is going to be forthcoming. Meanwhile Taiwan’s government announced plans to prepare public services and infrastructure to function in wartime “just in case”.
• IN EUROPE – it’s all about France as the far-right didn’t get the majority they wanted in the elections after all. The far-left did particularly well in the elections but no sooner had they united to fight off the far-right, they splintered back into their usual factions. Macron called for a “governing pact” to break the current impasse before swanning off to Washington for the NATO summit. At the end of the day, he’s the one that’s actually responsible for the mess because he called the election in the first place!
• IN THE UK – the new Labour government is facing major challenges but it has promised to address areas including health spending, construction, education and public sector investment among many other things. New chancellor Rachel Reeves has already started with the kitchen-sinking of all the bad stuff under the Conservatives, saying that the UK’s public finances are in their worst state since WWII. Meanwhile, GDP rose unexpectedly strongly in May, potentially signifying the start of an economic boom that Starmer might be inheriting as a recent survey by S&P Global showed that Britain was at the “top of the league” for business optimism with buoyant expectations for the second half of the year. From a consumer perspective, inflation is slowing down and wages are rising faster than prices – which means that the pressure on household finances is easing off (although this is obviously relative). I would also add that it seems to me like M&A activity has been picking up and now that we’ve got more relaxed listing rules and potentially the most stable government in the G7 for the next few years, the UK might not be a bad place for investors to park their money!

IN ENERGY NEWS…

• At least six renewables firms are planning new onshore windfarms following Labour’s reversal of the restrictions that the Conservatives put in place on turbines.

IN COMMODITIES NEWS…

• OPEC maintained its bullish outlook for oil demand growth and was even confident enough to boost its full year forecasts, powered by ongoing demand from major companies.
• On the other hand, BP is predicting that global demand for oil will peak next year while it also warned of lower-than-expected profits due to lower refining margins and a fall in the performance of its oil trading division.
• BHP has decided to suspend nickel mining operations thanks to oversupply from Indonesia. Nickel is used in making stainless steel – but it’s also a key material for EV batteries. Unfortunately, poor demand for EVs has led to falling demand for batteries which means that nickel prices have been hit by the double whammy of too much supply and too little demand.
• The chairman of coffee company Lavazza reckons that coffee prices will remain “very high” until at least the middle of next year thanks to pressures on the supply chain and worsening harvest conditions in Brazil, Vietnam and Colombia.
• Tea prices have risen considerably thanks to heatwaves and floods in India’s main tea-producing region. However, it’s unlikely to affect Brits that much because European tea bags contain just 30% of higher quality Indian tea so perhaps all this will do is mean that producers will just use lower quality leaves from places like Kenya and Uganda.

IN BUSINESS TRENDS NEWS…

• Vistry looks like it’ll be a key player in Labour’s housing drive, particularly as it switched focus last year to building homes for housing associations and local authorities. On the flipside, Barratt Developments said that it will be building fewer homes in the coming year as it will be limited by its relatively small landbank – an issue that it has tried to address with its recent deal to buy rival Redrow.
• Begbies Traynor reckons that high levels of corporate insolvencies will persist into next year as stubbornly high interest rates continue to put pressure on companies.
• Increased dealmaking activity is expected to boost investment banks, who are just kicking of results season. The benefits are already being felt by the likes of Linklaters and A&O Shearman who have paid senior partners around £2m each thanks to the fees generated.
• The profile of non-alcoholic beverages continues to rise as Carlsberg bought Britvic for £3.3bn and the biggest non-alcoholic beer brand in the US, Athletic Brewing, just closed its latest round of financing that has effectively doubled its valuation. Cheers!

IN EMPLOYMENT TRENDS…

• The number of management consultants fell by 3% last year, according to stats from the Management Consultancies Association, after work dried up following the industry’s hiring frenzy in 2022.
• UK recruitment agencies are having a hard time right now. Page Group issued a profit warning, as did Hays, due to employers taking longer to hire and because companies may have been waiting to see how the elections went in France and the UK.
• Samsung Electronics unionised workers have voted for an indefinite strike to get better wages and working conditions. The National Samsung Electronics Union has 30,000 members, making up almost 25% of the company’s workforce, and around 6,500 of its workers have been on strike since Monday.

IN DRIVERLESS NEWS…

• Shanghai got the go-ahead for the use of driverless taxis without supervisors. This newly-granted permission means that residents can now book free rides in robotaxis of four companies – Baidu, Saike Technology, Pony.ai and Auto X. The testing area covers about 127 miles of roads in Shanghai’s Pudong district. However, this isn’t going to go down all that well with humans, particularly as the unemployment rate for 16-24 year olds stood at 14.2% in May. Giving driverless taxis too free a rein at the moment will no doubt cause uproar because this will effectively kill off taxi-driving as a job option.

ELSEWHERE…

• South Korean battery maker SK On is really suffering because the demand for EVs in Europe is weak. This means that its net debt has quintupled as western EV sales have fallen way shorter than expectations. However, it’s not just SK On that’s suffering from this – Northvolt, PowerCo and Svolt have either cancelled or delayed plans to increase EV battery manufacturing capacity. Until EV sales start to improve I doubt this situation is going to get any better.
• It seems that Tesla has seen its market share in the US fall below 50% for the first time as competition from other makers (though not Chinese ones!) has increased. Meanwhile, foreign carmakers are losing market share in China as local rivals continue to sell well (comparatively).
• BYD announced a $1bn deal to build an EV plant in Turkey as part of its overall effort to boost European production.

IN RETAIL NEWS…

• Amazon could potentially be facing an investigation by the Groceries Code Adjudicator in the UK if it doesn’t improve its treatment of grocery suppliers. A recent survey said that fewer than 50% of Amazon’s suppliers thought that the etailing giant complied with its code of practice which meant that it was placed dead last among 14 retailers from 3,000 responses.
• The fashion industry in the UK continues to push for the restoration of the tourist tax break (where they don’t have to pay VAT) while Burberry announced that it was cutting its headcount, which it partially blamed on Sunak’s decision to ditch duty free shopping in the UK for tourists.
• Shein announced the launch of a €200m fund to tackle fashion waste but this is a paltry amount for a company that earned $2bn in profits last year and does have a whiff of sucking up to the British authorities ahead of a potential IPO on the LSE.
• Ocado announced that it was going to build a third robotic warehouse in Japan with its partner Aeon, Japan’s biggest grocer. It is scheduled to open in 2027 and represents a welcome bit of news for the company that has had a run of bad news recently.
• Superdrug managed to post a decent profit as it continued to benefit from the ongoing expansion of its cheaper own-label products.

IN CONSUMER GOODS NEWS…

• Consumer goods companies General Mills, Mondelez and PepsiCo are finding that they are losing their pricing power as consumers continue to rein in spending where they can. Relying on their well-known brands just isn’t sustainable for a lot of people who are still feeling the pinch.
• Nike’s still in a rut as it continues to rely on rehashes of old glories while the likes of Hoka, On and New Balance take market share. A new approach is definitely needed.

IN LEISURE NEWS…

• Cafe-bar chain Loungers announced record revenues, a slew of new openings and a strong start to trading for the current year. It’s great to hear good news from a restaurant chain for once, no??

• Microsoft and Apple ditched their seats on OpenAI’s board as regulatory scrutiny of their relationship intensifies. Instead, the companies will have regular meetings to communicate. This smacks of tokenism given that everyone knows just how close Microsoft and OpenAI are in particular!
• Apple has decide to give in to the EC in order to avoid a fine for anticompetitive behaviour and it has now opened up Apple Pay to rivals so that they can use their own virtual wallets instead of always having to go via Apple.
• User growth at X has stalled since Elon Musk’s takeover and Meta’s Threads takes advantage. It seems to me like a proper roadmap is needed for X. CEO Yaccarino has surely had long enough in the hot seat to know what needs to be done – so some execution is surely in order!
• China’s Xiaohongshu social media platform just got the backing of VC firm DST Global in its latest financing round, which is notable because non-Chinese investors are swerving Chinese tech companies right now due to crackdowns by Beijing. Xiaohongshu is China’s fastest-growing social media platform.
• Paramount Global agreed to merge with Skydance Media after all following the tabling of a new offer that involves more legal protections than the initial one.

• The UK announced its biggest overhaul of listing rules in a generation. The new rules will give company bosses more power to make decisions without shareholder votes by being more flexible on share-structures and will come into force on July 29th. Although the FCA has warned that there will be a higher risk of investors losing money, it believes that the potential rewards of more companies listing will outweigh this.
• Europe’s newest rocket had a successful launch this week. This is good news because it means that the Europeans are still in the game to provide their own satellites without just giving Tesla’s SpaceX a virtual monopoly.
• Dyson announced that it was going to cut almost a third of its workforce after a global review. It seems to me that the company needs to find a new hit product asap otherwise things could continue to slide. Its Zone Absolute+ Headphones just ain’t it as far as I’m concerned!

My favourite “AND FINALLY” video this week was the one where the cook used cheap ingredients to make something quite special! Very clever 👏

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

This was the week when Labour won its first election in 19 years, when Biden felt the heat and when Europe brought in the tariffs for Chinese EV imports…

• IN THE US – things are getting heated for Joe Biden following his disastrous performance at the TV debate last week. Democrats have lined up to defend him, he admits that he “screwed up” but he continues to be under pressure to bow out of the race although both presidential candidates clearly have their individual issues!
• IN EUROPE – central bankers are getting increasingly nervous about the effect that Rassemblement National might have on Europe after Le Pen’s party won the first round of the vote which saw an unusually high turnout and a shift in the way different age demographics voted. Macron looks like he’s having to make compromises with the far-left in order to prevent RN from getting a majority. In all the kerfuffle, no one really noticed that the eurozone’s headline inflation rate fell to 2.5% (although services price inflation was still high at 4.1%).
• IN THE UK – Labour won the general election with a massive majority, sterling strengthened, Nigel Farage became an MP for the first time and we now await the new PM getting to work on his new policies! The UK services sector lost momentum as companies put activity on hold ahead of the election but at least the new lot will be able to benefit from falling inflation and fuel prices. City analysts are hopeful that this big Labour victory will increase confidence in the UK and attract investment as a result.
• IN SOUTH AFRICA – Re-elected president Cyril Ramaphosa managed to announce a new cabinet, a month after his ANC party lost its majority for the first time since the end of apartheid 30 years ago. So far so good, but it’s going to be a tough old road ahead…

IN ENERGY NEWS…

• Shell has halted the construction at one of Europe’s biggest biofuel plants, putting a spanner in the works of airlines’ ambitions to offer passengers lower-carbon flights. This is the latest example of an oil and gas company reneguing on its environmental promises.

IN BUSINESS TRENDS NEWS…

• Management consultancy Bain & Co are pulling back from working in certain sectors in China as it adapts its working practices in the country following its highly-publicised raids last year by Chinese authorities on its Shanghai offices.
• Air freight rates have been pushed higher because Shein and Temu send so much 💩 everywhere! It’s made worse by ongoing issues in the Red Sea making sea freight expensive as well, so there’s not much in the way of alternative! Mind you, the EU is considering slapping customs duties on the two e-tailers who split deliveries up into smaller packages to avoid paying duties (which is the thing that’s clogging up air freight).
• Air France-KLM has said it’ll take a dent in its finances because would-be visitors are avoiding Paris during the Olympic Games.
• UK manufacturing growth has slowed down thanks to shipping delays I mentioned above in the Red Sea and resultant higher freight costs.
• Law firm Hogan Lovells launched a new “microaggressions” hotline where staff can report transgressions anonymously. I think this is less about welfare (I really don’t think people are going to use this that much) and more about the firm covering itself from any future lawsuits because they can say that they provided a way that inappropriate behaviour can be reported.

IN EMPLOYMENT TRENDS…

• Morgan Stanley became the latest investment bank to ditch the bonus cap after Goldman Sachs and JP Morgan ditched it before them.
• British uni grads are finding it particularly hard to find an internship in what is the toughest market for at least seven years. It seems that the number of internships relative to job openings has trended lower than any year since at least 2018 as the wider jobs market experiences a slowdown.

IN CONSUMER TRENDS…

• UK house prices ticked up for the second consecutive month in June, according to the latest Nationwide figures, while Rightmove data shows that rents are also on the rise and Zoopla says that the proportion of gross earnings spent on rent are at a record high. In London that equates to an eye-watering 41% of earnings 😱! Although we tend to hear a lot about younger people having problems with renting and getting on the housing ladder, data from Paragon Bank shows that there is an increasing number of older people who have not been able to get on it either! Estate agent Savills reckons that new demand from the over-35s for private rental tenancies will shoot up by 8x by 2030.
• Rich people have started to sell up assets including shares and property in anticipation of a tax raid from a Labour government.

