Category: Today

1. In MACRO, ENERGY & CURRENCY NEWS, Russia sees GDP contraction, the UK heads towards recession, Europe unveils energy measures, Shell predicts prolonged energy shortages while businesses forecast a major hit and the Euro gets a kicking
2. In EV-RELATED NEWS, Honda and LG announce a US gigafactory, Britishvolt comes unstuck and Chinese manufacturers focus on the UK
3. In COST-OF-LIVING NEWS, smaller businesses could get hit harder by rising interest rates, workers forego pensions and students suffer
4. In INDIVIDUAL COMPANY NEWS, Deloitte reckons Amazon and Neflix will bounce back, Pinduoduo surprises on the upside and a British cybersecurity start-up suffers from tech fatigue
5. AND FINALLY, I bring you some hospital bag packing errors…

So Russia puts on a positive spin, the UK continues to suffer, Europe tries to tackle energy nightmares  while UK businesses worry and the Euro takes a pasting…

I’m back from holiday! Having not had one for ten years, I can now see why they are so popular 😁. Podcasts and all that other good stuff will return next Monday 👍. Also, don’t forget:

*** I WILL BE DOING THE AUGUST ROUND-UP ON WEDNESDAY, AUGUST 31ST WITH JAKE SCHOGGER OF THE COMMERCIAL LAW ACADEMY. You need to sign up HERE to attend. It’d be great to see you there! ***

In Sanctions-hit Russia says its economy will shrink by 3pc (Daily Telegraph, Lauren Almeida) we see that Russia’s first deputy PM, Andrei Belousov, has said that Russia’s GDP will fall by just “a little more than 2pc” this year, followed by a contraction of a maximum of 1% in 2023. * SO WHAT? * Clearly the Russians will be talking a good game to play to the domestic gallery and everyone else will be saying that this is 🐂💩 given the weight of sanctions that have been imposed upon them. Given current circumstances and the limited amount of reliable data being released at the moment, it’s difficult to quantify what the real impact is. Mind you, when you consider that Russia has seen an exodus of companies that have represented an estimate of about 40% of its GDP, the limited impact does seem to be rather “optimistic”…

Recession is on the way and will last until 2024, Goldman warns (The Times, Robert Lea and Katie Prescott) highlights the latest predictions from the bods at Goldman Sachs, which represent a sharp downgrade on their previous stance. * SO WHAT? * TBH, I think you’d be hard-pressed to find other predictions out there but I think we might be able to stave it off for a bit longer because I would have thought that a new PM is going to want to implement a lot of voter-pleasing measures at this time to avoid a massive further drop-off in spending and confidence otherwise it could prove to be re-election suicide. I don’t, however, think recession will be avoided altogether, though…

In energy news, EU to unveil emergency measures to curb soaring energy prices (Financial Times, Sam Fleming and Valentina Pop) shows that the EU is going to be unveiling emergency measures to

address the skyrocketing price of electricity. EC chief Ursula von der Leyen made a lot of “high level” references like separating out electricity and gas prices and lowering the cost of renewables but has been light on specifics thus far. Uniper and Wien Energie seek state support as energy crisis deepens (Financial Times, Tom Wilson, Philip Stafford, Sam Jones and Guy Chazan) shows that utilities companies in Germany and Austria are in a desperate situation as they call for more help from their respective governments following the European gas price shooting up by almost a third last week and European gas shortages likely to last several winters, says Shell chief (The Guardian, Gwyn Topham) is the less-than-cheery prediction from Ben van Beurden, raising the prospect of ongoing energy rationing.

All of this is having a real effect on the ground as per High street firms forced to pay energy suppliers millions up front (Daily Telegraph, Tom Rees) which shows that a number of energy providers, including SSE and EDF, are asking firms for massive deposits to cover many months-worth of bills as concerns increase about a rise in the number of small businesses going bust. Thousands of pubs ‘face closure’ without energy bills support (The Guardian, Rob Davies) captures the mood of the hospitality sector that is increasingly worried about the potentially terminal effect of utility bills particularly as companies aren’t protected by price cap. Mind you, if it isn’t energy bills that are going to put them out of business, Interest rates: hikes set to hit smaller companies harder (Financial Times, Lex) says it’ll be the interest rate hikes that make borrowing and debt servicing that kill them. The pressure will be on the new PM to get stuck in and impose some big measure to avoid a massive economic decline.

Elsewhere, Investors increase bets against euro as energy crisis intensifies (Financial Times, Martin Arnold and Nikou Asgari) shows that investors aren’t pulling their punches on the Euro as more of them think that raging energy prices will pull the bloc into recession. A strengthening dollar stands in stark contrast to what’s going on with the Euro as investors chase the rising US interest rates that aren’t accompanied by energy dramas. * SO WHAT? * The Euro has already lost 15% versus the dollar over the last year. If the movements of the Euro are currently a function of what’s going on with energy prices and Shell’s predictions are right, the currency could be in for a tough few years.

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

Honda and LG announce a new gigafactory, Britishvolt’s looks shaky and Chinese EV manufacturers plan a UK assault…

Honda and LG to build $4.4bn US battery plant (Financial Times, Kana Inagaki and Christian Davies) shows that the Japanese and South Korean giants are to invest a sizeable amount of cash into a joint venture where LG Energy Solution will have 51% and Honda 49% of a plant in an as-yet-unnamed US location. Construction is to commence next year with the first lithium-ion battery cells due to roll off the production line by the end of 2025. * SO WHAT? * Both companies want to get ahead of the EV curve and get their hands on the cash on offer from the US government (via the US Inflation Reduction Act) to develop manufacturing assets that wean them off Chinese suppliers. I suspect that we will be seeing more deals like this, particularly as the US is splashing the cash on moving its supply chains in a meaningful way. Fun fact: South Korea’s three biggest battery companies – SK On, Samsung SDI and LG Energy Solution – account for over 25% of the world’s market share in batteries. SK On recently announced a JV with Ford to build three battery plants in the US, LG Energy Solution and GM announced a venture earlier this year and Samsung SDI is believed to be closing in on a partnership with Stellantis. Honda/LG: US battery deal boosts EV power of friends electric (Financial Times, Lex) makes the interesting observation that this is a bit of a slap in the face for Panasonic, which you would expect to be the natural supplier to

Japanese car manufacturers. It adds that, as the US accounts for nearly a third of global sales for Honda, this development will be particularly welcome as it looks to an electrified future.

Meanwhile, Britishvolt delays opening battery plant until late 2025 (Daily Telegraph, Lauren Almeida) highlights difficulties being experienced by British electric battery start-up Britishvolt as it has been forced to postpone production at its £3.8bn gigafactory until late 2025. The delay has been blamed on rising energy costs, which have knock-on effects on its construction. * SO WHAT? * Hailed as a leading force in the bid for Britain to be at the forefront of EV battery development and production, the company that was founded in 2019 and attracted £2bn in fundraising has already lost two of its co-founders, with the CEO Orral Nadjari resigning just last week. Tough times ahead…

Then in Chinese pair join electric car chase (The Times, Robert Lea) we see that Chinese carmakers Great Wall (via its Ora brand) and BYD are holding talks with dealer networks to get their cars in showrooms before Christmas. * SO WHAT? * This all sounds lovely, and the dealerships will be salivating at the prospect to represent more brands (that will presumably will give them better terms to build market share), but I really do wonder whether punters will be willing to shell out on EVs from unknown marques. I think that marques take years to build trust with potential buyers so I reckon this will be a slow burn. 

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

The cost of living continues to impact the lives of many…

Workers cut pension contributions amid cost of living crisis (Financial Times, Siddarth Venkataramakrishnan, Josephine Cumbo and Emma Dunkley) cites the Trades Union Congress as observing that workers are leaving pension schemes or cutting their contributions in increasing numbers as the cost-of-living crisis bites deeper. * SO WHAT? * Clearly this isn’t good for long-term financial health, but whaddayado?? If you have to pay the bills, this seems like one way of taking the edge off. The irony of all this is that unions putting pressure on companies to pay higher wages will ultimately fuel even more inflation and, arguably, put the futures of the members they are supposed to be protecting in jeopardy as vastly higher wage bills will surely result in job cuts in the not-too-distant future. As I keep saying, I don’t think that raising salaries is the answer to what we are facing now – it would be better for companies to pay one-off lump sums as salaries are more difficult to reduce longer term whereas lump sums could address the problem now without putting a longer term cost burden on the

company. Unions like to simplify things in terms of the workers versus “fat cat” bosses, but it is not always as simple as that (although there are obviously a lot of big companies making a killing from current prices that they aren’t passing on to their staff – but this doesn’t apply to everyone). I get the feeling that unions are enjoying a last hurrah before companies wield the axe – and all those “quiet quitters” out there may start regretting their (in)actions as they move to the top of the hit list.

Meanwhile, Housing crunch leaves UK university students without halls (Financial Times, Bethan Staton) highlights problems that uni students are likely to face when they commence their studies next month as some first year undergrads at the Unis of Glasgow, Manchester Met and UWE in Bristol are going to be left with no accommodation due to the lack of space in halls. Rental markets have become ridiculously tight in many UK cities, driving costs right up (as if things weren’t bad enough already!). Clearing students are particularly vulnerable. Private landlords servicing this market will, of course, be raking it in…

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

Streamers will recover, Pinduoduo surprises on the upside and a cybersecurity start-up suffers from the tech sell-off…

In a quick scoot around other interesting stories today, Netflix and Amazon woes are temporary, says Deloitte (Daily Telegraph, Ben Woods) cites research from Deloitte as concluding that the current fall in subscriber numbers at Netflix and Amazon will return when the cost of living crisis gets better. Wow. And they pay people to come up with this conclusion! Perhaps the title of their next oeuvre will be “Yes, bears do in fact 💩 in the woods”. Still, it will perhaps give the streamers something cheerful to grab onto…

China’s Pinduoduo surprises market with 36% revenue rise (Wall Street Journal, Shen Lu) highlights a strong performance from the Chinese e-tailer as it benefited from its “618” shopping event (the

event originally held on June 18th created by rival JD.com but now used by others including Pinduoduo. It’s now the second biggest online shopping event in the world after Alibaba’s Singles’ Day on November 11th). This is certainly a positive sign given all the downbeat news we are getting about the Chinese economy at the moment!

Back home, Cybersecurity start-up axes staff as global tech slowdown hits UK (Daily Telegraph, Matthew Field) shows that Immersive Labs, a British cybersecurity company backed by Goldman Sachs and advised by the former director of GCHQ, has announced that it will be cutting 10% of its staff as the global tech sell-off takes its toll. * SO WHAT? * Tech start-ups in the UK are having a rough ride at the moment as much-needed venture capital is drying up and tech company valuations go south. There will no doubt be more to come.

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

…in other news…

When you (or your partner) are pregnant you prepare a “go-bag” so you have one less thing to think about if you have to suddenly rush off to the hospital – and you usually get some kind of guidance of what to put in it. However, sometimes, you might have to get one together if you think you’re going to stay in overnight for other reasons – which can put some people in a bit of a fluster as per Man slammed for hospital bag packing blunder – as he brings girlfriend pie and talc (The Mirror, Ellie Fry). It’s not clear whether he packed the pork pie to calm his own nerves or whether it was for his partner’s benefit 🤣. This prompted a lot of comment on social media along with examples of other “packing errors” that included the hilarious “”My teenage son packed me a bag and put my post in just incase [sic] I wanted to catch up on my bills whilst I was nearly dying”. Ahhhh. How thoughtful!

1. In MACRO & ENERGY NEWS, Turkey does it again, China ups coal usage and Germany cuts VAT on gas sales
2. In CONSUMER/RETAILER NEWS, UK consumer confidence hits a new low, Britons are expected to keep drinking, full English brekkie prices rise and Halifax targets the wealthy while Made.com and AO World have issues. Estée Lauder and Kohl’s hit problems and a big shareholder sells out of Bed Bath & Beyond
3. In TECH NEWS, Apple Pay motors and Snap gives up on yet another bit of hardware
4. In INDIVIDUAL COMPANY NEWS, Geely experiences the good and bad and Carlsberg loses its fizz while P&O’s owner is laughing
5. AND FINALLY, I bring you rice pizzas and an accessible hangover cure…

So Turkey continues to go it alone, China increases coal usage and Germany cuts VAT on gas…

📢 Just so you know, I’m going to be going on holiday (for the first time in ten years!) from TOMORROW. This means that Watson’s Daily will have a “posting holiday” until Tuesday 30th August. There will be a lot of work going on behind the scenes until then, though – so keep watching this space! In the meantime, I did a special podcast over the weekend with Ralph on our thoughts for the final quarter of this year, so I would recommend you give this a try as we cover politics, economics and energy policy.

*** I WILL BE DOING THE AUGUST ROUND-UP ON WEDNESDAY, AUGUST 31ST WITH JAKE SCHOGGER OF THE COMMERCIAL LAW ACADEMY. You need to sign up HERE to attend. It’d be great to see you there! ***

I would also like to say a sincere and heart-felt thank you to all of YOU, the Watson’s Daily subscribers! It’s because of you that I can actually GO on holiday! I will continue to strive to help you as much as I can in your knowledge growth in as many ways as I can 👍 There’s more good stuff to come!

Turkey cuts interest rate as inflation nears 80% (The Times, Arthi Nachiappan) shows that the central bank of Turkey gave everyone a shock yesterday by announcing that it was going to cut interest rates by a full 1% (from 14% to 13%) despite the latest inflation reading in July of 79.6% and widespread expectations that it will break the 80% barrier. The market had expected the interest rate to remain the same so the Turkish lira fell by 1% to its pandemic lows. It has now fallen by over 25% this year after falling by 60% last year! * SO WHAT? * I have said this many times before, but Turkey is pretty much alone in the world in its approach to tackling inflation. Conventional wisdom says that interest rates need to rise in order to curb inflation (debt becomes more expensive, people and companies borrow less, they spend less and therefore prices cool

down), but President Erdogan fervently believes that RAISING the interest rate is the key. I wonder how long he will keep this up for before giving up on this approach. If inflation keeps going up, however, I have no doubt he’ll blame it on other factors. I think that we are now in quite an interesting position where many countries are facing the same problems at the same time and so you can really compare and contrast how the different approaches work and how long they take for the effects to kick in. TBH, at the moment, it’s hard to see whether ANY of the approaches are working although the US got a bit of a respite recently. I am willing to take back all my derogatory comments on Erdogan if his policy works, but I’m very sceptical at the moment!

Then in China boosts coal usage as extreme heat triggers power shortages (Financial Times, Primrose Riordan and Gloria Li) we see that China is going to help coal plants to keep electricity flowing in the face of current extreme weather conditions and droughts in the south-west of the country. The government said it would “enhance policy support [and] take multiple measures to help coal plants ease actual difficulties”, but didn’t give any details. * SO WHAT? * This just goes to show how desperate things are getting right now. Incredibly, some cities affected by the drought have fired metal cannisters into the air to try and get the clouds to rain!

Germany to slash VAT on gas sales to cushion price shock (Financial Times, Martin Arnold) shows that Olaf Scholz announced a cut in VAT on gas sales from 19% to 7% yesterday, saying that there were more measures to come that are designed to soften the impact of rising energy costs for households. * SO WHAT? * This will come as a great relief no doubt, but some observers will wonder whether this means that individuals and companies will worry less about cutting consumption in the short term. The state has set a target of cutting total gas usage by 20% this year to avoid energy rationing.

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

We look at more consumer trends and issues facing retailers…

Consumer confidence hits new low (The Times, Mehreen Khan) cites the latest monthly survey from GfK which shows that UK consumer confidence has fallen to a new low as inflation continues to erode household spending power. Britons expected to extend ‘pandemic trend’ of drinking more at home (Financial Times, Nic Fildes) shows that Australia’s biggest listed wine producer, Treasury Wine Estates  – which owns brands like Penfolds, Wolf Blass and Lindeman’s – reckons we will keep drinking the “good” stuff at home despite the cost-of-living crisis as its chief exec observed that “The £6-£8 a bottle price point continues to be pretty strong”. It also seems that Brits have tended to increase their consumption of alcohol at home during big downturns including the pandemic and the financial crisis. * SO WHAT? * This is quite an interesting observation and it does make me wonder whether something like Majestic Wine will be a winner as customers can get not only informed advice on their purchases, they can also save money by buying in bulk – so they know they can get decent wine at a reasonable price. Drinking at home is clearly good for supermarkets and wine retailers like Majestic Wine but could be bad for the hospitality industry.

Out of the frying pan into the higher: full English price soars (The Times, Arthi Nachiappan) shows that the average price of a full English breakfast is thought to have risen by almost 20% over the last year as the prices many of its constituents have gone up. According to Bloomberg, the price of a pint of milk has increase by over 40% in the last year while the cost of a 250g pack of butter and a kilo of tomatoes shot up by 20%. * SO WHAT? * I think we all realise that prices have gone up, but I think when it’s expressed like this it really brings it home!

Meanwhile, Halifax stops lending on mortgages below £100k (Daily Telegraph, Rachel Mortimer) shows that the Halifax increased its minimum mortgage size from £25k to £100k for some of its remortgage deals, a move following NatWest’s relaxation of lending limits for those who earn over £75k a year – which itself followed recent moves made by Nationwide to concentrate on wealthier customers. * SO WHAT? * Although this obviously doesn’t sound very fair, banks and building societies aren’t charities and so, given the economic downturn, you can understand why they are trying to concentrate on the wealthy who are probably better able to withstand the increased financial pressures. If the ongoing strength of the likes of LVMH, Watches of Switzerland, Mercedes-Benz etc. is anything to go by, it’ll take a while (if ever) for this sector of society to feel any financial pain.

Among the retailers themselves, Made.com seeks funds as shoppers shun big purchases (Daily Telegraph, Laura Onita) shows that online furniture retailer Made.com is considering the possibility of an emergency fundraising as millennials are cutting their spending on big ticket items. The company is looking at all potential options to bolster its finances and Electrical retailer AO World swings to loss as costs mount and demand weakens (Financial Times, Madeleine Speed) shows that the group has lost momentum thanks to product shortages, rising costs and slower consumer demand – echoing what Made.com is finding as it too sells big ticket items. Given the current economic uncertainty I don’t think this is at all surprising.

Over in America, Estée Lauder/Tapestry: China exposure goes from gain to pain (Financial Times, Lex) shows that the companies’ exposure to China, which has been a fantastic growth driver, is now becoming a drag. Both Estée Lauder and Tapestry, which owns the Coach and Kate Spade brands, yesterday posted full-year earnings forecasts that fell short of expectations as they were both affected by the constant China lockdowns. * SO WHAT? * It seems likely that companies with particularly large exposure to China will suffer as investors see it less as a driver and more as a limiter.

In Kohl’s earnings and sales drop as company works to clear excess inventory (Wall Street Journal, Suzanne Kapner and Dean Seal) we see that the department store chain’s earnings fell sharply on lower sales over the quarter and it also decided to cut its guidance for the year. This was all blamed on the usual suspects: rising inflation putting the mockers on consumer spending. Then in Meme lord Ryan Cohen unloads Bed Bath & Beyond bet, sending shares spiralling (Wall Street Journal, Caitlin McCabe and Gunjan Banerji) we see that the retailer that’s seen a massive spike despite not really doing anything to deserve it has been sold off by the guy that built up a stake, ostensibly, to push for improvements at the company. Retail investors followed him into the trade and he has now burned them royally by selling his entire shareholding! The share price fell by 20% initially and then another 35% in after-hours trading. * SO WHAT? * This just goes to show how dangerous meme stock trading can be. On the other hand, you’ll see a few stories knocking around in today’s press about an American uni student who managed to make $110m in profit from trading this meme stock, but it’s a non-story because he’s just a rich kid who used his family’s money (he managed to raise $25m from friends and family!) to make even more money. He did incredibly well on the timing though – and I’m sure a story like this will encourage others with rather less money to take risks on the stock market.

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

Apple Pay gets more popular and Snap fails at hardware yet again…

I thought that Wait, when did everyone start using Apple Pay (Wall Street Journal, Ben Cohen) was interesting because it highlighted how popular Apple Pay has become after many years of being a bit of a niche gimmick post its launch in 2014. * SO WHAT? * Did you know that Apple Pay was activated in 10% of iPhones in 2016, 20% in 2017 and hit 50% in 2020. It has now been activated in 75% of iPhones as it has benefited from wider acceptance and the fact that once people use it they tend to love it! At the moment, around 90% of retailers in the US use Apple Pay versus 3% when it was first introduced! Great news for Apple as it makes its hardware more irreplaceable and more useful and boosts the revenues for its services business.

On the other end of the success scale, Snap scraps development of flying selfie Pixy drone (Wall Street Journal, Meghan Bobrowsky) shows that Snap’s latest attempt at making a hardware hit has stalled as it has ditched further development of its latest gizmo just four months after launching it. The Pixy is basically a small drone that fits in the palm of your hand and follows you around – yours for a starting price of “just” $230. * SO WHAT? * After failing with its camera glasses – the “Spectacles” – it seems that the hunt continues to diversify the company’s revenues. It wants to be a camera company – but it’s still a social media platform IMO! It is still adjusting to those Apple privacy changes and looking to increase revenues any way it can but it just isn’t having any luck…

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

Geely hits a speed bump, Carlsberg loses its fizz and P&O’s owner is laughing…

In a quick scoot around other interesting stories today, Geely Auto earnings squeezed by Covid lockdowns and chip shortage (Financial Times, Oliver Telling and Peter Campbell) highlights the Chinese carmaker’s woes as its profits have more than halved thanks to a semiconductor shortage and Covid-related problems but then again Geely: worst of times is the best of times to build a global auto network (Financial Times, Lex) makes the point that although its current state isn’t great, it is continuing to build stakes in foreign rivals which will, longer term, help enormously with distribution of its vehicles.

Carlsberg/inflation: beer group’s defensive fizz prone to go flat (Financial Times, Lex) shows that the Carlsberg is suffering – like everyone else – from rising input costs and it is not overjoyed with the prospects for the rest of the year. It has been hard hit by its exposure to central and eastern European operations and is

currently in the middle of selling off its Russian operations. Tough times – and they’re not likely to get better any time soon…

Then in P&O Ferries owner reports record-breaking profits after mass sacking (The Guardian, Rupert Neate) we see that Dubai-based owner of P&O Ferries, DP World, has celebrated massive profits only a few months after it sacked 800 of its UK-based workers without notice via video call. It replaced them all with cheaper agency workers – and revenues were up by 60% and profits by over 50%. * SO WHAT? * This may not be a popular opinion, but I think we are ALL to blame for this. Virtue signalling and social media outrage had absolutely zero effect – and if everyone was REALLY angry about it, they shouldn’t use P&O! Although DP World didn’t separate out the performance of the ferries business, the implication here is that customers were saying one thing (“support the workers!”) and doing another (“ooh – bargain ticket price to France – don’t mind if I do!). This is terrible behaviour by the company, but unfortunately, it seems to have worked…

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

…in other news…

Well here’s something I didn’t realise the world needed: Rice Pizza?! Pizza Hut creates a new base for customers in Japan (SoraNews24, Oona McGee). What?? Then there’s a very accessible hangover cure touted by an interesting lady in Professional partier who gets paid to neck pints shares unbeatable hangover cure (The Mirror, Lydia Patrick and Saffron Otter). This doesn’t sound like the healthiest line of work – but she certainly enjoys it!

