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.

This was the week when Hong Kong called a stop to the Evergrande debacle, when Volvo decided to distance itself from Polestar and when Mark Zuckerberg said sorry…

• IN THE US – the Fed held interest rates steady, which was in line with market expectations. Fed chief Powell pushed back expectations of an early interest rate cut.
• IN CHINA – the China Securities Regulatory Commission decreed that investors would be restricted from short-selling to stop the slide in its markets (its CSI300 hit a five-year low early last week). Also, the latest data from the National Bureau of Statistics said that manufacturing output had fallen for the fourth consecutive month as lukewarm overseas demand for Chinese goods hit home. It was also interesting to see that Hong Kong is looking at proposals for a new national security law that will clamp down on espionage, treason and foreign political influence that would bring its own laws closer to those of mainland China.
• IN EUROPE – hopes for an early interest rate cut are fading but the Eurozone managed to avoid a recession despite Germany’s economy contracting. Meanwhile, Brussels was rumoured to be thinking of hitting Hungary’s economy hard if PM Orbán continues to block new aid to Ukraine, which he wasn’t too pleased about although later on in the week they came to an agreement and Orbán withdrew his veto. Meanwhile, Russia’s economy is benefitting from the war, according to the IMF, which upped its economic forecasts on the country. The country is readying itself for a presidential election in the coming weeks and support for “opposition” candidate Boris Nadezhdin seems to be growing (although he will surely not even come close to getting more of the vote than Putin).
• IN THE UK – chancellor Hunt was warned by the IMF not to squander money on tax cuts, but let’s face it – they are rubbish at making forecasts and they aren’t the ones facing the prospect of an election that they’ll probably lose. Meanwhile, ministers are getting ready to tell English councils to sell assets to help finance themselves. Although there are supposedly up to £23bn-worth of assets they could sell off, market conditions aren’t good and everyone and their dog will know that councils are forced sellers, so they are definitely going to low-ball any offers.

IN OIL NEWS…

• Saudi Arabia surprised oil markets by ditching plans to increase production capacity, which could imply that they think that we’ve reached peak oil demand already. Fall in demand from China has been a major factor. Meanwhile, Shell announced it would be raising its dividend and do a $3.5bn share buy-back despite profits falling last year. That said, the previous year was monstrous so the comparison wasn’t that relevant.

IN CRYPTO NEWS…

• Hamas victims are suing Binance for allowing the group access to financing. Crypto has long been criticised for enabling criminal and/or terrorist activities because of the anonymity it offers so the outcome of this case could become an important precedent. Elsewhere, FTX decided to ditch plans to make a comeback and George Osborne joined Coinbase, presumably to give it a bit of legitimacy given the dodgy reputation of anything crypto at the moment.

IN BUSINESS TRENDS…

• UK business confidence hit its highest level for January in eight years, according to the latest Lloyds Bank monthly business confidence index, as hopes increased of interest rates coming down this year. On the other hand, corporate insolvencies hit a 30-year high in England and Wales over 2023, according to the latest figures from the Insolvency Service. The gloom about last year was also reflected in research by EY-Parthenon, which said that the share of listed UK companies issuing profit warnings last year hit a record high.
• Flutter said that it would move its primary listing to New York, subject to shareholder approval. It might keep a secondary listing in the UK but given the way that the business has changed over the last few years, the move makes a lot of sense. It’s just galling for the FTSE as it’s just another British company going stateside.
• Pubs are in for a tough January as “dry” January is set to be the driest ever, with more people abstaining or opting to drink no-or-low-alcoholic drinks. Younger generations have generally been drinking less than previous generations but now the older demographic is joining them!

IN EMPLOYMENT TRENDS…

• The monitoring of employee movements is getting stricter – and EY is now looking very closely at how often staff come into the office. Return-to-office orders are now ramping up as employers are keen to see their employees working hard with their own eyes!
• 12,000 job cuts have been announced at UPS and Sky is to lose 4% of its UK workforce as the demand for dishes falls due to rising demand for Sky Glass and Sky Stream, which don’t need specialist installers.

IN CONSUMER TRENDS…

• Travel patterns look set to change, according to the UN World Tourism Organization, which predicted that tourism will return to pre-pandemic levels this year. Intense heatwaves and wild-fires in Greece last summer are starting to make travellers think more about cooler destinations such as Iceland and Denmark – which have seen a significant increase in arrivals between 2019 and 2023!
• UK shop price inflation slowed sharply to its lowest level in almost 2 years, according to the latest figures from the BRC.
• Consumers will be heartened by the latest Bank of England data which says that UK mortgage rates have fallen for the first time since 2021. This should bode well for the residential property market this year!

• Apple posted an increase in sales for the all-important holiday quarter last year, which broke its four quarter losing streak where its sales have been falling. Its iPhone business did well but there are concerns about a loss in momentum for China, its third biggest market.
• Alphabet didn’t shoot the lights out as poor advertising sales overshadowed decent performance at Google with its AI and Cloud business.
• Meta had a mixed week. Zuck had to face a grilling over online child safety in the Senate and made a public apology to the families whose lives had been devastated by the effects of activity on Meta’s social media platforms. Shortly after that, Meta announced record revenues at its results, the payment of its first ever dividend and a $50bn share buy-back!
• Microsoft reported record sales and revenues thanks to the booming demand for AI.
• IN SEMICONDUCTOR NEWS – Samsung posted its weakest earnings since 2011 thanks to poor performance at its memory chip division. This was its fourth consecutive quarter of decline. It seems that stocks that have real exposure to AI (e.g. Nvidia and AMD) are doing extremely well, while others that don’t (e.g. Intel and Texas Instruments) aren’t. Meanwhile, Newport Wafer Fab’s acquisition by Vishay Intertechnology still hasn’t been approved by the UK government two years on from when the government blocked NWF’s acquisition by a company that it said had links to China.
• IN AI NEWS – the Indian government has said that social media companies will be held accountable for AI-generated deepfakes posted on their platforms. Given that there are general elections being held in India this year, there is a sense of urgency here – and you’d think that Big Tech will have to play ball given the size and potential of the Indian market. Talking of deepfakes, X blocked searches of Taylor Swift as AI-generated sexually explicit images of her went viral on their platform. Pressure to police these platforms properly continues to build…

• EVs have had a shaky start to the year thanks to price wars, increased competition and flagging customer demand. Even the mighty BYD undershot expectations due to an ongoing EV price war, while GM expressed concerns that it had pushed for the electrification of its fleet too early and Renault announced that it had ditched plans to list its EV business, Ampere. If that wasn’t enough, we then saw that Volvo Cars was going to sell at least some of its 48% shareholding in Polestar to parent company Geely.
• There was drama at Tesla as a Delaware court judge told Elon Musk that he had to forfeit $56bn of share awards, the granting of which had been agreed back in 2018 as long as he fulfilled some pretty incredible targets – which he then duly did! Musk didn’t like that and is now looking to switch his HQ to Texas in protest while he appeals the ruling.
• Elsewhere, Toyota put in a solid performance over 2023, hitting a new record high for global sales while Ferrari posted record profits, enjoying particular success in the Americas and China in terms of sales.
• Paris is going to be holding a vote on whether to triple parking charges for SUV owners in some parts of Paris. 60% of Parisians polled said that they were in favour – and let’s face it, they did manage to get e-scooters off the streets in a similar vote a year or so ago. In the scooter vote, the turnout was very low but was predominantly comprised of older people – who clearly didn’t like them. Will the same happen again??

IN INVESTMENT NEWS…

• Ark bounced back after a tricky few years. Cathie Wood’s famous tech fund suffered in the massive tech sell-off but has bounced back strongly after spending time in the wilderness…
• BP got a letter from hedge fund Bluebell Capital Partners saying that it should abandon its clean energy strategy as it was a distraction from its core business.

IN BANKS NEWS…

• A report by Bain & Co reckoned that global deal activity will recover this year from its recent lows – something that investment banks and everyone in the deal chain will be pleased to hear!
• Deutsche Bank announced that it was going to make around 4% of its staff redundant as it chases cost savings – but it also unveiled its highest profits for 16 years in 2023!
• Julius Baer saw its profits more than halve as it wrote off a $700m exposure to the embattled Signa property group and announced the exit of its CEO. Will this be enough to draw a line under the whole thing??
• BNP Paribas shares fell by almost 10% in trading on news that it would fall short 0f its profit targets. The fact that it reported a 50% fall in its Q4 earnings proved to be a real buzz-kill.

IN RETAIL NEWS…

• Amazon reported a great Q4 performance but it faces increasing competition from the feisty Temu, which is spending billions of dollars on advertising. We also heard that it was forced to ditch its proposed $1.4bn deal to buy iRobot, which makes the Roomba robot vacuum cleaner.
• IN APPAREL RETAIL – Boohoo had something to cry about as lenders refused to extend debt payment deadlines, H&M’s CEO stepped down as the company comes under increasing pressure for weaker sales and profit margins while rivals Inditex (which owns Zara and other brands) and Shein keep competition tight. There were rumours that Superdry is considering a CVA as an option for restructuring but it looks like store closures and job losses are getting increasingly likely.
• IN SUPERMARKETS – Walmart announced that it would be opening new stores in the US over the next five years, a major turnaround from the strategy of the last few years to reduce store openings or keep them flat-ish. In the UK, Morrisons’ new boss has promised to “reinvigorate” the supermarket chain that has suffered particularly badly at the hands of the German discounters over the last few years. It sounds like the new CEO is gunning for a major overhaul…
• ELSEWHERE – outgoing chairman Dame Sharon White reckons that John Lewis will return to profitability this year – but she also announced that the company would cut about 10% of the workforce. Pets at Home faltered as it cut its annual profit forecasts due to weaker sales over the Christmas period.

IN RESTAURANTS…

• Starbucks had a disappointing quarter as it lost momentum in the US and faced tighter competition in China.
• SSP (owner of Caffè Ritazza and Upper Crust, among other brands) continues to do well from people returning to the office as its outlets at train stations and airports do brisk business.
• PE firm McWin Capital announced that it would buy Danish sushi restaurant chain Sticks’n’Sushi in a multi-million pound deal. There have been a lot of deals done over the last year or so in the restaurant space. I suspect that there will be more to come!

IN TRAVEL NEWS…

• Ryanair had to cut profit forecasts after a number of online travel agents removed their flights. Ryanair accused them of “scamming” customers by charging higher fees.
• Saga announced an “outstanding” performance of its cruise and travel business, but its insurance business remains problematic. Meanwhile, rival Carnival said that its earnings would take a hit from the ongoing conflict in the Red Sea. Royal Caribbean and MSC Cruises have also been affected.

• IN REAL ESTATE NEWS – Chinese developer Evergrande was ordered by a Hong Kong court to liquidate as it had failed to come up with a proper restructuring plan in time. It remains to be seen as to whether this will be recognised in mainland China. Meanwhile, IN THE UK RESIDENTIAL PROPERTY MARKET, Zoopla’s house price index showed a big 13% rise in property sales as mortgage rates fell, but sellers have had to cut asking prices by 10% or more to shift their properties. That being said, the latest stats from Nationwide shows that house prices increased at their fastest pace in a year.
• IN MEDIA NEWS – Universal Music Group threatened to stop licencing music to TikTok – and then they followed through with that threat, leaving many TikTok videos silent! Allen Media put in a $14.3bn offer to buy Paramount Global which was less than the $18.5bn he offered back in April. Other companies are lining up as potential buyers. WPP announced a drastic cost reduction programme and is committing more money into AI initiatives to stay ahead of the curve. Meanwhile, Channel 4 is set to cut 15% of its staff as it seeks to cut costs in the face of falling advertiser spend.
• IN PHARMA NEWS – GSK’s new jab for Respiratory Syncytial Virus (RSV) achieved blockbuster status (which means that sales have hit the $1bn mark), prompting the company to upgrade its long-term forecasts. GSK also announced 12 major product launches from 2025, which will also help long-term earnings. Also, Novo Nordisk’s share price hit a new high after it posted booming sales of its obesity and diabetes drugs Wegovy and Ozempic, pushing its market cap past the $500bn mark and confirming its position as Europe’s most valuable company!

Of course there was only one video that stood out as my favourite this week – and that was the one where Uncle Roger rates Kichi Kichi’s famous omurice! There’s a bit of swearing and adult humour here, but if you can look past that this is hilarious!

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 US GDP surprised on the upside, 99% mortgage rates were mooted and ElevenLabs became a unicorn…

• IN THE US – GDP grew above expectations last year, meaning that it was up by 3.1% over the course of 2023. Separate data showed that consumer prices were losing steam – all of which would imply that the US economy is heading for a “soft landing”.
• IN CHINA – markets rallied on hopes that Bejing was considering a £222bn state rescue plan but then the PBOC cut the reserve requirement by 0.5%, freeing up money that could be used in lending. It’s another example of the piecemeal approach being taken by Beijing at the moment when really it’s economy could do with a broad-based boost!
• IN EUROPE – the ECB left interest rates unchanged at its latest meeting while President Christine Lagarde’s performance was criticised by her own staff for being “poor”. Economists at Germany’s IFO Institute think the country’s heading for recession while the ultra-right party AfD made ground due to increasing frustration with the government. There was some good news for Sweden as Hungary’s PM Viktor Orbán said he would approve its application to join NATO.
• IN THE UK – the EY Item Club of economists reckon that the UK’s economic growth will rebound in late 2024 thanks to potential interest rate cuts and tax reductions, Goldman Sachs reckons that the UK’s stock market will outperform the US and European markets this year and chancellor Hunt seems to have £20bn he didn’t know he had ahead of the March Budget thanks to higher VAT and income tax receipts and lower spending, according to the ONS. Meanwhile, English councils got allocated an extra £600m, which is nice, but considering that the Local Government Association estimated that councils are facing a £4bn deficit over the next two years, this does look somewhat like a sticking plaster patching up a gaping wound! Still, it’s better than nothing, I guess.

IN TRADE NEWS…

• The Red Sea troubles are set to have long-term repercussions as ships and equipment will be all over the place for quite some time because of all the disruption and now more car-carrying vessels have stopped going via the Suez Canal, taking the longer route around the Cape of Good Hope, adding to the voyage time and costs.

IN ENERGY NEWS…

• The IEA reckons that nuclear power generation will hit record highs, driven by new reactors in China and India, in addition to those coming back online in France following a period of maintenance.
• …talking of which, the French government, which owns EDF, is putting pressure on the UK government to pony up more money for the nuclear projects it’s working on. At around the same time, EDF said that Hinkley Point C could be delayed to 2031 and cost way more than originally thought (now up to £35bn rather than the initially-projected £18bn!).

IN BUSINESS TRENDS…

• The luxury sector has generally been losing momentum – and LVMH is feeling this. That being said, some believe that there will be a divergence in fortunes between those companies right at the top end of the luxury spectrum will outperform those further down because it is the high net worth individuals who will be driving growth, not those on “middle incomes”.
• IN THE UK – research by Begbies Traynor says that almost 50,000 UK companies are close to failure as they battle with higher interest rates and cautious customers. It was, however, interesting to see that UK business activity grew faster than forecast but that was probably thanks to the services sector as UK manufacturers cut production due to the ongoing Red Sea problems.

IN EMPLOYMENT TRENDS…

• We saw job losses at Microsoft, Ebay, SAP, Wayfair, Aberdn, Lloyds Bank and Levi Strauss as companies tried to right-size.
• Bank of America got feisty with employees, sending those they’d deemed to be doing too much WFH “letters of education”, pressurising them to go back to the office.
• John Lewis cut redundancy pay in half, which suggests that there are more big job cuts coming around the corner.
• Research by the CMA shows that 26% of employees think that they have a non-compete clause in their contract. There are calls to restrict the time period where someone’s not allowed to go to a competitor (some say you’re not allowed to go to a competitor for a year!) but it looks like this’ll be on the back-burner in the UK which US, Australia, Italy and Portugal are among the countries assessing what they will do about them.

IN CONSUMER TRENDS…

• Household disposable incomes hit their highest levels in two years and the latest GfK survey said that consumer confidence was also at a two-year high – but then a CBI report showed that retail sales fell at their steepest rate for three years!
• Those with money to invest didn’t pour their money into St James’s Place as their fund inflows halved! The company is due to launch a strategic review.
• There was some interesting speculation about Chancellor Hunt considering introducing 1% deposit mortgages to give the real estate market some pep, but it was roundly criticised as a gimmick although you do wonder whether this would level the playing field for those who don’t have access to the Bank of Mum and Dad.

• Eurostar passenger numbers have now returned to pre-Covid levels – and you’d think they’ll have another good year considering that the Paris Olympics is coming up in the summer.
• Cruise liners are getting bigger – and we saw the launch this week of Royal Caribbean’s Icon of the Seas, which will be the world’s biggest operating cruise ship. With 18 passenger decks, 7 swimming pools and over 40 restaurants and bars, it is five times the size of the Titanic! The sector’s bounced back from Covid but wants to drum up interest from younger people.
• EasyJet is forecasting shrinking losses as summer bookings are building well – but in terms of the planes themselves, Boeing’s nightmare is continuing as the CEO maintained that the company prioritises quality, but then we heard that a nose wheel fell off a Boeing 757 waiting for takeoff! Surely this guy will get fired…
• All this travelling is great for Antler, who makes luggage! It saw a boom in global sales of its suitcases and other accessories.
• Meanwhile, back home, Wetherspoons and Fuller’s traded well over the holiday season, but the night clubs sector remains in crisis, according to the boss of Revolution Bars.

• Tesla warned that sales growth would be “notably lower” in 2024 due to weakening demand, more competition and stubbornly high interest rates. However share prices of Chinese rivals – including Nio, Xpeng, Li Auto, BYD and Great Wall Motor – also fell as investors got nervous. That being said, BYD launched a new luxury brand – Yangwang – which will be releasing a Lamborghini-like sportscar with a $150,000 price tag that can turn 360° on the spot and float in water (something, perhaps, for James Bond to consider in his next outing – after he magically comes back to life, of course 😁).
• Meanwhile, Porsche’s finance chief made a bold prediction this week – that Europe’s 2035 petrol powered car ban could be pushed back further. There are rumours, even, that it could be abandoned altogether as some conservative EU lawmakers are proposing to ditch the deadline as they head towards EU elections this year.
• The FCA is now looking into allegations that motor finance companies made consumers overpay in finance deals. If they find this is the case, auto lenders could be facing a potential £13bn compensation bill! Lloyds Bank has the most exposure here, but others will be affected.

• IN REGULATORY STUFF – the FTC launched an inquiry into investments and partnerships between Alphabet, Amazon, Anthropic, Microsoft and OpenAI. It will look into what rights the tech giants’ investments confer on them and whether they harm competition. This could get interesting!
• IN CHIPS NEWS – Chip-making equipment maker ASML announced a record amount of orders in Q4 and 2024 is looking good! Meanwhile, China spent a record $10.6bn on chip imports in Q4, bringing the total amount spent on chips last year to a whopping $31bn! Despite many players getting more positive about an upturn in the chip cycle, Intel gave a muted outlook for 2024 in the near term but that might be coloured by its autonomous driving business being hit by recent developments. Meanwhile, Computacenter is on track to have its 19th consecutive year of rising profits. It looks like PC demand is turning up again – and that’s got to be good for chip demand as well!
• IN AI NEWS – AI voice-cloning specialist ElevenLabs achieved Unicorn status in its latest funding round. The $80m it raised this time will go towards research and infrastructure that will ensure ethical development. Meanwhile, Japan is looking at ways to use AI and automation to help with its increasingly tricky labour problems. According to research by the Recruit Works Institute (RWI), Japan will have a labour shortage of 11m people by 2040 with the number of people above 60 expected to hit a peak in 2042 (they already make up almost 30% of the population!)
• ELSEWHERE – Apple is now going to allow EU customers to download apps without using the App Store as it is forced to bow to the new EU Digital Markets Act, which aims to encourage competition. Spotify is now taking advantage of this. This could come to the UK fairly soon as a similar bill is going through the House of Lords.

• Research by LCH Investments shows that the world’s top 20 hedge fund managers made their biggest profits ever last year. They included the likes of TCI, Citadel and Viking.
• Aussie bank Macquarie raised a record amount of cash (€8bn) for a European infrastructure fund and it seems that interest in such funds is starting to gain momentum…
• Exxon is now suing two ESG investors, Arjuna Capital and Follow This, saying that they only push proposals that will “diminish the company’s existing business” by suggesting they go further in their eco-efforts. Sounds dodgy to me as they are only doing what activist investors always do – but if Exxon succeeds, this could be a major problem for all ESG funds IMO.

• IN COMMERCIAL PROPERTY – Blackstone said that it intends to make more acquisitions after a very busy Q4 at the end of last year. It already has $1tn of assets under management and wants to buy properties now before everyone else starts piling in.
• IN RESIDENTIAL PROPERTY – Hamptons data shows that homeowners who sold up last year made an average profit of £102,000 despite property prices falling. There’s talk of the reintroduction of Help to Buy to boost the market but RICS says that all it does is jack up house prices and doesn’t actually help all that much. Chancellor Hunt is also looking at 99% mortgages as another way of stimulating the market, particularly among first-time buyers. Housebuilder Crest Nicholson saw its profits fall by 70% after a “disappointing” year and its CEO left the company. IN MORTGAGES, we saw some contrasting actions as Nationwide cut mortgage rates in order to drum up more business while Santander lifted them in response to last week’s surprise rise in inflation. Real estate agent Foxtons sounded quite chirpy about home sales in 2024 after benefiting from a strong performance in lettings last year. Meanwhile, Rightmove stats say that private rents have hit new record highs, but this rate of increase is slowing down as first-timers buy houses.

• Netflix saw a record uplift in subscriber numbers for Q4 and announced that it had struck a $5bn deal over 10 years to be the new home of WWE Raw and other WWE shows in the US and oversees. This is part of efforts by Netflix to get into the world of live programming!
• Vice and Buzzfeed are having to sell off key assets as the world of digital media continues to suffer. BuzzFeed’s trying to sell Tasty and First We Feast, while Vice’s owner Fortress Investment Group is trying to sell Refinery29 as its efforts to sell Vice in its entirety fell flat.
• Advertising and marketing group Publicis announced plans to pour €300m into AI to stay relevant for the future! It’s concerned that AI will enable clients to do their own marketing and strengthen tech companies as competitors.
• Research by the Advertising Association and consultancy Warc shows that TV advertising is on track to have its worst year since the financial crisis (excluding the Covid pandemic). Traditional broadcasters are expected to suffer the most.

• State-backed French lottery operator Française des Jeux made an all-cash offer to buy Sweden-listed betting group Kindred to create one of Europe’s biggest betting companies. It gives FdJ options for international expansion and takes the heat off Kindred, which has been under pressure to sell itself.
• Sony has called off the proposed $10bn Zee merger in India and Sony is now seeking a $90m termination fee. Will this make other foreign companies more reticent about making big acquisitions in India?
• Biotech company Zealand has high hopes for its anti-obesity drug that is late on in the approval process. Novo Nordisk and Eli Lilly are making serious inroads in this area but I think there’s room for a few players given the size of the market!
• Tonic and mixer maker Fever-Tree had a historic moment this week as sales in the US market overtook sales in the UK market for the first time! It continues to pursue overseas growth…

I thought that there were some pretty good “alternative” stories this week, but TBH the one I liked the most was the pineapple hack!

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 China managed to hit its GDP target, Post Office scandal developments reached fever pitch and Panmure Gordon and Liberum decided to join forces…

• GLOBALLY – Geopolitical concerns dominated Davos while global stock markets weakened as hopes for sooner-rather-than-later interest rate cuts faded thanks to strong US retail sales data, the ECB hinting that cuts would be more likely to happen in the summer than the spring and the UK seeing a surprise uptick in inflation.
• IN CHINA – Premier Li Qiang said at Davos that China’s GDP grew by 5.2% over last year, coming in slightly above the official target of 5%. Economists are now fretting about GDP growth in 2024 as China has ongoing problems with a declining birth rate and its massively indebted real estate sector.
• IN EUROPE – the ECB is looking increasingly likely to hold off on cutting interest rates and Germany’s nightmare continues as its GDP contracted by 0.4% last year thanks to higher interest rates and energy costs. The coalition is having all sorts of problems at the moment while the far-right AfD continues to see a rise in popularity.
• IN THE UK – inflation rose unexpectedly thanks to higher alcohol and cigarette prices but chancellor Hunt hinted that tax cuts could be on the cards ahead of the election this year as he outlined plans to have a March Statement and an Autumn Budget. Meanwhile, pressure built on Japanese IT company Fujitsu to compensate victims in the Post Office scandal and it admitted for the first time its role in the whole debacle and that it would pay compensation. Meanwhile, the government said that it would protect the litigation funding sector that made current developments possible in the scandal.

