Watson’s Weekly 04-12-2021

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 MACRO NEWS…

• The US – Fed chief Jerome Powell said that he was more minded to accelerate the central bank’s monetary tightening programme (Wednesday) to curb inflation, prompting speculation that interest rates could go up.

…but really this week was all about Omicron and inflation…

• There was initial panic as news of Omicron hit the travel industry and markets (Monday) as many countries immediately shut down borders and imposed movement restrictions. The OECD warned about the effects of  Omicron (Thursday), but said that it could go either way in that supply chain problems could get worse as movement restrictions are re-imposed, which would cause inflation to rise further. On the other hand, tighter restrictions could harm demand for goods and services, leading to economic slowdown, leading to weaker inflation. A Bank of England policymaker said Omicron could mean higher-for-longer inflation (Wednesday). In the meantime, Moderna and Pfizer/BioNTech’s respective share prices were particularly strong (Tuesday) because it is thought that their mRNA-based vaccines are more adaptable to variants.
• Inflation in the Eurozone hit new highs (Wednesday) as the rate hit 4.9% in November, which was way higher than forecasts, putting even more pressure on the ECB, but Germany’s rate was even higher! It hit 6% – its highest rate since 1992 (Tuesday)!!! ECB board member Isabel Schnabel said in TV interview that “November will prove to be the peak” for inflation, saying that a lot of the drivers behind this figure – rising energy prices, supply chain problems – will fizzle out next year.

There were some interesting developments in OIL…

• Gazprom made a lot of money amid all the gas shortages (Tuesday). It is the world’s biggest producer of gas and announced RECORD quarterly earnings, with even better results expected for Q4! The company says it fulfilled all contractual obligations in supplying Europe but Europe is still grumbling. It’s like AstraZeneca all over again!
• OPEC+ stuck with agreed oil supply increase (Friday) rather than retaliate for last week’s mini-assault with reserves.
  Shell walked away from the Cambo project (Friday) in the North Sea as, ostensibly, it was getting impatient about waiting to get the go-ahead to drill in this oilfield.

In ENERGY developments…

• We saw the world’s first floating nuclear power plant (Thursday) – made by Russia – on northern coast of Siberia and it’s being used to power Russian efforts to carve a new shipping lane through the Atlantic called the Northern Sea Route. Reliance on the Suez Canal was highlighted earlier this year by that whole blockage nightmare and it is thought that this new route could shave serious amounts of time off some routes e.g. South Korea’s Busan to Rotterdam – 27-28 days via NSR versus 40 days via Suez Canal…
• We also saw Commonwealth Fusion Systems being backed by Tiger Global Management and Bill Gates (Thursday) to look at fusion, not fission, to generate nuclear power. Fission splits atoms, fusion brings them together. Advantages include it being cheaper (it uses widely available elements like hydrogen), waste from process stays radioactive for a shorter time and there is no risk of meltdown.
• Drax is moving to biomass (Thursday). The UK power company wants to double the production and sale of wood pellets to burn for fuel. The company reckons it could remove 12m tonnes of carbon from atmosphere each year. Critics think this is not commercially viable.
• Nissan is building a solar farm (Thursday) at its Sunderland plant to power production of its Leaf as part of company’s £13bn push into decarbonisation. It’s due to complete by May next year and will mean the plant will meet 20% of its energy needs on its own! In the meantime, Nissan reiterated its overall commitment to EVs (Tuesday).

• Clara became the first approved pension superfund (Wednesday) and it will give companies who want to exit pensions a possible way out.
• A new UK clearing bank prepared to launch (Wednesday) and is aimed at providing services to business customers.
• Wise, formerly called Transferwise, is confident about the full-year (Wednesday) but was held back by development costs. It’s now targeting rapid growth.
• Brazilian fintech company Nubank had to rein in the pricing expectations for its IPO (Wednesday) to make it more attractive to investors.
• AJ Bell announced plans to launch its own trading app (Tuesday) in order to attract younger clientele with a commission-free trading platform called Dodl.
• Abrdn bought Interactive Investor (Thursday) in order to enhance its retail investor offering.

• The CMA told Meta to sell Giphy (Wednesday). Although this isn’t what I’d call a key acquisition I think that both sides will want to win this on appeal more as a point of principle than anything else! Meta also lost its crypto chief (Thursday), although this thing was going down the toilet anyway. He’s saying that it was to pursue his own interests, but…really??
• Founder Jack Dorsey quit Twitter (Tuesday) to concentrate on being CEO of Square, which is probably best for both companies.
• The Nvidia/Arm Holdings deal looks increasingly likely to collapse (Friday) as the US regulator is now weighing in with others to side against Nvidia. I just wonder, if it does collapse, what could be next for Arm?

In the US – Cyber Monday wasn’t that impressive (Tuesday) according to the latest figures from Adobe Digital Economy, but Black Friday saw consumers return to shops (Monday) and supermarket Kroger also did brisk trade (Friday).

In the UK – real estate demand keeps rising (Monday) and prices rise (Thursday) while household bills look set to increase by £1,700 on average next year (Thursday). Fortunately, household wealth reached all-time highs (Friday)! Amid all of this it seems that we’re all still buying cars as dealership Pendragon had to raise its full-year guidance for the third time in five months (Thursday)! There was a bit of good news for retailers as footfall in the West End has been recovering (Wednesday) and Selfridges got a new owner (Thursday), which should give some feeling of stability.

• Pressure from Chinese authorities has now led to Didi saying it will delist in New York (Wednesday) after only having listed there on June 30th!

• Watson’s Yearly updates: These will be left until the next edition of Watson’s Yearly that will be published shortly

My favourite “alternative” story this week just had to be this: Defiant baby pays no attention to mum as she insists on sharing highchair snack with dog (The Mirror, Catherine Swan). The expression on this little girl’s face is priceless!