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...
The drama continued with energy, the heatwave continued to call all sorts of problems and SoftBank had a historic moment regarding its stake in Alibaba…
- IN THE US – Inflation eased versus July (Thursday) on lower petrol prices, taking the pressure off the Fed and Biden for the moment, who continue to battle against rising prices. US factory prices fell as well (Friday), in another sign that inflation may be easing.
- IN CHINA – we see that the mainland’s zero-Covid policy continues to have negative effects as Hong Kong’s population declined by the sharpest rate in at least 60 years (Friday) as Hong Kongers emigrated to destinations including Australia, Portugal and Canada. Tensions between China and Taiwan continue to be stoked as Taiwanese authorities are trying to stop Foxconn from investing $800m in China’s Tsinghua Unigroup (Thursday) as it wants to align more with the US. Foxconn investing such a sum in a Chinese company may be seen to go against this.
- IN EUROPE – some say that Europe is going to be in a worse inflation crisis in the UK because of its greater reliance on Russian energy supplies (Monday), something that was alluded to by Germany’s finance minister who talked about how “fragile” his country’s economy was thanks to this (Friday), which is serious because Germany is the bloc’s main economic driver.
- IN THE UK – fears among UK businesses about inflation reached their highest ever level (Monday), according to a monthly report by BDO. This was all down to a weaker pound, higher labour costs, labour shortages and supply chain problems. This won’t have been helped by the Bank of England saying last week that it expects UK inflation to hit 13%.
The topic of energy is never far from the conversation and there were more developments this week as countries panic about not getting enough…
- Russian oil flow to central Europe stopped this week (Wednesday), putting loads of pressure on countries like Slovakia, the Czech Republic and Hungary and European electricity prices hit new highs (Friday). The IEA said that western sanctions intended to make life difficult for Russia haven’t worked (Friday) as oil shunned by the West is just going to countries like India, China and Turkey.
- Elsewhere, German utility company E.ON cut the value of its stake in Nord Stream 1 (Thursday), the pipeline connecting Western Russia to Germany via the Baltic Sea. It owns a 15.5% stake that they had valued at €1.2bn in March but they decided that this was now worth about €500m. Norway decided to cut power exports (Tuesday) as hydroelectric plants aren’t generating nearly as much power as normal thanks to the European heatwave, and this may have negative implications for the UK. Also, Danish wind turbine manufacturer Vestas posted disappointing Q2 results (Thursday) and it said that it was looking forward to the positive impact of upcoming renewables subsidies in the US.
There was more bad news in crypto this week…
- Coinbase, one of the world’s biggest crypto exchanges, posted a big swing into a chunky Q2 loss (Wednesday) with trading volumes halving as many expect a “crypto winter”.
WE CONTINUE TO MONITOR THE CONSUMER MINDSET...
- IN REAL ESTATE – UK builder Bellway posted record revenues and an outlook for a strong 2023 (Wednesday) while mortgage lenders are having to turn away customers (Wednesday) who are flooding in with applications in an attempt to beat more expected interest rate rises – which then lead to higher mortgage rates. That said, estate agents are reporting a continued fall in buyers (Thursday) while top-end estate agent Savills is getting a bit wobbly about global property markets (Friday), mindful of the effects of inflation and tricky prospects for the office market. It seems to me, then, that the UK residential property market is being driven by a shortage of supply, not because of red-hot demand. This is something that is true of the current state of the UK rental market as London tenants are still facing “increasingly unaffordable rents” (Tuesday) with weird things like tenants competing in bidding wars and having to pay 12 months of rent in advance (sure signs of an overheating market!) occurring.
- CONSUMER SPENDING IS CHANGING – and it was interesting to see the figures from the BRC and KPMG which showed that UK consumer spending grew in July versus the previous month (Tuesday), something that was echoed in the latest update from Barclaycard (Tuesday), which showed that spending increased by 7.7%, although that was probably more due to rising prices rather than higher spending volumes. WE ARE SPENDING on travel (Wednesday), as air fares have shot up; hotels (Wednesday), as IHG had a storming first half; and high-end fashion (Wednesday) as the likes of Ralph Lauren and Michael Kors were the latest labels to announce strong performances. WE ARE NOT SPENDING so much on used cars (Wednesday) as supply chain problems mean that there just aren’t as many available; takeaways (Thursday) as Deliveroo, aka “Flopperoo” thanks to its dire share price performance since flotation, publish its latest set of disappointing numbers; and gambling (Friday) as Entain, the owner of Ladbrokes and Coral, saw punters betting less.
