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. You will need a FULL SUBSCRIPTION to be able to click through all the links which take you to the relevant articles.
MORE DRAMA WAS HAD ON THE MACRO FRONT THIS WEEK...
- It sounded like an agreement on the US-China trade spat was getting closer (Monday) but then it turned out that the US trade deficit was getting wider (Thursday) and I just read today that the US ambassador to China said that an agreement is not actually imminent, one of the main sticking points being how each party would enforce the terms of any deal
- China also revised its GDP growth forecasts down to a range of 6-6.5% (Wednesday) – its slowest annual GDP growth rate for almost thirty years – by targeting a range of 6-6.5%. With this in mind, the Chinese government announced a major stimulus package worth £227bn in higher spending and tax cuts whilst also saying that VAT would be lowered for the manufacturing sector to help it out of the rut it has found itself in. The bad news continued when the General Administration of Customs released data showing that exports had fallen by 20.7% in February versus the previous year after rising by 9.1% in January
THERE'S A BUMPY CHINESE ROAD FOR THE TECH AND CAR INDUSTRIES...
- The Chinese tech sector has been suffering of late (Tuesday) as previously red-hot start-ups are cutting costs as the wider economy slows down after years of seemingly-unlimited cash flows. Didi Chuxing (ride-sharing) has cut free snacks and gym membership, ByteDance (internet tech company operating various content platforms, also developer of TikTok) cut its new year bonuses and others are cutting staff, fruitbowls and other perks. It seems that internet user numbers have plateaued while competition has intensified, margins have shrunk and regulations have got tighter. More job cuts are expected
- There’s a real contrast between the winners and losers among car makers in the Chinese market (Tuesday). Losers include Ford (which was late to the China market and has suffered because of an aging model line-up) PSA Group (which owns the Peugeot and Citroen brands and is suffering from its mid-market position where customers are getting increasingly price-conscious) and Jaguar Land Rover (which has suffered from a dent in its reputation following a number of safety recalls and a build-up of inventory). Winners include Toyota (which has benefited from having a reputation for selling good quality, fuel efficient cars and consistently bringing new models to market), Mercedes, BMW and Audi (where wealthier customers have been more insulated from the economic slowdown)
THERE WERE SOME IMPORTANT DEVELOPMENTS IN THE PHARMACEUTICAL INDUSTRY...
- The US Federal Drug Administration (FDA) approved a new antidepressant (Thursday) – made by Johnson & Johnson, called esketamine and branded Spravato – to treat patients who have already tried at least two other antidepressant treatments. It had been given a “Breakthrough therapy” classification, which meant that it was fast-tracked through the approval process. It is the first new antidepressant to get approval since Prozac was released 30 years ago
- FDA chief Scott Gottlieb resigned (Wednesday) for personal reasons as head of America’s powerful Food and Drug Administration (FDA). This is a big deal because he has been instrumental in pushing some major initiatives during his tenure – including a proposed ban on menthol cigarettes, the speeding up of generic medicine approval and restriction in the use of flavoured e-cigarettes among teenagers (after having helped the growth of vaping in the first place). He’ll hand over the reins to someone else next month. The tobacco industry in particular will be keen to see whether his successor will carry on with his initiatives or concentrate on other things
THE RETAIL SECTOR CONTINUES TO BE A MIXED BAG...
- US e-tailing behemoth Amazon shook up the retail sector (Monday) when it announced that is planning to launch urban grocery stores that will stock beauty products (high margin) alongside food (lower margin). Initial details about these stores suggests that they will be smaller than many traditional supermarkets but bigger than many convenience stores, which could mean that they will be trampling on the turf of the likes of Kroger, Walmart and Target. At the moment, it’s not clear whether the new format will have the Amazon brand name, although it is expected to be distinct from Whole Foods Market, which it bought two years ago. Kroger shares fell (Friday) on news that its revenues and profits were hit by its investment in online operations, so it seems that the benefits are yet to filter through
- Back on the UK high street, though, Greggs’s fortunes were a bright spot (Friday) but otherwise things stayed gloomy with consumers tightening their collective belts (Tuesday) in the face of Brexit. There were more restaurant closures (Tuesday) and fashion retailers continued to grab the headlines with Ted Baker’s founder resigning (Tuesday), Superdry cutting staff at its Cheltenham HQ (Wednesday), Primark telling 200 staff to move to Dublin or face redundancy (Friday), Quiz’s profit warning (Friday) and LK Bennett calling in the administrators (Friday). Newsflow for department stores wasn’t exactly uplifting either as John Lewis cut the staff bonus pool to its lowest level in 65 years (Friday) and Sports Direct’s Mike Ashley continued to turn the screws on the ailing Debenhams (Friday) only days after Debenhams announced a profit warning (Wednesday).
My favourite “alternative” story of the week was good news for all those would-be ninjas out there in VR ninja dojo: battle as a shadow warrior at new virtual reality world in Tokyo (SoraNews24, Oona McGee https://tinyurl.com/y39g9xdv). Mind you, this gift idea was also pretty bizarre: McDonald’s cheeseburger scented candle has fans’ mouths watering and lasts ages (The Mirror, Zahra Mulroy https://tinyurl.com/y3vsrejn). I’m not a fan of this myself, but I’m sure there will be many who will disagree with me!
Have a fun weekend!