Category: Protected – Watson’s Weekly

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

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

This was the week of CPTPP, Germany showing Europe who’s boss and Disney ditching the metaverse…

• IN CHINA NEWS – we see that China is retaliating against the West by shutting down access to China’s biggest academic database, the China National Knowledge Infrastructure (CNKI). China continues to pull away from the West (or the West is pushing it away, depending on your point of view). This will make research into China much more difficult.
• IN RUSSIA NEWS – Putin is looking at deploying tactical nuclear weapons in Belarus, it’s now recognising China’s renminbi as one of its main international reserve currencies and it’s now changed the rules so that any Western company leaving Russia will be forced to make a 10% “voluntary contribution” of the sale to the Russian state.
• IN EUROPE – Spain is making tough calls on how to deal with its pension shortfall by making its young people contribute more to its social security system. Separately, Spain’s inflation slowed down in March – as did Germany’s – which means that the pressure has eased on the ECB for now.
• IN TURKEY – President Erdogan is trying to be nice to the electorate by promising to cut residential and business electricity bills by 15% next month. He is facing elections in the middle of May, so clearly he’s trying to get into everyone’s good books after a patchy response to the terrible recent earthquakes.
• IN THE UK – Britain became a member of the CPTPP trade agreement to great fanfare but it’s difficult to see much practical upside from this as we’ve already got bilateral trade deals with most of the members!
• MEANWHILE…Finland got the clearance to join NATO thanks to Hungary eventually approving its application. Both Sweden and Turkey are now dragging their feet on Sweden’s membership but I would have thought Finland’s entry was more urgent given that it shares a 1,304km border with Russia!

IN OIL NEWS…

• Commodity trader Vitol saw massive profits last year thanks to the energy crisis. Although rivals including Trafigura, Glencore and Mercuria also did well, Vitol’s performance was even better.

IN BUSINESS TRENDS NEWS…

• Deal-making over the first quarter was at its lowest levels for ten years as falling valuations and rising interest rates have killed the vibe. Wall Street bonuses have hit their lowest level since 2008 and prospects for this year aren’t looking great either at the moment (although I’d say we have to wait until the dust settles on all this banking stuff first).
• UK business confidence hit a ten-month high, according to a Lloyds Bank survey. Companies are getting more upbeat about their ability to fill vacancies and the direction of the wider economy.

THE IMPACT OF THE BANKING CRISIS CONTINUES…

• US Treasury secretary Janet Yellen is pushing for World Bank reform on climate change as its efforts thus far have been judged as being insufficient. Yellen is pushing for some kind of roadmap by April.
• The Bank of England is looking to tighten capital rules on lending to SMEs, which is causing a lot of concern by SMEs and companies like Funding Circle as this is going to stunt growth.

IN US BANKING NEWS…

• First Republic still isn’t out of the woods yet despite last week’s high profile bailout and its shares crashed by another 46% while credit rating agency S&P Global made things worse by downgrading its rating.
• West coast lender PacWest had to get $1.4bn of cash from Atlas SP Partners to bolster its finances as it saw a massive outflow of 20% of its deposits as jitters in the sector continue.
• Janet Yellen stated the Treasury’s commitment to support smaller lenders, but First Republic’s share price kept falling anyway as around two-thirds of its clients had deposits that contained over $250,000 (the threshold beyond which their money is not guaranteed as things stand). Confidence was dented further as Yellen refused to commit to a broader lifting of the $250,000 threshold.

IN EUROPEAN BANKING NEWS…

• UBS rescued stricken rival Credit Suisse in super-quick time over the weekend. UBS paid peanuts to buy its rival but as part of the deal AT1 bond-holders were wiped out to the tune of $17bn. Condemnation of this wipe-out soon followed as bondholders usually take precedence to equity holders in these types of situations. Unsurprisingly, US investors are lining up to sue. Massive job losses look likely as a result of this takeover and Credit Suisse’s investment bank looks particularly vulnerable at this stage.

IN OTHER FINANCIALS NEWS…

• Payment fintech Block got hammered thanks to the publishing of a damning report by short-selling Hindenburg Research. The report said Block (formerly known as Square) had overstated the number of users, facilitated suspect payments via Block’s Cash App and targeted those on lower incomes with “predatory loans and fees”. Block denied everything, Hindenburg pointed out that it had been investigating Block for two years and we’ve seen some spectacular impact that Hindenburg’s poking around has had on Nikola (electric truck company) and Adani Group (Indian conglomerate). Nasty.
• Two UK small-cap brokers Cenkos Securities and FinnCap agreed a £43m merger just months after talks between FinnCap and Panmure Gordon failed. There’s been a lack of M&A deals and IPOs, so this looks like a defensive merger. Maybe this will prompt further consolidation in the sector as the deal pipeline is still looking pretty anaemic.

IN AI NEWS…

• There are increasing appeals for rules to govern AI given the current proliferation of its usage and it was interesting to see that negotiations are continuing between AI companies and news publishers regarding access to their quality content.
• Google launched the updated version of its AI chatbot Bard but it turns out that it still makes the same mistakes as the last version!
• Meanwhile, magic circle law firm Allen & Overy was very positive about how their own in-house chatbot “Harvey” is doing but they were less forthcoming as to whether its use would result in lower fees for clients 🤣!

IN TIKTOK NEWS…

• TikTok continues to face an uphill struggle, although parent company ByteDance still has another app ace up its sleeve – CapCut. Still, TikTok’s super-slick algorithm continues to be the main bone of contention between China and the US as the company faced a five-hour Congressional hearing that fretted about data security risks. Things then took another turn as the Chinese government said that it would “firmly oppose” a forced sale of TikTok.

IN OTHER TECH NEWS…

• China is now putting more effort into nurturing domestic chip and equipment companies like SMIC, Hua Hong Semiconductor and others in order to better cope with tighten US export controls on a longer term basis. Strict US controls may well backfire in future as China ends up making its own chips and not needing the US at all!

• Brussels tried to find a compromise with Germany to get their proposed ban on the sale of combustion-engined cars from 2035. German car manufacturers wanted to have an exemption for e-fuel-powered cars, so the EC has provided that – but say that these cars must have bits fitted that mean that neither petrol nor diesel can be used. Basically, this shows how powerful Germany is here – it’ll be interesting to see whether the EC crumbles completely!
• Prices for used EVs fell as more of them hit the market and Tesla reduced its prices – but they are still expensive!
• Ford launched a new EV – the Explorer – taking it closer to its goal of being 100% electric by 2025. However, Ford still expects $3bn of losses in EVs this year as it transitions to electrification.
• Meanwhile, it turns out that Maserati has aspirations to spin itself out of Stellantis and see the same success as Ferrari and Porsche before them.  No dates were mentioned, but it is clearly on the radar.
• News for VW was mixed this week. On the one hand, VW is having problems pulling out of its Russia business but on the other it turns out that one of its luxury brands, Lamborghini, is raking in the profits. Aston Martin will be looking on in hope as it wants its DBS to do for it what the Urus has done for Lamborghini!

IN CONSUMER TRENDS…

• UK consumer confidence is improving although the outlook for personal finances has worsened.
• UK house prices remained stubbornly high, according to Rightmove, but the latest ONS data said that prices in the south west have taken a hit over the last two months. DIY and a buoyant housing market usually go hand-in-hand but there has been a mixed picture here. On the one hand, Kingfisher (which owns B&Q and Screwfix) is seeing a slowdown in DIY but rival Wickes is still doing really well!
• In terms of spending, Unilever is indulging in a bit of “shrinkflation” to pass on price rises on the sly, Foot Locker expects sales to weaken over the coming year but Nike is doing a roaring trade and making inroads into its inventory.

IN RETAIL NEWS…

• GameStop in the US (remember this meme stock??) saw its share price sky-rocket by 48% as it surprised the market with news of its first quarterly profit for seven consecutive quarters! Apparently its efforts to cut costs and get its store offering right are paying off…
• Superdry announced a deal to sell its IP in Asia to South Korea’s Cowell Fashion in order to broaden its appeal. This could be great IMO – especially if it gets rid of the meaningless kanji that the company insists on using in its designs!
• It seems that John Lewis is thinking about scrapping its partnership structure – and while it’s wasting time pondering that, M&S is nicking its customers. Dame Sharon Lewis needs to be sorting out the core business – not fiddling around with peripheral stuff. She is just wasting time IMO.
• It was interesting to see a survey by trade body Revo and consultancy Lambert Smith Hampton which shows that up to 40% of shops need to be repurposed in the next five years as consumer habits have changed permanently since lockdown.

• It was another big week for job losses as Accenture announced it was cutting 2.5% of its workforce (19,000 people!), Amazon laid off another 9,000, Indeed is cutting 15% of its staff (2,200 employees) and Just Eat is axing 1,700 delivery staff. Tough times – but then again most of these companies did have a massive hiring boom over the last few years.
• Starbucks got a new CEO but faces tough competition in China from a whole host of domestic and foreign rivals.
• The world’s most indebted real estate company Evergrande is close to announcing a big bond restructuring deal which will bring it closer to safety.
• Zurich legalised cannabis as part of a trial to ascertain economic and health benefits!

My favourite “alternative” story this week was actually the video of Jordan Belfort of Wolf of Wall Street fame explaining the concept of sales. I’m not a fan of his or the way he acted but this is a brilliant explanation 👍

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

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

This was a week where China’s GDP rebounded, Tesla took a hit and Apple made a splash…

• IN GLOBAL NEWS – G7 ministers agreed to accelerate the transition from fossil fuels to renewables and they agreed that it would be important to reduce Russia’s influence on nuclear energy supply chains.
• IN CHINA NEWS – China’s GDP growth for Q1 came in higher than expected at 4.5% (market expectations were for 4%). This is pretty good, bearing in mind that the official full year target is 5%! Expectations are that momentum will continue to improve. While ECB chief Christine Lagarde warned of alienating China, it turns out that BT has been stress-testing supply chains in the event of a Chinese invasion of Taiwan, something that a company called Prism has said is an increasingly common request from corporates. In the meantime, China has been imposing sanctions on western companies in retaliation.
• IN UK NEWS – UK inflation stayed in double-digits for last month – at 10.1% – coming in above expectations and, along with evidence of strong wage growth the pressure is building on the Bank of England for their next interest rate decision. Meanwhile, the ongoing public sector strikes are affecting the economy while the Bank also looks at overhauling the bank deposit guarantee scheme which needs to be done in order to bolster confidence in the whole banking system.

IN COMMODITIES NEWS…

• IN OIL – Some big investors in BP are getting together to potentially oust the current chairman in protest at the company walking back its green commitments.
• IN GAS – current gas storage in the EU is running ahead of schedule, which is potentially good news for next winter, but that didn’t stop Putin from making more threats about choking off supply.

IN CRYPTO NEWS…

• Coinbase is threatening to move to the UK as Biden is accused of “punishing” tech and dragging his feet on putting a regulatory framework in place. London is seen as potentially more attractive as there’s only one regulator it’ll have to deal with (the FCA) whereas in the US there are two who oversee commodities and securities separately.

IN BUSINESS TRENDS…

• The number of UK company collapses is rising thanks to higher energy prices, no more government handouts and tighter credit conditions – and the UK food and drink sector has been particularly badly hit in that regard.
• On the flipside, the latest survey by the ICAEW shows that business confidence is improving.

IN CONSUMER TRENDS…

• Consumer confidence is also rising, according to the latest survey from GfK, and they might even get some more money to play with as the FCA is warning banks about not passing on higher interest rates to their saver customers.
• Cash-strapped customers are being squeezed by higher rents as the latest ONS data showed that rental growth hit a record high for the 11th consecutive month!
• There are mixed messages out there from takeaway operators as Just Eat Takeaway has seen them spending less on take-outs while Deliveroo actually put in a “resilient performance” in Q1 thanks to its more premium offering.

OVERALL…

• There was an interesting article this week on the impact of the imminent influx of Chinese EVs will be on net zero promises. Currently, EVs are not as green as they could be, mainly as a result of how the power is generated to power the factories where they are made along with things like shipping etc.
• Interest in EVs in the UK is falling, according to research by Auto Trader, because the benefits of actually owning an EV are fading given higher electricity prices, falling petrol costs and higher up-front costs.

IN EV NEWS…

• Tesla’s Q1 earnings took a hit as its price-cutting campaign sacrificed profits for boosting volumes. Renault whinged about Tesla’s price cuts, saying that the move killed value.
• Ford announced it would be selling its popular F-150 Lightning pick-up truck in Norway, which will be the first time it will be available outside the US.
• JLR announced it would be investing £15bn over five years towards the shift to electrification as part of its plans to be 100% electric by 2025.

MEANWHILE…

• VW announced it would be committing €1bn to building an innovation centre in China, demonstrating that it is very much wanting to be there for the long term.
• GM ditched Apple CarPlay and Android Auto on its new vehicles to push its own in-car infotainment systems. They join the likes of Tesla and Rivian in not offering this functionality, which in my opinion is not a good idea as it seems that proprietary systems are just not very good.
• In the UK, GKN’s automotive business, Dowlais, had a nightmare stock market debut in London as its share price fell by 20%. This is a real blow for the LSE given that it is going through a bad patch of losing IPOs to New York at the moment.

• Apple made a splash this week as it launched a new high-yield savings account in the US in conjunction with Goldman Sachs. This is just the latest move in Apple’s drive to have presence in financial services – and services overall!
• US banks saw a lot of withdrawals, which spooked investors in banks such as State Street, Northern Trust and BNY Mellon – as well as brokers like Charles Schwab (although in the latter’s case it wasn’t so bad because customers just switched money to another account).
• Bank of America announced that it would cut about 2% of its workforce despite actually posting Q1 results that came in above market expectations.
• Goldman Sachs underperformed Wall Street sales and revenue expectations for Q1 thanks to lack of deal flow. It’s also spending money on reversing out of consumer banking at the moment.
• Morgan Stanley also announced weak Q1 results and had a downbeat outlook. Although wealth management was a bright spot, it wasn’t bright enough to outweigh the downer in investment banking performance.
• Allianz is putting its stake in struggling fintech N26 up for sale at a massive discount as it just wants to get rid. Clearly, Allianz has decided to jump of the fintech hype train…
• In financial services – EY announced 3,000 job cuts in the US after its failed break-up while management consultants McKinsey and Bain announced delays for new starters as business levels are muted at the moment.

IN AI NEWS…

• MEPs are currently close to agreeing a list of proposals governing the use of AI. Discussions on this are expected to conclude next week as calls for exerting controls over AI increase and concerns about the effect on jobs deepen.
• Google is looking at using AI to build sophisticated ad campaigns that will be not too dissimilar to those produced by proper ad agencies.
• Snap launched its “My AI” chatbot powered by ChatGPT in addition to new AR services for businesses. This all sounds reasonable but I’m sure its ideas will be copied by others (which often seems to be the way of Snap’s best ideas!) soon enough!
• Elon Musk is rumoured to be planning a launch of a rival to OpenAI because he has apparently hired various engineers from top places.
• Monzo has just said that it has banned candidates from using ChatGPT in applications, according to a new disclaimer in its job ads. No doubt other employers will follow suit!

ELSEWHERE…

• Instagram is going to cut or relocate most of the staff at its London HQ – even those in its metaverse team in Reality Labs – as Zuck continues with his ruthless “year of efficiency” plans.
• Social media platforms are getting twitchy about prodding from lawmakers and regulators. Meta is being accused by the Virtual Global Taskforce (a group of 15 law enforcement agencies around the world) of not doing enough to combat child abuse while WhatsApp and Signal joined together to object to the upcoming Online Safety Bill.
• It seems that Zuck’s Metaverse ambitions are falling apart at the moment, but he’s trying to hang on by now offering the Horizon Worlds VR app to teenagers to drum up more buzz. Roblox, meanwhile, seems to be doing very well in a virtual universe that seems to be thriving!
• Twitter has started cutting legacy blue check marks, much to the annoyance of some multi-gazillionaire creators.
• Discord is growing pretty well at the moment as it benefited hugely from lockdown but is now reaping the rewards of not being beholden to ad revenues. It has a $9.99 subscription service and could well do an IPO in the future.

IN HARDWARE…

• China’s dominance in drones (particularly from DJI!) is continuing. Will the West ever catch up??
• Dell is looking to diversify its supply chain away from China, responding to increasing concerns by clients.

• Merck made an all-cash bid for Prometheus Biosciences for almost $11bn – a massive 75% premium to Friday’s closing price! Merck is trying to pep up its drug pipeline and boost its position in immunology. Prometheus’s flagship treatment isn’t yet fully approved, so this is a big risk and shows just how desperate some cash-rich companies are to keep their pipelines going.
• At one point this week, a number of listed public companies on the LSE were subject to £4bn-worth of takeover bids! The most high-profile of these was a rumoured bid by private equity firm Apollo for embattled online retailer THG, which now has until May 15th to put in a final offer.
• Japanese games-maker Sega Sammy launched a €706m offer for Rovio Entertainment, of Angry Birds fame. Will it be able to make a success of the characters and help its overall push into mobile gaming?
• China’s Anta raised $1.5bn in a placement on the Hong Kong market and will use the money to pay down debt and bolster its balance sheet. Anta owns France’s Salomon and Canada’s Arc’teryx. This shows that there is investor appetite for the right companies!

• IN THE US – discount retailers such as Dollar General and Dollar Tree are trying harder to appeal to more cash-strapped middle classes by making upgrades and offering more groceries. Given how successful Aldi and Lidl have been at this in the UK, you’d think this was the way to go! At the other end of the scale, Whole Foods is planning “office” job cuts that will affect less than 0.5% of its global workforce as it tries to streamline its structures.
• IN EUROPE – Ikea announced that it was going to make a massive €2bn investment in the US, opening eight big new stores and nine smaller outlets within the next three years.
• IN THE UK – WH Smith put in a great performance as its travel business (outlets in railway stations and airports) has really taken off. It’s on track to make up over 70% of all revenues by year end and about 85% of its profits! Elsewhere, the ONS took the unusual step of criticising supermarkets for not passing on lower international food prices, something particularly notable given that we recently saw food price inflation jump by its biggest margin for 45 years! Also, after the euphoria surrounding the bid rumours by Apollo, THG was brought back to reality as it unveiled disappointing results.

• EasyJet put in a solid performance in further evidence that the travel industry is bouncing back nicely after a catastrophic pandemic.
• Entain – the owner of Ladbrokes, Coral and Sportingbet – had a strong Q1 powered by gaming revenue growth in the US, giving it confidence to achieve its full-year guidance.
• Heineken saw group sales rise as Europe and the Americas performed above analyst expectations. Profit margins have been squeezed but cost-cutting initiatives are expected to take the edge off.
• Johnson & Johnson reported higher quarterly sales and even raised forecasts for the full year as it is nearing a resolution to the Baby Powder/cancer uncertainty.
• Lockheed Martin, along with other arms makers, is undershooting expectations at the moment as hopes for super-hot sales have been met with supply chain issues. I’m pretty calm about this as I’d say that there is plenty of underlying demand from many governments around the world as they all increase their defence budgets.
• Netflix gained subscribers but at a slower pace. The next stage of their growth is bound to be from those who currently share passwords as the company is cracking down on them, meaning that at least some of them will start paying for themselves.

My favourite “alternative” story this week was this one: ‘My boyfriend’s snoring drove me nuts – now I make money from his wheezing sounds’ (The Mirror, Zahna Eklund). How enterprising (and hilarious!) 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 COLOURED HIGHLIGHT REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

This was a week where the IMF spread gloom, bitcoin broke $30,000 and AI saw a rule crackdown…

• IN GLOBAL MACRO NEWS – the IMF cut its global GDP growth forecast to 2.8% due to the recent banking turmoil and the UK the G7 country with the worst growth prospects. Chancellor Jeremy Hunt disagreed with the assessment. It’ll be interesting to see whether they are right.
• IN THE US – the Fed warned that there could be a mild recession this year, fuelling speculation that more interest rate hikes are on the cards. The next meeting is to take place at the beginning of May.
• IN CHINA – we see that China escalated military drills near Taiwan and Japan that freaked everyone out but then some argued that this escalation of tensions wasn’t as bad as when former US House Speaker Nancy Pelosi visited Taiwan last year. If Taiwan fell to the Chinese, it could alter the country’s politics, the region’s balance of power and have an impact on living standards globally because it makes the majority of the world’s semiconductors.
• IN THE UK – the Bank of England’s governor aired the possibility of more interest rate rises and played down ongoing fears of a banking crisis. However, he was given food for thought as the latest ONS release showed that the UK’s economy showed zero growth in February, presumably due to the impact of the public sector strikes.

IN COMMODITIES NEWS…

• IN OIL – BP committed to developing the Gulf of Mexico oilfield with a new $9bn platform, its first there since the Deepwater Horizon disaster in 2010. This is evidence of its recent change of tack where it said it would slow down its transition from fossil fuels to renewables because the oil price is just so darn juicy at the moment (my words, not theirs 🤣).
• IN MINING – Canadian miner Teck Resources rejected Glencore’s unsolicited bid, then Glencore offered a sweetener, which Teck then rebuffed once more.

IN CRYPTO NEWS…

• Bitcoin broke $30,000 for the first time since June 2022 for no particular reason despite all the negative newsflow surrounding crypto lenders and platforms.
• The London Stock Exchange and London-based GFO-X are teaming up to offer future and options trading, which presumably feeds into the government’s previously-stated desire to become a global hub for crypto. There was also an interesting article about why bitcoin should move from proof-of-stake to proof-of-work, which basically means that mining it will use far less electricity and will therefore be much better for the environment.

