Watson’s Weekly 10-05-2025

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 WAR/DEFENCE NEWS…

• India launches military strikes on Pakistan in response to the deadly attacks on tourists in Indian-administered Kashmir on April 22nd. Pakistan vowed to retaliate. The US doesn’t appear to be all that interested in mediating – but someone should because both sides have nukes!
• The US now wants the UK to be more focused on the Euro-Atlantic region and back off from the Indo-Pacific region in a reversal of the emphasis of the Biden administration. Meanwhile, France and Germany held talks about setting up a joint security council. This sounds like a positive development given America’s recent shift.

IN TARIFF NEWS…

• Trump chose a new target this week – the film industry! He is talking about slapping 100% tariffs on films made abroad. This would hit the industry hard after it is still recovering from the havoc wreaked by the pandemic and could be disastrous for key production hubs like the UK. Trump has a point in that places outside America have benefited from offering generous tax breaks but it seems strange that he’s attacking an industry which is actually in surplus. This is the first time he’s attacked a service industry and it’ll be difficult to tax given how complicated the financing is. You do wonder how this might affect the recently-announced Universal Studios project in the UK. Talking about theme parks, Disney announced plans for a new park in Abu Dhabi but no dates were mentioned.
• IN TARIFF CONSEQUENCES – Mattel said it would increase prices and it withdrew its full year forecasts, Ford’s Q1 performance dropped sharply and it also suspended its guidance for the full year while research from EY showed that there was a big increase in UK-listed profit warnings last month versus April 2024 thanks to tariff uncertainties and general economic disruption. Listings and M&A have also been delayed. Leaders of major European and UK companies are counting the cost of the US trade war and more of them are scrapping or suspending their forecasts because of all the uncertainty. On a more individual basis, research by the Society of Pension Professionals shows that some people are having to put off their retirement plans because their pension pots could take a hit of up to 20% as a direct result of the effect of Trump’s tariffs on the market.

IN TRADE NEWS…

There are a lot of talks going on at the moment!

• The US and China are set to hold their first trade talks since Trump launched his trade tariff broadside against China that decimated markets. The two sides are to meet in Geneva this coming weekend.
• The UK and India struck a trade deal after three years of negotiations! It involved easing labour restrictions between the two countries and a reduction of whisky, gin and car tariffs.
• The US and UK signed the first trade deal with Trump since he instigated his trade war. Much was made of this “landmark” deal, but we’re still worse off than before he came to power. It’s a win for PM Starmer, though, because now he’s bagged two high-profile trade deals in a week. Next up – the EU. I guess the key here will be how “good” this deal is versus what other countries manage to get. FWIW, I think that we need to pay attention to any deal – and attached conditions – with China because I think that will set the tone for everyone else. Overall, the deal was good for cars, a bit of aerospace and possibly pharma with a bit of agricultural. Details are to be hammered out.

I wonder whether Trump’s overall plan has been to shock everyone into a reset, showing what the “worst-case scenario” could look like to get them to the negotiation table and then agree individual deals which he will claim as a victory. I guess this takes the faff out of negotiating multi-party trade deals and gives Trump ultimate flexibility because he can change his mind if he doesn’t like what he sees. If this is the case, then I think it will work – but the cost will be that no-one will trust the Americans any more.

IN TRUMP THINGS…

• The battle against Harvard continues as Trump’s administration is going to shut off Harvard’s eligibility for new federal government research grants. You do wonder how long Harvard will be able to survive this onslaught.
• Trump proposed raising income taxes on the wealthy in order to help finance broader tax breaks being discussed in Congress. This is notable because such a move is more akin to what the Democrats would do. Discussions are ongoing.

IN INDIVIDUAL COUNTRY NEWS…

• THE US – the Fed voted unanimously to keep US interest rates unchanged in the 4.25-4.5% range. Its interest rate setting group, the FOMC, justified this by saying that “Uncertainty about the economic outlook has increased further”
• CANADA – new PM Mark Carney paid his first visit to the White House and reiterated that Canada was “not for sale”, to which Trump replied “Never say never” 🙄.
• GERMANY – Friedrich Merz lost the vote needed to become chancellor on his first go, but kept everyone back for a second vote – which he managed to win. This just goes to show that he’s still got a lot of work to do to unify his party and his country!
• THE UK – the Bank of England cut interest rates by 0.25 percentage points to 4.25% in its fourth cut since August last year. This was widely expected but two members of the MPC had voted to cut by 0.5 percentage points. Markets are currently pricing in more cuts…

IN CRYPTO…

• Trump’s crypto-friendly stance is garnering rising interest from European and Asian crypto companies. Deribit, OKX, Nexo, Wintermute and DWF Labs are among those interested in a US presence.
• …and then Coinbase announced that it would buy Deribit in a cash-and-shares deal worth $2.9bn.
• Meanwhile, it’s interesting to note that “insiders” seem to be making an awful lot of money by trading memecoins like $MELANIA. The FT has been looking into this and I suspect it’s going to find a lot of interesting things!

