Watson’s Weekly 31-01-2026

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 WAR-RELATED NEWS…

• Trump piled the pressure on Tehran, saying that “time is  running out” to reach some sort of agreement or face the threat of US intervention. Trump talked ominously about a “massive Armada” heading towards Iran, moving with “great power, enthusiasm and purpose”.

IN DEFENCE NEWS…

• There’s growing unease in the UK government about how dependent Britain remains on American defence infrastructure. The Europeans are also having the same misgivings and an imminent decision to build next-generation military satellites will no doubt reflect this.
• NATO secretary-general Mark Rutte argued that a fully independent European defence system is basically unrealistic, saying that replacing the Americans would require defence spending closer to 10% of GDP, far above the agreed target of 5% by 2035. It is hard to tell whether he genuinely believes this or whether he is trying to keep Trump sweet.

IN TRADE NEWS…

• The EU and India signed free trade agreement this week after nearly twenty years of stop-start negotiations. Tariffs will fall to zero across a wide range of industrial products, from steel and chemicals to machinery and pharmaceuticals.
• PM Starmer went to Beijing on his first trip there as PM, the first such visit in eight years. With Trump becoming ever more unpredictable, the UK needs alternative trading partners but Trump didn’t like it.

IN TARIFFS NEWS…

• Trump threatened 100% tariffs on Canada if it agreed a trade deal with China. He doesn’t want China going a deal with Canada to use it as a back door into the US market.
• Trump threatened to raise tariffs on South Korea to 25%, venting his frustration over what he sees as slow implementation of last year’s trade deal. There was some confusion on the Korean side because the “deal” was not even  a formal treaty. This underlines the flimsy nature of Trump’s agreements, many of which could yet be ruled illegal by the Supreme Court.

IN TRUMP THINGS…

• IMMIGRATION – Trump faced a growing backlash against his immigration crackdown following the shooting of another protester in Minneapolis. He then backed off slightly as the outrage grew and sent Tom Homan to Minnesota to calm things down. Meanwhile, companies including Palantir and Deloitte and are benefiting hugely from ICE and CBP spending which surged after Trump’s “big beautiful bill”. Contracts have also gone to non-US firms like G4S and Smiths Detection.
• PANAMA – Panama’s top court gave Trump what he wanted, kicking Hong Kong’s CK Hutchison out of its canal ports, leaving an opening for greater US influence. The Panama Canal is a hugely important trade route that connects the Pacific and Caribbean, hence Trump’s interest.
• VENEZUELA – the US Treasury department removed restrictions that had stopped American firms from buying and selling Venezuelan oil in a key step towards doing business in the country.

IN MARKETS…

• Gold hit various news highs this week while the dollar generally tumbled and the Swiss franc soared. Trump said he was unconcerned by dollar weakness but it was interesting to see that Tether, the world’s biggest stablecoin company on one of the world’s biggest holders of gold, has benefitted enormously from the skyrocketing value of its stash, which is roughly equivalent to the amount that Qatar’s central bank holds!
• Big Tech’s dominance continued – and because it makes up over 40% of the S&P500, it drags everything up or down with it! Warnings about an AI bubble keep on growing, but markets ignore them. In the end, I think that circular deals could either be tech’s saviour or precipitate a massive downfall.
• Indonesian stocks fell on concerns that the  MSCI is considering downgrading its status from emerging market to frontier market. Meanwhile, emerging markets such as Turkey, Brazil, Korea have put in a stellar performance so far in 2026 as investors hunt upside away from Big Tech risk.

IN REGIONAL/INDIVIDUAL COUNTRY NEWS

THE AMERICAS…

• THE US – the Fed held interest rates on hold despite ongoing Trump pressure. This came after three consecutive cuts going into the end of last year. Trump wants cuts because they tend to lift markets, stimulate the economy and, by extension, make him look good.
• Democrats threatened a federal shutdown over immigration raids. They said that they’d withdraw support for funding the Department of Homeland Security unless ICE agents are reined in.
• CANADA – US state department officials met far-right separatists from oil-rich Alberta. The Alberta Prosperity Project was seeking a $500bn credit facility to finance the province if an independence referendum passes. Washington denies involvement.

ASIA…

• JAPAN – some people are getting worried about PM Takaichi’s stimulus plans. Given that Japan’s debt already stands at a huge 230% of the economy, it is understandable – but it does have extremely low borrowing costs.

