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...
The Iran war rages on, good-bye cheap oil and Italy says hello coal
IN WAR NEWS…
This week’s TRUMP BOASTS included – the president saying that the US could “take the oil in Iran”. He also said that Tehran is “agreeing” to a US peace plan but then Iran said that its troops “are waiting or American soldiers to enter so they can set fire to their souls”. He then said that the war would end in “two or three weeks” .
This week’s TRUMP THREATS included – saying that he’d stop supplies of weapons for Ukraine unless Europe joined a Hormuz coalition and that he would take the export hub of Kharg Island. He said that the US might pull out even if a peace deal is not reached and lashed out at France for not letting US warplanes fly over its territory.
RESPONSES included – Britain hosting talks with 35 countries for talks about the Strait of Hormuz. Iran escalating things by attacking a Kuwaiti power and water plant.
WHAT’S THE IMPACT OF ALL THIS? Oil prices have risen by 60% since the beginning of March – while gold fell by almost 15% over the same time period, meaning that the metal is on course to have its worst month since 2008.
The closure of the Strait of Hormuz means helium supplies, needed for chipmakers and healthcare, are being choked off. Fast fashion will suffer because of broken supply chains, hospitality businesses will go belly-up due to rising costs and tourism in Cyprus and Turkey is getting pummelled. Thousands of flights to the region have been cancelled and many more could be; higher fertiliser, fuel, gas and shipping costs are going to hit grocery bills and some consumer goods companies have already put their prices up.
On a broader basis, the IMF warned that the Middle East conflict will result in higher prices and slower global growth, Eurozone borrowing costs are soaring, European companies are looking more vulnerable than ever because they currently have less capacity to deal with the Iran war fallout than they did before Russia’s invasion of Ukraine and Qatar is really suffering from the hit it took on its Ras Laffan LNG plant, which could mean that Qatar could sell off at least some of the UK real estate and retail assets to raise money for reparations.
THOUGHTS ON THE WAR SO FAR…
China could be looking at the success that Iran is having with the Strait of Hormuz and do something similar in the Taiwan Strait. If China blockaded the Taiwan Strait it could “win” Taiwan without firing a shot and wreak more damage on the world’s economy by choking supply of chips to the world as Taiwan’s TSMC makes 90% of the world’s most advanced chips. Industries around the world would just grind to a halt. No one is going to want to take on China’s navy.
Starmer is keen to align more closely with the EU, although he’s been keen to point out that he would not be “choosing” between America and Europe. I often wonder how people would have voted in the Brexit referendum if they knew then what we know now!
Iran could potentially emerge from all this stronger and more dangerous than it was before because it has long threatened closing off the Strait of Hormuz but now that it’s done so for real and seen the havoc it causes, it could just do this whenever it feels like it. Funnily enough, Trump has, inadvertently it seems, empowered both China and Iran by forcing them to play their “aces”. Iran is playing its Strait of Hormuz ace now but last year, China forced the US to roll back its tariffs by making threats about the supply of rare earths.
Although Trump comes in for a lot of criticism for having no apparent plan re Iran it would be fair to say that Europe doesn’t either – but then again we didn’t go and invade Iran…
IN TRUMP THINGS…
The president’s popularity seems to be taking a bashing at the moment as “No Kings” demonstrations took place across the weekend and even his MAGA base is questioning the rationale regarding the war. He’s not addressing the affordability problem that he said he’d solve in his election campaign – and that could come back to bite him when it comes to the midterm elections – if they happen. There are rumours that he will cancel them…
A district court judge ordered the president to stop building his new $400m ballroom until Congress approves its completion. Trump didn’t like that.
It looks like King Charles is going to go ahead with his state visit to the US in April despite the president’s continued slagging off of Starmer and shaky relations with the UK. It would be Charles’ first official US tour as King and the first by a British monarch since 2007 and will mark “the 250th anniversary of American Independence”. Let’s hope he doesn’t get the Zelenskyy treatment…
IN INDIVIDUAL COUNTRY NEWS…
After having put in a decent Q1 performance, Chinese exporters are now looking forward to being able to grab more market share given their large oil reserves and domestic energy supplies while other manufacturers in other parts of the world face big energy price hikes.
In the UK, apparently Rachel Reeves is quietly pocketing £20m a day from taxes related to oil and gas. On the other hand, some argue that any gains will be more than offset by rises in the cost of government borrowing.
IN COMMODITIES NEWS…
OIL – we’re not going back to the era of $70 a barrel oil (last year’s average price) anytime soon because even if the war ends shortly, infrastructure will have to be built back up, ships will have to be rerouted and Iran will probably charge tolls for safe passage through the Strait, which will also add to the price. Insurance will no doubt be more expensive as well.
GOLD – there has been talk about gold losing its safe haven status because its price has weakened since the war. However, I think that it’s been sold off by investors who wanted to raise funds and crystalise some of that tremendous performance that gold has enjoyed over the last year or so. Given the likely continuation of an unstable geopolitical backdrop for the foreseeable future, I reckon it’ll come back.
COAL – Asia is now turning to coal as an energy source as it needs energy NOW and because it’s cheap and abundant. Coal producers including China and India are scrambling to access stockpiles while others are starting to fire up coal-fired power plants, shrugging off environmental concerns. Italy is now looking into keeping coal-fired power stations open for another decade…
IN INVESTMENT, BUSINESS & EMPLOYMENT NEWS...
