Monday 10/06/24

  1. In MACRO & ENERGY NEWS, the far-right makes big gains in Europe – prompting a snap French election – while central bankers ponder interest rate cuts, Meloni slows Italy’s solar rollout and Nucleo plan a fleet of 20 mini-nukes for Britain
  2. In BUSINESS, CONSUMER & EMPLOYMENT TRENDS NEWS, Indian companies takes on Musk in a space race, the US takes further measures to exclude the Chinese, the obesity drug phenomenon continues to gather pace, hopes rise for UK shops and pubs, new tools try to tempt workers back to the metaverse and we see why AI could be good for English grads and why permanent job numbers fall
  3. In LISTINGS & MARKETS NEWS, the UK is on the verge of overhauling its listing rules, US biotechs queue up for IPOs, GameStop shares fall and another FTSE company considers a listing switch
  4. In MISCELLANEOUS NEWS, the EU is expected to slap tariffs on Chinese EVs and Google gets accused of excluding search rivals
  5. AND FINALLY, I bring you a nightmarish rollercoaster…

1

MACRO & ENERGY NEWS

So the European election prompts a French election, central bankers tread a fine line, Meloni slows solar and Nucleo plans a mini-nuke fleet for Britain…

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Far-right makes significant gains in European parliament elections (Financial Times, Andy Bounds, Henry Foy, Alice Hancock, Guy Chazan and Leila Abboud) shows that the populists made major gains in the EU elections, performing strongly in Germany but even more so in France, prompting dramatic action in Emmanuel Macron gambles on snap French election after Marine Le Pen victory in EU vote (Financial Times, Leila Abboud and Sarah White) where the French president decided to go to the polls despite the risks involved. He already lost his parliamentary majority at the beginning of his second term just two years ago but believes that a vote is needed to get clarity for the country. This means that it could be possible that he may have to appoint a PM from another party, which could be the far-right Rassemblement National of Marine Le Pen. If so, he would have limited powers over domestic matters with three years remaining of his presidency.  French vote will decide fate of Europe’s rampart against far-right (Financial Times, Ben Hall) says that this is Macron putting the electorate to the test and whether they really want RN to be in power. * SO WHAT? * The results of the European parliamentary elections have shown the political pendulum swinging decisively to the right, but although the populists will now make up almost 25% of the parliament (a major increase from the 5% they won 15 years ago) they still don’t have the majority in the EU. It is interesting to note that by the end of this year, it is entirely possible that 10 out of the EU’s 27 member states – including France – could be led by coalitions that are comprise of, or are supported by, populist or far-right parties. Thus far the French have, when it’s come down to it, decided to keep Le Pen out of office. In the past, the European parliamentary elections have been used as a sort of protest vote on domestic issues but then when it came to the presidential elections, Le Pen was defeated. Will the same happen again this time? It is a monumental gamble on Macron’s part, but with support for his party falling apart around him and a resurgent and determined RN in prospect, you just don’t know whether he’ll be able to weather this…

Elsewhere, Political heat gives central bankers pause for thought on interest rate cuts (Financial Times, Sam Fleming and Claire Jones) highlights the delicate balance that central bankers are having to face in that while they may want to cut interest rates, they want to make sure that their actions don’t look like they’re politically motivated to help incumbent governments because they are supposed to be independent. This is a particularly delicate situation for the Bank of England given that its next meeting is just two weeks before the July 4th General Election. * SO WHAT? * I personally think this is ridiculous. The central bankers should do what’s best for the economy – not what makes them look good. They have already made an absolute pig’s ear of a) forecasting and b) making the right interest rate decisions at the right time. This just seems to me like a handy excuse to delay interest rate cuts!

In energy news, Giorgia Meloni puts brakes on Italy’s solar energy rollout (Financial Times, Amy Kazmin) shows that the Italian PM has decided to slow down the rollout of solar panels on farmland by issuing an emergency decree which bans ground-mounted solar panels on agricultural land and will instead require the installation of panels that are at least 2.1m off the ground, which are 20-40% more expensive to install. They will, however, allow cultivation of food beneath. * SO WHAT? * Critics say that this will slow down the roll out of solar and risks Rome’s ability to hit its international commitment to hit 80GW of solar capacity by 2030. Meloni believes that having these panels is a “threat to our food sovereignty” but the new measure still has to be approved by parliament. Some farmers are, however, saying that they WANT the solar panels because climate change is leading to higher temperatures which is rendering some land unsuitable for cultivation. Solar panels could save them by giving them an income.

