Watson’s Weekly 23-04-2022

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.

The gloom continued this week – but there are some positives! Honest!

• The global picture is looking pretty grim. The IMF downgraded year-end GDP forecasts for the UK and Eurozone (Wednesday) and stuck the boot in for the UK, saying that inflation would run higher than all other G7 members.
• China continues to suffer from all those strict Covid lockdowns (Tuesday), meaning that its Q1 GDP came in below market expectations. January and February were actually quite strong but then the lockdowns came into force and spoiled the party. China’s central bank, the People’s Bank of China, announced a raft of stimulatory measures to counter the slowdown (Wednesday) and encourage investment.
• It was a bad week for Germany as producer prices increased by the steepest rate since 1949 (Thursday), meaning that it won’t be long before higher prices filter through to the “real” economy. The country faces continued criticism for its reliance on Russian gas, but it turns out that the practicalities of just “switching off” are too much (Thursday).
• Some economists reckon the UK is heading for recession (Tuesday) and, given the current backdrop of rising prices and wages falling behind inflation, this sounds compelling. However, a lot can change before the end of this year – and it could all depend on how the Russia/Ukraine war concludes. Still, it wasn’t all bad! It looks like Rolls-Royce’s SMRs are making progress (Wednesday) and they reckon they’ll be pumping electricity into the national grid by 2029. Let’s hope this all goes smoothly – we don’t want another HS2, now do we!

• There was an interesting article this week that highlighted the relative lack of SPAC deals these days (Tuesday) versus the “glory days” of 2020 and 2021. There are a number of ongoing lawsuits focusing on whether the companies at the centre of the deal are skewed against ordinary investors. It certainly seems like they are no longer the favoured route of companies to market they once were!
• There was also some juicy M&A news this week. Private equity giant Blackstone bought a massive student accommodation portfolio in the US for $13bn (Wednesday) while it turns out that another private equity firm, TDR Capital, has made an absolute fortune from buying Asda (Tuesday) with the Issa Brothers. Meanwhile, Robinhood bought UK crypto trading platform Ziglu (Wednesday), adding to its array of services just two years after Robinhood abandoned entry into the UK market.

• Unsurprisingly, UK consumers are losing confidence (Friday), according to the latest GfK survey, thanks to the cost of living crisis – and even the ones with more money are not putting as much into the stock market as they have been (Friday), according to investment platform AJ Bell.
• As consumers, we are spending our money on Heineken’s beer (Thursday), consumer staples made by companies like P&G (Thursday) and Nestlé (Friday) in addition to Tesla’s cars (Thursday). We are trying to spend money on trains via the government’s “Great British Rail Sale” (Wednesday), but the website crashed and the discounts only apply to a very small number of journeys! However, we are not spending money on streaming in general (Tuesday) and Netflix in particular (Thursday) as subscriber numbers fell for the first time in over ten years (Wednesday), making it ponder options for its future (Friday). As if that wasn’t evidence enough of the current weakness in streaming, CNN+ got shut down (Friday), after only launching on March 29th!
• In EMPLOYMENT, it seems that unionisation is gathering momentum as railway workers voted on strike action (Thursday) as GSK workers also voted to strike (Thursday), something that is very unusual in the pharmaceuticals industry. It’s interesting to see that a combination of tight labour markets and pay lagging rampant inflation is frustrating employees and increasingly emboldening unions – something we are also seeing across The Pond with Amazon and Starbucks workers, although Starbuck’s new CEO is doing his level best to try to discourage membership. In the UK, some economists reckon pay is going to get worse (Tuesday) just as utility bills are likely to climb higher (Wednesday), according to the utilities companies themselves, while the prospect of “surge pricing” could prove to be another shocker (Tuesday).
• In RETAIL, a survey by BDO showed that 40% of retailers are planning on raising prices (Tuesday) and it seems that high streets may be offering benefits to our health as gyms are snapping up locations (Tuesday) while rents are low. Among retailers themselves, Amazon announced that it would allow retailers to sell directly to Prime subscribers (Friday) in an effort to fend off increasing competition from Shopify while fast fashion growth monster Shein got into hot water for allegedly copying Zara designs (Wednesday), although I’m not sure they really care as they have done this loads of times before and got away with it!

• A big change is in the offing for Big Tech in the form of new EU legislation (Friday). The Digital Services Act will force large tech companies to up their game on policing for dodgy content on their platforms – but given that this is going to predominantly target big US companies, I suspect there will be some kind of backlash from Biden and chums. More details to come this week I suspect.
• The Twitter drama rolls on with Elon Musk announcing a major finance package to buy the company (Friday) and private equity companies consider getting involved (Tuesday).

• In AUTOMOTIVE NEWS, you’ve no doubt been hearing about EV makers and battery makers scrambling around to source raw materials, but LG Energy went one further by buying an entire mines-to manufacturing supply chain (Wednesday) in Indonesia! Meanwhile, Rivian complained that EV battery shortages could prove to be worse than the current chip shortages (Tuesday). Staying with cars, Asian tyre maker Apollo Tyres said that prices will rise by up to 10% this year (Wednesday) because of higher costs. Separately, Stellantis also announced that it would be ending production in Russia (Wednesday) as the parts shortages and sanctions pile up.
• In RUSSIA, Putin ordered Russian companies to delist from foreign stock exchanges in a new law (Wednesday). TBH if they aren’t already doing it anyway, they are considering it so I think he’s just formalising it before individual exchanges do it for them.

• 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! 

My favourite “alternative” story this week was Scientist claims to have found the ‘perfect’ combination for a crisp sandwich (The Mirror, Salimat Garba, Emily Jane-Heap and Courtney Pochin). I never even considered putting crisps in a sandwich with something else! A game-changer for sure 🤣!