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 DAY IN BRACKETS 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.

OPEC sides with the Russians, Truss/Kwarteng eat humble pie and Musk changes his mind…

• The IMF spreads gloom on the world’s economy (Friday) highlights the overall mood at the moment (although Kristalina Georgieva didn’t really say anything particularly unexpected) but I think that there are some signs that inflation could be slowing down (Tuesday) as the Baltic Dry Index continues to weaken and cargo shipowners cancel sailings as global trade loses momentum (Monday).
• IN THE US – there may be early signs that the US economy is cooling as job vacancies fell sharply (Wednesday), according to the latest data from the US Labor Department’s Job Openings and Labor Turnover Survey (“JOLTS”). This was later confirmed by the Bureau of Labor Statistics at the end of the week (it came out after I published Friday’s editions of Watson’s Daily). Does this mean that the Fed’s interest rate hikes are starting to work?
• IN EUROPE – the minutes of the most recent ECB rate meeting highlighted fears of prolonged inflation (Friday) while members of the eurozone continued to be p!ssed off with Germany (Friday) for their own private energy bailout package. In the meantime, Germany signed another LNG supply deal (Friday), this time with Venture Global, a new US exporter of LNG.
• IN THE UK – the government was forced to abandon the proposed scrapping of the top rate of tax (Monday) while Kwarteng said he’d bring forward details of his debt-cutting plan (Tuesday) to calm the carnage caused by his mini-budget announcement. It turns out that the Bank of England didn’t have to buy as many bonds as it thought it would have to (Tuesday) and actually stopped buying them (Wednesday). 2022 has been the worst year for ten years for IPOs (Thursday), but then again this isn’t surprising given that sentiment is so low as the number of businesses going bust is on the rise (Thursday).
• IN TURKEY – inflation has hit 83% (Tuesday), so it looks like President Erdogan’s persistence in cutting interest rates to curb inflation (he’s one of the only leaders in the world to follow this) isn’t working.

In OIL NEWS…

• OPEC+ decided to make deep production cuts (Wednesday), which prompted the US to accuse OPEC+ of aligning with Russia (Thursday), the expectation of which probably prompted the US to talk about oil supply with Venezuela (Friday).
• Regarding specific oil companies, Shell’s latest trading update suggested that its winning profits streak is losing momentum (Friday) as refining and chemical margins have taken a hit while BP Solar launched its biggest UK project yet (Friday).

In ENERGY NEWS…

• North Sea gasfield permits are going to get fast-tracked (Tuesday) in order to boost domestic production for the short term in order to address the current energy crisis.
• Ofgem is already warning of potential blackouts (Monday) as supplies to some gas-fired power stations could be cut off. Tough times ahead…

In CURRENCY NEWS…

• There was some interesting debate as to whether a Plaza Accord II could be in the offing (Thursday) given the dollar’s recent strengthening versus the euro, the yen and the pound in particular. The original Plaza Accord in 1985 entailed a co-ordinated approach by politicians and central bankers to calm the effects of a strengthening dollar. This is speculation but is something that could happen if the dollar continues to strengthen.
• Then we saw that Kim Kardashian paid $1.3m to settle charges with the SEC (Tuesday) as she had been accused of not disclosing the fact that she’d been paid to push EthereumMax on her insta account. Small change for Kimmy, but then again I guess it’s better for the SEC to get something rather than drag things out and potentially get nothing. I think that much more needs to be done to stop influencers pushing digital assets, but we’ll just have to see how this develops.

UK lenders started offering mortgages again (Tuesday) after they all ran away to hide last week! However, two-year fixed rate mortgages broke through 6% for the first time since 2008 (Thursday) and the latest data shows that house sales are now falling at their fastest pace since the pandemic (Friday). Another consequence of last week’s kerfuffle was that UK property funds are now limiting withdrawals (Tuesday) in a move reminiscent of what happened in the early days of the pandemic to stop outflow and the forced selling of assets.

We’re not the only ones to suffer with mortgages, though! European mortgage costs have now hit a seven-year high (Wednesday). This isn’t even taking into account the ECB’s recent interest rate hike, with the prospect of more to come.

In CONSUMER TRENDS NEWS…

• Beer prices look set to soar as CO2 shortages loom (Monday), which doesn’t bode well for fertiliser production either (it’s a byproduct).
• Consumers have been flocking to use Telecom Plus – aka Utility Warehouse – for its discount deals (Tuesday) on gas, electricity, mobile phone, broadband and insurance. The utilities provider announced better-than-expected profits thanks to a bigger-than-expected influx of new customers. Staying on the theme of utilities, water bills might fall (Tuesday) because Ofwat says 11 companies have failed to hit their pollution targets. They will be forced to cut customer bills as a result.
• A report by KPMG and REC shows that hiring momentum is slowing (Friday) as corporate pessimism filters down.

In RETAIL NEWS…

• Tesco said its profits for the year are likely to fall short of expectations (Thursday) as consumers get more frugal. I reckon that Aldi and Lidl will continue to grab market share for the cost-conscious.
• Halfords bought B2B tyre seller Lodge Tyre (Thursday) which will skew its business much more towards cars than push-bikes. I think this is a good thing as I get the impression that interest in cycling is likely to decline. I also believe that cost-conscious consumers will be more likely to hang on to their existing vehicles because a) EVs are still expensive, b) they are more reluctant to splash out on big ticket items at the moment and c) they want to wait until charging networks and more car choices emerge.
• Greggs managed to surprise the market on the upside (Wednesday) as customers lapped up those meal deals but Pizza Express profits more than halved (Friday) thanks to rising flour and cooking oil costs.
• Hays Travel – famed for buying the Thomas Cook high street shops – returned to profit (Friday) for the first time since the pandemic. I would have thought it’s going to be in for another bout of turbulence, though, as rising costs and squeezed household budgets take hold.
• In apparel retailing, H&M turned cautiously positive on China (Wednesday) after a period where customers boycotted it for associating itself with the campaign to highlight the use of forced labour in Xinjiang while Boden saw its US sales jump (Wednesday). No wonder it’s planning on putting more focus on that market!
• Meanwhile, M&S has started to offer digital credit for Sparks loyalty card customers (Friday) for up to £500 on online purchases. This may well encourage more people to get a Sparks card, which means that M&S will be able to access better quality customer data.

• Semiconductor giants Samsung and AMD are turning pessimistic (Friday) thanks to weakening consumer spending that will hit demand for their memory chip and smartphone businesses. FWIW, I think that this will only be temporary as EV-related demand will increase immensely as deadlines for electrification loom.
• Apple got some disappointing news as the EU backed a universal phone charger (Wednesday), which means that it’ll have to use the USB-C standard. This probably means the death of the lightening cable.
• The most dramatic news this week was that Elon Musk has decided to buy Twitter after all (Thursday) and has skilfully managed to shift the conversation away from “how has Elon failed to wriggle out of the deal?” to “is Elon trying to use Twitter to engineer a super-app?”. FWIW, I don’t think a super-app in the mould of WeChat will be possible in the West because a) it was allowed to develop in China without much regulatory hindrance, b) there are now so many decent apps that Twitter would either have to sign them up (expensive) or make their own (expensive and time-consuming) and c) consumers may be less comfortable with one app tracking so much of their activity.
• Although ByteDance saw deepening losses (Friday) as it put money into growth, its TikTok business smashed it in Europe (Tuesday) with sales increasing sixfold to almost $1bn and it announced that it would be launching live shopping in the US (Monday) that would be in keeping with its ongoing efforts to help creators monetise their content.

• IN FINANCIALS – US investment banks are hoping for a dollar-powered buying spree (Monday) that will boost M&A revenues. In Europe, Credit Suisse had a rough time (Monday) because a memo sent by the CEO to employees was interpreted by investors as a sign that something was wrong at the bank after years of scandals dragging it down. UK banks are set to make a killing thanks to higher interest rates (Monday), but they’re probably not going to brag too much about it. On a related note, NatWest raises mortgage rates in line with its rivals (Monday).
• IN CAR-RELATED NEWS – a number of data sources point to weakening used car sales in the US (Wednesday) while Tesla’s deliveries staged a rebound (Monday), Porsche became bigger than parent company VW (Friday) and British car dealership Vertu reckons that car sales will be cushioned in the short term (Thursday) because of long lead times and limited car supplies. In EV-related news, Arrival is seeking more funding (Monday) to keep it going but rising electricity prices are hitting demand for EVs, according to the latest stats from the SMMT (Thursday) particularly as the RAC said that it pretty much costs the same to charge a car at a rapid public charging point as it does to fill one with petrol! Among British carmakers, Aston Martin seems to be attracting the interest of Chinese giant Geely (Wednesday), which is looking to explore “potential opportunities to engage and collaborate” with the company. The already-embattled Jaguar Land Rover is suffering with the strong dollar (Monday) because just over a third of its £8.9bn in debt is denominated in dollars! Ouch!

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

For me, I really liked the video of the Korean camping guy with all the gadgets HERE in this week’s “alternative stories” section. Talk about camping in style!

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 DAY IN BRACKETS 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.

Markets hate the mini-budget, sterling crashes badly and Porsche flies the VW nest…

• The OECD reckons that leading economies are sliding into recession (Tuesday), according to its latest report. Not exactly surprising but I guess this sort of thing just makes it official.
• The World Bank reckons that China’s GDP growth is going to lag the rest of Asia for the first time since 1990 (Wednesday) due to ongoing Coronavirus lockdowns and its massively-indebted real estate sector. I think this is pretty incredible given that for as long as I can remember, you could always rely on China as a growth engine.
• IN EUROPE – it looks like the ECB is going to make another big interest rate hike (Thursday) to attack inflation, the OECD reckons Germany will hit recession hard (Tuesday) and the latest Ifo survey reflects rock-bottom corporate confidence in Europe’s biggest economy (Tuesday) while later in the week, Germany’s inflation rate hit a 70-year high at 10.9% in the year-to-September. In any other week, this story would have had far more prominence, but Italy took a lurch to the right as Giorgia Meloni is to become Italy’s first female Prime Minister (Tuesday). This is going to make things trickier for the EU because she is way more populist than her predecessor, Mario Draghi (who was very pro-EU).
• IN THE UK – Kwarteng doubled-down on tax cuts (Monday) while the markets bombed (Friday) and many people were highly sceptical of the Kwarteng-Truss plan to get us to 2.5% annual GDP growth (Tuesday), all of which put the new PM under a lot of pressure as Labour took a massive lead in the polls (Friday). The Fed warned of possible contagion prompted by the UK’s plan (Tuesday) and things got so bad that the Bank of England launched a massive £65bn emergency bond-buying programme (Thursday) to avert massive outflows. All of this caused the pound hit a 37-year low (Monday) and Deutsche Bank warned that sterling’s massive collapse could mean shop prices rise by 15% (Tuesday). On a very slightly more positive note, some City forecasters reckon that gas prices will fall sharply next year (Monday), meaning that Truss’s energy bailout will not cost quite as much as expected.

In ENERGY NEWS…

• The UAE signed a deal to supply Germany with LNG (Monday), which is great, but a drop in the ocean for what Germany really needs. Still, it’s a move in the right direction. Later in the week, Chancellor Olaf Scholz latest announced a massive €200bn energy aid package (Friday), designed to help households and businesses.
• There was potentially good news for the UK as French utility EDF is looking to extend the life of two nuclear power plants in Britain (Thursday) which were due to close in March 2024. EDF actually operates all eight of our nuclear power plants currently.

In CHARGING news…

• Hertz and BP announced an EV charging partnership in North America (Wednesday), which takes Hertz’s foray into EVs to the next level. What a turnaround since the lows of the pandemic!
• Britishvolt continues to look precarious (Thursday) as its finances aren’t great, but we’ll just have to wait to see whether it’s too high profile to fail.

In CAR NEWS…

• Porsche’s IPO went ahead (Friday) and it wasn’t a disaster – which was good! It priced at the top of the range and didn’t tank – which was impressive considering what markets did this week. However, it’ll be interesting to see how it fares in a month or two without support of the deal underwriters!
• UK carmaker output was a bit meh (Thursday), according to the but a decimated sterling is not good for the industry. About 75% of cars made in the UK are for export (where a weak pound is useful) but a lot of parts are imported (where a weak pound is not so good because this adds to expense). Aston Martin’s nightmare continued as its share price fell to a new all-time low (Thursday) and Jaguar Land Rover is retraining its staff (Thursday) to help with the shift to EVs, but they’re being a bit coy about how much this is all going to cost!
• In EVs, we saw Arrival’s first all-electric van roll off the production line (Friday) – which is better late than never – and Chinese EV specialist Nio said that its European expansion was slowing (Wednesday) because of the energy crisis.

In CONSUMER NEWS…

• Pandemic savings have evaporated (Monday), according to a report by KPMG as it seems that a lot of the money that we saved under lockdown has gone as household budgets have been squeezed. It’s getting so bad that retirees are raiding their pension pots in higher numbers (Thursday) to cope with higher living costs.

In RETAIL NEWS…

• Amazon is going to do another Prime Day sale event (Thursday) in an effort to boost online sales and advertising revenues.
• In the UK, the signs are that Christmas isn’t looking very merry (Monday), according to the latest figures from Springboard. In apparel retailers, H&M saw a drop in profits (Friday) as the costs of pulling out of Russia pretty much wiped out all of their profits and Next cuts its profits and sales forecasts (Friday) in response to falling customer spend due to the cost-of-living crisis. Boohoo also warned that sales and profits would fall short of previous expectations (Thursday) for the same reasons. In grocery retailers, Morrisons had a disastrous Q3 (Thursday) as profits got sliced in half by what it called “temporary and transitional factors” and Aldi said its profits fell (Tuesday) but that customers are switching to it “in droves”.
• In the US, the embattled Bed Bath & Beyond saw its losses widen (Friday) as its leadership vacuum continues, Peloton started selling its bikes at Dick’s Sporting Goods (Friday) as it broadened its distribution channels and Nike’s share price fell sharply (Friday) as it reported high inventory levels ahead of the key Christmas season.

In LEISURE NEWS…

• Kent brewer Shepherd Neame reported a return to profit and revenue growth (Thursday) after a turbulent few years but Mitchells & Butlers warned of a hit from energy costs (Friday) despite the government’s recently-announced support package.
• It’s interesting to note that travel groups are still seeing strong demand (Monday), but I wonder how long that will last given the current state of the economy!
• There seems to be a trend at the moment of musicians cancelling their tours (Friday), which is a shame, but it’s largely because they can’t be insured for cancellation due to Covid and the costs are simply too high.

• Apple announced an expansion of iPhone production in India (Tuesday), which reflects a move to diversify its supply chains, which are very China-centric. It still makes most of its handsets in China, but this is a positive development, particularly as US-China relations aren’t great.
• Intel announced the imminent sale of new videogame graphics chips (Wednesday) to take on rivals Nvidia and AMD. It is going to target a gap in the market for cheaper games chips.
• Facebook parent Meta is freezing hiring plans (Friday) as part of a wider move to cut costs and SoftBank is cutting 20% of its London staff (Friday) as the repercussions of general tech weakness continue to bite.
• In ASIAN TECH NEWS, the region’s biggest metaverse platform Zepeto announced ambitions for global expansion (Wednesday) and NASDAQ-listed Grab announced that it would make its first profit by 2024 (Wednesday), which I’ll believe when I see as its cash burn rate is impressive.

• M&A activity is rising (Thursday) but IPO activity is falling (Thursday) while the City is likely to see an increase in takeover bids (Thursday), particularly from American companies given the current strength of the dollar.
• Funnily enough, Biffa just accepted a £1.3bn takeover bid from US private equity firm Energy Capital Partners (Wednesday). This is lower than the original bid, but you would have thought that, in a market like this, it was the smart thing to keep this alive.
• UK car dealership Pendragon got a £400m takeover offer from its biggest shareholder, Hedin Mobility (Tuesday). Given that its share price spiked by 20% on the news, it seems like the market reckons there could be other bidders out there.

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

There was a clear winner for me in this week’s best “alternative” story: Innocent office snap is boggling people’s minds over odd high heel optical illusion (The Mirror, Julia Banim). It took me aaaaaages to work this out!

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 DAY IN BRACKETS 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.

Putin takes things up a notch, Turkey does crazy (again) and Truss outlines her battle plans…

• IN RUSSIA – Putin decided to mobilise army reserves (Thursday) for the Ukraine war effort, whilst also threatening nukes if lines are crossed re what he deems is Russia’s territory.
• REGARDING INFLATION – central banks are rushing to tame inflation (Monday) by raising interest rates by larger amounts and in a shorter time frame.

Bearing that in mind…

• IN THE US – the Fed raised interest rates by 0.75% (Thursday) for its third month in a row, bringing it into the 3-3.25% range. It hinted that there would be more rises to come, that interest rates could reach 4.4% by year end and that there would probably be a correction in the housing market as a result.
• IN EUROPE – Sweden made its biggest interest rate increase since 1993 (Wednesday), but it has dragged its feet in the fight against inflation and therefore had some catching up to do! On the other hand, president Erdogan continues to ignore conventional wisdom and Turkey’s central bank cut interest rates (Friday) – which is what he believes kills inflation. His plan’s not going so well given that Turkey’s rate of inflation breached 80% recently…elsewhere, recession fears increased in Germany (Tuesday) as the latest Ifo report made big cuts to the country’s growth estimates.
• IN THE UK – we got a mini-budget from Truss & Co. Details came out after the publication of Friday’s edition of Watson’s Daily, but some of the highlights include £45bn-worth of tax cuts with the higher rate of tax being axed, the basic rate being cut from 20% to 19%, cancellation of the planned hike in corporation tax and leaving it at 19% and a permanent cut in stamp duty. The bankers’ bonus cap will also be lifted, which I suspect will mean a flood of interest in working in investment banking in the UK…

As always, at the moment, there was a lot of ENERGY chat flying around…

• The UK’s biggest electricity generators are now saying that they’d welcome a windfall tax (Monday) in preference to what Truss has suggested (signing cut-price power contracts this winter), but there are also allegations that they are turning away new customers (Monday) which, if true, means that they are breaching their licence conditions. In the meantime, Truss has committed to cutting business energy prices by more than half (Thursday), but it’ll be funded by the taxpayer (Wednesday).
• Elsewhere, Germany’s Uniper got nationalised (Thursday), which will bring some stability to the troubled utility company (which also happens to own a number of our own power stations!) but German companies are reeling from massive increases to their electricity bills (Wednesday). Still, if you think we’ve got it bad, South Africa is suffering its worst electricity blackouts ever (Thursday) thanks to the nightmare that is Eskom. Most South Africans are now without electricity for at least six hours per day!

It is also worth mentioning that Japan had to intervene in the forex market for the first time since 1998 (Friday) to prop up the yen that was collapsing rapidly against the dollar as the Bank of Japan left interest rates unchanged and in negative territory.

In RETAIL news…

• IN THE US – Gap announced cuts in office jobs (Wednesday), reflecting what rivals at Abercrombie & Fitch and Stich Fix are doing. Gap is in a lot of trouble and just hasn’t been able to get itself out of the rut it has found itself in over the last few years. Walmart said it was slowing down hiring (Thursday), but that could be because it hired so many seasonal workers last year (rival Target hired in smaller numbers last year and aims to be hiring a similar number this year). It was also interesting to see figures from the US Commerce Department showing a marked slowdown in sales for home goods retailers (Monday), which is probably being prompted by a weakening housing market.
• IN THE UK – Mike Ashley stepped down as a director at Frasers Group (Wednesday), but don’t be too worried – he still owns about 70% of the company and has installed his son-in-law as CEO, so he will still be pulling all the strings. Ashley is a controversial character but he is actually good at what he does. Having a fresher face for the business might also be quite useful. It was also interesting to hear that Boden is setting its sights on America (Tuesday) and boosting sales over there.

In LEISURE news…

• UK retailers and pubs were holding out hopes for a mini-budget (Wednesday) to help out with energy bills, VAT and business rates. Butlin’s got sold back to the family that sold it off last year (Wednesday) as part of Bourne Leisure to US private equity firm Blackstone. I think this could be quite interesting as a staycation play if the pound continues to be weak and airfares are still expensive…still, Tui retained its full-year forecasts (Wednesday), which I thought was quite punchy, given the economic backdrop.

• Porsche’s IPO price range was announced (Tuesday) giving the company a potential valuation of €70-€75bn. The flotation of 12.5% of the company is scheduled to go ahead on September 29th and looks like it will be one of Europe’s biggest ever IPOs. Honda cut production (Friday) due to computer chip shortages and supply chain disruptions while Ford also warned that inflation and supply chain problems are having a greater-than-expected effect on production (Wednesday).
• IN ELECTRIC VEHICLE NEWS – Tesla announced a recall (Friday), although it’s no biggie as it will be one of those software updates and Hertz ordered up to 175,000 EVs from GM over a five-year period (Wednesday).

• China continues to push robotics (Monday) as its workforce is shrinking. Shipments of industrial robots to China have increased sharply over the last year. It does make me wonder whether this is a sign of things to come elsewhere as the Coronavirus showed us that labour-intensive industries were particularly vulnerable to the pandemic, giving companies more reasons to see how they could automate their processes.
• US tech has had its longest tech IPO drought in over 20 years (Monday), which is leading to investment banks cutting back on staff.
• UK watchdog Ofcom said it would investigate Big Tech’s dominance of cloud computing (Friday), which shows yet more potential pressure on an industry that is suffering at the moment.
• IN INDIVIDUAL TECH COMPANY NEWS – Meta is looking at cutting headcount (Thursday) as it’s looking to do more with less and Apple said it has entered a deal with satellite communication company Globalstar (Tuesday) to provide phone-to-satellite service to customers in the US and Canada before the end of this year. Elsewhere, Schneider Electric has agreed to buy out the rest of UK software developer Aveva (Thursday) it doesn’t already own, SoftBank looks like it’s about to sound out Samsung on a “strategic alliance” (Friday) and Tencent got its first game approval in China in over a year (Thursday).

