Watson’s Weekly 20-11-2021

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.

In MACRO NEWS…

The presidents of both the US and China held talks about nuclear arsenals (Wednesday) after tensions have been mounting over the last few months in particular.

Brazil’s inflation is going crazy right now (Wednesday) as it edged above the 10% mark for the first time in over five years. There are concerns that President Bolsonaro is going to fritter away money to spend on an aid package on the poorer in society in order to buy their votes in next year’s election. Mind you, if you think Bolsonaro is bonkers, Turkey’s President Erdogan is faring even worse on the inflation front (Friday) with an eye-watering rate of 20% and he is cutting rates and not increasing them because he is one of the only leaders in the world that believes cutting interest rates helps to curb inflation!

Japan’s GDP has contracted way more than had been expected (Tuesday) and industrial production is down for the third straight month. The country is to launch a stimulus (Thursday) that will give families with kids ¥100,000 ($872) as part of a $350bn stimulus package, but it’s not widely seen as something that will be of huge benefit.

In the UK, Andrew Bailey has been yapping on about inflation concerns (Tuesday), but after last month’s fiasco of letting everyone believe that an interest rate rise was coming and then it not happening, if the Bank doesn’t raise interest rates at the next meeting his credibility will go down the toilet. As if to prove the point, UK inflation hit 4.2% in October (Thursday) – up from 3.1% in September and above market expectations – and the Institute of Fiscal Studies said that workers would have to get a 7% pay rise from now in order to merely maintain their current spending power.

In ENERGY,

Shell shifted its tax domicile to the UK (Tuesday), like Unilever and Relx before it while Brexiteers revelled in the news and the Dutch were frustrated by it. Peak power prices hit a new high (Tuesday) as low wind speeds hit renewable power generation and gas prices shot up because Germany decided to delay Nord Stream certification (Wednesday). Rising power prices have also helped National Grid’s revenues boom (Friday). Meanwhile, Qatar invested in Rolls-Royce’s Small Modular Reactor nuclear power generation venture (Wednesday) as interest in nuclear continues to gather pace.

• Chip shortages are forcing manufacturers to improvise, adapt, overcome (Monday) so they are supplying older chip-less models or modifying the design of existing ones and Tesla is supplying unfinished cars (Tuesday) because of the shortage, promising to retrofit them when the parts become available while GM and Ford have decided to get more directly involved in chip manufacture (Friday). High-end bicycle manufacturers are warning of longer disruption (Monday) due to parts shortages, Greggs is running low on vegan sausage rolls and bean and cheese melts (Thursday), Oatly is having production and distribution issues (Tuesday) and America’s Tyson Foods is increasing meat prices (Tuesday) due to rising costs and the expectation that this will continue for a while yet.

• UK employment is going up (Wednesday) and consumer confidence is rising again (Friday), according to GfK’s consumer confidence index. Consumers are spending money on stocking their wine cellars (Monday), buying board games (Monday) and going to watch the Bond movie at Cineworld (Tuesday). On the other hand, Alibaba has observed a weakening in Chinese consumer spending (Friday).
• In retail, Walmart and Home Depot continue to win (Wednesday) and Target and TJX are upbeat about Christmas (Thursday) while in the UK, House of Fraser got served notice from the landlord to move out of its flagship store in January (Thursday) while M&S has decided to rent out dresses (Wednesday).
• In leisure, US REIT Sun Communities bought Park Holidays for almost £1bn (Monday), international restaurants are looking to buy London premises (Monday) and while Wagamama’s parent upgrades earnings on a strong performance (Wednesday), Revolution Bars is hit by higher costs for employing bouncers (Wednesday).

• In commercial property, WeWork has benefited from the return of office workers (Tuesday), while Landsec (Wednesday) and British Land (Thursday) are staging a recovery.
• In residential property, house price growth is weakening (Monday) while rents are rising (Tuesday) and mortgage lenders are fighting for customers (Wednesday).

• In aviation, budget airline Wizz Air decided to put in a hefty order of new planes with Airbus (Monday) as Airbus is facing huge demand (Monday) and it won its first new freight plane order (Tuesday).
• In some surprising developments this week, Rivian became bigger than Europe’s biggest carmaker VW (Wednesday), Peloton announced plans to raise $1bn in cash in a stock offering (Wednesday) and Redefine Meat announced an amazing new development in alt-meat (Wednesday).
• In demergers/mergers/acquisitions news, Johnson & Johnson became the latest conglomerate to announce a split (Monday) after the likes of Toshiba and General Electric. On the subject of GE, it is seeing intense interest from PE firms (Tuesday) as they all salivate over what they could do with its businesses and in acquisition news, Nvidia’s proposed purchase of Britain’s Arm Holdings is going to get a thorough investigation (Wednesday). Separately, Nvidia announced record quarterly results (Thursday). There was disappointing news as Carlyle decided to walk away from its bid for Metro Bank (Friday) and Unilever decided to sell its tea business (Friday) to slim down its offering.
• Elsewhere, India’s biggest IPO failed (Friday) as fintech company Paytm saw its share price fall by 27% on its market debut.

• 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 Three minutes of golden retriever madness that will make your day (The Mirror, Bethan Shufflebotham), which I think will make anyone’s day!