Watson’s Weekly 15-02-2025

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.

It’s the Trump and Musk show all over again this week!

ON WARS…

• ON UKRAINE – Trump moved to end the Ukraine war by having a 90 min phone call with Putin. It sounds like Putin’s getting a lot of concessions from Trump which delighted markets but annoyed Europeans and Ukranians alike, because no-one else got a look-in.
• ON ISRAEL/HAMAS – Trump warned that all Israeli hostages should be released by Saturday or fighting would resume.
• ON TAIWAN – US Navy Admiral Paparo warned that China’s military manoeuvres near Taiwan could very easily turn into an actual invasion. Tensions continue…
• ON DEFENCE SPENDING – Trump said in an interview that he is looking to make big cuts to the defence budget as Musk’s DOGE shakes things up.
• IN OTHER US MACRO NEWS – inflation picked up in January – and that’s before any of Trump’s inflationary policies have had a chance to take effect! Trump also decided to halt the enforcement of the law banning the bribery of foreign officials under the 1977 Foreign Corrupt Practices Act (FCPA), justifying it by saying that “it’s going to mean a lot more business for America”. If he’s right and everyone does this anyway, prices of bribing officials will surely go up now that America is officially “back in the game”.
• IN TRUMP/MUSK BRO-MANCE NEWS – The Terrible Twins launched a large-scale plan to cut out swathes of the federal workforce in order to cut costs and boost efficiency. Musk said at the World Governments Summit that “I think we do need to delete entire agencies, as opposed to leave part of them behind”. There was a really good article about how each of Musk’s six companies will benefit/suffer from Musk’s closeness to Trump: X and SpaceX should benefit the most, xAI could benefit (but policies will benefit rivals too), Starlink has already suffered a bit of a backlash from Musk’s involvement in politics, as has Tesla. It’s not clear yet to what extent it will benefit Neuralink and The Boring Company.
• IN TARIFF NEWS – Trump announced 25% tariffs on steel and aluminium imports, with no exceptions. He conceded that “prices could go up” in the short term but Canada, Mexico and the EU talked about retaliating with tariffs of their own while the new British ambassador to the US said that we should make the most of Brexit and tout ourselves as being “not Europe”.

IN ENERGY, GAS & OIL NEWS…

• IN ENERGY NEWS – According to research from the Centre for Research on Energy and Clean Air and Global energy monitor, China built coal-fired power plants with 94.5GW of capacity over the course of 2024, which is the most it’s added since 2015! China accounts for around 30% of global greenhouse gas emissions, making it the world’s biggest emitter.
• IN GAS NEWS – European gas prices hit a two-year high thanks to cold weather and strong demand from Asia, necessitating more withdrawals from storage facilities that had already been running lower than normal.
• IN OIL NEWS – Activist investor Elliott Investment Management has built up a stake in BP, so it’s no doubt going to agitate for change, but BP suddenly promised a “new direction” after its profits dropped by a third. Details on the turnaround plan will be revealed at an investor day on February 26th. Meanwhile, Chevron announced that it would cut up to 20% of its global headcount by the end of next year as part of wider plans to cut $3bn in costs by the end of 2026.
• IN GOLD NEWS – the gold price breached $2,900 an ounce this week for the first time ever, meaning that it has risen by more than $1,000 an ounce since October 2023! This is probably a reflection of how investors feel about an uncertain world at the moment!

IN BUSINESS TRENDS…

• A report by EY-Parthenon UK chief execs showed that a whopping 82% of chief execs expressed optimism about the business landscape for the next 12 months! The vast majority of leaders thought that profits and income would also rise, all of which seems to run counter to many other indicators we’ve been seeing recently, but hey let’s hope this is a sign of things to come!
• Investment in data centres may face some tricky situations as the likes of Blackstone, Bain Capital, Warburg Pincus and General Athletic have poured billions of dollars into data centres in Malaysia that serve ByteDance, which could get awkward with tightening sanctions from the US!

IN EMPLOYMENT TRENDS…

• UK recruiters continue to be downbeat about the job market, according to the latest monthly survey by KPMG and REC. They say that they are seeing the most difficult conditions on the British jobs market since the pandemic as employers’ confidence got shot to pieces by Reeves’s Budget.
• DEI continues to fade as we now see that Walt Disney has become the latest company to ditch its “diversity and inclusion” policy to be replaced by a new “talent strategy” metric in its executive pay scheme.
• Office attendance is becoming increasingly important as a performance metric as the balance of power shifts towards employers in a loosening jobs market.

