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...
This was a week where Xi Jinping went to Moscow, UBS rescued Credit Suisse and TikTok took a lot of flak…
- IN CHINA NEWS – Xi Jinping made a three-day state visit to Moscow – the first one for four years – where Vlad praised Xi’s “strong leadership” and it became even more apparent that Russia is very much China’s junior partner. It was very interesting to see that China did not commit to a gas pipeline agreement, which surprised Russia.
- IN US NEWS – the Fed raised interest rates by 0.25% despite the current banking turmoil, following last week’s 0.5% hike by the ECB. Powell left the door open for further hikes in subsequent meetings but did admit that there had been talk of leaving the rates unchanged this time given what’s happening in the banking sector at the moment.
- IN FRANCE – President Macron managed to survive a no-confidence vote as the opposition is still useless and fragmented and he stuck with his unpopular plan to increase the retirement age from 62 to 64.
- IN THE UK – there was a surprise increase in inflation to 10.4% as last month’s salad price rises made themselves felt, which was what probably pushed the Bank of England to raise interest rates by 0.25% to 4.25%.
IN ENERGY NEWS…
- There was a lot of activity from firms looking to supply small nuclear reactors. British-based company Newcleo is trying to raise £900m to build a small fleet of reactors here, US firm Last Energy has signed a deal to sell 24 of its £100m modular power plants to UK customers and Rolls-Royce is looking to build its SMRs in Finland.
IN CRYPTO NEWS…
- Bitcoin’s been going crazy, especially since all this banking malarkey. It’s gone up by 21% so far this month – and by 70% so far this year! As usual, there’s no good explanation as to why.
- Coinbase got a warning from the SEC that it may face an enforcement action as authorities crack down on crypto. And yet people keep buying into bitcoin!
IN OIL NEWS…
- Commodities consultancy Wood McKenzie published a report that said oil prices could hit $90 a barrel sometime this year thanks to China’s reawakening from its zero-Covid hybernation and thirst for oil to power its growth.
IN FINANCIALS SECTOR NEWS...
OVERALL…
- US Treasury secretary Janet Yellen is pushing for World Bank reform on climate change as its efforts thus far have been judged as being insufficient. Yellen is pushing for some kind of roadmap by April.
- The Bank of England is looking to tighten capital rules on lending to SMEs, which is causing a lot of concern by SMEs and companies like Funding Circle as this is going to stunt growth.
IN US BANKING NEWS…
- First Republic still isn’t out of the woods yet despite last week’s high profile bailout and its shares crashed by another 46% while credit rating agency S&P Global made things worse by downgrading its rating.
- West coast lender PacWest had to get $1.4bn of cash from Atlas SP Partners to bolster its finances as it saw a massive outflow of 20% of its deposits as jitters in the sector continue.
- Janet Yellen stated the Treasury’s commitment to support smaller lenders, but First Republic’s share price kept falling anyway as around two-thirds of its clients had deposits that contained over $250,000 (the threshold beyond which their money is not guaranteed as things stand). Confidence was dented further as Yellen refused to commit to a broader lifting of the $250,000 threshold.
IN EUROPEAN BANKING NEWS…
- UBS rescued stricken rival Credit Suisse in super-quick time over the weekend. UBS paid peanuts to buy its rival but as part of the deal AT1 bond-holders were wiped out to the tune of $17bn. Condemnation of this wipe-out soon followed as bondholders usually take precedence to equity holders in these types of situations. Unsurprisingly, US investors are lining up to sue. Massive job losses look likely as a result of this takeover and Credit Suisse’s investment bank looks particularly vulnerable at this stage.
IN OTHER FINANCIALS NEWS…
- Payment fintech Block got hammered thanks to the publishing of a damning report by short-selling Hindenburg Research. The report said Block (formerly known as Square) had overstated the number of users, facilitated suspect payments via Block’s Cash App and targeted those on lower incomes with “predatory loans and fees”. Block denied everything, Hindenburg pointed out that it had been investigating Block for two years and we’ve seen some spectacular impact that Hindenburg’s poking around has had on Nikola (electric truck company) and Adani Group (Indian conglomerate). Nasty.
- Two UK small-cap brokers Cenkos Securities and FinnCap agreed a £43m merger just months after talks between FinnCap and Panmure Gordon failed. There’s been a lack of M&A deals and IPOs, so this looks like a defensive merger. Maybe this will prompt further consolidation in the sector as the deal pipeline is still looking pretty anaemic.
IN TECH NEWS...
IN AI NEWS…
- There are increasing appeals for rules to govern AI given the current proliferation of its usage and it was interesting to see that negotiations are continuing between AI companies and news publishers regarding access to their quality content.
