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 a week where Japan pulled itself out of recession, the EU approved the Microsoft/Activision Blizzard takeover and Disney’s ex-CEO faced serious accusations…
- IN JAPAN NEWS – the country managed to climb out of the technical recession it’s been in thanks to a rebound in household spending and tourism. Exports and manufacturing remain weak, though, so there’s still a way to go…
- IN THAILAND NEWS – the Move Forward party caused a shock upset by winning the general election, paving the way for the ousting of the country’s military-backed government.
- IN EUROPE NEWS – the European Commission is getting increasingly optimistic about the EU’s economic prospects, but let’s face it, it is obviously biased and when you consider that Germany’s been showing some serious signs of weakness recently (particularly in manufacturing) you do wonder whether the EC is just trying to talk up its situation in the hope that people will buy into it. Germany makes up 24% of the bloc’s GDP and has been flirting with recession…meanwhile, it was interesting to see that Brussels has agreed to sign up to a new memorandum of understanding with the UK to create a framework for voluntary co-operation.
- IN ITALY NEWS – the country is hastily trying to overhaul plans re how to spend €200bn in EU Covid recovery funds by the June 2026 deadline. Various dodgy suggestions have been booted by Brussels so far as unsuitable as Italy has to spend the money to bolster infrastructure, cut social inequality and boost its economic growth prospects.
- IN TURKEY NEWS – Erdogan looks like he will hang onto power after all as his opposition fell apart at the election. There’s more voting to come but it looks like he’s got it in the bag. What a wily operator!
IN SANCTIONS NEWS…
- The G7 and EU agreed to ban the restart of Russian gas pipelines, marking the first time that pipeline gas trading will have been stopped since the Russian invasion of Ukraine.
- South Africa may need to brace itself for US sanctions as the country has been accused of overtly supplying arms to Russia. Ramaphosa has obviously denied it and promised an inquiry, but there could be serious repercussions from this if he’s found to be lying…
IN CRYPTO NEWS…
- UK MP’s have called for crypto to be classed as gambling for regulatory purposes, adding that having the FCA oversee it gives it more credibility than it deserves. The drama continues…
IN COMMODITIES NEWS…
- Putin managed to continue to rake in the oil revenues despite international embargoes and a price cap. China and India accounted for almost 80% of Russian crude exports…
- Gold miner Newmont sealed a $19bn deal to buy Australia’s Newcrest. This will now be subject to regulatory and shareholder approval and is just the latest example of consolidation within the mining sector.
IN BUSINESS, EMPLOYMENT AND CONSUMER TRENDS NEWS...
IN BUSINESS TRENDS…
- The economic forecasting group, the EY Item Club, reckons that lending is going to rise as confidence grows. Confidence appears to increasing thanks to better-than-expected economic growth, slowing inflation and the expected sharp fall in wholesale gas prices. More lending, in theory, leads to more growth…
IN EMPLOYMENT TRENDS…
- Public sector pay is rising at record rates, according to the latest findings in the CIPD’s quarterly “Labour Market Outlook” report. Employers are finding it hard to both employ and retain the right talent.
- Grad salaries are falling in real terms as inflation continues to outpace any rise in this segment.
IN CONSUMER TRENDS…
- Consumer sentiment is continuing to improve, according to the latest GfK survey. This was the fourth consecutive month of rising consumer confidence for this survey, which seems to be echoing others that we are seeing at the moment.
- The Competition and Markets Authority is putting some of the blame of higher petrol prices on supermarkets, saying that they were less than forthcoming when asked to show that they weren’t ripping off customers.
- Watches of Switzerland had a tricky six months as luxury watches continued to sell well while jewellery didn’t. Sales growth in the UK and Europe has been losing momentum while sales have been rising rapidly in the US.
- IN THE US – consumer spending had a rebound, according to the latest figures from the Commerce Department, However, according to Home Depot, they are not spending as much on home improvements. It is slowing down so much that it warned that annual sales are expected to fall for the first time since 2009!
IN RETAIL AND LEISURE NEWS...
