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.
IN BIG PICTURE NEWS...
Russia’s talking a good game, energy panic goes up a notch and sterling heads towards parity with the dollar.
- IN THE US – job openings jumped as the labour market remains tight (Wednesday) as the Job Openings and Labor Turnover Survey stats came in above expectations and confirmed the ongoing tightness of the labour market.
- IN RUSSIA – the country’s first deputy PM, Andrei Belousov, said Russia’s GDP will only fall by a bit more than 2% this year (Tuesday) and a maximum of 1% in 2023 despite all the sanctions. Clearly, the Russians will be talking a good game to show citizens that they can weather the storm while countries imposing the sanctions will want to show that punitive measures are actually working. Maybe the truth is somewhere in between – or perhaps countries like India and China are buying up everything we’re rejecting…
- IN JAPAN – the government is planning on its biggest defence spending increase since WW2 (Thursday) as tensions in the Pacific worsen.
- IN EUROPE – Eurozone inflation hit a record high of 9.1% (Thursday), according to the latest release by Eurostat. This was above expectations and came off the back of a strong July. On a positive note, the Eurozone’s jobless rate hit a record low of 6.6% (Friday), which is pretty impressive given current economic circumstances. Is this really sustainable?
- IN GERMANY – inflation hit 7.9%, which is the highest it’s been since the winter of 1973-4 (Wednesday). This is not great considering that it’s probably going to get worse from here.
- IN THE UK – Goldman Sachs reckons the UK will fall into a recession that will last until 2024 (Tuesday) and that inflation could hit 22% if the Ofgem price cap rises by 80% in January (Wednesday). Remember that economists can be wrong as well as right 😜, but it is interesting.
- Oil prices are falling on worries about the cumulative effects of ongoing high inflation (Wednesday) and it’s the first time that they’ve remained below $100 a barrel at month-end since January (Thursday). It’s looking increasingly likely that producers at the next OPEC+ meeting could actually cut production to stem any further price slides.
- Wheat prices got cheaper (Thursday) as a strong Russian harvest and limited resumption of Ukrainian exports kicked in. This will be particularly good news for countries like Egypt who source heavily from Russia and Ukraine.
- The EU announced plans to unveil emergency measures to curb soaring energy prices (Tuesday), but haven’t given much detail at this stage. Wholesale gas prices fell back after this announcement (Wednesday) but even so, Shell reckons that European gas shortages will last for a few years yet (Tuesday). On a ground level, Gazprom stopped gas deliveries to France’s Engie (Wednesday), blaming a dispute on payments.
- There was a lot of newsflow on the impact of rising energy costs. German manufacturers are cutting production hours to limit their energy bills (Thursday), which doesn’t sound good (surely less hours = less need for current employee numbers = redundancies) and Germany’s finance minister said that although he’s about to release a massive relief package, there won’t be any direct household support for at least a year (Friday)! In the UK, some British factory workers are being asked to wear jumpers and work at night (Thursday) to reduce their company’s electricity bills, Network Rail is bracing itself for a massive rise in its energy bill (Friday) when its current agreement runs out and there are real fears that the hospitality industry is facing large-scale failures (Tuesday) due to sky-high energy bills. BrewDog announced the closure of a number of its bars (Thursday) while the viability of other bars and clubs remains in the balance (Wednesday). Consumer disquiet continues to grow and a protest movement called “Don’t Pay”, which advocates the mass-cancellation of direct debits to utilities companies on October 1st, is gathering momentum (Friday) while the power generation industry itself is offering up potential remedies (Friday).
Meanwhile, in CRYPTO AND OTHER CURRENCY NEWS…
- NFT demand has evaporated in the wake of the crypto crash (Wednesday) with volumes and values dropping dramatically.
- The Euro continued to lose ground against the dollar (Tuesday) and the Pound appears to be heading towards Dollar parity (Friday).
But apart from that, everything’s going great…😜
THE CHALLENGES JUST KEEP ON COMING FOR CONSUMERS...
- Earnings continue to fall in real terms (Thursday) according to the Resolution Foundation think-tank and more of us are turning to other sources of money. Credit card borrowing is now at its highest level for 17 years (Wednesday) and the TUC is saying that workers are reducing or cutting their pension contributions entirely (Tuesday). Consumers’ difficult current circumstances are having knock-on effects as per Klarna’s losses almost quadrupled (Thursday) thanks to a combination of rising credit losses, higher staff costs and rapid international expansion.
