Monday 11/12/23

  1. In MACRO, COMMODITIES & CRYPTO NEWS, Biden faces scepticism on Ukraine and the economy, central banks face pressure to cut rates, copper whacks Anglo American, China hoovers up uranium, we look at the excitement surrounding synthetic fuel and M&G buys into bitcoin
  2. In REAL ESTATE VS CONSUMER NEWS, the European mortgage is set to slow, UK average asking prices fall as the market calms, mortgage arrears hit a new high and tenants have a nightmare month
  3. In RETAIL & CONSUMER TRENDS NEWS, Macy’s gets a buyout bid, Ocado adds more M&S products, UK shoppers will pay more for less this Christmas and whisky exports rise
  4. In MISCELLANEOUS NEWS, UK car production rises and Cigna abandons its mega bid for Humana
  5. AND FINALLY, I show you how to make Korean army stew…

1

MACRO, COMMODITIES & CRYPTO NEWS

So Biden has issues, central banks face pressure, copper hits Anglo American, the Chinese try to corner uranium, we look at the excitement surrounding synthetic fuel and M&S invests in bitcoin…

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:

 

Nearly half US voters think Biden is spending too much on Ukraine aid (Financial Times, Lauren Fedor and Eva Xiao) cites a survey from FT-Michigan Ross which shows that 48% of American voters think the the US is giving too much aid to Ukraine at a time when President Zelenskyy is preparing to visit Washington. Biden is currently facing difficulties in getting Congress to approve a $111bn security spending package that would also encompass spending for Israel and Taiwan as well as $60bn for Kyiv. The Republicans are particularly hostile to Ukraine funding. As things stand currently, Biden’s chances of re-election are dwindling and Why Biden’s lacklustre talk on growth will boost Trump (Daily Telegraph, Tim Wallace) shows that, despite America’s economy looking pretty robust at the moment, Biden is not getting any credit for it as his approval rating is 40%, which is lower than Trump’s was at this stage of the cycle (Trump was on 44% at this point). Despite inflation slowing down, prices are still rising and households are still feeling it. The high interest rates are also painful for households that have debt. Biden is going to have to fight harder if he wants to remain in office…

Given that there are going to be a lot of announcements this week, Central banks aim to quell excitement over rate cuts (The Times, Jack Barnett) highlights the increasing pressure that the Fed, ECB and Bank of England are under to cut interest rates as their collective war on inflation seems to be reaping rewards as inflation is slowing down. Although the market is indicating that rate cuts will start in March (the Fed), April (the ECB) and June (the Bank of England), some commentators are saying that it’s too early to start cutting interest rates as there’s still “danger” that strong jobs markets and higher wages could fuel elevated levels of inflation for longer. At the moment it looks likely that rates will be left unchanged going into the end of this year, but the fireworks could start in 2024…

In commodities news, Anglo American tipped for takeover after copper shock (The Times, Emily Gosden) highlights a 20% drop in mining company Anglo American’s share price on Friday because it cut its outlook for copper production for the next few years due

to difficulties at mines in Chile and Peru. * SO WHAT? * Anglo American has underperformed its peers for a while now thanks to falling platinum prices, diamond demand and logistical problems in South Africa. Under current CEO Duncan Wanblad’s tenure, the company’s share price has more than halved and things could get worse this week as a ruling is expected that could herald the start of a class action lawsuit. If its share price continues to languish some are now saying that it could be vulnerable to takeover bids…

Then in China uranium grab poses threat to western energy supply, warns Yellow Cake (Financial Times, Harry Dempsey) we see that London listed uranium investment vehicle Yellow Cake is warning that China’s bid to corner the market in the radioactive commodity has already pushed prices up to a 15-year high. Chinese firms continue to buy on the open market, sign long-term contracts and snap up mines. * SO WHAT? * Uranium has been one of the best performing commodities of the year, climbing by 70% to its highest level since 2007! Much of this demand is thanks to more governments around the world wanting to become more energy-independent, which has resulted in strong demand. At the recent COP28 climate conference in Dubai, 22 world leaders committed to triple nuclear capacity by 2050 versus 2020 levels, implying further sustained demand. If we don’t get moving quickly on this, will this be lithium all over again, I wonder?!?

