Watson’s Weekly 06-06-2020

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.

• IN THE US – Trump got aggressive regarding the George Floyd protests (Wednesday), threatening to send in the army to quell the protests, but his Defence Secretary Mark Esper publicly disagreed with him (Thursday) so I assume he will be for the chop in the near future…
• IN EUROPE – the ECB announced it would be putting €600bn more into the existing bond-buying programme (Friday) and an extension of the scheme until at least June 2021. Germany announced a €130bn economic stimulus (Thursday) which comprised of measures including the lowering of VAT, giving parents one-off payments of €300 per child and incentives to buy electric vehicles. German car makers weren’t chuffed (Friday) because the incentives didn’t cover petrol and diesel cars, which still make up the majority of vehicles
• IN THE UK – there was talk about chancellor Rishi Sunak unveiling an economic stimulus package in July (Monday), but the latest news says that he may announce a modest version then and delay the “big” package of tax cuts and spending commitments until the autumn. He says it’s because he wants to wait until the dust settles before making irreversible spending decisions
• IN AUSTRALIA – it looks like the country is set to fall into recession for the first time in 29 years (Thursday) as GDP for the first quarter contracted. Given that the coronavirus outbreak happened in the second quarter Australia is highly likely to fall into recession because the definition of a recession is two consecutive quarters of GDP contraction

• IN THE US – Retailers who had just been preparing to open after lockdown suffered in some protests (Monday) Target, Walmart and Nike – as well as many much smaller operators – have had to close their doors or are recovering from the looting. Adidas has closed all of its US stores and Amazon has altered delivery routes to protect employees. For the retailers who do open, it’s going to be extremely competitive as solvent retailers and troubled/insolvent retailers will be trying to attract customers with huge discounts (Tuesday)
• IN THE UK – Primark announced it would be opening all of its shops (Tuesday), which is important given that it doesn’t trade online! However, there’s still trouble on the high street as Monsoon Accessorize is on the verge of going into administration (Tuesday) while Pret a Manger is trying rent negotiations with landlords (Monday) and Frankie & Benny’s owner announced the permanent closure of 120 restaurants (Thursday)

• Interestingly, car sales in China were up (Thursday) and the UK’s fifth-biggest car dealer said it had seen strong demand for secondhand cars (Thursday). Some of this uptick has been down to more people not wanting to use public transport, but the UK car dealer said that exceptional bargains could be had in the new car market when production comes back in a meaningful way in order to tempt buyers back into the showrooms
• Unfortunately, jobs continue to be lost in the car industry as Aston Martin said it was cutting 20% of its staff (Friday) while car dealer Lookers said it was shedding 1,500 jobs and closing 12 of its sites

• The FCA is going to embark on a test case at the High Court (Tuesday) to see whether insurers should be paying out for “business interruption” during the coronavirus outbreak. It is thought that this will speed up the process for current and potential claimants and a ruling is expected by July. A lot hangs on this! This could open the compensation floodgates if it is found in favour of the claimants represented by the FCA. Alternatively, if the insurers win, it is highly likely that disgruntled claimants will start to go after insurance brokers!
• The UK looks like it might do a U-turn on Huawei re 5G (Tuesday). Previously, Boris Johnson had frustrated the Americans by ignoring their advice to cut Huawei out of the UK’s 5G network completely – but now it seems that ministers are considering the contribution of taxpayer cash towards an international scheme to standardise 5G network equipment. This could make it easier for rival suppliers to enter the market and compete with Huawei
• It looks like a lot of companies could be seeking out a secondary listing on the London Stock Exchange (Monday) as the NSYE and NASDAQ in America are looking to tighten their listing rules. This could be HUGE in terms of fees for advisers
• IPOs came back with a vengeance as Warner Music had a successful market debut (Thursday) as its share price shot up by 20% on its first day. Mind you, it wasn’t as good as ZoomInfo (NOT the Zoom you are thinking of – that’s Zoom Video Communications 😜), which saw its share price rise by a staggering 60% on its debut in its IPO on the same day (I bet their advisers are wishing they’d set a higher price!)

• Watson’s Yearly updates: watch this space!

My favourite “AND FINALLY…” story this week was Two local teens grocery shopped for their grandparents. Soon it became a national volunteer effort (The Washington Post, Teddy Amenabar https://tinyurl.com/y7xtt9sq). Given what’s going on at the moment, something like this restores your faith a bit in humanity!