IN BUSINESS NEWS/TRENDS…
PRIVATE CREDIT – it’s worth mentioning that the private credit segment has more than quadrupled in size since 2010 but a growing number of private credit companies have had to stop or restrict clients from taking money out of their funds – with Apollo Global Management being the latest to join that list this week.
While we’re on the subject of restricting redemptions, UBS decided to suspend withdrawals from its European real estate fund for up to three years after a recent jump in redemption requests as investors brace for economic fallout from the Iran war. I got a sense of déjà vu here as we last saw this gating of funds in the aftermath of the Truss-Kwarteng budget and Covid!
The European missile champion MBDA – which is jointly owned by Airbus, BAE Systems and Leonardo – has reported a boom in interest from Gulf nations who want to strengthen their air defences so it’s going to hike overall output by 40% this year. Staying with defence, VW is in talks with Rafael Advanced Defence Systems, Israel’s Iron Dome maker, about a deal that could result in a switch in production at one of the company’s factories from cars to missiles! If this works, this could set a precedent perhaps for other carmakers who have been having a tough few years falling behind the Chinese in EVs.
IN EMPLOYMENT TRENDS…
City investment manager Octopus Investments announced that it is looking to cut about 20% of its staff as it ramps up its spending on AI whilst also streamlining the business.
IN CONSUMER TRENDS…
The latest GfK household sentiment index shows that the Iran war is, unsurprisingly, having a negative effect on consumer confidence. It’s now fallen to its lowest level since April last year.
The government is now reviewing the current thresholds where parents get funded childcare. Eligible working families have been able to get 30 hours of funded childcare from the term after their child is nine months old until they start school but the thresholds have not changed since the Conservatives introduced them in 2017. Given the latest cost-of-living crisis, many people will be watching this very closely.
IN CONSUMER, RETAIL & LEISURE NEWS...
IN AI – the Siemens CEO said that Europe could risk “disaster” if it prioritised AI independence over building faster with existing tools. He’s probably right but I think they could try to do both at the same time!
It was a bit of a week for OpenAI! The company announced an end to the Disney deal and the Sora video app to concentrate on core areas and put its erotic chatbot plans on ice “indefinitely” while it announced plans to double its workforce in order to sell to businesses.
Arm shares got a major boost as it outlined a shift in strategy from designing chips for other companies to producing its own “AGI CPU” which could rival its customers’ offerings – including those of Nvidia, Google and Amazon. Investors took it well but I think that it could be a bit dangerous going down this route. One of the reasons behind its success is that it makes chips for others and isn’t a competitive threat. It’s effectively built itself up over the years to be the “Switzerland of chips” – but that’s going to be different now. Will it work??
IN HARDWARE – UK iPhone users will have to confirm that they are 18 or older in order to use all available services. This will be included in a software update. NB ID will be confirmed by various methods – but not by debit card.
Dyson said that it saw revenues fall last year thanks to Trump’s tariffs and weakening consumer confidence – but profits were actually up thanks to cost cuts that partly came from job losses.
IN SOCIAL MEDIA NEWS…
A New Mexico jury found Meta to be liable for failing to protect young people from online dangers and said that it had misled consumers about the safety of its platforms and putting kids in harm’s way. The jury ordered the maximum penalty for each violation – which came to $375m – but Meta made 160 times that in revenues for the most recent quarter.
Later on this week in a landmark legal case, this time in Los Angeles, the court decided that Meta and Google were indeed designed to be addictive to kids and that the companies failed to warn users about the dangers. Interestingly, Snap and TikTok had settled for undisclosed amounts before the trial.
IN TECH & SOCIAL MEDIA NEWS...
Honda and Sony decided to ditch plans to jointly develop and launch an up-market EV, which would have been called Afeela. It was supposed to have gone on sale later this year and be built in Ohio. The two Japanese companies had formed a joint venture called Sony Honda Mobility but now this joint venture will be under review.
The government has decided to provide a new £1bn grant to help companies switch to electric trucks and vans. It will run until 2030 and means that companies could save up to £81,000 per lorry.
According to the latest stats from Autotrader, enquiries on its website for EVs have shot up as petrol prices have climbed. NB this is enquiries, not sales – and carmakers have said that they don’t expect huge sales because the price of electricity is going up as well!
IN AUTOMOTIVE NEWS...
PRICE TRENDS – the latest ONS data shows that London house prices fell for the sixth month in a row and at the fastest pace since February 2024.
The data also showed that the affordability of property has fallen much faster than property prices themselves. England’s housing is now at its most affordable since 2015!
MORTGAGE TRENDS – Borrowers can now get a five-year mortgage for less than a two-year mortgage as markets indicate that UK interest rates could go higher in the short term because of the Iran war. Mortgage lenders are having trouble pricing their mortgages given market volatility at the moment.
IN MISCELLANEOUS NEWS...
IN M&A NEWS – Poste Italiane launched €10.8bn bid for Telecom Italia, Singapore agreed to buy UK’s Access Self Storage for £1bn, Danone bought Huel in a €1bn deal, Estée Lauder confirmed that it’s in merger talks with Spanish beauty firm Puig but China is dragging its feet on approving the $2bn Manus sale to Meta because China’s regulators are looking at whether the acquisition violates Beijing’s investment rules.
European banks are now facing threats from the Iran war, AI and private credit – although banks with trading arms (like UBS and Barclays) could benefit from market volatility. How much they suffer all depends on how long the war goes on for!
The two-and-a-half year CMA investigation in the vet industry ended and there will be a clampdown on prescription fees and the ownership structure of practices among other things. It could have gone further but it now looks like the big groups are just going to get bigger…