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 COLOURED HIGHLIGHT 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.
IN BIG PICTURE NEWS...
The war drags on, the royals go to America and the UAE smashes OPEC apart
IN WAR NEWS…
The Pentagon says that the Iran war has cost $25bn so far and frustration with the situation is growing. Some Republican lawmakers are now challenging the president’s authority regarding the continuation of the war but I can’t see this going anywhere. German chancellor Merz even said that the US was being “humiliated” by Iran while Iran’s supreme leader vowed to “prevent the enemy’s abuses” of the Strait and referred to the US as the “Great Satan”. Clearly things aren’t getting any better…
Meanwhile, G7 central banks had a big week this week, what with the Fed, the Bank of Canada, the Bank of Japan, the Bank of England and the ECB all having interest rate meetings. All of them kept interest rates on hold but indicated that rates could go up if a prolonged Iran war pushed up inflation.
LOSERS OF THE WAR – developing nations because of the rising prices of oil and gas (they are net importers and don’t have much in the way of renewables), disruption to food supplies (worsening malnutrition) and returning expats who have been working abroad and sending the money home
Countries, industries and companies that have seen lots of investment from Gulf countries who are now reviewing the investment criteria of their sovereign wealth funds.
Industries and companies that use helium are going to be in trouble soon because there’s a shortage! Qatar normally supplies about a third of the world’s helium but it has not been able to make any shipments since the Iran war started. Helium is used in AI, nuclear power, advanced weaponry, aerospace, fibre-optic cables, quantum computing, chromatography and the cooling of superconducting magnets in MRI machines, among other things.
Shipping, because capacity is down and more stability is needed for prices to normalise.
Agriculture, because there’s not enough fertiliser – and that means crop yields are going to be poorer than they would have been otherwise.
Airlines, because of higher fuel costs and more travel disruption.
Consumers are already losing out as petrol prices have already climbed but air fares and food prices are set to rise considerably amid shortages of fuel. Britain is the most vulnerable country in Europe to jet fuel shortages because we don’t have as much oil refining capacity as other European countries
WINNERS FROM THE WAR – include the oil and gas sector (high prices, high demand), defence (share prices have weakened but that may be due to investors selling out of a strongly performing sector to raise money) and Chinese solar (China dominates supply chains for clean energy technologies).
OTHER EFFECTS OF THE WAR – US motorists are spending less at the pumps, according to data from Upside which tracks consumer spending across over 23,000 petrol stations in America. Pistachio prices have hit their highest level in years thanks to supply disruptions (Iran is one of the world’s biggest producers), London’s luxury hotels are suffering from the lack of rich Middle Eastern visitors and consumer worries about the effect on the UK economy are denting the prospects for house price growth this year.
IN TRUMP THINGS…
There was an assassination attempt on the president/his entourage, but the shooter didn’t get anywhere near the actual room he was in and, somewhat bizarrely, he was not shot dead. Trump used this as an opportunity to justify spending $400m on a new ballroom for the White House.
King Charles and Queen Camilla made a state visit to the US and it seemed to go quite well. A lot was made of the so-called “special relationship” but, in an unguarded moment caught on tape, it turns out that the current British ambassador to Washington saying that the “special relationship” everyone keeps banging on about is not with Britain, but with Israel. He also said he thought that it was “extraordinary” that the Epstein scandal “hasn’t touched anybody” in the US given that it had a major impact on the royal family and continues to have a huge impact on our PM and, obviously, on Mandelson. Trump then magnanimously dropped Scotch whisky tariffs “in honour” of King Charles.
Trump showed his continued taste for vengeance as US federal prosecutors charged former FBI-head James Comey with threatening the life of the president by posting a photograph of seashells arranged in a pattern that read “86 47”. Prosecutors interpreted this as “86” meaning “get rid of” and “47” referring to the number of Trump’s second presidency. Then the FCC launched a probe into all broadcast TV stations owned by Disney for the breach of a number of rules including “unlawful discrimination” which happened, completely coincidentally, just days after Jimmy Kimmel made a joke about Trump’s wife. On the other hand, the US Justice Department decided to shut down the investigation into Jerome Powell, chair of the Federal Reserve, regarding cost overruns at the Fed’s HQ.
