Watson’s Weekly 07-02-2026

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 DEFENCE NEWS…

• The expiry of the New Start treaty this week marks a sobering moment because it ends more than fifty years of nuclear arms control efforts between the US and Russia that began in 1972. Landmark agreements such as the 1991 Start I treaty introduced inspections, while New Start itself was signed in 2010, extended in 2021 and effectively collapsed after Russia’s invasion of Ukraine. Although Putin has floated the idea of both sides voluntarily sticking to limits but Trump is pushing for a new “modernised” treaty. This is a big deal because the US and Russia together hold around 86% of the world’s nuclear weapons, and although China’s growing arsenal explains Trump’s desire to include Beijing.
• EU members approved British companies’ participation in procurement tied to a €90bn Ukraine loan, of which €60bn will fund military equipment and €30bn budget support. This is positive both for UK defence firms and for Ukraine’s flexibility in sourcing equipment.
• Meanwhile, analysis of Trump’s rhetoric over Greenland and the Arctic suggests that US pressure on allies and adversaries alike may actually benefit China by making it appear the more stable superpower and a hedge for middle powers, even though China’s direct Arctic access remains geographically constrained.

TARIFFS

• Trump signalled tariff cuts on India to 18% after Modi reportedly agreed to halt purchases of Russian oil, alongside promises that India would remove trade barriers and buy over $500bn of US goods. However, analysts are sceptical about this because discounted Russian supplies now make up about a third of its imports versus just 2% before the Ukraine invasion. Untangling this dependence will be extremely difficult, and shifting volumes elsewhere could also create strategic complications for China.

TRUMP THINGS…

• STOCKPILING KEY MATERIALS – the US plans a $12bn critical minerals stockpile funded largely through the US Export-Import Bank (aka “Exim”) to counter China’s dominance and protect domestic manufacturers from supply shocks. Additional moves such as a $9bn copper-focused mining investment in the DRC underline Washington’s determination to secure raw materials although meaningful impact will take time.
• IMMIGRATION – Trump’s immigration crackdown is driving major government spending ($35bn so far!), boosting contractors involved in border security, detention and deportation. Companies such as Palantir are also benefiting from strong US government demand, even as European customers show reluctance to rely on American data tools. With tons of domestic work in the pipeline, Palantir’s probably not going to care too much though!
• CHEAPER MEDICINES – the launch of the TrumpRx direct-to-consumer drug platform aims to cut costs and bypass intermediaries although actual savings depend heavily on price comparisons because some medicines may still be cheaper via traditional prescriptions.
• PREPARATION FOR THE MIDTERMS – Trump and chums have amassed a huge $429mn campaign war chest ahead of midterm elections, far exceeding Democratic resources and likely to be channelled toward loyal candidates. Major donations from tech and crypto figures underline the financial firepower gathering behind the coming political battle.

IN REGION/COUNTRY NEWS…

• MARKETS – Tech stocks had a bruising week with a fresh sell-off triggered by disappointing results from AMD, dragging the wider US sector lower. Arm’s CEO described the downturn as “micro-hysteria”, suggesting that confusion about AI’s real impact on coding and workplace tools is exaggerating the reaction rather than being a sign of lasting structural weakness.
• THE US – Trump signed legislation ending the partial US government shutdown so that most federal operations will get funding until the end of September. However, negotiations over Department of Homeland Security funding remain heated, particularly surrounding immigration enforcement.
• JAPAN – Trump publicly endorsed Japan’s prime minister Sanae Takaichi ahead of this weekend’s general election. Polls suggest that Takaichi will win.
• FRANCE – France’s prime minister survived a no-confidence vote and pushed through a long-delayed budget after months of compromise. Although France’s deficit is expected to fall from about 5.4% currently to 5%, it’s still well above the EU’s 3% target, now pushed out to 2029. Even so, simply getting parliamentary approval will buy Macron valuable political breathing space after repeated crises.
• THE UK – the Bank of England held interest rates unchanged at 3.75% despite weaker growth expectations. Governor Andrew Bailey signalled that inflation could fall to around 2% by spring whilst also hinting at potential future cuts.
• This week has been dominated, however, by the impact of the latest release of the Epstein files. PM Starmer faced a massive backlash his appointment of Lord Mandelson as US ambassador despite warnings linked to Epstein, fuelling leadership speculation and raising the risk of renewed UK economic uncertainty if a successor pursues heavier tax-and-spend policies. Although a lack of clear challengers offers temporary protection, markets have already reacted – sterling weakened against both the dollar and euro amid fears of higher borrowing and fading hopes of political calm before May’s regional elections. One rare positive came as Trump softened criticism of the UK’s Chagos Islands deal, easing a bit of tension.

