Monday 27/06/22

  1. In OIL, MACRO & ENERGY NEWS, the G7 cooks something up to annoy Russia while India continues to be a loophole, the central bank of central banks says we’re at a “tipping point” and Macron backs his PM while France face electricity rationing
  2. In UK BUSINESS TRENDS, SMEs struggle, local builders fail and a car-charger start-up ditches its SPAC option
  3. In EMPLOYMENT NEWS, PwC coughs up and grads have it good
  4. In MISCELLANEOUS NEWS, Ukrainian farmers face big challenges, Amazon’s Prime Day looks a bit meh and JLR has leaky sales
  5. AND FINALLY, I bring you a caption competition and a flying hotel…

1

OIL, MACRO & ENERGY NEWS

So the G7 talks oil while India provides a Russian back door, the BIS reckons the world has reached a “tipping point”, Macron backs his PM and France faces electricity rationing…

📢 I’m going to be doing a roundup of the month of June THIS WEDNESDAY at 5pm with Jake Schogger of the Commercial Law Academy. I will whip through the major events of the month in the business and financial markets news and show you how they’ve developed and Jake will give you legal insight into many of those events. You need to REGISTER to attend this even (which is FREE), and you can do that HERE. See you on Wednesday!

G7 aims to hurt Russia with price cap on oil exports (Financial Times, Guy Chazan, Sam Fleming and David Sheppard) shows that G7 leaders are hammering out an agreement to put a “price cap” on Russian oil in order to hit Russia’s ability to finance its war in Ukraine. Talks began yesterday in Germany’s Schloss Elmau and the idea of limiting what countries will pay for oil has been pushed hard by Biden. Mind you, Concerns grow that India is ‘back door’ into Europe for Russian oil (The Guardian, Alex Lawson) suggests that India’s big rise in imports of Russian oil is due to India being used as a way to funnel oil into Europe. The problem here is that it is very difficult to prove as a number of shipments of crude can arrive in one port and then be blended together. * SO WHAT? * I have to say that I think that this price cap thing sounds like a nice idea in theory, but it is actually crazy in practice. It’s basically a buyers’ strike and the only way it could EVER work is if absolutely EVERY country signed up to it. And that ain’t going to happen. If that becomes the case, all I think will happen is that Russia will sell its oil to those countries and those countries will then sell it to the west. G7 countries could potentially impose sanctions on those who don’t sign up, but surely there would be so many countries that wouldn’t that the G7 would essentially be shooting itself in the foot because in a world of rising inflation, you don’t really want to be making trade any harder than it already is. The other thing is that OPEC isn’t going to like this either because no doubt its members will say that if they can do this to Russia, then any of them could be next – meaning that they could close ranks, restrict (or just not increase) production and watch everyone squirm whilst oil prices go even higher.

Meanwhile, World is at ‘tipping point’ as UK faces recession (Daily Telegraph, Tim Wallace) cites conclusions from the annual economic report published by the Bank for International Settlements (BIS) which say that we are reaching a crossroads where it may be impossible to stop inflation. It called on central banks to double-down on efforts to rein things in but in such a way that they avoid the pendulum swinging the other way and causing recession. Wow. How incredibly helpful and insightful. Thanks BIS for stating the bleedin’ obvious. I almost fell off my chair laughing this morning when I saw that Yael Selfin, chief UK economist at KPMG, said that there was a roughly 50% chance of mild recession in the UK. I hope she gets paid a lot of money to come out with such amazing conclusions. Surely “there’s a 50% chance of XYZ happening” = “I dunno mate” 🤣. Ah, economists. Gotta love ’em.

Over in France, Emmanuel Macron backs PM Élisabeth Borne and vows to press ahead with reforms (Financial Times, Leila Abboud) shows that a chastened president Macron is lining someone up to take the blame for everything if it goes wrong by backing his PM Élisabeth Borne to be able to stay on and continue to push through planned reforms despite the fact he no longer has a majority. Macron did well to eek out a second term (the first person to do so for twenty years) but he lost control of the National Assembly last week, making his job way harder than it was.

Talking of things getting harder, France prepares households for electricity rationing this winter (Daily Telegraph, Oliver Gill and Rachel Millard) highlights tough times ahead as France’s biggest energy suppliers – Engie, EDF and TotalEnergies – have appealed to households and businesses to limit their energy usage, saying that “The effort must be immediate, collective and massive”. * SO WHAT? * EU countries, including the Netherlands and Germany, are already making preparations to ration energy and although France is less exposed to Russian energy shenanigans as it covers almost 70% of its own energy needs from nuclear energy, it is still exposed. The mechanics of how rationing would work are still in discussion but it will probably include restrictions on usage for business and households at morning and evening peaks.