IN OIL NEWS…

• The IEA reckons there’s going to be a surplus of oil as demand growth slows and non-OPEC countries (particularly the US) step production up.
• Shell decided to suspend all Red Sea shipments until further notice while the war in the Middle East rages on. This is likely to push prices up as anything that’s normally shipped via the Red Sea will now have to go the longer way around, incurring more cost. Airline bosses are concerned about the price of jet fuel going up as that could mean that air fares will have to go up to compensate for higher costs.
• Shell decided to sell its Nigerian business for $1.3bn after 68 years there. It’s the latest foreign oil major to leave as they are increasingly deeming it to be more trouble than it’s worth for various reasons.

IN BUSINESS TRENDS…

• Insolvencies hit a 30-year high according to the UK’s Insolvency Service thanks to the ultimately fatal combination of higher interest rates, cost-of-living and pandemic impact.
• City law firms fell down the global pecking order in terms of earnings. US firms dominate and the highest placed City law firm was Allen & Overy (12th) while Anglo-American firm DLA Piper (3rd) did better. I would have thought that this has a lot to do with the lack of deal flow in the UK in particular.
• Logistics property landlord Prologis saw its profits rise in Q4 despite a tricky economic backdrop. It cited a positive outlook for the year and has an impressively high occupancy rate. I would have thought it would benefit from ongoing disruptions in global supply chains both in the short term (wars raging at the moment) and the longer term (as businesses realise that they have to have more readily-available inventory for “just-in-case!”).

IN EMPLOYMENT TRENDS…

• The IMF published a report which said that AI will affect 40% of jobs globally and will make inequality worse.
• A report by PwC said that British bosses are planning the biggest hiring spree in the G7 but then agency recruiter Page Group warned of slowing momentum in the jobs market. It cut full year profit forecasts and echoed the downbeat tone of rivals Robert Walters and Hays.
• Meanwhile, the UK’s annual wage growth slowed down to 6.5%, which means that wages have now outpaced prices for five months in a row!

IN CONSUMER TRENDS…

• The owner of Cartier, Richemont, managed to buck the overall trend of gloom for luxury brands as it reported a strong performance over the last quarter  thanks to decent performance in China, Hong Kong and Macau. However, Britain’s biggest retailer of Rolexes – Watches of Switzerland – saw its shares dive by a third as it warned that revenues would fall short of previous forecasts. Also, VW-owed brand Bentley reported weaker sales in 2023.
• Meanwhile, for mere mortal car drivers, there was good news and bad news! The good news is that UK fuel retailers are going to be forced to share information on price changes at the pumps within 30 minutes, making things much more transparent. The bad news is that the average UK car insurance quote hit a new high of £995 and new younger drivers faced a whopping 98% rise in premiums year-on-year!
• Despite the cost-of-living crisis, a Lloyds Bank survey showed that Britons continue to spend on leisure, something that was backed up by Hays Travel which saw a 93% rise in turnover and a doubling of total transaction value over the year!

• IN APPAREL RETAILING, Hugo Boss saw record revenues but lower-than-expected profits, which shocked investors. Its full year results will be released in early March. Fast Retailing (the Japanese parent company of Uniqlo) is suing Chinese fast fashion giant Shein for copying its most popular bag which was described by Vogue as the “hottest product of the year so far” in April 2023. I guess Shein will just add it to the pile of other lawsuits it faces on a continuous basis!
• IN FOOD RETAIL, Ocado saw record sales thanks to a surge in the number of M&S products sold on Ocado’s website but Sainsbury’s is going through a bit of a change at the moment as it’s ditching its financial services business and having a senior management shake-up.

• IN SALES AND PRICES NEWS – European EV sales fell for the first time since 2020 thanks to lower (or no) government subsidies. Also, in the UK, research by Auto Trader showed that the rate of depreciation on EVs is faster than that of petrol equivalents. It’s likely to get worse because manufacturers now have specific EV sales targets they have to hit, which means that there will be bargains to be had although Chinese EV manufacturers are gearing up for a price war. Companies like BYD will be in a particularly good position to cut prices aggressively as they make their own batteries – the biggest cost of an EV.
• IN INDIVIDUAL EV COMPANY NEWS – Hyundai and Kia are emerging as Tesla’s biggest threat in the US and it looks like they’ll consolidate their position over non-Tesla rivals this year with the introduction of new models. In India, electric scooter company Ola Electric is heading for what will be one of the biggest Indian IPOs in the last two years! It’ll have its work cut out convincing increasingly sceptical investors.
• IN BATTERY NEWS – European EV maker Northvolt is raising $3.4bn in debt from the EU and a consortium of banks to fund EV battery production at its factory in northern Sweden. BYD announced plans for a new EV plant in Indonesia as it continues to fight to become Indonesia’s biggest EV brand!
• ELSEWHERE…German car parts suppliers including Bosch and ZF Friedrichshafen are going to cut more jobs. Unfortunately, they have been hit by the double-whammy of big expenses involved in adapting their production to EVs and the fall in demand for EVs.

• UK house prices dropped at their fastest pace in over a decade, according to the latest ONS data. On the other hand, the latest RICS survey showed that newly agreed sales hit their highest level since March 2022 in December. Inquiries were also up for the fourth consecutive month and are now at their highest level since April 2022. Amidst all this, estate agents are becoming more optimistic about 2024, presumably because of the prospect of falling mortgage rates that will follow interest rates down.
• The latest Bank of England stats show that UK lenders are expecting a rise in mortgage demand this year but unfortunately, they also reported a rise in the number of mortgage defaults.
• Housebuilder Crest Nicholson announced its third profit warning in five months. Its current weakness is prompting increasing speculation that it will be bid for…

• IN AI NEWS – Microsoft’s chief had a dig at rival Google, saying that AI will threaten the latter’s long-held dominance of search. OpenAI also changed language related to its usage policies giving it more flexibility over using AI for military purposes. Meanwhile, Vodafone signed a $1.5bn deal with Microsoft where Microsoft will invest in Vodafone’s internet-of-things platform while Vodafone will use Microsoft’s cloud and AI capabilities to improve its customer service.
• IN HARDWARE – Apple has just beaten Samsung to become the world’s biggest smartphone maker by volume but it also announced it would cut iPhone prices in China as competition from domestic makers continues to heat up!
• ELSEWHERE – Google announced that it would build a new $1bn data centre in Britain and we heard that Deere & Co, the world’s second biggest farm machinery manufacturer has signed a deal with SpaceX to use Starlink to connect its tractors and other bits in areas that have poor internet.

• IN FINANCIALS – Goldman Sachs and Morgan Stanley had their worst profits for four years as business continues to be slow in investment banking and trading. Meanwhile, in the UK, small mid-cap brokers Panmure Gordon and Liberum announced plans to merge as the IPO and deal drought continues. This follows consolidation in the sector that we saw last year with Deutsche Bank buying Numis and Cenkos merging with FinnCap. It’s pretty desperate out there!
• Boeing’s problems just got worse as the scheduled resumption of 737 MAX sales to China has now been delayed following the Alaska Airlines incident.
• There are hopes that 2024 could be the year for Eli Lilly’s obesity treatment called Tirzepatide (but known as Mounjaro and Zepbound) as it is thought to have better efficacy than Novo Nordisk’s treatment – and it’s cheaper! Win-win…

There wasn’t a real stand-out for me this week, but I did find this video on how to “make” whipped honey quite interesting. How good could it actually be?? I mean it’s just honey with a bit of air, right? That said, aerated chocolate is pretty good, as is whipped yoghurt so maybe this will be the same…

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 central banks did *ugger all, businesses got an MI5 briefing and Trainline got a major reprieve…

• IN THE US – inflation remained stubborn as the headline rate fell from 3.2% to 3.1% while core inflation remained unchanged at 4%. Core inflation strips out energy and food because of their relative price volatility. The target rate is still 2% and the Fed subsequently kept its interest rates unchanged whilst prompting excitement among investors by saying that it expected three interest rate cuts next year. Meanwhile, Biden continues to face voter scepticism about financing Ukraine’s war effort as a recent survey showed that 48% of American voters think the US is giving too much aid to Ukraine.
• IN EUROPE – the EU failed to reach an agreement about a €50bn funding package for Ukraine as Hungary’s PM Orbán vetoed the proposal. Elsewhere, Donald Tusk returned as Poland’s PM, which will be good news for Brussels as he is more of a Europhile than his predecessor. Meanwhile, the ECB left interest rates unchanged at 4% but, unlike the Fed, didn’t commit to cutting them any time soon.
• IN ARGENTINA – New president Javier Milei is embarking on a programme of “chainsaw economics” where he will be cutting spending by 3% of GDP as part of a whole raft of dramatic cuts. The IMF is clearly supportive as Argentina is its biggest borrower so if these measures help Argentina to pay them back more quickly they will be pleased!
• IN THE UK – the UK’s GDP shrank by more than expected in October, which doesn’t bode well for the prospects of the final quarter. Still, the Bank of England decided to leave interest rates unchanged at 5.25%, saying that there was still more work to be done to tame inflation.

IN OIL NEWS…

• OPEC+ has hit a new low in market share, according to the IEA. It shows that OPEC+’s market share in oil is now 51% as demand growth has slowed down and US output has increased. This potentially means that output cuts or increases will have less of an effect on the oil price.
• Occidental put in an offer to buy CrownRock in a cash-and-shares deal worth $11bn as the shale industry continues to consolidate.

IN COMMODITIES NEWS…

• Anglo American saw its share price fall by 20% as it cut its outlook for copper production for the next few years due to difficulties at mines in Chile and Peru. It’s had a tough time this year and things might get worse as it may soon be facing a class action lawsuit.
• Uranium investment vehicle Yellow Cake warned that China’s bid to corner the market in the radioactive investment vehicle could threaten western energy supply. Prices are already at 15-year highs as Chinese companies have bought on the open market, signed long term contracts and snapped up mines. Is this going to be lithium all over again??

IN COP28 NEWS…

• The draft COP28 agreement initially dropped the phaseout of fossil fuels but then they did manage to hammer something out that committed signatories to moving away from fossil fuels  towards net zero in 2050. The OECD pointed out that the transition would cost trillions of dollars and limit economic growth.

IN CRYPTO NEWS…

• M&G announced that it is investing $20m in bitcoin trading business Global Futures and Options (GFO-X), representing a rare new commitment from a proper asset manager into bitcoin since the FTX collapse.

IN BUSINESS TRENDS…

• Begbies Traynor is very busy as the number of insolvencies continues to rise while restructurer FRP is also benefiting from the rising number of companies falling into administration.
• UK lawyers, particularly City law firms, are seeing a rise in earnings thanks to corporate, insolvency and banking work.
• Business leaders got a briefing this week from MI5 on things including IP theft and the risks posed by terrorist organisations as part of an overall push to encourage better co-operation between business and intelligence on matters of national security.
• The Federation of Small Businesses (FSB) filed a “super-complaint” to the FCA over “banks that excessively demand personal guarantees for business loans” as banks look like they’re going to do what they did back in 2008 and not lend to smaller businesses (which hampers growth).
• Explosives and missile maker Chemring reported strong orders in the year to October – another company profiting from war.
• Rising demand for goods from Shein and Temu have been a major boon for the logistics sector, particularly in air cargo. The main potential fly in the ointment is going to be ongoing tetchy relations between Beijing and Washington.

IN EMPLOYMENT TRENDS…

• Hasbro has followed other big companies announcing major job losses as it said it was cutting a whopping 20% of its workforce. Spotify, Twilio, Maersk, ByteDance and all sorts of other companies have been conducting major culls over the course of 2023. EY said that it was shedding 10% of its partners in consulting and about 4% in strategy as part of an overall cull. Separately, Etsy said that it would cut 11% of its workforce as part of its restructuring.
• UK companies are still hiring, according to recruitment firm Manpower Group, while wage growth is showing signs of losing momentum and job vacancies have fallen for the 17th month in a row, according to the ONS.

IN CONSUMER TRENDS…

• UK consumer confidence has reached a 3-month high, according to GfK’s latest consumer confidence survey. Shoppers will have to pay more for less this Christmas, though, according to research published by the CEBR and Christmas dinner’s going to cost more, according to the Good Houskeeping magazine’s Cost of Christmas Dinner survey.
• Mortgage arrears appear to be hitting an eight-year high, according to banking trade body UK Finance while separate data from the Bank of England says the rate of mortgage arrears is at its highest level since Q2 2017. The bad news is that they will probably continue to rise.
• Tenants were “hit by the highest increase in rent for a decade” in November, according to stats from Hamptons while Zoopla research suggests that increases in rents are likely to slow down in 2024.

• Macy’s got an offer of a buyout from a consortium of investors to take it private at a 32% premium to its pre-announcement level (although this is less than half of what Macy’s was worth at its peak).
• Shein has been accused by rival Temu of using “mafia-style” tactics to intimidate suppliers, according to a US lawsuit. Shein is preparing for an IPO and I think that investors will need to take into account Shein’s dodgy reputation and potential litigation risk.
• Inditex had a very strong trading statement showing profits up by a third, which is particularly impressive given the current economic backdrop.
• In the UK, it sounds like Boots may potentially re-list on the FTSE100 – something that the LSE would no doubt welcome after a period when everyone seems to be abandoning! Currys pleased investors by saying that its troubled Nordic business was getting back on track and it reiterated its full year guidance. Ocado has added almost 600 new M&S products to its website, prompted by recent criticism that it wasn’t contributing enough to the JV.

• The world’s leading semiconductor companies are racing to produce the next generation of chips, with TSMC leading the charge, closely followed by the likes of Samsung and Intel.
• Nvidia has emerged as one of the biggest investors in AI start-ups this year, according to estimates by Dealroom. Clearly, it’s investing in order to stay ahead of the pack!
• Axel Springer announced a deal with OpenAI where it will provide content from publications such as Bild, Politico and Business Insider to OpenAI to train its models. It’s good that Axel Springer is monetising its content, but the worry is that long-term this might damage journalism as a profession.
• TikTok invested $1.5bn in Indonesia’s Tokopedia, an e-commerce unit of the GoTo tech group. This sounds like a strategic win for TikTok in its biggest market outside the US.
• The Electronic Entertainment Expo trade show – aka “E3” – is to be no more as it just never recovered from Covid. It’s been a major event in the tech calendar since it started in 1995.

• Tesla’s having a tough time at the moment. It’s having continued problems with Swedish unions – and is now looking for a Nordic expert to help it negotiate – while it also announced a major recall regarding its autopilot system. The recall won’t be that bad as it’s a software update but still, it’s not a great look PR-wise.
• GM’s Cruise driverless unit sacked nine senior execs and then followed the announcement up by saying that it is going to lay of f24% of its workforce. This is unsurprising given the repercussions of the October incident.
• Meanwhile, UK car production rose in November and is now at its highest level for five months, according to Lloyds’ Bank’s latest economic activity tracker.

• IN REAL ESTATE NEWS – the European mortgage market is on track to grow at its slowest rate in a decade this year, according to EY’s European Bank Lending Forecast report. This is mainly due to banks tightening their lending criteria UK average asking prices are falling, according to the latest Rightmove stats although “second-steppers” boosted demand for three and four bedroom properties in November. Estate agents reckon that a recovery in the property market is around the corner, according to the latest RICS survey. Sentiment appears to be improving as mortgage rates fall further.
• IN MEDIA NEWS – Netflix released full viewership data for the first time ever this week, providing viewing figures for its top programming for the first half of the year. It plans to release such a report twice a year. Spotify seems to be winning the streaming war but it has also cut 25% of its staff this year. I think that the business is now maturing and so it now has to make incremental operational improvements to keep everything going.
• IN FINANCIALS NEWS – the FCA told brokers to stop “double-dipping”, a practice whereby they make money from the interest earned on client cash deposits and charge them for the privilege of holding that cash! Visa and Mastercard are being investigated by the Payments Systems Regulator which is looking at putting a cap on “interchange fees” between the UK and EU which the duopoly has increased almost fivefold since Brexit. Hiscox wants to use AI for underwriting purposes and has done a tie-up with Google to develop an AI model that can automate the core underwriting process. Hiscox will use this tool from the second half of next year.
• Unilever is going to be investigated by the Companies and Markets Authority over allegations of “greenwashing” in a number of its household products. It’s not the only company to be accused of doing so and it’ll be interesting to see what happens as a result of this investigation.
• Vivendi is looking to split into three businesses to crystallise the value more efficiently in each. The three businesses – that will be separately quoted – will be film/TV, PR and an investment division based on publisher Lagardère.
• Pfizer is suffering post-Covid, but it’s not the only Covid hero to suffer – Moderna and BioNTech have also fallen behind. It’s now embarking on a massive cost reduction programme but TBH if it really wants to get back to the glory days, it’ll have to get involved with anti-obesity drugs IMO…
• Trainline got a boost this week as the government has decided to give up making its own centralised ticketing app. Trainline’s share price tanked when the proposal was made two years ago, but I suspect that investors assumed the government attempt would fail, which is why Trainline’s share price only had a mini-blip upwards on the news.
• Cigna abandoned its proposed mega-merger with Humana that would have created a health insurance behemoth. It’s going to look at smaller bolt-on acquisitions and do a share buy-back instead.

Anyone who knows me well will easily be able to guess my favourite “alternative” story of this week – it was the one with the amazing-looking chocolate pizza! It looks amazing (but perhaps not amazingly healthy 🤣)!

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 China’s credit rating took a tumble, when Spotify cut 17% of its employees and when McDonald’s launched CosMc’s…

• GLOBALLY, pressure is mounting on central banks to cut interest rates as inflation is slowing down. Two years on from being too slow to raise them, will they be too slow to cut them as well?
• IN CHINA – Moody’s downgraded China’s debt from “stable” to “negative” thanks to rising debts at state-owned enterprises and the nightmare it’s having in its property sector at the moment.
• IN INDIA – PM Modi’s party, the BJP, put together a string of major victories in India’s state election, putting him in pole position to win another term in next year’s general elections.
• IN EUROPE – it wasn’t such a good week. EU leaders are dithering about a €50m slug of cash that is supposed to be going to Ukraine at a crucial time in the war. Trade talks didn’t go well either as the EU’s trade chief cancelled a trip to Brazil where he was supposed to sign a trade deal with the Mercosur nations and China then dismissed EU concerns about the trade deficit whilst also denying that there was overcapacity in its EV sector. All the while, the Eurozone moved closer to recession as output in the bloc’s four biggest economies continued to drop.
• IN THE UK – research from the Local Government Association (LGA) shows that almost 20% of English councils are close to bankruptcy this year or next because of the lack of government funding. This is the sort of momentum that no-one wants to see gaining pace…

IN COMMODITIES…

• The gold price hit an all-time high as interest rates are peaking and concern continues to abound because of the uncertain political backdrop.

IN OIL…

• Markets don’t seem to be taking into account the potential for conflict in the Middle East to spread to the Strait of Hormuz, which is used to transport about 20% of the world’s crude oil and LNG. If things escalate, supplies could be disrupted, which would mean oil prices going higher.
• There are talks of an Aussie LNG merger between Woodside and Santos that would create an absolute behemoth! Talks are ongoing but it would create a national champion if it went ahead…
• Meanwhile, Canada is talking about imposing greenhouse gas emission limits that would start in 2030 and get progressively tighter heading towards 2050, which is supposed to be when the industry hits net zero. The oil industry isn’t best pleased, but neither are the environmentalists who think that the measures don’t go far enough.

IN RENEWABLES NEWS…

• State-controlled UAE company Masdar just bought a 49% stake in the East Anglia Three offshore wind farm – one of the UK’s biggest wind farms – from Spanish developer Iberdrola. This will be the second deal struck by the UAE in two weeks as Masdar previously bought 49% of the £11bn Dogger Bank south project in the North Sea last week!

IN BITCOIN-RELATED NEWS…

• Bitcoin hit $42,000 for the first time since 2022, clearly tossing aside any concerns about scandals at FTX and Binance! Meanwhile, Coinbase said that it wants to create more crypto jobs in Britain as it presumably benefits from the downfall of rivals in the space!

IN BUSINESS TRENDS…

• German factory orders fell, according to the latest official figures. Things continue to go from bad to worse in Germany at the moment.
• The UK services sector grew for the first time since July, according to the latest S&P Global PMI. Businesses got a boost last month from rising demand from the US and EU.
• The UK M&A market hit its lowest level in a decade, according to research from LSEG Deals Intelligence, something that UK investment bank Peel Hunt is acutely aware of as it suffered a half year loss precisely because of this!
• The NHS is continuing to outsource more eye, hip and knee operations in its bid to cut surgery waiting lists. Companies such as Circle Health Group and Spire Healthcare continue to stand to benefit…

IN EMPLOYMENT TRENDS…

• The latest report by KPMG and REC shows that a recent surge in redundancies has resulted in the biggest jump in the number of job seeker numbers since lockdown! The hiring of permanent staff has fallen for the 14th month in a row.
  EY announced more job cuts thanks to the continued lack of deal flow. It seems to be being particularly brutal with its legal business.
• Spotify announced that it would cut its headcount by 17% amid a weakening economic backdrop and high interest rates. This is its third round of redundancies this year! Its CFO sold £7.2m worth of shares, which is normally a worrying sign – but it turns out that he’s leaving so it’s probably his last hurrah!

IN CONSUMER TRENDS…

• US consumers are increasingly turning to BNPL to pay for their holiday shopping as the cost of living continues to bite and the labour market shows signs of cooling off.
• Chinese borrowers are having a nightmare as they are defaulting in rising numbers. The big problem here is that late payment means you get cut off from all sorts of things as you get blacklisted.
• UK consumers are seeing their living standards fall while they face the worst food inflation in the G7, rein in spending and get hit particularly badly by inflation if they have a mortgage 😱! And talking of mortgages, 20% of first time buyers are signing mortgage deals of 35 years or more – the highest proportion since records began in 2005! They are resorting to this in order to make their monthly mortgage payments more affordable.

IN RETAIL NEWS…

• Alibaba is losing its lustre and it has relinquished its position as China’s most valuable online company after losing most of the gains it’s had since its 2014 IPO. Its online retail business is suffering from an increasing amount of pressure from newer rivals and has seen its market share in e-commerce slide from over 80% in 2014 to around 40% now!
• The company that superseded Alibaba in the #1 spot is PDD, Temu’s parent. The company is growing much more quickly than Alibaba and although it has overseas expansion ambitions, it may have to adapt its approach to suit local markets and be wary of ongoing US-China tensions.
• Online luxury retailing continues to falter with the likes of Farfetch, MyTheresa and Matches all suffering. I think this is because, of all the types of retailer, luxury retailers are the ones that concentrate the most on the actual experience. Online just doesn’t come close IMO!
• Frasers Group sees better sales but is cautious about the “softening” of the luxury market. That said, weakening in this area could throw up interesting opportunities either to consolidate what they have (e.g. Hugo Boss) or give them other targets to go for.
• Games Workshop is so bullish about its first half profits that it’s given its staff a £2,500 bonus to enjoy! How great is that ahead of a cost-of-living-crisis Christmas!
• Moonpig saw a rise in profits but a fall in the number of orders (because basket sizes were bigger). It is benefiting from using an AI algorithm which makes targeted recommendations.
• Sainsbury’s is winning back market share from Aldi and Lidl, according to the latest figures from Kantar. Although this is good news for Sainsbury’s, this is at least partly due to price matching with Aldi – and I wonder how sustainable that is over the medium-long term!

IN LEISURE NEWS…

• McDonald’s announced the launch in America of a new format called CosMc’s that will offer iced beverages, all-day Egg McMuffins (but no burgers or fries!) and will be drive-through only! CosMc’s is named after an orange alien mascot that featured in McDonald’s ads in the late 80s.
• SSP has benefited from more travellers, which means higher footfall in its outlets at stations and airports. Full year revenues have recovered significantly and it has been expanding into new overseas markets.
• On the Beach managed to breach £1bn in revenues for the first time as “revenge travel” has well and truly kicked in since lockdown! The company says that the majority of consumers have this year protected their holidays and not sacrificed them and that it was confident about the coming year.
• Travel company Tui is thinking of ditching its primary London listing and moving to Frankfurt instead. Although this will be bad news for the LSE, it makes sense for Tui given that 75% of the shareholders and share trading volumes are in continental Europe. It would also help the company cut costs and give it better trading liquidity.

