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 COLOURED HIGHLIGHT 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...
the wars rumble on, UK government borrowing was higher than expected and gold became the world's top reserve asset
IN WAR NEWS…
US/IRAN – tensions continued as zero progress appears to have been made. Meanwhile, the House of Representatives passed a resolution to stop Trump from conducting any more strikes on Iran without approval from Congress. The war has drained US oil stocks to their lowest level since 2004 and hybrid sales in America have boomed as consumers want to cut their reliance on petrol.
ISRAEL/GAZA – Trump claimed that Israel and Hizbollah were going to agree a ceasefire, they did and then Hizbollah rejected it.
RUSSIA/UKRAINE – Putin’s running out of workers because he’s lost so many as a result of the war. Russia’s now recruiting loads of Indian workers, some of whom would have gone to the Middle East but can’t work there now because of the war.
IN DEFENCE NEWS…
It looks like the Americans are going to withdraw key military assets from NATO’s rapid response force although whether this is genuine or another Trump negotiation tactic remains to be seen.
Ukrainians are brilliant at drones and Gulf states are getting attacked with drones despite having expensive American defence systems. It has been suggested that Ukraine sends experienced operators and equipment to these states and they will pay handsomely for it, which could come in useful for finances given the likelihood is that the Americans are going to pull money out in next year’s defence budget. It’ll be interesting to see
Norwegian firm Radionor Communications, which makes tactical broadband radios for the battlefield, is looking for a buyer. The company has seen a major increase in demand for communications equipment that sends very narrow signals making detection and disruption difficult. I think that further consolidation in the defence sector is highly likely as strong demand underpins future growth across what remains a fragmented industry.
IN TRUMP THINGS…
The president has abandoned his plan for a $1.8bn “anti-weaponisation” fund that would have paid out to allies targeted by the justice system under Biden, only after a court ruling temporarily blocked it. The fund was strongly criticised as a vehicle for Capitol Hill rioters to get compensation and even Republicans urged him to drop it.
He has also signed an executive order creating a “voluntary framework” for the US to get first look at AI models, having been reluctant to do so because he feared government oversight would slow down the tech advances of the likes of OpenAI, Google and Anthropic.
IN REGION/COUNTRY NEWS…
THE US – US Treasury Secretary Scott Bessent was doing his best to talk down inflation at a congressional committee hearing, preferring to point out that “the economic data is very strong”.
Meanwhile, Trump is trying to impose tariffs of at least 10% on 60 countries following an investigation into forced labour practices. China, the EU, India, Japan and the UK are among those deemed not to be doing enough. Given that the latest tariffs are due to expire soon, it is not surprising that he has found another excuse to keep the tariff party going.
IN EUROPE…
DENMARK – Danish PM Mette Frederiksen has finally formed a coalition government following over two months of negotiations since her narrow March election victory, resulting in a four-party centre-left coalition.
HUNGARY – newly-elected PM Péter Magyar has promised to change the constitution to remove Orban’s allies and restore the rule of law. His conservative Tisza party won a parliamentary supermajority in the recent election so he has real momentum behind him, but not everyone is going to take this lying down.
IN THE UK…
Government borrowing was way higher than expected – £60bn higher than then previous OBR forecasts! They admitted to underestimating the dent on growth from Reeves’s payroll tax raid. What is the point of the OBR if it gets its forecasts so badly wrong??
The UK government is putting £1.3bn towards Universal’s first European theme park in Bedfordshire. It will be called Universal United Kingdom Resort and should generate 20,000 construction jobs and then 8,000 permanent ones when it opens in 2031.
Andy Burnham has confirmed he wants to replace Starmer as PM if he wins the Makerfield by-election on June 18th. We all knew this anyway.
IN COMMODITIES…
OIL – Countries that export oil via the Strait of Hormuz are talking about building pipelines to bypass it, with Kuwait, Saudi Arabia and the UAE all exploring options. This all sounds good but it’ll be expensive, take time and could prove to be a white elephant if the Strait situation gets resolved. Such talks have happened before and have never come to fruition due to concerns about over-reliance on neighbours and possible vulnerabilities.
BP is on the verge of quitting the North Sea after over 60 years due to Labour’s fixation on tax raids. The North Sea industry is already losing about 1,000 jobs a month and while this is good news for environmentalists, it will ultimately be bad for consumers as we will have to spend more on importing oil.
GOLD – the shiny stuff is now the world’s top reserve asset, overtaking US government bonds after years of central banks loading up in search of alternatives to US assets. The ECB chief noted that “Geopolitical tensions continue to drive strong central bank demand for gold”.