- Google launched the updated version of its AI chatbot Bard but it turns out that it still makes the same mistakes as the last version!
- Meanwhile, magic circle law firm Allen & Overy was very positive about how their own in-house chatbot “Harvey” is doing but they were less forthcoming as to whether its use would result in lower fees for clients 🤣!
IN TIKTOK NEWS…
- TikTok continues to face an uphill struggle, although parent company ByteDance still has another app ace up its sleeve – CapCut. Still, TikTok’s super-slick algorithm continues to be the main bone of contention between China and the US as the company faced a five-hour Congressional hearing that fretted about data security risks. Things then took another turn as the Chinese government said that it would “firmly oppose” a forced sale of TikTok.
IN OTHER TECH NEWS…
- China is now putting more effort into nurturing domestic chip and equipment companies like SMIC, Hua Hong Semiconductor and others in order to better cope with tighten US export controls on a longer term basis. Strict US controls may well backfire in future as China ends up making its own chips and not needing the US at all!
IN CAR-RELATED NEWS...
- Brussels tried to find a compromise with Germany to get their proposed ban on the sale of combustion-engined cars from 2035. German car manufacturers wanted to have an exemption for e-fuel-powered cars, so the EC has provided that – but say that these cars must have bits fitted that mean that neither petrol nor diesel can be used. Basically, this shows how powerful Germany is here – it’ll be interesting to see whether the EC crumbles completely!
- Prices for used EVs fell as more of them hit the market and Tesla reduced its prices – but they are still expensive!
- Ford launched a new EV – the Explorer – taking it closer to its goal of being 100% electric by 2025. However, Ford still expects $3bn of losses in EVs this year as it transitions to electrification.
- Meanwhile, it turns out that Maserati has aspirations to spin itself out of Stellantis and see the same success as Ferrari and Porsche before them. No dates were mentioned, but it is clearly on the radar.
- News for VW was mixed this week. On the one hand, VW is having problems pulling out of its Russia business but on the other it turns out that one of its luxury brands, Lamborghini, is raking in the profits. Aston Martin will be looking on in hope as it wants its DBS to do for it what the Urus has done for Lamborghini!
IN CONSUMER AND RETAIL NEWS...
IN CONSUMER TRENDS…
- UK consumer confidence is improving although the outlook for personal finances has worsened.
- UK house prices remained stubbornly high, according to Rightmove, but the latest ONS data said that prices in the south west have taken a hit over the last two months. DIY and a buoyant housing market usually go hand-in-hand but there has been a mixed picture here. On the one hand, Kingfisher (which owns B&Q and Screwfix) is seeing a slowdown in DIY but rival Wickes is still doing really well!
- In terms of spending, Unilever is indulging in a bit of “shrinkflation” to pass on price rises on the sly, Foot Locker expects sales to weaken over the coming year but Nike is doing a roaring trade and making inroads into its inventory.
IN RETAIL NEWS…
- GameStop in the US (remember this meme stock??) saw its share price sky-rocket by 48% as it surprised the market with news of its first quarterly profit for seven consecutive quarters! Apparently its efforts to cut costs and get its store offering right are paying off…
- Superdry announced a deal to sell its IP in Asia to South Korea’s Cowell Fashion in order to broaden its appeal. This could be great IMO – especially if it gets rid of the meaningless kanji that the company insists on using in its designs!
- It seems that John Lewis is thinking about scrapping its partnership structure – and while it’s wasting time pondering that, M&S is nicking its customers. Dame Sharon Lewis needs to be sorting out the core business – not fiddling around with peripheral stuff. She is just wasting time IMO.
- It was interesting to see a survey by trade body Revo and consultancy Lambert Smith Hampton which shows that up to 40% of shops need to be repurposed in the next five years as consumer habits have changed permanently since lockdown.
IN OTHER NEWS...
- It was another big week for job losses as Accenture announced it was cutting 2.5% of its workforce (19,000 people!), Amazon laid off another 9,000, Indeed is cutting 15% of its staff (2,200 employees) and Just Eat is axing 1,700 delivery staff. Tough times – but then again most of these companies did have a massive hiring boom over the last few years.
- Starbucks got a new CEO but faces tough competition in China from a whole host of domestic and foreign rivals.
- The world’s most indebted real estate company Evergrande is close to announcing a big bond restructuring deal which will bring it closer to safety.
- Zurich legalised cannabis as part of a trial to ascertain economic and health benefits!
AND IN UPDATES FOR WATSON'S YEARLY...
- Watson’s Yearly 2022/23: coming shortly…
BANTER
My favourite “alternative” story this week was actually the video of Jordan Belfort of Wolf of Wall Street fame explaining the concept of sales. I’m not a fan of his or the way he acted but this is a brilliant explanation 👍