• It looks like the end of SPACs for now (Wednesday) as SPAC cheerleader-in-chief Chamath Palihapitiya had to close down his fund and return $1.5bn to investors because even he can’t find any suitable targets! Mind you, his record isn’t great as almost 50% of the companies he’s invested in so far are at least 40% below their listing price! FWIW, I think SPACs are largely a bull-market phenomenon as investors tend to take leave of their senses in a frenzy of FOMO but then get hit badly by reality on the way down.
• IN FINANCIALS – Credit Suisse is thinking about splitting itself up three ways (Friday) as part of a management shake-up, Jupiter is considering selling its stake in Starling (Friday) and EY’s revenues have boomed (Thursday) thanks to the consulting division raking it in, which will make the upcoming vote on a possible split quite interesting.

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

It was a bit of a tricky week this week for a truly good “alternative” story, so I’ll leave you with a LUNCH IDEA instead 👍

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 DAY IN BRACKETS 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.

Energy chat intensifies, the UK’s gearing up for a mini-budget and Big Tech faces further pressure…

• IN THE US – the monthly inflation figure came in higher than expected (Wednesday) at 8.3% for August. Although this was lower than the 40-year high of 9.1% for June, it’s still high and increases the likelihood of more interest rate hikes.
• IN THE UK – Kwasi Kwarteng told the Treasury to focus “entirely on growth” (Tuesday), so it’ll be interesting to see what comes in when he announces the new mini-Budget. Something needs to be done given that GDP growth stagnated (Tuesday) although at least it did just about grow (0.2%) and inflation did ease a bit (Thursday) to 9.9% thanks to lower petrol prices. On another note, it was interesting to see that India overtook the UK to have the world’s fifth biggest economy (Monday) and is on course to overtake both Japan and Germany by 2030!
• IN RUSSIA-RELATED DEVELOPMENTS – Russia’s budget surplus disappeared (Tuesday) thanks to shrinking energy revenues, particularly over August. Putin met President Xi Jinping and even acknowledged China’s “concerns” over Ukraine (Friday), but obviously this is all just hot air at the moment.
• IN OTHER MACRO DEVELOPMENTS – Sweden got a new PM (Friday) and Nigeria’s inflation hit its highest level for 17 years (Friday).

In this week’s ENERGY CHAT…

• European ministers came up with an energy plan (Thursday) that included €140bn in windfall taxes and power usage targets. Details continues to emerge.
• UK PM Liz Truss is coming under increasing pressure by businesses (Monday) to give more clarity beyond the six months the government committed to help with energy. UK banks are to conduct energy crisis stress tests (Tuesday) which will see how well they could cope with the combination of a deep economic recession, rising energy bills and defaults. However things work out, it is likely that there will be an energy-related regulatory overhaul (Tuesday) as something similar happened in the aftermath of the financial crisis.
• IN OIL NEWS – Shell’s CEO Ben van Beurden stepped down (Friday), to be replaced by the current head of renewables. Many take this as signalling a new direction.

• UK unemployment hit a 48-year low (Wednesday) but real wages continued to fall (Wednesday), according to the latest ONS figures, as the effect of inflation continues to hit.
• There was a lot of talk this week about scrapping the bonus cap that was imposed by European legislation in 2014. This was designed to put an upper limit on what bankers could earn in terms of multiples of their basic salary in order to encourage them to do the “right” thing rather than chase the bonus. Chancellor Kwarteng edged closer towards scrapping it (Thursday) and this even got the blessing of the Bank of England (Friday). This comes at quite an interesting time as Wall Street jobs are hot again (Tuesday) as jobs in tech and crypto are losing their lustre. I suspect that, if the cap comes in, investment banks will use it (and the current economic backdrop) as an excuse to cut basic salaries (“don’t complain – didn’t you know there’s a recession out there?!?) and hype up the “unlimited” upside of potential bonuses. I really do think this will mean that the best people (at least from Europe) will want to come to work in the UK and have a go at earning much more money…

• Consumers continue to face challenges. Food prices rose by their fastest rate since 2008 (Thursday) with some dairy products being 40% more expensive in August than they were last year and meat prices up by 20% over the same time period.
• IN APPAREL RETAILER NEWS – Zara-owner Inditex reported very strong profits for the first half (Thursday) but rival H&M faltered (Friday) and the UK’s Joules saw its share price crater by almost 50% (Wednesday) as Next decided not to give it a £15m cash injection. Further afield, it turns out that Chinese online behemoth Shein has plans to expand operations in the US (Friday).
• IN GROCERY RETAILER NEWS – Aldi overtook Morrisons to become the UK’s #4 supermarket (Wednesday) while Ocado braced itself for its first ever fall in sales (Wednesday).
• IN GENERAL RETAILER NEWS – John Lewis reported a horrible first half (Friday) as middle classes continued to feel the pinch and THG also suffered from customers cutting their spending (Friday). Elsewhere, Amazon decided to give drivers raises (Wednesday) given the tight labour market.

• CHINESE BANKS – had an interesting week! State banks, including ICBC, ABC etc. cut deposit rates for the first time since 2015 (Friday) to try to encourage spending and they were also told to check their exposure to debt-laden conglomerate Fosun (Wednesday).
• The US Consumer Financial Protection Bureau said Buy Now Pay Later operators will have to follow the same standards as credit card companies (Friday), which doesn’t sound good for the likes of Klarna and Affirm. I’d say it’s probably easier for a credit card company or bank to offer BNPL services than it would be for, say, Klarna to offer bank-like services. I wouldn’t be surprised if Klarna became a takeover target.
• Elsewhere in the financials sector, JP Morgan said that it is expecting a 50% drop in investment banking fees (Wednesday), which is what many of its peers have been saying, but UBS announced a hike in its dividend and a bigger share buy back (Wednesday) as its bid to buy US fintech Wealthfront fell through. It was also interesting to see that the IPO of AIG’s Corebridge fell flat (Friday) implying a waning of investor appetite for flotations given that it’s actually a decent company, profitable and has size.

• Adobe put in a $20bn cash-and-shares bid for rival Figma (Friday) which could be the biggest-ever takeover of a private tech start-up. Investors didn’t like the fat premium, though, and sent the shares down by 17% on the news.
• Amazon is getting sued by California (Thursday) for having “anti-competitive pricing policies, particularly pertaining to third-party sellers.
• Google is facing competition class actions in the UK and EU (Wednesday) regarding the lack of competition in the advertising space, lost its appeal against the EU’s antitrust fine (Thursday) for abusing the dominance of its Android mobile phones operating system and is facing fines in South Korea for collecting personal information without consent (Thursday), alongside Meta.
• It turns out that Meta Platform’s Instagram is falling way behind TikTok (Tuesday), according to an internal document.
• The proposed Microsoft acquisition of ActivisionBlizzard is now facing in-depth investigations in both Brussels and London (Thursday).
• Talking about gaming, Netflix announced a partnership with Ubisoft to boost its growing games division (Monday)
• Zoom announced plans to diversify into e-mail and digital calendars (Thursday), but I have to say I think this is a terrible idea as Microsoft is waaaaaaaaaaaaay ahead of it. If it wants to do something good I think it should concentrate on its core offering and make it unbeatable rather than try and take on some massive behemoths (even Google’s not exactly doing brilliantly!) and chuck cash down a bottomless money pit.
• Oracle saw sales come in above expectations (Tuesday) thanks to the success of its cloud business. It seems that corporates are still spending in at least some areas!
• There’s potential danger ahead for Philips as a product used to combat sleep disorders has been recalled (Tuesday) and it’s now facing a ton of lawsuits. This could potentially be very damaging for the company.

• IN CAR NEWS – the switch to EVs is going to take longer than expected (Monday) and development is slower because of restrictive ESG investment rules (Monday), Tesla is rethinking its plans to make batteries in Germany (Thursday) in favour of the US because it can take advantage of the grants available from the government there and Liz Truss announced an easing in the cost of car-charging (Tuesday) that will be music to the ears of EV drivers! Aston Martin faces more problems as it now has to fight a lawsuit for royalties (Thursday) just after having secured extra cash to keep going.
• Elsewhere, FedEx announced a profit warning (Friday) due to a slowdown in package volumes, creator platform Patreon announced a 20% headcount reduction (Friday) thanks to more competition from rivals and Patagonia’s founder announced plans to transfer ownership of the company to a trust (Friday) and essentially plough all its profits into environmental causes.

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

Without doubt, my favourite “alternative” story this week was Sushi and onigiri rice balls get a new look with rollable furikake (SoraNews24, Oona McGee) because furikake rocks my world (it really does!) – but as this is probably somewhat niche, you will probably enjoy THIS moment with Allie Sherlock more!

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 DAY IN BRACKETS 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.

Queen Elizabeth II dies, Europe hammers out details of its energy plan and the ECB jacks up interest rates.

• IN THE US – the Biden administration bans “advanced tech” firms from building facilities in China for ten years (Thursday), upping the pressure on already-strained US-China relations. This is primarily a way of ensuring that companies who build semiconductor manufacturing facilities in the US with US grants don’t let the benefits flow back to China.
• IN CHINA – exports fell thanks to falling demand and Covid lockdown repercussions (Thursday).
• IN EUROPE – the ECB increased interest rates by 0.75% to 1.25% (Friday) and hinted that there could be more to come. Separately, it was also interesting to note that Brussels is pushing for more powers during crises (Tuesday), including things like forcing businesses to stockpile supplies and break their contracts. This sounds very alarming to me and I wonder whether they’re trying to push this through now as everyone is putting all their efforts into solving the energy problem.
• IN THE UK – Liz Truss became Prime Minister (Tuesday) and promised a hefty energy bailout (Wednesday).

IN ENERGY NEWS…

• IN EUROPE – the EU started to hammer out details of its response to the energy crisis (Friday), which could include a windfall tax on European electricity companies (Thursday) – something that Germany has decided to do (Monday) – as utilities companies panic about the big increase in collateral requirements (Tuesday), which are occurring because of the extreme swings in energy prices.
• IN THE UK – new PM Truss unveiled an energy bailout package for households (Friday) which caps household energy bills for two years and those of businesses for six months. A relief for households and although it’s better than nothing for businesses, the fact that there’s only a guarantee for six months will make it very hard to plan for anything.
• The tech industry is worried about blackouts in the UK (Monday) but JP Morgan seems to think blackouts are more likely in Frankfurt than in London (Tuesday) as they are moving work over from Germany to the UK to ensure smooth trading. I wonder whether others will follow suit (if they haven’t done already) because of the same reasoning…

IN OIL NEWS…

• The G7 is thinking about imposing a price cap on Russian oil (Monday), but I think it would be difficult to get consensus on among EU members and you do wonder whether it’s worth it anyway because India and China seem to be importing the stuff we are rejecting (Friday).
• The oil price continued to weaken (Thursday) despite OPEC+ deciding to cut production (Tuesday) to arrest the slide. Against this backdrop, Spain’s biggest oil company, Repsol, sold a 25% stake in itself to US investment group EIG (Thursday) to raise money that it will invest in the transition to renewables.

IN CURRENCY AND CRYPTO NEWS…

• The pound hit lows versus the dollar not seen since 1985 (Thursday) and the Yen hits its lowest level versus the Dollar since August 1998 (Wednesday) as fears of a global recession prompted a “flight to quality”.
• More news emerged on recently-failed crypto trading platform Celsius Network that it was actually “insolvent for three years” (Thursday) before seeking out bankruptcy protection. No doubt other platforms will be looking particularly closely at their financials to make sure they don’t meet the same fate. Investors may get freaked out by all of this.

• Ford and GM unveiled new EVs (Friday) and Rivian announced a joint venture with Mercedes (Friday) on electric vans.
• VW announced a much-anticipated move to float Porsche (Tuesday) but there was some initial resistance (Wednesday) given the relatively small size, the high valuation and the lack of voting rights.
• IN THE UK – car sales appear to have halted their slide (Tuesday), but Aston Martin had a disappointing rights issue (Tuesday), online car marketplace Cazoo decided to pull out of Europe (Friday) and plans to build a gigafactory in Coventry got torpedoed (Monday) because the site might have unexploded bombs from WW2.

• IN CONSUMER NEWS – it seems that Americans are buying flash cars (Thursday) like Lamborghinis, Bentleys and Ferraris, according to automotive industry specialist JD Power. The divide between the haves and the have-nots continues to get wider. IN THE UK, consumer spending has slowed down (Tuesday) as everyone braces themselves for massive hikes in energy bills and workers face a cut in real wages (Wednesday) because inflation is rising faster than pay.
• IN EMPLOYMENT NEWS – Amazon says it’s going to slow down its hiring (Thursday) after a period of massive expansion during the pandemic but in the UK, challenger bank Revolut revoked graduate jobs (Thursday) as part of a sweeping cost review. This could be a company-specific or industry thing (maybe fintechs will be particularly vulnerable) but I wonder whether we’re going to see more of this going on as the economy gets weaker.
• IN RETAIL NEWS – GameStop announced disappointing Q2 numbers (Thursday) as efforts to turn around the fortunes of the former meme-stock failed to gain traction, and the CFO of troubled firm Bed Bath & Beyond died (Monday) by falling from a New York skyscraper, further complicating the situation at the embattled company. IN THE UK, Halfords announced strong numbers (Thursday) on the back of success in its car maintenance business, something I would have thought will continue as people hang on to their existing cars for longer because a) they’re not feeling like buying a big ticket item like a car right now, b) they’re putting off buying an EV because it’s expensive and c) they would like to wait for a bit to see a better charging network and a wider choice of cars. WH Smith’s numbers took a hit (Thursday) from a poor performance from its high street division and the damage caused by a cyberattack in April on its Funky Pigeon business. On the other hand, its cash-cow travel business (outlets at stations, airports etc.) rose above pre-pandemic levels and it decided to leave its full-year guidance unchanged. Elsewhere, Primark’s owner, Associated British Foods, announced a profit warning (Friday) on pessimism about the effect of inflation on customers’ pockets and Matalan put itself up for sale (Monday). Meanwhile, John Lewis thinks it has identified a new trend (Thursday), that we are transitioning to a “moments economy” where we want to buy affordable treats more often as the economy falls around our ears. This sounds like another way of referring to “the lipstick effect” where sales of lipstick rise in tough economic times because people still want to treat themselves, albeit on a smaller scale.

• The Irish data regulator slapped a €405m fine on Instagram (Tuesday) for failing to adequately protect children’s data. This came after a two-year investigation and is the third fine it has slapped on Meta. It seems that crackdowns on US Big Tech are gathering momentum, but we really need to see the US regulators and lawmakers get onside – and it’s not clear whether we can expect Americans to punish one of their most valuable exports.
• Apple had its “event” this week (Friday), but it was more evolution than revolution in terms of product launches. Everything was just a bit better and a bit more powerful than what has come before. It was interesting, however, to see that Apple announced it was going to double headcount in its digital advertising division (Tuesday). Changes in Apple’s privacy settings have done a lot of damage to advertising revenues at Facebook, Twitter and Snap – but Apple has benefited handsomely at their expense! Is this a sign of things to come?
• British cybersecurity company Darktrace saw its shares crater by almost 35% (Friday) as US private equity firm Thoma Bravo decided to walk away from its mooted purchase. Under UK takeover rules, it won’t be able to make another offer for six months unless there are exceptional circumstances.

• IN CONSTRUCTION – UK construction activity fell in August due to higher prices hitting demand for housing (Wednesday), which was something we saw elsewhere as one of London’s biggest housebuilders, Berkeley, said it was slowing down plans on building new homes (Wednesday) and would be more selective about new projects.
• IN REAL ESTATE – Vistry Group and Countryside announced plans to merge in a £1.3bn cash-and-shares deal (Tuesday) and it is now with shareholders for approval.
• Big Four accountancy firm EY is moving towards splitting its audit and consulting businesses (Wednesday) and there will be another partner vote at the end of this year/beginning of next. This could have a considerable impact on other professional services firms as an IPO could give EY more currency to attract talent and/or buy other businesses.
• Former vaping giant Juul is to pay $438.5m to settle an investigation on underage vaping (Wednesday). Will this mean a cloud has lifted and it will go from strength to strength from now or is this just the beginning of the end?
• The FDA approved a rival to Botox (Friday), called Daxxify which is made by Revance Therapeutics. AbbVie’s Botox currently has a 70% market share of the anti-aging market and is very profitable. This looks like it is about to change as Daxxify last for six months whereas Botox lasts for four.
• The container shipping industry is facing a tough reality as the boomtimes of the last three years look likely to end (Friday). MSC, Maersk and Hapag-Lloyd are among the companies to have made huge profits because of sky-high demand and freight rates, but that seems to be losing momentum as worries about global inflation and potential recession take hold.
• Cineworld filed for bankruptcy in the US with debts of $5bn (Thursday) after the world’s #2 cinema chain suffered the consequences of abysmal timing of a takeover deal just before Covid hit.
• UK banks are getting into the BNPL market (Monday) in a bid to jump onto the latest bandwagon. I would have thought that it’s easier for a bank to offer BNPL services because it’s just a variation of what they already do, whereas I would have thought that BNPL specialists like Klarna won’t be able to offer banking services. If banks continue down this road and regulators get heavier-handed with the BNPL sector, there may not be a BNPL sector left! I wonder whether banks will just buy these businesses (maybe even Klarna itself!) to hasten the development of this as a standalone service or perhaps as part of a newer brand designed to attract a younger demographic.

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

My favourite “alternative” story this week was unquestionably Japanese hotel gives you a beer tap in your room, 10 liters of craft beer to drink for free (SoraNews24, Casey Baseel). How great is 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 DAY IN BRACKETS 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.

Russia’s talking a good game, energy panic goes up a notch and sterling heads towards parity with the dollar.

• IN THE US – job openings jumped as the labour market remains tight (Wednesday) as the Job Openings and Labor Turnover Survey stats came in above expectations and confirmed the ongoing tightness of the labour market.
• IN RUSSIA – the country’s first deputy PM, Andrei Belousov, said Russia’s GDP will only fall by a bit more than 2% this year (Tuesday) and a maximum of 1% in 2023 despite all the sanctions. Clearly, the Russians will be talking a good game to show citizens that they can weather the storm while countries imposing the sanctions will want to show that punitive measures are actually working. Maybe the truth is somewhere in between – or perhaps countries like India and China are buying up everything we’re rejecting…
• IN JAPAN – the government is planning on its biggest defence spending increase since WW2 (Thursday) as tensions in the Pacific worsen.
• IN EUROPE – Eurozone inflation hit a record high of 9.1% (Thursday), according to the latest release by Eurostat. This was above expectations and came off the back of a strong July. On a positive note, the Eurozone’s jobless rate hit a record low of 6.6% (Friday), which is pretty impressive given current economic circumstances. Is this really sustainable?
• IN GERMANY – inflation hit 7.9%, which is the highest it’s been since the winter of 1973-4 (Wednesday). This is not great considering that it’s probably going to get worse from here.
• IN THE UK – Goldman Sachs reckons the UK will fall into a recession that will last until 2024 (Tuesday) and that inflation could hit 22% if the Ofgem price cap rises by 80% in January (Wednesday). Remember that economists can be wrong as well as right 😜, but it is interesting.

In COMMODITIES…

• Oil prices are falling on worries about the cumulative effects of ongoing high inflation (Wednesday) and it’s the first time that they’ve remained below $100 a barrel at month-end since January (Thursday). It’s looking increasingly likely that producers at the next OPEC+ meeting could actually cut production to stem any further price slides.
• Wheat prices got cheaper (Thursday) as a strong Russian harvest and limited resumption of Ukrainian exports kicked in. This will be particularly good news for countries like Egypt who source heavily from Russia and Ukraine.

In ENERGY…

• The EU announced plans to unveil emergency measures to curb soaring energy prices (Tuesday), but haven’t given much detail at this stage. Wholesale gas prices fell back after this announcement (Wednesday) but even so, Shell reckons that European gas shortages will last for a few years yet (Tuesday). On a ground level, Gazprom stopped gas deliveries to France’s Engie (Wednesday), blaming a dispute on payments.
• There was a lot of newsflow on the impact of rising energy costs. German manufacturers are cutting production hours to limit their energy bills (Thursday), which doesn’t sound good (surely less hours = less need for current employee numbers = redundancies) and Germany’s finance minister said that although he’s about to release a massive relief package, there won’t be any direct household support for at least a year (Friday)! In the UK, some British factory workers are being asked to wear jumpers and work at night (Thursday) to reduce their company’s electricity bills, Network Rail is bracing itself for a massive rise in its energy bill (Friday) when its current agreement runs out and there are real fears that the hospitality industry is facing large-scale failures (Tuesday) due to sky-high energy bills. BrewDog announced the closure of a number of its bars (Thursday) while the viability of other bars and clubs remains in the balance (Wednesday). Consumer disquiet continues to grow and a protest movement called “Don’t Pay”, which advocates the mass-cancellation of direct debits to utilities companies on October 1st, is gathering momentum (Friday) while the power generation industry itself is offering up potential remedies (Friday).

Meanwhile, in CRYPTO AND OTHER CURRENCY NEWS…

• NFT demand has evaporated in the wake of the crypto crash (Wednesday) with volumes and values dropping dramatically.
• The Euro continued to lose ground against the dollar (Tuesday) and the Pound appears to be heading towards Dollar parity (Friday).

But apart from that, everything’s going great…😜

• Earnings continue to fall in real terms (Thursday) according to the Resolution Foundation think-tank and more of us are turning to other sources of money. Credit card borrowing is now at its highest level for 17 years (Wednesday) and the TUC is saying that workers are reducing or cutting their pension contributions entirely (Tuesday). Consumers’ difficult current circumstances are having knock-on effects as per Klarna’s losses almost quadrupled (Thursday) thanks to a combination of rising credit losses, higher staff costs and rapid international expansion.
• On a more positive note, Fulham Shore has managed to put in a solid performance (Thursday) as the owner of The Real Greek and Franco Manca has managed to navigate a tricky market thus far. The company said that it wouldn’t be immune to the effects of higher energy bills on a sustained basis, though…

• IN EV NEWS – Chinese manufacturers BYD and Great Wall are making a push into the UK market with their EVs (Tuesday) but I would have thought it will take them years to succeed as it generally seems to take a long time for consumers to trust a new entrant into the market. Polestar announced a $1bn loss for the first half (Friday) as rapid expansion and flotation costs dented finances. On the upside, it has a decent cash buffer and will be launching its new electric SUV, the Polestar 3, in October.
• IN BATTERY NEWS – Honda and LG announced plans to build a $4.4bn US battery plant (Tuesday) with the first batteries to roll off the production line by the end of 2025. In contrast, Britishvolt is coming unstuck (Tuesday) as the British battery start-up is going to have to delay the opening of its battery plant until late 2025. It’s had a bad time of late having lost a second co-founder, but I think that it’s too high profile a project to be allowed to fail. Meanwhile, Toyota announced a $5.3bn investment in battery tech (Thursday) and is interesting because it differs from others in the sector as it wants to do everything in-house by itself with no JV partners.

