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...
Gaza talks progressed, wild fires raged in California and South Korea's president got arrested...
- IN WAR NEWS – global leaders voiced concerns of conflict risk for 2025 ahead of next week’s World Economic Forum and then there was talk of a potential ceasefire between Hamas and Israel, which could ultimately precipitate the normalisation of relations between Israel and Saudi Arabia.
- IN THE US – inflation ticked up in December, meaning that it remains above the Fed’s target of 2% – and Goldman Sachs’s chief David Solomon voiced cautious optimism about the US economy with business-friendly policies providing a boost on the one hand while inflationary policies could prove to be a drag on the other. Ahead of Trump’s inauguration, economists seem bearish while investors are more bullish on his impact on the US economy while emerging markets could get trickier because the products that would have been exported to America could be dumped elsewhere. Meanwhile, California’s governor said that the wild fires could prove to be the costliest disaster in US history. Other countries seem to be emphasising their US fan credentials – like Poland, which is spending more of its GDP on defence and Mexico, which has promised to shrink its trade deficit with China.
- IN CHINA – China somehow managed to hit its full-year GDP growth target of 5% despite pretty much all of the data in the final quarter of last year suggesting otherwise (but then again not many people actually believe these official figures anyway – and that’s not just a discrimination thing, it’s widely known in financial/investment banking circles).
- IN SOUTH KOREA – South Korea’s President Yoon Suk Yeol was finally arrested by the police after a six-hour standoff, the first time a sitting president has been arrested in South Korea’s history. More instability at a particularly tricky time for the country – and region!
- IN EUROPE – Germany’s nightmare continued as its economy shrank for the second successive year and it faced a meat and dairy export ban thanks to a foot-and-mouth outbreak. Meanwhile, France’s new PM opened up the possibility of ditching Macron’s pension reform and Spain suggested the imposition of a 100% tax on homes bought in the country by non-EU residents in an effort to slow down price rises that are pushing home ownership out of the reach of locals.
- IN THE UK – GDP growth was less-than-expected (but at least there was growth!) but there was an unexpected drop in inflation, which should give the under-fire chancellor Reeves a bit of breathing room as she’s faced criticism for steering the economy towards stagflation, with suggestions that she might have to roll out an emergency Budget. In gloomier news, UK goods exports hit their lowest level for three years, Surrey councillors appealed for the government to write off Woking’s £1bn debt and now councils face a massive price hike in what they’ll have to pay to get audited.
IN OIL NEWS…
- BP announced that it would be cutting 4,700 permanent jobs and 3,000 contractor jobs (about 5% of its global workforce) in a wider effort to cut costs by at least $2bn by the end of 2026.
IN ENERGY-RELATED NEWS…
- China is surging ahead in renewable energy capacity, according to IEA forecasts, which is probably just as well given that it’s the world’s biggest greenhouse gas emitter (it accounts for about 30% of global carbon emissions!).
- Energy consultancy firm Enverus reckons that the AI boom will necessitate a surge in new US gas power plants to keep up with the projected rise in energy demand, a phenomenon that Barclays also echoes in its research and it could also prompt water shortages given the amount of water these data centres need to cool down.
- IN NUCLEAR – Rolls-Royce continues to fight three North American competitors to win orders for a fleet of SMRs from the UK government while UK ministers pledge a record £410m on supporting UK nuclear fusion energy.
IN BUSINESS, INVESTMENT & EMPLOYMENT TRENDS...
IN BUSINESS TRENDS…
- The defence industry is getting ready for a tech shake-up under Trump, who they fear might be more inclined to disrupt the “established order” and give newer players a go. For instance, his previous meddling with the Air Force One contract resulted in Boeing suffering heavy losses!
- IN IPOs – Silicon Valley start-ups might shun IPOs in 2025 because there are more ways to access proper finance these days – something that Goldman Sachs’s chief David Soloman echoed (bearing in mind that his company has just set up a separate private credit business!). Back in the UK, the IPO pipeline is looking pretty good what with the likes of Ebury, Zopa, ClearScore, Parameta, Shawbrook, Metlen Energy & Metals, Air Baltic and, of course, Shein all at least considering a London listing. However, the London “exodus” appears to be continuing what with both EG Group and eToro both eyeing a stateside listing.
- IN LUXURY – there are signs that the luxury sector may have turned a corner as Richemont’s quarterly sales beat expectations, sending its share price sharply higher. This comes after a year of relative sluggishness due to weaker demand from Chinese consumers.
IN EMPLOYMENT TRENDS…
- Reeves’s Budget where she raised national insurance contributions for employers, seems to have backfired badly in that it appears to have killed jobs growth as fewer companies are hiring, according to a report by the BCC. The latest research from REC says that the number of advertised jobs in the UK has now fallen to pre-pandemic levels while both Hays and PageGroup have been suffering a notable drop in fees from the slowdown in hiring.
