Friday 09/06/23

1. In MACRO, MARKETS & OIL NEWS, Europe falls into recession, the UK needs to watch out, CAB seeks out an IPO, CRH decides to quit London and Hunt is about to ease oil windfall tax parameters
2. In CONSUMER, RETAIL & PROPERTY NEWS, Signet suffers from poor engagement ring sales, overall retail sales fall as Frasers picks up more Asos, HSBC withdraws all mortgages, Crest Nicholson cautions and Gove’s rules hit planning applications
3. In NEWS ON CARS & TRANSPORT, GM gets Supercharger access, Barcelona loses out to ride hailers, Uber looks at different fares for greener rides, Carvana shares boom and Wizz Air takes off with summer bookings
4. In MISCELLANEOUS NEWS, UK’s involvement in AI gets an ego boost, WhatsApp offers a new thing, BlackRock buys into private credit and the FCA goes after Odey
5. AND FINALLY, I bring you some stupid ideas for what to do on a trampoline…

So Europe falters, the UK isn’t out of the woods, CAB chooses London, CRH chooses New York and Hunt fudges the windfall tax…

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:

Further to what I said yesterday, Eurozone sinks into recession as cost of living crisis takes toll (The Guardian, Richard Partington) shows that the Eurozone did in fact fall into recession in Q1 as revised figures were published by Eurostat. GDP fell by 0.1% in Q1 and Q4 of 2022, meaning that the bloc hit the requirement of a recession – two consecutive quarters of GDP contraction. Although we avoided recession (narrowly!), Inflation keeps recession in the picture (The Times, Mehreen Khan) cites the British Chambers of Commerce (BCC) as saying that we could yet fall into recession this year as stubbornly high inflation continues to pile the pressure on households and businesses. The BCC published new economic forecasts and its main case is for just 0.3% growth over the year, although this was an upgrade on the 0.3% contraction it had previously expected.

In markets news, CAB payments announces plans to pursue London listing (Financial Times, Siddharth Venkataramakrishnan) shows that the payments fintech CAB Payments Holdings has

announced intentions to float on the LSE, which is another nice boon to the latter after WE Soda last week announced intentions to do the same. CAB Payments’ main business is focused on forex and payment services for businesses that send money to emerging markets and is looking at a potential valuation of somewhere between £800m and £1bn (WE Soda, incidentally, is looking for a valuation of around $7.5bn). Is this the beginning of a turnaround of sorts for the LSE? Mind you, CRH shareholders approve listing switch from London to New York (Financial Times, Jude Webber) shows that the world’s biggest building materials group is heading stateside, which makes sense given that 75% of its earnings are in the US. It’ll leave a big hole given that its market cap is £29bn and it will follow the likes of plumbing equipment supplier Ferguson and betting company Flutter who have already shifted – or are about to shift – their respective listings, while SoftBank ditched the option of floating on the LSE in favour of heading to New York. It’s been a rubbish start to the year for the LSE, but if WE Soda and CAB can bring back the feel-good, then hopefully there will be some kind of turnaround.

In oil-related news, Hunt poised to ease windfall tax in boost for North Sea oil and gas (Daily Telegraph, Matt Oliver) shows that Jeremy Hunt is looking to announce changes to the government’s windfall tax on oil and gas companies by way of compromise that will aim to boost investment in the North Sea. Many operators have threatened to – or have already – cut investments there because of the tax and the government is thought to be on the verge of announcing a “floor” for the tax which means that it won’t kick in if oil and gas prices fall below certain 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!

We look at consumer spending patterns, HSBC whipping away mortgages, Crest Nicholson in a careful mood and the impact of Gove’s planning rules…

Consumers continue to adapt their spending behaviours against a tricky economic backdrop and Signet takes sales hit as fewer couples buy engagement rings (Daily Telegraph, Daniel Woolfson) shows that the world’s biggest diamond jewellery retailer – which owns H Samuel and Ernest Jones in the UK – has predicted a $750m dent in its sales this year because of weak demand for diamond rings. Fun fact: Signet Jewelers makes about 50% of its income from the sale of engagement rings! The company said that fewer people were getting engaged because lockdown effectively put dating on hold. Fun fact 2: apparently, couples take about three years on average to get engaged after they start dating! More broadly, First slump in retail sales in two years as borrowing costs bite (Daily Telegraph, Eir Nolsøe and Hannah Boland) cites the latest figures from BDO’s research which show that retail sales have dropped for the first time in over two years as higher rates continue to filter down to the real economy. Rising mortgage payments were the main cause of this fall in spending. On a side note in retailing, Frasers buys up more of ailing Asos (The Times, Isabella Fish) shows that Frasers Group’s stake in Asos has increased from 8.8% at the beginning of the week to 9.86% now.