• IN LEGAL DEVELOPMENTS – legislation is being discussed in the US which will force the major tech platforms to take into account the physical and mental health of minors when they design their products (Wednesday), but this is very much a fluid situation currently. Big Tech is pushing back and if the changes are signed off, they would come into effect in July 2024.
• Elsewhere, Nvidia is being forced to provide special licences to supply Chinese customers two of its processors (Friday) that are widely used to accelerate AI calculations. US-China tensions continue to tighten while Nvidia is left in the middle potentially nursing a $400m sales loss as a result. The Microsoft/Activision deal faces scrutiny by the UK’s CMA (Friday) who reckons that it will harm competition among console game makers and potentially in newer areas of game streaming. Interestingly, Brexit has meant that the UK’s CMA now has the power to veto prominent deals – in the past, this would have been Brussels’ responsibility. The Twitter drama had its latest twist with its ex-head of security confirming some of Musk’s allegations (Wednesday) against the company he is trying to back away from. Later in the week Twitter announced it was putting a new “Edit” button through testing (Friday), which is something Musk was keep to implement. We also saw that Snap announced its was cutting 20% of its staff (Thursday) and abandoning its recently launched drone in order to rein in costs.

• IN REAL ESTATE – UK house prices are rising at an annualised rate of 10% despite increasing mortgage costs (Friday), but that’s largely because of the poor supply of properties rather than red-hot demand. That said, seven small UK lenders pulled buy-to-let mortgages (Wednesday) in order to give them time to catch up with a deluge of applications they were seeing from landlords trying to lock in rates before they went up further.
• IN RETAIL – America’s Bed Bath & Beyond (Thursday) was suffering from a meme-stock hangover this week as the company announced the closure of 150 stores, staff cuts and share sales to raise money. Chinese e-tailing giant Pinduoduo surprised the market with a chunky rise in revenues (Tuesday) thanks to its “618” shopping event, the second biggest online shopping event in the world after Alibaba’s Singles’ Day.
• IN MEDIA – Disney is looking at offering a Prime-style option (Thursday) which could combine its streaming services, theme parks, resorts and merch in a single offering to subscribers. I think this sounds interesting because its services are more closely aligned with its customer base might be interested in whereas Amazon’s services are perhaps too broad to be attractive to everyone. We also heard that Netflix is seeking to charge op dollar for its ads at the moment (Thursday) as it tries to get the revenues rolling in ahead of the launch of its ad-supported service. If I was an advertiser, I’d be willing to wait until the rates fall given that ad spending tends to drop in economic downturns.

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

It was a bit of a quiet week for “alternative” stories, but I think that the most bizarre one was Spreadable coffee to put on your toast going on sale in Japan (SoraNews24, Casey Baseel). This just sounds plain weird, doesn’t it??

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 DAY IN BRACKETS 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.

Rivers dry up, gas prices jump and real wage rises in the UK take us back over 15 years 😧…

• IN THE US – the Fed looks like it’ll continue to raise interest rates (Thursday), according to the minutes of the latest Fed meeting which were released this week. Biden’s clean energy continues to face hurdles (Thursday) although it has been widely praised thus far. As always the devil is in the detail and the execution!
• IN CHINA – the lending rate was cut by 0.1% to 2.75% (Tuesday) in the first such cut since January, implying that there are rising concerns in Beijing about the cumulative effects of Covid lockdowns and a massively indebted real estate sector. Energy shortages have boosted China’s use of coal (Friday) and, to make matters worse, the Yangtze River is drying up (Thursday), which has led to companies like Toyota and Foxconn to suspend plant operations. It is China’s biggest and most important waterway. Given China’s recent sabre-rattling in the region, ostensibly prompted by Nancy Pelosi’s recent visit, there was also an interesting discussion about what might happen if there was a blockade of Taiwan (Tuesday). Basically, it would be a disaster for the world’s semiconductor supply – among many other things.
• IN GERMANY – power station owner Uniper posted a massive loss (Thursday) even after agreeing a bailout package with the German government. The Rhine is continuing to dry up (Tuesday) to the extent that heavier cargo ships are now unable to use it. The effects of global warming, eh…
• IN TURKEY – markets were surprised by the central bank’s decision to cut interest rates from 14% to 13% (Friday) as it continues to believe – contrary to pretty much everyone else in the world – that cutting interest rates is the right way to slow inflation down. It is widely believed that Turkey’s inflation rate will soon breach 80%…
• IN THE UK – inflation hit a 40-year high (Thursday) as the latest official inflation figure from the ONS hit 10.1% – the first double-digit annual increase since February 1992! Markets are now pricing in interest rates of 3.5% or 3.75% early next year…

In ENERGY NEWS…

• Germany has decided to to a U-turn on its previous stance on nuclear energy (Wednesday) and is trying to keep its last three nuclear power plants running to keep electricity going.
• Kosovo is experiencing blackouts as Russia’s restriction of energy supplies hits (Tuesday) in a potential sign of things to come for the rest of Europe as we head into winter.

In COMMODITIES NEWS…

Oil and metal prices fall (Tuesday) on fears of a weakening Chinese economy while gas prices jump (Wednesday) – thanks to ongoing concerns about how Europe is going to react to Russia choking off energy supplies – and BHP benefits from increasing coal prices (Wednesday). Meanwhile, the EU is doubling down on efforts to source its own raw materials (Wednesday) as it intensifies efforts to mine its own lithium, cobalt and graphite to wean it off excessive imports. Clearly, it has seen what is happening in energy and doesn’t want the same to happen in commodities – especially if things go south with China.

• US CONSUMERS…continue to spend on fun – particularly on travel and entertainment (Monday) and it is interesting to note that food prices have gone up so much now that the price gap between “cooking your own” and going to a restaurant is now at its narrowest since the 1970s! (Tuesday)!
• SPANISH CONSUMERS…are joining in the global trend for buying own labels to save money (Tuesday) as well as Italians, Brits and Americans (among others, no doubt!).
• UK CONSUMERS…are facing higher prices for a full English brekkie (Friday) as rising prices for food and drink drove up inflation (Thursday). Brits are expected to continue drinking through it all (Friday), though, but the latest survey from GfK showed that UK consumer confidence has hit a new low (Friday). IN EMPLOYMENT TRENDS…the number of open vacancies has slowed down (Wednesday) for the first time in two years while nominal wages continue to rise in a tight job market (Monday) but fall in real terms (Thursday) as some employers try to help employees by announcing one-off payments (Tuesday). Meanwhile, PwC lowered its entry requirements so a 2:1 is no longer required (Monday), which is good in a way, although I think it’s also a slap in the face for the university system because it seems to me that, by doing this, PwC says that it knows best. It was also interesting to note that the four-day week experiment doesn’t seem to be working (Monday), which I’m sure will be a relief to employers who probably don’t want to pay their staff 100% of their wages for rocking up in the office only four times per week.

In THE RETAIL SECTOR…

• IN THE US – solid results from Walmart and Home Depot calmed fears of recessionary impact (Wednesday) while Bed Bath & Beyond got the meme stock treatment on the up (Wednesday) and on the down (Friday). Estée Lauder and Kohl’s had a tricky time (Friday) thanks mainly to their exposure to China and build-up of inventory respectively. Target’s latest update disappointed (Thursday) as it too had problems with offloading excess inventory.
• IN THE UK – preppy apparel retailer Joules named a new boss (Tuesday) who is ex-John Lewis and Ted Baker was taken over by Authentic Brands Group (Wednesday). In grocery retail, Aldi is set to overtake Morrisons as Britain’s #4 supermarket (Wednesday) and Nationwide is helping its staff in the cost-of-living crisis by increasing pay again (Tuesday).
• IN ONLINE RETAIL NEWS – Europe’s biggest online fashion retailer, Zalando, announced disappointing sales numbers (Monday) but brushed this off as a blip while Amazon has been testing out a new TikTok-like feed in its app (Thursday) that’s designed to make it more shareable on social media.

Meanwhile, in REAL ESTATE NEWS…

• UK house price growth is slowing (Thursday), according to the latest data from the ONS and Rightmove said that house prices are falling (Monday) while new UK-based lender has just been granted a new licence by UK financial regulators to offer fixed mortgage rates with a 50-year term (Tuesday)! Halifax has made moves to concentrate more efforts on providing mortgages for the wealthy (Friday), echoing similar recent moves from the likes of NatWest and Nationwide.

• Apple continues to take a bigger slice of the digital advertising market (Tuesday) while more people use Apple Pay (Friday) as the company gets tougher on its staff working from home (Wednesday).
• Snap gives up on yet another bit of hardware (Friday) as it ditched further development of the Pixy mini-drone. This is its latest failure following that of the Spectacles. It’s having a tough time at the moment.
• Tencent announced its first ever quarterly revenue loss (Thursday) after numerous clampdowns by Beijing on the gaming sector. This is particularly notable given that it has posted double-digit growth for pretty much every quarter since it floated in 2014.

• IN LEISURE – the City of London has lost 14% of its restaurants since 2020 (Monday), a percentage that isn’t too dissimilar in places like Birmingham and Glasgow. Casualties of lockdown…talking of which, Cineworld is in trouble as its share price halved on news it is in rescue talks (Thursday). It is blaming a poor slate of releases, but this sounds like 🐂💩 as arch-rival AMC Entertainment (owner of Odeon) is doing just fine 👍. Craft brewers are worried that recession will kill them off (Monday) as punters look to slake their thirst with cheaper beverages and the owner of members’ club Soho House, Membership Collective Group, cut its forecasts despite seeing a strong rise in memberships (Thursday).
• Elsewhere, Chinese car maker Geely unveiled disastrous profits (Friday) as successive lockdowns and semiconductor shortages took their toll, Goldman Sachs cut pay in London by 60% (Tuesday) due to a slowdown in dealflow, WeWork founder Adam Neumann got a ton of money to invest in his new real estate venture called Flow (Wednesday) and the UK approved a new Covid booster from Moderna (Tuesday). Meanwhile, P&O’s owner DP World announced massive profits (Friday) and the latest figures showed that British young adults are now spending more time on TikTok than they are watching TV (Wednesday).

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

Although I had a lot of fun researching this week’s “alternative” stories, there was only one clear winner: ‘Clever’ dog leaves people in stitches as it’s spotted surfing along a beach (The Mirror, Zahna Eklund). Amazing!

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

THE DAY IN BRACKETS 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.

The drama continued with energy, the heatwave continued to call all sorts of problems and SoftBank had a historic moment regarding its stake in Alibaba…

• IN THE US – Inflation eased versus July (Thursday) on lower petrol prices, taking the pressure off the Fed and Biden for the moment, who continue to battle against rising prices. US factory prices fell as well (Friday), in another sign that inflation may be easing.
• IN CHINA – we see that the mainland’s zero-Covid policy continues to have negative effects as Hong Kong’s population declined by the sharpest rate in at least 60 years (Friday) as Hong Kongers emigrated to destinations including Australia, Portugal and Canada. Tensions between China and Taiwan continue to be stoked as Taiwanese authorities are trying to stop Foxconn from investing $800m in China’s Tsinghua Unigroup (Thursday) as it wants to align more with the US. Foxconn investing such a sum in a Chinese company may be seen to go against this.
• IN EUROPE – some say that Europe is going to be in a worse inflation crisis in the UK because of its greater reliance on Russian energy supplies (Monday), something that was alluded to by Germany’s finance minister who talked about how “fragile” his country’s economy was thanks to this (Friday), which is serious because Germany is the bloc’s main economic driver.
• IN THE UK – fears among UK businesses about inflation reached their highest ever level (Monday), according to a monthly report by BDO. This was all down to a weaker pound, higher labour costs, labour shortages and supply chain problems. This won’t have been helped by the Bank of England saying last week that it expects UK inflation to hit 13%.

The topic of energy is never far from the conversation and there were more developments this week as countries panic about not getting enough…

• Russian oil flow to central Europe stopped this week (Wednesday), putting loads of pressure on countries like Slovakia, the Czech Republic and Hungary and European electricity prices hit new highs (Friday). The IEA said that western sanctions intended to make life difficult for Russia haven’t worked (Friday) as oil shunned by the West is just going to countries like India, China and Turkey.
• Elsewhere, German utility company E.ON cut the value of its stake in Nord Stream 1 (Thursday), the pipeline connecting Western Russia to Germany via the Baltic Sea. It owns a 15.5% stake that they had valued at €1.2bn in March but they decided that this was now worth about €500m. Norway decided to cut power exports (Tuesday) as hydroelectric plants aren’t generating nearly as much power as normal thanks to the European heatwave, and this may have negative implications for the UK. Also, Danish wind turbine manufacturer Vestas posted disappointing Q2 results (Thursday) and it said that it was looking forward to the positive impact of upcoming renewables subsidies in the US.

There was more bad news in crypto this week…

• Coinbase, one of the world’s biggest crypto exchanges, posted a big swing into a chunky Q2 loss (Wednesday) with trading volumes halving as many expect a “crypto winter”.

• IN REAL ESTATE – UK builder Bellway posted record revenues and an outlook for a strong 2023 (Wednesday) while mortgage lenders are having to turn away customers (Wednesday) who are flooding in with applications in an attempt to beat more expected interest rate rises – which then lead to higher mortgage rates. That said, estate agents are reporting a continued fall in buyers (Thursday) while top-end estate agent Savills is getting a bit wobbly about global property markets (Friday), mindful of the effects of inflation and tricky prospects for the office market. It seems to me, then, that the UK residential property market is being driven by a shortage of supply, not because of red-hot demand. This is something that is true of the current state of the UK rental market as London tenants are still facing “increasingly unaffordable rents” (Tuesday) with weird things like tenants competing in bidding wars and having to pay 12 months of rent in advance (sure signs of an overheating market!) occurring.
• CONSUMER SPENDING IS CHANGING – and it was interesting to see the figures from the BRC and KPMG which showed that UK consumer spending grew in July versus the previous month (Tuesday), something that was echoed in the latest update from Barclaycard (Tuesday), which showed that spending increased by 7.7%, although that was probably more due to rising prices rather than higher spending volumes. WE ARE SPENDING on travel (Wednesday), as air fares have shot up; hotels (Wednesday), as IHG had a storming first half; and high-end fashion (Wednesday) as the likes of Ralph Lauren and Michael Kors were the latest labels to announce strong performances. WE ARE NOT SPENDING so much on used cars (Wednesday) as supply chain problems mean that there just aren’t as many available; takeaways (Thursday) as Deliveroo, aka “Flopperoo” thanks to its dire share price performance since flotation, publish its latest set of disappointing numbers; and gambling (Friday) as Entain, the owner of Ladbrokes and Coral, saw punters betting less.
• IN EMPLOYMENT – IWG’s poor results suggested the the return to office wasn’t as good as it had predicted (Wednesday), recruiter PageGroup reported early signs of a job market slowdown (Tuesday) and German investment bank Berenburg said it would cut 5% of its staff (Tuesday). I think we’ll see more job cuts among investment banks as deal flow continues to get patchier. In other trends, a report from the International Labour Organisation said lockdowns had hit youngest workers hardest (Friday) and it turns out that larger companies have been raising wages (Friday) to help staff counter the rising cost-of-living. Although City workers have continued to get big pay raises (Monday), there is a rise in demand for companies who offer pay advances (Monday), like Wagestream, which provides employees of signed-up employers the ability to draw on their wages before they get paid.

• Abrdn announced a big pre-tax loss for the first half of 2022 (Wednesday) as customers withdrew their cash at a faster-than-expected rate due to tricky market conditions while Prudential suffered from repeated Hong Kong lockdowns (Thursday) and said that it expected market conditions to be “challenging” for the rest of the year. Meanwhile, L&G benefited from more companies wanting to offload their pension schemes (Wednesday) and Aviva did better-than-expected in generating cash (Thursday), which prompted a buy-back. Admiral had a disappointing time as its first-half profits almost halved (Thursday) and the much-hyped Robinhood saw its nightmare continue (Thursday) as users continued to abandon the platform.

• IN SEMICONDUCTORS – some chip-makers, including Micron Technology, reckon there will be a slowdown in demand (Wednesday) while Intel continues to appeal to the UK to put money into chip production (Tuesday).
• SoftBank had a bad week this week as it announced a massive €23bn loss (Tuesday) shortly followed by a big sell-off of one of its most famous investments, Aliababa (Thursday).
• Gloom in the tech sector continued as Microsoft is cutting costs (Wednesday) and I wonder whether we are going to see redundancies next.

• IN EV NEWS – Elon Musk sold about $7bn-worth of Tesla stock the period of over a few days (Wednesday) as the Twitter thing drags on and Rivian saw its losses nearly triple (Friday) although the Q2 results were largely in line with expectations.
• IN HEALTHCARE NEWS – GSK and Haleon could lose billions (Friday) as there are fears that GSK’s common stomach ulcer treatment, Zantac, may be carcinogenic. If it is proved to be the case, there could be huge damages to pay, something that another rival company is aware of as Johnson & Johnson said it would withdraw talc-based baby powder globally next year (Friday) a few years after it was withdrawn from the US and Canada for harming some female users.
• IN MEDIA NEWS – US TV networks and new publishers reckon they are seeing a slowdown in the advertising market (Monday), but Fox (Thursday) and News Corp (Tuesday) were quite upbeat about it. It was also interesting to see that Disney reported an earnings surge (Thursday), with success in Disney+ subscriber numbers playing a part.
• IN LEISURE – Tui suffered a Q3 loss thanks to flight disruptions (Thursday) while hotels increased prices (Monday) and restaurants remained in the red (Monday) thanks to higher debt costs, staff shortages and rising energy bills.
• THE HEATWAVE is also having some serious consequences as UK farmers are warning of potential vegetable shortages (Monday) and olive oil prices are rising (Wednesday) because the lack of water is ruining harvests while water levels on the Rhine have fallen significantly (Thursday), which will put further pressure on supply chains.
• ELSWHERE, Siemens had its first quarterly loss in 12 years (Friday), Britishvolt’s Northumberland gigafactory is on “life support” (Friday) and Next said it would take a £15m stake in struggling apparel retailer Joules (Tuesday).

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

My favourite “alternative” story of the week was Tourists duck as plane makes extremely low landing on Greek island of Skiathos (SkyNews), which is just incredible!

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 DAY IN BRACKETS 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.

Pelosi caused a splash, crypto wallets got drained and the Saudi’s ignored Biden…

• Speaker Nancy Pelosi caused all kinds of problems with a visit to Taiwan (Thursday) as she stopped over as part of her tour of Asia where she’ll be popping in to Japan, South Korea and Malaysia. China responded by conducting military exercises close to Taiwan and a lot of angry rhetoric. I think that this may just be sabre-rattling by Biden whose pleas to the Saudis to produce more oil were ignored (Thursday) as his administration considered sanctions against those found to be supporting Iranian oil shipments (Monday) and strong intentions to restrict Russian oil trading were also walked back (Monday) because it would be too disruptive to European countries. Biden seems to be pretty ineffectual at the moment and we also heard that US jobless claims rose (Friday), powered in part by layoffs in the tech sector.
• IN CHINA – manufacturing activity shrunk last month (Monday) as the country continued to suffer repercussions from ongoing Covid lockdowns. Its GDP growth target for year-end is looking very dodgy. The lockdowns had knock-on effects as Hong Kong fell into recession for the second time in two years (Tuesday) with exports and tourism taking a particularly bad knock.
• IN THE UK – manufacturing growth slumped to its lowest level since May 2020 (Tuesday) according to the latest S&P/CIPS stats and the all-important services sector grew at its lowest rate since February 2021 (Thursday). No wonder UK firms are getting increasingly nervous about investment (Monday) according to the latest survey by the Institute of Directors. The Bank of England hiked interest rates by the largest margin in 27 years (Friday) in order to fight inflation that it thinks will hit 13% by year-end. Bad though this is, spare a thought for the Turkish people whose rate of inflation is now just shy of 80% (Thursday), its highest level since 1998.

There was, as always at the moment, a lot of newsflow on ENERGY.

• In its infinite wisdom, the IMF is urging European countries to pass on energy costs to customers (Thursday). The rationale here is that passing on all the costs will encourage “energy saving” and accelerate the shift to renewables. Commerzbank analysts joined the chorus of warning voices saying that Germany will suffer particularly acutely if Russian gas gets cut off (Thursday) and analysts at Cornwall Insight reckon that British businesses will face a 500% jump in energy bills (Thursday) when wholesale prices rise. Individual companies are thinking of ways to reduce energy consumption. French retailer Carrefour is thinking of turning the rotisseries on earlier and dimming the lights (Monday) while UK retailer Iceland faces massive cost increases (Monday) given that it has way more freezers than other supermarkets. Energy-intensive firms will have to shorten operating hours (Monday).
• IN COAL NEWS – we see that Glencore is raking it in from the energy chaos (Friday) as it smashed profit records in the first half thanks to the rising price of coal. Prior to the Ukraine war it had invested a lot in this area and clearly the gamble is now paying off handsomely.
• IN RENEWABLES NEWS – nuclear fusion technology continues to progress. Oxford nuclear fusion start-up First Light Fusion is seeking to raise more funds (Wednesday) to finance the next stage of its research, which sounds like it’s going well.

