Watson’s Weekly 07-12-2024

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.

Both France and South Korea saw huge political turmoil and Trump took credit for bitcoin breaching $100,000 while Equinor and Shell merged their UK oil and gas assets…

• IN FRANCE – PM Barnier lost a no-confidence vote over his Budget measures and then resigned, but will stay on in his post until a successor is found.
• IN GERMANY – the imminent wave of industrial job cuts is going to hang over the upcoming election as steelmaker Thyssenkrupp is cutting 11,000 jobs, Bosch is cutting 3,800, Shaeffler 2,800 and Ford is shedding 2,900. There is a very real possibility that a disgruntled electorate could eschew the main parties and vote for the AfD (far right) or BSW (far left), which could potentially divide the EU.
• IN SOUTH KOREA – president Yoon Suk Yeol tried to impose martial law, but then had to call for the military to stand down while the government stood ready to stabilise the markets.
• IN AUSTRALIA – weaker-than-expected GDP growth numbers were published for Q3, which means that an early interest rate cut is more likely – and this sent the Aussie dollar down versus the US dollar (because a lower interest rate makes it less attractive for speculators).
• IN THE UK – the OECD raised UK GDP growth forecasts for next year, making us one of the best-performing economies of the G7 while PM Starmer announced six milestones that he wanted his government to be judged by and the Bank of England complained about the ongoing problems with having unreliable unemployment data. In the meantime, Berenberg analysts reckoned that the recent NICs rise could actually lead to 150,000 job losses rather than the 50,000 estimated by the OBR.

IN MARKETS NEWS…

• IN THE UK – the regulator made positive noises about Shein, so it looks like it’s smoothing the way for that bumper IPO in Q1 next year and UK dealmaking continues to gather pace. The value of M&A involving UK companies has hit $306.3bn so far this year – a 57% increase versus the same period last year! This is way more than the value of deals that have been done since the beginning of the year in Europe. British caterer Compass has said that it is on the prowl for deals in Europe despite already having spent a total of $1.7bn on acquisitions in the region over the past year.
• IN THE US – investors have poured $140m into US stock funds after the Trump election victory as they are betting that he’s going to boost US stocks by unleashing a boatload of reforms and tax cuts. The monthly inflow for November saw the biggest influx since records began in 2000!

IN COMMODITIES NEWS…

• Equinor and Shell decided to merge their UK oil and gas assets. Some say this is to get synergies, others say that it’s a precursor to selling out.
• Cocoa prices have jumped hugely due to bad harvests and the recent respite is unlikely to last long thanks to structural challenges. This could obviously have an effect on inflation ultimately as higher-for-longer prices will no doubt be passed on to customers.

IN CRYPTO NEWS…

• Bitcoin hit $100,000, a more than 50% increase since Trump won the election in November! A more pro-crypto candidate is likely to be the next leader of the SEC, so investor hopes are high.
• Other crypto assets like MOO DENG, PNUT and CHILLGUY have benefited from the bitcoin boom as speculators increasingly bet on a Trump administration being more crypto-friendly.

IN BUSINESS & TRADE TRENDS…

• The latest monthly Lloyds Bank Business Barometer shows that although companies are concerned about the overall state of the UK economy, they are actually more positive about their own trading prospects!
• China’s ties with Saudi Arabia have been buoyed by the kingdom’s increasing demand for green tech. This is interesting because bilateral trade has been almost exclusively China buying Saudi oil until now.
• China continues to fight back against US sanctions and this time it’s banned the export of several minerals and metals used in chip manufacturing and military applications to the US in its latest push-back of sanctions coming the other way. This move came after the US imposed more export controls to slow down China’s ability to develop AI for its military.

IN ENERGY NEWS…

• EDF has decided to extend the life of four ageing nuclear power plants by more than a decade over their planned lifespan to plug the gap caused by Hinkley Point delays.

IN BATTERIES…

• The troubled European battery maker Northvolt looks like it’ll struggle to find a buyer given that carmakers are having their own problems to deal with and existing battery makers are now facing overcapacity, so they’re not likely to be interested in buying.

WITH REGARD TO CAR SALES…

• The UK government is considering various options at the moment for easing the transition to electrification, including reducing the financial penalties for carmakers not hitting targets and introducing cheaper loans to help encourage people to buy EVs. Meanwhile, EV brands are offering big discounts to shift EVs and hit targets at the same time as rationing the sale of petrol-powered cars.

