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.
IN BIG PICTURE NEWS...
- In its half-yearly Global Economic Prospects (GEP) report, the World Bank cut its global GDP forecasts from 4.1% to 2.9% (Wednesday). It said that the world’s economy is on track for a growth slowdown over the 2021-2024 period that will be twice as bad as it was in the 1976-1979 period when the oil shocks were the cause of stagflation.
- IN CHINA – it turns out that hundreds of thousands of permanent coronavirus testing and quarantine centres are being built in many big cities (Friday), but then lockdown was imposed yet again in Shanghai in the Minhang District just one week after the government declared victory against the virus after two months of lockdown. On the positive side, China’s exports rose by a decent 16.9% in May versus the previous year (Friday), which shows that the economy is showing signs of bouncing back after being ravaged by lockdowns.
- IN JAPAN – PM Kishida is using increasing concerns about China to bolster support for defence (Monday) as he said “Ukraine might be East Asia tomorrow”. This could manifest itself in a further boon to companies like BAE Systems, Dassault Aviation, Lockheed Martin etc. as the region sees a growing need to defend itself from potential China attack.
- IN AUSTRALIA – Australia accused China of intercepting a surveillance plane in a “dangerous manoeuvre” (Monday), adding fuel to the fire as per the story above. Also, Australia’s central bank raised its interest rate by 0.5% (Wednesday) from 0.35% to 0.85% in its biggest hike for 22 years.
- IN EUROPE – the ECB said it would raise interest rates next month (Friday) in order to curb inflation but that it would resist pressure to raise them by 0.5% in the first instance – it’ll probably be more like 0.25%.
- IN GERMANY – the latest figures showed that there was a surprise drop in factory orders in April (Wednesday), which was mainly due to China lockdowns hitting supply chains and the ongoing war in Ukraine.
- IN THE UK – the OECD warned that the UK’s economic growth is going to be the worst in the G20 apart from Russia (Thursday) while the British Chambers of Commerce also offers a very downbeat assessment of the UK’s economy (Thursday). Earlier in the week, BoJo faced and survived a vote of no confidence (Tuesday).
In OIL AND GAS NEWS…
- There were signs that Biden is relenting on oil sanctions and tariffs (Monday) to let Iranian and Venezuelan oil through to Europe, which is desperately trying to wean itself off Russian supplies. Meanwhile, Russian oil is making its way to places like China and India (Tuesday) at a $20-$30 discount to Brent Crude.
- As if things weren’t bad enough already, European gas prices suddenly rose by 20% (Friday) because of a fire at a major LNG export terminal in the US. It is expected to take at least three weeks to fix.
IN BUSINESS TRENDS AND SUPPLY CHAIN NEWS...
- BUY NOW PAY LATER saw a lot of newsflow this week as Apple announced its US launch in the space popularised by the likes of Klarna (Tuesday), something that rivals should be scared of given Apple’s strengths (Wednesday). It turned the interest levels up another notch by saying that it was going to be offering BNPL loans directly to consumers (Friday) and not doing so via Goldman Sachs, who it will still use as a way to access Mastercard’s network. This is a major turning point for Apple as it moves more aggressively into the finance business. Elsewhere, in B2C BNPL, Indonesia’s biggest startup GoTo is going to start offering the service (Tuesday), which could be interesting given that it already has 100m monthly customers! It was also interesting to see that B2B BNPL is attracting a lot of investor interest (Monday) as businesses are using the service to help spread the pain of rising costs.
- In the UK, bankruptcies look set to boom (Monday) due to rising costs, supply chain problems and rampant inflation while British farmers warn of tough times ahead (Thursday) because a major fertiliser supplier is shutting down one of its two plants in the UK due to ongoing high running costs. Meat processors are warning that households will have to go for cheaper cuts of meat as a consequence (Friday) because cattle will have to be slaughtered earlier in the season. Rising prices are causing tension between suppliers and supermarkets (Friday), according to the Groceries Code Adjudicator as some supermarkets are proving to be better than others at keeping suppliers happy.
THERE WERE SOME MAJOR DEVELOPMENTS IN TECH THIS WEEK...
- There seems to be an end in sight for Chinese tech companies (Tuesday) after being in limbo whilst being investigated by the Cyberspace Administration of China over the last year. Share prices recovered in anticipation.