• AbbVie made an offer for Cerevel Therapeutics for $8.7bn, enhancing its neuroscience portfolio. This is AbbVie’s second big acquisition in the last fortnight – the other one being ImmunoGen which it is buying for $10bn.
• Alaska Air made an offer for Hawaiian Airlines in a deal worth about $1bn but it will have to pass the regulators. Execs are hopeful that the deal will go through as there’s not much overlap for the airlines in terms of routes.
• Saudi Arabia’s sovereign wealth fund just bought 49% of Rocco Forte Hotels with the aim of helping it double in size over the next five years.
• Private equity firm Trive Capital Partners has just made a recommended offer for ten pin bowling specialist Ten Entertainment Group that values the business at £287m and is being struck at a 49.7% premium to the average share price over the past 12 months. This is just the latest example of consolidation in the leisure sector!
• Coventry Building Society launched a bid for Co-op Bank. If it is successful, the enlarged group would be big enough to take on the likes of Virgin Money.
• Meanwhile, Brookfield’s $13bn bid for Origin Energy failed to get shareholder approval. This is the second big deal that has failed in this way in the last few weeks – the first being US lithium miner Albermarle walking away from a $4.2bn bid for Liontown Resources in mid-October.

IN BATTERIES…

• Europe continues to fall behind on  automotive electrification as it’s only managed to secure 16% of the battery raw materials it needs by 2030 to hit EV battery targets. Meanwhile, the European Commission is now looking at offering €3bn in subsidies to battery makers in the EU.

IN EV NEWS…

• The EU proposed a 3-year delay to EV sales tariffs between the UK and EU that would have come into force next year. The rules had been introduced originally to encourage the development of the European battery supply chain – but things haven’t quite turned out as expected as the Chinese continue to be absolutely dominant in this area.
• Tesla’s fight against Sweden’s unions spread to Denmark and PensionDanmark, one of Denmark’s biggest pension funds sold out of its £46m stake in Tesla, ostensibly because of Tesla’s anti-union stance. Tesla also lost in its legal bid to force Sweden’s postal service, PostNord, to deliver its licence plates. Meanwhile, the UK won’t be taking part in the Cybertruck frenzy as much as the Americans because its weight means that the standard driving licence won’t cover it!
• Car dealership Vertu saw its value shrink by up to a quarter as it continues to suffer from falling demand for EVs.

IN OTHER CAR NEWS…

• Toyota is looking at making two potential investments in the UK after the government extended the petrol/diesel/hybrid sales ban deadline from 2030 to 2035. One involves a new model being made here and the other is making hydrogen fuel cells. Meanwhile, it sold down some of its stake in parts maker Denso, which is notable as cross-shareholdings in suppliers are quite common in Japan and some think that this could prompt other companies to reduce their cross-shareholdings as well.
• GM’s Cruise has been ordered by the California Public Utilities Commission to testify about the infamous October incident. It said that Cruise omitted crucial information about its vehicles’ safety.

IN AI NEWS…

• Meta and IBM launched an “AI Alliance” which takes an “open-source” approach to the larger players in AI at the moment – Google, Microsoft and OpenAI (who take the opposite approach). Dell, Sony, AMD, Intel and a number of uni start-ups and universities are also part of this new alliance.
• Google launched a new batch of AI models that will run directly on mobile phones for the first time. Being able to run an AI model natively on a mobile phone has two main advantages – firstly, it’s cheaper to run, and secondly, it means that private data will be restricted to the device itself.
• BlackRock will be rolling out its first generative AI tools to clients from the beginning of next year that will enable them to access information from its risk management systems. A number of financial services companies are also experimenting with AI tools for their own use and for the use of clients. Bank of America, Wells Fargo and PwC are among those who are already working on/launching such models.

IN OTHER TECH NEWS…

• Apple is looking to use batteries made in India for its latest generation of iPhones as part of an overall effort to lessen its reliance on manufacturing in China. It has told component suppliers of its preference to source batteries for its iPhone 16 from Indian factories!
• ByteDance announced a share buyback, putting its enormous $50bn+ cash pile to work ($5bn of this has been earmarked for the share buyback). It’s heading towards an IPO at some point but there are still regulatory clouds hanging over it so I guess a buyback is something to keep the investors happy for the time being!

• IN REAL ESTATE NEWS – The massively indebted Evergrande just got a stay of execution and has been given some extra time to put together a restructuring plan by a Hong Kong judge that will satisfy its creditors. It has until next month to come up with something. If it fails, this could have major repercussions not just on Evergrande – but also on China’s economy. Elsewhere, luxury brands are snapping up high profile commercial property (LVMH just bought 150 Avenue de Champs-Élysées for a whopping €950m, a record price for a building on the glizty street) as they look to protect their prestigious addresses but, overall, many property firms are now feeling the nasty hangover they got from “free money” when they borrowed at virtually zero rates of interest. We saw this most recently with Signa Group and Selfridges. In residential property, the latest stats from Halifax show that house prices increased in November, making it the second consecutive monthly rise. This has been mainly down to the relative short supply of properties on the market as opposed to red-hot demand.
• IN FINANCIALS NEWS – the SEC warned companies against “AI-washing” – where companies make false claims regarding their association with AI – and that they need to be making “full, fair and truthful” disclosures. I think that AI-washing is going to become the new “greenwashing”! Elsewhere, the Qatar Investment Authority is going to halve its shareholding in Barclays which would suggest that it doesn’t believe in Barclays’ current turnaround plans…then we saw that investment platform AJ Bell saw a huge rise in pre-tax profits thanks to the interest earned on customer accounts! You would have thought that although this is great right now while interest rates are high this state of affairs won’t last forever and it will need to make sure its core business is firing properly for when they don’t get this income!
• IN PHARMA NEWS – Novo Nordisk is already looking beyond its wildly successful obesity drug and is now looking into drugs that can stop you gaining weight in the first place! Research is in the early stages, but it sounds exciting! Meanwhile, Roche bought Carmot Therapeutics for up to $3.1bn. Carmot is developing its own anti-obesity drugs.
• The UK’s mobile networks are now facing a big class action as they are being accused of overcharging millions of customers on their phone contracts when they consistently fail to cut the amount charged to customers’ bills once the minimum term of their contracts expire.

My favourite “alternative” story from this week is actually this educational one about how to find the centre of a circle! I never knew this!!!

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 Europe’s inflation fell closer to target, when Shein filed for an IPO and when Tesla finally delivered on the Cybertruck…

• IN THE US – US GDP grew by more than expected in Q3. At an annualised rate of 5.2%, this was the fastest rate since 2021 and was was due to continued consumer spending and government subsidies for green industries.
• IN CHINA – factory activity contracted as the economy lost momentum, according to the latest PMI. This was the second consecutive month of contraction, which could imply that the government’s efforts to stimulate the economy either haven’t worked or haven’t fed through yet.
• IN EUROPE – Eurozone inflation fell by more than expected to 2.4% – its lowest level in over two years, edging closer to its 2% target rate. Although this could be seen as a victory against inflation, it has come at a cost – economic growth. France’s economy shrank and Germany’s unemployment rate rose as the eurozone heads towards recession. The far-right victor of last week’s Dutch elections, Geert Wilders, is looking to “moderate” his stance in a bid to make a proper bid for the premiership.
• IN THE UK – the OECD reckons that the UK’s on track to have the second lowest growth in the G7 over the next two years, just one place ahead of Germany, thanks to lingering inflation. Back in the UK, a Lords committee criticised the Bank of England’s poor record of inflation forecasts, which they argue made inflation worse than it should have been. I’d argue that the Fed, the ECB AND the Bank of England ALL got it wrong (they said that inflation was a temporary blip) so the fact that ex-Fed chief Ben Bernanke is supposedly going to come in and sort it all out in response to the report makes me laugh given that Bernanke didn’t always cover himself in glory. Then there was the news that Nottingham City Council issued a section 114 notice, basically declaring itself bankrupt. Councils had been particularly worried since the Autumn Statement didn’t give them much – and this was the result.

IN COMMODITIES NEWS…

• India plans to triple the amount of underground coal mining in order to meet the country’s fast-growing need for energy. The country’s coal ministry wants to triple output from underground coal mines by 2028. India currently relies on coal for about 75% of its power production.

IN OIL NEWS…

• OPEC+ decided to cut oil production, but the market treated this with scepticism as not every member was fully committed to the new target. Meanwhile, US crude oil inventories rose by more than expected.

IN RENEWABLES NEWS…

• Inflation may affect the viability of mini-nuclear power plants. NuScale Power, an American developer of Small Modular Reactors (SMRs – mini nuclear power stations) said this month that plans to build its first cluster of mini-nukes in Utah died after a number of towns that were backing the project pulled out due to rising costs. Despite this, the mayor of Tees Valley is about to agree a deal with US nuclear power company Westinghouse to build Small Modular Reactors (SMRs) in the North East.

MEANWHILE…

• Global stocks had their best month in three years as market hopes that interest rates would be coming down gathered pace, something that also helped the dollar to hit a three-month low.

IN BUSINESS TRENDS…

• South Korean defence firms such as Hanwha Aerospace, Hyundai Rotem and Korea Aerospace Industries are riding the wave of defence spending at the moment, helping the country to become one of the world’s top 10 defence exporters. It’s in a constant state of readiness anyway because of its neighbour and is robust enough to scale production very quickly and the Europeans are getting a bit nervous about it…talking of defence, the latest figures show that Turkey’s exports to Russia have boomed this year amid allegations that Turkey is becoming a backdoor supply route for sensitive items fuelling the Russian war machine.
• Deloitte and KPMG staff going to Hong Kong on business are being advised to take burner phones even if they’re not doing anything particularly sensitive. This is just symptomatic of the current wave of Chinaphobia gripping major corporates at the moment. Mind you, given the clampdown on western corporates recently, you can understand the paranoia…
• IN THE UK – UK business confidence is actually rising back to levels before the war in Ukraine, according to a monthly report by Lloyds Bank! This is having a positive effect on hiring plans. Meanwhile, given that I’m always banging on about how advertising is often seen to be a decent leading economic indicator, it was interesting to see that Channel 4’s chief said that the TV industry is seeing its worst advertising slump in 15 years! This isn’t boding well for the economy.

IN EMPLOYMENT TRENDS…

• Vacancies are increasing in the approach to Christmas, according to Adzuna, thanks to retailers and warehousing companies.
• The ONS’s new unemployment rate is 3.5%. This is notable because it’s lower than it was before and is using a new methodology because the previous one was deemed to be losing its accuracy.
• On the flipside, EY has decided to push some graduate start dates back in its advisory arm because of the lack of business while London has become the redundancy capital of the UK, according to REC. The tech and construction downturns have proved to be particularly damaging.
• A research report published by the Unit for Future Skills concluded that the finance and insurance sectors would be most vulnerable to AI taking over jobs. Management consulting was deemed to be most affected, followed by financial managers, accountants, psychologists, economists and lawyers – and London was found to be most impacted because of the concentration of these kinds of jobs. There was a mildly concerning article in The Guardian about a report alleging that Sports Illustrated published articles written by authors who were generated by AI! Sports Illustrated obviously denied the allegations. It’s already happening people 😱!!! The bots are taking over!

IN CONSUMER TRENDS…

• UK shop price inflation slowed down to its lowest rate in over a year, according to the BRC, as retailers cut prices ahead of the all-important Christmas season.
• Food producers have been found by the CMA to be guilty of putting prices up at a faster rate than their own costs were rising. Companies like Unilever deny this while supermarkets have already been cleared of indulging in “greedflation”.
• More consumers will use BNPL over the Christmas period, which is unsurprising given the cost-of-living crisis. A study shows that over 25% of adults in the UK will use BNPL as part of their Christmas spending – a rate which rises to 50% among parents with young children.
• Mortgage approval rates have risen for the first time in months despite a rise in borrowing costs! Is this the start of a modest housing recovery?? I wouldn’t have thought it would last too long though as we will soon be in the quietest time of the year for real estate (once the Christmas frenzy – i.e. wanting to move in before Christmas – is over, it usually all goes quiet for a few months as people build up cash again!).

IN RETAIL NEWS…

• IN CHINESE RETAILER NEWS – Shein filed to go public in the US – and although it’ll try to get a high price, there are political and regulatory risks. Meanwhile, Temu is going to be investing further in the US and its parent, PDD Holdings, has bought multiple ad units during the Super Bowl, which is some of the priciest ad real estate on broadcast TV! It is clearly putting its money where its mouth is!
• IN UK RETAILER NEWS – UK retailers are bracing themselves for a disappointing festive season, according to the CBI but online market places selling used goods – such as Amazon and eBay – are reporting a surge in sales as people aim to get the most for their money. Companies including Depop and Vinted have also been trading well. Luxury online retailer Farfetch had rubbish results and the founder is thinking of taking it private while Halfords warned of weaker profits. Elsewhere, Lush announced the opening of a new “hair lab” concept store in Brighton and Mountain Warehouse is planning on opening more stores after a strong first half performance.

IN LEISURE NEWS…

• EasyJet reported its first annual profit since the pandemic and the outlook is positive. The CEO observed that customers are starting to return to booking longer holidays and more expensive hotels.
• Saga is looking at financing options as it continues to battle with rising debts. Its CEO, Euan Sutherland, resigned. It looks like he has the opposite of the Midas touch and hasn’t really done a decent job for the last decade…

IN BANKS NEWS…

• Goldman Sachs said that it was reining in its previously aggressive China expansion ambitions given the ongoing US-China tensions.
• Barclays said that it is looking to drop thousands of investment banking clients in order to concentrate on the more profitable ones. This makes sense given that the bank is also looking to cut staff numbers as well.
• Lloyds Bank said it is going to close more branches whilst at the same time throwing its hat in the ring to buy Tesco Bank as the supermarket moves away from finance.
• Metro Bank got the OK from shareholders for its financing and is close to selling most of its home mortgage portfolio to Barclays. It then announced that it would be cutting 20% of its staff and reconsidering opening hours (especially Sunday opening).

IN INVESTMENT/WEALTH MANAGEMENT NEWS…

• Anti-greenwashing reforms that were due to come into force on January 1st next year have been pushed back to May 31st in response to City requests for more time to comply. The reforms are intended to stop fund managers from making false “green” claims.
• Financial advisers are going to be required by the FCA to hold more capital to cover potential compensation claims for poor advice. Until now, claimants have been paid out of the Financial Services Compensation Scheme but the new approach means that those who are guilty will have to pay more of their share.
• Trading app Robinhood is to launch next year in the UK. It’ll kick off with share trading of US stocks followed by London-listed stocks later on. I think they’ve got their work cut out given the relative lack of share-trading culture over here.

IN CHINA…

• We see the effects of the Chinese real estate crisis that were turned up a notch with Evergrande’s default in 2021. The scale of indebtedness in the sector that accounts for 25% of China’s GDP is frightening.
• Talking about indebtedness, Chinese authorities have launched a probe into shadow bank Zhongzhi, after the company described itself as “severely insolvent”. Shadow banks are getting dragged into the real estate abyss as they also lent money to the sector.

IN THE UK…

• IN COMMERCIAL REAL ESTATE – UK estate agent group Carter Jonas estimated that almost seven million square feet of office space in Canary Wharf currently falls short of environmental property standards, which could mean that Canary Wharf Group is left with a whopping bill to upgrade. Not great for them, but it could be a nice money-earner for construction companies and building materials suppliers!
• IN RESIDENTIAL PROPERTY – UK house prices are falling, according to the latest stats from Zoopla, as discounts are now getting bigger – 5.5% in November. This is the highest discount since 2018. Meanwhile, Rightmove remains bullish about its own prospects despite the imminent juicing up of rival OnTheMarket after the latter’s acquisition by deep-pocketed American property data group CoStar.

IN EV NEWS…

• The EU’s got a plan to get around the 10% Brexit tariff on EVs – it will extend the validity of the 2023 “statements of origin” into 2024 while the car industry itself continues to lobby for a three-year suspension of the tariff.
• Tesla’s Cybertruck is now ready for delivery and the prices have already been announced. Funnily enough, the prices are way higher than what had been stated previously ($61,000 starting price – way north of the $40,000 that had originally been touted!) but then again, those who’d put their deposit down have had a few more years to save the extra pennies given how many delays there have been to its release! Meanwhile, Tesla continues to battle Swedish unions – and there’s a bigger battle at stake here because losing in Sweden could have global implications for its workers!

IN OTHER CAR NEWS…

• VW is looking to cut more jobs as part of a €10bn cost-cutting exercise.
• Ford has slashed its profit forecasts thanks to lost production and higher labour costs resulting from the union strikes.
• GM announced a $10bn share buyback as a way to reassure investors about the health of its carmaking business. It also cut its investment in its driverless division Cruise. I think it needs to ditch the thing entirely as it is just a massive money pit IMO.
• Meanwhile, UK car production continues to increase – and has now done so for the eighth consecutive month!

IN AI NEWS…

• The US, UK and 16 other countries unveiled a new AI pact that calls for AI systems to be “secure by design”. It’s not binding, but it’s a step in the right direction!
• PwC launched a chatbot that can work out whether acquisitions are worth making. It should speed up the due diligence process but the timing of the announcement isn’t great given that it comes not long after the company made 600 redundancies in its advisory team.
• Retailers are using AI for inventory now. This will ensure that they have the right amount of stock in the right places depending on variables such as weather patterns and social media trends.
• OpenAI is readying itself for a employee share sale which will be an interesting indicator of sentiment following the dramatic events of last week! Talking of OpenAI, Microsoft now has a seat on its board, which will give it access to confidential information although it won’t be able to vote on key decisions. And talking of Microsoft, the company has shown that there are no hard feelings with the UK about the Activision Blizzard debacle as it announced a £2.5bn investment in a new data centre in west London and expanded computer capacity in Cardiff, among other things.

IN SOCIAL MEDIA NEWS…

• Meta has been accused of getting children addicted to its platforms and knew about underage users, but Meta is trying to shift blame onto the app stores, saying they should be tighter on age restrictions.
• Twitter has lost 3m British users since Elon Musk took it over, according to the latest figures from Ofcom and Ipsos. CEO Yaccarino’s job wasn’t made any easier by a frustrated Musk telling advertisers who’d abandoned the platform to “go **** yourself”.

ELSEWHERE…

• A report by VC group Atomico shows that funding for European tech companies has almost halved this year as US investors pulled back. It seems that this is at least partly because investors are now much more focused on profitability rather than raw growth.

• Private equity firm Blackstone announced it is to buy petcare marketplace company Rover Group in a deal worth $2.3bn. Rover Group now has 30 days to seek alternative buyers.
• Cigna and Humana are in talks to combine in what could become a new giant in the health insurance industry!
• The Saudi Arabian sovereign wealth fund is taking a 10% stake in Heathrow for £1bn. It’s buying it from Ferrovial which has been trying to offload its 25% stake for the last few months.
• AbbVie is to buy ImmunoGen in a $10bn deal which basically buys the former a promising new technology for treating cancer. This will be a much-needed boost given AbbVie’s anaemic drug pipeline.
• Aviva is buying a Canadian vehicle insurance rival for £100m as part of its drive to focus on business in the UK, Ireland and Canada.

• Novo Nordisk is looking at flexible pricing for its obesity drug. It’s not planning to cut prices but it’s talking to healthcare systems around the world about how they can spread the cost. I think that this shows a lot of confidence – and given that the obesity market is absolutely massive it’s a decent call, IMO!
• Rolls-Royce is looking to sell its flying taxi and electric plane business as the CEO wants to streamline the business as part of plans to quadruple profits.
• Uber was in the news this week for a couple of eye-catching reasons! Uber is having another go at tempting London’s black cabbies to join its app after its last abandoned attempt  in 2017. It is also pushing its train-booking service, something it’s had for a while but hasn’t pushed so much until now. Will Trainline be worried??

My favourite “alternative” story from this week was the one about which is better – Roses or Quality Street! I agree with the conclusion in this article 👍

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 Sam Altman returned to OpenAI, when Jeremy Hunt announced the Autumn Statement and when Argentina got a new president…

• IN TAIWAN – plans for the opposition parties to get together got problematic over the weekend as neither party could agree who would lead the campaign! They have to unite in order to stand any chance of winning against the ruling DPP.
• IN EUROPE – the Eurozone is moving closer to recession, according to the latest data from the HCOB PMI. Business output fell in November for the sixth consecutive month and the number of jobs cut exceed the number of those created for the first time since the pandemic. The ECB said that it could potentially raise interest rates if needs be to tame inflation (although most believe that Europe has already hit the peak). Meanwhile, within the region, Germany’s government were forced to suspend a vote on the country’s budget for 2024 following a ruling by the country’s highest court declaring that the government’s move to shift €60bn to a climate fund breached fiscal rules to limit debt! Politics in the Netherlands shifted to the right as Geert Wilders won elections on Wednesday, benefitting from the increasing disconnect between liberal city-dwellers and more right-wing rural voters who are getting increasingly concerned about immigration and worsening public spaces. Turkey’s central bank whacked up its interest rate to 40% in order to tame inflation while Greece’s leftist Syriza party looks like it’s breaking up as nine of its MPs quit in protest against its leader.
• IN THE UK – chancellor Jeremy Hunt announced various initiatives in the Autumn Statement. It looks like he’s used any “spare” money to implement more broader-based measures than I had expected and it is, unsurprisingly, designed to win more votes. In the meantime, the latest “flash” reading of the S&P Global CIPS PMI highlights the first signs of economic recovery in the UK for four months. It was also good to see that UK business activity grew slightly in November.
• IN ARGENTINA – Radical libertarian Javier Milei won the presidential election and so Argentina will be facing an uncertain future until everyone can work this guy out.

IN OIL NEWS…

• Oil prices fell as the Opec+ alliance postponed a meeting which was scheduled to get members to commit to production targets. The group is expected to either keep production plans unchanged or cut them in order to support the price.

IN CRYPTO NEWS…

• Binance founder and CEO Changpeng Zhao pleaded guilty to money laundering yesterday. He’ll pay a $50m fine himself and sever any involvement with the business while Binance itself will pay fines of over $4bn to settle criminal charges. The new chief, Richard Teng, has called for calm and is committed to getting customers and regulators onside.

IN BUSINESS TRENDS…

• US private equity firm Carlyle sold its 28% stake in McDonald’s Chinese operations for $1.8bn in the latest example of a western private equity firm reducing exposure to the region.
• India is seeing a back-office boom which means that IT services workers are hot property! Multinationals are opening their own “Global Capacity Centres” (aka GCCs) to develop proprietary tech such as cyber security systems and AI. These centres are very cost effective because of cheaper labour costs.
• More businesses are closing than opening, according to the latest data from the ONS. Transport and storage businesses were hit hardest as rising energy prices, inflation and higher wage costs continue to hit hard.
• Compass benefitted from more companies deciding to outsource their catering – and it also managed to increase its prices as well. Not bad!

IN CONSUMER TRENDS…

• US retailers are not expecting great things from Black Friday given the squeeze on household incomes and it looks like they will have to offer deeper discounts to attract increasingly cost-conscious customers.
• UK retailers are also offering deeper discounts but, on the plus side, the latest GfK consumer confidence survey shows that Brits are starting to feel more optimistic about the economy and personal finances! Unfortunately, consumers will face more pressure on their finances as the energy price cap is set to rise from January, which means that bills will go up.

IN RETAIL NEWS…

• Electrical goods retailer AO World managed to return to profit after a year of painful cost cutting. It also pleased investors by lifting full-year profits.
• Go Outdoors saw profits almost halve last year as it struggled to cope with higher operating costs. On the plus side, sales are now showing signs of recovering and it’s going to roll out a new format in high streets called Go Outdoors Express after a successful trial.
• Halfords got a bid and rejected it not long after it threw its hat in the ring to buy rival bike specialist Wiggle out of administration. I still think that we’re potentially at “peak bike” for now and that there will be more sector consolidation.
• Kingfisher, which owns B&Q and Screwfix, announced its second profit warning in two months as its French business saw a weakness in sales. It has decided to concentrate on growing market share in Britain, France and Poland next year whilst keeping a lid on wage costs.
• UK beauty retailer Space NK has benefitted from the “Zoom Boom” of people wanting to look their best on video calls and reported strong sales!

IN LEISURE NEWS…

• Jet2 had strong results for the first half and although winter bookings have been a bit lacking, bookings for summer next year look pretty good.

