Watson’s Weekly 30-10-2021

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.

In MACRO NEWS…

• So Rishi Sunak unveiled the least Conservative-like Budget a Conservative government has come up with in living memory (Thursday), as it was a high tax, high-touch state plan not normally associated with the “Big Society”, low tax hallmarks of a Conservative government under more “normal” circumstances.
• Inflation continues to be a hot topic of conversation as speculation increased about a sooner-than-expected interest rate rise to clip the wings of inflation. Markets are already pricing in a hike next week (Friday) but it was interesting to see that there are also winners from higher interest rates for a change (Thursday) because most commentary tends to concentrate on who will lose out! Many members of the MPC (including the governor of the Bank of England) seem to be leaning towards an earlier interest rate rise but there is at least one member who wants to take a wait-and-see approach (Tuesday).
• Although it’s not strictly “macroeconomic”, I thought I’d include some commentary about what’s going on in advertising as is often seen as being a lead economic indicator (it reflects the direction of the wider economy). Research from the Advertising Association shows that advertisers are willing to splash the cash going into the end of the year (Thursday) and this bullishness seemed to be reflected later on in the week as WPP lifted its sales forecasts for 3^rd time (Friday). Spotify benefited from ad revenues over the quarter as well (Thursday).

• Major US banks believe that Americans are likely to hit the credit cards again (Tuesday). Meanwhile, in the UK, consumers are spending more on BNPL (Wednesday) according to Credit Karma – and this will probably be enhanced by the new Klarna/Stripe tie-up (Wednesday), which will enable more retailers in the US, UK and Europe to add Klarna as a payment option more easily.
• UK consumers are facing stronger headwinds at the moment and their confidence continues to weaken (Monday) as they get increasingly concerned about inflation (Wednesday). House sales and prices are continuing to rise (Tuesday), which usually implies consumer confidence, but I think this may be supply-led than demand-led. Mortgage rates are now on the rise (Friday) as banks expect interest rates to increase and many Londoners are also facing additional costs as the ULEZ was expanded considerably this week (Monday). On the plus side, the majority of employers are aiming to hire over the next 12 months (Monday).
• In terms of UK consumer trends, we are spending at restaurants (Monday) giving chains like Giggling Squid and Las Iguanas more confidence to expand (despite ongoing difficulties of hiring staff), picking up our online shopping in-store (Monday) and going mad for frozen food (Monday). Meanwhile, Ikea bought Topshop’s former flagship store (Wednesday) for an eye-watering sum. It’s all part of the company’s strategy to have more presence in city centres, but I think it just makes them like any other furniture store…

• Facebook is facing various issues in the wake of the Facebook Papers revelations (Tuesday) but it outlined a new future and brand (Friday) emphasising the shiny new things to come rather than the rather murkier practices that have brought them to this current stage. The company is now under investigation by the FTC (Thursday).
• Google and Microsoft posted solid results (Wednesday) thanks to advertising and cloud services respectively, but Apple and Amazon were more downbeat (Friday) on supply chain problems and increased costs.
• In tech hardware, Samsung announced strong figures (Thursday) thanks largely to semiconductor demand.

• BP/Daimler announced new hydrogen plans (Thursday) as part of the journey to be carbon neutral. Lorries are more difficult to power on electricity alone, so it’s good to see alternative avenues being explored.
• The UK’s only Gigafactory, owned by Chinese company Envision, is planning a massive expansion (Tuesday) that will make the facility one of the biggest in Europe.
• Tesla became a $1tn company (Tuesday) powered by various reasons (Wednesday), including the fact that it sold 100,000 cars to Hertz , who then announced that it was supplying half of the new order to Uber (Thursday).
• In “traditional” carmakers, Volvo had to reel in its expectations for its IPO (Tuesday), GM and Ford moaned about chip shortages lasting into next year (Thursday) and UK car production hit new lows (Thursday).

• In IPO and M&A news, online petcare retailer Zooplus had a joint bid from two private equity firms (Tuesday) but two big potential M&A deals fell by the wayside as PayPal abandoned its bid for Pinterest (Tuesday) and DraftKings pulled out of the proposed Entain takeover (Wednesday).
• In banks news, Deutsche Bank benefited from advisory fees on deals (Thursday), Santander benefited from mortgages (Thursday) and Lloyds Bank’s profits doubled (Friday), also because of its exposure to the red-hot housing market. Further afield, Brazilian “challenger bank” Nubank filed for an IPO in the US (Thursday) as it continues to benefit from having less baggage than the incumbents.
• Then Evergrande started work again in Southern China (Monday) to give the impression of some sort of normality but it looks like the state is leaving it to its own devices (Wednesday).

• Watson’s Yearly updates: These will be left until the next edition of Watson’s Yearly that will be published shortly

My favourite “alternative” item this week was, of course, the drumming granny! What an inspiration to us all!