In real estate-related news, HSBC pulls all mortgages after surge in demand (Daily Telegraph, Eir Nolsøe, Melissa Lawford and James Fitzgerald) shows that HSBC has gone one step further

than other banks as it withdrew all of its mortgages as it faced a deluge of customers scrambling to lock in deals before more interest rate rises! HSBC has a near-25% market share of the home loans market and withdrew all of its residential, buy-to-let and business mortgage deals, with the intention of relaunching the products on Monday. Other lenders, such as Nationwide and Lloyds, hiked their mortgage rates yesterday – but didn’t go as far as HSBC in withdrawing all of them! * SO WHAT? * This is not good news and nerves will be jangling as 700,000 homeowners face a jump of at least 50% in their monthly payments between now and February when they emerge from their current fixed rate deals.

Meanwhile, Housebuilder Crest Nicholson warns about impact of inflation on sector (Financial Times, Joshua Oliver) shows that the UK housebuilder posted a chunky 60% fall in profits after last year’s mini-Budget upended the property market. It is now on tenterhooks as sentiment that improved until just a few weeks ago is looking decidedly shakier in the face of more potential interest rate rises and consequent mortgage rate hikes that frighten off buyers. The situation clearly won’t be helped by Gove’s reforms push planning approvals to 14-year low (Daily Telegraph, Eir Nolsøe and James Warrington) as local councils granted a mere 75,033 approvals to build new homes in Q1, which was an 11% fall versus last year. This was the second weakest Q1 for approvals since 2009 (the weakest was during the first Covid lockdown). Observers say that this is due to the impact of Gove’s new green rules which have been causing delays. Things aren’t looking great in the UK real estate sector at the moment!

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!

GM gets supercharged, Barca loses out to Uber et al, Uber considers pricing, Carvana shares leap and Wizz Air gets a boost…

Following on from the recent announcement that Ford car-owners will be allowed to access to Tesla’s Supercharger network, GM EV Owners to Tap Tesla’s Supercharger Network (Wall Street Journal, Mike Colias) shows that GM’s future vehicles will be able to use Tesla’s network starting next year. They will have to use an adaptor to access the chargers until 2025, when GM will make EVs with the Tesla charging port instead. * SO WHAT? * This is further endorsement of Tesla’s network and could help to accelerate the increased adoption of EVs.

Then in EU court overturns Barcelona’s limits on ride-hailing groups (Financial Times, Barney Jopson and Tim Bradshaw) we see that the European Court of Justice ruled yesterday that Barcelona was wrong to restrict ride-hailing licences. The Barcelona city government said back in 2018 that for every 30 traditional taxi licences only one licence could go to rivals at Spain’s Cabify and Uber of the US, but this was overturned. This latest development is great for Uber and Cabify, but not so good for traditional local companies. Talking of Uber, Uber passengers to pay more for petrol car journeys than electric (Daily Telegraph, James Titcomb) shows that the company is going to start applying a 10% discount to EV journeys from Heathrow and other airports as part of an effort to decarbonise the taxi service. All of its cars in London will be electric by the end of 2025 versus 20% today. This sounds like a decent enough idea, no?

Staying with car-related news for the moment, Carvana Shares Jump More Than 50% as Company’s Profit Outlook Improves (Wall Street Journal, Will Feuer) shows that shares in the online used-car retailer shot up on its positive outlook for Q2 after struggling last year with consumers being reluctant to splash out on big ticket items like cars. Carvana: shaky ride reaches a smoother patch (Financial Times, Lex) shows that the company has managed to get back on track by shifting the focus from growth to profitability. That said, there’s still a lot of debt ($6bn of bond debt, to be precise) but at least this performance will buy the company time to continue in the right direction. * SO WHAT? * Carvana was one of those lockdown luvvies that was powered by debt and hype. Despite the fact that it’s staging a bit of a comeback, it’s too early to get overly excited as it is still hugely indebted, but at least it’s doing the right things now (although there’s a risk that it will use this turnaround to ask for more money or issue/sell more equity!)