1. In MACRO, ENERGY & CLIMATE CHANGE NEWS, UK inflation hits a 40-year high, the Fed looks like it’ll continue to raise rates, the Yangtze river is drying up, Biden’s clean energy push faces hurdles and Uniper is on the brink
2. In CONSUMER & RETAIL NEWS, we look at what’s getting more expensive, Target disappoints and Amazon’s looking at a new feature
3. In LEISURE NEWS, Entain gets a big fine, Cineworld is in trouble and Soho House’s owner reins it in
4. In MISCELLANEOUS NEWS, Tencent has a tough time, meme stocks ride again and UK house price growth slows
5. AND FINALLY, I bring you Italian reactions to Starbucks coffee and ketchup on pasta…

So UK inflation booms, the Fed looks like it’ll keep raising rates, the Yangzte becomes the latest river to cause problems, Biden’s green plans face difficulties and Uniper is on the edge…

📢 Just so you know, I’m going to be going on holiday (for the first time in ten years!) from the end of this week. I will be writing Watson’s Daily as normal until tomorrow but will be having a social media (and podcast) “posting holiday” until returning on Tuesday 30th August. There will be a lot of work going on behind the scenes until then, though – so keep watching this space! That said, I did do a special podcast edition this weekend with Ralph on our thoughts for the final quarter of this year, so I would recommend you give this a try as we cover politics, economics and energy policy.

*** NB – there is NO Thursday night call today. This will return on Thursday 1st September. See you again then! ***

UK inflation rate rises to 40-year high of 10.1% (Financial Times, Chris Giles) reflects the latest official inflation figure from the Office for National Statistics – which is the first double-digit annual increase since February 1982! Our rate of inflation is now higher than all of the other G7 countries. The monthly rise was particularly surprising because prices generally fall in July because they take into account high street sales. Governor’s missteps doomed UK to high inflation until 2023 (Daily Telegraph, Tim Wallace) highlights our Andrew Bailey’s uselessness as he continues to get it all wrong. A year ago, he said inflation would peak at 4% 🤣. TBF, he couldn’t have predicted a war then – but still. The race is now on to stop inflation from becoming embedded but now that workers are demanding high pay increases to maintain their standard of living the Bank’s problems could get even worse. He stupidly asked for individuals to show wage restraint (what planet does he live on?!?) and for companies to resist putting up prices (does he walk around with his eyes closed??) but this just isn’t going to work. I hate to say it but I think that hiking interest rates enough to cause a recession is the only way to stop this in its tracks – and unfortunately, that means rising unemployment. Interest rates on track to double over the next six months (Daily Telegraph, Tim Wallace and Szu Ping Chan) points out that markets are now pricing in interest rates of 3.5% or even 3.75% early next year, with a further 0.5% increase next month. This is going to be a rough ride.

Staying on the same subject, Federal Reserve to keep raising rates (The Times, Callum Jones) shows that America’s central bank is going to keep raising interest rates until “unacceptably high” inflation starts to fall, according to the minutes of the most recent meeting that were released yesterday.

Meanwhile, Toyota and Foxconn hit as drought leads to record low Yangtze River level (Financial Times, William Langley, Gloria Li and Primrose Riordan) shows that it’s not just the Rhine that’s running low and causing problems as the Yangtze River (which is China’s biggest and most important waterway) hit is lowest ever recorded level for this time of the year. In some parts there have been almost 20 days without major rainfall and the resulting drop in hydropower has led to companies like Toyota and Foxconn to suspend plant operations. Yangtze/climate change: droughts push China towards coal power (Financial Times, Lex) shows that major moves to switch to hydropower over seven years ago are now haunting the currently affected areas and the resulting scramble to generate power has meant that average daily consumption at coal-powered power stations was 15% higher than it was a year ago in the first two weeks of August. * SO WHAT? * Unfortunately, this seems to be yet another example of where the push for renewables has blown up in our collective faces and although we need more, we’re going to have to rely on dirtier fuels to get back on track. China could really do without this problem given how dodgy the state of its finances are at the moment.

‘Friction in the system’: the problem with Biden’s $369bn clean energy push (Financial Times, Myles McCormick) is an interesting article that takes a closer look at the recently-trumpeted Inflation Reduction Act, which aims to give a significant $369bn boost to renewable power projects across the country. Although it has been widely praised, this article says that there are a number of hurdles that it has to overcome to reach its goals, particularly in supply chains, parts of which have to meet certain requirements (e.g. having to use only American vessels and crews when installing turbines). Wind farm development will require vast tracts of land – and they are not always popular with those who live near the turbines – and there will be a requirement to build transmissions lines to get the electricity to where it is needed. * SO WHAT? * This is a good bill, but it won’t come without problems. Still, I would really recommend that you read the full article if you have access! It also has a really good summary of the key climate measures that the bill addresses at the end.

Then in Power station owner Uniper posts £10bn loss as gas shortages bite (The Guardian, Alex Lawson) we see that the German owner of a number of UK power stations announced some disastrous results yesterday – posting a €12bn loss just weeks after it agreed a bailout package with the German government. The state agreed last month to pay €15bn for a 30% stake in the company that has seen its share price crater by 80% this year. This just goes to show how dire the situation is in Germany regarding energy…

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

We look at which prices are going up and a few retailer developments…

Given all this chat about inflation, It’s not just petrol: from pasta to pet food, prices of everyday essentials are surging (Daily Telegraph, Louis Ashworth and Laura Onita) gets more specific about what prices are actually going up. Although energy bills and expensive petrol take a lot of the spotlight, price rises for food and drink were by far the biggest reason behind the recent rise in inflation. Food price inflation is now 12.7% from the 12 months to July, which is the biggest rise since August 2008 – but the 2.3% price rise between June and July was the largest one-month jump ever! Milk prices have risen by 28% over the last year, closely followed by butter up 28% and cheese 17.9%. Looking further ahead, Working from home will cost £175 in energy bills this winter (Daily Telegraph, Lucy Burton) warns that heating bills are going to make it less financially appealing to work from home, according to price comparison site Uswitch. No doubt employers will be using this line to tempt workers back to the office!

In retailer news, Target’s profit sinks as retailer unloads unwanted inventory (Wall Street Journal, Sarah Nassauer) shows that Target’s performance was dented by it offloading inventory as consumer spending habits turned on a dime. Basically, it didn’t

have enough inventory over the pandemic and so it overbought this time around, assuming consumers would still be in spending mode – something that other retailers such as Walmart and  TJ Maxx also did. Target was probably more aggressive in running inventory down than others in order to clear the decks as quickly as possible, but this all resulted in a wafer-thin margin and net earnings down by a whopping 90%. * SO WHAT? * Only time will tell as to whether Target did the right thing in ripping off the Band Aid, but I would have thought that it would be generally positive for the future because there will be fewer sale items on show. Presumably this helps with selling things at full price because customers are less likely to decide to “wait” until things go for a discount.

Then in Amazon tests TikTok-like feed in App (Wall Street Journal,  Sebastian Herrera) we see that the trend to become more like TikTok has spread further as Amazon experiments with a feature that will show a TikTok-like photo with a video feed of the products to share with other users. Shoppers will then be able to like, share and purchase items via this widget. * SO WHAT? * It’s interesting to see this old dog learning new tricks and maybe this sort of thing could work better than livestreaming, which has been very successful in China but had limited traction elsewhere. Mind you, Amazon is also keen to dip its toes into livestreaming, as we saw recently. 

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

Entain gets punished, Cineworld’s in trouble and Soho House’s owner reins it in…

Entain fined record £17m for breaching gambling rules (The Times, Russell Hotten) shows that the company that owns Ladbrokes and Coral has been handed a sizeable fine from the Gambling Commission for “unacceptable” breaches of rules that cover safe and crime-free gambling. It broke anti-money laundering rules and failed to ensure safer gambling. * SO WHAT? * The company will now be under closer scrutiny after some shocking instances of failure. All the more reason for it to concentrate on its sports betting business in America IMO! It just sounds like doing business in the UK is getting increasingly difficult. It does need to tighten up its act, though, as gambling can destroy lives.

Shares halve as cinema chain enters rescue talks (The Guardian, Mark Sweney) highlights a shocker for Cineworld, as the share price of the world’s second-biggest cinema chain cratered. It is now in talks with shareholders about a financial rescue package and

blames a lack of blockbuster films for disappointing admissions. * SO WHAT? * It does sound like they are full of 💩 though because rival AMC Entertainment (the world’s biggest cinema chain and owner of Odeon) has been coining it in! The company also has another problem in that it may have to pay Canadian rival Cineplex almost $1bn for pulling out of a takeover. This isn’t going to be pretty…

Then in Soho House owner lowers forecasts (The Times, Callum Jones) we see that the share price of Membership Collective Group fell by 15.9% in New York yesterday as it talked about a slowdown in Hong Kong and the difficulties it faced with a strengthening dollar. On the plus side, it unveiled a 96% rise in revenue as membership numbers increased but it cut guidance for the year. * SO WHAT? * It sounded pretty calm about things and you would have thought that business would bounce back in Hong Kong once Covid restrictions lift. The company also reckons it’ll be net free cashflow positive by Q4 this year – which I think is pretty good going in this business!

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

Tencent hits hurdles, meme stocks return and UK house price growth slows…

In a quick scoot around other interesting stories today, Tencent hit by Beijing clampdown (The Times, Emma Powell) highlights the Chinese tech giant’s first ever quarterly revenue loss as Covid lockdowns and the ongoing clampdown on gaming by the authorities have hit sales. Tencent is currently China’s most valuable company and has posted double-digit growth for pretty much every quarter since it floated in 2014. * SO WHAT? * Although regulators lifted a ban on issuing new gaming licences, they haven’t yet issued one to Tencent since the change. You may recall that Beijing took drastic action on gaming, which is not deemed to be compatible with its stated values of “common prosperity”, severely limiting gaming time for young people to avoid addiction. Still, it is worth noting that there are no new “anti-gaming” laws so far this year, so perhaps there are reasons to be positive!

Then in BB&B: meme stocks are linked to fundamentals – someone else’s (Financial Times, Lex) there’s an interesting discussion as to why shares of Bed Bath & Beyond have boomed

by 400% over the last month – that meme stocks are back! Bed Bath & Beyond was the third most purchased stock by investors in trading on Tuesday and trading volumes hit 400m versus an average of less than 12m. Other meme stocks like GameStop and AMC have also made gains over the last month as the earnings season has gone pretty well. * SO WHAT? * I think that trading on momentum is far dodgier that trading on fundamentals, but traders will always try to make the most money in the least time. The problem this time around is that, with household budgets being squeezed, any losses are going to be that much more painful.

Back home, House prices cool faster than at peak of financial crash (Daily Telegraph, Rachel Mortimer) cites the latest data from the Office for National Statistics which shows that the current property market has lost momentum as house price growth slowed from 12.8% to 7.8% between May and June, one of the sharpest monthly drops in annual growth ever recorded. * SO WHAT? * The comparisons were particularly stark from a year ago when there was a property stampede as buyers tried to beat the end of the stamp duty holiday, but when you consider that real wages are falling and mortgage rates are rising – along with inflation more generally – you would have thought that a downturn is in sight.

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

…in other news…

Are Italians the go-to experts with coffee? Well this is quite the reaction: Italian grandma tastes Starbucks coffee for the first time – and gives scalding review (The Mirror, Julia Banim and Tiffany Lo). It did remind me a bit of a video I saw a while back of an Italian girl filming her mother’s reaction to putting ketchup on pasta 🤣. I am ashamed to say that this is one of my youngest son’s go-to meals. Words fail me. On the positive side, he’s still young enough to potentially grow out of this! BTW, as a half-Japanese person, I would have the same reaction if someone just poured soy sauce on rice. Years ago, I saw a client do this – and it was all I could do to hold in my urge to say “What the f————————————————- are you doing?!?”. But he was a client. I wanted commission. I held it in. Yes, I could have told him, but he had years of experience in Japan and had that air of someone who feels he knows everything so I thought I would be wasting my breath. I would also surmise that Japanese are generally too polite to point it out to someone they don’t know well!

1. In COMMODITIES & ENERGY NEWS, BHP benefits from rising coal prices, gas prices jump, the EU digs for lithium and Germany does a U-turn on nuclear
2. In EMPLOYMENT & CONSUMER TRENDS NEWS, wages crater, job figures calm down, hospitality loses 200k overseas workers and what consumers watch evolves
3. In RETAIL NEWS, Bed Bath & Beyond’s shares triple, Walmart and Home Depot reassure, Ted Baker closes in on a sale and Aldi is set to overtake Morrisons
4. In MISCELLANEOUS NEWS, Apple wants more office “facetime” and WeWork’s founder rises again
5. AND FINALLY, I bring you some rather unusual baby names…

So China cuts, we look at what might happen with Taiwan, the Rhine’s level falls further, Kosovo faces blackouts while oil and metal prices weaken…

📢 Just so you know, I’m going to be going on holiday (for the first time in ten years!) from the end of this week. I will be writing Watson’s Daily as normal until this Friday but will be having a social media (and podcast) “posting holiday” until returning on Tuesday 30th August. There will be a lot of work going on behind the scenes until then, though – so keep watching this space! That said, I did do a special podcast edition this weekend with Ralph on our thoughts for the final quarter of this year, so I would recommend you give this a try as we cover politics, economics and energy policy. Please note that there is a small chance that I will have to publish tomorrow’s Watson’s Daily later on in the day.

Soaring coal prices help miner BHP pay record dividend (Daily Telegraph, Rachel Millard) shows that a 26% rise in annual profits for the world’s largest miner gave it the confidence to announce a record annual dividend for shareholders of $3.25 per share. Most of BHP’s coal is used for steelmaking, but it also produces coal that is used in power stations. Interestingly, it was planning on selling the mines that produce this coal in order to cut carbon emissions but it will now keep them as it can’t find a buyer. Other miners including Glencore and Thungela Resources have, rather unsurprisingly, also benefited from rising coal prices as everyone scrambles to do what they can to generate energy.

Supply fears push gas to record high (The Times, Emily Gosden) shows that wholesale energy prices increased across the Continent and in the US due to increasing concerns about the impact of weaning ourselves off Russian energy. This is happening just as French nuclear reactors shut down for much-needed maintenance and droughts threaten other sources of energy, particular hydroelectricity. Electricity for the coming winter in Britain is trading a a record £600 per megawatt-hour after rising by almost 50% in the last month. Just to give you an idea of scale, winter power prices are going to be about 12 times higher than average power prices over the last decade! Tough times ahead for all of us…

EU digs for more lithium, cobalt and graphite in green energy push (Financial Times, Sam Fleming, Alice Hancock and Peter Wise) shows that the European Commission is looking at lowering regulatory barriers to mining and production of key materials including lithium, cobalt and graphite used in wind farms, solar panels and electric vehicles. This is all part of a wider effort to wean the bloc off raw material imports and, given that the EU’s Joint Research Centre reckons that lithium demand is likely to be almost 60 times current levels by 2050, you can understand the sense of urgency! * SO WHAT? * This is a fascinating area as there are clearly difficulties in developing mines in a densely populated European continent and mines concentrated in Portugal, the Balkans and Scandinavia currently face a lot of environmental hurdles. I suspect it is going to be fiendishly difficult (if not impossible) to strike a balance between environmental concerns and the urgent need to find raw materials closer to home (and from more stable countries). Isn’t it ironic that in order to be kinder to the planet we are having to damage it more?!?

Meanwhile, Germany backtracks on nuclear to keep plants open and lights on (Daily Telegraph, Tim Wallace and Rachel Millard) shows that the country is now trying to keep its three remaining nuclear plants open for longer in a bid to keep electricity flow going. They had been due to close down at the end of this year and permission for an extension to operate is yet to be agreed. * SO WHAT? * Germany had promised to phase out nuclear energy in the wake of the Fukushima disaster of 2011, but things have changed rather a lot since then. It imported about 50% of its gas from Russia pre-Ukraine war and is now racing to fill gas storage sites ahead of winter. It’s aiming to get them 95% full by November 1st and they are currently at 75%. German business leaders are getting increasingly panicky, according to the latest monthly ZEW survey, which shows that sentiment is currently at its lowest ebb since the financial crisis!

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

Wages fall sharply, job figures calm down, hospitality suffers an exodus and telly-watching habits evolve…

Biggest wage fall on record as inflation crushes pay (Daily Telegraph, Tim Wallace) cites the latest depressing figures from the Office for National Statistics which show that, after inflation is taken into account, real wages have fallen by 4% to send pay back to levels last seen in 2006. The situation is likely to get worse when energy bills rise in October and January and it is worth noting that the higher cost-of-living has prompted record numbers of the over-65s to return to the workplace over the quarter. Wages crash despite record job vacancies as fears mount (Daily Telegraph, Lucy Burton and Szu Ping Chan) observes that a tight labour market and rising wages aren’t really helping workers that much due to the even stronger trend of rising inflation. * SO WHAT? * I think that various phenomena will come into play as we head into the end of the year that will calm things down – increasing worries of workers about the macroeconomic situation, rising resistance of companies to new joiners on fat salaries that will p!ss off the existing workforce and weakening demands for WFH as employees try to put in more face-time with the company to lessen their chances of being made redundant when the cuts inevitably come. Maybe we are already seeing a sign of the situation calming down as Job figures ease fears over wage-price spiral (The Times, Mehreen Khan) highlights the bit of the Office for National Statistics’ report which says that although the 3.8% unemployment rate has remained unchanged the number of open vacancies has slowed down – the first time this has happened for two years.

UK hospitality industry loses nearly 200,000 overseas workers (Financial Times, Oliver Barnes) shows what an uphill climb the hospitality industry has facing it as stats from Caterer.com show that the number of EU citizens employed by the hospitality sector

has fallen by around 41% versus the pre-pandemic total. When you consider that foreign staff have, in the past, made up over 40% of the workforce in the hospitality sector, it’s easy to see how dire the situation has become. * SO WHAT? * Large tracts of the hospitality industry have been decimated over the course of the pandemic and the combined pressure of rising wages, utility bills, raw ingredient costs and an increasingly thrifty customer base will undoubtedly push many over the edge. Brexit has clearly made a difference and the government is obviously sticking to its line of saying that it wants employers to make long-term investments in the UK’s domestic workforce.

Meanwhile, UK’s young adults spending more time on TikTok than watching TV (Financial Times, Alex Barker) shows that the 16-24 age group is spending more time on TikTok than watching broadcast TV (and unsurprisingly, the over-65s are spending longer on the latter), according to the latest Ofcom reports conducted by Ipsos and BARB. It is interesting to note that the younger age group still holds public service broadcasters in high regard but they are just consuming less while streaming services are increasing their reach. Interestingly, given the current squeeze on household incomes, 600,000 UK families ditch Amazon Prime (Daily Telegraph, Ben Woods) highlights Ofcom’s Media Nations report which shows a 5% fall in the number of Amazon Prime subscribers over Q2 this year, versus the 1% who cancelled subscriptions to Netflix. * SO WHAT? * While I find the young people/TikTok thing unsurprising, I do find the drop in Amazon Prime a bit of a turn up for the books. I have always been of the opinion that Amazon Prime would be “stickier” as it doesn’t JUST provide TV and Movies – it provides many other benefits. It will be interesting to see whether Amazon puts more effort into making deliveries noticeably different to the shorter deliveries enjoyed by Amazon Prime members as a way of getting people back…that’s one of the things I’d do if I was in charge 😜.

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

We take a look at some US and UK retail trends…

In America, Bed Bath & Beyond shares surge despite liquidity concerns (Wall Street Journal, Jodi Xu Klein, Soma Biswas and Andrew Scurria) shows that the home-goods company saw its share price rocket by 70% in trading yesterday before settling at 29% up on the day despite recent analyst warnings of the company being in some kind of valuation fantasy. The retailer has been trying to maintain supplier and investor confidence in the face of the tricky macro conditions that everyone is facing. * SO WHAT? * This all sounds rather tenuous to me and potentially ripe for a correction given the amount of scepticism in the market. I think that even if it gets the loan it’s after, once the euphoria has died down investors will be focused on the fundamentals again. The current economic backdrop does not scream the need to buy a home goods retailer IMO!

That said, Walmart and Home Depot ease fears of recession even as inflation persists (Financial Times, Andrew Edgecliffe-Johnson and Alexandra White) highlights decent performances from two of America’s biggest retailers as they reported solid consumer spending in the face of food and fuel price inflation. Walmart even said that it had seen signs of improvement in recent weeks and Home Depot said that spending on home improvements had been “incredibly high”! * SO WHAT? * This is pretty amazing as Home Depot reported its highest ever quarterly sales and earnings while Walmart put in this performance after having issued two recent profit warnings! Walmart: bargain bragging rights will help store chain as inflation rips (Financial Times, Lex) is of the opinion that the world’s biggest retailer is now better placed to sell the groceries and essential goods customers want through a recession after addressing previous inventory issues (they had too much). 

Back in the UK, Ted Baker agrees takeover by US Reebok owner (The Guardian, Mark Sweney) shows that the troubled apparel retailer has agreed to a reduced £211m takeover by Authentic Brands Group (ABG), which owns Reebok, among other brands. * SO WHAT? * The offer is way below the original one ABG made in May (current offer 110p per share vs the original one at 160p per share) and it is now up to the shareholders as to what they want to do. Despite this “discount”, the offer price is still 18% higher than the share price was at on Monday. Founder Ray Kelvin will no longer be involved in the privatised company, but it sounds like he’s leaving the door open to a fashion comeback in the future…

Then in Aldi on track to overtake Morrisons as fourth largest supermarket (Daily Telegraph, Laura Onita) we see that the German discounter managed to increase its market share to 9.1% over the latest quarter versus the same period a year ago as Morrisons lost ground, going from 10% to 9.3%, according to the latest figures from Kantar. * SO WHAT? * It’s interesting to note that, since their entry into the UK market in the 1990s, the combined market share of Aldi and Lidl has grown to 16.1%. Morrisons has definitely lost its mojo, particularly since it was bought for a very hefty price tag last year by US private equity firm Clayton, Dubilier & Rice. Will it come back or have to bow to the inevitable and lose its place in “The Big Four”?? FWIW, I think Morrisons is toast. CD&R spent a huge amount of money on buying it, reducing the potential upside and I haven’t really seen any kind of growth plan thus far. I am thinking that it will sell off the real estate (as per the original plan?) and then wield the axe on cost cutting, whilst using current economic circumstances as an excuse.

