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...
The Iran war rumbles on, Canada announces a big LNG deal and BP's chair gets kicked out
IN WAR NEWS…
IN IRAN – the American side talked a good game on peace/extending the so-called “ceasefire”, the Iranians said they weren’t close to a deal and the oil price went up on hopes that a deal would be done and down when it wasn’t. The US struck various Iranian targets.
IN GAZA – Netanyahu is ignoring previous conditions of a truce and pushing to get control of 70% of Gaza – much more than the 53% that had previously been agreed.
REGION/INDIVIDUAL COUNTRY NEWS…
Energy consultancy Wood Mackenzie has warned that if the Strait of Hormuz remains closed until the end of the year, oil prices could rocket from $94 a barrel to $200, which would almost certainly trigger a global recession. Advisory firm Rapidan Energy Group has warned that the world could face a downturn on the scale of 2008 if the Strait stays closed until August.
US – The Trump-backed Republican candidate Ken Paxton easily beat Republican senator John Cornyn in the Texas run-off, further tightening the president’s grip on the country. Despite Cornyn having voted with Trump 99% of the time, the MAGA base viewed him as a RINO (Republican In Name Only) and that was enough to see him ousted.
UK – the chancellor has told ministers to favour British companies for government contracts in shipbuilding, steel-making, energy and AI, with the Treasury and Cabinet Office set to oversee contracts in these areas. This sounds like a lot of hot air and may well be academic anyway given that if Starmer loses the leadership there could be a general election on the horizon.
OIL – BP has removed its chair Albert Manifold just eight months into the role over serious concerns about governance standards, oversight and conduct. BP has now lost two chief executives and one board chair since 2023, though it has a well-respected CEO in Meg O’Neill and a favourable oil price environment to work with.
Chevron’s CEO has warned that oil prices are likely to rise over the next two months as inventories fall, with prices having already dropped around 10% over the past week amid growing optimism about a US-Iran deal.
ENERGY
Canada has announced a deal to sell LNG to Germany as it pushes towards becoming an energy superpower, with Germany’s state-owned utility SEFE committing to buy a million metric tons annually for up to 20 years from the early 2030s. I would have thought that there will be more of these deals to come as countries try to reduce their reliance on America.
Paris-based nuclear developer Newcleo has announced plans for a SPAC-backed IPO valuing it at around $2.4bn, which will help finance its existing European projects and its bid to enter the American power market.
IN INVESTMENT NEWS & TRENDS...
IN MARKETS…
The AI boom is having a dramatic effect on markets, with the Philadelphia Semiconductor Index on course for its biggest annual return since 1999, already up 75% since the start of the year on the back of insatiable demand from Meta, Alphabet, Amazon and Microsoft.
South Korea’s KOSPI index has also been extraordinary – up over 90% since the start of the year, fuelled by Samsung and SK Hynix! To illustrate the scale: the index took over 18 years to go from 1,000 to 2,000 points, another 13 years to reach 3,000, four months to get from 4,000 to 7,000 and just two weeks to go from 7,000 to 8,000.
It all feels precarious and valuations are getting sillier by the day, but the money keeps coming in and datacentre demand is through the roof. The fact that this bubble is still inflating during two active wars and with the world teetering on the brink of recession makes it all the more remarkable. The problem comes when the AI gravy train slows down because the market falls will be dramatic. Any slack could, however, be taken up by mass EV adoption, which should provide the next big wave of demand for the utilities and tech supply chain.
IPOs – SpaceX, OpenAI and Anthropic are among a wave of mega-flotations set to test the limits of the AI boom this year. These trillion-dollar listings will test whether investors have the appetite to get involved and will inevitably require them to sell other assets, making market direction even more skewed towards tech.
SpaceX also successfully launched its redesigned Starship, returning it to Earth intact, a real boost ahead of its imminent flotation. The launch had been delayed because of a fault.
M&A – Fertitta Entertainment has agreed to buy Caesars Entertainment for around $5.7bn in cash, something of a gamble given that Caesars’ share price has cratered 70% over five years.
Belgian gunmaker FN Browning is buying UK sniper maker Accuracy International to strengthen its bid for Britain’s rifle replacement programme. I think that there will be more defence sector consolidation as stronger companies look to take advantage of their positions and tap into all that government defence spending from governments around Europe!
Eli Lilly has agreed to buy three vaccine developers for a combined $4bn, sensibly deploying the cash generated by its weight-loss drugs.
Uber is thinking about putting in a higher bid for Delivery Hero after its initial €11.5bn offer was rebuffed, while rival DoorDash continues to circle without doing anything concrete. Shareholders are clearly holding out for a better price.