IN RETAIL TRENDS…
- Amazon decided to do a major overhaul of its US logistics network to streamline its operations and improve profitability. This was probably inevitable given the break-neck pace it expanded at over lockdown.
- Target saw its earnings squeezed as shoppers tended to buy groceries more than non-food (and it makes most of its money on discretionary items rather than groceries) but Walmart unveiled rising sales in the latest quarter as customers sought out bargains.
- IN GROCERY-RELATED NEWS – research from Circana showed that UK retailers are raising prices of own-label goods faster than they are for branded goods, which clearly isn’t great news for customers! Morrisons announced that it would cut prices, following similar moves from Sainsbury’s and Tesco last week and Asda said it would reduce headcount as it is in a cost-cutting drive currently because the cost of financing its debt has risen considerably.
- IN APPAREL RETAILER NEWS – Shein managed to raise a chunky $2bn from its latest funding round. Although this gave it a reduced implied valuation versus its previous funding round, it’s still a lot of money! Meanwhile Boohoo.com reported a loss due to supply chain problems, a more nervous customer and higher costs – not to mention the ongoing high cost of customer returns! JD Sports is on track to hit £1bn in profits and it’s still bullish about its expansion plans for Europe and Latin America. At the other end of the scale, Burberry put in a decent performance and kept its mid-term revenue targets unchanged as its new creative director seems to be doing all the right things at the moment…
- IN OTHER SPECIALIST RETAILER NEWS – Currys saw sales improve as customers opted to buy bigger-ticket items on credit for now and there was big news at John Lewis as it ditched the ad agency it’s used since 2009 and switched to Saatchi & Saatchi.
IN LEISURE TRENDS…
- EasyJet saw its losses narrow and bookings are looking good! It’s even moving forward with plans to operated from Switzerland next year. This just confirms positive trends we’ve seen from airlines, hotels and travel operators of late despite the ongoing cost-of-living crisis.
- Travelodge reported record profits and revenue growth as it benefited from a staycation boom – a far cry from when it had to go through a CVA to keep in business. Talking of staycations, private equity firm Brookfield Property Partners is looking to cash in from the trend and is selling Center Parcs for double what it paid for it in 2015!
- Elsewhere, Greggs had a good week as it posted strong like-for-like sales growth, said it was on track to hit full-year numbers and it won the right to open its flagship Leicester Square store until 2am from Thursday to Saturday! Meanwhile, Marston’s saw increases in revenues, sales and operating profits. It benefited from the WFH trend as over 90% of its pubs are in suburban areas.
IN FINANCIALS NEWS...
IN BANKS NEWS…
- UBS highlighted a reality check from its takeover of Credit Suisse. It said that it would take a $17bn hit from the combined assets, liabilities and legal costs but it would also book a $34.8bn gain because of the rock-bottom price it paid for this distressed asset! UBS now has to prove it can turn things around.
- The Bank of England is considering watering down the new international capital rules which take effect in 2025 because they would force British lenders to significantly raise the amount that banks had to have in reserve. We were going to interpret them more strictly than our European counterparts but it was deemed that this would put our lot at a disadvantage and make lives for our SMEs particularly difficult.
- HSBC committed to grow its business in Asia just two weeks after it saw off investor pressure to split into Asian and non-Asian business. Clearly there will be a lot of pressure to execute on this.
- It looks increasingly like Revolut won’t get the banking licence it has been seeking for the last two years, mainly because of the recent qualified audit opinion it got from its auditors.
IN OTHER FINANCIALS NEWS…
- Nationwide launched a 0% loan for green home improvements for the first time. Qualifying customers will be able to borrow anywhere between £5,000 and £15,000 to make green improvements. It will be on offer from June 1st.
- “Sustainable” funds were warned once more about greenwashing as environmental think-tank Carbon Tracker Initiative says that over 160 funds badged as being “green” held $4.6bn in companies such as ExxonMobil, Chevron and TotalEnergies.
IN CAR-RELATED NEWS...