There were some interesting developments in CRYPTO this week:

• Thousands of crypto wallets linked to the Solana blockchain were drained by hackers (Thursday), in a major blow to all things cryptocurrency. An incident like this isn’t going to do anything to enhance crypto’s reputation!
• There was one incremental bit of good news for crypto, though, as Coinbase signed a deal with BlackRock to hook its clients up to digital asset markets (Friday).

• US CONSUMERS are cutting back and going to dollar stores (Tuesday) in order to cut costs and eBay put in a solid performance (Thursday), something I would expect to continue as people look for ways to raise money by searching their homes for items to sell and buyers look to save money by buying on such platforms. Despite everything, US consumers are still ordering takeaways at DoorDash (Friday) and it was even confident enough to have a positive outlook, despite the cost-of-living crisis.
• GERMAN CONSUMERS are also reining in spending as retail sales fell by the steepest rate on record (Tuesday).
• SPENDING TRENDS ARE EMERGING as Starbucks’ strong sales show consumers still want their daily cup of coffee (Wednesday), they also spend some of their money on Airbnb breaks (Wednesday) and getting around in minicabs as Uber reported a doubling of revenues (Wednesday) – while its Uber Eats business also continues to do well. Brits are also spending on summer outfits and suits, according to Next (Friday). WE ARE GOING TO HAVE TO SPEND OUR MONEY ON air fares as BA has decided to extend its suspension of Heathrow ticket sales (Wednesday) and Direct Line is going to put motor insurance premiums up (Wednesday) after having to contend with higher claims costs while Greggs is putting its prices up for the third time this year (Wednesday). WE ARE NOT SPENDING OUR MONEY on dating apps like Tinder (Wednesday) and its CEO had to take the fall for it (NB Tinder is a brand of Match Group). We are also not spending money on trading stocks as Robinhood laid off 23% of its staff (Wednesday), drinking oat milk (Wednesday) , video streaming subscriptions (Friday) – with the exception of Disney+ and Apple TV+ – or DIY (Wednesday).
• Alibaba is slowly but surely going back to China. Although it wants to keep its New York listing, the SEC plans to kick Alibaba out in 2024 (Tuesday) for insufficient disclosure and SoftBank has been selling down its stake in a big way (Thursday). So much for international expansion to get some growth. The Chinese authorities’ constant pressure is clearly taking its toll.

• IN UK RESIDENTIAL PROPERTY – we see that first-time buyers are looking outside London (Monday) as they are increasingly being priced out while at the other end of the scale, equity release is on the increase (Wednesday), according to the Equity Release Council as homeowners are withdrawing cash from their properties to cover the rising costs of day-to-day living. Despite demand in the housing market remaining strong (Tuesday) and some development in west London being curtailed because the electricity grid has run out of capacity (Monday), thus further limiting the supply of properties, estate agent Purplebricks has somehow managed to make a loss (Wednesday), which is so bad as to be impressive. If an estate agent can’t make money in a market like this, things will surely get terminal when the market falls. Worries about household finances have prompted Nationwide to focus on wealthier clients (Thursday) as they are less likely to default.
• IN OFFICE PROPERTY – some are saying that there are tough times ahead (Tuesday) due to a combination of the fading away of cheap financing (rising interest rates forcing up borrowing costs) and the push for more environmentally-friendly working environments (which entail costly upgrades for the landlord) although actually WeWork has been recovering nicely (Friday) as people return to the office, helping its occupancy rate return to pre-pandemic levels.

• The luxury end of the car market is still going strong – Ferrari reported record profits (Wednesday) and it was even confident enough to raise its full-year revenue forecasts. Mind you BMW sales lost momentum (Thursday) as they were hit particularly badly by supply chain problems – although you do wonder, given arch-rival Mercedes-Benz announced strong results.
• Among Japanese makers, Toyota saw its profits halve (Friday) due to supply chain problems and the effect of China lockdowns – but it did leave its full-year figures unchanged. Rival Nissan said it was going to offer long-term rental EVs in Japan (Thursday) in an effort to stem the flow of its cars (and the precious metals within them) for sale secondhand abroad. Elsewhere, Lucid cut production due to – you’ve guessed it – supply chain and logistics problems (Thursday) and have become the latest EV start-up to discover that the automotive industry isn’t that easy.
• In the UK, car sales continue to slide (Friday), according to the latest figures from the SMMT. This is the fifth consecutive month of falling car sales and I suspect it’s not going to get much better.

• IN SEMICONDUCTOR NEWS – Samsung and Hynix are facing tricky decisions – whether to appease the US or appease China (Thursday) as they want to be able to get access to the $52bn in grants the US is offering to build semiconductor factories in America. If they do so they will have to curtail any further investment in China, which will no doubt irk the Chinese. TSMC is in a similar dilemma (Wednesday) while there were contrasting fortunes for fellow chipmakers as AMD prospered and Intel struggled (Wednesday).
• IN OTHER TECH NEWS – Nintendo’s Q1 performance was disappointing (Thursday) thanks to the ongoing global chip shortage but it expects to get back on track by the end of summer. There was a lot made about Instagram’s chief basing himself in London for the next few months (Wednesday) but it just seems to me that he’s over here to build out its presence and then go back, so no biggie IMO.
• ELSEWHERE – consolidation in the satellite sector seems to be gathering pace as SES and Intelsat are now in deal talks (Friday), traditional ad agencies (apart from S4 Capital, which is having its own problems) are doing OK relative to their digital counterparts (Tuesday) as their “secret sauce” of customer targeting has been severely damaged by Apple’s privacy changes and Pearson is continuing with its migration from analogue to digital delivery (Tuesday), even talking about ways to use NFTs to help it get more revenues on its published works. It was also unsurprising to hear that container shipper Maersk knocked it out of the park again (Wednesday) due to the ongoing effect of supply chain disruptions.

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

My favourite “alternative” video of the week was the one of Spider-Man dancing in a supermarket. Superb!

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 DAY IN BRACKETS 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 week, the Fed got feistier and the energy convo gets increasingly heated…

• The IMF said that the world is on the cusp of recession (Wednesday) as it updated its World Economic Report that it published in April. Unsurprisingly, it cut its growth forecasts and made for gloomy reading!
• IN THE US – the Federal Reserve raised interest rates by 0.75% for the second consecutive month (Thursday). This was widely expected and there is speculation as to whether another big hike will happen next month, although Fed chief Jay Powell said that he would give the market less guidance as to what he is thinking (Friday), which means that everyone will be guessing again. US GDP contracted again (Friday), meaning that it is technically in recession but because it’s America, it has extra criteria so that it can pretend that it isn’t (but it is). For pretty much everyone else, the definition of recession is two consecutive quarters of GDP contraction.
• IN EUROPE – Goldman Sachs economists reckon that the Eurozone will go into recession this year (Thursday), which is hardly surprising given the macroeconomic situation and energy nightmare the bloc is having currently. It was also interesting to see that controversial populist Hungarian PM Viktor Orbán is changing his tune (Thursday) so that he can get his hands on €15bn of pandemic funds that Brussels has control of.

Energy continued to be a hot topic this week as we edge closer to the autumn.

• EU countries were lining up to appeal for exemptions for cutting gas usage (Monday) just as Russia squeezed gas deliveries (Tuesday). In the meantime, Putin, Drax (Wednesday), Equinor, Iberdrola (Thursday), Shell and Centrica (Friday) are all benefiting from higher energy prices. Germany is having to rethink its exit from nuclear power (Wednesday), National Grid is asking for UK coal plants to go on standby (Thursday) and it turns out that it begged Belgium for electricity last week (Monday) to ensure supplies kept flowing.

There was an interesting development for cryptocurrency this week…

• The Law Commission put forward new proposals to give British courts the power to award damages in Bitcoin and other crypto assets (Thursday). The rules could help with guidance on how to treat these new assets and may act as precedent for other jurisdictions, but nothing is finalised about this as yet.

• Alphabet saw its growth slow down (Wednesday) as it announced its worst sales growth for two years due to falling advertising sales. Weaker advertising revenues continues to be a recurring theme as Meta announced its first ever drop in revenues (Thursday) while Twitter’s ad revenue woes were worsened by its Musk lawsuit (Friday) as corporate clients used it as an excuse to give them less business.
• IN STREAMING – Spotify managed to add subscribers over Q2 (Thursday), showing that it was wrong for investors to tar all streamers with the same brush as Netflix. Disney+ started to show more grown-up content (Monday), which is interesting because it may mean that subscribers keep subscribing because they may want to see what else it has up its sleeve!
• Lockdown winner Shopify is having a shocker (Wednesday) as it revealed that it was going to cut staff numbers by 10% in response to a slowdown in growth.

• Ford (Thursday), and Stellantis (Friday) announced strong numbers from the volume producers although GM saw profits fall (Wednesday) thanks to China weakness and ongoing supply chain problems. Mind you, at the more luxury end of things, Bentley (Friday) and Mercedes-Benz (Thursday) put in strong performances as more affluent consumers continue to spend.
• It was interesting to hear that Tesla is thinking about opening up its charging network in the US (Monday) in order to get its hands on government funds designed to encourage the expansion of the charging network more generally. I suspect similar schemes around the world as everyone tries to boost charging network capabilities. Closer to home, we heard that a service station on the M6 could be one of the first HGV hydrogen refuelling stops in the world (Monday). Hydrogen is being looked at as a suitable power source for HGVs, but it’s not commercially viable at the moment – hence the testing.
• More generally, car manufacturing in the UK is picking up (Thursday), according to the latest figures from the SMMT. This is the second consecutive month of growth, so it looks like things are picking up nicely just as the cost-of-living crisis is kicking in!

• US consumers are (like their British counterparts) continuing the trend of trading down (Monday) in order to save costs but when you’ve got the likes of Unilever, Coca-Cola, McDonald’s (Wednesday), Kraft Heinz, Reckitt Benckiser (Thursday) and Nestle (Friday) increasing prices, consumers are being forced to rethink their spending habits, although it seems that they are doing so whilst drinking premium spirits, according to Diageo (Friday). All of this is being echoed by the latest BRC report which says that shop prices are rising at their fastest rate since at least 2005 (Wednesday) as Asda’s latest monthly income tracker shows that household spending power continues to fall (Tuesday). Given that UK consumers (Thursday) and German consumers (Friday) are facing massive utility bill hikes, it’s not surprising that Sky subscriptions are falling (Friday) and corporates are spending less on advertising (Friday). The rising incidence of late repayment of car loans is further evidence of the pressure that consumers are under (Thursday) although, at the other end of the scale, LVMH booming sales shows that the affluent are immune to the cost-of-living crisis (Wednesday).
• IN RETAIL NEWS – Walmart announced a profit warning (Tuesday) as US consumers continue to rein in spending and it was interesting to see that Alibaba is pulling back from international expansion (Wednesday) as the ongoing crackdowns it has suffered take their toll. In the UK, WH Smith is staging a bit of a comeback thanks to its US business (Tuesday), particularly as its airports business gathers more momentum due to more leisure and business travel and Aldi has increased its hourly rate of pay (Tuesday) as it bids to continue its fast pace of growth and become the UK’s fourth biggest supermarket.
• IN REAL ESTATE NEWS – the share prices of Chinese real estate stocks rose on hopes of a government bailout fund (Tuesday) that could help a troubled sector. In UK residential property news, UK mortgage brokers are working hard to stay ahead of interest rate rises (Tuesday) while rental prices and first-time buyer mortgages hit record highs (Monday). Things are getting so ridiculous in the UK property market at the moment that the average asking price for a beach hut is now £50k (Monday)! Elsewhere in the sector, it seems that buy-to-let is turning a corner (Thursday) while sales of £10m+ London properties have reached their highest level for ten years (Monday)! This is due in great part, though, to the currently weaker pound.

• IN FINANCE NEWS – Swiss wealth manager Julius Baer saw a massive collapse in first half profit (Tuesday), which is notable as the company is often seen as a bellwether for the Swiss banking industry. This weakness was echoed at UBS, which saw its Q2 earnings fall short of market expectations (Wednesday) as client activity lost momentum.  Elsewhere, it was interesting to see Jack Ma relinquishing control of Ant Group (Friday). Mind you, given the pressure that he and the company were under since its IPO was pulled at the end of 2020, it was probably inevitable. Still, I would have thought that it makes a “new” IPO more likely…
• IN M&A NEWS – JetBlue bought Spirit Airlines for $7.6bn (Friday) as two American budget airlines got together to take on the big players while the announcement of Paris-listed Eutelsat and British OneWeb combining to take on the likes of SpaceX’s Starlink and Amazon’s Project Kuiper (Monday) caused a bit of a kerfuffle. Eutelsat shares fell sharply on the news (Tuesday) and there was scepticism as to whether it the combined group will be able to take on the Americans (Wednesday). Very crudely speaking, it sounds like OneWeb has the ideas (but a lot of debt) and Eutelsat has the money (but lacks creativity).

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

My favourite “alternative” story of the week was Terrified mum sees Spider-Man eerily flying towards her home – but it’s hilarious mishap (The Mirror, Amber O’Connor and Josie O’Brien) as this is just a superb video!

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

THE DAY IN BRACKETS 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 week saw a lot of drama in Europe, with the ECB getting off its behind and Italy heading towards chaos…

• IN CHINA – China lockdowns were put in place to control the BA.5 Omicron subvariant (Tuesday) and Goldman Sachs reckons that Chinese cities with districts falling into the mid-to-high risk category account for just under 25% of China’s GDP. All these zero-Covid measures are continuing to chip away at the country’s GDP growth potential. Concerns are also increasing over an invasion of Taiwan by China (Wednesday) as demand for political risk insurance is climbing sharply and inquiries to consultants and China experts about the likelihood of an invasion rise. The general consensus currently is that an invasion is unlikely, but then again they said the same about Russia and Ukraine…
• IN EUROPE – the IMF warned that Europe would fall into recession if Russia stopped gas supplies (Wednesday) while the ECB went and raised interest rates for the first time in over a decade (Friday) in order to do something to curb inflation.
• IN ITALY – Italy is going to have a September election (Friday) because PM Mario Draghi quit after his coalition partners couldn’t agree on his policies. Putin must be loving this as his war is working a treat with splitting the unity of Europe. Germany and France are in an energy crisis and Italy is in all sorts of problems.
• IN THE UK – there was a lot of talk about the potential for a big (0.5%) rate hike as UK inflation hit a 40-year high of 9.4% (Wednesday) and one member of the MPC mooted the possibility of interest rates creeping above 2%.
• IN SOUTH AFRICA – the central bank announced its biggest interest rate rise for almost 20 years (Friday) to combat inflation. It hiked its interest rate by 0.75% to 5.50%.

As you’d expect, there was a lot of comment on the energy sector (and I’d expect this to carry on for quite some months to come)…

• IN UTILITIES NEWS – The French government is going to pay €9.7bn for the 16% of EDF it doesn’t already own (Wednesday), but given that it’s racked up the debts under the state’s stewardship, you do wonder what difference this is going to make! Germany’s Uniper is on its knees at the moment (Tuesday) as it turns out that Europe’s biggest buyer of natural gas has burned through an emergency loan of €2bn in only six months! Things are looking so bad that it’s in talks with the German government about a potential bailout.
• IN GAS NEWS – Brussels is calling on member states to cut gas usage “immediately” (Tuesday) with the European Commission sending out a list with voluntary reduction targets – although there has been a lot of speculation as to whether this will actually work (Thursday). Europe was on tenterhooks as to whether Russia would actually switch the gas back on after “scheduled maintenance”, but it did in the end (Thursday).
• IN NUKE NEWS – Chevron invested in Google-backed nuclear fusion start-up TAE Technologies (Wednesday) as more money continues to be poured into this area. Meanwhile, the UK government gave planning permission for Sizewell C (Thursday), a 3.2gigawatt twin-reactor plant in Suffolk.
• IN OIL NEWS – BP said that the windfall tax would not affect its North Sea investments after all (Thursday) but oilfield services companies like Baker Hughes are having a tough time (Thursday) despite the oil companies they work for making an absolute killing!
• IN OTHER COMMODITIES NEWS – Tata Steel UK made its first pre-tax profit for 13 years (Thursday) but then its owner, Tata Group, threatened to close the Port Talbot steelworks (Friday) if it doesn’t get £1.5bn of aid from the government to help it cut carbon emissions.

Meanwhile, in the wonderful world of crypto,

• The Dutch central bank just fined crypto trading platform Binance €3m (Tuesday) for offering services without proper registration. This is a bit of a token amount and it’s interesting to see that some regulators are welcoming Binance with open arms (e.g. France, Spain, Italy) while others (Netherlands, UK) are less keen.

• The Farnborough Airshow went ahead for the first time in four years (Monday) and we saw Delta announcing a big order (Tuesday) and BAE said it would be working with Japan on the Tempest fighter project (Tuesday).
• Rolls-Royce announced it is trialling hydrogen-powered engines (Monday). These will be ground trials for the moment but it will be interesting to see whether this technology could be at all viable.
• US airlines are benefiting from selling airmiles (Thursday) and they are also making money again (Friday), although they just can’t keep up with demand. On the other hand, European flight demand is being hit badly by travel chaos (Thursday) and there has been a notable drop-off in demand.

• Consumers continue to face higher prices. Supermarket inflation in the UK hit a record 10% high (Wednesday), according to the latest Kantar stats and there is evidence of shoppers buying more own-label products to cut costs and switching to German discounters Aldi and Lidl in greater numbers.  Consumer staples companies like Premier Foods are still able to pass higher prices onto customers (Thursday) and people are still buying “affordable” treats at Hotel Chocolat (Wednesday) but they are not staying in to watch Netflix (Wednesday) and ordering in on Deliveroo (Tuesday), which announced a profit warning. Consumers are also reluctant to buy big ticket items like furniture from Made.com (Wednesday), which cut its annual sales guidance as it announced its third profit warning since listing last summer.
• IN RETAIL NEWS – Frasers Group is seeing booming profits (Friday) and is planning on opening more stores while Joules had some good news for a change (Wednesday) as it increased full-year profit forecasts and bolstered its borrowing capabilities whilst still cutting costs. In grocery retail, Amazon is now price-matching with Tesco (Monday) and Ocado is thinking of slowing down its UK expansion (Friday) as consumer spending on online grocery shopping is slowing down.
• IN REAL ESTATE NEWS – disgruntled Chinese tempers flared as they threatened mortgage strikes (Wednesday), which seemed to have the desired effect as a bailout fund was set up for property developers (Thursday). Meanwhile, embattled China Evergrande is fast-approaching a deadline to come up with a proper restructuring plan (Thursday), something everyone will be watching closely as many will want to know what exactly it’s going to do about its mahoosive $300bn (yes, that’s BILLION) debt. In the UK, a report from commercial property agent Lambert Smith Hampton says that we need a major overhaul of shopping centre developments (Thursday) as the pandemic has changed behaviours for the long term. In the residential property market, house prices have surged as buyers race to get “cheap” mortgages (Thursday).

• Amazon bought US healthcare provider 1Life Healthcare in a deal worth $3.9bn (Friday), which will give its existing healthcare business, Amazon Care, a major boost.
• Chinese ride-hailer Didi got a $1bn fine for breaches of data laws (Friday) as part of the ongoing big tech crackdown in China.
• Glassdoor was on the wrong end of a potentially terminal judgment (Wednesday) as a California ruling ordered it to unmask its anonymous reviewers as part of another case. I say this could be terminal because it lives on its reviews, and I think that it will get far fewer reviews if people have to use their real names.
• IBM had decent Q2 results (Tuesday) thanks to decent sales growth.
• IN SOCIAL MEDIA NEWS – Snap posted its weakest ever sales (Friday) as it continues to suffer from falling ad revenues since Apple changed its privacy policy. Also, the Twitter/Musk case has been fast-tracked and legal proceedings will commence in October (Wednesday). Musk may have been hoping to drag things out to put more pressure on Twitter’s share price.
• Big Tech companies signed up to Indonesia’s strict content law (Friday) that will allow content censorship and give access to user data. Signatories include Apple, Microsoft, Google, Amazon, Netflix, Spotify, Meta, TikTok and Twitter who all seem to be willing to partially ditch their “free speech” morals because Indonesia is such an enticing market.

• IN CAR NEWS – Tesla profits took at hit thanks to China factory shutdowns (Thursday) and Baidu overtook Tesla on autonomous vehicle development (Friday) as it announced plans to launch a robotaxi service in 2023, a year before Tesla is planning to. Volvo got a step closer to 100% electrification (Thursday) as it sold a higher percentage of EVs versus total sales. Meanwhile, UK car dealership Pendragon announced strong half-year results (Thursday) as new car shortages strengthened margins.
• IN FINANCIALS NEWS – Bank of America managed to limit downside in its results (Tuesday) thanks to the resilience of its retail banking business but Goldman Sachs warned of job cuts (Tuesday) as investment banking revenues fell. Meanwhile, Australia’s ANZ put in an offer to buy Suncorp’s banking arm (Tuesday) to boost the size of its mortgage book. In the UK, it was interesting to see that Direct Line issued a profit warning (Tuesday) as inflation pushed up the cost of motor insurance claims.
• IN MEDIA NEWS – Advertising company S4 Capital issued a profit warning (Friday) in another sign that advertising generally is weakening significantly as we enter a global economic slowdown. There was good news for The Guardian as it announced its strongest results since 2008 (Thursday) and there were some interesting trends among young people – that Instagram is British teenagers’ #1 news source (Thursday) and that young people are abandoning streaming in increasing numbers in order to save money (Monday). They are increasingly turning to free options such as BBC iPlayer, ITV Hub and TikTok, according to research by Kantar.
• IN MISCELLANEOUS NEWS – the UK is going to boost its “catch-up” tutoring plan with new partnerships (Wednesday) to make up for all that learning lost during the Covid years, PwC is resisting pressure to split its business into audit and consulting (Monday) having announced record revenues, GSK’s spin-off of its healthcare business Haleon didn’t go well (Tuesday), Johnson & Johnson cut full-year guidance (Wednesday) as it blamed the poor macroeconomic background and stronger dollar and ASML announced very strong Q2 numbers (Thursday) as the company that makes the machines that make semiconductors has a fat order book.