IN CHIPS NEWS…

• Nvidia reported yet another storming quarter powered by its leading position in AI but investors remain concerned about the effect of the ongoing US-China trade tensions. Through it all, Nvidia is taking things in its stride and continues in its aim to be a one-stop chip shop as it announced an even better AI chip.

IN OPENAI NEWS…

• There was a kerfuffle over the weekend as there was speculation that Sam Altman would be returning as CEO of OpenAI, but then the board rejected this and appointed a new interim chief, Microsoft then hired Altman and his team but then he made a dramatic return to OpenAI as chief exec with a new board. There were comments that one of the reasons why Altman was ousted in the first place was that the company had been working on a new AI model which was so powerful that it caused safety concerns among staff.

IN OTHER TECH NEWS…

• The $69bn Broadcom-VMWare merger finally got approval from the Chinese regulator, which had been dragging its heels. Is this a sign of a thawing of relations between Washington and Beijing??
• The UK government has stopped advertising on X over the last few months although they continue to spend on Facebook and Instagram ads. This was happening even before last week’s anti-Semitism row.
• Sage announced booming profits and it’s working on an AI product that it says will be a game-changer for SMEs!

IN BATTERY NEWS…

• South Korean battery makers such as LG Energy Solution and SK On are reining in their US operations due to slow EV demand, which has itself prompted a pause in EV production capacity expansion at the likes of GM and Tesla. Ford announced that it would continue to build its Michigan factory but on a smaller scale precisely because of this.
• Stellantis is in talks with CATL about a 50-50 battery joint venture that would increase the affordability of EVs, although this means that superior Chinese tech is firmly embedded in European car supply chains!
• European battery maker Northvolt has made a breakthrough discovery of a sodium-ion battery which costs less to make, is more sustainable than existing lithium ion batteries and doesn’t require the use of any lithium, nickel, graphite or cobalt. It is currently designed for electrical storage plants but it could potentially be used in EVs.

IN CARMAKER NEWS…

• Nissan said that it plans to build new EVs at its Sunderland plant, which will be great news for the region.
• Musk is getting frustrated about workers at his Swedish factory striking to protect collective bargaining rights. Could this inspire other Tesla workers around the world perhaps??
• Fisker lost its second chief accounting officer in less than a month, shortly after unveiling its Q3 results. Fisker is finding out the hard way how difficult it is for a new car company to survive in an increasingly competitive space.

IN OTHER CAR-RELATED NEWS…

• The chief of GM’s autonomous car unit, Cruise, resigned after all the safety troubles last month. Cruise’s future is unclear but, for the moment, it has planned a more conservative reintroduction of its robotaxi service that will be much smaller-scale than before.
• France has voiced its support for the UK call to delay tariffs on electric vehicles. It had, up till now, been the only major European opponent of the UK’s request to defer the 10% duty on EV sales.

• Chinese shadow bank Zhongzhi warned that it was “severely insolvent”, which could have big implications for the whole $3tn shadow banking market as its exposure to a disastrous real estate sector is dragging everything down with it.
• Barclays said that it would be reducing headcount by 2,000 as part of a cost-cutting drive. The cuts will mostly come in the “back office” (non client-facing) departments.
• Citigroup announced imminent big job cuts as part of its own restruction.
• Swiss bank Julius Baer announced a profit warning mainly thanks to its exposure to troubled Austrian property group Signa.
• Virgin Money fell short of market expectations because it had to make bigger-than-expected provisions for bad loans to cover rising credit card arrears prompted by the ongoing cost-of-living crisis.

• IN REAL ESTATE NEWS – London landlords are racing to upgrade their office properties to new tighter standards, according to a survey by Deloitte. Meanwhile, EY is considering ditching its London HQ as it has a think about its ongoing office space requirements near the end of its 25-year lease.
• IN MANUFACTURING NEWS – farm equipment maker Deere & Company made downbeat forecasts for 2024 thanks to higher borrowing costs and an increasingly budget-constrained customer base and Thyssenkrupp wrote down the value of its steel business by a massive €2.1bn due to low demand and falling prices.
• Bayer shares fell by up to 20% to their lowest level since 2008 as investors expressed their disappointment with a blood-thinning drug that saw its drug trial halted. It had been seen to be a potential blockbuster and the cessation of the trial exposes Bayer’s relatively poor drugs pipeline.
• Lego is pinning a lot of hopes on its new proprietary line of Lego sets called “Lego Dreamzzz”, which is a result of four years of testing with children. The company is trying to wean itself off reliance on third party franchises like Star Wars and Harry Potter by coming up with its own “thing”, so we’ll just have to see how this goes!
• The UK Supreme Court decided that Deliveroo riders are contractors – and not employees – in the latest development in the whole gig economy thing. The Independent Workers’ Union of Great Britain will look to appeal against the ruling under international law…

My favourite “alternative” video from this week was the one with the trap door! You could have soooo much fun with that!

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 Hotel Chocolat went to Mars, David Cameron made a dramatic return to frontline politics and Sam Altman left OpenAI…

• IN THE US – inflation fell to 3.2% in October, which was more than expected. It was its first fall for four months, so the implication here is that there is less pressure for the Fed to increase interest rates.
• IN TAIWAN – we saw that the two main opposition parties joined up in a bid to oust the ruling DPP in January’s presidential election. At the moment, this would be the only way they could win. China has framed the election as a choice between war and peace – and it is rumoured that the Chinese will roll back military threats if the opposition win.
• IN THE UK – UK inflation fell to 4.6%, which is more than the 4.8% economists were expecting and a victory for Sunak who had promised to halve inflation back in January. There was a dramatic Cabinet reshuffle this week paving the way for David Cameron to return to frontline politics as Suella Braverman was sacked as home secretary and replaced by James Cleverly. It was also interesting to see that the UK is going to rein in takeover screening powers in the National Security and Investment Act just two years after they were brought in to make overseas takeovers more difficult in sensitive sectors and industries.

IN ENERGY NEWS…

• The US and China, the world’s biggest polluters, announced that they would accelerate the rollout of renewable energy to offset their heavy reliance on fossil fuels, although they didn’t make any reference to the phasing out of fossil fuels. In the meantime, China’s emissions look set to fall from next year thanks to a record increase in clean energy investments.
• Danish wind power developer Ørsted reported major losses not long after it announced the recent cancellation of two major US projects, which cost it over £3bn to exit. No doubt this prompted the UK to offer higher subsidies for offshore windfarms after developers complained of being faced by extremely high prices – but it was also probably due to the fact that England has seen a major drop-off of onshore wind projects and needed to take action!

IN COMMODITIES NEWS…

• Glencore’s acquisition of Teck Resources’ coal business is expected to be a precursor to a full demerger. The coal business will then be spun off and listed in New York with secondary listings in Toronto and Johannesburg.
• The oil price weakened this week as China demand fell, suggesting that there might be cheaper petrol prices.
• IN LITHIUM – Exxon announced that it was starting to drill for lithium in Arkansas with a view to becoming a major US supplier to EV battery makers by 2030! Meanwhile, Geothermal Engineering Ltd is looking to diversify into lithium by raising £600m to build multiple sites by 2030. In doing this, it would join the likes of Cornish Lithium and Imerys British Lithium in tapping the region for resources to power the future of transport and power generation!

IN BUSINESS TRENDS…

• UK business confidence hit its lowest point this year, according to a report by Accenture and S&P Global. That said, sentiment in the UK is still actually better, on average, than many other regions – including Europe!
• Company collapses are on the rise, according to research from a company called Azets, and could reach their highest ever levels thanks to stubbornly high interest rates.
• Many defence companies reported this week as BAE Systems, Babcock and Qinetiq all reported higher order levels as war – and fear of war – prompted governments to increase their defence budgets.
• Many Middle Eastern carriers – including Emirates, Flydubai and Royal Jordanian – placed massive orders for planes worth tens of billions of dollars at the opening day of the Dubai air show.

IN CONSUMER TRENDS…

• US consumers are finally seeing a slowdown in consumer goods price rises, but they have also been buying less.
• IN THE UK, retail sales fell to a two-year low as interest rates continued to hit household incomes while UK wage growth eased in Q3 and consumers face rising energy bills according to Cornwall Insight and Southern Water, the latter of whom needs bills to go higher to pay for its turnaround. On the plus side, Premier Foods (which owns brands including Mr Kipling cakes, Angel Delight and Bisto etc.) announced price cuts on some of its ranges thanks to weakening inflation and cheaper production costs.

• Mars bought Hotel Chocolat in a £534m deal – at a massive 169.8% premium to its share price on Wednesday and came after Hotel Chocolat announced a loss for the year thanks to falling demand and failed expansion attempts in the US and Japan.
• Natura & Co sold The Body Shop to private equity firm Aurelius for £207m, which was way less than the £870m it bought it for in 2017! No doubt it suffered from increased competition as the years ticked by.
• Canadian insurer and money manager Manulife made an offer to buy UK credit investor CQS. It intends to fold CQS’s $13.5bn assets under management into Manulife’s $746bn in assets under management. Manulife is particularly strong in America and Asia.
• Young’s bought rival pub chain City Pub Group for £162m at a 46% premium to what City was trading at before the news. The whole sector seems to be seeing consolidation at the moment.
• Accountancy firm Mazars announced a tie-up between its US business and that of Forvis, a top 10 American accounting firm by revenue. They are both trying to build scale that will help them invest in tech and be more competitive internationally.
• Sports-focused private equity group Arctos bought into Aston Martin’s F1 team, saying that it will “provide extensive resources to enhance” the team’s “reach and brand”.
• General Atlantic, the US private equity firm, bought a controlling stake in Danish sandwich chain Joe & the Juice taking its shareholding from around 30% to up to 90%.
• Canadian private equity firm Brookfield Property Partners announced that it was going to cancel the sale of Center Parcs after it failed to find a buyer willing to pay the £5bn price it was seeking. Does this mean that we’ve reached “peak staycation”??

IN THE US…

• Amazon is showing signs of strong recovery after a period of cost-cutting and overhaul after a frenzied expansion over lockdown. It was also interesting to hear that Amazon is going to start selling Hyundai cars from next year! This will enable customers to get it from a local dealership and then pick it up or have it delivered. It sounds interesting but we’ll have to see how this goes TBH, but it sounds like a fun idea in theory…
• Target stock surged as investors applauded its tighter inventory control and expense management but Walmart saw its share price fall by 8% on its cautious outlook for the holiday season despite it actually raising full-year guidance.
• Home Depot unveiled a better-than-expected decline in same-store sales thanks to demand from professionals rather than amateur DIY-ers.

AMONG EUROPEAN RETAILERS…

• Ikea bought a Brighton shopping mall for around £145m as part of its effort to move away from its traditional out-of-town model to more central locations. It is planning to convert an empty Debenhams site in Brighton’s Churchill Square into a new Ikea that will open within two years.
• Danish jewellery chain Pandora is sounding a positive note ahead of the all-important Christmas season. It continues to experience accelerating growth quarter-on-quarter.

IN THE UK…

• Beauty company Avon is going to open its first actual store in the UK for the first time in its 137-year history. It won’t sell the full range, but it will be there to support its sales representatives. This is already doing well in Turkey.
• Burberry saw its profits hit by weakness in luxury goods spending. Its full-year revenue targets are looking a bit vulnerable now.
• Selfridges saw a shift in control at the top as Thai retailer Central Group has taken control of the department store after major shareholder Signa Investment Group got into financial difficulties earlier this month.
• Ocado signed its first ever non-grocery tech deal to supply an automated warehouse for McKesson Canada, which is a drug distributor that delivers over 40% of the country’s pharmaceutical products! I think that this is an amazing development because it opens up a whole new load of possibilities for the company…
• Petrol retailers will be forced to reveal profits – and could pay big fines if they don’t – thanks to new powers bestowed upon the CMA. The powers will come into force from next year.

IN LEISURE NEWS…

• Fuller’s says that it’s on track for a very merry Christmas as bookings are running 11% ahead of where they were last year! Let’s hope that the train drivers don’t spoil it all again with their strikes.

IN COMMERCIAL PROPERTY NEWS…

• British Land saw the value of its property portfolio drop by a whopping £200m thanks to high interest rates – but its occupancy rates are high across the board. This probably gave it the belief that it could find new tenants for the office space that Meta decided not to take up.
• Rival Landsec is shifting the balance of its portfolio away from the City and Canary Wharf towards the West End as clients are asking for smaller spaces with “more buzz”. That said, Great Portland said that it’s bought more London property than it’s sold for the first time in a decade having spent £123m worth of property since March with a view to spending an additional £700m.

IN RESIDENTIAL PROPERTY NEWS…

• Rightmove stats showed that the UK housing market beat expectations as average asking prices only dropped by about 3% from their peak in May while the number of agreed sales was only down by about 10% pre-Covid. Meanwhile, ONS data showed that the average price of a house fell for the first time in 11 years, but added the caveat that the sample size was smaller than it has been in the past. ONS data has a lag versus, say, property websites because it counts completed purchases where the mortgage has been agreed (and not just asking prices).
• A Hamptons report said that landlords are on track to to have bought the fewest number of homes since 2010 (excluding Covid) while the estate agents themselves are consolidating. In the meantime, estate agents are raking in tens of millions from the interest they get on rent deposits according to a report from the Tenancy Deposit Scheme. This income has been going up as rent rises mean deposits have increased as well.
• Housebuilder Crest Nicholson announced job cuts due to ongoing weakness in the housing market, which isn’t surprising given the generally negative newsflow.

IN TECH TRENDS…

• Lenovo is the latest company to say that it’s seeing signs of recovery in PC demand despite reporting its fifth consecutive quarter of shrinking revenues. It’s not alone in saying that there are encouraging signs, so maybe this is the bottom of the market??

IN REGULATION-RELATED NEWS…

• TikTok and Meta are now challenging their classification as “gatekeepers” for the purpose of the Digital Markets Act because they say it will limit their growth prospects. The legislation will force companies designated as “gatekeepers” to make their services interoperable with those of rivals and subject their currently closed ecosystems to competitors. The DMA is set to come into force in Q1 of 2024.
• Big Tech is resisting the Digital Markets, Competition and Consumer Bill (DMCC) which had been due to give more powers to the CMA. Big Tech is being given more opportunities to appeal things including forcing Apple and Google to allow alternative app stores and Google and Meta to pay news providers for content.

IN CHIP NEWS…

• Microsoft announced the launch of its own proprietary chips for AI as developers continue to look for alternatives to Nvidia, which has a virtual monopoly on high end GPUs that are needed to train large AI models.
• Nvidia just launched its most cutting edge chip in the form of the H200, which will replace the hotly demanded H100 as Nvidia’s fastest chip (it will double the speed of the current one) and it will be compatible with the current model

IN OTHER TECH NEWS…

• It turns out that Apple takes a chunky 36% cut of Google ad revenue from searches on Safari. The figure is usually secret but came out in the antitrust trial against Google. The contract between Google and Apple for Google to remain Apple’s default search engine is thought to be worth up to $15bn a year! The drama continues…
• YouTube has brought together a number of stars including Demi Lovato, John Legend and Sia who have agreed to offer AI-generated versions of their singing voices to be used as soundtracks for Shorts. The AI advance continues…

IN CAR-RELATED TRENDS…

• Owning a car is becoming less attractive these days as costs rise. Hiring is becoming more prevalent and many expect sharing to become the norm. However, I’ve seen this before and I don’t believe that people will stop wanting to own their own cars. The fact is that not everyone lives in areas with good transport and, for many, cars are the only way of getting around!
• German car parts giant Continental is going to be cutting thousands of jobs thanks to falling car production and chip shortages over the last few years.
• Driverless car unit Cruise is suspending an employee share programme in order to revalue (downwards!) the company. This looks like bad news as it shows that GM is kind of drawing the line under any previous bullishness in this area.

IN ELECTRIC VEHICLE NEWS…

• Companies are racing to make EV batteries recyclable. Hong Kong’s GRST and America’s OnTo Technology (as well as giants like BASF) are working on water-based tech that will bind battery components together and make them much easier than current batteries to recycle. This’ll be great but isn’t going to be an overnight cure for the perennial problem of recycling EV batteries.
• Carmakers are offering more discounts on EVs in order to shift them these days. In the UK, the average discount last month was 11% below RRP. Higher prices, wobbles about charging and safety and political attacks on EVs as well as reticence by potential buyers have really hit sales growth.
• Fisker cut production targets after a lacklustre Q3, sending its share price tumbling. The EV landscape isn’t good at the moment!

IN INVESTMENT NEWS…

• ESG investment is facing more criticism as there is speculation that MSCI, a major player in the ESG ratings space, gives higher rankings to companies that get better stock market performance! The problem here is that the ratings reflect this performance more than proper ESG criteria…
• Warren Buffett’s Berkshire Hathaway has sold off a number of shareholdings in Q3 including GM, UPS, HP and Chevron and his cash pile continues to build up. It’ll be interesting to see what he buys next!

IN PAYMENTS…

• Wise saw a massive 848% increase in profits made on customer balances in the six months to September thanks to the high interest rate environment which meant that they could enjoy earning revenues with zero effort! Nice if you can get it!

• Diageo’s CEO said she wants to introduce the world to tequila! The US and Mexico makes up 85% of the spirit’s sales, so there is massive room for improvement here. I think that a company of Diageo’s size and marketing muscle is able to convince people to change their tastes (I’ve seen this done before!) so it could get interesting!
• Pfizer announced that it is going to cut about 50% of its workforce at its Kent site as it rejigs the business. There will be additional job losses in the US and Ireland. Tough times as it transitions to post-Covid times.

I have to say I thought this game looked like a lot of fun! It could get a bit messy though…

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 China fell back into deflation, X launched Grok and WeWork filed for bankruptcy protection…

• IN THE MIDDLE EAST – Wall Street big hitters Jamie Dimon (JP Morgan) and Larry Fink (BlackRock) reckon that a global recession could be sparked by conflict in the Middle East at a time when a fragile global economy is just starting to recover from the major shocks of Covid and the Russia-Ukraine war. Dimon said that geopolitics is now shaping the future of the world in terms of freedom, democracy, food, energy and immigration (which is presumably why Goldman Sachs recently set up a stand-along advisory business to provide insight onto these very things!).
• IN THE US – Trump is currently enjoying a lead in the 2024 polls as more people doubt Biden’s handling of the economy and national security whilst also believing that they’ll be financially better off under The Orange One. Biden’s got an uphill battle but there’s still time to turn things around…
• IN CHINA – falling pork prices pushed China back into deflation (they’ve fallen by over 30% in the year to October!). Beijing has already implemented a stimulus to boost consumer spending and business investment but this will take time to filter through given the fragility of consumer confidence at the moment.
• IN EUROPE – business activity in the Eurozone has fallen by its fastest pace since November 2020, according to the latest S&P Global PMI survey. Germany has decided to introduce a multi-billion euro package to subsidise power for its manufacturers to help them out in the current “higher-for-longer” interest rate environment. This does smack of hypocrisy given that Europe is currently investigating Chinese companies for getting “unfair” help from the state but hey…Portugal is having a nightmare as its PM just resigned over a massive corruption scandal involving lithium mines. This leaves projects like re-privatising the national airline TAP and scrapping tax breaks for rich foreigners in limbo…
• IN THE UK – the first King’s Speech for 70 years was given by King Charles III, setting out the political agenda for the rest of Sunak’s term as the UK government continued with plans to regulate agencies that determine ESG ratings. There is also debate as to whether the FCA will be the regulator to oversee the adherence to these rules. I think that it is high time that this was regulated given the increasing influence of ESG funds and (until now) the lack of quality control!

IN OIL NEWS…

• Shell defended its move away from eco-friendly business areas whilst also announcing that the company is going to be investing more in its gas business to increase sales of LNG by 20-30% by 2030!
• Sunak was also due to unveil new legislation that will allow companies to bid for new licences to drill for fossil fuels in the North Sea on an annual basis. The argument is that this will protect jobs and strengthen Britain’s energy security by making us a bit more energy-independent, but the North Sea Transition Authority reckons that this won’t really move the needle in terms of making us any less dependent on oil imports.
• Saudi Aramco beat market expectations for net profits thanks to higher oil prices. Its plan to keep prices higher-for-longer is working in its favour but this may well contribute to higher-for-longer inflation for the global economy…

IN ENERGY NEWS…

• Britain struck a deal with the US to work together on nuclear fusion after an EU programme rejected the UK due to Brexit. This will involved sharing resources and building shared supply chains.

IN CONSUMER TRENDS NEWS…

• The latest BRC data showed that UK retail spending slowed down last month as pressure on household budgets continued. The question is whether this will continue going into Christmas…
• Grocery inflation is continuing to fall, according to the latest data from Kantar and it looks like Lidl and Aldi continue to attract more middle class customers as the squeeze on disposable income continues.
• This squeeze is pushing up the number of mortgage arrears, although a new “cheap” mortgage deal was announced by Nationwide, which is good news for those who can afford to put down a 40%+ deposit or equity stake!
• UK consumers continue to face other pressures, such as higher car insurance premiums from Direct Line and higher petrol prices as retailers take their sweet time in converting cheaper oil prices to cheaper prices at the pump. While we’re on the subject of cars, US auto loan delinquency rates are rising as lenders are now getting more nervous about car loans dished out during the pandemic.

IN EMPLOYMENT TRENDS NEWS…

• Recruiters have been seeing a sharp rise in the number of jobseekers over the last month, according to a report by REC and KPMG, presumably because more people are being made redundant and others are getting increasingly worried about their own jobs.

IN BUSINESS TRENDS NEWS…

• Digital advertising agency S4 Capital saw a 15% drop in sales over Q3 as the slowdown in ad spending from Big Tech continued to hit home.

IN OVERALL AUTOMOTIVE TRENDS…

• Official figures showed that Germany’s factory output fell to a three-year low in September thanks to a drop in car production. The slowing sales of EVs has been particularly problematic.
• Japanese carmakers are facing a dilemma at the moment – do they stay in China and face increasingly fierce competition with ever-improving local makers or do they just shift focus to the US and southeast Asia where they continue to do well?
• EV sales and prices seem to be suffering these days. In the US, EV makers are increasingly turning to discounts to shift vehicles while in the UK, the latest SMMT figures show that demand for EVs seems to have been dented by Sunak’s decision to delay the “electrification” deadline from 2030 to 2035, in line with the rest of Europe. Meanwhile, Auto Trader says that the price of used EVs has fallen so much that they now cost around the same as their petrol equivalents thanks to higher electricity prices.
• Tesla raised wages for German workers as efforts continue to keep unions out of the company! Tesla is currently the only major carmaker in Europe that does not have union representation on the shop floor!
• GM announced that it has decided to stop production of its fully driverless “Origin” van given recent problems with the whole driverless thing. California recently banned GM’s driverless vehicles due to safety concerns and it has had to pause operations in the US in order to “take steps to rebuild public trust”.
• Rivian plans to increase production of its electric trucks and SUVs in 2023, but TBH this is from a very low base – so don’t get too excited about this! The good news is that it is now shedding its exclusive agreement to only supply Amazon – so at least it can now get more orders from other customers.
• Swedish truckmaker Scania, which is wholly owned by VW, is going to launch a pay-per-use truck JV with logistics start-up Sennder. This is an admirable attempt to spark demand for electric trucks, which has been poor because of scepticism about the charging network and high prices.

IN AI-RELATED NEWS…

• X, NatWest and Cleo introduced their respective chatbots this week and comes shortly after rival Meta announced the launch of around 30 AI chatbots across its Instagram, Facebook and WhatsApp apps. ChatGPT launched a new service whereby you can create personalised versions of its chatbot with speech style, knowledge and behaviours as part of its $20 a month ChatGPT Plus service.
• Tech firms including Amazon, Microsoft and Alphabet are pouring even more money into cloud capacity in order to keep up with rising demand for AI. It sounds like this will continue to increase.

IN CHIP NEWS…

• Chipmakers who are more exposed to automotive-use chips, such as NXP, are falling behind companies who make them for PCs and smartphones due to the slowdown in EV sales, so they are under-shipping demand to avert inventory pileup.
• Meanwhile, Arm announced strong Q2 results, a slightly weaker-than-expected Q3 but it is positive about the full-year. It is hoping to benefit from the AI frenzy although the fact remains that it’s still mostly about smartphones, which aren’t doing brilliantly at the moment.
• Nexperia sold Newport Wafer Fab to US chip company Vishay Intertechnology, bringing an end to the whole Wingtech debacle and the UK government not wanting a company with Chinese ownership to buy the British chip company on national security grounds. Vishay’s CEO said that NWF would be an integral part of its expansion plans.
• Nvidia announced the development of three new China-specific chips that meet its growing demand for advanced chips on the one hand but satisfy US sanctions on the other. A tricky balancing act to be sure – but we’ll have to see if further US sanctions scupper the latest attempts to make money from the Chinese!

