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...
Trump throws tantrums and parties, rumours surround Lagarde and Starmer has another difficult week
TRUMP THINGS…
THREATS – Trump gave Iran an ultimatum: strike a deal in 15 days or “bad things will happen”! The US has now built up its biggest military presence in the Middle East since the 2003 Iraq invasion. All of this has rattled oil markets, pushing Brent crude to a six-month high amid fears that conflict could disrupt supplies or even lead to the closure of the Strait of Hormuz. Critics argue Trump needs Congressional approval for war but he appears unconcerned.
Donald Trump announced plans to roll back tariffs on metal and aluminium goods of up to 50% that he introduced last summer.
RETRIBUTION – the president escalated an assault on the US Consumer Financial Protection Bureau, arguing that regulatory burdens have reduced credit availability and cost Americans billions. The CFPB, created after the 2008 financial crisis to protect consumers, has been accused of pursuing a radical agenda.
The pro-Trump director of the National Economic Council said that New York Fed economists should be “disciplined” for publishing study on tariffs which suggests that US businesses and consumers are bearing the brunt of tariffs – and not the corporates, as Trump keeps saying. Kevin Hassett labelled the study an embarrassment and said that “It’s I think the worst paper I’ve ever seen in the history of the Federal Reserve system”. He maintains that it failed to include the full effect of the tariffs. What a drama queen.
CRYPTO – The Trump family hosted a glitzy crypto-themed Mar-a-Lago party promoting World Liberty Financial (WLF) and the future of crypto. Despite bitcoin’s sell-off, enthusiasm remained high. WLF has applied for a US banking licence to ease access to the traditional financial system as it builds broader infrastructure.
IN REGIONAL/COUNTRY NEWS…
IN THE AMERICAS
CANADA – Canada is planning to allocate 70% of defence spending domestically, up from 50%, as part of a push to raise military spending to 5% of GDP over the next decade. Long-standing procurement cooperation with the US is fraying amid Trump tensions. Ottawa is also seeking closer ties with the EU, UK and Indo-Pacific partners.
Canada’s Liberal Party got closer to majority as another Conservative MP defected to Carney’s party. He currently relies on opposition support but faces a challenging year ahead, including a USMCA review and ongoing US tariffs on key exports, so getting an actual majority would be really good for him.
ASIA
JAPAN – Japan announced $36 Billion in US energy and manufacturing projects following Trump’s October visit. With further diplomatic visits ahead, Japan appears keen to maintain favourable relations.
EUROPE
Rumours surfaced about Christine Lagarde leaving the ECB before the end of her 8-year term in order to get her successor chosen by Europhiles Macron and Merz rather than a Eurosceptic. Spain may field a candidate.
SWITZERLAND – the Franc’s relentless rise (because it’s a “safe haven” currency) continues to alarm Swiss companies. It’s now at levels against the dollar not seen since 2015. With exports accounting for over 70% of GDP, an “expensive” currency could become a serious problem.
THE UK
UK inflation fell to 3%, its lowest level since March last year, increasing expectations of a Bank of England rate cut. Lower petrol, air fares and food prices helped, with the 2% target still in sight for this year.
Starmer cancelled plans to delay 30 local council elections in England became his latest U-turn after legal advice warned delays would be unlawful. Elections will go ahead in May, presumably much to Reform UK’s delight.
He also said that Britain needs to “go faster” on defence spending in order to hit the target of 3% of GDP, up from 2.3% in 2024, although how he’s planning to finance this remains vague.
IN COMMODITIES…
OIL – Repsol said that it wants to triple Venezuelan oil output in the next three years after securing a permit from the US to go ahead. Other oil majors have been quite reticent so far about operating in Venezuela so Repsol’s enthusiasm may encourage broader re-engagement.
GOLD – Soaring gold prices are forcing vaults to cut their insurance cover. This means that bullion is having to be relocated, which is proving to be a boon for specialist transport services.