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

Apple gets serious and WeWork’s “guru” comes up with another plan…

In a quick scoot around other interesting stories today, Apple tells staff to be at desk 3 days a week (Daily Telegraph, Simon Foy) shows that Apple has ordered staff to get to their offices after a year of hybrid working. They will have to come in on Tuesdays and Thursdays plus another, starting on September 5th. * SO WHAT? * I’m going to be blunt here, but I think that there are many people who would sell their own body parts to work at a place like Apple, so whingers who don’t realise how lucky they are will be easily replaced by those who are very eager to be there. This is going to become more acute as cost-of-living hits and unemployment rises. Three days in the office is still a pretty good deal IMO, so we’ll see how employees react soon enough. I’d say good luck at getting a job elsewhere in tech as all the big places seem to be cutting staff already. I don’t think Apple will be the only one taking this action – and if other companies follow suit there will be fewer opportunities for leavers to go to.

Then in Andreessen Horowitz backs WeWork co-founder Adam Neumann’s real-estate startup Flow (Wall Street Journal, Berber Jin) we see that VC firm Andreessen Horowitz is investing $350m in Flow, giving the start-up an implied valuation of over $1bn – not bad for a company that was started at the beginning of this year! Flow is designed to address problems in the rental housing market where renters can’t own equity in their homes and the absence of “community” between neighbours. * SO WHAT? * All I have to say here is that I hope Neumann is not full of 💩 like he was with WeWork which saw its valuation drop from the dizzy heights of the touted $47bn to $4bn burning many investors in the process. Will he re-employ all his family members and mates and keep wearing those ridiculous slogan t-shirts again 🤣? Who knows, maybe this idea will prove to be style over substance and that he won’t burn everyone again while he did pretty well out of it himself. Flow is expected to launch its services in 2023. Let’s hope that Andreessen Horowitz is wearing a flame-retardant suit…

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

…in other news…

I remember it was quite a few years ago now that we had to name our first child. I had put it off for ages but in the end my wife thrust a baby-names book into my hand before I got on the Eurostar and told me I had to choose some names on my business trip or else! I went through it and came up with a list of my “top ten” preferred names and then cross-referenced them with hers – and fortunately our top choice coincided! Job done! However, not everyone does it like that: Top baby names parents Google to check if they’re socially acceptable (The Mirror, Saffron Otter) goes to show that some parents really like to push the envelope when it comes to naming their kids. If you feel have to Google search “Can I name my baby Batman?” then I think you may have serious issues…

1. In MACRO & COMMODITIES NEWS, China cuts its lending rate, we look at what might happen with a Taiwan blockade, the Rhine goes lower and Kosovo has blackouts while oil and metal prices fall
2. In COST-OF-LIVING & RETAIL NEWS, the gap between staying in and going out narrows in the US, Spanish go for own-labels, Nationwide helps its staff, Aldi ups pay again, a new UK lender considers 50-year mortgages, Joules gets a new boss and Ted Baker is close to being taken over
3. In FINANCIALS NEWS, Phoenix rises and Goldman cuts pay
4. In MISCELLANEOUS NEWS, Apple benefits, Disney comes under pressure, the UK approves a new Covid booster and Treatt suffers
5. AND FINALLY, I bring you the right way to use an electric fan…

So China cuts, we look at what might happen with Taiwan, the Rhine’s level falls further, Kosovo faces blackouts while oil and metal prices weaken…

📢 Just so you know, I’m going to be going on holiday (for the first time in ten years!) from the end of this week. I will be writing Watson’s Daily as normal until this Friday but will be having a social media (and podcast) “posting holiday” until returning on Tuesday 30th August. There will be a lot of work going on behind the scenes until then, though – so keep watching this space! That said, I did do a special podcast edition this weekend with Ralph on our thoughts for the final quarter of this year, so I would recommend you give this a try as we cover politics, economics and energy policy.

China cuts lending rate as economic data disappoint and Covid cases rise (Financial Times, William Langley and Edward White) shows that the People’s Bank of China yesterday reduced its medium-term lending rate by 0.1% to 2.75% in the first such cut since January, versus market expectations of it being left unchanged. This would imply that there are heightening worries in Beijing about the damaging effects of on-again-off-again Covid lockdowns and a troubling real estate sector. Official figures released yesterday highlighted worse-than-expected consumer and factory activity along with a rise in youth unemployment to a new high of 19.9%. * SO WHAT? * This isn’t looking good, particularly as the world’s second biggest economy only just escaped a GDP contraction in Q2. As I have said before, I don’t think is good for Taiwan either as the government may be tempted to get more aggressive in order to take the focus away from its tricky domestic situation.

Talking of which, What a Chinese blockade of Taiwan would mean for global business (Wall Street Journal, Chun Han Wong and Yang Jie) is an interesting discussion of what might happen if China decides to cut Taiwan off. Firstly, it would decimate global supply chains and cause a hike in freight rates in Asia and beyond as the island plays a massive role in global business despite only representing around 1% of global GDP. Fun fact: Taiwan accounts for around 70% of the world’s semiconductor supply. It is therefore key to the supply of smartphones, computers and cars – and if it was cut off, there would be more shortages that would lead to higher prices and more inflationary pressures. Secondly, because it is home to the world’s biggest contract chip manufacturer – TSMC – any kind of lengthy disruption could prompt massive losses among global electronics companies. It produces chips for the likes of Apple and Qualcomm. According to a report by the Boston Consulting Group and the Semiconductor Industry Association, if

Taiwanese output was permanently disrupted, it would take three years and cost $350bn to replace production capacity elsewhere! In a CNN interview in July, the chairman of TSMC said that an invasion of Taiwan would render TSMC factories inoperable. Thirdly, shipping capacity would be severely impacted as the Taiwan Strait is one of the world’s biggest shipping routes. This would mean longer routes, using more fuel, leading to higher costs that would then be passed on to customers, adding to inflation. * SO WHAT? * Although the US and Europe are making somewhat belated attempts to nurture semiconductor manufacturing, they won’t bear fruit for some time to come. On a slightly more positive note, some are saying that a blockade is unlikely because China itself actually relies on Taiwan for tech and jobs. Is it willing to shoot itself in the foot to prove a point??

Disappearing Rhine adds to the drip, drip of problems in Europe (The Times, Oliver Moody and Charlie Devereux) shows that the drying up of Germany’s Rhine is continuing. Heavier cargo ships are now unable to use it and fears are growing about its potential economic impact given its importance as an artery of the supply chain at a time when Germany is having a bit of a wobble. Fun fact: two years ago, researchers at the Kiel Institute for the World Economy reckoned that for every 30 days the level at a certain point in the river was below 78cm, Germany’s Industrial Production would fall by 1%. * SO WHAT? * The Rhine isn’t the only river in Europe that is at historically low levels – areas of south eastern France, northern Italy and a huge part of central and eastern Europe are suffering along with other parts of central Germany. This just makes an already difficult situation even worse. Environmentalists will obviously use this as more evidence of the effects of global warming…

Meanwhile, Blackouts in Europe as Kosovo turns out the lights (Daily Telegraph, Louis Ashworth) shows that blackouts have now arrived in Europe thanks to Russia restricting energy supplies. State energy distributor Keds said yesterday that it would have to operate a “six hours on and two hours off” policy for the foreseeable future in order to make supplies go further. Going forward, the country will see coal-fired power plants providing about 90% of the country’s energy but, right now, around half of the generators are undergoing maintenance ahead of winter. * SO WHAT? * This looks like it will be a sign of things to come for the rest of Europe in what looks like a difficult winter ahead…

Then in commodities news, Oil prices hit lowest level since Ukraine invasion over China fears (The Guardian, Richard Partington) shows that global oil prices have fallen due to concerns about a weakening China economy while Metal prices hit by fears of slowdown (The Times, Emily Gosden) highlights the same concerns and their effect on the prices of copper and other materials. Given that China is the world’s biggest consumer of copper, this is perhaps unsurprising.

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

We take a look at the current state of the cost-of-living, moves to ease the situation and some developments for Joules and Ted Baker…

Restaurant meals become a relative bargain as grocery prices soar (Wall Street Journal, Heather Haddon) makes an interesting point in that grocery prices are now rising so much in the US that the gap between grocery price rises and restaurant price rises are now at their narrowest since the 1970s! According to the latest stats from the Labour Department, grocery prices increased by 13.1% year-on-year in July while restaurants put their prices up by “just” 7.6% over the same period. Interestingly, execs from Burger King, McDonald’s, Cheesecake Factory and Applebee’s have recently said to investors that customers are increasingly looking at eating out as being better value than making their meals at home! * SO WHAT? * I think this sounds rather tenuous TBH, BUT the difference between the price rises is undoubtedly considerable.

Meanwhile, Spanish shoppers ditch branded food amid cost of living crisis (Daily Telegraph, Laura Onita) shows that shoppers in Italy and Spain are changing their shopping habits and going for own-brand alternatives in order to save the pennies. “Trading down” is a trend being followed around the world and will no doubt continue in the face of ongoing price rises.

Some companies are trying to help their employees cope with the price rises as per Nationwide helps pay staff’s living costs (Daily Telegraph, Patrick Mulholland), which shows that the Nationwide Building Society is the latest lender after the likes of TSB and Virgin Money to announce one-off payments to employees (those who earn £35k or less will get a £1,200 lump sum in the next few weeks, equivalent to about 61% of its workforce) while Aldi to give UK warehouse workers second pay rise in a year (The Guardian, Sarah Butler) goes further as the German discounter announced a second pay rise for warehouse workers in the space of a year.

It’s also interesting to see New UK lender plans 50-year fixed rate mortgages (Financial Times, Emma Dunkley) which highlights new UK-based lender Perenna as being granted a licence by UK financial regulators to offer mortgages with fixed rates of up to 50 years! Perenna is going to start off by offering fixed rates for 30 year mortgages before then offering products with even longer terms! * SO WHAT? * Longer-term mortgages are being seen as one way to help younger people get onto the housing ladder, but I have to say that this is getting somewhat ridiculous, don’t you think?? Having said that, the current system clearly isn’t working well as “normal” people are increasingly finding that they can’t afford to buy somewhere to live. It will be interesting to see whether more “traditional” lenders will also go down this road.

In retail news, Joules names new boss amid Next talks (Daily Telegraph, Laura Onita) shows that Joules has taken on a former John Lewis director as its new CEO amid talks that Next is going to take a £15m stake in the apparel retailer. Jonathan Brown will take over from the current CEO Nick Jones when he leaves next month. * SO WHAT? * I guess that the company could do with a new big cheese after such a tough period in the company’s history. Fortunately, the new fella has a lot of experience of online retail businesses, so this could come in very handy. The Next investment isn’t a done deal just yet, so we’ll just have to see how this unfolds.

Then in Ted Baker ‘close to agreeing £200m takeover offer from US’ (The Times, Russell Hotten) we see that the troubled British fashion retailer looks like it is nearing a deal with Authentic Brands (which bought Reebok from Adidas last year and also owns other brands including Juicy Couture, Brooks Brothers, Forever 21 etc.) albeit at a lower price versus the original offer it was thought to have made in June. * SO WHAT? * I think that Ted Baker just HAS to sell itself to survive. It hasn’t been the same since founder Ray Kelvin left and needs a major injection of energy IMO.

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

Life insurer Phoenix rises  while Goldman Sachs cuts pay…

UK life insurer Phoenix boosted by corporate pension deals (Financial Times, Ian Smith) highlights a strong performance thanks to it taking on the assets and liabilities of corporate pension schemes, with the prospect of more to come. Separately, it was interesting to see Phoenix calls on businesses to help retirees back to work (Daily Telegraph, Simon Foy) as the insurer weighed in on something that the chief of John Lewis, Dame Sharon White, said recently – that recruitment practices should be more inclusive of older workers – particularly the over-50s. Having having spent a number of years as a headhunter, I can confirm that age discrimination in the employment market is rife and can be

desperately unfair in this age group where many still have a lot to give. It’s good that there is a growing chorus of voices adding to the debate but whether or not anything actually gets done is another question!

Then in Goldman cuts London pay by 60% (Daily Telegraph, Patrick Mulholland) we see that bankers at Goldman Sachs are seeing their wages shrink considerably as they are having to scrape by on just $265, 440 (£219,662) 🤣 versus the decidedly more attractive $644,100 they had been enjoying in the first half of last year. Investment banking revenues have cratered – something that Berenberg last week used to justify the sacking of 5% of its staff. I suspect that there will be more wage cuts and redundancy rounds going into the end of the year.

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

Apple takes a bigger bite, Disney faces pressure, a new Covid booster gets approval and Treatt suffers…

In a quick scoot around other interesting stories today, Digital advertising: Apple takes bigger bite of new business (Financial Times, Lex) highlights the success thus far of Apple’s efforts to boost its digital advertising revenues. The company has said that this business is hitting record levels in quarterly earnings, something that will be useful as it continues with its ambitions to get revenues from services to be equal to what it gets from the sales of hardware.

Disney under pressure to spin off ESPN and focus on streaming (Daily Telegraph, Ben Woods) highlights new pressures for the company as an activist investor, Dan Loeb who runs Third Point, has taken a decent stake in the entertainment giant and is now calling for it to ditch its ESPN sports channel, streamline its streaming services and bring in new management to shake things up. We’ll see how this develops…

UK becomes first country to approve Omicron-specific Covid booster (Financial Times, Hannah Kuchler) shows that the

Medicines and Healthcare products Regulatory Authority, which was the first in the world to approve the original Covid jab, has given conditional authorisation for Moderna’s vaccine which targets both the original and Omicron strain of the virus. It’s authorised for those aged 18 and over, but it is thought that the booster programme will initially target the over-50s and those in higher risk groups in the UK.

Then in Treatt shares plummet on profit warning as inflation bites (Financial Times, Madeleine Speed) we see that fragrance and flavouring manufacturer Treatt has cut its profit forecast thanks to flagging consumer confidence and cost inflation. The company makes natural extracts and ingredients for the beverage, flavour and fragrance industries and has seen significant rises in input costs. It has only been able to pass some of this on because it is often tied into long term contracts. It also said that its high margin US tea division saw a particularly big drop in sales (down 41% in the first half compared to the same period last year!). Shares fell by 30.7% in early London trading. * SO WHAT? * I guess it doesn’t stand a chance of getting itself out of this rut until it gets out of long term contracts.

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

…in other news…

It seems that the nights are now finally getting a bit cooler, so this might be a bit late but I think it’s worth highlighting just in case things get sweaty again: Gobsmacked woman discovers fan hack – and we’ve been using them wrong all our lives (The Mirror, Grace Hoffman). TBH it sounds a bit tenuous to me, but maybe worth a try!

1. In BUSINESS TRENDS NEWS, SMEs fear their prospects, the City of London loses restaurants and craft brewers worry about recession
2. In EMPLOYMENT TRENDS, salaries rise but those at asset managers fall, the four-day week experiment looks like it’ll fall flat and PwC lowers its entry requirements
3. In MISCELLANEOUS NEWS, US consumers still spend on fun, Zalando remains undeterred, Rightmove says house prices are falling and Saudi Aramco hits a new profit record
4. AND FINALLY, I bring you a surfing labrador…

So there’s a lot of concern about the outlook…

📢 Just so you know, I’m going to be going on holiday (for the first time in ten years!) from the end of this week. I will be writing Watson’s Daily as normal until this Friday but will be having a social media (and podcast) “posting holiday” until returning on Tuesday 30th August. There will be a lot of work going on behind the scenes until then, though – so keep watching this space! That said, I did do a special podcast edition this weekend with Ralph on our thoughts for the final quarter of this year, so I would recommend you give this a try as we cover politics, economics and energy policy.

Small business owners worry whether they will make it through the winter (Financial Times, Oliver Barnes) just shows the concerns that small businesses are having at the moment, particularly as they face vastly inflated energy bills going as we head into winter. And this is before all the other pressures like rising wage bills, material costs and a supply chain crunch. Over the course of 2020, the UK saw almost 390,000 small businesses go under and it looks like we could be heading back there again. SMEs in hospitality, manufacturing, construction and retail have all seen input costs almost double over the same quarter last year. It’s not looking good. Unless the government steps in here, the situation could get very bad very quickly.

Hospitality seems to be facing some of the worst pressures as City of London has lost 14% of its restaurants since 2020 (Financial Times, Oliver Barnes) shows that there have been a huge number of restaurant closures in the Square Mile between March 2020 and June this year, according to AlixPartners and industry tracker CGA. A similar amount closed in Birmingham, followed by Glasgow. This reversed the pre-pandemic trend of more openings but shifts in working patterns have hit hard. For those of you who want to dine in central London at the moment, the day with the lowest footfall is Monday! * SO WHAT? * Given that more “white-collar” jobs can be done from home and the overall shift to WFH, this is hardly surprising – particularly in the Square Mile. The restaurant business has always been tricky, but it is sad that so many have suffered so much.

Brewers fear that a recession will burst the craft beer bubble (The Times, Constance Kampfer) reflects current fears among craft brewers that cash-strapped drinkers will switch from the more expensive craft beer option to cheaper alternatives. There was a craft beer brewer boom last year but there’s a danger that craft beer is perceived to be a luxury item, which could make it particularly vulnerable in a cost-of-living crisis. * SO WHAT? * I suspect that we will see two trends emerging: a lot of brewers going out of business as well as a wave of acquisitions by mega-brewers eager to broaden their offering (and at presumably fire-sale prices).

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

Salaries generally rise, the four-day week doesn’t look like it’ll last and PwC lowers its entry requirements…

It was interesting to see Salaries rising as bosses struggle to find new staff (The Times, Constance Kampfner), which cites findings from the Chartered Institue of Personnel & Development’s Labour Market Outlook report which show that the labour market continues to be “incredibly tight”, leading to employers to increase wages and offer workers more flexibility. However, Asset managers curb pay amid rising cost pressures (Financial Times, Adrienne Klasa, Brooke Masters and Lydia Tomkiw) shows that fund managers are going the other way as clients continue to withdraw money against the backdrop of a falling stock market. Even the biggest one in the world, BlackRock, has seen an 11% fall in assets under management and is postponing hiring for more senior roles. We heard recently that one of the world’s biggest hedge funds, Man Group, has also been seeing asset withdrawals and when that happens, redundancies often follow.

In Four-day week may not leave drawing board (Daily Telegraph, Leonora Lynn and Lucy Burton) we see that the great four-day-week-for-five-days-wages experiment may fall flat as increasing numbers are doubting that it can be sustained beyond the trial period that is set to end in December. * SO WHAT? * The experiment has divided opinion as, on the one hand, many employees are happy with the arrangement. On the other hand,

many have found it difficult to co-ordinate who’s around and who isn’t. This is going to sound cynical but I suspect that a big fat recession looming large is going to give chief execs ample excuse to walk back ambitions here, and I really think that EVERYONE needs to work a four-day week for this to truly work.

Then in No 2:1? That’s no problem for PwC (The Times, Constance Kampfner) we see that PwC has decided to ditch its requirement for grads to get a 2:1 as a way to increase the “socio-economic diversity of the firm”. It says that it places greater store on its own aptitude and behavioural testing. It is not the only one to do this – rival EY dropped the 2:1 requirement in 2015, saying that it had no correlation to achievement in professional qualifications. * SO WHAT? * This is an interesting development. I always think that the first phase for recruitment for many firms is to cut the field down to a more manageable size. One of the easiest ways of doing this is by using grades as they are absolute. This is why some employers ask for A-level grades for graduate jobs (and I have heard that, interestingly enough, A-level grades are a more accurate predictor of how someone is likely to do in professional exams) as well as university grades. At the end of the day I’ve seen and worked with plenty of people who don’t have top grades and yet they are leaders in their field, but that has been more the exception rather than the rule because I guess that those with lower grades often don’t get a look in. You do wonder, though, why PwC even bothers with uni grads, though, if they believe in their own tests as a more meaningful way of judging potential…

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

US consumers just wanna have fun, Zalando hopes for a better future, Rightmove shows house prices getting weaker and Saudi Aramco hits new heights…

In a quick scoot around other interesting stories today, Consumers are still spending on fun (Wall Street Journal, Will Feuer and Kathryn Hardison) shows that Americans are continuing to spend on travel and entertainment over the summer, particularly on experiences that they perhaps missed under the pandemic. Hotel chains, theme parks and Las Vegas casinos are reporting strong activity, for instance. In Europe, though, Europe’s largest online fashion retailer bets sales slump is just a blip (Financial Times, Olaf Storbeck) shows that Zalando is hoping to avoid massive job cuts that online rivals such as Amazon, Klarna and Shopify are implementing despite revenues taking a drubbing in the first half of the year. It wants to keep employee numbers steady to the end of the year, but it has slowed down hiring. Although revenues have taken a hit, the company believes that it still has room to build market share while it continues to concentrate on profitability.

Meanwhile, Prices drop for first time this year, says Rightmove (The Guardian, Kalyeena Makortoff) shows that the rising trend may have reversed although some observers say that this was due to slower activity over the summer rather than tricky economic conditions. * SO WHAT? * TBH, there is usually a summer lull, so we’ll see the true picture once everyone gets back from holidays. Interestingly, asking prices are expected to fall this month as seller who need to move quickly tend to cut their asking prices so they can be in the new place by Christmas – as the average price to complete a sale now is four-and-a-half months. It is expected that the ongoing lack of supply of houses will continue to support the market.

Saudi Aramco posts record $48bn profit after oil surge (Daily Telegraph, Laura Onita) shows that red-hot demand for oil following Russia’s invasion of Ukraine has led to the state-controlled company’s biggest ever quarterly profit – and the biggest ever profit by any other publicly-listed company on the planet! It managed to make a profit of $48.4bn in the last quarter – an increase of 90% on the same period last year (although that is a bit of an extreme comparison given what we were experiencing last year). No wonder it didn’t care when Biden asked it to open the taps 🤣…

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

…in other news…

This really is brilliant – and a great way to start the week: ‘Clever’ dog leaves people in stitches as it’s spotted surfing along a beach (The Mirror, Zahna Eklund). I mean, who wouldn’t love a surfing lab???

1. In MACRO, OIL & ENERGY NEWS, Germany’s problems worsen, western sanctions are having “limited impact” on Russian oil output and European electricity prices climb to new highs
2. In MANUFACTURING & ENGINEERING NEWS, US factory prices fall, Siemens has its first quarterly loss in 12 years, Britishvolt has problems and Rivian’s losses almost triple
3. In EMPLOYMENT/COST-OF-LIVING NEWS, lockdowns hit the young, big companies raise wages and punters pull back on gambling
4. In MISCELLANEOUS NEWS, Hong Kong’s population shows a record decline, Savills sounds a cautionary note, GSK faces trouble and Johnson & Johnson plans to withdraw baby powder completely
5. AND FINALLY, I bring you a ridiculous landing of a plane…

So Germany suffers, sanctions aren’t biting and European electricity prices keep rising…

📢 Just so you know, I’m going to be going on holiday (for the first time in ten years!) from the end of next week. I will be writing Watson’s Daily as normal until next Friday August 19th but will be having a social media (and podcast) “posting holiday” for next week and the week after to give my wonderful social media team a rest and time for me to do a strategy overhaul that will continue to enhance content and your experience with Watson’s Daily. I am always striving to improve content here and while I want to concentrate on doing what we already do better, there will be another development which will seriously enhance your learning on here. This particular thing is very time-consuming to do, but once it’s done it’s done! Anyway, thank you – as always – for your ongoing support. It means a lot!