IN NEWS ON INDIVIDUAL CAR COMPANIES…

• Stellantis’s CEO, Carlos Tavares, “resigned” abruptly. No reasons were given and the company’s share price slid, meaning that it’s now down 60% versus the record high in March.
• GM took a $5bn hit on its China business which will involve shutting plants down and offering a more limited vehicle line-up. It also decided to offload its stake in a Michigan EV battery plant to its Korean partner, LG Energy Solution, in another example of a big automobile company reining things in on the EV front.
• Jaguar released its new EV, which split opinion. I think it looks like a car that would be driven by a pimp but maybe my mind will change at some point! At least it’s daring to be different!
• Tesla sales fell in China while those of Chinese rival BYD boomed over November. Will BYD just pull away in the China market??

IN RETAIL NEWS…

• IN THE US – Americans decided to shop Black Friday online as stats showed that sales were up on Friday. Online sales hit new highs while store footfall was lower. Apparel retailer American Eagle saw its shares dive as it cut its outlook due to consumers reining in spending on non-essential items while Calvin Klein’s owner, PVH, also announced a downbeat forecast.
• IN THE UK – the latest BRC report said that retail spending was falling. In terms of individual retail news, M&S said it would return to the Spanish market 23 years after it withdrew – and it also got its way to knock down and rebuild its flagship Marble Arch store, thanks to getting approval from housing secretary Angela Rayner. Games Workshop gained entry to the FTSE100 while Frasers Group dropped out, with the latter adding to the gloom by issuing a profit warning.

IN LEISURE…

• Claridge’s owner, Maybourne, said that it’s planning to increase the number of hotels it owns as it surfs the luxury travel boom.
• On The Beach had a great year and reinstated the dividend as a result. It currently has high hopes for next summer!

IN AI NEWS…

• Musk announced plans to expand xAI’s Colossus AI supercomputer tenfold in order to close the gap and edge ahead of more established rivals including Google, OpenAI and Anthropic.
• OpenAI said that it wants to get 1bn users in its next phase of growth. It aims to get there by releasing new AI products, building its own data centres and partnering with Apple. It’s also looking at monetisation via potentially putting advertising on ChatGPT.

IN CHIP NEWS…

• Intel’s boss “stepped down” as his turnaround strategy has failed to deliver and the giant potentially faces the prospect of being broken up. Qualcomm has already expressed an interest in buying all or part of Intel.
• China continues to wean itself off foreign chips as four government-backed industry associations which represent the majority of China’s chip demand have made a concerted effort this week to urge member companies to rethink American purchases that they describe as “no longer safe or reliable”.

IN MEDIA NEWS…

• Disney hiked its dividend by a chunky 33%, having had a successful year. Last month, it announced that its streaming business and studio gained momentum over the latest quarter while its cable business and theme parks lost momentum.

IT SEEMS THAT M&A ACTIVITY CONTINUES TO GAIN MOMENTUM…

• Thames Water has received bids from Covalis Capital, which could include the involvement of France’s Suez. At the moment, the thinking behind this bid would be to sell off some of Thames Water’s assets and then do an IPO for the remaining business.
• The Vodafone/Three merger got approval from the CMA after both parties agreed to investing £11bn in upgrading the enlarged group’s network. The merger is expected to complete in H1 next year.
• Aviva raised its offer for Direct Line from the original 250p per share to 261p per share. No comment from either side so far…

• IN REAL ESTATE – UK house prices have boomed at their fastest pace in two years, according to the latest Nationwide house price index but London’s market seems to be going sideways if you take a long term view. This relative sluggishness has been due to the effect of higher interest rates, the reduced attraction of buying for investment and property prices still being too high for many first-time buyers.
• Airbus is axing about 500 jobs in the UK as it has decided to shrink its space division which just can’t compete with SpaceX.
• BlackRock, the world’s biggest money manager, has decided to go even deeper into private credit by purchasing investment firm HPS for $12bn. HPS is a major player in private credit, a massive growth area in finance particularly over the last few years.

My favourite “AND FINALLY” video this week was, of course, the original carrot-in-a-box game although here’s a follow-up to it as well 👍