Watson’s Weekly 06-03-2020

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.

• ITALY announced a big stimulus at the beginning of the week of €3.6bn (Monday), which is addition to the €900m it has already allocated to the hardest-hit regions in the North of Italy
• Markets have been very volatile this week and the US central bank cuts its interest rates by 0.5% (Wednesday) to a 1-1.25% range in an effort to slow the market slide. Many – including President Trump – said that this wasn’t enough, but to be fair to Jay he’s raised rates in the past which means that he now has some leeway to address the current situation. If he’d caved to Trump’s constant pressure to cut rates he would have had far less wiggle room. As it is, there’s already talk of another cut in the offing
• CHINA is showing some signs of returning back to normality as Foxconn is aiming to return to normal levels of production by the end of this month (Wednesday), which is particularly impressive when you consider that staff levels are just above 50% of normal levels currently. Also its seems that levels of pollution are heading towards their normal levels (Thursday) according to satellite data from the Centre for Research on Energy and Clean Air which monitors levels of nitrogen oxide in China’s atmosphere. Economists tend to use seemingly random information from places like this in order to compare it with officially sanctioned data because the latter is often viewed with heavy scepticism given the centralised nature of the economy
• Airlines continue to suffer with more route cuts and booking cancellations due to the coronavirus(Tuesday) so the industry’s trade body, IATA, is trying to get normal rules suspended for take-off and landing slots. Under normal circumstances, if the airlines don’t use their allocation at least 80% of the time, they lose them – but given the havoc caused IATA is saying that it would be unfair to penalise airlines. Talking about airlines, Flybe fell into administration (Thursday) but given its tricky past and its dodgy financials being made even worse by the coronavirus impact, the government just decided it wasn’t worth bailing them out.

• Oil prices weakened – and things got worse on Friday as the meeting between Opec and Russia concluded without agreement on production cuts that would help to stabilise the oil price. Russia was uncomfortable with the additional cuts being proposed by Opec and they could not find common ground. This could be a problem for President Putin who needs to finance a major $60bn economic stimulus package (Tuesday) as Russia’s break-even price for oil is $42 a barrel but it is also a nightmare for US shale producers (Wednesday) whose production costs are higher than those for “traditional” producers
• There were some really interesting car-related developments this week. VW talked about its plans to spend €33bn on producing emission-free cars over the next 9 years to overtake Tesla (Monday) and, crucially, that they were going to make money on the cars from day-one (unlike Tesla who went through years of losses). General Motors announced a breakthrough in battery technology (Thursday) and its new batteries are cheaper to make, quicker to charge and have a better range! In driverless cars, Waymo attracted outside investment for the first time (Tuesday) to the tune of $2.25bn. It’s the first time that someone other than parent company Alphabet has financed them

• Recent UK floods mean that food prices are likely to rise (Monday) as the rain just isn’t draining away fast enough for farmers to start spring planting
• Impossible Foods decided to cut wholesale prices by 15% (Wednesday) as the competition continues to hot up in the meatless market. When you’ve got giants like Nestlé, Cargill and Tyson Foods itching to take your business you are going to want to try to protect the gains you have already won. Impossible Foods is much smaller, which means that production costs are higher – but it is imperative that it at least defends what it already has

• In the “Themes for 2020” section, short-form video streamer Quibi, which specialises in video series that run for ten minutes or less per installment, has just completed a second round of financing worth $750m. This is in addition to the $1bn it has already raised one month before the product’s launch. This is interesting because it is new and different from all the rest! It will launch with over 50 shows and charge subscribers between $4.99 and $7.99 per month for access. In meat-alternatives, Impossible Foods announced that it would be cutting its wholesale prices by 15%. Given the intensifying competition from food giants, this is a necessary move IMO. In the “Country-by-country overview for 2020” section, Brazil decided to cut its growth estimates due to concerns that the coronavirus outbreak would hurt exports; South Africa fell into recession for the second time in two years as the figures from Statistics South Africa were even worse that the already pessimistic forecasts. Ramaphosa blamed power cuts, lack of business confidence and drought.

My favourite stories this week were the rather unusual Japan goes beyond gaming desks with the gaming bed (SoraNews24, Casey Baseel https://tinyurl.com/vpays3s) and the hilarious Mum brands kids’ book explaining reproduction ‘child-friendly kama sutra’ (The Mirror, Luke Matthews https://tinyurl.com/tyrovvf).