I thought I’d mention Green air travel: why synthetic fuel prompts genuine excitement (Financial Times, Lex) because although it’s not going to be a short-term solution, it is increasingly being seen as an important part of the future decarbonisation of aviation. Sustainable Aviation Fuel (SAF) costs more than double conventional fuel but the fact that it is largely compatible with existing engine technology means that investment costs for manufacturers will be lower. Electric engines and hydrogen propulsion will need a ton of money to “get off the ground”, for instance.  * SO WHAT? * At the moment, SAF represents just 0.1% of global aviation fuel, according to the International Air Transport Association. Production of SAF generally involves converting waste fats and oils which helps to reduce carbon emissions by around 70% versus fossil jet fuels. SAF is realistically years away from commercialisation but companies including Rolls-Royce, Boeing and United Airlines are putting money into start-ups such as OXCCU. We’ll just have to wait and see how this unfolds!

Then in crypto news, M&G’s $20m stake in bitcoin trading business ‘is stamp of approval’ (The Times, Patrick Hosking) shows that insurer and management group M&G is putting $20m into Global Futures and Options (GFO-X) which will launch its first bitcoin-linked products in Q1 of next year. * SO WHAT? * This is a major coup for GFO-X and represents a rare new commitment from a proper asset manager into bitcoin since the FTX collapse. TBH, I don’t think $20m is that high an amount for M&G and it does get them a front row seat in an asset class that many want to get involved in despite the scandals. The fact is that bitcoin has surged by over 160% this year despite scandals at FTX and Binance so there still appears to be plenty of interest!

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

REAL ESTATE VS CONSUMER NEWS

The European mortgage market slows while the UK market has its issues…

European mortgage market set for lowest growth in a decade (Financial Times, Owen Walker) shows that the European mortgage market is on track to grow at its slowest rate for a decade this year, according to EY’s European Bank Lending Forecast report. This is at least partly thanks to banks tightening their lending criteria. That being said, European banks have built up decent capital buffers over the last 15 years so this should mean that they are better prepared for a slowdown than they were in the wake of the global financial crisis.

Nearer home, Average asking price for home in UK drops by £7,000 in December (The Guardian, Graeme Wearden) shows that average asking prices for UK homes fell this month as sellers competed hard to get buyers before Christmas. Prices usually drop at this time of year but this month’s drop of 1.9% was bigger than the usual 1.5% average. Rightmove reckons that house prices will fall by an average of 1% over 2024. However, ‘Second-stepper’ demand gives boost to calmer property market (The Times, Lara Wildenberg) cites the same report as showing that the mid-market – aka “second-stepper” category of people looking to move out of their first homes – saw more activity than the rest of

the market as demand for three and four-bedroom properties grew by 9% in November versus the same month last year.

On the flipside, Households in mortgage arrears to hit eight-year high (Daily Telegraph, Alexa Phillips) shows that cost of living pressures and higher borrowing costs have meant that the number of people in arrears is 30% higher than it was in 2022 according to research by banking trade body UK Finance. This is the highest level it’s been since 2015 and many homeowners still face the prospect of big mortgage shocks over the next two years as they come to the end of cheaper fixed rate deals that were signed when mortgage rates were at historically low levels.

Meanwhile, Tenants in Britain ‘hit by highest increase in rent for a decade’ last month (The Guardian, Graeme Wearden) shows that tenants in Britain last month saw their biggest November rise in rents since at least 2014, when records began! Rents on new tenancies increased by 10.2% year on year, according to stats from Hamptons. It latest monthly letting index shows that the total bill for rent has doubled since 2010 😱! Ouch! * SO WHAT? * This means that more millennials are renting for longer and getting onto the first rung of the housing ladder later as a result. It is possible that more millennials will have to rent forever, being priced out of buying a property.

