Watson’s Weekly 15-01-2022

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.

This week was dominated by news about INFLATION, NATO vs Russia and, of course, BoJo’s highly inappropriate partying. So, without further ado:

• The US Labor Department announced that inflation had increased by a whopping annual rate of 7% in December (Thursday), which was the biggest 12-month increase since June 1982! It was the seventh consecutive month for the rate of inflation being more than 5%! Fed chief Jay Powell sounds like he’s softening everyone up for an interest rate increase (Wednesday) because, in order to power labour markets higher for longer “we are going to need price stability”.
• Meanwhile, the European Central Bank continued to do nothing despite the incoming new Bundesbank chief Joachim Nagel pushing for them to do something about rampant inflation levels in Europe (Wednesday).
• With regard to the UK, chief European economist at Goldman Sachs, Jari Stein, thinks the UK’s got worse to come in inflation (Wednesday) and that the bank is going to make more interest rate increases to bring us to 1% by year end.

In terms of all the NATO vs Russia chat that kicked off this week,

• There were meetings (Monday) to try to de-escalate the heat between NATO and Russia regarding Russia’s build-up of troops along Ukraine’s border. Russia argued that NATO is going against a 1997 agreement that it would not permanently station military forces in former members of the Soviet bloc and limit the number of troops and equipment there. This all changed when Russia annexed Crimea from Ukraine in 2014 and NATO increased its presence in Poland and the Baltics. The US and Russia extended talks (Tuesday), but didn’t achieve anything and, by the end of the week, the Kremlin concluded that the talks proved to be “unsuccessful”. President Putin said he’d be open to more talks but to give it a few days before resuming.

Then it all started to kick off in the UK for Prime Minister Boris Johnson as a more serious “partygate” scandal broke (Thursday) than the one that weakened his credibility last year, all because he was actually in attendance. I don’t see how he can survive this and think that the official investigation that is going on at the moment will be used as cover to give potential replacements time to formulate plans (but that’s just my opinion and not the official line). “Fortunately” for BoJo, it looks likely that he will be out of the public eye as a member of his immediate family tested positive for Covid. Hmmm. Interesting timing.

• UK companies are feeling optimistic (Monday) according to surveys from Deloitte and Make UK although the one from BDO was more downbeat due to the effect of Omicron.
• UK companies will be facing more difficulties as food import costs look set to rise (Monday) following the introduction of new post-Brexit checks that will entail more admin. Also, SMEs are struggling with dramatically higher utility bills (Monday) which could prove to be fatal for some.
• It seems that buying in instalments is spreading. A start-up called Fly Now Pay Later just raised £55m in funding to expand in the US (Tuesday) and it helps users to split payments for holidays over 12 months with a sliding scale of interest rates from 0-40%. Over 250 companies currently use its services.
• Funnily enough, Heathrow passenger numbers hit a record low in 2021 (Wednesday). This was its lowest number of passengers since 1972!

• Volume recruiter Hays is raking in the placement fees (Friday) while rival Robert Walters highlighted wage inflation (Wednesday) and another recruiter, Morgan McKinley, said that almost three-quarters of employees said they’d quit if they could do at least some home working (Wednesday). Meanwhile, major London law firms are facing hiring difficulties (Monday) because everyone is chasing the same candidate pool, something that is also forcing Pret a Manger to raise its wages (Thursday).
• There was a bit of controversy this week as both Ikea (Monday) and Next (Friday) joined a growing band of employers who are limiting sick pay for the unvaccinated in certain circumstances. Will this catch on??

• In tech hardware, Apple got investors excited about its potential involvement in the metaverse (Thursday) despite the company not saying anything about it in particular! Philips saw its shares fall sharply on worries about a major product recall (Thursday) and profits warning and the future’s looking bright for semiconductor maker TSMC (Friday) as demand for chips generally continues to be strong and because they are also one of only two suppliers (the other being Samsung) who make advanced chips using 5nm technology.
• In software, payments platform Checkout.com managed to raise $1bn in its latest funding round (Thursday) that gave it an implied valuation of $40bn, making it the UK’s most valuable private tech company. Also, restaurant tech company Flipdish, became a unicorn (Thursday). Its software provides tech to create food ordering apps and just got a slug of money from its latest funding round that tipped its implied valuation to $1.25bn

• Figures from the China Passenger Car Association showed car sales rising for the first time in three years (Wednesday). This was powered by strong sales of EVs despite the ongoing global chip shortage and Covid outbreaks hitting production. Chinese brands including XPeng and NIO put in a strong performance but it was mixed for the foreigners as Tesla did well but VW didn’t (Wednesday).
• Beyond Meat is one of the biggest shorts in America (Friday) as investors are more inclined to doubt the hype.
• Private equity firm TPG had a great IPO (Friday). It was the latest in a line of private equity firms deciding to crystallise value in their businesses and getting currency to hire and keep future and existing talent.
• The Grand Theft Auto maker Take-Two decided to buy FarmVille maker Zynga in a $13bn punt on the future of mobile gaming (Tuesday). This should be interesting as they specialise in different platforms.

• Watson’s Yearly updates: These will be left until the next edition of Watson’s Yearly that will be published shortly

My favourite “alternative” story this week was Why are cats scared of cucumbers? (Metro, Nicole Vassell). Well I never!