IN RETAIL NEWS…

• Amazon’s international business has rebounded after a period of streamlining and founder Jeff Bezos announced plans to sell $5bn of Amazon stock shortly after the company’s valuation breached the $2tn valuation threshold. The company also announced that it won a $1.3bn contract to build an Australian defence cloud which will enhance the secure sharing of information with allies.
• We heard that Dior and Armani were named as high end luxury houses using exploited labour in Italy, attracting criticism from a Milan court of failing to oversee their supply chains properly. Surely they won’t be the only ones doing this – and it also goes to show that it’s not just retailers at the cheap-and-cheerful end of things (like Boohoo and Shein) that indulge in a bit of labour naughtiness.
• M&S has launched a new clothing repair and alterations service as part of efforts to improve its sustainability credentials and it was also interesting to note that it was increasing stocks of smaller womenswear sizes, which implies that it customer base may be getting younger!

IN LEISURE NEWS…

• Embattled cinema chain Cineworld is looking at closing 25% of its cinemas in a bid to cut costs. It’s also renegotiating the rents for around half of its UK sites. Cinemas had a rough pandemic and just when things were starting to improve, they were hit by the Hollywood writers’ and actors’ strikes.

IN BATTERY & CHARGING NEWS…

• Hyundai and LG Energy have opened a $1.1bn battery cell plant in Indonesia as part of the country’s efforts to move further up the global EV supply chain. It’s the first of its type in Indonesia and is projected to have an annual production capacity of 10 gigawatt hours. About 90% of its products will be exported to South Korea and India.
• Europe’s biggest EV battery “hope” Northvolt continues to suffer mysterious deaths of people connected to its gigafactory. It is powered by renewable energy from a hydroelectric plant and will churn out lithium ion batteries that will have a 90% smaller carbon footprint than leading rivals. There are rumours of a potential $20bn stock market listing in 2025.
• A Cambridge-based start-up called Nybolt claims to have made a breakthrough by developing an EV that can be charged in just five minutes – the same length of time it takes to fill a car with petrol! It introduced the prototype vehicle, which has a range of 155 miles, last week. Clearly now this needs to be built at scale!
• The UK’s Road Haulage Association is now calling for the new government to invest in the virtually non-existent UK charging structure for Britain’s fleet of 300 electric HGVs. At the moment, there is just one public charging point for HGVs in the entirety of the UK!

IN CAR NEWS…

• EV sales in China rose in China in June thanks to government subsidies, tax breaks and steep discounts. BYD will have to watch its back, though, as domestic rivals are snapping at its heels!
• The EU decided to go ahead with imposing import tariffs on EV imports from China as negotiations between the EU and China failed to yield any results. BMW is belly-aching about the imposition talking about it being bad for competition, but this is clearly all about the company not wanting to suffer retaliatory measures from the Chinese for their China business. Mercedes-Benz and VW are saying the same for the same reasons.
• Tesla deliveries fell for the second straight quarter, but by less than the market was expecting and it got a bit of good news at the end of the week that it made it onto a Chinese local government’s list of EVs that can be bought by public, party and government groups for the first time. It is the only foreign-owned car maker on eastern province Jiangsu’s list.
• In the UK, new car registrations have reached a level not seen since 2019 and EV sales have reached their highest ever market share of 16.6%! On the flipside, though, there has been a general slowdown in sales over June and plug-in hybrid and hybrid sales have performed better than those of fully-electric cars.

IN AI NEWS…

• Google emissions have jumped by 48% in the last five years thanks to the expansion of data centres that power AI systems. This could put its “net zero by 2030” targets in jeopardy.
• Apple joined OpenAI’s board as an observer as part of the deal announced last month to integrate ChatGPT into Apple devices.
• There were a couple of interesting and controversial developments we heard about this week – firstly there was the all-AI generated ad from Toys ‘R’ Us which was made solely using Sora, OpenAI’s video making tool. Then there was the announcement by ElevenLabs which now has permission to clone the voices of Judy Garland, Sir Laurence Olivier, James Dean and Burt Reynolds so that users of its “Iconic Voices” tool can select them to read their favourite novels!
• Research from chip consultancy SemiAnalysis estimates that Nvidia is on track to sell $12bn worth of AI chips to China despite US sanctions! This wasn’t confirmed by the company itself but it does show that there are ways around these things if there is enough will and money involved…

ELSEWHERE…

• Meta was accused of breaking the EU’s new digital laws by using an advertising model that charged users for ad-free versions of Facebook and Instagram. If users don’t pay, their personal data is effectively deemed fair game for ad purposes. The EC says that Meta must launch “equivalent” versions of Facebook and Instagram that don’t use as much personal data.
• Samsung reckons it’ll see booming profits in Q2, carrying on the momentum it saw in Q1 when it returned to profit after four consecutive quarters of losses. It’s benefited from higher prices and strong demand for its powerful chips. Its full quarterly results will be released later this month.

• BlackRock bought Preqin, a UK private markets data group, for £2.55bn after fighting off competition from Bloomberg and S&P Global to buy it. There have been grumblings since that BlackRock had paid through the nose for the privilege.
• TDR Capital is looking to offload BPP and has appointed bankers to lead the sales process. This looks like another sign of growing confidence in the market as M&A activity continues to increase!
• Boeing agreed to buy Spirit AeroSystems in a $4.7bn deal after spinning it off back in 2005. This is all part of efforts to improve quality control after all the problems with the Boeing 737 Max jet. This has created problems, though, for its facility in Belfast where 2,400 jobs hang in the balance.
• The owner of Saks Fifth Avenue, holding company HBC, has agreed a deal to buy rival Neiman Marcus in a $2.65bn deal. Supporter say this will create a luxury retailing powerhouse while Amazon, which will take a minority stake in the company (which is to be called Saks Global) will provide it with tech and logistical expertise.

My favourite “AND FINALLY” video this week was the one with the absolutely amazing busker! A nice bit of music to end the week with 👍

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

This was the week when Biden failed that TV debate, when VW announced a JV with Rivian and when Frasers did BNPL with THG…

• IN THE AMERICAS – a report by Moody’s Analytics contended that if Trump got the presidency, there would be a recession by mid-2025 while unemployment and inflation would rocket with the less affluent taking most of the brunt (which is ironic because they are the ones looking to vote for Trump). Biden’s plans look less extreme in comparison but he had a disastrous TV debate with The Orange One, prompting commentators to say that this would be disastrous for his bid for a second consecutive term in office. Will Michelle Obama come to the rescue?? The IMF voiced concern about the potential for the US to pile on the debt whoever gets into office and urged whoever gets in to pay down debts while the economy is still strong (but that would be a real buzzkill for voters, so is unlikely to happen!). In Argentina, President Milei’s tough economic policies designed to get the country’s finances back on track have pushed the country into recession. Unemployment has risen while consumer spending and investment have fallen. No pain, no gain??
• IN ASIA – the Yen fell to its weakest level versus the dollar since 1986 but the Finance Ministry may be reticent about wading in to shore up the currency because they chucked loads of money at it in April and the impact didn’t last for as long as it had hoped! Meanwhile, the situation regarding the Philippines, China, the Second Thomas Shoal and the US got increasingly fraught, prompting the Philippine ambassador to Washington to warn that this could escalate to nuclear war if things remain unchecked.
• IN EUROPE – Ursula von der Leyen got closer to winning a second term as the EC president by gaining endorsement from most of the European leaders (although Italy’s PM Meloni abstained). She’s now got to win a vote scheduled for the week of July 15th. Meanwhile, in France, an FT poll suggested that the French electorate trusts Le Pen more than President Macron on the economy. Both the extreme right and extreme left parties are comfortably more popular than Macron’s centrists and it looks likely that they will spend, putting France further into debt (and they’re already quite substantially in debt).
• IN THE UK – there was a suggestion that France’s political predicament could present an opportunity for the City of London to claw back some of the business it had lost to Paris during Macron’s ongoing efforts to make his own finance hub since Brexit. However, the IFS think tank believes that Britain’s finances are in a right old state and it looks like pledges of NHS spending are quite spurious whoever gets in.

IN CLIMATE-RELATED NEWS…

• A coalition of businesses, mayors, governors and investors – dubbed “Mission 2025” – has come together to oppose the increasingly prevailing view that tackling climate change was “too difficult, too unpopular or too expensive”. Mission 25 wants governments to solidify environmental commitments for the next decade. As if to illustrate further why this is necessary, BP’s CEO implemented a hiring freeze and suspended new offshore wind projects in an attempt to calm investors who don’t like the company’s green targets. It is the latest example of an oil company walking back its climate commitments.

IN COMMODITIES NEWS…

• There’s potentially good news for chocolate lovers as cocoa futures prices have continued to fall in the longest “losing” streak since 2022 as weather in the key growing region of West Africa has been improving with the arrival of seasonal rains. Will this signal the “ceiling” for chocolate prices?

IN CONSUMER-RELATED NEWS…

• REGARDING MORTGAGES – Rightmove stats show that first-time buyers are facing monthly mortgage repayments that are 61% higher than they were in 2019 but then at the other end of the scale, the Bank of England says that most of the 3 million households who are currently on relatively low mortgage rates (at or below 3%) will see their monthly repayments jump by over 25% within the next two years as they roll on to new deals.

IN EMPLOYMENT-RELATED NEWS…

• Data from Adzuna showed that the UK jobs market remained largely unchanged last month despite early signs of improvement in the economy. Meanwhile, the Resolution Foundation think tank says that average weekly wages in Britain have reason by just £16 a week in real terms since 2010 thanks to anaemic GDP and productivity growth that followed on from the financial crisis of 2008. This compares badly with equivalent average wage rises of almost £70 a week in Germany and the US.

• China has agreed to talk with EU on EV tariffs. Proposed tariffs could be up to 48% for some makers and Germany has the most to lose if the Chinese were to retaliate with tariffs of their own. Talks are certainly needed if a trade war is to be avoided!
• Ferrari is looking at offering a €7,000 annual subscription fee that will entitle the owner to a replacement battery for its hybrid and electric vehicles after eight years and then 16 years. I think this is a canny way to squeeze more money out of Ferrari owners but this is a service that I think “normal” car companies should offer (for much less than €7,000 per year, obviously) in future in order to help address the problem of battery degradation and massive depreciation.
• Stellantis is threatening to shut down production at two UK plants unless the next government puts up some cash and provides some tax incentives to encourage demand for EVs.
• VW announced that it would invest up to $5bn in a 50/50 JV with Rivian. This is great for both sides because VW will get better software (its in-house effort, Cariad, was 💩) and Rivian will get a sugar daddy to finance it. There will obviously be other benefits (e.g. VW getting a better foothold in the US and Rivian getting access to Europe etc.) but this seemed to go down well with the investment community. Given that the rollout of Chinese-made EVs might be slowed down by the incoming tariffs, it may give VW time to make up some ground…
• Tesla recalled its Cybertrucks again, this time for issues with the trunk and windscreen wiper. Tesla isn’t having a great time at the moment as it’s had to announce a lot of recalls and comes at a time when the company is facing increasing competition in China and waning demand for EVs generally elsewhere.

IN CONSUMER TRENDS NEWS…

• Amazon announced plans to launch a service that will offer cheap fashionwear, household goods and other products that come directly from China in a bid to take the fight back to upstarts Temu and Shein. Delivery to customers in the US would take between 9 and 11 days of placing the order, coming directly from China. Meanwhile, Amazon is being sued by a University of East Anglia professor on behalf of UK third-party sellers on Amazon’s website for £2.7bn.
• Shein submitted paperwork with the FCA ahead of its anticipated IPO on the LSE. It still needs to get approval from Beijing authorities to list in London. In order to work, though, it would be advisable for it to give more detail about why it wants to list, address ongoing supply chain concerns and give more assurance about its corporate structure.
• Frasers Group signed a multi-year partnership with THG where Frasers will buy some of its luxury goods websites and sell some of its protein products at Sports Direct while THG will use Frasers’ BNPL product and integrate its customer service and loyalty programme.
• Boots’ American owner, Walgreens Boots Alliance, has decided to postpone the sale of the high street retailer (presumably because no-one wanted to buy it at a price they were comfortable with). This is the second time it’s failed at this and it only fairly recently ditched efforts for a flotation. Clearly, a new strategy is needed – pronto!
• Halfords announced disastrous profits and said that the “Golden age of cycling” is over. The car business has been pretty rubbish as well and it has also been hammered by high freight costs.
• On a more positive note, AO World announced a tripling of its profits! Tumble dryers have been flying off the shelves thanks to wet weather and the Euros have helped boost TV sales.
• Gap seems to be getting some of its mojo back after a long period of decline. It had its its first quarterly rise in like-for-like sales for six quarters and was confident enough about the outlook to upgrade its full year sales and operating income forecasts.
• Watches of Switzerland reported a disappointing performance and blamed it mainly on Sunak sticking with his decision to axe tax-free shopping, which it says drives tourists away.

