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.
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IN BIG PICTURE NEWS...
Trump makes even more waves, Milei survives scandal and things are looking tricky for Reeves
The Trump and Musk show keeps rolling on!
ON WARS…
- ON UKRAINE – Trump and Russia are deciding the outcome of the Ukraine war without Ukraine or the Europeans, who met in Paris to discuss what to do. Although PM Starmer offered to “put boots on the ground” and spend more on UK defence, Europeans couldn’t agree on such a course of action. Trump’s hurry to end the war gives Putin the upper hand and it looks like Trump is really looking to take over Ukraine’s economy, which is ironic because the whole access to Ukraine’s rare earths thing was Zelenskyy’s idea in the first place! Trump called Zelenskyy a “dictator”, voiced objections to referring to the invasion as “Russian aggression” in a G7 statement on Ukraine and JD Vance warned Europe to “step up in a big way” on rearmament.
- ON GAZA – US Secretary of State Marco Rubio supported the Israeli goal of “eradicating” Hamas, making the current ceasefire look vulnerable. Negotiations are continuing…
IN TRADE WARS…
- THE THREAT – Trump is looking at imposing a 25% tariff on imported cars, a level that he said would be a “starting point” and could go higher later if companies don’t relocate production to the US. This is in addition to all the other tariffs he’s already talked about so far!
- THE REACTION – China is already imposing new border controls and restricting the movement of tech used for processing critical minerals while the UK is looking at imposing retaliatory tariffs on American goods like whiskey, jeans and motorbikes.
- CONSEQUENCES – the reallocation of production away from China is likely to benefit countries like Vietnam, Malaysia and Singapore because they have invested in various industries over the last couple of decades.
- THE REASON – Trump needs the cash to reduce America’s biggest deficit since at least 1975! As things stand currently, debt is likely to grow twice as fast as the economy, according to projections by the Government Office of Accountability. Despite this, Trump wants to implement tax cuts (which will be expensive), which is probably another reason he’s so keen on reviewing public spending via DOGE. However, even Musk himself, who is currently its driving force, says that the actual savings could perhaps end up being half the $2tn target. Although the DOGE review will likely result in job losses as departments close down or downsize, this could be good news for companies such as Palantir, Coinbase, Lockheed Martin and Northrop Grumman who could benefit from a shake-up in how the Pentagon handles defence contracts.
IN NON-WAR/TARIFF NEWS…
- The Fed is getting cautious about further interest rate cuts, according to the latest FOMC minutes, so it looks like they’ll be looking at the effect of Trump’s policies before making any further moves.
- IN ARGENTINA – President Milei got into hot water for promoting a memecoin called $LIBRA on X on Friday night which shot up in value before tanking badly shortly after. He was accused of ethics violations but still managed to survive a senate vote on electoral reform, which must have been a relief!
- IN JAPAN – we saw that Japan’s GDP grew at an annualised 2.8% in the October-to-December 2024 period, which is way more than the market was expecting.
- IN AUSTRALIA – the Reserve Bank of Australia cut interest rates for the first time since November 2020 although its governor said that “We cannot declare victory on inflation yet”. It cut its cash rate by 0.25 percentage points to 4.10%.
- IN THE UK – the UK is looking tricky at the moment, what with the ONS figures showing sluggish productivity growth, insolvencies reaching a 16-year high and inflation edging higher. Chancellor Reeves is facing some tricky choices and may have to choose between raising taxes again, cutting spending and/or breaking her “iron-clad” fiscal rules in order to prompt growth. In the meantime, she seems to be copying the Americans as she’s just launched an audit on the UK’s 130 regulators with a view to scrapping some and making all of them prioritise growth. There was bad news for her on the car finance scandal as the Supreme Court judges rejected Reeves’s intervention and this means that the Treasury could get £5.5bn less in corporation tax because if lenders have to pay compensation, this can be offset against their tax bill.
IN ENERGY-RELATED NEWS…
- It sounds like Japan is on the verge of a major breakthrough in next-gen ultra-thin light and flexible solar panels that has the potential to make a dent in China’s dominance of renewable energy. This could be transformational because it could completely change supply chains and make them much less dependent on China.
- Europe is currently running low on gas and although it has been jolted into developing its own LNG capabilities on a more sustainable basis since Russia invaded Ukraine, the current energy mix is such that Russian gas supplies will still be very tempting in the event of the end of hostilities.
- MI5 is currently investigating the use of Chinese green tech in the UK and whether there is a potential future security threat.
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IN BUSINESS, CONSUMER & EMPLOYMENT NEWS...
IN BUSINESS TRENDS…
- DEFENCE – European defence shares including Rheinmettal, BAE Systems and Thales saw a lot of buying from investors as the the Stoxx Europe aerospace and defence index reached its highest point since the early 1990s! The CEO of Airbus called for Europe to “up its game” and invest more in defence as it could actually turn out to be a good thing in the long run.
- ESG – support for ESG investing continues to lose momentum as research from campaign group ShareAction found that out of 279 ESG shareholder resolutions put forward at AGM meetings in the UK, Europe and US, just 4 of them got majority support.
- “SPORTSWASHING” – the sporting arm of Saudi Arabia’s sovereign wealth fund, Surj Sports Investment, announced that it will be investing $1bn in DAZN and a new joint venture as the country deepens its presence in the global sports market. It will show Saudi and Saudi-based events across over 200 markets.
