Watson’s Weekly 20-08-2022

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.

Rivers dry up, gas prices jump and real wage rises in the UK take us back over 15 years 😧…

• IN THE US – the Fed looks like it’ll continue to raise interest rates (Thursday), according to the minutes of the latest Fed meeting which were released this week. Biden’s clean energy continues to face hurdles (Thursday) although it has been widely praised thus far. As always the devil is in the detail and the execution!
• IN CHINA – the lending rate was cut by 0.1% to 2.75% (Tuesday) in the first such cut since January, implying that there are rising concerns in Beijing about the cumulative effects of Covid lockdowns and a massively indebted real estate sector. Energy shortages have boosted China’s use of coal (Friday) and, to make matters worse, the Yangtze River is drying up (Thursday), which has led to companies like Toyota and Foxconn to suspend plant operations. It is China’s biggest and most important waterway. Given China’s recent sabre-rattling in the region, ostensibly prompted by Nancy Pelosi’s recent visit, there was also an interesting discussion about what might happen if there was a blockade of Taiwan (Tuesday). Basically, it would be a disaster for the world’s semiconductor supply – among many other things.
• IN GERMANY – power station owner Uniper posted a massive loss (Thursday) even after agreeing a bailout package with the German government. The Rhine is continuing to dry up (Tuesday) to the extent that heavier cargo ships are now unable to use it. The effects of global warming, eh…
• IN TURKEY – markets were surprised by the central bank’s decision to cut interest rates from 14% to 13% (Friday) as it continues to believe – contrary to pretty much everyone else in the world – that cutting interest rates is the right way to slow inflation down. It is widely believed that Turkey’s inflation rate will soon breach 80%…
• IN THE UK – inflation hit a 40-year high (Thursday) as the latest official inflation figure from the ONS hit 10.1% – the first double-digit annual increase since February 1992! Markets are now pricing in interest rates of 3.5% or 3.75% early next year…

In ENERGY NEWS…

• Germany has decided to to a U-turn on its previous stance on nuclear energy (Wednesday) and is trying to keep its last three nuclear power plants running to keep electricity going.
• Kosovo is experiencing blackouts as Russia’s restriction of energy supplies hits (Tuesday) in a potential sign of things to come for the rest of Europe as we head into winter.

In COMMODITIES NEWS…

Oil and metal prices fall (Tuesday) on fears of a weakening Chinese economy while gas prices jump (Wednesday) – thanks to ongoing concerns about how Europe is going to react to Russia choking off energy supplies – and BHP benefits from increasing coal prices (Wednesday). Meanwhile, the EU is doubling down on efforts to source its own raw materials (Wednesday) as it intensifies efforts to mine its own lithium, cobalt and graphite to wean it off excessive imports. Clearly, it has seen what is happening in energy and doesn’t want the same to happen in commodities – especially if things go south with China.

• US CONSUMERS…continue to spend on fun – particularly on travel and entertainment (Monday) and it is interesting to note that food prices have gone up so much now that the price gap between “cooking your own” and going to a restaurant is now at its narrowest since the 1970s! (Tuesday)!
• SPANISH CONSUMERS…are joining in the global trend for buying own labels to save money (Tuesday) as well as Italians, Brits and Americans (among others, no doubt!).
• UK CONSUMERS…are facing higher prices for a full English brekkie (Friday) as rising prices for food and drink drove up inflation (Thursday). Brits are expected to continue drinking through it all (Friday), though, but the latest survey from GfK showed that UK consumer confidence has hit a new low (Friday). IN EMPLOYMENT TRENDS…the number of open vacancies has slowed down (Wednesday) for the first time in two years while nominal wages continue to rise in a tight job market (Monday) but fall in real terms (Thursday) as some employers try to help employees by announcing one-off payments (Tuesday). Meanwhile, PwC lowered its entry requirements so a 2:1 is no longer required (Monday), which is good in a way, although I think it’s also a slap in the face for the university system because it seems to me that, by doing this, PwC says that it knows best. It was also interesting to note that the four-day week experiment doesn’t seem to be working (Monday), which I’m sure will be a relief to employers who probably don’t want to pay their staff 100% of their wages for rocking up in the office only four times per week.