• Apple announced that it would delay the rollout of its AI-powered features in Europe, blaming EU rules. It plans to roll them out in 2025 to give the company time to comply with the EU’s Digital Markets Act. Meanwhile, Apple and Meta are talking about a potential AI tie-up where Apple could integrate Meta’s Llama 3 model into Apple Intelligence, but it is also holding similar talks with other firms, including Anthropic. In regulatory developments, the European Commission has accused Apple of restricting competition on its App Store and will be using the new Digital Markets Act One of the purposes of the DMA is to force “online gatekeepers” like Apple to open up their businesses to competition.
• The European Commission accused Microsoft of abusing its market power by including Teams with its Office 365 productivity software suite following the announcement of its preliminary antitrust findings this week. The drama instigated by Slack back in 2020 rolls on…
• The US is pushing for more China tech restrictions, this time in investment. There is draft legislation that could put total bans on certain investments and force American individuals and organisations to notify the government of related transactions. Meanwhile, TikTok advertisers are bracing themselves for a ban in the US as the January deadline approaches. They are now putting things like “kill clauses” in contracts that will enable them to cut off financial commitments if a ban comes into force.
• X had a senior management shake-up as the CEO, Linda Yaccarino, had to fire her head of business ops and communication as she is feeling the pressure to boost sales and cut costs. Although 60% of the advertisers that abandoned the platform have returned in the last few months, I really do think that the company could do with outlining a proper strategy…

• Airbus lost a big chunk of its market value after it lowered its commercial aircraft delivery and financial targets for the year thanks to supply chain problems and impairment costs relating to its space activities.
• Fast delivery specialist Getir is set for a break-up and a $250m cash injection by Abu Dhabi’s wealth fund Mubadala Investment Company, which will give it majority control of the Getir’s Turkish operations. The company will be split into its food delivery business in Turkey, which Mubadala will control, and a separate business that will be made up of its other assets.
• Nike’s share price took a major tumble after it reported slower demand and cut its outlook for the year. It’s already deep into executing a cost-cutting plan that it announced in December – it’s not got to concentrate on innovation and address the slide of its core business.
• YouTube is currently holding talks with record labels over how to licence their songs to train AI models for use by creators on its platform. A final agreement has not yet been reached but I guess that this is all going to be about price!
• Nestlé is about to launch a range of products that address the problem of “Ozempic face”, where takers of weight-loss drug Ozempic find that their face looks gaunt and skin loses elasticity. I guess if you are going to lose out on revenue from confectionary and ice cream, you might as well lean into the phenomenon that’s causing it!

My favourite “AND FINALLY” video this week was the one with the singing “horse”! Amazing!

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

This was the week when the UK’s inflation rate hit its 2% target, when Nvidia became the most valuable company in the world and when Fisker became the latest EV start-up to fail…

• IN THE US – one of the top Fed officials said that recent data showing discounting at big retailers and sluggish sales shows that a consumer spending slowdown is “finally” taking place, increasing the likelihood of an interest rate cut this year.
• IN CHINA – the latest data from the National Bureau of Statistics showed that industrial output grew by less than expected in May although exports (particularly those of steel and aluminium) were pretty good, as were retail sales.
• IN EUROPE – there was a lot of chat about the repercussions of Macron’s decision last week to call a snap election. Some said that the EU should be hoping for a Le Pen win as it might be able to get more out of a Rassemblement National government. Parties on the extreme right and the extreme left currently look like they will get France into even more debt if they stick to their current spending plans. In the meantime, French businesses are trying to build bridges with Le Pen (I guess because they think she’s going to win!) but it has spooked investors to the extent that London overtook Paris in terms of market size (more because French stocks were sold off rather than British stocks doing particularly well) and trendy Italian sneaker brand Golden Goose decided to postpone its IPO due to concerns about the uncertain macro environment in France.
• IN THE UK – inflation hit its 2% target but the Bank of England left interest rates unchanged for the seventh time in a row. Labour said that it would improve UK-EU trade terms if it wins the election and forge closer ties with the EU on carbon tax. Somewhat ironically, recent developments in the European parliament and French politics may make the UK an “island of stability” and given that the bloc seems to be having a rough time of it, maybe the new government (especially if it’s Labour) will be in a better position to get better terms with Europe.

IN OIL & GAS NEWS…

• The oil industry is getting a bit nervous about Labour’s North Sea tax pledge and says that increasing the tax will make investment much less appealing.
• Russia is continuing to supply Europe with gas and actually overtook the US as a supplier for the first time in almost two years in May (but that was probably due to a number of one-off factors).

IN ENERGY NEWS…

• Rolls-Royce is continuing to pressure the UK government into making a decision on SMRs, understandable given that it’s in the mix with a number of other companies to win a lucrative UK contract.
• Research from Offshore Energies UK shows that wind actually outperformed gas over Q1, becoming the UK’s main electricity source for the first time. It looks like this will continue for the rest of the year…
• Roof space on warehouses is increasingly been seen as an opportunity to spread the use of solar energy. OK, so this depends on the cost of installing panels on the vast roof space (not just the panels but the structural reinforcement needed) and the prevailing price of electricity in that location, but this sounds like something that could be pretty useful.

IN OTHER COMMODITIES NEWS…

• Chinese warehouses have built up the biggest surplus of copper in four years thanks to the combination of a price spike and anaemic consumer demand. One of the major reasons for this is tepid activity in the real estate sector which can power demand for copper due to the metal’s use in electrical wiring, plumbing and household appliances.

IN BUSINESS TRENDS NEWS…

• Australia’s trade with China hit record highs over 2023 despite a tricky relationship over defence tensions in the region. Chinese premier Li Qiang went on a four-day visit in Australia this week, taking in the mining and winemaking regions in the first visit by a Chinese leader since 2017.
• Research by think tank IPPR says that investment in the UK has lagged other G7 members for 24 out of the last 30 years. Public sector investment has also trended below the G7 average, so it looks like the next government has got its work cut out!
• UK manufacturers expect orders and output to increase significantly in the second half, saying that order books have doubled in the last three months thanks to exports – with demand from the US being particularly strong. Business confidence is now at its highest level for ten years!
• Investment banks are raking it in currently, according to Dealogic, as revenues from trading and deals have risen by 25% over the first six months of the year. JP Morgan, Goldman Sachs and Bank of America were the top performers over the period. This increase in activity would also suggest that business confidence is also on the rise…
• KPMG said that it will be cutting an additional 200 jobs following a review of its cost base. It said that sluggish demand for its services and a slowdown in natural attrition has forced its hand. It’s not the only one to have had to do this – PwC just made a “significant” number of “silent lay-offs” in recent weeks. YouGov’s share price almost halved on its profit warning announcement – this was thanks to a slowdown in its consultancy business where it advises corporates on the collection of data and how to interpret it. It is well-known for its polling (particularly in elections!) but this is only a small part of the business. It just seems that corporates aren’t prioritising consultancy work at the moment.
• Investment in defence tech start-ups is gathering pace in Europe, according to the head of NATO’s €1bn venture capital fund. This isn’t surprising given the sudden boom in defence spending since Russia invaded Ukraine.

IN EMPLOYMENT TRENDS…

• The rise in defence spending is resulting in global defence groups hiring at their fastest rate since the end of the Cold War as they race to fill orders.
• JP Morgan lifted the bonus cap, meaning that UK workers can now earn up to 10 times their basic pay. Goldman Sachs was the first to respond to the lifting of the bonus cap in October last year by lowering basic salaries but allowing workers to earn up to 25 times their salary.
• There’s been a lot of comment on junior lawyers earning upwards of £150,000 among “magic circle” firms, while some American firms pay even more. This could have some unintended consequences but clearly British firms want to keep up with the Kennedys. This reminds me of what happened in the UK with investment banking in the 90s when the Americans came waving their chequebooks – and look at what happened since then!
• There was a paper published in Science this week which concluded that higher earners are more exposed to the impact of AI than lower paid employees. The report covered over 900 occupations and highlighted uncertainty over AI’s impact on employment. Jobs most affected included blockchain engineers, clinical data managers, PR specialists and financial quant analysts.

• Silicon Valley firms are getting increasingly paranoid about corporate espionage, particularly from China, and are tightening their security vetting of employees. Companies including Google, OpenAI and Sequoia are increasingly concerned about the potential leakage of intellectual property and company information.
• Nvidia became the world’s most valuable company, overtaking both Microsoft and Apple for the number one spot. It’s a great achievement to get to this position but I suspect it will be hard to stay there!
• OpenAI co-founder Ilya Sutskever launched his own AI start-up called Safe Superintelligence just one month after quitting OpenAI. He said that it won’t be commercially motivated but I have to say that I doubt this can last forever as investors are bound to want to see some kind of return further down the line.
• Apple was charged under EU’s new Digital Markets Act for restricting competition in its mobile app store. The European Commission said that Apple is not doing enough to point users to offers outside its App Store without slapping them with fees. Meanwhile, Apple ditched Apple Pay Later, its BNPL service that launched in the US last year. The agreements and partnerships it started out with have mostly run their course and it seems that Apple is now looking to provide the same or similar services – just with less risk!
• TDK said that it had made a technical breakthrough with small solid-state batteries. It has developed a new all-ceramic material for batteries that can hold more charge, charge more quickly and be more stable than what’s available currently. At the moment, this will only be for small devices – not EVs.

IN CONSUMER TRENDS NEWS…

• Although inflation has come down to 2%, ONS figures showed that services price inflation is still high while a report from KPMG showed that consumers are reining in spending on eating at restaurants, takeaways and clothing as they continue to concentrate on spending on the basics. That being said, the latest GfK survey said that consumer confidence has bounced back to its highest level since November 2021! This is the third consecutive month of rising confidence and came in above market forecasts and has been driven almost entirely by optimism over the health of the economy.

IN RETAIL NEWS…

• Asda saw another drop in sales as it continues to lag the performance of its rivals. Britain’s third-biggest supermarket chain was the worst-performing supermarket over the quarter and continues to lose market share.
• Games Workshop announced a strong year of sales and profits and topped it off by distributing £18m in cash to each of its employees.
• Ocado saw its share price slide on news that its Canadian supermarkets partner, Sobeys, decided to suspend the launch of its new automated warehouse blaming a weaker online grocery market. This follows hiccups with other retailers in the US (Kroger) and Australia (Coles), not to mention the niggles it has been having with M&S in the UK. Tricky times…
• Chinese e-tailers without international exposure are likely to suffer as the “618” annual online shopping event proved to be disappointing. At least those with international exposure, like Alibaba and JD.com, still have growth to go for (although this is costing them a lot).
• Talking of Chinese e-tailing behemoths, Shein is looking to diversify into other areas such as furniture, electronics and petcare via third party vendors selling on the marketplace it set up last year. Recent market research shows that use of the app has reached a plateau globally so it makes sense to diversify.

• IN REAL ESTATE NEWS – Chinese house prices fell at their fastest pace since October 2014, according to the latest data from the National Bureau of statistics. This was the eleventh consecutive month of falling property prices in China despite various stimulus efforts from the government. In the UK, housebuilder Berkeley was confident enough to lift its outlook for the year ahead, adding that it would be diversifying into the London rental market by launching its own build-to-rent business. The latest research from Rightmove showed that UK house prices have remained near record high levels. It seems that owners of high-end properties are holding off to see what the next government’s going to do while pent-up demand in the “mass market” has powered ongoing activity despite higher mortgage rates.
• IN CAR NEWS – BYD continues to aim to “break” Europe – it’s the only carmaker to sponsor Euro 2024 – despite poor EV sales across the region. Performance was particularly poor in Germany and the Netherlands. Meanwhile, Fisker filed for bankruptcy protection late on Monday. Another EV start-up bites the dust…
• IN M&A NEWS – NatWest took on most of Sainsbury’s banking business – but this was notable because Sainsbury’s paid NatWest to take it on as it would be taking on more liabilities than assets in the deal. Tate & Lyle struck a $1.8bn deal to buy food ingredients supplier CP Kelco which will help the former’s efforts to develop and sell healthier products. Elsewhere, Honeywell International just announced an all-cash deal to buy aerospace and defence tech company CAES Systems from PR firm Advent International. This should enhance its offering but it is actually quite a small deal in the scheme of things as Honeywell itself is worth almost $140bn!

My favourite “AND FINALLY” video this week was the sweary mum-dancing in the kitchen! This lady is talented!