IN BUSINESS, INVESTMENT & FINANCIALS NEWS...
IN BUSINESS NEWS/TRENDS…
US companies are raising prices once more after holding off for months despite last year’s tariffs. Many of them delayed increases or offered discounts but January typically brings price resets and this year’s rises have been steeper than usual, according to UBS. If everyday essentials like groceries keep squeezing household budgets, even a hefty campaign war chest may struggle to distract voters from affordability concerns.
Prediction betting platforms such as Polymarket and Kalshi are shaking up traditional gambling by allowing bets on crypto, politics and other events alongside sport. Investors fear market share erosion, sending shares in Flutter and Entain down sharply this year.
IN INVESTMENT NEWS…
EU cross-border banking deals have hit their highest level since the 2008 crisis. With the sector still fragmented, further consolidation looks likely.
Hapag-Lloyd made an all-cash off to buy Israeli Rival Zim for $4.2bn. This should boost shipping its existing capacity, pending approvals.
eBay bought Depop, highlighting eBay’s eagerness to attract younger users. Given that 90% of Depop’s audience is under 34, this looks like a good move. It will also help Depop compete more effectively with Vinted.
IN FINANCIALS NEWS…
Bank of America announced that it would commit $25bn to private credit lending, becoming the latest Wall Street bank to push into a fast-growing sector despite rising scrutiny and liquidity concerns.
UK bank bosses announced plans to set up a domestic payments system to rival Visa and Mastercard by 2030. Given Trump’s unpredictability and the UK’s extreme reliance on these two companies (around 95% of UK car transactions are made via payments systems owned by the two companies), this sounds like a sensible idea!
Klarna’s share price took a 27% dive thanks to rising loan costs. It seems to me that the more it tries to be like everyone else the less appealing it becomes.
IN EMPLOYMENT NEWS...
It was a bad week for jobs market news. UK unemployment rate hit a five-year high of 5.2% while wage growth cooled. Youth unemployment is particularly grim, with the 16 to 24 rate hitting 16.1% in the three months to December. This is even higher than the EU’s 15% jobless rate for the same demographic! Over time, measures such as the national living wage, higher employer national insurance contributions, the Employment Rights Act and pensions auto-enrolment have combined to make hiring young staff less attractive.
The Labour government has been blamed for jacking up employer costs at a sensitive time but momentum was already fading before Labour took office. Recent job losses have been concentrated in lower-paid sectors such as retail and hospitality, areas heavily staffed by younger workers. When costs rise these are the first roles to go.
The mood among employers is gloomy. According to a CIPD survey, 37% of employers plan to reduce permanent hiring due to the Employment Rights Act, with 75% expecting higher costs. Critics argue the legislation may backfire by pushing firms toward temporary staff.
The mood among employees isn’t that much better either. The broader job market remains difficult because mid-career professionals are now getting displaced by AI with nothing to fall back on so some white-collar workers have decided to take action and ditch their jobs in favour of retraining in AI-proof trades. Given that 40% of graduates are underemployed (i.e. doing a job where a degree is not required) and graduate roles attract around 140 applications each these days, it is understandable that alternatives look appealing. The fact that PwC graduate job applications have surged by 35% emphasises the intense competition that everyone is facing.
City law firm Mishcon de Reya now uses an AI chatbot to interview graduates for first-round interviews, allowing candidates to expand verbally rather than complete lengthy forms. Transcripts are reviewed by early careers teams.
Some firms are really pushing the use of AI among their staff. Accenture is now going to the extent of tracking AI engagement and using the data as part of promotion decisions. However, a KPMG partner overstepped the line because he used AI tools to pass an internal AI course and got fined!
Goldman Sachs decided to drop its diversity commitments amid shifting political winds. Given Trump’s hostility to DEI, the move is unsurprising, though you do hope that companies will still do the decent thing even without formal criteria.
