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...
*** NB THIS EDITION OF THE WEEKLY IS A BIT UNUSUAL in that there were only three editions of Watson’s Daily this week due to the extended Jubilee Bank Holiday. However, you will be glad to know that I still picked out some key stories from Thursday and Friday, so I have included them below 👇 This is why some stories will be in bold but not have correlated hyperlinks (because they did not appear in an edition of Watson’s Daily) ***
- In CHINA – the authorities have been pulling out the stops to reopen and boost economic activity (Monday) by encouraging spending on physical infrastructure and construction and pressing banks to lend, something that was reiterated towards the end of the week with the approval of a near-£100bn credit quota for infrastructure projects.
- In EUROPE – Eurozone inflation hit a new record high of 8.1% (Wednesday), piling the pressure on the ECB to follow other countries – such as the US and UK – in raising interest rates in order to tame inflation. Expectations are increasing for a 0.25% rise in interest rates in the July meeting, although there is an outside chance it could be hiked even earlier than that. Separately, Croatia was given the go-ahead by the ECB to join the the Eurozone from January next year. This was based on an assessment of its convergence with the rest of the Eurozone. Bulgaria and Romania are also aiming for this but remain behind them in the process.
- In RUSSIA – it looks like the country is getting even closer to a historic debt default as it failed to pay a part of the interest due for one of its bonds. It managed to avoid default on its foreign currency debt when it paid investors in early May, but many observers reckon it’s a question of when and not if, Russia defaults.
- In UKRAINE – the central bank raised its lending rate from 10% to 25%, in its first increase since Russia invaded in February. The National Bank of Ukraine said that the move was made in order to address inflation that had shot up to 17% in May and is heading towards 20%.
Meanwhile, there were some big developments in energy and oil:
- In NUCLEAR NEWS – BoJo must have been on a bit of an emotional rollercoaster this week as France’s EDF Energy said that it wouldn’t keep Hinkley Point B in Somerset open beyond its scheduled July shutdown (Tuesday) as the request had come too late, but then it said that it would keep the Hartlepool station and Heysham 1 station near Lancaster going until March 2024, following a review carried out in the middle of last year. It added that further consent would be required for it to operate beyond this date. EDF also made the headlines for domestic problems in France (Tuesday) due to nuclear power station closures, many of which are due to corrosion issues – something that will take years to fix. This could prove to be a major headache for Macron’s nuclear ambitions. Austria also managed to stick the knife in by voicing safety concerns about the construction of Sizewell C in Suffolk (Monday) which either means that the design is indeed faulty or that there’s an element of Austrian sour grapes given that they are a massive consumer of Russian oil and don’t want anyone to get ahead of them in energy self-sufficiency. The week ended on a more upbeat note as the UAE made positive noises about investing billions of dollars in offshore wind, green hydrogen and batteries in the UK.
- In OIL NEWS – EU leaders managed to cobble together an agreement to ban most Russian oil imports (Tuesday) as part of the sixth package of sanctions against Russia, the EU and UK announced a ban on insurance for Russian oil cargoes (Wednesday) making it much more difficult for Russia to export crude (apparently) and oil prices shot up in the meantime (Tuesday). After all that drama, OPEC then announced later in the week that it would boost production considerably in July and August after appearing to cave to increased calls to do so in order to reduce oil prices. In the meantime, the UK government approved a new gasfield in the North Sea called Jackdaw and environmentalists then threatened to take legal action to prevent it from going ahead.
- In CRYPTO NEWS – there was an interesting story in the Guardian at the end of the week which said that the FBI had charged an ex-employee of the leading NFT marketplace, OpenSea, with wire fraud and money laundering. Product manager Nathaniel Chastain was accused of essentially front-running NFTs and over 25 crypto experts have written an open letter to Congress urging more regulation in the sector. It seems that the net is starting to close on crypto assets.
ALL SORTS OF ISSUES CONTINUE TO AFFECT CONSUMERS AND RETAILERS..
- Consumers continue to face pressures on their budgets. New data from the ONS showed that prices for some low-cost groceries increased more sharply than the general inflation rate (Tuesday), but then again it added that when it included 30 everyday items there wasn’t that much difference (but perhaps they would say that, wouldn’t they?). Sainsbury’s said it’s allocated £500m to cut prices for its customers (Tuesday) but having said all that, the latest BRC figures showed that UK footfall at retailers increased last month despite all the price rises – maybe this is due to increased credit card spending (Wednesday), something that could be a worrying sign as consumers aren’t spending because they are confident, they are spending more just to “live”. In terms of consumer spending trends, Brits’ love for the gym is losing momentum (Monday) against the tricky economic backdrop while Americans are still willing to travel (Monday) despite rising petrol prices. At current prices, the average family is now spending $414 per month more than they used to!