IN BUSINESS TRENDS NEWS…

• US companies are facing their steepest fall in profits since the Covid shutdowns, something that may have gone under the radar for some given that the S&P has gone up by over 6% since the beginning of the year – but actually only 20 stocks have been responsible for almost 90% of this rise.
• The first raft of China IPOs under the new-look, slightly more relaxed, rules came to market this week and some surged by a huge amount! The huge climb implies that pricing was incorrect, but this sort of thing will probably bed down once everyone gets used to it.
• Europe’s biggest SPAC, Pegasus Europe, announced plans to wind down as this high-profile vehicle just couldn’t find anything worth buying – which may imply the death of SPACs for now (although they may be resurrected once more when interest rates eventually calm down, making debt cheaper than it is now!).
• Corporate activist investors have had their busiest quarter ever in Q1 of this year as they have been able to build stakes in companies due to their weakening share prices.
• It was also good to see that a business trends survey by BDO showed that supply chain recovery has boosted optimism among companies about the outlook, but then the latest Bank of England report highlighted a rise in both household and company defaults, with the possibility that the situation could get worse.

IN CONSUMER TRENDS NEWS…

• The latest Barclays data showed that consumer spending increased last month, but continues to lag inflation.
• In real estate, first-time buyers are opting to buy smaller homes rather than stay put and pay much higher rents. UK surveyors are getting less pessimistic about the prospects of the market, particularly as there seems to be an end in sight regarding rising interest rates.
• Meanwhile, the UK jobs market appears to be slowing down as average earnings growth is easing.

IN BANKS NEWS…

• The ECB is drafting legislation that will better protect taxpayers from having to foot the bill for failing banks. This is intended to prevent individual member countries propping up banks when they shouldn’t.
• The BoE is now looking to raise UK bank deposit protection, something that Chancellor Jeremy Hunt said he is reviewing. The SVB debacle highlighted just how much better American depositors are protected (up to $250,000 currently) versus Brits (up to £85,000).
• IN INDIVIDUAL BANKS’ NEWS – HSBC is now hiring over 40 bankers in the US just weeks after buying SVB’s UK operations for £1. I would have thought this would be good for both sides as long as there aren’t any nasty surprises lurking in SVB’s financials! HSBC will suddenly get access to a class of clients that it didn’t previously have access to and SVB’s bankers will be able to carry on with their business with HSBC’s nice fat balance sheet behind them! Elsewhere, JP Morgan is pushing its bankers to get back in the office, telling its MDs to be in there five days a week. This is a trend that is continuing across all investment banks!

IN ACCOUNTANCY NEWS…

• EY has called-off the plan to split its business into audit and consultancy. Basically, the EY partners in the US thought that the audit business would get too weak. It’s now in limbo and there will no doubt be a power vacuum and a ton of job cuts.

IN PRIVATE EQUITY NEWS

• KKR bought a 29% stake in PR group FGS Global, which gives strategic advice to companies and execs. The financial communications market is going through a lot of consolidation at the moment.

IN AI NEWS…

• AI data breaches cause concern and prompt lawsuits from creators who object to AI models being trained using their work (and not getting paid for it).
• The US Commerce Department is looking at rules to stop AI tools spreading discrimination and harmful information, which may include some kind of certification process.
• China has gone one further with calling for security reviews on AI products to slow their release. A database to register them will be established and there must be user verification and tracking.
• Streaming sites have been warned by Universal Music Group not to let their AI models train on copyrighted songs – or else it will “not hesitate to take steps to protect our rights and hose of our artists”.
• Amazon has just announced a new AI offering that targets corporate customers. It will make new AI tools available and provide a neutral platform for businesses to integrate AI features into their offering, potentially becoming the Switzerland of cloud computing!

IN SOCIAL MEDIA NEWS…

• Twitter changed its name (although users will still know it as Twitter) to X Corp and its domicile from Delaware to Nevada in what some see as a move to Musk’s dream of an “everything app”. It was also interesting to note that Twitter announced a tie-up with online trading group eToro.
• ByteDance, TikTok’s parent, posted record profits despite headwinds with TikTok – and it was the first time that it had overtaken those of Tencent and Alibaba!

IN CHIP NEWS…

• China has been cracking down on US tech companies recently in retaliation for US sanctions but experts suggest that they won’t go too far given that China still needs AI chips made by the likes of Nvidia, Intel and Qualcomm.
• Intel announced plans to work with Arm to manufacture its mobile phone chips as it pushes ahead with plans to open up its manufacturing facilities to third parties to keep revenues going. In the meantime, Germany is urging Intel to spend more on its megafab in Madgeburg. Meanwhile, SoftBank has committed to listing Arm in New York, potentially this autumn and it also announced plans to sell down most of its Alibaba stake, leaving it much more vulnerable without that perennial buffer.

IN EV NEWS…

• The US is trying to accelerate the shift to EVs by mooting the possibility of implementing tougher emissions targets.
• China car manufacturers are targeting Europe with models that have all sorts of gizmos and up to 25 marques will be targeting the UK from next year! Meanwhile, Tesla increases its China investment, showing that it is very much committed to the country.
• IN INDIVIDUAL COMPANY NEWS – Arrival is running low on cash and BMW continues the shift to EVs.

IN OTHER CAR NEWS…

• Ford announced the launch of Britain’s first hands-free car, which just gained Department of Transport approval.
• Hyundai and Kia are being sued by a number of US cities who accuse them of doing too little to protect their cars – and this is leading to more thefts of the cars, which is taking up valuable police resources.

• IN SUPERMARKETS – Tesco’s profits tumbled thanks to the effects of inflation and it is cutting the price of everyday items to attract cash-strapped shoppers. Sainsbury’s is also cutting prices, particularly to Nectar card holders.
• Germany looks set to legalise personal use of cannabis – and when it does it’ll be the biggest country in the world by population to legalise it.

My favourite “alternative” story this week was actually the video of the “ranger roll”! I haven’t tried it yet, but it looks like it’s very effective! Fast forward to 2mins 20secs to cut out the preamble 👍

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

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

This was a week where OPEC+ cut production, Parisians rejected e-scooters and China turned the screws on rare earths…

• IN GLOBAL NEWS – the IMF said that the global economy was on track for its weakest growth since 1990 thanks to the ongoing repercussions of Covid and the Ukraine war. It went further to say that it expected an annual GDP growth rate of 3% for the next five years as a result.
• IN CHINA NEWS – when China and Japan’s respective foreign ministers met this week, China urged Japan not to go through with imposing big curbs on the exports of semiconductor manufacturing equipment despite Japan unveiling restrictions last Friday on the export of 23 types of tech pursuant to a deal struck with the US and the Netherlands. China also announced that it was launching a review of imports of US chipmaker Micron Technology imports, citing “national security” grounds. China is also retaliating against US sanctions in more subtle ways – like its anti-trust regulator (the State Administration for Market Regulation) delaying the approval of M&A deals of US companies. Even if deals eventually go ahead, the delays can cost the companies involved a lot of money.
• IN UK NEWS – Economists are debating the BoE’s next interest rate move as you have the Bank’s economist hinting that there may be another interest rate rise next month while a member of the MPC reckons that they need to be cut “earlier and faster”. Meanwhile, it seems that business confidence appears to be improving, which is good to hear especially as many were predicting dire things for our economy last year.

IN COMMODITIES NEWS…

• IN OIL NEWS – OPEC+ made a surprise announcement about cutting oil production which immediately boosted the price sending a message to the Americans that they won’t necessarily comply with their requests. While Putin continues to push Russian oil exports to new highs, Shell is in line to get $1.2bn for the sale of its Russian business.
• IN COPPER NEWS – Glencore launched a massive $22bn bid for rival copper miner Teck Resources. If it goes ahead it will be Glencore’s biggest acquisition since it bought Xstrata in 2013.

IN CRYPTO NEWS…

• Crypto exchange Binance has had its Australian financial services licence cancelled by the Australian Securities and Investments Commission (ASIC) for incorrectly classifying a large number of retail customers as wholesale investors. Another slap for Binance…

IN BUSINESS TRENDS NEWS…

• Brands continued to raise ad spending on TikTok despite the threat of a US ban.
• UK retailers are hoping for a big spending Easter weekend, particularly as spending on weekends is trending up as more people return to offices during the week.
• Parisians voted to ban e-scooters by a massive margin, which will be bad news for suppliers Lime, Dott and Tier.
• Italy voted to reject lab-grown meat and animal feed.

IN EMPLOYMENT TRENDS NEWS…

• IN THE US – US job vacancy numbers fell to their lowest level in almost two years, in the latest release from the US Department of Labor’s Job Openings and Labor Turnover Survey, in a potential sign that the jobs market is cooling down. This trend was echoed by the ADP National Employment report, which showed that private sector employers took on fewer new employees than expected last month.
• IN THE UK – more firms have been offering “early finish Fridays” as a perk to attract more Gen-Z candidates as the jobs market remains tight. That said, recruiter Robert Walters announced a disappointing Q1 as it blamed tech layoffs for the weakness.

IN CONSUMER TRENDS NEWS…

• Tui reported strong demand for both Easter and summer bookings, with momentum building since the beginning of this year.

IN BANK-RELATED NEWS…

• BlackRock got called in by the US Federal Deposit Insurance Corporation to manage $114bn-worth of asset disposals after the failures of SVB and Signature Bank last month. This means that there will be a more orderly sale of the assets rather than the FDIC dumping them on the market all at once.
• HSBC faced pressure from Hong Kong investors who said that it was pandering too much to the UK government by buying SVB for £1 but HSBC argued that it was a unique opportunity at an unbelievably low price.
• Switzerland’s Federal Prosecutor has started an investigation into UBS’s takeover of Credit Suisse. It had to really, given that 75% of Swiss citizens are opposed to the merger and that so many investors were incensed by it all. Investors sold down holdings in both banks, Credit Suisse investors vented their anger with bosses at the bank’s last ever meeting and the Swiss government decided to cut bonuses of the senior bods at Credit Suisse. It wasn’t a nightmare for everyone, though – hedge funds made $7bn betting against banks in the whole turmoil!

IN FUND MANAGER AND BROKER-RELATED NEWS…

• Vanguard is looking to exit its China joint venture with Ant Group as its passive fund philosophy hasn’t gained much traction with local investors.
• Rathbones announced it was tying up with Investec to create a £100bn wealth manager in an all-share deal.
• Numis and Peel Hunt both said that they were pretty gloomy about the deal pipeline, which is one of the main reasons why smaller rivals Cenkos and FinnCap got together recently.

IN OTHER FINANCIALS NEWS…

• VC funding for start-ups has halved in the tech downturn, according to data provider Crunchbase. Valuations of many of the companies in their portfolios have taken a pasting, so VCs have been less free with doling out the cash.
• The FCA and Advertising Standards Authority have launched a campaign to warn influencers of the risks of promoting NFTs and cryptocurrencies. As I’ve said in the past, once celebs (e.g. Ronaldo, any of the Kardashians etc.🤣) get involved, it’s usually a sign that you’re at the top of the market and it’s worth getting out…

IN BATTERY-RELATED NEWS…

• China is threatening to ban exports of the tech needed to process and magnetise “rare earth” materials that are commonly used in EV batteries. This is no doubt another example of China retaliating against US sanctions.
• Lithium shortages are causing increasing concern given China’s dominance in its supply and processing (it controls 44% of the existing supply of battery-grade lithium and 60% of the world’s lithium processing).
• CATL faces concerns from both the US and China as the US is worried about its car manufacturers relying too much on its batteries whereas China is concerned about CATL having too many US customers, which may prove problematic if US-China relationships deteriorate further.
• Tesla is about to see a major ramp-up in battery production when its Nevada plant comes online
• Stellantis and BMW are holding talks with Panasonic to build EV battery plants in the US.
• Meanwhile, JCB’s chief is now pushing the government to re-think its stand on the net zero timetable for new cars (2030) to make it the same as the Europeans (2035), consider e-fuels and put more effort into developing hydrogen-powered vehicles.

IN EV NEWS…

• Tesla announced a rise in the number of vehicle deliveries, something that was helped by its recent price cuts.
• Ram’s new pickup truck is looking to achieve a 500 mile range when it goes on sale late on next year.
• EV sales are hitting record levels in the UK, to the extent that there are concerns about whether the charging network is going to be able to cope.

…AND MORE GENERALLY…

• US car sales are rebounding from their lows as supply bottlenecks ease, with the likes of GM, Hyundai, Nissan and Honda all putting in strong performances recently and UBS reckons there will be a car price war because it thinks that global car production will exceed sales this year.

IN AI NEWS…

• Universities expressed unease with AI detection as plagiarism detection software Turnitin announced a new tool that claimed to be able to detect the use of AI with a 98% success rate. Some education establishments already decided to opt out of the new service.
• An Australian mayor threatened to sue ChatGPT’s creator OpenAI after it incorrectly said he’d done time for bribery when he had in fact been the whistleblower! It could be the first ever legal case brought against ChatGPT, so all eyes will be on what happens here! OpenAI has 28 days to respond…
• Meanwhile, Google announced that it would be including ChatAI in its main search engine as competition from the likes of ChatGPT intensifies.

IN OTHER TECH NEWS…

• Google announced a crackdown on loan apps that access sensitive data from phones to harass or blackmail users. Such apps will now be restricted from what data they can access. Surely they should have done this before now, no??
• Microsoft and Amazon are now facing a probe in the UK by the Competition and Markets Authority looking at their dominance of the UK’s cloud computing market. Amazon Web Services and Microsoft’s Azure account for 60-70% of the market with the mighty Google coming in at a distant third with a market share of just 5 to 10%!
• TikTok got fined a paltry £12.7m by the Information Commissioner’s Office (the British privacy watchdog) for collecting data on kids, failing to do proper age checks and removing underage users. Elsewhere, it still faces a ban in the US.
• Samsung announced very downbeat forecasts as its memory chip business is suffering a massive downer due to tech spend falling overall.

• Inditex got approval to sell its business in Russia to Daher Group of the UAE. Until Russia invaded Ukraine, it used to be the company’s second biggest market by store numbers, but clearly not any more.
• Sainsbury’s got criticised for its vacuum-packed mince, but it said that it was doing it this way in its bid to cut plastic packaging on own-label products by 50% by 2025!
• Franco Manca’s owner, Fulham Shore, got bought by Japanese chain restaurant operator Toridoll and sector specialist fund Capdesia.

• BlackRock ended the withdrawal restrictions on its £3.5bn UK property fund, which has been gated since last year when investors all wanted to withdraw their money at the same time. Rivals including M&G and Schroders are yet to allow fund withdrawals…
• UK house prices rose for the third consecutive month in March, surprising everyone. These Halifax figures back up recent Bank of England stats which show that mortgage approvals turned around in February. It is worth noting that this “conclusion” diverges somewhat from the read-through of Nationwide stats (that house prices are falling).
• The UK’s construction PMI points to a recovery as total output increased in March. That said, although commercial building and civil engineering experienced growth in February, residential building activity had its slowest month since May 2020.

• Allied Universal, the world’s biggest private security group, postponed its IPO due to ongoing market turmoil and ongoing recruitment problems.
• L’Oreal bought Australian vegan beauty brand Aēsop for £2bn, a decent strategic move given that the premium beauty segment is one of the fastest growing areas of the consumer goods market at the moment.
• US law firm Kirkland & Ellis still managed to pull in more revenues than last year – unlike rivals – but also cut headcount due to the slowdown in dealmaking.
• Management consultancy giant McKinsey announced that it would be downsizing its bankruptcy practice due to an rise in the number of lawsuits and government investigations the business was caught up in.
• Saga suffered losses despite its cruises business staging a decent turnaround. It blamed higher motor insurance costs and regulatory changes.

My favourite “alternative” story this week was this review of some April Fool’s Day pranks: April Fool’s Day 2023: Biggest pranks including silent flights and cement perfume (The Mirror, Julia Banim). Nice 👍

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

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

This was a week where Xi Jinping went to Moscow, UBS rescued Credit Suisse and TikTok took a lot of flak…

• IN CHINA NEWS – Xi Jinping made a three-day state visit to Moscow – the first one for four years – where Vlad praised Xi’s “strong leadership” and it became even more apparent that Russia is very much China’s junior partner. It was very interesting to see that China did not commit to a gas pipeline agreement, which surprised Russia.
• IN US NEWS – the Fed raised interest rates by 0.25% despite the current banking turmoil, following last week’s 0.5% hike by the ECB. Powell left the door open for further hikes in subsequent meetings but did admit that there had been talk of leaving the rates unchanged this time given what’s happening in the banking sector at the moment.
• IN FRANCE – President Macron managed to survive a no-confidence vote as the opposition is still useless and fragmented and he stuck with his unpopular plan to increase the retirement age from 62 to 64.
• IN THE UK – there was a surprise increase in inflation to 10.4% as last month’s salad price rises made themselves felt, which was what probably pushed the Bank of England to raise interest rates by 0.25% to 4.25%.

IN ENERGY NEWS…

• There was a lot of activity from firms looking to supply small nuclear reactors. British-based company Newcleo is trying to raise £900m to build a small fleet of reactors here, US firm Last Energy has signed a deal to sell 24 of its £100m modular power plants to UK customers and Rolls-Royce is looking to build its SMRs in Finland.

IN CRYPTO NEWS…

• Bitcoin’s been going crazy, especially since all this banking malarkey. It’s gone up by 21% so far this month – and by 70% so far this year! As usual, there’s no good explanation as to why.
• Coinbase got a warning from the SEC that it may face an enforcement action as authorities crack down on crypto. And yet people keep buying into bitcoin!

IN OIL NEWS…

• Commodities consultancy Wood McKenzie published a report that said oil prices could hit $90 a barrel sometime this year thanks to China’s reawakening from its zero-Covid hybernation and thirst for oil to power its growth.

OVERALL…

• US Treasury secretary Janet Yellen is pushing for World Bank reform on climate change as its efforts thus far have been judged as being insufficient. Yellen is pushing for some kind of roadmap by April.
• The Bank of England is looking to tighten capital rules on lending to SMEs, which is causing a lot of concern by SMEs and companies like Funding Circle as this is going to stunt growth.

IN US BANKING NEWS…

• First Republic still isn’t out of the woods yet despite last week’s high profile bailout and its shares crashed by another 46% while credit rating agency S&P Global made things worse by downgrading its rating.
• West coast lender PacWest had to get $1.4bn of cash from Atlas SP Partners to bolster its finances as it saw a massive outflow of 20% of its deposits as jitters in the sector continue.
• Janet Yellen stated the Treasury’s commitment to support smaller lenders, but First Republic’s share price kept falling anyway as around two-thirds of its clients had deposits that contained over $250,000 (the threshold beyond which their money is not guaranteed as things stand). Confidence was dented further as Yellen refused to commit to a broader lifting of the $250,000 threshold.

IN EUROPEAN BANKING NEWS…

• UBS rescued stricken rival Credit Suisse in super-quick time over the weekend. UBS paid peanuts to buy its rival but as part of the deal AT1 bond-holders were wiped out to the tune of $17bn. Condemnation of this wipe-out soon followed as bondholders usually take precedence to equity holders in these types of situations. Unsurprisingly, US investors are lining up to sue. Massive job losses look likely as a result of this takeover and Credit Suisse’s investment bank looks particularly vulnerable at this stage.

IN OTHER FINANCIALS NEWS…

• Payment fintech Block got hammered thanks to the publishing of a damning report by short-selling Hindenburg Research. The report said Block (formerly known as Square) had overstated the number of users, facilitated suspect payments via Block’s Cash App and targeted those on lower incomes with “predatory loans and fees”. Block denied everything, Hindenburg pointed out that it had been investigating Block for two years and we’ve seen some spectacular impact that Hindenburg’s poking around has had on Nikola (electric truck company) and Adani Group (Indian conglomerate). Nasty.
• Two UK small-cap brokers Cenkos Securities and FinnCap agreed a £43m merger just months after talks between FinnCap and Panmure Gordon failed. There’s been a lack of M&A deals and IPOs, so this looks like a defensive merger. Maybe this will prompt further consolidation in the sector as the deal pipeline is still looking pretty anaemic.

IN AI NEWS…

• There are increasing appeals for rules to govern AI given the current proliferation of its usage and it was interesting to see that negotiations are continuing between AI companies and news publishers regarding access to their quality content.
• Google launched the updated version of its AI chatbot Bard but it turns out that it still makes the same mistakes as the last version!
• Meanwhile, magic circle law firm Allen & Overy was very positive about how their own in-house chatbot “Harvey” is doing but they were less forthcoming as to whether its use would result in lower fees for clients 🤣!

IN TIKTOK NEWS…

• TikTok continues to face an uphill struggle, although parent company ByteDance still has another app ace up its sleeve – CapCut. Still, TikTok’s super-slick algorithm continues to be the main bone of contention between China and the US as the company faced a five-hour Congressional hearing that fretted about data security risks. Things then took another turn as the Chinese government said that it would “firmly oppose” a forced sale of TikTok.

IN OTHER TECH NEWS…

• China is now putting more effort into nurturing domestic chip and equipment companies like SMIC, Hua Hong Semiconductor and others in order to better cope with tighten US export controls on a longer term basis. Strict US controls may well backfire in future as China ends up making its own chips and not needing the US at all!

• Brussels tried to find a compromise with Germany to get their proposed ban on the sale of combustion-engined cars from 2035. German car manufacturers wanted to have an exemption for e-fuel-powered cars, so the EC has provided that – but say that these cars must have bits fitted that mean that neither petrol nor diesel can be used. Basically, this shows how powerful Germany is here – it’ll be interesting to see whether the EC crumbles completely!
• Prices for used EVs fell as more of them hit the market and Tesla reduced its prices – but they are still expensive!
• Ford launched a new EV – the Explorer – taking it closer to its goal of being 100% electric by 2025. However, Ford still expects $3bn of losses in EVs this year as it transitions to electrification.
• Meanwhile, it turns out that Maserati has aspirations to spin itself out of Stellantis and see the same success as Ferrari and Porsche before them.  No dates were mentioned, but it is clearly on the radar.
• News for VW was mixed this week. On the one hand, VW is having problems pulling out of its Russia business but on the other it turns out that one of its luxury brands, Lamborghini, is raking in the profits. Aston Martin will be looking on in hope as it wants its DBS to do for it what the Urus has done for Lamborghini!

