Watson’s Weekly 08-05-2021

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.

• The US Treasury Secretary Janet Yellen spooked markets (Wednesday) by implying that interest rates might have to increase, but then “walked it back” later on in the day as markets plunged on these remarks. Given she’s got tons of experience and was the previous chair of the Fed, I really doubt that this was a slip of the tongue! I am inclined to believe that this was an attempt to take the heat out of the market momentarily but you can’t do this kind of thing too often without impacting credibility and causing doubt. Given that Excitement and pent-up demand from some of the recovering economies is pushing food prices up (Friday), I just think that inflation is going to hit us earlier than expected – even moreso if you add in the fact that petrol prices are continuing to rise (Thursday) due to stronger oil prices.
• Things are hotting up in the UK as well as the Bank of England raised its estimate for UK GDP growth for 2021 (Friday) to 7.25% (the fastest GDP growth rate since WW2!) from the previous estimate of 5%, due to successful vaccine rollout and easing of restrictions and this feelgood boosted investor confidence as the FTSE100 saw its biggest one-day rise for two months (Thursday) as the recovery continues.
• In oil, Saudi Aramco saw good earnings (Wednesday) – something that other oil majors have been experiencing due to increasing momentum in global trade. I guess the next thing would be to see whether OPEC and other oil producing countries are going to open the taps and agree to higher oil production quotas. Given that everyone could do with more money at the moment you would have thought that they’d agree to production increases sooner rather than later.
• Cryptocurrencies had a very interesting week this week as Ethereum broke the $3,000 barrier (Tuesday), meaning that it has advanced by over 325% so far this year versus Bitcoin’s rather more “pedestrian” 95% 😂. Actually, right now, Ethereum has broken the $3,500 barrier! Mind you, both of these rises look positively puny when you compare them with Dogecoin’s 14,000% rise (Thursday) since the start of this year! It seems that everyone is hoping that “The Dogemaster” himself, Elon Musk, will push the cryptocurrency with one of his tweets. If he doesn’t, latecomers to the Dogecoin party will be nursing very big hangovers very soon!

• Asia’s really suffering (Thursday) versus the UK and US (and to a lesser extent, the EU) as new waves of the virus are hitting countries like India, Indonesia, the Philippines, Thailand and even Japan (I say that because Japan has really not been hit as hard as many countries in the region). Indian businesses have been calling for more lockdowns (Tuesday) in addition to the existing lockdowns in places like New Delhi, Mumbai and Bangalore. On the other hand, Germany is calling for the lifting of lockdown restrictions (Tuesday) – for those who are vaccinated – and the rate of vaccine rollout appears to be gathering pace. Just for reference (according to last week’s figures), 8% of Germany’s population is now fully vaccinated versus 55.8% of Israel’s, 23% of the UK’s and 32% of the US’s. The US is even trying to get vaccine doubters to get the jab by offering them things like beer (Thursday)!
• Regarding the actual jabs themselves, Pfizer boasted that it would rake in $26bn from its Covid vaccine this year alone (Wednesday) but then President Biden said he would support a temporary lifting of patents on coronavirus vaccines (Thursday) to help boost vaccine supplies in developing countries. Funnily enough, the pharma companies are not pleased about that (Thursday) and argue that it’s not just a case of giving, say, generic makers a recipe and off they go – they also argue that if there is an exception made for the coronavirus, what’s next? Cancer treatments? I think they are just going to have to shut up and take it because if they don’t, they will be portrayed in the media as money-grabbing mass murderers. The longer they drag their feet on this, the more people will die. And I don’t think they want that…

• Some chipmakers commented on the latest situation with regard to the current shortage of chips. Ford had to suspend production for this very reason (Tuesday) and German chipmaker Infineon thinks that there’s a global shortfall of 2.5m cars estimated due to the current chip drought (Wednesday). Fortunately, it also says that it thinks that the supply shortage will improve this summer (Wednesday) but rival ST Microelectronics says that the whole production process has to change in order to ensure that the current situation of widespread chip shortages does not repeat itself. Basically, it says that everyone is going to have to hold more inventory in future because the current way of doing things does not go well when there is a sudden shock.
• In EVs, Tesla is going to be losing out by hundreds of millions of dollars (Thursday) as Stellantis says that it will no longer need to pay Tesla emissions credits because its EV line-up will put it under the emissions limits imposed by Brussels. When you also take into consideration that Tesla’s recent strong Q1 results included such payments and a useful boost from selling off 10% of its bitcoin holding, the money they get from selling cars doesn’t look all that great! I would imagine that other car manufacturers will go the same way as they increasingly electrify their fleets. Tesla will have that to deal with, as well as an increasing variety of models from other producers like GM (Thursday).
• In larger EVs, Uber is going to team up with British electric van and bus start-up Arrival to make electric taxis (Tuesday), which sounds like a good idea strategically. It is interesting to note, however, that all is not rosy on the electric van front as it turns out that big fleet buyers are reluctant to buy more electric vans (Wednesday) because they just don’t have the range.

• Chancellor Sunak is confident that the consumer is going to return with a vengeance (Wednesday) and it seems that not a week goes by these days without some kind of comment that the housing market continues to heat up (Wednesday) There is an uneven recovery in the jobs market, though (Tuesday) and companies are readying themselves for an increase in employment litigation (Tuesday) when furlough comes to an end. Companies are now making plans for employees to return to work (Wednesday), which seems to tally with what office developer Workspace Group is finding as it says that inquiries, viewings and new lettings all increased in Q1 (Friday). Rival Derwent London has also said that it has seen an increase in lettings.
• So what will everyone be doing when lockdown lifts? Well Match reckons that there will be a “summer of love” and more dating will be going on (Wednesday) and, given lockdown lifting means that more businesses will be able to open, there will be more things to do on a date! You’ll be able to go to watch the Bond film at Odeon cinemas (Wednesday), drink inside a pub from June 21st (Wednesday) and perhaps if all goes well and you end up at yours you could get food delivered from an increasing number of takeaway delivery companies (Thursday) and if that goes well, you might end up buying synthetic diamonds (Wednesday)! Phew 😅!
• In terms of the retailers themselves, Next, Zalando (Friday) and Boohoo (Thursday) all saw solid sales – and even the embattled Superdry looked like it was turning a corner (Friday) – while Sainsbury’s got a new boss to head up its non-groceries (Friday). This could be interesting because Paul Nickolds has a very strong reputation and, I think, has some decent assets to play with in Sainsbury’s to get it on the right track.

• Peloton announced a recall of its treadmills (Thursday) following the tragic fatality of a 6-year old. I think this will be hugely damaging to the company and will be extremely expensive. It is also likely to give rivals a boost.
• US private equity group Apollo Global Management bought Verizon’s media assets including Yahoo for $5bn (Tuesday) as it reckoned it could do a better job of improving the performance of its digital media and advertising technology assets. Verizon will retain a 10% stake in the new entity.
• Trainline announced a big loss after a nightmare year (Friday), but I think that it could potentially have a decent turnaround as more commuters return to work and increase their use of apps to buy tickets. It could also be that they benefit from people preferring to travel around Europe via train rather than by plane. We’ll have to wait and see, though!

• Watson’s Yearly updates: These will be left until the next edition of Watson’s Yearly that will be published shortly

There were quite a few candidates this week for my favourite “alternative” story – but I think I’m going to have to go with Scottish five-year-old lays into Amazon Alexa as bot fails to understand accent (The Mirror, John Bett and Magdalene Dalziel) as her reaction is just priceless!