Friday 30/06/23

1. In MACRO & COMMODITIES NEWS, US growth surprises, Germany sees inflation increase, China puts laws in place to combat sanctions, the UK blocks Russia from legal advice and we get our first lithium mine in Cornwall
2. In TECH NEWS, Microsoft and Activision chiefs keep fighting, Open AI gets sued, Inflection AI gets a ton of money and the strategy for Twitter 2.0 is unveiled
3. In CONSUMER, RETAIL & LEISURE NEWS, cash withdrawals hit new highs, package holidays get more expensive, Moonpig suffers, B&M booms and Merlin entertains
4. In MISCELLANEOUS NEWS, there’s more water chat, Serco gets a boost and Salesforce commits to the UK
5. AND FINALLY, I bring you the definitive answer to the ketchup question…

So there are growth and inflation surprises, China retaliates, the UK shuts Russia out and we get our first lithium mine…

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:

Surprise US growth figures show resilience to rate rises (The Times, Callum Jones) shows that GDP in the US actually grew by an annualised 2% in Q1, which is significantly more than the previous estimate of 1.3%. Does this mean that the Fed has managed to tame inflation by hiking interest rates but without actually damaging the underlying economy? If so, you would have thought there might be no need to increase interest rates further. I guess we’ll just have to see…

Over in Europe, Germany hit by surprise inflation rise (Daily Telegraph, Adam Mawardi) highlights a nasty surprise as inflation rose by 6.8% in the year to June, up from 6.3% for the previous month. * SO WHAT? * Given that Germany is Europe’s biggest economy, this will put more pressure on the ECB to keep raising interest rate to arrest the rise of inflation. It looks increasingly like Germany will stay in recession for the remainder of the year.

Meanwhile, China passes foreign relations law to strengthen Xi Jinping’s response to sanctions (Financial Times, Edward White) shows that the National People’s Congress has just approved a new foreign relations law that will bolster China’s legal backing for “countermeasures” against perceived threats to China’s national

security and foreign sanctions. The law will come into force from tomorrow! * SO WHAT? * China has already been fighting back against sanctions by cracking down on foreign due diligence firms, slapping Deloitte with a record fine and banning Micron’s products from key infrastructure, among other things (including dragging its feet on the approval of M&A deals involving American companies). Although this is clearly a nice thing for Xi to have in his back pocket, it may well put foreign investors off investing in China because it brings another layer of uncertainty. He is actually trying to encourage investment, so this will be a delicate balancing act to pull off! That said, a number of major companies have very recently reiterated their commitment to investing in China (e.g. Siemens, Tesla, AstraZeneca and VW).

In New UK sanctions block Russia from legal advice in City (Daily Telegraph) we see that the Ministry of Justice has just announced a new law that will ban Kremlin-linked individuals and businesses from accessing UK legal advice on deals that “could bolster the nation’s war chest”. This pretty much covers any deals that involve Russian businesses and adds a further layer to restrictions announced last year that banned UK lawyers from doing transactional work for Russian clients.

There was some quite exciting news in UK to gain first lithium mine in Cornwall in boost to electric car industry (The Guardian, Jasper Jolly) as it looks like we’ll get our first lithium mine in Cornwall thanks to an agreement between the start-up British Lithium and French mining company Imerys. The idea is that it will employ 300 people, extract 20,000 tonnes of lithium ore and produce enough lithium for 500,000 electric cars by 2030! * SO WHAT? * This is great news! It stands in notable contrast to the nightmare that rival Cornish Lithium is having at the moment. It looks like UK dreams of being at the cutting edge of EV tech are not quite over yet! I also wonder whether this deal makes it more likely for others to come forward to finance Cornish Lithium…

Don’t forget to register HERE to attend NEXT MONDAY’S roundup of the business and financial markets news of May and June with myself and Jake Schogger of the Commercial Law Academy!