- Ford is looking to scale back in China because it doesn’t think that efforts there will necessarily be enough to fight off local competition in the long run. It is going to do more with commercial vehicles in the country.
- Chinese automotive manufacturer Geely (which owns Volvo Cars) doubled its stake in Aston Martin, making it the company’s third biggest shareholder. It will get a seat on the board but won’t be able to increase its stake above 22% in August 2024. Aston Martin has once again been having financial wobbles, but this will keep the wolf from the door for now.
- Tata edged closer to committing to making a gigafactory in the UK after Chancellor Jeremy Hunt offered £500m in subsidies but it’s not necessarily a good idea to jump in with both feet as it is possible that superior tech will supersede it, rendering our investment almost worthless.
TECH CONTINUES TO BE AN EVENTFUL AREA...
IN AI NEWS…
- Open AI’s chief exec Sam Altman appealed to lawmakers on the US Senate subcommittee this week to put rules in place asap in order to avert any “interactive disinformation” in the run-up to next year’s US presidential elections.
- There was an interesting article on AI voice synthesising which could be used to replicate voices with near-limitless dialogue options that could be used to dramatically lower costs for game development. Australian software developer Replica Studios, for example, uses the voices of 120 actors (with their permission) that are capable of up to 1,000 different vocal tones! This could be a nightmare for the entertainment industry going forward if there are no guidelines…
- Apple has decided to restrict its staff from using ChatGPT while it develops its own AI model as it is concerned that use of ChatGPT could expose confidential data.
IN TECH HARDWARE NEWS…
- Excitement is building about the likelihood of Apple launching a VR headset at its forthcoming developer conference early next month. It is rumoured to come with a hefty price tag, but could precede a more widespread take-up of VR, AR and the metaverse!
- Global chipmakers (including the likes of TSMC, Samsung Electronics, Intel and Micron) met in Tokyo to discuss plans on increasing production capacity there as everyone tries to reduce reliance on China.
- British satellite group Inmarsat had its best ever quarterly results in the last such announcement before it gets absorbed into US competitor Viasat. Its aviation and maritime businesses both performed very strongly. I would have thought that there is plenty more scope for the sector to consolidate in order to take on SpaceX!
IN SOFTWARE NEWS…
- Tencent reported decent Q1 revenues as China’s economy picked up after the lifting of all the Covid restrictions.
- TikTok got banned in Montana, something that is set to come into force on January 1st, but TikTokers retaliated with an appeal, saying that the ban is unconstitutional etc.
- It was also interesting to see that the EU approved the Microsoft/Activision Blizzard takeover, which is set to stir things up as the UK’s CMA only just rejected the deal.
AND IN OTHER NEWS...
- IN MEDIA NEWS – Disney’s ex-chief, Bob Chapek, is being accused by a group of shareholders in a lawsuit that he misled them over the scale of the streaming division’s losses. Investors are seeking damages as a result. This could get pretty bad by the looks of things…also Vice Media filed for bankruptcy, becoming the latest “alt-media” firm to hit a wall after BuzzFeed had to close down BuzzFeed News thanks to ongoing losses.
- IN REAL ESTATE NEWS – British Land unveiled a £1bn loss thanks to weaker demand for its warehouses and a revaluation of its property portfolio that hit it badly. Land Securities also took a portfolio valuation hit as the chief exec warned of tough times ahead while interest rates remain high (the sector relies on huge amounts of debt, which becomes very painful when the cost of servicing it is high!).
- IN TELECOMS NEWS – BT announced plans to cut up to 42% of its workforce over the next ten years, but it’s not as shocking as it sounds as a lot of them are contractors who are working on the fibre rollout. Vodafone announced that it was going to cut 11,000 jobs globally – about 12% of its workforce – in its deepest cull for 40 years. The new CEO is clearing the decks for a new start…
- The chief exec of Eskom warned South Africans to expect their worst-ever blackouts in the colder winter months as its creaking power plant infrastructure continues to limp on.
BANTER
My favourite “alternative” story this week was this riddle! You’ll kick yourself – guaranteed 🤣!