From Europe’s powerhouse to its weak link: Germany’s economy stutters (Financial Times, Guy Chazan and Joe Miller) highlights the travails of the economy that is usually the engine of the European economy. Germany’s finance minister, Christian Lindner, talked on Wednesday about the country’s prospects being “fragile” and cutting growth forecasts as rising prices for gas, energy and food hit. The country is having particularly acute problems because of its outsize reliance on Russian energy and its exposure to manufacturing, which is particularly power-hungry. With retail sales and consumer confidence falling as inflation worries intensify, there is a real chance that Germany could fall into recession (two consecutive quarters of GDP contraction). * SO WHAT? * Putting it bluntly, if Russia decides to switch the power off completely,

Germany’s economy is toast. On the positive side of things, oil prices seem to be coming down, as are air and ocean freight rates – and many companies still have a backlog of orders, which might take the edge off the effects of a recession (well, initially, anyway). That said, the government is looking at implementing a third package of relief measures since the Ukraine war broke out. If Germany suffers, ALL of the EU will suffer.

Sanctions have ‘limited impact’ on Russian oil (Daily Telegraph, Louis Ashworth) shows that western sanctions imposed on Russian oil haven’t massively affected production, according to the International Energy Agency, because the slack has been taken up by heightened demand from India, China and Turkey. Interestingly, there is a stark contrast between what the IEA is saying and what OPEC is saying. IEA says that Europe will be at mercy of oil producers this winter thanks to a sudden drop in Russian gas imports and rising demand whereas OPEC is talking about oil surpluses as economic activity slows down. The tough times continue…

European electricity prices hit new highs amid power market disruption (Financial Times, Tom Wilson) is no doubt a sign of things to come as the ongoing heatwave has led to even higher demand as supplies remain limited. The benchmark price increased by over 5% yesterday to €455 per megawatt hour, which is five times what it was this time last year! * SO WHAT? * Power prices have been rising all year, but the current heatwave has made it even worse! The fact that it has also coincided with reduced wind power and falling water levels on the Rhine just add to the misery. Tough times…

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

US factory prices drop, Siemens has a ‘mare, Britishvolt is looking tricky and Rivian’s losses almost triple…

US factory prices dip for first time since early in pandemic (Daily Telegraph, Szu Ping Chan) cites the latest data from the US Labour Department which shows that producer prices actually fell in July, in another potential sign that inflation may slow down from here. The producer price index is often seen as a decent bellwether for inflation and this news comes shortly after official CPI figures showed the rate of inflation growth slowing in the US. * SO WHAT? * This is potentially good news but we need to see more of it!

Things aren’t going so well in Siemens posts first quarterly loss in 12 years (Financial Times, Joe Miller) as the German industrial group had to make a €2.7bn write-down on the Siemens Energy business it spun off and €400m that it cost to exit its operations in Russia. Siemens still has a 35% stake in Siemens Energy, but its share price has more than halved over the last two years. Its Gamesa subsidiary, which makes wind turbines, has also had difficulties related to wind-turbine contracts because commodity costs have risen sharply. * SO WHAT? * This isn’t great – and it goes to prove that even players in the renewables space are suffering. This news came only a day after Gamesa rival Vestas announced a €119m quarterly loss.

And the drama doesn’t just end there as Huge electric car battery factory on ‘life support’ to cut costs (The Guardian, Jasper Jolly) shows that the construction of Britishvolt’s gigafactory in Northumberland has just been put on “life support” to cut costs in order to unlock the next round of funding. Both Britishvolt and ISG, the main construction contractor, say that this only applies to some parts of the project. * SO WHAT? * It seems that Britishvolt chose the “life support” option in preference to making redundancies, terminating all contracts and delaying specific works until June 2023. It sounds like the company is talking a good game, but given all the hype, the road looks like it has been quite bumpy.

Then in Rivian losses nearly triple to $1.7billion (Wall Street Journal, Sean McLain) we see that the much-hyped electric SUV and truck-maker posted massive losses despite increasing production and deliveries of its first three models, which started to roll (quietly) off the production line late last year. That said, the Q2 results were largely in line with market expectations and it reiterated its 2022 production guidance although profits will be hit by rising raw material, freight and lithium prices. * SO WHAT? * Targets are pretty punchy and it’s got a lot to prove at a difficult time in the economic cycle. This was made even more challenging this week as new restrictions were put in place in the US to claim a $7,500 tax credit for EV buyers that will impact Rivian’s sales because of the relatively high price point of its vehicles.

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

Lockdowns hit the young, big companies raise wages and Ladbrokes feels the pinch…

Lockdowns hit young workers hardest in threat to global growth (Daily Telegraph, Tim Wallace) cites findings from an International Labour Organisation (ILO) report which show that young workers’ job prospects have been hit hardest by the pandemic and Covid lockdowns. They suffered particularly badly as companies cut hiring at the beginning of the pandemic, favouring those who were already in work and who had more “money-making” power. Disruption to training and education has also led to a skills shortage, which may go some way to explain the latest report from the Recruitment and Employment Confederation, which showed a record high in the number of positions available. Demand is particularly high in leisure industries – and actors, entertainers, presenters, dancers and choreographers are in particularly high demand! Job vacancies for driving instructors, sewing machinists and sewage plant operators are also high – and all of this is pushing up pay.

Quarter of big companies raise wages to counter high cost of living (The Times, Robert Miller) cites a report from the Office for

National Statistics which shows that almost 25% of big companies ramped up staff wages to help them cope with the rising cost of living. It was interesting to note that some larger companies made a one-off payment to support employees but smaller companies with fewer than 250 workers did not. * SO WHAT? * You could argue that the fact that not ALL employees were given higher salaries to cope with inflation means that the likelihood of a wage-price spiral has decreased as not all employers try to stay ahead of the rise in the cost-of-living. I am personally a fan of one-off payments from employers rather than general salary increases because the latter are much harder to roll back in future and a big one-off slug of cash can, IMO, do more in the short term to calm nerves than a few hundred extra quid on your monthly salary (although maybe this is psychological?).

Then in Ladbrokes owner hit by cost of living crisis (Daily Telegraph, Hannah Boland) we see that Entain, which owns Ladbrokes and Coral betting shops, is also being hit by the cost-of-living crisis as people have less money in their pockets to gamble with. The company is trying to put a positive spin on the fact that punters are only cutting average spend per head by about 10% (it could be a lot worse!) and that people may be more inclined to gamble rather than spend money on going out. Obviously time will tell…

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

Hong Kong’s population falls, Savills suffers, GSK faces a new problem and Johnson & Johnson aim to cut out talc-based baby powder…

In a quick scoot around other interesting stories today, Hong Kong suffers record decline in population (Daily Telegraph, Louis Ashworth) highlights the latest official government figures which show that the territory has seen its sharpest ever population fall as people leave political crackdowns and draconian Covid policies behind. The 1.6% fall in its population was the biggest in at least 60 years and this is the third year in a row that its population has fallen. Top destinations for those leaving include Australia, Portugal and Canada.

Back in the UK, Higher interest rates and Ukraine war threaten property recovery, says Savills (Financial Times, George Hammond) shows that high-end real estate agent Savills believes that macro and geopolitical developments are going to negatively impact global property markets. Its gloomy outlook helped to send its share price down by up to 13% following the announcement and Savills: inflation and higher interest rates rattle real estate investors (Financial Times, Lex) homes in particularly on the potentially grim prospects for the office market – particularly the bit which won’t meet newer more stringent environmental regulations. Savills is clearly facing a tricky period ahead.

Elsewhere, GSK and Haleon lose billions in value as investors fear lawsuits (The Times, Alex Ralph) shows that GSK’s share price tanked by 10% and Haleon’s by 13% due to concerns that a former GSK blockbuster drug for stomach ulcers, Zantac, could be carcinogenic. Haleon is GSK’s newly-demerged consumer healthcare business. * SO WHAT? * The impact of any potential litigation is anyone’s guess but Morgan Stanley dreamt up a range of anywhere between $10.5bn-$45bn, based on historical precedents (such a large range suggests they haven’t got a clue – but TBF, this sort of thing is notoriously hard to predict). All forms of Zantac have been suspended to all markets pending tests and investigations. Nasty.

Then in Johnson & Johnson to stop selling talc-based baby powder globally next year (Wall Street Journal, Talal Ansari) shows that the company is responding to the myriad of lawsuits it is facing that allege the product’s use has harmed female users, where there have already been some hefty payouts. * SO WHAT? * The baby powder was withdrawn from sale in the US and Canada in 2020 and it will, in future, transition to an all cornstarch-based baby powder instead. This just goes to show how a household product can go from hero to villain very quickly – and just how much it can cost the company that makes it. No doubt GSK and Haleon will be taking notes…

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

…in other news…

You really have to see this plane landing. It is absolutely insane: Tourists duck as plane makes extremely low landing on Greek island of Skiathos (Sky News). I think that this is highly stressful for all involved! It does remind me a bit of the one time I went to Gibraltar. The landing there is just ridiculous! Take a look at THIS! I think pilots will have to have nerves of steel!

1. In MACRO & ENERGY NEWS, US inflation eases, Taiwan gets feisty with Foxconn, Vestas likes US clean energy subsidies, E.ON cuts the value of its Nord Stream stake and the Rhine dries up
2. In FINANCIALS/INVESTMENT NEWS, Aviva gets a boost, the Pru suffers from Hong Kong lockdowns, Admiral looks forward, Robinhood takes a bath and SoftBank has a historic moment
3. In CONSUMER SPENDING TRENDS NEWS, Tui suffers with flight disruption, Deliveroo doesn’t deliver, Bumble’s sales rise and estate agents see a continued fall in buyer interest
4. In INDIVIDUAL COMPANY NEWS, Fox predicts higher spending and Disney adds subscribers
5. AND FINALLY, I bring you a “how to” guide on escaping prison…

So US inflation eases, Taiwan gets nervous, Vestas gets hopeful, E.ON gets real and the Rhine dries up…

📢 It’s Thursday, so it’s time for the one hour weekly ZOOM call for SILVER and GOLD subscribers! *** THIS CALL WILL RUN FROM 6PM TILL 7PM ***. As usual, during this call, I will do a round-up of the week’s news and then open it up to questions from you. After that, depending on how much time we have, we will also debate the following:

• How can Deliveroo turn around its fortunes?
• Why are our energy bills so high? Follow @watsonsdaily on Twitter for the FT article you can use to answer this question!

You can just listen into the debate if you want to, but I thought I’d give you the heads up on topics for if you would like to engage. You will definitely get more out of this call if you take part in the debate, though 😜!

US inflation eased slightly in July on lower petrol prices (Financial Times, James Politi and Kate Duguid) shows that prices increased at a slower annual rate versus June (July’s figure was 8.5%), something that will be a relief for both the Federal Reserve and Biden’s government, who have come in for a great deal of criticism for failing to address inflation earlier. This level is still high, so further rate rises are still on the cards…

Given the current tensions, Taiwan security officials want Foxconn to drop stake in Chinese chipmaker (Financial Times, Kathrin Hille) shows that national security officials are keen on forcing Apple supplier Foxconn to walk back an $800m investment in Chinese semiconductor company Tsinghua Unigroup. Foxconn is the world’s biggest contract electronics manufacturer and the largest private sector employer in China, so this is quite literally a big deal. Officials from the National Security Council and the Mainland Affairs Council reckon this deal needs to be blocked. * SO WHAT? * The company had originally intended to use this deal to bolster its semiconductor business but the Taiwanese authorities worry that Foxconn’s money could be used to finance the advancement of China’s tech capability. Foxconn is in a particularly delicate position given that 75% of its production capacity is in

mainland China. On the other hand, Taiwan does not want to be seen aiding China, particularly as it wants military cover from the US and that the US just adopted the Chips Act, which is designed to restrict the flow of tech know-how to China.

In energy-related news, Vestas hails US clean energy subsidies as breakthrough (Financial Times, Richard Milne) shows that the Danish wind turbine manufacturer is looking forward to the US passing a new subsidies package because it believe it will safeguard the acceleration of renewables in the US for the next ten years. Vestas posted Q2 results on Tuesday that came in below market expectations but its share price rose by 8.6% in trading yesterday because its profit margin outlook was better than rival Siemens Gamesa. Vestas has been hit hard by massive rises in raw material and component prices, but it has been able to pass some of this on.

Meanwhile, E.ON slashes value of Nord Stream stake as Russia cuts gas supplies (Daily Telegraph, Rachel Millard) shows that Germany’s E.ON has written down the value of its stake in Nord Stream 1 by a chunky €700m as the Ukraine war rages on. It owns 15.5% of the pipeline which connects Western Russia to Germany via the pipeline which runs under the Baltic Sea. It had valued the stake at €1.2bn in March but now it says this is worth more like €500m. E.ON said it won’t be selling out of its stake for the moment.

Germany is having a right old time at the moment, isn’t it. However, it never rains but it pours – or actually not in this case as Rhine/drought: low water levels will parch the German economy (Financial Times, Lex) shows that the current heatwave has meant that river levels have fallen significantly. * SO WHAT? * This has affected logistics (inland waterways are used to ship around 30% of Germany’s coal, crude oil and natural gas) and industrial production. River levels aren’t yet at the lows of 2018, but broker Jefferies reckons that it they fall another 15cm, insurance policies will kick in. French insurer Axa has exposure in this area via its Axa Climate business.

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

Aviva does well, Pru’s held back, Admiral hopes for better, Robinhood is not so merry and SoftBank marks a historic moment…

In news on insurers, Aviva promises share buyback after boost from rising interest rates (Financial Times, Ian Smith) highlights the insurer’s strong first half results yesterday as it also announced another share buyback (no details on the size thus far, though) thanks to better-than-expected cash generation only months after returning £4.75bn to investors. Investors loved this and sent the share price up by around 12% by lunchtime yesterday. It had been under pressure to raise shareholder returns and clearly the company is doing so. In contrast to this, Hong Kong’s Covid lockdowns hit Prudential (Daily Telegraph, Simon Foy) shows that the Pru’s pivot towards Asia has been badly affected by China’s lockdowns and said that market conditions were likely to be “challenging” for the rest of this year. Elsewhere in the sector Admiral looks past declining profits (The Times, Patrick Hosking) shows that the automotive insurer saw its first-half profits fall by48% as the rise in used car prices, parts prices and towing charges hit it badly. It raised new premiums by 16% over Q2, which is above the industry average and it doesn’t expect the second half to be much better. That said, the comparison with the first half last year was always going to be tricky because there are now far more vehicles on the road, so it stands to reason that there are going to be more accidents! On the plus side, its unsecured car loans business, Admiral Money, made a small profit for the first time since it was launched in 2017.

Meanwhile, Robinhood suffers harshest hangover after pandemic stock trading boom (Financial Times, Madison Darbyshire) shows that the much-hyped retail broker has had a harsh dose of reality since the heady meme stock days. The number of active users has fallen and its market cap has dropped by two-thirds since its flotation last summer. Its Q2 revenues were down 44% year on year – in contrast with more “traditional” brokers like Charles Schwab which reported an increase of 13% along with record profits. * SO WHAT? * Robinhood has suffered particularly acutely because its younger audience, which fuelled initial trading with US government stimulus cheques, have lost interest. Those who put their money on fintech and crypto – the hot areas last year – have been burned particularly badly. Last year, it focused on growing its customer base, but in order to survive for the long haul it probably needs to concentrate on serving its existing customers better.

Then in SoftBank set to post $34bn gain after handing over Alibaba shares (Financial Times, Leo Lewis and Ryan McMorrow) we see that SoftBank is, on the one hand, about to post a hefty gain of over $34bn, marking the end of an era when CEO Masayoshi Son bought a chunk of Alibaba 22 years ago. This latest move will take its holding down from 23.7% to 14.6% in September, when the settlement process is completed. * SO WHAT? * It will lose its board seat and things could get interesting as the smaller shareholding will mean that it won’t have to deliver on its original promise to vote according to the direction of founder Jack Ma, vice-chair Joe Tsai and other top execs. This comes just two days after SoftBank’s Masayoshi Son unveiled its worst ever QUARTERLY loss of $23bn.

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

We take another look at what consumers are and aren’t spending money on…

Tui suffers third-quarter loss after flight disruption (Financial Times, Oliver Barnes) shows that flight disruption across Europe has hit Europea’s biggest travel company hard, pushing it into a loss for Q3 despite the strong demand. The company is pushing for compensation from airport operators and expects “to get something in the next coming month and it should be significant”. * SO WHAT? * Despite all this, Tui remains confident that it can deliver close to pre-pandemic trading levels this summer and winter bookings from UK customers are at normal levels. Whether European consumers will remain confident into the winter is a moot point, given how energy prices are set to rise sharply pretty much everywhere. If that’s the case, as holidays are very much a discretionary spend, they could suffer.

Deliveroo losses soar to £147m as cost of living crisis bites (The Guardian, Mark Sweney) continues the flow of bad news coming from the food deliverer as the cost-of-living crisis focuses the minds of customers. Although deliveries and monthly active customer numbers increased, gross transaction value per order (which is the amount customers spend on a takeaway on average) fell by 4%, although it must be said that customers were ordering more under lockdown. Still, the company did beat (reduced) market

expectations and investors pushed the share price up by almost 4%. That said, “Flopperoo” has seen its share price crater by a morbidly impressive 75% over the past year…

Then in Bumble sales rise on higher user spending (Wall Street Journal, Denny Jacob) we see that the dating app saw sales increase over the latest quarter thanks to higher spending by users on dating apps post-lockdown. That said, it cut its 2022 revenue estimates mainly due to foreign currency movements and its sales estimate for the current quarter fell short of market expectations, so the share price fell by 11% in after-hours trading. * SO WHAT? * Bumble’s performance compared favourably with arch-rival Match Group, which recently published such disappointing Q2 numbers that Tinder’s CEO had to leave. I would have thought that spending on such apps would continue to be pretty solid although the cost-of-living crisis will surely kick in given that this is very much a discretional spend.

Estate agents rue falling interest in buying homes (Wall Street Journal, Tom Howard) highlights the interesting trend that the number of potential buyers leaving their details with estate agents has just fallen for the third month in a row but the shortage in supply of houses is causing prices to keep rising (stock levels are nearing all-time lows). Transaction levels are falling and estate agents are getting more downbeat about the market going forward.

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

Fox does well and Disney add subscribers…

In a quick scoot around other interesting stories today, Fox predicts record political ad spending in US midterm elections (Financial Times, Alex Barker) shows that Fox Corporation is looking forward to the cash rolling from an “unprecedented wave” of political advertising this year looks like it’ll overtake the amount spent before the 2020 elections! Chief exec Lachlan Murdoch even went as far as saying he thought that the fight for the Senate, House and gubernatorial races would make the upcoming November election cycle the most lucrative in US history!

Then in Disney reports earnings surge, reduces long-term forecast for Disney+ subscribers (Wall Street Journal, Robbie Whelan) we see that Walt Disney posted a better-than-expected 26% rise in revenues yesterday due to strong performances from its theme parks division and new subscriber numbers for Disney+. Having said that, it did lower its forecasts for subscriber growth whilst raising prices on its streaming offerings. It also talked about another ad-supported tier of membership * SO WHAT? * It is amazing to just sit back and consider how fast Disney+ has grown in such a short timespan. It now has a total subscriber base across all of its channel of 221.1m – and Netflix now has 220.67 subscribers! The company’s share price rose by 7% in after-hours trading.

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

…in other news…

Do you remember that iconic scene at the beginning of Daniel Craig’s first Bond outing in Casino Royale where he’s chasing that guy with the rucksack? Well this parkour prison “escape” is pretty spectacular. The athleticism involved is incredible. How they managed to do this without breaking their legs/ankles etc. is beyond me! Don’t try this at home, kids!

1. In MACRO & CRYPTO NEWS, Russian oil flow to central Europe stops, Xi Jinping tightens his grip on power and Coinbase takes flak
2. In CONSUMER TRENDS NEWS, it looks like we are spending on travel, fashion, streaming and property, not so much on used cars and we will be spending more on olive oil while IWG sees a slowing influx
3. In TECH NEWS, Microsoft cuts spending and chipmakers expect a slowdown
4. In INDIVIDUAL COMPANY NEWS, Musk sells Tesla shares, Abrdn suffers while L&G gets a boost and Domino’s pulls out of Italy
5. AND FINALLY, I bring you a sighting of the “Loch Ness monster” and a great drum cover of a Top Gun classic…

So Russia cuts oil flow, Xi Jinping grabs more power and Coinbase has a ‘mare…

Russian oil flow halted through Druzhba pipeline to central Europe (Financial Times, Tom Wilson, Harry Dempsey and Max Seddon) shows that a dispute over payments has led to the oil flow being stopped five days ago. This part of the pipeline takes Russian oil across Ukraine to refineries in Slovakia, the Czech Republic and Hungary. * SO WHAT? * This is yet another instance that highlights the reliance that has been built up over the years on Russian oil. It is thought that stocks in these countries will only last another few weeks, so a solution to the impasse needs to be found pronto. So far, the northern part of the Druzhba pipeline, which goes through Belarus to Poland and Germany has not been affected by the current stoppage but you can guess what might happen next…

Then in Xi Jinping grasps ‘knife’ of internal security to complete grip on power (Financial Times, Tom Mitchell) we see that China’s president secured an even tighter grip on power than he already had by appointing a strong ally in the form of Wang Xiaohong as

public security minister in June, who helped form the military response to Pelosi’s Taiwan visit last week. His predecessors were not particularly close to Xi Jinping, who is expected to continue as head of the Chinese Communist Party and its Central Military Commission for an unprecedented third term in power at a party congress this year. This will be further consolidated by his reappointment as state president at the annual session of China’s parliament next year. The “knife” in the title of the article refers to the internal security infrastructure of China. It sounds like he’s making good progress in consolidating his power, giving little away to those who may criticise him.

Crypto winter comes early for Coinbase (The Times, Robert Miller) highlights challenges being faced by Coinbase Global, one of the world’s biggest crypto exchanges, as it posted a big swing into a chunky loss for Q2 as punters lost their crypto appetite. Trading volumes more than halved as many (including the trading platforms themselves) believe we are heading into a “crypto winter”…

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

We take a look at what consumers are spending on, what they’re not spending on and what they’re not doing…

Consumers are spending on travel, it seems, as Flight prices soar amid travel chaos (Daily Telegraph, Hannah Boland) cites travel agency Kayak which says that airline ticket prices have shot up by around 30% versus pre-pandemic levels in the month of August due to everyone wanting to get away (mind you, average airfares to Athens and the Algarve are now more than double what they were in 2019!) and IHG launches $500m buyback and raises dividend as travel rebounds (Financial Times, Oliver Barnes) shows that the owner of Crowne Plaza and Holiday Inn, InterContinental Hotels Group, did so well in its first half results that it was confident enough to increase its dividend and launch a share buyback. It said that the Americas were showing strong recovery, Europe is picking up strongly and Asia is showing positive signs as well. It was particularly interesting to see that business travel was particularly strong (I’m assuming that is in America).

