Watson’s Weekly 03-07-2021

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.

• I guess the biggest story from this week was the agreement signed by 130 countries for a global minimum corporation tax of 15% (Friday). It’ll be interesting to see how this pans out as there are lots of exemptions (Thursday) that have been carved out and there is still resistance to it (Friday).
• Japan saw business sentiment in manufacturing hitting a two-year high (Thursday) although the services sector is still a bit disappointing. There’s a bit of turmoil in Europe as Sweden’s PM Stefan Lofven resigned (Tuesday). He’s trying to build a new coalition rather than call a new election because an election will take four months to organise and execute. I think this just goes to show how much of a nightmare coalition governments are because everyone’s got wildly different agendas. IMO, some of this agenda-following probably saw a bit of truce in the depths of the pandemic because everyone was working together against a common cause but now that places like Sweden are pulling out of it I think that the normal backstabbing/agenda-pushing will return. Do countries like Sweden need an election just when they need to get their economy back on track? I think not…
• Meanwhile, in the UK, the British Chambers of Commerce said in its latest survey that the proportion of UK manufacturers looking to raise prices over the coming months was at its highest level since 1989 (Thursday) and that businesses were at their most concerned about inflation than they had been for the last ten years! The outgoing chief economist of the Bank of England, Andy Haldane, warned against complacency about inflation (Thursday) and, on a smaller scale, advertising company M&C Saatchi increased its profit forecasts for the full year after a better-than-expected performance (Thursday). This is worth mentioning because much as the fortunes of Danish company Maersk are seen as being a bellwether for global trade, advertising is seen to be a leading economic indicator because advertising spend is one of the first company costs to get cut in a downturn and the first to come back in an upturn.
• OPEC conducted virtual meetings this week to discuss production increases (Friday), but the participating countries could not agree. Talks are set to continue next week, but oil prices went slightly stronger in the meantime. It sounds to me like the production increases were going to be less than the market was expecting but, as I say, it’s all up in the air at the moment.

• In the US, house prices are rising at their fastest rate for 30 years (Wednesday) while US car sales are going crazy (Wednesday) as consumers are having to pay over the odds. Also, as unemployment falls, some employees are grumbling about going back into the office (Thursday). Apple wants its staff to go in on Mondays, Tuesdays and Thursdays and argues that its creativity is largely thanks to in-person collaborations while some staff are pushing back, arguing that their quality of life will be affected. Labour markets are so tight in some sectors that signing-on bonuses are becoming the norm (Friday)!
• In the UK, the tapering of stamp duty started (Tuesday) and although consumers saved a lot over lockdown, according to the latest figures from the ONS (Thursday), their confidence has risen to the extent that they are increasingly comfortable with taking out personal loans (Wednesday). As far as UK jobs are concerned, unemployment continues to fall (Wednesday) but the furlough scheme is now starting to wind down and older workers look more likely to suffer the most from increased unemployment (Thursday) according to the Resolution Foundation. Employee shortages continue to hit specific sectors, with the lack of lorry drivers being a particular cause of concern (Tuesday). The shortage in the hospitality industry is getting even more acute (Wednesday) because the staff that are working there are increasingly getting pinged by the NHS App, which is leading to restaurants having to close in some instances – not ideal when they are trying to get back on their feet! The working from home debate continues in investment banks as UBS appears to be taking a more pragmatic approach (Tuesday) versus peers such as Goldman Sachs and Morgan Stanley.

• UK car dealership Lookers is enjoying a sales bounce-back after a tricky year (Friday) but rival Pendragon (who owns Stratstone and Evans Halshaw) warns that the supply of cars is likely to be restricted in the second half of this year (Thursday) thanks to ongoing supply chain bottlenecks. For instance, the global chip shortage is hitting car production in China and Japan (Thursday). Meanwhile, Nissan said it would be building a massive EV hub in Sunderland (Friday). Tesla is having a tough time in China as it has suffered a number of PR problems following a stellar year last year (Tuesday). Should it look to rely less on this market as domestic rivals look increasingly attractive to Chinese buyers?

• US banks are starting to pay dividends again (Wednesday) and it seems likely that Europe (Friday) and the UK could go the same way soon enough as central banks deem economic circumstances to have calmed sufficiently that their capital buffers will be able to withstand further shocks.
• Private equity firms have done the most deals in the first half of the year for 40 years (Friday), which is probably one of the reasons why UK-based Bridgepoint is making plans for a London Stock Exchange Flotation (Wednesday)!
• Elsewhere, Nordic payment groups in Norway (Vipps), Denmark (MobilePay) and Finland (Pivo) plan to merge (Thursday) in order to give themselves more scale to take on the likes of Apple, Google, Alibaba and PayPal and trading app Robinhood gets a fine (Thursday) as losses mount (Friday) ahead of a proposed IPO.

• Facebook became a trillion-dollar company this week (Tuesday) as it won an antitrust lawsuit against the Federal Trade Commission
• Chinese ride-hailer Didi had its stock market debut in New York this week (Thursday), but two days later China’s cybersecurity regulators launched an investigation to “safeguard national data security and protect national security”, which hit the share price quite badly.
• Gap decided to close all of its stores in the UK and Ireland (Thursday) and just go online. It’s had problems for quite some time, so this is not a complete surprise.

• Watson’s Yearly updates: These will be left until the next edition of Watson’s Yearly that will be published shortly

My favourite “alternative” story this week was McDonald’s fans are making Percy Pig McFlurries and they’re gamechangers (The Mirror, Emma Rosemurgey). It may not be the weather for it at the moment, but it’s there for if you need it 👍