- On a more positive note, Fulham Shore has managed to put in a solid performance (Thursday) as the owner of The Real Greek and Franco Manca has managed to navigate a tricky market thus far. The company said that it wouldn’t be immune to the effects of higher energy bills on a sustained basis, though…
IT'S BEEN AN EVENTFUL WEEK IN THE WORLD OF EVs...
- IN EV NEWS – Chinese manufacturers BYD and Great Wall are making a push into the UK market with their EVs (Tuesday) but I would have thought it will take them years to succeed as it generally seems to take a long time for consumers to trust a new entrant into the market. Polestar announced a $1bn loss for the first half (Friday) as rapid expansion and flotation costs dented finances. On the upside, it has a decent cash buffer and will be launching its new electric SUV, the Polestar 3, in October.
- IN BATTERY NEWS – Honda and LG announced plans to build a $4.4bn US battery plant (Tuesday) with the first batteries to roll off the production line by the end of 2025. In contrast, Britishvolt is coming unstuck (Tuesday) as the British battery start-up is going to have to delay the opening of its battery plant until late 2025. It’s had a bad time of late having lost a second co-founder, but I think that it’s too high profile a project to be allowed to fail. Meanwhile, Toyota announced a $5.3bn investment in battery tech (Thursday) and is interesting because it differs from others in the sector as it wants to do everything in-house by itself with no JV partners.
THERE WERE SOME IMPORTANT TECH DEVELOPMENTS...
- IN LEGAL DEVELOPMENTS – legislation is being discussed in the US which will force the major tech platforms to take into account the physical and mental health of minors when they design their products (Wednesday), but this is very much a fluid situation currently. Big Tech is pushing back and if the changes are signed off, they would come into effect in July 2024.
- Elsewhere, Nvidia is being forced to provide special licences to supply Chinese customers two of its processors (Friday) that are widely used to accelerate AI calculations. US-China tensions continue to tighten while Nvidia is left in the middle potentially nursing a $400m sales loss as a result. The Microsoft/Activision deal faces scrutiny by the UK’s CMA (Friday) who reckons that it will harm competition among console game makers and potentially in newer areas of game streaming. Interestingly, Brexit has meant that the UK’s CMA now has the power to veto prominent deals – in the past, this would have been Brussels’ responsibility. The Twitter drama had its latest twist with its ex-head of security confirming some of Musk’s allegations (Wednesday) against the company he is trying to back away from. Later in the week Twitter announced it was putting a new “Edit” button through testing (Friday), which is something Musk was keep to implement. We also saw that Snap announced its was cutting 20% of its staff (Thursday) and abandoning its recently launched drone in order to rein in costs.
AND IN OTHER NEWS...
- IN REAL ESTATE – UK house prices are rising at an annualised rate of 10% despite increasing mortgage costs (Friday), but that’s largely because of the poor supply of properties rather than red-hot demand. That said, seven small UK lenders pulled buy-to-let mortgages (Wednesday) in order to give them time to catch up with a deluge of applications they were seeing from landlords trying to lock in rates before they went up further.
- IN RETAIL – America’s Bed Bath & Beyond (Thursday) was suffering from a meme-stock hangover this week as the company announced the closure of 150 stores, staff cuts and share sales to raise money. Chinese e-tailing giant Pinduoduo surprised the market with a chunky rise in revenues (Tuesday) thanks to its “618” shopping event, the second biggest online shopping event in the world after Alibaba’s Singles’ Day.
- IN MEDIA – Disney is looking at offering a Prime-style option (Thursday) which could combine its streaming services, theme parks, resorts and merch in a single offering to subscribers. I think this sounds interesting because its services are more closely aligned with its customer base might be interested in whereas Amazon’s services are perhaps too broad to be attractive to everyone. We also heard that Netflix is seeking to charge op dollar for its ads at the moment (Thursday) as it tries to get the revenues rolling in ahead of the launch of its ad-supported service. If I was an advertiser, I’d be willing to wait until the rates fall given that ad spending tends to drop in economic downturns.
AND IN UPDATES FOR WATSON'S YEARLY...
- Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document!
It was a bit of a quiet week for “alternative” stories, but I think that the most bizarre one was Spreadable coffee to put on your toast going on sale in Japan (SoraNews24, Casey Baseel). This just sounds plain weird, doesn’t it??