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

RETAIL & CONSUMER TRENDS NEWS

Macy’s gets an offer, Ocado adds M&S products, UK shoppers will get less for more and whisky exports rise…

Investor Group Launches $5.8 Billion Buyout Bid for Macy’s (Wall Street Journal, Lauren Thomas) highlights a bid from an investor group comprising of Arkhouse Management (a real estate investment firm) and Brigade Capital Management (a global asset manager) to take the department store private as competition continues to chip away at the company’s valuation. The group offer equates to a 32% premium to where the company’s share price closed pre-announcement but, at $21 a share, is still way off Macy’s peak at $70 a share. * SO WHAT? * Currently, Macy’s has 500 stores  under the Macy’s name along with over 30 locations of Bloomingdale’s and other smaller format shops. Department stores have suffered hugely in the last few years and we saw JCPenney, Neiman Marcus and Lord & Taylor all file for bankruptcy in 2020 alone! Whether the group will be able to achieve a higher valuation for the company by taking it private and conducting a major overhaul is moot. At the end of the day, department stores are in terminal decline in most developed countries, so it’ll have to be a corking strategy to get Macy’s out of its current rut…

Back in the UK, Ocado adds 580 more M&S products (Daily Telegraph, Hannah Boland) shows that almost 600 M&S products

have been added to the Ocado website in the run-up to Christmas following recent criticism from M&S that Ocado wasn’t doing enough to nurture the relationship. The joint venture Ocado Retail posted a half-year loss of £23m. * SO WHAT? * The initial boom that Ocado Retail experienced during lockdown has since diminished and efforts are now being made to turn things around. I would say, however, that M&S is in a much stronger position now than it was when the joint venture first started but it’s only right that it should make its feelings known to Ocado.

In UK consumer trends, UK Christmas shoppers will pay more for less this year, say economists (The Guardian, Gwyn Topham) cites research from the bods at CEBR who have come to the massively insightful conclusion that consumers are going to pay more for less this Christmas. According to their calculations, consumers would have to spend another 20% in order to get the same kind of Christmas they got in 2019! On the plus side, Whisky is toast of drinks industry as exports rise 13% (The Times, Lara Wildenberg) shows that thirsty consumers in foreign markets have been helping whisky contribute to a 13% rise in UK drinks exports according to Hazlewoods business advisers and accountants. It outperformed other drinks and made up about two thirds of total exports, followed by gin and then beer. Fun fact: America is the biggest export market for British whisky by value.

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

UK car production increases and Cigna abandons its mega bid…

In a quick scoot around some of today’s other interesting stories, there were some interesting retail articles in Carmakers lead way as output accelerates (The Times, Jack Barnett) which shows that the number of sectors that increased production in November in the UK economy reached their highest level for five months, according to Lloyds Bank’s latest economic activity tracker. They were led by car manufacturers and auto parts makers which have bounced back strongly from contraction! Now all we need to know is whether the next GDP estimates from the ONS will show that

the UK economy has returned to growth for Q4! That all being said, the Lloyds report pointed out that half of the sectors in its report cut production last month and there are concerns about the lack of new business – so it’s not all unicorns and rainbows just yet…

Meanwhile, Cigna Calls Off Humana Pursuit, Plans Big Stock Buyback (Wall Street Journal, Lauren Thomas) shows that Cigna has now ditched plans to pursue a tie-up with Humana that would have created a $140bn behemoth in the health insurance industry. It just couldn’t agree on price and other details so it’s going to look at smaller bolt-on acquisitions and do a share buyback instead.

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…

Everything in this video looks OK – apart from the Spam, IMO 😁! What do you think??

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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)