Watson’s Weekly 25-02-2023

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.

Ukraine developments, salad shortages and metaverse mayhem…

• IN THE US – the Fed talks about more interest rate hikes (but that’s not much of a surprise!) although the incremental increases will be smaller.
• REGARDING UKRAINE – Biden reiterated support for Ukraine at a surprise visit to Kyiv while China expressed concern about the US’s involvement but then rolled back its unconditional support for Russia as it appears that China may be wanting to play the role of peacemaker.
• IN JAPAN – we see that the Japanese PM announced a raft of new policies to boost birth rates as he tries to address the perennial problem of Japan’s ageing demographic. Other countries with similar problems will no doubt be monitoring this with interest.
• IN THE UK – it looks like a UK recession could be milder than expected and the latest S&P PMI showed a turnaround in both services and manufacturing for the first time in seven months. Citi even thinks that inflation could dip under 2% due to falling energy prices.

IN COMMODITIES NEWS…

• Russian exports of oil to China hit a record high although its oil revenues still fell by 48% in January presumably because it a) sold oil at big discounts to market prices to get rid of it and b) was adversely affected by western sanctions. Interesting how China says it doesn’t want war on the one hand and then just blatantly goes and finances it on the other 🤣!
• Miners reported this week and BHP and Rio Tinto took hits from inflation and falling commodity prices but were positive about the outlook for this year.

…AND IN CRYPTO NEWS…

• There’s a crypto “real estate” crash going on at the moment as the value of metaverse property transactions has plummeted by a whopping 95% in the last six months! Numbers continue to drop as interest in the metaverse continues to wane.

IN BUSINESS TRENDS…

• Japanese chip component company Kyocera has decided not to build a new factory in China, instead opting to build it in Japan given ongoing US-China tensions. There does seem to be a trend forming here as other tech companies are having to weigh up whether they want to risk putting too much money into China at the cost of doing business with America.
• Management consultancy firm McKinsey announced one of its biggest ever headcount reductions as part of a wider restructuring plan. I suspect that rivals will be reviewing their own personnel requirements if McKinsey is!

IN CONSUMER TRENDS…

• The latest CBI survey said that UK retail sales lost momentum as consumers cut back.
• Having said that, the latest survey by GfK showed that there was an unexpected bounce-back in UK consumer confidence! Maybe this will cushion the blow of an economic downturn this year.

IN AI NEWS…

• IN CHINA – companies such as Baidu, Alibaba and NetEase are all developing their own chatbots, although Baidu seems to be the most advanced at the moment with its answer to ChatGPT called “Ernie”.
• IN THE UK – The UK government has confirmed that chatbots such as ChatGPT are going to be regulated under the forthcoming Online Safety Bill, which is currently going through Parliament. Both search results and content posted by chatbots will be covered by the new rules.
• IN GENERAL – we are seeing more examples of where AI is being used – like with submissions for a science fiction magazine – but we are also seeing big companies like JPMorgan cracking down on its use for data privacy issues. Meanwhile, Microsoft has loosened some of the restrictions on its ChatGPT-powered version of Bing, which had been put in place to stop it from being overwhelmed. Nvidia is benefitting from AI as it has a huge market share of AI processors but Intel and AMD are also taking more of an interest in this growth area, but Nvidia is also increasing efforts to sell AI services directly to corporates and governments, putting them in direct competition with their biggest customers – Google and Microsoft! AI certainly seems to be the hot ticket at the moment, replacing Web3 as the place for investors to be right now.

IN SOCIAL MEDIA NEWS…

• The European Commission has banned staff from using TikTok and PM Sunak has been urged to do the same – all because of data security concerns.
• The Australian eSafety Commissioner has given Big Tech companies 35 days to answer questions on how they combat child sexual abuse and blackmail attempts. The regulators really are tightening the screws at the moment!
• Meanwhile, Facebook and Instagram launched paid-for subscription services that gets you extra bits. It has been launched initially in Australia and New Zealand and is part of an attempt to wean itself off advertising revenues.

IN TECH HARDWARE NEWS…

• Ericsson cut its domestic headcount by about 10%, but additional job losses are expected globally.
• Intel slashed its dividend by two-thirds – to its lowest level since 2007 to conserve cash while it spent $100bn on new facilities.
• Apple’s commitment to China is deepening as Chinese supplier Luxshare has been tasked with producing its up-coming AR headsets, meaning that Foxconn and Pegatron are facing more competition.

ELSEWHERE…

• There were concerns about missing Chinese tech dealmaker Bao Fan, founder of China Renaissance although some claimed that he was just setting up a family office in Singapore. There were worries that this was just the whole Jack Ma/Ant Group thing happening all over again. The country’s courts and patent panels are also reacting against US-China sanctions and the resulting tech squeeze by invalidating patents and making foreign companies licence tech to Chinese rivals.

IN NEWS ON UK SUPERMARKETS…

• The UK is running out of salad, so Asda and Morrisons were among the first to ration sales and were followed by Tesco. Morrisons cut prices for customers as supermarkets try to stem the tide of shoppers “defecting” to Aldi and Lidl and Tesco announced a 7% pay rise in an attempt to retain and attract staff in a tight market.

IN GENERAL RETAILERS…

• M&S is making more of a splash in sportswear as part of overall efforts to broaden its product range. Brands such as Asics, Veja, Hoka and Girlfriend Collective are among the brands that will also make it to M&S’s website. It seems to be doing all the right things at the moment!

• Lithium prices continue to drop as EV demand weakens
• Bentley announced it was phasing out its 12-cylinder engine as it phases in electrification
• Start-up Lucid said it would almost double production in 2023 (which was lower than market expectations).
• In the UK, EV production rose in January but the boss of Stellantis pointed out that middle classes still can’t afford EVs because of the lack of incentives. Stellantis actually did pretty well last year, so well that it was confident enough to announce a dividend payout and a share buy back.
• Mind you, if you think sales of EVs are bad, cars powered by hydrogen fuel cells are worse! Toyota and Hyundai are leaders in the field with their respective Mirai and Nexo models and at least they are continuing with their efforts.

• IN FINANCIALS NEWS, HSBC and Lloyds continued to rake it in thanks to higher interest rates, Visa and Mastercard are facing a class action lawsuit in the UK for unlawful and excessive debit and credit card fees while ESG investing has come under more criticism for not supporting the defence sector. That said, Lockheed Martin is planning a UK satellite factory.
• IN REAL ESTATE NEWS, renting property in Singapore is becoming a nightmare as Covid-led construction delays and an influx of Hong Kongers fleeing zero-Covid policies have driven up demand while, in the UK, Hamptons research shows that 60% of homeowners selling property worth over £1m in January have had to cut their asking prices to find buyers.
• BrewDog announced plans to expand in China.
• Troubled South African utility Eskom lost its chief exec and the government had to step in to service the company’s debt.
• Alibaba managed to grow sales despite the hits it took from Covid lockdowns .
• Rolls-Royce saw its share price boom this week on news of a turnaround plan from its new CEO and strong results from last year.
• BAE Systems managed to beat market expectations for sales, profits and cashflow thanks to a fat order book powered by in the increase in defence spending following Russia’s invasion of Ukraine.

• Watson’s Yearly 2022/23: coming shortly…

My favourite “alternative” story this week was, for the first time ever, not from the “In other news…” section – it was from Friday’s edition of Watson’s Daily where I highlighted an amazing Nike commercial that used AI to pit a 1999 version of Serena Williams against a 2017 version! This was just mind-blowing!