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

My favourite “alternative” story of the week was Deliveroo creates special song to stop seagulls stealing food in ‘Chipwatch’ zones (The Mirror, John Bett) as it seemed like such a good idea!

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 DAY IN BRACKETS 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.

Another incredible week! I think we all need a holiday to get over so many dramatic events!

• IN THE US – inflation rose to epic levels as it hit 9.1% (Thursday), a new 40-year high. This will make it more likely for the Fed to hike rates at the next meeting by a full percentage point.
• IN JAPAN – Japan’s LDP won the upper house election by a landslide (Monday) following the assassination of former PM and LDP leader Shinzo Abe. This will make it easier for Japan to change its Constitution – specifically the bit about defence and the military. It pacifist Constitution was imposed on them by the Americans after WW2. Subsequent attempts have been made to amend it but they have failed. However, when you consider the increasing threat of China (and possibly North Korea) in the region, you can see why there is more of a sense of urgency about changing it to enable Japan to take a more front-seat role in the defence of itself and others.
• IN EUROPE – Italy’s PM Mario Draghi caused a bit of a kerfuffle (Friday) as he offered his resignation after he lost an important parliamentary vote on a proposed €26bn package designed to protect Italians from inflation. President Sergio Mattarella did not accept it (well he did invite Draghi to be president in the first place), but the mere possibility of Italy losing a strong stabilising influence spooked investors.
• IN THE UK – the bun-fight began as candidates jostled for position in the Conservative Party leadership contest (Monday) and there was a lot of noise during the week (and this will continue). As usual with these things, everyone stabs each other in the back only for them to pull the knives back out when the winner is announced and then they all become BFFs again 🤣.

IN CURRENCY NEWS…

• The Euro hit parity with the Dollar (Wednesday), which hasn’t happened since 2002!
• IN CRYPTO – European regulators, did their usual “I-told-you-so” schtick about crypto (Monday) that they always do when Bitcoin hits the skids, but it looks like this time there might be some substance as the Financial Stability Board said it was going to put forward a new rules framework for crypto assets in October (Tuesday). Don’t get too excited, though – what they do isn’t binding, but its members (who include regulators, central banks and officials from G20 countries) generally adhere to its principles. So at least this might be a (very long overdue) step in the right direction! Celsius Network, the crypto lender, filed for bankruptcy protection this week (Thursday) just one month after freezing withdrawals as the market collapsed around it. Who’s going to be the next crypto bank/broker to crash and burn??

IN ENERGY NEWS…

• Russia turned the gas off to Germany (Tuesday), ostensibly “for repairs” as part of “scheduled maintenance”. This in itself spooked investors as concerns increased about it not getting turned back on again on July 21st, as per the original schedule. No gas to Europe would be a huge blow to the region’s economy and could tip the ‘zone into recession.
• Nuclear fusion continues to attract investment (Thursday), meaning that it could start feeding power grids by the 2030s. Interestingly, $2.8bn has been invested in the sector globally in the last 12 months versus around $2bn over the last 10 years! Tokamak Energy and First Light Fusion, who are both based in Oxford, are at the forefront of developments in this space!
• Solar panel demand is on the rise (Thursday), not only for residential properties but also for offices – and farms! At the moment, solar only makes up 4.2% of the UK’s electricity generation, so there’s huge room for upside here!
• It was also interesting to hear that Britain has actually powered mainland Europe for every month since the start of April (Friday) via subsea cables. It’s the first time this has happened since November 2017 as we are usually net importers…

I thought it was also worth highlighting that the oil price fell below $100 a barrel (Wednesday) as fears increased of a drop in demand as China started Covid lockdowns again.

• UK consumers continue to cut spending (Monday), according to research from Abrdn and Bristol University and UK retail sales got weaker (Tuesday), according to the latest BRC-KPMG retail sales report – which isn’t surprising, considering that UK consumer confidence hit a 22-month low (Wednesday).
• Consumers are still having to spend, though. Credit card borrowing is on the rise (Friday) and fuel costs continue to be nightmarish (Thursday) while motor insurance looks likely to go up (Friday) because second hand car prices are rising – as are labour and raw material costs. PepsiCo is talking about putting its prices up yet again (Wednesday), Wetherspoons was moaning about fewer people in pubs (Thursday) as it announced a £30m loss but it seems that people are trying to cheer themselves up with clothes shopping (Friday) as Kantar reckons customers are spending 20% more on clothing than they did last year. It was also great to see restaurant/bar chain Loungers doing well (Thursday) and is continuing to expand.
• IN EMPLOYMENT NEWS – PageGroup unveiled strong numbers (Thursday), as did Hays (Friday), which isn’t too surprising given that wages are rising. In the legal profession, salaries of Baker McKenzie’s newly qualified solicitors were hiked up by £5,000 to £110,000 (Wednesday) which followed similar rises in Herbert Smith Freehills, Freshfields Bruckhaus Deringer and Clifford Chance (among others) in the war for talent. It wasn’t just the juniors who are raking it in either – equity partners at A&O awarded themselves a 3% pay rise (Friday).
• IN REAL ESTATE NEWS – Mortgage rates are rising (Tuesday) as lenders try to keep up with interest rate increases but mortgage lending seems to be slowing down (Friday) as interest in the residential property market seems to be cooling (Thursday) and rents go higher (Thursday) as the number of landlords falls (Friday).

• IN TECH HARDWARE NEWS – ST Micro and GlobalFoundries are going to build a chip factory in France (Tuesday) and the biggest chipmaker in the world lifted its revenue forecasts (Friday) after reporting a 76.4% increase in net profit for Q2. In what sounds like a pretty exciting (albeit long-term) development, Ericsson, Qualcomm and Thales are looking to develop a satellite network (Tuesday), using LEO satellites, that will give SpaceX a run for its money. Ericsson announced disappointing results (Friday) later in the week and blamed it on inflation and supply chain problems.
• IN TECH TRENDS – hiring in the tech industry is slowing (Monday), a trend confirmed when Google announced that it was slowing down its pace of hiring (Thursday). The Twitter vs Musk thing continues to unfold as Musk attempted to extricate himself from taking over Twitter (Thursday). Snap announced that it is looking at ways to work with NFTs (Thursday), but I have to say that if it goes well Meta will probably copy it and put it on Instagram – and if it goes badly, they’ll just let Snap get on with it.
• IN OTHER TECH NEWS – Panasonic announced plans to open a $4bn battery gigafactory (Friday) in Kansas and virtual meeting specialist Hopin is cutting a third of its staff (Thursday) after having already laid off 12%. Also, it looks like it was a false dawn for Chinese tech companies (Tuesday) as regulatory fines were dished out by Chinese authorities for retrospective infractions, which freaked out investors because this could happen to any company.

• Airbus is getting bullish about global jet demand (Tuesday), mainly because there will be a push for more fuel-efficient planes, Wizz Air thinks it’ll see a “material” rise in operating profit in the July-September period (Tuesday) and hydrogen-powered planes are set to be made in the UK (Tuesday) by a start-up called ZeroAvia.
• On the other hand, Heathrow is telling airlines to stop selling tickets for flights this summer (Wednesday) in a bid to reduce delays and cancellations – but you can imagine how badly this is going down with the airlines who have had a torrid couple of years.

• Klarna had a bad week. It launched a fundraising (Monday) which ended up giving it a much lower implied valuation (Tuesday).
• Peloton decided it won’t make its own bikes anymore (Wednesday). It says that this is a conscious decision to morph into a subscription company and away from a fitness equipment company. I say this was a situation foisted on them because of bad luck/poor performance/a badly executed idea. Will they exist in a year?
• Electric van/bus start-up Arrival announced it would shed up to 800 jobs (Thursday) as it tries to cut costs amid supply chain problems and everything else that’s going on at the moment.
• Gap’s CEO stepped down (Tuesday), but this company seems to be dying the death of a thousand cuts at the moment. Its previous strategy of splitting itself into two was ditched and the “new” CEO just didn’t seem to click.
• JP Morgan and Morgan Stanley announced disappointing results (Friday), which doesn’t bode well for their rivals in banking results season.
• The world’s biggest SPAC is closing down and handing back $4bn to investors (Wednesday) because the leader of the fund couldn’t find anything worth buying (!). It’s amazing to think that about 90% of the companies that went public via the SPAC route are currently trading below their listing price…
• Aston Martin is doing a financing to raise £500m (Friday), £200m of which with be from the Saudi Arabian sovereign wealth fund and £300m from a rights issue. This should hold the wolf from the door for now, but it really needs to sell more cars sooner rather than later.

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

My favourite “alternative” story of the week was obviously the one about the drumming granny, Dorothea Taylor! HERE‘s my favourite video of her doing her stuff!

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 DAY IN BRACKETS 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.

I think we’d all agree that was quite an eventful week!

• IN THE UK – Boris Johnson quit as PM (Friday) after much pressure and a mass-exodus of ministers. Markets seemed to take it quite well and sterling actually strengthened versus the dollar. As things stand currently, the expectation is that a new PM will be installed by early September straight after the House of Commons’ summer recess. It’s hoped that the first bit (cutting the candidate list down to two from a longlist) can get done quickly, something that requires a bit of a rule change. The second part will be both candidates campaigning for the top job. Expect loads of noise from the media as to runners and riders etc. The Bank of England warned that the UK’s economic outlook had “deteriorated materially” (Wednesday) as inflation continues to pile the pressure on household and company finances.
• TALKING ABOUT INFLATION/INTEREST RATES – South Korea’s central bank is looking at making its first ever 0.5% interest rate increase (Wednesday) to take the edge off inflation, which rose at its quickest rate since 1998, but it was even worse in Turkey as its inflation rate hit 78.6% (Tuesday), its highest for 24 years. The situation has been made worse by Erdogan cutting interest rates rather than raising them and the Turkish lira collapsing. Turkish people are facing really tough times (Friday). Meanwhile, Hungary put its interest rates up by 2% (Friday) to 9.75% to prop up its currency and address inflation while Poland raised its interest rates by 0.5% (Friday) to an 18-year high of 6.5%.
• IN EUROPE – Germany announced a massive €1bn trade deficit (Tuesday) that’s likely to get worse and Norway managed to avert strikes in the oil and gas industry (Wednesday), which is good because oil and gas prices would have been even worse had they gone ahead!

Commodities and energy news continued to be prominent this week…

• IN OIL – Shell continues to benefit from record fuel prices (Friday) as its indicative gross profit margin for fuel refining has tripled between Q1 and Q2
• IN COAL – demand continues to rise in Europe, the US and China (Tuesday), so miners like Glencore are raking it in!
• IN GAS – UK gas prices reached their highest level for three months (Tuesday) due to ongoing concerns about Russian supply and Japan continues to import gas from Russia (Monday), even though it doesn’t want to, because it’s tied in to long-term contracts. In the meantime, Qatar is benefiting from the war (Thursday) as QatarEnergy, the state-owned gas producer, is significantly increasing its gas export capacity as more countries seek alternative sources to their existing suppliers.
• IN COMMODITIES – there was news of a possible $60bn merger between Norilsk and Rusal (Wednesday) to create a Russian national metals champion. If it went ahead, it would be bigger than Glencore.

Crypto’s rocky ride continued this week…

• Celsius Network continued its freeze on asset withdrawals (Monday) and the broker/”bank” that precipitated the collapse of Three Arrows Capital last week, Voyager Digital, filed for bankruptcy (Thursday). Against this rather shaky backdrop, Facebook owner Meta reiterated that it is sticking with its plans to broaden access to NFTs (Thursday).

• EU lawmakers geared up to approve two important new pieces of legislation (Wednesday) – the Digital Markets Act and the Digital Services Act that could, if implemented well, really affect Big Tech companies.
• It seems that we’re moving closer to having US-style class-actions (Monday) as cash-rich litigation funders are keen to make money in what could be a major growth market. Many of us are already part of one (without knowing it!) with Mastercard regarding “interchange fees” charged between May 1992 and June 2008. If this progresses, it could open the door to further actions.
• Facebook was threatened with an EU ban (Friday) by Ireland’s Data Protection Commission, which has provisionally ruled that it can no longer send user data to the US. It now has four weeks to protest the recommendations. It certainly seems that momentum is with the lawmakers at the moment and I guess that they are being helped by the fact that the tech sector as a whole has been suffering a general sell-off.
• Shein continues to face dozens of lawsuits (Monday) for design theft as it seems to have a broad interpretation of copyrights! It, along with its Hong Kong-based parent Zoetop, has been a defendant in at least 50 US federal lawsuits over the last three years. It looks to me like we’re overdue a crackdown! I remember a few years ago that the Chinese government was trying to crackdown on counterfeit goods (Alibaba was notorious for this, for instance), but it seems that this has gone on the backburner…

• IN US EMPLOYMENT NEWS – Starbucks hit back at workers for unionisation (Tuesday) by shutting down the outlet in Ithaca that supported it. CEO Howard Schultz is not taking this pressure lying down and is clearly doing his best to nip unionisation in the bud. It also seems that there is a trend where workers are getting midyear raises (Wednesday) in order to retain employees.
• IN UK EMPLOYMENT NEWS – the labour market remains super-tight (Friday), according to the latest survey by the Recruitment and Employment Confederation and KPMG, something that was echoed in recruiter Robert Walters’ results (Thursday).
• IN CONSUMER NEWS – Generation Z is the most confident demographic regarding personal finances (Tuesday), but consumers generally are getting increasingly concerned about debt (Thursday) as demand for debt services from Lloyds Bank customers shot up by 30% in the first half of this year. More firms are passing costs onto customers (Monday) as suppliers pass on higher costs (Tuesday) and dairy farmers warn of price rises (Friday) because they just can’t get the staff. Tesco’s continues to push back on supplier demands for price rises (Wednesday), but I think that this is largely symbolic because they need each other and price rises are bound to result eventually. Consumers are facing rising car insurance premiums (Monday) because the number of claims and costs per claim are rising because there are more people on the road now than under lockdown and repairs costing more due to supply chain issues, house prices continue to defy gravity (Friday), according to the latest Halifax figures and consumers are spending on travel and pubs (Wednesday) and luxury watches (Friday), with Watches of Switzerland remaining confident for the rest of the year. On the downside, consumers are avoiding the high street (Thursday), according to the latest Springboard figures and flight prices are shooting up (Tuesday) as couped-up consumers scramble to go on their holidays. Without meaning to be a doomsayer, it is worth remembering that a lot of people who took out super-low fixed rate mortgages will be coming off them over the coming months and years (Monday) and have a nasty shock.
• IN RETAIL NEWS – there were some contrasting stories on livestreaming retail. TikTok has abandoned a livestream rollout in the US and Europe (Wednesday) to get the offer right in the UK before it has another go, but Amazon has decided to put more into this potentially new revenue-generative area (Friday). Talking about Amazon, it struck a deal with Grubhub in the US (Thursday) which will give Prime Customers there access to Grubhub’s food delivery app but it also faces an investigation by the UK’s CMA (Thursday)  over its Marketplace practices. Meanwhile, in electricals retailers, AO World’s shares hit a two-year low (Tuesday) as investors got concerned about the company’s finances as the company decided to concentrate on the domestic market. It then decided to do an equity issue to raise capital (Thursday). Rival Currys voiced concerns about the future (Friday) given that it sells big-ticket discretionary items in an inflationary environment, but it did actually put in a decent performance.

• EV sales rose in the UK (Monday), but EVs still only represent around 1.2% of the cars on British roads currently. Demand for EVs is rising, presumably because of the rising cost of petrol! “Normal” car sales in the UK continued to be weak, though (Wednesday), according to the latest SMMT figures.
• It was a mixed week for Tesla. 20% of EVs sold in the UK are made by Tesla (Monday), but it lost its top spot in China to BYD (Wednesday). Tesla deliveries fell in China (Monday) because of Covid shutdowns and supply shortages and the company also took at Bitcoin hit (Monday) as there was a big valuation write-down.
• IN OTHER NEWS – Chinese manufacturer Geely diversified into making phones (Tuesday), in an interesting reversal of what Foxconn is going (going from iPhone assembler to car maker). It was also interesting to see Evergrande unveiling its first car (Friday), which is an electric SUV coming in at about half the price of a Tesla Model Y. It sounds like a move in the right direction, but the parent company is the embattled, indebted real estate developer – so I do wonder whether people are really going to trust the brand all that much.

• Canadian private equity firm Brookfield is downbeat about UK commercial real estate (Wednesday) and says that it thinks deals will dry up as the world’s attention is more focused on interest rates and recessions. Banks are being more selective about who they lend to, meaning that there will be fewer buyers and, therefore, lower prices.
• UBS said it was subletting two floors of its London HQ (Wednesday) because it is has found that, after all this WFH malarkey that it has too much space on its hands. When other big companies do this, they may find the same thing – which is bad news for office space players like WeWork and IWG, because there will be more competition in the market.
• DHL announced a UK expansion (Wednesday) showing that there’s still scope for growth in warehousing and logistics.
• US developer Greystar has raised more money (Thursday) to put into residential rental investment in Europe as it sees it as an inflation hedge because property in this category has shorter leases (they are reviewed annually versus offices and retail which are on multiyear deals).

• In TECH – this didn’t make it into Watson’s Daily because it happened later on Friday after publication, but Elon Musk announced he was walking away from his $44bn takeover bid for Twitter. This came shortly after Twitter announced it was cutting its recruitment team by 30% (Friday), in a sign that recruitment is going to take a back seat for now. In tech hardware, Samsung Electronics disappointed (Friday) as inflation took the edge of demand for gadgets and the semiconductors that they contain, something echoed by rivals including Intel, Micron Technology and AMD. PC sales and cryto demand (from miners) is also slowing chip demand (Tuesday), although it’s still strong for cars and data centres.
• GSK got approval for a spin-off of its consumer brands (Thursday) that will have a separate stock market listing at a hoped-for valuation of up to £45bn.
• British banks made more money than their European counterparts (Monday), despite the EU trying to force staff to go to Europe after Brexit. I suspect this won’t be forgotten about and that efforts will be renewed to put more pressure on.

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

My favourite “alternative” stories of the week were New £1 pill ‘that prevents hangovers’ launches in UK after 30 years of research (The Mirror, Kieren Williams and Neil Shaw) for obvious reasons and Best and worst butter brands compared as Lurpak soars to £7.25 in supermarkets (The Mirror, Sanjeeta Bains) because it’s very useful at the 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 DAY IN BRACKETS 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.

It looks like we’re going all Cold War II now as NATO and the G7 shift mindsets and adapt to a more aggressive world. Another war affecting many of us – the war on inflation – continues to rage as governments and central bankers try their best to head off a global recession. Not too much drama then?!?

• NATO has reacted to Russian aggression by making four major announcements (Friday) about a step-up in NATO forces, a new US base, new members in the form of Finland and Sweden and a new ten-year manifesto that cuts Russia out. NATO also managed to push China up the agenda (Wednesday), classing it as “a challenge to our interests, our security and our values” while also saying that “China is not our adversary”. Talk about ruffling feathers!
• The G7 meetings were all about imposing new sanctions on Russia (Tuesday), like imposing price caps on Russian oil imports (Monday), but I think they will be difficult to impose given India’s propensity to funnel Russian oil in to Europe (Monday) by mixing it will oil from other origins.
• The BIS – aka the central bank of central banks – cautioned that the global economy was reaching a point past which it would lose control of inflation (Monday). Meanwhile, Russia defaulted on foreign debts for the first time since the 1918 Bolshevik revolution (Tuesday). Russia can pay, but it only wants to do so in Roubles, which no-one wants to accept.
• IN THE US – we saw revised GDP data which showed that the US economy might be weaker than originally thought (Thursday), something borne out by the sharp slowdown in consumer spending.
• IN CHINA – quarantine restrictions were cut thanks to falling numbers of Covid cases (Wednesday), which should help China to bounce back, but we all know in the back of our minds that strict lockdowns could be imposed again if recent history has taught us anything.
• IN EUROPE – the ECB floated the possibility of a 0.5% rate cut (Wednesday) to address the problem of runaway inflation, French president Macron backed his PM Elisabeth Borne to push through planned reforms (Monday) although he is on much shakier ground these days and Spain’s inflation figures hit double digits (Thursday). In the meantime, Sweden made a 0.5% interest rate hike (Friday).
• IN THE UK – Rishi Sunak pondered knotty problems (Wednesday) including whether to go ahead with a windfall tax on UK electricity generators, whether to cut corporation tax and whether additional cuts should be made to fuel duty. The governor of the Bank of England warned that UK inflation could be higher for longer (Thursday) and suffer more than other nations. He even floated the possibility of a future 0.5% interest rate rise. Clearly he’s trying to give himself some wiggle room.
• IN ENERGY NEWS – France faces the possibility of electricity rationing (Monday), Japan asks its citizens to save power (Tuesday) and our own National Grid is talking about paying households to change their electricity usage (Tuesday). It was rather concerning to see that Germany’s Uniper, which owns a number of our power stations, is in talks to get state aid from the German government (Friday) and its share price cratered accordingly on the news.
• IN COAL NEWS – BP’s annual review of energy shows that global demand for coal is, unsurprisingly, going up (Wednesday) as countries scramble for immediate generation capacity. It was not surprising to see net zero regulations being diluted to allow Britain to use more coal (Tuesday) and it was interesting to see that China is actually benefiting from many countries’ aversion to Russian coal (Friday) as it now has access to plentiful discounted cheap Russian supplies – pretty useful given that China is a major consumer of coal.
• IN CRYPTO NEWS – we saw the failure of the Three Arrows Capital crypto-focused hedge fund (Thursday) and Celsius Network continues to face suspicion (Thursday) as its previous boast about being less risky than a bank are looking decidedly questionable.

• There’s more evidence that SPACs are just yesterday’s news as British car-charging start-up EO ditched a SPAC-backed flotation in favour of getting private funding (Monday). It seems that we are seeing this kind of thing more and more these days.
• UK corporate confidence has hit a 15-month low (Thursday), according to the latest Lloyds Banking Group survey and it’s not hard to see why. SMEs are finding the going particularly tough (Monday) as they have less robust cash buffers and warehousing capacity, meaning that they are more exposed to supply chain problems than larger firms. Local builders are also failing at an increasing rate (Monday) thanks to rising raw materials and labour costs despite strong demand for their services.