IN COMMODITIES NEWS…

• OIL – Oil prices fell sharply as easing US-Iran tensions improved the diplomatic outlook, reducing immediate supply fears.
• PRECIOUS METALS – Gold and silver declined after last week’s rally, partly reflecting investor profit-taking and reassurance from the nomination of Fed chair Kevin Warsh, viewed as a steady, conservative choice. Price fluctuation has real-world consequences: London jewellers were flooded with second-hand metal as consumers cashed in, some even melting stock to cover costs. Also, Pandora is now thinking about shifting from silver toward platinum as wild price swings threaten sales, though such a move could raise prices significantly and illustrates how commodity volatility is rippling through businesses.

IN ENERGY…

• Europe’s gas storage has dropped to its lowest seasonal level since 2022, pushing prices to a ten-month high and increasing the likelihood of higher utility bills across the region.

CRYPTO NEWS…

• Bitcoin fell below $65,000, erasing more than a quarter of its value this year and wiping out the entire Trump-era surge from last year’s peak near $125,000.
• Crypto weakness has hit major bitcoin players like Strategy and Gemini in addition to Britain’s biggest bitcoin hoarder, The Smarter Web Company, while Tether has scaled back fundraising ambitions significantly after investor resistance.
• Meanwhile, it turns out that a senior UAE figure poured a whopping $500m into Trump-linked crypto assets, highlighting ongoing concerns about Trump’s lack of concern regarding conflicts of interest.

IN BUSINESS TRENDS…

• AD PRICES & SHIFTING MARKETING DYNAMICS – Super Bowl advertising slots have reached record highs, with some brands paying over $10m for 30 seconds as NBCUniversal said that hit had sold out earlier than usual. The TV advertising market has been strong in the last six months, with particularly strong demand from tech and pharmaceutical firm clients.
• ANTI-AMERICAN SENTIMENT RE BRANDS – American brands are losing their appeal internationally amid backlash linked to tariffs and political tensions. Surveys show widespread willingness across Europe to avoid US products while governments and organisations are experimenting with domestic alternatives to American technology. If consumers don’t buy, there’s not much politicians can do about it.
• CAR INDUSTRY PANIC AT THE CHINESE INFLUX – Warnings from suppliers highlight how a surge of cheap and technologically superior Chinese electric vehicles could wipe out Western suppliers and even entire industrial ecosystems if left unchecked. Europe appears especially vulnerable given strong consumer demand for cheaper EVs and rising Chinese market share, suggesting aggressive export pushes into the UK and EU are likely as Chinese domestic demand weakens.
• TRADE DISRUPTION & COST PRESSURES – Trump’s tariff uncertainty is already reshaping behaviour, with a notable share of British factories cutting or halting US exports and others reducing reliance on the market. At the same time, CIPS data points to rising consumer prices driven by higher shipping costs, although I’d argue that this clashes with expectations of shipping overcapacity, easing Middle East tensions and relatively weak oil prices.
• SIGNS OF UK RESILIENCE – UK manufacturing has shown surprising strength, with January delivering one of the best PMI readings since Labour took power! New export orders rose for the first time in four years and optimism hit pre-autumn-budget highs. Combined with stronger retail sales and unexpected GDP growth late last year, the data hints that economic conditions may be less gloomy than headlines suggest.
• CHANGING DRINKING HABITS – independent UK breweries are closing at the fastest rate in half a century thanks to tax pressures and shifting consumer behaviour, particularly the drop in alcohol consumption among younger people.
• CHANGING EATING HABITS – the surge in high-protein foods is reshaping product development across retail and consumer goods, allowing companies to charge big premiums and boosting demand for ingredients like whey, that used to be seen as an undesirable by-product of cheese production!