Meanwhile, Summer bookings help Wizz Air’s swift turnaround (The Times, Jon Rees) shows that Wizz Air reckons it’ll make a tidy profit this year as bookings are strong. Its return to profit will be welcomed and the company hopes that its investment in making the discount airline more operationally resilient will bolster its performance. Although it almost doubled its passenger numbers over the last financial year, the average price of fuel more than doubled and Wizz Air said that it would revamp its fuel hedging programme to make it less susceptible to price fluctuations in future. * SO WHAT? * This further confirms trends we have seen from other budget airlines like Ryanair and EasyJet – and holiday operators – that consumers continue to crave getaways despite the cost-of-living crisis. The spending 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!

The UK gets endorsement for AI, WhatsApp gets a new function, BlackRock buys into private credit and the FCA investigates Odey…

In a quick scoot around some of today’s other interesting stories, Joe Biden and Rishi Sunak unveil ‘Atlantic declaration’ to strengthen economic ties (Financial Times, George Parker, James Politi and Jim Pickard) shows that old man Biden and PM Sunak have agreed to increase US-UK trade in sensitive areas such as defence, nuclear materials and critical minerals for EV batteries as Biden continues to try to exclude China from supply chains. Sunak also got a Biden boost as the president endorsed his attempt to lead a debate on how to regulate AI and UK is ‘better place than Europe’ to develop artificial intelligence (Daily Telegraph, Gareth Corfield and James Titcomb) shows that the chief exec of US data giant Palantir also gave his seal of approval because of our potentially less draconian approach to AI versus the Europeans. This is a nice (and rare) win for Sunak at the moment…

WhatsApp challenges Twitter with celebrity-following feature (Daily Telegraph, James Titcomb) shows that the Meta-owned WhatsApp has announced a new feature called Channels whereby users can subscribe to updates from celebrities, organisations and regular users who can send them all messages en masse. Channel owners will be able to post text, photos, videos and polls to their followers. * SO WHAT? * This sounds like an attempt to be a Twitter-killer no? A boatload of celebs have gone off in a huff at having to pay for a blue tick, so it is possible that they could pivot over to this new platform. Given that WhatsApp has 2bn users – which is 10x more than Twitter pre-Musk – this sounds like an alternative that could actually work. Posts will NOT be protected by end-to-end encryption and there is talk about potentially charging people to promote channels.

Then in BlackRock grows private credit business with Kreos acquisition (Financial Times, Will Louch and Ivan Levingston) we see that the world’s biggest money manager is buying one of Europe’s biggest provider of loans to start-ups and tech companies, Kreos Capital, in order to grow its $54bn private credit business. The venture debt sector is growing in popularity as it provides loans to start-ups without taking equity stakes. This is a particularly interesting area because banks are getting increasingly constrained by not being able to lend to riskier businesses, so there is a gap (and demand!) in the market.

Then in FCA investigates Odey Asset Management (Financial Times, Laura Noonan, Harriet Agnew, Antonia Cundy and Madison Marriage) we see that Odey Asset Management is facing an investigation into the potential “non-financial misconduct” at the hedge fund as allegations of sexual assault and harassment were made against the founder Crispin Odey. This sounds like a massive can of worms and businesses such as Morgan Stanley are racing to cut ties after allegations were initially made by the FT. This investigation showed that the firm’s exec committee tried to discipline him in December 2021 for breaking a “final written warning” – and then he sacked them! * SO WHAT? * If this is true, there will be huge consequences. There will definitely be reputational damage here as he is very much associated with the company and has had some notable successes there over the years. However, being brutal about it, there are some very sharp people there and I would have thought you could boot him out, change the name of the company and things would eventually get back to normal. Not for him though…

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 have a massive tower-like structure in your garden? If yes, then here are some ideas for you and, if no, why not have a look at some people doing ridiculous things on a trampoline. This is not my idea of fun, but I admire those who are able to do it!