IN CONSUMER TRENDS…

• UK consumer confidence is improving although the outlook for personal finances has worsened.
• UK house prices remained stubbornly high, according to Rightmove, but the latest ONS data said that prices in the south west have taken a hit over the last two months. DIY and a buoyant housing market usually go hand-in-hand but there has been a mixed picture here. On the one hand, Kingfisher (which owns B&Q and Screwfix) is seeing a slowdown in DIY but rival Wickes is still doing really well!
• In terms of spending, Unilever is indulging in a bit of “shrinkflation” to pass on price rises on the sly, Foot Locker expects sales to weaken over the coming year but Nike is doing a roaring trade and making inroads into its inventory.

IN RETAIL NEWS…

• GameStop in the US (remember this meme stock??) saw its share price sky-rocket by 48% as it surprised the market with news of its first quarterly profit for seven consecutive quarters! Apparently its efforts to cut costs and get its store offering right are paying off…
• Superdry announced a deal to sell its IP in Asia to South Korea’s Cowell Fashion in order to broaden its appeal. This could be great IMO – especially if it gets rid of the meaningless kanji that the company insists on using in its designs!
• It seems that John Lewis is thinking about scrapping its partnership structure – and while it’s wasting time pondering that, M&S is nicking its customers. Dame Sharon Lewis needs to be sorting out the core business – not fiddling around with peripheral stuff. She is just wasting time IMO.
• It was interesting to see a survey by trade body Revo and consultancy Lambert Smith Hampton which shows that up to 40% of shops need to be repurposed in the next five years as consumer habits have changed permanently since lockdown.

• It was another big week for job losses as Accenture announced it was cutting 2.5% of its workforce (19,000 people!), Amazon laid off another 9,000, Indeed is cutting 15% of its staff (2,200 employees) and Just Eat is axing 1,700 delivery staff. Tough times – but then again most of these companies did have a massive hiring boom over the last few years.
• Starbucks got a new CEO but faces tough competition in China from a whole host of domestic and foreign rivals.
• The world’s most indebted real estate company Evergrande is close to announcing a big bond restructuring deal which will bring it closer to safety.
• Zurich legalised cannabis as part of a trial to ascertain economic and health benefits!

• Watson’s Yearly 2022/23: coming shortly…

My favourite “alternative” story this week was actually the video of Jordan Belfort of Wolf of Wall Street fame explaining the concept of sales. I’m not a fan of his or the way he acted but this is a brilliant explanation 👍

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

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

This was a week characterised by huge drama in the banking sector, the latest version of ChatGPT and the UK Budget…

• IN THE US – the annualised rate of inflation slowed to 6%, which shows that the interest rate hikes are working – but given what’s going on with the banking sector the Fed might pause the next expected rate rise. There was also a meeting of the Aukus defence pact between the US, UK and Australia. Companies that would benefit from the agreement include BAE Systems, Rolls-Royce, Sheffield Forgemasters, Babcock International, General Dynamics, Huntington Ingalls, Lockheed Martin and Thales. Talking of defence spending, Sunak has committed to increase defence spending, as has China which wants to build a military “wall of steel”.
• IN EUROPE – the ECB raised interest rates by 0.5% from 2.5% to 3% despite the drama going on in the banking sector at the moment, so I guess it is confident that things will get sorted.
• IN FRANCE – President Macron decided to use special powers to force through his controversial pension reforms which include a lifting of the pension age from 62 to 64. There are threats that he could face a no confidence vote as a result, but his fragmented opposition will have to get organised in order to do this.
• IN THE UK – Chancellor Hunt unveiled the Budget. Most of the contents had been well-flagged previously but the main surprise was the abolition of the lifetime tax-free pension allowance that was supposed to help with stemming the exodus of senior doctors although some think-tanks doubted it. As with all Budgets, there were winners and losers. Business was not pleased that the corporation tax rise went through as planned.
• IN ARGENTINA – although we saw the country’s inflation rate breaking through the 100% barrier there is a lot to be positive about in its agriculture, energy, mining and digital services sectors.

IN COMMODITIES NEWS…

• Saudi Aramco, the world’s biggest oil company, unveiled the biggest profits ever seen by an oil and gas company at a whopping $161bn! Just to give you an idea of how immense this is, it is more than the recent profits of Shell, BP, Exxon and Chevron put together!
• The UK is on the verge of removing palm oil import tariffs in order to ease its passage to the CPTPP. Palm oil is controversial because it involves deforestation, but then Malaysia and Indonesia say that the tariffs aren’t fair because they don’t differentiate between the destructive and sustainable producers.

IN BUSINESS TRENDS…

• UK business confidence is rising, according to the latest survey from Accenture and S&P Global but then again the latest findings of the Insolvency Service show that company insolvencies are at their highest rate for four years!
• Saudi Arabia’s new airline, Riyadh Air, just splashed out £30bn on 72 Dreamliners from Boeing to take on existing carriers including Emirates, Qatar Airways and Etihad. Lots of airlines seem to be buying lots of planes these days don’t they!

IN BANKS NEWS…

• IN THE US – Tech-focused bank Silicon Valley Bank collapsed as it just couldn’t cope with the mass-withdrawals of deposits. The Fed moved to protect the deposits of all SVB’s customers in an attempt to calm the panic. HSBC bought SVB UK for £1 but investors were not satisfied by Biden’s verbal reassurances and VCs came in for a lot of criticism for stoking the panic while the sell-off of regional banks continued. Credit rating agency Moody’s downgraded the entire US banking sector and investors continued to be nervy so it was interesting to see First Republic got rescued by a consortium of big banks powered by “the three J’s”.
• IN EUROPE – Credit Suisse caused panic when it said that it found “material weaknesses” in its financial reporting controls which then resulted in a market sell-off that prompted the Swiss central bank to step in with a $54bn loan to calm nerves. There was speculation that UBS could take over its rival, which resulted in an offer on Sunday morning of up to $1bn (I’ll no doubt be writing more about this in tomorrow’s Watson’s Daily!).
• ELSEWHERE – NatWest announced it would limit customers’ crypto payments while Binance said that it would suspend sterling transfers as its payment provider, Paysafe, said it would restrict payments. This could mean that Binance’s customers won’t be able to withdraw their money in the next few months!

IN INSURANCE NEWS…

• We see that insurers face a “mega-trial” over the planes that have been stranded in Russia since it invaded Ukraine. The insurers want one big trial and companies like AerCap want to get on with individual actions to get their money quicker. This is going to get messy.
• Direct Line reported an annual loss thanks to higher claims costs, but it’s also having a tricky time at the moment because its CEO recently stepped down.

IN OTHER FINANCIALS NEWS…

• Stripe managed to raise over $6.5bn but at a valuation that was way short of its 2021 peak. It needed to do this because of the tax liabilities tied to its employees’ stock units. Other payments firms like Adyen and PayPal are also doing badly since their respective peaks in the last year or so
• The FCA threatened to shut down “shadow banks” (which basically act like banks but without a licence – like Revolut) unless they have proper safeguards in place to protect customers’ money – an action no doubt prompted by this week’s events!

IN AI NEWS…

• Microsoft announced that it is continuing to integrate AI into its suite of productivity tools while OpenAI announced its latest version of ChatGPT. The AI could be used for good things like improving the NHS by being used in diagnosis and giving better analysis of data faster and cheaper than a brand new system, but it’s also being used at the moment to cheat on job applications.

IN SOFTWARE NEWS…

• TikTok continues to come under enormous pressure as it objects to Washington’s stance that it is a security threat and the Biden administration is threatening a US ban. In the UK, Sunak banned TikTok on government mobiles, there’s speculation that its handling of personal information breaches UK law and it’s being accused of mishandling sexual harassment allegations against the former head of its UK operations.
• Meta Platforms cut headcount by another 10,000 as part of the “Year of Efficiency” just months after he culled 11,000 but pressure continues for it to cut spending on the metaverse.

MEANWHILE…

• Apple has high hopes for its mixed-reality headset that’ll cost around $3,000 a piece later this year (perhaps in June?).
• The UK commits £2.5bn to quantum computing over a ten year period in a bid to make us the “next silicon valley”.
• Brussels is looking to restrict imports of Chinese green tech in the Net Zero Industry Act by excluding it from public contracts and making it more difficult for buyers to get hold of subsidies. No doubt there will be some retaliation from China on this!

• VW announced that it would pour £160bn into EVs over the next five years, two-thirds of which will go into developing battery-powered cars and related software. VW also announced that it was going to pick Canada for its next battery plant while plans for its European one remain on hold as it waits to see what subsidies it can squeeze out of Europe…
• Amazon and Rivian look set to relax their exclusivity deal, allowing Rivian to manufacture for clients other than Amazon.
• Porsche announced great sales in its first year as a quoted company and has a positive outlook for strong momentum continuing.

IN CONSUMER TRENDS…

• UK wage growth slowed to 5.7% as unemployment stays near record lows, according to the ONS.
• Mortgage approvals fell by a whopping 25% in the final quarter of 2022, but I’d say that’s going to be the quarter with the biggest impact from the whole Truss-Kwarteng Mini-Budget debacle.

IN RETAIL NEWS…

• Inditex (owner of Zara et al.) managed to beat rival H&M’s performance again and topped it off by announcing an increase to the dividend!
• John Lewis had a shocker and scrapped the bonus but announced a new CEO who, like Dame Sharon White, has virtually zero retail experience. It continues to experiment at the fringes with formats in its non-food outlets whilst continuing to fail to address its core business.

• Pfizer announced a massive $43bn acquisition in – cash – to buy biotech company Seagen. The deal is expected to complete either at the end of the year or beginning of next but it will have to get past the regulators. Will this “break the seal” of deal flow for bankers??
• Celadon won the right to sell medical cannabis in Britain, becoming the first UK-based manufacturer of cannabis to get a licence to do so from the Home Office since the whole market opened up in 2018. This will enable it to sell its cannabis oil to certain private clinics, universities and pharma companies engaged in R&D.
• Trainline announced a strong lift in ticket sales thanks to foreign travellers visiting Europe. It was pretty good considering the strikes we’ve been having and I would have thought it’ll get better from here as strikes reduce, more people travel for leisure and return to commuting.

• Watson’s Yearly 2022/23: coming shortly…

My favourite “alternative” story this week was the one about the guy who used ChatGPT to make money: Man tasks AI bot with making ‘as much money as possible’ and it goes very well (The Mirror, John Bett). Amazing!

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

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

This was a week where we saw Biden’s big tax plans, law meeting AI and ongoing TikTok problems…

• IN CHINA – we saw China unveil its lowest GDP target for almost three decades! China’s outgoing premier Li Keqiang stated the target of “about five per cent”. Some say this heralds a new era of caution, although some think that this is just China under-promising to over-deliver versus over-promising and under-delivering last year! There was a bit of tension as US house speaker Kevin McCarthy met Taiwan’s president in the US to avoid what happened the last time when speaker Nancy Pelosi popped over to Taiwan (the Chinese really didn’t react well to this). All the while, Chinese defence companies and arms manufacturers like Hefei Jianghang Aircraft, AviChina Industry & Technology and China State Shipbuilding Corp are benefiting from the government increasing its military spending by 7% this year.
• IN THE US – Fed chief Jay Powell warned that bigger interest rate increases were still a possibility as he feels that there’s more to be done about inflation, which is still strong – something reflected by robust recent economic data. Later in the week, President Biden put forward plans for big tax increases which might prove academic as his party doesn’t control the House of Representatives – but even if the proposals don’t get enshrined in law it could be a glimpse of the platform that Biden is making with a view to next year’s elections. Transatlantic friction continues as the EU tries to combat US moves to dish out incentives as part of the Chips and Science Act (for chip production) and the Inflation Reduction Act (for green tech industries), but I would not expect the EU to get much in the way of concessions as it seems that the US is increasingly adopting a “shoot first, ask questions later” approach. The US also imposed sanctions on Chinese companies (Koto Machinery, Raven, Guilin Alpha, S&C Trade and Caspro) for selling aerospace components used to manufacture Iranian drones (which the companies obviously denied).
• IN THE UK – the BCC reckons that we’ll avoid recession but growth will be sluggish. There was a bit of a kerfuffle this week as the valuation gap between the US and UK markets is getting wider and various companies are threatening to list in the US, including WANdisco, but it turns out that WANdisco’s financials are dodgy, so it wound its neck in.

IN COMMODITIES NEWS…

• Nickel IPOs have been a strong driver of public listings in Indonesia this year as President Joko Widodo aims to make the country a powerhouse in the global EV market. Indonesia has the world’s biggest nickel reserves and is the world’s biggest producer of the metal that is a key material for EV batteries.
• Talking of nickel, hedge fund lawsuits are piling up against the LME for last year’s nickel chaos caused by the Exchange suspending and cancelling trades when prices more than tripled in a day last year.

IN ENERGY NEWS…

• National Grid fired up its coal plants for the first time this winter as temperatures in the UK plummeted.
• Cornwall could be the site of the UK’s first geothermal power plant when it goes operational next year! It has drilled a hole that’s over three miles down to tap into water that’s up to 180°C. Fracking expertise could help hugely as well as there’s an American company called Quaise Energy that’s looking at tech that could help it drill down by up to 20km to reach water that is up to 500°C!

IN CRYPTO NEWS…

• FTX’s trading affiliate Alameda is suing Grayscale and its parent company DCG about its crypto investments as interim CEO John Ray tries to claw back as much as he can for FTX customers and creditors.
• Crypto bank Silvergate announced plans to wind down after being hugely damaged by the FTX collapse.

IN BUSINESS TRENDS…

• Automation is accelerating as the war in Ukraine and the pandemic have brought to light glaring weaknesses in the supply chains and manpower in energy, agriculture and manufacturing. Relations between the US and China continue to be fraught and so manufacturers are looking to diversify where they manufacture “just in case”. Increased automation could benefit Japanese companies like Fanuc and/or Keyence.
• Two big London law firms – Clifford Chance and Herbert Smith Freehills – along with US firm Latham & Watkins have been granted foreign law licences to open offices in Saudi Arabia. I suspect others will follow!
• UK construction activity hit its highest growth rate in 9 months, according to the latest S&P Global PMI and things seem to be looking up in the sector.

IN CONSUMER TRENDS…

• First-time buyers are seeing their mortgage repayments skyrocket – ONS data showed that average monthly mortgage payments rose by 61%!
• Barclaycard data shows that discount stores are winning as consumers try to make their money go further. They are also buying more own-brands.
• HelloFresh continues to do well as consumers still seem to want to buy meal kits in a cost-of-living crisis!
• Premier Foods is doing so well that it raised its annual forecasts. Consumers clearly like the familiarity of their brands (which include Oxo, Angel Delight, Bisto and Mr Kipling) in uncertain times.

IN EMPLOYMENT TRENDS…

• Britain is looking at relaxing foreign worker rules to plug gaps in our workforce, putting bricklayers, roofers, carpenters, plasterers and others in the trade on the “shortage occupation list” which will allow employers to bring in people from these professions on lower wages. This clearly needs to be monitored as I suspect this could be subject to abuse by employers wanting to cut their wage bills!
• Recruiter PageGroup had another successful year thanks to a tight labour market and rising wages but it is seeing momentum slowing down. All eyes will be on the trading update next month.

OVERALL…

• US listed tech companies continue to have a tough time with many that floated in 2020 and 2021 now trading below their IPO price. Interestingly, private equity firms like Thoma Bravo are picking them up on the cheap with a view to putting some of them together and floating them down the road as a more “rounded” entity. Investors are less impressed with growth these days – they are much keener on profitability (although any company with “AI” in its name may still be able to attract interest 🤣).

IN AI NEWS…

• AI is now facing investor scepticism as they worry about the cash burn and real prospects of actually making money and cyber experts warn about AI being used for nefarious purposes like phishing attacks and other types of fraud. Still, law firm DLA Piper poached ten data scientists from a smaller rival to help advise clients on the use of AI and build tools to help its own lawyers and its clients.

IN HARDWARE NEWS…

• South Korean firms Samsung and SK Hynix are hesitating whether to take Uncle Sam’s dollar via the US Chips Act because there are too many strings attached. No doubt other chip makers will be watching this with interest to see who blinks…mind you it’s possible that Intel might be held back by the Chips Act because it doesn’t produce the top spec chips like rival AMD does – so actually its rivals may benefit more.
• Although some chip companies – like Intel and Qualcomm – have been reporting a slowdown due to falling PC and smartphone demand, chip companies that supply the automotive industry have been reporting rising sales. NXP Semiconductors, Infineon, Renesas, Analog Devices and Texas Instruments have been among those to experience this trend and I  suspect this will continue as the whole automotive industry advances towards electrification.
• The Netherlands has now bowed to US pressure and said it will restrict chip exports to China, which will not be great for China long-term.
• Germany is reviewing potential security risks with Chinese 5G equipment in its networks. This could lead to a potential ban on some parts manufactured by Huawei and ZTE…
• Apple and Foxconn are getting closer to increasing India production as labour laws have been changed there to accommodate its 12-hour (as opposed to the previous standard of 9-hour) shift patterns, easing its path to potentially become the next major manufacturing hub.

IN SOFTWARE NEWS…

• TikTok is rolling out its “Project Clover” charm offensive to convince Europeans that it’s not going to steal user data for spying purposes. Project Texas is the American equivalent – which will be needed because senators are pushing through a bill (called the RESTRICT Act) that could pave the way for Biden to ban TikTok! This could also be bad for other Chinese-controlled tech groups like Alibaba, PDD and Shein.
• Twitter had its biggest malfunction since Musk took over while the EU told him to hire more human moderators and fact-checkers to oversee content. The FTC is also concerned that his recent headcount reductions have adversely affected user protection but it’s probably the ruthless cull that’s led him to say that he thinks Twitter could be cashflow positive by Q2.
• Spotify launched a new video feed that gives you podcast, music and audiobook recommendations via short video clips à la TikTok and YouTube Shorts.

THE MAIN NEWS WAS THIS…

• Germany just rejected the EU’s proposed ban on the sale of internal combustion-engined vehicles by 2035, showing that Germany continues to hold the upper hand here – not the EU! This was supposed to be a central plank of the EU becoming carbon neutral by 2050. It continues to push for an exemption for cars using e-fuels.

IN BATTERY NEWS…

• VW decided to put a European battery plant on hold and is threatening to up sticks and head to the States for the “free” money on offer under the Inflation Reduction Act rather than settle for the lower amount of money available in Europe. FWIW, I think VW is in a very strong negotiating position here as the EU will not want to lose it.
• China’s CATL reinforced its leading position in batteries with a huge jump in profits, but it was interesting to hear President Xi say that he was happy that it was so successful, but concerned that it could be over-reliant on raw materials from foreign countries, which may be subject to future sanctions.

IN EV NEWS…

• Tesla went and cut prices again in its fifth round of price cuts since the beginning of the year! This should be good for sales volumes but it’s bound to be annoying for current Tesla owners. Mind you, what is going to be even more annoying than this is steering wheels in Tesla cars falling off while you are driving – something that is being investigated by the National Highway Traffic Safety Administration!
• BMW gave Oxford reasons to cheer as it brought electric Minis back to Oxford after it looked like production was going to go to China. It seems that a £75m injection of cashpayers’ money did the trick 😜. BMW also announced that it’d be paying a fat dividend to shareholders thanks to profits from its increased stake in Chinese partner Brilliance.

MEANWHILE…

• GM’s push into EVs has been slower than expected as production has failed to keep up with demand and British EV-start-up Arrival is facing another lawsuit from creditors.

IN TERMS OF SALES…

• UK car sales rose by 26% year-on-year as the industry recovered from the chip shortage and it was interesting to hear that sales of hybrids are catching up with 100% EVs implying that consumers are seeing this as an acceptable stepping stone to full electrification.

IN CONSUMER GOODS NEWS…

• Adidas cut its dividend as it faced its first annual loss in 31 years after big changes in its top management and sharp drop-off in China sales.
• Dyson’s sales hit a new record but rising costs took the edge off profits.

IN RETAIL NEWS…

• Morrisons ditched at least 80 maintenance suppliers as it tries to cut costs.
• WH Smith is trying to appeal to Paperchase fans by launching a high-end souvenir and stationary format called Curi.o.city to plug the gap Paperchase left behind.
• Fast fashion retailer In The Style agreed to sell itself to Baaj Capital, a UK private family office, for just £1.2m just two years after it floated with a £105m valuation on AIM!

IN LEISURE NEWS…

• Fortunes in the restaurant/takeaway sector were mixed as The Restaurant Group (owner of brands like Wagamama and Frankie & Benny’s) announced plans to cut around 35 underperforming outlets as part of its streamlining plans while Greggs announced the opening of 150 new stores despite rising overheads. and Domino’s benefited from the World Cup, helping it to its busiest ever quarter!
• MGM China and Melco Resorts have put in strong performances in Macau, which is great news for a sector that has been decimated over the last few years.

IN COMMERCIAL PROPERTY NEWS…

• IWG had a stellar year last year on the back of record revenues as hybrid working practices continue. They sounded pretty confident about the rest of the year also.

IN RESIDENTIAL PROPERTY NEWS…

• Surrey house prices fell the most, according to data company TwentyCi but Halifax said that house prices are generally holding up as mortgage rates fall.
• That said, rating agency Fitch reckons homeowners with mortgages in the UK are currently more at risk of falling behind on payments that those in any other developed country!
• There’s potentially bad news for renters in London as more landlords have been priced out of the market, meaning that there will be fewer rental properties, which means that rents are likely to go up.

• US investors dumped bank shares as investors worried that problems at tech-focused lender Silicon Valley Bank (SVB) could reflect similar problems at larger rivals. Over the weekend, SVB got taken over by regulators, prompting the US and UK governments to pledge support for depositors. This is getting messy!
• Credit Suisse’s share price plumbed new depths as it delayed the publication of its accounts due to the SEC asking questions about its financials, which CS is downplaying.
• In the UK, the FCA told banks to pass on rate rises more quickly when the interest rate changes while an investors in Revolut saw a major sell-off as a big early investor has cut the internal valuation of its sake by 15%, implying that there’s not much to cheer about at the moment.

