Watson’s Weekly 08-02-2025

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.

Trump and Musk continued to make waves this week!

ON THE INTERNATIONAL FRONT…

• TARIFF IMPACT – Trump’s threats to jack up taxes on Canadian, Mexican and Chinese imports boosted the dollar initially but then Trump relented on the tariffs with Mexico and Canada. Maybe Trump has turned to tariffs because sanctions haven’t worked but he’s probably sowing the seeds of an anti-American movement where countries will be more inclined to partner up with each other to wean themselves off reliance on the US because it is now becoming a liability. Xi Jinping must be loving all this because China could well present itself as an alternative partner.  Tariffs could force the Fed to delay interest rate cuts, deepen Chinese inflation, limit growth across Europe and indirectly hit the UK by dampening global trading volumes and raising borrowing costs.
• TARIFF REACTIONS – the US Chamber of Commerce said that the tariffs “will only raise prices for American families”, a patriotic “Buy Canada” campaign launched in response to Trump’s threats (Starlink’s £55m contract with Ontario was ripped up!)and while markets braced for impact on his initial threats, there was a relief rally after Trump gave Canada and Mexico another month before the tariffs come into force. The Chinese government responded by unveiling its own retaliatory tariffs and opened an anti-trust investigation of Google, China’s exporters stepped up offshoring and the UK got ready to retaliate if it came under fire.
• GAZA STRIP “TAKEOVER” – Trump suggested a “take over” of the Gaza Strip and force 2.2m Palestinians to leave the enclave permanently to resettle in countries such as Egypt and Jordan but the world condemned the suggestion, which made Trump make marginally more conciliatory noises.
• ENDING THE UKRAINE WAR – Trump offered continued military support for Ukraine in exchange for access to rare earths, because they are essential ingredients for a number of everyday and high tech products.

ON THE DOMESTIC FRONT…

• DE MINIMIS SHUTDOWN – Trump decided to shut down the “de minimis” loophole which allows shipments under $800 to avoid taxes, something that’s likely to hit the likes of Shein and Temu in particular.
• CLOSING THE PRIVATE EQUITY LOOPHOLE – Trump is looking to close the tax loophole on private equity and hedge fund profits, something that’s been hotly debated for the last two decades. Both Biden and Trump have tried and failed to close this loophole in the past.
• DOGE SHENANIGANS – Musk’s Department Of Government Efficiency (“DOGE”) got given access to the Treasury system and said it would cancel trillions of dollars worth of grants every year. Musk gleefully said that he would put USAID “into the wood chipper”, but DOGE was then barred from accessing US Treasury payments data (although this may only be temporary).

IN EUROPE…

• The EU is looking to change its own “de minimis” rule and tighten current restrictions that allow parcels worth under £125 exemption from customs duties. The UK was urged to do the same.

IN THE UK…

• Starmer went to the European Council of EU Leaders at the beginning of the week in Brussels as part of process of re-engagement with Europe. He was pushed to “choose” between closer relations with Brussels or Washington, but he didn’t commit – although he did talk about a security and defence pact.
• Back home, the OBR slashed its GDP growth forecasts for the UK to take into account the shock caused by Reeves’s Budget, the Bank of England cut interest rates and the FTSE100 hit a new high as a result.

IN OIL NEWS…

• Vitol, the world’s biggest independent energy trader, said that global demand for oil won’t drop until at least 2040! This stands in stark contrast to what the IEA is saying – it reckons “peak oil” will be reached in 2029.
• Shell’s boss questioned Reeves’s opinion of sustainable aviation fuel (SAF) being a “game-changer”, saying that it is hardly used at the moment (in the scheme of things) and costs way more than traditional fuel, so isn’t really all that practical.

IN ENERGY NEWS…

• According to some satellite photos, it looks like China could be making big advances in nuclear fusion because it seems to have built a massive laser nuclear fusion research centre. If this is the case, it looks like it’s 50% bigger than its US equivalent!
• The world’s biggest offshore wind developer, Ørsted, announced that it would cut its planned investments in renewable energy to 2030 by a chunky 25%, less than a week after it replaced its CEO.
• Back home, PM Starmer pledged to amend the planning system to accelerate the delivery of new nuclear power stations in England and Wales.

IN BUSINESS TRENDS…

• India is looking forward to a bumper year for IPOs despite slowing economic growth. Last year was a big one for listings and it looks like retail investors will power 2025 as well despite many international investors getting cold feet (because of fat valuations).
• Green investments from oil companies continue to get hit as Norwegian oil firm Equinor is pushing for the opening of a massive new oilfield, called Rosebank, off Shetland whilst also halving its investments in low-carbon energy.

IN EMPLOYMENT TRENDS…

• The latest S&P Global PMI survey highlighted Britain’s biggest fall in employment – apart from the pandemic shock – since the financial crisis. Reeves’s Budget continues to hit sentiment and recruitment but some economists have suggested that the PMI could be overstating the scale of the job cuts as the survey tends to be more sensitive to business sentiment.

IN AI NEWS…

• Last week was clearly a big one for DeepSeek! However, other Chinese AI companies that could also have a big impact include Alibaba Cloud, Zhipu, MoonshotAI, ByteDance and Tencent.
• OpenAI launched a new “deep research” tool that find, analyse and synthesise vast amounts of online resources to create a “comprehensive report”. It will become available as a button in ChatGPT. It will be available in the US for users of its “pro” tier (this costs $200 a month) and is not available in the UK and Europe.
• Anthropic made a major “jailbreak” advance which prevents users from obtaining harmful content from its models. It acts as a protective layer on the top of LLMs capable of monitoring both inputs and outputs for harmful content.