Consumers are also spending on fashion, as per Ralph Lauren, Michael Kors buck consumer spending woes (Wall Street Journal, Suzanne Kapner) which shows that the luxury end of retail continues to do just fine as Ralph Lauren saw revenues rising by 8% in Q1 and Capri Holdings – which owns Versace, Jimmy Choo and Michael Kors – reported an 8.5% rise in quarterly revenues despite China lockdowns. In contrast, at the more “humble” end of the retail spectrum, Allbirds and Signet Jewelers both warned that US consumers were feeling the pinch from inflation which sent their shares down by over 20% and 13% respectively. Warner Music revenues hit right note (The Times, Callum Jones) shows that we’re still spending on music streaming, although streaming royalties slowed down over the last quarter thanks to the widespread slowdown in the global advertising industry. UK builder Bellway reports record revenue as house prices climb (The Guardian, Mark Sweney) shows that the housebuilder had a great

year for revenues and predicts a strong 2023 as demand remains strong while Mortgage lenders turn away customers in scramble to lock in rates (Daily Telegraph, Szu Ping Chan and Melissa Lawford) shows that the frenzy to get mortgages is intensifying to the extent that a number of building societies – including Coventry Building Society, Suffolk Building Society and Saffron Building Society – are not taking any new applications until they’ve cleared the backlog!

On the other hand, Shortage of cars puts brakes on second-hand motor sales (Daily Telegraph, Howard Mustoe) shows that sales of used cars in the latest quarter actually fell to below pre-pandemic levels as supply chain problems have effectively restricted the number of cars being made available. Talking of a restriction in supply, Heatwave lights a fire under olive oil prices (The Times) shows that the recent/current heatwave has hit production, according to Spain’s Acesur which supplies Britain with olive oil, meaning that prices could rise by 25%! * SO WHAT? * Overall, it looks to me like some consumers (particularly the more affluent ones) are doing pretty well, going on business trips, buying luxury treats while others are having trouble buying used cars (prices of used cars have gone up by 40% over the last three years!) and scrambling to buy property while they can. It just seems like EVERYTHING is getting so expensive right now!

Meanwhile, IWG growth hit by slow return to office (Daily Telegraph, Lucy Burton) shows that IWG (formerly known as Regus and one of the world’s biggest office providers) saw its share price fall by 11.4% yesterday as it unveiled higher losses than the market expected at its results and walked back its previously bullish stance on a return-to-office boom. This is quite interesting given the recent performance of WeWork, which has seen occupancy rates return to pre-pandemic levels.

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

Microsoft cuts costs and chipmakers expect a slowdown…

Microsoft tried to reduce business expenses by restricting spending on travel and company gatherings (Wall Street Journal, Aaron Tilley and Sarah Krouse) shows that even the mighty Microsoft is asking its staff to rein in some employee expenses as part of a wider effort to cut costs. At the moment some business travel, outside training and company gatherings are being targeted after last month’s Q4 results referred to such efforts. * SO WHAT? * I’m so sorry to be gloomy here, but usually moves like this are a precursor for big redundancies – there is already a hiring freeze in some parts of the business. It just goes to show that pretty much everyone is now battening down the hatches for a global economic slowdown (notice I didn’t say the “R” word there – we’re not quite there yet!).

Chip makers expect demand slowdown to expand beyond PCs, smartphones (Wall Street Journal, Asa Fitch) shows that the chip industry is showing signs of slowdown as the world’s economy goes backwards in the face of geopolitical, economic and supply chain pressures. The CFO of Micron Technology remarked that “the market is worse than we thought it would be” after two years of acute shortages in the face of massive demand. Recent news from chip makers has not been great – Intel shocked the market recently with a loss on the quarter and a downgrade in its full-year forecasts. Maybe this is why semiconductor makers are really pushing governments to put money into manufacturing capabilities given that they are expensive and time-consuming to make.

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

Musk sells Tesla shares, Abrdn takes a hit, L&G gets a boost and Domino’s exits Italy…

In a quick scoot around other interesting stories today, Elon Musk sells nearly $7bn worth of Tesla stock amid Twitter uncertainty (Wall Street Journal, Rebecca Elliott) shows that the eccentric billionaire sold a big slug of Tesla shares over the last few days amid uncertainty about what’d going to happen with Twitter. He sold around 7.9m shares between Friday and Tuesday, leaving him with 15% in the company. Neither party commented. * SO WHAT? * On the one hand, investors could take this as good news as a big seller is now out of the market but the problem is that he previously said that he wouldn’t sell any more shares – and that’s what he’s just gone and done! I think a big official statement is needed here otherwise the shares will just be in limbo!

In financials news, Abrdn announces pre-tax loss of £320m for first half of 2022 (The Guardian, Kalyeena Makortoff) shows that the investment group suffered over the first half as customers withdrew cash at a faster pace against the backdrop of worsening market conditions while L&G boosted as companies rush to offload pension schemes (Financial Times, Ian Smith) shows that the insurance giant benefited from a major uptick in the risk transfer market (where companies shift all of their pension liabilities to insurers).

Domino’s shuts up shop in Italy after failing to win over the home of pizza (Financial Times, Oliver Barnes) shows that the pizza purveyor has given up in the country after seven years of trying to flog its wares to Italians. It had suffered from falling sales, rising running costs, big debts and a massive increase in local competition. Ah well, you can’t win them all!

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

…in other news…

You can understand the excitement that the photographer might have had at first glance in Recent Loch Ness Monster sighting turned out to be an Alpaca going for a swim (The Mirror, John Bett) but this did make me laugh.

Then I saw this drum cover of Top Gun/Kenny Loggins classic Danger Zone. Love that song! If I had more time now (and space!) I really would love to play the drums. I used to play the piano and the violin (I played piano for about 11 years with a blind piano teacher!), but the drums do look like a lot of fun don’t they?? Particularly great if you are having a bad day – you can vent in a constructive manner 😁

1. In TECH NEWS, SoftBank has troubles, Baidu does driverless robotaxis, Vertical Aerospace does flying taxis and Intel urges the UK to throw money at chips
2. In CONSUMER/RETAIL NEWS, London rents rise, spending patterns change, Next is to take a chunk of Joules and The Works gets gloomy about Christmas
3. In EMPLOYMENT TRENDS NEWS, PageGroup sees signs of a slowdown and Berenberg is to wield the axe
4. In MISCELLANEOUS NEWS, News Corp benefits from ad sales, Veolia sells waste business, BioNTech puts hopes in a new Covid vaccine jab and Norway decides to cut power exports
5. AND FINALLY, I bring you a brilliant Tina Turner cover (and no – for once, it’s not Pomplamoose 🤣)…

So SoftBank has a ‘mare, Baidu does driverless, Vertical does flying taxis and Intel wants some government input…

I mentioned the SoftBank story yesterday as it was breaking but Masayoshi Son ‘ashamed’ of focus on profits after SoftBank logs record $23bn loss (Financial Times, Leo Lewis and Eri Sugiura) shows that massive losses at the company’s flagship Vision Funds will prompt epic cost-cutting. Valuations have suffered from the general global sell-off of tech companies and previous star-performers like ecommerce company Coupang, AI group SenseTime and delivery service DoorDash have tanked. The often-controversial Son said that he is looking to sell Fortress Investment Group, the asset manager it bought in 2017, Lossmaking SoftBank quits its Uber ride (The Times, Tracey Boles) shows that it already reversed out of its remaining stake in Uber at a profit – and there will no doubt be more disposals to come. SoftBank/Son: downhill march proves painful for Grand Old Duke of Tech (Financial Times, Lex) highlights the ups and downs that the company has been through but ultimately, with every asset that has blown up in Son’s face, a little bit of credibility disappears with it. Son is SoftBank, so if he ever leaves it would be a massive deal. We haven’t got there yet, though!

Meanwhile, Baidu to operate fully driverless robotaxis in China (Financial Times, Primrose Riordan and Gloria Li) shows that Baidu has edged ahead of rivals including Pony.ai, WeRide and AutoX in the race to launch driverless taxis. The internet giant (aka “China’s Google”) announced that it would be allowed to operate its Apollo Go cars in Wuhan and Chongqing in a testing phase. * SO WHAT? * This all sounds lovely, but no-one really knows how long it’ll take to become commercial. Everyone is going to be watching this VERY closely for what to do and what NOT to do!

On the subject of taxis, I thought I’d include ‘Flying taxi’ prototype set for take-off in 200mph tests (Daily Telegraph, Howard Mustoe) as a prototype flying taxi designed in Bristol by Vertical Aerospace is about to start flight tests. It is designed to carry four passengers plus a pilot for trips of up to 100 miles and has customers like American Airlines, Virgin and Japan Airlines lined up with over 1,400 orders already on the books. Interestingly, it signed a deal with Babcock to develop an air ambulance version of the VX4 prototype to sell to 999 services and the military. * SO WHAT? * This sounds like a very exciting development, but I’m still sceptical as to the practicality of its application as a “taxi” that you can get on a night out, for instance. I do, however, think it will be good for emergency services and the military 👍.

Then in UK urged to come up with chip strategy (The Times, Katie Prescott) we see that Intel has appealed to the UK government to put some money toward chip production to help diversify the supply away from the Asian region. So far, it is spending €33bn on the Continent on semiconductor research and manufacturing with financial support from the EU and the US is also putting more money into it. At the moment, only 10% of the world’s semiconductors are made in Europe but it is hoped that this will rise to 20% by 2030. At the moment, Britain is reviewing the sector but hasn’t yet got as far as setting out a plan. * SO WHAT? * It sounds like Intel is willing to invest in production facilities in the UK as long as we can pony up a decent slug of cash. It is clearly a compelling option as semiconductors could be “the new oil” but it’ll probably come down to a case of how much financing the UK is willing to put up.

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

London rents rise, spending patterns evolve, Next comes to the rescue of Joules and The Works lacks confident…

London tenants facing ‘increasingly unaffordable’ rents (Financial Times, Persis Love and James Pickford) shows that private tenants in London are faced with “increasingly unaffordable” rents, according to the homeless charity Shelter. The shortage of properties in the capital has led to prospective tenants having to compete in bidding processes and others are being asked for a whopping 12 months of rent in advance! Data from Zoopla shows that rental growth in inner London was around the 20% level in Q1 of 2022 and 10% in outer London. * SO WHAT? * A 20% rise sounds chunky but there are reports of much higher demands and, clearly, with the current cost-of-living crisis, this is going to be the source of a lot of stress for consumers. Some estate agents are even charging prospective tenants to VIEW properties! Demand is clearly way ahead of supply at the moment…

UK retail sales growth fails to keep pace with soaring inflation (Financial Times, Chris Giles) cites the latest figures from the BRC and KPMG which show that UK consumer spending actually grew in July versus the same month last year although it lagged the rise in inflation, powered by sales of clothing, picnic treats and electric fans. Squeezed households reduce spending on holidays and dining (Daily Telegraph, Tom Rees and Szu Ping Chan) cites data from Barclaycard which shows that there was a 7.7% increase in spending in July versus July last year, but that was more about rising prices than rising volumes. * SO WHAT? * Although the headline figures don’t look too bad, activity seems to be slowing

down and as prices keep rising, you would have thought that this will eventually flow through to that headline figure. I think that we really need to see what the new PM is going to do and whether measures will be put in place that will help to ease household finances.

Among the retailers themselves, Next in talks to take £15m stake in struggling chain Joules (The Guardian, Mark Sweney) shows that the apparel retailer is close to taking a £15m stake in the preppy retailer (about 25% of the company). * SO WHAT? * Given that Joules share price has fallen by almost 90% over the last year and that the deal is being done “at no less than Joule’s current market price”, this move should at least put a floor under the shares. The deal will be subject to the approval of Joules’ shareholders. The troubled retailer is also in talks to use Next’s online platform to run its digital operations. It’s good to see that Joules is at least making positive moves. From Next’s point of view, this looks like just another name to add to its platform that it will have picked up very cheaply.

Then in The Works sounds early warning over Christmas sales period (The Guardian, Sarah Butler) we see that the discount crafts, books and toys retailer is reining in its full year outlook as it voices uncertainty over this year’s Christmas season. * SO WHAT? * I’m actually quite surprised by this because I think that The Works looks like it could be really well-placed to take advantage of families wanting to have a “cheap and cheerful” Christmas as the shops are quite a lot of fun to go into and are crammed with stuff. I guess we’ll just have to wait and see how things go.

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

PageGroup sees signs of slowdown and Berenberg is to wield the axe…

Page Group reports slowdown in hiring as recession fears mount (Daily Telegraph, Simon Foy) shows that one of the UK’s biggest recruiters is seeing early signs of a slowdown in the recruitment market although it has done well so far and reckons its full-year profits will be in line with expectations. The company noticed that decision making from clients has been taking longer recently – and this has been interpreted as being an early sign that the overall market could slow down. * SO WHAT? * It still seems to me that the overall market is pretty tight at the moment but I do wonder whether employers are trying to bring recruitment more in-house as they want to avoid the fat fees recruiters charge in an effort to cut

costs. This could delay decisions and reduce volumes from the recruiters’ point of view IMO.

Then in Berenberg to cut staff as chill sweeps City (Daily Telegraph, Simon Foy) we see that the German investment bank is planning on cutting staff numbers by over 5% as deal-making is getting thinner on the ground. This follows their June headcount reduction in the New York office, where the bank cited difficult market conditions. * SO WHAT? * In terms of absolute numbers, it’s not that big, but given that it’s the lack of dealflow that was cited as the reason behind the cuts, you’d think that other investment banks will follow suit. It won’t just be investment banks that will be affected either IMO (that includes other advisers on deals, e.g. lawyers etc)…

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

News Corp does well from ads, Veolia makes a sale, BioNTech puts hope in a new jab and Norway decides to cut energy exports…

In a quick scoot around other interesting stories today, Ad sales and data demand boost profits at Murdoch’s News Corp (Daily Telegraph, Ben Woods and Giulia Bottaro) shows that record profits at Rupert Murdoch’s media empire were powered by strong demand for online advertising sales and demand for its data business. It goes against the trend that some tech companies are finding of falling ad revenues.

Veolia to sell Suez’s UK waste business for €2.4bn (Financial Times, Leke Oso Alabi) shows that France’s Veolia will sell the British waste business of recycling group Suez to Macquarie Asset Management for €2.4bn following pressure to do so by the UK’s Competition and Markets Authority as part of efforts to ease Veolia’s takeover of Suez. Macquarie has a load of experience in owning UK infrastructure assets.

Elsewhere, BioNTech backs Omicron jab to bolster slowing sales (Daily Telegraph, Hannah Boland) shows that the company made famous by its Covid jabs is putting more hopes into its new Covid vaccine that should give better protection against Omicron. It reckons it could start to issue the new jab in October, when booster rollouts are due. Sales fell by 40% in the latest quarter, so clearly it could do with a booster itself!

Then Norway’s power curbs threaten UK winter plan (Daily Telegraph, Matt Oliver) shows that the country is indicating that it will ration electricity exports top make sure it has enough to power itself. * SO WHAT? * This is bad news for the UK and Europe as everyone scrambles to ensure power supplies ahead of winter. This is likely to push prices even higher as the National Grid will have to use coal-fired plans as back-up. Usually, Norway gets loads of electricity from its hydroelectric plants, but the hot weather has led to lower-than-normal levels and it will take months to be replenished by rain and melting snow.

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

…in other news…

I saw this pop up on my YouTube feed the other day and thought it was great. It’s a brilliant cover of a Tina Turner classic – and for once, it’s not Pomplamoose doing it! Watch it HERE. It sort of reminds me a bit of something that Jimmy Fallon used to do in his show! HERE‘s a clip of Jimmy Fallon and Adele.

1. In MACROECONOMIC NEWS, we look at the prospects for UK and European inflation
2. In PAY NEWS, City workers continue to get big pay boosts, pay access companies see a rise in activity, UK Amazon workers plan strike action and Next has a pay problem
3. In LEISURE NEWS, hotels up prices and the majority of top restaurants are firmly in the red
4. In MISCELLANEOUS NEWS, the ad slump spreads and UK farmers warn of veg shortage
5. AND FINALLY, I bring you the secret to crispy bacon plus an early look at what toys are going to be “hot” this Christmas…

So we look at the inflation prospects for the UK and Europe (they ain’t pretty)…

Inflation fears hit record as energy bills surge (Daily Telegraph, Louis Ashworth) shows that fears about inflation among UK businesses have reached their highest level on record, according to a monthly report by BDO. A weaker pound, labour costs/shortages and supply chain issues are proving to be a toxic economic cocktail and the prospect of the imminent energy price cap review isn’t likely to improve sentiment either. * SO WHAT? * Last week, the Bank of England warned that we’re on track for 13% inflation and a 15-month recession beginning with GDP contraction in the final quarter of this year (recession – unless you’re American and make up the rules as you go along 🤣 – is defined as being two consecutive quarters of GDP contraction) but many economists believe that we’ll see GDP contraction before that. I personally think that a lot will depend on who the incoming PM is, because I think they’ll try to put in place stimulatory measures to get us out of a rut

to win back the electorate, but my own base case is that we’ll start to see contraction right at the end of this year, which will continue at the beginning of next year.

However, Europe risks a worse inflation crisis than UK as chaos grips energy market (Daily Telegraph, Tim Wallace) argues that Europe will be in a worse position due to its bigger reliance on Russian energy supplies. Although our inflation rate stands at 9.4% at the moment, inflation across the EU is actually 9.6% (taken as an average where you’ve got 6.1% in Malta and 22% in Estonia, for instance), according to Eurostat – and Spain’s rate broke through 10% in June. It is also worth bearing in mind that inflation in the US now stands at 9.1%. Things in Europe could get worse as energy shortages hit – but also food prices are likely to rise because of poor local harvests (which I’ll be referring to later), so although things are bad here, it’s not just us. Not much consolation, I grant you, but worth bearing in mind.

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

City workers get big pay bumps while others have varying issues…

City workers earn double-digit wage rises while lowest paid get one percent increase (The Guardian, Phillip Inman) cites the findings in the latest CEBR research which highlight the stark contrast in fortunes for City workers and low-income workers. Despite an increase in the minimum wage of 6.6% in April, many have not been able to benefit and given that paying for “basics” makes up a larger proportion of income for those on less money than those on more, the suffering will be that much more acute for those on lower incomes. The research found that average pay in the finance, professional and technical industries has grown particularly strongly in 2022 as year-on-year increases in pay for those in finance and insurance peaked at 19.8% in February and are still well above 10%. * SO WHAT? * I would say that one of the main reasons that “professional” pay is higher is because competition for staff is more acute, but the other major thing is that they deal in higher amounts of money. For instance, if you are a banker and have brought in £2m in commission/fees for your employer which was 50% more than the previous year, it would seem somewhat churlish to give that banker a £50k salary and a £2k bonus, for instance. I would argue that their bargaining power is generally pretty strong right now (although that’s not going to continue forever) and that perhaps the only way that lower income workers can increase their pay in a meaningful way is to change jobs as the labour market is still tight. This is why we are now seeing unions getting increasingly militant. They are probably likely to get their way at the moment, but there will be a time when employers are just going to say no and start cutting people.

Growing numbers sign up to access their pay early (The Times, Katie Prescott) shows that demand for companies that offer pay advances is rising as the cost-of-living crisis squeezes household budgets. One of the biggest providers of this service in the UK,

Wagestream, has seen its client numbers double to over 300 employers over the past year – and they include big names like the NHS trusts, Gordon Ramsay’s restaurant group, Next, Halfords and Pizza Express, among others. At the end of 2021 just under a million workers had access to this service, but it’s now over 2.5million! The majority of those on the service increasingly want early access to cover basics and Wagestream charges a flat fee of £1.50, which is either paid for by the business or by the staff themselves. * SO WHAT? * Whilst these kinds of services are clearly a life-saver on a regular basis, this is a sticking-plaster solution for household finances and I would imagine that, using them along with putting more on credit could become a big problem in the making. This is definitely something that the government – and particularly the incoming PM -needs to pay attention to before it gets out of hand.

Elsewhere, Amazon workers plot strike action over pay (Daily Telegraph, Louis Ashworth) shows that UK Amazon workers are considering a wave of strikes, stoked by the recent 35p an hour pay rise offered to staff at Amazon’s Tilbury, Essex. Staff want a £2 per hour pay rise, so it’ll be interesting to see how this goes. The company will no doubt use the argument that their starting pay is significantly about the minimum wage of £9.50 an hour.

Then after the glory of last week, Next faces HMRC probe over incorrect staff payments (Financial Times, Jonathan Eley) shows that the retailer is going to be investigated after a rollout of the new payroll system resulted in thousands of employees getting the wrong salary payments. * SO WHAT? * If HMRC finds that Next has paid workers below minimum wage, it can fine the company up to 200% of the arrears owed to the workers! This could be particularly painful for Next given the macro environment and take the edge off any success it has even thought it looks like this was unintentional…

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

Hotels put up prices but restaurants are still under water…

There’s still room at the inn, but at a higher price (The Times, Jessica Newman and Dominic Walsh) cites the latest figures from BNP Paribas Real Estate which show that the Average Daily Room rate (ADR) for Q2 shot up by 70% versus Q1 to £122.86, with “revpar” (REVenue Per Available Room) rising to its highest ever level of £98. One hotelier, Michels & Taylor, has seen the proportion of energy bills versus turnover rise from 3-4% to 8-10%, which is impacting its profit. * SO WHAT? * At the moment, there is still

demand but rising rates will surely push more people into using services like Airbnb, don’t you think? 

Meanwhile, Two-thirds of UK’s top restaurants in the red after Brexit, Covid and inflation (The Guardian, Julia Kollewe) cites a report by UHY Hacker Young which shows that a record 64% of the biggest restaurant companies are currently making a loss due to higher debt costs, staff shortages and rising energy bills. On the positive side, many of them are predicting a return to profitability. * SO WHAT? * I suspect that there will be renewed calls for another VAT holiday on hospitality to help the sector in the short term.

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

The ad slump continues and farmers warn of a veg shortage…

In a quick scoot around other interesting stories today, Advertising slowdown spreads beyond tech giants to hit TV networks, publishers (Wall Street Journal, Suzanne Vranica and Alexandra Bruell) shows that US TV networks and new publishers are feeling a slowing in momentum for the advertising market, showing that the slowdown in the digital ad market is spreading to analogue advertising (TV ads etc.). As I keep saying, advertising is seen as a leading economic indicator as ad spend tends to get cut as economies tip into a downturn but then boom again when they start going up again. Companies like Warner Bros Discovery, CNN, TNT and the Food Network are all experiencing the same thing at the moment.