IN CONSUMER TRENDS…
- MORTGAGES – UK mortgage growth looks set to double, according to forecasts from the EY-Item Club, while Savills data shows that housing market debt is falling as older generations pay off their mortgages. At the other end of the scale, a report from Skipton Group showed that first-time buyers’ chances of owning their own home is getting harder by the day.
- SAVINGS – the latest GfK survey showed that UK households are now prioritising saving over spending due to pessimism over the economic outlook. Not great news for economic growth!
IN EMPLOYMENT TRENDS…
- UK firms are considering the biggest wave of layoffs in a decade thanks to the collapse in business confidence, according to the latest CIPD survey.
- Recruitment firm Hays reckons that the global jobs market is seeing its longest losing streak since the millennium. It said that demand for both temps and permanent staff has been sluggish, presumably as employers a) absorb the impact of Reeves’s Budget and b) the potential impact of Trump’s tariffs.
- Citi became the latest company to abandon DEI targets and will be changing the name of its DEI and Talent Management team to Talent Management and Engagement.
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IN RETAIL & LEISURE NEWS...
IN RETAIL…
- IN LUXURY – it seems that the luxury market in China has cooled down as a result of a sluggish economy and increasingly reluctant consumers. That being said, Hermès posted strong results for Q4 of 2024, citing strong performance in the Americas although revenues increased across all regions.
- Walmart’s sales fell short of target and its downbeat outlook disappointed investors although it did manage to report a strong holiday quarter.
IN LEISURE…
- Holiday companies are seeing stronger demand for long-haul destinations, with Kuoni and Thomas Cook both reporting decent momentum. Intercontinental Hotels Group (IHG) is doing well – and was so confident that it announced plans to return even more money to shareholders this year. This is a bit of a contrast to Tui’s loss of momentum last week.
- The hospitality industry is looking pretty nervous at the moment as it waits for the Budget changes to hit and a report from Savills suggests that the growth of “competitive socialising” (e.g. axe-throwing, tenpin bowling etc) could be reaching a peak.
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IN TECH & MEDIA NEWS...
IN AI NEWS…
- Musk rolled out the Grok-3 chatbot to Premium+ subscribers of X.
- Google announced that it has built an AI lab assistant that will help accelerate biomedical research. It will do this by identifying knowledge gaps and suggesting new ideas. Early test results of its efficacy have been promising.
- Alibaba announced a massive increase in AI investment over the next three years, which prompted a share price jump of 12%.
- Tencent made a notable change in the direction of its AI strategy as it announced this week that its social media and messaging app Weixin will use AI-powered search from DeepSeek in a move which signals that it’s willing to give up full in-house control to prioritise increased flexibility.
IN OTHER TECH DEVELOPMENTS…
- Lenovo doubled its profits thanks to the commercial PC replacement cycle kicking in as well as the release of several AI-powered PC models in China last May.
- Microsoft announced a major breakthrough in quantum computing as it unveiled a new chip which generates new particles that exist in a “topological” state – something that has only been a theoretical concept until now.
- Meta cut staff stock awards as it prepares to spend big on AI this year. It remains to be seen as to whether all this spending is going to pay off!
IN MEDIA…
- Amazon now has full “creative control” over the James Bond franchise after drawn-out discussions with Barbara Broccoli and Michael G Wilson. This could be an absolute goldmine if done right…
- Spotify announced the launch of a new “Music Pro” premium service for an extra $6 a month that will offer higher quality audio, early access to concert tickets and increased functionality, such as a “DJ” option for streaming.
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IN AUTOMOTIVE NEWS...
IN BATTERIES NEWS…
- Northvolt sold its industrial battery unit to Swedish truckmaker Scania. This just goes to show how far the once-promising Northvolt has fallen.
- CATL and VW announced a new EV battery collaboration deal. I guess for VW this is a case of “if you can’t beat ’em, join ’em!”.
IN EV NEWS…
- Rivian posted its first ever gross profit but it may face headwinds this year given Trump’s anti-EV stance.
- Nikola, the maker of hydrogen fuel and battery-powered trucks which was once valued at over $30bn, filed for bankruptcy protection in the US leaving over $1bn in liabilities. What a disaster it has been!
- Tesla is seeing growing numbers of protests at various locations in the US as owners reject Musk’s increasing association with Trump.
IN OTHER AUTOMOTIVE NEWS…
- Mercedes has continued to see sliding demand for EVs, so it will now include more combustion engine models than EVs in its new product range in order to help boost margins.
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IN MISCELLANEOUS NEWS...
- IN MINING – Anglo American announced another writedown of De Beers (the second in two years) which will make it more difficult to sell the business, BHP’s profits fell thanks to a major drop in iron ore prices and Glencore’s profits fell to their lowest level in four years thanks to weakening coal prices. Meanwhile, Rio Tinto’s profits looked quite strong but underlying earnings fell short of market expectations as weaker iron ore demand from China hit.
- HSBC announced an 8% reduction in headcount as part of a wider plan to cut costs. It also pushed back its net-zero targets by 20 years.
- Thames Water managed to get access to a £3bn emergency debt package that should give it a few months of breathing room as it tries to find new investors that will help it cut its debt pile and allow it to carry out proper maintenance.
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