Watson’s Weekly 08-03-2025

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.

This week was another emotional rollercoaster of war, tariffs – and now crypto…

IN SOME OF THE MAIN THEMES OF THE WEEK…

• ON UKRAINE – there was initial talk of a one-month truce, Trump continued to insult Zelenskyy and followed that up with suspending military aid. Zelenskyy said that Ukraine was ready to talk peace but then the US cut off intelligence sharing with them. European countries are looking at seizing frozen Russian assets and putting it towards defence spending and showed Zelenskyy a lot more support than the Americans did. Starmer’s diplomacy won plaudits at home and he continued with efforts to unify Europeans in a “coalition of the willing”.
• ON GAZA – Israel halted aid to Gaza and Trump said “I am sending Israel everything it needs to finish the job…This is your last warning” while Arab states endorsed an alternative post-war Gaza plan that didn’t involve kicking all Palestinians out of Gaza.
• ON TARIFFS – Trump started the week threatening to impose 25% tariffs on Mexico and Canada but then backtracked on them later in the week, giving them a one-month reprieve. Trump also gave carmakers a month’s extension on the tariffs, which is just as well given how complicated the tariffs will make things for carmakers. In doing all this, Trump will be lifting border taxes to their highest level since 1943 and US stocks fell as investors wavered. China reacted angrily to Trump’s new tariffs and the Bank of England’s governor warned that the UK could also suffer flack even though it looks like we might not be affected by them directly.
• ON DOGE – the administration started to amend recent layoffs in government departments and Trump himself got involved in holding back DOGE’s zealous wielding of the axe. DOGE’s next target could be management consultants as all federal agencies have been asked to list and justify existing consultancy contracts from ten companies by the end of the week!

IN REGIONAL/COUNTRY NEWS…

• IN THE US – Trump addressed Congress, boasted about his actions thus far and said that he was “just getting started”. He’s all about the optics of his actions and many supporters believe that “Trump is kicking ass” because “he’s actually doing what he promised he was going to do”. His approval ratings have only suffered slightly despite all his recent dramatic actions but US stocks have erased all of their post-election gains though. He pressured BlackRock to buy a 90% stake in two major ports on the Panama Canal, as part of a consortium, from current Hong Kong-based owner CK Hutchison. He did this because he believes that China has too much influence in the region. Meanwhile, Trump pulled the US out of the $45bn Just Energy Transition Partnership (JETP) global climate finance coalition launched in 2021 to help South Africa, Indonesia and Vietnam to wean themselves off fossil fuels and use more renewable energy.
• IN CHINA – the country is sticking with a 5% GDP growth target for the full year, a target set last year and apparently achieved (although many say that this was a bit dodgy given all the other indicators).
• IN EUROPE – Germany’s new chancellor-in-waiting Friedrich Merz made a historic move to relax the country’s strict borrowing rules that will allow it to fund its armed forces and give military assistance to Ukraine. Its borrowing costs will rise sharply as a consequence but the extra money will allow Germany to invest in crucial infrastructure while defence spending could rise from 2.1% of GDP in 2024 to 3.5% of GDP in 2027, which is significant given the size of Germany’s economy. Meanwhile, the ECB cut rates by 0.25 percentage points to 2.5% as inflation seems to be calming down (for now!). The bank did also cut its growth forecasts for this year though.
• IN THE UK – the overall gloomy mood continued as Reeves warned that the trade war could still harm the UK economy, the BCC downgraded its latest economic forecasts and official data showed that the UK is already falling behind on government targets to build homes.

IN COMMODITIES NEWS…

• IN OIL – oil prices fell to their lowest levels for three years after OPEC+ decided to increase production from April. Saudi Aramco is suffering from weaker oil prices and BP cut its CEO’s pay after the company missed its profit targets.
• IN GAS – Gas prices rose after hopes of a Ukraine peace deal were dashed and it was interesting to hear rumours about the potential restart of the Nord Stream 2 gas pipeline to Europe with the backing of US investors, something that would previously have been unthinkable until recently.

IN ENERGY…

• Europe’s biggest battery storage project went live in Scotland. Zenobe’s site at Blackhillock, between Inverness and Aberdeen, will absorb any surplus wind power to supply 200 megawatts of electricity, to be expanded to 300 megawatts by next year. That would mean it could power every home in Scotland! How brilliant is that!

IN CRYPTO…

• Cryptocurrencies got a boost as Trump unveiled a “crypto reserve”. XRP, cardano, solana, bitcoin and ethereum all strengthened on the news. Some say that if Trump used the stock market as a gauge of his popularity in his first stint at the presidency, he may use bitcoin as the gauge this time around.

IN BUSINESS TRENDS…

• European defence stocks boomed as arms makers expect orders to rise, and although the companies themselves say that they can step up into the void left by the US, America’s shift has highlighted gaps in our capabilities that need to be filled. Given the strong dollar and American corporate hunger, it was interesting to hear Starmer say that he wants to shield UK defence firms from takeover.
• Global vineyard values have fallen as consumers (especially younger ones) seem to be drinking less wine than they used to. In a shocking statistic from Nielsen, French Gen Zs consume about 50% as much wine per capita as older Millennials!