IN BUSINESS & EMPLOYMENT TRENDS...
IN BUSINESS TRENDS…
Research from Boston Consulting Group shows that bank lending to UK businesses has fallen to its lowest level in nearly 30 years, dropping to 59% of GDP in Q3 2025 versus a peak of around 90% in 2008, with SMEs particularly badly affected.
IN EMPLOYMENT TRENDS…
PAY – Samsung workers are set for a massive $400,000 bonus after their union secured a profit-sharing agreement giving 78,000 semiconductor workers 10.5% of the company’s operating profit, equating to a bonus pool of a whopping $22.6bn. Both Samsung and SK Hynix are now $1tn companies thanks to the AI boom. These are eye-catching sums and employees at other AI-related companies around the world will surely take note, which could eventually start to hit margins more widely.
ByteDance is meanwhile offering special stock linked to its AI lab to fend off poaching from rivals including Tencent, the first time it has offered shares tied to a specific business unit.
RECRUITMENT – A Stanford-led study of four million job applications found that AI-powered hiring tools are producing clear racial disparities, particularly disadvantaging Black and Asian applicants. The algorithms favour candidates who most closely resemble already successful employees, which arguably just builds an expensive system for reinforcing existing bias. AI is not the whole answer in recruitment but it is a useful tool for the initial sweep of applications and will continue to improve over time.
BEHAVIOUR – Resignation rates have fallen to their lowest level since the depths of Covid according to research from Deutsche Bank, with falling vacancies and higher hiring costs making employees more reluctant to move.
THE CONSULTING INDUSTRY – the industry is facing serious disruption as individuals leave the big firms to set up independently, using AI tools that give them effective virtual scale. The major players are already cutting headcount and graduate recruitment as AI automates research, data summarisation and presentation work. Clients are pushing for outcome-based pricing rather than the traditional billable hour and the argument is that if work can be completed faster, they have the capacity to do more business. Bigger firms should ultimately survive but mid-tier firms are most exposed, lacking both the financial firepower of the incumbents and the specialist expertise of the smaller boutiques. AI consultants from the model-building companies are also beginning to move into management consultancy territory, setting up an interesting clash with the Big Four.
UNEMPLOYMENT – long-term unemployment has hit its highest level since January 2016. The longer someone is out of work the harder it becomes to return and employers tend to make lower offers to those who have been out for extended periods.
Next’s CEO has also warned of a “dramatic fall” in entry-level jobs, with the company now receiving twice as many applicants per role as it did two years ago. Rising employment costs, the Employment Rights Act and a struggling economy have made this significantly worse and the government urgently needs to come up with a coordinated plan.
UNIVERSITIES & GRADUATES – British universities are in serious difficulty, with 38% now carrying out compulsory redundancies versus 11% in 2024 and 79% making voluntary redundancies, driven by rising National Insurance costs and a sharp drop in international students. Two-thirds are considering alliances or mergers and 44% are cutting courses. There have arguably been too many courses at too many universities for too long and international fees have been papering over the cracks for years. More mergers are surely coming.
Manchester University’s plan to offer work placements to all 32,000 undergraduates is admirable but will be a very tall order given employer reticence, and one in seven graduates are currently classified as NEETs, the highest proportion in 25 years.
IN CONSUMER & RETAIL NEWS...
CONSUMER TRENDS…
The energy price cap is set to rise 13% from July, adding over £200 to the average annual bill and putting further pressure on household finances. Poorer households will be hit hardest and the likelihood is that most people will simply hunker down and wait for the economic storm to pass.
Guardian research has also found that the current heatwave has pushed prices of hot tubs and air conditioning units sharply higher, with some products more than doubling in price within a week.
RETAIL
Lidl has overtaken Morrisons to become the fifth largest supermarket in Great Britain while Aldi sits just above it and closes in on the ailing Asda.
Waitrose is cutting own-brand prices to claw back ground lost to M&S and Ocado. Asda continues to slide and desperately needs to find a point of difference: Lidl has its middle aisle and in-store bakery, Aldi has its middle aisle, and Asda currently has nothing.
Private equity firm Modella Capital bought Flying Tiger Copenhagen to add to its portfolio of TG Jones and Hobbycraft. This could actually be quite an interesting combination because TG Jones brings retail presence, Hobbycraft brings an educational angle and Flying Tiger brings fun. Melding them together could create something genuinely refreshing on the UK high street.
B&Q owner Kingfisher reported a weaker quarter, blaming wet Easter weather, although the current economic backdrop makes a strong consumer recovery in discretionary home improvement spending unlikely IMO.
