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...
War continues, Trump goes to China and we had the King's Speech
IN WAR NEWS…
Trump said that Iran’s response to the latest peace proposal was “unacceptable” and that the Iran ceasefire is on “life support”. So far, the Pentagon reckons that the war has cost the government $30bn.
Meanwhile, Lebanon and Israel were due to meet in Washington to discuss whether or not to extend the current ceasefire agreement. The agreement was extended.
IN TRUMP THINGS…
APPROVAL – 58% of US voters disapprove of Trump’s handling of the economy, according to Focaldata survey. If this trend continues, it’s not going to be good for Trump’s prospects at the midterm elections later this year.
POWER – Trump’s next weapon of choice in his push for global trading supremacy could be LNG. Since his war started, the only place that the UK and Europe can source LNG is North America, which now supplies over 50% of the EU’s LNG imports and over 80% of Britain’s. This dependence is surely going to grow given that a ban on Russian gas imports takes effect at the start of 2027 and there’s no more capacity coming from anyone else, so it’s not looking great!
TRIP TO CHINA – Trump’s over in China this week and will probably try to get Xi to withdraw, or at least limit, support for Iran. I wouldn’t expect much to be achieved from these talks because Trump hasn’t really got that much to offer Xi.
VENDETTA – The sole Democratic commissioner in the FCC, Anna Gomez, said in a letter to Disney’s CEO what everyone actually knows but isn’t saying: that ABC has been the subject of a “sustained, coordinated campaign of censorship and control” by the Trump administration. Basically, the FCC is being weaponised to keep the media from saying things the administration doesn’t like.
IN REGION/COUNTRY NEWS…
THE AMERICAS
US – Trump said “I think about one thing: We cannot let Iran have a nuclear weapon, that’s all” when asked about Americans’ financial situation, which is a pity for ordinary Americans because US inflation has jumped to 3.8%, its highest level in three years, thanks to Trump’s war in Iran. The incoming Fed chief is going to have a rough time given that he’s running out of reasons to justify interest rate increases while Trump is pressuring him to cut them. The US Senate has confirmed Kevin Warsh as Federal Reserve chair, replacing Jerome Powell, and he comes in at a particularly difficult moment given these competing pressures.
ASIA
CHINA – It’s been suggested that the Iran war, originally portrayed as a canny move to squeeze China, is actually aiding China’s global economic influence. Higher fossil fuel prices are hastening everyone’s transition to renewables, and Chinese firms account for at least 70% of global manufacturing capacity for the main green technologies, with Beijing’s exports of solar and battery products booming since the war began. Trump’s actions have also alienated his allies and raised China’s relative international standing, while China’s infrastructure expertise puts it in pole position for the post-war rebuild.
EUROPE
RUSSIA – Russia cut its GDP growth forecasts for this year from 1.3% to 0.4% despite rising oil prices, with its deputy PM blaming labour shortages, rising government spending and western sanctions. GDP growth has been powered for several years by military spending but the economic strains are starting to tell.
UK – Government borrowing costs are once more approaching levels not seen since 2008, adding to pressure on Keir Starmer. That being said, the UK economy grew at 0.6% in Q1, its fastest pace in a year, which Rachel Reeves seized on as evidence the government has “the right economic plan”, though some economists are more circumspect, pointing out that Q1 tends to start strong and then tail off.
STARMER/GOVERNMENT – Starmer is fighting for his political life after a huge drubbing in the elections last week. Things escalated quickly as senior ministers began urging him to leave or publish a timetable, and he faced four ministerial resignations in one day. It’s all falling apart and it’s increasingly looking like there will be a leadership contest soon. The situation is changing by the day so I won’t spend too much time on it now…
THE KING’S SPEECH – A huge range of bills was announced, which Starmer maintained would remove “barriers to growth”, covering everything from Clean Water and NHS Modernisation to Leasehold Reform, Police Reform, Northern Powerhouse Rail and Energy Independence, with Miliband also vowing a permanent shutdown of the North Sea. Businesses weren’t particularly enthused, with the BCC, CBI and BRC all saying the measures didn’t go far enough given the pressures they’re facing from the Iran war.
FARAGE – Reform’s leader is going to be investigated by the parliamentary standards watchdog over a £5m donation he received just weeks before he said he’d stand as a candidate in the 2024 general election. It sounds like Farage sailed very close to the wind on this, hence the investigation.
