Monday 11/04/22

  1. In MACRO, SANCTIONS & CONSEQUENCES NEWS, it’s Macron vs Le Pen, an Aussie election is announced and Ukraine appeals to oil traders while Russian consumers suffer, US bank deals dry up and a cardboard crisis looms
  2. In CONSUMER & RETAIL NEWS, the UK job market grows, staycations divide, Walgreens might have to offload Boots at a discount and we look at why Asos has fallen out of favour
  3. In REAL ESTATE NEWS, UK landlords buy again and London prices rise
  4. In MISCELLANOUS NEWS, Shanghai’s lockdown bites, Elon gets fidgety with Twitter and Amazon workers union up
  5. AND FINALLY, I bring you a photo illusion that will definitely mess with your head…

1

MACRO, SANCTIONS & CONSEQUENCES NEWS

So elections approach in France and Oz, Ukraine appeals to oil traders, Russian consumers suffer, US bank deals fade and there could be an imminent cardboard crisis…

Hi there! Apologies for the lack of Watson’s Weekly thus far! I was catching up on a lot of things over the weekend, so it will be available later on today. Sorry for the inconvenience!

Emmanuel Macron to face Marine Le Pen in French election run-off (Financial Times, Victor Mallet, Leila Abboud and Sarah White) shows that it’ll be Macron vs Le Pen again in a re-run of 2017 vying for the presidency as the weekend’s vote left them the last two candidates standing. Two polls run yesterday show that Macron would only beat Le Pen by a very narrow margin. Le Pen is Eurosceptic, wants to get out of NATO’s military command structure and admires Putin (although I suspect she’ll be backpedalling a bit on at least two of these). * SO WHAT? * A Le Pen win should NOT be dismissed. People assumed Trump couldn’t possibly win (and he did) and David Cameron assumed that we’d all want to be European (and then Brexit happened) and I imagine that Le Pen has learned a few things since she lost last time. Macron has definitely lost his lustre to many over the course of his presidency so he might have to put the work in to assure he stays in office.

Then in Scott Morrison calls election in Australia on May 21 (Financial Times, Nic Fildes), we see that Australia’s PM has launched a bid to be the first PM in a generation to actually get a second term (Australia’s almost as bad as Japan in terms of how many PMs it goes through!). Fun fact: Scott Morrison is the first Australian PM to make it to the end of a term since 2007! * SO WHAT? * It’ll be interesting to see what happens here especially given the growing disquiet in the Asia-Pacific region about China and its growing military might. Morrison is playing on voter fears of unpredictable change if they vote for the opposition vs stability with his “tried and tested” leadership.

In sanctions and consequences, Ukraine calls on commodity traders to stop handling Russian oil (Financial Times, Harry Dempsey, Neil Hume and Chelsea Bruce-Lockhart) shows that the Ukrainian government has asked some of the world’s biggest oil traders – including Vitol, Trafigura, Glencore and Gunvor – to stop handling Russian crude because this funds Moscow’s war effort. According to a couple of think tanks, Russian exports of crude and refined products to Europe are providing Moscow with $850m a day. So far they seem to be saying that they are not taking on new business but are fulfilling existing contracts.

Meanwhile, Russian consumers cut spending as sanctions bite (Daily Telegraph, Tom Rees) cites Sberbank data which shows that Russians have cut spending by 9.7% at the beginning of April versus the same time last year as sanctions trickle down to the real economy, US banks set for big hit to revenues as dealmaking dries up (Financial Times, Joshua Franklin) guides down revenue expectations for banks ahead of next week’s reporting season as the Russia/Ukraine-war-inspired slowdown has hit harder than first predicted (investors don’t like uncertainty) and Cardboard crisis looms as war threatens packaging (Daily Telegraph, Howard Mustoe) highlights a perhaps less obvious casualty of the current war – cardboard. Cardboard and paper use the starch biproduct of wheat, potatoes and other food – but wheat and starch prices have shot up this year. Fun fact: starch is used to stick the three layers of corrugated card together to give it strength. * SO WHAT? * Rising prices and scarcity mean that we could see a return of single-used plastics and delayed food deliveries. One of the world’s biggest paper manufacturers, DS Smith, has sounded a warning on the current situation but says that it is OK for the moment. However, if the current situation continues, smaller companies without strong starch supply lines could be the first to suffer.

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

CONSUMER & RETAIL NEWS

We look at current consumer trends and what’s going on at Boots and Asos…

UK job market grows at quickest rate since before the pandemic (The Guardian, Miles Brignall) cites the latest data from BDO which shows that employment growth returned to pre-Covid levels in March but it cautioned that this could be slowed down by the rising cost of living, inflation more generally and, of course, the effects of the Russia/Ukraine war. Still, Demand for staycations falls despite flights chaos (Daily Telegraph, Hannah Boland) shows that families are increasingly heading for the airport post-lockdown. According to data from AirDNA, bookings in Penzance and Plymouth have fallen by 15% and 10% respectively while data from IATA said last week that it saw a strong rebound from travel in February. Tenerife, Lanzarote and Florence are among the top destinations for Brits at the moment. In Tourist hotspots battle to keep holidaymakers at home (Daily Telegraph, Hannah Boland) we see that cancellations for staycations shot up by 18% in the week after January 5th when the government lifted travel restrictions and the number of incoming travellers is not making up for the shortfall. Interestingly, there seems to be a trend now of two or three night stays. * SO WHAT? * I really think that the staycation boom isn’t over. When households get through months of higher utility, food and fuel bills with inflation rising faster than wages I really think that they will be reconsidering far-flung holidays booked in the “euphoria” of January. Even if there are cancellations, I would have thought that there will still be enough demand to take up the slack.