- In RETAIL NEWS – over in Europe, the latest retail sales figures for Germany fell way short of expectations, showing just what “new” chancellor Olaf Scholz is up against and, over in the US, grocers like Kroger and Giant Eagle are still pushing back on rising prices from food producers including Kellogg (Wednesday). In the UK, the CMA said it was investigating Morrisons’ purchase of McColl’s (Tuesday), B&M announced disappointing numbers (Wednesday) and fast-fashion retailer Missguided called in the administrators (Tuesday), only to be swept up later in the week by Mike Ashley’s Frasers Group for just £20m. This is that latest acquisition of a distressed asset that I have lovingly called “Mike Ashley’s Bag of 💩” in the past and comprises of House of Fraser, Flannels, Jack Wills, Evans Cycles, Game, Sofa.com and Agent Provocateur. TBF, they are not all 💩, some of them just fell badly by the wayside.
THERE WAS SOME INTERESTING NEWSFLOW IN REAL ESTATE...
- UK property price momentum is losing steam (Monday), according to Zoopla, and UK mortgage approvals have fallen (Wednesday) as mortgages are getting more expensive but Help To Buy is going to hit a deadline later this year (Monday), so I wonder whether we’ll see another buying frenzy ahead of that – similar to what we saw when the stamp duty deadline loomed. It was also interesting to see that Singapore’s sovereign wealth fund bought a £3bn+ portfolio of student housing (Tuesday) in a sign of confidence in the UK rental property market.
- Elsewhere, US house prices continue to stretch affordability (Monday) but it seems that there’s still plenty of upside in other property markets as Saudis are powering a mortgage boom at the moment thanks to government-subsidised mortgages designed to boost home ownership. This is particularly interesting given that home ownership in Saudi Arabia has been quite low historically – 47% in 2016 versus more than 60% in the UK and US – but has almost caught up thanks to such measures. The government targeted a rate of 70% by 2030 as part of its “Vision 2030” plan to transform the country’s economy and reduce its reliance on oil revenues.
IN INVESTMENT, M&A AND FINANCIALS NEWS...
- In INVESTMENT NEWS – Deutsche Bank got raided for “greenwashing” its investments (Wednesday) and, a few days later, the chief exec of its DWS asset management firm resigned (Deutsche Bank owns 80% of DWS). This will be frustrating for Deutsche Bank as it has been trying to move on from being mired in a decade of scandals and losses. It was only last week that we saw the SEC fining BNY Mellon from fudging environmental credentials (albeit for a paltry amount). Is there a pattern forming? In other developments, it was interesting to see that more execs are buying their companies’ shares (Wednesday), which would suggest that they have confidence in future performance.
- In M&A NEWS, DSM put in an offer to buy Firmenich in a deal worth €41bn (Wednesday) to create a global alternative foods and nutrition “powerhouse” in a consolidating sector and Elliott Management sold AC Milan to RedBird Capital (Wednesday) after turning the club’s fortunes around, whilst keeping a minority stake. Incidentally, there was quite an interesting development at the end of the week where the proposed takeover by Shanghai Kington Technology of British graphene specialist Perpetuus was ditched after a national security investigation voiced concerns about key technology falling into foreign hands.
- In FINANCIALS NEWS, hackers announced that they had attacked Sberbank (Monday) in retaliation for the Ukraine invasion and Revolut seems to be getting closer to flotation (Monday) as it is hiring an Investor Relations team, something that is often done as a precursor to an IPO.
AND IN OTHER NEWS...
- In CAR/EV-RELATED NEWS – the latest figures from the SMMT showed that the number of cars owned in Britain fell last year (Tuesday) thanks to rising petrol prices and a relative lack of new vehicles for sale. It also seems that owners are hanging on to their vehicles for longer. It seems that interest in EVs is rising, though, as a report from accountants EY showed that 49% of drivers looking to buy a car said that they would go for the electric option – pretty amazing considering that the proportion was 21% just two years ago! Elsewhere, it turns out that Volvo is close to getting a 600-mile range from a lorry battery (Monday), which is great news considering that HGVs accounted for 20% of road transport emissions in 2019.
- In TECH NEWS – we saw HP lifting its earnings outlook (Wednesday) as it looks like we’re over the worst of component shortages, Sheryl Sandberg left Meta/Facebook after 14 years of highly eventful service (and massive growth – especially in terms of profitability) and it turns out that Apple is moving some of its iPad production out of China and into Vietnam to insulate it against any current and future political interference, although Vietnam’s component makers aren’t likely to be big beneficiaries in the immediate future. In other tech-related news that happened towards the end of the week, Microsoft downgraded its profit and sales forecasts for the latest quarter thanks to the strong dollar and companies linked to China mobile phone manufacturer Xiaomi have all halted IPO plans after facing closer scrutiny from the regulators about the nature their relationships with Xiaomi. Later on in the week, Amazon announced that it would be closing its Kindle store in China and the app will be removed from Chinese app stores by 2024. It didn’t give any reasons but it has suffered from increasing competition from local rivals such as Huawei and iFlytek.
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!
Just for a change, I thought I’d leave you with my “gadget of the week” in LED gaming chopsticks are here for your mid-game munchies or whenever you eat in the dark (SoraNews24, Krista Rodgers). Fun fact: I eat a lot of my meals with chopsticks (I cook with them also), even when it comes to a full English brekkie. I only do that at home, though, because I think I would get a lot of funny looks if I did it elsewhere!