IN INVESTMENT TRENDS…
- Private equity firms are continuing to plough money into the UK’s consumer law firms. The trend seems to be about investors buying up small practices and rolling them into bigger groups by using automation and technology to streamline their back-office functions in particular.
- Pension funds are now dabbling in crypto after last year’s massive bitcoin rally (and the prospect of bitcoin bros getting the keys to the White House!) as the asset class edges closer to the mainstream.
- Environmental investing took another hit as BlackRock, the world’s biggest investment group, decided to pull out of the voluntary Net Zero Asset Managers (NZAM), prompting the latter to suspend its operations.
IN TECH NEWS...
IN REGULATION NEWS…
- Apple’s class action kicked off in the UK where it’s being taken to task over its “excessive and unfair” charges of up to 30% on software downloaded from its App Store.
- The European Commission is going to conduct a review of where it’s at re ongoing investigations into Apple, Google and Meta with a mind to potentially watering down or changing the remit of the probes. All decisions and fines will be suspended pending the review’s completion.
- Google is being investigated by the UK watchdog, the CMA, over the impact of its search and advertising practices. It wants to see whether Google is restricting competitors from market access and if it is showing signs of “potential exploitative conduct” by collecting consumers’ data without informed consent.
IN AI NEWS…
- Mistral signed a deal with Agence France-Presse to use thousands of its articles as source material for its chatbot (“Le Chat”!). This follows a recent deal signed by Google with Associated Press.
- OpenAI hired Adebayo Ogunlesi, a billionaire investor and major Wall Street dealmaker, to its board this week. Ogunlesi is a biiiiiig hitter and having him on board is a real sign of intent and potential indicator of where OpenAI is going to go. His presence will no doubt help with future funding rounds as well!
- The US has decided to blacklist China’s answer to OpenAI, Zhipu, which is developing LLMs for AI. Some say that this will strengthen Zhipu’s position domestically as the Chinese government will be more likely to give it a helping hand.
- UK AI start-up Synthesia hit a $2bn valuation at its latest funding round. It makes AI models that replicate humans and the company said that it’d use the money raised to make its avatars even better!
- PM Starmer pledged to make a huge increase in government-owned AI computing power over the next five years by building a new supercomputer in a bid to put the UK at the cutting edge of AI. His “AI Opportunities Action Plan” outlines 50 recommendations to make Britain an “AI maker” rather than an “AI taker” and will involve the creation of special “AI growth zones” with better access to power and other resources. There is scepticism about how far we can realistically take this, though, as access to capital in the UK is more limited than it is in the US – and AI development sucks up a lot of cash!
IN TECH HARDWARE…
- The US has now implemented additional US export controls on high-end chips to China, putting in place a tiered system that allows differing levels of access to different countries.
- Intel announced that it would be selling off its venture capital business, Intel Capital, in a broader bid to cut costs. It’ll still keep a stake in the business but the move would mean that it would be free to swell its coffers with non-Intel money.
- TSMC looks like it can weather the storm of all the geopolitical tensions going on right now as it is sitting pretty at the centre of the global AI supply chain. It also unveiled a strong set of Q4 results and continues to attract global interest.
- Apple lost its smartphone crown in China last year, being overtaken by local makers Vivo and Huawei. Apple’s shipments to China continue to fall.
- Nintendo’s release of the Switch 2, the follow-up to its wildly successful Switch after eight years, underwhelmed as the company failed to provide any details about price, launch date or specifications. The company said that it’d provide more details in April with a view to release sometime this year.
IN SOCIAL MEDIA NEWS…
- A looming TikTok ban is creating tension at the moment, with rumours flying around that backroom deals could be done to sell it to Elon Musk and Donald Trump said to be considering a delay on the ban. Panicked Americans are flocking to Chinese rival RedNote (called “Xiaohongshu” in China), powering it to #1 in US app stores earlier this week. This seems somewhat ironic because surely RedNote is an even bigger potential security risk to user data – but an interesting consequence of the take-up of RedNote is that lots of Chinese are “meeting” Americans online for the first time given that Google, Facebook and WhatsApp are blocked and social media operates under very tight restrictions.
- Zuckerberg announced that he would be culling the bottom 5% of performers (about 3,600 staff). TBH, such practices aren’t uncommon in big American companies, but it seems to me that Zuck is sending out a signal…
- Meta’s move towards “free speech” is freaking out advertisers due to the watering down of its content moderation policies and child protection experts are getting increasingly concerned about X’s dumbing down of safeguards against abuse despite Musk’s vocal attacks about grooming gangs on his platform.
IN CONSUMER, RETAIL & LEISURE NEWS...
IN CONSUMER TRENDS…
- Americans are leasing EVs in rising numbers as it’s a cheap way of getting a better EV, with the $7,500 federal subsidy making deals even sweeter. Interestingly, around 45% of EV transactions in Q3 of 2024 were in the form of leases versus 2% for the wider industry.
