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...
This was the week when Hong Kong called a stop to the Evergrande debacle, when Volvo decided to distance itself from Polestar and when Mark Zuckerberg said sorry…
- IN THE US – the Fed held interest rates steady, which was in line with market expectations. Fed chief Powell pushed back expectations of an early interest rate cut.
- IN CHINA – the China Securities Regulatory Commission decreed that investors would be restricted from short-selling to stop the slide in its markets (its CSI300 hit a five-year low early last week). Also, the latest data from the National Bureau of Statistics said that manufacturing output had fallen for the fourth consecutive month as lukewarm overseas demand for Chinese goods hit home. It was also interesting to see that Hong Kong is looking at proposals for a new national security law that will clamp down on espionage, treason and foreign political influence that would bring its own laws closer to those of mainland China.
- IN EUROPE – hopes for an early interest rate cut are fading but the Eurozone managed to avoid a recession despite Germany’s economy contracting. Meanwhile, Brussels was rumoured to be thinking of hitting Hungary’s economy hard if PM Orbán continues to block new aid to Ukraine, which he wasn’t too pleased about although later on in the week they came to an agreement and Orbán withdrew his veto. Meanwhile, Russia’s economy is benefitting from the war, according to the IMF, which upped its economic forecasts on the country. The country is readying itself for a presidential election in the coming weeks and support for “opposition” candidate Boris Nadezhdin seems to be growing (although he will surely not even come close to getting more of the vote than Putin).
- IN THE UK – chancellor Hunt was warned by the IMF not to squander money on tax cuts, but let’s face it – they are rubbish at making forecasts and they aren’t the ones facing the prospect of an election that they’ll probably lose. Meanwhile, ministers are getting ready to tell English councils to sell assets to help finance themselves. Although there are supposedly up to £23bn-worth of assets they could sell off, market conditions aren’t good and everyone and their dog will know that councils are forced sellers, so they are definitely going to low-ball any offers.
IN OIL NEWS…
- Saudi Arabia surprised oil markets by ditching plans to increase production capacity, which could imply that they think that we’ve reached peak oil demand already. Fall in demand from China has been a major factor. Meanwhile, Shell announced it would be raising its dividend and do a $3.5bn share buy-back despite profits falling last year. That said, the previous year was monstrous so the comparison wasn’t that relevant.
IN CRYPTO NEWS…
- Hamas victims are suing Binance for allowing the group access to financing. Crypto has long been criticised for enabling criminal and/or terrorist activities because of the anonymity it offers so the outcome of this case could become an important precedent. Elsewhere, FTX decided to ditch plans to make a comeback and George Osborne joined Coinbase, presumably to give it a bit of legitimacy given the dodgy reputation of anything crypto at the moment.
IN BUSINESS, EMPLOYMENT & CONSUMER TRENDS NEWS...
IN BUSINESS TRENDS…
- UK business confidence hit its highest level for January in eight years, according to the latest Lloyds Bank monthly business confidence index, as hopes increased of interest rates coming down this year. On the other hand, corporate insolvencies hit a 30-year high in England and Wales over 2023, according to the latest figures from the Insolvency Service. The gloom about last year was also reflected in research by EY-Parthenon, which said that the share of listed UK companies issuing profit warnings last year hit a record high.
- Flutter said that it would move its primary listing to New York, subject to shareholder approval. It might keep a secondary listing in the UK but given the way that the business has changed over the last few years, the move makes a lot of sense. It’s just galling for the FTSE as it’s just another British company going stateside.
- Pubs are in for a tough January as “dry” January is set to be the driest ever, with more people abstaining or opting to drink no-or-low-alcoholic drinks. Younger generations have generally been drinking less than previous generations but now the older demographic is joining them!
IN EMPLOYMENT TRENDS…
- The monitoring of employee movements is getting stricter – and EY is now looking very closely at how often staff come into the office. Return-to-office orders are now ramping up as employers are keen to see their employees working hard with their own eyes!
- 12,000 job cuts have been announced at UPS and Sky is to lose 4% of its UK workforce as the demand for dishes falls due to rising demand for Sky Glass and Sky Stream, which don’t need specialist installers.