• EY decided to postpone a contentious vote on whether it should break up its auditing and consulting businesses. Deloitte, KPMG and PwC have said that they have not interest in splitting their businesses up.
• International schools are switching focus away from China and on to other countries like Japan, India, Vietnam and Nigeria to make money. The clampdown on the education sector in China by its own government has made life very difficult for private sector education providers ever since.

• Watson’s Yearly 2022/23: coming shortly…

My favourite “alternative” story this week was the one about the guy who got a six-pack tattooed on his stomach but the optical illusion thing was also pretty clever!

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

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

ESG shenanigans, a solution to Northern Ireland and hydrogen-powered BMWs…

• REGARDING UKRAINE – the West wants countries like the UAE and Turkey to stop dodging sanctions against Russia, particularly regarding the re-exporting of things like drones and electronic components and the US has classed the UAE as a “country of focus” due to suspicions that it has exported goods to “US-designated entities. China wants an end to the war by peaceful means but is having to perform a delicate balancing act at the moment.
• IN EUROPE – pressure is mounting on the ECB as Europe’s core inflation figure rose unexpectedly in February, which was probably due to a greater extent to Germany also seeing a jump inflation thanks to higher food prices. The bickering over America’s Inflation Reduction Act between the US, Europe and UK is continuing as concerns increase about companies in cutting edge industries upping sticks and going across The Pond to help themselves to its very generous subsidies!
• IN THE UK – the EU and UK signed a historic Brexit deal on Northern Ireland that would now reduce bureaucracy and smooth trade whilst also perhaps freeing up negotiations on other bits of legislation. Separately, food price inflation hit a new high as milk, eggs and margarine prices increased particularly strongly. Elsewhere, the governor of the Bank of England hinted that we might have seen a peak in interest rates, but left the door open to change that stance, if needed. In energy news, energy secretary Grant Shapps called for a delay to the closure of coal-fired power plants to get us through next winter.

IN OIL NEWS…

• US oil exports to Europe have increased hugely thanks to the Ukraine war but its oil frackers see limited upside this year because they expect capex to rise.

IN CRYPTO NEWS…

• Crypto bank Silvergate’s survival is looking decidedly iffy as it said it had to delay the publication of its annual report with the SEC due to its tricky capital position after reporting a dire Q4. Another one bites the dust??

IN BUSINESS TRENDS…

• British companies are getting more optimistic about the outlook, according to research from Boston Consulting Group as over 61% of companies surveyed expected output to be “somewhat or significantly better”.
• French defence group Thales is planning to increase headcount by 15% next year due to increased defence spending around the world, something that companies like BAE Systems have also benefited from.

IN CONSUMER TRENDS…

• Brits head to Greece in record numbers as “revenge tourism” took hold but consumers are still facing challenges.
• Utility bills are likely to rise despite a fall in the price cap because the government’s price guarantee won’t be as generous, but the government might do a U-turn on this, perhaps at the next Budget.
• Consumers are returning to the high street as they return to offices in greater numbers, which is good news for the high street and shopping centres, but not so good for out-of-town retail parks.
• The over-50s are returning to work in greater numbers but there are calls for the government to change tax laws regarding pensions to make this easier to do.

IN GENERAL…

• ESG caused a kerfuffle as President Joe Biden looks like he’s going to use his presidential veto to push through a rule that will make fund managers overlay their investment decisions with ESG considerations. He’s been forced to do so because the motion to do so put forward by his party did not garner enough votes. Big fund managers are also pushing for more flexibility in ESG funds, which is hardly surprising as they’ve probably suffered from unflattering comparisons with the performances of funds that did not have such restrictions.
• Vanguard closed its UK financial advice arm after less than two years in operation due to lack of interest! The company was going to roll this service out in Germany and Europe but that’s got to be up in the air now.
• There were hopes that the Northern Ireland breakthrough will have cleared the bottleneck and pave the way for further negotiations re the financial sector on the Memorandum of Understanding signed two years ago.

IN BANKS NEWS…

• Chinese banks are trying a rather unconventional way of stimulating the housing market by offering mortgages to older customers aged between 80 and 95 😱 which can then be passed to their offspring! It also means that people can have longer repayment periods on their mortgages. This is pretty eye-catching and, given that life expectancy in developed countries is increasing, you would have thought that this is something that other countries may consider…
• Goldman Sachs said that is it looking at backing out of at least some of its consumer businesses after big losses. It always seemed a bit un-Goldman-like for it to diversify away from its bread-and-butter institutional and corporate client base, but we’ll see what happens next. This is just my opinion but I think that Goldman probably felt forced to put at least some effort into build a consumer business after the financial crisis but now that this is more of a distant memory, it can just go back to what it was doing before. But I could be wrong!

IN FINTECH NEWS…

• Stripe has really suffered from a general tech sell-off and the loss in momentum in e-commerce more generally. However, despite the pasting its potential valuation has taken, there is still pressure for it to continue to list as employees have already been given stock options that will expire.
• Revolut posted its first annual profit and is getting closer to obtaining a UK banking licence, but the bad news is that its own auditor left a “qualified” opinion on its accounts due to not being able to verify revenues that could be “materially misstated”.
• Klarna reckons that it’ll hit profit this summer after narrowing losses in Q4 of last year but I remain sceptical given the effect of the ongoing cost-of-living crisis and the prospect of a big regulatory clampdown (not to mention more competition from big established players).

• US home sales prices have fallen for the last 12 months in a row, its weakest run in over a decade, and this could be a factor in pushing the US into recession. If that happens, there could be a ripple effect which would be felt over here…
• In the UK, Zoopla says that 40% of home sellers are having to cut a chunk off the asking price to shift them and in terms of trends, Nationwide data showed that annual house price growth has fallen at its steepest annual rate since 2012 while rival Halifax said that house prices had actually stabilised in January, but had been falling for the four previous months.
• The industry body Home Builders Federation reckons that the number of new property completions per year in England could fall to their lowest levels since WW2, a concern backed by news that Taylor Wimpey is planning on headcount reductions in a sluggish UK market and will be building fewer homes this year.

IN AI NEWS…

• Another legal chatbot emerges as a British AI start-up called RobinAI has secured funding to develop a lawyer bot that can pick apart contracts and recommend new wording to solicitors. It’s said that this could cut contract reviewing time by up to 80%!
• There was a really interesting case involving the US patent office which concluded that a comic book that had been produced using AI would have its written content covered but not the AI-generated artwork because although the author used “prompts”, the outcome was “unpredictable”. I think this will have been watched very closely, but I don’t think the debate is over yet…
• It was really interesting to hear that Meta’s AI-powered advertising system, called Advantage+, has made up a lot of ground lost to Apple since it imposed a new privacy policy two years ago.
• Apple blocked the update of an AI-powered e-mail app called BlueMail because there were concerns that it could show inappropriate content. It’ll be interesting to see whether similar moves will be made regarding other apps that use AI…

IN TECH HARDWARE NEWS…

• The European Commission is now focusing on how Apple restricts apps from directing users out of its in-app purchasing system. The clampdown continues…
• It looks like Arm is going to list in New York and not London, although it is still possible that there could be a dual listing. Arm’s valuation may be a bit dented by China delaying the company’s exit from a tricky local JV because the longer it takes the more the sector downturn is likely to take its toll.

IN TECH SOFTWARE NEWS…

• Canada banned TikTok from government devices, following similar recent moves in the US and EU. Will this mean that TikTok could actually get banned more widely? I can certainly imagine more companies deciding that this is a potential security risk.
• The US House Foreign Affairs Committee has approved a bill to allow Biden to ban TikTok due to security concerns. Tricky times indeed for TikTok!
• Twitter cut another 200 jobs and then a few days later – it crashed!
• Salesforce announced better-than-expected earnings as it promised to prioritise profit over growth. This comes after a sustained period of pressure from activist investors who want a proper overhaul of the business.

OVERALL…

• Berlin is threatening to block the recent EU move to ban the sale of new cars with combustion engines from 2035 unless it exempts vehicles that run on synthetic fuels.
• BMW said that it is committing to be the first European car maker to go all-in on hydrogen fuel cells, aiming to have a hydrogen-powered X5 by the end of the decade. It’s great to look at tech that isn’t lithium ion (because there aren’t enough raw materials in the world at the moment to meet future demand!), but it’ll be a hard slog because if you think that the EV charging network is bad, hydrogen is on another level!

IN BATTERY NEWS…

• LG Energy Solution is putting its money where its mouth is as it’s building a factory in Ohio with Honda because it thinks the US market is going to be the top growth market this year.
• JLR’s owner Tata Motors is giving the UK government an ultimatum – contribute £500m to a battery factory or they will go to Spain instead.
• Aussie-based company Recharge looks like it’s finalising the deal to take over Britishvolt, keeping alive hopes of a gigafactory.

IN EV NEWS…

• Tesla is planning on building a factory in Monterrey, Mexico in a bid to increased production significantly, and Musk said that he is planning on making cheaper cars in the “next generation” of models.
• Meanwhile, Rivian’s frightening rate of cash burn continues while British EV start-up Arrival is facing a lawsuit for unpaid bills as its cash position continues to come under pressure.

ELSEWHERE…

• Aston Martin’s losses more than doubled, but it reckons the worst will be behind it in H2 of 2023. Hmm. Let’s see…

IN GROCERY NEWS…

• Sainsbury’s shut its Milton Keynes office as part of its overall cost-cutting plans.
• Lidl became the latest retailer to ration the sale of salad ingredients.
• Ocado’s full year loss came in worse than expectations as the cost-of-living crisis continues to hit home and the boom in online grocery shopping under lockdown faded.

IN NON-FOOD RETAILER NEWS…

• AO World has staged a comeback after the rollercoaster ride of lockdown highs and post-lockdown lows and was confident enough to make an upward revision to its annual earnings forecast for the third time in just over three months!
• Primark is expecting higher profits, but parent company Associated British Foods remains cautiously positive about the rest of the year.

• Watson’s Yearly 2022/23: coming shortly…

My favourite “alternative” story this week by far was this video of the adventures of Gary the Stormtrooper. Hilarious 🤣🤣🤣!

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

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

Ukraine developments, salad shortages and metaverse mayhem…

• IN THE US – the Fed talks about more interest rate hikes (but that’s not much of a surprise!) although the incremental increases will be smaller.
• REGARDING UKRAINE – Biden reiterated support for Ukraine at a surprise visit to Kyiv while China expressed concern about the US’s involvement but then rolled back its unconditional support for Russia as it appears that China may be wanting to play the role of peacemaker.
• IN JAPAN – we see that the Japanese PM announced a raft of new policies to boost birth rates as he tries to address the perennial problem of Japan’s ageing demographic. Other countries with similar problems will no doubt be monitoring this with interest.
• IN THE UK – it looks like a UK recession could be milder than expected and the latest S&P PMI showed a turnaround in both services and manufacturing for the first time in seven months. Citi even thinks that inflation could dip under 2% due to falling energy prices.

IN COMMODITIES NEWS…

• Russian exports of oil to China hit a record high although its oil revenues still fell by 48% in January presumably because it a) sold oil at big discounts to market prices to get rid of it and b) was adversely affected by western sanctions. Interesting how China says it doesn’t want war on the one hand and then just blatantly goes and finances it on the other 🤣!
• Miners reported this week and BHP and Rio Tinto took hits from inflation and falling commodity prices but were positive about the outlook for this year.

…AND IN CRYPTO NEWS…

• There’s a crypto “real estate” crash going on at the moment as the value of metaverse property transactions has plummeted by a whopping 95% in the last six months! Numbers continue to drop as interest in the metaverse continues to wane.

IN BUSINESS TRENDS…

• Japanese chip component company Kyocera has decided not to build a new factory in China, instead opting to build it in Japan given ongoing US-China tensions. There does seem to be a trend forming here as other tech companies are having to weigh up whether they want to risk putting too much money into China at the cost of doing business with America.
• Management consultancy firm McKinsey announced one of its biggest ever headcount reductions as part of a wider restructuring plan. I suspect that rivals will be reviewing their own personnel requirements if McKinsey is!

IN CONSUMER TRENDS…

• The latest CBI survey said that UK retail sales lost momentum as consumers cut back.
• Having said that, the latest survey by GfK showed that there was an unexpected bounce-back in UK consumer confidence! Maybe this will cushion the blow of an economic downturn this year.

IN AI NEWS…

• IN CHINA – companies such as Baidu, Alibaba and NetEase are all developing their own chatbots, although Baidu seems to be the most advanced at the moment with its answer to ChatGPT called “Ernie”.
• IN THE UK – The UK government has confirmed that chatbots such as ChatGPT are going to be regulated under the forthcoming Online Safety Bill, which is currently going through Parliament. Both search results and content posted by chatbots will be covered by the new rules.
• IN GENERAL – we are seeing more examples of where AI is being used – like with submissions for a science fiction magazine – but we are also seeing big companies like JPMorgan cracking down on its use for data privacy issues. Meanwhile, Microsoft has loosened some of the restrictions on its ChatGPT-powered version of Bing, which had been put in place to stop it from being overwhelmed. Nvidia is benefitting from AI as it has a huge market share of AI processors but Intel and AMD are also taking more of an interest in this growth area, but Nvidia is also increasing efforts to sell AI services directly to corporates and governments, putting them in direct competition with their biggest customers – Google and Microsoft! AI certainly seems to be the hot ticket at the moment, replacing Web3 as the place for investors to be right now.

IN SOCIAL MEDIA NEWS…

• The European Commission has banned staff from using TikTok and PM Sunak has been urged to do the same – all because of data security concerns.
• The Australian eSafety Commissioner has given Big Tech companies 35 days to answer questions on how they combat child sexual abuse and blackmail attempts. The regulators really are tightening the screws at the moment!
• Meanwhile, Facebook and Instagram launched paid-for subscription services that gets you extra bits. It has been launched initially in Australia and New Zealand and is part of an attempt to wean itself off advertising revenues.

IN TECH HARDWARE NEWS…

• Ericsson cut its domestic headcount by about 10%, but additional job losses are expected globally.
• Intel slashed its dividend by two-thirds – to its lowest level since 2007 to conserve cash while it spent $100bn on new facilities.
• Apple’s commitment to China is deepening as Chinese supplier Luxshare has been tasked with producing its up-coming AR headsets, meaning that Foxconn and Pegatron are facing more competition.

ELSEWHERE…

• There were concerns about missing Chinese tech dealmaker Bao Fan, founder of China Renaissance although some claimed that he was just setting up a family office in Singapore. There were worries that this was just the whole Jack Ma/Ant Group thing happening all over again. The country’s courts and patent panels are also reacting against US-China sanctions and the resulting tech squeeze by invalidating patents and making foreign companies licence tech to Chinese rivals.

IN NEWS ON UK SUPERMARKETS…

• The UK is running out of salad, so Asda and Morrisons were among the first to ration sales and were followed by Tesco. Morrisons cut prices for customers as supermarkets try to stem the tide of shoppers “defecting” to Aldi and Lidl and Tesco announced a 7% pay rise in an attempt to retain and attract staff in a tight market.

IN GENERAL RETAILERS…

• M&S is making more of a splash in sportswear as part of overall efforts to broaden its product range. Brands such as Asics, Veja, Hoka and Girlfriend Collective are among the brands that will also make it to M&S’s website. It seems to be doing all the right things at the moment!

• Lithium prices continue to drop as EV demand weakens
• Bentley announced it was phasing out its 12-cylinder engine as it phases in electrification
• Start-up Lucid said it would almost double production in 2023 (which was lower than market expectations).
• In the UK, EV production rose in January but the boss of Stellantis pointed out that middle classes still can’t afford EVs because of the lack of incentives. Stellantis actually did pretty well last year, so well that it was confident enough to announce a dividend payout and a share buy back.
• Mind you, if you think sales of EVs are bad, cars powered by hydrogen fuel cells are worse! Toyota and Hyundai are leaders in the field with their respective Mirai and Nexo models and at least they are continuing with their efforts.

• IN FINANCIALS NEWS, HSBC and Lloyds continued to rake it in thanks to higher interest rates, Visa and Mastercard are facing a class action lawsuit in the UK for unlawful and excessive debit and credit card fees while ESG investing has come under more criticism for not supporting the defence sector. That said, Lockheed Martin is planning a UK satellite factory.
• IN REAL ESTATE NEWS, renting property in Singapore is becoming a nightmare as Covid-led construction delays and an influx of Hong Kongers fleeing zero-Covid policies have driven up demand while, in the UK, Hamptons research shows that 60% of homeowners selling property worth over £1m in January have had to cut their asking prices to find buyers.
• BrewDog announced plans to expand in China.
• Troubled South African utility Eskom lost its chief exec and the government had to step in to service the company’s debt.
• Alibaba managed to grow sales despite the hits it took from Covid lockdowns .
• Rolls-Royce saw its share price boom this week on news of a turnaround plan from its new CEO and strong results from last year.
• BAE Systems managed to beat market expectations for sales, profits and cashflow thanks to a fat order book powered by in the increase in defence spending following Russia’s invasion of Ukraine.

• Watson’s Yearly 2022/23: coming shortly…

My favourite “alternative” story this week was, for the first time ever, not from the “In other news…” section – it was from Friday’s edition of Watson’s Daily where I highlighted an amazing Nike commercial that used AI to pit a 1999 version of Serena Williams against a 2017 version! This was just mind-blowing!

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

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

China’s balloon gets shot down, Google gets embarrassed by Bard and Adidas has celebrity problems…

• IN THE US – the Fed warned of more interest rate rises if the jobs data stays strong while Biden angered the Chinese by shooting down their spy balloon which apparently veered off course (and over sensitive military sites) because of “bad weather” 🤣. This isn’t great for the US-China relationship that had looked like it was thawing when Biden met Xi in Davos.
• IN INDIA – PM Modi is having Adani problems as his political opponents are pressing Modi and the ruling Bharatiya Janata party on their involvement with the Adani Group that was subject to a damning recent report by Hindenburg Research. So far the pressure has been largely ignored.
• IN TURKEY – there was a terrible earthquake, killing thousands. A state of emergency was declared and the Istanbul stock exchange was shut down for the first time in 24 years in order to stop panic selling.
• IN GERMANY – we saw that inflation fell to a five-month low, which surprised economists who were expecting it to rise further. This will give the ECB more to think about at its next interest rate meeting…
• IN THE UK – Sunak broke up the sprawling business department (the Department for Business, Energy and Industrial Strategy, aka “BEIS”) to refocus on energy and science and he did a bit of a reshuffle after sacking Nadim Zahawi for his dodgy tax issues. It’s too early to tell whether this is really going to do anything, but I guess a bit of streamlining is always good!

IN MARKETS NEWS…

China has seen a huge uptick in inward investment from foreign investors in 2023 with a $21bn injection thus far. There are high hopes for an economic rebound following the lifting of China’s zero-Covid restrictions and the positive economic data released after the lunar new year holiday has vindicated this stance so far.

The FTSE100 hit its highest ever levels this week thanks to takeover rumours and good news from some of the index’s biggest constituents. It was also interesting to note that this has been the best start to the year for the FTSE100 since 2013! This may suggest that beneath all the gloom, there may actually be some light at the end of the tunnel!

IN COMMODITIES NEWS…

• BP reined in its climate goals as it’s making way too much money at the traditional oil and gas! It cut its emissions pledges and increased production targets but said that its higher profits would finance renewables.
• North Sea oil and gas firm Serica is nearing the completion of a £644m deal to take over Tailwind Energy that could double its oil output. Given that it saw a massive rise in profits last year because of the strong oil price, you can see why it clearly wants more!
• Norway’s state-owned oil and gas giant Equinor (which used to be called Statoil) unveiled record profits – more than triple the profit it made last year! Yet another example of an oil company absolutely raking it in!
• Exxon announced that it would be streamlining a number of its business units as part of a general reorganisation. Interestingly, it said that there won’t be that many job losses – more of a reshuffle or resources.
• China appears to be back-pedalling on its climate commitments as it is using more fossil fuels to power energy-intensive businesses like those in the chemicals, steel and cement industries. Fossil fuels account for over 80% of China’s energy usage!

IN CRYPTO NEWS…

• The Bank of England and the Treasury are going ahead with preparations for a digital pound (aka “Britcoin”), saying that it could be launched by 2030. A final decision to go ahead with it will be made in 2025.
• It was really interesting to see luxury goods company Hermès beating an NFT “disruptor” in court for profiting from a digital version of its famous Birkin handbag. This will have been watched very closely by others and will be used as precedent for similar future cases.

IN AI NEWS…

• We saw that Big Tech companies are continuing to pursue alliances with AI groups as search wars just got more intense. China’s Baidu is working on its own AI chat/search bot while Google brought out its own, called Bard, to great fanfare. Unfortunately, its launch was a disaster and Alphabet’s share price dived as Microsoft gave more detail about what it was going to do with ChatGPT and Bing. Even Amazon is working on Alexa as it doesn’t want to miss the AI bandwagon either!

IN HARDWARE NEWS…

• Arm saw its profits rise by 28% over the last quarter, but it didn’t give any more guidance plans regarding its much-anticipated flotation plans.

IN JOBS NEWS…

• Some are saying that the Big Tech jobs cull has cost $10bn so far, but it’s still continuing with Dell cutting 5% of its workforce and Zoom cutting off a whopping 15% of its employees.