- IN EMPLOYMENT – IWG’s poor results suggested the the return to office wasn’t as good as it had predicted (Wednesday), recruiter PageGroup reported early signs of a job market slowdown (Tuesday) and German investment bank Berenburg said it would cut 5% of its staff (Tuesday). I think we’ll see more job cuts among investment banks as deal flow continues to get patchier. In other trends, a report from the International Labour Organisation said lockdowns had hit youngest workers hardest (Friday) and it turns out that larger companies have been raising wages (Friday) to help staff counter the rising cost-of-living. Although City workers have continued to get big pay raises (Monday), there is a rise in demand for companies who offer pay advances (Monday), like Wagestream, which provides employees of signed-up employers the ability to draw on their wages before they get paid.
IT WAS ANOTHER WEEK OF FINANCIAL SECTOR REPORTING...
- Abrdn announced a big pre-tax loss for the first half of 2022 (Wednesday) as customers withdrew their cash at a faster-than-expected rate due to tricky market conditions while Prudential suffered from repeated Hong Kong lockdowns (Thursday) and said that it expected market conditions to be “challenging” for the rest of the year. Meanwhile, L&G benefited from more companies wanting to offload their pension schemes (Wednesday) and Aviva did better-than-expected in generating cash (Thursday), which prompted a buy-back. Admiral had a disappointing time as its first-half profits almost halved (Thursday) and the much-hyped Robinhood saw its nightmare continue (Thursday) as users continued to abandon the platform.
TECH WAS ALSO PRETTY ACTIVE IN TERMS OF NEWSFLOW...
- IN SEMICONDUCTORS – some chip-makers, including Micron Technology, reckon there will be a slowdown in demand (Wednesday) while Intel continues to appeal to the UK to put money into chip production (Tuesday).
- SoftBank had a bad week this week as it announced a massive €23bn loss (Tuesday) shortly followed by a big sell-off of one of its most famous investments, Aliababa (Thursday).
- Gloom in the tech sector continued as Microsoft is cutting costs (Wednesday) and I wonder whether we are going to see redundancies next.
AND IN OTHER NEWS...
- IN EV NEWS – Elon Musk sold about $7bn-worth of Tesla stock the period of over a few days (Wednesday) as the Twitter thing drags on and Rivian saw its losses nearly triple (Friday) although the Q2 results were largely in line with expectations.
- IN HEALTHCARE NEWS – GSK and Haleon could lose billions (Friday) as there are fears that GSK’s common stomach ulcer treatment, Zantac, may be carcinogenic. If it is proved to be the case, there could be huge damages to pay, something that another rival company is aware of as Johnson & Johnson said it would withdraw talc-based baby powder globally next year (Friday) a few years after it was withdrawn from the US and Canada for harming some female users.
- IN MEDIA NEWS – US TV networks and new publishers reckon they are seeing a slowdown in the advertising market (Monday), but Fox (Thursday) and News Corp (Tuesday) were quite upbeat about it. It was also interesting to see that Disney reported an earnings surge (Thursday), with success in Disney+ subscriber numbers playing a part.
- IN LEISURE – Tui suffered a Q3 loss thanks to flight disruptions (Thursday) while hotels increased prices (Monday) and restaurants remained in the red (Monday) thanks to higher debt costs, staff shortages and rising energy bills.
- THE HEATWAVE is also having some serious consequences as UK farmers are warning of potential vegetable shortages (Monday) and olive oil prices are rising (Wednesday) because the lack of water is ruining harvests while water levels on the Rhine have fallen significantly (Thursday), which will put further pressure on supply chains.
- ELSWHERE, Siemens had its first quarterly loss in 12 years (Friday), Britishvolt’s Northumberland gigafactory is on “life support” (Friday) and Next said it would take a £15m stake in struggling apparel retailer Joules (Tuesday).
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!