IN OIL NEWS…

• Oil prices weakened thanks to renewed concerns of global oversupply as OPEC+ announced production increases for the second month in a row.
• US oil output may have peaked as two big American shale producers – Diamondback Energy and Coterra Energy – announced that they would reduce capex as a result of ongoing sluggishness in oil prices.

IN ENERGY NEWS…

• Danish wind power developer Ørsted announced that it has decided to cancel plans for the Hornsea 4 project, one of the UK’s biggest offshore windfarms, because of booming costs in its supply chain. Milliband’s plans for net zero look even shakier than they already did and his suggestion for car parks across the UK to be turned into solar farms sounds a bit desperate.

IN CONSUMER TRENDS…

• UK consumer confidence hit its lowest level since December 2022 according to a Which? survey. Despite this, Britons have been snapping up holidays to the US as European and Canadian travellers are avoiding it, leaving more availabilities and the ability to enjoy a weaker dollar.
• Those exposed to US travel/leisure are getting very nervous about the outlook. Expedia is already seeing weaker demand to and from the US, something that rivals such as Booking and Trivago are also experiencing. Marriott Hotels have cut their full year outlook in expectation of a drop in travel demand although Q1 was OK. Rivals Hilton and Airbnb and airlines including Southwest, American Airlines and Delta have all become more pessimistic of late.
• The FCA is on the verge of easing mortgage lending rules in order to make it faster, cheaper and easier to get a mortgage. It will also ditch guidelines for lenders dealing with interest-only mortgages and related advice. Banks cheered the new developments.

IN EMPLOYMENT NEWS…

• The European Commission is looking at making it easier for UK professionals to work in the bloc and vice-versa. A UK-EU summit is due on May 19th.

IN BUSINESS TRENDS…

• Resellers like ThredUp and RealReal look set to benefit from the growing appetite for used clothes and Trump’s tariffs making everything more expensive. That being said, both of the companies I just mentioned rely on consignments, which have high operating expenses. They are also in competition with Facebook Marketplace. I have mentioned recently TJX (owner of TK Maxx) as another potential beneficiary of the trends I just mentioned…

IN RETAIL NEWS…

• Trump had a spat with Jeff Bezos because it looked like Amazon was going to highlight the cost of US tariffs in order receipts. This was furiously rejected by the White House and Bezos backed down (or at least said that this was not going to happen on the main site anyway, just on “Amazon Haul”). This is yet another example of dissent being swiftly punished.
• Amazon is putting pressure on its suppliers to cut prices to protect its own margins against the tariff onslaught. I talk about this with Duncan on Episode 928 of the podcast this week 🎙️.
• Gymshark took a hit to its profits last year thanks to investment in new stores and it now looks like Trump’s tariffs will further dent the performance of is growing US business. Other British retailers like Boden, Lush and Fortnum & Mason are also feeling the exposure to new trade policies.
• Ikea’s new Oxford Street store opened this week after a lot of delays! This is good news for Oxford Street that has been suffering somewhat since Covid and I talk a bit more about this with Duncan on Episode 928 of the podcast this week 🎙️.
• Online marketplace eBay announced higher quarterly profits and revenues over Q1. It’s too early to tell how it will be affected by Trump’s tariffs at the current time.
• Shein is looking at a US restructuring as the “de minimis” loophole that it has been benefiting from for so long is going to close. It looks like its proposed London IPO is off as two corporate comms companies that it hired to support its flotation haven’t had their contracts renewed.
• M&S’s cyber attack nightmare is continuing and has wiped almost £700m off its valuation. It turns out that the company was already aware of the risks of such an attack but clearly it didn’t do enough to defend itself despite that. Disruption is expected to drag on for weeks. Meanwhile, Harrods became the latest retailer to be hit by a cyber attack but it seems that it hasn’t been as badly affected as M&S has.

IN CONSUMER GOODS NEWS…

• Coca-Cola sales were under pressure from Trump’s “America First” policies and suffered from the boycott of American products in Muslim countries (because of their stance on Israel) and places like Canada and Denmark (because of the tariffs and Trump’s talk of making Canada its 51st state).
• Adidas warned that Trump’s tariffs would mean that footwear prices would go up. Like many other companies, it decided not to raise its outlook for sales and profits this year.
• LVMH’s weakest division, Moët Hennessy, is going to cut employee numbers by 10% but it didn’t mention a timetable.

IN LEISURE NEWS…

• IN ACCOMMODATION – Airbnb saw its revenues rise in Q1 but thinks that they’ll weaken in Q2 because of economic uncertainty, Marriott announced plans to buy Citizen M hotels to broaden its “affordable luxury” offering. Profits at Premier Inn’s owner, Whitbread, fell thanks to higher costs and weaker bookings. It was mildly optimistic about bookings, though, as Europeans could avoid the US and do shorthall, staying in places like the UK instead.
  IN ENTERTAINMENT – Live Nation said it was on track for a record concert season as concertgoers continue to pay up for more shows in bigger venues.
• IN CASUAL DINING/TAKEAWAY NEWS – Starbucks saw a sharper-than-expected fall in quarterly global sales as the turnaround is taking time, Greggs is seeing a slowdown but is considering overseas expansion and founder of Deliveroo, Will Shu, could get a £172m payout if DoorDash succeeds in taking the company over. DoorDash has until May 23rd to make a firm offer.