• IN EV NEWS – Tesla sacked 200 in the Autopilot division as part of current cost cuts (Thursday) whilst also “strongly encouraging” workers to head back to the office (Friday). Stellantis moaned about high EV prices (Thursday), but I think it may be no bad thing to ensure that more effort is put into the charging network. After all, having an EV would be useless if you can’t ever charge it! VW made the prediction that it will overtake a “weakening” Tesla by 2025 (Wednesday) as VW thinks it’ll have superior abilities in scaling production. Elsewhere, GM is ramping up its production of the electric Hummer (Friday) and Lotus said it is going to phase out all new petrol models from next year (Wednesday).
• IN “TRAD” CAR NEWS – UK car production is on the up (Thursday), dealership Lookers is reporting higher profits (Thursday) but JLR is complaining that some dealerships are selling UK-spec cars overseas for much higher prices (Monday). Aston Martin is seeking outside funding (Friday) but spooked investors about its impressive debt pile.

• US consumers are spending less than expected (Friday) as rising prices concentrate minds.
• UK consumers are also paying higher prices, buying frozen foods and avoiding scratchcard purchases (Wednesday), all as real disposable wages continue to fall (Friday). That said, PwC is giving about half of its staff wage hikes (Monday) and grad salaries are on the rise (Monday), according to Adzuna.
• IN RETAIL NEWS – US home goods retailer Bed Bath & Beyond axed its CEO (Thursday) following sluggish performance. In Europe, H&M profits rose (Thursday), Mulberry is doing well enough to reinstate its dividend (Thursday) and Cath Kidston got a new owner (Thursday). Walgreens Boots Alliance abandoned the sale of Boots (Wednesday) and subsequently said that it would be throwing some money at it (Friday) to give it a boost. In supermarkets, Heinz stopped supplying Tesco with product (Thursday) but I think they both need each other and will have to come to a compromise on the prices they charge. Morrisons had a downbeat trading update (Thursday) and has been discounting product to keep the customers coming in, but it’s not looking good. It was interesting to see that B&M decided to leave its year-end profit forecasts intact (Thursday) despite overall fears about the fate of the British consumer.

• Big Tech companies including Meta and TikTok could face civil liability lawsuits (Wednesday) if they are found to encourage children to get addicted to their platforms.
• IN CHINA – Tencent and ByteDance announced job cuts (Friday) despite the fact that the authorities’ crackdown on them looks like it is coming to an end. China’s most valuable AI company, SenseTime, saw its share price halve (Friday) thanks to a lock-up expiry. This means that early investors were prohibited from selling their shares until this date, so it seems like a lot of them decided to take the first opportunity to do so.

• IN REAL ESTATE – some of Britain’s biggest landlords were sold off this week (Thursday) as analysts at the Bank of America concluded that the UK office property market is on the verge of a downturn. In residential property, Knight Frank’s latest report says that prime London rents have now returned to pre-Covid levels (Tuesday).
• Robinhood shares shot up initially on takeover hopes (Tuesday) but then fell as crypto exchange FTX said that it was not in the running.
• Snap announced it was going to launch a new subscription option (Thursday) called Snapchat+ for $3.99 per month. Presumably it’s doing this in response to the fact that it has been losing out on ad revenues ever since Apple changed the rules.
• Talking of ads, Deliveroo announced that it will be doing more advertising (Thursday) in order to diversify earnings streams.
• Hello Kitty’s parent company Sanrio unveiled a new deal with Alibaba (Friday), putting the cat on course to stardom in China!

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

My favourite video this week was the one of Steve Carell trying out British snacks for the first time! I do love a reaction video 👍

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

THE DAY IN BRACKETS 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.

Governments around the world are scrabbling around to fight inflation and get energy independence as quickly as possible!

• Wall Street has had the worst first half performance since the Depression (Wednesday). Although previous plunges have turned into surges, it’s not necessarily the case that this will be repeated on this occasion because macro pressures continue to build.
• IN THE US – Goldman Sachs analysts reckon that the chances of recession in the next 12 months have doubled (Wednesday) because they think that the Fed will prioritise inflation over growth, a hypothesis that seemed to be borne out by louder rumblings that the Fed could go for another 0.75% rate rise in July (Friday).
• IN CHINA – President Xi has committed to hit the previously-stated full-year 5.5% GDP growth target (Friday), although consensus believes it will be more like 4.1%. This is despite the prospect of strict Covid lockdowns, although worries are now increasing about the potential effects of a new flu epidemic (Friday) due to pretty much all resources being funnelled into Covid and little else.
• IN SOUTH EAST ASIA – we are seeing a rebound of the economies of Vietnam, Malaysia, Indonesia and the Philippines in particular (Wednesday) as they recover from strict lockdowns and benefit from companies wanting to diversify their presence away from China but stay in the region.
• IN THE UK – City bosses reckon that the UK will fall into recession (Monday) and one of the MPC members is pushing for more interest rate hikes (Tuesday), in part to get the additional benefit of bumping up sterling.
• IN EUROPE – Italy’s Five Star party splintered due to disagreement over whether they should arm Ukraine (Thursday), but at least “super” Mario Draghi is in charge to stop this from turning into carnage. He seems to be particularly gifted at herding cats 🤣. France’s President Macron lost control of the French National Assembly (Monday), so he’ll have to learn some humility to stand any kind of chance of getting anything done now, and Norway put in a cheeky 0.5% interest rate rise to combat inflation (Friday), which surprised everyone!
• IN ENERGY NEWS – Germany decided to fire up coal power stations (Monday) by bringing them out of retirement as a “quick fix” but the International Energy Agency reckons that spending on coal projects will rise by 10% this year (Wednesday). It also warned European countries to prepare for Russia switching off power suddenly (Thursday) and Germany is now bracing itself for potential gas rationing (Friday). In the UK, Rolls-Royce is pushing for approval of the tech powering its Small Modular Reactors (Thursday) so that it can launch in 2029, on schedule, but there could also be competition from a plucky British start-up called Newcleo (Wednesday) which makes clean energy from waste plutonium.
• IN CRYPTOCURRENCY NEWS, after the Bitcoin carnage over the weekend (Monday), the cryptocrash looks real (Friday) because of the magnitude of the fall, contagion to other assets and the breadth of lossmaking investors. Hedge funds who shorted will be sitting pretty (as will early buyers) but when you’ve got the head of Binance painting a bearish picture (Thursday) and Celsius continuing to keep Bitcoin assets frozen (Tuesday), you know it’s bad. The icing on the cake is Ronaldo starting to sell NFTs (Friday) because you know that when celebs/footy players get involved it’s all over 🤣.

• IN CONSUMER NEWS – Consumer confidence in the UK is at a record low (Friday), which is not surprising considering that we’re all facing higher bills (Wednesday). We’re not buying bikes (Friday) or booze from Naked Wines (Friday) and a third of UK users of BNPL say they can’t make their payments (Thursday), so it’s a good job that the UK is now fleshing out new rules to cover the industry (Monday).
• IN RETAIL NEWS – inventories are piling up as lead times continue to grow (Monday) and retailers are noticing that there’s a lot of “trading down” going on (Wednesday) as households try to cut costs. There were some interesting new directions for US food delivery company DoorDash (Thursday) – which signed a deal with Canada’s biggest grocery chain Loblaw to provide ultrafast delivery services – along with Shopify diversifying into B2B services (Thursday) and China’s Alibaba looking at growth opportunities in South Asia (Thursday) in order to stir things up. Talking of Chinese e-tailing behemoths, JD.com put in a lacklustre performance (Tuesday), perhaps reflecting the impact of Covid lockdowns on business. IN THE UK, Primark launched a limited roll-out of click-and-collect (Tuesday), Frasers Group upped its stake in Hugo Boss to 30% (Thursday) and Harrods had to delay its summer “sale” because of supply chain problems (Thursday). Matalan is looking a bit dicey (Friday) not because of trading (it’s doing quite well), but because it has big debts that it needs to refinance.
• IN EMPLOYMENT NEWS, it seems that about 20% of people are planning to quit their jobs within the next year (Monday), mainly because they want to get better pay and benefits, something that they feel they can get given that profit margins continue to outpace inflation (Monday). The CIPD identified a trend among employers who are planning to cut pay and/or benefits from those who choose to work from home (Friday), although employers who do this may have to be careful how they do this.

• IN CAR NEWS – Germany objected to a 2035 cut-off date for selling combustion engines in the EU (Wednesday), Ford warned that there would be major job losses in Europe (Thursday) as it re-jigged its EV production and then Toyota announced a recall of an EV it released only a couple of months ago (Friday) because “the wheels might fall off” 🤣!
• IN BATTERY NEWS – Britishvolt is trying to get Tesla on board as a customer for its batteries (Thursday) and there was a bit of a kerfuffle about car charger rules changing (Thursday), resulting in manufacturers threatening to pull their charging products.

• IN COMMERCIAL REAL ESTATE NEWS – it looks like the number of UK property companies going bust is set to rise (Monday) but warehouse demand remains rock solid (Friday) thanks to the ongoing rise of e-commerce and the need for companies to build up inventory to combat supply chain problems.
• IN RESIDENTIAL PROPERTY NEWS – buy-to-let landlords are having a nightmare as rising interest rates squeeze profitability (Friday), modular housing developer TopHat announced plans for a new factory in Corby (Tuesday) – which could eventually help with the housing supply shortage – and mortgage lenders were told they could scrap affordability tests for buyers (Tuesday), which will ease the process slightly although loan-to-income rules will still apply.

• Talk of EY splitting its business into audit and consultancy is continuing (Tuesday) and partners could be in for massive payouts if it goes ahead. No doubt other members of the Big Four will be looking on with interest.
• Visa and Mastercard are being investigated by the Payment Systems Regulator (Wednesday) due to the quintupling of cross-border transaction fees since Brexit. They say they are looking forward to working with PSR but let’s face it, the market is pretty much a duopoly and surely they just saw a chance to rip everyone’s faces off while they could.
• Juul got banned from selling its products in the US by the FDA (Friday). This is a nightmare particularly because the US accounts for 90% of its sales globally – and I wonder whether this will spell the beginning of the end of vaping globally.
• Netflix is cooking up an ad-backed tier of membership (Thursday) but, in the meantime, it announced more job cuts (Friday) as damage limitation for the outflow of subscribers.
• Kellogg has decided to split itself into three listed companies (Wednesday) covering snacks, cereals and plant-based food. It is just the latest conglomerate wanting to focus more on core areas after similar moves last year by General Electric and Johnson & Johnson. I suspect we’ll see more of this kind of thing going forward as there seems to be a trend developing here.

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

I thought it was a bit tame this week in the “alternative” news section of Watson’s Daily, so I’ll leave you with what I think is (controversially) the superior version of Running Up That Hill – the song that’s seen a massive revival thanks to the popularity of Stranger Things.

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 DAY IN BRACKETS 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.

What a dramatic week that was!

• There was a lot of interest rate chat this week! UK and US markets took a pasting as Wall Street tipped into bear market territory (Tuesday) and investors feared for the UK economy (Tuesday) because the latest ONS figures pointed to a slowdown in GDP. With almost 70% of leading economists surveyed by the FT thinking that the US will go into recession next year (Monday) drastic action was needed and the Fed hiked its interest rate by a chunky 0.75% (Thursday) in order to tackle the highest inflation for forty years with the biggest one-time increase since 1994! The Bank of England followed suit on lifting interest rates (Friday), albeit by “only” 0.25% while chancellor Sunak faced calls from the Confederation of British Industry to cut business taxes (Monday) before recession kicks in properly. Meanwhile, Switzerland surprised everyone with a cheeky 0.5% increase in its interest rate (Friday) to take it from -0.75% to -0.25% in its first hike for 15 years!
• IN ENERGY NEWS – BP took a stake of 40% in a massive $30bn Australian renewables project (Thursday) that has the potential to be one of the biggest renewable power hubs in the world! This is subject to regulatory approval, but if it goes ahead it will be a big step towards BP’s climate goals and net zero by 2050. Gas prices rose sharply as Russia cut supplies to Europe (Thursday) and Germans were told to conserve energy as a result (Friday). In the meantime, Centrica signed a deal with Norway’s state-owned oil company Equinor to secure energy supplies (Friday) as part of the UK’s efforts to ensure ongoing supply without Russia.
• IN CURRENCY NEWS – the yen and pound hit new lows versus the dollar (Tuesday) and the yen is now so low – its weakest level for 24 years – that some think Japan’s companies will be more vulnerable to foreign takeovers (Monday) as a result. However, the biggest developments came with CRYPTOCURRENCIES! Bitcoin fell sharply versus the dollar (Tuesday) and investors got spooked so much that many tried to withdraw their funds only to find themselves being blocked by the likes of Celsius Network. To add to the crypto-misery, Coinbase Global announced it would be cutting 20% of its workforce (Wednesday) in anticipation of a “crypto winter”. Bitcoin slid so much that crypto-heavy hedge fund Three Arrows Capital had to resort to Twitter to say it was still solvent (Thursday) in response to speculation that it had suffered fatally.

• US car prices keep rising (Friday), forcing consumers to go to dramatic lengths to buy cars for a price where they are not getting their faces ripped off. Mind you, when they collect their cars from far afield, they have to pay the highest ever prices for fuel (Monday) – $5 per gallon, which they find shocking, but that’s equivalent to £1.07 a litre while we are currently paying about £1.83 per litre!
• IN EV NEWS – Tesla increased its prices again (Friday), Ford announced a recall of almost 49,000 Mach-E cars (Wednesday) and Ferrari reiterated its commitment to electrify (Friday). If you’re into something a bit unusual, how about the world’s first solar-powered car (Tuesday) – yours for the princely sum of only £216,000 😱! Manufacturers were up in arms about the UK government’s decision to ditch the last remaining EV subsidies (Wednesday), but then when you consider the prices of most EVs these days, the subsidies that were on offer weren’t at exactly deal-breaking levels. The government’s argument was that the money would be better used elsewhere and I have to say that I think this will buy them time to sort out (or at least address) our patchy charging network.
• IN BATTERY NEWS – Foxconn is building an EV battery-making facility in its native Taiwan (Thursday), which is a particularly interesting step as it shows just how serious the company-famed-for-iPhone-assembly is about its diversification into EVs. Britishvolt, which is currently building a battery gigafactory in Northumberland is aiming to educate its employees (Thursday) via a venture with Northumberland College that will oversee a qualification on battery technology. It was also interesting to see that the Pentagon signed a $120m deal to build the country’s first major rare earths refinery (Wednesday) as part of plans to reduce reliance on China which processes the vast majority of the world’s rare earths used in all sorts of key tech.

• US retail sales weakened in May (Thursday) in its first month-on-month decline this year while China also saw its retail sales decline (Thursday) thanks to recent strict Covid lockdowns which just goes to show how cautious consumers are being.
• UK consumers are already trading down and buying less (Friday) according to the Lloyds Bank CEO while food prices look set to rise further (Friday) and Sainsbury’s continues to make efforts to stop its customers defecting to Aldi (Thursday) by broadening their price matching. While all this is going on, there may be some potential bumps in the road as UK supermarkets are being forced to move unhealthy foods out of temptation’s way (Monday) and are facing investigation by the Competition and Markets Authority (Tuesday) about competition in the retail fuel market. Meanwhile, Morrisons’ owner, PE firm Clayton, Dubilier & Rice is now planning to sell off properties that have been used by Morrisons’ food production division (Monday). CD&R just had its takeover approved and it was pretty obvious what it was going to do given the price it ended up paying for it! I would expect more asset disposals.
• Consumers are travelling, though, and Whitbread (owner of Premier Inn) is benefiting, as is WH Smith (Thursday) with its strong presence at railways stations and airports finally paying off once more. With the prospect of strikes over the summer, the Department for Transport and the Civil Aviation Authority are calling for airlines to stick to their schedules to minimise disruption (Wednesday).
• IN EMPLOYMENT TRENDS NEWS – the UK labour market remains tight (Wednesday) but rampant inflation means that average wages are falling at their fastest rate for over twenty years (Wednesday). Still, airport vacancies remain at record highs (Wednesday), meaning that employees have the upper hand in wage negotiations at the moment but it was interesting to see that railways workers have been rushing to take voluntary redundancy (Monday), making you wonder why the RMT is getting so aggressive about strikes (although it turns out this scheme was only offered to managers). Unfortunately, poor working conditions persist in Leicester factories (Monday) over a year on from all that Boohoo ruckus.
• IN RETAIL NEWS – H&M posted decent sales (Thursday), but they’re still below pre-pandemic levels, until at arch-rival Inditex, but Asos had a profits warning (Friday), blaming inflation and the rising cost of returns (something that is particularly bad at an online retailer). Elsewhere, Halfords’ share price cratered by a whopping 27% (Friday) as it blamed inflation for hitting earnings and bike demand.

• Concerted pressure on Big Tech seems to be bearing some fruit as the giants are about to sign up to an updated version of the EU’s anti-fake news code (Tuesday) which forces them to address disinformation on their platforms. Talking of Big Tech, Apple signed a big MLS deal (Thursday) worth $2.5bn over 10 years to show football matches on Apple TV. Oracle smashed sales forecasts in Q4 (Tuesday) thanks largely to cloud revenues and Google claims that YouTube shorts are now of a similar scale to TikTok (Thursday) just two years post launch.
• Over in China, the beleaguered Chinese education tech sector is adapting to last year’s crackdown in unusual ways. One former big player in the industry, New Oriental, has managed to think of a way of teaching but getting “paid” for selling product (Tuesday). This way it is not profiting per se from the education itself, but from the goods that it sells whilst educating, thus finding a way round restrictions on making money from teaching what is deemed to be the national curriculum. One teacher on there is teaching English whilst selling steak (!) and it has been a roaring success!

• US mortgage rates jumped by the biggest margin since 1987 (Friday) in anticipation of more aggressive interest rate rises to curb inflation. In the UK, HSBC hiked its mortgage rates (Friday) in anticipation of more interest rate rises coming from the Bank of England. Still, UK new home demand is greater than supply (Wednesday), but you wonder how long that’s going to last for given rising mortgage rates and the ongoing cost-of-living crisis.
• IN COMMERCIAL PROPERTY – Prologis has put in an offer to buy Duke Realty in a deal worth $26bn (Tuesday) that shows continued belief in the warehousing sector. In the UK, West End landlords Shaftsbury and Capital & Counties agreed a £5bn merger (Friday).

• K-pop supergroup BTS announced they were going on hiatus (Thursday) which sent the share price of their management company Hybe into a major tailspin. The boy band brings in about 70% of the company’s total operating profit! It’ll be interesting to see where they go from here, but I think they have a decent chance because K-pop knows the formula that has cracked the West, unlike Japanese J-pop.
• IN INVESTMENT-RELATED NEWS, it seems that ESG is still in the spotlight (Wednesday) after DWS’s recent brush with the law for greenwashing. It is unlikely to be the only guilty party here, so watch this space re other investors…Then it was interesting to see some analysis on ten consumer IPOs last year – and their performance since. Deliveroo has been the worst by far (Monday) as it was worth £7bn on flotation only to see it fall to the current value of “just” £1bn! Another nightmare performer has been ProCook.
• US cosmetics firm Revlon filed for bankruptcy protection (Friday) as it has failed to keep up with the latest trends. Although Chapter 11 means it’ll be delisted from the NYSE, it’ll still be able to trade while sorting out some kind of creditor repayment plan. Massive debts have been the company’s biggest downfall.

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

I have to say that my favourite “discovery” this week was of the Lego version of the Top Gun: Maverick trailer. It’s just amazing! Here’s the Lego-only one and here’s the Lego/official version side-by-side! Superb!

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

• In its half-yearly Global Economic Prospects (GEP) report, the World Bank cut its global GDP forecasts from 4.1% to 2.9% (Wednesday). It said that the world’s economy is on track for a growth slowdown over the 2021-2024 period that will be twice as bad as it was in the 1976-1979 period when the oil shocks were the cause of stagflation.
• IN CHINA – it turns out that hundreds of thousands of permanent coronavirus testing and quarantine centres are being built in many big cities (Friday), but then lockdown was imposed yet again in Shanghai in the Minhang District just one week after the government declared victory against the virus after two months of lockdown. On the positive side, China’s exports rose by a decent 16.9% in May versus the previous year (Friday), which shows that the economy is showing signs of bouncing back after being ravaged by lockdowns.
• IN JAPAN – PM Kishida is using increasing concerns about China to bolster support for defence (Monday) as he said “Ukraine might be East Asia tomorrow”. This could manifest itself in a further boon to companies like BAE Systems, Dassault Aviation, Lockheed Martin etc. as the region sees a growing need to defend itself from potential China attack.
• IN AUSTRALIA – Australia accused China of intercepting a surveillance plane in a “dangerous manoeuvre” (Monday), adding fuel to the fire as per the story above. Also, Australia’s central bank raised its interest rate by 0.5% (Wednesday) from 0.35% to 0.85% in its biggest hike for 22 years.
• IN EUROPE – the ECB said it would raise interest rates next month (Friday) in order to curb inflation but that it would resist pressure to raise them by 0.5% in the first instance – it’ll probably be more like 0.25%.
• IN GERMANY –  the latest figures showed that there was a surprise drop in factory orders in April (Wednesday), which was mainly due to China lockdowns hitting supply chains and the ongoing war in Ukraine.
• IN THE UK – the OECD warned that the UK’s economic growth is going to be the worst in the G20 apart from Russia (Thursday) while the British Chambers of Commerce also offers a very downbeat assessment of the UK’s economy (Thursday). Earlier in the week, BoJo faced and survived a vote of no confidence (Tuesday).

In OIL AND GAS NEWS…

• There were signs that Biden is relenting on oil sanctions and tariffs (Monday) to let Iranian and Venezuelan oil through to Europe, which is desperately trying to wean itself off Russian supplies. Meanwhile, Russian oil is making its way to places like China and India (Tuesday) at a $20-$30 discount to Brent Crude.
• As if things weren’t bad enough already, European gas prices suddenly rose by 20% (Friday) because of a fire at a major LNG export terminal in the US. It is expected to take at least three weeks to fix.