IN CONSUMER TRENDS…
- Travel patterns look set to change, according to the UN World Tourism Organization, which predicted that tourism will return to pre-pandemic levels this year. Intense heatwaves and wild-fires in Greece last summer are starting to make travellers think more about cooler destinations such as Iceland and Denmark – which have seen a significant increase in arrivals between 2019 and 2023!
- UK shop price inflation slowed sharply to its lowest level in almost 2 years, according to the latest figures from the BRC.
- Consumers will be heartened by the latest Bank of England data which says that UK mortgage rates have fallen for the first time since 2021. This should bode well for the residential property market this year!
IN TECH NEWS...
- Apple posted an increase in sales for the all-important holiday quarter last year, which broke its four quarter losing streak where its sales have been falling. Its iPhone business did well but there are concerns about a loss in momentum for China, its third biggest market.
- Alphabet didn’t shoot the lights out as poor advertising sales overshadowed decent performance at Google with its AI and Cloud business.
- Meta had a mixed week. Zuck had to face a grilling over online child safety in the Senate and made a public apology to the families whose lives had been devastated by the effects of activity on Meta’s social media platforms. Shortly after that, Meta announced record revenues at its results, the payment of its first ever dividend and a $50bn share buy-back!
- Microsoft reported record sales and revenues thanks to the booming demand for AI.
- IN SEMICONDUCTOR NEWS – Samsung posted its weakest earnings since 2011 thanks to poor performance at its memory chip division. This was its fourth consecutive quarter of decline. It seems that stocks that have real exposure to AI (e.g. Nvidia and AMD) are doing extremely well, while others that don’t (e.g. Intel and Texas Instruments) aren’t. Meanwhile, Newport Wafer Fab’s acquisition by Vishay Intertechnology still hasn’t been approved by the UK government two years on from when the government blocked NWF’s acquisition by a company that it said had links to China.
- IN AI NEWS – the Indian government has said that social media companies will be held accountable for AI-generated deepfakes posted on their platforms. Given that there are general elections being held in India this year, there is a sense of urgency here – and you’d think that Big Tech will have to play ball given the size and potential of the Indian market. Talking of deepfakes, X blocked searches of Taylor Swift as AI-generated sexually explicit images of her went viral on their platform. Pressure to police these platforms properly continues to build…
IN AUTOMOTIVE NEWS...
- EVs have had a shaky start to the year thanks to price wars, increased competition and flagging customer demand. Even the mighty BYD undershot expectations due to an ongoing EV price war, while GM expressed concerns that it had pushed for the electrification of its fleet too early and Renault announced that it had ditched plans to list its EV business, Ampere. If that wasn’t enough, we then saw that Volvo Cars was going to sell at least some of its 48% shareholding in Polestar to parent company Geely.
- There was drama at Tesla as a Delaware court judge told Elon Musk that he had to forfeit $56bn of share awards, the granting of which had been agreed back in 2018 as long as he fulfilled some pretty incredible targets – which he then duly did! Musk didn’t like that and is now looking to switch his HQ to Texas in protest while he appeals the ruling.
- Elsewhere, Toyota put in a solid performance over 2023, hitting a new record high for global sales while Ferrari posted record profits, enjoying particular success in the Americas and China in terms of sales.
- Paris is going to be holding a vote on whether to triple parking charges for SUV owners in some parts of Paris. 60% of Parisians polled said that they were in favour – and let’s face it, they did manage to get e-scooters off the streets in a similar vote a year or so ago. In the scooter vote, the turnout was very low but was predominantly comprised of older people – who clearly didn’t like them. Will the same happen again??
IN FINANCIALS NEWS...
IN INVESTMENT NEWS…
- Ark bounced back after a tricky few years. Cathie Wood’s famous tech fund suffered in the massive tech sell-off but has bounced back strongly after spending time in the wilderness…
- BP got a letter from hedge fund Bluebell Capital Partners saying that it should abandon its clean energy strategy as it was a distraction from its core business.
IN BANKS NEWS…
- A report by Bain & Co reckoned that global deal activity will recover this year from its recent lows – something that investment banks and everyone in the deal chain will be pleased to hear!
- Deutsche Bank announced that it was going to make around 4% of its staff redundant as it chases cost savings – but it also unveiled its highest profits for 16 years in 2023!
- Julius Baer saw its profits more than halve as it wrote off a $700m exposure to the embattled Signa property group and announced the exit of its CEO. Will this be enough to draw a line under the whole thing??