- US Big Tech is lobbying hard to stop Congress from limiting their businesses (Tuesday) and the stark difference between what they have spent on campaigns versus the antitrust bill’s supporters is particularly incredible (Friday). It is all to play for and Big Tech could lose big if it is stopped from being able to prioritise its own products over others.
- IN SOCIAL MEDIA, Buzzfeed’s share dropped through the floor (Tuesday) as the post-IPO shareholder lock-up period expired and Elon Musk had a bit of a hissy fit saying that he might walk away from the Twitter acquisition (Tuesday).
- IN HARDWARE, the chip shortage situation doesn’t seem to be getting any better (Friday) as two of the world’s biggest manufacturers (TSMC and Samsung) continue to face difficulties meeting deliveries. Also, Brussels ruled on a single standard charger (Wednesday) and that charger will be the USB-C. The new law will come into effect in 2024 and will particularly impact Apple’s iPhones given that they use Lightning cables versus Android phones which already use the standard.
IN REAL ESTATE, CONSUMER AND EMPLOYMENT NEWS...
- IN REAL ESTATE NEWS, the latest Halifax data showed that average house prices rose but new home inquiries slowed down (Thursday), which could be due to rising mortgage rates – Lloyds Bank decided to raise them more than the Bank of England (Thursday). Meanwhile, John Lewis announced more detailed plans about becoming a landlord (Thursday).
- IN CONSUMER NEWS, official figures from KPMG and the BRC show that Brits made big cut-backs on spending last month (Tuesday), which I don’t think will come as much of surprise!
- IN EMPLOYMENT NEWS, global trials of a four-day week went ahead (Monday) to see whether productivity would be affected if people worked 80% of the time with 100% of the pay. I’m sure those in the study will do their darndest to make good for the rest of us 🤣. A survey from the Policy Institute and King’s College London showed massive support for WFH (Wednesday), with the desire to avoid rush hour commuting being the biggest reason to support flexible working. In terms of what’s going on now, City bonuses are running riot (Monday) and the labour market remains tight, with the logistics sector being one of the fastest-growing in Britain (Monday) as online shopping continues to grow in popularity.
IN AUTOMOTIVE NEWS...
- UK new car sales have fallen off a cliff (Tuesday), which isn’t surprising given the cost of living crisis, and Cazoo announced the decision to cut 15% of its workforce (Wednesday) in response. Separately, Mercedes-Benz recalled 1m cars over dodgy brakes (Tuesday).
- The price of fuel is making EVs look much more attractive (Wednesday) these days but Tesla sounds like it’s making plans to cut 10% of its workforce (Monday) and Rivian continues to have supply chain problems (Monday). Other than that, Chinese maker BYD is being investigated (Tuesday) for having potentially harmful ingredients in its paint.
AND IN OTHER NEWS...
- The RETAIL SECTOR had some interesting newsflow as America’s Target had a profit warning (Wednesday) as it battled with inventory levels, Japan’s Fast Retailing (which owns Uniqlo) is having trouble with a weak Yen (Thursday) as it produces outside Japan and buys raw materials internationally – making it particularly prone to price rises – and Spain’s Inditex (owner of Zara etc.) absolutely smashed it with profits up by 80% (Thursday). Other than that, Ted Baker lost the main bidder for its business (Wednesday), JD Sports got slapped with a fine for fixing Rangers’ football kit prices (Wednesday), DFS is seeing demand for sofas starting to sag (Friday), AO World decided to give up on its business in Germany (Friday) and India’s Reliance looks like it’s close to buying high street retailer/pharmacy Boots (Friday).
- IN FINANCIALS, there was a run on local Chinese banks (Thursday) as locals lost trust in local lenders and tried to withdraw their money and Credit Suisse had its third profit warning this year (Thursday) as market volatility hit investment banking revenues.
- IN INVESTMENT, activist investor Elliott Management announced it would be suing the London Metals Exchange for the nickel trading fiasco earlier this year (Tuesday) and was shortly after joined by US trading firm Jane Street (Wednesday), which was doing the same thing. It was also interesting to hear that the head of BlackRock said “I don’t want to be the environmental police” (Tuesday), something that could have repercussions for the ESG investment industry as it may perhaps roll back some of its more aggressive pro-environmental rhetoric.
AND IN UPDATES FOR WATSON'S YEARLY...
- Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document!