- Boomers and saggy-faced Ozempic users are behind the surge in popularity of injectable aesthetic treatments, according to Swiss dermatology group Galderama. Given the huge take-up of weight loss drugs, I would have thought that this trend is going to continue!
- A tick tock of a different kind is trending at the moment – non-smart watches are becoming increasingly popular among Gen-Zs as they favour “retro” digital watches and top end timepieces from Rolex while using their phones to keep track of time. Interestingly, after almost ten years since the advent of Apple’s Watch, smart watch demand is now falling.
- UK mortgage defaults have been on the rise for the longest consecutive stretch since 2007 – and it could get worse from here because around 700,000 households are scheduled to remortgage at higher rates in 2025. We’re not out of the woods yet…
IN RETAIL NEWS…
- GROCERY – Asda announced the cull of 13 regional managers as part of a shake-up following its worst Christmas performance since 2015. Ocado Retail, on the other hand, celebrated “record” Christmas sales.
- DEPARTMENT STORES – Fortnum & Mason experienced strong profits and sales last year, to prove that this category of retailer isn’t entirely dead after all!
- ON THE HIGH STREET – homewares retailer Dunelm posted a “solid” performance over Christmas but is concerned about rising costs resulting from Reeves’s Budget and Games Workshop’s success continued as sales boomed over the six months to December 1st but JD Sports cut its annual profit forecasts, blaming “volatile market conditions”. This marked its second profit warning in two months. Ouch…
IN LEISURE…
- IN TRAVEL – EasyJet’s new CEO said that the company will be pushing mini-package holidays as a growth driver, transforming the humble “city break”.
- PUBS – Mitchells & Butlers reported a strong quarter and a successful Christmas while Heineken (which owns Murphy’s, a popular Irish stout) benefited from the rationing of Guinness (owned by Diageo) over the festive season.
- Deliveroo sounded a promising note, announcing that its year-end profits would be coming in at the top end of guidance thanks to tie-ups with more retailers. It sounds like it will “deliver” on expectations 🤦♂️!
IN REAL ESTATE NEWS...
IN CHINA…
- Indebted developer Country Garden said that it had lost a whopping $24bn in 2023 in its hugely-delayed results. Trading in the shares of what used to be one of China’s biggest developers has been suspended since March last year. This isn’t going to help sentiment in the embattled real estate sector.
IN UK HOUSEBUILDER NEWS…
- Big housebuilders are getting increasingly positive and have praised Labour’s planning reforms.
- Taylor Wimpey said that its profits are proceeding according to plan but it expects building costs to rise.
- Persimmon announced that it had beaten its homebuilding targets last year – to the extent that it decided to upgrade its profit forecasts.
IN SALES TRENDS…
- The latest RICS survey showed that the property market ended on a high last year with the majority of estate agents reporting rising volumes and more buyer inquiries.
- Research from Hamptons showed that sellers in England and Wales made less than £100,000 in profit on the sale of their homes last year. This represents a return of “just” 40%, which is the lowest return for a decade after peaking out in 2022 and may be a turn-off for potential sellers.
IN MISCELLANEOUS NEWS...
- IN FINANCIALS – JP Morgan and Goldman Sachs saw booming profits over Q4 thanks to the acceleration of deal activity, rising demand for financing and decent trading revenues. Goldman Sachs announced plans to build a new unit to expand its financing business as competition with private credit funds ratchets up. The new division will be called Capital Solutions Group and will be made up of specialists in private equity, private credit and leveraged buyouts. Meanwhile, the CIO of one of the world’s biggest charitable foundations, the Wellcome Trust, said that there are “accidents waiting to happen” in private credit because of looser lending standards that could come back to bite in the event of a recession and/or interest rates staying higher for longer. Also, infamous short-selling giant-killer Hindenburg Research announced that it would be shutting down, heralding the end of an era.
- IN AUTOMOTIVE NEWS – European car makers are pushing for a “grand bargain” with Donald Trump in order to avoid a trade war as over 20% of the EU’s car exports go to the US. The industry’s trade body is also calling for a de-escalation of hostilities with China. GM signed a deal with Norway’s Vianode for the supply of anode graphite, a key material for EV batteries and Mercedes-Benz posted a disappointing performance for 2024, blaming adverse market conditions in China, the introduction of new models and sluggish EV demand.
- IN PHARMACEUTICALS – GSK put in an offer to buy US cancer drug firm IDRx for up to $1.15bn in order to address a “major gap in the current standard of care” in relation to gastrointestinal cancers. Also we saw that Moderna’s share price tanked by a massive 22% on news that its sales forecasts fell short of investor expectations. Sales of its Covid jabs continue to fall while it continues to invest in other inoculations…
BANTER
Given that I am a big fan of their videos and I like their music, I’m going to have to say that my favourite video of the week was the one of OK Go and their quite frankly mesmerising offering that was shot using 64 phones!