Watson’s Weekly 02-05-2020

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE DAY IN BRACKETS REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

• France and Germany are tightening regulations to stop foreigners from taking advantage of current circumstances (Thursday) and buying up important assets on the cheap. Spain has already made moves in this regard and it seems that they are all heading advice from the EU to protect their own companies. This is because everyone is getting wary of cashed-up investors, like Gulf-state sovereign wealth funds, going on a bargain hunt. The Qatar Investment Authority said it was looking to scoop up assets in the health and tech sectors (Monday)
• Countries are starting to change their lockdown statuses. Although Russia is extending its lockdown (Wednesday), Spain, France, Italy and Germany are all relaxing conditions to some extent (Monday) as well as some parts of the US
• UK companies are in various states of lockdown lifting mode – Travis Perkins says that 70% of its shops are now open (Wednesday), Nando’s and Burger King are making plans to return (Wednesday) and will join the likes of McDonald’s and KFC while Wetherspoons and Dixons are also looking at how they might return (Thursday). Interestingly, Tesco’s has started to cut some of the people it hired when things were getting a bit crazy (Tuesday)

• Facebook (Thursday) and Google (Wednesday) said they were seeing a bottoming out in ad revenues although Twitter wasn’t as bullish (Friday). Still I think their prospects are better than WPP, the traditional ad agency, which is having a nightmare (Thursday)
• Microsoft continues to benefit from working from home and videoconferencing (Thursday) while Zoom had to make the embarrassing admission that it had exaggerated its success (Friday)
• In hardware, Apple said it would delay the production of its new iPhones (Tuesday) that were originally due to launch in mid-September and they announced reasonable numbers for the quarter (Friday) but remained tight-lipped about prospects for the current quarter

• UBS, Santander, HSBC (Wednesday) and Lloyds Bank (Friday) announced their quarterly numbers. Their performance was mostly OK for the quarter but they took a massive hit on loan loss provisions as they readied themselves for the potential storm to come when individuals and companies will inevitably start to default. The real test will be how the banks perform in the second quarter IMO

• Airlines are having a nightmare. Norwegian Air, Virgin Atlantic, EasyJet, Lufthansa, Air France-KLM and US carriers are all at various stages of trying to borrow large amounts of cash (Tuesday) but BA announced big job losses and mooted the possibility that they wouldn’t be using Gatwick
• If it’s a nightmare for the airlines, I would argue that it’s even worse for the aeroplane makers because airlines can try to pull out of purchases etc. plus thousands of cheaper planes could suddenly be available (Tuesday) as airlines around the world go bust and the aircraft they have been leasing become available. Both Boeing and Airbus are cutting costs (Tuesday) and they don’t see a return to “normality” for a few years yet

• The US meat supply chain is breaking down. Tyson Foods had to shut three slaughterhouses (Tuesday) and now, around 30% of US pork processing capacity and 14% of beef capacity has been shut down. Trump hit back by invoking the Defense Production Act (Wednesday), forcing the companies to stay open. The DPA is legislation that was used during the Korean War era to compel companies to remain open for the national interest. The problem is that employees don’t want to work in an environment where they could catch the coronavirus (understandable!), but if the government forces them to go to work, they will not be able to sue companies for failing to provide the right protection
• On the other hand, plant-based meat substitutes have been seeing a major uptick in sales (Monday). OK, so it’s from a low base, but for future reference it is interesting to note that production of meat substitutes involves fewer staff and is therefore more sustainable under social distancing restrictions

• Watson’s Yearly updates: Not tremendous amounts this week. A few minor sporty event updates, interest rate cuts for Mexico, China, Turkey and Russia plus a few extra comments on the increasing popularity of meat-alternatives, cannabis trends and streaming content  

My favourite “alternative” stories of this week were the amazing Massive coronavirus-themed grass graffiti is unveiled in Swiss Alps (Reuters https://tinyurl.com/y9vvkt23) and the quite frankly completely bonkers Japan’s latest work-from-home innovation: The wearable video conference background (SoraNews24, Casey Baseel https://tinyurl.com/ycqzpr2f). Enjoy!