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

This was the week where Macron suddenly announced an election, when Raspberry Pi had a decent market debut and when Europe decided to slap big tariffs on Chinese EV imports…

• IN THE US – the Fed decided kept interest rates unchanged and signalled that there will only be one interest rate cut before the year is out. Inflation has proven to be stickier than hoped but then official figures showed that inflation fell to 3.3% in May, which still keeps hopes of an interest rate cut alive. Meanwhile, the US announced 25% tariffs on natural or synthetic graphite from China that will come into force this month (they are trying to force development of an EV supply chain that doesn’t rely on China) as well as further sanctions on Russia where it will treat any foreign financial institution that transacts with a sanctioned Russian as if it was working directly with Russia’s military-industrial base.
• IN EUROPE – the far-right made major gains in the European parliamentary elections, so much so that President Macron ordered a sudden French election, which means that he could be a centrist president presiding over a populist government if he loses. At the moment, it looks like Macron’s party will suffer a wipeout. Things were also pretty bad in the EU’s biggest economy as the German coalition has so far failed to approve a budget for next year as they are all pulling in different directions. Italy’s PM Meloni, in contrast, saw her position strengthened in the elections, putting her in a position to be able to bend Europe towards her more conservative policies.
• IN THE UK – the UK’s GDP flatlined in April thanks to poor weather and sluggish performance in retail and construction. Things just aren’t going Sunak’s way at the moment! In the meantime, we saw more policy announcements after the publication of LibDem and Conservative manifestos earlier in the week while Labour made us wait until Thursday to unveil theirs. Nigel Farage added further spice to the mix as his party, Reform UK, edged ahead of the Conservatives in the polls.

IN ENERGY NEWS…

• Italian energy start-up Nucleo is planning a fleet of 20 mini-nuclear reactors for Britain, which would be housed in up to six sites.
• Italian PM Meloni has decided to slow down the rollout of solar panels on farmland and critics are saying that this will slow down Italy’s ability to he solar capacity targets by 2030.

IN OIL & GAS NEWS…

• The IEA warned of a “staggering” excess of oil supply versus demand by 2030 as China’s growth slows while global production increases. It also argued that OPEC+’s power, as a result, would wane. Will this make owning an EV even less compelling if oil prices fall to much lower levels over time?
• State-owned oil giant Saudi Aramco just signed its first deal to buy LNG in a non-binding deal with US LNG developer NextDecade to supply them over the next 20 years (a binding agreement is expected to follow).  This is just the latest deal where a Middle Eastern oil producer has signed an LNG supply deal in order to tap into the expected rise in demand.

IN MARKETS NEWS…

• The UK is on the verge of announcing the biggest overhaul in its listing rules for 40 years, which means that the IPO process will be more streamlined whilst still maintaining standards. This coincides with an uptick in market sentiment – something that the successful flotation this week of Raspberry Pi evidenced – although we did hear of another FTSE company looking to switch its listing from London to New York (the company in question is Ashtead which now gets over 90% of its annual turnover from the US!). Meanwhile, Walgreen Boots Alliance decided against floating Boots, preferring instead to find a buyer (just remember it did this before and couldn’t find anyone).
• IN M&A NEWS, takeover talks between Paramount and Skydance have now ended, so we’ll just have to see what comes next and Voodoo acquired BeReal for €500m with a view to launching paid advertising on the latter’s photo-sharing platform. It’s Voodoo’s biggest ever acquisition.

IN BUSINESS TRENDS NEWS…

• GroupM, a division of advertising giant WPP, has predicted that global ad revenues will grow by 7.8% in 2024 (excluding spend on US political ads). This is a major upgrade from its previous forecast and suggests that the global economy may be turning a corner.
• Private credit is starting to get increasingly competitive, particularly at the high end of the market, as more competitors turn their attention to this hot area. It will clearly become more difficult to make margins in a more crowded market but you could argue that if global economies improve, there will be more business to go around for everyone. Will this mean consolidation among existing players?

IN EMPLOYMENT TRENDS…

• The latest TUC figures show that UK unemployment is rising at the fastest rate of all OECD countries over Q1 (but a) obviously the TUC’s going to say that as it’s a union and b) rates are still at very low historic levels) while another report by KPMG and REC shows that permanent job appointments are continuing to fall. I’d suggest that there is probably an element of employers slowing things down until they know who’s going to be in government next.
• Meanwhile, wage growth rose thanks to the 10% living wage increase that came in on April 1st, which means that the Bank of England may be less inclined to cut interest rates just yet.
• There was an interesting article in the FT saying that English language and literature grads may actually benefit from the rise of AI as their articulate nature equips them well to be prompt engineers…

IN TARIFF NEWS…

• The EU decided to slap big import taxes on Chinese EV imports of up to 38% after a long investigation. Chinese manufacturers are likely to be mostly unfazed as this will not have come as a shock but you would have thought that China will retaliate with tit-for-tat taxes on imports of luxury European cars from Europe, for example.

IN INDIVIDUAL COMPANY NEWS…

• Tesla shareholders gave Musk what he wanted by approving his record pay deal and Tesla’s incorporation in Texas but it looks like the price of the Model 3 will rise in Europe thanks to the new China imports tariff.
• Troubled EV-maker Fisker announced voluntary recalls of its Ocean SUVs in North America for software-related problems. This is just one of those update things but it’s grief that Fisker could do without.
• Ford has expanded sales of its EVs across all of its US dealerships now, which means that the majority of Americans will be able to get their hands on their EVs.
• VW is going to start selling solar panels with its electric car chargers thanks to an agreement with solar panel installer Otovo. EV customers will get a roof-mounted solar panel/wall charger combo as part of the deal which should help drivers cut costs.

IN CHINA…

• Data from the National Bureau of Statistics highlighted a massive glut of empty properties as of April despite attempts by local authorities to sweeten the deal. Buyer reluctance is making life worse for developers as they need to sell properties to develop more (or at least get themselves out of the debt hole they’ve dug themselves into).

IN UK RESIDENTIAL PROPERTY NEWS…

• The UK rental market is proving tricky for tenants, according to the latest RICS numbers which show that increasing demand and limited supply of rental properties means that rents are likely to remain higher for longer.
• RICS numbers also show that interest from would-be buyers is waning as mortgage rates have risen – but I’d also suggest that they are waiting to see what happens in the aftermath of the election.
• UK housebuilder Crest Nicholson issued a profit warning and cut its dividend. Initial expectations of a sooner-rather-than-later interest rate cut from the Bank of England are now receding, hence the cooling off in sentiment. Ouch.

IN COMMERCIAL PROPERTY NEWS…

• Revolut has decided to move its HQ to a more central location in Canary Wharf despite its ongoing lack of a full banking licence. This is good news for Canary Wharf Group, which appears to be seeing a bit of an exodus of tenants.

• Apple announced a partnership with OpenAI that will enable it to roll out a new AI system (called “Apple Intelligence”) that is device-based and not cloud-based (although there will be that option). Elon Musk didn’t like this and threatened to ban Apple devices from his companies for being an “unacceptable security violation” but this didn’t dampen sentiment as Apple overtook Nvidia again as its valuation rose on the back of the AI update.
• OpenAI announced plans to beef-up its lobbying team in order to head off more challenges from politicians and regulators. Meanwhile, Elon Musk announced that he’d drop his lawsuit against the company for allegedly breaching the company’s original mission to benefit humanity.
• French AI start-up MistralAI got another €600m of funding barely a year on from its launch as it gets more financial firepower to help it become a European AI champion.

• IN RETAIL NEWS – the British Beer & Pubs Association is expecting a boom in beer sales in the four weeks of the men’s Euro 2024 tournament (although that will very much depend on how England and Scotland actually progress!) while research from GlobalData Retail reckons that the wider hospitality sector could also get a major boost as well as retailers who may benefit from increased sales of goods like TVs and sportswear. Meanwhile, DFS cut profit forecasts due to weak demand and supply delays. Furniture retailers generally tend to do well in a booming property market (consumers tend not to buy tons of sofas in their lifetime – and if they do it, it tends to be when they move house) so I guess that there’s a lag between the housing market turnaround and when it filters through to retailers in the furniture and DIY space. Over in the US, GameStop shares dropped sharply as the company took advantage of the Roaring Kitty boom and sold 75m of its own shares. The madness continues…
• IN MUSK-RELATED NEWS – the Wall Street Journal published a damning in-depth piece about Musk’s questionable relationships with employees/ex-employees. If the allegations are proved to be correct, this could be disastrous for all of his companies as he is the face of those companies and they don’t appear to have realistic succession plans. I do, however, believe that Musk is too important to too many companies, industries and, indeed, America so I wouldn’t be very surprised if this story just faded away. Elsewhere, Bharti Airtel and JioSpaceFiber will soon take on the might of Starlink in India, a market that Musk has been trying to crack for the last three years. May the satellite wars begin!
• IN FINANCIALS NEWS – Invesco has shut down its standalone UK equities team as the US asset manager merges it with the European team, Wise saw its share price drop by 15% as the CEO announced slower growth rates and Legal & General is planning to streamline its business and focus on core areas by expanding its pensions business and selling housebuilder Cala.

My favourite “AND FINALLY” video this week was the one where Gordon Ramsey got pranked! So satisfying!

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

This was the week of shock election results, when Nvidia became bigger than Apple and when Shein caused even more of a kerfuffle…

• IN ELECTIONS NEWS – it was all looking good for a third term for the current PM, but then Modi’s party lost its majority and had to get backing from other parties to form a new government. His lack of majority may take the edge off some of his more controversial policies. Claudia Sheinbaum became Mexico’s first female president but faces tough challenges when she takes over from incumbent AMLO on October 1st. In South Africa, the ruling ANC party just about stayed in power but has had to resort to appealing to rival parties to form a “government of national unity”. Former president Jacob Zuma’s recently-formed party was accused of being bankrolled by the Russians but no proof was provided and it was obviously denied.
• IN THE US – Biden has been trying to capitalise on Trump’s conviction while Trump himself returned to TikTok, the app he tried to ban towards of the end of his term in office, as both candidates vie for voters’ attention.
• IN CHINA – the latest Caixin services sector PMI came in at the top end of analyst estimates, showing that China’s economy is gathering pace.
• IN CANADA – the Bank of Canada cut its main interest rate from 5% to 4.75%, becoming the first G7 central bank to cut interest rates this cycle. This had been widely expected in the market.
• IN EUROPE – the ECB cut interest rates from 4% to 3.75% in its first cut for five years. It had also been widely expected. Germany had an unexpected rise in unemployment and Turkey’s constitutional court struck down President Erdoğan’s decree allowing him to sack central bank governors (he’s been through five already in the last five years!). Inflation is still 75% though!
• IN THE UK – the Conservatives and Labour outlined policies on immigration and tax among other policies designed to appeal to middle Britain while Nigel Farage ruffled Conservative feathers by returning to politics as leader of the Reform party, something that might split the Conservative vote. In the meantime, councils are selling off assets as they face massive budget shortfalls, something that the next government is going to have to deal with.

IN MARKETS NEWS…

• The LSE wants to have a higher profile as part of efforts to make the exchange more attractive for flotations. Although the current narrative seems to be that New York is more attractive than London, the valuations aren’t all necessarily that different.
• The NYSE had a technical glitch this week, but it got sorted fairly quickly, while Texas put forward plans to launch a rival exchange – something that got a lukewarm reception.
• Investors continue to pull money out of ESG funds to the extent that, according to stats from Barclays, this is now the first year that fund flows for ESG have been net negative!

IN CLIMATE/ENERGY-RELATED NEWS…

• La Niña is going to be hitting the world later this year, following the El Niño warming phase. This is going to mess further with weather patterns around the world – so expect more volatility in commodity prices as harvests are affected.
• IN ENERGY – Britain will be relying more than ever on imported power for the next few years until we get our nuclear power and renewables plans sorted – but in the meantime we’ll be relying on our aging existing fleet of power stations. We could perhaps learn from the Americans who are rolling out and using more battery storage facilities that help to even out the provision of electricity.

IN COMMODITIES NEWS…

• IN OIL – the consolidation in US shale companies is having a major impact on the whole oil and gas industry – for instance, oil prices actually fell despite OPEC+ members committing to keep current production quotas intact. Meanwhile, uncertainty continues in the North Sea as companies are unwilling to commit to new projects until they know who’s going to be in Number 10 and what policies they are going to be implementing (particularly regarding windfall taxes).
• IN GAS – European gas prices jumped suddenly after an outage at a gas processing plant in Norway. China is playing hardball in negotiations with Russia on a new gas pipeline deal as it demands much less gas and at a much lower price than the Russians had been hoping for. Russia really is the junior partner in this relationship and China is taking full advantage.

IN CRYPTO NEWS…

• Robinhood has pushed on with an acquisition in the crypto space, Bitstamp, despite warnings from the SEC on its digital assets business. This will be Robinhood’s biggest acquisition to date and will really broaden its business in crypto.

IN BUSINESS TRENDS NEWS…

• Container shipping giant Maersk’s optimism continues to increase as it raised its full year guidance for the second time in just over a month thanks to higher global freight rates powered by ongoing disruption in the Red Sea. This could be seen as a positive because Maersk is often seen as a bellwether for global trade – but I’d temper this with the fact that the Red Sea is holding things up and there will be a lot more shipping capacity coming online in the near future, which should mean that freight rates will go weaker.
• Things are looking up for British manufacturing, according to the latest S&P Global/CIPS manufacturing PMI as output has been growing at its fastest pace since July 2022.
• Private healthcare demand has hit a record high in the UK, according to the Private Healthcare Information Network (PHIN) – but I don’t think this is surprising given NHS waiting lists!
• Beverage companies including Diageo, Campari, Pernod Ricard and Rémy Cointreau are all seeing their share prices trade at record lows because of various difficulties of stocking in Latin America and tariffs in China but I’d also imagine that changing drinking trends among young people is also a factor in this.

