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 BIG PICTURE NEWS...
Another incredible week! I think we all need a holiday to get over so many dramatic events!
- IN THE US – inflation rose to epic levels as it hit 9.1% (Thursday), a new 40-year high. This will make it more likely for the Fed to hike rates at the next meeting by a full percentage point.
- IN JAPAN – Japan’s LDP won the upper house election by a landslide (Monday) following the assassination of former PM and LDP leader Shinzo Abe. This will make it easier for Japan to change its Constitution – specifically the bit about defence and the military. It pacifist Constitution was imposed on them by the Americans after WW2. Subsequent attempts have been made to amend it but they have failed. However, when you consider the increasing threat of China (and possibly North Korea) in the region, you can see why there is more of a sense of urgency about changing it to enable Japan to take a more front-seat role in the defence of itself and others.
- IN EUROPE – Italy’s PM Mario Draghi caused a bit of a kerfuffle (Friday) as he offered his resignation after he lost an important parliamentary vote on a proposed €26bn package designed to protect Italians from inflation. President Sergio Mattarella did not accept it (well he did invite Draghi to be president in the first place), but the mere possibility of Italy losing a strong stabilising influence spooked investors.
- IN THE UK – the bun-fight began as candidates jostled for position in the Conservative Party leadership contest (Monday) and there was a lot of noise during the week (and this will continue). As usual with these things, everyone stabs each other in the back only for them to pull the knives back out when the winner is announced and then they all become BFFs again 🤣.
IN CURRENCY NEWS…
- The Euro hit parity with the Dollar (Wednesday), which hasn’t happened since 2002!
- IN CRYPTO – European regulators, did their usual “I-told-you-so” schtick about crypto (Monday) that they always do when Bitcoin hits the skids, but it looks like this time there might be some substance as the Financial Stability Board said it was going to put forward a new rules framework for crypto assets in October (Tuesday). Don’t get too excited, though – what they do isn’t binding, but its members (who include regulators, central banks and officials from G20 countries) generally adhere to its principles. So at least this might be a (very long overdue) step in the right direction! Celsius Network, the crypto lender, filed for bankruptcy protection this week (Thursday) just one month after freezing withdrawals as the market collapsed around it. Who’s going to be the next crypto bank/broker to crash and burn??
IN ENERGY NEWS…
- Russia turned the gas off to Germany (Tuesday), ostensibly “for repairs” as part of “scheduled maintenance”. This in itself spooked investors as concerns increased about it not getting turned back on again on July 21st, as per the original schedule. No gas to Europe would be a huge blow to the region’s economy and could tip the ‘zone into recession.
- Nuclear fusion continues to attract investment (Thursday), meaning that it could start feeding power grids by the 2030s. Interestingly, $2.8bn has been invested in the sector globally in the last 12 months versus around $2bn over the last 10 years! Tokamak Energy and First Light Fusion, who are both based in Oxford, are at the forefront of developments in this space!
- Solar panel demand is on the rise (Thursday), not only for residential properties but also for offices – and farms! At the moment, solar only makes up 4.2% of the UK’s electricity generation, so there’s huge room for upside here!
- It was also interesting to hear that Britain has actually powered mainland Europe for every month since the start of April (Friday) via subsea cables. It’s the first time this has happened since November 2017 as we are usually net importers…
I thought it was also worth highlighting that the oil price fell below $100 a barrel (Wednesday) as fears increased of a drop in demand as China started Covid lockdowns again.
THERE WAS A LOT OF NEWSFLOW ON CONSUMERS, EMPLOYMENT AND REAL ESTATE THIS WEEK...
- UK consumers continue to cut spending (Monday), according to research from Abrdn and Bristol University and UK retail sales got weaker (Tuesday), according to the latest BRC-KPMG retail sales report – which isn’t surprising, considering that UK consumer confidence hit a 22-month low (Wednesday).
- Consumers are still having to spend, though. Credit card borrowing is on the rise (Friday) and fuel costs continue to be nightmarish (Thursday) while motor insurance looks likely to go up (Friday) because second hand car prices are rising – as are labour and raw material costs. PepsiCo is talking about putting its prices up yet again (Wednesday), Wetherspoons was moaning about fewer people in pubs (Thursday) as it announced a £30m loss but it seems that people are trying to cheer themselves up with clothes shopping (Friday) as Kantar reckons customers are spending 20% more on clothing than they did last year. It was also great to see restaurant/bar chain Loungers doing well (Thursday) and is continuing to expand.
