Watson’s Weekly 16-05-2021

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 the US, Americans are facing higher prices (Monday) according to research and markets were spooked by official figures showing that US inflation came in above market expectations (Thursday), prompting more speculation that inflation could get out of control without interest rate rises. Another major event in America that made the headlines this week was the hacking of the major US pipeline by a group of hackers called DarkSide (Tuesday). The pipeline, operated by Colonial Pipeline, supplies around half of the entire East Coast’s fuel, so petrol stations were running dry (Wednesday) as people were panic-buying petrol (Thursday) sending it up to $3 a gallon, its highest level for seven years! It turns out that the company paid the hackers (Friday) and supply is coming back online. This really shows how vulnerable America can be and could embolden other hackers. I would have thought that, on the other hand, it will be good news for companies who supply cybersecurity software and services.
• In China, the latest figures from the National Bureau of Statistics showed that the Producer Price Index (PPI) increased at its fastest pace since October 2017 (Wednesday). Producers are currently swallowing higher commodity prices, but surely it’s just a matter of time before they pass them on to the end user. It was also interesting to see that the latest census figures show that China’s population growth has slowed down to levels not seen since 1953 (Tuesday). This is not going to be a situation that can be solved overnight, but it does store up serious problems for the future.
• In Europe, the European Commission has revised its GDP forecasts and thinks that the bloc is going to bounce back more quickly than expected (Thursday).
• In the UK, a BDO survey is the latest evidence of positivity for the economy as it showed that service sector confidence is at its highest level for 14 months (Monday) while the latest ONS data showed that the UK economy didn’t do too badly in the second lockdown (Thursday). It also showed that the creation of businesses were at their highest level for 10 years (Thursday), especially in retail, wholesale and logistics.
• In commodities, the iron ore price reached record highs (Tuesday) due to strong demand from China and the BDI, which tracks freight rates, was at its highest level for over 10 years. This is important because the BDI is used by many as a barometer for the state of world trade. It was also interesting to see that the International Energy Agency said that renewables grew at their fastest rate since 1999 (Tuesday), with wind power capacity almost doubling and solar power increasing by over 50%.
• In cryptocurrency news, there was a lot of drama this week! Elon Musk suspended the acceptance of Bitcoin as payment for Tesla’s cars (Thursday), which shocked many who assumed he was a big fan. It was all about him being concerned about the negative effect of Bitcoin mining on the environment – but I think that this is very suspect given that this is not a new phenomenon. Alternative “greener” cryptocurrencies include Ether (Thursday) or Chia (Friday). Billionaire investor Peter Thiel decided to inject $10bn into a new Bitcoin exchange to be called Bullish (Wednesday), as a competitor to Coinbase and a brand new cryptocurrency called Internet Computer token launched this week (Thursday) and is already worth $45bn! It is now the world’s 8th biggest cryptocurrency. Then an MD at Goldman Sachs quit his job (Wednesday) because he’d done so well from his Dogecoin investment – but don’t take this as a cue to try the same thing! It sounds good but MDs at Goldman are paid loads and the spare cash that he can afford to fritter away is more than most people could earn in a decade or more (or even in a lifetime)! Everyone is just looking for the next Bitcoin…

• Nio continues to push battery-swapping (Monday) as the way forward for EVs and is going to roll the tech out in Norway as part of its European expansion plans. Interestingly, Renault is mulling the possibility of swappable batteries (Wednesday), having originally aired the concept about a decade ago. There was a piece of research published by BloombergNEF which said that the cost of producing EVs and “traditional” cars will reach parity by 2027 (Monday), but clearly we won’t know that for sure for a while.

• In the US, consumers are spending on hotels and secondhand cars (Tuesday) while concerned British parents are looking to put their kids into private schools (Tuesday) given that many have had their education badly affected by the pandemic, that school fees have stayed relatively static and because some have been able to save/do well over the period.
• As far as UK retail is concerned, online sales are weakening (Thursday) according to the latest data from IMRG Capgemini as people flock back to the high street, Hotel Chocolat has done well enough to pay down furlough (Tuesday), Greggs is getting back on track (Tuesday) and Pret has made an interesting move to do an in-store trial at Tesco (Tuesday) which should help with broadening its customer and geographic exposure if it goes well. A new discount store is going to open (Monday) and plans a serious expansion. Meanwhile, Dixons, PC World and Carphone brands will disappear (Friday) to be rebranded Currys by this October. Dixons Carphone will also change its name to Currys plc on the London Stock Exchange.

• In China, Meituan caused a lot of controversy (Tuesday) after its chief exec posted a poem on social media that investors interpreted as something criticising President Xi Jinping, causing its share price to crater. It is under scrutiny currently for anti-competitive behaviour. The Chinese government also threatened the Swedish government (Wednesday) over its stance on Huawei, saying that Ericsson would suffer as a result and Alibaba announced its first quarterly loss (Friday) since flotation in 2014 as their recent big fine weighed on them.
• In Japan, SoftBank posted record profits as its various investments paid off (Thursday), although they made most of their money in one of their major funds from just three companies! Talking of SoftBank, Britain’s The Hut Group announced a joint venture deal with the company (Tuesday) on a yet-to-be-formed tech division.

• Ebay decided to take on banks and PayPal (Thursday) offering business loans via a new division called “Capital for eBay Business Sellers”.
• Delivery Hero announced that it would return to Germany to do business (Thursday). What is it about Germany?? Uber Eats recently announced that it would return there in a move clearly designed to chip away at Just Eat Takeaway’s dominance.
• British biotech company Allergy Therapeutics announced human trials of its peanut allergy vaccine (Monday), which is a real breakthrough. Even if all went well, though, it won’t hit the shelves for a few years because of all the tests it has to get through.
• Virgin Active won a case in the High Court (Thursday) that gave it the right not to have to pay back rental arrears to landlords. This decision could open the floodgates to a lot of similar actions IMO and seems like it could be the “new” CVA…

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

My favourite “alternative” stories of the week included the uplifting yet painful-sounding Paralysed man makes miracle recovery – so he can kick his friend in the balls (The Mirror, John Bett) and the fabulous Artist creates unique skatepark that looks like a frying pan full of bacon and eggs (The Mirror, John Bett). Amazing!