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 when the central banks did *ugger all, businesses got an MI5 briefing and Trainline got a major reprieve…
- IN THE US – inflation remained stubborn as the headline rate fell from 3.2% to 3.1% while core inflation remained unchanged at 4%. Core inflation strips out energy and food because of their relative price volatility. The target rate is still 2% and the Fed subsequently kept its interest rates unchanged whilst prompting excitement among investors by saying that it expected three interest rate cuts next year. Meanwhile, Biden continues to face voter scepticism about financing Ukraine’s war effort as a recent survey showed that 48% of American voters think the US is giving too much aid to Ukraine.
- IN EUROPE – the EU failed to reach an agreement about a €50bn funding package for Ukraine as Hungary’s PM Orbán vetoed the proposal. Elsewhere, Donald Tusk returned as Poland’s PM, which will be good news for Brussels as he is more of a Europhile than his predecessor. Meanwhile, the ECB left interest rates unchanged at 4% but, unlike the Fed, didn’t commit to cutting them any time soon.
- IN ARGENTINA – New president Javier Milei is embarking on a programme of “chainsaw economics” where he will be cutting spending by 3% of GDP as part of a whole raft of dramatic cuts. The IMF is clearly supportive as Argentina is its biggest borrower so if these measures help Argentina to pay them back more quickly they will be pleased!
- IN THE UK – the UK’s GDP shrank by more than expected in October, which doesn’t bode well for the prospects of the final quarter. Still, the Bank of England decided to leave interest rates unchanged at 5.25%, saying that there was still more work to be done to tame inflation.
IN OIL NEWS…
- OPEC+ has hit a new low in market share, according to the IEA. It shows that OPEC+’s market share in oil is now 51% as demand growth has slowed down and US output has increased. This potentially means that output cuts or increases will have less of an effect on the oil price.
- Occidental put in an offer to buy CrownRock in a cash-and-shares deal worth $11bn as the shale industry continues to consolidate.
IN COMMODITIES NEWS…
- Anglo American saw its share price fall by 20% as it cut its outlook for copper production for the next few years due to difficulties at mines in Chile and Peru. It’s had a tough time this year and things might get worse as it may soon be facing a class action lawsuit.
- Uranium investment vehicle Yellow Cake warned that China’s bid to corner the market in the radioactive investment vehicle could threaten western energy supply. Prices are already at 15-year highs as Chinese companies have bought on the open market, signed long term contracts and snapped up mines. Is this going to be lithium all over again??
IN COP28 NEWS…
- The draft COP28 agreement initially dropped the phaseout of fossil fuels but then they did manage to hammer something out that committed signatories to moving away from fossil fuels towards net zero in 2050. The OECD pointed out that the transition would cost trillions of dollars and limit economic growth.
IN CRYPTO NEWS…
- M&G announced that it is investing $20m in bitcoin trading business Global Futures and Options (GFO-X), representing a rare new commitment from a proper asset manager into bitcoin since the FTX collapse.
IN BUSINESS, EMPLOYMENT & CONSUMER TRENDS NEWS...
IN BUSINESS TRENDS…
- Begbies Traynor is very busy as the number of insolvencies continues to rise while restructurer FRP is also benefiting from the rising number of companies falling into administration.
- UK lawyers, particularly City law firms, are seeing a rise in earnings thanks to corporate, insolvency and banking work.
- Business leaders got a briefing this week from MI5 on things including IP theft and the risks posed by terrorist organisations as part of an overall push to encourage better co-operation between business and intelligence on matters of national security.
- The Federation of Small Businesses (FSB) filed a “super-complaint” to the FCA over “banks that excessively demand personal guarantees for business loans” as banks look like they’re going to do what they did back in 2008 and not lend to smaller businesses (which hampers growth).
- Explosives and missile maker Chemring reported strong orders in the year to October – another company profiting from war.
- Rising demand for goods from Shein and Temu have been a major boon for the logistics sector, particularly in air cargo. The main potential fly in the ointment is going to be ongoing tetchy relations between Beijing and Washington.
IN EMPLOYMENT TRENDS…
- Hasbro has followed other big companies announcing major job losses as it said it was cutting a whopping 20% of its workforce. Spotify, Twilio, Maersk, ByteDance and all sorts of other companies have been conducting major culls over the course of 2023. EY said that it was shedding 10% of its partners in consulting and about 4% in strategy as part of an overall cull. Separately, Etsy said that it would cut 11% of its workforce as part of its restructuring.
- UK companies are still hiring, according to recruitment firm Manpower Group, while wage growth is showing signs of losing momentum and job vacancies have fallen for the 17th month in a row, according to the ONS.
IN CONSUMER TRENDS…
- UK consumer confidence has reached a 3-month high, according to GfK’s latest consumer confidence survey. Shoppers will have to pay more for less this Christmas, though, according to research published by the CEBR and Christmas dinner’s going to cost more, according to the Good Houskeeping magazine’s Cost of Christmas Dinner survey.
- Mortgage arrears appear to be hitting an eight-year high, according to banking trade body UK Finance while separate data from the Bank of England says the rate of mortgage arrears is at its highest level since Q2 2017. The bad news is that they will probably continue to rise.