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

UK BUSINESS TRENDS

UK SMEs struggle – as do local builders – while a car-charging start-up swerves a SPAC

Small and medium businesses struggling with ‘a hat-trick of hurt’ (The Guardian, Phillip Inman) cites findings by the ICAEW (the industry body for accountancy) which show that SMEs are stocking up on raw materials and ordering parts six months in advance to minimise supply chain problems and the possibility of exposure to even higher prices going forward given the weakness of the pound. This comes shortly after the CBI observed a downturn in private sector activity in the UK which points to imminent recession. UK’s local builders disappearing in their thousands as costs soar (Financial Times, Gill Plimmer) is further evidence of this as we see the phenomenon of smaller builders going bust despite construction demand being red-hot. Over 3,400 smaller UK construction businesses went into administration in the year to April – the most since the financial crisis hit. It seems to be accelerating as bankruptcies in the construction sector are overtaking those of every other sector in the UK. * SO WHAT? * Critics say that consumers have been helped through these recent tough times, but businesses have not. Shipping, energy, labour and

material costs have proved to be more than these businesses can bear and smaller companies are less able to take the buffeting as they don’t have the same visibility of demand, cash buffers to buy in advance or the facilities to store them or the ability to pass all of this on to customers, particularly if they have agreed to fixed price contracts.

Meanwhile, I thought it was interesting to see Car charging start-up EO dumps Spac for private funding (Financial Times, Daniel Thomas) as the British provider of EV chargers to companies that own fleets of electric vehicles and trucks is close to fielding enough money to finance its expansion into the EU and US after its attempt to float via a SPAC in the US failed miserably. The company said that there are no plans to do an IPO in the near future. * SO WHAT? * SPACs really seem to be soooooooo last year. It’s interesting to see how they have gone from hero to zero in a pretty short time span. The CEO even said that the failure of the SPAC-backed flotation may have been a blessing in disguise because it means that he won’t have the commitments of being a public company and will be able to execute “behind closed doors”, relatively speaking.

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

EMPLOYMENT NEWS

PwC decides to pony up and grads are looking good…

PwC matches inflation with wage hikes to attract talent (Daily Telegraph, Tom Rees) shows that the Big Four accountancy firm has decided to give half of its 20,000 staff wage hikes in line with inflation to help with the rising cost of living. It said that it is doing this to attract talent and it is likely to cost £120m plus an extra £10m for bonuses. * SO WHAT? * The government has been asking companies NOT to do this, saying that this will just make prices rise even more but if you are a company wanting to do your best for your employees/stop them from leaving then of course you’ll do what you need/have to.

Then It’s boom time for graduate salaries (The Times, Callum Jones) cites Adzuna findings which shows that graduate salaries

have increased to a six-year high as employers fall over themselves to attract them. The average advertised salary for UK grads rose by 7% to £26,076 last month while law and banking are offering particularly attractive salaries. JPMorgan Chase is offering up to £70,000 while Barclays is offering £50,000. Nice! * SO WHAT? * For those who may be worried about things getting a bit tricky if we do actually tip into recession, I would say that graduates are usually fairly well-insulated in that they are still “cheaper” than more experienced colleagues and if the axe eventually falls, the more expensive employees can be more vulnerable. However, that is not always the case given that it’s easier for employers to cut people who’ve been at a firm for less than two years and that more experienced colleagues may have better business-generating capacity.

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

Ukrainian farmers race to salvage harvests, Amazon’s Prime Day is a bit meh and JLR tries to close a loophole…

In a quick scoot around other interesting stories today, Ukrainian farmers race against time to resolve world food crisis (Daily Telegraph, Tom Rees) shows that the Ukrainian grains and poultry giant MHP says that storage limits and logistics nightmares will now reduce how much farmers can grow – and this is likely to worsen the global food crisis as both production and exports have been compromised by the Russians. Decisions on growing winter crops like wheat will have to be made soon and it is likely that continued disruption will intensify exiting problems.

Elsewhere, Amazon’s Prime Day isn’t quite the blockbuster it once was (Wall Street Journal, Sebastian Herrera) shows that the e-tailing behemoth’s Prime Day shopping event has seen momentum

slow and the company is not chucking money at it in the same way as it once did. It plans to hold its Prime Day this year on July 12th and 13th and although it will give the company a bit of a boost it is nowhere near the kind of boost that Singles’ Day (Alibaba) or 618 (JD.com) give to their respective companies.

Jaguar Land Rover battles grey market in China (Daily Telegraph, Howard Mustoe) highlights an interesting loophole that JLR is trying to close as frustrated dealers in the UK are managing to sell their cars on the grey market in markets like China and South Africa for a very big mark-up. This isn’t illegal, but it is frowned upon and it is worsening the shortage over here. It’ll be interesting to see whether this goes on elsewhere for other car manufacturers…

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…

There’s a new ride coming in Japan’s Fuji-Q Highland amusement park (I’ve been to this place – and it’s great!), as per Fuji-Q Highland theme park is opening its newest attraction next month: The Fujiyama Slider (SoraNews24, Dale Roll), and the park has decided to hold a caption competition to mark its launch. My entry would be “Why did I do this again??”. Then in Flying hotel that ‘never lands’ could see 5,000 guests soar through the skies in luxury (The Mirror, Michael Moran) we see someone’s weird idea of a good time. Holiday. On a plane?!? Nope.

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Some of today’s market, commodity & currency moves (as at 0757hrs 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 **
7,209 (+2.68%)31,500.68 (+2.68%)3,911.74 (+3.06%)11,607.62 (+3.34%)13,118 (+1.59%)6,073 (+3.23%)26,871 (+1.43%)3,379 (+0.88%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$107.55$113.19$1,837.341.228851.05679135.1381.1628721,251.6

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