Watson’s Weekly 09-08-2025

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.

IN TARIFF NEWS…

• Switzerland got slapped with an unexpected 39% tax from the US which hit share prices of Swiss companies the following day. There were some last-minute attempts to escape the worst of the tariffs but Switzerland and Taiwan failed to get any concessions before the Thursday deadline when the reciprocal tariff regime came into force. US import taxes are now at their highest level in a century!
• India was hit by an additional 25% tariff as punishment for buying Russian oil. India has taken a third of its crude oil imports from Russia and it has been the biggest market for Russian Crude since 2023, importing 50% more than China.
• Trump then threatened a massive 100% tariff on chips but Apple got an exemption from this (presumably because he promised to invest an additional $100bn in the US over the coming years).

AND IN TERMS OF IMPACT…

• Over 60 countries are now scrambling to respond to the new tariff regime. South Africa is just one such country suffering as its wineries were hit by a 30% tax. The US has been their fourth biggest market after the UK, Germany and the Netherlands.
• However, this is also hitting Americans – particularly those in the lower quartile of earners – while consumers generally have been front-loading expenditure before the tariffs really kick in.

IN TRUMP THINGS…

• The president moved to appoint a new governor for the Fed to replace the one that resigned last week and he’s also on the hunt for a replacement head of the Bureau of Labor Statistics who he sacked last week. That sacking has continued to spook investors because it will shake trust in the independence of official US data although there is something to be said for an overhaul of the BLS as the labour stats have a lot of holes.
• It looks like JP Morgan Chase and Bank of America could be getting a hazing from Trump as he hinted at getting his own back on them for snubbing his business in the wake of the Capitol Hill riots. It is thought that the White House is putting together an executive order to make regulators investigate banks that unlawfully discriminate against customers.
• Meanwhile, it looks like his MAGA congressional election war chest is looking pretty healthy thanks to big donations mainly from crypto companies and big tech investors. It’s built up $200m in funds versus a paltry amount raised by the Democrats.

IN INDIVIDUAL COUNTRY NEWS…

• The Bank of England cut interest rates by 0.25 percentage points to 4%, its lowest level since March 2023. However, the vote was so tight that it had to be done twice – the first time this has happened in its 25 year+ history, reflecting rising inflation concerns. There had been talk that the Bank will need to cut rates six times over the next year to help stimulate the economy but that’s clearly not a given now.
• NIESR reckons that the chancellor’s going to have to raise taxes in the autumn Budget to cover the £40bn deficit and it looks like the government’s going to start “soft-pitching” tax rises to us from September to gauge what is possible and perhaps least unpopular. Gambling levies look like a dead cert as an initial target. Pun intended.
• Inner London boroughs and the south of England looks to lose out from English council funding reforms, according to research from the IFS. On the positive side, councils in the Midlands and north should do well from it.
• Data from S&P Global Market Intelligence shows that UK construction activity in July dropped at its sharpest rate since the height of Covid thanks to labour shortages and other macroeconomic headwinds both domestically and abroad. This is going to make it even more difficult for the government to hit its target of building 1.5m new homes.

IN COMMODITIES NEWS…

• IN OIL – OPEC+ raised oil production quotas to a two-year high. Meanwhile, BP made its biggest oil and gas discovery in 25 years off the coast of Rio de Janeiro and São Paulo. On the other hand, it announced that it would launch another review of the business that could cut out at least 15% of its office staff.
• IN OTHER COMMODITIES – China is continuing to restrict the flow of critical minerals to Western defence manufacturers, in a flex over its dominance in this area.

IN CRYPTO NEWS…

• Former chancellor George Osborne, who is a member of the global advisory council of Coinbase, warned that the UK could fall behind in the crypto evolution because it’s too risk averse. It’s true that crypto does require a leap of faith but what Osborne says should be taken with a big pinch of salt given his involvement in Coinbase.

IN BUSINESS TRENDS…

• The end of the de minimis rule is spooking not just the likes of Temu and Shein, but other companies like Etsy who are now going to face much higher costs. The closure of the loophole is going to happen on August 29th versus the previously stated July 2027, so this is understandably causing a lot of panic!
• The UK services sector saw its biggest fall in orders since November 2022. This is serious because it is the UK’s main GDP growth driver!
• The FT did a study using Companies House filings which shows that there’s been a significant uptick in top company execs leaving the UK as 3,790 company directors reported leaving between October’s Budget and last month versus 2,712 in the same period a year earlier. The theory is that rich people are leaving the UK because of a combination of the ending of the non-dom status, restricting inheritance tax relief on businesses, increasing capital gains tax and raising duties on private equities bosses brought in by the government.