IN CRYPTO NEWS…
Bitcoin is approaching its biggest weekly loss since November 2022 after Strategy, one of its biggest corporate fans, sold 32 bitcoin for $2.5m last week. Bitcoin has lost 14% of its value this week and the fall came more because of WHO was selling rather than WHAT they sold. It seems retail investors are prioritising tech stocks over bitcoin (for now at least).
IN INVESTMENT NEWS...
IN MARKETS – Concerns about an AI bubble bursting haven’t stopped the S&P 500 from hitting record closing highs 11 times in May while Q1 earnings smashed expectations. It’s all about AI-related tech! The danger is that AI stocks drag the whole index with them, potentially masking poor performance underneath.
IN INVESTMENT TRENDS…
IPOs – Investors have been falling over themselves to get exposure to SpaceX ahead of its much-anticipated IPO, putting money into mutual funds and four ETFs that hold slices of the company since December last year. At least 14 ETFs will offer exposure once the flotation happens and a successful launch should bode well for the eventual valuations of OpenAI and Anthropic.
Chinese authorities are cracking down on citizens’ exposure to US equity markets, with the China Securities Regulation Commission ensuring investors can only buy overseas stocks via official channels. This clampdown has extended to on opening offshore bank accounts, news of which hit HSBC and Standard Chartered share prices.
As far as SpaceX’s valuation is concerned, SpaceX values itself at about $1.8tn, Morningstar analysts reckon it’s worth $780bn and Goldman Sachs, which is lead on the deal, reckons that its AI revenues will increase a hundredfold by 2030 (but then they are probably biased!).
Anthropic has now filed for an IPO likely to value it at over $1tn, less than a week after closing its latest funding round, which puts pressure on OpenAI to do the same and keep up with the Joneses. OpenAI just needs to get on board the hype train and ride it all the way to Flotation Central IMO! Will the markets be able to absorb all these mega-IPOs in short succession though??
M&A – Berkshire Hathaway agreed to buy Taylor Morrison Home Corp for $6.8bn in cash, one of the first big investments by CEO Greg Abel who took over from Warren Buffett in January.
People Inc offered to buy the rest of MGM Resorts to take it private which would likely give Entain a windfall for its 50% stake. There is speculation that Entain itself might be a takeover target given consolidation in the sector.
General Mills sold its Häagen-Dazs ice-cream stores in China to a group of local investors, following similar moves by Starbucks and Burger King as competition intensifies.
US private credit firm Castlelake put in a cheeky bid for easyJet, taking advantage of a share price that has fallen by almost a third in the last 12 months and by over 75% since its peak. EasyJet isn’t keen and there are EU poison pills to deal with for such an opportunity to work out.
EQUITY RAISE – Alphabet initially planned to raise $80bn in equity to finance massive AI infrastructure investments. This will be the biggest stock offering in history and the company’s first in over 20 years – but then demand has been so strong that it upped the ante to raise $85bn!
IN BUSINESS, EMPLOYMENT & EDUCATION TRENDS...
IN BUSINESS TRENDS…
The OECD has confirmed that subsidies and cheap loans have been behind Chinese companies’ growth in 15 key industrial sectors, attributing almost 60% of their global market share gains since 2005 to subsidies. Everyone has known this for some time so the OECD is really just putting a number on it. In many cases it is too late to do anything about it. The only real way to push back is to form alternative alliances, perhaps with Europe and the Gulf states.
Saudi Arabia’s Public Investment Fund has been replacing foreign execs with locals across a number of its companies, which makes a lot of sense given the fund’s narrowing of focus. There will probably be a lot of asset disposals where existing holdings no longer fit the new priorities.
Blackstone capped withdrawals from its $79bn private credit fund in response to redemption requests booming over Q2. This is a significant development for a firm of its stature and reflects broader concerns about private credit in general.
The M&S chairman criticised the effect of high taxes and too much bureaucracy on British businesses while the boss of Stonegate, Britain’s biggest pub company, remarked that it’s not that they don’t want to hire young people – it’s not happening because there is no economic breathing room to do so.
IN EMPLOYMENT TRENDS…
IN THE US – A New York Federal Reserve study concluded that working from home was to blame for almost two-thirds of the recent rise in youth unemployment, as less experienced workers are harder to supervise remotely, weakening incentives to hire them.