• BUY NOW PAY LATER saw a lot of newsflow this week as Apple announced its US launch in the space popularised by the likes of Klarna (Tuesday), something that rivals should be scared of given Apple’s strengths (Wednesday). It turned the interest levels up another notch by saying that it was going to be offering BNPL loans directly to consumers (Friday) and not doing so via Goldman Sachs, who it will still use as a way to access Mastercard’s network. This is a major turning point for Apple as it moves more aggressively into the finance business. Elsewhere, in B2C BNPL, Indonesia’s biggest startup GoTo is going to start offering the service (Tuesday), which could be interesting given that it already has 100m monthly customers! It was also interesting to see that B2B BNPL is attracting a lot of investor interest (Monday) as businesses are using the service to help spread the pain of rising costs.
• In the UK, bankruptcies look set to boom (Monday) due to rising costs, supply chain problems and rampant inflation while British farmers warn of tough times ahead (Thursday) because a major fertiliser supplier is shutting down one of its two plants in the UK due to ongoing high running costs. Meat processors are warning that households will have to go for cheaper cuts of meat as a consequence (Friday) because cattle will have to be slaughtered earlier in the season. Rising prices are causing tension between suppliers and supermarkets (Friday), according to the Groceries Code Adjudicator as some supermarkets are proving to be better than others at keeping suppliers happy.

• There seems to be an end in sight for Chinese tech companies (Tuesday) after being in limbo whilst being investigated by the Cyberspace Administration of China over the last year. Share prices recovered in anticipation.
• US Big Tech is lobbying hard to stop Congress from limiting their businesses (Tuesday) and the stark difference between what they have spent on campaigns versus the antitrust bill’s supporters is particularly incredible (Friday). It is all to play for and Big Tech could lose big if it is stopped from being able to prioritise its own products over others.
• IN SOCIAL MEDIA, Buzzfeed’s share dropped through the floor (Tuesday) as the post-IPO shareholder lock-up period expired and Elon Musk had a bit of a hissy fit saying that he might walk away from the Twitter acquisition (Tuesday).
• IN HARDWARE, the chip shortage situation doesn’t seem to be getting any better (Friday) as two of the world’s biggest manufacturers (TSMC and Samsung) continue to face difficulties meeting deliveries. Also, Brussels ruled on a single standard charger (Wednesday) and that charger will be the USB-C. The new law will come into effect in 2024 and will particularly impact Apple’s iPhones given that they use Lightning cables versus Android phones which already use the standard.

• IN REAL ESTATE NEWS, the latest Halifax data showed that average house prices rose but new home inquiries slowed down (Thursday), which could be due to rising mortgage rates – Lloyds Bank decided to raise them more than the Bank of England (Thursday). Meanwhile, John Lewis announced more detailed plans about becoming a landlord (Thursday).
• IN CONSUMER NEWS, official figures from KPMG and the BRC show that Brits made big cut-backs on spending last month (Tuesday), which I don’t think will come as much of surprise!
• IN EMPLOYMENT NEWS, global trials of a four-day week went ahead (Monday) to see whether productivity would be affected if people worked 80% of the time with 100% of the pay. I’m sure those in the study will do their darndest to make good for the rest of us 🤣. A survey from the Policy Institute and King’s College London showed massive support for WFH (Wednesday), with the desire to avoid rush hour commuting being the biggest reason to support flexible working. In terms of what’s going on now, City bonuses are running riot (Monday) and the labour market remains tight, with the logistics sector being one of the fastest-growing in Britain (Monday) as online shopping continues to grow in popularity.

• UK new car sales have fallen off a cliff (Tuesday), which isn’t surprising given the cost of living crisis, and Cazoo announced the decision to cut 15% of its workforce (Wednesday) in response. Separately, Mercedes-Benz recalled 1m cars over dodgy brakes (Tuesday).
• The price of fuel is making EVs look much more attractive (Wednesday) these days but Tesla sounds like it’s making plans to cut 10% of its workforce (Monday) and Rivian continues to have supply chain problems (Monday). Other than that, Chinese maker BYD is being investigated (Tuesday) for having potentially harmful ingredients in its paint.

• The RETAIL SECTOR had some interesting newsflow as America’s Target had a profit warning (Wednesday) as it battled with inventory levels, Japan’s Fast Retailing (which owns Uniqlo) is having trouble with a weak Yen (Thursday) as it produces outside Japan and buys raw materials internationally – making it particularly prone to price rises – and Spain’s Inditex (owner of Zara etc.) absolutely smashed it with profits up by 80% (Thursday). Other than that, Ted Baker lost the main bidder for its business (Wednesday), JD Sports got slapped with a fine for fixing Rangers’ football kit prices (Wednesday), DFS is seeing demand for sofas starting to sag (Friday), AO World decided to give up on its business in Germany (Friday) and India’s Reliance looks like it’s close to buying high street retailer/pharmacy Boots (Friday).
• IN FINANCIALS, there was a run on local Chinese banks (Thursday) as locals lost trust in local lenders and tried to withdraw their money and Credit Suisse had its third profit warning this year (Thursday) as market volatility hit investment banking revenues.
• IN INVESTMENT, activist investor Elliott Management announced it would be suing the London Metals Exchange for the nickel trading fiasco earlier this year (Tuesday) and was shortly after joined by US trading firm Jane Street (Wednesday), which was doing the same thing. It was also interesting to hear that the head of BlackRock said “I don’t want to be the environmental police” (Tuesday), something that could have repercussions for the ESG investment industry as it may perhaps roll back some of its more aggressive pro-environmental rhetoric.

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

I have to say that my favourite alternative story of the week was Notorious seagull who worked out how Tesco doors work steals £300 of crisps (The Mirror, Liam Buckler). Amazing!

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

THE DAY IN BRACKETS 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.

*** NB THIS EDITION OF THE WEEKLY IS A BIT UNUSUAL in that there were only three editions of Watson’s Daily this week due to the extended Jubilee Bank Holiday. However, you will be glad to know that I still picked out some key stories from Thursday and Friday, so I have included them below 👇 This is why some stories will be in bold but not have correlated hyperlinks (because they did not appear in an edition of Watson’s Daily) ***

• In CHINA – the authorities have been pulling out the stops to reopen and boost economic activity (Monday) by encouraging spending on physical infrastructure and construction and pressing banks to lend, something that was reiterated towards the end of the week with the approval of a near-£100bn credit quota for infrastructure projects.
• In EUROPE – Eurozone inflation hit a new record high of 8.1% (Wednesday), piling the pressure on the ECB to follow other countries – such as the US and UK – in raising interest rates in order to tame inflation. Expectations are increasing for a 0.25% rise in interest rates in the July meeting, although there is an outside chance it could be hiked even earlier than that. Separately, Croatia was given the go-ahead by the ECB to join the the Eurozone from January next year. This was based on an assessment of its convergence with the rest of the Eurozone. Bulgaria and Romania are also aiming for this but remain behind them in the process.
• In RUSSIA – it looks like the country is getting even closer to a historic debt default as it failed to pay a part of the interest due for one of its bonds. It managed to avoid default on its foreign currency debt when it paid investors in early May, but many observers reckon it’s a question of when and not if, Russia defaults.
• In UKRAINE – the central bank raised its lending rate from 10% to 25%, in its first increase since Russia invaded in February. The National Bank of Ukraine said that the move was made in order to address inflation that had shot up to 17% in May and is heading towards 20%.

Meanwhile, there were some big developments in energy and oil:

• In NUCLEAR NEWS – BoJo must have been on a bit of an emotional rollercoaster this week as France’s EDF Energy said that it wouldn’t keep Hinkley Point B in Somerset open beyond its scheduled July shutdown (Tuesday) as the request had come too late, but then it said that it would keep the Hartlepool station and Heysham 1 station near Lancaster going until March 2024, following a review carried out in the middle of last year. It added that further consent would be required for it to operate beyond this date. EDF also made the headlines for domestic problems in France (Tuesday) due to nuclear power station closures, many of which are due to corrosion issues – something that will take years to fix. This could prove to be a major headache for Macron’s nuclear ambitions. Austria also managed to stick the knife in by voicing safety concerns about the construction of Sizewell C in Suffolk (Monday) which either means that the design is indeed faulty or that there’s an element of Austrian sour grapes given that they are a massive consumer of Russian oil and don’t want anyone to get ahead of them in energy self-sufficiency. The week ended on a more upbeat note as the UAE made positive noises about investing billions of dollars in offshore wind, green hydrogen and batteries in the UK.
• In OIL NEWS – EU leaders managed to cobble together an agreement to ban most Russian oil imports (Tuesday) as part of the sixth package of sanctions against Russia, the EU and UK announced a ban on insurance for Russian oil cargoes (Wednesday) making it much more difficult for Russia to export crude (apparently) and oil prices shot up in the meantime (Tuesday). After all that drama, OPEC then announced later in the week that it would boost production considerably in July and August after appearing to cave to increased calls to do so in order to reduce oil prices. In the meantime, the UK government approved a new gasfield in the North Sea called Jackdaw and environmentalists then threatened to take legal action to prevent it from going ahead.
• In CRYPTO NEWS – there was an interesting story in the Guardian at the end of the week which said that the FBI had charged an ex-employee of the leading NFT marketplace, OpenSea, with wire fraud and money laundering. Product manager Nathaniel Chastain was accused of essentially front-running NFTs and over 25 crypto experts have written an open letter to Congress urging more regulation in the sector. It seems that the net is starting to close on crypto assets.

• Consumers continue to face pressures on their budgets. New data from the ONS showed that prices for some low-cost groceries increased more sharply than the general inflation rate (Tuesday), but then again it added that when it included 30 everyday items there wasn’t that much difference (but perhaps they would say that, wouldn’t they?). Sainsbury’s said it’s allocated £500m to cut prices for its customers (Tuesday) but having said all that, the latest BRC figures showed that UK footfall at retailers increased last month despite all the price rises – maybe this is due to increased credit card spending (Wednesday), something that could be a worrying sign as consumers aren’t spending because they are confident, they are spending more just to “live”. In terms of consumer spending trends, Brits’ love for the gym is losing momentum (Monday) against the tricky economic backdrop while Americans are still willing to travel (Monday) despite rising petrol prices. At current prices, the average family is now spending $414 per month more than they used to!
• In RETAIL NEWS – over in Europe, the latest retail sales figures for Germany fell way short of expectations, showing just what “new” chancellor Olaf Scholz is up against and, over in the US, grocers like Kroger and Giant Eagle are still pushing back on rising prices from food producers including Kellogg (Wednesday). In the UK, the CMA said it was investigating Morrisons’ purchase of McColl’s (Tuesday), B&M announced disappointing numbers (Wednesday) and fast-fashion retailer Missguided called in the administrators (Tuesday), only to be swept up later in the week by Mike Ashley’s Frasers Group for just £20m. This is that latest acquisition of a distressed asset that I have lovingly called “Mike Ashley’s Bag of 💩” in the past and comprises of House of Fraser, Flannels, Jack Wills, Evans Cycles, Game, Sofa.com and Agent Provocateur. TBF, they are not all 💩, some of them just fell badly by the wayside.

• UK property price momentum is losing steam (Monday), according to Zoopla, and UK mortgage approvals have fallen (Wednesday) as mortgages are getting more expensive but Help To Buy is going to hit a deadline later this year (Monday), so I wonder whether we’ll see another buying frenzy ahead of that – similar to what we saw when the stamp duty deadline loomed. It was also interesting to see that Singapore’s sovereign wealth fund bought a £3bn+ portfolio of student housing (Tuesday) in a sign of confidence in the UK rental property market.
• Elsewhere, US house prices continue to stretch affordability (Monday) but it seems that there’s still plenty of upside in other property markets as Saudis are powering a mortgage boom at the moment thanks to government-subsidised mortgages designed to boost home ownership. This is particularly interesting given that home ownership in Saudi Arabia has been quite low historically – 47% in 2016 versus more than 60% in the UK and US – but has almost caught up thanks to such measures. The government targeted a rate of 70% by 2030 as part of its “Vision 2030” plan to transform the country’s economy and reduce its reliance on oil revenues.

• In INVESTMENT NEWS – Deutsche Bank got raided for “greenwashing” its investments (Wednesday) and, a few days later, the chief exec of its DWS asset management firm resigned (Deutsche Bank owns 80% of DWS). This will be frustrating for Deutsche Bank as it has been trying to move on from being mired in a decade of scandals and losses. It was only last week that we saw the SEC fining BNY Mellon from fudging environmental credentials (albeit for a paltry amount). Is there a pattern forming? In other developments, it was interesting to see that more execs are buying their companies’ shares (Wednesday), which would suggest that they have confidence in future performance.
• In M&A NEWS, DSM put in an offer to buy Firmenich in a deal worth €41bn (Wednesday) to create a global alternative foods and nutrition “powerhouse” in a consolidating sector and Elliott Management sold AC Milan to RedBird Capital (Wednesday) after turning the club’s fortunes around, whilst keeping a minority stake. Incidentally, there was quite an interesting development at the end of the week where the proposed takeover by Shanghai Kington Technology of British graphene specialist Perpetuus was ditched after a national security investigation voiced concerns about key technology falling into foreign hands.
• In FINANCIALS NEWS, hackers announced that they had attacked Sberbank (Monday) in retaliation for the Ukraine invasion and Revolut seems to be getting closer to flotation (Monday) as it is hiring an Investor Relations team, something that is often done as a precursor to an IPO.

• In CAR/EV-RELATED NEWS – the latest figures from the SMMT showed that the number of cars owned in Britain fell last year (Tuesday) thanks to rising petrol prices and a relative lack of new vehicles for sale. It also seems that owners are hanging on to their vehicles for longer. It seems that interest in EVs is rising, though, as a report from accountants EY showed that 49% of drivers looking to buy a car said that they would go for the electric option – pretty amazing considering that the proportion was 21% just two years ago! Elsewhere, it turns out that Volvo is close to getting a 600-mile range from a lorry battery (Monday), which is great news considering that HGVs accounted for 20% of road transport emissions in 2019.
• In TECH NEWS – we saw HP lifting its earnings outlook (Wednesday) as it looks like we’re over the worst of component shortages, Sheryl Sandberg left Meta/Facebook after 14 years of highly eventful service (and massive growth – especially in terms of profitability) and it turns out that Apple is moving some of its iPad production out of China and into Vietnam to insulate it against any current and future political interference, although Vietnam’s component makers aren’t likely to be big beneficiaries in the immediate future. In other tech-related news that happened towards the end of the week, Microsoft downgraded its profit and sales forecasts for the latest quarter thanks to the strong dollar and companies linked to China mobile phone manufacturer Xiaomi have all halted IPO plans after facing closer scrutiny from the regulators about the nature their relationships with Xiaomi. Later on in the week, Amazon announced that it would be closing its Kindle store in China and the app will be removed from Chinese app stores by 2024. It didn’t give any reasons but it has suffered from increasing competition from local rivals such as Huawei and iFlytek.

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

Just for a change, I thought I’d leave you with my “gadget of the week” in LED gaming chopsticks are here for your mid-game munchies or whenever you eat in the dark (SoraNews24, Krista Rodgers). Fun fact: I eat a lot of my meals with chopsticks (I cook with them also), even when it comes to a full English brekkie. I only do that at home, though, because I think I would get a lot of funny looks if I did it elsewhere!

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 DAY IN BRACKETS 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.

• It was an interesting week for the US – President Biden made yet another embarrassing gaffe. He said that the US would respond militarily if China invaded Taiwan (Tuesday), a statement that had to be hurriedly walked-back by his staff given its overtly aggressive tone. The minutes of the latest Fed meeting were released this week and it looks like US interest rates have further to go in the upward direction (Thursday). Mind you, there is a fine line to be trodden because hiking interest rates too much may cause recession, a danger that the Fed would have been reminded of given the unexpected contraction in Q1 GDP (Friday) that was unveiled this week.
• In CHINA – Premier Li Keqiang said that the world’s second biggest economy will struggle to grow in the current quarter (Thursday), which would suggest that the prospects for year-end GDP growth of 5.5% look pretty shaky. Ongoing lockdowns are really taking their toll on China’s economy.
• In RUSSIA – Putin made double-digit increases to the national minimum wage and pensions (Thursday) against the backdrop of skyrocketing inflation, more Western sanctions and efforts to tame the rouble, which entailed an interest rate cut of 3% (Friday).
• In the UK – chancellor Sunak came under increasing pressure to bring in concrete measures to help households with rising energy bills and not only did he cave, he came up with a package that was way more comprehensive than expected (Friday). On the subject of energy bills, the CEO of E.ON UK said that he thought energy bills would remain higher for longer (Monday) and it turns out that National Grid is considering making wholesale electricity prices region-dependent (Wednesday), rather than being flat across the board. Controversial, no?
• In ENERGY NEWS – Siemens Energy said that it would be buying the 33% of Siemens Gamesa that it doesn’t already own (Tuesday) to give it more control over this part of the business and there have been warnings of impending energy problems in the US (Tuesday) as drought in the south west has hit water levels, impacting hydroelectricity generation.
• In CRYPTO NEWS – the ECB criticised crypto again (Wednesday), reiterating the danger it poses to mainstream banking and, reflecting on recent crypto asset weakness, it looks like the only big winners will be crypto exchanges (Thursday) because they make money on whether you buy or sell. Still American VC group Andressen Horowitz has just launched a new crypto-focused $4.5bn fund (Thursday).

Meanwhile, in other developments this week,

• Australia got a new Prime Minister (Monday) as the previous guy, Scott Morrison, saw his gamble at calling an election failing miserably.
• Italy’s economy is losing momentum (Tuesday) due to its reliance on Russian energy.
• The global minimum corporation tax deal agreed by the OECD last year had a wobble as it turns out that it won’t be coming into force until 2024 (Wednesday) instead of the original plan for 2023.
• The UK’s FCA is looking at easing/simplifying the UK listing rules (Friday) to get a bit more IPO action going.
• There were some interesting business exits this week. Starbucks decided to exit Russia (Tuesday) after 15 years in the country and Airbnb quit China (Tuesday) as it just couldn’t cope with the ongoing uncertainty of lockdowns, giving local domestic operators more business opportunities (Wednesday).

• In INVESTMENT NEWS – ESG funds are taking a pasting at the moment (Monday) as they are generally tech-heavy given their relatively benign environmental credentials but it was interesting to see that the US SEC fined BNY Mellon a token amount of a fine (Tuesday) for making misleading claims about being ESG-friendly, something that I’d expect to see more of as time goes on. Meanwhile, the US Department of Justice wants to crackdown on acquisitions by private equity firms (Tuesday) as there have been a lot of instances where they have “rolled up” or “hollowed out” industries before cashing out. Closer to home, Qatar pledged to invest £10bn in the UK over the next five years (Wednesday) in tech, fintech, healthcare, infrastructure and clean energy sectors after talks with our party-loving PM BoJo.
• In FINANCIALS NEWS – JP Morgan cautioned that overseas digital bank losses could exceed $1bn (Wednesday) and Klarna cut 10% of its employees (Tuesday) while it said that it is changing tack and transitioning from the current growth phase to a profitability (Friday).

• Apple announced that it was considering production outside China (Monday), significant because, currently, almost 90% of Apple products are made in China.
• Microsoft announced that it will be slowing its hiring plans (Friday), becoming the latest Big Tech company to do so after Meta Platforms, Twitter and Uber have made similar announcements recently.
• Snap announced a profit warning (Tuesday) as it continued to struggle with the change in Apple’s privacy policy, prompting debate on the broader subject of potential problems in the advertising market (Wednesday).
• Twitter continued to make the headlines this week as investors kicked an Elon Musk ally off the board (Thursday) while founder Jack Dorsey’s term expired, meaning that he wouldn’t be on the board for the first time since 2006. Twitter was also fined $150m for privacy violations (Friday) in a federal privacy suit, something I think could set an interesting precedent for other harvesters of user data.
• Nvidia unveiled strong quarterly sales (Thursday) but had a cautious outlook given ongoing supply chain problems.
• Zoom put in a decent performance (Tuesday) and was even confident enough to raise its earnings forecasts for the year. The share price got a nice 15% bump up on the news but it has still suffered from investor rotation out of tech as it has pretty much halved this year.
• There was also news of a massive acquisition as chipmaker Broadcom made a formal offer to buy software company VMware for a whopping $69bn (Friday) in a move that would transform it into a diversified tech company.

• Consumers continue to struggle with higher grocery prices (Wednesday) but, according to HomeServe, we are spending money on insulation (Wednesday) while food-to-do companies like SSP (Wednesday) report that they are seeing business return to pre-Covid levels.
• In RETAIL NEWS – big cheeses departed from JD Sports (Thursday), M&S (Thursday) and Pets At Home (Thursday), with varying degrees of success over their respective tenures. Retailers are seeing some interesting trends as Chanel continues to benefit from consumer thirst for luxury (Wednesday) and Ted Baker is benefiting from people returning to offices and going to weddings (Friday). B&Q’s owner, Kingfisher, is sticking with full year forecasts (Tuesday) despite a trickier quarter and Asda shoppers are spending less (Friday) and switching to own brands while Britain’s egg farmers voice concern about a rise in egg imports (Monday), warning that many may leave the industry all together if supermarkets continue to squeeze them on prices. Over in the US, we saw that Macy’s and Dollar Tree posted decent sales performances over the latest quarter (Friday), which contrasts with recent weakness from Walmart and Target. Meanwhile, Abercrombie and Fitch got very downbeat (Wednesday) thanks to rising costs and an expected drop in consumer demand.
• In EMPLOYMENT NEWS – there was some insight on wage trends as research from the High Pay Centre thinktank showed that the boss/worker pay gap is widening (Monday) and ONS data showed that those on higher incomes are getting paid more and at a faster rate (Wednesday) than those on lower incomes. Wages for those in finance, professional services and IT were particularly impressive.

