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 Iran struck back, when investment banks came back and when LVMH was held back…
- IN GEOPOLITICAL DEVELOPMENTS – Biden and others urged restraint from the Israelis after Iran launched a drone attack on Israel over the weekend. The Iranians said that this was in retaliation for a suspected Israeli strike on its consular building in Damascus earlier this month that killed a number of Iranian commanders in the Revolutionary Guards. Later in the week, Iran fired air defences as the Israelis responded to the Iranian response…the troubles have forced countries in the region to take sides but the Israeli public was divided as to how to respond. Markets got nervous about the potential escalation and clearly, the situation is fluid.
- IN THE US – US stocks had a wobble as investors fretted about escalation in the Middle East while US inflation remained stubbornly high, meaning that interest rates will probably remain higher for longer!
- IN CHINA – GDP growth increased by 5.3% in Q1, which was above expectations and it seems that its manufacturing sector it leading the charge thanks to the state pouring money in.
- IN THE UK – the IMF downgraded its GDP forecasts for the UK for the second time in a matter of months. On the plus side, chancellor Hunt is hopeful that he can implement some tax cuts ahead of the general election and Bank of England governor Andrew Bailey reckons that the UK is on track to see interest rates come down – he even said that he thought that inflation would fall strongly next month. In the meantime, Rishi Sunak continues to face pressure ahead of the imminent all-important local elections that could divide or unify his party in the run-up to this year’s general election (date TBC).
IN COMMODITIES NEWS…
- Oil prices didn’t move all that much in the wake of the Iranian drone attack because markets presumably assumed that there wouldn’t be much risk of an escalation but this could all change pretty quickly…
- Metals prices increased after Washington and London exchanges imposed a ban on the CME and LME (the world’s two biggest metal exchanges) accepting new aluminium, copper and nickel produced by Russia in addition to prohibiting their import into the US and UK.
- Cocoa prices have hit new highs, having already tripled over the last year! Unfortunately, cocoa prices have been rising at the same time as sugar and milk products to it looks very much like the chocolate we see on our shelves is going to see price increases.
IN BUSINESS, EMPLOYMENT & CONSUMER TRENDS NEWS...
IN BUSINESS TRENDS NEWS…
- Asahi is moving towards providing a higher proportion of zero and low-alcohol drinks as part of its beverage line-up. The company joins rival brewers including Heineken, Budweiser and Guinness who are all looking to hop onto the low-or-no alcohol trend that is prevalent particularly among increasingly health-conscious younger customers.
- Legal changes could threaten future David vs Goliath actions as the Justice Minister is under pressure to ditch reforms to the litigation funding industry that could end hopes of clawing back compensation from litigation funders. A decision by the Supreme Court last year effectively imposed a cap on how much profit litigation funders could make, something that’s a hot topic at the moment given what’s happening with the postmasters.
- China’s capital markets activity has fallen to its lowest level since 2003 in Hong Kong and 2005 in mainland China as political uncertainties, wobbly confidence in the economy and ongoing troubles in the massively indebted real estate sector are making for an unappetising mix.
- IN IPO NEWS – CVC is planning an IPO on Amsterdam’s stock exchange to raise at least €1.25bn. This will hopefully be third time lucky for the European PE firm as it has had to cancel IPO plans twice in the last two years! Meanwhile, UK digital bank Zopa is eyeing an IPO as it just announced a profit. It seems that the appetite for IPOs is building…
IN CONSUMER TRENDS NEWS…
- Drivers are facing petrol price rises as the Middle East crisis continues but, on the other hand, UK car insurance prices fell at the start of 2024 for the first quarter-on-quarter drop in over two years.
- Research from Hamptons showed that rent rises for British tenants have almost halved since the summer but then ONS data showed that rental costs rose by 9.2% last month versus a year ago – the biggest year-on-year change since at least 2015 when the ONS started collecting this data.
IN EMPLOYMENT TRENDS…
- Recruitment firm Page Group announced a weak Q1, following a weak Q4 at the end of last year. It said that both candidate and client sentiment remains subdued. Meanwhile, the latest ONS data showed that wage growth slowed down (although not by as much as economists had been expecting) while the unemployment rate rose sharply. You would have thought if you take all of this into account, it is more likely that the Bank of England will cut interest rates sooner rather than later.
IN CAR NEWS...
IN ELECTRIC VEHICLE NEWS…
- EV sales in the US slowed down further in Q1 while sales of hybrids continued to outperform them. The trend that started last year is continuing…
- EV sales in Germany fell by 29% year-on-year in March, according to the latest statistics from the European Automobile Manufacturers’ Association. This is way higher than the EU average – and it’s dropped so much that the UK is now Europe’s biggest market for EV sales!
- Tesla had an interesting week this week! It asked shareholders to back the $56bn pay deal for Elon Musk that a Delaware judge recently rejected just as he announced that he would cut 10% of the workforce and the company announced more delays for Cybertruck deliveries without elaborating on why.
- VW said that it would lower EV costs by launching a cheaper EV production platform co-developed by local partner Xpeng. It will be used on vehicles produced in China and will be the basis of four VW-branded EV models made there from 2026.