IN EMPLOYMENT TRENDS…

• The government continued with plans to increase workers’ rights in areas including unfair dismissal, zero-hours contracts and sick pay. This is great for employees but not so great for employers who will be more restricted and face more powerful unions. Although things aren’t too bad now, I’d argue that increased restrictions will amplify an economic downturn.
• UK businesses are continuing to cut jobs thanks to momentum slowing down, but it is interesting to note that the PMI survey only asks whether companies are cutting output or employment – not by how much. This means that observers could be overestimating the scale of a slowdown…

IN CONSUMER TRENDS…

• US consumers are a bit nonplussed about Trump’s actions on making America “affordable again”. They are delaying home improvement projects and just reining things in generally. Consumer spending accounts for over two thirds of US economic activity – and it dropped unexpectedly in January, the first fall since March 2023.
• UK consumer spending is weakening, according to the CBI but the latest BRC figures show that shop price inflation has been falling (which should be a boon for consumers). Having said that, food price inflation hit a five-month high. Elsewhere, Zoopla data shows that UK rental prices increased at their slowest annualised rate since July 2021 thanks to tenant demand calming down.

IN RETAIL NEWS…

• IN APPAREL – Prada edged closer to buying Versace for around €1.5bn but momentum for Deckers Brands (which owns the Hoka, Ugg and Teva brands), and other star-performers such as On and Birkenstock, appears to be slowing down in share price terms. This may be due to investors worrying about the impact of tariffs (a lot of footwear sold in the US is made in China, for instance) although underlying demand remains solid. Gap managed to beat market expectations as its rehabilitation continues…
• Asda was the only supermarket to see lower sales in February, as the misery following its worst Christmas since 2015 continues.
• ON THE HIGH STREET – Games Workshop posted results that came in ahead of expectations in its latest trading update and PE firm Sycamore Partners announced a deal to take Walgreens private, which I’d suggest doesn’t bode well for Boots in the UK (Walgreens owns it). Pepco Group put Poundland up for sale as part of Pepco’s drive to move away from FMCG and into higher margin clothing and general merchandise.

IN CONSUMER GOODS…

• Adidas lowered its profit forecasts for the year after a strong 2024. It remains cautiously optimistic about its prospects but obviously there’s the shadow of tariffs hanging over it.

IN LEISURE NEWS…

• China’s Mixue (a bubble tea chain) became the world’s biggest food and beverage chain by number of locations! It has outlets across Asia and Australia and has more than doubled the number of its locations to 45,000 stores in just three years.
• Greggs posted its worst sales growth since the pandemic as it seems that shoppers are cutting down on snacks.
• Flutter said it was bullish about its prospects in the US as it reckons it will triple its profits this year in the states in which it operates. This certainly justifies its decision to switch its primary listing from London to New York last year!

IN CHIPS NEWS…

• TSMC announced that it would spend at least $100bn over four years on the construction of five cutting-edge chip manufacturing facilities in the US but Taiwan’s government was keen to say that the most advanced tech will remain in Taiwan, the idea being that keeping it there ensures US commitment to defend it.

IN AI NEWS…

• There’s an increasing trend of AI companies using the “distillation” process that was used to such devastating effect by DeepSeek and even the likes of OpenAI, Microsoft and Meta are looking closely at it.
• Anthropic’s valuation tripled at its latest funding round just one week after it unveiled its latest SI model, Claude 3.7 Sonnet. The money will be used to develop new models and fund expansion into Asia and Europe.
• A US Federal Court blocked Musk’s request for an injunction to pause OpenAI’s transition to a for-profit company. The drama continues…

IN OTHER TECH NEWS…

• Eutelsat, the owner of OneWeb, is currently in talks with European governments about providing additional connectivity via satellite to Ukraine. The prospect of Musk switching off internet access via its Starlink satellites is clearly sharpening minds…
• Discord is in early stage talks with banks about an IPO.
• ITV’s share price boomed thanks to it announcing a more than doubling of profits. This has been courtesy of great results at its TV production division and cost-cutting.
• Microsoft announced that it will be shutting Skype down 14 years after it bought it for $8.5bn. I guess its days were numbered after the advent of Teams!

• EC president Ursula von der Leyen announced that European car makers will be given an extra two years to hit this year’s pollution target as part of a wider retreat on green deal climate policies. This will take some of the pressure off…
• BYD raised $5.6bn via a share placement on the Hong Kong stock exchange. It will use the money to boost its R&D and accelerate overseas expansion. This also signifies a revival for the Hong Kong exchange itself as this was its biggest deal for four years!

• The housing minister has promised to abolish the ancient leasehold system in England and Wales and make it easier for homeowners to jointly own the buildings that they live in. This has been in the offing for some time, so it’ll be good to see whether anything actually comes of this.

My fave video this week was undoubtedly the one with the cunning cat! Superb 😂!