IN CONSUMER TRENDS…

• Pay growth in Japan jumped to its highest level since 1994! This is great news, but we’ll have to just wait and see whether consumption will now pick up…
• In the UK, a survey by the Bank of England showed that wages and price growth are going to slow down – which should make it easier for the Bank of England to justify cutting interest rates this summer as it would imply that inflationary pressures are receding.

IN AI NEWS…

• Nvidia became more valuable than Apple this week to become the world’s second most valuable company behind Microsoft! This just goes to show how important Nvidia is in the AI boom. Nvidia also announced its latest generation of chips not long after the last one! Nvidia’s success is boosting the fortunes of CoreWeave, which rents out servers for specialist use.
• IN THE MIDDLE EAST – Saudi Aramco’s venture capital arm put some money into the latest $400m investment round in Chinese AI start-up Zhipu AI, showing that it is willing to spread its bets as far as AI is concerned and not just back American companies. On the other hand, the UAE is keen to deepen the relationship with the Americans on AI, implying that the recent deal with Microsoft was only the beginning.
• IN THE AI vs JOBS DEBATE – JP Morgan is expanding the use of a generative AI tool designed to highlight controversial investment decisions for review by fund managers. Meanwhile, on the “sell-side”, there has been a recent draft paper which shows that AI outperformed financial analysts on predicting the direction of future earnings quite comfortably while wealth manager St James’s Place has started to use AI to help identify and assist customers by identifying “any kind of intonation or any kind of language…that may trigger that someone is a vulnerable customer”. Meanwhile, the rising use of chatbots giving full answers to questions is cutting into search engine volumes, which puts companies that generate ad revenue from search engines in a vulnerable position. Later in the week, we saw that the US Department of Justice and the Federal Trade Commission are to launch an inquiry the roles of Microsoft, OpenAI and Nvidia in the AI industry and whether they have been anti-competitive.

IN MEDIA NEWS…

• Spotify saw its share price jump as it doubled down on profitability rather than growth, something that chimed with investors.
• Universal is planning to build one of the biggest theme parks in the world – in the UK! It has bought a 500 acre site just south of Bedford, but a final decision as to whether it will go ahead is due by the end of the year.

IN IPO NEWS…

• The LSE’s pipeline of IPOs is looking increasingly healthy although it’s already making quite a lot of money from “follow-on” transactions. Shein is getting closer to a London IPO although there are detractors given its patchy record.
• It was interesting to see some stats on how London stock market floats that happened in 2021 are doing now – generally not well! The best performer was Darktrace (+135%) and the worst was Dr Martens (-76%).

IN M&A NEWS…

• Medical tech company Becton Dickinson added another acquisition to their string of acquisitions by buying Edwards Lifesciences, a company that specialises in advanced patient monitoring using AI algos, for $4.2bn in cash.
• The president of Paramount Global, Shari Redstone, is keeping the door open for other potential buyers as she is unhappy with the offer from Skydance.

IN DRIVERLESS NEWS…

• British driverless car company Wayve is planning to unleash its cars on the streets of San Francisco, challenging the likes of Tesla and Waymo. This might help driverless get back on track after a series of missteps by the local incumbents.

IN EV-RELATED NEWS…

• Stellantis and Mercedes-Benz have decided to postpone plans to make EV battery gigafactories in Germany and Italy. This isn’t surprising given anaemic demand for EVs in Europe at the moment.
• EV charging in apartment blocks got a £35m boost from the government’s Charging Infrastructure Investment Fund as it put the money into Hertfordshire-based start-up Energy Park, which specialises in this area.
• There’s mixed news for EV sales depending where you go but China saw strong sales in May while manufacturers are warning that current discounts on EV prices are unsustainable. That being said, overall car sales continue to rise – and they are being powered by the ongoing popularity of hybrids!

IN “TRAD” CAR NEWS…

• A Japanese government investigation has unearthed dodgy testing data at five of Japan’s leading carmakers, including Toyota and Honda. Some vehicle shipments have been suspended as a result. This may well clip the wings of Toyota’s hybrid-led renaissance.

• IN REAL ESTATE NEWS – although commercial property values have had a tough time of it in the last few years LondonMetric’s focus on warehouses has paid off as a warehouse tenant that took out a lease in 2019 and renewed it last year now has to pay 40% more! Meanwhile, in residential, the latest S&P Global PMI for the construction industry reflected growth in May for the first time since the whole mini-budget debacle! US PE firm Blackstone is looking at pushing into the UK rental property market as it just agreed a deal with Vistry to buy around 1,750 new homes for rental purposes. Meanwhile, Zoopla stats say that rental growth is slowing down to its lowest level in 30 months!
• IN RETAIL NEWS – Zara owner Inditex unveiled a strong trading update for Q2 despite poor weather across Europe. It is on track for double-digit growth for the period. BRC figures showed that retail sales in the UK stayed pretty downbeat in the year-to-May thanks to poor weather and ongoing consumer caution in terms of spending. Over in the US, discount retailer Dollar Tree is thinking of selling the Family Dollar chain almost ten years after it bought it! It is trying to streamline operations but you do wonder how the whole discount sector will do when economies start firing up again…
• IN FINANCIALS NEWS – billionaire investor Bill Ackman just sold a 10% stake in his hedge fund Pershing Square. It’s thought the fund will IPO next year. Meanwhile, hedge fund short sellers are getting burned by the recent flurry of UK takeover bids as their bets are blowing up in their faces because takeover target share prices suddenly boom on bids and/or bid rumours (their short positions in these companies mean that they are betting that their share prices will go down – not up!). Private equity funds are warning that there may be lower returns for the next few years as they try to sell out of assets they’ve bought over the pandemic.
• The Monsanto payout for the ongoing legal battle surrounding its weedkiller Roundup has been slashed to $400m from $2.25bn, something that its parent company Bayer will no doubt be very pleased with. Monsanto said it will be pushing for further reductions in the Superior Court.

My favourite “AND FINALLY” video this week was Uncle Roger’s latest roast of a Jamie Oliver recipe! Honestly, Jamie – what is going on??!?!

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

This was the week when NATO discovered massive defensive weaknesses, when Donny T got into more big doo-doo and when Nvidia became more valuable than the FTSE100…

• IN DEFENCE NEWS – NATO found that Europe’s eastern flank is 95% deficient in air defences that would be needed to fend off a full attack from Russia. Given that the Americans are less and less keen these days on helping Europe, leaders are going to need to up their defence game. Interestingly, in a sign that defence is becoming less of a dirty word these days, football club Borussia Dortmund has just signed a multi-year sponsorship deal with Rheinmettall, the German weapons manufacturer. Will we see an increasing amount of “sportswashing” to give defence companies a more acceptable image??
• IN CHINA – factory activity came in below expectations in May, in a bit of a blow to President Xi’s efforts to boost manufacturing as a way of pulling China out of its current economic rut. Xi also called for more efforts to provide China’s youth with “high-quality full employment” almost a year on from when the administration banned the release of youth unemployment stats because they made them look bad (they have since started to publish them again).
• IN THE US – the economy grew at a slower rate than expected in Q1. This, along with stubbornly high inflation, is going to make it more difficult for Biden to boast about his economic credentials in the run-up to the presidential election. The other bit of big news in the US this week was Donald Trump being found guilty on all counts in the “hush money” trial. He is now the first former US president to be convicted of a crime.
• IN EUROPE – Ursula von der Leyen’s path to a second term has hit some turbulence as some major groups in the European parliament are threatening to block her nomination if she does a deal with Italy. Meanwhile Germany’s far-right AfD did worse than expected in local elections after a string of recent scandals. That being said, it’s still ahead of where it was in the polls versus where it was five years ago.
• IN THE UK – Sunak caused a bit of a ruckus after he announced a £2.4bn pensioner tax cut although he caused panic at the other end of the age scale with the weekend announcement of the reintroduction of national service. Labour boasted about a letter of endorsement from 120 business execs that it said reflected confidence in its policies but this was later ridiculed as none of the FTSE100’s CEOs signed it. Meanwhile, Labour promised that there would be no budget until September if it won the election but it was called on to clarify the timing of its pledge to slap VAT on private school fees.

IN COMMODITIES NEWS…

• IN OIL – Saudi Arabia announced the sale of $12bn worth of Aramco shares to raise additional capital for its sovereign wealth fund. Closer to home, there was an interesting comment in the FT about why European oil majors aren’t taking part in the US oil consolidation frenzy at the moment – mainly because they’ve already been through this consolidation phase. Meanwhile, Shell and Exxon are close to offloading assets in the North Sea in their withdrawal from the UK’s oil basin.
• IN MINING – BHP abandoned its bid to buy smaller rival Anglo American, so now the pressure is on for the latter to deliver on its restructuring promises!
• IN OTHER COMMODITIES – wholesale prices of orange juice hit new highs due to poor harvests, which themselves are due to consecutive hurricanes and spread of the greening disease. The disease is spread by insects and turns the fruit bitter before killing the tree itself. There is no quick “orange” solution, so alternative actions will be required. Elsewhere, there have been some bird flu outbreaks among US poultry flocks. It sounds like the problem is relatively contained but that situation could change…

IN CURRENCY NEWS…

• Sterling hit its highest level in two years against the euro as the market is now assuming that the Bank of England will cut interest rates less sharply than the ECB will.

IN BUSINESS TRENDS NEWS…

• Consumer goods conglomerates may break up – as we’ve already seen that Unilever is trying to sell off its ice cream business and Reckitt Benckiser is looking to offload its baby formula business. It seems that “focused and profitable” is deemed to be “good” while “broad-based and growing” isn’t.
• Goldman Sachs is putting another $20bn into private credit – as this unregulated area of lending continues to grow.
• Food delivery companies are finding it difficult to deliver – as leading delivery apps in Europe and the US have been struggling since their respective IPOs as shares in Deliveroo, Just Eat Takeaway, Delivery Hero and DoorDash are all now trading way short of the pandemic peaks as investors shift their focus from growth to profitability.
• Business confidence in the UK has hit a new high – according to Lloyds Bank’s latest business confidence index it is at its highest level since November 2015. Given that we exited recession in Q1, GDP growth is looking good and inflation is within touching distance of the Bank of England’s 2% target it’s understandable!

IN CONSUMER TRENDS NEWS…

• A report by the IFS says that UK living standards have lagged most peer nations since 2010, which is no doubt something that Labour will be latching onto! Given that one of Sunak’s biggest hopes to hang on to power is the turnaround of the economy, this won’t be a welcome bit of research.
• Shoppers seem to be staying at home, according to the last data from the BRC. Footfall is down on the high street and in shopping centres while the weather didn’t help either. Retailers will be praying for a strong summer! It is interesting to note, however, that online shoppers are increasingly ditching their baskets mid-order, according to a different report, because of higher delivery costs, fewer delivery options and higher returns fees.
• Meanwhile, shop price inflation dropped to its lowest level since November 2021, thanks to falling food prices and the latest stats from the CBI showed that retail sales expanded at their highest pace in a year-and-a-half in May while the latest GfK consumer confidence index shows that optimism is now at its highest point for over two years!
• The performance of fast-food chains owned by the likes of Yum Brands and Darden Restaurants has been mixed while “fast-casual” chains such as Sweetgreen, Chipotle and Shake Shack have done quite well over the last quarter and this could be a reflection of the latter being frequented by more affluent customers. Will this continue when fast-food restaurants inevitably cut their prices again??
• QR codes are increasingly being ditched for paper menus in the US. The codes rose in popularity under lockdown but now customers are pushing back because of privacy concerns and the fact that their use seems to lead to lower takings. Will this trend come over here?

IN EV NEWS…

• BYD unveiled new hybrid models this week that have a 1,300 mile range! Range anxiety? Pfft. What-evs.
• Tesla is now telling suppliers who provide parts to cars for sale outside China to build components outside China and Taiwan by early next year due to the ongoing trade tensions and likelihood of more sanctions.
• In the UK, the car industry body – the SMMT – is calling from more help from the government to get people to buy EVs but it’s difficult to get away from the fact that EV costs are rising generally as governments around the world look at ways to claw back revenue that they used to get from petrol car users. Auto Trader reckons that EV prices will continue to fall as manufacturers resort to discounts in order to boost flagging sales.
• Faraday Future is the latest EV start-up to have problems as it announced that it was withdrawing its production target guidance for the year. Will this be the next EV maker to go down the toilet??
• It was interesting to see some research from the Energy and Climate Intelligence Unit which found that plug-in hybrids cost double to fuel versus the manufacturers’ promises! If this proves to be true, could this be another “dieselgate” waiting to happen??

