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.
IN BIG PICTURE NEWS...
This was a week where the IMF spread gloom, bitcoin broke $30,000 and AI saw a rule crackdown…
- IN GLOBAL MACRO NEWS – the IMF cut its global GDP growth forecast to 2.8% due to the recent banking turmoil and the UK the G7 country with the worst growth prospects. Chancellor Jeremy Hunt disagreed with the assessment. It’ll be interesting to see whether they are right.
- IN THE US – the Fed warned that there could be a mild recession this year, fuelling speculation that more interest rate hikes are on the cards. The next meeting is to take place at the beginning of May.
- IN CHINA – we see that China escalated military drills near Taiwan and Japan that freaked everyone out but then some argued that this escalation of tensions wasn’t as bad as when former US House Speaker Nancy Pelosi visited Taiwan last year. If Taiwan fell to the Chinese, it could alter the country’s politics, the region’s balance of power and have an impact on living standards globally because it makes the majority of the world’s semiconductors.
- IN THE UK – the Bank of England’s governor aired the possibility of more interest rate rises and played down ongoing fears of a banking crisis. However, he was given food for thought as the latest ONS release showed that the UK’s economy showed zero growth in February, presumably due to the impact of the public sector strikes.
IN COMMODITIES NEWS…
- IN OIL – BP committed to developing the Gulf of Mexico oilfield with a new $9bn platform, its first there since the Deepwater Horizon disaster in 2010. This is evidence of its recent change of tack where it said it would slow down its transition from fossil fuels to renewables because the oil price is just so darn juicy at the moment (my words, not theirs 🤣).
- IN MINING – Canadian miner Teck Resources rejected Glencore’s unsolicited bid, then Glencore offered a sweetener, which Teck then rebuffed once more.
IN CRYPTO NEWS…
- Bitcoin broke $30,000 for the first time since June 2022 for no particular reason despite all the negative newsflow surrounding crypto lenders and platforms.
- The London Stock Exchange and London-based GFO-X are teaming up to offer future and options trading, which presumably feeds into the government’s previously-stated desire to become a global hub for crypto. There was also an interesting article about why bitcoin should move from proof-of-stake to proof-of-work, which basically means that mining it will use far less electricity and will therefore be much better for the environment.
IN BUSINESS & CONSUMER TRENDS NEWS...
IN BUSINESS TRENDS NEWS…
- US companies are facing their steepest fall in profits since the Covid shutdowns, something that may have gone under the radar for some given that the S&P has gone up by over 6% since the beginning of the year – but actually only 20 stocks have been responsible for almost 90% of this rise.
- The first raft of China IPOs under the new-look, slightly more relaxed, rules came to market this week and some surged by a huge amount! The huge climb implies that pricing was incorrect, but this sort of thing will probably bed down once everyone gets used to it.
- Europe’s biggest SPAC, Pegasus Europe, announced plans to wind down as this high-profile vehicle just couldn’t find anything worth buying – which may imply the death of SPACs for now (although they may be resurrected once more when interest rates eventually calm down, making debt cheaper than it is now!).
- Corporate activist investors have had their busiest quarter ever in Q1 of this year as they have been able to build stakes in companies due to their weakening share prices.
- It was also good to see that a business trends survey by BDO showed that supply chain recovery has boosted optimism among companies about the outlook, but then the latest Bank of England report highlighted a rise in both household and company defaults, with the possibility that the situation could get worse.
IN CONSUMER TRENDS NEWS…
- The latest Barclays data showed that consumer spending increased last month, but continues to lag inflation.
- In real estate, first-time buyers are opting to buy smaller homes rather than stay put and pay much higher rents. UK surveyors are getting less pessimistic about the prospects of the market, particularly as there seems to be an end in sight regarding rising interest rates.
- Meanwhile, the UK jobs market appears to be slowing down as average earnings growth is easing.
THERE WERE SOME INTERESTING DEVELOPMENTS IN THE FINANCIALS SECTOR...
IN BANKS NEWS…
- The ECB is drafting legislation that will better protect taxpayers from having to foot the bill for failing banks. This is intended to prevent individual member countries propping up banks when they shouldn’t.
- The BoE is now looking to raise UK bank deposit protection, something that Chancellor Jeremy Hunt said he is reviewing. The SVB debacle highlighted just how much better American depositors are protected (up to $250,000 currently) versus Brits (up to £85,000).