Meanwhile, Italian energy company targets Britain for fleet of 20 mini-nukes (Daily Telegraph, Jonathan Leake) shows that Italian energy start-up Newcleo is planning to build 20 mini reactors across the UK, tapping into our nuclear power expansion goals. The reactors will be housed in up to six sites which will be situated near energy-intensive industries. * SO WHAT? * Both the Conservatives and Labour are keen for a massive push for nuclear power and are currently targeting this source to make up around 40% of the country’s energy mix by 2050. Six other companies – including Rolls-Royce, Westinghouse and EDF – have already had designs shortlisted for the first generation of Small Modular Reactors but the Newcleo ones are more for the generation after that.

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

BUSINESS, CONSUMER & EMPLOYMENT TRENDS NEWS

Indian companies take Musk on, the US tries even harder to cut out the Chinese, the obesity phenomenon gathers pace, UK shops and pubs have summer hopes while we consider the latest on VR and AI in the workplace and why job numbers are falling…

Billionaires Mittal and Ambani take on Musk in India’s internet space race (Financial Times, Chris Kay and Stephen Morris) shows that India’s biggest telecoms companies, led by rival billionaires Mukesh Ambani and Sunil Bharti Mittal are looking to launch their own respective satellite internet services and take on Elon Musk’s Starlink. Bharti Airtel has a joint venture with Eutelsat OneWeb and Ambani’s JioSpaceFiber will both be ready to roll any time between now and the end of this year. SpaceX, which owns Starlink, has been trying to get operating licences in India for the last three years but has not yet won regulatory approvals, which means that JioSpaceFiber could get a head-start given that it has got all the necessary approvals. The initial focus, at least, will be on B2B. * SO WHAT? * By some estimates, the satellite internet market in India could be worth $1bn in revenues, hence the scramble. The Indian companies will get a head-start and there is the feeling that once customers get a provider they tend to stick with them – which is why they are jockeying for position currently. That being said, Starlink is well-established and has a network of over 6,000 low-orbit satellites – so it could quite easily expand very quickly if it was given the go-ahead. I would have thought that Starlink will be a very compelling option given that its capabilities have quite literally been “battle tested” in Ukraine – and that kind of testing is rare. If you’re going to offer a service like this to the military, they will need to know that they can rely on it.

Then in The graphite fight: US tariffs trigger race to build non-Chinese supply chain (Financial Times, Christian Davies) we see that graphite is shaping up to be the next bone of contention in the ongoing US-China trade tussle as graphite is needed to make graphite anodes that are key components of EV batteries. 25% tariffs on natural or synthetic graphite anodes from China will come into force this month in the US. * SO WHAT? * This is a bit of a cut-off-your-nose-to-spite-your-face kind of moment because Chinese production accounts for 97% of global anode output! This is just going to make life even harder for carmakers who are already having to deal with sluggish demand for EVs – after all, let’s not forget that the battery in an EV is its most expensive component. Everyone is now going to be forced to make massive investments in a new graphite anode supply chain at a time when they’re trying to cut costs because of sluggish EV demand.

Vision of trillion-dollar market sparks obesity drugs ‘gold rush’ (The Times, Alex Ralph) is an interesting article which shows that although Novo Nordisk (Wegovy) and Eli Lilly (Zepbound) have got first-mover advantage with their weight loss treatments, the market is still big enough to accommodate more players in the space. * SO WHAT? * Given that obesity rates have almost tripled globally since 1975, according to the WHO, by 2035 it is thought that over half of the world’s population will be overweight or obese versus 38% in 2020. However, what everyone is waiting for is an effective anti-obesity pill. Novo Nordisk presented early data in March for an experimental pill that is said to be even more effective than Wegovy! Being first mover in this industry means that massive revenues earned from initial treatments can be used to accelerate R&D in next-gen versions. However, it seems that there will be plenty of room for more players in this treatment area!

Then in Beer and new TVs: Euro 2024 ‘to fuel £2.75bn spree for UK shops and pubs’ (The Guardian, Rob Davies and Sarah Butler) we see that the British Beer & Pubs Association is expecting a boom in beer sales during the four weeks of the men’s Euro 2024 tournament which starts this week. Research from GlobalData Retail reckons that the wider hospitality sector could also get a major boost as well as retailers who may benefit from increased sales of goods like TVs and sportswear. * SO WHAT? * Remember the last Euros tournament in 2021 when there were restrictions on where to sit and the “rule of six”? Well clearly that won’t happen now and pubs in particular will be able to benefit more fully from the buzz. The boost will, however, depend on how far England and Scotland progress in the tournament…

In employment trends news, New tools bring workers back to the metaverse (Financial Times, Hannah Murphy) shows that although the hype surrounding the metaverse has largely dissipated over the last three years with start-ups feeding into the frenzy going out of business and larger groups like Meta and Microsoft scaling back dramatically in this area. It seems that the next new big thing could be AI-powered avatars and assistants who could do things like translate discussions in real-time although other uses in design, engineering, architecture and urban planning are also emerging. * SO WHAT? * Although I personally think that one of the best uses of VR is in training (e.g. in emergency/military settings) one of the biggest problems is that you need bulky headsets to access all this stuff. Once that can be solved and people are able to wear reasonably-sized (and priced!) peripherals, then I think that there could be widespread adoption. But until then I think that upside is going to be limited.