In an update on other presidential ego trips, America is going to be issuing passports with the president’s face on as he continues with his campaign to Trumpify everything. The new passport will be a special limited edition with his portrait overlaid on the Declaration of Independence on the inside cover with his signature in gold (obviously) at the bottom. Unfortunately, his $5m golden visa scheme isn’t going well as, so far, only one person has been approved for the expedited visa despite the price of the “Gold Card” visa being cut from $5m to $1m in December.
IN REGIONAL/INDIVIDUAL COUNTRY NEWS…
THE AMERICAS
THE US – economic growth rebounded although consumer spending is slowing down because of the Iran war. In the meantime, the S&P 500 shot up by 10% in April in what was its biggest monthly jump since November 2020 when there was a vaccine breakthrough! Tech stocks were the main drivers of the rebound and it is notable that corporate America has been raking in the money, as evidenced by numbers bandied around in the current earnings season so far.
CANADA – PM Carney announced the creation of a new sovereign wealth fund (called the “Canada Strong Fund”) that will be used to finance big projects that are of national interest and provide returns for Canadians. It is part of Carney’s drive to make Canada the “strongest economy of the G7” and the fund will work with the private sector to finance 15 infrastructure proposals with the nation’s Major Projects Office.
ASIA
CHINA – the country’s regulators decided to block the deal and are insisting on a full unwinding. This is going to be a massive pain for Meta because it’s already integrated Manus into some of its tools. The action sends a strong signal to Chinese tech companies that their expertise will not be allowed to go abroad.
THE MIDDLE EAST
THE UNITED ARAB EMIRATES – the country announced that it would leave OPEC and OPEC+ in frustration with oil production quotas (imposed by OPEC) and Russia’s support of Iran (OPEC+). This is a win for Trump, who has wanted to break the cartel’s grip on the oil price for a very long time and could signal the beginning of the end for OPEC as others may feel emboldened. Israel took advantage of the move to strengthen ties with the UAE by sending a sophisticated weapons system – and “several dozen” Israeli military personnel to operate it – to the UAE to help defend it.
EUROPE
GERMANY – the country made a formal announcement that it would increase original defence spending plans by 20% in 2027 and meet NATO’s new defence spending target at least six years ahead of plan! Well, given that Trump’s just decided to withdraw 5,000 American troops from the country, this is probably just as well!
THE UK – borrowing costs hit their highest level since the 2008 financial crisis but Starmer got a rare bit of good news as it turns out that he won’t have to face a parliamentary ethics inquiry over the whole Mandelson thing after all because it was convincingly voted down in the Commons.
There was a whole load of noise this week, though, and I guess this is just par for the course in the run-up to the local elections that are going to be held next week. Labour is expected to get absolutely trounced. There was talk about a one-year freeze on private rents to help tenants, but all that does is store up problems for later – and it was officially dismissed as an idea. Reeves defended her record in the job as chancellor as rumours surfaced about a potential cabinet reshuffle when Labour loses at the local elections.
UK ministers are going to get the power to force pension funds to invest a minimum amount in British companies via some upcoming legislation. Fund managers will complain that this could affect returns for their investors because it will restrict what they can or cannot invest in. I say that fund managers should make sure they do their job properly and invest in the right British companies 😬.
IN COMMODITIES NEWS…
OIL – Goldman Sachs analysts sounded a warning about the rapid depletion of the world’s oil supplies thanks to the Iran war. They also nudged up their Q4 oil price estimates. Prices topped $120 a barrel in response to Trump making noises about not wanting to end his blockade of the Strait of Hormuz. China’s about to restart the exporting of jet fuel, diesel and gasoline from May. An export ban had been put in place at the beginning of the war to protect domestic supply, but that is going to be relaxed.