IN OTHER BIG TECH NEWS…

• Meta Platforms said it was going to rethink its Horizon Worlds metaverse app and aim it more towards teens with a view to releasing it possibly as soon as March.
• Microsoft may have to sell Call of Duty in order to get approval for its proposed $69bn takeover of Activision, according to the UK’s Competition and Markets Authority. Clearly, Microsoft isn’t happy. Sony is probably doing cartwheels! A final decision is expected in April.
• Nintendo had to cut forecasts due to chip shortages, but there might be some light at the end of the tunnel as it will (along with other platforms) be releasing the hottest game of the year so far in Hogwarts Legacy.
• SoftBank’s Vision Funds posted massive losses and the usually-high profile CEO Masayoshi Son has decided to swerve his usual investor presentation. The funds have been hugely damaged by investor rotation out of tech.

IN CHINA…

• Property brokers are getting nervous as buyers aren’t rushing in despite the government relaxing leverage limits after a prolonged crackdown. It might take a bit of time for things to normalise. Also, you would have thought that consumers will need to see property prices rise again to inject a bit of FOMO into the proceedings…

IN THE UK…

• IN RESIDENTIAL PROPERTY – Demand for new builds is rising, according to the likes of Redrow and Bellway, UK house prices are levelling out and mortgage rates are calming down. House prices may not bounce back as quickly as they have done in previous downturns and Barratt Developments is cautious about the rest of 2023, but will need to see how spring goes to get better visibility. The number of millennials and Gen-Zs living with their parents is at record levels as, presumably, they are all trying to scrape together a deposit, something that is very difficult if you are facing booming rents! Rental evictions in England and Wales have almost doubled in a year, but it’s unclear as to whether this trend will continue.

• Credit Suisse had a shocker, announcing its worst full-year loss since 2008 – and it cancelled the annual bonus for its top execs. This was due to rapid fund withdrawals from their wealth management, asset management and investment management divisions.
• Rothschild said it wants to take the investment bank private, interesting because most banks want to do the opposite!
• Finance sector jobs vacancies increased in the UK, so it’ll be interesting to see how long the momentum lasts.
• The City of London has started a review of financial services regulations in the UK to make it more competitive and attractive. Let’s see how that goes!
• It was interesting to see how US BNPL provider, Affirm, is trying to adjust to making profit (or minimising losses) in a rising interest rate environment. When interest rates were low, this was pretty easy, but now they are moving – and in the upward direction – they are finding it more difficult.

• Adidas had celebrity problems as it reported weak sales. Beyonce’s clothing line isn’t selling well and it has a ton of Kanye West’s Yeezy trainers that it needs to sell.
• The Adani Group continues to pose problems (as mentioned above) and the MSCI decided to cut weightings in its indices to better reflect the actual free float. All this meant that there was a lot of technical selling in addition to the “normal” selling due to the recent damning report from Hindenburg Research.
• Disney announced 7,000 job cuts and $5.5bn in cost reductions as new/old CEO Bob Iger performs open heart surgery on the company to get back on the growth track again.
• Mattel’s earnings fell in Q4 due to the hostile economic environment. It has inventory to get rid of – but it’s not the only one having problems! Rival Hasbro is also experiencing the same thing.

• Watson’s Yearly 2022/23: coming shortly…

My favourite “alternative” story this week was the Mini Eggs game-changer in People discover ‘life-changing’ way of eating Mini Eggs and ‘won’t turn back’ (The Mirror, Ariane Sohrabi-Shiraz). I haven’t tried this yet but I am DEFINITELY going to!

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

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

This was a week of interest rate hikes, Meta Platforms’ rebound and tech disappointment…

• IN THE US – the Fed raised interest rates by 0.25%, as widely expected. US stocks jumped as investors interpreted the smaller-than-usual 0.25% jump (as opposed to what has become the “normal” 0.5% or 0.75% increase) as a sign that inflation is being tamed.
• IN CHINA – economists are getting increasingly excited about China’s reopening and the IMF has even upgraded its forecasts as a result. There were mixed messages coming from recent PMI surveys, though, as the official manufacturing sector PMI showed a tiny bit of growth for the first time in four months whereas the private-sector led Caixin manufacturing PMI showed a sixth consecutive month of contraction.
• IN EUROPE – the tussle between Europe and the US regarding subsidies for green industries rumbled on. The EU is talking about relaxing state aid to finance subsidies for green industries as it is becoming increasingly apparent that what’s on offer in the EU is not as attractive as what’s on offer stateside. Meanwhile, German chancellor Scholz said at Davos that Germany will avoid recession, but he might have spoken too soon as official data showed economic contraction in the final quarter of the year. If the current quarter goes the same way, he will have to eat his words as Germany will then be in a recession (which is defined as two consecutive quarters of economic contraction).
• IN THE UK – the Bank of England raised interest rates by 0.5% to 4% and the governor said that inflation is likely to have peaked. Markets rose on the back of this but concerns remain that wage growth could still push inflation higher. All of this is taking its toll on UK businesses as the number of UK profit warnings increased by up to 50% last year, according to analysis by EY Parthenon – something echoed by research conducted by the Insolvency Service, which concluded that UK companies failed at their fastest rate since the financial crisis!

IN OIL NEWS…

• There was good news and bad news for Shell this week. On the one hand, it was hit with a compensation claim in Nigeria for causing environmental damage and separately accused by activist group Global Witness of overstating how much money it was spending on renewable energy. It managed to console itself later in the week, however, as it smashed Q4 expectations and delivered its biggest ever profits!
• Meanwhile, there was some refreshing candour from BP as it said that it wanted to “dial back” its efforts in clean energy to focus on making money from the boom in fossil fuels! That said, BP also said earlier in the week that it reckons carbon emissions will fall more sharply than previously thought as the Ukraine war has pushed more countries towards renewables.

IN CRYPTOCURRENCY NEWS…

• The UK government is pushing ahead with bringing crypto regulation under the umbrella of mainstream financial services, although it won’t make guidelines as strict as they are for stocks, shares and insurance products (presumably, this is to give the new asset room to develop).

IN EMPLOYMENT TRENDS…

• US workers are returning to the office in greater numbers, according to data from Kastle Systems (which monitors swipe cards) and are now spending the most time in the office since the beginning of the pandemic. Meanwhile, headcount reductions of between 6% and 10% were announced at PayPal, FedEx and Rivian.

IN CONSUMER TRENDS…

• IN THE US – consumers are getting increasingly nervous as retail purchases have been falling for three out of the last four months, spending was flat in December, existing home sales fell to their lowest level since 2014 as mortgage rates increased and car sales were at their lowest for over ten years!
• IN THE UK – the government raked in £12bn more than it had originally thought because rising wages have dragged more people into the 40% tax bracket! In terms of behaviour, though, we saw more people making mortgage overpayments to beat higher interest rates while Nationwide figures showed that house prices fell for the fifth consecutive month, mortgage demand weakened and flat/apartment searches rose as consumers return to cities as they can’t afford houses in the ‘burbs. Meanwhile, food price inflation rose by a record rate in January, putting even more pressure on household budgets.

IN RETAIL NEWS…

• Tesco bought Paperchase brand – but not its shops – and announced an overhaul of its stores. It was a bit of a mystery as to why Tesco wanted to do this, but I guess that it got a recognisable brand on the cheap. Sainsbury’s got a nasty surprise as wholesaler Bestway built up a 4.5% stake, prompting rumours of an unsolicited takeover attempt. Aldi was unsuccessful at fending off M&S claims that the former had copied the latter on its light-up gin bottles and Lidl committed to spending an extra £2bn on UK suppliers, “cementing its support for suppliers across the country”.
• Elsewhere, Frasers is to start offering up to £2,000 in credit to customers via its “Frasers Plus” brand, Pets at Home did so well that it was confident enough to raise its guidance and Wickes put in a solid performance thanks to customers making home improvements to minimise their utility bills.

IN SOCIAL MEDIA…

• Meta had a better week as it posted strong results and fended off an FTC antitrust challenge for its proposed acquisition of VR start-up Within Unlimited. Zuck said 2023 would be the year of efficiency and lowered capex targets.
• Snap warned of a hit to revenue due to the expectation that advertisers will rein in spending this year and that there will be more competition for that shrinking pot of money.
• Twitter is making preparations to launch online payments, which will put it head-to-head with the likes of PayPal.
• YouTube intensified its rivalry with TikTok as it offered new financial incentives to content creators to attract them to its platform.

IN STREAMING NEWS…

• UK homes ditched 2m streaming services last year, according to Kantar, as households continue to cut costs.
• Spotify managed to add users and posted stronger user growth over the quarter.
• Universal Music is in talks with the major streaming platforms to change the business model in order to help encourage new artists, pay existing ones and de-prioritise lower quality songs, like ones that are meant to send you to sleep.

IN “BIG PICTURE” TECH NEWS…

• Washington moved towards a total ban on selling US tech to Chinese telecom equipment behemoth Huawei. It asserts that Huawei assists Beijing in espionage.
• Meanwhile, Big Tech companies like Meta, Amazon and Google are withdrawing job offers – sometimes at the last minute – as they continue to clampdown on costs. Nightmare.

IN CHIP NEWS…

• The Netherlands and Japan joined the US in restricting chip exports to China in a joint effort to make it harder for the Chinese military to develop advanced weapons.
• Research from Gartner predicts that spending on smartphones, PCs and tablets will fall by 5% this year, with PC demand falling particularly sharply.
• Meanwhile, there was a very interesting development this week as a US chipmaker (called Wolfspeed) announced plans to build a €3bn factory in Germany – this is particularly interesting because you’d expect it to be the other way around (i.e. a German chipmaker building a factory in the US) given the drama surrounding the goodies being dished out by the US Inflation Reduction Act.
• Intel cut exec and management pay to save money while rival Qualcomm announced a 12% fall in sales as the doom and gloom in the chip sector continues.

IN AI NEWS…

• OpenAI is offering a new subscription plan for ChatGPT for $20 a month which will include access during peak periods. Figures from Similarweb showed that ChatGPT hit 100million users just two months since launch! It took TikTok about nine months to reach this landmark and Instagram over two years, according to Sensor Tower!
• China’s Baidu said it is developing its own equivalent of ChatGPT and will be the first to bring AI tech to Chinese customers. Access to ChatGPT in China is currently blocked.

IN “BIG TECH” NEWS…

• Apple announced disappointing results and blamed Covid lockdowns in China for an underwhelming performance in what is usually its most profitable quarter.
• Google also posted disappointing results as its advertising sales fell more sharply than expectations. Advertising revenues fell by 4% in the final quarter of 2022 in only its second quarterly contraction in its history! Elsewhere, there was an interesting discussion about what would happen if the Department of Justice was successful in its legal action against Google. It would result in Google splitting up its highly lucrative ad business – but the problem would then be that it would be difficult to find a buyer because the only ones that could afford it may also face competition issues themselves!
• On the other hand, Amazon reported higher net sales, outperforming expectations for the final quarter of 2022 but expressed concerns about near-term prospects for consumer spending.
• Meanwhile, in the UK, British cybersecurity firm Darktrace saw its shares plunge on sizeable short-selling. It strongly denied accusations that it had inflated its sales figures and responded with a share buyback.

IN “TRAD” CAR NEWS THIS WEEK…

• Renault and Nissan recalibrated their 24-year alliance to move forward on an equal footing.
• GM saw a boom in Q4 profits as supply chains eased and outperformed market expectations.
• Ford underwhelmed in its results, missing its full-year profit guidance. It’s planning on making more cost savings this year.
• In the sportscar arena, Ferrari announced a record year of profits and expects “an even stronger 2023” while Geely-owned Lotus remains on course for a SPAC-backed IPO sometime in H2.

IN EV-RELATED NEWS…

• Ford cut prices of its Mustang Mach-E to counter the attractions of the newly-cheaper Tesla range.
• Arrival had more pain as it announced that it was going to cut around half of its remaining workforce in a dramatic effort to save costs.
• In batteries, a number of bidders emerged for Britishvolt and there are increasing calls for a shake-up of UK subsidy policies given Britishvolt’s spectacular failure.

• Starbucks announced record quarterly revenues although costs are still rising. Everywhere but China seemed to put in a strong performance (but you’d think this will bounce back now Covid restrictions have been lifted).
• Adani Enterprises had to call off a $2.4bn share sale following the release of the Hindenburg report trashing it last week. The drama continues…
• Peel Hunt announced the launch of a new trading venture called RetailBook, which will enable investors better access to IPOs and share offerings. It’s unusual in that the company is engaged in this with its rivals at Hargreaves Lansdown, Jefferies, Numis and Rothschild & Co.
• Flybe entered administration for the second time in less than a year. All flights were cancelled and their take-off and landing slots will be sold off. On the other hand, Ryanair posted very strong results – so strong, in fact, that it was confident enough to announced that it would be expanding in Scandinavia.
• A small Shropshire-based company called Upp is testing a broccoli harvester which not only picks broccoli – it also processes much more of the plant itself that can be used in alternative meat and nutritional products. This could be a huge game-changer, particularly in an industry that has been seeing a shortfall in manual workers.

• Watson’s Yearly 2022/23: coming shortly…

My favourite “alternative” story this week was the one about the very enterprising ice-cream/sorbet-maker in Dessert shop creates Prime sorbet version of sell-out drink and fans go wild (The Mirror, Ariane Sohrabi-Shiraz). Very niche, but I’m sure it’s very popular!

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

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

Microsoft buys into ChatGPT – which passes an MBA exam – while Adani Group shares get the Hindenburg Research treatment and bankers brace for impact…

• IN THE US – US GDP growth beat market expectations and inflation slowed down going into the end of last year. GDP growth came in at 2.9% versus expectations of 2.6%. The FOMC is due to meet next week to talk about the next interest rate move and it looks like the market’s expecting a 0.25% hike rather than the 0.75% increments we’ve been getting used to!
• IN CHINA – it looks like rural China has run short of Covid drugs over the lunar new year holiday. Pfizer hasn’t yet got approval by China’s national health insurance scheme as there is an impasse over pricing, which is being framed as the company being greedy. Will China be able to style this out and avoid another massive spread of the virus?
• IN EUROPE – economists think that the eurozone will avoid recession, in a sign that there’s been a sudden change in sentiment. The EU is also planning its response to America’s Inflation Reduction Act, creating a multibillion-euro fund to dish out subsidies to qualifying green energy companies and carmakers. The Greek government faced a no-confidence vote, but survived. For now.
• IN THE UK – public sector borrowing hit a new record, according to the latest release from the ONS. That wasn’t the only bad news either – it turns out that UK productivity is losing momentum, which is a problem because you need rising productivity to ensure that wages and living standards can improve without pushing up inflation.

IN COMMODITIES NEWS…

• Oilfield services companies got a serious boost last year and the “Big Three” (Halliburton, Baker Hughes and SLB – formerly known as Schlumberger) had their most profitable 12 months since the peak of the US shale boom of 2014 thanks to higher energy prices. SLB’s chief exec thinks there’s going to be more upside to come…
• Coal power stations in the UK were put on stand-by to help the French but they didn’t have to generate in the end.

IN CRYPTO NEWS…

• The FCA is continuing to investigate the crypto industry amid allegations of dodgy dealings and after having rejected a massive 85% of registration applications by crypto asset firms because they didn’t meet minimum requirements. Meanwhile Tesla has suffered a loss of $34m thanks to its bitcoin holdings suffering a major chill in the crypto winter.

IN REAL ESTATE NEWS…

• IN COMMERCIAL PROPERTY – it seems that big pharmaceutical companies are snapping up lab space, according to data from Savills.
• IN RESIDENTIAL PROPERTY – in terms of buying behaviour, data from Hamptons shows that cash buyers took the biggest share of house sales in eight years – 40% of property purchases in January were made in cash! Cash buyers now have even more advantage over those with mortgages given the rising interest rate situation. Homeowners are also rushing to withdraw money from their properties via equity release, first-time buyers are increasingly joining forces to buy properties as affordability is getting more and more difficult – and those who don’t want to/can’t buy are being faced by rising rents, according to Rightmove. It was also interesting to note that housebuilder Redrow has decided that it will no longer fit gas boilers in detached new builds and will fit air source heat pumps instead in order to work towards the government’s Future Homes Standard mandate to make all new-builds gas-free by 2025.

IN EMPLOYMENT TRENDS…

• IN THE US – companies are shedding temps, in what may be a precursor of what’s to come for permanent workers if the economy doesn’t improve fast enough. 3M cut 2,500 manufacturing jobs thanks to slowing consumer demand and Hasbro said it was going to cut its global workforce by 15% but then on the other hand, Chipotle said it wanted to hire 15,000 additional workers to help them meet demand during “burrito season”!

IN CONSUMER NEWS…

• It turns out that China’s households have accumulated a massive $2.6tn in savings over last year thanks to lockdowns curtailing their spending options. Although hopes are high about them indulging in a bit of “revenge spending” some analysts reckon that “only” around $200bn of this will be unleashed due to cautious households pulling money from riskier investments like mutual funds and leaving it as cash in the bank. Japan looks like it will get a pay rise as workers will hope that companies will follow the lead of Fast Retailing, the owner of Uniqlo, in dishing out big pay rises that will result in a consumer spending boom. Meanwhile, high street spending in the UK is still 20% below what it was pre-pandemic as the ongoing trend of WFH takes its toll.

SO WHAT’S EVERYONE BEEN SPENDING MONEY ON THEN??

• PUBS have had a mixed time of it what with Fuller’s announcing a profit warning (it said it had been badly affected by rail strikes) on the one hand and Marston’s is doing well from consumers not trading down in their booze choices on the other. Marston’s probably did better because it has fewer city centre pubs than some of its rivals.
• RETAILERS have also had a mixed experience! Japan’s convenience stores are benefiting from lockdown behaviour continuing, which is good for the likes of Seven & i, which owns 7-Eleven, and Lawson. In the UK, Asda announced job and pay cuts while Morrisons saw sales and profits dive over 2022. Things were a bit better for Primark, as the apparel retailer owned by Associated British Foods saw sales increase as shoppers returned to city centres and, at the other end of the scale, LVMH lifted its dividend after another year of record sales and profits and drinks giant Diageo fared well despite the cost-of-living crisis thanks to its broad footprint and decent portfolio of brands.

IN SOFTWARE NEWS…

• Microsoft confirmed that it made a “multi-billion dollar investment” in ChatGPT maker OpenAI, although the final amount has not been confirmed officially. As if to reassure Microsoft that it made the right decision, it turns out that ChatGPT passed an MBA exam with a B to B- grade – showing that things are going to get very difficult in education if they don’t adapt! BuzzFeed said it would use ChatGPT for content creation to enhance quizzes and personalise some content for its audiences but if I was a journo working there I would be very concerned about my future. Yes, the company said that it remained committed to humans, but I think we need to see whether that wavers at all in the event of an economic slowdown/recession.
• It turns out that Microsoft’s results actually came in better than expected thanks to the strong performance of its cloud division but it caused a lot of frustration for users in the UK as it suffered an outage.
• The US DoJ is suing Google over its dominance in digital advertising. The pressure from regulators on Big Tech continues to gather momentum…
• Apple said that it was strengthening its smartphone services and working hard to differentiate its mobile operating system from Google’s Android. It is focusing on mapping, search and advertising. Rivals should be particularly concerned about the latter area of focus as this is where Apple really can make massive inroads!
• Elsewhere, Elon Musk is looking at raising up to $3bn to help pay off his Twitter debt, which could help pay down an unsecured portion of the debt; Strava bought British off-road navigation app Fatmap to enhance its premium subscription business; Slack owner Salesforce has attracted the attention of activist investor Elliott Management, which has built up a big stake in the business software company. Elliott is looking to shake things up…and Spotify announced an overhaul which involved a 600-person headcount reduction in an effort to reduce costs.

IN HARDWARE NEWS…

IN CHIP NEWS, ASML’s chief exec called for “sensible” chip export controls as the US tightens conditions of business in the tech arena, Intel had weak guidance thanks to falling PC sales and pressure on its market share in its server chips business. It’s also feeling the heat from Arm, whose chips are making inroads with Apple and Amazon.

Elsewhere in hardware, there’s growing concern that the speedy march of the Internet of Things is leaving users vulnerable to cyber attacks and if fears continue to grow, the uptake of these devices could lose momentum. Also, IBM announced that it would cut 3,900 jobs amid a broader tech slowdown…

IN EV NEWS…

• India’s EV market is hotting up as the government is offering incentives to producers and suppliers as it looks to reduce reliance on Chinese imports.
• Kia says that making affordable EVs isn’t possible, but I think that’s a ridiculous statement and the company is just talking its own book (for the moment, anyway). Meanwhile, Tesla’s price cuts are hurting other EV makers and it’s thinking about spending $3.6bn on expanding its plant near Reno. It announced record profits over Q4 but saw used Model 3 prices fall in the UK.

IN OVERALL CAR NEWS…

• Ford announced plans to slash jobs in Europe, UK car production fell to its lowest level in 70 years and JLR returned to profit. It has maintained its aim to have an all-electric line-up from 2025.

• IN INVESTMENT BANKING – bankers are bracing themselves for the deepest job cuts since the financial crisis due to the ongoing lack of M&A and IPO deals. The Qatar Investment Authority doubled its stake in the troubled Credit Suisse and Citadel announced massive profits.
• Activist fund Elliott Management has become one of the biggest shareholders of Dai Nippon Printing which has a near-monopoly on certain components that go into EV batteries and smartphone screens. It reckons it can unlock value in the company, but I’ve seen this before in the past with foreigners muscling in on Japanese companies and failing miserably as the Japanese companies close ranks and help each other to keep outsiders out. It’ll be interesting to see whether Elliott will have learned from previous failures. If its efforts work, though, there could be a massive spike in other funds trying to replicate it…
• IN UK BANKS – NatWest said it close another 23 branches in England and Wales, not long after similar recent announcements by Halifax and Lloyds Bank as customers continue to gravitate towards digital. Meanwhile, TSB announced record profits and a fat bonus for employees but it said that it was now bracing itself for a potentially rough period ahead as the UK economy suffers.