IN COMMODITIES NEWS…
OIL – Saudi Aramco posted a strong Q1 performance, with its east-west pipeline proving to be a godsend as it took the edge off the impact of the Iran war. The company then warned that the world’s supplies of gasoline and jet fuel could reach “critically low levels” heading into the summer if the Strait of Hormuz stays closed, particularly as inventories are falling.
It was interesting to see that, despite China signalling it would relax a ban on exports of jet fuel, gasoline and diesel, export levels remain way below pre-war levels, which is particularly bad news for Asian countries crying out for refined products.
COAL – Coal shipments have jumped as countries seek alternative fuels, with global coal imports on track to hit their third highest monthly number for May since at least 2017 and freight rates averaging about 50% higher than in February, with demand strongest from Asia.
IN MARKETS, INVESTMENT & FINANCE NEWS...
IN MARKETS NEWS…
Despite all the turmoil, US markets continue to thrive, essentially because tech behemoths are dragging up the indexes by themselves. The NT ratio, which tracks the divergence between the Nikkei 225 and Topix, is also skyrocketing as investors seek AI exposure outside the US. Trump has been boasting that markets are strong, but the reality isn’t as simple as that. Consumer confidence isn’t good, household spending power is shrinking and such a narrow group of stocks having such an outsize influence on wider markets is concerning because, if you put all that together, you have a recipe for what could be a nasty correction.
IN INVESTMENT NEWS/TRENDS…
While Q1 deal activity stoked banker expectations of a Gulf deal bonanza, the Iran war cut those expectations stone dead. Investment banking revenues are weakening, M&A activity has been particularly badly disrupted and some big Gulf IPOs like Emirates Global Aluminium have been delayed. Gulf sovereign wealth funds are also reviewing portfolios with a view to changing priorities, including pulling money out to finance increased defence spending. Many bankers are probably now accepting that 2026 won’t be the bumper year they were expecting, and the future really does depend on how and when the war ends.
TRENDS
IPOs – Lime, the Uber-backed electric bike start-up, has filed for a $2bn US IPO in a test of investor appetite for flotations. Lime has done well to get to this point, given that rival Bird had to file for bankruptcy in 2023, although Lime itself admits it has lost money every year since 2017 and that expenses are likely to rise. It’s also facing claims in the UK that use of its bikes increases the risk of leg injuries. Hmm. Does this sound like an IPO that you’d like to buy into??
M&A – German energy company Eon is going to buy the embattled Ovo for an undisclosed sum, creating the UK’s largest energy supplier and overtaking Octopus Energy in size. If the deal goes through, the top three suppliers will make up 75% of the market!
GameStop’s cheeky $55.5bn bid for eBay was rejected by eBay as “neither credible nor attractive”. It’ll be interesting to see whether GameStop has another go.
MONEY RAISING – Anthropic is in the middle of a fundraising at a level that implies a whopping $900bn valuation, making it bigger than arch-rival OpenAI, which was most recently valued at $852bn.
German defence tech group Helsing looks set to raise funding at an implied valuation of around $18bn, which would make it one of Europe’s most valuable start-ups.
Blue Owl’s flagship credit investment fund for retail investors has seen inflows almost disappear as concerns about private credit persist. Its share price has taken a more than 30% tumble this year, with particularly big concerns about the fund’s massive exposure to software and tech loans.
FINTECH – Klarna announced that it had broken even for the first time since its New York IPO, helped by a surge in sign-ups for its debit card, as it tries to move away from its BNPL origins towards becoming a more traditional digital bank.
Revolut is looking to launch a private bank in the UK later this year for customers with at least £500,000 to deposit.
Hargreaves Lansdown is cutting around 100 positions from its 2,400-strong workforce to streamline operations and compete with intensifying competition from the likes of Interactive Investor and AJ Bell. There’s still a lot of work to do after a tough few years.
IN BUSINESS & EMPLOYMENT TRENDS...
IN BUSINESS NEWS/TRENDS…
There’s ongoing debate as to whether the Singapore loophole has been permanently closed for Chinese companies following the Meta/Manus shutdown, or whether it was a one-off. Chinese companies have been getting around restrictions on foreign investment by “moving” their HQ to Singapore and Chinese authorities have mainly turned a blind eye until now. The cottage industry of advisers who facilitate this could be affected longer term but for now, things are looking a bit trickier than they were.
Separately, Citadel has moved some of its key quant strategy researchers out of Hong Kong and into Singapore or Miami amid rumoured concerns about data security although the official line is that this was not the case.