Microsoft and Activision fight their case, Open AI gets sued, Inflection AI gets a load of money and we see a plan for Twitter…

It’s all go for Microsoft at the moment! Microsoft and Activision CEOs fight for their $75bn deal in court hearing (Financial Times, Richard Waters) highlights a last-gasp attempt by the two big cheeses at the tech giants to save the deal that’s getting so much flak. There could be an annulment of the deal next week, but it seems that there is still hope for the deal to go ahead as it seems that the case is not going all the FTC’s way at the moment. If the FTC loses its case, it would just leave the UK’s CMA as the only entity blocking the deal. The drama continues…

Then in ChatGPT owner sued over alleged theft of private data off internet (Daily Telegraph, Matthew Field) we see that Open AI and Microsoft have been slapped with a $3bn class action lawsuit for the alleged theft of data from hundreds of millions of internet users via the “secret scraping of the internet”, including “luring thousands if not millions of children to the platform”. There are allegations of Open AI using personal and copyrighted information by the wholesale scraping of the web to train its AI chatbot. Neither company has commented. * SO WHAT? * They are facing very serious allegations here. $3bn is a lot of money but I’d also say that what’s potentially worse is the reputational damage and whether this calls into question other AI chatbots. Ultimately, I wonder whether finding Open AI guilty here will stop the AI frenzy dead in its tracks until legislation is brought into play to stop any further indiscriminate scraping.

Then in Microsoft and Nvidia join $1.3bn fundraising for Inflection AI (Financial Times, Madhumita Murgia) we see that a one-year old AI start-up company set up by one of the founders of DeepMind has just managed to raise $1.3bn from Microsoft and Nvidia (among others) as the frenzy surrounding AI start-ups continues. Inflection AI has a chatbot called Pi (“Personal Intelligence”, nothing to do with anything involving pastry or a very very long number 🤣) run by a team of 35 people – who are all ex-DeepMind, Google,

OpenAI and Microsoft. * SO WHAT? * Inflection AI looks positively geriatric compared to French start-up Mistral AI that raised “just” €105m after just four weeks in existence 🤣! Still the sheer amount of money raised here – and the type of companies involved – just goes to show that the AI frenzy is not abating. I guess that the best thing in THIS particular case for Inflection AI, though, is that it will get access to 22,000 Nvidia H100 GPUs – the hottest AI chips on the market – thanks to Nvidia’s involvement! AI boom forces tech companies to make M&A choice (Financial Times, Richard Waters) gives an interesting discussion on what options are available to companies in the scramble for all things AI – to buy into it, partner with another company or build it yourself. We’ve seen acquisitions (e.g. Databricks buying AI start-up MosaicML for $1.3bn and Thomson Reuters buying 10-year old AI company Casetext for $650m, for example), partnering/investing in other companies (e.g. Salesforce putting money into Anthropic, Oracle buying into Cohere etc.) but as more money gets thrown in this direction, maybe companies will decide to go it alone. I thought the article made an interesting point about OpenAI – that it is not forever tied to Microsoft and it may even become a competitor in the future. We are still at the very early stages!

Then in Linda Yaccarino’s vision for Twitter 2.0 emerges (Financial Times, Hannah Murphy) we see that Twitter’s new chief exec outlined a plan of how the company will win back advertisers. Among other things Twitter will launch a video ads service, do more to attract celebs and increase headcount (particularly in the advertising, sales and partnership team). Yaccarino used to be NBC Universal’s head of advertising and will be meeting media partners, publishers and agencies to pump up the hype to get more creators on board the Twitter fun bus. The new ad format is still in beta, but video is definitely a focus. She also plans to make e-commerce a slicker proposition on the platform. * SO WHAT? * This all sounds pretty positive but I suspect that advertisers will be particularly interested in how Twitter proposes to moderate what goes on its platform and how it ensures that company advertising does not appear next to inappropriate content. Also, how much free rein will Yaccarino have and will Musk be properly hands-off? Still it’s a move in the right direction IMO.

Don’t forget to register HERE to attend NEXT MONDAY’S roundup of the business and financial markets news of May and June with myself and Jake Schogger of the Commercial Law Academy!