• Adani Group shares bombed after Hindenburg Research published a damning report on the sprawling Indian conglomerate. Hindenburg was the firm that did the hatchet job on Nikola a couple of years back, so this will have a significant impact given the size of Adani Group.
• Defence firms, like Rheinmetall and BAE Systems, are bracing themselves for more orders as countries restock the weapons they’ve donated to Ukraine and up their defence spending in general.
• MSC and Maersk have ended their alliance as they pursue different paths to growth. MSC is more interested in expanding its shipping fleet whereas Maersk is keen on developing its land-based logistics business.

• Watson’s Yearly 2022/23: coming shortly…

My favourite “alternative” story this week was the one about the very frustrating illusion in Tricky illusion sees people dubbed ‘genius’ if they can spot 5 items in 15 secs (The Mirror, Grace Hoffman and Christine Younan). If you haven’t seen this already – have a go! It’s very annoying!!!

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

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

Economists get cautiously positive, ChatGPT causes a kerfuffle and environmentalists take Danone to task…

• FROM A GLOBAL PERSPECTIVE – the IMF looks to upgrade forecasts because it believes there will be a pick-up in H2 that will continue into 2024 after positive data releases from Europe and the US.
• IN THE US – we saw that Janet Yellen was headed to Africa this week to visit Senegal, Zambia and South Africa to improve relations, but the Russians and Chinese have been doing this more consistently for quite some time, so now does seem a tad late to be sniffing around in order to make investments in things like metals for EV batteries and renewables! It was quite interesting to see drama increasing regarding the strong attractions of US incentives that are part of the recent IRA legislation. Bayer is hinting that it will go stateside in preference to “innovation unfriendly” Europe, turning the screws on the EU, while Europe appealed to the US to come to some kind of agreement so there isn’t a massive drain of companies out of Europe in search of American cash. Unless Europe ponies up the money sharpish, there will be an exodus.
• IN CHINA – we saw GDP growth weakening considerably from 8.1% in 2021 to 3% in 2022 and the first decline in China’s population since the early 1960s although China does now seem to be turning a corner now that the strict Covid restrictions have been eased. On that subject, President Xi Jinping is taking a risk regarding superspreading as we head to China’s lunar new year holiday when 1.4bn people take 2bn trips out of the big cities to go to their home towns and villages. It is the world’s biggest annual human migration and the problem is that vaccination in rural areas is somewhat patchier than it is in the big cities.
• IN EUROPE – Chancellor Scholz says that Germany won’t fall into recession, presumably emboldened by the milder weather and the fact that he now has LNG import terminals meaning that the country’s sorted for this winter. Turkey continues to resist Finland and Sweden’s application to join NATO and then Erdogan brought forward the date of the general election, hoping to add to his 20 years in power despite his party, the AKP, seeing its support looking more vulnerable than usual on the back of poor handling of the economy.
• IN THE UK – the governor of the Bank of England said that inflation could drop sharply thanks to the recent weakness in energy prices – and then we saw that UK inflation slowed down for the second consecutive month.

IN OIL NEWS…

• France’s TotalEnergies said it will absorb $2.1bn from windfall taxes from the UK and EU, about half of which will be the UK. Harbour Energy said it would cut jobs, blaming the cost of the windfall tax but then the IEA forecasts big oil demand this year as China opens up.

IN CRYPTO NEWS…

• Crypto lender Genesis and two of its subsidiaries filed for bankruptcy protection as the after-effects of FTX’s collapse continue. They managed to last longer than Celsius and Voyager who went under last year. Meanwhile, the interim chief of FTX is considering the resuscitation of the bankrupt exchange as a way to recover more value for customers than liquidating assets or selling off the platform…

IN BUSINESS TRENDS…

• Macau could be in a lot of trouble as a major gambling tycoon faces an 18-year jail sentence. This could lead to the stream of high-rollers dwindling to the territory. Given that they only account for 1% of the gamblers there – but a whopping 75% of all gambling revenue – this could be highly problematic. Gambling has generated up to 90% of tax revenue in the past, so this could be a very big deal!
• Three environmental groups are taking Danone to court, accusing the French owner of brands such as Evian and Activia of not doing enough to cut plastic pollution. If the environmentalists win, this could be massive as rivals including PepsiCo, Mondelez and Diageo – not to mention consumer goods groups like Unilever, P&G and Reckitt Benckiser may have to pay into a clear-up fund further down the line.
• UK house prices fell for the first month since October 2021 as rising borrowing costs dented the residential market. Vistry was the latest housebuilder to act in the face of a potentially slowing market by cutting up to 100 jobs. On the other hand, Crest Nicholson reckons that the market will pick up in the spring.

IN EMPLOYMENT NEWS…

• London law firms are employing all sorts of tactics to tempt their worker into offices by offering things like Brompton Bike hire, Ottolenghi-style brasseries, beehives and nail bars. If the economy slows down enough to dent these firms, I have no doubt this kind of stuff will disappear, to be replaced with directives to go to the office – or else! Just look at what happened at Goldman Sachs…
• The government proposed new measures to enable police to intervene more quickly in disruptive public protests in Britain in the face of strong criticism from rights groups. It is looking to broaden the definition of “serious disruption” in a new public order bill.
• Critics say that tech job culling at social media companies could lead to a surge in online terrorist content. On a broader level, though, it was worth noting that although the absolute number of job cuts in the tech sector sounds big, these cuts were made after a huge recruitment drive under lockdown.
• Following recent job cuts at investment banks, it’s possible to infer that jobs at companies involved in M&A are also vulnerable. Lawyers may be able to survive, though, as their work has a longer tail (e.g. a deal has to go through a number of hoops before it gets final approval). Also they can be deployed more easily elsewhere in the firm.

IN CONSUMER TRENDS…

• US companies are pulling back on price rises as customers are increasingly unwilling to pay, which may explain why US retail sales fell by their steepest rate last month for the whole year as inflation took its toll.
• In the UK, mortgages are becoming harder to get and banks are bracing themselves for a surge in mortgage defaults. UK wages continue to lag inflation, according to the latest ONS figures, and a broader range of consumers are using BNPL. Formerly something that was thought of as exclusive to “young-uns”, apparently almost 20% of the over-65s have used the products or plan to in the next 12 months. This is great for companies like Klarna – but the phenomenon has also been reflected stateside, benefiting companies like Affirm, Afterpay, Klarna, PayPal and Zip. In the midst of all this, the latest GfK survey shows consumer confidence has dropped to near-record lows.

IN RETAIL NEWS…

In APPAREL RETAILERS, Chinese giant Shein is in talks for its latest fund raising at a level that gives it an implied valuation that’s a lot lower than it was at its previous fund raising round. At it’s peak, the company was the world’s third biggest private company after ByteDance and SpaceX. It still wants to launch an IPO in the US, which is its biggest market. FatFace had a strong Christmas, enjoying its best ever year for menswear and Reiss also had a great festive period. On the other hand, Dr Martens had a profit warning and Boohoo reported a poor performance as customers returned to the high street.

In GENERAL RETAILERS, Fortnum & Mason returned to profit and luxury retailers Burberry, Cartier and Aspinal generally did well although Burberry and Cartier saw some weakness in China as lockdowns took their toll. M&S signalled its confidence by announcing a store opening programme, WH Smith did well thanks to strong performances from their airport and railway station outlets and furniture store Dunelm had a great Christmas thanks to brisk sales of electric blankets and heated indoor airers! Hotel Chocolat also did well but wants to play it safe with Easter, aiming to run out of eggs rather than over-produce and then have to discount. On the downside, Matalan’s lenders took over ownership of the group while stationary retailer Paperchase was on the brink of collapse. Ocado posted its first ever annual fall in grocery sales as consumers returned to supermarkets and went bargain-hunting in Lidl and Aldi while THG cut its profit forecast for the fourth time in 12 months thanks to intensifying competition.

IN TECH NEWS…

• Microsoft is considering putting $10bn into OpenAI which makes ChatGPT and says that it thinks it could revolutionise the way humans interact with computers. Chief exec Satya Nadella said at Davos that Microsoft would move swiftly to commercialise OpenAI’s tools and integrate it into all of its products. Not everyone was best pleased, though – artists are against it and getting increasingly concerned about copyrights around what the AI produces. I suspect there will be a lot of potential for lawyers to earn big fees with this given the uncertainty! Meanwhile, Microsoft announced 10,000 job losses as it adjusts to post-Covid spending habits and overall weaker economic backdrop.

IN SOCIAL MEDIA NEWS…

• Social media platforms are bracing themselves for a drop in user numbers ahead of the introduction of the UK’s Online Safety Bill which is now in its final stages in the House of Commons. They will have to tighten their age verification measures and an amendment was introduced that will impose jail time on senior execs accountable who fail to protect under-18s sufficiently by allowing harmful and illegal content.
• TikTok is looking to do an overhaul of its US business to satisfy US officials and lawmakers who continue to be concerned about user data and its China connections.
• Elon Musk is facing a big interest payment related to the $13bn of debt he used to finance the purchase of Twitter, meaning he’ll have to sell more stock and/or some of Twitter’s dwindling cash reserves. Some say that he could just let the company go bust, but I think that’s unlikely given the amount of money he’s sunk into it, plus the fact that he’d lose control of the company – something I’d imagine isn’t really his thing!

OVERALL…

• KKR followed rival Blackstone in becoming the latest investment manager to limit fund withdrawals as increasingly nervous clients fight to pull their money out of an area that is likely to suffer in an environment where the cost of borrowing keeps rising. As a result of rising costs, commercial construction rates have hit their highest level for twenty years as builders are trying to take into account rising prices on initial quotes to ensure they aren’t left out of pocket.

IN RESIDENTIAL PROPERTY NEWS…

• Homebuyers seem to be returning to the market as HSBC becomes another lender to drop mortgage rates from the highs they reached in the wake of the mini-Budget-massive-shock. Although we’ve heard that developers like Barratt and Persimmon are holding back, Crest Nicholson reckons that the market will pick up again in spring.
• Elsewhere, it won’t be that surprising to hear that Russians are now the biggest foreign buyers of property in Dubai as the Ukraine war limits the options for the super-rich. Property broker Betterhomes says Russians are the biggest group of non-resident buyers, accounting for 15% of their transactions versus Brits on 12%, Indians 11%, Italians 7% and French 4%.

• IN INVESTMENT BANKING – Goldman Sachs saw its profits drop by two-thirds, undershooting analysts’ earnings forecasts thanks to the lack of deals. That said, rival Morgan Stanley did pretty well thanks to its expansion into wealth and asset management. Credit Suisse cut 10% of its European investment bankers – also due to the lack of deals – and Citi is clamping down on WFH. If you are deemed “unproductive” you get hauled into the office for “coaching sessions” 🤣.
• Elsewhere, Wise’s share price took a hit the fintech said that cross-border transfer volumes fell in the final quarter of 2022 to their lowest level in two years.

• IN CAR-RELATED NEWS, Renault and Nissan got closer to making a deal that would reset their 23-year-old alliance. They need each other in a world that is switching to electrification. Renault saved Nissan back in the day, but things have changed considerably since then. Meanwhile, EVs made up 10% of all new cars sold last year, according to figures from LMC Automotive. This was thanks to strong growth in China and Europe. In battery news, Britishvolt fell into administration and its site drew interest from more than a dozen companies. What a sorry end to a story that started out with a lot of hope…
• Chinese ride-hailer Didi resumed new customer sign-ups after a major clampdown from authorities but then a state-owned ride-hailing app called “Strong Nation Transport” was lauched to compete with it! The government really does seem to hate Didi!
• There were a few big management changes announced this week. Netflix’s co-founder Reed Hastings stepped down after 25 years to become the exec chairman, a move echoed by Cazoo’s chief exec Alex Chesterman. The difference is that Hastings is stepping down on a high while Chesterman is doing so after shares in his company have been decimated by 97% since flotation.
• A hydrogen-powered aircraft, made by Anglo-US group ZeroAvia, completed a 10-minute test flight in a major breakthrough in the bid to commercialise the technology.
• Deliveroo had a positive trading update as it returned to profitability, prompting upgrades from City analysts. Growth was strong going into the end of last year but its share price is still waaaaaaaay down on its flotation price!

• Watson’s Yearly 2022/23: coming shortly…

I’ve got two favourite “alternative” stories this week! There was this one: Pet duck that drinks tea, chases binmen and walks to shops wins fans across world (The Mirror, Stephen White) and the one about how to start your day in the most epic way: Hotel guests enjoy breakfast in bed outside in the snow at lavish ski resort (The Mirror, Milo Boyd). Nice 👍

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.

Japan signs deals, UK supermarkets outperform pessimistic expectations and the M&A drought continues to have consequences…

• FROM A GLOBAL PERSPECTIVE – the World Bank cut 2023 growth forecasts (Wednesday) and said that there could be a second global recession within three years in its latest report. That is a very big range, so kind of useless but hey…
• IN THE US – Inflation growth slowed down to its lowest level in a year (Friday), showing that the interest rate hikes the Fed put through last year are taking effect. Biden is in trouble (Friday) because he left confidential documents lying around and there’s going to be an official investigation. This is ironic because he criticised Trump for doing the very same thing!
• IN JAPAN – Japan also deepened military ties with the US (Monday) which actually extended to space (Friday) to protect satellites. It also signed a defence agreement with the UK (Wednesday)
• IN EUROPE – some new data points suggest that the EU’s recession could be shallower than expected (Tuesday) as employment and factory output improved. In France, president Macron outlined plans to increase retirement age from 62 to 64 (Wednesday) but I’d imagine he has his work cut out as this is bound to be unpopular and he doesn’t have the majority to force this sort of thing through any more. In Sweden, we saw the government pushing back against pressure from Turkey (Monday) who is making Sweden’s proposed membership of NATO more problematic. Sweden also plans a new law that will aid the construction of nuclear power plants (Thursday) in ongoing efforts for European countries to wean themselves off Russian oil.
• IN THE UK – the Bank of England warned that inflation could be higher for longer (Tuesday) and we heard at the end of the week that the UK economy grew in November, making it more likely that the central bank will keep the upward pressure on interest rates. There was good and bad news for UK businesses this week re the energy support scheme (Tuesday). The government plans to give businesses energy support for longer than the initially-suggested April to extend it by a year, but the amount of support would be less.
• IN RUSSIA – war in Ukraine and sanctions against Russia seem to be taking their toll (Wednesday) as the public deficit is now higher than had originally been predicted.

IN ENERGY NEWS…

• Centrica predicts an almost-eightfold increase in earnings on higher energy prices (Friday) although the gas price has fallen recently due to unseasonably mild weather meaning that the government might not have to pay so much in energy subsidies (Monday) as it had originally thought.
• UK wind power generation hit a new high (Thursday) thanks to blustery conditions. Wind made up 46-59% of all UK electricity generation over the last week and has only dipped below 30% once in the last 11 days!

IN COMMODITIES NEWS…

• The LME/nickel review is now out (Wednesday), which highlights what went wrong last year when nickel trading was suspended on the LME for a week. The main conclusion was that the exchange should do more to monitor off-exchange positions.
• Copper and iron ore prices have been rallying (Friday) on hopes that the end of strict lockdowns in China will mean that construction demand will return as the wheels of the economy start turning faster.
• Sweden discovered the biggest deposit of rare earths in the EU (Friday), which could be a big help in the Continent’s efforts to wean itself off over-reliance on imported raw materials (the supply of which is heavily controlled by China).
• UK coal got a stay of execution (Thursday) as one of Britain’s last coal-burning power plants is going to be kept going for another two years in the ongoing move that most countries are making to diversify energy sources in the near-term.
• Saudi Arabia just launched a $15bn mining fund (Thursday) to use oil money to buy a non-oil future. The venture will buy into overseas mining assets.
• Oil prices have been rebounding (Monday) on hopes that China demand will return and analysts at UBS and the Bank of America reckon the oil price will peak at $110 per barrel this year. Meanwhile, it looks like the G7 oil cap on Russian oil is hurting Russia (Thursday) as it is potentially costing Putin £140m in lost revenues per day.

IN CRYPTO NEWS…

• We see that the US attorney for the Southern District of New York is gearing up to take on FTX founder Sam Bankman-Fried (Friday) while SBF continues to maintain that he didn’t steal funds (Friday) and even goes as far to say that it FTX had still been going he would have been able to make good on the debts.

IN “TRADITIONAL” CARS NEWS…

• Rolls-Royce had a “momentous” year (Tuesday), thanks to rich clientele personalising the **** out of their cars. It just serves to highlight the massive difference between the spending patterns of those at the top end of the socio-economic scale and those lower down.

IN EV NEWS…

• EV production looks set to slow (Wednesday), according to the latest quarterly review from The Advanced Propulsion Centre, a body that promotes a zero-emissions future for the automotive industry. It says that cars are still too expensive for most customers, especially at the moment.
• In INDIVIDUAL COMPANY NEWS, Rivian had a clearout of the executive team (Wednesday) after a disappointing 2022, Tesla got a lot of flak for cutting prices of its cars in China (Tuesday) from disgruntled existing owners, but then followed that up by announcing it would cut prices in the US (Friday), so we’ve yet to hear how that’s going to be received. In the UK, Israeli truck start-up Tevva commenced production of electric lorries (Wednesday) at its Essex plant. It aims to sell 1,000 units this year!

IN BATTERY NEWS…

• There was a ton of news on ailing would-be British EV battery manufacturer Britishvolt this week as it sought to sell a majority stake to a consortium of investors (Tuesday). An Indonesian investor emerged (Wednesday) which prompted another offer to come out of the woodwork (Thursday). Meanwhile, it was interesting to see some research from the RAC which showed that, at current prices, charging your EV at a motorway service station cost more than filling a petrol tank (Tuesday)!

IN CONSUMER TRENDS NEWS…

• Millionaires are leaving the UK (Thursday), according to research migration consultancy Henley & Partners, as they feel the attractions of living here are lessening due to having to pay more tax.
• For the rest of us, the cost-of-living crisis is resulting in more people using credit cards and cash (Thursday) to afford things and stick to budgets respectively and the tightening of household finances has meant that online retailers had their worst fall in sales since records began in 2000 (Tuesday). Things are expected to get worse and mortgage defaults are looking increasingly likely (Thursday), food prices could be higher for longer (Thursday), according to the World Economic Forum’s annual global risk report – but on the plus side, petrol prices hit their lowest level since the outbreak of the Ukraine war (Wednesday).

IN RETAIL NEWS…

• It was a big week of results for supermarkets! Sainsbury’s (Thursday), Tesco (Friday) and M&S (Friday) had a strong Christmas – and their strength just highlights a difficult potential future for Waitrose.
• In ONLINE RETAILERS, Amazon said it would close three UK warehouses (Wednesday), but net-net there would actually be more jobs; Asos said it would close warehouses and cut office space (Friday) as it continues to suffer a post-Covid hangover; Boohoo is to cut staff at its Soho office (Wednesday) but, on the other hand, Very had a very merry Christmas (Friday) as it managed to sell an air fryer every 30 seconds in the seven weeks to December 23rd!
• ELSEWHERE, Majestic Wine announced its second-biggest ever trading performance over Christmas (Wednesday) and electrical goods maker AO seems to be seeing success (Wednesday) in its “pivot to profitability”. JD Sports benefited from GenZ buying (Thursday) but Halfords announced a profit warning (Friday) as it’s still having problems finding enough staff. It was also interesting to see car dealer Lookers announcing a strong performance (Thursday), but you do wonder how long this is going to last in the current economic environment as many customers are going to be thinking particularly hard about buying big ticket items like cars. Pent-up demand won’t last forever and current circumstances are a perfect excuse for consumers to keep driving their existing cars before switching to electric IMO.

IN EMPLOYMENT NEWS…

• White-collar recruiter Robert Walters says that there’s a slowdown in global hiring (Wednesday) while the US tech layoffs continue (Monday). Disney is getting workers to return to the office four days a week (Tuesday) as the new/old CEO cracks the whip and think-tank IFS talks about the damage that disrupted education and recession could have on current grads (Wednesday), although I’d argue that this may make them more resilient in the longer term!

IN RESIDENTIAL REAL ESTATE NEWS…

• There’s a ticking timebomb for the UK’s middle earners (Monday) who will be coming off fixed rates in the coming months to face major increases in mortgage payments, first-time buyers are now spending a whopping 40% of their salary on mortgage payments (Friday) and it’ll get even harder to rent as the Bank of England wants to crack down on buy-to-let mortgages (Wednesday). Meanwhile, posh estate agent Savills is seeing a buoyant top end of the market (Friday) but it sounds like developers are not very confident about the outlook as Barratt said it may well build fewer houses if the market doesn’t improve from here (Thursday) and Persimmon said that its would be slowing the pace of building properties (Friday) as it has been hit particularly hard by the end of Help To Buy, the rise in interest rates and the mini-Budget debacle of last year.

IN COMMERCIAL PROPERTY NEWS…

• The number of commercial property deals has fallen to its lowest level in over ten years (Thursday), but that might have something to do with landlords being hit by falling property values (Tuesday). In the meantime, TV and film studios got a nasty shock (Thursday) as the Valuation Office Agency’s most recent assessments of rateable value will mean they have to pay massive increases in property taxes.

IN BANKS & INSURANCE NEWS…

• US banks are facing the possible end of the rate rise cycle (Wednesday), meaning that earnings may be near their peak because they tend to make higher profits when interest rates are high, but US investment bank Goldman Sachs announced it was cutting over 3,000 jobs (Wednesday) as the number of deals has just dried up. This was actually reflected elsewhere as research showed that US lawyers’ billable hours his a new low point (Wednesday). They would obviously be much higher if there were deals knocking around! Interestingly, some Chinese banks are trying to attract customers by offering foreign mRNA Covid vaccines (Wednesday) if they deposit a certain amount of money! In INSURANCE news, Direct Line scrapped the dividend (Thursday) as its Q4 performance was badly hit as the sudden cold weather snap resulted in a spike in claims.