Why the rise of AI is good for English grads (Financial Times, Lex) highlights a very interesting point of view that although the rise in AI is obviously going to help people studying subjects like computer science (in the last five years in the US, the number of undergrads majoring in computer and information sciences jumped by a chunky 43%) its advent may actually help those who study arty subjects like English language and literature (where the number of undergrads has fallen by about 20%). Given AI’s vulnerability to errors or hallucinations, there may be an increased demand for prompt engineers because they will be able to express questions more clearly with AI-powered systems. Those with a liberal arts education may find that stronger language and creative thinking skills will be in demand…

Meanwhile, Permanent job appointments continue to fall (The Times, Emma Taggart) cites a report from KPMG and REC which shows that the number of people getting permanent jobs fell once more in May as vacancies and demand fell. The number of permanent staff appointments dropped for the 20th consecutive month. This was thought to be a result of fewer vacancies and slower decision-making from companies. * SO WHAT? * I would add that reticence may also have been due to uncertainties surrounding the government. Even if the report was compiled before the election was announced, I would have thought that employers would be more likely to wait and see what policies the new government might have before committing to new hires.

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

LISTINGS & MARKETS NEWS

The UK is about to change its listing rules, US biotechs line up to list, GameStop shares fall and another FTSE company considers listing stateside…

UK poised to approve biggest overhaul of listing regime in 40 years (Financial Times, Michael O’Dwyer and Emma Dunkley) shows that the FCA is due to approve the biggest overhaul of our listing regime in 40 years at a meeting on June 27th where it will make a decision on the final version of the rules. The changes would then take effect after a two-weekk implementation period. * SO WHAT? * Basically, the idea of all this is to speed-up the listing process whilst still trying to maintain stringent standards.

Across the Pond, Biotechs line up for IPOs in bullish sign for US listings market (Financial Times, Oliver Barnes and Nicholas Megaw) shows that dozens of biotech companies, including Alumis and Upstream Bio who develop medicines for inflammatory diseases, are filing for IPOs so that they can list this year. This is more incremental evidence of the IPO market gaining momentum!

Meanwhile, GameStop stock drops on share sale plan and Roaring Kitty livestream (Financial Times, Jennifer Hughes, Alexandra White, Nicholas Megaw and George Steer) shows that

the share price of GameStop dropped sharply on Friday (although it’s still up 60% since Roaring Kitty’s return in the middle of last month). GameStop itself took advantage of the boom in its stock and sold 75m of its own shares! * SO WHAT? * This is just plain weird. I wonder whether we’ll be seeing a Netflix documentary about this guy in a few years’ time as he languishes in prison. The fact of the matter is that this company sells games consoles, software and collectibles – this is surely a dying business…

Then in FTSE giant weighs £25bn switch to Wall Street in fresh blow to London (Daily Telegraph, Ben Marlow) we see that heavy machinery and equipment rental company Ashtead is now looking at whether to switch its UK listing to the US. Over 90% of its annual turnover came from sales in North America last year – which is up from 80% in 2022 – and it is now the second-largest equipment rental company in the US! It also recently benefited greatly from Joe Biden’s Inflation Reduction Act. * SO WHAT? * Everyone’s tearing their hair out about this stuff, but it seems to me that those who switch listings are either a big dodgy (and are gambling on US investors’ arguably greater appetite for risk) or generate a large part of their revenues over there. I am not that concerned. We DO still want to attract more companies for listings, however – so maybe the change in the listing rules will prove to be useful!

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

MISCELLANEOUS NEWS

The EU gets closer to slapping tariffs on Chinese EVs and Google is accused of muscling out search rivals…

In a quick scoot around some of today’s other interesting stories, EU expected to impose import tariffs on Chinese electric vehicles (The Guardian, Lisa O’Carroll) shows that the EU is expected to tell China that it will start slapping tariffs on EV imports this week. Here we go!

Then in Google accused of trying to push out search engine rivals (Daily Telegraph, Matthew Field) we see that Google has been accused of planning to squeeze rival search engines out by cutting down choices on smartphones. The British and EU regulators continue to put pressure on Big Tech companies regarding anti-competitive behaviour…

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…

I’m OK with most rollercoasters but this one looks like an absolute nightmare! I do not like the look of that vertical drop!

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Some of today’s market, commodity & currency moves (as at hrs 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 **
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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