In THE RETAIL SECTOR…

• IN THE US – solid results from Walmart and Home Depot calmed fears of recessionary impact (Wednesday) while Bed Bath & Beyond got the meme stock treatment on the up (Wednesday) and on the down (Friday). Estée Lauder and Kohl’s had a tricky time (Friday) thanks mainly to their exposure to China and build-up of inventory respectively. Target’s latest update disappointed (Thursday) as it too had problems with offloading excess inventory.
• IN THE UK – preppy apparel retailer Joules named a new boss (Tuesday) who is ex-John Lewis and Ted Baker was taken over by Authentic Brands Group (Wednesday). In grocery retail, Aldi is set to overtake Morrisons as Britain’s #4 supermarket (Wednesday) and Nationwide is helping its staff in the cost-of-living crisis by increasing pay again (Tuesday).
• IN ONLINE RETAIL NEWS – Europe’s biggest online fashion retailer, Zalando, announced disappointing sales numbers (Monday) but brushed this off as a blip while Amazon has been testing out a new TikTok-like feed in its app (Thursday) that’s designed to make it more shareable on social media.

Meanwhile, in REAL ESTATE NEWS…

• UK house price growth is slowing (Thursday), according to the latest data from the ONS and Rightmove said that house prices are falling (Monday) while new UK-based lender has just been granted a new licence by UK financial regulators to offer fixed mortgage rates with a 50-year term (Tuesday)! Halifax has made moves to concentrate more efforts on providing mortgages for the wealthy (Friday), echoing similar recent moves from the likes of NatWest and Nationwide.

• Apple continues to take a bigger slice of the digital advertising market (Tuesday) while more people use Apple Pay (Friday) as the company gets tougher on its staff working from home (Wednesday).
• Snap gives up on yet another bit of hardware (Friday) as it ditched further development of the Pixy mini-drone. This is its latest failure following that of the Spectacles. It’s having a tough time at the moment.
• Tencent announced its first ever quarterly revenue loss (Thursday) after numerous clampdowns by Beijing on the gaming sector. This is particularly notable given that it has posted double-digit growth for pretty much every quarter since it floated in 2014.

• IN LEISURE – the City of London has lost 14% of its restaurants since 2020 (Monday), a percentage that isn’t too dissimilar in places like Birmingham and Glasgow. Casualties of lockdown…talking of which, Cineworld is in trouble as its share price halved on news it is in rescue talks (Thursday). It is blaming a poor slate of releases, but this sounds like 🐂💩 as arch-rival AMC Entertainment (owner of Odeon) is doing just fine 👍. Craft brewers are worried that recession will kill them off (Monday) as punters look to slake their thirst with cheaper beverages and the owner of members’ club Soho House, Membership Collective Group, cut its forecasts despite seeing a strong rise in memberships (Thursday).
• Elsewhere, Chinese car maker Geely unveiled disastrous profits (Friday) as successive lockdowns and semiconductor shortages took their toll, Goldman Sachs cut pay in London by 60% (Tuesday) due to a slowdown in dealflow, WeWork founder Adam Neumann got a ton of money to invest in his new real estate venture called Flow (Wednesday) and the UK approved a new Covid booster from Moderna (Tuesday). Meanwhile, P&O’s owner DP World announced massive profits (Friday) and the latest figures showed that British young adults are now spending more time on TikTok than they are watching TV (Wednesday).

• 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! 

Although I had a lot of fun researching this week’s “alternative” stories, there was only one clear winner: ‘Clever’ dog leaves people in stitches as it’s spotted surfing along a beach (The Mirror, Zahna Eklund). Amazing!