IN INVESTMENT TRENDS…

• FUNDING ROUNDS – OpenAI got another $8.3bn in its latest funding round while, on a smaller scale, Mistral AI secured enough money its its latest round to give it an implied valuation of $10bn. The money keeps pouring in after that DeepSeek blip at the beginning of the year! OpenAI-backed drug discovery start-up Chai Discovery raised $70m at its latest funding round giving it an implied valuation of about $550m.
• RETAIL INVESTORS – Trump signed an executive order to allow the $9tn US retirement market access to crypto, private equity and other alternative investments including property deals. Regulators will now overhaul existing rules to give US savers access to these categories of investment for 401k retirement plans. This is a huge development for investment as a whole and will enable individuals to take on more risk if they want to. Meanwhile, UK investors have been buying gold coins in record numbers, which makes sense in these uncertain times as bullion coins are exempt from capital gains tax, hence the popularity!
• M&A – US battery start-up is buying Northvolt out of bankruptcy, cryptocurrency group Ripple is buying stablecoin platform Rail in a $200m deal and big companies are telling investment banks they want fewer staff working on deals because the FCA found that almost 40% of takeovers of UK-listed companies had been reported before their official announcement between April 2024 to the end of May this year!
• IN ADDITION – Eric and Donald Trump Jr are now backing a new SPAC, called New America Acquisition I Corp, that will focus on US manufacturers that will benefit from government spending. How useful that their dad also happens to be president and is well-placed to know who’s going to get the contracts…

IN AI GENERALLY…

• Brookfield Asset Management has signalled its intention to increase its bets on AI by executing a strategy that will involve the development of data centres, chip storage and other AI-related infrastructure.
• AI continues to attract more investment because there’s increasing evidence that all the billions being poured into AI are actually now starting to yield actual returns in the form of revenues.
• Meanwhile, Apple has become a bit of a contrarian trade in that it is a notable absentee from all the AI hype. Although it has a reputation as being a bit slow initially and then clearing up with a better product, that may be more difficult to do for Apple.

IN COMPANY-SPECIFIC NEWS…

• OpenAI released its first open AI models since the launch of ChatGPT in an effort to fight back against rising competition from DeepSeek and others but then followed that up with releasing its new GPT-5 model which has been billed as a “major upgrade”. OpenAI’s valuation is looking very heady currently, particularly on traditional valuation metrics, but everyone’s buying it because it is at the cutting edge of the next industrial revolution.
• Palantir continues to boom and it upgraded its 2025 outlook thanks to the ongoing impact of AI. The group sells AI software that collates and analyses data to businesses and governments around the world.
• UK cybersecurity company Darktrace, is looking to boost its expansion into the US as part of a broader effort to reach $1bn in revenues so that it can better compete with bigger rivals like Palo Alto Networks and CrowdStrike.
• Nintendo’s profits climbed thanks to the popularity of its new Switch 2 console which is selling well despite the price tag.

IN MEDIA NEWS…

• News Corp earnings rose for Q4 thanks to growth in its Dow Jones and Digital Real Estate Services divisions. There was nothing forthcoming about what might happen as a result of the recent spat between Rupert Murdoch and Trump regarding the whole Epstein thing that was sparked by an article that appeared in the Wall Street Journal, just one of the publications owned by News Corp.
• The NFL is taking a 10% stake in Disney’s ESPN in exchange for control of specific media assets including NFL Network. This is good for ESPN because it deepens its relationship with its most important content provider. Meanwhile, Disney’s profits eclipsed market forecasts thanks to strong performances by its US theme parks. Its traditional TV networks saw revenue declines but streaming was good.
• WPP announced a strategic review and halved its dividend ahead of its new CEO joining next month. There’s a lot of work done!

IN CONSUMER TRENDS…

• British tourists are shunning European summer breaks and delaying them to the cooler (and cheaper) September to November months, according to the European Travel Commission, but when Brits do go to Europe, they splash out on VAT-free shopping – something that’s quintupled over the last four years!
• Luxury brands continue to feel the pinch as tourist spending overall in Europe and Japan is disappointing.