The news for students and grads was mixed this week. On the one hand, a group of UCL students won £21mn from the university over Covid disruption in watershed UK settlement, so you would have thought there will be similar actions in other universities. On the other hand, the thresholds where student loan payments kick in is going to be lowered, which will catch out a number of UK nationals living abroad, meaning higher monthly repayments. For some, bills may double, adding further strain for graduates. The irony of all this is that the government’s actions are actually punishing the students who actually need the money the most, leaving the more affluent unscathed.
IN CONSUMER & RETAIL NEWS...
IN CONSUMER TRENDS…
IN THE US – there’s growing resistance to Trump’s AI infrastructure obsession – even in the MAGA heartlands – because people don’t want massive data centres consuming water and electricity in their communities. Polls suggest around 60% of his voters are worried about rapid AI development and almost 80% think it needs more regulation. Dozens of projects have already been delayed in Republican states due to local resistance.
Trump is also feeling pushback with regard to ICE and immigration. A warehouse owner in Hutchins, Texas refused to sell the warehouse to the Department of Homeland Security for use as a migrant detention centre. Although alternative sites have been secured, the episode shows that resistance to immigration policies exists and could grow if activists coordinate more effectively.
IN THE UK – household debt is rising thanks to a borrowing binge fuelling the fastest rise in debt levels for the past seven months, led particularly by 18 to 24 year olds. Sentiment appears fragile, with confidence in big purchases at a 10-month low.
Given the rise in household debt, it is worth noting that there has been strong growth in credit card lending, with major banks reporting double-digit increases and outstanding debt hitting a record £78bn. Pessimists see strain, optimists see spending confidence.
Maybe everyone is splashing out on gig tickets! Live Nation reported strong ticket sales but there is a looming antitrust case that could force a Ticketmaster divestment if regulators prevail.
IN RETAIL NEWS…
Topshop returned to high street in John Lewis stores, marking a revival aimed at attracting younger shoppers.
John Lewis announced a 6.9% pay rise for shop floor staff that would imply improving fortunes, although bonuses remain uncertain.
Amazon overtook Walmart to become America’s biggest company by revenue after its remarkable transformation.
IN TECH & SOCIAL MEDIA NEWS...
IN TECH NEWS…
IN AI – Amazon’s Andy Jassy is putting $200bn into AI infrastructure spending to keep AWS ahead of rivals as rivals have been catching up recently. AWS generates over 60% of Amazon’s profits but analysts think Microsoft could overtake it within three years! The AI arms race is expensive but the prize is enormous.
Nvidia and OpenAI decided to ditch the $100bn deal they “sort of” made in favour of Nvidia throwing $30bn into the pot at OpenAI’s latest funding round. Given how the original agreement triggered waves of cross-investment across the sector, this scaling back could suggest growing investor nerves about the tangled web of AI financings.
Perplexity has decided to ditch advertising because it thinks that ads adversely affect user trust. Having been an early mover into ads and shopping features, Perplexity is now prioritising subscription revenue and answer accuracy. Good on them!
Somewhat surprisingly, Japan’s largest toilet maker is emerging as an undervalued AI play! Toto’s advanced ceramics division produces electrostatic chucks used in Nand chip manufacturing. With AI driving chip demand, this previously overlooked business is becoming more central.
Raspberry Pi shares surged in meme-stock fashion as some people got excited that its micro-computer devices can run OpenClaw software, which helps users perform everyday tasks.
A British researcher is raising $1bn for his AI start-up, called Ineffable Intelligence, that builds self-learning AI systems. Success would be a real boon for the UK’s AI standing.
Hyundai is accelerating robotics deployment in its US factories and targeting driverless taxis in Las Vegas in a bid to catch up with the likes of Tesla and others. Fortunately, it has manufacturing expertise and hard won data in its corner.
IN CHIPS – Nvidia secured a multibillion-dollar Meta deal despite Meta also developing in-house alternatives. Nvidia reports earnings next week.