IN INVESTMENT NEWS/TRENDS…

• INVESTMENT FLOWS – data from global funds network Calastone showed that geopolitical tensions such as Greenland threats has driven continued outflows from UK equity funds, though the pace has moderated compared with pre-Budget selling.
• M&A – SpaceX bought xAI, creating a private company with the unprecedented valuation of $1.25tn. Musk wants to launch data centres in space, put factories on the moon and colonise Mars. The deal challenges traditional valuation logic and reinforces the idea that investors are effectively backing Musk’s vision of the future rather than current fundamentals.
• Devon Energy’s $21.5bn acquisition of Coterra signalled the continued consolidation in US shale.
• Zurich Insurance finally had its takeover bid for Beazley accepted.
• Rio Tinto and Glencore decided to abandon a potential mining mega-merger after failing to agree terms.
• IN FUNDING – AI voice firm ElevenLabs reached an $11bn valuation after a major fundraise, emphasising ongoing investor eagerness to throw money at AI.

IN EMPLOYMENT TRENDS…

• IN THE US – US job cuts climbed to their highest January level since 2009 while job openings fell to a five-year low and unemployment insurance claims spiked late in the month, all of which suggests a softening labour market and rising expectations of higher unemployment. This creates a potential policy dilemma for the Federal Reserve, which only last week said that it thought that the jobs market was stabilising and held rates steady. The publication of an all-important jobs report was postponed again due to delays caused by the government shutdown, meaning that the Fed is flying blind, to an extent.
• IN THE UK – London’s graduates are feeling the strain of a tough jobs market, London’s unemployment rate is the highest in the country at 7.2% but youth unemployment (of 16-to-24 year olds) is even worse – being close to 20% in the three months to September 2025! Competition for graduate roles has increased dramatically, with around 140 applicants per graduate role versus 38 two decades ago. Graduate hiring has never been easy, meaning success increasingly depends on clear self-assessment, targeted applications and avoiding scattergun approaches.
• The employment landscape in hospitality is also pretty grim with pubs and restaurants experiencing the longest run of job losses since the financial crisis, something that hasn’t been helped by the tax increases on employers.
• That being said, a survey by Incomes Data Research showed that most businesses anticipate stable or rising wages this year, largely reflecting inflation pressures. This is not especially encouraging, but nor is it disastrous.

IN CONSUMER TRENDS…

• IN THE US – affluent consumers continue to spend freely, boosting American Express through spending on dining out and shopping – reflected in strong demand for their premium cards, while lower-income households are becoming more cautious even about everyday essentials. Food and drink companies are already seeing weaker performances as a result of economic anxiety and weak sentiment. Figures from the Conference Board published last week showed that consumer confidence has fallen to a decade low and reflects persistent affordability pressures for middle and lower income groups.
• IN THE UK – restaurants have had to resort to heavy discounts to tempt increasingly cautious diners in January, squeezing already thin margins. Despite this, there are tentative signs that confidence among households and businesses may be improving. Given that consumer spending drives roughly 60% of GDP, falling interest rates, looser mortgage rules, easing inflation and gradually improving sentiment could support a recovery in 2026 – assuming no fresh shocks!

RETAIL NEWS

• Ikea is reshaping its China strategy by closing large stores and expanding into smaller city-centre locations and boosting its online channels.
• Tesco has overtaken Asda as Britain’s cheapest supermarket, adding pressure to Asda’s failing turnaround efforts and raising doubts about leadership stability if performance fails to improve.