- IN EMPLOYMENT NEWS – PageGroup unveiled strong numbers (Thursday), as did Hays (Friday), which isn’t too surprising given that wages are rising. In the legal profession, salaries of Baker McKenzie’s newly qualified solicitors were hiked up by £5,000 to £110,000 (Wednesday) which followed similar rises in Herbert Smith Freehills, Freshfields Bruckhaus Deringer and Clifford Chance (among others) in the war for talent. It wasn’t just the juniors who are raking it in either – equity partners at A&O awarded themselves a 3% pay rise (Friday).
- IN REAL ESTATE NEWS – Mortgage rates are rising (Tuesday) as lenders try to keep up with interest rate increases but mortgage lending seems to be slowing down (Friday) as interest in the residential property market seems to be cooling (Thursday) and rents go higher (Thursday) as the number of landlords falls (Friday).
THE DRAMA IN TECH CONTINUED...
- IN TECH HARDWARE NEWS – ST Micro and GlobalFoundries are going to build a chip factory in France (Tuesday) and the biggest chipmaker in the world lifted its revenue forecasts (Friday) after reporting a 76.4% increase in net profit for Q2. In what sounds like a pretty exciting (albeit long-term) development, Ericsson, Qualcomm and Thales are looking to develop a satellite network (Tuesday), using LEO satellites, that will give SpaceX a run for its money. Ericsson announced disappointing results (Friday) later in the week and blamed it on inflation and supply chain problems.
- IN TECH TRENDS – hiring in the tech industry is slowing (Monday), a trend confirmed when Google announced that it was slowing down its pace of hiring (Thursday). The Twitter vs Musk thing continues to unfold as Musk attempted to extricate himself from taking over Twitter (Thursday). Snap announced that it is looking at ways to work with NFTs (Thursday), but I have to say that if it goes well Meta will probably copy it and put it on Instagram – and if it goes badly, they’ll just let Snap get on with it.
- IN OTHER TECH NEWS – Panasonic announced plans to open a $4bn battery gigafactory (Friday) in Kansas and virtual meeting specialist Hopin is cutting a third of its staff (Thursday) after having already laid off 12%. Also, it looks like it was a false dawn for Chinese tech companies (Tuesday) as regulatory fines were dished out by Chinese authorities for retrospective infractions, which freaked out investors because this could happen to any company.
IN AVIATION NEWS...
- Airbus is getting bullish about global jet demand (Tuesday), mainly because there will be a push for more fuel-efficient planes, Wizz Air thinks it’ll see a “material” rise in operating profit in the July-September period (Tuesday) and hydrogen-powered planes are set to be made in the UK (Tuesday) by a start-up called ZeroAvia.
- On the other hand, Heathrow is telling airlines to stop selling tickets for flights this summer (Wednesday) in a bid to reduce delays and cancellations – but you can imagine how badly this is going down with the airlines who have had a torrid couple of years.
AND IN OTHER NEWS...
- Klarna had a bad week. It launched a fundraising (Monday) which ended up giving it a much lower implied valuation (Tuesday).
- Peloton decided it won’t make its own bikes anymore (Wednesday). It says that this is a conscious decision to morph into a subscription company and away from a fitness equipment company. I say this was a situation foisted on them because of bad luck/poor performance/a badly executed idea. Will they exist in a year?
- Electric van/bus start-up Arrival announced it would shed up to 800 jobs (Thursday) as it tries to cut costs amid supply chain problems and everything else that’s going on at the moment.
- Gap’s CEO stepped down (Tuesday), but this company seems to be dying the death of a thousand cuts at the moment. Its previous strategy of splitting itself into two was ditched and the “new” CEO just didn’t seem to click.
- JP Morgan and Morgan Stanley announced disappointing results (Friday), which doesn’t bode well for their rivals in banking results season.
- The world’s biggest SPAC is closing down and handing back $4bn to investors (Wednesday) because the leader of the fund couldn’t find anything worth buying (!). It’s amazing to think that about 90% of the companies that went public via the SPAC route are currently trading below their listing price…
- Aston Martin is doing a financing to raise £500m (Friday), £200m of which with be from the Saudi Arabian sovereign wealth fund and £300m from a rights issue. This should hold the wolf from the door for now, but it really needs to sell more cars sooner rather than later.
AND IN UPDATES FOR WATSON'S YEARLY...
- Watson’s Yearly updates 2021/22: there have been updates in the G20 statistics (some inflation and unemployment rate changes) as well as country updates. Please click HERE to see Watson’s Yearly and the changes. Changes have been highlighted in this purple colour 👍 You will be able to see how themes and countries develop throughout the year by reading this document!