• In the UK – car production fell by 11% in April (Thursday) as the impact of China lockdowns continued to impact supply chains, VW announced a payout to UK drivers (Thursday) to settle a five-year legal battle Auto Trader continues to be bullish about the prospects for the used car market (Friday) as many new vehicles continue to face long lead times.
• In BATTERIES NEWS – Stellantis and Samsung announced a new $2.5bn battery factory in Indiana (Thursday) as part of Stellantis’ efforts to accelerate its EV capabilities. The International Energy Agency is predicting that the cost of EV batteries will rise by 15% (Tuesday) if metals continue their current trend but despite the “hotness” of the battery market (or maybe because of it?) and Johnson Matthey sold its high-performance EV battery business to EV Metals for £50m.

• In REAL ESTATE NEWS – a two-tier commercial real estate sector in the UK continues to emerge (Monday) as “primary” eco-friendly offices are seeing strong demand whereas “secondary” offices that need expensive upgrading are lagging. Warehouse demand is continuing to rise (Friday), despite Amazon taking a breather, as LondonMetric reckons the onshoring of supply chains and continued growth in e-commerce will still drive demand. Meanwhile, holiday rental companies are trying to source more accommodation (Monday) as tourist numbers continue to climb.
• In TRANSPORT NEWS – Airbus said it was trying to build a financial buffer (Monday) to withstand any future turbulence and it turns out that P&O, DFDS and Irish Ferries are aiming to operate only electric ferries on short sea-Channel crossings (Monday).
• Gorillas laid off 300 staff (Wednesday) as it said that it is transitioning from growth to profitability. I suspect that we will soon be seeing more consolidation in this industry as scale is key here in order to push down costs.

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

My fave “alternative” story this week by far is Confusing optical illusion of a man’s jumper changing colour leaves people baffled (The Mirror, Julia Banim). Amazing editing!

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

• In the US, the latest official figures show that prices are still rising, but losing some steam. The US annualised rate of inflation in April stood at 8.3% (Thursday) versus 8.5% in March, but it’s still at levels that haven’t been seen since the 1980s.
• In CHINA, the inflation rate has reached its highest level for five months (Thursday) thanks to a combination of food stockpiling in the wake of strict lockdowns and ongoing supply chain problems. China also saw its exports grow at their slowest pace in almost two years in April (Tuesday) and employment isn’t in a great place either – Chinese premier Li Keqiang reckons that unemployment is likely to increase (Tuesday) as the latest data from its National Bureau of Statistics shows its unemployment rate hitting 5.8%, its highest level since May 2020. All of the problems that China is experiencing are likely to continue to affect world supply chains and where companies source their materials and parts.
• In RUSSIA, we see that the finance ministry is now forecasting a 12% fall in GDP this year (Tuesday), which would be the biggest economic contraction since it made the transition to capitalism in 1994.
• In EUROPE, it sounds like the ECB just might be thinking about increasing interest rates (Thursday) in order to curb inflation. The EU also tried to put a figure on the potential cost of the Ukraine war (Thursday), although these kind of estimates are usually waaaaay off – and the war hasn’t finished yet either. BoJo signed a security agreement with Sweden and Finland (Thursday), a move that  will no doubt smooth the path to NATO entry.
• In the UK, the pressure is increasing on the government to help with the cost of living crisis (Thursday) and Sunak is thought to be putting together a support package. It could be unveiled in August around the time that the new energy price cap is due to be announced. No doubt the Labour Party, TUC and BCC want swifter action (Friday), particularly as the latest ONS figures showed that the UK economy contracted by 0.1% in March.

Meanwhile, in energy and oil news…

• The US is facing electricity shortages (Monday) and potential blackouts as generation looks like it’ll fall short of demand. European gas prices shot up at the end of the week (Friday) as gas supplies to Germany were cut off as Gazprom imposed sanctions on some European firms.
• In OIL, US refiners are benefitting from high pump prices (Monday) as well as shortages of diesel, petrol and jet fuel. BP is still facing calls to pay a windfall tax (Friday) but doing its best to fend this off while Shell sold its Russian petrol stations and lubricants business (Friday) for an undisclosed sum (undisclosed because it’s probably 💩 as Shell is obviously a forced seller!).

It was also a pretty dramatic week for crypto…

• The market value of cryptocurrencies fell sharply (Tuesday) as investors continued to get nervous about risky assets and the panic continued into the end of the week (Friday) as the FCA seemed to enjoy sticking the boot in when it said “…if you buy crypto-assets you should be prepared to lose all the money you invest”.

• Toyota said that its profits would be hit (Thursday) by – surprise, surprise – higher energy bills and raw material prices. This was particularly interesting given that their sales are actually increasing! Ford sold a bit of its Rivian stake (Tuesday) – but then only a few days later we saw the news that Rivian announced a recall (Friday). Fishy much? Who  knew what when??
• In EV news, Tesla said its Shanghai gigafactory would be cutting production (Wednesday) due to supply chain problems, the latest SMMT figures show that sales of used EVs have increased by 120% (Tuesday) and EV maker Arrival announced the shutting down of its Russia operations (Thursday).
• In BATTERY news, Stellantis warned of shortages (Wednesday), Allianz’s insurance division warned of increased fire risk of ships carrying EVs (Wednesday) due to their combustible nature and commodities trader Trafigura announced that it would be investing in UK start-up Green Lithium to build a refinery in the UK (Monday), which would be a fantastic development if it works out as most lithium used in EVs is currently processed in China. Separately, it was great to see that Shell is accelerating the rollout of its charger network (Wednesday).

• In the US, consumers are continuing to spend money on meat (Tuesday) despite rising prices and they are also spending money gambling (Thursday), helping casinos to have their best month ever!
• In EUROPE, wages are rising (Tuesday) thanks to increasingly confident unions.
• In the UK, the latest BRC figures show that UK consumer spending is falling (Tuesday) while figures from the Food Foundation Charity show that 57% more households are cutting back on food or skipping meals to reduce spending (Monday) than they were in January and Energy Support and Advice UK observed that the trend of people using “buy now, pay later” to pay for their utility bills via companies like Zilch is increasing (Monday). You know that things are getting bad when the CEO of Scottish Power is appealing for the government to help financially-stretched families (Monday). It is interesting to see that employers are paying out more in bonuses rather than raising salaries (Thursday) as it’s probably easier for them to cut bonuses in future than cut salaries.
• In LEISURE NEWS, Tui’s chief exec is saying that bookings are strong for summer (Thursday), Airbnb has made adjustments to its website to broaden customers’ travel horizons (Thursday) and in aviation, British Airways has a management reshuffle (Wednesday) while Wizz Air announced ambitions to launch flights to Saudi Arabia (Wednesday). Meanwhile, on the sea, Eurotunnel benefitted from P&O’s recent misery (Wednesday) as more trucks have used the service. In GAMING NEWS, EA ended its long-term relationship with Fifa (Wednesday), Nintendo had a stock split (Wednesday) – making it easier for retail investors to buy its stock – and Sony was bullish on PS5 sales this year (Wednesday). In STREAMING NEWS, Netflix announced the launch later this year of a a cheaper membership that will have ads (Wednesday) as it tries to stop the outflow of subscribers. It was interesting to see, however, that Disney+ is adding subscribers (Thursday), contrasting sharply with what’s going on with Netflix at the moment.

• Elon Musk’s takeover of Twitter is now postponed, pending a look at the figures related to the proportion of bots and spam accounts. Musk also said that Donald Trump could make a return to the platform (Wednesday).
• Elsewhere, Philip Morris bought Swedish Match for around $16bn, Pfizer agreed an $11bn deal for biotech company Biohaven (Wednesday), Morrisons bought McColl’s (Tuesday) and it turns out that Vodafone and Three are in talks to merge (Friday). BT and Warner announced the creation of a 50:50 JV pay-TV sport business (Friday) and Warner Music is competing with BMG to buy Pink Floyd’s back catalogue (Friday).
• I think that it was interesting to note that Goldman Sachs has announced that it has stopped new SPAC offerings for the moment (Tuesday), which is pretty incredible considering that it was the second-biggest SPAC underwriter in the world last year, helping sponsors raise $16bn! Does this signal the further demise of SPAC offerings?

• In SOCIAL MEDIA NEWS, Twitter announced the departure of two top execs (Friday) as it tries to cut costs (and prepare itself for a Musk takeover – assuming that he’s still going to go ahead with it!). Dating app Grindr is aiming to float via a SPAC merger (Wednesday).
• Other than that, we saw that global investment banks have started to make money in China (Thursday), West End landlords Shaftsbury and Capital & Counties are in merger talks (Monday) and Peloton saw its share price crash (Wednesday) thanks to a bigger-than-expected quarterly loss and pessimistic sales guidance.

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

I didn’t put that many “alternative” stories in this week – so I think I’ll put an educational one in this time to end here: Hacking expert shares which social media posts to avoid to keep your data safe (The Mirror, John Bett). See you again next week!

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 DAY IN BRACKETS 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.

• The China lockdown is still ongoing and there’s nervousness about Beijing potentially going the same way as Shanghai (Tuesday). Gyms and cinemas were closed down and Covid testing was tightened. The Shanghai lockdowns have been hugely damaging to China’s economy, so the prospect of Beijing going down as well isn’t great.
• This was a week of interest rate increases! Australia kicked things off (Wednesday) with its first interest rate rise in 11 years, the US then followed with its biggest rise in 22 years (Thursday) and then the Bank of England raised the interest rate from 0.75% to 1% (Friday) as central banks continue to battle high inflation. However, inflation is likely to rise further as factory prices rose (Wednesday) and the ONS released figures showing that around 50% of UK businesses reported higher prices for materials, goods or services during March (Friday).
• It wasn’t that much better in Europe either as German and French manufacturing is suffering particularly acutely (Friday). Italy is backing away from its historically cordial relationship with Putin (Tuesday) and the EU is talking about further sanctions on Russia including more restrictions on SWIFT (Thursday) and an EU-wide oil embargo (Tuesday), although Hungary is holding out (Thursday) because it is heavily reliant on Russian energy. UK Foreign Secretary Liz Truss imposed a professional services ban on Russia (Thursday) although that didn’t include law firms or banks.
• In COMMODITIES NEWS, non state-controlled Chinese oil refiners are buying up cheap Russian oil (Wednesday) as it seems to be too tempting to overlook and both BP (Wednesday) and Shell (Friday) had stellar results thanks to the sky-high oil price, which led to increasing calls for the oil industry to pay a one-off windfall tax to help out consumers who are facing higher utility bills. This has thus far fallen on deaf ears.
• In ENERGY NEWS, there were some interesting developments in wind power (Tuesday), as the world’s biggest wind turbine manufacturer, Vestas, said that the Ukraine war would have a big impact on revenues and profits, something recently echoed by rivals including Siemens Gamesa and General Electic. The UK and South Korea are in talks about nuclear power (Tuesday) and French utility Engie signed a 15-year natural gas contract with Texan supplier NextDecade (Tuesday).

• The SMMT is getting less confident about car sales heading into the end of the year (Friday), taking into account rising car prices, cost of living, interest rates and supply chain problems. It was interesting to hear that VW has sold out of EVs in Europe and the US  (Thursday), so it has got s considerable backlog to work through. At the top end of the car “food chain”, Aston Martin got a refresh (Thursday) with a new CEO and CTO who used to be at Ferrari, which has performed extremely well since its flotation in 2015 – something that has not been the case at Aston Martin!
• It seems that some previously-“hot” themes in the automotive sector have lost momentum of late, namely shared ownership (Wednesday) and online car sales (Wednesday) as Mercedes and BMW gave up on their car-sharing joint venture and Cazoo’s US-listed share prices have tanked since its SPAC-listing last summer respectively.

• US consumers are pretty much returning to pre-pandemic behaviours (Thursday) by going to the gym, to live concerts and flying (on planes, not with their arms – that really would be impressive 🤣). However, some lockdown winners have fallen by the way-side (e.g. Peloton and Netflix) as consumer behaviour has changed. Some, like DoorDash, are continuing to win (Friday), which is interesting considering the contrasting experience of European rivals Deliveroo and Just Eat Takeaway, who are seeing a bit of a slowdown.
• European consumers are getting more thrifty as Eurostat data shows that Eurozone retail sales fell further than expected in March (Thursday).
• In the UK, the latest BRC figures show that shoppers are paying higher prices (Wednesday), with more of this going on credit (Thursday). Speaking of credit, Klarna will start reporting customer activity to credit agencies (Wednesday) from June. This is a major development and makes me wonder whether Klarna will get more confident about offering its services for higher ticket items.
• In APPAREL RETAIL NEWS, Boohoo’s profits fell off a cliff (Thursday) but its CEO reckons there’s still life in the market yet, blaming falling profits on high shipping costs and supply chain disruption. Joules had a shocking trading update (Thursday), which was topped off by news that its chief exec will be leaving.
• In FOOD RETAILER NEWS, Tesco has signed a deal with Uber to expand its rapid grocery delivery service (Wednesday) but has come under fire from pig farmers who want it to pay a “fair price” (Friday), something echoed by egg, fruit and veg producers (Tuesday).
• In ONLINE RETAIL NEWS, Etsy is causing a bit of a kerfuffle by raising its transaction fees (Friday) and Shopify’s Q1 earnings fell below expectations (Friday).
• In EMPLOYMENT NEWS, Amazon workers in Staten Island voted against unionisation (Tuesday), Starbucks announced enhanced wages and benefits to those who didn’t join a union (Wednesday) and lawsuits from disgruntled employees including the word “banter” have increased (Thursday), implying that there will be more actions to come in future if the economy takes a dive and redundancies increase as appropriate behaviour in the workplace evolves and gets called into question. Meanwhile, Eurozone unemployment numbers fell (Wednesday). Unions are feeling more powerful given the tight market and inflation outpacing wages…sound familiar?!?

• Apple is facing accusations of breaching competition law by the EU (Tuesday) and, if found guilty, could face a fine of up to 10% of its global turnover.
• Meta Platforms continues to face intensifying competition (Tuesday) and it announced its exit from podcasting (Wednesday).
• Netflix continues to suffer as it is facing the imminent loss of a number of hit shows (Tuesday) as their contracts end – and if that’s not bad enough, it’s now facing a lawsuit from investors accusing the company of misleading them about subscriber numbers (Friday).
• We heard that Elon Musk is thinking of bringing Twitter back to public markets (Wednesday) once he’s carried out deep surgery whilst it is taken private and there was also news that he got more financing (Friday) from a number of financial heavyweights.

• In AVIATION-RELATED NEWS, Heathrow decided to back down on landing charges (Tuesday), which is good news for airlines. Talking of airlines, Qantas said it bought 12 Airbus planes (Tuesday) and we also heard how much aircraft leasing company Avalon lost in Russia (Wednesday).
• In INDIVIDUAL COMPANY NEWS, things are getting so desperate at Peloton that it is now trying to sell a big chunk of itself (Friday) to bolster its flagging finances. Flutter entertainment (owner of Paddy Power and Betfair) is doing really well in the US (Thursday) and could get a boost from California’s imminent legalisation of sports betting. Uber shares fell to their lowest level since the start of Covid (Thursday) as its main US rival announced it was boosting its own efforts to sign drivers.

• Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document! 

My favourite “alternative” stories of the week were the incredible omelette-in-a-can story We eat a canned omelette from a Japanese vending machine and hope for the best (SoraNews24, Oona McGee) and the one about the baby sumo wrestler in Sumo wrestler vs. 16-month-old toddler: The cutest match you’ll ever see (SoraNews24, Oona McGee). He seems like a happy little boy!

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 DAY IN BRACKETS 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.

• It was a turbulent week for markets as they took a dive on China Covid concerns (Tuesday), but then President Xi Jingping announced a huge infrastructure investment (Thursday) that would cover transport, energy, water projects, ports and airports to stimulate the economy. Wall Street was sold off on its biggest one-day decline since September 2020 (Wednesday) on fears that growth was slowing, something that proved to be quite prescient as official figures showed a surprise contraction in the US economy (Friday), which prompted further concerns about an imminent recession (a recession happens when you get two consecutive quarters of economic contraction). Staying on the subject of America for the moment, Biden asked Congress for $33bn more aid for Ukraine (Friday), which implied that he is thinking that this war will drag on.
• Europe is facing an increasing possibility of recession (Thursday) as the German government cut its full year GDP forecast from 3.6% to 2.2% while consumer confidence is at rock bottom. Germany is Europe’s main economic driver and so if Germany sneezes, Europe catches a cold. The market is pricing in a July interest rate hike from the ECB (Thursday), but that is not the official position. That said, the ECB admitted how rubbish its inflation forecasts have been (Friday), which may be a tiny weeny step towards them softening everyone up for an interest rate rise sometime this year rather than in 2022, which is what president Christine Lagarde has been saying. The other big bit of news from Europe this week was that Macron won a second term as France’s president (Monday), which was a big relief for the EU as it meant that it would be business as usual rather than the massive upheaval that would have happened if Le Pen had been victorious.
• In ENERGY news, Poland and Bulgaria got cut off from Russian gas (Wednesday), which sent gas prices up by 20% (Thursday) and it turns out that Germany and Austria are trying to get around sanctions (Friday) by opening K accounts with Russian state-controlled Gazprombank, paying in with Euros for gas that they are buying from the Russians which is then turned into Roubles by the bank (!). Maybe guilt prompted Germany to send the Ukrainians tanks this week because paying for Russian gas may well be prolonging the war. Will they become Europe’s pariahs and/or will other struggling countries use Germany’s actions to justify their own circumventing of sanctions?!? I don’t think this can continue for too long. Meanwhile, in the UK, coal-fired plants that were due to be shut down in September have been asked to continue operating (Thursday) by the Business Secretary Kwasi Kwarteng. The potential energy problem prompted chancellor Rishi Sunak to reconsider a windfall tax on the oil and gas industry (Thursday), although the official line that this short term solution would damage longer term investment in renewables is still holding.
• In SUPPLY CHAINS, the prolonged strict lockdowns in Shanghai have already damaged supply chains (Tuesday), forcing many companies to seek alternative suppliers outside China. Retailers including John Lewis, AO World and Halfords are already seeing shortages and delivery delays. Other consequences include a weaker oil price due to reduced demand from China (Tuesday), patchier availability of toys and electronics, travel delays (especially in Asia) and continued strength in the used car market because new car shortages will continue.

• Twitter featured heavily this week! It all started with Twitter accepting a takeover offer from Elon Musk (Tuesday), which was then followed by Tesla shares dropping sharply (Wednesday) as investors feared a sell-off from Musk’s stake to finance the bid. They were right to as filings showed he had indeed offloaded a chunk (Friday) but it also got a bit tricky as Twitter admitted that it had been overstating user numbers for the last three years (Friday). Twitter employees are, understandably, feeling nervous (Thursday) given all the changes that Musk is suggesting and billionaire rival Jeff Bezos had a little dig, saying that Musk’s new platform could favour China (Wednesday) given Tesla’s business interests there, although he added this was unlikely. Still, he couldn’t resist planting the seed!
• Apple had an eventful week as it announced record profits on the one hand (Friday) but then found itself on the wrong end of yet another EU antitrust lawsuit. It’s still massively reliant on the success of iPhone sales, but the services business also did well.
• Amazon announced its slowest growth for 20 years (Friday), but its cloud services business, AWS, put in a solid performance and advertising revenues were good. Its performance was hit by the poor share price performance of its big stake in Rivian, the EV pickup-truck maker that recently reported production problems.
• Spotify took a pasting as it got a nasty infection of Netflix-itis (Thursday) as investors interpreted Netflix’s weakness last week as a sign of a wider malaise of streaming in general. Spotify could actually be in a worse position than Netflix (Friday) because it doesn’t own much of its own content and is competing with powerful and deep-pocketed rivals (Apple, Amazon and Google) with staying power and substantial additional businesses. I reckon it should try to buy more podcasts to give it proprietary content for a much more reasonable fee.
• In news on the other tech giants, Meta Platforms unveiled its slowest quarterly sales growth for a decade (Thursday) but if it stays the course, it could be a massive beneficiary from the development of the metaverse (Friday). Microsoft continued to benefit from WFM (Wednesday) as revenues and profits were driven by cloud services and software over the last quarter while Google’s shares slid (Wednesday) on disappointing ad revenue growth.

• Household food bills look set to rise by £271 (Wednesday) according to the latest figures from Kantar and so people who are able to are withdrawing money from their houses via a surge in equity release (Wednesday) to help them pay for all these bills (and possibly help their kids, I suspect). They are also, increasingly, looking for higher-paying jobs or joining unions (Monday).
• In GROCERY-RELATED SPENDING TRENDS, consumers are starting to stockpile some essentials like cooking oil (Wednesday) as grocery price inflation reached its highest level in over a decade in April. It’s getting to the point that Tesco, Morrisons and Waitrose are rationing out the bottles! Consumer goods companies like Coca-Cola (Tuesday) and Unilever (Friday) are putting up prices, something that we’ve seen with the likes of P&G, Reckitt Benckiser and Heineken – but I don’t think that can last forever. I wonder whether it’ll last over the next few months and then hit a wall when the weather starts getting colder again and utility bill pain really starts to kick in again. Palm oil prices are set to rise as the world’s biggest producer, Indonesia, stops exports of the stuff (Tuesday). Purveyors of groceries – including Asda (Tuesday) and Morrisons (Monday) – are cutting prices to help consumers, and while Aldi and Morrisons are increasing market share (Wednesday), Sainsbury’s had a profit warning (Friday).
• In NON-GROCERY RELATED SPENDING TRENDS, consumers spent money on Mattel’s toys (Thursday) and staycations (Monday) – a trend that Premier Inn is targeting (Friday) – although Heathrow is getting downbeat (Wednesday), saying that the summer booking frenzy is a “bubble”, although airlines are saying that they’re just doing this as a precursor to increase charges.
• In RETAIL, WH Smith has already started stocking up for Christmas (Thursday), which would imply that other retailers are doing the same, meaning that demand for warehouse space is going to continue to be strong. Primark is putting up prices (Wednesday) while both Boots (Thursday) and Ted Baker (Thursday) are getting closer to finding new owners.