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...
- China manufacturing activity slowed down for first time since April 2020 (Thursday) according to the Caixin manufacturing purchasing managers’ index which shows its first fall since the early stages of the pandemic, notable because this independent measure echoed the official PMI. It all seems to be due to falling export demand, rising raw materials costs and a fragile property sector that is suffering from another crackdown designed to reduce debt. In agriculture, it looks like the pork shortage caused by swine fever last year appears to be over (Thursday) and hog stocks like Muyuan and feed businesses like New Hope Liuhe are suffering as a result.
- Vietnam’s status as a reliable Asian manufacturing hub is being called into question by the current Covid surge (Wednesday). Its relatively successful handling in the early stages of the pandemic via super-strict quarantines and track-and-trace to the difficult situation the country finds itself in today stand in stark contrast to each other. Global manufacturing companies are getting increasingly concerned, but I would have thought this will die down.
- Japan’s PM Yoshihide Suga resigned (Friday), apparently to take responsibility for the country’s poor response to the coronavirus.
- In the Eurozone – high frequency indicators are all at their highest levels since the beginning of the pandemic (Tuesday) as data on things like visits to leisure venues, spending, travel and recruitment are all trending strongly. This implies good news for the bloc!
- German inflation surged to a 13-year high of 3.4% (Tuesday) putting extra pressure on the ECB to raise interest rates to rein in spending but the ECB is standing firm. Interestingly, the last time German inflation reached this level was just before the 2008 financial crisis.
- In the UK – business confidence is at four-year high as restrictions ease (Tuesday) according to a Lloyds Bank survey, although this is getting increasingly tinged with concerns about staff shortages and the inevitable upward pressure on wages that will no doubt result. The vaccine rollout, the lifting of lockdown restrictions and lower chances of getting pinged have all helped.
- In COMMODITIES – Aluminium prices hit a 10-year high as China production fell (Wednesday) due to a crackdown on electricity consumption. China produces over 50% of the world’s aluminium and its aluminium production hub of Guangxi has cut production to 80% of normal levels. Meanwhile, demand for aluminium used in planes, vehicles and cans continues to grow as economies pull themselves out of the lows of the pandemic
- In MARKETS – Germany’s Dax index announced that it was going to expand the number of its constituents (Thursday) from the current 30 constituents to 40 after consultation with a big number of companies and financial institutions. There will be new selection criteria that specify profitability and the constituents will be reviewed twice a year rather than the current once. This is the first overhaul of an index that has been around for 32 years. This news isn’t going to rock your world, but it is notable!
SUPPLY CHAIN ISSUES CONTINUE...
- Although we are hearing a lot about employee shortages at the moment, the other side of this is that the treatment of transport workers is making supply chain pressures worse (Tuesday) and Korean global shipping giant HMM, one of Asia’s biggest shipping companies threatened to strike (Thursday) although a last minute deal was reached in the end.
- US retailing giant Walmart said that it will add 20,000 workers to supply-chain operations this year (Thursday), taking on more order pickers, freight handlers, forklift truck drivers, technicians and managers.
- The consequences of supply chain problems continue to have knock-on effects as building materials costs climb to record highs (Thursday) and they are up to 20% higher versus the previous year. They have now risen so much that the construction materials price index is at its highest level since records began in 1996!
- Wetherspoons has not been immune to shortages either as it was running short of some brands of beer (Thursday)! This is just the latest hit stemming from the lack of delivery drivers as Nando’s and McDonald’s have also reported other shortages of things like chicken (!) and milkshakes.
THE M&A AND IPO FRENZY SHOWS NO SIGNS OF SLOWING DOWN...
- Bankers continue to rake in the fees (Tuesday) as the sheer volume of M&A deals and a fat pipeline is putting bankers on course for their their best year on record. Fee income so far this year has been estimated by Refinitiv to be about $4bn and is the highest year-to-date total since at least 2000 and way above last year’s levels! It looks like the party is going to continue as a survey by KPMG of big international businesses said 87% were looking to do deals in the next three years (Wednesday).
- In terms of specific deals, European tech giant Prosus put in an all-cash offer for Indian payments platform BillDesk (Wednesday), Russian internet giant Yandex is in the process of buying out Uber from its various joint ventures (Wednesday) in a $1bn deal, Baxter put in an offer to buy US medical equipment group Hillrom for $12.4bn (Friday), which many see as a punchy price and private equity firm Advent and sovereign wealth fund GIC put in offer $8bn to take biotech company Swedish Orphan Biovitrum (aka “Sobi”)private (Friday). Meanwhile, woolly shoe maker Allbirds announced intentions to do an IPO (Wednesday).
US CONSUMERS STOCKPILE WHILE UK CONSUMERS SAVE...
- US consumers seem to be stockpiling toilet paper again (Wednesday) and P&G, the country’s biggest maker of loo roll (including the Charmin brand) and paper towels (including the Bounty brand)is increasing production to meet demand.
- The latest figures from the Bank of England show that UK consumer borrowing fell to zero in July (Wednesday), implying that some households are leaning towards more saving than spending as Covid cases rise (or are they maybe saving up for a big Christmas spending spree perhaps?).
- Meanwhile, prices in the shops are rising as driver shortages and Brexit red tape are being passed on to the consumer (Wednesday), according to the latest figures from the British Retail Consortium and UK house prices showed their second biggest monthly increase in the cost of the average home in 15 years (Thursday), according to the latest figures from the Nationwide building society
...AND IN INTERESTING INDIVIDUAL COMPANY NEWS...
- In TECH NEWS, China decided to limit gameplay to three hours per week (Tuesday), Alibaba decided to suck up to the government (Friday) by giving them large sums of money to further “common prosperity” and South Korea ruled on in-app game purchases (Wednesday) but shortly after that Apple said that it was going to allow media apps to link to their own websites for payment options (Friday), rolling it out around the world from next year for reader-apps available via the App store. WhatsApp was fined €225m for not telling users how it shared data with Facebook (Friday) by the Irish Data Protection Commission, but I’m not holding out much hope as it is puny and doesn’t seem to be very effective against the might of US Big Tech. Elsewhere in tech-land, Snap continues to grow (Tuesday) and wearables company Whoop is gaining traction (Tuesday) but Zoom seems to be losing ground (Tuesday).
- In CAR NEWS, UK second-hand car prices continue to rocket up (Tuesday), with the average asking price having gone up by over 15% year-on-year, according to Auto Trader and rising prices are already feeding into rising inflation. Elsewhere, Ford and GM shut down factories and Tesla delayed the launch of its Roadster due to chip shortages (Friday)
- In TRAVEL SECTOR NEWS, flying overall is picking up (Thursday) but business travel looks like it’ll still take a while (Thursday). Ryanair is taking a bullish stance (Wednesday)!
AND IN UPDATES FOR WATSON'S YEARLY...
- Watson’s Yearly updates: These will be left until the next edition of Watson’s Yearly that will be published shortly
My favourite “alternative” stories this week were the search tips in Man says we all ‘suck’ at using Google – and shares tips we need to know (The Mirror, Zahna Eklund) and the rather wonderful Adorable seven-month-old puppy loves to cuddle the other dogs he meets on walks (The Mirror, Paige Freshwater). Brilliant!