Back in the UK, Farmers warn of vegetable shortage after heatwave (Daily Telegraph, Tom Rees) shows that a combination of the recent heat wave ravaging crops and the bottleneck at Dover making imports more difficult means that fewer vegetables are likely to be available to customers. European farmers are also suffering the same hot weather effects and crops like onions, potatoes, carrots and lettuces are likely to be particularly badly affected.

Then in news just in, SoftBank reports record $23bn quarterly loss as tech downturn hits (Wall Street Journal, Megumi Fujikawa) shows that the Japanese tech investor has reported a massive loss as it takes flak for its exposure to a tech sector that has been sold off widely. The tough times continue…

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

…in other news…

I have to say that this sounds somewhat counterintuitive but I’m willing to give it a try next time – and if I remember, I’ll get back to you as to what I find but Man claims key to perfectly crispy bacon is to boil it in a pan – not fry it (The Mirror, Zahna Eklund) could help you achieve the perfect fry-up/sarnie (if you are a meat-eater, of course!).

Now I know that we’re not yet out of summer, but if you are one of those people who like to stay ahead of things, this may be for you: Top 10 John Lewis toys for Christmas including Jiggly Pets pink pup and Le Mieux Pony (The Mirror, Ruki Sayid). I’m a fan of the Lego “Santa’s Visit” set myself! The Play-Doh Ice Cream Cart looks pretty good also 👍.

1. In MACRO, COMMODITIES & CRYPTO NEWS, the Bank of England hikes interest rates, Glencore rakes it in and Coinbase does a deal with BlackRock
2. In CONSUMER/RETAIL NEWS, US jobless claims rise, DoorDash delivers, WeWork recovers, Netflix and Prime slide while Next gets optimistic
3. In INVESTMENT/M&A NEWS, ethical investors pivot on defence, SES and Intelsat are in deal talks while Mediclinic accepts an offer
4. In MISCELLANEOUS NEWS, Toyota’s profits halve, UK car sales continue to slide, Rolls-Royce announces a loss and the UK construction industry slows down
5. AND FINALLY, I bring you another 3D digital billboard and advice on how to practice effectively…

So the Bank of England hikes rates, Glencore booms and Coinbase does a deal with BlackRock…

It has been pretty well-flagged but Bank of England raises rates sharply and warns of 13% inflation by end of year (Financial Times, Delphine Strauss and George Parker) shows that the Bank of England bit the bullet and boosted interest rates by 0.5% (the biggest one-time increase for 27 years) to 1.75% yesterday. This follows similar recent moves by the US Federal Reserve and ECB but it added to the overall gloom by predicting a 15-month recession later this year. Bailey will have to lower rates to fight recession (The Times, Mehreen Khan) highlights market expectations that interest rates will have to come down from around the final quarter of next year to jolt the economy back to life.

Although there is a great deal of newsflow regarding rising energy prices and their role in the cost-of-living crisis, Glencore reaps benefit of energy chaos with record $12.1bn profit (The Times, Emily Gosden) highlights a company that’s “winning” in a big way from the whole situation. It made a record profit in the first half – nine times as much as it made a year earlier largely thanks to its commodities traders and Glencore: fortune of war falls to miners not military (Financial Times, Lex) points to Glencore’s ultimately

prescient investment in its coal business before the Ukraine war even started. * SO WHAT? * There are always winners and losers in any given situation and although headlines like this will inevitably lead to intensifying calls for windfall taxes, a one-off tax raid can only really be a short-term solution (if it happens, that is). I would argue that a longer term solution would be to come up with a better co-ordinated longer-term world energy transition plan.

In crypto news, Coinbase forges deal to give BlackRock clients access to crypto (Financial Times, Oliver Ralph, Scott Chipolina and Harriet Agnew) shows that Coinbase is going to connect to BlackRock’s IT platform Aladdin – apparently it’s like A Whole New World (sorry – I couldn’t resist that) – in order to give the asset manager’s clients smoother access to digital asset markets. Bitcoin will come first, then others will follow. * SO WHAT? * This is good news for Coinbase, which has come under a lot of pressure recently what with crypto assets coming under heavy fire amid an industry beset by recent failures, and shows another step towards the mainstream for crypto assets. Having said that, Cryptocurrencies: tech companies should follow Tesla’s lead and sell out of Bitcoin (Financial Times, Lex) says that companies like Block and MicroStrategy who invested in cryptocurrencies need to stop holding reserves in such a volatile asset class and follow Tesla in ditching them to cut their losses. Yes, there may be upside from here, but the volatility isn’t worth it…

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

US jobless numbers go higher, DoorDash delivers, workers boost WeWork, Netflix and Prime sub cancellations increase while Next reports a decent performance…

Jobless claims in US near record amid wave of tech layoffs (Daily Telegraph, Giulia Bottaro) shows that the wave of layoffs in the tech industry have partly powered the rise in claims for unemployment benefits to their highest levels of the year, according to the latest data from the US Labour Department. Neflix, Vimeo and Gopuff are among the tech players to cut staff numbers.

Meanwhile, in terms of consumer trends, DoorDash revenue climbs as restaurants raise prices, consumers continue spending (Wall Street Journal, Preetika Rana) shows that consumers in the US are still ordering in takeaways despite the cost-of-living crisis as the food delivery company managed to increase revenues in the latest quarter. It also buoyed investors by outlining a positive outlook, all of which sent its share price up by over 13%.

Consumers are also going to offices in greater numbers and WeWork’s offices are back in business (The Times, Tom Howard) shows that the flexible office space provider has now seen business recover to pre-pandemic levels. Its occupancy rate reached 72% between April and June – a far cry from the lockdown low of 46%. The company posted decent Q2s and is confident about the outlook but it is still yet to hit profitability!

It was also interesting to see Thousands cancel Netflix or Prime Video (The Guardian, Mark Sweney), which cites the results of the latest survey from the Broadcast Audience Research Board (Barb) that shows almost 800,000 UK households cancelled their subscriptions to Netflix or Amazon Prime. On the other hand, Disney+ and Apple TV+ managed to add subscribers! * SO WHAT? * Clearly the cost-of-living crisis is forcing more people to take a close look at their finances and streaming services are an easy target. However, I maintain my opinion that, overall, I think Amazon Prime should lose subscribers at a slower rate than the others because an Amazon Prime subscription includes a number of other services whereas other rivals are “just” streamers.

Then in retail news, Next forecasts bigger profits as summer dresses and suits lift sales (The Guardian, Sarah Butler and Julia Kollewe) shows that the apparel retailer is on track to make £10m additional annual profits versus expectations due to the rise in sales of suits and summer outfits as well as the demise of competitors. Strong first-half sales gave Next the confidence to upgrade its full-year profit forecasts. Clothing prices are set to rise in the second half by about 8% and are expected to continue going up into next year. * SO WHAT? * It remains to be seen as to whether people will still feel like buying clothes when the shock of rising utility bills really hits home as we head into winter. Having said that, it may sound silly, but I would imagine that jumper and thermal underwear sales will do well because I think people will layer up at home (well, more than they normally would!) to save money on bills.

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

Ethical investors change, there’s more satellite talk and Mediclinic gets a buyer…

Ethical investors ‘U-turn’ on defence (Daily Telegraph, James Warrington) highlight an interesting change in behaviour as it seems that the investor class that generally avoided putting money into the defence sector has done an about-turn following Russia’s invasion of Ukraine. It has focused minds on the matter of national security and Meggitt profits as spending on air travel and defence soars (Daily Telegraph, Gareth Corfield) shows that the British defence and aerospace supplier has seen its sales jump by 20% on the defence spending boom. If investors continue to avoid defence stocks, they are clearly going to miss out on outperformance if this kind of spend continues (which I think it will).

What is it about satellites these days?? Satellite operators SES and Intelsat in deal talks (Financial Times, Anna Gross and James Fontanella-Khan) shows that now Luxembourg-based satellite operator SES is in talks with US-based operator Intelsat about a possible merger as sector consolidation continues to gather pace.

They are talking about a potential structure and talks are being given a bit of extra pep because of other deals going on around them! Basically, there’s a lot of interest in Low-Earth Orbit (LEO) satellites at the moment as Eutelsat and OneWeb are in the throes of combining in order to take on the bigger Starlink, operated by Elon Musk’s SpaceX and Jeff Bezos’ Project Kuiper. This itself followed another takeover in November last year by US company Viasat of the UK’s Inmarsat in a $7.3bn deal. The talks are in early stages. * SO WHAT? * The race to provide better quality communications around the world in more remote places is getting more frenzied as no-one wants to get left behind. I would think that the cash burn rate in this industry is pretty horrific and so scale is key if companies have ambitions to survive for the long term.

Then in other M&A news, London-listed hospital group Mediclinic accepts £3.7bn offer (Financial Times, Rachel Banning-Lover) shows that the private hospital group, which is actually headquartered in South Africa, has accepted a chunky takeover bid from a consortium of its biggest shareholder and (somewhat bizarrely) the world’s biggest container shipping group, Remgro (which owns Mediterranean Shipping Company, or MSC).

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

Toyota and UK car sales have a tough time, Rolls-Royce has supply chain woes and the UK construction industry loses momentum…

In a quick scoot around other interesting stories today, Toyota profits halve as shutdowns and supply chain drive up costs (Daily Telegraph, Matthew Field) shows that the car giant’s profits were almost cut in half for the quarter as it struggled with rising raw material costs, chip shortages and China’s Covid lockdowns. That said, it has decided to stick with its full-year forecasts. I do wonder whether this is optimistic, though, as Car industry fears for future as slide in sales worsens (The Times, Robert Lea) cites the latest data from the Society for Motor Manufacturers and Traders which show that new car registrations fell by 9% last month. Is this really going to get that much better as we go into the end of the year, given the cost-of-living crisis? No wonder car manufacturers are trying to focus on the high end of their ranges as more affluent customers still appear to be willing to spend. This is the fifth consecutive month of falling car sales.

Elsewhere, Rolls-Royce blames supply chain woes and Covid hit to aviation for £111m loss (The Guardian, Jasper Jolly) shows that the jet-engine maker fell short of market expectations in terms of profitability as its outgoing CEO warned of further supply chain problems and the effect of inflation. * SO WHAT? *Rolls-Royce has suffered badly under the pandemic as its revenues closely correlate with the number of hours its engines are in the air, so given the pickup in aviation activity you would have thought this would continue to improve.

Then in Construction industry hit by first slowdown in 18 months (Daily Telegraph, Louis Ashworth) we see that British builders are in a right state. They are now at their most downbeat since the beginning of the pandemic thanks to a combination of inflation and recession fears, according to the latest PMI data from S&P. The fall was driven by a major slowdown in civil engineering activity while housebuilding declined slightly. * SO WHAT? * Increasing labour costs, supply chain problems and rising raw material costs continue to dog the industry and although order books are improving, the rate of improvement is slowing down. Although the energy-intensive nature of the industry is undoubtedly a worry as energy prices continue to rise, infrastructure spending is set to rise and the housing market is still growing, albeit at a slower pace.

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

…in other news…

I know I’ve included stories about the 3D digital billboard in the Shinjuku district of Tokyo, but this new one is possibly even better (I think it’s right next to the in/famous Shibuya scramble crossing that you always see on telly): Giant puppies frolic, play with frisbees in the Tokyo skyline in new 3-D billboard display (SoraNews24, Casey Baseel). I would love to see these billboards myself one day as they look amazing!

I thought I’d end the week on something that you might find useful- a TedEd video on how to practice things effectively. Watson’s Daily is all about improving your knowledge, after all 😜! I hope you have a great weekend!

1. In MACRO, ENERGY & CRYPTO NEWS, Pelosi’s visit has repercussions, the Saudis refuse to play ball with Biden, the Bank of England decision is due, the UK services sector slows down, Turkey has a ‘mare, energy price drama continues and crypto wallets get drained
2. In CAR NEWS, BMW hits reverse, Nissan plans a push on rentals and Lucid cuts production
3. In TECH NEWS, SoftBank moves to sell down its Alibaba stake, Nintendo takes a chip hit, Avast-Norton looks likely while Samsung and Hynix rethink China exposure
4. In MISCELLANEOUS NEWS, SocGen reports, Nationwide focuses on the wealthy, Hugo Boss vibes with the young’uns and eBay puts in a solid
5. AND FINALLY, I bring you cutting technology in the pet heat regulation arena…

So Pelosi causes a stir, the Saudis don’t play ball, the Bank of England is due to make a decision, UK services sector growth slows, Turkey has a ‘mare, high energy costs cause havoc and crypto wallets get raided…

📢 It’s Thursday, so it’s time for the one hour weekly ZOOM call for SILVER and GOLD subscribers! *** THIS CALL WILL RUN FROM 6PM TILL 7PM ***. As usual, during this call, I will do a round-up of the week’s news and then open it up to questions from you. After that, depending on how much time we have, we will also debate the following:

• Should the Pelosi trip to Taiwan have taken place? What do you think the implications will be?
• When will the housing market bubble burst? Where will it burst?

You can just listen into the debate if you want to, but I thought I’d give you the heads up on topics for if you would like to engage. You will definitely get more out of this call if you take part in the debate, though 😜!

Taiwan tension to wreak havoc at ports and disrupt shipping (Daily Telegraph, Matt Oliver and Louis Ashworth) shows that Nancy Pelosi’s overnight stay in Taiwan was well-received in Taiwan but caused anger in China. The result of this anger was China embarking on live-fire military exercises close to Taiwan in a show of force over four days. An analyst at maritime intelligence company Dryad Global said that clients were now being advised that there is now a substantial threat to the safety of vessels and crew members. * SO WHAT? * I think this is pathetic posturing over a wizened old lady have a few meetings with a few people (she’s only the SPEAKER for God’s sake!). I really do think that the REAL reason behind all of this is that the Chinese economy is doing badly and that the regime wants to take attention away from this, the disastrous state of its real estate sector (which is hugely important to the economy) and its Covid failures to get a whole “us against the world” thing going on. Unfortunately, this could well mean that an invasion of Taiwan is more likely and it will give international companies even more impetus to avoid investment in anything related to China given the very real threat of major sanctions should an invasion go ahead. Ultimately, I don’t think that the avoidance of China investment will be healthy for the future because if that happens the end game could be that both Russia and China get effectively cut off from the West, meaning that there are no ties to stop the two leaders from invading wherever they like. In that scenario, it will be a case of who has the biggest army and who can throw the most money and resources at the military. I really hope that it does not get that far.

Meanwhile, Saudis reject Biden plea for major oil boost (Daily Telegraph, Rachel Millard) shows how little clout Biden has in foreign affairs as his pleas for an increase in oil production fell on deaf ears. Basically, Saudi Arabia has the US and the rest of the world by the balls and can pretty much do what it likes. It seems to vacillate between wanting to be BFFs with the US and with Russia and, at the moment, that’s obviously going to be a bit tricky. I guess we’ll just have to wait until Saudi Arabia actually wants something that the West has before we see any movement. BTW, in case you were wondering, I have nothing against Biden – I just think that nothing seems to be going right for him at the moment, and that this is not the time to be ineffectual. Maybe Pelosi’s Taiwan jaunt was a bit of a testosterone moment for the old fella to remind the Chinese he’s still there, but it may well have repercussions for many countries other than the US!

In the UK, Fear of persistent inflation may push Bank to raise interest rates (The Guardian, Larry Elliott and Phillip Inman) shows that there’s a possibility that the Bank of England will hike interest rates by 0.5% today in a move that has never happened since the Bank went independent in 1997. We won’t have to wait too long to see whether Andrew Bailey and chums make the decision!

Meanwhile, Services sector grows at slowest rate since February of last year (The Times, Mehreen Khan) cites the latest S&P/CIPS survey which shows that the UK services sector is experiencing its weakest growth since February 2021. The health of the services sector is vital to the UK as it accounts for almost 80% of our GDP.

Although we are all tearing our hair out over here about our inflation situation, spare a thought for the Turkish people as Turkey inflation set to exceed 80% (The Times, Mehreen Khan) highlights the latest data which shows that consumer prices rose to 79.6% in July versus the same period last year, its highest level since 1998. * SO WHAT? * President Erdogan’s policy of going against pretty much every other economist/minister/leader/central banker around the world in CUTTING interest rates to tame inflation (everyone else and their dog INCREASES them) is clearly not paying dividends. Having said that, rising interest rates around the world have not yet tamed inflation either (it takes quite a while for them to take effect) so I guess that Erdogan will be hanging onto that as long as he can before admitting failure (although I don’t ever see that happening! He’s just not that kind of guy…). I think that Erdogan’s nightmare scenario will be other countries breaking out of this inflationary spiral and Turkey’s situation getting worse just as he gets into the final straits of a campaign leading into elections next year.

In energy news today, IMF urges Europe to pass on energy costs to consumers (Financial Times, Valentina Romei) shows that the IMF is clearly living in its own fantasy world as it said that passing on rising energy costs to consumers will encourage “energy saving” and a shift towards renewables. What a pile of 💩. It added that governments should help the most vulnerable. This is precisely the reason why no-one should take the IMF too seriously (unless you want them to give you money – in which case, take them very seriously!). Yes, of course the most vulnerable should be protected – however, there are a lot of people stuck in the middle and without their spending power, economies are just going to stagnate. It really is amazing how people in institutions like this lose touch of reality. I think that governments need to get a bit more creative and provide a mix of finance options to target different parts of society. The IMF will no doubt argue that passing on higher energy costs is needed because they are expected to stay high for a few years – but I would argue that this gives governments time to, say, subsidise energy bills over perhaps the next three-to-six months whilst putting together something more robust that will tide us over for the next couple of years. Just passing on all the costs right now and going forward sounds like a supreme act of idiocy and economic suicide. I know what you’re thinking – hey Peter, just say what you really mean 🤣! Rant over.

The whole gas problem continues to rumble on in Germany faces ‘chain reaction’ without its gas from Russia (Daily Telegraph, Tim Wallace) shows that the country could be letting itself in for a “chain reaction of unforeseen consequences” if Russia cuts off gas supplies completely, according to Commerzbank analysts. They said that key industries could be severely disrupted which would have knock-on effects to other parts of the economy and Firms face 500% rise in energy bills (The Times, Emily Gosden) cites projections from analysts at Cornwall Insight which suggest that British businesses could face massive increases in their energy bills as wholesale energy prices jump.

In the wonderful world of crypto, Solana wallets ‘drained’ in blow to crypto network (Financial Times, Scott Chipolina) shows that thousands of accounts linked to the Solana blockchain have been hacked, draining at least 7.767 digital wallets. The Solana Foundation said that the draining was due to a bug but they still haven’t got to the bottom of it. It is worth noting that in recent hacks, users didn’t get their funds back because transactions generally can’t be reversed on blockchains. Solana is designed to process up to 50,000 trades a second and some think that it could be “the Visa of the digital asset ecosystem” but stunts like this will undoubtedly set it back (or even prove fatal if users don’t get their money back). Yet another example of why crypto needs more regulation IMO…

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

BMW suffers, Nissan thinks creatively and Lucid cuts production…

BMW suffers reverse amid supply chain bottlenecks (Daily Telegraph, Louis Ashworth) highlights BMW’s disappointing performance and outlook as it said that car deliveries will be lower this year versus last year thanks to parts shortages, China lockdowns and Ukraine war disruption. It has painted very downbeat picture of the second half, which is interesting as it sounds like this is in complete contrast to recent performance at arch-rival Mercedes-Benz and other up-market car makers.

Nissan plans rental push for electric vehicles to keep precious metals in Japan (Financial Times, Eri Sugiura) shows that the Japanese car maker is launching a new long-term rental subscription service that will enable drivers to rent its EVs for a number of years rather than just buying them in an effort to keep precious metals the cars rely on within the country. It is hoped that

this will stop the flow of Japanese cars being sold abroad as second-hand models, taking their precious metals with them. * SO WHAT? * This sounds like an interesting development and comes not long after Toyota started offering a subscription service in Japan for its first major EV model. Fascinating though this is I can’t help wondering whether they would be better off designing cars in such a way that the batteries could be taken out more easily and then people would only have to “rent” the battery itself. No doubt this is easier said than done!

Meanwhile, EV maker Lucid cuts production outlook in half (Wall Street Journal, Sean McLain and Ryan Felton) shows that yet another EV start-up – this time, Lucid – is having to cut production due to supply chain and logistical problems. It says that it is now only expecting to manufacture 50% of the cars versus its original plans – the second time it’s had to cut its production target this year. The company’s share price fell by over 12% in after-hours trading.

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

SoftBank sells, Nintendo falters, Avast moves forward and Samsung/Hynix have a rethink…

SoftBank raises $22bn in moves to sell down Alibaba stake (Financial Times, Ryan McMorrow and Kana Inagaki) shows that the company has sold down a third of its Alibaba stake so far this year via derivatives that give it a right to retain the shares. If it decides not to buy the shares back, this could be the end of a very profitable era for SoftBank where the Alibaba stake was arguably its making. Unfortunately, given the flak that Alibaba has been taking recently, SoftBank would be cashing out at multiyear lows but I guess it could do with the cash as its other tech holdings have suffered from the tech sell-off we’ve been seeing this year.

Chip drought sees wheels come off at Nintendo (The Times, Dominic Walsh) shows that Nintendo’s Q1 performance fell short of forecasts as it continued to suffer from the ongoing global chip shortage. It said that although current production was playing catch-up, it expected to be back on track from the end of the summer as the shortages ease. * SO WHAT? * It wasn’t just Nintendo that has suffered from the lack of chips – Sony reported pretty much the same thing last week. It was interesting to see that Nintendo disappointed, however, as it has a reputation for providing overly-conservative forecasts.

Meanwhile, UK regulator makes U-turn on Avast-Norton cyber security deal (Financial Times, Kate Beioley) highlights a massive 40% jump in the UK-listed Avast’s share price as the Competition and Markets Authority (CMA) made a U-turn, saying that it would green-light an $8bn merger with US software company NortonLifeLock. The CMA had originally voiced concerns, saying that the merger would reduce competition in the sector and result in higher prices for customers, but clearly it has now changed its mind.

Then in Samsung and SK Hynix rethink China exposure following US chips act (Financial Times, Christian Davies and Song Jung-a) we see that both South Korean companies are reconsidering their thinking about their Chinese investments as the US is about to bring in restrictions on the production of advanced chips following the passing of the Chips and Science Act last week. There will be $52bn in grants to encourage advanced chip manufacture in the US, but they will only be accessible by those who do not upgrade or expand their existing chip capacity in China for 10 years. This is all part of wider plans to improve US supply chains whilst also discouraging investment in China.

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

SocGen reports, Nationwide focuses on the wealthy, Hugo Boss is down with the kids and eBay does well…

In a quick scoot around other interesting stories today, SocGen reports €1.5bn loss on Russia exit but higher-than-expected revenues (Financial Times, Sarah White) shows that French bank SociétéGénérale went into a €1.5bn loss over Q2 as it sold its Russian operations, but managed to report better-than-expected revenues. It also announced new growth targets, all of which resulted in a 3.7% bump in the share price.

