Friday 02/12/22

  1. In MACRO & OIL NEWS, China looks like it’s about to change its Covid stance, South Africa’s Ramaphosa’s on the edge, UK inflation expectations ease, Europe debates a price cap on Russian oil and Total cuts North Sea investment
  2. In EMPLOYMENT, RETAIL & LEISURE NEWS, US white-collar layoffs feature, law firms cut headcount and British factory workers lose jobs while Dollar General cuts its forecasts, Next buys Joules and Vue eyes Cineworld
  3. In CAR NEWS, EV running costs equal those of traditional cars, Tesla delivers its Semi trucks and Toyota announces UK plans
  4. In INDIVIDUAL COMPANY NEWS, Monzo aims for profit in 2023, Peel Hunt loses its profits, Blackstone limits property fund withdrawals, UK house prices drop sharply and Macron sticks the boot into Twitter while Musk offers advertisers incentives
  5. AND FINALLY, I bring you a home-made Advent Calendar…

1

MACRO & OIL NEWS

So China might relent, Ramaphosa has a shocker, UK inflation expectations calm, Europe plans a Russian oil price cap and Total cuts investment in the North Sea…

📢 If you don’t already follow Watson’s Daily, why not 😁?!? I started a video Advent Calendar yesterday, so please have a look as there will be lots of good stuff on there leading up to Christmas!

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

China’s Covid tsar says fight against virus entering ‘new stage’ (Financial Times, Thomas Hale, Edward White, William Langley and Eleanor Olcott) shows that China’s stance on Covid may be softening as vice-premier Sun Chunlan said yesterday that the Omicron variant was becoming “less pathogenic”, a stance that was reinforced by state media. * SO WHAT? * The government has not expressly said anything about changing its current stance officially, but it sounds like they are softening the ground for such a policy drop. This was particularly interesting in light of the sudden easing of lockdown restrictions in Guangzhou despite high case numbers. Given that the regime controls everything – including the whole narrative – it’ll be interesting to see how smoothly this transition from zero-Covid to “living with Covid” goes given all the recent civil unrest. Although the regime will no doubt go to great lengths to deny the fact that its sudden change in stance has anything to do with the protests, it does seem incredibly convenient that the state media is changing in lockstep with this new stance. What has changed exactly?? Have more people become vaccinated?? Has the local vaccine’s efficacy suddenly jumped? I just hope that people don’t die because of this change in stance.

Moving from one calamity to another, Cyril Ramaphosa’s presidency under threat after panel finds he ‘abused position’ (Financial Times, Joseph Cotterill) shows that South Africa’s

president is under huge pressure to resign as it looks very much like he abused his office, appearing to have covered up a $4 million theft from his Phala Phala farm in the northeast of the country in 2020 and wrongly sought Namibia’s president’s help. Senior ANC leaders are meeting today to decide Ramaphosa’s fate. * SO WHAT? * Ramaphosa is one of South Africa’s richest men and this has come up just weeks away from his re-election as ANC’s leader which is, ironically, being fought on the theme of anti-corruption! You couldn’t make it up. After all the corruption allegations of previous president Jacob Zuma, it just seems that South Africa can’t get away from its recent past…

Meanwhile, UK inflation expectations have eased, business survey finds (Financial Times, Daria Mosolova) cites a monthly survey of chief financial officers from SMEs for the Bank of England which shows that the current expectation is for selling prices to rise at their lowest pace since the start of the Ukraine war. * SO WHAT? * The implication here is that inflation, which hit a record 40-year high of 11.1% in October, will start to ease off in the coming months – something that has already been happening in the US and eurozone. If this proves to be the case, it could take some of the pressure off the Bank of England to raise interest rates.

In oil news, Europe plans to cap price of Russian oil at $60 a barrel (Daily Telegraph, James Warrington) highlights EU plans to limit the swelling of Putin’s coffers but the problem is agreeing what this level is going to be. The G7 last week suggested a $65-70 a barrel price cap but Poland, Lithuania and Estonia wanted it to be lower. * SO WHAT? * Although this all sounds great in principle, I do wonder how enforceable this is really going to be and whether everyone is actually going to stick to it. However, if this level is agreed on, the EU price cap will be reviewed in the middle of January and every two months after that so that the bloc can adjust if needed.