- BNP Paribas shares fell by almost 10% in trading on news that it would fall short 0f its profit targets. The fact that it reported a 50% fall in its Q4 earnings proved to be a real buzz-kill.
IN RETAIL, RESTAURANT & LEISURE NEWS...
IN RETAIL NEWS…
- Amazon reported a great Q4 performance but it faces increasing competition from the feisty Temu, which is spending billions of dollars on advertising. We also heard that it was forced to ditch its proposed $1.4bn deal to buy iRobot, which makes the Roomba robot vacuum cleaner.
- IN APPAREL RETAIL – Boohoo had something to cry about as lenders refused to extend debt payment deadlines, H&M’s CEO stepped down as the company comes under increasing pressure for weaker sales and profit margins while rivals Inditex (which owns Zara and other brands) and Shein keep competition tight. There were rumours that Superdry is considering a CVA as an option for restructuring but it looks like store closures and job losses are getting increasingly likely.
- IN SUPERMARKETS – Walmart announced that it would be opening new stores in the US over the next five years, a major turnaround from the strategy of the last few years to reduce store openings or keep them flat-ish. In the UK, Morrisons’ new boss has promised to “reinvigorate” the supermarket chain that has suffered particularly badly at the hands of the German discounters over the last few years. It sounds like the new CEO is gunning for a major overhaul…
- ELSEWHERE – outgoing chairman Dame Sharon White reckons that John Lewis will return to profitability this year – but she also announced that the company would cut about 10% of the workforce. Pets at Home faltered as it cut its annual profit forecasts due to weaker sales over the Christmas period.
IN RESTAURANTS…
- Starbucks had a disappointing quarter as it lost momentum in the US and faced tighter competition in China.
- SSP (owner of Caffè Ritazza and Upper Crust, among other brands) continues to do well from people returning to the office as its outlets at train stations and airports do brisk business.
- PE firm McWin Capital announced that it would buy Danish sushi restaurant chain Sticks’n’Sushi in a multi-million pound deal. There have been a lot of deals done over the last year or so in the restaurant space. I suspect that there will be more to come!
IN TRAVEL NEWS…
- Ryanair had to cut profit forecasts after a number of online travel agents removed their flights. Ryanair accused them of “scamming” customers by charging higher fees.
- Saga announced an “outstanding” performance of its cruise and travel business, but its insurance business remains problematic. Meanwhile, rival Carnival said that its earnings would take a hit from the ongoing conflict in the Red Sea. Royal Caribbean and MSC Cruises have also been affected.
IN OTHER NEWS...
- IN REAL ESTATE NEWS – Chinese developer Evergrande was ordered by a Hong Kong court to liquidate as it had failed to come up with a proper restructuring plan in time. It remains to be seen as to whether this will be recognised in mainland China. Meanwhile, IN THE UK RESIDENTIAL PROPERTY MARKET, Zoopla’s house price index showed a big 13% rise in property sales as mortgage rates fell, but sellers have had to cut asking prices by 10% or more to shift their properties. That being said, the latest stats from Nationwide shows that house prices increased at their fastest pace in a year.
- IN MEDIA NEWS – Universal Music Group threatened to stop licencing music to TikTok – and then they followed through with that threat, leaving many TikTok videos silent! Allen Media put in a $14.3bn offer to buy Paramount Global which was less than the $18.5bn he offered back in April. Other companies are lining up as potential buyers. WPP announced a drastic cost reduction programme and is committing more money into AI initiatives to stay ahead of the curve. Meanwhile, Channel 4 is set to cut 15% of its staff as it seeks to cut costs in the face of falling advertiser spend.
- IN PHARMA NEWS – GSK’s new jab for Respiratory Syncytial Virus (RSV) achieved blockbuster status (which means that sales have hit the $1bn mark), prompting the company to upgrade its long-term forecasts. GSK also announced 12 major product launches from 2025, which will also help long-term earnings. Also, Novo Nordisk’s share price hit a new high after it posted booming sales of its obesity and diabetes drugs Wegovy and Ozempic, pushing its market cap past the $500bn mark and confirming its position as Europe’s most valuable company!
BANTER
Of course there was only one video that stood out as my favourite this week – and that was the one where Uncle Roger rates Kichi Kichi’s famous omurice! There’s a bit of swearing and adult humour here, but if you can look past that this is hilarious!