Staying in the financials sector, Nationwide targets wealthy buyers amid fears of mortgage chaos (Daily Telegraph, Rachel Mortimer) shows that Britain’s biggest building society is now looking to focus in on rich homebuyers by offering to lend them up to £5m as concerns increase about the plight of the less well-off in the cost-of-living crisis. Those who earn more than £100,000 a year will be allowed to get a mortgage worth up to 5.5x their annual income – up from the previous limit of 4.49x. It has also increased its maximum loan size and eased lending limits which could, in some cases, double the amount that applicants can borrow. * SO WHAT? * Given the cost-of-living crisis, it probably makes sense to go after this market as the affluent continue to remain relatively immune to rising prices and it comes after similar moves from the likes of HSBC and Halifax.

Elsewhere, Hugo Boss brands back in fashion with young buyers (The Times, Dominic Walsh) shows that the German fashion group is confident enough to raise its guidance for sales and profits after a strong Q2 performance. It seems that its “bolder look and feel” had boosted its popularity with younger consumers. Frasers Group has a 30% stake in the company, so Mike Ashley will be very pleased with this!

Then in Careful consumers boost eBay (The Times, Robert Miller) we see that the online auction site managed to beat market expectations for Q2 despite rising inflation. I would imagine that sites like eBay will see more activity in a downturn as people look for items to buy for a bargain and/or sell to make some extra cash.

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

…in other news…

Although you could argue that pets should stay indoors when it’s really hot outside, if you absolutely, positively have to take them outside then perhaps this device could be just the ticket: The heat’s ruff on pets – but a new wearable fan in Japan is helping hot dogs keep cool (SkyNews). It’s this season’s must-have accessory for those heat-sensitive pets-about-town 😁

1. In SPENDING TRENDS NEWS, I take a look at what we are spending money on, what we’re going to have to spend money on and what we’re not spending money on
2. In UK PROPERTY NEWS, UK house prices keep rising but Purplebricks manages to post a loss and equity release is on the up
3. In TECH NEWS, TSMC faces difficult decisions, AMD does does well but Intel doesn’t and Instagram’s chief comes to London
4. In MISCELLANEOUS NEWS, Maersk rakes it in, Ferrari motors, Man Group gets dented and nuclear fusion continues to progress
5. AND FINALLY, I bring you dog vs kitten…

So Pelosi goes on a trip, Hong Kong hits recession again, UK manufacturing suffers, wind turbines get bigger and Saudi Aramco makes an acquisition…

📢 HERE WE GO! I’m going to be doing my monthly roundup of JULY today with Jake Schogger. July has been an incredibly eventful month, so if you want to get the only monthly overview in town, please register HERE to see the Ant and Dec of commercial awareness 😁

In these straitened times, it’s important to know what we’re spending (or not spending!) our money on.

WHAT WE ARE SPENDING OUR MONEY ON:

Starbucks hit by higher costs for wages and supplies, but US demand is strong (Wall Street Journal, Heather Haddon) shows that although labour and ingredient costs are rising, US consumers in particular are not foregoing their daily cup (or bucket – have you seen the size of a venti?? What about a trenta???) of joe. Its highly customisable offering is proving to be very popular and its loyalty programme appears to be doing its job.

Record bookings at Airbnb as travel recovers (Daily Telegraph, Giulia Bottaro) shows that we’re spending money on “cheap” stays as the company said it is currently experiencing its “strongest peak-travel season yet”, with July 4th bringing in its best ever revenues! It was very bullish about Q3 revenues and profits and its listings were up by almost 25% in both urban and non-urban destinations. * SO WHAT? * The performance was driven by spending cuts it made over the pandemic and its flexible business model. It also benefited from more listings as the cost-of-living crisis is pushing more people to supplement their income. Although this was all good, the shares dropped by 7% in after-hours trading (they’ve fallen by over a third since the beginning of this year) as investors remain mindful about local authorities around the world cracking down on short-term rentals, particular in popular tourist destination cities.

Uber revenue doubles, sending shares surging (Wall Street Journal, Preetika Rana and Meghan Bobrowsky) highlights Uber’s strong performance over the quarter as the cost-of-living crisis has pushed more people to become Uber drivers. Despite inflation, customers just keep on coming and revenues were boosted in part by high ride prices and investors piled in to boost the share price by a chunky 19% on the news. Uber Eats is also growing, albeit at a slower pace than it had experienced under lockdown – and it is seeing volumes rise as it branches out into grocery and household essentials delivery.

WHAT WE HAVE TO SPEND OUR MONEY ON:

There’s bad news in Travellers face higher fares after BA extends suspension of Heathrow ticket sales (Financial Times, Sylvia Pfeifer and Oliver Barnes) where passengers who are looking to book last minute are likely to suffer as British Airways extended its suspension of short-haul ticket sales from Heathrow, where it is the biggest operator. * SO WHAT? * BA blamed it on Heathrow imposing a limit last month of 100,000 passengers on departures until September 11th in order to keep travel disruption under control. It looks like the current suspension of ticket sales could also be extended further. This may take the edge off travel demand – and for those who do manage to book, it’s yet another expense to contend with…

I’ve been referring to this quite a lot recently but Direct Line drives up prices after double blow on profits (The Times, Ben Martin) shows that the car insurance specialist is pushing up premiums thanks to the rising cost of claims following a very quiet lockdown. Direct Line announced a profit warning last month and cut its outlook for the full year. It’s not the only one to suffer in this area as

claims are rising across the entire industry. * SO WHAT? * Car insurance is just one of those things that you HAVE to have, so I expect that consumers will look more closely at their coverage with a view to switching if the prices aren’t right. If that is a case, then there may be a race to the bottom in terms of pricing in order to win more business – and if that happens, that means margins are getting thinner.

Greggs warns of third price rise in a year as 9pc cost increase bites (Daily Telegraph, Helen Cahill) shows that even the humble sausage roll isn’t immune to global macroeconomic factors as the company warned of price hikes thanks to rising costs. * SO WHAT? * The baked goods chain has already increased prices twice in the last six months but margins are bound to come under pressure at some point in the near future as Greggs remains committed to being one of the cheapest lunch options, with average spend per visit is about £4 on average.

WHAT WE ARE NOT SPENDING OUR MONEY ON:

Match splits with Tinder CEO as earnings fall short (Wall Street Journal, Denny Jacob) shows that revenues for Match Group fell well below market expectations and it looks very much like Tinder CEO Renate Nyborg has had to take the fall as part of “new” CEO Bernard Kim’s efforts to turn performance around. * SO WHAT? * Tinder merged with Match in 2017 and the group in general is still not seeing demand back to pre-pandemic levels. Its outlook for the rest of the year wasn’t exactly inspiring either, so it is not surprising that the share price fell by a chunky 22% in after-hours trading yesterday.

In Robinhood lays off 23% of staff as retail investors fade from platform (Wall Street Journal, Caitlin McCabe) we see yet another lockdown-winner-turned-loser as the online brokerage loses flaky retail investors. This is the second round of layoffs so far this year and will mean that 1,000 people will have lost their jobs as a result. This is all a far cry from when the stock was riding high in Q2 last year! * SO WHAT? * Robinhood joins the likes of Deliveroo, Hopin and many others who used lockdown performance to predict future performance – and fell well short. Investors in the IPO will be very p!ssed off as the share price has cratered by a massive 76% from its IPO price last year. Yesterday it was trading at $9.23 versus the IPO price of $38! There’s also a cloud hanging over the company as regulators take a closer look at its operations. I personally think that Robinhood needs to be taken over by a “proper” grown-up company in order to survive long-term otherwise it could just disappear up its own 🍑.

Oatly lowers full-year outlook, posts wider loss (Wall Street Journal, Connor Hart) highlights Oatly’s tricky situation currently as the cost-of-living crisis is making it harder to convert cow milk drinkers into oat milk drinkers, leading to it lowering its sales outlook for the year. This came as the company reported a bigger loss for its Q2 thanks to higher raw material costs and supply chain problems. The company said that demand was still strong, but that momentum is fading.

Then we see that another lockdown trend seems to be slowing down dramatically as End of DIY boom is blow for builders’ merchant (The Times, Robert Lea) highlights a major problem for builders’ merchant Travis Perkins. Its fortunes are normally driven by the long-term performance of the construction industry, but its “hidden gem” Toolstation business that supplies small-time builders and DIY-ers is seeing a major slowdown. * SO WHAT? * It’s interesting to see Travis Perkins confirming what Wickes reported last week – disappointing sales. Travis Perkins’ share price is now about half what it was last September and there is now speculation that it has fallen so far that it is now a takeover target…

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

House prices keep going up but Purplebricks makes a hash of it and equity release activity increases…

UK house prices rising at 11% a year despite cost of living crisis (The Guardian, Julia Kollewe) cites the latest Nationwide figures which show that the UK housing market is remaining stubbornly buoyant, boosted by a tight jobs market and relative lack of homes on the market. Despite this, Purplebricks swings to loss despite post-lockdown sales surge (Financial Times, George Hammond) shows that it is possible to snatch defeat from the jaws of victory as it has plunged into a loss, with no prospect of emerging from the rut until 2024. * SO WHAT? * Purplebricks is Britain’s biggest online estate agent and launched in 2014. The CEO said that performance had been dented by agents being treated as employees rather than contractors but has also suffered from its limited ability to get a slice of the hot market as it only charges a flat fee at the point of instruction rather than taking a percentage of

the sale price. It also managed to lose market share to rivals. It sounds to me like this CEO needs to be booted out because it is pretty impressive for an estate agent to manage to lose in THIS housing market! This is failure of epic proportions to my mind and will cost the company dearly when the housing market cools down. 

Homeowners tap into record equity release to beat squeeze (Wall Street Journal, Charlotte Gifford) cites findings from the Equity Release Council which show that a record £1.6bn was withdrawn from properties in the last three months as homeowners are using the money to cover day-to-day living. This is 36% more than had been unlocked in the first half of 2021. * SO WHAT? * I guess that this is a sign of the times, although equity release is relatively new and there may be an element here of more people feeling comfortable about being able to do it. It is concerning that, far from original fears that oldies will withdraw money and splurge it on Lamborghinis, they are withdrawing the money just so they don’t have to worry about paying utility bills and the grocery shop.

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

It’s all go in semiconductors and Insta comes to London…

In the wonderful world of semiconductors, Taiwan/Pelosi: push to pick US or China leaves TSMC in dire straits (Financial Times, Lex) highlights the very tricky decision that Taiwanese semiconductor giant TSMC is going to have to make – will it pledge allegiance to the west or will it stick with China? Given that speaker Nancy Pelosi’s visit has caused Taiwanese, Hong Kong and Chinese stock markets to fall, the Taiwan dollar to hit a two-year low and Chinese warplanes to fly over the Taiwan Strait we can see how geopolitical pressures are developing such that it is going to have to pick a side. This is a cloud hanging over a company that should otherwise be benefiting hugely from the current global chip shortage.

There are contrasting fortunes in Chip maker AMD prospers as rival Intel struggles (Wall Street Journal, Asa Fitch) as AMD reported a major increase in quarterly sales thanks to the strong

performance of its data centre business, something that rival Intel has been struggling with. Despite this decent performance, AMD indicated a rather lacklustre outlook whilst maintaining full year targets in contrast with Intel which cut its full-year projections last week. It seems that semiconductor companies are having to deal with shifts in demand – and some are dealing with it better than others!

Then in Instagram head Adam Mosseri to relocate to London (Financial Times, Madhumita Murgia and Cristina Criddle) we see that the boss of Instagram is being moved over to London as it continues to battle rival TikTok. This will make London Instagram’s base for the next few months as Mosseri builds out its presence here and works hard to retain its community of influencers. Fun fact: did you know that UK engineers are up to three times cheaper to pay than in San Francisco?

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

Maersk continues to do well, Ferrari races ahead, Man Group suffers and nuclear fusion advances…

In a quick scoot around other interesting stories today, Maersk raises profit forecasts for third time this year as supply chain hit persists (Financial Times, Richard Milne) shows that the world’s second biggest container shipping group has hiked annual profit forecasts for the third time this year due to the ongoing effect of supply chain disruptions, Ferrari reports record profits as supercar sales boom (The Guardian, Mark Sweney) highlights record quarterly sales for the prancing horse as rich people continue to spend unabated – prompting Ferrari to raise its full-year forecast for full-year revenues – and Man Group hit by client nerves over market turbulence (Financial Times, Laurence Fletcher) shows

that one of the world’s biggest hedge funds saw weaker-than-expected fund inflows as clients sought to withdraw money in anticipation of imminent market turbulence while Man Group: long story falls short for UK hedge funds with go-go algos (Financial Times, Lex) suggests that its fortunes may actually turn around in the event of market volatility and its fancy algorithms.

Meanwhile, Nuclear fusion start-up bids to raise £400m (Daily Telegraph, Howard Mustoe) shows that Oxford start-up First Light Fusion is now looking to raise £400m to fund the next stage of its research into nuclear fusion. The company hopes to raise the target in the next few months as the new development edges the technology closer to commercialisation.

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

…in other news…

You’re going to think I’m going soft, but I have to confess that I watch at least one of these sorts of videos before I go to sleep to wind down at the end of the day. I just find it relaxing and it makes me smile! Here’s a contest between a big dog and a very tiny kitten. Yes, sorry. Extreme cuteness alert!

1. In MACRO, ENERGY & OIL NEWS, Nancy Pelosi goes to Taiwan, Hong Kong falls into recession again, UK manufacturing slumps, wind turbines get bigger and Saudi Aramco goes shopping
2. In REAL ESTATE NEWS, we see headwinds for office property and developments for residential
3. In CONSUMER/RETAIL-RELATED NEWS, US consumers go to dollar stores, German retail sales fall, Heineken passes on prices, Alibaba hopes to keep in contact with New York and JD Sports gets slapped
4. In MISCELLANEOUS NEWS, Pearson looks to the future, trad ad agencies do better than expected and HSBC has issues
5. AND FINALLY, I bring you a very intriguing map…

So Pelosi goes on a trip, Hong Kong hits recession again, UK manufacturing suffers, wind turbines get bigger and Saudi Aramco makes an acquisition…

📢 HEADS UP! I’m going to be doing my monthly roundup of JULY tomorrow with Jake Schogger. July has been an incredibly eventful month, so if you want to get the only monthly overview in town, please register HERE to see the Ant and Dec of commercial awareness 😁

Nancy Pelosi to meet Taiwan’s president on Wednesday (Financial Times, Demetri Sevastopulo and Kathrin Hille) shows that the Speaker of the US House of Representatives is scheduled to meet Taiwan’s president Tsai Ing-wen tomorrow in a visit that will ruffle feathers in China. This is ostensibly part of a wider agenda of a tour of Asia (she’ll be popping in to Japan, South Korea and Malaysia) but will be the first time a speaker has visited Taiwan in 25 years. China has already threatened a robust response to the visit and continues to oppose any visit by US lawmakers to Taiwan. It is particularly irksome for them because she is third in line to the presidency and is in the same party as Biden. China’s military has increased its movements around Taiwan in the weeks leading up to the visit. * SO WHAT? * I really do wonder whether this ridiculous posturing is all about taking the focus away from China’s faltering economy and the questionable effectiveness of its Covid vaccine policy and response. The fact that things aren’t going brilliantly on the domestic front makes things more dangerous IMO because governments sometimes do go to war when things aren’t great because they galvanise the population and give an excuse to quieten any dissent. Let’s hope that things don’t get out of hand!

Meanwhile, Zero Covid rules hammer economy in Hong Kong (Daily Telegraph, Szu Ping Chan) shows that Hong Kong has, like mainland China, suffered from the “Zero-Covid” response as its economy has contracted again, meaning that it has now fallen into

recession twice in three years. Trade was particularly poor as exports dropped by 7.7% in Q2 but tourism is also having a nightmare what with its border to the mainland remaining indefinitely closed. It is also worth noting that, according to the European Chamber of Commerce in Hong Kong, almost 50% of European companies are planning to fully or partially move out of the city. Tough times.

Back home, Declining demand sends growth in manufacturing to two-year low (The Times, Arthi Nachiappan) cites the latest PMI from S&P and the Chartered Institute of Procurement & Supply’s monthly survey of 650 British manufacturers, which shows that growth in UK manufacturing has dropped to its lowest level since May 2020.

In energy news, Hundreds of onshore wind turbines to be made taller (Daily Telegraph, Rachel Millard) shows that energy companies are looking at getting past planning restrictions by making existing turbines taller with bigger blades. Octopus energy is planning on upgrading 1,000 existing turbines in conjunction with wind turbine maker EWT by 2030. Nearby homeowners will have to approve. As things stand currently, wind power accounts for about 10% of Britain’s annual electricity.

Then in Saudi Aramco to buy Valvoline’s products arm for $2.65bn (Financial Times, Tom Wilson) we see that the world’s biggest oil producer has agreed to buy the global products division of motor oil and lubricants group Valvoline for a chunk of change. Valvoline said towards the end of last year that it would be splitting itself into its global products division (which sells lubricants and engine maintenance products) and its engine retail service business (vehicle maintenance). The deal will still need to get regulatory approval but will stand alongside Saudi Aramco’s existing line of branded lubricants should it get the go-ahead.

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

Office property could be heading for a ropey future while the UK residential property market keeps on going…

The triple whammy for office real estate (Financial Times, Patrick Jenkins) is a really interesting article which suggests that the combination of working from home, the evaporation of cheap financing as interest rates rise and push for more environmentally-friendly working environments (and the cost of getting existing properties up to these standards) is leading to the inevitable slowdown/demise of the office property sector. * SO WHAT? * It seems that generally accepted wisdom suggests that it’s not a question of whether the current bubble will burst – more a question of how deep will the ramifications be felt and how long they will last. Offices in city centres may fare slightly better than out-of-town counterparts as office workers tend to value the buzz and amenities of a centrally-located workspace.

Meanwhile, on the residential property side of things, The red hot market that just refuses to cool down (The Times, James Hurley) cites the latest research from Zoopla which says that although

demand in the home-buying market has slowed down over 2022, it’s still 25% above the five-year average – although it thinks that the market will calm down to this level by the end of the year. It did say, though, that forecasts of a crash are “unwarranted” as demand is still there while supply is very tight. Activity could, however, be stoked further as Mortgage rules boost for first-time buyers (Daily Telegraph, Melissa Lawford) shows that first-time buyers will now be able to borrow almost £50,000 more than they were able to previously because the Bank of England has now removed the stipulation on lenders to only grant mortgages to those who can afford payments at 3% above the standard variable rate. The rule was originally brought in after the financial crisis to protect consumers and now it’s been removed (potential buyers will be tested at 1% above the standard variable rate), it will enable buyers to take out bigger mortgages (potentially 15% bigger). * SO WHAT? * In theory, this should lead to more lending, but the reality may be more muted as banks are likely to test at 1.5% or more above the standard variable rate to take into account likely interest rate rises.

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

Consumers around the world tighten their collective belts, Heineken passes on higher costs, Alibaba wants to stay in touch and JD Sports gets a slap…

Consumers are facing challenges everywhere at the moment. Dollar-store diners and vats of shampoo help families cope with inflation (Wall Street Journal, Rachel Wolfe) shows that American consumers are looking to cut costs for essentials as well as all the extraneous stuff. This is proving to be good news for dollar and discount stores as average spending on groceries at discount chains has gone up by an impressive 71% from October 2021 to June 2022, according to stats from InMarket. German retail sales fall by largest rate on record (Financial Times, Valentina Romei) shows that German consumers are reining in their spending as well as data from Destatis, Germany’s ONS equivalent, shows that retail sales dropped by the biggest annual rate since records began in 1994. If we want to console ourselves with an alcoholic beverage, then we need to get it in quick as Heineken puts prices up by 8.9% and warns of more rises to come (The Guardian, Joe Middleton) shows that Heineken posted better-than-expected profits thanks to putting its prices up – and said that may not be the end of it! * SO WHAT? * Hold that celebration, though – Heineken: drinkers’ willingness to swallow higher prices will be tested (Financial Times, Lex) points out that the company won’t be able to do this forever and that rising energy prices will no doubt eat away at current margins. Interestingly, 40% of its brand portfolio is made up of premium brands – which is quite high versus rivals. This means

that worsening economic conditions could make the company more vulnerable in a downturn if the current trend of “premiumisation” reverses.

Elsewhere, Alibaba to ‘strive’ to keep New York listing despite addition to SEC watchlist (Financial Times, Oliver Telling) shows that the troubled Chinese e-tailing behemoth is keen on maintaining its place on the New York Stock Exchange in the face of plans by the SEC to delist it in 2024. Basically, companies that don’t provide access to audit files, they will be kicked off the exchange. * SO WHAT? * China has banned its companies and accountants from providing foreign regulators with access to audit files and so the only foreseeable way for Alibaba to maintain its listing is if it is granted some kind of extension by China.

Then in JD Sports agrees £38m sale of Footasylum after UK watchdog ruling (The Guardian, Jasper Jolly) we see that the sporting retailer has agreed to sell Footasylum to German asset management firm Aurelius Group for less than 50% of the price it originally paid after it was forced to dump it by the UK’s competition watchdog. * SO WHAT? * The whole debacle has been dragging on JD Sports and cost it a lot in lawyers’ fees as the Competition and Markets Authority (CMA) had major misgivings about JD Sports buying Footasylum on the grounds that it would weaken competition. Maybe the company can put the whole thing behind it now (especially as long-time CEO Peter Cowgill is no longer there either) and get back to benefiting from the ongoing athleisure trend. 

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

Pearson looks to the future, trad advertising is doing better than expected and HSBC is having issues…

In a quick scoot around other interesting stories today, Pearson expects education demand to insulate against economic headwinds (Financial Times, Mark Wembridge) shows that the publisher is relying on demand for its courses and textbooks to protect it against a global economic slowdown whilst also showing that its digital business is turning a corner. It said yesterday that it expected its profit margin to grow to the mid-teens next year – two years ahead of its original plans – thanks to cost cuts and solid demand for its courses. The company is trying to make the transition from traditional textbook publisher to a digital brand catering not just to the traditional school and college market – but also to adult education and training programmes. Digital tokens feature in next chapter at Pearson (The Times, Katie Prescott) picks up on an interesting aspect of what Pearson said yesterday – that it is looking at applying NFTs to its online textbooks in order to capture revenues from the resale market. Normally, Pearson textbooks are resold up to seven times – but the company only gets money from the initial sale, so getting multiple bites at the cherry is clearly something worth pursuing! * SO WHAT? * It sounds like Pearson is undergoing a really interesting transition to the digital world. Its Pearson+ subscription service, which gives users access to online textbooks and other digital content,

attracted a 64% rise in users over the first half of this year and I would have thought that a shift into new areas outside its traditional comfort zone – especially in the “upskilling” of employees – will continue to boost the company’s fortunes.

