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 the week where Macron suddenly announced an election, when Raspberry Pi had a decent market debut and when Europe decided to slap big tariffs on Chinese EV imports…
- IN THE US – the Fed decided kept interest rates unchanged and signalled that there will only be one interest rate cut before the year is out. Inflation has proven to be stickier than hoped but then official figures showed that inflation fell to 3.3% in May, which still keeps hopes of an interest rate cut alive. Meanwhile, the US announced 25% tariffs on natural or synthetic graphite from China that will come into force this month (they are trying to force development of an EV supply chain that doesn’t rely on China) as well as further sanctions on Russia where it will treat any foreign financial institution that transacts with a sanctioned Russian as if it was working directly with Russia’s military-industrial base.
- IN EUROPE – the far-right made major gains in the European parliamentary elections, so much so that President Macron ordered a sudden French election, which means that he could be a centrist president presiding over a populist government if he loses. At the moment, it looks like Macron’s party will suffer a wipeout. Things were also pretty bad in the EU’s biggest economy as the German coalition has so far failed to approve a budget for next year as they are all pulling in different directions. Italy’s PM Meloni, in contrast, saw her position strengthened in the elections, putting her in a position to be able to bend Europe towards her more conservative policies.
- IN THE UK – the UK’s GDP flatlined in April thanks to poor weather and sluggish performance in retail and construction. Things just aren’t going Sunak’s way at the moment! In the meantime, we saw more policy announcements after the publication of LibDem and Conservative manifestos earlier in the week while Labour made us wait until Thursday to unveil theirs. Nigel Farage added further spice to the mix as his party, Reform UK, edged ahead of the Conservatives in the polls.
IN ENERGY NEWS…
- Italian energy start-up Nucleo is planning a fleet of 20 mini-nuclear reactors for Britain, which would be housed in up to six sites.
- Italian PM Meloni has decided to slow down the rollout of solar panels on farmland and critics are saying that this will slow down Italy’s ability to he solar capacity targets by 2030.
IN OIL & GAS NEWS…
- The IEA warned of a “staggering” excess of oil supply versus demand by 2030 as China’s growth slows while global production increases. It also argued that OPEC+’s power, as a result, would wane. Will this make owning an EV even less compelling if oil prices fall to much lower levels over time?
- State-owned oil giant Saudi Aramco just signed its first deal to buy LNG in a non-binding deal with US LNG developer NextDecade to supply them over the next 20 years (a binding agreement is expected to follow). This is just the latest deal where a Middle Eastern oil producer has signed an LNG supply deal in order to tap into the expected rise in demand.
IN MARKETS NEWS…
- The UK is on the verge of announcing the biggest overhaul in its listing rules for 40 years, which means that the IPO process will be more streamlined whilst still maintaining standards. This coincides with an uptick in market sentiment – something that the successful flotation this week of Raspberry Pi evidenced – although we did hear of another FTSE company looking to switch its listing from London to New York (the company in question is Ashtead which now gets over 90% of its annual turnover from the US!). Meanwhile, Walgreen Boots Alliance decided against floating Boots, preferring instead to find a buyer (just remember it did this before and couldn’t find anyone).
- IN M&A NEWS, takeover talks between Paramount and Skydance have now ended, so we’ll just have to see what comes next and Voodoo acquired BeReal for €500m with a view to launching paid advertising on the latter’s photo-sharing platform. It’s Voodoo’s biggest ever acquisition.
IN BUSINESS & EMPLOYMENT TRENDS NEWS...
IN BUSINESS TRENDS NEWS…
- GroupM, a division of advertising giant WPP, has predicted that global ad revenues will grow by 7.8% in 2024 (excluding spend on US political ads). This is a major upgrade from its previous forecast and suggests that the global economy may be turning a corner.
- Private credit is starting to get increasingly competitive, particularly at the high end of the market, as more competitors turn their attention to this hot area. It will clearly become more difficult to make margins in a more crowded market but you could argue that if global economies improve, there will be more business to go around for everyone. Will this mean consolidation among existing players?
IN EMPLOYMENT TRENDS…
- The latest TUC figures show that UK unemployment is rising at the fastest rate of all OECD countries over Q1 (but a) obviously the TUC’s going to say that as it’s a union and b) rates are still at very low historic levels) while another report by KPMG and REC shows that permanent job appointments are continuing to fall. I’d suggest that there is probably an element of employers slowing things down until they know who’s going to be in government next.
- Meanwhile, wage growth rose thanks to the 10% living wage increase that came in on April 1st, which means that the Bank of England may be less inclined to cut interest rates just yet.
- There was an interesting article in the FT saying that English language and literature grads may actually benefit from the rise of AI as their articulate nature equips them well to be prompt engineers…
IN AUTOMOTIVE NEWS...