IN OFFICES…

• US firms have been buying up central London offices at the bottom of the market, according to data from CoStar. The West End appears to have been a “target-rich environment” as Blackstone, Realty Income, Oval Real Estate and Global Holdings have been buying mainly from East Asian investors.

IN STUDENT ACCOMMODATION…

• Private developers seem to be piling into the UK student housing sector despite falling numbers of international students and ongoing financial issues in the higher education sector. They like the high rests and property density.

IN RESIDENTIAL PROPERTY…

• New property listings are rising as mortgage rates fall, according to the latest RICS survey. Real estate agents are seeing the broadest influx of property coming to market since the pandemic!
• The number of first-time buyers increased by 19% in 2024, according to the latest research from Halifax. I expect we’ll see a lot more action as we approach the stamp duty deadline in April!
• The UK’s biggest housebuilder, Barratt Redrow, upgraded its profit guidance thanks to “solid customer demand” over recent months. They were also pretty positive about the outlook as well!
• Applications from local authorities across England put applications in for over 100 sites to become “new towns” as part of the government’s commitment to build more housing. PM Starmer believes that this will be Britain’s biggest housebuilding programme for over fifty years!

IN AI NEWS…

• President Macron announced a €109bn investment in AI in France over the next few years at the AI Action Summit in Paris event. This is a considerable amount of money, but it’s still way less than the $500bn being put into Stargate and the $300bn that Google, Amazon, Microsoft and Meta put into AI this year alone!
• A consortium led by Elon Musk put in a cheeky offer of $100bn to buy the non-profit part of OpenAI. Musk subsequently said that he’d drop the bid if its board abandoned its plans to transition to becoming a for-profit company.

IN CHIP NEWS…

• China’s leading maker of memory chips, CXMT, is continuing to take global market share from the like of South Korea’s Samsung and SK Hynix as well as America’s Micron. It seems that CXMT and DeepSeek are spearheading Chinese efforts to cut dependence on foreign tech in AI.
• Arm announced plans to launch its own AI chip later this year after Meta stepped up to be one of its first customers. This could certainly make things interesting given Arm’s reputation.

IN OTHER TECH NEWS…

• TikTok returned to US app stores this week, which would suggest that the Trump administration green-lit it. Meanwhile, Musk dismissed rumours that he’d buy TikTok. No-one 100% believes him, so we’ll just have to see how this actually works out…
• SoftBank posted a quarterly loss for the three months to December, falling short of market expectations. This was mainly due to losses at its Vision Funds and forex impact as the dollar strengthened versus the yen.

IN CONSUMER-RELATED NEWS…

• UK used EV sales hit a record last year thanks to massive depreciation but there’s a nasty surprise looming over the horizon – when higher rates of VED come in, meaning that EV drivers will have to pay road tax for the first time, depending on the age of the car concerned.
• UK consumers are spending more on health foods, according to the latest Barclays spending data. Food supplements, vitamins and high-protein foods have been seeing stronger sales (but I guess this is the beginning of the year!).
• It seems that consumers are still spending on beer, though, according to Heineken, which saw its annual numbers outperform market expectations.
• Demand for summer holidays is slowing down, according to Tui, prompting investors to worry about whether holiday demand across Europe is running out of steam.

IN RETAIL NEWS…

• IN LUXURY – Kering saw sales crater as the troubled parent company of Gucci continues to suffer. Its Q4 numbers fell short of expectations, but it’s going to find the going difficult as it’s also currently looking for a new creative director. On the other hand, EssilorLuxottica, the parent company of Ray-Ban (and loads of others!), announced strong Q4 numbers due to solid performance from North America and China.
• WH Smith is looking vulnerable as at least of half of WH Smith’s 500 high street stores could close under a new owner. Offers for the stores are expected in the next few weeks.

• IN CHINA – Chinese battery giant CATL is applying for a secondary listing in Hong Kong, which will be great news for the territory. Meanwhile, speculation is increasing that two state-owned car makers – Dongfeng and Chongqing Changan – could get together.
• The Honda/Nissan deal is now dead but Foxconn has confirmed interest in potentially buying Renault’s stake in Nissan.
• Tesla is talking about potentially opening an Oxford Street showroom to prompt better sales, but TBH I think he’d be better off making fewer political rants (that would also be FREE!).
• Porsche is looking to cut 1,900 jobs in its German factories by 2029 thanks to sluggish demand for its electric models. The outlook is tricky because its profit margins are way less than the company’s long-term target and heavy investment in trad vehicles and hybrids will add to costs.

My fave video this week was the one with that ridiculously difficult-looking foot-race! The people doing that race are incredible IMO!