Temu was fined €200m by the European Commission under the Digital Services Act for allowing the sale of illegal and unsafe products. Temu’s thinking about how to respond.
IN TECH NEWS...
The EU is assembling a tech strategy aimed at reasserting its position in the global race for technological power centred on accelerating European data centre construction and prioritising European cloud and AI technologies. The Cloud and AI Development Act could benefit companies like SAP, Mistral and OVHCloud, but with Amazon, Microsoft and Google making up over 70% of the EU cloud market currently, the gap is very large and this may well be too little too late.
AI – Safety protections can be stripped from models by Meta and Google in a matter of minutes using freely available tools, according to tests carried out with an AI safety group. Once stripped, the models provided instructions on dispersing harmful gases, generated credit card theft code and gave lethal dosage calculations for dangerous substances. Modified versions of advanced models are readily available online to anyone with a reasonable level of technical knowledge. This is definitely something that needs addressing as a matter of urgency!
A phenomenon called token maxxing is emerging as employees given AI usage KPIs burn through token allocations far faster than employers anticipated. Amazon has already shut down an internal AI usage leaderboard after employees padded their usage with meaningless activity to boost their scores. If this continues at scale the cost benefit of AI versus humans may start to look considerably less compelling.
Elon Musk caused a stir ahead of SpaceX’s IPO by claiming that it’s much more of a shorter term thing than its pre-IPO filing said. He said that a recently announced deal with Anthropic for datacentre capacity is only a 180-day lease rather than the three-year agreement referenced in the pre-IPO filing, which had implied a total contract value of around $45bn. Musk appears to be gambling that investors will back him regardless.
On a more positive note for Anthropic, the company has finalised a $65bn funding round that has tripled its valuation in just three months, pushing it past OpenAI to a valuation of $900bn. A flotation at a trillion dollars feels like a real possibility.
Robinhood is launching a feature allowing clients to use AI chatbots including Claude Code and ChatGPT to build portfolios, automate trading strategies and place orders, with a significant rise in brokerages offering agentic trading expected to follow. This sounds interesting and could democratise trading. It could also put a lot of people on the road to ruin if used incorrectly, though.
Kirkland and Ellis announced plans to spend $500m building its own proprietary AI platform rather than adapting existing tools. I think that this risks being an expensive ego trip: it is a bit like ditching Microsoft Excel to build your own spreadsheet software. If rivals successfully adopt existing tools and lower their bills while handling greater volume, Kirkland could find itself with an inferior model it cannot afford to abandon and partners becoming increasingly unhappy about the hit to their profit share.
UK firm Pinsent Masons was reprimanded by the High Court after a junior lawyer made false submissions based on AI-generated content, a timely reminder of the dangers of over-relying on the technology.
HARDWARE – China is overhauling the world’s biggest surveillance network by integrating AI to track individuals, analyse behaviour and forecast unrest in real time. Products from Hikvision and Huawei combine computer vision and LLMs to issue alerts for behaviours ranging from erratic driving to crowd gatherings. This has distinct Minority Report vibes and raises the obvious question of whether cash-strapped governments elsewhere might eventually see the appeal.
Meta is lobbying the UK to shift social media age verification responsibility onto Apple and Android at the operating system level as the UK moves towards a ban on social media for the under-16s. Placing checks at OS level is probably the right approach but it is hard to escape the impression that tech companies are trying to do as little as possible for as long as possible on user safeguarding.
Spotify’s CEO has defended the company’s move into AI-generated music as a better alternative to piracy and unregulated content, although the risk of crowding out human artists and eroding their earnings is very real.
IN MISCELLANEOUS NEWS...
AUTOMOTIVE – Ferrari launched its first EV, designed by Jony Ive and priced at around €550,000, to widespread mockery. There are so many memes about the Ferrari Luce being a lookalike of Nissan’s Leaf (even Nissan’s own social media team roasted Ferrari!). The share price fell by over 6% after the unveiling. Some cars have a halo effect that lifts an entire range but the design here is so poorly received that I wonder whether the reverse could happen with buyers drifting to other marques entirely. It simply does not look like a Ferrari. Nissan Leaf sales might do well, though! I was thinking of making sticker like this that Nissan Leaf owners could put onto their cars to help any confusion…
IN REAL ESTATE – a JLL report shows that London has only built 7% of the homes it had planned to last year owing to thriftier buyers, the exit of investors, rising service charges and planning delays, making the government’s housing targets look impossible to attain. Rightmove data showed that coastal properties continue to command a premium even as average house prices moved broadly sideways.
BANTER
My fave video of this week was the one with the super-cute sing-a-long! What an amazing performance!!!