IN TECH SOFTWARE NEWS…

• Alphabet’s shares took a hit as Google’s cloud business fell short of expectations. Meanwhile Google has gone back on its pledge not to make weapons using AI and is now of the opinion that free countries should be able to use the tech for national security.
• Microsoft poached three former DeepMind staff who had been working on NotebookLLM’s podcast-generating feature. I suspect that we’ll see lots of poaching going as companies look to make monetisable apps.
• Data analytics company Palantir shares boomed on a positive outlook and potential under Trump’s administration that is cracking down on costs – because it needs data to make its decisions. Palantir supplies software to governments and companies to collect, analyse and interpret big data sets.

IN TECH HARDWARE NEWS…

• Qualcomm and Arm got a boost in quarterly sales thanks to improving smartphone demand. Despite this success, the share prices of both companies fell, but their respective share prices have been strong over the last year and this presented a high note on which to take at least some profits off the table.
• Sonos announced that it would be cutting headcount by 12% as it aims to improve its core experience and deliver new products. It is expected that the impact of this will be biggest in its Q2 earnings

IN MEDIA NEWS…

• Disney posted quarterly results that beat market expectations thanks to a strong performance by its Disney Entertainment division, which includes film, TV and streaming.
• Spotify announced its first annual profit thanks to a surge in premium subscriber numbers. This is its first annual profit after 16 years in existence!

• Tesla sales have fallen across Europe, perhaps in reaction to Musk’s increasingly erratic political rants.
• Ferrari announced a big rise in quarterly profits as well as plans to unveil its first EV in October. Its profits were pumped up by customers spending a ton of money on personalisation options!
• VW said that it will launch a €20,000 EV to take on the Chinese (called the ID.1), but it isn’t going to go into production until 2027 so perhaps too little, too late??
• It looked increasingly likely this week that the proposed $58bn merger of Honda and Nissan was going to collapse. Honda proposed that Nissan should be turned into a fully-owned subsidiary, something that Nissan is unlikely to agree to.
• Porsche announced that it would expand its model line-up but also said that its going to be spending a lot of money on vehicle development and battery operations.
• Car dealership Vertu said that it expected more discounting of EVs to continue in 2025 as manufacturers battle to hit stricter EV sales targets, in line with the Zero Emission Vehicle (ZEV) mandate.

IN ONLINE RETAILER NEWS…

• Amazon’s sales outlook fell short of expectations and it announced plans to ramp up AI infrastructure spending. Revenues from its cloud division were decent by as strong as the market had been expecting (this seems to be a recurring theme at the moment, doesn’t it!).
• Temu looks likely to weather the “de minimis” thing because its prices are still so much lower than everyone else – but it’s also been preparing for turbulence in the US market by diversifying operations into other countries.
• Two major credit insurers have reinstated cover for Asos clothing suppliers, reflecting renewed confidence in Asos’s financial stability. This is welcome news for the e-tailer which had cover withdrawn in 2023, due to the lack of faith in Asos’s financials.

IN OTHER RETAILER NEWS…

• M&S’s fashion boss, Richard Price, has stepped down. This is tricky because he’s the one who’s had a lot to do with the retailer’s high profile turnaround. He’s being replaced with the former CEO of Boohoo who’s had, let’s face it, a chequered career. Let’s hope he doesn’t muck it all up.

IN CONSUMER GOODS NEWS…

• Diageo scrapped its mid-term guidance thanks to uncertainty about the impact of new tariffs and ongoing weakness in the spirits market.
• Pernod Ricard lowered its guidance thanks to a weaker outlook in China and uncertainty over US tariffs. This comes hot on the heels of Diageo announcing the ditching of its mid-term sales targets thanks to tariff-related economic uncertainty.
• Barbie maker Mattel is considering raising its prices given the likely disruption to its business coming from incoming tariffs in Mexico and China.
• Estée Lauder doubled planned job cuts as ongoing China weakness forced their hand. Their Q2 numbers were disappointing and the outlook was downbeat.

• AstraZeneca reported a chunky revenue rise and it sounded positive about its China operations. Its full-year results were good and it sounded positive about its prospects for this year.
• GSK saw enough growth in HIV, oncology and specialty medicines to give it enough confidence to upgrade its long-term sales outlook.
• Novo Nordisk sounded confident despite the potential impact of Trump’s tariffs, safe in the knowledge that its Wegovy weight-loss drug sales had almost doubled!
• Eli Lilly was upbeat about its prospects for the year following two difficult quarters. Demand for its diabetes and weight-loss treatments Mounjaro and Zepbound are driving the optimism!

• IN FINANCIALS – Citigroup committed to hybrid working, going against the Wall Street “return-to-office” trend. It is sticking with the current model where most employees are allowed to work remotely for two days a week. Vanguard announced that it would be cutting fees, putting pressure on its rivals!
• Serco won a big recruitment contract for UK armed forces worth up to £1.5bn over the course of seven years, the first time that hiring for all of the forces will be under the control of one privatised service. It looks like Serco has whipped the contract from under the nose of Capita, which currently has it.
• Crest Nicholson reported a big loss for the year as its problems continue. It warned investors yesterday that it is getting close to breaching banking covenants unless things don’t improve in the coming months.

My fave video this week was the puppy reaction! It’s a magical moment for sure!