Watson’s Weekly 12-09-2020

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.

• Japan signed a trade agreement with the UK (actually, this wasn’t in Watson’s Daily because the news came after it had been published) which has been described as “historic” as the UK’s first big post-Brexit trade deal. This is supposed to take us closer to being part of the Trans-Pacific Partnership (TPP – which currently comprises of Japan, Australia, Peru, Malaysia, Vietnam, New Zealand, Chile, Singapore, Canada, Mexico and Brunei). It looks like the current deal reflects most of the existing agreements between Japan and the EU with a few extras. One Brexiteer said “Brexit bonanza here we come”, but I wouldn’t get too excited yet!
• In EUROPE – the ECB left interest rates unchanged (Friday) while Eurostat data showed that global trade was increasing (Wednesday) while concern is building over the likelihood of a loss of momentum as economies continue to face headwinds
• In the UK – Rishi Sunak is going to have to face up to the prospect of the end of furlough as October 31st is fast approaching. Many will want the handouts to continue and MPs are already pushing for it to be extended at least for those in some industries that are suffering the most. However, the Bank of England’s chief economist Andy Haldane says that furlough should not be extended (Wednesday) as it is just putting off the inevitable. A survey from BDO shows that 60% of mid-sized UK businesses are expecting to cut staff once the Job Retention Scheme ends (Monday) but then another survey from KPMG/REC showed that blue-collar jobs are thriving more than white-collar ones (Wednesday) with temporary jobs being more prevalent than permanent ones as employers are wary about longer-term commitment given the current economic backdrop

• UK consumer spending is increasing (Tuesday) according to Barclaycard data – and we have been spending more on clothing, pubs and bars but not so much in shops. Presumably this has been mainly driven by the Eat Out To Help Out initiative, but with the prospect of the end of furlough looming large, momentum could easily slow
• Interesting trends seem to be emerging among retailers. US retailers are talking about bringing Christmas promotions forward (Tuesday) to get consumers to spend now (presumably they are worried that they might not be minded to spend so much later in the year) while in the UK, Primark reported weaker sales in town centres while their outlets in retail parks were buoyant (Tuesday), which is interesting because the opposite trend had been true leading into the coronavirus outbreak. Mind you, M7 Real Estate just bought 6 out-of-town retail parks (Tuesday), which was cheaper than buying industrial property given that the latter has seen far more demand than the former, so maybe they are not dead yet
• In supermarket trends, Lidl said it would be expanding by one new shop per day (Monday) until it reached a target of 1,000 outlets by 2023. Morrisons plan to employ more staff (Tuesday) although doing so under lockdown took the shine off their profits (Friday). Iceland is also employing more staff (Wednesday)
• In positive retail trends JD Sports did well online but not so much in its physical stores (Wednesday), Halfords continues to do well (Wednesday) as people continue to shun public transport – but I think that’s not going to last too long as winter will make cycling less appealing and there are only so many people who can go to work by car – and SCS did well from sofa-buying (Wednesday) as those with money to spare in lockdown decided to make sitting down more comfortable 😂
• In negative retail trends, New Look appears to be close to collapse (Thursday) and pizza-related restaurants continue to suffer as Pizza Hut cut 29 outlets (Thursday) and Pizza Express cut 73 restaurants (Tuesday) as part of a restructuring

• Samsung signed a $6.6bn deal with Verizon to build 5G networks in the US (Tuesday). The contract runs until 2025 and is clearly a slap in the face for Huawei. This is good for Samsung because it has quite a small market share in the 5G network business, so this will go some way to make up for weaker handet sales
• Epic Games continues its suicide mission in trying to make Apple do something via the courts. It is trying to return to the App Store (Monday) but then Apple decided to countersue (Wednesday). I think that Epic Games was arrogant/stupid/naive to think that it could take Apple on on its own. The longer it drags it out the more business it will lose. I think that it would have stood more of a chance if it had taken the time to consult others on this, but by going it alone, it has made things much harder for itself. The only thing stopping me from thinking that it is yet another games company with a massive hit which then fades badly is that it has its Unreal Engine which powers other games. IMO it needs to wind its neck in and get back to business – and pronto. The only parties to benefit from this will be the lawyers! Yes, Apple charges a lot – I can see why Epic Games is irked – but you don’t take a pea-shooter to a gun fight with a massive opponent and their huge array of weapons
• Talking of Apple, the company has a big product launch set for next week on Tuesday 15th – and it will not be announcing the new version of the iPhone as the 5G iPhone launch was delayed until October due to coronavirus-related supply chain disruption. According to With no iPhone to launch, Apple turns to accessories and wearables (Financial Times, Patrick McGee and Tim Bradshaw), this will be the first time it has not unveiled its new iPhone at the event in almost ten years! Instead, it will push the accessories business and new hardware such as the Apple Watch, a new iPad Air, new over-ear headphones called AirPods Studio and lost items tracker AirTags. It’s interesting to note that, over the last five years, sales attributed to the iPhone have fallen from 63% to 44% in the latest quarter. Over that time, its wearables and accessories sales have shot up by 144%, mainly thanks to the Apple Watch and AirPods. One interesting metric shows that for every 100 iPhones sold, Apple sells 49 pairs of AirPods and 14 Apple Watches. In contrast, for every 100 Galaxy S phones sold, Samsung sells 34 Galaxy Buds and 14 watches – and Apple also manages to sell at higher margins

• Tesla’s share price took a massive dive (Wednesday) as part of the wider Big Tech sell-off where investors decided to crystallise the massive gains they’d made. However, the juiciest stories in electric vehicles this week concerned Nikola, the upcoming electric truck specialist! First of all, General Motors announced it had taken an 11% stake in the company (Wednesday) and will work jointly on an electric truck called the Badger – but then allegations surfaced in a report by Hindenburg Research which posed major questions about the legitimacy of the company’s claims to proprietary technology (Friday)! Some of the allegations are absolutely shocking! Nikola subsequently said it had “nothing to hide” and threatened legal action. Nikola’s share price fell by 12% initially on the report, then fell another 8% in the following day’s trading. This is going to get very messy IMO. Nikola says that it is just a short-seller talking its own book, but Hindenburg is saying that Nikola is lying to its investors
• Everyone was disappointed by AstraZeneca pausing its coronavirus vaccine trial for one of the big hopes (Wednesday) after a “suspected adverse event”, but they played down its significance (Thursday) and it emerged over the weekend that trials resumed once more with the Oxford University venture, according to Oxford and AstraZeneca resume coronavirus vaccine trial (Financial Times, Clive Cookson). Interestingly, the trial was actually paused last Sunday but the news did not emerge publicly until Wednesday. Also, this is the second time the Oxford-AstraZeneca trial has been put on hold – and it wouldn’t be a surprise if there were further pauses along the way
• AND FINALLY, LVMH is officially trying to back out of its purchase of Tiffany (Thursday) that it proposed in November last year. A massive bun-fight lies in prospect, but I think this is all about LVMH getting a better price

• Watson’s Yearly updates: watch this space!

This week, my favourite “alternative” story by far was Toddler leaves people in tears as baking with grandma descends into chaos (The Mirror, Luke Matthews). This kid is hilarious (and very, very fast). Also, how about this for an unusual first date idea:  A chain of “welding theme parks” is opening in Japan (SoraNews24, Casey Baseel). See you next week!