Watson’s Weekly 19-02-2022

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.

The Russia/Ukraine drama got increasingly tetchy, Lithuania put China’s back up and consumers kept spending…

• One of Ukraine’s main airlines, SkyUp Airlines, suspended flight sales (Monday) because its insurers refused to cover aircraft flying in Ukrainian airspace. Other airlines have been cancelling as well, global markets wobbled as geopolitical tensions heightened and sentiment waxed and waned according to what Putin said. France weighed in, calling for a re-jig of Europe’s security framework (Thursday) to combat future incidents, which is ironic considering how it wasn’t so long ago that the French were trying to cosy up to the Russians. It was also interesting to see how China supported its ideological ally (Thursday) in its demands not to let NATO expand the number of members – but it stopped short of supporting an invasion of Ukraine. The threat of possible sanctions hung in the air and it would seem that Russian companies with a secondary listing on the London Stock Exchange might be decent targets (Friday). Rozneft, Gazprom and Lukoil could be targeted along with companies like Evraz and En+ Group, but this is all speculation at the moment.
• In the US – interest rates look even more likely to go up, according to the latest meeting minutes (Thursday) and rising producer prices put even more pressure on (Wednesday).
• In ASIA – Japan’s GDP grew at an annualised 5.4% (Wednesday) as a relaxation in Covid restrictions helped to boost consumer spending going into the end of 2021 but the economy did lose steam in December as Omicron hit. Consumer spending accounts for over 50% of Japan’s GDP.
• In EUROPE – we saw that the Eurozone’s trade deficit hit its highest level in 13 years (Wednesday) and, amazingly, the ECB’s chief economist changed his position on inflation (Friday), admitting for the first time that inflation was unlikely to dip below 2% for the next two years. It was also interesting to see China banning imports from Lithuania (Monday) in a fit of pique because Lithuania dared to recognise Taiwan as a country rather than a Chinese territory. It’s the first time China has imposed such a broad ban and the EU is taking a case against China to the WTO in protest. It will be interesting to see what the outcome is here and if this will be China’s policy going forward or whether it’s just rattling everyone’s cage.
• In the UK – economists now think that the rate of inflation could see a major rise (Thursday) from 5.5% in January to 7.8% in April! This is way higher than was predicted in the October budget.
• In COMMODITIES – Russia/Ukraine tensions pushed oil prices up (Monday) which is pushing up petrol prices (Tuesday). Prices of raw materials and food staples are continuing to rise (Monday) thanks to red-hot demand for things like metals, battery-grade lithium carbonate and coffee beans.
• In CRYPTO NEWS – America’s SEC slapped BlockFi with a $100m fine (Tuesday) for offering interest-bearing accounts linked to cryptocurrency without registering them as securities first and in the UK, HMRC seized three NFTs related to a fraud investigation (Monday). It was interesting to hear that the Financial Stability Board (FSB), which oversees financial authorities in 24 countries, is coming to the conclusion that crypto needs taming (Thursday) whilst VC fund Sequoia Capital, is going to allocate at least $500m in digital assets (Friday) as part of a restructure.

• In EMPLOYMENT/WAGES TRENDS – UK employers are looking to award pay rises of 3% this year (Monday), according to a survey conducted by YouGov for the Chartered Institute of Personnel and Development – the highest rise for ten years. Although this headline rate implies that wages are not keeping pace with inflation, it seems that “real” wages (wages taking into account inflation) are better than than they were pre-Covid (Wednesday). Workers are returning to their offices (Friday), although occupancy is obviously way lower than it was pre-Covid, but commuting into London is about to get more expensive (Tuesday) as London mayor Siddique Khan is going to hike bus and tube fares by record amounts.
• Consumers are facing major pressures on their household budgets. Buying a used car will now cost £20k (Wednesday) as demand has shot through the roof, prices for household items are going up (Thursday), something that is likely to continue according to Nestle and Reckitt (Friday) and there have been rumblings about the government imposing a new road pricing system (Friday) that could hit EV owners. In the meantime, rents are rising (Thursday) and lenders are pulling their cheapest mortgage rates (Thursday) in anticipation of more interest rate increases from the Bank of England.
• In CONSUMER TRENDS – Americans are primed to spend (Friday) as a number of companies do brisk business, Gucci is benefitting from luxury spending (Friday), DoorDash’s strong performance shows that demand for takeaways remains unabated (Thursday) and tourism is sparking demand for planes (Friday) and hopes for places like Australia (Friday), which is opening up next week (well, unless you are Novak Djokovic)!
• As for RETAILERS – Amazon made up with Visa (Friday), Walmart put in a solid performance (Friday) and Ocado expanded its deal with France’s Casino (Friday), in a rare bit of good news for the online retailer. It was also good to hear that John Lewis is getting back to profitability (Monday), with Waitrose being a major driver.

• Ericsson admitted to bribery (Thursday) where it may have “inadvertently” paid terrorists Islamic State to transport equipment through terrorist-controlled areas. Investors didn’t like this and the stock got sold off.
• The Texas Attorney-General filed a lawsuit against Facebook’s parent Meta (Tuesday) alleging that its face recognition tech violated the state’s privacy protections. It’s seeking civil damages in the hundreds of billions of dollars. Funnily enough Meta’s going to fight this vigorously.
• Google said it would be cutting ad-tracking (Thursday) quite some time after Apple did! It’s done well from ads since advertisers have switched from Apple but advertisers will no longer be able to track users across apps on Android smartphones.
• The UK Home Office is looking at ways to compel big internet companies to take more responsibility for content on their platforms (Wednesday). Home Secretary Priti Patel is looking to make changes in the upcoming Online Safety Bill.
• Meanwhile, cybersecurity rises up the priority list for companies as insurance premiums rise for cyberattacks (Monday) and a new dating app Fluttr launched on Valentine’s Day (Monday). It’s different from others in that it makes all users complete biometric ID verification before they can participate.

• In CAR NEWS – Chinese company Luxshare Precision Industry is looking to assemble EVs (Wednesday). It’s a competitor to Foxconn, and also an assembler for Apple. In the UK, the SMMT is pushing for a proper charging point “road map” with timings (Wednesday) to give more people confidence to go electric. Britishvolt also secured even more money to pour into its Northumberland gigafactory (Wednesday).
• Rolls-Royce made the headlines for some interesting things this week! It is on track to produce Britain’s first generation of zero-emissions hydrogen engines for trains (Monday), it’s also aiming to roll out an electric passenger plane by 2025 (Tuesday) and is on the lookout for sites for its SMRs (Thursday), starting with de-commissioned nuke sites.
• SUPPLY CHAIN problems are continuing. The chicken industry is bracing itself after some cases of bird ‘flu were found in the US (Tuesday), tough timing considering that meat prices are already going up. There could also be a shortage of paper (Monday) as European printing companies are warning that food and consumer goods industries could suffer particularly acutely.
• In other news bits, SPACs continue to fade in popularity (Tuesday), Wizz Air announced plans to go transatlantic with cargo (Tuesday) and US hotel group Hyatt seems to be turning a corner (Thursday), something confirmed by similarly solid performances from rivals Marriott and Hilton. Also, after all the recent hoo-hah, Peloton might not be sold after all (Tuesday) as the new CEO doesn’t seem to be keen on the idea.

• 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! 

It was very easy to pick my favourite “alternative” story this week. I just had to be this: Puzzled dogs play whack-a-mole with sausages and get confused when they disappear (The Mirror, Nia Dalton). Absolutely hilarious!