IN GAMING-RELATED NEWS…

• Epic Games moves into it latest phase of fighting a court battle against Google and its Play Store charges, which originally ended up with Fortnite being taken off its app store (and Apple’s App Store). It’s going to be an uphill battle…
• Nintendo said that it plans to make a live-action film based on its video game franchise “The Legend of Zelda”, which went down very well with investors as they will no doubt hope for similar success following the Super Mario Bros Movie. They plan to release one movie a year which could be a nice little earner outside consoles and games!
• Sony said it might not hit its console sales targets this financial year as it reported weaker-than-expected Q3 results yesterday. That said, sales might get a boost from the imminent launch of the new slimmer version of the console in its first major update to the PS5 since it was launched in November 2020.

ELSEWHERE…

• Apple might have to pay €14.3bn in back taxes after all, according to an advisor to the ECJ. An ECJ ruling is due next year, so EU Competition Commissioner Margrethe Vestager might yet get the last laugh!

• WeWork shares were suspended as investors braced for bankruptcy protection and then the company did actually file for bankruptcy, which enables it to terminate leases without big financial penalties and restructure its debts. SoftBank, a major investor in WeWork, still had to pay lenders (including Goldman Sachs) $1.5bn just days prior to WeWork filing for bankruptcy protection! SoftBank ended up posting a massive – and unexpected – $6.2bn loss in its Q2 results in its fourth quarter in a row of making losses. IWG hopes to profit from WeWork’s woes and has already taken on some of the buildings leased by WeWork. IWG’s Q3 revenues rose by 7% year-on-year but occupancy slipped a bit from 73.7% in the spring to 73.5% in the summer.
• The housing market looks like it’s past the worst, according to Savills, but UK construction activity contracted in October. That said, Persimmon said that the property market has bounced in the last five weeks and Taylor Wimpey also sounded an upbeat note, saying that it expected annual operating profits to come in at the high end of guidance. Maybe there are early signs of a turnaround??

IN BANKS NEWS…

• UBS announced its first quarterly loss since 2018 thanks to the cost of the Credit Suisse takeover. Still, the increased scale could help it catch up with rivals in the wealth management space!
• N26 withdrew from Brazil as the German fintech continues to rein in its overseas ambitions. It will concentrate on its European business as it has already pulled out of the UK and US.
• Metro Bank’s refinancing seems to have been successful in stemming deposit withdrawals so far. We’ll just have to see how things go from here and whether they come up with a decent plan going forwards!

IN BUY NOW, PAY LATER NEWS…

• Klarna is making preparations for a stock market listing as it is just setting up a new holding company registered in the UK, although it’s probably going to list in New York because it’ll probably get a higher valuation there.

IN INVESTMENT NEWS…

• The fortunes of private equity firms diverge as KKR prospers in infrastructure and property while Carlyle announces job cuts due to poor fund raising performance.
• Robinhood’s Q3 earnings were lacklustre as competition got tighter and trading revenues languish.
• Clara-Pensions, a start-up that aims to consolidate the UK’s 5,000 traditional pension funds, has just agreed its first deal as it has taken on the pensions of 10,000 former workers at Miss Selfridge, Warehouse and Wallis who are in the £600m Sears Retail Pension Scheme.

IN PROFESSIONAL SERVICES…

• Bain Capital made an offer to buy consultancy Guidehouse (which specialises in advising government organisations and businesses) in a deal worth $5.3bn including debt. This is the latest example of a private equity firm buying a professional service provider.
• PwC is going to cut up to 600 UK jobs via voluntary redundancies (initially, anyway!) as demand for its services has fallen. The axe will fall mainly on the advisory business and across all levels below partner. Rivals at EY, Deloitte and KPMG have already launched their own redundancy programmes.

IN RETAIL NEWS…

• M&S smashed analyst expectations and it even regained its title as top womenswear retailer after four years, overtaking Next in the process! The CEO said that it was experiencing a strong start to Christmas.
• Shein is thinking about putting in an offer for Topshop, which Asos bought for £330m in 2021 from Sir Philip Green’s Arcadia. If this went ahead, it’d be Shein’s second acquisition of a British fashion brand after it bought Missguided from Frasers Group last week!
• B&M has benefited from Wilko’s collapse and even jacked up its profits forecasts for the full year as it had an influx of customers. It bought 51 Wilko stores in the aftermath, all of which have now been rebranded.
• WH Smith profits almost doubled over the course of one year as it has benefited from rising traveller numbers going to its airport convenience stores. The UK high street business was a bit of a drag but the overseas business boomed.

IN LEISURE…

• Flutter, which owns Paddy Power and Betfair, warned that its profits for non-US operations this year would come in at the bottom end of expectations. Understandably, it looks likely that it’ll switch its primary listing to NY in Q1. This makes a lot of sense since the US is where’s it’s at now for Flutter in terms of growth.
• In pubs, Wetherspoon toasted better sales as it managed to outpace rivals as inflationary pressures have started to ease.

• IN MEDIA NEWS – Hollywood actors reached a tentative agreement with major studios and streamers that could bring an end to months of disruption in the industry. The agreement includes the biggest increase in minimum wages for 40 years, a new streaming participation bonus and various protections against the use of AI. Disney boss Bob Iger outlined the company’s future strategy but rival Warner Bros Discovery saw its share price have its biggest one-day drop since March 2021 after it said it would fall short of targets as the ad market had been particularly disappointing. In the UK, ITV cut back on new shows due to disappointing ad revenues. There’s definitely a trend here!
• IN AIRLINE NEWS – Ryanair reported a record high for profits and is on track to smash previous full-year records although it said that it does expect to be lossmaking for the first months of 2024. On the other hand, rival Wizz Air cut annual profit forecasts due to an “unprecedented operational challenge”.
• IN LUXURY GOODS NEWS – LVMH is going to buy LA-based eyewear maker Barton Pereira to enhance its existing eyewear division. LVMH aims to expand the brand outside Japan. Meanwhile, Watches of Switzerland announced plans to more than double its sales and profits in less than five years by expanding in the US and getting involved in the secondhand market where it will launch a Rolex-certified, pre-owned programme.
• IN PHARMACEUTICALS NEWS – AstraZeneca is making a push into the weight-loss market by signing an exclusive licensing agreement with Chinese company Eccogene, for an obesity and type 2 diabetes pill that is in the early stages of development.

My favourite “alternative” video of the week was the one with the AMAZING rice ball!!! I love this!

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 world’s first AI safety summit took place at Bletchley Park, when the Bank of England left interest rates unchanged and when Sam Bankman-Fried was found guilty of fraud and money laundering…

• IN THE US – the Fed left interest rates unchanged at their 22-year high (the Federal Funds Rate was held steady at the 5.25-5.5% range) while Fed chief Jerome Powell left himself room to increase rates further should the need arise.
• IN CHINA – FT research showed that direct investment in China has slowed down sharply while the number of tech IPOs has also fallen thanks to clampdowns by Chinese regulators on tech start-ups. Start-ups now have to proof of a more robust track record and sustainable business plan, which is cutting a lot of them out!
• IN JAPAN – the government launched a $113bn stimulus to tackle inflation that will fund tax cuts and cash handouts. There will also be an extension to existing subsidies to take the edge off rising petrol and electricity prices.
• IN EUROPE – the Eurozone’s economy contracted in Q3, as did Germany’s – meaning that they could both fall into recession if the next quarter is also negative.
• IN THE UK – the Bank of England left interest rates unchanged and warned that they could remain at higher levels “for an extended period of time” although some think that we’ve reached the peak and the next move is going to be in the downward direction. Meanwhile, the ONS is trying to fix the way our unemployment numbers are collated as the current methods aren’t working and aren’t accurate enough. It’s important because the Bank of England needs these to inform its decisions on interest rate policy.

IN OIL NEWS…

• The World Bank warned that the oil price could potentially go to $150 a barrel if the Israel-Hamas war becomes more prolonged.
• US oil inventories went up by more than expected, according to the Energy Information Association, which might help to take the edge of high oil prices.
• BP continued to focus more on profitable oil and gas projects but batted away suggestions that they’d be involved in any M&A going on in the sector at the moment, something that the likes of Goldman Sachs and Morgan Stanley are doing very well out of. In the meantime, Shell made decent profits in Q3, boosted by oil and gas production and higher oil prices.

IN RENEWABLES…

• Wind power company Orsted cancelled two massive US offshore windfarm projects, opting instead to pay the £3.3bn impairment charges instead. It has, along with rivals, complained about rising costs in the industry and voiced the need for governments to foot more of the bill.

IN CRYPTO NEWS…

• Bitcoin continues to do well despite all the negative press surrounding the Sam Bankman-Fried trial. There’s an expectation that there will be less supply of bitcoin next year and hopes that incoming regulation could bring crypto closer to the mainstream.

IN BUSINESS TRENDS…

• Smaller UK companies are getting more confident, according to the latest quarterly report from the Federation of Small Businesses (FSB) – which is something reflected by the Lloyds Bank business barometer which also showed businesses becoming more confident.
• That said, while insolvencies are hitting new highs, bankruptcies are benefiting the likes of PJT Partners, Houlihan Lokey and Paul Weiss who advise on them. EY’s latest research says that profit warnings are rising – and as if to illustrate the point, WeWork looks like it will go bankrupt – which has negatively affected investor sentiment in rivals such as IWG, which is actually doing quite well!

IN CONSUMER TRENDS…

• The luxury boom looks like it is losing momentum as LVMH saw a slowdown in its growth rate over Q3, a trend that was confirmed by DVLA figures which showed a fall in the sale of “supercars” in the year to March. Estée Lauder’s share price fell to its lowest level in six years as investors reacted to news of Chinese customers reining in their spending. Mind you, Prada bucked this trend by reporting stronger revenues, as did Ferrari when it reported its Q3 results.
• Consumers continue to face hurdles as home insurance premiums look set to rise after a period of higher claims due to unseasonable weather, high inflation and strained supply chains. UK mortgage approvals have fallen due to the knock-on effects of higher interest rates and real wages are falling as they can’t keep pace with inflation. At least shop price inflation is slowing down, according to the latest BRC figures!

IN EMPLOYMENT TRENDS NEWS…

• Grad recruitment is down as vacancies have fallen by 30%, according to jobs search engine Adzuna.
• Trainline has benefited from more people returning to work in offices as workers use it to buy their tickets. Most of this is from leisure travel so if business travel starts to improve that should provide a further boost.

IN AI NEWS…

• The inaugural two-day AI Safety Summit took place at Bletchley Park this week. A lot of AI’s big hitters – as well as representatives from many governments – took part and even Elon Musk added some celebrity stardust to the proceedings (although Presidents Biden and Macron gave it a miss). 26 nations agreed to co-operate over AI development while the US pursued its own efforts back home and although the “landmark” agreement isn’t legally binding, it is a first step! I thought it was impressive that the event even took place with so many big shots making it there in person but opinion was divided as to the damage that AI can do to society and countries are at different stages regarding how to regulate it. As if to further illustrate the need for regulation, an Australian academic was forced to admit using false information gleaned from Google’s AI chatbot Bard in a piece of research submitted to a parliamentary inquiry.

IN TECH HARDWARE NEWS…

• The $69bn Broadcom-VMWare merger was held up by Chinese regulators dragging their feet (presumably in retaliation for US sanctions) and a final deadline has been set for November 26th.
• Panasonic cut profit forecasts for its battery division due to worse-than-expected sales to Tesla, one of its main customers. It seems that there are a lot of EV manufacturers cutting back on EV/battery factory expansions due to slowing customer demand.
• Samsung managed to beat consensus in its Q3 results and although its memory chip business remained in loss for the third quarter in a row, the losses narrowed. It reckons that demand for memory chips will continue to improve from here – another major player saying the same thing!
• Western Digital announced that it would split itself in two after abandoning merger talks with Japan’s Kioxia. It will be separating into a flash memory business and a hard drive business, which is something activist investor Elliott Management has been pushing for for over a year.
• Huawei’s Mate 60 Pro phone continues to be popular in China’s domestic market and has raised its market share there from 9% to 13%! It’s coming for Apple, but Apple still has that status-symbol cachet at the moment and there may be trouble ahead given America’s moves to starve Chinese tech companies of advanced chips.
• Apple suffered its longest continuous streak of revenue decline in over 20 years. It’s thought to be down to a global drop-off in smartphone sales and the economic slowdown in China. Still, it’s just unveiled a new lineup of products ahead of the key Christmas season, so you would have thought that things will pick up from here!

IN SOCIAL MEDIA NEWS…

• Meta says it will charge EU users of Facebook and Instagram up to €12.99 per month to get ad-free versions in order to “comply with its data privacy rules” after the EU’s top court ruled that Meta needed to get users’ permission before targeting them with personalised ads.
• TikTok has asked its managers around the world to dole out more lower ratings in employees’ performance reviews. This is bad news for staff as this sort of move is a precursor to job losses. It also faces continued pressure for not sufficiently policing the content on its platform, particularly regarding Israel-Hamas war videos.

IN EDTECH…

• Byju’s is on the verge of collapse as the company that was once India’s most valuable start-up is about to start a programme of asset disposals to pay down its debts. It went on a massive debt-fuelled acquisition spree to consolidate its place in the edtech industry and it’s now backfiring…
• Educational publisher Pearson, which said that full-year profits will be coming in slightly higher than previous forecasts, is committing to the ongoing development and integration of AI in its transition from textbook purveyor to edtech master!

ELSEWHERE…

• Magic circle law firm Allen & Overy sold a stake in its legal tech business aosphere, to UK private equity firm Inflexion and US investor Endicott Capital whilst retaining a minority stake. It looks like this is part of an emerging trend of companies attracting private equity cash to finance non-core business units whilst retaining a stake to make sure they can participate in any potential upside.

• An agreement has been reached between Ford, GM, Stellantis and the powerful UAW union in America over recent strikes. Workers’ pay will increase by 25% over the next four years and they will be paid for the time they spent on the picket line! Stellantis reckons that the strikes will have cost it about €3bn in lost revenues.
• Toyota announced a more than doubling of its investment in a North Carolina factory that is being built right now to increase manufacturing capacity for hybrid vehicles and it announced a doubling of profits over the quarter, prompting it to raise its full-year forecasts. On the flipside, Toyota announced the recall of over 1.8m RAV4s built between 2013 and 2018 due to potential fire risks involving the batteries! This could be expensive because a software update this ain’t!
• IN LUXURY AUTO MAKER NEWS – Ferrari had a great Q3 and decided to raise its full-year guidance as a result. It beat market expectations for profits and revenues thanks to an improving sales mix and rising demand for vehicle customisation. However, Aston Martin had to cut sales forecasts because of production delays to its new DB12 model.
• JLR returned to profit in Q3 and raised its forecasts for the full-year. This marked its fourth consecutive quarter of growth so it certainly seems to be going in the right direction!
• Tesla had an important win in an Autopilot lawsuit which is examining its role in a fatal crash as a jury found that there wasn’t a manufacturing defect in the driver-assistance system.

IN BANKS NEWS…

• Deutsche Bank announced plans to shut down about half of its Postbank branches over the next two years but promised to drastically improve its digital offering. Germany’s bank branch network has dropped by over 43% over the last ten years as more customers move online but Deutsche has attracted massive criticism recently as the migration of Postbank’s 12m customers to its IT platform was disastrous.
• HSBC had some pretty solid Q3 results and pre-tax profits more than doubled thanks to higher interest rates boosting income. It chief exec reckons that China is now past the worst of the property crisis but I’d take what he says with a massive pinch of salt as HSBC is trying to suck up to the Chinese government (remember the government recently told commentators and analysts not to be so negative about China’s economy??) as it commits more to the Chinese market.

IN PAYMENTS NEWS…

• The FCA is taking action against PayPal and QVC as it believes that customers using its BNPL functionality were deemed to be “at risk of harm” because of the dodgy fine print in their contracts.
• Zilch, a British rival to Klarna, has just attracted a low single digit million pound equity investment from eBay ventures, giving Zilch an implied valuation of $2bn. It almost tripled revenues in 2023 but still reported an overall loss but it is clearly in a hot area as now over 25% of people in the UK now use BNPL services.

• The troubled Evergrande is facing a winding-up petition in Hong Kong two years after it had its first default. If this goes ahead, Evergrande could face liquidation and the repercussions would be serious.
• In the UK, Zoopla has highlighted house price weakness across the UK this year thanks to – surprise, surprise – higher mortgage rates frightening off buyers of new homes. That said, the latest Nationwide numbers showed that house prices actually rose unexpectedly last month – but that was because of a shortage of supply rather than an uptick in demand.
• Housebuilding is in a rut currently as the latest RICS survey showed that construction output is falling, which will add to housing supply shortages. The outlook for next year isn’t all that great either, unfortunately!

IN RETAIL NEWS…

• Amazon announced the closure of its “Amazon style” clothing stores. It comes after other physical outlets for Amazon, including bookstores and specialty outlets, also shut down. Surely it should just stick to e-tailing?
• IN APPAREL RETAIL – Asos announced a downbeat outlook at the delayed publication of its results and blamed the weather for poor sales. Frasers sold Missguided’s brand and IP to Shein and there is a possibility that Frasers could have more of a relationship with Shein as the latter aims to expand in Europe. Next announced strong results and upgraded its annual profit expectations for the fourth time in five months! It seems that its mix of online, offline and array of brands is proving to be a hit with the customers.
• Sainsbury’s said it was winning customers back from Aldi and Lidl and that it would hit full-year profit forecasts at the top of the expected range. Supermarkets are beginning their Christmas ad campaigns in earnest, hoping to tempt customers with the help of various celebs!

IN LEISURE NEWS…

• McDonald’s saw profits rise in Q3 but in order to keep ahead of the game in a cost-of-living crisis it needs to make sure that it keeps the right balance on pricing.
• Six Flags and Cedar Fair announced an all-paper merger to bring together the two US theme-park operators which will give them scale, a broader geographical footprint and the potential for cost cuts.

• IN PHARMACEUTICAL NEWS – Moderna had a nightmare as its shares were hit by a bigger-than-expected quarterly loss and a downbeat outlook as demand for its Covid vaccine has tanked. Meanwhile, Novo Nordisk continues to benefit from its anti-obesity drugs – which it seems can also treat other conditions! Its Wegovy drug is doing extremely well – but if Eli Lilly’s Mounjaro diabetes drug gets approval for treating obesity there will be more competition (although it sounds like there’s enough demand to go round!).
• IN TELECOMS NEWS – BT announced bigger profits thanks to higher bills for customers and the implementation of cost-cutting measures. Vodafone offloaded its Spanish business to Zegona Communications as part of efforts to streamline its business.
• Disney has kicked off the process of buying the rest of Hulu that it doesn’t own in an $8.6bn deal.
• Beyond Meat announced that it would be cutting a whopping 19% of its non-production staff and 8% of its global workforce thanks to waning demand for its products and competition from the likes of Tyson Foods and Impossible Foods.
• Deckers Outdoor is doing well thanks to its Hoka brand of shoes. This is interesting given that more established rivals Nike and Under Armour are losing ground currently. Another brand to watch out for is On Holding, which continues to gain ground…

I didn’t get to do this with my kids this weekend, but this was my fave video of the week by far 🤣! I am definitely going to try it though!

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 luxury slowed down, when the bankers’ bonus cap was removed and when the US ordered Nvidia to stop selling AI chips to China…

• IN THE US – GDP accelerated at a rate of 4.9% in Q3, its fastest pace since Q4 of 2021! It was driven largely by consumer spending. The Fed is due to meet next week to discuss interest rates, but it is widely thought that they will be left unchanged. The strength in GDP would suggest that interest rates are going to have to stay higher for longer.
• IN EUROPE – the ECB left interest rates unchanged amid worries that the Eurozone economy is going to be weak for the rest of the year at least. Germany continues to be a drag.
• IN MARKETS – it was interesting to note that the UK Parliamentary Contributory Pension Fund holds a severely underweight position in UK equities – which is other UK defined pension schemes. This suggests that the PCPF thinks the UK economy is going sideways, at best! This isn’t exactly a ringing endorsement of the government and the way it’s running things!

IN COMMODITIES NEWS…

• Anglo American cut its full year guidance for copper production thanks to a fire at a Chilean mine that led to power supply problems for 16 days. This is important given copper’s key role in solar panels and EVs. There were also weaknesses in iron ore production (maintenance issues in Brazil), diamonds (its DeBeers subsidiary had issues in South Africa) and coking coal (difficult conditions in Australia).
• IN OIL, Chevron announced its biggest-ever acquisition – a $53m all-paper bid for Hess. This comes less than two weeks after ExxonMobil announced its $60bn takeover of Pioneer Natural Resources. I think this is interesting because a) it seems to suggest that there is still a lot of mileage (and profit) to be had in fossil fuels and b) that there seems to be a move towards deal-making among oil groups in the Western hemisphere as global powers shift in the Middle East, China and Russia. The fact that Shell also announced job cuts at its low-carbon division adds to the feeling that oil companies aren’t really taking decarbonisation all that seriously.

IN BUSINESS TRENDS…

• UK business activity continues to slow, although at a slower rate than it has been doing of late. The gloom continues in both manufacturing and services according to the latest S&P/CIPS flash UK PMI.
• WPP has had to cut its revenue forecasts for the second consecutive quarter as ad spend from Big Tech companies fell. It wasn’t all bad, though, as it did win new business in Q3 – but a turnaround in tech sector fortunes would clearly make a big difference.

IN EMPLOYMENT TRENDS…

• The latest employment figures have been called into question because the ONS has had to change the way they collect the data as the number of respondents has fallen sharply (from 40% pre-Covid to just 14% now!), rendering their accuracy somewhat doubtful. Inaccurate data is clearly going to make interest rate decisions by the Bank of England very difficult…

IN CONSUMER TRENDS…

• Tesco reckons that customers are going to “party” at home this Christmas (although, isn’t that supposed to happen every Christmas??) but online retailer Asos had to delay the publication of its results as it’s already showing signs of strain (there was also a report from the CBI which showed that online retail sales have fallen at their sharpest pace ever this month) and research suggests that households are going to be facing higher energy bills next year.

IN RETAIL NEWS…

• Luxury seems to be slowing down as Hermès experienced slowing sales growth in Q3, Kering fell short of its sales forecasts and Moncler also experienced a sales growth slowdown (although maybe they’ll do better in this coming quarter as they are more known for winterwear). Even Porsche buyers are having to rein things in, particularly in China. It’ll be interesting to see whether there’s any slowdown at other luxury marques. The luxury segment has been pretty robust thus far as those further up the socio-economic scale have been more insulated from the cost-of-living crisis because the amount they spend on “basics” is much lower as a percentage of their disposable income. However, even they have limits it seems!
• IN APPAREL – Boohoo is now facing a £100m class action to get compensation for shareholders who lost money after allegations were made back in 2020 that it used forced labour in its factories. Ouch! Still, that didn’t put Mike Ashley off as he topped up his shareholding in Boohoo and Asos (he’s been building up his holdings in both for a while now).
• Amazon beat market forecasts for Q3 revenues – mainly thanks to great performance by AWS, its cloud-computing business – but it also benefited from cost-cutting measures.
• Heineken suffered from poor summer beer sales in the UK, but they were weak across Europe as well. That said, it managed to gain market share in over half of its markets and it’s sticking with its year-end forecasts.
• Unilever put in a decent performance thanks to people buying more personal care products as more of them go into the office, but their LatAm business also did well. Rival Reckitt Benckiser put in a weaker-than-expected performance but sounded confident about the business going forward, announcing an ambitious £1bn share buyback.
• Toymaker Mattel put in a strong performance in Q3 as the “Barbie” movie helped power it out of its sales slump.
• Sofa seller ScS received a £100m bid from Italian furniture chain Poltronesofà to take it private. This is part of the latter’s plans to expand in Europe.

IN LEISURE…

• Heathrow reckons it’ll break even after experiencing a summer boom and although things are looking OK at the moment, its high debt levels will continue to be painful if interest rates stay higher for longer.
• Cruise ship operator Carnival faces big legal problems as it is being forced to compensate a cruise passenger who caught Covid by an Aussie judge who said the company had been “negligent” in the way it had handled the outbreak. Could this open the floodgates of compensation – not just within the cruise industry, but in other industries as well??
• Pizza Express’s owner is rumoured to be considering making a bid for Wagamama owner TRG, which has already received a bid from US private equity firm Apollo.