Meanwhile, Total cuts North Sea oil funding over windfall tax (Daily Telegraph, Rachel Millard) shows that the French oil giant TotalEnergies has become the first North Sea operator to reduce its investment on new wells by 25% because of Rishi Sunak’s windfall tax of 75% of profits until 2028. TotalEnergies is the North Sea’s second largest operator. * SO WHAT? * You do wonder whether this really is 100% down to the windfall tax or whether other things have played a part in this decision.

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!

2

EMPLOYMENT, RETAIL & LEISURE NEWS

White-collar and blue-collar workers lose their jobs, Dollar General cuts its forecasts, Next buys Joules and Vue considers buying Cineworld

Layoffs hit white-collar workers as Amazon, Walmart, others cut jobs (Wall Street Journal, Theo Francis and Emily Glazer) shows that the recent layoffs of workers has been concentrated in white-collar roles at Amazon (retail, devices and HR divisions) and Meta Platforms (recruitment and business teams) along with Ford, Walmart and H&M (salaried and office staff) – whilst leaving the blue-collar jobs largely untouched, something that is the reverse of what usually happens in downturns. Demand for professionals in tech, legal, scientific and finance fields is now waning and the pandemic recruitment boom appears to be firmly in the rear-view mirror. Law firm job cuts: Wall Street slump now comes for legal profession (Financial Times, Lex) highlights US law firm Cooley’s decision to fire over 100 employees, including lawyers and support workers as the boom times of SPACs, junk bond financings and M&A over the last two years have petered out. The huge scramble for talent pushed wages up, but the industry is now facing the consequences of a hiring hangover. The article implied that, much with investment banking, with higher reward comes higher risk – and that means more firing to go along with the hiring. Meanwhile, British factories laying off workers as economy heads for recession (Daily Telegraph, Eir Nolsoe) cites the latest S&P Global’s monitor of employment which shows a fall to levels not seen since November 2020. Stocks of finished goods are now accumulating at warehouses at their steepest rate for three and a half years thanks to distribution issues and fading demand. Tough times.

Then in retail news, Dollar General: supply chain woe is not a red flag (Financial Times, Lex) looks at America’s biggest discount store operator which announced a downbeat outlook, notable given that it tends to do well in economic downturns. It put the blame on supply chain costs but on the plus side it has great margins, which should help it bounce back once it sorts out these costs. I thought this was interesting given recent disappointing performances and forecasts from British discounters like B&M, Matalan and Wilko. It sounds like things are going to get worse before they get better…

Meanwhile, Next rescues Joules from administration, saving 100 shops and 1,450 jobs (The Guardian, Sarah Butler) shows that Next and founder Tom Joules put in a cheeky last-minute offer for the ailing apparel retailer and beat the likes of M&S, Frasers and the Foschini Group. It will, however, close 24 stores with the loss of around 130 jobs. The Joules website will gradually be switched over to Next’s Total Platform operation, which already has brands like Gap and Victoria’s Secret on it. Next has a 74% stakes, with Tom Joules wearing the remaining 26%. * SO WHAT? * Given that Joules’ share price has lost 95% of its value over the last year, there is clearly a LOT of work to do here! Still, it lives to fight another day…

Then in leisure, Vue has its sights on Cineworld (The Times, Dominic Walsh) shows that Britain’s third biggest cinema is gearing up to make an offer for its rival, Cineworld which itself is still reeling from its disastrous foray with Cineplex, which it offered to buy just before the pandemic hit (and then tried to get out of it, which ended up costing it C$1.23bn in damages 😱). * SO WHAT? * I would imagine that scale is particularly useful in this business and if it did manage to pull this off, it could be a precursor to a Vue IPO.

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!

3

CAR NEWS

EV running costs rise, Tesla delivers and Toyota commits…

In Electric cars will cost as much to run as petrol after latest tax raid (Daily Telegraph, Tom Haynes) we see that EVs are actually going to cost pretty much the same to run as cars running fossil fuels after EV drivers are to pay more tax from 2025 in the latest set of government tax rises. Stats from Compare the Market found that EV running costs are about £1,296 for 12 months versus £1,824 for a petrol car including petrol, tax and MOT – a £528 difference, versus the £601 difference a year ago. Those savings will then take another hit when the owners have to pay £165 a year in vehicle excise duty from April 2025 in addition to an “expensive car supplement” for cars worth over £40,000 or more, which will come to about £355. * SO WHAT? * This will clearly make people double-take when they consider an electric vehicle but given that EVs are pretty expensive to buy, you would have thought that the people who’ve bought them already have the financial capacity to shoulder the extra costs more than most.

