Watson’s Weekly 22-10-2022

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.

Truss leaves after 44 days, Hunt abandons Trussonomics and President Xi Jinping lands another term…

• China delayed key economic data (Tuesday), presumably so as not to sully the atmos at the Communist Party’s 20th Congress where President Xi Jinping’s historic third term in office was rubber-stamped. The delay would imply that growth figures are disappointing.
• IN THE UK – Truss ended up resigning as Prime Minister (Friday) after huge pressure and new Chancellor Jeremy Hunt pretty much chucking her mini-Budget proposals in the bin. Fortunately, there won’t be a general election or a protracted leadership contest for the next leader (because I think this would be too disruptive in such difficult economic circumstances) and it seems that Rishi Sunak, Penny Mordaunt and Boris Johnson are in the running. We’ll either know who’s leader on Monday (if only one real candidate emerges) or on Friday if there is an actual contest to be had. UK inflation hit a 40-year high of 10.1% (Thursday) but the deputy governor of the Bank of England talked down fears of interest rates reaching 5.25% (Thursday), although it looks likely that there will be another hike when the MPC next meets on November 3rd.

In ENERGY NEWS…

The International Energy Agency warned that it the UK and Europe didn’t gut gas use by 10%, they’d risk blackouts (Tuesday). Meanwhile, the European Commission announced new measures to limit energy prices (Wednesday), Germany extended the lives of its nuclear power plants (Tuesday) while the French equivalent of the National Grid warned that strikes made blackouts more likely in the coming months (Wednesday) as a number of nuclear reactor restarts have already been delayed because of this.

IN CURRENCY NEWS…

• The yen plunged to its lowest level versus the dollar since 1990 (Friday) as the greenback continues its strength versus the world’s other major currencies.

• Apple said it was suspending plans to use Yangtze Memory Technologies chips (Tuesday) due to new US export controls. This was a blow for both Apple (it’ll have to rely on Samsung and Micron now) and Yangtze (which has been trying to break the US market for years). In other news, Apple launched some more gadgets this week (Wednesday) which are pretty much all upgrades of their existing tech.
• Meta was forced to sell Giphy (Wednesday) by the UK’s Competition and Markets Authority as the purchase by the former of the latter was deemed to be anti-competitive, particularly in the advertising space. This was a big win for the regulator and Meta won’t appeal. Separately, internal documents showed that its flagship metaverse offering, Horizon Worlds, is not doing very well (Monday) and is very glitchy. It seems that many users that visit Horizon tend to leave within a month.
• Microsoft announced that it will be cutting headcount (Wednesday) as it joins the likes of Twitter, Netflix and Uber in reducing staff numbers to save on costs. Tech sector weakness continues…
• In social media-related news, Snap saw its share price crater by 23% as revenues disappointed (Friday). It just doesn’t seem to be coping well with the shake-up in advertising prompted by Apple’s privacy changes. Also, Kanye West bought right wing social network Parler (Tuesday) for an undisclosed amount. Well I guess this is one way you could react if you get banned from IG and Twitter!
• In other tech news, Tencent is doing share buybacks as its share price is bumping along at four-year lows (Thursday), Uber is rolling out a new advertising business (Thursday) and Elon Musk’s SpaceX is getting increasingly tight with the Pentagon (Friday) thanks to the Starlink satellites that are quite literally getting battle-tested right now in the Ukraine war.

• Foxconn, better known for assembling iPhones, announced major ambitions to supply EVs (Wednesday) as it continues in its efforts to diversify away from the assembly of consumer electronics.
• Tesla announced sales that fell short of expectations (Thursday), which wasn’t taken well by the market and near-term upside could be difficult to see (Friday) given that it continues to face rising costs and tighter competition.
• It looks like the UK’s EV industry is going down the toilet as BMW has decided to shift production of the electric Mini to China (Monday), EV start-up Arrival said that it was going to shift production from the UK to the US (Friday) and give up on making buses and cars to concentrate on vans in an effort to cut costs while EV battery manufacturer Britishvolt continues to fight for its survival (Monday) as its horrendous cash-burn continues. On the plus side, Rolls-Royce unveiled its first ever 100% electric car (Wednesday) which costs a mere £300,000+. What a bargain 🤣!
• In other car-related news, Shell decided to shut down all three of its hydrogen fuel refilling stations in Britain (Wednesday), blaming the lack of hydrogen-powered cars. Meanwhile, car dealership Lookers announced bumper profits (Wednesday) as rising new and used car prices have been benefiting them greatly. How long that will continue is moot, however…