- Jaguar became the latest carmaker to rein in EV ambitions, abandoning its promise to have a 100% electric product line-up by 2025.
- Britishvolt’s former “gigafactory” site is to be sold for £110m to US PE firm Blackstone Group with a view to building one of Europe’s biggest data centres on it. It certainly looks like EVs are on the wane while AI’s star is still rising!
- Automotive vehicle distribution group Inchcape is selling its UK car dealerships to US car dealership 1 Automotive for £346m in cash. This is the latest deal where an American dealership has taken over a British one as we saw the acquisition last year of Pendragon by Lithia Group and Lookers was bought by Global Auto Holdings.
IN TECH NEWS...
IN AI NEWS…
- The UK continues to consider AI legislation, but it’s important for the US and Europe to have a joined-up strategy otherwise expertise and resources could gravitate towards countries that allow more “freedom” and provide more money. Meanwhile, AI investment continues with Microsoft putting $1.5bn into Abu Dhabi AI group G42 and VC firm Andressen Horowitz raising $7.2bn to invest in tech start-ups. That being said, Big Tech is going to want to see some profitability following the massive investment it’s making in AI and we might see some of that when they start reporting results next week. Meanwhile, OpenAI’s latest model, GPT-4 has now almost equalled expert doctors in analysing eye conditions, according to the latest research. This is an impressive development!
- IN INDIVIDUAL COMPANY NEWS, Google announced a top management restructure in an effort to accelerate its development and launch of AI products in its ongoing race with rivals (particularly Microsoft). All of the teams working on AI models, including its Gemini chatbot, will now come under the DeepMind division run by Demis Hassibis. We also saw Meta unveiling the latest version of its AI model, Llama 3, that it describes as being “less sanctimonious”. This brings it a step closer towards human-level intelligence.
- IN CHIP NEWS, chip-making equipment manufacturer ASML said that it thought that semiconductor industry would recover in the second half of this year despite its own Q1 results falling short of expectations. Elsewhere, Samsung announced that it’s going to start producing the latest generation of semiconductors in the US two years earlier than rival TSMC at a new fabrication plant (aka “fab”) in Texas and TSMC said that it’s considering charging more for chips made outside Taiwan given the higher related costs.
- Apple ceded its position as the world’s biggest mobile phone seller to Samsung as handset sales fell. Apple’s weakness has been blamed on difficulties in China as local makers such as Xiaomi and Huawei have intensified competition in their domestic market.
IN MEDIA NEWS…
- Netflix posted its best start to the year since 2020 thanks to its password sharing crackdown helping to boost subscriber numbers and the success of a number of popular shows.
- The pressure is continuing to build on TikTok as efforts by US Congress to force TikTok owner ByteDance to sell the app are gathering momentum while it is being questioned by the EU to provide a risk assessment over its new service aimed at kids, TikTok Lite, over fears that it could get kids addicted to videos on the platform.
- Trump Media shares continued their losing streak this week after the company announced that it could sell millions of additional shares in the next few months, which would dilute existing shareholders’ holdings.
IN FINANCIALS NEWS...
- IN BANKS NEWS – loan growth at the largest US banks is slowing down, possibly because corporate borrowers are paying down debt while interest rates stay high. Meanwhile, Goldman Sachs saw strong performances from its investment banking and trading businesses as rival Morgan Stanley also benefited from more investment banking and IPO activity.
- IN INSURANCE NEWS – figures from the Association of British Insurers showed that last year was the worst one on record for weather damage insurance claims as climate change rages on…
- IN HEDGE FUND NEWS – Brevan Howard announced a 10% headcount reduction after a period of poor performance while Citadel decided to double the size of its operation in London by signing up for a bigger office in a rare bit of good news for the London office market.
IN RETAIL & LEISURE NEWS...
IN RETAIL NEWS…
- Asos is continuing to fend off interest from other retailers (including Shein) for Topshop, the brand it bought from Arcadia Group for £330m in 2021 along with Topman and Miss Selfridge. It said last year that it was considering selling it off to reduce its debt pile and losses.
- B&M continues to go from strength to strength as sales rose strongly. It said that its store expansion plans remain on track.
- Dr Martens’ CEO left the shoe/boot seller after it announced its latest profit warning in a whole succession of them.
- Superdry outlined a three-year restructuring plan in a bid to raise up to £10m to avoid going insolvent but I have to say that it ain’t looking good at the moment!
- In the luxury segment, we saw that LVMH is still a strong exporter although its growth is currently being held back by weakening Chinese demand and falling champagne sales.
IN LEISURE NEWS…
- Saga is looking for investors to help in its debt reduction plans. It needs help given that it has debts of £637.2m! Its insurance business is doing badly but its travel business is doing well at the moment.
- TGI Fridays’ US operations are going to get a listing on the London Stock Exchange as the UK franchise owner of TGI Fridays, Hostmore, has agreed to a £177m reverse takeover. In the US, TGIF is controlled by US-based PE firm TriArtisan Capital Advisors, who will remain a major shareholder in the combined group. A good piece of news, for a change, for the London Stock Exchange!
BANTER
My favourite “AND FINALLY” moment from this week was the video with the astronauts drinking coffee! I thought that this was strangely fascinating!