Watson’s Weekly 03-12-2022

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.

This was a week where we saw some signs of positivity, the UK made another onshore windpower U-turn and Twitter going a bit crazy…

• OVERALL – Global inflation looks like it’s peaked, according to key data indicators (Monday) and we’ve already seen inflation slow down in emerging markets like Brazil, Thailand and Chile. Continued high energy costs could prove to be problematic and overall levels are expected to remain high for some time. This general feeling would seem to be borne out by the Fed suggesting they may slow the pace of interest rate rises (Thursday) and although the ECB remains committed to such rises to tame inflation (Tuesday), Eurozone inflation actually fell more than expected (Thursday), which implies that the interest rate hikes are kicking in.
• IN CHINA – public frustration towards the strict zero-Covid policy turned to heated protests (Monday) while sales of ventilators and oxygen machines spiked (Tuesday) in the belief that hospitals won’t be able to cope with an influx of new cases. The stop-start and unpredictable nature of the Covid-lockdowns in China has led to some concluding that the country is uninvestable (Tuesday) at the moment and that more resulting economic slowdown will lead to falling demand for oil, pushing the price down (Tuesday). Beijing sought to distance itself from the whole thing by blaming local officials for the response to new Covid cases (Wednesday), but in the meantime, high youth unemployment in China is feeding frustration (Thursday). Funnily enough, China’s Covid tsar signalled a potential easing in stance towards Covid (Friday) at the end of the week. No doubt this will be framed as something that would have happened anyway rather than something that happened in response to civil unrest!
• IN JAPAN – a nine-day training operation (called “Vigilant Isles 22”), involving UK and Japanese armed forces, was completed (Thursday) as concerns continue to bubble away at the prospect of China invading Taiwan. Japan is to boost its defence budget by 11% for the year to March 2024.
• IN SOUTH AFRICA – Cyril Ramaphosa’s presidency is looking dicey (Friday) as he has been accused of using his status to cover up a $4m theft from his farm in 2020. His fate will be decided by a meeting of senior ANC leaders.
• IN THE UK – a recent business survey of SMEs for the Bank of England showed that UK inflation expectations have calmed down (Friday), with the general feeling that it will ease off in the coming months.

IN ENERGY NEWS…

• State-owned Qatar Energy signed another big deal this week, this time to supply Germany with LNG (Wednesday) just one week after signing a massive one with China.
• IN NUCLEAR ENERGY – Rolls-Royce is in talks over the location of its first SMR in the UK (Monday) as part of its longer term plams to develop 20-30. Hinkley Point C nuclear power station could be facing a potentially massive delay for completion (Wednesday) as the government wants to buy out China’s interest to elbow it out of key infrastructure. British nuclear fusion start-up, First Light Fusion, is looking at sites across the UK (Monday) for electricity and tritium production that will help in the commercialisation of nuclear fusion.
• IN ALTERNATIVES – Shell just agreed a deal to buy Denmark’s Nature Energy (Tuesday), Europe’s biggest biogas producer, as it tries to diversify away from fossil fuels. Elsewhere, Business Secretary Grant Shapps made a U-turn on UK onshore windpower (Tuesday), signalling a move by the government to make it easier for developers to build onshore windfarms.
• IN OIL – Europe is planning to cap Russian oil at $60 a barrel (Friday) in order to stop financing Putin’s war machine. Meanwhile, TotalEnergies cut investment in new North Sea wells (Friday), saying that it was a result of having to pay Sunak’s new windfall tax.

And then IN CRYPTO NEWS…

• BlockFi became the latest crypto business to go bust (Tuesday), prompting further suggestions that the crypto ecosystem is inherently unstable (Wednesday). MEPs debated whether the EU’s incoming Markets in Crypto Assets (MiCA) legislation would be robust enough to avoid another FTX-type situation (Thursday) while the UK’s High Court gave permission to track stolen crypto assets as part of an investigation (Wednesday). Given that crypto fraud has jumped by a third in the UK (Monday), more regulation can’t come quickly enough IMO!

I thought that there were a couple of interesting business trends emerging as well…

• It turns out that up to 500 Chinese companies have redomiciled or registered in Singapore over the last 12 months (Thursday) in an effort to side-step a potential escalation in China-US tensions and resulting sanctions.
• The closely-watched German Ifo business confidence survey showed European business leaders turning more upbeat (Thursday) as it seems that economists may have been overly pessimistic in their forecasts. Isn’t it great to see something positive for a change?!

• The UK looks like it’s about to relax ringfencing rules on larger banks (Wednesday), which could lead to banks with smaller – or no – trading activities having more cash to play with as part of a post-Brexit regulation liberalisation “bonanza”.
• IN UK BANKS – HSBC decided to quit Canada (Wednesday) and sell its business in the country to Royal Bank of Canada, as well as shutting a quarter of its branches (Thursday) in the ongoing client shift to digital banking. Monzo’s chief exec talked a good game (Friday), saying that the challenger bank would turn a profit in 2023.
• IN OTHER FINANCIALS – UK broker Peel Hunt saw its profits disappear (Friday) thanks to the lack of IPOs and other offerings during 2022 while international money transfer platform Wise put in a solid performance (Wednesday) and had an upbeat outlook.