Meanwhile, in retailer news, Walgreens braced for £3bn loss on Boots sale (Daily Telegraph, Oliver Gill) shows that Boots’ owner looks set to lose out big time if it sells the high street stalwart now because it just isn’t getting any love for the £7bn price tag it has put on the business. Buyout funds CVC and Bain walked away from acquiring it for £4bn, which is particularly notable because CVC’s UK head, Dominic Murphy, actually sits on the board of Walgreens and has been working with Boots for 15 years – so you would have thought he knows a thing or two about the  company! There are still some potential buyers left out there, so it ain’t over yet.

Then in Why has Asos fallen out of fashion? (The Times, Ashley Armstrong) our attention is brought to the downfall of lockdown winner Asos and why its share price has fallen by around 75% since of the highs of last year. It has suffered an investor shift away from tech and increased scrutiny of its previously bullish projections, not to mention the major impact of supply chain problems. A lack of success at cracking the US market and the incredible success of Chinese rival Shein have hit Asos hard. Hedge funds are shorting the company, there’s a management vacuum at the top and consumers are going back to physical shops. * SO WHAT? * I would have thought that the company will, at best, go sideways while these pressures continue, but maybe an injection of new expertise at the top could sprinkle some stardust on this fallen darling. The search for a new permanent CEO 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!

3

REAL ESTATE NEWS

Landlords return and London gets a boost…

Landlords return to market (Daily Telegraph, Rachel Mortimer) cites the latest analysis from Hamptons which shows that investors bought more homes in the first quarter of this year than they sold, the first time this has happened since a 3% stamp duty surcharge was imposed on additional properties in April 2016. * SO WHAT? * The decrease in the number of landlords has resulted in an increase in rents over the years, putting further pressure on tenants. It’s too early to tell whether this will calm rents down yet, as it seems like there is a shortfall between supply of and demand for property.

Then in London house prices rise at fastest rate since 2016 (Financial Times Valentine Romei) we see that, according to the latest figures from Nationwide, London property prices are rising again thanks to a shortage of supply and strengthening of demand. Average asking prices in London are also up as well, according to Rightmove, and the most active bit of the market is the top end where buyers are less impacted by the rising cost of living. Despite this latest bump, the London property market has been underperforming the national average since 2016.

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

Shanghai lockdown continues, Musk digs at Twitter and Amazon workers unionise…

In a quick scoot around other interesting stories today, Locked-down Shanghai residents demand food as Covid hits record level (Financial Times, Thomas Hale, Andy Lin and Gloria Li) shows that Covid cases hit new highs despite ongoing strict lockdowns and Shanghai residents warned about online posts over Covid lockdown (Financial Times, Eleanor Olcott and Andy Lin) shows that authorities are doing their best to control the narrative. How long is this going to last, I wonder??

Meanwhile, Elon Musk is up to his old tricks of stirring things up in Elon Musk reverses decision to join Twitter’s board, CEO says (Wall Street Journal, Salvador Rodriguez) as he made a major U-turn from last week without giving a reason. Over the weekend, Musk tweeted followers asking whether they thought Twitter was dying and observing that many of the platform’s biggest accounts hardly ever tweet.

He also suggested that Twitter Blue should ban ads, lower its $2.99 price and accept dogecoin for the subscription service. * SO WHAT? * Maybe I am reading too much into this, but I do wonder whether this suggests Musk doesn’t have confidence in the current board and will be looking to remove them? If he became CEO of Twitter, would Tesla’s share price come under fire as investors fret that his attention will be diluted at a crucial time when more rivals are entering the EV market??

Then in Amazon faces wave of US workers joining trade union (Wall Street Journal, Callum Jones) we see that Amazon is now bracing itself for more and more workers joining its Amazon Labor Union. I suspect this means that Amazon will have to raise wages and improve working conditions that will, no doubt, lead to higher prices that will then be passed on to consumers.

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…

We haven’t had one of those optical illusion things for a while, but this really is a good one: Clever optical illusion reveals if you’re happy or not – what do you see? (The Mirror, Zoe Forsey). The first one is OK – but it’s the second one that is the one that will do your head in 🤣. So frustrating! Maybe I’ll enlarge the photo later and have a proper look!

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Some of today’s market, commodity & currency moves (as at 0749hrs 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 **
7,670 (+1.56%)34,721.12 (+0.4%)4,488.28 (-0.27%)13,711 (-1.34%)14,284 (+1.46%)6,548 (+1.34%)26,817 (-0.62%)3,167 (-2.61%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$96.220$100.84$1,942.521.299081.08786125.3761.1941842,331.3

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