Watson’s Weekly 18-12-2021

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.

This week was dominated by news on inflation as well as the effects and spread of the Omicron variant.

• In the US, the Fed saw its steepest rise in inflation in almost 40 years (Tuesday), which prompted Fed chief Jerome Powell to hasten the scaling back of monetary policy and then the subsequent signalling of rate rises to come in 2022 (Thursday).
• In EUROPE, the ECB chickened out of raising interest rates (Friday) but the pressure got too much in the UK as the Bank of England surprised the market by raising interest rates (Friday) to curb inflation that had, yet again, hit new highs (Thursday) with all sorts of pressures coming to bear, including rising wages (Thursday) as UK employment levels continued to rise (Wednesday). The IMF had earlier urged the Bank of England to get a grip on inflation (Wednesday). Meanwhile, Turkey’s currency fell (Tuesday) on concerns that president Erdogan would continue to insist on going against all economic theory – a concern that proved to be well-founded as he did indeed cut interest rates to combat inflation (Friday) – the exact opposite of what everyone else thinks he should do – whilst simultaneously hiking the minimum wage by 50%! It seems to me like he’s buying himself time and potentially favour with poorer people. This is all pretty incredible, considering that the country’s current inflation rate is running north of 21%! Given that he just gets rid of opponents and installs yes-men into key positions I can’t see anyone standing up against him as things stand currently.
• Talking about “strong” leaders doing weird things, Brazil has kicked the IMF out of the country (Friday) because it doesn’t like the unflattering forecasts that it is making about its economy. Seems pretty petulant to me as this isn’t going to stop them!

Meanwhile, the effect of the spread of Omicron is just multiplying by the minute.

• BoJo felt a strong backlash from businesses in response to “Plan B” restrictions (Tuesday) and saw serious rebellion from his own parties on the measures (Wednesday), which only got voted through because of support from the Labour Party. The economy has taken a hit (Friday) and some measures were hastily brought in like Harrods starting its sale earlier (Friday) and the Congestion Charge was eased (Friday) to encourage people into the West End and other areas of London. Hospitality is suffering so much that there are calls for an industry-wide reintroduction of furlough (Friday). Virgin Atlantic got a much-needed cash injection (Tuesday) and among all the chaos, BA decided to announce plans to launch a new budget short-haul airline operating from Gatwick (Wednesday)!

Elsewhere, in ENERGY…

• A giant battery storage site is planned for Teeside (Tuesday), which will be real boon in the pursuit of a smoother delivery of power.
• Gas prices are continuing to rise (Tuesday) and Gazprom is loving it.
• EDF has suffered a major setback as faults were discovered at one of its nuclear power plants (Friday), which led to them shutting down four reactors. Given that Macron recently committed to more nuclear in the power mix, this is tricky timing.

…and in CRYPTOCURRENCY DEVELOPMENTS…

• The Bank of England, once again, warned against cryptocurrency (Wednesday) but the Advertising Standards Authority took matters into its own hands and warned seven crypto businesses for breaking standards (Thursday). So in reality, criticism still pretty much amounts to hot air at this stage but it seems that the powers that be are getting really really cross now and perhaps stamping their feet in frustration 🤣. Maybe they’ll actually do something at some stage…

• In UK REAL ESTATE NEWS, the number of new homes for sale hits a new low (Monday) but Rightmove reckons that the frenzy will subside in 2022 (Monday). Meanwhile, central London residential rents are rising (Monday) as people head back to city centres.
• US RETAILERS are getting a Christmas uplift (Thursday), while in EUROPE Inditex posted record results (Thursday). Frasers Group was so confident about its performance that it launched a share buyback (Tuesday), Screwfix is planning on surfing the DIY wave and expanding the number of outlets (Tuesday) and Ocado saw its share price rise (Wednesday) because its legal battle against rival AutoStore seems to be going its way at the moment. On the downside, Currys complained of supply chain problems causing shortages of popular products (Thursday) and Boohoo suffered not only from this (Friday), but also the increasing expense of processing returns as well as rising costs.

• Microsoft’s proposed acquisition of British AI company Nuance Communications is attracting closer scrutiny of the CMA (Monday) as part of the current trend of the CMA looking into foreign takeovers of key British assets (Monday). Private equity firm KKR made a big investment in PureGym (Wednesday) while another American private equity firm Fortress bought Punch Pubs (Thursday). Hard Rock bought Mirage Casino in Las Vegas (Wednesday) and Nike bought virtual trainer designer RTFKT (Wednesday). Meanwhile, Rentokil announced plans of its biggest-ever deal in buying US rival Terminix (Wednesday) and National Express announced plans to buy Stagecoach (Wednesday). On the other hand, Cineworld reeled from getting slapped with a massive fine (Thursday) because it walked away from its proposed purchase of Canadian cinema operator Cineplex.
• Funnily enough, bankers and other advisers have been raking in the fees on all these deals (Monday). I suspect this will keep the top end of the housing market stoked up for some time yet!

• In BATTERIES, Volvo Cars and Northvolt pursue a major battery venture (Tuesday) as they look to expand both within Europe and further afield. Galp and Northvolt are teaming up to build Europe’s biggest lithium processing plant (Wednesday) and the joint venture will be called Aurora and located in Portugal.
• In VEHICLES, British EV start-up Arrival is now making a special vehicle for Uber (Friday) and Harley-Davidson wants to spin off its electric bike division (Wednesday), LiveWire. Toyota committed even more money to EVs (Wednesday) and Tesla shares fell as Musk sold more (Wednesday). The company also announced it would accept Dogecoin as payment for its branded merchandise. Elsewhere, the government said it is going to cut EV subsidies (Thursday) while the EV charging network still leaves a lot to be desired (Wednesday). 

• There were a couple of interesting SPAC prospects that came up this week. Indian online education start-up Byju is in talks about a SPAC-backed IPO in the US (Friday) and British online cycling retailer Wiggle looks set to take on the world (Wednesday) with the help of its new SPAC sugar-daddy.
• Streaming (and the need to produce new content for it) is providing a major boost for the UK film industry (Monday).
• Jaguar and Porsche buy into BNPL (Monday) for repairs – so rather than having to pay a massive bill on credit card, car owners will be able to split the payments via a start-up called Bumper.
• Adobe introduced a new design software package (Tuesday) that will put it in direct competition with Australian success story Canva. I think this sounds pretty compelling and could prove to be a useful “on-ramp” for Adobe’s more established professional design software.

• Watson’s Yearly updates: These will be left until the next edition of Watson’s Yearly that will be published shortly

My favourite “alternative” story this week was the misheard Christmas songs by comedian Bec Hill. She really is superb! Wouldn’t it be great if you could present like this in business meetings 😁!