- IN INDIVIDUAL BANKS’ NEWS – HSBC is now hiring over 40 bankers in the US just weeks after buying SVB’s UK operations for £1. I would have thought this would be good for both sides as long as there aren’t any nasty surprises lurking in SVB’s financials! HSBC will suddenly get access to a class of clients that it didn’t previously have access to and SVB’s bankers will be able to carry on with their business with HSBC’s nice fat balance sheet behind them! Elsewhere, JP Morgan is pushing its bankers to get back in the office, telling its MDs to be in there five days a week. This is a trend that is continuing across all investment banks!
IN ACCOUNTANCY NEWS…
- EY has called-off the plan to split its business into audit and consultancy. Basically, the EY partners in the US thought that the audit business would get too weak. It’s now in limbo and there will no doubt be a power vacuum and a ton of job cuts.
IN PRIVATE EQUITY NEWS
- KKR bought a 29% stake in PR group FGS Global, which gives strategic advice to companies and execs. The financial communications market is going through a lot of consolidation at the moment.
IN TECH NEWS...
IN AI NEWS…
- AI data breaches cause concern and prompt lawsuits from creators who object to AI models being trained using their work (and not getting paid for it).
- The US Commerce Department is looking at rules to stop AI tools spreading discrimination and harmful information, which may include some kind of certification process.
- China has gone one further with calling for security reviews on AI products to slow their release. A database to register them will be established and there must be user verification and tracking.
- Streaming sites have been warned by Universal Music Group not to let their AI models train on copyrighted songs – or else it will “not hesitate to take steps to protect our rights and hose of our artists”.
- Amazon has just announced a new AI offering that targets corporate customers. It will make new AI tools available and provide a neutral platform for businesses to integrate AI features into their offering, potentially becoming the Switzerland of cloud computing!
IN SOCIAL MEDIA NEWS…
- Twitter changed its name (although users will still know it as Twitter) to X Corp and its domicile from Delaware to Nevada in what some see as a move to Musk’s dream of an “everything app”. It was also interesting to note that Twitter announced a tie-up with online trading group eToro.
- ByteDance, TikTok’s parent, posted record profits despite headwinds with TikTok – and it was the first time that it had overtaken those of Tencent and Alibaba!
IN CHIP NEWS…
- China has been cracking down on US tech companies recently in retaliation for US sanctions but experts suggest that they won’t go too far given that China still needs AI chips made by the likes of Nvidia, Intel and Qualcomm.
- Intel announced plans to work with Arm to manufacture its mobile phone chips as it pushes ahead with plans to open up its manufacturing facilities to third parties to keep revenues going. In the meantime, Germany is urging Intel to spend more on its megafab in Madgeburg. Meanwhile, SoftBank has committed to listing Arm in New York, potentially this autumn and it also announced plans to sell down most of its Alibaba stake, leaving it much more vulnerable without that perennial buffer.
IN CAR NEWS...
IN EV NEWS…
- The US is trying to accelerate the shift to EVs by mooting the possibility of implementing tougher emissions targets.
- China car manufacturers are targeting Europe with models that have all sorts of gizmos and up to 25 marques will be targeting the UK from next year! Meanwhile, Tesla increases its China investment, showing that it is very much committed to the country.
- IN INDIVIDUAL COMPANY NEWS – Arrival is running low on cash and BMW continues the shift to EVs.
IN OTHER CAR NEWS…
- Ford announced the launch of Britain’s first hands-free car, which just gained Department of Transport approval.
- Hyundai and Kia are being sued by a number of US cities who accuse them of doing too little to protect their cars – and this is leading to more thefts of the cars, which is taking up valuable police resources.
IN OTHER NEWS...
- IN SUPERMARKETS – Tesco’s profits tumbled thanks to the effects of inflation and it is cutting the price of everyday items to attract cash-strapped shoppers. Sainsbury’s is also cutting prices, particularly to Nectar card holders.
- Germany looks set to legalise personal use of cannabis – and when it does it’ll be the biggest country in the world by population to legalise it.
My favourite “alternative” story this week was actually the video of the “ranger roll”! I haven’t tried it yet, but it looks like it’s very effective! Fast forward to 2mins 20secs to cut out the preamble 👍