IN THE UK – hospitality bosses are calling for the chancellor to reverse NIC changes because they see the move as the primary driver of the slowdown in youth employment. BCC forecasts warn that a toxic combination of higher taxes, minimum wage rises and AI will produce a joblessness rate of 17.8% in the 16-24 age group in 2027. The number of households where no adult has ever worked has hit a record high and online ads for starter jobs have halved over the past decade. This has become a structural problem rather than a cyclical one and until the government does something dramatic, things are not going to improve IMO.
IN EDUCATION…
Almost 25% of British universities had less than 70 days of cash to cover costs at the end of 2024-25, with London South Bank University the worst performer at just seven days. The government needs to make difficult decisions about slimming down universities and courses but the current leadership situation makes that challenging.
The VAT on private school fees has resulted in pupil numbers falling by over 20,000 in the first full year of the policy and it is not clear whether the money has actually funded 6,500 new teachers – as per the government’s initial promises.
Confidence in the value of a university degree has also hit a record low, with rising costs, falling employment prospects, debt fears and the prospect of AI rendering courses obsolete all explaining the reticence. I think that the government will need to make some unpopular decisions to fix the system.
IT consulting share prices continue to take a battering every time AI advances because investors worry that it renders their billable hour business model obsolete. Accenture’s share price has more than halved in less than 18 months, for instance, but it’s possible that the pricing model moves towards being outcomes-based, something that professional services companies have increasingly been debating.
IN CONSUMER & RETAIL NEWS...
IN CONSUMER TRENDS…
Americans on GLP-1 weight-loss drugs are creating a significant headache for apparel retailers because their use has led to a rise in consumers returning their purchases. Some people are dropping one clothing size per month at peak weight loss! Returns are a major issue given shipping, labour and warehousing costs plus the risk of garments coming back out of season. There is surely an opportunity here for better virtual sizing technology!
British car sales hit their highest level for May since before Covid, up 7% overall with battery electric car sales showing the strongest uptick. This is particularly notable because private buyers were the main driver for the best May sales rise since 2019. Fleet buyers had previously been leading the charge.
Sales of lower-strength beer between 1.3% and 3.4% ABV have boomed by 2,500% between 2022 and the end of 2025, growing from a 0.4% share of the market to 12.5% following reforms in August 2023 that cut duty on drinks with an ABV of 3.4% or less.
IN RETAIL NEWS…
Amazon is expanding its fast-track UK delivery service, Amazon Now, to Manchester and Birmingham this year following its existing sub-30-minute service in parts of London. The company is putting more effort into Whole Foods following the closure of Amazon Fresh stores. This is unlikely to be a major money-spinner but given Amazon’s logistical expertise, if anyone can make a mark it is probably them.
IN CONSUMER GOODS…
Rapha and Lululemon are proving popular in China as the activewear market booms, with On and Columbia Sportswear also benefitting as the Chinese consumer base embraces a more active lifestyle.
That being said, Lululemon cut its full-year forecasts due to negative commentary from its founder and a lukewarm response to new products, with its share price down 40% year to date! It needs to get back on track quickly in what is a very competitive space.
IN TECH NEWS...
AI – Around 90% of companies have not yet seen any financial benefit from using AI despite the sharp rise in uptake, according to the CEO of Accenture UK. Clearly, he’s just talking his own book here because helping companies in this regard is a service that Accenture provides! Still, it sounds like a valid point – and it’s interesting to see that many of the big management consultancy firms are actively recruiting grads!
Research shows that Gen Zs are increasingly concluding that AI is actually harming their prospects rather than improving them, with candidates using AI to generate applications, employers using it to screen them and multiple rounds of automated interviews before any human contact occurs.
There is also an interesting argument that if the cost of using AI exceeds the cost of having humans do the same work, the case for replacing people looks increasingly shaky. I recently mentioned the practice of “token maxxing” which has made use of AI very expensive in some cases!
Estate agents are coming in for criticism for using AI to make properties look better than they actually are in listings, with Winkworth currently in hot water in London. Savills and Knight Frank are also apparently doing the same.
Florida filed a lawsuit against OpenAI and Sam Altman alleging that its chatbots have inflicted a litany of harms on kids by releasing products it knows are addictive and unsafe.
MODELS – Anthropic is expanding access to its Mythos cybersecurity tool to over 150 organisations worldwide. New countries include members of the Five Eyes intelligence alliance as well as France, Germany, Italy, Switzerland and several other European and Asian nations. Companies including Okta, Samsung, Euroclear, Intercontinental Exchange and Swift will also get access along with NATO and ENISA.