IN OTHER CAR NEWS…

• Research from the IEA showed that global sales of SUVs hit a new high in 2023. Emissions from such vehicles accounted for 20% of the global increase of CO2. If SUVs were a country, they’d be the world’s fifth biggest emitter of CO2 ahead of Germany and Japan!

• OpenAI is pushing forward with training its next-gen AI model after its recent clash with Scarlett Johansson, which could yet have repercussions for privacy. It also admitted this week that its models are being used for nefarious purposes by operations linked to Russia, China, Iran and Israel – but then you do wonder that if this tool is being used to do this that it could also be used to counter such actions.
• Elon Musk’s xAI hit its $6bn funding target, so we’ll just have to wait and see how this goes now!
• Nvidia became more valuable that all the constituents in the FTSE100 put together this week, but it’s not the only way to play the AI theme – Japanese suppliers such as Tokyo Electron, Towa, Advantest and Screen are all part of the AI supply chain.
• A specialist Chinese fund has raised $47bn to boost its chip industry while Chinese chipmakers – such as SMIC and ChangXin Memory – are making a real push to replace foreign suppliers with local ones to limit the effect of US sanctions.
• Tencent-owned Supercell has launched its first new title in over five years – Squad Busters – as the Finnish company tries to turn its fortunes around.
• Samsung workers are going to embark on their first ever strike on 7th June for one day as wage negotiations with the union have not gone well.

IN RETAIL NEWS…

• Walmart store managers could benefit from a new scheme that will enable them to earn up to $500,000 a year! Cue a deluge of applications!
• Gap reported higher quarterly sales and raised full-year guidance as turnaround efforts seem to be taking hold. This was the first quarter in years that all of its brands – Gap, Old Navy, Banana Republic and Athleta – announced gains. Let’s hope it can keep/build on this momentum!
• UK politicians are calling for more scrutiny about a potential Shein IPO in the UK, given their less-than-angelic track record. It’s going to be a tug-of-war between the LSE (which desperately needs a high-profile and big IPO) and the politicians (who want to look like they’re doing the right thing in the run-up to the election).
• Profits at Boots boomed thanks to beauty sales. I would have thought this would be at least partly due to the downfall of department stores…
• Pets at Home announced a subdued trading performance but let’s be honest – all eyes are on the review that will be conducted by the CMA into the company’s veterinary business. Any upside will be limited until Pets at Home is cleared (if it is cleared).

IN LEISURE NEWS…

• Subway announced a $3.4bn bond offering, the largest bond of its kind, as it looks to pay down some of the debt that was incurred by PE firm Roark Capital Group when it bought Subway for $9bn earlier this year.
• American Airlines announced a disappointing Q1 performance thanks to it falling behind rivals in its provisions for business travel. The CEO has admitted his strategy is wrong and is now working to turn things around.

• IN M&A NEWS – Chevron’s takeover of Hess was backed by the latter’s shareholders, ConocoPhillips is to buy Marathon Oil, T-Mobile is to buy most of US Cellular and Asahi Kasei made a bid for Calliditas Therapeutics while EP Group bought Royal Mail. Some are saying that Royal Mail could be broken up as a consequence…
• IN REAL ESTATE NEWS – Zoopla reckons that house prices won’t go crazy this year because more houses on the market will cater for rising demand (they’ve been strong prior to this because the number of properties on the market has been low). Also, WeWork founder Adam Neumann decided to drop his bid to acquire the bankrupt company.
• Salesforce saw its share price plummet after it announced its lowest-ever quarterly revenue growth forecast as investors fretted about the threat of AI-powered rival offerings. Salesforce reckons it’ll be an AI winner but investors weren’t convinced…

My favourite “AND FINALLY” video this week was the one about the cottonwood fire. I thought it was fascinating!

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

This was the week when Argentinians got a new 10,000 peso note, when TikTok fought back and when Apple unveiled a new chip…

• IN GLOBAL NEWS – the OECD, IMF and WTO are all forecasting a doubling of global trade growth this year following a disappointing 2023 but then the Institute of International Finance said that global debt is at a new high thanks to major borrowing from China and India in particular.
• IN THE UK – the UK pulled out of recession with better-than-expected Q1 growth and the Bank of England left interest rates unchanged whilst indicating that summer cuts were on the cards. Sunak looks set to limp on after disastrous local election results last week as Tory rebels can’t be bothered to replace him and some are saying that a Labour government could boost prospects for the London market as investors may see it as new start after a tumultuous few years. Still, it turns out that HS2 is about to get the go-ahead to dig a 4.5mile tunnel under London within weeks – but it’s going to be at least partly funded by taxpayers! Sunak had originally promised that this would be funded by the private sector.
• IN SWEDEN – the country’s central bank, the Riksbank, cut interest rates for the first time in eight years – potentially putting pressure on the ECB to cut rates as well!
• IN ARGENTINA – the country’s central bank has released the country’s first 10,000 peso notes into circulation as rampant inflation has meant that everyone has to wander around with wads of cash! The previous largest note was 2,000 pesos (which was introduced last year) but the most common note is 1,000 pesos. Currently 10,000 pesos is worth about $11. The peso has fallen by 95% over the last five years and new president Milei is battling to bring inflation and the country’s currency under control.

IN COMMODITIES NEWS…

• IN OIL – Trump allegedly offered to shred Biden’s pro-EV agenda and un-freeze LNG export permits in exchange for oil and gas industry execs contributing $1bn to his re-election campaign! Meanwhile, 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 two climate-focused investors. There was an interesting article in the FT on why switching from a UK/European listing isn’t a cure for Europe’s oil majors because their cheaper rating reflects a discount due to their being further along on their climate commitments which means that their US cousins have more cash available to distribute to shareholders in the form of dividends and share buybacks (which makes them more attractive, hence the higher rating).
• IN MINING – it looks like Anglo American’s South African investors are potentially open to a higher offer from BHP, but BHP now has until May 22nd to make a formal bid under UK takeover rules. The drama continues…

IN CRYPTO NEWS…

• FTX looks like it’ll be able to repay creditors the full $11bn they lost once it sells off all remaining assets. This is an impressive outcome given the state of the company when John Ray III took over but this state of affairs has been helped enormously by the value of bitcoin more than tripling since it hit those lows!
• Retail brokerage Robinhood has warned of an imminent lawsuit from the SEC over its crypto business in the ongoing US regulatory clampdown on digital assets. This is a pain for the company rather than a disaster but it’s going to be interesting to see how this unfolds.

IN BUSINESS TRENDS NEWS…

• IN CHINA-RELATED TRENDS – The EU and France have been pressing President Xi for more balanced trade ties on the latter’s tour of Europe. The Europeans are potentially going to be slapping imports from China with tariffs which China says are just protectionist. Trade in China is on the rise thanks to a surge in imports of key equipment for the development of AI while Chinese tech companies are migrating towards the Middle East as part of their overall global expansion plans. Alibaba, Tencent and Shein are all among those increasing activity in the region.
• The US tech industry is on the verge of getting a major funding boost from the US Federal government as part of an overall effort to stay at the cutting edge of technology. This is likely to unlock more investment from the private sector.
• The UK’s IPO pipeline is “building up”, according to the LSE. It seems that companies are waiting for new (less strict) listing rules to come into force. The changes will represent the biggest overhaul of the primary market rules in 40 years!

IN EMPLOYMENT NEWS…

• The CEO of Reed said 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 latest research from KPMG and REC 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 – something that the Bank of England will need to take into account when deciding the direction of interest rates.

IN CHIPS NEWS…

• The US tightened the ban on supplying chips to Huawei by revoking export licences allowing Intel and Qualcomm to supply the Chinese telecoms equipment company.
• Apple unveiled a new “outrageously powerful chip for AI” in its latest iPads, the M4 chip. This could be a sign of things to come re chips for AI-powered phones – something that is also likely to benefit Qualcomm.
• Arm underwhelmed the market with its full-year revenue forecasts, but then again it had a storming Q4 last year so it had a lot to live up to! That being said, I would have thought that it will be well-placed to benefit from on-mobile AI given its massive market share in smartphones.
• Intel cut its sales outlook following the revocation of its licences to sell to Huawei (see above!) but it kept its full year guidance unchanged.

IN AI-RELATED NEWS…

• It turns out that Microsoft has created a new “top secret” LLM that will be used by US spies. It is completely independent from the internet, which is why it’s suitable for spies!
• UK publishing and exhibitions company Informa 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. It’s 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.

IN OTHER TECH NEWS…

• 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. It seems increasingly that there’s nowhere to hide for Big Tech!

IN EV NEWS…

• Chinese car dealers are ditching non-Chinese brands because domestic brands are just selling better! Dealerships that are more EV-focused are doing well while those that are more weighted towards “traditional” cars are not.
• VW has called for Brussels not to increase tariffs on Chinese EV imports because it would risk “retaliation” against other international brands. I think that this is more about about covering its 🍑rse because it wants to protect its own business in China (something that Mercedes-Benz is also doing).
• Governments are starting to slap taxes on EVs to make up for the shortfall in revenues that they normally get for fuel duties on petrol-powered cars. EV fans will say this will slow down wider electrification while governments will be keen to make at least some money from EV owners rather than nothing!
• UK carmakers are calling for help to boost EV sales, which are sliding. If you take out fleet buyers who are taking advantage of tax breaks, demand looks particularly weak.
• IN TESLA NEWS – Musk has sent his chief fixer to China to revive its business there. Meanwhile, the Department of Justice is now investigating whether Tesla has committed wire and securities fraud by overstating the capabilities of its self-driving systems. The company really does seem to be having a tough time at the moment!
• Meanwhile, BYD said that it 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 are keen to slow down their progress by slapping taxes on them!
• Demand for EVs is getting so poor at the moment that Ford has said that it is willing to limit the sales of petrol models in order to hit EV sales targets and avoid massive fines. Ford also said that its goal of only selling electric vehicles in Europe by 2030 will have to be pushed back.

IN OTHER AUTOMOTIVE NEWS…

• Used car dealer Cazoo is on the verge of insolvency after failing to attract emergency funding. What a sorry end for a company that was valued at $8bn on its New York flotation in 2021.
• British driverless car start-up Wayve just raised $1bn from SoftBank, Microsoft and Nvidia. Its approach to driverless differs from rivals in that it aims to “teach” vehicles how to drive from real-life videos rather than input a stack of “rules” that cover every eventuality.

OVERALL…

• The UK construction industry grew at its fastest 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.

IN COMMERCIAL REAL ESTATE NEWS…

• There’s some doubt as to whether new lab space in Canary Wharf will be the answer to the recent “exodus” of financial companies. Yes, you can charge higher rents but building costs are higher and there’s only so much demand. I’d also argue that by the time these facilities are built, M&A activity will have improved and demand from “traditional” financials services companies could well bounce back.
• Meanwhile, Heineken said that it was going to reopen 62 pubs and upgrade them to attract customers 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!

IN RESIDENTIAL PROPERTY-RELATED NEWS…

• UK house prices held steady in April, according to the latest data from Halifax and the latest RICS survey showed that the housing market recovery is “stuttering slightly”. Still, estate agent Savills said that it reckons house prices will rise this year, reversing 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.
• It seems that the exodus from London to the ‘burbs that we saw under lockdown has slowed down considerably to the pre-Covid norm, presumably because of the return-to-office trend.
• Purpose Built Student Accommodation (PBSA) is turning out to be a big cash cow as big funds like Legal & General Investment Management have been hoovering up property while other buy-to-let landlords have been moving out of the market. LGIM and others are attracted to reliable returns and the mismatch between supply and demand.

IN CONSUMER TRENDS…

• The edge was taken off UK sales in spring by wet weather and an early Easter, according to the latest figures from the BRC. Concerns still remain over the economy but the expectation is that the economy will rebound as wages are now outpacing inflation after a long period where they were lagging.
• Research from Global Blue showed that tourists who would have come to the UK avoided it because of the lack of tax-free shopping. France, Italy and Spain have all benefited since the VAT scheme was scrapped in January 2021. Surely it’d be an easy win for Sunak to reintroduce it as it’d be a popular move for retailers and he can just leave the next government to deal with any consequences!
• Jeweller Pandora is benefitting from the sales boom in synthetic diamonds, particularly from young customers. Given that they are essentially the same as mined ones and sell at a third of the price, you would have thought that there is plenty of upside to go from here!

IN RETAIL NEWS…

• 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!

IN LEISURE NEWS…

• Airbnb’s profits more than doubled in Q1 but the company is more cautious about Q2. That being said it is confident about its prospects thereafter.
• Gordon Ramsay is going to open the UK’s highest restaurant and bar at 22 Bishopsgate in London in a building that is being described as a “vertical village”. Who said that the City was dead?!?

