Watson’s Weekly 02-08-2025

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 TRADE NEWS…

• The US and EU reached a tariff agreement of 15% on imports to the US but Germany and France weren’t too happy because they said it would damage the bloc’s economy – and European share prices fell as a result. Trump also announced 15% tariffs on imports from South Korea, putting them on the same rate as Japan.
• The US extended the tariff deadline for China until 12th August and for Mexico for 90 days whilst announcing that reciprocal tariffs would come into force from Friday 8th August for 68 countries plus the EU.
• Trump shocked everyone again by suddenly announcing 25% tariffs on India, but then he posted on Truth Social that negotiations were still ongoing.

IN TRUMP THINGS…

• Trump’s administration continued the crackdown on financing international organisations – and it’s now looking to defund the OECD, the organisation that most recently led the push for global tax rates.
• The president also threatened pharmaceuticals companies, saying that they should “not offer other developed nations better prices for new drugs than prices offered in the US”. Ultimately, this probably means that the NHS is going to have to pay more for the drugs it buys.
• Trump then told Starmer, while he was in the UK, to cut taxes and curb immigration in order to beat Farage.

IN REGIONAL/COUNTRY  NEWS…

• GLOBAL – The IMF upgraded its global growth forecasts as the initial extremes of Trump’s tariffs threats tempered.
• IN THE US – the Fed left interest rates unchanged despite the White House pushing for interest rates to be lowered to 1%. Mind you, two members of the rate-setting committee voted against the majority decision to keep rates unchanged – the first time that more than one member has done so since 1993. If Trump gets his candidate in the Fed, we can see the way this is going to go…
• IN CHINA – the government announced its first nationwide programme of childcare subsidies as part of a concerted effort to encourage its citizens to have more kids. Families will get a $503 subsidy per year from the government for each child under the age of three, which will apply from January 2025, although families with kids born between 2022 and 2024 will also be able to apply for partial subsidies. Separately, China has increased its use of “exit bans”, where it has been stopping Chinese nationals and foreigners from leaving the country. No explanations are given, no help is available and the first time a lot of these people get a whiff of it is at airport customs.
• IN THE UK – the IMF upgraded UK growth forecasts, making us the fastest growing European economy in the G7 but also warned that the worst consequences of trade protectionism are yet to come. Doubt has been cast about the veracity of all those millionaire migration numbers that the government is using and the HRMC raked in a record £6.7bn from inheritance tax receipts thanks to a freeze on the 40% threshold and a streamlining of the various reliefs.

IN COMMODITIES NEWS…

• Trump caused panic in the copper market when he threatened a 50% tariff on copper, but then it turns out this was on copper products and not the raw material itself.
• Rio Tinto announced its weakest H1 profits for five years thanks to a big drop in the iron ore price. This is painful for Rio Tinto because iron ore is its biggest income generator.
• The World Gold Council reported that gold demand has boomed as the precious metal continues to be seen as a hedge against economic and geopolitical risks.

IN RENEWABLES NEWS…

• The UK’s biggest offshore wind farm was granted planning permission off the east coast of Scotland after 31 months of discussion. Objections had been raised because of dangers to local seabirds. The electricity generated by Berwick Bank could power 6m homes a year.

IN CRYPTO NEWS…

• JP Morgan announced a crypto trading partnership with Coinbase whereby the former’s customers will be able to connect their bank accounts to their Coinbase wallets starting from next year, enabling them to trade crypto. They will even be able to use their credit cards to trade crypto via Coinbase from this autumn.
• In crypto trends, companies are continuing to load up on crypto in order to pump up their valuations, but they’re not just buying bitcoin these days! Bitcoin still outperforms other tokens considerably, though…meanwhile, crypto lenders are getting more confident after a tricky few years surrounding the collapse of FTX. They are offering crypto-backed unsecured loans to customers who are avoided by traditional banks – sounds like the recipe for a nightmare to me! Similarities are being drawn between the way crypto is being pushed now and the rise of CDS trading that led to the financial crisis of 2008. I guess the difference between now and then was that CDSs didn’t have presidential backing!