In company news, Shell agreed to buy Canadian shale producer ARC Resources in a deal worth $16bn. This will be its biggest acquisition since it bought BG Group for $70bn at the beginning of 2016. BP’s Q1 profits more than doubled, mainly thanks to its oil traders raking in the money from betting on volatile prices. It swiftly warned the government against getting any funny ideas about imposing another windfall tax, though!
It turns out that Exxon Mobil, ConocoPhillips and other US oil majors are now sniffing around Venezuela again just three months after turning their noses up at the opportunity after Trump invaded and effectively put Delcy Rodriguez in charge. They were burned in the past after they poured loads of money and effort into the country’s oil industry only for it to be nationalised, shutting them out with no recourse.
IN CONSUMER, RETAIL & LEISURE NEWS...
IN CONSUMER TRENDS…
Savills data shows that home renovation approvals have dropped to their lowest level in over a decade. It seems that homeowners are getting increasingly reluctant to splash out on major refurbishments if they think they might not get the return when it comes to selling the property. On that front, the latest data from Zoopla shows that homes across London are now taking six days longer to sell than at the same point this time last year. It’s eminently understandable that people are getting more cautious given the current macroeconomic scenario.
UK high streets are rebounding in terms of footfall but it’s still lower than it was in 2019. Rents in prime locations are rising and vacancies are falling – but this seems to be concentrated in specific places while other locations are struggling as city centre vacancy rates remain a problem. I suspect that there will be more business failures in retail and hospitality because of cost rises and a weakening of demand – and that will no doubt put downward pressure on rents once more.
IN RETAIL NEWS…
The BRC said that price rises in UK shops are slowing down as retailers are offering discounts on clothing, furniture and DIY goods.
Boots is potentially looking to float on the UK stock market sometime in 2027. The company is actually doing surprisingly well at the moment but I think that the real opportunity for the high street stalwart is in beauty because a) it’s a trusted name, b) since department stores shut down, there are fewer outlets where you can buy beauty products and c) the shops are always in prime locations. If they get the offering right, it could work well. It’s not as if the company is having to do this from a standing start either – it has form! It’s just that perhaps it should concentrate on making it have a more premium feel IMO…
IN CONSUMER GOODS NEWS…
Mondelez boasted improved profits and revenues over Q1 thanks to stronger performances in developing markets offsetting weakness in North America and Europe. However, you would have thought that this isn’t necessarily going to last given the uncertain macroeconomic picture and then there’s that problem on the horizon of more people being on weight-loss drugs, meaning that a lot of people are going to be snacking less.
Adidas benefitted from a boom in sales of football merch ahead of this summer’s World Cup, helping the company to beat market expectations. Its clothing sales were particularly strong and managed to offset weaker growth in footwear.
IN LEISURE NEWS…
A report by market research firm NIQ showed that three licenced venues are shutting down every day because of rising labour and energy costs in addition to shaky consumer confidence.
Starbucks announced a rebound in sales over the quarter despite consumer gloom. The chain has invested significant amounts in improving its offering over the last 18 months and it’s clearly paying off.
IN TRAVEL-RELATED NEWS…
The industry lobby group Airlines UK is urging the government to put together an emergency plan or face a summer of travel chaos if the Strait of Hormuz remains closed. The government has insisted thus far that there is no need for people to change their travel plans – but it did advise people to top up their travel insurance.
The Airports Council of Europe said that regional airports were the most at risk if airlines cut capacity and/or raise fares. All they can do is wait…
Wizz Air made the unusual move this week of accusing Middle Eastern airlines of putting politics ahead of customer safety as many have resumed flights in the war zone. Many European airlines have already stopped flights to the UAE because of the conflict. Separately, the company said that flight bookings for this summer were up by 17% despite all the jet fuel fears and that it expected to turn a profit in its next financial year.