SOCIAL MEDIA NEWS
Starmer is looking to bring AI chatbots within the scope of the Online Safety Act following the recent deepfake scandal. Breaches could result in massive fines.
The UK is to require tech firms to remove abusive images within 48 hours as part of the newer tightening of laws with companies facing severe penalties or service blocks. This feels long overdue.
Among all this, Donald Trump is looking to help Britons bypass online safety laws by launching freedom.org, which will essentially act like a VPN. With most affected firms being American, Washington’s opposition is unsurprising but it is incredible to think that, by doing this, Trump is unashamedly trying to sabotage laws that are being put in place for good reason and that aren’t in his jurisdiction.
Meta is cutting staff stock awards for a second straight year, highlighting the prioritisation of finances which are increasingly being diverted into attracting AI talent and building datacentres. Employee complaints look somewhat tone deaf given the tough tech jobs market.
IN MISCELLANEOUS NEWS...
IN AUTOMOTIVE NEWS – Carmakers have taken a $65bn hit overall as the pace of the electric transition is far slower than they had anticipated. Ford and Stellantis are among those cutting targets and trimming model line-ups as demand remains sluggish and regulatory backing weakens. Trump’s lack of enthusiasm for EVs has not helped sentiment.
US carmakers are getting increasingly concerned about the prospect of Chinese rivals gaining foothold in America, particularly after Trump said he would “love” Chinese manufacturers to build plants in the US. Geely has hinted at entering the US market within three years. US manufacturers are torn between partnering with Chinese players or defending market share against them.
Back in Europe, Brussels is planning to enforce rules that EVs must be 70% made in the EU to qualify for state support as part of a broader effort to protect the bloc’s €2.6tn manufacturing base. In theory this supports local industry but implementation may raise costs, potentially making EVs less attractive and boosting cheaper Chinese imports unless paired with tighter trade protections.
VW is aiming to cut costs by 20% by 2028 as part of an aggressive restructuring. VW has fallen down the rankings in China after once dominating as a foreign brand. Weak domestic demand and heavy investment in China leave it vulnerable, particularly if European rules restrict Chinese-built imports into Europe. There is a risk of being squeezed from both sides!
A study by the Fraunhofer Institute showed that Plug-in Hybrid Electric Vehicles (PHEVs) use three times more fuel than manufacturers claim. While this calls into question their green credentials, consumers may still favour hybrids for balancing fuel savings with reduced charging anxiety.
IN REAL ESTATE – in the US, the Federal Reserve is set to loosen capital requirements in order to boost mortgage lending. Banks’ market share has fallen from 60% before 2008 to 35% in 2023 as tighter post-crisis rules pushed them out. Relaxation could increase competition and borrower choice as specialist lenders have grown market share over that time.
In the UK, Rightmove data shows that house prices have levelled off after a strong start to year. With the Budget behind us and rate cuts likely, momentum could build from here. That being said, ONS data showed that inner London house prices saw their biggest annual drop since 2008 although suburban areas held steadier. There’s potentially good news for renters as there are signs that the exodus of landlords fleeing the buy-to-let market may be bottoming out. Greater rental supply would help ease pressure on soaring rents!
Uber said that it would launch in 7 new European markets in food delivery. Austria, Denmark, Finland, Norway, the Czech Republic, Greece and Romania are part of plans to expand its European footprint.
BrewDog has put itself up for sale as losses are piling up. AlixPartners has been appointed to explore the options and co-founder James Watt, who retains a 21% stake, may consider an offer.
Rheinmetall won approval for expanding munitions production in Italy after years of wrangling with local authorities. This saga reflects planning challenges faced by defence companies looking to expand production capacity!
Nestlé plans to exit the ice cream business as the company slims down under its new chief. The business will be streamlined into four core divisions while the ice cream division will be up for sale.
BANTER
My favourite video of the week is the one with the clever designs! Check out that desk/chair thingy at the end!!! How clever is that??