IN REAL ESTATE…

• UK house prices rose by 1% in the year to January following a pre-Budget slowdown although it’s not clear yet whether this is a trend or a blip.
• Santander announced that it will offer a 98% mortgage for first-time buyers – but the conditions are very restrictive. Still, it’s an interesting move all the same!
• Rental demand has dropped to its lowest January level since 2019, according to Zoopla data, as buying becomes more attainable and immigration slows, hinting at early structural changes in the housing market, although it is still too soon to draw firm conclusions.

IN TECH NEWS…

• IN AI – the latest International AI Safety Report highlights rapid but uneven progress in AI capability alongside growing risks. Deepfakes are becoming more convincing and widespread, AI companions are increasing emotional dependence among users and safeguards are being introduced to prevent biological or chemical misuse.
• Markets reacted strongly to fears that AI could disrupt software, analytics and legal services after Anthropic launched productivity tools capable of automating legal work. Shares in major data-driven firms fell and UK-listed RELX dropped heavily, reflecting concern that disruption in law could spread to consulting and finance. However, the sell-off may be overly broad because large organisations typically adopt new technologies slowly due to legal, regulatory and security risks.
• In terms of spending, Google plans to double AI spending to $185bn while maintaining strong advertising and cloud revenues. Amazon also unsettled investors with plans for spending up to $200bn in AI infrastructure! No wonder investors are getting increasingly jumpy as Big Tech’s combined AI investment approaches an eye-watering $660bn. Such enormous expenditure will inevitably lead to increased pressure to deliver tangible returns.
• Anthropic launched its new Claude Opus 4.6 model, reinforcing its focus on enterprise customers.
• IN CHIPS – Nvidia’s AI chip sales to China are stuck in a bottleneck pending US approval showing just how geopolitical friction continues to affect semiconductor supply. AMD reported strong datacentre-driven sales but it still saw its shares sold off due to sector-wide AI bubble fears.
• IN SATELLITES – SpaceX’s move to block unauthorised Russian military use of Starlink highlights both the strategic importance of satellite infrastructure and the huge influence private tech leaders can wield in geopolitical conflicts.

IN MEDIA NEWS…

• Disney reported strong recent performance but warned that falling visitor numbers to US theme parks could hurt the outlook, a proper concern given that experiences generate most operating profit and depend heavily on travel demand.

IN SOCIAL MEDIA NEWS…

• Spain plans to ban social media access for under-16s, joining France and Australia in tightening protections for young users and pushing for stronger age verification. With the UK considering similar steps, momentum is clearly building toward stricter regulation of online platforms and their societal impact.

• IN THE UK – Chinese carmaker Chery is preparing to launch a fourth brand in the UK as part of a broader push to gain market share, with initial production in China but hopes of eventually engaging in manufacturing over here. Fellow Chinese EV group Leapmotor is also expanding rapidly with ambitions to become the next BYD although it is avoiding European production for now due to high energy and labour costs.
• The EV market in Britain is weakening, with January market share of new cars slipping below 21% – a level that is way short of government targets. Tesla’s sales have been particularly bad. High prices, uncertainty over a future pay-per-mile tax, possible delays to petrol and diesel phase-out deadlines and tighter household finances are all dampening demand.
• In the US, Ford’s January sales fell and EV production cuts continued after multibillion-dollar losses, highlighting both consumer affordability pressures and the difficulty of sustaining large EV investments when broader demand is weak.
• Insurance group Lemonade reckons that autonomous driving could eventually lower premiums significantly after analysing Tesla safety data, though widespread driverless adoption still appears many years away despite the hype.

IN LAW – Competition for elite legal talent remains fierce, illustrated by Paul Weiss poaching senior dealmakers amid strong global M&A activity. On the flipside, the company’s chair Brad Karp resigned because of his relationship with Epstein. In the UK, Justice Secretary David Lammy’s proposed plans to capture interest earned on client accounts could remove a major income source for property-focused firms, threatening jobs and even firm survival if implemented.

IN PHARMACEUTICALS – Novo Nordisk delivered strong recent sales but warned revenue could fall as competition intensifies in obesity treatments, making pricing more challenging despite potential support from its Wegovy pill.

My favourite video of the week was the beatboxer one! This guy is amazing!