IN BUSINESS TRENDS…

• A report from Begbies Traynor, the corporate restructuring specialist, suggested that 50,000 British companies are on the verge of collapse thanks to the cumulative effect of higher taxes and global economic turmoil. Bars and restaurants were the worst hit sectors, followed by travel and tourism.
• The latest survey by the Institute of Directors shows that British execs are more pessimistic about the prospects for the UK economy now than they were after the Brexit referendum, the start of the pandemic and in the wake of the Truss-Kwarteng mini-budget. Over 80% of business leaders surveyed in July said that they were “very” or “quite” pessimistic about the outlook for the next year.

IN INVESTMENT TRENDS…

START-UPS…

• German AI start-up n8n is in the middle of securing new funds at a valuation equivalent to over $1.5bn as it tries to tap into growing investor interest in European AI prospects. n8n automates workflows using AI. This is amazing considering it “only” had an implied valuation of around €300m at its last funding round just four months ago!
• Investment group Iconiq Capital is leading a $5bn funding round for AI start-up Anthropic that will give Anthropic a massive $170bn valuation, triple the amount it was valued at just four months ago!

M&A…

• Oilfield services company Baker Hughes is closing in on a $13.6bn all-cash acquisition of Chart Industries to improve its capabilities in LNG, nuclear energy and data centres in addition to boosting its rapidly-growing industrial and energy tech division. Chart had been in negotiations with Flowserve, but that merger would have been an all-paper deal, so you can see why they jumped at the Baker Hughes offer!
• Palo Alto Networks agreed a $25bn takeover of CyberArk Software in the latest example of consolidation in a fragmented sector.
• Iveco sold its defence business to Italian defence group Leonardo and its truck, bus and industrial power train units to India’s Tata Motors as Iveco continues its move away from the automotive sector.
• Canadian investment giant Brookfield put in a £2.4bn offer to buy retirement specialist Just Group in the latest merger to happen in the financial services sector. It really does seem like confidence is picking up!
• Chinese e-tailer JD.com launched a €2.2bn all-cash takeover bid for German electronics retailer Ceconomy in what could potentially be one of the biggest acquisitions by a Chinese company of European company in recent years.
• Next bought the brand rights to insolvent maternity group Seraphine. It will probably go well with another one of Next’s purchases – its 44% chunk of Jojo Maman Bébé which it bought in 2022.

IN IPO NEWS…

• Design software maker Figma attracted a lot of market interest and saw its share price surge by over 200% on its market debut! IPO confidence is well and truly back!

IN FINANCIALS NEWS…

• IN BANKS – HSBC’s profits slid by 29% in Q2 thanks to restructuring costs and a hit on the value of its stake in China’s Bank of Communications. Restructuring efforts are still ongoing…UBS profits doubled in Q2 thanks to strong trading revenues in equities and forex making up for a a shortfall in its investment banking business.
• IN FINTECHS – Revolut is thinking about buying a US bank in order to speed up the process of it getting a banking licence. Meanwhile, Wise’s shareholders voted to move the company’s primary listing from London to New York and extend its dual class share structure, going against Wise’s former chairman and co-founder. Another nightmare for the London Stock Exchange.