• IN BANKS NEWS – Goldman Sachs announced a major streamlining of its business (Wednesday) which involved a reining in of retail banking efforts, Credit Suisse continues to look at selling assets (Monday) as its financial problems persist and it looks like Jeremy Hunt is going to impose a windfall tax on British banks (Thursday) given that they are probably going to be raking it in (Wednesday) because of higher interest rates. That said, hiring in the financial sector in the City seems to be losing momentum (Monday), which is probably not that surprising given the ongoing lack of IPOs and investor reticence to participate given current economic uncertainty.
• IN INVESTMENT MANAGEMENT NEWS – investor nerves are resulting in more redemptions, according to the world’s biggest quoted hedge fund Man Group (Thursday). The world’s biggest alternative asset manager, Blackstone, saw its Q3 profits fall (Friday) as it sold fewer assets at lower prices because of weak markets and UK fund managers including Schroders and Jupiter are also having a tough year (Friday) due to the same thing. It’s possible that we will see consolidation in the sector as a result.

IN CONSUMER TRENDS…

• On the positive side of things, luxury goods company Hermes put in another strong performance (Friday) as the wealthy continue to spend with enough abandon that the company is confident enough to put through even more price rises. It also seems that demand for travel in the US is still strong (Friday) as American Airlines was the latest airline to report a strong performance. It is so far untouched by inflationary pressures, but surely this can’t last forever…
• NOW FOR THE GLOOM! The latest research by GfK shows that UK consumer confidence continues to be at rock bottom (Friday) and the resulting drop-off in spending is hitting the leisure and tourism industries particularly badly (Thursday). Takeaway volumes are falling, according to JustEat (Thursday), rising prices of goods from P&G (Thursday) and Nestlé (Thursday) are powering strong sales and revenue performances and consumers are less willing to buy big ticket items, which is hitting furniture retailers like Made.com (Tuesday) and Eve Sleep, which has just been bought out of administration by Bensons for Beds (Tuesday). Dunelm is saying that it expects to do well on shoppers trading down (Friday), but I think that is wishful thinking given that consumers are likely to “make do” rather than buy soft furnishings IMHO!

IN RETAILER NEWS…

• Amazon’s workers rejected unionisation (Wednesday) in New York, which puts the labour movement back a bit and then we heard that Amazon is launching a UK insurance portal (Thursday) as part of efforts to deepen its offering in financial services.
• In apparel retailing, Asos caused concern about its credit worthiness (Monday), saw its share price crater as a result (Tuesday) and then announced it was writing off a whopping £100m worth of stock (Thursday) and cutting costs to spark sales growth. Meanwhile, Zara announced it was launching a new pre-owned service (Friday) to further enhance its offering and give it environmental bragging rights.

• IN THE UK REAL ESTATE MARKET – house prices are continuing to rise (Monday) but first-time buyers are quitting the market (Monday) and housebuilder Bellway forecasts slower sales as interest rates rise (Wednesday). 25% of young renters are increasingly getting priced out of London (Tuesday). Property funds are seeing high levels of redemptions, meaning that they are being forced to sell properties (Wednesday), something that is not being lost on cash-rich investors who are looking for bargains. Meanwhile, warehouse landlord Segro continues to benefit from rising rents and strong warehouse demand (Friday).
• IN THE MEDIA SECTOR – Netflix managed to reverse subscriber decline (Wednesday), which went down very well with investors (Thursday). Disney is having a bit of a to-do in France (Tuesday) as it is locking horns with authorities over the time limitations between cinematic release and release onto streaming platforms.

• 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! 

This week, my favourite “alternative” story was Tokyo taxis offer to let you take a ride with The Ring’s ghost girl, just in time for Halloween (SoraNews24, Casey Baseel). If only we had something like that over here!