Airbus profits halved in a tough Q1 as it delivered the fewest commercial aircraft over a single quarter than it has done since 2009. Revenues were ahead of analyst estimates, though, and the company kept its 2026 delivery target unchanged.
IN GAMBLING…
Robinhood saw its quarterly results falling short of expectations – but it did well from rising fees on prediction market trades and growth in its subscription service. Although prediction markets did well, crypto trading did not.
Analysis by the Anti-Corruption Data Collective showed that long-shot bets – deemed to be bets of $2,500 plus at odds of 35% or less – on Polymarket had an average win rate of around 52% in markets on military and defence actions! This win rate is notably higher than the 25% rate across all politics-focused markets and just 14% on all markets on the platform. Surely prediction markets are going to get regulated – it’s just the wild west out there!
IN TECH NEWS...
IN TECH NEWS…
Tech stocks saw a massive $180bn sell-off after ChatGPT said that it fell short of an internal goal of reaching one billion weekly users by the end of 2025 and missed its revenue goals.
OpenAI and Microsoft relaxed the terms of their partnership to allow both sides to negotiate outside deals – and OpenAI promptly announced an expanded deal with Amazon that enabled Amazon’s cloud customers to use OpenAI’s advanced models via AWS’s Bedrock AI developer platform.
Google unveiled particularly strong results this week among its “hyperscaler” peers Amazon, Meta and Microsoft. Although investors are getting increasingly nervous about the eye-watering sums being thrown at AI, they seemed to be satisfied with results generally.
IN AI NEWS – Anthropic has had to ration access to its most popular tools and the situation has become so serious that it is now talking about dropping this coding tool entirely from its popular Claude Pro tier, which costs £18 a month. Basically, the company can’t build datacentres fast enough and it now seems to be more constrained than arch rival OpenAI. There is no quick fix, unfortunately, but it could take 12 to 18 months to get on top of.
Google employees signed an open letter to their CEO, Sundar Pichai, to say that they were against allowing the government to use their AI tech for classified military operations. That fell on deaf ears as the company said that it is not only proud to work with the military – it will continue to do so. Google signed a deal with the defence department on Monday to allow its AI tech to be used in classified operations. I’m sure that the company will be of the view that the employees can just leave if they object that much. It might even help them out given all the redundancies the tech sector has been announcing recently.
Anti-Palantir sentiment continues to grow as Australian government agencies are being called upon to ban any new contracts for the company that is closely aligned with Trump, ICE and the Israeli military. It’s also possible that the Met’s bid to use Palantir’s AI intelligence software could be blocked by the Mayor of London. Palantir is already facing efforts to strip its tech from the NHS because of its links to the Israelis and the war in Palestine.
IN HARDWARE NEWS – Huawei’s chip sales boomed by a whopping 60% thanks to strong demand from Chinese clients seeking an alternative to Nvidia.
Sandisk and Western Digital put in strong Q3 performances thanks to huge demand for their data storage products as the great AI datacentre buildout continues.
Apple smashed market expectations in a quarter that saw strong sales driven by its “most popular” iPhone ever! Tim Cook will be leaving his post on a high! Investor concerns remain about Apple’s disappointing showing in AI but its deal with Google earlier this year is supposed to address that.
IN SOFTWARE NEWS – Roblox cut its full-year guidance in order to put more resource into safety features. It thinks that the roll-out of age checks is slowing down – and will continue to slow down – user and bookings growth and so has decided to factor that in.
Synthesia’s CEO warned against the generation of over-complicated documents with “pages full of fluff” when churning out AI content, something he referred to as “AI-sloppification”. He believes that the use of LLMs should “make us more concise, not more verbose”.
IN STREAMING NEWS – Spotify’s shares slumped after the company unveiled weaker subscriber growth and profit forecasts. Investors were concerned by higher subscription prices putting off customers.