IN TECH…

• Meta’s revenues boomed and it outlined positive expectations for Q3 whilst also continuing to pour money into its AI infrastructure. Zuck is building up a start-up like division within Meta that can be financed by the bigger parent but not be encumbered by it. The lab in which they are working, which is in a separate unit at its Menlo Park HQ, is shrouded in secrecy.
• Microsoft saw its earnings supercharged by demand for its AI services and it said that it will continue with the build-out of AI data centres. It added that it was positive about the outlook for the next quarter. Later in the week it became the second public company to hit a $4tn valuation. It also warned about the impact of AI on jobs and said how white collar jobs were more in danger than blue collar ones.
• Apple announced strong earnings but investors worried about how its supply chain would incur tariffs given that most of it isn’t in the US.
• Amazon had a decent Q2 in terms of sales but the CEO was downbeat about Q3 and warned about high spending on AI and the ongoing uncertainty around Trump’s tariff policies.
• KKR and ECP announced plans to join forces to build a massive data centre to speed up development of AI infrastructure in a $4bn project. They’re splitting the investment and are already building a facility in the ‘burbs of Dallas, which has already been leased to an as yet unnamed tech giant.
• According to a new report from Hays, the mass recruiter, British companies are falling behind overseas rivals in the use of AI. British firms were also particularly lacking in giving their staff training on how to use AI with only 37% offering it versus 50% in America.
• Arm’s share price fell on the NASDAQ following disappointing quarterly forecasts and it is now thinking about designing its own chips in addition to making them for everyone else. Not sure about this given that Arm has been the “Switzerland of chips” in that it has been neutral without a whiff of competition with its clients. That could be about to change.
• VPN usage skyrocketed on Monday (in one case by up to 1,800%!) as the new Online Safety Act came into force, bringing in new age verification rules. The rules have been designed to protect children from harmful materials but it seems they’ve been getting around it by using VPNs!

IN AI…

• China outlined its AI vision at its World Artificial Intelligence Conference in Shanghai. It was much more collaborative than Trump’s “America First” version.
• ChatGPT launched a new “study mode” to encourage better learning practices. Rather than just give you the answer, it guides students through how it got there, which should keep the haters at bay for now.

IN CHIPS…

• Samsung announced a deal worth $16.5bn over the next eight years to make Tesla’s next generation of custom AI chips. This is the biggest deal Samsung’s chip business has ever had from a single customer and although it’s great, Samsung needs more than this to dig itself out of the hole it finds itself in and catch up with rival SK Hynix.
• The Cyberspace Administration of China has summoned Nvidia for “serious security issues” with its newly-OK’d H20 chips. They say that there are “serious security issues” in that that the chips have “location tracking and can remotely shut down the technology”. Nvidia will have to explain its case and provide documentation to support it.

IN CYBER SECURITY…

• Allianz’s US life business was hit by a cyber attack and hackers managed to get access to the personal information of the majority of Allianz Life’s 1.4m US customers and some of its employees on an attack made on July 16th. An investigation is ongoing.
• French submarine-maker Naval Group, which builds and maintains ships and submarines for the French Navy, has also been hacked and the hackers claim to have obtained sensitive data about France’s nuclear submarines. It seems that cyber attacks are generally on the up (or at least more of the hacks are making it into the newspapers at the moment).

IN MEDIA NEWS…

• The latest report from Ofcom says that 20% of Gen Alpha (those born after 2010) turn to YouTube first on their TV while the over 55s have also doubled their time on it. YouTube is now the second most watched TV service in the UK behind the BBC and ahead of ITV. No wonder that the BBC is being told to make more of its content available on the platform! Mind you, in Australia, the government is talking about banning YouTube for the under-16s, adding to the list of banned sites under last year’s legislation. I guess that VPNs will be doing pretty well in Australia as well (if they are allowed!)!
• Spotify posted a net loss for Q2 but managed to add more premium subscribers. It’s seeing an interesting trend at the moment – that video podcasting is growing 20 times faster than audio podcasting! I guess it has had to catch up…

IN SOCIAL MEDIA NEWS…

• There was a very interesting article about something that was highlighted by the whole Coldplay concert scandal – that we shouldn’t automatically believe what we see! Astronomer’s former CEO Andy Byron did not say that he was troubled by “what should have been a private moment [that] became public without my consent”, his wife did not post a tearful statement about it all, Coldplay did not say that it would have camera-free audience sections and the woman standing next to the couple was not another Astronomer employee named Alyssa. We still need proper journalism!!!

IN TELECOMS NEWS…

• It looks like Apple’s going to launch its first foldable iPhone next year. This was an educated guess by analysts at UBS and Apple didn’t comment on it, presumably because if they did the sales of their upcoming iPhone won’t do as well because people will wait for the folding model! Samsung’s been doing these types of phones since 2019!

