Watson’s Weekly 26-07-2019

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.

• Both the US Federal Reserve (Monday) and the ECB (Friday) are moving towards implementing stimulatory measures that include cutting interest rates
• South Korea’s economy actually staged a rebound (Friday) but its shipping industry continues to reflect weak global trade (Thursday) and its situation isn’t helped by the trade spat it’s having with Japan at the moment (Thursday)
• Although Spain has one of Europe’s best-performing economies, the caretaker PM Pedro Sanchez has failed again to put together a coalition government (Friday), meaning that he now has only two months to get something agreed with potential partner Podemos, who complain that they were only being offered “decorative” government roles

• Chinese car manufacturer BAIC bought a 5% stake in Mercedes-Benz owner Daimler (Wednesday) as it wants to make sure it doesn’t let rival Geely get all the exposure (Geely bought a 9.69% chunk in Daimler for $9bn early last year)
• Peugeot owner PSA Group put in a decent performance (Thursday) as its pricing and profitability benefited from new Citroen models (the C5 and the Aircross SUV), three commercial van launches and the integration of Opel-Vauxhall in 2017
• On the other hand, Nissan announced that it would cut 9% of its global workforce (Thursday) which reflects continued strife in the wider industry
• Tesla lost its chief technology officer (Thursday) – the latest senior management bod to leave the company. Investors didn’t like this, especially it is the latest departure in a long line at a pretty crucial time in the company’s development
• Aston Martin announced absolutely shocking European sales figures (Thursday) which sent its shares down by 26%. There’s a lot riding on the success of its new 4×4, the DBX, which is due to be unveiled in December. Given that it’s going to cost between £140,000 and £160,000, I just don’t know how popular it’s going to be in an increasingly crowded luxury SUV segment – there are only so many people who want to fork out this much money on a big 4×4 IMHO and they will be choosing between the DBX, Ferrari’s new 4×4, Bentley’s Bentayga and Lamborghini’s Urus among others. At least Lambo brought its offering out relatively early to get ahead of the pack.

• Amazon’s winning streak of record profits came to an end (Friday) due to higher shipping costs, a loss in momentum for its cloud computing business and problems in its Indian and European businesses
• Google, on the other hand, did well (Friday) as it continued to benefit from ad revenues and steady progress from its cloud computing division
• Snap posted its best user growth figures since its listing (Wednesday) as Snapchat app improvements and a management overhaul took effect. The company has yet to report a profit, but company founder and CEO Evan Spiegel said that there is an outside chance that it will be in the black by the end of this year
• Although I’ve just said that Google continued to see solid ad revenues, research by global media agency group Zenith which suggests that the internet could lose its crown for being the fastest growing sector of the advertising market for the first time in 20 years (Monday) as brands opt to move away from riskier space towards the traditional areas of cinema, billboards and posters. I’m not so sure about this – surely the whole beauty of internet advertising is that you can be far more targeted in your approach!

• It seems that there was some excitement surrounding Ted Baker (Tuesday) as rumours circulated about founder Ray Kelvin taking it private and away from the City’s prying eyes
• Mothercare also looks like putting itself up for sale (Friday) in order to focus on its online and international business
• Homebase bought Bathstore (Tuesday) and will put Bathstore concessions in its outlets. Homebase is owned by Hilco, the turnaround specialists. I think this is a very risky combo – especially if the UK housing market stays sluggish
• Sports Direct decided to drop its case against Debenhams’ recent CVA (Tuesday) but it will be giving money to another landlord (CPC) to continue the action. It looks to me like it thinks it won’t win but wants to keep some skin in the game for if CPC does win

My favourite “alternative” story this week was An optical illusion that seems to be both a circle and a square is baffling the internet – here’s how it works (Insider, Gili Malinsky https://tinyurl.com/y5kaje9c). This really is so so clever! Have a great weekend!