Watson’s Weekly 08-04-2023

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 was a week where OPEC+ cut production, Parisians rejected e-scooters and China turned the screws on rare earths…

• IN GLOBAL NEWS – the IMF said that the global economy was on track for its weakest growth since 1990 thanks to the ongoing repercussions of Covid and the Ukraine war. It went further to say that it expected an annual GDP growth rate of 3% for the next five years as a result.
• IN CHINA NEWS – when China and Japan’s respective foreign ministers met this week, China urged Japan not to go through with imposing big curbs on the exports of semiconductor manufacturing equipment despite Japan unveiling restrictions last Friday on the export of 23 types of tech pursuant to a deal struck with the US and the Netherlands. China also announced that it was launching a review of imports of US chipmaker Micron Technology imports, citing “national security” grounds. China is also retaliating against US sanctions in more subtle ways – like its anti-trust regulator (the State Administration for Market Regulation) delaying the approval of M&A deals of US companies. Even if deals eventually go ahead, the delays can cost the companies involved a lot of money.
• IN UK NEWS – Economists are debating the BoE’s next interest rate move as you have the Bank’s economist hinting that there may be another interest rate rise next month while a member of the MPC reckons that they need to be cut “earlier and faster”. Meanwhile, it seems that business confidence appears to be improving, which is good to hear especially as many were predicting dire things for our economy last year.

IN COMMODITIES NEWS…

• IN OIL NEWS – OPEC+ made a surprise announcement about cutting oil production which immediately boosted the price sending a message to the Americans that they won’t necessarily comply with their requests. While Putin continues to push Russian oil exports to new highs, Shell is in line to get $1.2bn for the sale of its Russian business.
• IN COPPER NEWS – Glencore launched a massive $22bn bid for rival copper miner Teck Resources. If it goes ahead it will be Glencore’s biggest acquisition since it bought Xstrata in 2013.

IN CRYPTO NEWS…

• Crypto exchange Binance has had its Australian financial services licence cancelled by the Australian Securities and Investments Commission (ASIC) for incorrectly classifying a large number of retail customers as wholesale investors. Another slap for Binance…

IN BUSINESS TRENDS NEWS…

• Brands continued to raise ad spending on TikTok despite the threat of a US ban.
• UK retailers are hoping for a big spending Easter weekend, particularly as spending on weekends is trending up as more people return to offices during the week.
• Parisians voted to ban e-scooters by a massive margin, which will be bad news for suppliers Lime, Dott and Tier.
• Italy voted to reject lab-grown meat and animal feed.

IN EMPLOYMENT TRENDS NEWS…

• IN THE US – US job vacancy numbers fell to their lowest level in almost two years, in the latest release from the US Department of Labor’s Job Openings and Labor Turnover Survey, in a potential sign that the jobs market is cooling down. This trend was echoed by the ADP National Employment report, which showed that private sector employers took on fewer new employees than expected last month.
• IN THE UK – more firms have been offering “early finish Fridays” as a perk to attract more Gen-Z candidates as the jobs market remains tight. That said, recruiter Robert Walters announced a disappointing Q1 as it blamed tech layoffs for the weakness.

IN CONSUMER TRENDS NEWS…

• Tui reported strong demand for both Easter and summer bookings, with momentum building since the beginning of this year.

IN BANK-RELATED NEWS…

• BlackRock got called in by the US Federal Deposit Insurance Corporation to manage $114bn-worth of asset disposals after the failures of SVB and Signature Bank last month. This means that there will be a more orderly sale of the assets rather than the FDIC dumping them on the market all at once.
• HSBC faced pressure from Hong Kong investors who said that it was pandering too much to the UK government by buying SVB for £1 but HSBC argued that it was a unique opportunity at an unbelievably low price.
• Switzerland’s Federal Prosecutor has started an investigation into UBS’s takeover of Credit Suisse. It had to really, given that 75% of Swiss citizens are opposed to the merger and that so many investors were incensed by it all. Investors sold down holdings in both banks, Credit Suisse investors vented their anger with bosses at the bank’s last ever meeting and the Swiss government decided to cut bonuses of the senior bods at Credit Suisse. It wasn’t a nightmare for everyone, though – hedge funds made $7bn betting against banks in the whole turmoil!

IN FUND MANAGER AND BROKER-RELATED NEWS…

• Vanguard is looking to exit its China joint venture with Ant Group as its passive fund philosophy hasn’t gained much traction with local investors.
• Rathbones announced it was tying up with Investec to create a £100bn wealth manager in an all-share deal.
• Numis and Peel Hunt both said that they were pretty gloomy about the deal pipeline, which is one of the main reasons why smaller rivals Cenkos and FinnCap got together recently.