IN SOCIAL MEDIA NEWS – Meta signed a deal with US start-up Overview Energy that will enable Meta to harvest solar energy from space to power its AI datacentres on Earth. Power will be collected in space and then be converted into low-intensity infrared beams that can be directed at photovoltaic panels on Earth where they are then converted into energy.
IN AUTOMOTIVE NEWS...
EVs – Xiaomi, , better known for making cool smartphones, has now delivered 650,000 EVs, which puts it on a par with Tesla in terms of vehicles sold last year in China. What an achievement in just two years! The company has European expansion plans but hasn’t yet said which market it will enter. The Chinese wave is coming to Europe!
Rivian said that it wants to increase initial production capacity for a plant that it’s building in Georgia by 50%. The idea of this is to lower the cost per unit. It’s a punchy move for a company that hasn’t done particularly well until now, but I guess you have to go all in!
IN TRADITIONAL CAR NEWS – VW rolled out the ID.Polo, one of four entry level EVs to be released this year across the VW stable of brands. The models were jointly developed, which saved costs, and have almost 80% of shared components. The company also announced that it would cut its European production capacity by an extra 500,000 vehicles per year in response to weakening demand and rising US tariffs.
Aston Martin got another cash injection, this time from a consortium backed by billionaire chair Lance Stroll as the carmaker suffered its fifth consecutive quarterly loss whilst bracing itself for Middle East fallout. Aston Martin makes great cars but is an absolutely massive money pit…
IN FINANCIALS & INVESTMENT NEWS...
BANKS – JP Morgan is now relocating staff back to London from Paris as it now says that it overestimated the numbers needed there. CEO Jamie Dimon was pretty damning about the prospects for London in the wake of Brexit but he got this one very wrong.
UBS put in a stellar Q1 performance as the trading and wealth management divisions both did a roaring trade. Volatile markets powered UBS’s trading, reflecting similar at US banks. Stronger equity capital markets activity also helped.
UK banks are preparing for Starmer potentially losing the leadership, meaning that the government policy is more likely to lurch to the left. They are bracing themselves, in particular, for another windfall tax.
Lloyds Banking Group made pretty downbeat comments about the likely effects of the Iran war on the economy and slashed its UK GDP growth forecasts quite dramatically from 1.2% to 0.5%. Lloyds is of the belief that the war will spark a return to inflation and a rise in unemployment.
INVESTMENT NEWS…
Bill Ackman’s Pershing Square USA closed-end stock picking fund and his Pershing Square hedge fund management company floated this week on Wall Street. The former fell on its debut and the latter was slightly up. Investors don’t like closed-end funds because they tend to trade at a discount to their assets.
Back in London, the RAC decided to postpone its proposed IPO until the end of the year. The driving services group was originally going to do a flotation in the first half of the year but then Iran happened and markets became very volatile.
Negotiations between Pernod Ricard and Brown-Forman ended as neither side could reach agreement. It seems to me that alcoholic beverage companies need to change their offering because of changing consumer tastes, so a reshuffling of brands is surely likely. I would not be surprised if this brought other bidders out of the woodwork.
IN PHARMACEUTICALS NEWS...
AstraZeneca made a surprise U-turn as it decided to invest £300m in the UK after all following the pause in all large-scale projects last year. It will resume a £200m expansion in Cambridge and invest £100m in its Macclesfield site.
GSK announced decent results thanks to stronger vaccine sales. The company is currently focusing on its late-stage drugs pipeline and will unveil which medicines made the cut this summer.
Eli Lilly profits more than doubled thanks to booming sales of its diabetes and weight-loss drugs. Its performance was so strong that it raised its guidance for the full year. It’s a bit early to tell how its new Foundayo weight-loss pill is doing, but the early signs are good…
Apparently, side effects of taking GLP-1 weight-loss drugs – nausea, dry mouth and burping – are resulting in higher sales of mints and chewing gum! Sales of protein bars have also risen as increased use of weight-loss jabs has pushed jabbers to buy more protein-dense food to avoid losing muscle.