IN TARIFF NEWS…
- The EU decided to slap big import taxes on Chinese EV imports of up to 38% after a long investigation. Chinese manufacturers are likely to be mostly unfazed as this will not have come as a shock but you would have thought that China will retaliate with tit-for-tat taxes on imports of luxury European cars from Europe, for example.
IN INDIVIDUAL COMPANY NEWS…
- Tesla shareholders gave Musk what he wanted by approving his record pay deal and Tesla’s incorporation in Texas but it looks like the price of the Model 3 will rise in Europe thanks to the new China imports tariff.
- Troubled EV-maker Fisker announced voluntary recalls of its Ocean SUVs in North America for software-related problems. This is just one of those update things but it’s grief that Fisker could do without.
- Ford has expanded sales of its EVs across all of its US dealerships now, which means that the majority of Americans will be able to get their hands on their EVs.
- VW is going to start selling solar panels with its electric car chargers thanks to an agreement with solar panel installer Otovo. EV customers will get a roof-mounted solar panel/wall charger combo as part of the deal which should help drivers cut costs.
IN REAL ESTATE NEWS...
IN CHINA…
- Data from the National Bureau of Statistics highlighted a massive glut of empty properties as of April despite attempts by local authorities to sweeten the deal. Buyer reluctance is making life worse for developers as they need to sell properties to develop more (or at least get themselves out of the debt hole they’ve dug themselves into).
IN UK RESIDENTIAL PROPERTY NEWS…
- The UK rental market is proving tricky for tenants, according to the latest RICS numbers which show that increasing demand and limited supply of rental properties means that rents are likely to remain higher for longer.
- RICS numbers also show that interest from would-be buyers is waning as mortgage rates have risen – but I’d also suggest that they are waiting to see what happens in the aftermath of the election.
- UK housebuilder Crest Nicholson issued a profit warning and cut its dividend. Initial expectations of a sooner-rather-than-later interest rate cut from the Bank of England are now receding, hence the cooling off in sentiment. Ouch.
IN COMMERCIAL PROPERTY NEWS…
- Revolut has decided to move its HQ to a more central location in Canary Wharf despite its ongoing lack of a full banking licence. This is good news for Canary Wharf Group, which appears to be seeing a bit of an exodus of tenants.
IN TECH NEWS...
- Apple announced a partnership with OpenAI that will enable it to roll out a new AI system (called “Apple Intelligence”) that is device-based and not cloud-based (although there will be that option). Elon Musk didn’t like this and threatened to ban Apple devices from his companies for being an “unacceptable security violation” but this didn’t dampen sentiment as Apple overtook Nvidia again as its valuation rose on the back of the AI update.
- OpenAI announced plans to beef-up its lobbying team in order to head off more challenges from politicians and regulators. Meanwhile, Elon Musk announced that he’d drop his lawsuit against the company for allegedly breaching the company’s original mission to benefit humanity.
- French AI start-up MistralAI got another €600m of funding barely a year on from its launch as it gets more financial firepower to help it become a European AI champion.
IN OTHER NEWS...
- IN RETAIL NEWS – the British Beer & Pubs Association is expecting a boom in beer sales in the four weeks of the men’s Euro 2024 tournament (although that will very much depend on how England and Scotland actually progress!) while research from GlobalData Retail reckons that the wider hospitality sector could also get a major boost as well as retailers who may benefit from increased sales of goods like TVs and sportswear. Meanwhile, DFS cut profit forecasts due to weak demand and supply delays. Furniture retailers generally tend to do well in a booming property market (consumers tend not to buy tons of sofas in their lifetime – and if they do it, it tends to be when they move house) so I guess that there’s a lag between the housing market turnaround and when it filters through to retailers in the furniture and DIY space. Over in the US, GameStop shares dropped sharply as the company took advantage of the Roaring Kitty boom and sold 75m of its own shares. The madness continues…
- IN MUSK-RELATED NEWS – the Wall Street Journal published a damning in-depth piece about Musk’s questionable relationships with employees/ex-employees. If the allegations are proved to be correct, this could be disastrous for all of his companies as he is the face of those companies and they don’t appear to have realistic succession plans. I do, however, believe that Musk is too important to too many companies, industries and, indeed, America so I wouldn’t be very surprised if this story just faded away. Elsewhere, Bharti Airtel and JioSpaceFiber will soon take on the might of Starlink in India, a market that Musk has been trying to crack for the last three years. May the satellite wars begin!
- IN FINANCIALS NEWS – Invesco has shut down its standalone UK equities team as the US asset manager merges it with the European team, Wise saw its share price drop by 15% as the CEO announced slower growth rates and Legal & General is planning to streamline its business and focus on core areas by expanding its pensions business and selling housebuilder Cala.
BANTER
My favourite “AND FINALLY” video this week was the one where Gordon Ramsey got pranked! So satisfying!