• Microsoft beat Wall Street expectations for quarterly sales and profits due to ongoing demand for its cloud computing services and it also promised to shield its European operations from Trump interference. It wants to offer “digital stability” and offered to “uphold Europe’s digital resilience”.
• Apple managed to beat forecasts as concerned consumers stocked up on iPhones ahead of the tariff-powered price rises but the company estimated that it would take a $900m hit in the June quarter because of the tariffs. On another note, there was a very good article that explained in detail why iPhones can’t be built in the US. Clearly this is going to be very problematic for Apple given that the iPhone is still its core product – unless Trump somehow grants it special exemptions.
• IN AI – brands are becoming increasingly interested in optimising their appearances on AI chatbots such as ChatGPT because search seems to be shifting from “traditional” search engines these days. Are we seeing the ushering in of a new post-Search Engine Optimisation era??
• Sam Altman’s eyeball-scanning project, Worldcoin, will now be available in the US. Basically, it takes your biometric data in return for crypto tokens. The venture has yet to make a profit and it has faced resistance in a number of countries over security and privacy concerns.
• IN HARDWARE – IBM announced a commitment to invest $150bn in US manufacturing over the next five years, including $30bn for R&D for its mainframe and quantum computers. Amazon managed, at last, to launch its first batch of 27 satellites to kick off its broadband internet constellation, Project Kuiper. The idea is to become a credible alternative to SpaceX’s more established Starlink constellation.
• IN STREAMING & SOCIAL MEDIA – Spotify added another 5m paying subscribers over Q1 this year, which was more than the company had expected but its share price weakened due to a tricky outlook. Elsewhere, Meta outperformed market expectations with its Q1 results and raised capex forecasts for the full year in order to splash out on “additional data centre investments” to power its AI advance.

• IN BATTERIES – European battery makers including French Automotive Cells, Verkor and PowerCo are racing to help hit a target of Europe making 90% of EV batteries on the continent by 2030. I don’t believe they’ll succeed given how far ahead Chinese companies like CATL and BYD are and how much investment it would take to get these companies on level pegging, but I hope they prove me wrong!
• IN CAR MAKER NEWS – Chinese makers are now rethinking their European expansion ambitions because they’ve come up against some serious speed bumps in the form of tariffs of up to 45% on Chinese EVs imported to the EU. The EU tariffs have already had an impact – Chinese carmakers’ group share of new EVs in Europe fell from about 50% pre-tariffs to 30% post-tariffs. There was a bit of a kerfuffle about Tesla as rumours emerged that the company’s board were looking for a new CEO but then it was forced to deny it (Duncan and I talked about this on Episode 929 of the podcast 🎙️). Even if Musk is not able to return “full time” to Tesla, it’s better to have some access to him than none! Meanwhile, Aston Martin slashed car exports to the US until it gets more clarity about Trump’s tariffs.

• IN FINANCIALS – IN BANKS – Morgan Stanley is now thinking about offering crypto trading on its ETrade platform, given the increasingly pro-crypto backdrop of Trump’s administration, Spain’s antitrust watchdog just approved BBVA’s €11bn hostile takeover bid of Sabadell, Lloyds Banking Group saw its profits slip in anticipation of a rise of bad loans resulting from Trump’s tariffs and Barclays got a Q1 boost from investment banking revenues. There was an interesting article on chatbot Rogo that aims to take the donkey work out of investment banking. It’s already been road-tested in a few investment banks and it could well reduce the number of junior bankers…IN PRIVATE EQUITY – big investors are now having to use “net asset value loans” that use their stakes in PE funds as collateral to borrow money. This is because PE firms are having difficulty offloading assets onto a market that isn’t doing much on the IPO front. Meanwhile, KKR reported its first quarterly loss since 2022 because of the shocking performance of its Global Atlantic insurance business…ELSEWHERE, the FCA is calling on Big Tech to stop finfluencers flipping between social media accounts to continue promoting unauthorised financial schemes or businesses.
• The UK foreign office has now warned senior British lawyers that they could face sanctions by the Trump administration for giving advice to the International Criminal Court on Israel’s behaviour in Gaza.
• Andersen, the tax and consulting business that rose from the ashes of disgraced accounting firm Arthur Andersen has filed for an IPO in the US with the  SEC.
• UPS announced plans to cut 20,000 jobs (it currently employs about 490,000) after deciding in January to reduce the number of packages it delivers for Amazon. Amazon had accounted for about 12% of UPS’s revenue. Like many other companies recently, it decided not to update the forecasts for the full year because of Trump tariff uncertainty.

*** ON ANOTHER NOTE, I recorded a podcast on Friday with Carla Hoppe, founder of Wealthbrite. In this episode, we talk about how commercial awareness crosses over with personal finances. Click here to listen 🎙️! ***

My fave video this week was the one about Steve’s Lava Chicken…weird, yes, I know…