IN ONLINE MEDIA NEWS…

• Ofcom is putting more pressure on the tech industry to protect children online by outlining a proposed code consisting of over 40 measures that will form part of the UK’s Online Safety Act, which was passed in October. The Act is wide-ranging and gives Ofcom major powers to enforce big fines and criminal liability for non-compliance.
• TikTok and parent company ByteDance are suing to block the forced sale of the app in the US, saying that the law is unconstitutional and violates free speech. Separately, TikTok said that it will automatically label AI-generated user content, the first social media platform to do so. This is clearly a hot topic as everyone is fretting about the spread of online disinformation and deepfakes.
• Reddit beat market expectations and jacked up its forecasts in its first earnings announcement since its flotation thanks to solid user growth and the success of the company’s nascent advertising business.

IN “TRADITIONAL” MEDIA NEWS…

• Disney published its first profit in its core streaming business but investors seemed to be more concerned about a potential slowdown in its theme parks after the initial post-pandemic frenzy. Meanwhile, Disney and Warner announced plans to join 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.
• Warner Brothers Discovery posted a bigger-than-expected drop in revenues thanks to a sharp dip in ad sales at its cable TV division and the impact of last year’s Hollywood strikes by actors and writers.

• IN FINANCIALS NEWS – HSBC is appealing to the government to rein in new national security rules that aim to restrict China’s influence in the UK. If these pleas are ignored, companies will have to publish details about their commercial dealings with China, which they are clearly not a fan of! UBS managed to beat its own and market expectations in its latest quarterly results and it looks like the positive momentum will continue! In insurance, Direct Line’s performance has been hit by worse-than-expected weather and a fall in the number of motor customers. The company’s just had a top management shake-up and the CEO says that there have been some positive signs at the beginning of 2024.
• Boeing’s nightmare newsflow continues as it had to call off its Starliner spacecraft launch due to an issue with a component! When will Boeing’s nightmare end??
• Ferragamo posted disappointing Q1 revenues as weakness in China hit its performance. Luxury brands have had a mixed performance of late – and Ferragamo is definitely in the “losers” category along with Kering and others. Winners, on the other hand include the likes of Prada, Hermès and Puig.
• 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. This is a bit of a downer considering that it was only a few months ago that it trumpeted its first ever annual profit!
• AstraZeneca announced the end of an era as it said that it would be withdrawing its Covid-19 vaccine worldwide due to a “surplus of available updated vaccines”.

My favourite “AND FINALLY” video this week was the one with Big Brother watching commuters on the London Underground 🤣!

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

This was the week when TikTok’s spat with Universal ended, when Peloton’s boss stepped down and when McDonald’s said it would double down on China…

• IN THE US – the Fed left interest rates unchanged and it looks like they’ll be higher for longer as Fed chief Jay Powell said that he couldn’t cut them at the moment due to “a lack of further progress” in getting inflation down to its 2% target. Biden’s administration is looking at loosening rules on marijuana as he tries to appeal to the youth vote ahead of the election. This has still got to survive a public comment period, but if the proposed changes go through, they will represent the biggest change in US drug policy in a generation!
• IN CHINA – factory activity expanded for the second consecutive month, according to the latest PMI, thanks to rising high-tech manufacturing output. President Xi is due over in Europe next week. This should be 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.
• IN EUROPE – the EU exited recession thanks to a better-than-expected performance by the economies of Germany, France, Italy and Spain over Q1. However, German inflation turned out to be stubbornly high in April thanks to strong food and energy prices. This will make it a bit more difficult for the ECB justify interest rate cuts. Meanwhile, Spain’s PM Pedro Sánchez announced that he would be staying in office after all following threats to resign after his wife got caught up in corruption charges. Elsewhere, Turkey suspended trade with Israel in protest at the “humanitarian disaster” in Gaza as tensions between the two nations worsened.
• IN UK NEWS – the OECD reckons that the UK will be the worst performing economy in the G7 next year thanks to high interest rates and the ongoing effects of inflation. It also believes that the US and Canada will be the best performers in the group. Meanwhile, Sunak’s fate could be decided in the local elections this week while council problems persist as their debt keeps rising. The UK manufacturing sector fell back into contraction, although at a slower rate than the market had been expecting. Red sea problems, uncertainty about the prospects for the UK economy and the running down of inventories all played their part in the weakness. Meanwhile, Scotland’s First Minister, Humza Yousaf, resigned. The SNP subsequently scrambled to find a suitable “safe pair of hands”.

IN COMMODITIES NEWS…

• IN OIL – Gazprom had its worst loss in decades as sanctions have pretty much taken Europe out of the equation as gas customers. On the other hand, Shell posted better-than-expected Q1 results and delighted investors even more by announcing a $3.5bn share buyback to be executed over the next three months.
• IN COCOA – the price of cocoa futures dropped by 16% since last week after almost tripling in value this year alone – but there was no particular explanation, so this might just be a temporary thing.
• IN LITHIUM – 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.
• IN LIVESTOCK – US cattle prices have been weakening thanks to an outbreak of bird flu. 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.

IN ENERGY NEWS…

• Cheap solar power is boosting the prospects for desalination plants. The process of desalination is very energy-intensive so cheaper solar power for countries like Egypt, Algeria and Morocco will be very welcome.
• The boss of wind developer Ørsted believes that high interest rates will keep the costs of renewable energy high, although he also believes prospects are looking up after what was a pretty disastrous 2023.

IN CRYPTO NEWS…

• Binance’s founder, Changpeng Zhao, just got sentenced to four months in jail after pleading guilty of money laundering and breaking sanctions laws. Maybe this will give fellow crypto-king Sam Bankman-Fried hope as he was sentenced to 25 years in the slammer for his deeds.

IN BUSINESS TRENDS NEWS…

• City law firm Mayer Brown is the latest law firm to split out its China operations to avoid potential entanglement in the ongoing US-China trade tensions. Dentons, Latham & Watkins, Winston & Strawn and Linklaters are among the other law firms that have either separated out, slimmed down or shut down their operations in China.
• A record backlog of new aircraft built up over Q1 as the industry was hit by delivery delays and capacity problems.
• Shipping giant Maersk saw its profits sink thanks largely to Red Sea problems. On the plus side, the company said that it thought that losses for this year would actually be better than expected as volumes are trending up.
• Rapid delivery firm Getir is quitting its business in the UK, Germany, the Netherlands and US to retreat to its domestic market in Turkey. Competition has been fierce and I’d suggest that there’s only limited longevity for this kind of business as it strikes me as being one of those things that works when the economy is on fire (everyone’s cash-rich and time-poor) and goes down the toilet when things aren’t going so well (everyone’s focused on costs).

IN EMPLOYMENT TRENDS…

• Job vacancies fell again last month – by 17% – in further evidence of a cooling market. The report also said that jobs in advertising, marketing and PR fell by 11% in March versus the previous month as corporates slashed marketing budgets. Does this mean that it’ll be easier to justify interest rates cuts sooner-rather-than-later??
• UK universities face more course closures and job cuts after struggling with the freeze in tuition fees for domestic students, which still has at least two years to run. They want help from the government but their pleas seem to be falling on deaf ears as the government says that they are offering too many courses that don’t offer a decent return and that they’ve become too reliant on fees from overseas students.
• Business travel has been returning back towards pre-pandemic levels in the US according to reported flight and hotel bookings. One wonders whether this implies that the prospects for the likes of Zoom and others are going to be limited.

IN AUTOMOTIVE TRENDS NEWS…

• Wallenius Wilhelmsen, 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.
• Researchers at Rhodium Group published a report which says that although the EC is expected 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!
• While all this anti-China stuff is going on more carmakers are announcing tie-ups with Chinese rivals in China’s domestic market to take advantage of superior Chinese technology. Toyota’s teamed up with Tencent, Nissan with Baidu and Hyundai with CATL.
• Chinese EV makers BYD, NIO, XPeng, Geely’s Zeekr and newcomer Xiaomi reported strong EV sales in April but hybrid vehicle specialist Li Auto lagged behind – the opposite to the trend that we are seeing in the West.

IN INDIVIDUAL COMPANY NEWS…

• Tesla had an eventful week? It started off with Musk popping over to China for a surprise visit to meet Premier Li Qiang to talk about deploying fully driverless technology. The China Association of Automobile Manufacturers said that Tesla’s Model 3 and Model Y cars 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. Later in the week, Musk fired the entire supercharger team which caused somewhat of a kerfuffle as it caught the entire industry by surprise.
• Meanwhile, Aston Martin’s losses almost doubled as SUV sales plunged. It’s got new models coming out by the end of this year which should hopefully revive demand.

IN CONSUMER TRENDS NEWS…

• Food importers in the UK are being hit by new post-Brexit checks that came in this week on animal and plant products entering from the EU. They say that this could increase costs by up to 60%, which will probably be passed on to the end customers and put smaller importers out of business.
• Non-food shop prices dropped in April, according to the latest stats from the BRC. This should be good news for household budgets.
• A survey by Deloitte showed that the cost-of-living has led to Britons spending less money in pubs and bars than at any time since the end of lockdown as higher costs have continued to weigh on households. On the plus side, a separate survey by Deloitte showed that consumer confidence hit a two-year high in Q1 of 2024.

IN CONSUMER GOODS NEWS…

• Puig Brands – which owns brands including Jean Paul Gaultier, Carolina Herrera, Paco Rabane and Nina Ricci – priced its IPO at the high end of the range. The offering was many times oversubscribed, highlighting its popularity.
• Mulberry sales fell, according to its latest trading update. The company painted a downbeat picture of the outlook, saying that the UK and China markets will continue to be challenging. I think it’s suffering from being at the “low” end of luxury brands which means that its core customers are more likely to be feeling the pinch from the current cost-of-living crisis.
• At the more realistic end of the market, Adidas posted better-than-expected profits for Q1 thanks to improved inventory levels, lower sourcing costs and a better business mix.

IN RETAIL NEWS…

• IN APPAREL – Frasers hoovered up the brand and IP of MatchesFashion out of administration, for an undisclosed sum, which excluded its stock and employees. Online luxury has had a particularly rough ride, presumably as part of the attraction of shopping at these kinds of places is more influenced by experiences, which you only really get in a shop. Next managed to post better-than-expected sales growth over Q1 and Spanish fashion retailer Mango announced plans for more UK stores as part of its global expansion plans. Meanwhile, secondhand fashion seller Vinted managed to reach profitability for the first time. This is great but rivals Depop and RealReal reported losses last year. How Vinted will fare when economies recover is, as yet, unclear…
• Amazon.com posted record Q1 sales thanks to its cloud computing business benefitting from the AI boom. It continues to spend big in AWS infrastructure and generative AI investment.

IN LEISURE/RESTAURANTS NEWS…

• McDonald’s announced plans to double down on expansion in China, but I have to say that I hope it has a Plan B given what’s happened to Starbucks in that market and what might happen if China invades Taiwan (will it be like what happened to its Russia business all over again?).
• Fast-food giants such as 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. They clearly have to adapt accordingly.
• Starbucks reported a major slowdown in visits and underwhelming sales and profits over Q1. The company is planning to address this by speeding up morning service and launching some new food and beverage options.

IN COMMERCIAL REAL ESTATE NEWS…

• WeWork agreed a restructuring deal that managed to shut out controversial founder Adam Neumann. The question is whether the only way is up from here or whether the company will slide further into the abyss from here!

IN RESIDENTIAL PROPERTY NEWS…

• The latest Bank of England figures showed that mortgage approvals rose in March to their highest level since the whole Truss-Kwarteng disaster in 2022. This tallies quite well with Zoopla data which showed that UK house sales rose 12% in April. That being said, Nationwide figures showed that interest rate wobbles and rising mortgage costs led to UK house prices falling unexpectedly for the second month in a  row.
• Average rents in the UK hit a record high, according to figures from Rightmove, due to the demand for rental properties exceeding supply.

IN TECH NEWS…

• IN AI – Chinese AI start-ups are racing to catch up with the likes of OpenAI and Anthropic. Zhipu AI, Moonshot AI, MiniMax and 01.ai are leading the pack at the moment. Meanwhile, eight newspapers including The New York Daily News, Chicago Tribune, Denver Post and other newspapers are suing OpenAI and Microsoft, accusing them of scraping their copyrighted content without permission or payment. That being said, the FT signed a deal with OpenAI so that the latter is allowed to train AI models on the FT’s archived content.
• Apple saw its revenues fall, but the drop was less than the market expected and it was pretty positive about the outlook for the year. It also announced a whopping great share buyback! It also seems like Apple has been building up its AI capabilities by poaching staff from Google. Hype is building about an iPhone with on-board AI capabilities. On the downside, Huawei’s profits have boomed more than six-fold, taking some of Apple’s market share in the process – all in spite of US sanctions!
• Meta is now facing an investigation over the spread of Russian propaganda as we head towards European parliamentary elections, the UK general election and the US presidential election. The EC reckons Meta hasn’t done enough to stop the spread of disinformation.

IN MEDIA NEWS…

• TikTok had an eventful week this week! It settled its months-long spat with Universal Music for an undisclosed sum but remains defiant about a potential US ban.
• OnlyFans is now being investigated by Ofcom due to concerns that it has not done enough to shield kids from pornography. Ofcom is due to give an update of its progress in August.