IN OTHER FINANCE NEWS…

• Personal investing platform Vanguard continues to do well (Monday) as money just flows in to its no-frills fund while co-founder of Hargreaves Lansdown, Peter Hargreaves, is tearing his hair out about Hargreaves Lansdown’s disappointing performance (Monday) and is calling for a culling of 50% of the workforce!
• Elsewhere, accountancy giant EY said it was putting aside $2.5bn to invest (Monday) after it splits its audit and consultancy business. This is a chunk of change and I think it could be used to buy struggling specialist businesses, e.g. law firms or M&A boutiques that may benefit from access to the bigger balance sheet a company like EY can provide.

• TSMC outlined a cautious outlook for semiconductors (Friday) although it did report strong financial earnings. It said that it thought there would be a downturn in the industry, potentially exacerbated by falling PC sales. Still, it is continuing with its global expansion and I think that demand will be underpinned by rising demand from the automotive sector in the coming years as more people buy electric cars.
• Apple hired workers in India in preparations to open its first flagship stores (Monday). Things are looking exciting for Apple in India, the world’s second biggest smartphone market.
• There seems to be contrasting fortunes in satellites as OneWeb closed its site in Alaska (Monday) while SpaceX announced it would be increasing the number of launches (Monday).

• AstraZeneca bought biotech company CinCor in a $1.8bn deal (Tuesday) as it wants to expand its pipeline of heart and kidney drugs.
• HBO Max increased prices of its ad-free subscription by $1 a month (Friday) from $14.99 to $15.99 in what will be its first price increase since May 2020. I guess this will just make the offering more differentiated from its ad-supported membership.

• 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 the one about the bizarre tourism video to big up Kagoshima in Japan in Kagoshima City releases catchy promotional video with weird dancing, bushy eyebrows, no pants (SoraNews24, Dale Roll)! It’s unlike any tourism video I’ve ever seen 🤣🤣🤣 – and yes, that is “pants” in the American sense of the word 👍

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.

Interest rates get hiked, everyone goes on strike and crypto-mauling continues…

• IN CENTRAL BANK NEWS – it was a big week as the Fed, ECB and Bank of England all raised interest rates by 0.5% (Friday) to curb ongoing inflation.
• IN THE US – the rate of inflation is still rising, but at a slower rate (Wednesday), according to the latest data from the US Bureau of Labor Statistics. This helped push the pound up versus the dollar (Wednesday) as markets went up and bond yields fell.
• IN CHINA – Beijing eased zero-Covid restrictions (Monday) and stopped counting asymptomatic cases (Thursday), which China’s insurance industry responded to by pulling Coronavirus coverage (Thursday). It was also interesting to see that China decided to file a dispute with the WTO (Wednesday) as it decided to push back against wide-ranging US export controls on chips imposed in October by Washington. The WTO has ruled against Washington before, so there is precedent. There will be a sense of urgency on this as Arm Holdings decided it couldn’t supply Alibaba with its most advanced chips (Thursday) because of these controls.
• IN EUROPE – the EU is having a tough time trying to match US “green” incentives (Tuesday) but will be relaxing rules on state aid to narrow the gap, although it’ll have a tightrope to tread because the WTO also has rules on this. The clock is ticking, though, as European EV battery “champion” Northvolt is pressuring the EU to increase subsidies (Friday), presumably with the veiled threat that it could take its weighty order book and manufacturing capability stateside if it doesn’t get what it wants.
• IN THE UK – the public sector is largely on strike! Public sector wage rises this year lagged private sector rises (Wednesday), but some argue that this is just the private sector catching up with the public sector (Wednesday). There is also the opinion that the government is overstating the cost of giving the public sector a higher pay rise (Wednesday) as pretty much half of it has already been factored in to government estimates anyway. The RMT is holding out as other unions agree a pay deal (Friday) but it has done a good job historically with keeping train workers’ wages high (Thursday) as no-one earns less than the average wage of £33,00o (the lowest earner gets £37,740). Meanwhile, UK inflation slowed to 10.7% in November (Thursday), which was below market expectations, but UK manufacturing looks set to fall (Monday) as the latest Make UK and BDO Manufacturing Outlook survey reflected corporate uncertainty. The Bank of England got feisty this week as it warned Sunak not to go too crazy with deregulation of the City (Wednesday) and said that rising mortgage costs will spark an exodus of landlords (Wednesday).

This was yet another week of drama for crypto!

• Investors withdrew record levels of bitcoin from crypto exchanges (Monday) as investor sentiment towards crypto assets continues to darken. Binance described the withdrawal of $1bn of assets being pulled out of its platform in one day as reflecting confidence in its structure (Thursday), which I think is a hilariously optimistic assessment of the situation, while the US Justice Department is now looking into charging Binance execs (Tuesday) for all sorts of dodgy dealing.
• Talking of dodgy dealing, former FTX CEO Sam Bankman-Fried was arrested in the Bahamas (Tuesday) and it turned out that he gave himself priority access to trading systems (Thursday) in what has been described as “one of [the] biggest ever frauds” (Wednesday) as the US Department of Justice charged him.
• In another hilariously bad turn of events, London-listed bitcoin miner Argo Blockchain was forced to deny it had gone bankrupt (Tuesday) after “accidentally” saying it had on its own website 🤣. You just couldn’t make this stuff up!
• Meanwhile, Hong Kong’s recent plugging of bitcoin looks somewhat embarrassing (Thursday) and the incoming chair of the FCA has made his position clear to MPs that he is crypto-sceptic (Thursday), which could be at odds with Sunak’s previously stated desire to help the UK become a crypto hub. Amidst all the drama, bitcoin appears to be holding up incredibly well considering. It is just my opinion but I think something very suspicious is going on in the background as I just do not understand why bitcoin isn’t falling through the floor in response to what seems to be daily scandal and news of asset withdrawals. I think there needs to be an investigation into suspicious trading patterns.

In the world of energy…

• OVERALL, France raised the possibility of winter power cuts (Monday) and power prices in the UK reached record levels (Monday) thanks to low wind speeds killing the amount of electricity being generated by renewable sources. On the plus side, Chancellor Jeremy Hunt is looking at giving businesses more support with their energy bills once winter is over (Thursday), which should provide some relief.
• IN RENEWABLES NEWS – Rolls-Royce rivals in the Small Modular Reactor space are bidding for attention (Tuesday) to supply electricity in the UK. There was excitement as US scientists made a major breakthrough in nuclear fusion technology (Wednesday), although we are still a way off large-scale energy generation from this source. Mind you, with a number of breakthroughs being made this year, you would have thought that there will be more R&D dollars poured into it.
• IN OIL NEWS – oil tanker bottlenecks off the coast of Turkey have been resolved (Wednesday) as proof of insurance for vessels has now been accepted. There had been a bit of a kerfuffle over appropriate insurance cover after the western price cap on Russian oil came into force last week.

IN BUSINESS TRENDS…

• Pessimistic employers are hiring fewer workers for the third consecutive month, particularly in the services sector (Tuesday) and a lack of staff is forcing some restaurants and pubs to cut festive hours (Thursday), something that is being made worse by the rail strikes.
• The number of insolvencies is rising (Thursday), according to the latest data from the Insolvency Service, as they increased by 20% in November versus November 2021 to their second highest level since the beginning of the pandemic.
• The phenomenon of ‘shrinkflation’ is alive and well (Friday) as it turns out that Mini Cheddars – among other products – are seeing package and content size shrinking as makers try to pass on higher raw ingredients prices in ever-sneakier ways…

IN CONSUMER TRENDS…

• Spanish apparel retailer Mango is looking at bringing production closer to home (Monday) and reducing reliance on Chinese suppliers given the rollercoaster ride of the last few years. Levi’s, Dr Martens and Inditex are among those to make the same moves.
• US consumers are spending less (Friday) as the official retail sales figure was weaker than expected. It seems that inflation is seeping through to households…
• UK consumer confidence hit a 50-year low (Friday), but consumers continue to buy products like electric blankets to be more energy-efficient (Tuesday) and save on utility bills. That said, the luxury sector is benefitting from younger people spending (Tuesday) as the demographic is increasingly living with parents, who are insulating them from the worst effects of the cost-of-living crisis. In the residential property market, property website Rightmove said that asking prices fell by their biggest amount for four years (Monday), the latest ONS data showed that London property prices fell in London but rose everywhere else (Thursday) and Credit Suisse reckons that house prices should fall by 10% (Tuesday) as inflation continues to squeeze household finances.

• Currys highlighted interesting trends of consumers using more credit and opting for cheaper models (Friday) as the cost of living crisis continues to bite.
• Inditex had a solid set of results considering (Thursday) and it outperformed rival H&M due to its superior control over inventories (Friday).
• It seems that a trend of big stores coming to the high street in smaller formats is gathering pace (Wednesday) as the likes of B&Q and Ikea are jostling for high street space along with the likes of Tesco Express and Sainsbury’s local.
• Monsoon surprised on the upside (Monday) as it announced intentions to open more stores! What a turnaround considering its collapse during the pandemic!

• Amgen bought Horizon Therapeutics (Tuesday) in a deal worth $28bn, but Amgen’s debt levels will skyrocket as a result at a time where interest rates are high. It does make strategic sense, though.
• US-based private equity firm Thoma Bravo bought business software provider Coupa Software for $8bn (Tuesday) to add further to its collection of acquisitions that include Anaplan, SailPoint Technologies, Ping Identity and ForgeRock.
• Microsoft bought a 4% stake in the London Stock Exchange (Tuesday) as part of a 10-year strategic partnership. This should help to improve the LSE’s data and analytics and enhance its revenue growth.
• UK building materials provider Jewson is being sold off to Danish group Stark (Tuesday) as current owner Saint-Gobain exits its British businesses.

• IN AUTOMOTIVE NEWS – EV demand in Europe seems to be on the wane according to VW (Wednesday), a trend that is reflected in the UK, according to AutoTrader (Tuesday), something that is presumably down to rising electricity costs and the high prices of EVs. Rivian has shelved plans to open a European electric van plant with Mercedes-Benz (Tuesday) to focus on existing production in the US and Tesla investors are getting increasingly frustrated with Elon Musk’s focus on Twitter (Wednesday).
• IN FINANCIALS NEWS – Danske Bank is going to have to pay $2bn for defrauding US banks (Wednesday) following a major money laundering scandal, HSBC has promised to stop funding new oil and gas projects (Thursday) following intensifying criticism of “greenwashing” and fintech Checkout.com saw its valuation slashed by 75% versus its January level (Wednesday) thanks to the overall tech sell-off and increasing focus from investors on profitability rather than growth. In the meantime, insolvency specialists like Begbies Traynor and FRP Advisory look likely to benefit from economic misery (Wednesday). Talking about professional services, KPMG saw its full year revenues rise by 8% to almost $35bn (Wednesday) benefitting particularly from its consultancy business. KPMG is committed to keeping its auditing and consultancy business together (unlike EY, which is thinking of separating them).
• IN TECH NEWS – Twitter relaunched its blue tick service (Monday) where users will have to pay an $8-11 monthly fee for extra features and a bump up the priority list. It will now be available in the US, Canada, Australia, New Zealand and the UK. Elsewhere, Adobe saw Q4 revenues come in above expectations (Friday), which is particularly impressive as rivals such as Salesforce and Okta have said that customers were getting more cautious and taking longer to sign deals.
• AND ANOTHER THING – I thought it was very interesting to see that Canary Wharf just submitted plans for a massive “vertical” life sciences campus (Wednesday) that will broaden its exposure outside financial services as demand for office space weakens.

• 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 the one about the “ultimate” 🤣 Christmas present for that special someone who has everything: Former US President Donald Trump sells out NFT trading cards (BBC, Annabelle Liang). Just 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.

China retreated on its strict Covid stance, Jezza announced “Big Bang 2.0” and Fenwick departs.

• China’s State Council outlined more relaxed measures regarding Covid (Thursday) but Covid clinics got a sudden spike in demand for fever medication (Friday). The relaxation of measures is coming at a tricky time as there’s an outbreak, we’re close to the lunar new year when many in the big cities travel back to see their families in the countryside and everyone’s been vaccinated with sub-par vaccines. I really hope that history won’t repeat itself here. I really think that president Xi needs to order a ton of foreign vaccines and get busy with using them before that mass-exodus spreads the virus again. In other more positive news for China, President Xi and Crown Prince Mohammed bin Salman of Saudi Arabia announced a “new era” in China-Saudi Arabia relations (Friday) and signed a ton of deals, including one with Huawei to install superfast internet and a cloud computing facility. I’d say this is bad news for Russia (China can go somewhere else for its oil now) and the US (it’s yet another slap in the face for Biden).
• IN EUROPE – the EU is desperately scrambling around to scrape together dosh to offer as incentives to manufacturers (Monday) as the US’s IRA legislation has made it pretty darn tempting to scoot on over Stateside to claim their free money from Biden’s enormous stash. In the meantime, the EU proposed more sanctions on Russia – this time on the mining industry (Wednesday). This could be very painful for Russia as it has been a major source of inward investment.
• IN THE UK – Rishi Sunak is under increasing pressure to accelerate the introduction of anti-strike legislation (Wednesday) in order to prevent the whole of the public sector holding the government to ransom. This is something that Maggie Thatcher did in the past, but I wonder how effective/enforceable any such measures could really be…
• IN SOUTH AFRICA – President Cyril Ramaphosa remains as president (Tuesday) as the ANC got behind him in the face of pressure to resign for abusing his position.

IN COMMODITIES NEWS…

IN OIL – OPEC stood ready to act as the EU oil price cap came into force this week (Monday) and traders saw price volatility (Tuesday) as the news was digested by the markets while the number of oil tankers built up off Turkey (Tuesday) as authorities there demanded to see the correct insurance paperwork. Elsewhere, ExxonMobil announced a massive share buyback (Friday) – which shows that it doesn’t care about what Biden says – and commodities trading firm Trafigura said it would be splitting $1.7bn in dividends (Friday) as it made an absolute killing on volatility in oil prices.

IN GAS – Europe cut gas demand by a quarter (Tuesday) which will help as we enter winter but on the other hand, exports of British natural gas to Europe reached their highest level for six years (Tuesday).

IN LITHIUM – Canada’s Sigma Lithium is building a lithium mine in Brazil (Monday) that could start commercial production of battery-grade lithium in Spring next year. Given that demand continues to rise and that prices have increased tenfold since the start of 2021, you can understand the decision to do this!

IN CRYPTO NEWS…

Stablecoin specialist Circle decided not to go ahead with a SPAC-backed IPO (Tuesday), Coinbase (Tuesday) and Genesis (Tuesday) suffered from ongoing FTX fallout while a judge from the High Court forced Binance to hand over user data (Tuesday) as part of an investigation and the Treasury is in the final stages of putting together some rules to regulate crypto (Tuesday). The net appears to be closing in…

• IN EMPLOYMENT NEWS – new government legislation was introduced this week, giving employees the right to flexible working from day one (Monday), a departure from the current rule where you only get the possibility after 26 weeks, with only one request being possible every 12 months. Meanwhile, a survey by REC and KPMG showed that the number of permanent hires fell for a second consecutive month (Thursday) as uncertainty appears to be showing some signs of seeping into the job market.
• IN CONSUMER NEWS – European customers tighten their belts (Tuesday), UK customers are buying more but spending less (Tuesday) because of general inflation but specifically, increases in the price of food (Wednesday) and fuel (Wednesday), all of which has resulted in UK household spending trailing the rest of the G7 countries (Friday).
• IN RETAILER NEWS – Black Friday in the US turned out to be pretty disappointing (Wednesday) as sales over Thanksgiving weekend were disappointing. In the UK, there seems to be a trend of big retailers opening high street convenience stores as both Asda (Wednesday) and B&Q (Tuesday) are both heading there while, in supermarkets, Lidl and Aldi continue to increase market share (Wednesday) mainly at the expense of Morrisons and Sainsbury’s ploughs £550m into making prices lower for shoppers (Tuesday). Meanwhile, Frasers Group announced strong H1 results (Friday) thanks to younger shoppers spending on clothes and Bond Street department store Fenwick announced that it will depart its flagship store (Wednesday) at the beginning of 2024. It still operates eight others, but it is a sign of the times that another West End department store bites the dust.
• IN LEISURE NEWS – Cancelled Christmas parties, due to rail strikes, are causing many pubs a real nightmare (Thursday), although Mitchells & Butlers – which owns Harvester, Toby Carvery and All Bar One – announced a decent performance (Thursday) thanks to returning office workers and Marston’s saw sales increase (Wednesday) thanks to World Cup fever. Meanwhile, On The Beach saw package holiday demand for three-star destinations dip (Friday) while premium bookings remained resilient and IATA reckons airlines will return to profit for the first time since 2019 (Wednesday). Increased footfall at airports has been good for the likes of SSP – which owns Upper Crust and Caffe Ritazza – which saw a return to profit (Wednesday) and said it would be targeting North America for expansion, something that sounds like a good idea given that the recovery in air travel there looks more robust than it does in the UK and Europe IMO.

THE REGULATORS TIGHTEN THE SCREWS ON TECH COMPANIES…

• Amazon came to an agreement with the EU regulators (Wednesday) after three years of wrangling over its unfair advantage over third-party sellers on its website and has committed to increase visibility of rival products. The FTC said that it was suing Microsoft to block its proposed acquisition of Activision Blizzard (Friday) and is also looking to disrupt Meta’s proposed acquistion of VR app-maker Within Unlimited (Friday). TikTok’s owner ByteDance continues to face difficulties in talks with the Biden administration (Wednesday) designed to assuage ongoing concerns about national security that TikTok’s handling of user data allegedly poses. Meanwhile, in the UK, Nexperia (the Dutch subsidiary of Chinese firm Wingtech) is now fighting back against the UK government’s decision to stop the purchase of Newport Wafer Fab on national security grounds (Tuesday)…

THEN IN GENERAL TECH NEWS…

• Apple is accelerating plans to move production out of China (Monday), particularly in India and Vietnam, whilst also reducing its reliance on Foxconn. Talking of Foxconn, disruption at its main Zhengzhou plant has caused a 29% fall in its revenues (Tuesday) but it reckons that normal production patterns will resume in the New Year.
• A report from Magna reckons that TikTok may escape the worst of the global ad slowdown (Tuesday), something that is given credence thanks to the fact that it doubled advertising revenues in 2022.
• Google is planning on further integrating its Maps and Waze teams (Thursday) although Waze will continue to be a standalone product. Google bought Waze in 2013 for $1.1bn.
• Microsoft signed a 10-year ‘Call of Duty’ deal with Nintendo (Thursday), which may be partly motivated by addressing worries that its proposed acquisition of Activision Blizzard could restrict “COD” access via other platforms, including Sony.

• IN BATTERY NEWS – the price of lithium ion batteries went up for the first time since 2010 (Wednesday) as prices for the raw materials continue to rise. Talking of which, Chinese battery makers look set to dominate supply to European car makers (Wednesday) as the likes of CATL and Envision AESC have the most battery production capacity. FWIW, I think that we will be building problems for the future as China will be so dominant in battery supply that negotiating with China more generally will get much more difficult. Batteries could be to China what gas and energy has been to Russia and could be used as a very powerful political tool in the future. This is another reason to pursue other technologies like hydrogen fuel cells, for instance. I also think that if the supply of battery materials is getting tricky now when the numbers of EVs on the roads is still so small, it will just get exponentially worse as demand ramps up to meet emissions targets…
• IN EV NEWS – Tesla launched the Model 3 and Model Y in Thailand, its latest new market (Friday) just before the peak car buying season. This could be particularly exciting as there is very little competition in EVs in Thailand. Toyota announced plans to launch six electric models by 2026 (Tuesday). On a completely different scale, Glasgow start-up Munro Vehicles announced a new fully=electric 4×4 (Wednesday), saying that it expects to make 50 cars next year and scaling up thereafter. The SUV will cost around £50,000 and go for up to 16 hours on a full battery.

• The European Commission has unveiled legislation designed to force banks to move business to the EU (Thursday) in Brussels’ latest bid to take the City’s lucrative clearing house business.
• Jeremy Hunt announced a bit of deregulation in financial services (Friday). It wasn’t the “Big Bang 2.0” that predecessor Kwarteng was talking about – it was badged as the “Edingburgh Reforms” by Jezza – but it did get rid of the bankers’ bonus cap and relaxed the ring-fencing rules in banks with more to come in the reform of the Solvency II rules and review of MiFID II.
• IN INVESTMENT BANKING – Morgan Stanley announced that it will be cutting 2,000 jobs (Wednesday) on fears of a global recession, but also because of a lack of IPO and M&A deals. UK broker Numis said it will be cutting bonuses because of the lack of deals (Friday) but did better than rival Peel Hunt (Friday) due to the former’s lower relative reliance on UK company financing.
• IN PROFESSIONAL SERVICES – PwC is actively poaching EY partners (Monday) as it tries to capitalise with unease at EY over the potential splitting of the audit and consultancy businesses.

• 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 this weirdly compelling video of a climber vs a parkour “crew” seeing who could hang on a bar the longest! This really was quite something!