IN CONSUMER NEWS…

The average worker’s pay fell for the first time this century (Thursday), according to data from the International Labour Organisation (ILO), egg shortages boosted food inflation to a new high (Wednesday) while sandwich sales rose (Wednesday) as more people returned to the office.

In employment news – white-collar jobs have been culled at places like Amazon and Walmart (Friday), while blue-collared ones have so far remained relatively untouched, although in the UK, factory workers are being laid off (Friday) thanks to a build-up of inventory and weakening demand for their end products. Law firms are starting to look vulnerable in a hiring hangover (Friday).

IN RETAIL NEWS…

Amazon downsized (Thursday) as profits plunge and costs are cut and Dollar General, America’s biggest discount store operator, announced a downbeat outlook (Friday), which was a bit of a nightmare considering that this is a company that’s supposed to do well in times like this. Talking of cheap-and-cheerful, UK budget retailer Wilko reported a £30m loss (Wednesday) due to supply chain problems and is looking for finance.

In apparel retailers, UK businesses like New Look, Asos and Boohoo went mad for Black Friday discounts (Tuesday) to tempt thrifty consumers, H&M said it was cutting 1,500 jobs (Thursday) as part of a wider cost reduction programme, Next rescued Joules from administration (Friday) and announced the closure of 24 stores. Superdry was in talks to source more financing (Tuesday), M&S bought online fashion marketplace Thread (Wednesday) and Boohoo increased its stake in cosmetics company Revolution (Tuesday) while luxury bag company Mulberry posted a half-year loss (Thursday) thanks to fewer rich shoppers coming to the UK.

IN LEISURE NEWS

Marston’s pubs have benefited from increased custom due to the World Cup (Tuesday), Vue is considering making an offer for rival Cineworld (Friday) and restaurants in the US vie with supermarkets for consumers (Monday) as the difference between restaurant prices and supermarket prices are narrowing as prices at the former have been rising slower than those at the latter!

• IN RESIDENTIAL PROPERTY – UK house prices fell at the fastest pace since 2020 after the mini-Budget (Wednesday), house-buying demand fell 44% (Monday) according to Zoopla and first-time buyers are expecting to wait until their late thirties to afford a home (Thursday) as houses continue to stretch affordability to the max.
• IN COMMERCIAL PROPERTY – private equity firm Blackstone has decided to limit withdrawals at its $125bn property fund (Friday) to slow the rate of redemptions as investors panic about falling prices.

• IN REGULATORY STUFF – Google was hit with a $13.6bn class action lawsuit (Thursday) over claims that it is too powerful in the online advertising market, Meta was fined €265m by the Irish Data Protection Commission (Tuesday) for its poor handling of user data and US Treasury secretary Janet Yellen voiced “legitimate national security concerns” about TikTok (Thursday) regarding data sharing concerns. Meanwhile, the UK government dropped the “legal but harmful” clause from the new Online Safety Bill (Tuesday) which will anger reformists but appease tech firms and free speech advocates.
• It was a pretty feisty week in the sector as Twitter abandoned its misinformation policy in the name of free speech (Wednesday) to criticism from the European Commission (Thursday) who threatened to ban it unless its sticks to strict moderation policies and there were worries that Apple would kick it off the App Store (Tuesday) although that seemed to be resolved after a meeting between Apple CEO Tim Cook and Elon Musk (Thursday). Meanwhile, Twitter offered big incentives to attract advertising spend (Friday). Elsewhere, there were suggestions that Apple’s amazing 14-quarter growth streak could falter due to the Foxconn factory problems it is having (Wednesday) and things are getting tight at Snap as workers were told to work in the office four days a week (Wednesday). In hardware news, the UK is going to trial Starlink satellites for rural connectivity (Thursday), controversially bypassing the British option OneWeb (controversial because the government funneled $500m into it to stop it from going bust in 2020!).

• Toyota said it plans to build green-energy trucks in the UK (Friday) and make hydrogen fuel cells at its plant in Derbyshire.
• IN EV NEWS – Tesla delivered its first electric semitrailer trucks to PepsiCo (Friday) five years after the model was unveiled and three years after they were actually due out! Closer to home, China’s Great Wall launched in the UK this week (Monday) with the £32,000 all-electric Ora Funky Cat. There was some sad (but not entirely unexpected!) news that Britishvolt decided to scrap plans for a second factory in Canada (Monday), but it’s got enough on its plate just to survive rather than have any more distractions! Meanwhile, it was also pretty interesting to hear Compare the Market research showed that, with new taxes, EVs will cost about the same to run as petrol-powered cars (Friday)!

• 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! 

Without a shadow of a doubt, this was my favourite “alternative” story of the week: ‘My brother is obsessed with crisps so I made him a special one-off advent calendar’ (The Mirror, Danielle Kate Wroe). Genius 🤣!