- Tenants were “hit by the highest increase in rent for a decade” in November, according to stats from Hamptons while Zoopla research suggests that increases in rents are likely to slow down in 2024.
IN RETAIL NEWS...
- Macy’s got an offer of a buyout from a consortium of investors to take it private at a 32% premium to its pre-announcement level (although this is less than half of what Macy’s was worth at its peak).
- Shein has been accused by rival Temu of using “mafia-style” tactics to intimidate suppliers, according to a US lawsuit. Shein is preparing for an IPO and I think that investors will need to take into account Shein’s dodgy reputation and potential litigation risk.
- Inditex had a very strong trading statement showing profits up by a third, which is particularly impressive given the current economic backdrop.
- In the UK, it sounds like Boots may potentially re-list on the FTSE100 – something that the LSE would no doubt welcome after a period when everyone seems to be abandoning! Currys pleased investors by saying that its troubled Nordic business was getting back on track and it reiterated its full year guidance. Ocado has added almost 600 new M&S products to its website, prompted by recent criticism that it wasn’t contributing enough to the JV.
IN TECH NEWS...
- The world’s leading semiconductor companies are racing to produce the next generation of chips, with TSMC leading the charge, closely followed by the likes of Samsung and Intel.
- Nvidia has emerged as one of the biggest investors in AI start-ups this year, according to estimates by Dealroom. Clearly, it’s investing in order to stay ahead of the pack!
- Axel Springer announced a deal with OpenAI where it will provide content from publications such as Bild, Politico and Business Insider to OpenAI to train its models. It’s good that Axel Springer is monetising its content, but the worry is that long-term this might damage journalism as a profession.
- TikTok invested $1.5bn in Indonesia’s Tokopedia, an e-commerce unit of the GoTo tech group. This sounds like a strategic win for TikTok in its biggest market outside the US.
- The Electronic Entertainment Expo trade show – aka “E3” – is to be no more as it just never recovered from Covid. It’s been a major event in the tech calendar since it started in 1995.
IN AUTOMOTIVE NEWS...
- Tesla’s having a tough time at the moment. It’s having continued problems with Swedish unions – and is now looking for a Nordic expert to help it negotiate – while it also announced a major recall regarding its autopilot system. The recall won’t be that bad as it’s a software update but still, it’s not a great look PR-wise.
- GM’s Cruise driverless unit sacked nine senior execs and then followed the announcement up by saying that it is going to lay of f24% of its workforce. This is unsurprising given the repercussions of the October incident.
- Meanwhile, UK car production rose in November and is now at its highest level for five months, according to Lloyds’ Bank’s latest economic activity tracker.
IN OTHER NEWS...
- IN REAL ESTATE NEWS – the European mortgage market is on track to grow at its slowest rate in a decade this year, according to EY’s European Bank Lending Forecast report. This is mainly due to banks tightening their lending criteria UK average asking prices are falling, according to the latest Rightmove stats although “second-steppers” boosted demand for three and four bedroom properties in November. Estate agents reckon that a recovery in the property market is around the corner, according to the latest RICS survey. Sentiment appears to be improving as mortgage rates fall further.
- IN MEDIA NEWS – Netflix released full viewership data for the first time ever this week, providing viewing figures for its top programming for the first half of the year. It plans to release such a report twice a year. Spotify seems to be winning the streaming war but it has also cut 25% of its staff this year. I think that the business is now maturing and so it now has to make incremental operational improvements to keep everything going.
- IN FINANCIALS NEWS – the FCA told brokers to stop “double-dipping”, a practice whereby they make money from the interest earned on client cash deposits and charge them for the privilege of holding that cash! Visa and Mastercard are being investigated by the Payments Systems Regulator which is looking at putting a cap on “interchange fees” between the UK and EU which the duopoly has increased almost fivefold since Brexit. Hiscox wants to use AI for underwriting purposes and has done a tie-up with Google to develop an AI model that can automate the core underwriting process. Hiscox will use this tool from the second half of next year.
- Unilever is going to be investigated by the Companies and Markets Authority over allegations of “greenwashing” in a number of its household products. It’s not the only company to be accused of doing so and it’ll be interesting to see what happens as a result of this investigation.
- Vivendi is looking to split into three businesses to crystallise the value more efficiently in each. The three businesses – that will be separately quoted – will be film/TV, PR and an investment division based on publisher Lagardère.
- Pfizer is suffering post-Covid, but it’s not the only Covid hero to suffer – Moderna and BioNTech have also fallen behind. It’s now embarking on a massive cost reduction programme but TBH if it really wants to get back to the glory days, it’ll have to get involved with anti-obesity drugs IMO…
- Trainline got a boost this week as the government has decided to give up making its own centralised ticketing app. Trainline’s share price tanked when the proposal was made two years ago, but I suspect that investors assumed the government attempt would fail, which is why Trainline’s share price only had a mini-blip upwards on the news.
- Cigna abandoned its proposed mega-merger with Humana that would have created a health insurance behemoth. It’s going to look at smaller bolt-on acquisitions and do a share buy-back instead.
Anyone who knows me well will easily be able to guess my favourite “alternative” story of this week – it was the one with the amazing-looking chocolate pizza! It looks amazing (but perhaps not amazingly healthy 🤣)!