IN IPO NEWS…

• Flutter shareholders voted overwhelmingly to switch the company’s primary listing from London to New York. It’s been well-flagged, makes sense (because it’s where their growth lies!) and is expected to become effective by the end of this month.
• Cruise line Viking had a successful IPO in what was the second-largest US flotation this year.
• It’s not all doom and gloom for the London Stock Exchange as a newly-established real estate investment trust (REIT) is aiming to float in London in June. Also, even if there’s a dearth of home-grown IPOs, investors can still invest in them via ETFs.
• European PE firm CVC Capital Partners started trading at over €17 per share, which was above the €14 offer price. It was a popular IPO and the proceeds will help CVC’s growth and give it currency to attract investor cash and talent.

IN M&A NEWS…

• Sony and Apollo put in a $26bn all-cash offer to snatch the initiative away from Skydance Media to buy Paramount. Skydance and Paramount have been engaged in exclusive negotiations. Paramount’s shares got a 13% bump as investors got excited about a bidding war.
• The UK’s only quote cybersecurity name, Darktrace, was taken private by US PE firm Thoma Bravo as the former accepted the latter’s £4.3bn offer.
• UK bar operator Nightcap is having exploratory talks about a potential takeover of the troubled hospitality group Revolution Bars. Talks are at the very early stages.

• IN FINANCIALS NEWS – Lloyd’s insurers Hiscox and Lancashire are counting the cost of the Baltimore bridge disaster but said that the impact “will be within expectations of this type of event”. 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. The average cost of UK car insurance has risen by a third in a year, according to the latest figures from the ABI. Maybe some of that is due to the increased use of cheap Chinese phone signal jammers which have been fuelling the theft of luxury cars! Meanwhile, Goldman Sachs announced the scrapping of the bonus cap that will allow their top performers to earn up to 25 times their annual salary! No doubt all the other investment banks in the UK will follow suit (or they will see a mass-exodus of their staff!).
• IN PHARMACEUTICALS NEWS – Novo Nordisk is upbeat about the prospects for its profits this year thanks to its massively successful weight-loss drugs. Meanwhile, Johnson & Johnson proposed an improved $6.5bn deal to draw a line under its long-running talc litigation. If accepted, it would be made over the next 25 years and settle all current and future claims.
• Peloton’s latest CEO, Barry McCarthy, is stepping down given that he has failed miserably in his tenure to drag the company out of the ditch it found itself in. I think that 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).
• The EC is investigating allegations of “greenwashing” at 20 airlines, including things like allegedly exaggerating their eco-credentials. The airlines in focus come from Belgium, the Netherlands, Norway and Spain.

My favourite “AND FINALLY” video this week was the one with the guy that just burst into life when the spotlight was on!

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

This was the week when the Senate finally passed the aid bill, when BHP suggested a mega-merger and when Congress approved a ban on TikTok…

• IN THE US – investors are starting to price in an interest rate increase as inflation came in stronger than expected and GDP growth numbers underwhelmed. The US Senate eventually passed a $95bn bill for aid to Ukraine, Israel and the Indo-Pacific region, in a boost for Biden as it got cross-party support.
• IN ASIA – the Bank of Japan kept interest rates unchanged, sending the Yen to its lowest level in 34 years while Indonesia raised interest rates to bolster its currency, which had hit four-year lows against the dollar.
• IN THE UK – the Bank of England’s chief economist, Huw Pill, warned against cutting interest rates too early while the latest ONS data showed that government borrowing came in above expectations. The FTSE100 hit a record high this week and although there may be potential wobbles near-term due to continued UK fund outflows, there are some pretty interesting catalysts further out that could really power the index forward from here. Meanwhile, debate continues as to the timing of the next UK general election. The general consensus would suggest that Sunak will leave it as late as possible in order to take advantage of potential good news on the economy but his hand might be forced by a poor performance in the May 2nd local elections.
• IN SPAIN – PM Pedro Sánchez threatened to resign as his wife has been caught up in accusations of corruption. He is due to make a decision on his future on April 29th.

IN COMMODITIES NEWS…

• IN MINING – BHP proposed a takeover of rival miner Anglo American in a transaction that could be the industry’s biggest for years! BHP is keen to get more copper exposure through the deal because it thinks that copper will be a key driver of the green revolution. However, BHP is going to have to put in a higher offer to stand a realistic possibility of getting the deal over the line.
• IN DIAMONDS – we see that output from Anglo American’s diamond business, De Beers, fell by a whopping 23% in Q1 thanks to a combination of a reining in of luxury spending and the rising popularity of synthetic diamonds. Although De Beers said that there were some signs of recovery over the quarter it does seem that the current oversupply of gems will limit upside for some time yet.
• IN LITHIUM – 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.
• IN OIL – Ithaca Energy agreed to buy almost all of Eni’s UK oil and gas fields for £750m, transforming it into one of the North Sea’s biggest producers. Eni will retain a 38% stake in the enlarged group.
• IN COCOA – Latin American farmers are now rushing to plant cocoa given the massive price rises over the last year. There is obviously a danger that, by the time the new plants bear fruit, prices will have normalised.

IN ENERGY…

• Data from National Grid’s electricity system operator (ESO) shows that the proportion of electricity generated in GB by burning fossil fuels fell to a record low of just 2.4% earlier this month. 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%.
• Schneider Electric is working on the development of the world’s first offshore charging station for cruise ships that would be sited off Orkney. Sounds great but a bit niche IMO!

IN BUSINESS TRENDS NEWS…

• Suez trade has dropped by 59% over the year to April thanks to conflict in the Middle East. Delivery times have obviously increased but they haven’t increased by all that much and are starting to fall.

IN EMPLOYMENT TRENDS…

• Tata Consultancy Services’ CEO said that AI could kill call centres – potentially within one year. We’ve already seen this starting to happen at Klarna.
• Some of the world’s biggest commodity traders, such as Vitol and Trafigura, are investing huge sums in AI that they use to process data and make faster decisions. Citadel is currently at the forefront, but others are throwing money at it to catch up.
• Chinese tech workers are getting hit by the “curse of 35” where employers are tending to favour younger over older workers, leaving the latter out in the cold. The problem is that this trend is across other industries, meaning that those affected by this find it very hard to find other work.

IN AI NEWS…

• The US is looking for an alliance with Abu Dhabi on AI as the US doubles down its efforts to get the UAE onside. After a big announcement from Microsoft last week, it’ll be interesting to see what other deals come of this push.
• China is continuing with efforts to come up with its own “ChatGPT”. SenseTime is the company that seems to be furthest ahead and just released the newest version of its chatbot, SenseNova 5.0, this week.
• The US is pushing for a tightening of existing tech exports to China (particularly of advanced chips and chip-making equipment) as it is getting concerned about the strides China’s Huawei is making.
• Microsoft’s efforts in AI are paying off as Q3 revenues came in way above Wall Street’s estimates thanks to gains from its exposure to AI via its cloud services and business software products.
• VC firm Sequoia committed to investing in Elon Musk’s start-up xAI. It is an investor noted for investing at the early stages of development for companies like Google, YouTube and Apple. Musk is trying to raise up to $6bn to catch up with rivals including OpenAI – a tall order, but if anyone can do it he can (let’s hope he manages to negotiate a water-tight bonus this time though eh 🤣).
• Meta’s share price fell on concerns about how much money it is going to have to spend on turning Meta into “the leading AI company in the world”. Slowing revenues and rising costs are turning sentiment on the company and trying investor patience.
• Meanwhile, Google owner Alphabet saw its valuation breach the $2tn mark after announcing that it would be paying its first dividend. It’s in the mix for AI supremacy but seems to me to be generally one step behind OpenAI.

IN TECH HARDWARE NEWS…

• The European regulators conducted a surprise raid on the Warsaw and Rotterdam offices of Chinese security equipment supplier Nuctech under the new anti-state subsidy rules. This didn’t go down well with China’s commerce ministry, who said that the raid was motivated by protectionism. No doubt there will be retaliation from the Chinese side.
• Intel disappointed investors with underwhelming Q2 forecasts. Basically, it’s seeing weaker demand for what it’s strong in – CPUs – while the demand for GPUs used in AI is booming.
• IBM put in 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 will be subject to regulatory approval but should close by the end of the year. Another M&A deal in the bag for the investment banks!
• LG Electronics’ profits rebounded thanks to steady revenue growth in home appliances and vehicle components. It now expects a gradual recovery in global demand for consumer electronics.

IN MEDIA NEWS…

• US Congress approved a bill banning TikTok from US app stores unless its owner, ByteDance, sells it. On the other side of The Pond, the EU threatened a ban on TikTok’s new TikTok Lite service under the new Digital Service Act for not offering enough protection to kids.
• Spotify reported record quarterly profits thanks to an increase in the number of premium subscribers and a clampdown on costs.

IN BATTERY NEWS…

• Global battery production is rising – but not fast enough, according to a report by the IEA. 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.
• South Korea warned that China’s control (and virtual monopoly) over key types of graphite used in battery anodes means that Inflation Reduction Act restrictions will make it virtually impossible to cut China out of the supply chain. It’s also worried about whether subsequent administrations could just change the rules, so is seeking some kind of guarantee…
• Toyota announced a $1.4bn EV investment in its Indiana facility, meaning that it has now poured $18.6bn into its US manufacturing operations to advance its electrification efforts. The carmaker continues to play catch-up with everyone else in the sphere of EVs.

IN EV NEWS…

• Research from New Automotive suggests that the combination of huge overproduction of EVs and weakening consumer demand will mean that there will be an overhang of zero-emission vehicles over the next two years, which in turn means that the likelihood of price wars is high! Stellantis’ CEO says that the UK’s existing EV sales targets are unrealistic because they are “double the natural demand of the market”, which means that carmakers are going to be forced to sell vehicles at a loss to avoid hefty fines.
• Tesla’s having a tough time at the moment! It announced another round of price cuts, falling sales and the recall of 3,878 Cybertrucks to replace faulty accelerator pedals. It did, however, say that it would accelerate the rollout of its new “affordable” models but caused some nervousness by announcing ambitions to operate its own fleet of robotaxis (that some are referring to as “Cybercabs”).

IN OTHER CAR NEWS…

• Car production dropped by 27% last month, ending the six month run of growing output as production facilities continued to adjust to the manufacture of new electric models.
• GM raised its profit outlook for the full year after benefitting from demand for petrol-powered pickup trucks and SUVs and cutting investment in things like robotaxis. It unveiled a 24% increase in Q1 profit as a result.
• Nissan cut full year profit estimates as car sales numbers came in weaker than market expectations. Maybe its JV with Honda on EVs could help boost their fortunes…

IN CONSUMER NEWS…

• IN CONSUMER TRENDS NEWS – consumer confidence is recovering, according to the latest GfK survey, as falling inflation and tax cuts have helped to boost consumer confidence this month. Analysis by the Daily Telegraph showed that UK households have cut household spending the most in the 38-member OECD – apart from people in the Czech Republic. Hopefully there will be some relief, though, as UK grocery price inflation slowed down to its lowest level since November 2021. This is the 14th drop in a row and came in way lower than it did last month.
• IN CONSUMER GOODS NEWS – Mattel underperformed versus expectations in Q1 as the Barbie effect that boosted it last year faded. Reckitt Benckiser shares rose as sales and volumes came in above market expectations but there’s still litigation risk in the US over its Enfamil premature baby formula.

IN RETAIL NEWS…

• IN LUXURY – the sector has had mixed fortunes as Hermes, Moncler and Prada put in decent performances while Burberry and Kering showed weakness.
• ON THE HIGH STREET – Asda became the only one of the Big Four to see a drop in grocery sales over the last quarter, according to the latest stats from Kantar, as it sinks further into oblivion (like Morrisons IMO). Meanwhile, WH Smith said that it expected a busy summer, ABF got upbeat about its prospects for the full year and its apparel retailer, Primark, put in a particularly strong performance. Then we saw JD Sports striking a $1.1bn deal to expand in the US via an acquisition of Alabama-based chain Hibbetts. This is particularly notable given that it’s a Brit company taking over an American one (it’s usually the other way around!) and will double the number of its US stores at a stroke!

• The FTC is attempting to scupper an $8.5bn deal for US luxury goods company Tapestry buying Capri Holdings, saying that this could damage competition.
• City advisers, including Goldman Sachs and JP Morgan, are raking in £80m in advisory fees from the planned Nationwide takeover of Virgin Money. M&A is coming back!
• Consulting firms are continuing to streamline their operations after the boom of 2020-2022 led to over-hiring. I suspect that this will turn around relatively soon given that the M&A market is showing signs of returning!
• The CMA is looking into Big Tech’s AI deals, initially fielding views on whether partnerships between Big Tech companies and smaller start-ups are anti-competitive. It has already launched an investigation into whether Microsoft’s partnership with OpenAI could be considered a merger by stealth!