IN EV NEWS…

• The International Energy Agency said in its World Energy Outlook report that China could power a tenfold increase in demand for EVs which means that peak demand for fossil fuels will happen in the next seven years.
• Ford has decided to delay its proposed $12bn investment in EVs, citing sluggish consumer demand and pricing pressure from rivals. Meanwhile, it made a profit in Q3 but revised its guidance for the full year because of the UAW strikes.
• Stellantis has moved to buy a 20% stake in Zhejiang Leapmotor Technology, a Chinese EV start-up, for about $1.6bn. It’s probably hoping that Leapmotor will become the next BYD and/or help them in some way with reducing production costs.
• Mercedes described the EV market as “brutal” for manufacturers as the competition from cheap models coming from China is increasing.

ELSEWHERE…

• Harley-Davidson saw Q3 profits drop sharply due to customers suffering with higher borrowing costs and inflation.
• Online used car retailer Cazoo is really tanking now as sales have halved year-on-year. The NYSE is threatening to delist it unless things improve pronto. This is a shining example of a massive SPAC-backed failure!
• GM’s driverless unit Cruise got its permits suspended by the DMV in California saying that its vehicles weren’t safe for public operation! This is clearly a massive blow and a huge step back for driverless taxis.

IN US BANKS NEWS…

• Goldman Sachs launched the Goldman Sachs Global Institute that will analyse and advise clients on geopolitics and disruption from the rise of AI. This kind of business already exists but I’m sure that this one will be a great way of harnessing Goldman’s expertise given its incredible network.

IN EUROPEAN BANKS NEWS…

• BNP Paribas had a mixed set of Q3 results. Quarterly revenues came in above expectations but trading was disappointing.
• Deutsche Bank actually announced a solid set of Q3 results that came in above expectations as annual revenues hit their highest level for seven years! It was helped by the high interest rate environment.
• Santander reported a strong Q3, again thanks to the high interest rates. Although it looks like rates have now peaked, it is still confident of getting growth from its LatAm business.

IN UK BANKS NEWS…

• Barclays reported a steep drop in Q3 profits and cut its UK growth outlook. It sounds like there are cost cuts to come…
• Lloyds Banking Group saw its Q3 profits coming in above market expectations as a result of the high interest rate environment.
• Standard Chartered had to put aside $1bn to cover its losses from the ailing Chinese property sector.
• The banker bonus cap, where bankers were limited to getting a bonus of “just” double their salary, is going to be scrapped. Many are up in arms about this, but I think the reality of it is that this is going to be used by many banks as an excuse to cut staff numbers and bring down the wage bill. It is likely that working in investment banks will be much more interesting for foreign nationals wanting to work here as a result of this…

ELSEWHERE…

• The cross-border payments fintech CAB Payments saw its share price collapse after posting a profit warning and cut its full-year revenue forecast. It got even worse the following day as rival Worldline also announced its own profit warning thanks to a combination of weak demand and rising instances of cybercrime. A slowdown in demand and fierce competition in the space from the likes of Block, Strip and Adyen is putting downward pressure on prices.
• PwC announced its latest numbers which showed that its revenue growth was lagging that of its competitors. The global chair did say, however, that it was in investment mode at the moment and that the benefits will filter through in the coming years.

IN AI NEWS…

• The Frontier Model Forum (the group made up of Microsoft, OpenAI, Google and Anthropic) appointed a new director who comes from the Brookings Institution think-tank. The FMF is to be a non-profit industry body funded by membership fees.
• That said, there are still rumblings as Google DeepMind’s British chief exec warned about the dangers of AI while publisher Bloomsbury also appealed for ministers to act quickly to protect the industry from AI.
• Microsoft saw sales jump as a result of strong AI demand and the cloud business that underpins it. It is clearly reaping the benefits of early investment into AI.

IN CHIP NEWS…

• The US ordered Nvidia to stop exporting AI chips to China – with immediate effect. The previous deadline was mid-November. This move comes ahead of trade talks due to be held in the US when President Xi visits next month.
• Intel reckons that PC demand is on the verge of recovery as chip inventories that had been built up in the aftermath of the pandemic have been falling for the last few months. It also has plans to make chips for use in AI, so that could also be a tailwind…

IN SOCIAL MEDIA NEWS…

• Meta had some good and bad news. The good news is that its Q3 turned out to be its most profitable quarter in years. The bad news is that Meta is being sued by 33 states over claims that Instagram usage endangers youth mental health. This could be bad if it loses.
• Snap returned to growth after suffering in the last two quarters thanks to improvements in its ad platform.
• Spotify managed to get back into profit in Q3 thanks to the implementation of recent price rises and cost cutting.

I know this was staged, but it still made me laugh – so my favourite “alternative” video from this week was this one of the inappropriate DJ at an office party 🤣!

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 Poles ousted the ruling party, DJ D Sol was told to quit and when China said it would join the AI shindig…

• IN THE MIDDLE EAST – the US warned Iran against getting involved in the Israel-Hamas war while China’s support for the Palestinians could increase its influence in the Arab world. Jordan warned that the Middle East was on the edge of an ‘abyss’ and called for humanitarian aid for the Gaza Strip whilst refusing to take in Palestinian refugees. The situation worsened considerably when a hospital was bombed killing many innocents. Egypt is also not keen on taking in Palestinian refugees via its Rafah crossing as it could worsen the region’s stability even more and that the displacement would become permanent. The US defence sector is now under pressure to supply munitions to Israel but it is already overrun with supplying Ukraine and replenishing depleted Pentagon stocks. There was speculation as to potential outcomes that included a) the war is confined to an Israeli ground assault on the Gaza Strip, b) the war will spread in the region as Iran gets involved and c) China could take advantage of the situation and impose a blockade on Taiwan while the US – and everyone else – is stretched. Fed chief Jerome Powell said that if the Israel-Hamas war escalates it could derail the global economy.
• IN THE US – we looked at why the US is outperforming Europe – in a repeat of what happened after the financial crisis. The US provided a bigger and broader-based stimulus to combat Covid, it’s not having to deal with a war on its doorstep and it hasn’t had to contend with energy prices as much as we have. Also, it has a much bigger tech-weighting than Europe (which helps with the hottest area at the moment – AI), it’s not as exposed to industries where China is strong and it’s got a massive pot of money to dole out for green tech that everyone is flocking to. Access to finance is also better but the main thing that could hold America back is the tremendous amount of debt it’s built up.
• IN CHINA – we saw the central bank pumping a huge sum of money into the financial system to boost the economy and a few days later we saw China unveiling a better-than-expected Q3 GDP growth number. In the meantime, Xi and Putin met in Beijing, hailing their “deep friendship” but stopped short of reiterating the “no-limits” partnership they talked about just before Russia invaded Ukraine.
• IN POLAND – the election saw a record voter turnout and it looks like the ruling government will be replaced by a pro-European coalition government.
• IN THE UK – an EY research report says that the UK economy will underwhelm next year due to higher-for-longer interest rates although it has upped its GDP growth forecasts for this year considerably! UK inflation was expected to fall this month, but it actually remained unchanged – which puts the Bank of England under pressure re interest rates and inflation. The OBR released its latest Forecast Evaluation Report where it ‘fessed up, admitting that it had done a 💩 job with its forecasts.

IN BUSINESS TRENDS…

• A PwC survey on law firms showed that billable hours were falling, something that was probably due to cost pressures and being unable to pass higher costs on to customers. If this continues, you’d think that law firms will have to cut more headcount. They are now paying the price of hiking wages over the last year or two.

IN CONSUMER TRENDS…

• Japanese consumer spending has slowed considerably in 2023, according to the latest research by Goldman Sachs. This is no doubt a result of real incomes falling by 3-4% since 2022, but it’s also probably due to changing working practices meaning that there are fewer spending opportunities!
• UK consumer confidence is weakening, according to the latest GfK report. This doesn’t bode well for the key Christmas quarter for retailers. In the meantime, a survey from Barclaycard shows that more consumers are buying second hand items and renting products in order to make their money go further.
• The olive oil shortage continues, resulting in a rise in a rise in thefts. Given that prices have risen by around 200% over the last year it’s hardly surprising! It’s not clear yet whether this is just a one off or whether poor harvests are going to continue because of climate change.

IN RETAIL NEWS…

• Amazon announced plans to start deliveries via drones in the UK and Italy in late 2024. This will be the first time that Prime Air will be available outside the US. I’m not convinced about it being widely adopted but maybe they can still licence the tech to other firms – the sort of thing it’s trying to do with the tech in Amazon Go.
• Britain’s biggest car dealer Sytner posted another year of record profits thanks to drivers continuing to be willing to pay premium prices for new and used cars thanks at least in part to a shortage of supply. Amazingly, profits at Sytner are now more than double what they were pre-pandemic!
• M&S is preparing for a decent Christmas by planning to hire 40% more temp staff for the busy Christmas period than it did last year across the UK. Momentum is with the company at the moment as it just returned to the FTSE100 last month. Their plans and what consumers are saying (that they’re not confident, according to the GfK survey above) seem to be somewhat at odds.
• Online fashion brand Sosandar is putting its faith in the high street and planning a rollout of 10 shops (with a view to opening others). Until now, the brand has been online-only via its own website or that of M&S and Next.

IN LEISURE NEWS…

• Choice Hotels International (owns Radisson and Econo Lodge) launched a $10bn hostile bid for rival Wyndham Hotels and Resorts (owns La Quinta and Ramada brands) after previously having to abandon takeover talks. If the two combined, the enlarged group would be one of the biggest budget hotel owners in the US.
• Whitbread, the owner of Premier Inn, posted great results as London bookings were strong and the company continues to benefit from a shake-out in the sector as many independents have gone under during and since the pandemic. UK is pretty solid but it’s also aiming to be the biggest hotel chain in Germany! A share buyback and increased dividend will have pleased investors.

IN BANKS…

• Bank of America posted a rise in Q3 profits, beating forecasts. It continued to benefit from the higher interest rate environment on the retail side and its traders made a ton from market volatility on the investment banking side.
• Goldman Sachs saw its profits plummet in Q3 despite seeing some action in deal making over the quarter. It had to make an $864m writedown for its fintech business and real estate investments. It’s now highly geared towards a pick-up in IPO and M&A activity.
• Morgan Stanley underwhelmed with its Q3 results as it proved to be another victim of the lack of deal flow. A new boss is coming in and the existing boss reckons he’ll benefit from a rebound in deal-making next year.
• The lack of deals didn’t just affect investment banks – KPMG announced plans to cut around 6% of its employees in the UK deal advisory teams and survivors are being told that they won’t get any pay rises this year.

IN INVESTMENT MANAGEMENT…

• Blackstone underwhelmed in Q3 thanks to a fall in profits from asset sales and investor nervousness about putting money into private equity funds. It has, however, built up a decent cash pile to invest in assets when the opportunity arises.
• Jupiter saw a net £1bn of fund withdrawals over the quarter and said that revenues would be lower next year thanks to it introducing a new fee structure for bigger funds.
• Schroders also saw assets slide as markets spooked nervous investors.
• M&G decided to close its property fund once and for all after twice having to suspend it in the last seven years. Retail investor appetite just isn’t there and it’s going to sell the underlying assets in a process that’ll probably take around 18 months.

IN WEALTH MANAGEMENT…

• Charles Schwab suffered with deposit outflow, unrealised losses on its securities portfolio and rising interest rates. The good news is that the outflow is now slowing down but its still got to deal with higher funding costs and the paying down of expensive loans it took out from the Federal Home Loan Bank.
• There was a contrast in fortunes for Hargreaves Lansdown, which saw just a trickle of new customers while rival AJ Bell did a lot better, according to a trading update. They are both suffering from clients preferring to pay down debt at the moment rather than invest in markets.
• St James’s Place announced that it was going to conduct a major overhaul of its fee structure following pressure from regulators and make it more transparent. It’ll be interesting to see whether this results in an outflow of customers.

IN CRYPTO…

• Binance has stopped taking on new British customers due to a tightening of regulations by the FCA on the promotion of crypto assets.
• The New York Attorney General, Letitia James, will be suing crypto firm Genesis Global, its parent firm Digital Currency Group (DCG) and Gemini for allegedly “defrauding” investors of more than $1bn. Get the popcorn and settle in – this should get interesting!

IN CHINA…

• Country Garden missed a payment on a dollar bond and now has international debts worth $11bn and total liabilities of around $200bn! Its problems seem to be far from over…

IN THE US…

• Prologis, the world’s biggest warehouse landlord, reckons that industrial property demand continues to remain robust despite the economy shifting away from its focus on goods. It believes that demand is now bottoming out as companies continue to re-jig their supply chains in the face of international tensions.

IN THE UK…

• UK house prices are rising at their slowest post-summer rate since the 2008 crash, according to the latest data from Rightmove although cash buyers are still keeping the top end of the London property market buoyant. Meanwhile, Barratt warned of a tough market resulting from would-be buyers struggling with mortgage costs – but a report from CBRE suggested in a report that empty offices could be repurposed to create almost 28,000 new homes in London. This sounds good, but you do wonder about the logistical nightmare!
• Flatshare website SpareRoom highlighted the massive rises in rent over the last year, with some postcodes in London seeing a 50% rise! On the other side of that, landlords have had to fork out over £4.3bn in extra mortgage payments over the last 12 months versus the previous year thanks to higher borrowing rates, according to research from Hamptons. No wonder they are raising rents or selling up!
• Rightmove competitor OnTheMarket just got bought by US company CoStar for £99m. This should get interesting as the parent company will no doubt pump some cash in and give Rightmove (and Zoopla) a run for its money!

IN DRIVERLESS CAR NEWS…

• Autonomous taxis from Waymo (Alphabet) and Cruise (GM) have been available in San Francisco for the last few months and it hasn’t been a smooth process as there have been notable incidents involving at least one ambulance and a fire engine which have forced authorities to make Cruise cut its fleet of cars in half! Fares are roughly similar to what you’d pay for an Uber, so many people are asking what the point of driverless is (they are supposed to be cheaper after all!)!
• That said, Sunak is paving the way for driverless vehicles in four years although the legislation has to go through various consultations and testing processes first. Legislation is one thing, but getting the public to trust driverless is another!

IN ELECTRIC VEHICLE NEWS…

• GM has decided to postpone the opening of its electric pickup truck factory in Michigan given lukewarm demand. Despite the oil price hovering around the $100 a barrel mark, sales of electric pick-up trucks are particularly weak at the moment, so the company has decided to bide its time.
• Tesla cut Model 3 prices in the UK again! The price of the popular Model Y will remain the same though. Tesla seems to keep cutting prices and I would have thought that current owners won’t like that – and it may put off potential buyers because they may think that Musk will do the same to them too, making depreciation steeper when it comes to selling them on.

IN TECH NEWS…

• It looks like China will join the AI off-site at Bletchley Park next month after all where world leaders and companies at the cutting edge of AI will discuss ethics and how to avoid misuse of AI in the future. The UK is pushing for the formation of an international advisory group on AI (probably called the International Panel on Artificial Intelligence Safety – IPAIS) whose job it will be to produce an annual report on developments in AI and spread the word on the threats and opportunities posed by AI.

IN CHIP NEWS…

• Nvidia and Foxconn announced a tie-up to build “AI factories”, aka large data centres, to train autonomous vehicles, robotics platforms and LLMs. It’s not clear how they will be different from other data centres, but it’s good to hear that Foxconn continues to try and branch out from its massive reliance on Apple!
• TSMC reported weaker Q3 revenues because of weaker demand from automakers but it expects there to be an uptick in 2024 for chip demand after a tricky 2023.

IN SOCIAL MEDIA NEWS…

• The Israel-Hamas war has seen a huge surge of misinformation been spread on social media. X, Telegram and TikTok are among the platforms to have spread such misinformation but it seems to me that regulators wanting to make platforms more accountable for the content they allow are going to gain the upper hand. The lowering of guardrails and reduction in the amount of moderators in the name of cost cutting is now coming back to bite the platforms.
• LinkedIn announced that it would be cutting about 3% of its global workforce in the second round of redundancies this year due to momentum in their main earnings streams – ad sales and subscriptions for search professionals – falling behind the pace. This sounds brutal but this is also reflected by what recruiters have been saying in their recent results.
• X is starting to charge new users in New Zealand and the Philippines a $1 annual fee to unlock all the features. The company says that this is an anti-spam device but this is surely a test to see what the take-up is before rolling it out to the rest of the world!
• TikTok said that it is making a proper effort to curb misinformation in the Israel-Hamas war by increasing resources devoted to it. The EU has been particularly critical of X, Meta and TikTok about the role they have been playing in the spread of false news.

IN STREAMING…

• Netflix is likely to be the only streamer making a profit while Disney, Warner Bros, Discovery, Paramount and Comcast are all continuing to burn cash. Its crackdown on password sharing has boosted subscriptions and it aims to increase prices for British subscribers on the basic and premium plans while the ad-supported and standard tiers remain unchanged. It is also looking at making money from games based on successful franchises such as “Squid Game” and “Wednesday”, which is interesting given that it recently talked about making money from merch. Although it’s possible that the strength in the latest results is a one-off, it’s good to see the company making efforts to do something about its revenue streams!

IN TELECOMS NEWS…

• Nokia announced that it would be cutting 16% of its global workforce in order to reduce costs while it unveiled a 70% profit drop in Q3 profits. 5G rollout just hasn’t been as successful as everyone had originally thought.

• IN TRANSPORT NEWS – London bus operator Arriva was bought by infrastructure fund I Squared Capital and the latter has promised to invest over €2bn in growing Arriva’s fleet and electrifying it. I Squared continues to be on the hunt for bargains in the public transport space. In trains, the TransPennine Express is going to cut 20 services a day between Leeds and Manchester – so it’ll be interesting to see how quickly Sunak responds to this given his promises to spend some of the £36bn “saved” from a shorter HS2 on infrastructure projects in the region!
• Adidas seems to be recovering from its post-Kanye West slump as it was confident enough to raise its full-year guidance for the second time in three months! It seems to be going in the right direction anyway…
• Rolls-Royce announced that it would cut up to 2,500 white-collar jobs as the “new” CEO continues to put his mark on the company after conducting a senior management shake-up, a reduction in spending on non-core projects and the renegotiation of sales and maintenance contracts with customers.

My favourite “alternative” video from this week was, perhaps inevitably, the one of the wholesome dog moment!

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 Hamas shocked Israel, Country Garden fell in the danger zone (again) and Birkenstock’s IPO underwhelmed…

• HAMAS STRUCK THE HEART OF ISRAEL – Hamas launched a multi-faceted attack from the Gaza strip and stormed Israel by land, air and sea. Israel imposed a “complete siege” on Gaza in retaliation. Other news and media outlets will cover this better than I can, but in terms of economic/market impact, oil and gas prices surged, as did the share prices of defence companies like BAE Systems.
• IN THE US – inflation remained unchanged at 3.7% for September, which was higher than the market had been expecting. This means that there will be more pressure on the Fed to increase interest rates further but then one of the senior officials hinted that interest rates had actually peaked, which sent markets higher.
• IN THE UK – the IMF published its latest forecasts, which said that UK interest rates are going to remain higher for longer, but let’s face it – the IMF have been pretty rubbish at their predictions with the UK, perennially underestimating us! Then we saw data published by the ONS which showed that the UK returned to growth in August, making it look more likely that we’ll avoid recession again. That said, our GDP growth is pretty anaemic currently.

IN COMMODITIES NEWS…

• OPEC increased its oil demand forecasts as it expects strong demand from India, China and other Asian countries over the next two decades, with much of the growth coming this decade.
• ExxonMobil put in an offer to buy Pioneer in a $60bn deal that will be the biggest oil and gas deal since the late 90s! This is a huge bet on US oil production and will cement its status as the major player in the US fracking industry.
• France’s Total signed a massive LNG supply deal with Qatar. It is one of the longest deals of this type ever signed and the deliveries (for an undisclosed price) from Qatar to France will continue until 2053!

IN RENEWABLES NEWS…

• The world’s largest offshore windfarm project, called Dogger Bank, off the coast of Yorkshire started to power the UK grid. When fully up to speed, it will produce enough power for 6m homes a year by the time it is complete in 2026.

IN BUSINESS TRENDS…

• There’s talk now of another EU anti-subsidy probe into Chinese companies – this time for steelmakers! The EU vendetta against Chinese companies continues after recent rumblings in the automotive and domestic appliance industries. This time, they are joining forces with Washington (presumably because the US is threatening the EU with the reimposition of tariffs on EU steel if they don’t play ball!) as Biden is keen not to lose the vote of US steelworkers in next year’s election. Mind you, Chinese EV suppliers are finding ways to skirt existing sanctions by investing heavily in companies in “free trade” countries such as South Korea. I have no doubt that this is a massive loophole that Biden’s opponents will exploit if he doesn’t close it himself!
• Talking of EVs, there was an interesting article on how the salvage business will have to evolve to cope with increasing numbers of EVs coming to scrapyards in the years to come. I think that this could be a very lucrative new business in the future and it will have high barriers to entry given the expertise and costs it will entail…
• It looks like Poland is vying to take Germany’s place as the premier manufacturing destination of Europe as it is benefiting from Western companies bringing supply chains back from Asia. One observer reckoned that Poland could be the only country in Europe – or possibly even worldwide – that has seen industrial production not only exceed pre-pandemic levels but also return to its pre-pandemic growth trend! Although it already has automotive production it’s pushing to move into higher value manufacturing and is already seeing interest from Intel and TSMC.
• It looks like the wheels are falling off the luxury trend as LVMH said that it suffered a slowdown in Q3 particularly in the US and Europe. All that post-pandemic “revenge spending” seems to be losing steam…

IN EMPLOYMENT TRENDS…

• More US law firms are pushing for employees to be in the office for at least four days a week! Hiring is slowing down, according to a BDO poll of polls, as business confidence has been hit by worries about the state of the economy. Mind you, it’ll be interesting to see what effect the recent stats about GDP growth will have on sentiment and whether this will ease concerns. I guess this is reflected in the falling number of job vacancies.
• Recruiters reported this week and it was a bit of a mixed bag. Robert Walters did OK in that it avoided another profit warning, but then again it makes 84% of its money outside the UK these days, but PageGroup warned it would not hit annual earnings targets while Hays managed to benefit from supplying temps. All of them said that client confidence has been on the wane, though, and that the recruitment process is getting longer while candidates are being more hesitant about taking up offers.

IN CONSUMER TRENDS…

• Non-alcoholic beer popularity is rising while spending at pubs and bars increased last month, according to the latest stats from Barclays.
• Consumers continue to face hurdles though as many have problems paying energy bills, something that might get worse as gas prices hit their highest level for seven months. On the plus side, food price inflation hit a 15-month low!

IN RETAIL NEWS…

• Boots’ owner, Walgreens Boots Alliance, is planning to cut $1bn of costs despite the UK business actually performing well. WBA tried and failed to sell Boots last year and there are rumours that it is under pressure to concentrate on its US business and cut out its international operations.
• In apparel retail, Next is on the verge of buying FatFace and Jigsaw is benefiting from the return-to-office trend as sales of smart attire are strong. Will there be more momentum going into Christmas in the office party season?
• Selfridges fell into loss despite a rise in sales thanks to higher debt interest costs. At least the business seems to be going in the right direction though!
• Waitrose is in talks with Amazon about a tie-up. This could be good for Waitrose, which came to the end of a long-standing partnership with Ocado a few years ago.

IN LEISURE NEWS…

• Pubs are suffering and are cutting opening hours to survive and Marston’s said it was streamlining its menu in order to cut costs.
• It was interesting to see that The Restaurant Group (owner of Wagamama) is going private after accepting a £506m takeover bid from private equity giant Apollo. Caprice Holdings (owner of The Ivy Collection, Bill’s etc) managed to turn a profit for the first time since the pandemic!
• In travel-related news, FirstGroup has had a strong summer and things are getting back on track while easyJet was confident enough to buy new planes and commit to restarting dividends after record profits over the summer.

• IN ASIA – China’s Country Garden is under the spotlight again as being in a dodgy financial position due to it expecting that “it will not be able to meet all of its offshore payment obligations…”. Given that this company had been, until recently, seen as a “safe bet” in a sector riddled with debt, the main concern now is who’s going to be next and what sort of shocks are coming next! Elsewhere, the IMF reckons that Australia has the highest level of mortgage stress in the world, which is clearly bad for consumers.
• IN THE UK – the latest RICS survey reflected UK house prices falls and this low demand is hitting companies like Travis Perkins, which had to cut its prices to shift product as a result. Meanwhile, mortgage defaults are rising at their fastest rate since 2009 as homeowners contend with higher interest rates and the Bank of England voiced concerns about the rising popularity of 35-year mortgages and their long-term impact on household finances.