The UK’s FCA is pushing private credit groups to share more data by overhauling reporting requirements. As you’ll know by now, private credit is under a lot of scrutiny at the moment!
IN EMPLOYMENT TRENDS
Gen Z are increasingly becoming content creators thanks to the current jobs crisis, though the market is getting increasingly crowded. It’s worth giving it a go, ideally in a field you’re genuinely interested in, as employers may well value the following you build up.
Walmart has laid off or relocated about 1,000 corporate workers as part of a streamlining of its global tech and product teams.
Cisco has announced it will cut around 4,000 jobs in the name of putting more resource into AI, although its results were actually pretty strong and shares climbed 17%.
A court in China found in favour of a worker replaced by AI and awarded him over £28,000 in compensation after he refused a demotion and 40% pay cut when his company said that he was being replaced. This could well set a precedent as AI-related sackings become an increasingly thorny legal minefield for HR departments to navigate.
IN CONSUMER, RETAIL & LEISURE NEWS...
IN CONSUMER TRENDS…
US – Higher diesel prices are now filtering down and hitting every part of the supply chain in the US. Some businesses are passing those costs on to customers while others are still absorbing them, but this can’t go on forever. Voters are reminded about the effect of the war and tariffs every time they go grocery shopping, which isn’t great news for Trump given the latest 3.8% inflation reading!
UK – The UK’s biggest chicken supplier, 2Sisters, responsible for a third of all poultry products eaten in Britain each year, has hiked up prices by £70m to take the edge off the government’s tax raids on businesses. This is yet another example of the effect the government’s employment policies have had on business and you do wonder whether things might get even worse if Labour lurches further to the left under a different leader because they are arguably even more likely to tax and spend than the current regime.
IN RETAIL NEWS…
ONLINE – ASOS shares rose on the news it is selling its mothballed warehouse in Lichfield to M&S for £67.5m as part of a broader move to bolster its ailing balance sheet, netting a tidy sum while also avoiding occupancy costs of about £6m per year. It’s a lifeline for ASOS and also goes to show how M&S is gaining momentum as it ramps up efforts to double annual online sales from its non-food businesses.
Shein is also suing rival Temu at the High Court for “industrial-scale” copyright violations, which is ironic given the mountain of claims that have been made against Shein itself over the years for the very same thing!
HIGH STREET – WHSmith’s new owner Modella Capital apparently plans to combine essential high street services like postal services and retail banking in its stores while sprucing up its offering with products from Toys R Us and Hobbycraft. It sounds like a great idea but success will depend entirely on execution.
Alex Baldock, formerly CEO of Currys, has been appointed chief executive of Boots ahead of a potential flotation valuing the company at up to £7bn. He’s got turnaround form at Currys where he streamlined the store estate, cut costs and boosted online sales. I think that Boots’ main opportunity is probably in health and beauty, particularly given the demise of the department store has reduced competition in that space.
LUXURY – LVMH has sold Marc Jacobs to New York-based brand manager WHP as part of a broader pivot from acquiror mode to seller mode, having also disposed of Off-White and its stake in Stella McCartney in recent months.
Burberry, is reverting to more familiar territory in the mid-market after an attempted foray into higher-end luxury resulted in falling sales. The current CEO has culled the more avant-garde products and returned to classic trench coats, scarves and check patterns, with only 3% of stock now costing more than £2,000. It is going in the right direction.
IN CONSUMER GOODS NEWS…
Japanese snack maker Calbee is temporarily switching to black-and-white packaging for 14 of its products, saying the Iran war is restricting the supply of petroleum-based colourants. The Japanese government objected, saying Japan has enough printing ink to cope but you can see why they’re spooked because this kind of announcement could easily spark panic across the corporate world.
Chinese customers are falling out of love with Nike and favouring domestic brands like Anta and Li-Ning, making China Nike’s worst performing overseas business. Once-great American brands are increasingly losing ground in China and Nike’s going to have to take a serious look at what’s going wrong there.
IN LEISURE NEWS…
TRAVEL TRENDS – Airlines around Europe are cutting prices for summer flights to entice travellers who are delaying bookings because of the jet fuel situation. Britons are getting very cautious about holiday plans as a result and are increasingly looking at train trips and cruises.
Heathrow passenger numbers dipped last month versus April last year. There is a lot more room for air fares to rise if jet fuel supply disruption continues: the price has almost doubled and once airline reserves are exhausted, jet fuel consumption would need to drop by 20% to meet the fall in supply, which would likely see short haul suffer more cancellations than long haul.