IN RETAIL NEWS…

• Claire’s filed for bankruptcy in the US for the second time in seven years thanks to the slowdown in consumer spending and more people shopping online. The US retailer has over 2,700 outlets in 17 countries.
• Morrisons revenues dropped by £1bn to their lowest level since the supermarket was taken over by a PE firm in 2021. Morrisons is in the UK’s “Big Four” supermarkets group but it’s on the cusp of being overtaken by Lidl. The CEO moaned about macro circumstances but let’s be honest, everyone’s faced the same issues – it’s just that they’re dealing with them better than Morrisons is…

IN CONSUMER GOODS…

• The new interim CEO of Diageo increased cost-cutting targets whilst also announcing a bigger-than-expected hit to profits from US tariffs this year at its full year results.
• Crocs’ share price collapsed by almost 30% in trading yesterday thanks to very downbeat sales guidance along with its opinion that the “ugly shoe” trend is coming to a close.

IN LEISURE NEWS…

• IN ACCCOMMODATION – InterContinental Hotels reported a big jump in profits thanks to having more rooms to offer weary travellers! It seems to be cautiously positive about the outlook. Airbnb had better-than-expected Q2 results but expressed worries about the effect of new tariffs whilst already having committed to investing $200m in new services and experiences.
• IN RESTAURANTS – McDonald’s sales rebounded after four previous quarters that had been on the downward trend! Interestingly, the CEO noticed that while lower-income customers were visiting less, middle-income customers are visiting more.

IN “TRAD” AUTOMOTIVE NEWS…

• Honda’s quarterly profits halved thanks to Trump’s tariffs and policies. This is all they need given the nightmare they’ve been having.
• India’s Tata Motors went through with its $4.36bn all-cash purchase of Iveco’s commercial vehicles business. This deal is almost double the size of its previous biggest acquisition – the $2.3bn purchase of Jaguar Land Rover in 2008!  Talking of which, Tata Motors’ CFO joined JLR as its new CEO.

IN EV NEWS…

• Tesla offered Musk a massive $29bn-worth of shares as a bonus that is part of an interim 2025 pay award that will vest in two years’ time. Clearly they want him to stay even though Tesla’s UK sales dropped by a whopping 60% in July.

IN DRIVERLESS NEWS…

• Tesla was ordered to pay $243m in damages to victims of a fatal accident that involved its autopilot system. This is the first federal case to find Tesla responsible for an accident involving its self-driving software. Other similar allegations have been settled out of court in the past, so you wonder whether more cases are going to crop up. Tesla will, unsurprisingly, appeal the decision.
• Baidu, the Chinese internet search giant, stated that it was planning to test self-driving Apollo Go taxis in the UK and Germany starting in 2026 as part of a deal with Lyft, one of Uber’s rivals. Baidu already operates ride-hailing operations in China.

• IN FINANCIALS NEWS – European bank shares hit their highest levels since 2008 thanks to historically high interest rates and it’s possible that this momentum could continue because there’s still upside to be had from investment banking and governments are going to be borrowing more in order to finance infrastructure and defence spending. British banks are going to have to pay compensation for dodgy car-financing, but investors were relieved that the impact isn’t going to be as big as had been feared previously. High street banks have lost £100bn in deposits as more UK savers are shifting to online rivals while Santander’s purchase of TSB has been approved. No doubt branch closures and job losses will follow…
• IN PHARMACEUTICALS NEWS – sales of Novo Nordisk’s diabetes drugs, including Ozempic, have been slowing sharply because Eli Lilley’s Mounjaro is taking more market share because it’s more effective but Eli Lilley’s test results for its new obesity pill were disappointing.
• Bupa profits jumped by 20% thanks to people getting tired of ever-growing NHS waiting lists and demand for elderly care.
• Holiday jobs are in jeopardy as increased hiring costs have hit temp recruitment because employers want to give their permanent staff preferential treatment in terms of hours and they can’t afford casual staff as much as they used to.
• Visa is in talks to move its European HQ to Canary Wharf – which is good news. There had been talk of a mass exodus from the area, but it’s not all bad…
• Uber reported a major jump in operating profits but investors were more worried about the company’s insistence on pouring a lot of money into robotaxis. One day I am convinced this is going to make money – but not for a while yet!!!
• Miner Glencore decided not to change its London listing for New York after all, having conducted a formal review. The LSE will be very relieved about this!
• Services giant Serco saw its share price hit an 11-year high thanks to the government’s boost in defence spending. Serco gets 40% of its revenues from defence!
• Construction equipment manufacturer Caterpillar reported a drop in earnings and cited a hit of up to $1.5bn courtesy of Trump’s tariffs. Caterpillar is seen as a bellwether for industrial activity, so this is serious.

My favourite video this week was, without a doubt, this fabulous version of The Spice Girls’ “Wannabe”. I actually prefer this to the original 🤣