IN OTHER FINANCIALS NEWS…

• VC funding for start-ups has halved in the tech downturn, according to data provider Crunchbase. Valuations of many of the companies in their portfolios have taken a pasting, so VCs have been less free with doling out the cash.
• The FCA and Advertising Standards Authority have launched a campaign to warn influencers of the risks of promoting NFTs and cryptocurrencies. As I’ve said in the past, once celebs (e.g. Ronaldo, any of the Kardashians etc.🤣) get involved, it’s usually a sign that you’re at the top of the market and it’s worth getting out…

IN BATTERY-RELATED NEWS…

• China is threatening to ban exports of the tech needed to process and magnetise “rare earth” materials that are commonly used in EV batteries. This is no doubt another example of China retaliating against US sanctions.
• Lithium shortages are causing increasing concern given China’s dominance in its supply and processing (it controls 44% of the existing supply of battery-grade lithium and 60% of the world’s lithium processing).
• CATL faces concerns from both the US and China as the US is worried about its car manufacturers relying too much on its batteries whereas China is concerned about CATL having too many US customers, which may prove problematic if US-China relationships deteriorate further.
• Tesla is about to see a major ramp-up in battery production when its Nevada plant comes online
• Stellantis and BMW are holding talks with Panasonic to build EV battery plants in the US.
• Meanwhile, JCB’s chief is now pushing the government to re-think its stand on the net zero timetable for new cars (2030) to make it the same as the Europeans (2035), consider e-fuels and put more effort into developing hydrogen-powered vehicles.

IN EV NEWS…

• Tesla announced a rise in the number of vehicle deliveries, something that was helped by its recent price cuts.
• Ram’s new pickup truck is looking to achieve a 500 mile range when it goes on sale late on next year.
• EV sales are hitting record levels in the UK, to the extent that there are concerns about whether the charging network is going to be able to cope.

…AND MORE GENERALLY…

• US car sales are rebounding from their lows as supply bottlenecks ease, with the likes of GM, Hyundai, Nissan and Honda all putting in strong performances recently and UBS reckons there will be a car price war because it thinks that global car production will exceed sales this year.

IN AI NEWS…

• Universities expressed unease with AI detection as plagiarism detection software Turnitin announced a new tool that claimed to be able to detect the use of AI with a 98% success rate. Some education establishments already decided to opt out of the new service.
• An Australian mayor threatened to sue ChatGPT’s creator OpenAI after it incorrectly said he’d done time for bribery when he had in fact been the whistleblower! It could be the first ever legal case brought against ChatGPT, so all eyes will be on what happens here! OpenAI has 28 days to respond…
• Meanwhile, Google announced that it would be including ChatAI in its main search engine as competition from the likes of ChatGPT intensifies.

IN OTHER TECH NEWS…

• Google announced a crackdown on loan apps that access sensitive data from phones to harass or blackmail users. Such apps will now be restricted from what data they can access. Surely they should have done this before now, no??
• Microsoft and Amazon are now facing a probe in the UK by the Competition and Markets Authority looking at their dominance of the UK’s cloud computing market. Amazon Web Services and Microsoft’s Azure account for 60-70% of the market with the mighty Google coming in at a distant third with a market share of just 5 to 10%!
• TikTok got fined a paltry £12.7m by the Information Commissioner’s Office (the British privacy watchdog) for collecting data on kids, failing to do proper age checks and removing underage users. Elsewhere, it still faces a ban in the US.
• Samsung announced very downbeat forecasts as its memory chip business is suffering a massive downer due to tech spend falling overall.

• Inditex got approval to sell its business in Russia to Daher Group of the UAE. Until Russia invaded Ukraine, it used to be the company’s second biggest market by store numbers, but clearly not any more.
• Sainsbury’s got criticised for its vacuum-packed mince, but it said that it was doing it this way in its bid to cut plastic packaging on own-label products by 50% by 2025!
• Franco Manca’s owner, Fulham Shore, got bought by Japanese chain restaurant operator Toridoll and sector specialist fund Capdesia.

• BlackRock ended the withdrawal restrictions on its £3.5bn UK property fund, which has been gated since last year when investors all wanted to withdraw their money at the same time. Rivals including M&G and Schroders are yet to allow fund withdrawals…
• UK house prices rose for the third consecutive month in March, surprising everyone. These Halifax figures back up recent Bank of England stats which show that mortgage approvals turned around in February. It is worth noting that this “conclusion” diverges somewhat from the read-through of Nationwide stats (that house prices are falling).
• The UK’s construction PMI points to a recovery as total output increased in March. That said, although commercial building and civil engineering experienced growth in February, residential building activity had its slowest month since May 2020.

• Allied Universal, the world’s biggest private security group, postponed its IPO due to ongoing market turmoil and ongoing recruitment problems.
• L’Oreal bought Australian vegan beauty brand Aēsop for £2bn, a decent strategic move given that the premium beauty segment is one of the fastest growing areas of the consumer goods market at the moment.
• US law firm Kirkland & Ellis still managed to pull in more revenues than last year – unlike rivals – but also cut headcount due to the slowdown in dealmaking.
• Management consultancy giant McKinsey announced that it would be downsizing its bankruptcy practice due to an rise in the number of lawsuits and government investigations the business was caught up in.
• Saga suffered losses despite its cruises business staging a decent turnaround. It blamed higher motor insurance costs and regulatory changes.

My favourite “alternative” story this week was this review of some April Fool’s Day pranks: April Fool’s Day 2023: Biggest pranks including silent flights and cement perfume (The Mirror, Julia Banim). Nice 👍