Then in Tesla delivers Semi trucks to PepsiCo, expanding beyond passenger vehicles (Wall Street Journal, Rebecca Elliott) we see that Tesla delivered its first electric semitrailer trucks yesterday in a historic move that broadens the company’s product range beyond passenger vehicles. The trucks were delivered to PepsiCo five years on from Musk unveiling the model! They were due out in 2019. Interestingly, Musk did not say how much the vehicle cost, but still, this is a great step forward!

Meanwhile, Toyota to build green-energy trucks in UK (The Times, Robert Lea) shows that Japanese car manufacturer will unveil plans to make hydrogen fuel cells at its plant in Derbyshire, which some are seeing as a precursor to the company choosing the UK as its European hub for next-gen zero-emission tech. Toyota continues to see a future for hydrogen fuel cells and that it could potentially supply other manufacturers. * SO WHAT? * It’s great to hear about this initiative, but I’ll believe it when I see it as, currently, hydrogen fuel cell tech is still way behind lithium ion batteries. There are increased calls for it, BP and Daimler are toying with it, but Shell recently shut down all of its hydrogen car refuelling stations due to lack of use – although they still see potential for the tech for lorries.

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!

4

INDIVIDUAL COMPANY NEWS

Monzo gets perkier, Peel Hunt sees its profits wiped out, Blackstone gets protective, UK house prices drop, Macron criticises Musk while Twitter tries to woo advertisers…

In a quick scoot around other interesting stories today, Monzo chief says UK digital bank will turn a profit in 2023 (Financial Times, Siddharth Venkataramakrishnan) shows that the company’s chief is getting more upbeat, marking a bounceback from the lows of 2021 when its auditors concluded that there were “material uncertainties” about its ability to stay in business. As things stand, it is focusing on the UK but has made no secret of its ambitions to go Stateside. Given recent failed promises by fintechs, I will be taking Monzo’s assurances with a large pinch of salt!

Peel Hunt profits wiped out after equity market slump (Financial Times, Daniel Thomas) highlights the fact that Peel Hunt’s profits were pretty much wiped out due to the lack of IPOs and other offerings over the course of 2022, with the short-term outlook remaining “challenging” for 2023. Given investor reticence while the Ukraine war is raging on, this is hardly surprising. I think it’s just time for Peel Hunt to hunker down and wait for the storm to subside.

In property news, Blackstone limits withdrawals at $125bn property fund as investors rush to exit (Financial Times, Antoine Gara and Sujeet Indap) shows that private equity group Blackstone has limited withdrawals as redemption requests have risen sharply as investors want to cash out as they worry about the longer-term prospects of the commercial property market. In the residential property market, House prices fall at fastest pace since 2020 after mini-budget (The Guardian, Kalyeena Makortoff) shows that UK house prices fell in November in the wake of Liz Truss’s ill-fated mini-budget. Expectations are that the housing market will remain quiet for the next few months, but it’ll be interesting to see whether they start to pick up again in Spring.

Then in Twitter news, Macron attacks Musk over cutting Twitter moderation (Daily Telegraph, Matthew Field) shows that the French president has criticised Musk’s efforts to relax moderation rules on Twitter but in the meantime, Twitter offers advertisers generous incentives after many marketers left platform (Wall Street Journal, Patience Haggin) shows that Twitter is offering things like matching customer ad spending if they spend at least $500,000 up to a $1m cap before the end of the year. So much for weaning itself off advertising revenues!

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!

5

...AND FINALLY...

…in other news…

So just in case you don’t follow Watson’s Daily on Instagram, I started a video Advent Calendar yesterday. There will be various bits of content on here in the lead up to the Big Day including things like tips on how to improve your commercial awareness, definitions, stuff you didn’t know about Watson’s Daily, Christmas cracker jokes and other things. This isn’t the only “alternative” Advent Calendar though – oh no no no. There’s this: ‘My brother is obsessed with crisps so I made him a special one-off advent calendar’ (The Mirror, Danielle Kate Wroe). This is absolutely superb 🤣!

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Some of today’s market, commodity & currency moves (as at 0633hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq*DAX *CAC-40 *Nikkei **Shanghai **
7,558 (-0.19%)34,395.01 (-0.56%)4,076.57 (-0.09%)11,482.45 (+0.13%)14,490 (+0.65%)6,754 (+0.23%)27,755 (-1.79%)3,156 (-0.29%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$81.322$86.843$1,800.311.223841.05350135.0221.1617116,943

(markets with an * are at yesterday’s close, ** are at today’s close)