IN CONSUMER TRENDS…

• The latest data from the BRC and NielsenIQ showed that shop prices jumped again over the last month, with food price inflation being the main driver. Food price inflation was up again for the sixth month in a row to 4%, which is above the three-month average of 3.5%.
• The latest Bank of England data showed that UK households are starting to save more in anticipation of a painful autumn Budget. I think that the chancellor needs to be dropping some big hints about what’s going to be in this thing otherwise everyone’s going to assume the worst and this could be damaging for the economy.
• IN PROPERTY – the latest report from Zoopla said that it’s currently a “buyer’s market” because of a higher number of properties on the market. Although buying interest is increasing because of falling mortgage rates, the number of properties available is taking the edge off the prices. Meanwhile, Bank of England figures show that remortgaging activity has hit its highest level since October 2022 as mortgage rates continue to fall from their peak.

IN RETAIL NEWS…

• IN LUXURY – Chinese luxury names like Laopu, Mao Geping and Songmont are doing really well while a lot of big Western brands are faltering. A case in point is Gucci-owner Kering, which saw sales drop by a whopping 25% in Q2.
• IN ONLINE RETAIL – Temu’s struggling to get back on track in America because suppliers are being told that they can’t undercut prices they give to Amazon. Given this and the closure of the de minimis rule, things aren’t looking good for the Chinese e-tailer…
• ON THE UK HIGH STREET – the Women’s Euros has been a boon to UK pubs, supermarkets and other outlets – and Tesco reckons it’ll see a 15% increase in spending on products related to the Euros in the run-up to the final. Next reported strong quarterly sales thanks to a combination of hot weather and rival M&S’s misfortunes with the hacking. It added to the feelgood by noting strong international sales and by raising its growth forecast for the second half.

IN CONSUMER GOODS…

• Proctor & Gamble said that it was going to increase prices by 5% in the US this year to take some of the edge off an estimated $1bn cost hit from Trump’s tariffs. His tariffs have increased costs for raw materials, packaging and various goods that P&G makes.
• Rival Unilever reported a decent first half performance with a particularly good showing from the ice-cream division, which it’s going to be spinning off. Sounds good, but let’s face it, it is summer so ice cream was bound to do well!

IN LEISURE NEWS…

• There was debate as to whether we’ve seen “peak Greggs” as the company warned on full-year profits. However, we are in summer and Greggs is known for product that sells better in the winter. Interestingly, it’s thinking of focusing efforts on people on weight-loss drugs by providing smaller portions and protein-rich alternatives.
• Starbucks saw its profits crater over the quarter thanks to turnaround costs. It’s still looking for potential investors/buyers for its China business.

• IN AUTOMOTIVE NEWS – Stellantis has decided to offer more hybrids and petrol vehicles in the US as a reaction to Trump’s anti-EV policies, Ford announced a surprise quarterly loss thanks to a costly recall and a big hit from Trump’s tariffs, Aston Martin managed to ship enough cars to the US before the tariffs came in to keep sales from falling over the quarter and Mercedes-Benz and Porsche bemoaned the lack of a carve-out for European automaker tariffs.
• IN PHARMACEUTICAL NEWS – AstraZeneca reported higher sales on record US growth, Merck suffered a weaker quarter due to a sharp drop in HPV vaccine sales in China and Novo Nordisk continues to suffer as it admitted that its injections were losing out to rival jabs, including cheaper copies of its jabs.
• Heineken said that it was open to moving manufacturing to America to mitigate the hit it’ll get from the new US-EU trade deal. Its results beat forecasts.
• Heathrow submitted plans for a third runway as part of a broader £50bn investment. It could be operational by 2035 with government support but we’ll have to see…
• Rolls-Royce profits jumped in the first half by 50% on strong demand for jet engines and power generators, powering its share price to a new historical high.

My fave video this week was this game. I definitely want to try this with my family🤣!