IN TECH NEWS…

• Saudi Arabia’s collaboration with the Chinese has raised concerns about access to advanced chips used in the development of AI. Although China’s access to advanced chips is supposed to be subject to restrictions, its close ties with Saudi Arabia could be seen to be a rather large loophole!

IN SOCIAL MEDIA NEWS…

• Meta is about to face scrutiny on manipulated content and “deepfakes” after it refused to remove a Facebook video wrongfully describing Joe Biden as a paedophile. Separately, concerns are increasing about the risks of fake news as both Facebook and X have cut their moderator capacity in an effort to cut costs and it seems that X has already failed the Israel-Gaza test as the platform has been flooded with fake news and disinformation.

IN MEDIA NEWS…

• Disney is going to raise prices at its theme parks to mitigate the weakness in its TV and streaming business but it has also just signed a 10-year deal with sports betting company Penn Entertainment to bring gambling to Disney’s ESPN! Will this last, though??
• Netflix subscriber growth in the UK has slowed down to its lowest level since it launched in the UK a decade ago! It’s still the UK’s most popular streaming service but it clearly needs to hang onto the subscribers it already has and find ways of squeezing more money out of them!

IN BANKS NEWS…

• HSBC deepened its China ties by buying rival Citi’s wealth management business in the country for $3.6bn. This is particularly notable because many other Western businesses are going in the opposite direction and either leaving China or separating out their businesses there so as not to fall foul of current or future sanctions either by the Americans or by the Chinese as tensions continue.
• Metro Bank managed to survive thanks to a dramatic £925m rescue deal and promptly said that it would make £30m of cost savings per year from 2025, supposedly without cutting branches!

IN INVESTMENT NEWS…

• A report by the Association of Investment Companies showed that investors are getting “greenwashing” fatigue and ESG funds are continuing to see outflows.
• Odey Asset Management shut down its wealth management business following recent allegations of founder Crispin Odey’s sexual misconduct. Odey himself continues to strenuously deny all the allegations made against him, but more and more allegations are piling up.

• IN TOBACCO NEWS – Big Tobacco companies are digesting the effect of Sunak’s recent “assault” on smoking while the FDA banned the sale of Vuse Menthol e-cigarettes and the UK launched a consultation on disposable vapes as Philip Morris called for a pushback on the WHO’s “attack” on vapes.
• IN IPO NEWS – Birkenstock’s IPO was pretty disappointing after it priced at $46 a share. Maybe the IPO deluge might slow down after recent mediocre performances from those who tried to make the leap.
• IN PHARMACEUTICALS NEWS – GSK signed a massive £2.5bn shingles vaccine deal with China’s Zhifei as part of its efforts to double the global sales of its shingles vaccine by 2026. Elsewhere, Ozempic was found in trials to be effective for kidney problems – causing other companies that make products to treat kidney disease to fall! Is there anything this drug can’t do??

My favourite “alternative” video from this week was the push-up inspo one! It’s amazing how versatile push-ups can be!

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 a week of HS2 drama, John Lewis drama and Spotify moving into audiobooks…

• IN GLOBAL DEVELOPMENTS – there was panic in the bond markets as US treasuries were subject to a major sell-off and UK bond yields reached their highest level since 1998! Investors clearly believe that central banks will keep interest rates higher for longer than had previously thought. Meanwhile, the WTO slashed its growth forecast for global trade growth in half thanks to stubbornly high interest rates hitting customer spending power in the US, Europe and Asia.
• IN CHINA – it’s hoped that the current Golden Week holiday will give the economy a bit of a boost. It is interesting to note that, eastern European countries are benefiting from a China exodus as companies decide to spread their bets given the ongoing China-US tensions. They are also benefiting from Chinese companies wanting to move closer to their customer base.
• IN THE UK – debate raged about HS2 as northern mayors battled right up to the wire to save the Birmingham-Manchester leg of HS2 but it was to no avail as Sunak axed the extension but promised to use the money saved on transport improvements in the region. It is worth noting that Labour’s Keir Starmer refused to commit to undoing the HS2 cuts. Sunak also announced an intention to reform A-levels with the introduction of a new broader “Advanced British Standard” qualification and committed to introduce a yearly raising of the legal smoking age, which I think sounds good but will be very difficult to enforce!

IN ENERGY NEWS…

• Rolls-Royce made it to the short-list to supply Britain’s first mini-nuclear power plants. Six designs are in the running to get £20bn in taxpayer funding and Rolls-Royce is thought to be a front-runner. Contracts are due to be awarded next summer.
• The West continues to rely on nuclear materials from Russia, including enriched uranium. Did you know that, last year, US power companies bought almost 25% of their fuel supplies from Russia?? The West continues to try to wean itself off Russia-supplied materials but clearly this is still a work in progress!

IN BUSINESS TRENDS…

• CASINOS – Macau casinos are bouncing back and gambling revenues are rising. Of the six casino operators in Macau, Sands China and Galaxy Entertainment are more focused on leisure gamblers and least exposed to the clampdown of high-rollers and therefore more likely to see upside.
• FOOD PRODUCERS – US food giants like Campbell Group and Conagra Brands are thinking about how they will react to the impact of Ozempic and other weight-loss drugs. Recent research by Morgan Stanley suggests that daily calorie consumption could fall by up to 30%, which could be bad for these companies!
• UK MANUFACTURING – the latest S&P Global/CIPS manufacturing PMI highlighted the worst fall in factory output for 15 years thanks to the effects of higher interest rates and a downturn in global demand.
• UK SERVICES – thankfully, the UK services sector contracted by less than had been expected last month despite consumer spending weakening. I say thankfully because the services sector makes up most of the UK’s GDP!

IN EMPLOYMENT TRENDS…

• Bosses could get punished for “excessive” monitoring of their staff. The Information Commissioner’s Office (ICO) has the power to impose fines of up to 4% of a company’s global turnover for breach!
• Those pesky bosses also reckon office workers will be back to five days in the office by 2026, according to a report by KPMG. In a tight labour market, employees have the upper hand – but we’ll see what employers’ true colours are when the pendulum swings back to them. However, I think that the longer more people work from home the more “normal” it will become and the harder it will be to eradicate.

IN CONSUMER TRENDS…

• RETAIL PRICES – UK retail inflation dropped to its lowest level in a year, according to the latest stats by the BRC. This is particularly good news for lower income households where the proportion of disposable income spent on “basics” like food and utilities is higher.
• UTILITY BILLS – English water firms on the verge of hiking water bills to cover the cost of repairing leaks as they seek approval from Ofwat for their 2025-2030 spending plans.

IN RETAIL NEWS…

• SHOPLIFTING – 88 retailers have come together to ask the Home Secretary, Suella Braverman, to take action against the rise in shoplifting and violence against staff. They want stronger action against the perpetrators and more police to respond to incidents. I guess this is a sign of the times and a consequence of the cost-of-living crisis…
• JOHN LEWIS – had an eventful week this week! First of all, it reported an 8% rise in footfall to its stores but then the chairman of John Lewis, Dame Sharon White, announced she would be stepping down by early 2025 (although you’d think that could be earlier if they find a suitable replacement).
• IN APPAREL RETAILERS – Boohoo warned that sales will fall by more than expected this year as shoppers bought fewer items while competitors like Shein continue to pile on the pressure. The embattled Superdry sold off its South Asian intellectual property assets for £40m as part of a JV deal with Reliance Brands, India’s biggest retailer. This comes not long after it did something with its Asia-Pacific IP rights to South Korea’s Cowell Fashion Company. What will it sell off next??
• Tesco put in a solid H1 performance, giving it enough confidence to raise both sales and profit forecasts for the full year. The results came in above consensus estimates and the CEO sounded quite upbeat about the run-up to Christmas!

IN LEISURE NEWS…

• Greggs is trading well and promised that it would not increase prices this side of Christmas. There was discussion as to future growth potential with franchising, which has plenty of upside from here.
• Britain’s biggest Mexican food chain Tortilla is looking to expand both domestically and in Europe. Sounds great but this is a crowded market.
• Airbnb is thinking about moving into the longer-term rental market and is looking at providing more “experiences” and “become a greater part of your daily life”. It wants to offer rentals for up to a year and potentially rental cars, among other things.

• IN CHINA – Evergrande’s shares started trading again after they were suspended during an investigation of its founder. They shot up by 42%! Sounds dodgy to me as the investigation is still ongoing, the debts are still high and there’s no plan (that I’m aware of)!
• IN SAUDI ARABIA – we see that Riyadh Season, a government-backed entertainment project overseen by the kingdom’s General Entertainment Authority, has put up most of the $55m of debt and equity raised by HyperSpace, a digital theme park set-up. It’s all part of plans to create great leisure facilities that will appeal to locals and tourists alike!
• IN EUROPE – house prices fell – on an annual basis – for the first time since 2014. This is notable because EU house prices have been rising by 50% on average since 2015 before they started to cool last year as a result of rising mortgage rates. House prices fell particularly steeply in Germany – by 9.9% – over the last year.
• IN THE UK – the construction industry is suffering from a slowdown, prompting companies to cut their headcount. House building also saw its worst drop-off in activity since April 2009! From the consumer side, house prices are falling in all UK regions for the first time since 2009 but given that they’re still high, it wasn’t surprising to hear that 25% of new homeowners aged 29 and under are opting for extra long mortgage terms (aka “marathon mortgages”) of up to 40 years to keep monthly mortgage payments reasonable. The proportion of people going for marathon mortgages has historically been about 10% – so 25% is a very big jump! REGARDING RENTALS, tenants continue to face higher rents and data from Rightmove shows that renting is now more expensive than it’s ever been! A separate report from Hamptons recently concluded that rents were rising at their fastest ever pace as well. A lot of this is driven by private landlords selling up, which leaves build-to-rent landlords in pole position to move in a make money with their superior financing and bargaining power.
• Canadian investment firm Brookfield announced it would buy Banks Renewables, one of the UK’s biggest renewable developers, in a $1bn deal. This is a rare bit of positive news in a sector that’s been hit with generally negative newsflow about projects being abandoned because of cost rises and lack of government funding etc.

IN AI NEWS…

• Calls for AI “guard rails” are increasing to prevent AI from generating toxic speech, misinformation and assisting crimes. A group of companies in this space, including Anthropic and Google DeepMind, are putting together “AI Constitutions” to keep their models on the straight(ish) and narrow. However, there is clearly an urgent need for this given the rapid development of AI at the moment!
• Publishers such as the News Media Association say that the proliferation of AI-fabricated articles under false branding poses “significant threats to the information ecosystem”, again emphasising the need for deals to be struck between news outlets and companies like OpenAI.

ELSEWHERE…

• The EU is looking at potentially reassessing tech exports to China as the whole China-paranoia continues and is particularly protective of tech in semiconductors, AI, quantum computing and biotech. Meanwhile, on the other side of this, Apple has bowed to Chinese pressure to ban unapproved apps – but then this is understandable considering that 20% of its revenues now come from China! In other Apple news, it rolled out an update to stop its new iPhones overheating.
• Amazon and Microsoft are now going to be investigated by the CMA for their respective dominance in cloud computing as an Ofcom study found that these two players alone have a 70-80% market share between them!
• Candy Crush saga reached a major milestone this week as it hit $20bn in revenue since it was released back in 2012! The game’s developer, King, is now a subsidiary of Activision Blizzard.

IN EV NEWS…

• China’s EV makers are really putting a lot of pressure on the “established” European car makers and BYD in particular is now within touching distance of Tesla in terms of number of cars sold!
• Talking of Tesla, sales fell in Q3, but that was down to it having to close down factories to prepare production lines for the refreshed Model 3 and new Cybertruck. On the plus side, Tesla kept its full year production targets unchanged. Talking of the Cybertruck, deliveries got delayed yet again! Still, I suspect that those who had ordered theirs expecting delivery in 2021 won’t be all that surprised!
• As if to emphasise the difficulty posed by Sunak’s recent decision to leave EV sales targets unchanged for car manufacturers despite delaying the new petrol/diesel car deadline (they have to ensure that 80% of their new car sales are zero emission by 2030, for instance) the latest figures from the SMMT show that EV sales are suffering “due to lack of incentive”.
• Meanwhile, much-hyped Vietnamese EV maker VinFast said that it still plans to go ahead with a global expansion despite its first car on sale in the US being absolutely panned by the critics and the fact that its share price has dived by 90% from its IPO peak. Style over substance??

IN OTHER CAR NEWS…

• Ford put in a strong performance in Q3 thanks to stronger demand for its big petrol-engine pickups and hybrid vehicles.
• GM announced an all-electric line-up for Europe spearheaded by its Cadillac brand. On the downside, it could be facing the biggest recall in history due to a problem with airbag inflators made by ARC Automotive.
• Owning a car in Singapore just got even more expensive as a “Certificate of Entitlement” (which entitles people to buy a car) will cost $106,000! This means that a Toyota Camry Hybrid that would cost $28,855 in the US will cost the buyer a whopping $183,000 including everything in Singapore! The average household salary in Singapore is $121,188 so you can see that the COE isn’t anywhere near affordable for many people!

IN STREAMER NEWS…

• Netflix is aiming to emulate Disney by pushing merch from its programmes as another revenue stream. Until now, it’s waited a long time to make sure something is a hit before doing so but now it’s going to get more prepared earlier so that it can get the full benefit if something proves to be a hit. Meanwhile, Netflix looks like it’s going to jack up the price of its ad-free service although there aren’t many details about when that will be or by how much it will increase.
• Spotify announced that it would be launching audiobooks on its platform as it searches for more ways to diversify its revenue streams away from music. It hasn’t worked that well with podcasts so far, so let’s hope that audiobooks work out for them!

IN SOCIAL MEDIA NEWS…

• Meta is planning on charging up to €13 per month for users in the EU to get ad-free use of Facebook and Instagram. It looks like this will be rolled out over the next few months in the EU and European Economic Area (which includes Switzerland). Although everyone will no doubt be up in arms about this, it will only bring it in line with other platforms such as YouTube, Twitch and Reddit who all have ad-supported and ad-free options.
• TikTok’s parent ByteDance managed to turn an operating profit of almost $6bn in Q1 of 2023, almost double last year, thanks to it focusing on expenses. The cloud of whether or not it will be banned in the US continues to hang over it, though…
• X hired the services of Paris Hilton to create exclusive content. It’s all part of “new” CEO Linda Yaccarino’s efforts to spark better performance from the platform by boosting audience numbers.

IN M&A NEWS…

• Wall Street bankers continue to hope for more deals! Fees earned by the likes of Goldman Sachs, JP Morgan Chase and Morgan Stanley peaked in 2021 and although there’s been some life recently with Arm’s IPO and Cisco’s $28bn acquisition of Splunk it’s too early to tell whether this is the beginning of another upswing.
• Eli Lilly bought cancer specialist Point for $1.4bn for a massive 90% premium to its Monday closing price, prompting speculation that more biotech companies could be cherry-picked by other Big Pharma names.

IN IPO NEWS…

• VCs are calling for start-ups to delay IPO plans after Arm and Instacart underwhelmed. Markets are quite choppy at the moment so companies may well only come to market if they absolutely have to!
• Birkenstock is looking to raise up to $1.58bn via its proposed IPO, which looks likely to launch on October 11th on the New York Stock Exchange. This gives the company an implied valuation of $9bn.

• IN FINANCIALS NEWS – Metro Bank mooted an emergency £600m capital raising, which then freaked everyone out enough to prompt a collapse in the share price and subsequent meetings with the Treasury. Surely it won’t be allowed to fail??
• BAE Systems got a massive £4bn contract to build nuclear submarines as part of the Aukus security agreement with Australia and the US. Rolls-Royce and Babcock will also benefit and it’ll create tons of jobs!
• French transport equipment maker Alstom saw its shares fall by 37% in trading on news of major cuts to its cash flow forecasts. This was partially thanks to delays by UK customers taking deliveries but also because of its big inventory build-up that came of its desire to insulate itself against possible supply chain interruptions.
• AstraZeneca paid $425m to settle US lawsuits alleging that two of its heartburn drugs – Nexium and Prilosec – caused kidney damage after prolonged use. The company admitted no wrongdoing.

My favourite “alternative” videos from this week the one about the ridiculous pizza and the father-son surfing!

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 a week where the FTC took on Amazon, Amazon invested big in Anthropic and progress was made with Hollywood writers…

• IN GERMANY – the latest Ifo survey shows that business activity in Germany is now hitting five-year lows and many economists think that the economic slump there is going to go on for longer than previously expected.
• IN THE UK – the latest report from KPMG contends that the UK economy is going to lose momentum in the second half of the year, rumours continue to fly about the fate of HS2 and sterling has a tough time largely because our interest rates look like they’re peaking while it seems that they’ve still got a bit more upside in the US. Economic growth expectations for the UK are also pretty low.

IN COMMODITIES NEWS…

• Russia has managed to dodge G7 price caps on most of its oil exports, according to research by the Kyiv School of Economics and Greek shipping magnates have made billions in selling tankers to the Russians.
• There was an interesting discussion about China oil demand reaching its peak this year. The IEA reckons it won’t reach its peak until 2030 but the country’s rapid take-up of EVs could having a significant effect.
• Although the oil price is heading towards $100 a barrel, it looks like shale drillers won’t be tempted back presumably because they’ve been burned badly in the past by a heady boom and bust cycle.
• There’s potentially good news for this winter – that the risk of blackouts is likely to be less this year than it was last year because European gas stocks are looking good and more French nuclear reactors are coming back online, all of which will contribute to the energy mix.
• Olive oil stocks are running out after summer wildfires and particularly hot weather in countries that produce it. It looks like global production could fall to less than half what it was last year thanks to the weather!

IN BUSINESS TRENDS…

• IN GLOBAL TRENDS – global trade has dropped at its steepest pace since the pandemic, according to the latest stats from the World Trade Monitor. There are no immediately obvious signs that this is going to change in the short-term.
• IN CHINA TRENDS – fears are increasing about China’s real estate sector problems bleeding into other sectors, particularly into commodities given that construction-related demand is a major driver. US companies are saying that the business environment in China is getting worse and Western companies appear to be “de-risking” their China businesses at an increasing rate in order to insulate themselves against tightening US-China trade tensions.
• IN UK TRENDS – UK business confidence has fallen, according to the latest Lloyds Bank business confidence tracker. That said, it’s thought this might improve again following the Bank of England’s recent decision to keep interest rates unchanged. Meanwhile, the manufacturing sector is still reeling from Sunak’s reining in of climate commitments last week. This is understandable given that they have to make plans years in advance and this has no doubt pulled the rug from underneath them!

IN CONSUMER TRENDS…

• US consumer confidence fell for the second consecutive month on rising fears that the country will fall into recession next year.
• It seems that consumers aren’t gambling as much as Entain (the owner of Ladbrokes, Bwin and Coral) reported a decline in online gaming revenues. It was also due to unfavourable (to Entain) sports results which meant higher payouts.
• UK families are having a particularly tough time as they have to contend with rapidly rising childcare costs thanks to back-to-office-prompted demand! As if things weren’t bad enough at the moment with other rising costs!

• The FTC and 17 states filed a lawsuit against Amazon saying that it overcharged customers, stifled competitors and mistreated third-party sellers on its website. This is a big test for Big Tech and the FTC, so we’ll just have to see how it goes.
• The outlook for UK retail sales has improved, according to the latest from the CBI. OK so they have fallen for the fifth consecutive month, but the rate at which they have fallen is slowing down. Apparel sales were particularly slow in September but the feeling is that there will be a bottoming out and spending will start to improve.
• Asos cut full-year profit forecasts thanks to wet weather in contrast to the more successful Next, which recently raised its full-year forecasts.
• H&M announced a sharp rise in profits for Q3 thanks to its continued focus on profitability and inventory control.
• John Lewis announced the sale and lease-back of 12 Waitrose supermarkets, the proceeds of which are to be used to update stores, cut prices and bolster its online business. I still think it needs to make drastic improvements to its core business and make a big deal about it. This move does not sound like it is enough at all!

• IN CHINA – the Evergrande drama continues as more of its bosses were put under house arrest, but then the company’s shares were suspended again until further notice just a month after its shares started trading following a 17-month suspension!
• IN UK COMMERCIAL PROPERTY NEWS – London offices lost just over 17% of their value in a year, according to the latest data from BNP Paribas and commercial property landlords took a big hit as the WFH phenomenon has hit demand for office space. As if to illustrate this point, Meta paid a whopping £149m to landlord British Land (the equivalent of 7 years of rent!) to get out of its lease because it said that it doesn’t require the space any more.
• IN UK RESIDENTIAL PROPERTY NEWS – the number of UK first-time buyers has fallen by 22%, according to the latest research from Halifax Mortgages and their average age has gone up as property has become less affordable, although more recent mortgage rate cuts have pushed the average five-year fixed-rate mortgage to below 6%. There may be some “bargains” around the corner as Zoopla research has shown that discounts to asking prices have been increasing – and new housing starts have seen a big surge in order to beat the June 15th deadline past which they will be subject to onerous new regulations aimed at cutting carbon emissions. However, the market may not necessarily get flooded with new homes because if building on the houses was started before that deadline they won’t be subject to the new regulations. That means that there is no urgency to finish them any time soon!

IN CAR NEWS…

• Biden is going to be making a crucial decision on how the $7,800 tax credit on EVs will be applied. The problem is that it won’t be applicable to cars that contain components from countries that are a “foreign entity of concern” (i.e. China) starting from next year, which could be a massive problem for Ford in particular, as it is planning to use batteries that utilise Chinese battery tech and materials. This is such a serious issue that Ford announced that it would suspend development of a gigafactory that was using technology from CATL pending further clarification on this. There was some good news for Ford, though, as it seems to have made progress with its auto workers in Canada thanks to a wage increase and improved pensions.
• Carmakers are calling for the EU to delay a 10% tariff on EV exports from Europe. It’s supposed to come into effect from January but the makers say this would just open the door to Chinese cars as European cars would get more expensive in comparison. Interestingly, on the flipside to this, Tesla might face scrutiny as part of an EU investigation of car makers who export from China.
• Nissan committed to go all-electric by 2030 despite Sunak’s recent push-back of the new petrol/diesel car sales deadline to 2035.
• Weirdly, Sunak kept EV sales targets for manufacturers unchanged despite his pushing back of the deadline last week. This means that they will still have to ensure that 80% of the cars they sell by 2030 will have to be fully electric. I’d say that this is the worst of all worlds for the manufacturers because potential buyers have lost their sense of urgency to buy EVs because of the push-back of the deadline while the pressure remains for auto makers to make the switch to electrification.

IN BATTERY NEWS…

• Northvolt announced that it is to build a battery gigafactory in Canada. This will be its first facility outside Europe and was selected for its renewable energy, supply of raw materials and “the attitude of the government”.

IN AI-RELATED NEWS…

• Amazon announced that it would be investing $4bn in AI start-up Anthropic over a few years. This is a chunky sum but the move is particularly interesting as it signals a departure from Google. It will still lag Google and Microsoft in terms of AI “presence” but it’s a step in the right direction and Amazon has very deep pockets, so can throw more money into this!
• Everyone got excited about news that Sam Altman (OpenAI), Jony Ive (ex-Apple, now LoveFrom) and Masayoshi Son (SoftBank) were getting together to develop some kind of AI gadget that will change humanity but I suspect this is all part of the masterplan for OpenAI to pump up its valuation to $90bn and has yielded nothing concrete as yet.
• Meta announced the launch of 28 new AI-powered “persona” chatbots to encourage more engagement, which sounds like fun. Zuck wants them to be more than talking search engines – he wants them to be your friend!

IN OTHER TECH NEWS…

• There are reports that Apple’s new iPhones are overheating. Not great PR, but Apple hasn’t responded (presumably this will be sorted in a new software update).
• Huawei impressed with new gadgetry despite US sanctions on the export of advanced tech. It sounds like it’s on the road to independence from US tech!
• Fortnite developer Epic Games announced that it would be cutting 16% of its workforce in order to contain costs. Is this the beginning of the end??