Advertising: digital slowdown creates opportunity for trad ad agencies (Financial Times, Lex) shows that, amid the general downturn in digital advertising being felt acutely by the likes of Meta, Google, Snap and Twitter, traditional advertising agencies are actually doing OK relatively speaking. * SO WHAT? * Interpublic, Omnicom and Publicis actually raised their year end revenue forecasts recently as digital advertising has lost some of its “targeting” power with the introduction of new privacy features. Traditional ad agencies are able to use their own pool of data to target and reach new customers, so they aren’t doing as badly as you might expect!

Then in HSBC pledges to restore dividend to pre-pandemic levels (Financial Times, Tabby Kinder and Stephen Morris) we see that the bank has promised to get its dividend back on track while it faces all sorts of other issues including pressure from its biggest shareholder, Ping An, to split its Asian and western operations. That said, it posted better-than-expected quarterly results. The drama continues…

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

…in other news…

Beware – the map in this article is seriously addictive! See the article here: Interactive map reveals the most notable person from your hometown (The Mirror, Milica Cosic) and the map itself HERE. It is quite mesmerising!

1. In MACRO, OIL & ENERGY NEWS, China manufacturing dips, UK firms swerve investment and sanctions on Russian oil trading are eased while the US ponders sanctions on companies supporting Iranian oil shipments and companies consider energy conservation
2. In INDUSTRY TRENDS, we look at tourism in Europe and investment in defence
3. In MISCELLANEOUS NEWS, data centres restrict London housing development, first-time buyers move out of London and we look at what appears to be a lawyer pay bubble
4. AND FINALLY, I bring you Spidey dancing in another supermarket…

So China manufacturing falters, UK firms slow investment, sanction chat abounds and we look at practical efforts to cut electricity usage…

📢 HEADS UP! I’m going to be doing my monthly roundup of JULY this week with Jake Schogger. July has been an incredibly eventful month, so if you want to get the only monthly overview in town, please register HERE to see the Ant and Dec of commercial awareness 😁 Way-aye

Covid restrictions halt expansion in China’s key manufacturing sector (The Times, Ben Martin) highlights the surprise contraction of China’s manufacturing activity last month as the world’s second largest economy takes a hit from Covid lockdowns. China’s official Purchasing Managers’ Index fell to its lowest level for three months. * SO WHAT? * Readings like this make it look like the official target of 5.5% GDP growth for the year is looking increasingly difficult to attain, particularly as the economy continues to be buffeted by ructions in the real estate sector.

Meanwhile, UK firms slash investments due to soaring prices and Brexit (The Guardian, Graeme Wearden) shows that UK business leaders are now at a point where there are equal numbers planning to cut investment as there are to increase it, according to the latest survey by the Institute of Directors. * SO WHAT? * This is notable because it is signifies the lowest number of directors willing to increase investment since October 2020. According to this Economic Confidence Index, business leaders are markedly less confident about the prospects for the UK economy. TBH, this is unsurprising given the constant negative newsflow on consumer confidence, political limbo in the UK and the prospect of a very expensive winter – not to mention all the other macroeconomic hurdles that everyone else is facing! I would have thought a new leader at number 10 could provide a jolt with (perhaps) a new team and new policies, but that’s all a bit academic at the moment.

In West eases efforts to restrict Russian oil trading as inflation and energy risks mount (Financial Times, Tom Wilson, Harry Dempsey and Oliver Ralph) we see that European governments are now walking back aggressive rhetoric on Russian oil trading and are delaying plans to cut Russia out of Lloyd’s of London maritime insurance market in addition to allowing some international shipments through. * SO WHAT? * This just goes to show how

much of a stranglehold Russia has on European energy. The EU announced a worldwide ban on giving maritime insurance to vessels carrying Russian oil just two months ago, but there has been a lack of co-ordination between Europe and the UK on this – and UK support is vital to the threat as it is at the epicentre of the world’s marine insurance industry. If both sides DID eventually get their act together, it would be a nightmare for Russian exports but concerns were expressed about the effect of a SUDDEN global ban on maritime insurance – potentially massive price hikes.

Talking about sanctions and oil, US eyes sanctions against global network it believes is shipping Iranian oil (Wall Street Journal, Ian Talley) says that the US administration is considering imposing sanctions on particularly UAE-based businesses and their related networks for allegedly helping export Iran’s oil. Negotiations are currently being hammered out about Iran’s nuclear programme and how sanctions might be lifted. It has been claimed that the oil has been passed off as Iraqi, thus managing to avoid Western sanctions aimed at restricting Iranian oil exports. Exxon Mobil, Koch Industries and Shell could be caught up as the drama continues to unfold…

Meanwhile, Roast the chickens earlier and dim the lights: French retailers prepare for power shortages (Financial Times, Leila Abboud and Jonathan Eley) looks at one way French retailer Carrefour is considering as part of wider efforts to consume less energy and/or minimise usage at peak times. Fun facts: France’s tertiary sector (shops, financial institutions, services) accounted for 16% of France’s energy consumption last year, industry 20% and residential buildings 30%. Back in the UK, Iceland’s freezers give retailer a chill as its energy bills soar (Daily Telegraph, Laura Onita) shows that Iceland (the retailer, not the country!) may see its credit rating cut due to rising bills given that its freezers use a lot of electricity! Clearly, it uses way more freezers than its rivals so it is particularly exposed. In the first quarter of this year, its energy bill went up by £19m, and it’s likely to climb even further! On a broader basis, Energy-intensive firms may face shutting early or self-rationing (The Times, Tracey Boles) highlights potential actions as energy prices continue to rise. Only last week we heard that Centrica was cutting its exposure to industrial and commercial customers to maintain its profit margins – and it sounds like ScottishPower is also going down a similar road. Tough times, but given that wholesale gas prices have doubled this year it is unsurprising.

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

European tourism is hot right now but we look at the prospects while Mitsubishi Heavy ponders defence spending…

Summer tourism brightens eurozone economy but cost of living crisis casts shadow (Financial Times, Amy Kazmin, Akila Quinio and Peter Wise) highlights the current tourism boom in the Eurozone but concerns are building now about what effect recession will have in the second half of this year. France, Italy and Spain have benefited from the influx of tourists yearning for foreign climes but once the sun goes down, European businesses will be facing more supply chain problems and energy-related challenges. * SO WHAT? * According to the latest data from Eurostat, consumers are increasingly reluctant to splash out on big purchases and some (particularly domestic) holidaymakers are either opting for shorter holidays or avoiding them altogether. If you consider that energy prices will continue to rise and that the ECB is

likely to raise interest rates further (making debt more expensive), then post-summer prospects aren’t looking all that great.

In Mitsubishi Heavy warns survival of Japan’s defence industry at stake (Financial Times, Eri Sugiura and Kana Inagaki) we see that Mitsubishi Heavy Industries, Japan’s #1 defence contractor, is saying that governments should be willing to pay more for their military hardware as defence spending increases, after years of ever-tightening margins. MHI echoes wider concerns about heightened risks from China and North Korea. * SO WHAT? * Margins for companies supplying the Japanese government with military equipment are supposed to be up to 7%, but it seems that the ACTUAL margin has often been zero or even negative given inconsistencies of contracts and costs. More imports of US equipment have also hit domestic makers. It is widely believed that Japan will indeed increase defence spending but given that PM Kishida faces other economic pressures, including rising healthcare costs for the elderly, there’s only so far he can go.

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

Data centres hit housing (!), first-time buyers flee London and lawyer pay gets interesting…

As rising energy prices continue to pervade all areas of the economy, Data centres suck the power grid and delay new housing (Daily Telegraph, Gareth Corfield) shows that developers were told last week that new projects in West London would not be possible until after 2035 because the electricity grid has run out of capacity. This wasn’t just because of tightening energy supplies – it was due to rising demand for data centres which take up tons of capacity. New developments in Hillingdon, Ealing and Hounslow are all vulnerable. What a shocker! This is particularly tricky given that there is already a shortage of houses in London and the South East.

Sticking with real estate, First-time buyers flee London (Daily Telegraph, Rachel Mortimer) cites research by estate agent

Hamptons which shows that the number of Londoners leaving the capital in order to get their foot on the property ladder has reached an all-time record high! In the first six months of 2022, 28% of Londoners buying outside the city were first-time buyers. This has clearly been driven by more WFH and rising London prices.

If you’ve been reading Watson’s Daily over the last few months, you’ll know that I have commented from time to time about rising pay for both junior and senior lawyers, so I thought Lawyers’ pay is soaring, but is boom set to bust? (The Times, Jonathan Ames) would be interesting to highlight because it poses the question – how long can the good times last? There are worries that we are in a pay bubble that is about to burst, particularly as M&A advisory work loses momentum and some are even talking about the first large-scale redundancies in a generation. Where that will fall in terms of seniority is a subject of debate…

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

…in other news…

I’ve brought you a different video of this guy before, but his Michael Jackson-dancing-Spider-Man-In-A-Supermarket shtick is just so uplifting! This is just what you need on a Monday morning, no? Maybe you’ll “wanna be startin’ something” at your local after watching this 😁!

1. In MACRO & ENERGY NEWS, US GDP contracts again, Shell and Centrica boom, EDF makes a big loss and German consumers face massive bills
2. In TECH NEWS, Apple outperforms, Amazon posts a net loss, Meta has difficulties and Twitter’s in limbo
3. In CONSUMER GOODS/SPENDING TRENDS NEWS, Nestlé ups prices, Diageo toasts success, while Sky and ITV suffer and Stellantis and Bentley do well
4. In MISCELLANEOUS NEWS, JetBlue agrees to buy Spirit, Jack Ma plans to relinquish control over Ant Group and defence companies get a boost
5. AND FINALLY, I bring you a cute puppy certificate and a Pomplamoose cover…

So US GDP contracts again, Shell and Centrica knock it outta the park, EDF announces a massive loss and German consumers are going to pay the price…

📢 HEADS UP! I’m going to be doing my monthly roundup of JULY next week with Jake Schogger. July has been an incredibly eventful month, so if you want to get the only monthly overview in town, please register HERE to see the Ant and Dec of commercial awareness 😁

US economy shrinks for second consecutive quarter (Financial Times, Kate Duguid and Colby Smith) shows that the US GDP contracted by 0.9% on an annualised basis in Q2 after a 1.6% contraction in Q1. Most economies’ definition of recession is two consecutive quarters of GDP contraction, but the US makes its own rules and says that it isn’t a recession unless the National Bureau of Economic Research says so (they use other “broader” measures). Fed’s Jay Powell calls time on running commentary for rate rises (Financial Times, Colby Smith) shows that the Fed’s chief has decided to stop providing detailed indications of the direction the central bank is going in future because he has been burned in the past by looking like it’s going one way only to then do a U-turn. * SO WHAT? * The cynic in me says America’s in recession but trying all it can to bend the rules to say that it isn’t. The cynic in me would also say that Jay Powell is admitting he’s done a 💩 job of predicting what the economy is going to do and doesn’t want all the extra hassle of talking to the market only to have to get flak for changing his mind later. On the other hand, you

could say that he has had to deal with exceptional circumstances (no-one was REALLY expecting a war – and they certainly weren’t expecting it to go on for this long!) and that communicating nuances of thought to the market is just a waste of time when things are changing so rapidly on a daily basis. It’ll be interesting to see whether this new non-communication strategy will let him do a better job or whether it will just lead to more market volatility as markets try to second-guess his next move with no guidance.

In energy-related news, Shell reports record profits on surging oil and gas prices (Financial Times, Tom Wilson) shows that the oil super-major has broken profit records for the second quarter in a row while Centrica reinstates dividend as profits soar during energy crisis (Financial Times, David Sheppard) shows that the owner of British Gas saw its profits quintuple – all thanks to rising oil and gas prices. Rising oil and gas prices are going to filter through and become massive bills for ordinary people as per German households to pay €1,000 a year to replace Russian gas (Daily Telegraph, Helen Cahill), which shows that the increased costs of replacing Russian gas will be felt by all. Germany is currently racing to fill its gas storage facilities to 95% by November. Meanwhile, over in France, EDF posts its largest ever half-year loss (Daily Telegraph, James Warrington) highlights a nightmare performance by the utilities giant after its performance was badly dented by nuclear outages. The worrying thing here is that it had to shut down about half of its nuclear power stations to repair corroded equipment. That doesn’t sound good, now does it!

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

Apple has a good time, Amazon has a rough time, Meta is facing challenges and Twitter is in limbo…

In Apple iPhone sales remain resilient as company reports 11% decline in profit (Wall Street Journal, Tim Higgins) we see that although the company posted an almost 11% fall in profit thanks to supply chain problems and China shutdowns, iPhone sales continued to rise despite what’s going on in the wider economy. * SO WHAT? * Overall, the results came in better than expected for the quarter and CEO Tim Cook said that he expects revenues to pick up pace in the September quarter. Nice work 👍.

Then in Amazon posts net loss for the second straight quarter as it manages slower demand (Wall Street Journal, Dana Mattioli) we see that the e-tailing behemoth posted slower sales and a net loss for the second consecutive quarter. Although its cloud computing business put in a decent performance, the overall business was dragged down by ongoing weakness in its core retail operations. Part of the poor performance was due to its stake in EV maker Rivian Automotive, whose valuation has plummeted this year – it accounted for a pretax loss of $3.9bn on its own! * SO WHAT? * It seems that investors were willing to look past these losses as the company’s share price rose by over 13% in after-hours trading. Amazon seems to be comfortable with its efforts to counteract inflation thus far as it has reined in costs here and there.

In Mark Zuckerberg’s bid to reinvent Facebook parent Meta hits early snags (Wall Street Journal, Salvador Rodriguez) we see that Meta announced yesterday that it was going to withdraw some new Instagram features that got heavy user criticism, specifically fullscreen photos and videos and the tweak in the AI that showed you more content from accounts you don’t already follow. * SO WHAT? * Meta is currently in a bit of a rough patch as it continues to feel TikTok snapping at its heels, but it has had hard times before. The company continues its evolution towards the metaverse.

Meanwhile, Twitter ‘rudderless’ as Musk saga hurts advertising business (Financial Times, Hannah Murphy, Dave Lee and Cristina Criddle) highlights tough times for Twitter as the Musk bid continues to cloud the future of the company, resulting in staff departures and plummeting morale. * SO WHAT? * All of this uncertainty is hurting its advertising business as some execs are saying (although it sounds like an excuse to me) that they are concerned Twitter’s focus will be elsewhere while it engages in a legal battle with Elon Musk, who is trying to back out of his takeover bid. On top of that, critics say that Twitter has a reputation for slow product innovation and has a narrower advertising offering compared to competitors like Instagram. This doesn’t bode well for the company’s market share, particularly while its leadership status remains so uncertain.

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

Nestle and Diageo do well but Sky and ITV are suffering while Stellantis and Bentley put in strong performances…

Continuing the recent newsflow from consumer goods companies (who are basically being very successful at jacking up their prices), Nestlé raises prices but takes hit to margins (Financial Times, Judith Evans) shows that the world’s biggest food company managed to up prices by 6.5% in the first half of the year for brands including KitKat, Nescafé, Maggi and Purina, joining rivals including Kraft Heinz, Danone, Unilever and Mondelez in passing on rising costs to customers. That said, the company saw its margins dented by sudden increases in commodities, energy and freight costs. Another interesting aspect of this was highlighted in Coffee pod sales slip amid return to offices (Daily Telegraph, Hannah Boland) which shows the effect of current labour trends as Nespresso sales in Europe fell, although they were actually up globally thanks to strong growth in North America.

Then in Diageo sales up 20% amid thirst for ‘super-premium’ spirits (The Guardian, Joanna Partridge) we see that the owner of brands such as Don Julio, Johnnie Walker, Smirnoff, Tanqueray and Captain Morgan etc.etc. saw very healthy annual sales as people returned to bars and restaurants. The company added, however, that it was monitoring rising inflation and that it expects the operating environment to be “challenging”. Like all the others, it said that it had managed to pass on higher costs to consumers via higher prices. Diageo: inflation will test the limits of premium pricing strategy (Financial Times, Lex) says that although inflation is clearly going to test its resilience, it is in a good position to benefit from the twin long-term trends of more people drinking spirits and being increasingly willing to go for more up-market brands. Having said that, the latter might lose a bit of momentum in the short term because of prevailing macroeconomic conditions.

Regarding consumer trends, Sky revenues fall as Europeans opt out amid cost of living crisis (Daily Telegraph, Ben Woods) shows that households are cutting extraneous expenditure – and Sky subscriptions are proving to be a casualty. Revenues fell by 14% in the latest quarter. Then in ITV braces for advertising downturn despite World Cup (Daily Telegraph, Ben Woods) we see further

confirmation that advertising spend is being cut as ITV is readying itself for a 9% fall in ad revenue in July and 18% drop in August. We’ll just have to wait and see whether that pans out. * SO WHAT? * Households continue to tighten their belts and I think that all extraneous costs are being looked at very closely. Those that are replicated (e.g. satellite/cable/streaming contracts) are either eliminated or slimmed down. As I keep saying, advertising is often seen to be a leading economic indicator because it is the first expenditure to go when economies weaken and the first to rise when things get better. As things stand now, it seems that advertising budgets are being hit because companies are generally trying to cut costs at the moment and are conscious that they might get less bang for their buck as consumers are going to be less willing to spend.

On the other hand, Stellantis hits record profits but warns on economic clouds (Financial Times, Peter Campbell, Joe Miller and Eri Sugiura) highlights a great performance by the owner of brands such as Jeep, Dodge, Peugeot, Fiat, Alfa Romeo and Maserati (among many others) especially as it manage to do better than rivals Nissan and Volkswagen at dealing with parts shortages and cost inflation. The company is concerned about macro conditions denting consumer confidence but then it has a big order backlog that should take it through to 2023 at least. Flying Spur sales help drive Bentley profits 124pc higher (Daily Telegraph, Howard Mustoe) provides yet more evidence that top-end cars are still selling well as the luxury car maker managed to make more profits in the first half of this year than in all of 2021. Not bad since the average price per unit is €213,000! God knows why, but the Bentayga SUV continues to be its most popular model, accounting for 40% of sales! * SO WHAT? * Although VW-owned Bentley has done well so far, it is readying itself for a potentially tougher second half and weaker sales in China thanks to Covid lockdowns.

Although it seems somewhat incongruous to put it here, I did think it was worth mentioning Housing affordability falls to its lowest since 1999 (The Times, Arthi Nachiappan), which cites the latest figures from the Office for National Statistics that show just how expensive buying a property in England has become! Right now, the average home costs 8.7x the average annual disposable income in the year to March for English properties, 6x for Welsh properties and 5.5x for Scottish ones. Buying now is a brave choice IMO.

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

JetBlue buys Spirit, Jack Ma announces plans to step back and defence companies benefit…

In a quick scoot around other interesting stories today, JetBlue agrees to buy Spirit Airlines for $7.6bn (Financial Times, Steff Chávez and James Fontanella-Khan) signals the end of a dramatic tussle for the two budget airlines that will now make it the fifth biggest airline in the US (the others being American, United, Delta and Southwest). Frontier Airlines had previously been the preferred partner for Spirit, but that all fell apart on Wednesday. JetBlue: smells like deal Spirit (Financial Times, Lex) heralds this as being a real victory for JetBlue. Next stop: approval from the regulators.

Elsewhere, Jack Ma plans to cede control of Ant Group (Wall Street Journal, Jing Yang and Raffaele Huang) shows the latest development in the “rehabilitation” of the previously rebellious fintech as Billionaire founder said he will now step back following a year of massive pressure from the regulators. * SO WHAT? * This is

a pretty amazing development and just goes to show that no billionaire is too big to take on the government as consistently as Jack Ma has. It does, however, make the long-awaited IPO of Ant Group more likely to go ahead IMO.

Then in Defence firms re-energised by war in Ukraine (Daily Telegraph, Howard Mustoe) we see that BAE Systems and Babcock are among the British companies looking likely to benefit greatly from a huge influx of orders as military budgets from governments around the world get boosted. They are the UK’s #1 and #2 defence companies and are seeing orders increasing across the board for ammo, anti-tank weapons, subs, fighter jets and combat vehicles, among other things. * SO WHAT? * After years of falling defence spend, it looks like the Ukraine war is changing all that. If investors can change their ESG rules, you would have thought that more money would flow through to defence companies so that they, in turn, can invest in more production facilities and product lines. I think that this war is going to transform their futures and I wonder whether we’ll see more consolidation in this sector. 

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

…in other news…

I challenge you not to smile when you read this: Owner couldn’t be prouder as puppy returns with sweet note on school report card (The Mirror, Nia Dalton). What a good dog!

Then I thought I’d end the week with another cover from Pomplamoose. A nice version of a classic, no?

1. In MACRO, ENERGY & CRYPTO NEWS, the Fed hikes again, Goldman predicts Eurozone recession, Hungary falls into line, Equinor and Iberdrola see profit rises, National Grid puts coal plants on standby and there’s a Bitcoin law change
2. In CONSUMER/CONSUMER GOODS NEWS, energy bills hit poorest hard, late car loan repayments rise, consumer goods companies benefit from price rises and Wizz Air aims to hike fares
3. In CAR NEWS, Ford sees rising profits, Mercedes-Benz raises guidance, UK car production recovers but JLR has chip problems
4. In MISCELLANEOUS NEWS, Meta has its first ever drop in revenues, Spotify adds subscribers, Boeing hits turbulence and Paragon shows that there’s still life in buy-to-let
5. AND FINALLY, I bring you the world’s seed bank and some very dodgy shorts…

So US inflation goes ballistic, UK growth returns, nuclear fusion gets more money (and progress) and solar panel demand rises while Celsius Network files for bankruptcy protection…

📢 It’s Thursday, so it’s time for the one hour weekly ZOOM call for SILVER and GOLD subscribers! *** THIS CALL WILL RUN FROM 6PM TILL 7PM ***. As usual, during this call, I will do a round-up of the week’s news and then open it up to questions from you. After that, depending on how much time we have, we will also debate the following:

• Should rich people be taxed more in this cost-of-living crisis? If so, how? If not, why not?
• When will interest rates stop going up and why?

You can just listen into the debate if you want to, but I thought I’d give you the heads up on topics for if you would like to engage. You will definitely get more out of this call if you take part in the debate, though 😜!

Fed raises rates by 0.75 points for second month in a row (Financial Times, Colby Smith and Kate Duguid) highlights the US Federal Reserve’s latest attempt to calm inflation as it hiked its interest rates by 0.75% yesterday. This was widely expected, but now this is out of the way, there is speculation as to whether we’ll see another 0.75% hike in next month’s meeting. Federal Reserve piles pressure on Bank of England with another steep rate rise (Daily Telegraph, Tom Rees) shows that the ball is now in the court of the Bank of England to follow with another big rate rise (0.5%?) when its Monetary Policy Committee meets next week. * SO WHAT? * The Fed was late to the interest rate rise party but is clearly now making up for it. I think that the UK has different variables to deal with that will make the Bank of England’s job quite difficult – particularly with what’s going on re our leadership at the moment. If we get a PM in who wants to cut taxes there is a chance that this might stoke more inflation, which would be something else for the Bank of England to contend with.