German holiday giant Tui is hoping for wet British weather so that consumers will book holidays abroad as UK bookings are down 10% and almost half of their holidays remain unsold.
RESTAURANTS – The proliferation of weight-loss drugs is changing the dining-out landscape as many Americans are now dining out less frequently and ordering smaller quantities. A Gallup poll found that over 12% of Americans are now taking GLP-1 drugs for weight loss, up from 6% in early 2024.
Greggs has confirmed price rises as a result of the Iran war but outlined a cautiously optimistic forecast for the rest of the year. It also announced it would open a shop in Tenerife South airport, its first outside the UK since closing its Belgium business in 2008. Most foreigners’ perception of British food is not positive, so opening a Greggs in a country that actually has decent food seems like a questionable move and it’s hard not to wonder whether this is more of a CEO ego trip than a genuine commercial strategy.
IN AUTOMOTIVE NEWS...
IN AUTOMOTIVE NEWS…
European carmakers have taken an €8bn hit from Trump’s tariffs, with things potentially getting worse if he follows through on threats to impose 25% taxes on car imports from the EU.
Xpeng is in talks with VW about buying a factory in Europe as part of its overseas expansion. VW needs to do something with its excess production capacity in Europe.
Ford’s share price boomed by over 20% in two days on hopes that its new energy subsidiary will get it a piece of the AI data centre action via battery storage capacity.
Nissan is considering building cars for other manufacturers at its Sunderland plant, potentially including Chery, as it continues to struggle following a net loss for the last financial year.
Honda has reported its first annual loss in 70 years as a listed company.
JLR’s annual profits have all but evaporated thanks to US tariffs and a cyber-attack. It also took a bit of a beating in China thanks to intensifying competition from local makers.
Lotus Group is planning to build its first supercar at its Hethel plant in Norfolk, which will give the plant a real lifeline. The model is due for launch in 2028.
EV – BYD and its peers are smashing it in overseas markets but struggling domestically due to sluggish demand, with a risk that the Chinese government turns its attention to newer sectors like AI and robotics, reducing EV support.
Stellantis and Ford have talked about the increasing importance of partnerships with Chinese carmakers and rivals to survive in a tough European market, though this doesn’t sound sustainable long term unless established players develop new technologies using raw materials that Chinese firms don’t already control.
According to the latest SMMT figures, sales of used electric cars in the UK rose 32% to a record high in Q1, driven by booming petrol and diesel prices.
BATTERIES – Panasonic is forecasting a rebound for its battery business as Tesla appears to be gaining market share and Tesla is thought to be its biggest customer.
Tesla is injecting $250m into its Berlin-Brandenburg gigafactory to boost production as European demand for its vehicles continues to rise.
IN MISCELLANEOUS NEWS...
IN TECH NEWS…
AI – NHS England has given the go-ahead for external staff from companies including Palantir to have “unlimited access” to identifiable patient data while they work on the Federated Data Platform. A balance clearly has to be struck between getting the project moving and making sure data is safe.
There is also a massive danger lurking within AI systems at companies: tech start-up PocketOS lost its entire codebase because a bot running the coding tool Cursor, powered by Claude AI, tried to remove a bug and in doing so destroyed everything. A Deloitte report shows that although 85% of businesses are thinking about using AI agents, just 20% have set up any rules on how they should be used. That gap is going to become an increasingly serious problem.
HARDWARE – Nintendo decided to increase prices of its Switch 2 and cut sales forecasts, a direct knock-on effect of higher memory chip prices and US tariffs.
IN REAL ESTATE NEWS…
TRENDS – UK estate agents are at their gloomiest in more than two years as higher mortgage rates hit demand and sales, with the expected 2026 rebound looking dead in the water until the Iran war ends.
The share of new homes sold before they are built has fallen to a 12-year low and almost half of UK homes listed for sale in the last three years have failed to find a buyer, mainly because sellers price too high.
New home builds fell 6%, nearing their lowest level in 14 years, casting doubt on government housing targets.
IN COMMERCIAL PROPERTY – Canary Wharf Group is back in the black as its office portfolio rose in value for the first time since the pandemic.
Landsec has reported occupancy levels at a 20-year high, with its CEO noting that “rents are growing at their fastest pace in nearly two decades”, though it remains to be seen whether this is sustainable as companies downsize headcount.