• IN FINANCIALS NEWS – Binance, the world’s biggest cryptocurrency exchange, is selling its Russian business to CommEx for an undisclosed sum. Sounds a bit dodgy given that the “top tier VC”-backed CommEx only launched the day before 🤣. DWS paid $25m to settle SEC probes into its alleged “greenwashing” of ESG investments. It was also interesting to hear that the FCA is going to launch a review by the end of the year into private valuations (but I don’t know how they can really enforce anything) and that the space insurance industry has a lot of room to grow, particularly as more LEOs are being launched these days.
• IN M&A NEWS – dealmaking on the London Stock Exchange has hit its lowest point since 2013! The pipeline is looking a bit better at the moment, but we’re still losing flotations to New York…the CMA is to launch an in-depth investigation into Arçelik’s purchase of Whirlpool’s European appliances business and Portuguese flag-carrier TAP goes up for sale as the government aims to reduce its share.
• ELSEWHERE – Lululemon and Peloton end their feud and enter into a partnership, effectively cross-promoting each other’s products. McKinsey has decided to pay out an additional $230m to settle most of the remaining claims that it was responsible for boosting opioid sales and the EU is in talks with Moderna over the supply of new Covid vaccines.

My favourite “alternative” videos from this week involved modern pole vaulting and an example of “practical” pole vaulting!

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 US and UK left interest rates unchanged, when Sunak reined in environmental commitments and when Microsoft finally managed to get approval for its Activision deal…

• IN THE US – the Fed held interest rates unchanged but indicated that there would be another interest rate rise later this year and fewer cuts than people had been expecting for next year. The headline rate remains at its highest level for 22 years! The ongoing automotive industry strikes could hit Biden’s election chances next year as his commitment to a clean energy revolution is at odds with the unions whose members are worried that, because EVs take 40% time less to assemble than trad cars, job losses are likely to ensue. Biden needs to keep “the Rust Belt” onside to help win the election.
• IN CHINA – we see that recent data is pointing to a weaker economy at the moment what with record high levels of unemployment, a rise in the proportion of people working in the “informal sector”, the inability to collect taxes, surprise regulatory crackdowns and dodgy finances for local governments. Will Xi come out with some kind of “grand plan”??
• IN THE UK – the Bank of England left interest rates unchanged this week, although it was a close call with the MPC voting 5-4 to leave them as they were (governor Bailey had the casting vote on this occasion). The headline rate remains at 5.25%, the highest rate since the 2008 financial crisis. There are various theories as to how it can go from here – whether the graph would look like the Matterhorn (sharp up to a higher peak and sharp down) or Table Mountain (sharp up, then stays at the same level for a while before falling). PM Sunak had an eventful week as he reined in climate commitments, notably pushing back the deadline on petrol and diesel vehicle sales from 2030 to 2035, saw inflation actually falling (expectations had been that it would rise!) and then digesting the news that public sector borrowing in August had come in below expectations. Taking all this into consideration, it now actually looks possible that inflation could hit 5% by year end – meaning that Sunak would actually be able to fulfil the promise he made in January to halve it! Still, the OECD continues to be characteristically pessimistic on the UK economy, saying that it will be the second worst performer in the G20 next year. One other thing that came out this week was that there was talk that Sunak is thinking about introducing a “British Baccalaureate”, but I would imagine that’s not going to be something that’s going to be considered in the short term given the unsettling time we’ve had in lockdown and since.

IN COMMODITIES NEWS…

• Oil prices are heading towards $100 a barrel as a result of production cuts – and this could make inflation more of a headache for Sunak, particularly as Russia made things worse by imposing a diesel export ban towards the end of the week.

IN BUSINESS TRENDS NEWS…

• IN CHINA-RELATED TRENDS – China’s relationship with Apple is being tested at the moment, which is pretty tricky given that China is Apple’s biggest international market, making up 20% of its sales in the last quarter. Recent bans imposed by government agencies on the use of Apple products have hit the company’s valuation hard. Elsewhere, an American VC fund split out its China business just a few months after rival Sequoia Capital did the same and such moves are clearly intended to avoid the impact of a potential worsening of sanctions between the US and China. Meanwhile, EU companies continue to warn about the consequences of China flooding the European markets with EVs. They are concerned that cheap product from China will undercut their own.
• US warehouses are doing well at the moment. Although the frenzy of the glory years of 2021 and 2022 have passed, there’s still enough demand to keep rents buoyant as companies continue to see the value of having more flexibility in their supply chains. Will we see more of the same over here?
• IN THE UK – businesses are seeing a fall in orders across the board, according to the latest Lloyds Bank sector tracker and manufacturers are getting increasingly worried about a recession, according to the latest MakeUK/BDO manufacturing outlook survey while S4 Capital is taking a hammering at the moment after its second profit warning in three months. It said that it suffered from weak ad spending in August and admitted that debt levels would rise. This is interesting because S4 Capital is focused on tech companies and because advertising companies are often seen as leading economic indicators, so it provides a snap shot of a few things at the same time!

IN CONSUMER TRENDS…

• UK consumer confidence is rising, according to the latest GfK survey but shoppers are going deeper into debt, according to the latest data from UK Finance, which shows that outstanding credit card debt is on the increase.

IN RETAIL NEWS…

• UK retail seems to be turning a corner at the moment as the incidence of surprisingly positive updates is increasing!
• Next raised its profit outlook again – for the third time in four months – and it said that prices could fall in spring.
• JD Sports reported strong sales thanks to Gen-Z shoppers who are paid well and live with their parents.
• DFS saw its profits halve thanks to higher mortgage rates hitting the property market, something that also affected B&Q’s owner Kingfisher, which cut its full-year profit guidance.
• Elsewhere, Naked Wines’ future looks in doubt as sales stalled and turnaround efforts just aren’t working. Ocado’s venture with M&S rebounded as sales came in above expectations but the share price tanked shortly afterwards. Some said that this was due to some broker note but I suspect it was more to do with investors just taking profits.

IN LEISURE NEWS…

• Tui said that it would extend the holiday season for Greece and Turkey to accommodate increased demand in the colder months.
• The City Pub Group put in a decent performance and is benefitting from the Rugby World Cup and strong bookings for Christmas.
• SSP, the owner of brands including Upper Crust, was confident enough to raise annual earnings guidance thanks to a rebound in travel and brisk trading in the US market.
• Ten Entertainment Group, which does tenpin bowling, managed to keep customers coming in by keeping charges low. It’s clearly confident as it said it was on the lookout for acquisitions as it has a strong cash position!

• It’s rumoured that Tesla is in early talks about setting up a gigafactory in Saudi Arabia. Musk has had a mixed experience dealing with the Saudis and there could be awkward moments regarding the kingdom’s existing partnership with Lucid, which is majority owned by the PIF. However, I think this could be interesting given Saudi Arabia’s status as China’s BFF currently, which could come in handy for raw material supply purposes.
• BYD just launched its second model for the Japanese market, called the Dolphin. Some argue that it’s good for the local market but I don’t give it much of a chance to make major inroads in this market given that there is major rivalry with the Chinese – plus the fact that the Japanese are generally very patriotic with their car-buying!
• In the UK, carmakers are still going to have to hit EV sales targets despite Sunak’s eco U-turn this week unless he changes this as well. Surely this will have to change as the U-turn will probably lead to slower EV sales, which will then be punished by big fines, making things even harder for auto makers. UK makers also called for more tax incentives to encourage the switch to EVs – and clearly Sunak’s petrol/diesel deadline delay may actually make this more necessary as the easier thing for budget-conscious consumers to do is to just sit on their hands and delay EV purchases until they become more affordable. Having incentives in place may therefore help to persuade some to make the switch.
• Lenders have had enough of Cazoo’s failures and empty promises and have done a deal whereby they now own 92% of the stock. Another SPAC-backed IPO failure!

IN IPO NEWS…

• Arm’s advisors earned $84m in fees from last week’s IPO, with the lion’s share of around $51m going to Deloitte. However, Arm’s share price dipped below the IPO price. That aside, owner SoftBank was rumoured to be thinking of sinking some of the proceeds of the IPO into OpenAI but it did actually lead a $280m funding round for Mapbox whose software powers the in-car navigation systems of many major car manufacturers. Interestingly, another UK chip designer, Imagination Technologies looks like it will head stateside to do an IPO in New York. Another one gets away!!!
• All eyes were on the IPOs of Instacart and Klaviyo this week to see whether the Arm “party” would continue and help usher in a new flood of flotations. Instacart’s IPO went well and closed up 12% on its debut.
• Kokusai Electric is gearing up to be Japan’s biggest listing for five years! It makes machines that are used for part of the chipmaking process so it is able to take advantage all the current AI hype!

IN M&A NEWS…

• Cisco bought cybersecurity company Splunk for $28bn in cash in Cisco’s biggest ever acquisition! The combined company will provide customers with AI and other tools to analyse their data and find security threats.
• Toshiba is to be taken private in an £11bn private equity deal led by Japan Industrial Partners. It would be Japan’s biggest takeover this year if it gets shareholder approval in November.

• China Evergrande Group’s woes continue – this time at its wealth management business as some staff are detained by police. Last week, ratings agency Moody’s downgraded China’s property sector from stable to negative.
• Dubai property prices have shot up at the fastest rate in the world thanks to rich Russians and Ukrainians buying properties. At first it was just the top end of the market that was particularly hot, but activity there has dragged up the whole market, according to the latest research by UBS.
• IN UK COMMERCIAL PROPERTY NEWS – British Land bucked the general gloomy trend as its portfolio of out-of-town retail parks has done particularly well against a difficult economic backdrop. It has the biggest retail park portfolio in the UK.
• IN UK RESIDENTIAL PROPERTY NEWS – the supply of UK homes looks like it’ll get worse, according to the latest research while Rightmove says that sellers are cutting asking prices more than at any time in the last 12 years. Mortgage bills are likely to rise as more people come off fixed rate deals, according to the FCA, while property price inflation has hit its lowest level in 11 years thanks to high mortgage rates (although lenders are now cutting them). Research from Hamptons shows that rents are continuing to rise and the latest numbers from the ONS back that up, saying that UK rental costs in August rose at their steepest rate since records began (although they only started seven years ago!). All these higher costs are resulting in rising rates of homelessness.

• Apple reported sales coming in above Wall Street estimates, with orders for the 15 Pro and Pro Max being particularly strong. This is impressive given the overall trend for smartphone sales is that they are weakening!
• Huawei appears to have made a technological breakthrough with a processor in its new Mate 60 Pro smartphone, which sold out shortly after launch. Will it need any US tech in future??
• It looks like the Microsoft/Activision Blizzard deal will go through as the UK’s CMA appears to have been satisfied by the revised merger agreement.
• WhatsApp launched an in-app payments service in India. Clearly this is a market with huge potential, so the success of this move will be closely monitored!

• IN MEDIA NEWS – Disney said it would be investing $60bn in theme parks and cruises over the next decade – but it needs to do more and sort out the cable TV and broadcast business in order to make a proper go of a turnaround. Deezer increased its subscription prices following recent rises by YouTube and Spotify. It’s interesting to note that music subscription prices have been largely static for the last ten years or so whereas TV/movie streamers have been able to double theirs. There’s good news for the movie/TV industry in the UK as Warner Bros announced that it will make a major investment in the expansion of its studios in Leavesden that will create 4,000 UK jobs. Also, Rupert Murdoch stepped down as chair of Fox and News Corp at the tender age of 92! Although eldest son, Lachlan, will take up the reins, it’s likely that Murdoch senior will be pulling strings in the background.
• IN FINANCIALS NEWS – Hargreaves Lansdown made a hefty £270m in interest payments from cash lying around in client accounts – an amount that was almost as much as it earned in fees! Revolut got an extension to publish its annual results as it waits to hear whether its application to obtain a UK banking licence succeeds. Meanwhile, Chinese shadow bank Zhongrong continues to cause concern due to its exposure to massively-indebted Chinese property developers.
• IN MISCELLANEOUS NEWS – HS2 looks like it is slipping away as there are rumours that it won’t run any further north than Birmingham and speculation is rife. Marlboro maker Philip Morris International could be giving up on its efforts to diversify away from tobacco as it looks to potentially sell out of its pharmaceuticals division.

My favourite “alternative” video this week was the one with the guy with the mask! Genius 🤣🤣🤣

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 EU turned it up a notch against China, when Apple unveiled the iPhone 15 and when Arm returned to the stock market…

• IN THE US – inflation rose to 3.7% in August mainly thanks to a steep increase in energy prices. It’s the first time US inflation has increased since June 2022! This may mean that the Fed increases interest rates later on in the year. Biden also signed major chip and AI deals with Vietnam as part of an effort to broaden the US footprint in the region outside China.
• IN EUROPE – the ECB increased interest rates by 0.25% to 4% as the ECB president appeared to have called the peak. It’s now at its highest rate since the euro was launched in 1999! Meanwhile the European Commission downgraded its GDP forecasts and, in doing so, predicted that Germany would be the only major European economy to contract this year. It’s not surprising given that the latest ZEW survey suggests that Germany is in its worst state since the financial crisis – apart from the pandemic – and has been particularly badly hit by China’s slowdown as it’s Germany’s biggest export market.
• IN THE UK – we saw the UK economy contract by 0.5% in July thanks to wet weather and strikes. All three major sectors – manufacturing, services and construction – contracted together for the first time since summer last year, which will no doubt stoke fears of recession going into the end of the year.

IN OIL NEWS…

• The Saudis and Russians have been instrumental in boosting the oil price, according to the IEA and it looks like they could yet go higher as they extended production cuts to the end of the year.
• BP’s CEO, Bernard Looney, abruptly resigned thanks to the emergence of past relationships with colleagues. He’ll be replaced by the current CFO until a new CEO is found. This puts BPs plans of a path to net zero up in the air.

IN BUSINESS TRENDS NEWS…

• China’s business sentiment has been dampened by the current state of the wider economy as the latest Caixin survey showed it as being at its lowest point in a year in August. This is stifling job creation, wealth creation, innovation and a decent chunk of GDP growth.
• China’s car makers could overtake Japan to be the world’s biggest car exporter this year, according to the latest data from Moody’s. This is something that was not lost on the EU, which announced that it would launch an anti-subsidy probe into China’s EV industry. Chinese EVs currently have an 8% market share in Europe but some believe it could hit 15% within two years! The implication here is that the EU will probably, as a result, whack tariffs on car imports from China. China didn’t like this and said it would protect the “legitimate rights” of its companies. I think this could harm European companies more than Chinese as VW now gets half of its net income from Chinese operations while BMW gets over 30% – and the Chinese will surely retaliate against non-Chinese companies by slapping on their own tariffs.
• In the same way that the Europeans are worried about China making serious inroads with EVs, the chief exec of Arçelik (which owns appliance maker brands including Beko, Grundig, Blomberg and Singer) is getting increasingly concerned that cheap Chinese appliances will be dumped onto the European market because China’s domestic market has been weak and these appliances need to go somewhere. China has a history of dumping large amounts of cheap stuff on overseas markets when it has over-produced and/or when domestic demand has been weak, so the concerns aren’t surprising. I guess the only way of allaying this fear is for tariffs to be imposed on Chinese imports.
• The EU has backed new air pollution limits in line with WHO guidelines, but decided to delay the date for meeting them from 2030 to 2035.
• There’s a construction crisis going on in Germany at the moment as builders are having to cancel projects with increasing frequency and financing is continuing to get pricier in the high interest rate environment, according to the latest Ifo survey.
• IN LAW FIRM NEWS – CMS announced it was going to make “significant” job cuts, particularly among the associate solicitors in its corporate department while DLA Piper has become the latest law firm to launch a dedicated space law business. It will advise on regulatory and intellectual property issues in addition to dispute resolution. Elsewhere, Paul Weiss poached more partners from Kirkland & Ellis and Linklaters as it continues in its quest to build out its European business.
• IN ACCOUNTANCY FIRM NEWS – PwC announced that it would stop offering some advisory services to US audit clients in a bid to reduce any potential conflicts of interest. Deloitte said that it would reduce its headcount in Britain by 3% (about 800 employees) across its consulting, financial advisory and risk advisory businesses due to the economic slowdown while EY posted record revenues over the last year despite all that break-up kerfuffle.
• IN BANKING NEWS – Citigroup is about to undergo its biggest overhaul in almost two decades in a bid to push back against its “also-ran” status.
• UK firms are looking vulnerable at the moment. Although the latest survey by accountancy firm BDO showed a small uptick in manufacturing in August, there was a broader slide in UK private sector economic activity and a separate BCC report highlighted concerns that over 80% UK SMEs were not aware of the new reporting requirements that are part of “Brexit 2.0” that will kick in next month. This will affect VAT in particular.
• IN DEFENCE SECTOR NEWS – Sweden plans to boost its defence budget by almost 30% next year in response to Russia’s invasion of Ukraine so maybe some representatives attended Europe’s biggest ever arms fair at the ExCeL centre in London this week.
• IN FUEL-RELATED NEWS – higher diesel, jet and marine fuel prices are hitting the construction, transportation and agricultural sectors hard so it was interesting to see that shipping container giant Maersk has set up a new company, called C2X, to produce green methanol which it believes could be the key to decarbonising global trade.

IN CONSUMER TRENDS NEWS…

• IN THE US – US consumer prices rose, showing that consumers are willing to spend despite facing higher interest rates and inflation squeezing household finances.
• IN THE UK – consumers are facing higher energy bills due to the loss of government subsidies, cash use increases as more people use it to budget but food price inflation fell to its lowest level for over a year. The Stonegate Pub Company (which owns brands including the Slug and Lettuce, Walkabout, Be At One etc.) caused a kerfuffle by introducing “dynamic pricing” on drinks in about 800 of its 4,000 venues meaning that it will charge more for drinks at peak times. In real estate, lenders continued to push through cuts in mortgage rates but arrears have risen to a seven-year high. Meanwhile, consumers could be facing rents that increase by 25% over the next four years, according to research from Hamptons estate agents. If this happens, they will increase more than four times faster than house price rises!

IN EMPLOYMENT TRENDS…

• Pay rises exceeded inflation for the first time for a year in July, according to the latest figures from the ONS, but the wage differential between London and the rest of the country is now at its widest since 1997.
• Analysis by consultancy firm Public First concluded that hybrid working boosted the number of UK women in full-time jobs, particularly in areas like finance and insurance.
• Bernard Looney’s resignation not only threw BP’s future strategy in doubt – it reminded us of previous indiscretions by top management and highlighted the need for companies to seek a better balance between having rules that protect the business whilst recognising that employees have a right to a private life.

IN AI-RELATED NEWS…

• Top US software companies including Adobe, Salesforce and Zoom have said they won’t charge more for their recently-released new AI features. This sounds great, but I think that the real reason is that the features aren’t all that amazing and they’re not confident enough to charge for fear of people abandoning altogether. After all, OpenAI and Microsoft have increased subscription charges!
• UK researchers are partnering up with National Air Traffic Services (NATS), the Alan Turing Institute and Exeter University to use AI in air traffic control. It could be used to direct air traffic along more fuel-efficient routes to cut down the environmental impact of aviation, minimise delays and congestion.
• The chief exec of News Corp reckons that AI will amplify Big Tech’s power in news distribution, making it imperative that publishers come to an agreement with the AI companies to ensure user access to quality information and those generating it get treated fairly. The future of quality journalism could be in the balance…

IN NON-AI TECH NEWS…

• There was mixed news for Apple this week. On the positive side, Apple introduced its iPhone15 line-up to great fanfare but then on the negative side, the Chinese government warned about the security risks of foreign phones not long after state employees were banned from using iPhones and France has stopped iPhone 12 sales, alleging that they emit too much radiation. If this spreads to other EU countries, this could have serious implications for Apple. In other Apple-related news, Qualcomm got a new contract to supply Apple with 5G chips for the next few years. This goes to show just how good Qualcomm is given that Apple has spent the last few years desperately trying to cut it out by making chips in-house.
• Arm had a strong market debut this week, rising by 25% on Wall Street in its first day of trading. Demand had been strong enough to close the order book a day early, which no doubt created FOMO for more orders in the open market!
• Instacart set the price range for its upcoming IPO but it is way lower than the private valuation it got a couple of years ago.
• A trial opened this week asserting that Google got to where it is by abusing its market dominance in search. Google currently accounts for over 70% of all online searches! It’ll take a while to unfold but it’s possible that the company could face huge fines and/or a potential break-up of the business as a result.
• Oracle outlined a weak outlook, identifying increased competition in cloud computing and a slowdown in digital spending by corporates as the main culprits.
• TikTok saw massive revenue rises in Europe as it increased staff numbers by a whopping 40%! That said, parent company ByteDance still reported an overall loss of $512m. This is great but there’s still the threat of a ban hanging over it!

IN SUPERMARKETS NEWS…

• Carrefour decided to shame brands over “shrinkflation” by putting price warnings on products where manufacturers have cut pack sizes rather than increase prices. This is to put pressure on the likes of Nestlé, PepsiCo and Unilever etc. and perhaps take attention away from the fact that Carrefour also indulges in a bit of cheeky shrinkflation!
• UK supermarkets have cut prices on numerous occasions over the summer and Waitrose cut again this week in response to Ocado’s recent cuts. Amid all this, Aldi and Lidl actually lost market share to the British incumbents but that doesn’t seem to be putting them off further expansion! Lidl in particular has been hit by expansion costs but there could be other ways for supermarkets to generate revenues – by using loyalty data to sell ads to consumer goods companies, for instance!
• Meanwhile, Wilko shut down while Poundland picked up some of the sites with a view to turning them into Poundland outlets.

IN APPAREL RETAIL NEWS…

• H&M is going to sell used clothing at its flagship store (alongside its new stuff, obviously!) in response to “fast fashion” criticism, but I’m not a believer of this long term because I think that people – particularly when they go clothes shopping – want something new.
• Inditex, arch-rival of H&M and owner of Zara and other brands, has committed to the large store format in order to facilitate new product lines and online logistics.

IN OTHER RETAIL NEWS…

• John Lewis is going to take two years longer than originally thought to turn around, according to chairman Dame Sharon White. She had targeted 2026 as being the year where the retailer would make “sustainable profit”, but that’s delayed until 2028. Will the company give her a chance to follow her plan through??
• Wickes published some strong numbers as it continues to benefit from WFH and people wanted to enhance their home working environment.
• THG shares cratered after it announced lower-than expected sales for the half year and a downbeat forecast for the full year.

IN LEISURE NEWS…

• Wagamama’s owner, The Restaurant Group (TRG), has agreed to sell Frankie & Benny’s and Chiquitos to Big Table, which owns brands including Café Rouge, Las Iguanas and Bella Italia. This will leave TRG free to focus on Wagamama and its remaining businesses.
• Chick-fil-A is planning to return to the UK four years after it left. It plans to open give in the UK in the first two years.

IN COMMERCIAL PROPERTY NEWS…

• AI data centres continue garner interest as Australia’s biggest pension fund – AustralianSuper – is putting €1.5bn into Vantage Data Centers, one of the biggest data centre businesses in Europe!

IN RESIDENTIAL PROPERTY NEWS…

• Vistry announced that it would focus purely on social housing, which investors seemed to like. This means that the company will be less exposed to land price fluctuations, thus lowering its risk profile.
• UK estate agents are the gloomiest they’ve been for 14 years as the latest RICS survey showed that house prices and sales fell in August thanks to high mortgage rates denting demand. As if to confirm the gloom, Redrow had a profit warning and predicts that there will be further weakness in buyer demand.

• IN IPO NEWS – TKO floated began trading on the NYSE this week and given the initial success of Arm’s IPO, it seems that other companies – such as Birkenstock and Lime – are considering their own flotations to take advantage of the feelgood!
• IN CAR NEWS – Morgan Stanley published a report which said that Tesla’s AI-powered supercomputer system could be a serious advantage against its competitors and could make it possible for them to be used as robotaxis while BMW announced a £600m package to upgrade its Oxford factory to enable it to produce the new electric minis.
• IN HEALTH-RELATED NEWS – Spire Healthcare Group, one of the UK’s biggest private healthcare companies, posted strong revenue growth for the first half thanks to getting more business as a result of the NHS waiting list crisis. Meanwhile, the FDA approved new Covid boosters from Pfizer and Moderna ahead of the traditional ‘flu season.
• Associated British Foods, which owns Primark in addition to its substantial foods business expects to beat previous expectations for the full year.
• The Hipgnosis Songs Fund is going to offload 29 catalogues of music and use the proceeds to fund a share buyback programme and cut debt, following investor frustration with the share price performance.

My favourite “alternative” video this week concerned two things that are close to my heart – kids doing amazing things in sports and amusing dog tricks!

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.