Anthropic is also now helping the NSA use Mythos for offensive cyber operations despite simultaneously suing the defence department for designating it as a supply chain risk after it refused to let Claude be used for mass surveillance of American citizens and in lethal autonomous drones.
Microsoft unveiled seven new AI models at its Build conference, with its AI chief conceding that Anthropic is still a few months ahead in tech capability.
Kirkland & Ellis signed a multiyear deal with Palantir to develop AI tech for advising private equity groups on fundraising, enabling outcome-based fees rather than billable hours.
The House of Commons technology committee has pushed back against Palantir’s significant role across sensitive areas including UK defence, health and policing data systems. It wants ministers to trigger a 2027 break clause in its £330m contract in favour of a UK-based provider. Fair enough but whether there is anyone else that can actually do the job remains the key question.
AI AGENTS – Tencent is moving closer to launching an AI agent for WeChat, the everything app used by China’s 1.4bn people. There will be a limited rollout this month ahead of a proper public launch. Making the experience more agentic makes enormous sense though whether there is enough computing power to support it could be its Achilles heel.
Meta is rolling out a new Business Agent for WhatsApp that will automatically respond to customers, provide analysis to business owners and close sales or book appointments without human involvement, with Instagram also getting the feature soon.
CHIPS – Intel plans to produce an AI chip by the end of this year that uses cheaper memory and cooling tech than rival products from Nvidia and AMD. This chip’s focus will be on inference tasks rather than the chips used for model training that Nvidia dominates. This is a decent move that will get Intel a seat at the AI table after years on the sidelines.
Nvidia is also going to launch a new PC “superchip” that will pit it against Apple, Qualcomm, Intel and AMD to capitalise on expected consumer upgrades to AI-enabled devices. Nvidia’s CEO has said that such devices will ultimately displace the mouse and keyboard as the primary means of interacting with computers.
Despite all this positive momentum in the world of chips, Broadcom lost more than $300bn in market value in a single day after AI revenue guidance disappointed, with some of that sell-off possibly reflecting investors building up dry powder ahead of the SpaceX flotation. Is this a sign of what could happen to other chipmakers if they even fall slightly short of estimates?? Given how much of the market they make up, if they all started to lose value at the same time, it could all get quite serious…
DATACENTRES – supply chain backlogs and permit issues are delaying data centre rollouts in the US despite enormous investment. Over 60% of capacity scheduled for completion in 2027 is not yet under construction and a further 7% has already been delayed. There will probably be a grace period in investor expectations given the scale of the task but that will not last forever.
GAMING – the mobile gaming industry is pushing back against a European Commission proposal to force games to display pop-ups every time virtual currency is used to make a purchase. The industry says this will kill gameplay. What a Battle Royale this is proving to be…
IN MISCELLANEOUS NEWS...
IN AUTOMOTIVE – Nissan signed a deal with China’s Chery to make Chery’s vehicles at its Sunderland factory starting next year, providing a lifeline for jobs at the plant.
Resistance is building against robotaxis just as they are supposed to be going mainstream, with incidents including vehicles being barricaded in cul-de-sacs, passengers being taken into flooded streets and ambulances being blocked. Liability in the event of an accident also remains a tough hurdle to overcome. This will take a lot of time to resolve.
REAL ESTATE – Iran war-driven higher mortgage rates are going to cause house prices to fall by 2% this year according to Savills, with buyers withdrawing and more homes coming onto the market partly due to landlords leaving because of rental reforms that came into effect last month. Prices are expected to bounce back next year.
Buy-to-let lending has fallen since November’s budget, which does not bode well for tenants who may face less choice and higher rents.
New blockchain-based technology is being tested by UK banks that cut the average 120-day property transaction time in half and reduce costs by around £1,600. It works by tokenising deposits on the blockchain and automating payment obligations and property rights. Some banks believe they will be able to transact tokenised mortgages in less than three years. If this works, it could be genuinely transformational.
SoftBank has overtaken Toyota to become Japan’s most valuable company by market cap, with its share price up almost 73% this year. To overtake a veteran like Toyota after over two decades at the top is quite something and it illustrates both the massive hype around AI and the ongoing downfall of the automotive sector.
SoftBank has also pledged up to €75bn to build a network of AI computing clusters in France in what could be Europe’s biggest ever data centre project.
The established gambling companies including Flutter and DraftKings are upping their game ahead of the World Cup, which begins on June 11th, to stop punters being lured away by up-and-coming prediction market players like Polymarket and Kalshi. There is quite literally a lot at stake and it will be fascinating to see who wins the battle of the gambling platforms.