Consumers withdraw cash, have to spend more on package holidays but less on cards, B&M booms and Merlin entertains…

It’s interesting to see how consumers are behaving at the moment given the tricky economic circumstances. Squeezed UK households withdraw record amount of savings in May (The Guardian, Richard Partington) highlights a record amount of withdrawals (£4.6bn) from savings accounts at the fastest rate since these stats were recorded in October 1997! It is thought that the money is being spent to maintain living standards and/or pay off mortgages or loans before higher rates kick in. Prices of package holidays in popular Mediterranean destinations leap (The Guardian, Julia Kollewe) shows that they are getting less for their money for holidays, according to the latest stats from TravelSupermarket. Prices for Crete, Tenerife and Mallorca were up by 25%, 22% and 21% respectively versus the same time last year but demand continues to exceed supply. They are also spending on theme parks, as per Tourists put Merlin back on its feet (The Times, Dominic Walsh) which shows that Merlin Entertainment, which is the world’s second biggest attractions operator, made it

back into the black last year and returned to pre-Covid growth levels. Consumer demand remained strong over Q1 and there are plans to expand with their Lego and Peppa Pig theme parks over the coming years. * SO WHAT? * I really think that this year could be the last hurrah for a bit for overseas holidays purely because prices are so high and that mortgage rate increases are going to dent household finances enough to forego more expensive holidays. However, I think that may play into the hands of theme park operators as people opt to stay nearer home and have more days out to compensate.

Cost-conscious consumers are spending at discounters, though, as per Bargain-hunting shoppers help B&M revenues pile up (The Times, Isabella Fish) which highlights the company’s “strong profitable trading momentum” over Q1, although it didn’t really say anything about full year guidance. Consumers aren’t spending so much on cards, though, according to Less profit on the cards as Moonpig shopper cut back (The Times, Isabella Fish) which showed that although annual sales increased (thanks to charging higher prices), volumes decreased. Higher costs hit profits and there was a noticeable shift in customer behaviour with many opting to send cheaper gifts.

Don’t forget to register HERE to attend NEXT MONDAY’S roundup of the business and financial markets news of May and June with myself and Jake Schogger of the Commercial Law Academy!

We look at the latest on water, Serco’s boost and Salesforce’s commitment…

In a quick scoot around some of today’s other interesting stories, England’s water companies are ‘environmentally insolvent’, study says (The Guardian, Rowena Mason) highlights a report compiled by the Corporate Accountability Network and Sheffield University which recommends nationalisation without compensation for our water companies, Yorkshire Water raises £500m from shareholders to shore up finances (Financial Times, Gill Plimmer, Mercedes Ruehl and Olaf Storbeck) highlights a defensive fundraise for another vulnerable water company in a move to consolidate its balance sheet while Thames Water could delay accounts as turmoil in water industry grows (The Guardian, Anna Isaac and Sandra Laville) underlines the immediate panic at Thames as it is due to publish its annual report and accounts next week and What are the options for Thames Water as crisis talks continue? (The Guardian, Sandra Laville) highlights a number of options that could “solve” Thames Water’s problems. They include being put into special administration (keeps the business going, staves of the creditors), nationalisation via various means or waiting for shareholders to bail the company out. However, I think it’d take very brave investors to get involved at this point! Recovery artist limbers up for his latest mission (The Times, Alex Ralph) shows that veteran City chairman and turnaround specialist Sir Adrian Montague is taking the reins at Thames Water with a view

to get it back on track, which is no doubt good news for University pension scheme braced for wipeout of biggest investment (Daily Telegraph, Oliver Gill) as Britain’s biggest pension fund waits nervously with its whopping 19.7% stake in the water company. The drama continues!

In non-water news, Boost for Serco as demand for immigration services surges (Daily Telegraph, Howard Mustoe) shows that outsourcing specialist Serco had a nice 10% bump in its share price yesterday on the back of news that it had upped its profits forecasts thanks to rising demand for immigration services. It is also benefiting from rising demand in the defence sector, particularly in the US.

Then in Salesforce to invest $4bn in Britain in fillip for tech sector (Daily Telegraph, Matthew Field) we see that the US software giant has earmarked $4bn for investment in the UK over the next five years. In your face Bobby Kotick (Activision Blizzard CEO who slagged off the UK as a place for tech investment, saying that the UK was “not going to be Silicon Valley, they will be Death Valley”). It seems that we are still in the game ✌.

Don’t forget to register HERE to attend NEXT MONDAY’S roundup of the business and financial markets news of May and June with myself and Jake Schogger of the Commercial Law Academy!

…in other news…

To fridge or not to fridge, that is the question (if Hamlet cared about the correct way of storing ketchup). Well here’s the answer: Heinz finally settles debate on whether you should keep ketchup in fridge or cupboard (The Mirror, Julia Banim). Phew 😅 I got it right!