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 was a week where we saw some signs of positivity, the UK made another onshore windpower U-turn and Twitter going a bit crazy…

• OVERALL – Global inflation looks like it’s peaked, according to key data indicators (Monday) and we’ve already seen inflation slow down in emerging markets like Brazil, Thailand and Chile. Continued high energy costs could prove to be problematic and overall levels are expected to remain high for some time. This general feeling would seem to be borne out by the Fed suggesting they may slow the pace of interest rate rises (Thursday) and although the ECB remains committed to such rises to tame inflation (Tuesday), Eurozone inflation actually fell more than expected (Thursday), which implies that the interest rate hikes are kicking in.
• IN CHINA – public frustration towards the strict zero-Covid policy turned to heated protests (Monday) while sales of ventilators and oxygen machines spiked (Tuesday) in the belief that hospitals won’t be able to cope with an influx of new cases. The stop-start and unpredictable nature of the Covid-lockdowns in China has led to some concluding that the country is uninvestable (Tuesday) at the moment and that more resulting economic slowdown will lead to falling demand for oil, pushing the price down (Tuesday). Beijing sought to distance itself from the whole thing by blaming local officials for the response to new Covid cases (Wednesday), but in the meantime, high youth unemployment in China is feeding frustration (Thursday). Funnily enough, China’s Covid tsar signalled a potential easing in stance towards Covid (Friday) at the end of the week. No doubt this will be framed as something that would have happened anyway rather than something that happened in response to civil unrest!
• IN JAPAN – a nine-day training operation (called “Vigilant Isles 22”), involving UK and Japanese armed forces, was completed (Thursday) as concerns continue to bubble away at the prospect of China invading Taiwan. Japan is to boost its defence budget by 11% for the year to March 2024.
• IN SOUTH AFRICA – Cyril Ramaphosa’s presidency is looking dicey (Friday) as he has been accused of using his status to cover up a $4m theft from his farm in 2020. His fate will be decided by a meeting of senior ANC leaders.
• IN THE UK – a recent business survey of SMEs for the Bank of England showed that UK inflation expectations have calmed down (Friday), with the general feeling that it will ease off in the coming months.

IN ENERGY NEWS…

• State-owned Qatar Energy signed another big deal this week, this time to supply Germany with LNG (Wednesday) just one week after signing a massive one with China.
• IN NUCLEAR ENERGY – Rolls-Royce is in talks over the location of its first SMR in the UK (Monday) as part of its longer term plams to develop 20-30. Hinkley Point C nuclear power station could be facing a potentially massive delay for completion (Wednesday) as the government wants to buy out China’s interest to elbow it out of key infrastructure. British nuclear fusion start-up, First Light Fusion, is looking at sites across the UK (Monday) for electricity and tritium production that will help in the commercialisation of nuclear fusion.
• IN ALTERNATIVES – Shell just agreed a deal to buy Denmark’s Nature Energy (Tuesday), Europe’s biggest biogas producer, as it tries to diversify away from fossil fuels. Elsewhere, Business Secretary Grant Shapps made a U-turn on UK onshore windpower (Tuesday), signalling a move by the government to make it easier for developers to build onshore windfarms.
• IN OIL – Europe is planning to cap Russian oil at $60 a barrel (Friday) in order to stop financing Putin’s war machine. Meanwhile, TotalEnergies cut investment in new North Sea wells (Friday), saying that it was a result of having to pay Sunak’s new windfall tax.

And then IN CRYPTO NEWS…

• BlockFi became the latest crypto business to go bust (Tuesday), prompting further suggestions that the crypto ecosystem is inherently unstable (Wednesday). MEPs debated whether the EU’s incoming Markets in Crypto Assets (MiCA) legislation would be robust enough to avoid another FTX-type situation (Thursday) while the UK’s High Court gave permission to track stolen crypto assets as part of an investigation (Wednesday). Given that crypto fraud has jumped by a third in the UK (Monday), more regulation can’t come quickly enough IMO!

I thought that there were a couple of interesting business trends emerging as well…

• It turns out that up to 500 Chinese companies have redomiciled or registered in Singapore over the last 12 months (Thursday) in an effort to side-step a potential escalation in China-US tensions and resulting sanctions.
• The closely-watched German Ifo business confidence survey showed European business leaders turning more upbeat (Thursday) as it seems that economists may have been overly pessimistic in their forecasts. Isn’t it great to see something positive for a change?!

• The UK looks like it’s about to relax ringfencing rules on larger banks (Wednesday), which could lead to banks with smaller – or no – trading activities having more cash to play with as part of a post-Brexit regulation liberalisation “bonanza”.
• IN UK BANKS – HSBC decided to quit Canada (Wednesday) and sell its business in the country to Royal Bank of Canada, as well as shutting a quarter of its branches (Thursday) in the ongoing client shift to digital banking. Monzo’s chief exec talked a good game (Friday), saying that the challenger bank would turn a profit in 2023.
• IN OTHER FINANCIALS – UK broker Peel Hunt saw its profits disappear (Friday) thanks to the lack of IPOs and other offerings during 2022 while international money transfer platform Wise put in a solid performance (Wednesday) and had an upbeat outlook.

IN CONSUMER NEWS…

The average worker’s pay fell for the first time this century (Thursday), according to data from the International Labour Organisation (ILO), egg shortages boosted food inflation to a new high (Wednesday) while sandwich sales rose (Wednesday) as more people returned to the office.

In employment news – white-collar jobs have been culled at places like Amazon and Walmart (Friday), while blue-collared ones have so far remained relatively untouched, although in the UK, factory workers are being laid off (Friday) thanks to a build-up of inventory and weakening demand for their end products. Law firms are starting to look vulnerable in a hiring hangover (Friday).

IN RETAIL NEWS…

Amazon downsized (Thursday) as profits plunge and costs are cut and Dollar General, America’s biggest discount store operator, announced a downbeat outlook (Friday), which was a bit of a nightmare considering that this is a company that’s supposed to do well in times like this. Talking of cheap-and-cheerful, UK budget retailer Wilko reported a £30m loss (Wednesday) due to supply chain problems and is looking for finance.

In apparel retailers, UK businesses like New Look, Asos and Boohoo went mad for Black Friday discounts (Tuesday) to tempt thrifty consumers, H&M said it was cutting 1,500 jobs (Thursday) as part of a wider cost reduction programme, Next rescued Joules from administration (Friday) and announced the closure of 24 stores. Superdry was in talks to source more financing (Tuesday), M&S bought online fashion marketplace Thread (Wednesday) and Boohoo increased its stake in cosmetics company Revolution (Tuesday) while luxury bag company Mulberry posted a half-year loss (Thursday) thanks to fewer rich shoppers coming to the UK.

IN LEISURE NEWS

Marston’s pubs have benefited from increased custom due to the World Cup (Tuesday), Vue is considering making an offer for rival Cineworld (Friday) and restaurants in the US vie with supermarkets for consumers (Monday) as the difference between restaurant prices and supermarket prices are narrowing as prices at the former have been rising slower than those at the latter!

• IN RESIDENTIAL PROPERTY – UK house prices fell at the fastest pace since 2020 after the mini-Budget (Wednesday), house-buying demand fell 44% (Monday) according to Zoopla and first-time buyers are expecting to wait until their late thirties to afford a home (Thursday) as houses continue to stretch affordability to the max.
• IN COMMERCIAL PROPERTY – private equity firm Blackstone has decided to limit withdrawals at its $125bn property fund (Friday) to slow the rate of redemptions as investors panic about falling prices.

• IN REGULATORY STUFF – Google was hit with a $13.6bn class action lawsuit (Thursday) over claims that it is too powerful in the online advertising market, Meta was fined €265m by the Irish Data Protection Commission (Tuesday) for its poor handling of user data and US Treasury secretary Janet Yellen voiced “legitimate national security concerns” about TikTok (Thursday) regarding data sharing concerns. Meanwhile, the UK government dropped the “legal but harmful” clause from the new Online Safety Bill (Tuesday) which will anger reformists but appease tech firms and free speech advocates.
• It was a pretty feisty week in the sector as Twitter abandoned its misinformation policy in the name of free speech (Wednesday) to criticism from the European Commission (Thursday) who threatened to ban it unless its sticks to strict moderation policies and there were worries that Apple would kick it off the App Store (Tuesday) although that seemed to be resolved after a meeting between Apple CEO Tim Cook and Elon Musk (Thursday). Meanwhile, Twitter offered big incentives to attract advertising spend (Friday). Elsewhere, there were suggestions that Apple’s amazing 14-quarter growth streak could falter due to the Foxconn factory problems it is having (Wednesday) and things are getting tight at Snap as workers were told to work in the office four days a week (Wednesday). In hardware news, the UK is going to trial Starlink satellites for rural connectivity (Thursday), controversially bypassing the British option OneWeb (controversial because the government funneled $500m into it to stop it from going bust in 2020!).

• Toyota said it plans to build green-energy trucks in the UK (Friday) and make hydrogen fuel cells at its plant in Derbyshire.
• IN EV NEWS – Tesla delivered its first electric semitrailer trucks to PepsiCo (Friday) five years after the model was unveiled and three years after they were actually due out! Closer to home, China’s Great Wall launched in the UK this week (Monday) with the £32,000 all-electric Ora Funky Cat. There was some sad (but not entirely unexpected!) news that Britishvolt decided to scrap plans for a second factory in Canada (Monday), but it’s got enough on its plate just to survive rather than have any more distractions! Meanwhile, it was also pretty interesting to hear Compare the Market research showed that, with new taxes, EVs will cost about the same to run as petrol-powered cars (Friday)!

• 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 a shadow of a doubt, this was my favourite “alternative” story of the week: ‘My brother is obsessed with crisps so I made him a special one-off advent calendar’ (The Mirror, Danielle Kate Wroe). Genius 🤣!

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

THE 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 was marked by European gas price rises, more FTX repercussions and the return of Disney’s Jedi Master…

• IN GENERAL – the UN climate summit ended in discord (Monday) as there was agreement on giving financial help to poorer nations but disagreement on commitment to COP26 targets on global warming (particular from major oil producing companies Russia and Saudi Arabia!). Also, the OECD published a report that trashed the UK (Wednesday), saying our inflation will be the highest in the G7 in 2022 and that our economy will contract the most in 2023.
• IN EUROPE – business confidence hit new lows (Thursday), according to research by the European Round Table (an industry lobby group) and the Conference Board (a US think-tank) thanks to sky-high energy prices and a slowdown in demand. Whatever anyone says, I am still of the belief that the key to Europe’s fortunes is how the Ukraine war ends and who is then in charge of Russia. Meanwhile, Spain implemented windfall taxes on banks and energy groups (Friday) and Sweden hiked up its interest rates to their highest level since the financial crisis (Friday) as the Riksbank governor stepped down after being in his post for 17 years.
• IN ASIA – Malaysia got a new PM, Anwar Ibrahim (Friday) after a very close election result.

IN ENERGY NEWS…

• IN FOSSIL FUELS – European gas prices increased as Russia threatened to restrict flows (Wednesday), China’s state-owned Sinopec signed with Qatar Energy for the latter to supply the former with LNG for 27 years (Tuesday) as China continues to soak up the world’s supply of LNG in its quest to reduce reliance on coal. This is probably the biggest single LNG sale and purchase agreement in history!
• IN RENEWABLES – Rolls-Royce is pressuring the government to fund its Small Modular Reactors (Thursday) in order to help it reach its launch targets while the government gave £100m in extra funds for nuclear fusion research (Tuesday).
• IN COMPANY-SPECIFIC DEVELOPMENTS – South Africa’s Eskom is running out of money to buy diesel for back-up power plants (Tuesday), which means that the government will have to bail it out to avoid more rolling blackouts and it sounds like the cost of bailing out Germany’s Uniper will be almost double previous estimates (Thursday) thanks to it being tied into long-term supply contracts that were signed before the Ukraine war (before the price really shot up).

IN CRYPTO NEWS…

• FTX businesses owe over $3bn to their biggest creditors (Monday), which is being made even more complicated by a hacker of FTX currently laundering millions it stole from FTX (Monday). FTX’s collapse could have affected around 80,000 Britons (Wednesday) as most FTX users were unsecured users of the exchange.
• Crypto investor Digital Currency Group revealed a series of investments between its units (Friday) which have now backfired in the wake of FTX’s collapse. Maybe it can avail itself somehow of Binance’s newly-unveiled “crypto recovery fund” (Friday) which aims to buy out collapsed crypto exchanges (and presumably help to stem the loss in sentiment of crypto assets).

SOME INTERESTING BUSINESS TRENDS ALSO EMERGED THIS WEEK…

• There are increased concerns that European industry could decamp to the US (Monday) because of the massive cash incentives on offer as part of the Inflation Reduction Act (IRA) versus the “paltry” ones available in Europe for certain types of tech and manufacturing. Northvolt is one such company considering a move.
• IN THE UK – 67% of the UK’s business advertisers polled in a recent survey intend to cut spending on TV (Monday), which is concerning as advertising is often seen as a leading economic indicator. This move implies that there is more gloom to come. Meanwhile sales at the world’s biggest caterer, Compass, have exceeded pre-pandemic levels (Tuesday) as workers return to the workplace and people go about their lives more normally. I just wonder how long momentum will continue as inflation continues to rise and more companies go out of business.

• IN EMPLOYMENT TRENDS – it was interesting to see that some employers are actively trying to recruit older employees. Halfords is targeting the over-50s to fill 1,000 roles (Thursday) and easyJet is seeking over-45s in cabin crew recruitment (Thursday). It will be interesting to see whether this is part of a longer-term trend or whether it will revert back to the norm when the labour market loosens up.
• IN CONSUMER TRENDS – UK consumers aren’t going to as many Christmas parties these days (Monday), which isn’t been made any easier by rail strikes timed to hit the hospitality industry at a key time (Thursday) although they will be given broader fast food options in the future as Wendy’s is looking at serious UK expansion (Monday) over 20 years since it left these shores. And although around 50% of shoppers are putting spending limits in place for Christmas (Wednesday), Jet2 says that they are seeing decent bookings for next summer (Friday).
• IN RETAIL TRENDS – we see that online retailer lockdown heroes have become post-pandemic zeroes as consumer spending patterns didn’t change permanently (Thursday). The likes of Deliveroo, THG, Victoria Plumbing and Music Magpie are among the lockdown darlings who are now having a very hard time. Made.com has gone that one step further by falling into administration. On the subject of online retailers, AO World actually upgraded its outlook (Wednesday) and investors probably took heart when they heard its intentions to stick to its knitting and focus on the domestic market and not international expansion. Elsewhere, Halfords warned that year-end profits would be at the lower end of expectations (Thursday) thanks to rising costs and thriftier consumers while B&Q’s owner Kingfisher managed to unveil higher sales (Friday) due to customers buying energy-efficient products and Pets at Home saw profits fall short (Thursday) thanks to rising heating costs incurred by keeping their pets warm overnight.

• IN CHINA – it looks like the authorities might be relenting on the gaming sector (Wednesday) as the Game Industry Group Committee has now officially declared children’s gambling addiction to be “resolved”, which is surely great news for the likes of Tencent and NetEase who have endured a tricky few years as the authorities have clamped down severely on the amount of time that minors can play games.
• IN THE UK – Apple and Google face an inquiry by our Competition and Markets Authority (Wednesday) over the power they have in internet gaming and cloud gaming tech. On the subject of regulation, the UK’s Digital Services Tax (DST) has managed to bring in £360m from US tech giants in its first year of operation (Wednesday), which is above expectations. The DST will, however, be phased out fairly soon in order to avoid retaliatory tariffs on British products in the US.
• IN COMPANY-SPECIFIC NEWS – HP is the latest company to report weakening PC demand (Wednesday) and will be cutting 10% of its workforce as a result. IN SOCIAL MEDIA, Meta was told to overhaul its content removal policy (Wednesday) after controversy involving drill music on Instagram while Twitter shed more jobs (Tuesday) – but then started hiring again (Wednesday) – and postponed its Twitter Blue relaunch (Wednesday). Meanwhile, Apple’s Foxconn woes continued (Friday) as Foxconn announced a payoff to quell protests at its biggest China factory and UK chip designer Arm had its London listing postponed (Monday), presumably because of adverse market conditions.

• IN BATTERY-RELATED NEWS – Australia’s Syrah Resources, the world’s biggest natural graphite producer outside China, warned that Western supplies of graphite could get very tight over the next ten years (Tuesday) as the material is used in battery anodes. Electric car charger Pod Point issued a profit warning (Tuesday) on delayed installations of home EV chargers while the family behind Ikea is pouring £177m into electric car charging sites (Tuesday) run by ABB E-mobility.
• IN EV NEWS – Sony and Honda announced a joint venture to make EVs with an emphasis on entertainment (Monday), ailing electric bus maker Arrival announced a new CEO (Friday), who is most well-known as the man who sold Marvel and Domino’s Pizza is buying a fleet of EV delivery vehicles in the US (Tuesday) to attract more drivers who don’t own their own cars.
• IN “NORMAL” CAR NEWS – carmakers push back on America’s move to cut China components out of the EV manufacturing process (Wednesday) as it would make life more difficult and render them ineligible for juicy incentives that make their vehicles more appealing to buyers.

• IN FINANCIALS – we saw a number of investors change classification of their “green” funds (Wednesday) as ESG investment continues to evolve. It sounds like the FCA is getting increasingly antsy about the gamification of trading apps (Tuesday), which may mean an investigation might be on the cards. Elsewhere, Societe Generale and AllianceBernstein announced an equities joint venture (Wednesday) with SocGen having the option to buy the venture outright after five years. This could be big, or it could just be a whole load of hot air in terms of whether it will actually change the day-to-day running of either institution.
• IN REAL ESTATE – China’s state banks announced $30bn in additional credit lines for real estate developers (Thursday), which is good news for the hugely indebted sector. IN UK COMMERCIAL REAL ESTATE NEWS, the occupancy rate remains low (Monday) and property values look likely to weaken further (Thursday, Friday). IN UK RESIDENTIAL PROPERTY NEWS, rental demand is shooting up because of rising prices and the lack of landlords (Friday) and although five-year mortgage rates dipped below 6% for the first time since that dreaded mini-Budget (Wednesday), Virgin decided to withdraw 5% deposit mortgages (Thursday) in what I think is a vote of no-confidence in the near-term for the market overall.

• Disney’s old chief, Bob Iger returned as CEO, replacing Bob Chapek (Monday) in a boardroom coup (Tuesday).
• Deere & Co saw its sales rise as supply chain problems receded (Thursday). The outlook for sales of large farm equipment looks particularly strong as farmers invest thanks to higher commodity prices.

• 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! 

This week, I thought I’d choose the story that you may find the most useful: Best and worst Christmas sandwiches of 2022 – classic wows but Aldi bargain steals show (The Mirror, Courtney Pochin). Merry Christmas!

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 was the week of FTX’s collapse, a Twitter tornado and the Autumn Statement…

• IN GENERAL – Central banks are moving away from big interest rate rises (Wednesday). There will be more rises to combat inflation, but they will probably be smaller than the 0.75% increments we have been becoming accustomed to! President Biden and President Xi had a long meeting at the G20 (Tuesday), but nothing really got done. Improving US-China relations will clearly take time given what’s happened since the Trump administration.
• IN CHINA – retail sales fell for the first time since May (Wednesday) as Covid lockdowns continued to take their toll. Industrial output is also down and property investment saw its steepest drop since early 2020. Investors initially got excited about President Xi wandering around the G20 without his facemask on and speculation increased that it could be a sign that China would ease its strict Covid policies (Thursday), but we then got a dose of reality when officials in the city of Guangzhou weren’t quite sure to relax or enforce restrictions (Friday) when they faced a new outbreak this week.
• IN RUSSIA – the country fell into recession (Thursday) as Western sanctions took effect.
• IN JAPAN – the economy contracted in the three months to September (Wednesday) thanks to the killer combo of a weak yen, an uncertain economic outlook and rising import costs.
• IN EUROPE – the ECB warned of financial instability in the bloc (Thursday) in its latest twice-yearly report, but TBH some bloke standing at the bus stop could have told you that for free 🤣.
• IN THE UK – new chancellor Jeremy Hunt unveiled the Autumn Statement (Friday), a collection of policies designed to get the country’s finances back on track. It was made up of £30bn in spending cuts and £25bn in tax rises. Other policies included a freeze on national insurance thresholds for business, a windfall tax on energy companies and cutting the threshold of the 45% tax rate but kept the pension triple lock in place and allocated more money to public health and schools. Markets had a muted reaction to the announcement (Friday), which is a good thing given the extremely negative reaction Kwarteng’s mini-Budget got!

IN ENERGY NEWS…

• Germany managed to complete its first LNG import terminal (Wednesday) in an impressive 200 days! Usually this takes years, but I think that desperation in the face of blackouts has been a great aligning force. This means that Germany is way less likely to face gas rationing this winter!
• France faces potential power shortages even in a “normal” winter (Tuesday) because almost 50% of its nuclear power stations are offline for maintenance.
• In the UK, SSE announced that its profits had more than tripled (Thursday) thanks to rising energy prices.

IN CRYPTOCURRENCY NEWS…

• FTX’s collapse and subsequent repercussions were big news this week. FTX’s auditors faced scrutiny for obvious reasons (Monday), other crypto exchanges raced to distance themselves from FTX-type problems (Monday) and global regulators are now trying to gauge how many people are going to be affected (Wednesday). There was immediate impact on Nigeria’s Nestcoin (Wednesday), which held about $4m on FTX and crypto lender Genesis Global Capital suspended withdrawals (Thursday). The new interim CEO tasked with mopping up the mess uncovered a hideous mess (Friday) and described the collapse as the worst he’d seen for 40 years!
• Binance appealed for more regulation (Tuesday) to bolster investor trust, but it was interesting to note that bitcoin hasn’t fallen nearly as far as you’d think (Tuesday), which could be the result of “wash” trades hiding the true extent of bitcoin trading. I suspect that, like VW and dieselgate, FTX is not the only crypto player to have “pushed the limits”. This story is going to be one that just keeps giving IMO!

• IN BUSINESS TRENDS – UK business confidence has fallen to its lowest level since 2009 (Monday), according to the latest Accenture/S&P Global report. Hardly surprising given what’s going on!
• IN EMPLOYMENT TRENDS – bosses are regaining the upper hand as recession looms large (Monday) and the rising cost of living is driving early retirees back into the workforce (Monday), according to Reed, Britain’s biggest recruitment firm.
• IN CONSUMER TRENDS – real wages continue to fall (Wednesday), according to the latest figures from the ONS, and we face a shortage of champagne and turkeys (Wednesday) while Fuller’s takes a hit from the recent train and tube strikes (Friday). Having said that, used car prices are weakening in the UK (Thursday) and the US (Friday), which could point to a slowdown in inflation growth.