Watson’s Weekly 18-07-2020

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.

• China’s GDP for the second quarter was up by 3.2% (Thursday), making it the first major economy to return to growth since the beginning of the pandemic
• In Russia – President Putin announced the six-year postponement of a massive spending plan (Tuesday) he suggested two years ago. The $360bn National Projects Plan will now be delayed and the announcement comes only two weeks after a vote that allowed him to stay in power until 2036!
• In Europe – President Duda was re-elected as president of Poland (Tuesday), the European summit to discuss the proposed €750bn bailout plan started at the end of the week (Thursday) – but apparently it’s not going well – President Macron pledged an additional €100bn to stimulate France’s recovery (Wednesday) on top of the €460bn already allocated for the task and Margrethe Vestager got a massive kick in the teeth (Thursday) as Europe’s second highest court rejected a 2016 Brussels competition ruling that ordered Apple to hand over €13bn that she had imposed. This will dent her reputation badly and it will cast serious doubt over the power of Europe’s competition watchdog
• In the UK – Economic output was up (Wednesday) but was well short of market expectations. UK inflation was up (Thursday) for the first time this year, but I would caution too much reliance on these figures as accurate data under covid has been hard to come by. Boris Johnson announced a ban on all new Huawei equipment (Wednesday) and telecoms operators were ordered to rip out all existing Huawei equipment from their networks by 2027
• Opec and Russia are to increase oil production again (Thursday) after the cuts made at the beginning of the year appear to have done their job in raising prices from major lows. It seems that they are confident that rising demand from a world emerging from coronavirus hibernation will be able to absorb more supply without denting prices. It’ll be interesting to see how things go but the market seems to be taking it quite well at the moment

• On the consumer side of things, Nationwide re-introduced 90% mortgages (Tuesday) only a few weeks after taking them off the table as they clearly want a piece of the action. There are additional strings attached but Sunak’s raising of the stamp duty threshold means that a £4-500,000 house will cost you around £15,000 less than it would have done before the changes were made. Interest in living in the suburbs has picked up as a result (Wednesday). Elsewhere, although Sunak cut VAT from 20% to 5% for the hospitality industry, not all businesses will pass all of the benefits on in reduced prices to customers (Wednesday)
• There was a lot of news on online retailers this week with Ocado doing well from lockdown (Wednesday) but missing out on more upside because it couldn’t move quickly enough and AO World benefiting from big demand in TVs, chest freezers and other goods (Wednesday) although Boohoo’s shares took a tumble because of ongoing worries about dodgy suppliers (Tuesday) but the company’s directors bought more of their own shares on the dip (Friday), potentially implying that they are confident they can get through this dodgy supplier scandal relatively intact. Quiz suspended one of its suppliers (Tuesday) as Asos cut ties with a number of suppliers (Wednesday) but it added that it had performed well overall in terms of sales because they sold more “athleisure” gear that is more forgiving size-wise, which meant that returns were lower. The cost of returning goods has been a major problem for many online apparel retailers, so this was obviously a boon. In offline retail news, it appears that Next is close to buying Victoria’s Secret (Thursday), having beaten competition from the likes of M&S and others

• In the pharmaceuticals sector, both Moderna (Wednesday) and AstraZeneca (Thursday) took their respective coronavirus drugs to the next stage, which led to strong share price rises for both companies. Fingers crossed that they will succeed! We are bound to see volatility in pharmaceutical stocks as their coronavirus drugs progress or fall by the wayside
• There were some interesting developments regarding India this week. First of all, Google said that it would invest over $10bn in the country over the next 5-7 years (Tuesday) via an India Digitalisation Fund to get more people access to the internet. Google then announced a $4.5bn investment in Reliance Jio (Thursday), joining a host of other Big Tech companies eager to get a foothold in what many see as a market with huge potential
• Social media also saw some big stories this week what with Europe rejecting the current data-sharing agreement with the US (Friday), Twitter being hacked (Friday) and TikTok’s parent ByteDance being under review from being on America’s “entity list”. Apparently the final decision will be made within a month

• Watson’s Yearly updates: watch this space!

My favourite “AND FINALLY…” stories of this week were the rather nostalgic Lego Nintendo Entertainment System lets you ‘play’ Mario on a TV made of blocks (Tech Radar, Stephen Lambrechts), and Ramen face mask from Japan fogs up your glasses, looks like a steaming hot bowl of noodles (SoraNews24, Oona McGee)for its sheer brilliance!