THE MIDDLE EAST…

• It looks like Saudi Arabia is going to scale back Neom megaproject following a year-long review. The Line, the linear city that was meant to be the centrepiece, is expected to be dramatically scaled back and Neom may pivot into a data centre hub. The project will still be massive, but you do wonder what this means for the armies of consultants, builders and architects who have poured into the project and whether Riyadh will lean more on local talent.

EUROPE…

• THE UK – Labour’s National Executive Committee blocked Greater Manchester’s mayor, Andy Burnham, from standing as a parliamentary candidate, effectively heading off what might have turned into an eventual leadership challenge. No doubt Starmer will be relieved.

IN COMMODITIES…

• IN OIL – Canada’s efforts to push further into Asian markets seem to be working well as it pumped record volumes to reduce reliance on the US.
• GAS – US natural gas prices hit their highest level in 3 years as winter storm Fern prompted stronger heating and power demand at a time where production was restricted.
• GOLD – Gold had its best trading week since the 2008 financial crisis and surged even further this week. Silver and platinum also hit record highs. The weaker dollar was also instrumental here because gold is priced in dollars, meaning it becomes cheaper for non-dollar buyers who can, in theory, buy more of it.
• RARE EARTHS – Meanwhile, the Trump administration is planning to invest $1.6bn into rare earths group USA Rare Earth in a bid to bolster the supply of key minerals. This will be the Trump administration’s biggest investment in the sector so far.

IN ENERGY…

• The UK is joining nine other European countries to build a 100GW offshore wind power grid in the North Sea, aiming to turn it into a “clean energy reservoir” linked by high-voltage subsea cables. It sounds like a real step forward, so fingers crossed it actually works.
• There was some comment this week that data centres are not yet the main driver of US utility bill increases, but that may not last. If AI keeps scaling, power demand could become a serious pinch point that needs dealing with now so the future does not involve AI running out of power. Other countries will have to confront the same issue.

IN INVESTMENT NEWS/TRENDS…

• IN IPOs – European IPOs have had their best ever start to a year what with ammo maker Czechoslovak Group raising €3.8bn in Amsterdam and shares jumping 31% on debut recently. Other defence groups such as KNDS and Vincorion could follow and UK candidates include Waterstones, RAC, AS Watson and CK Hutchison’s European telecoms business.
• IN FUNDING – Nvidia, Amazon and Microsoft are involved in talks about a $100bn funding round for OpenAI, which implies a $750bn valuation. Amazon may even invest $50bn on its own in this round!
• On a somewhat smaller scale, UK AI start-up Synthesia’s latest funding round, where it successfully raised $200m, gave the company an implied valuation of $4bn. This is almost double its valuation from a year ago! UK rivals like ElevenLabs are also raising money. I hope that successful UK start-ups will be able to grow rather than just get cherry-picked by Big American tech companies.

IN BANKS NEWS…

• Deutsche Bank, ING and Nordea in Europe and Lloyds Banking Group in the UK all posted strong results and the prospects are good given the potential for more lending.
• Santander is making more cuts in preparation for its £2.6bn takeover of TSB. 12% of its branches are to close further 44 branches as it gears up for the takeover. Once the deal completes, the enlarged group would become the UK’s third largest bank by personal account deposits. Closures were inevitable given the sheer amount of overlap of the two businesses.

EMPLOYMENT TRENDS

• It is taking unemployed Americans longer to find new roles than at any point in four years, with about 26% of 7.5m jobseekers searching for over six months. That kind of data will weigh on Fed decision-making as officials juggle growth and inflation priorities.
• Amazon cut about 4% of its workforce as office workloads shift towards AI. That being said, warehouse workers were spared this round.
• Amazon, UPS, Dow, Nike, Home Depot and others are set to lay off at least 52,000 workers as the jobs market cools. Companies say that this is right-sizing for an AI future after a few years of heavy hiring.
• 27% of UK workers fear AI replacing their jobs while a third of UK graduates say that poor health is stopping them from working. There’s been a 46% jump in graduates out of work and claiming benefits since 2019. As if to reinforce this, Lloyds Banking’s boss warned that bankers need to ‘reskill themselves’ to survive AI boom. There’s an argument to say that when there’s a profound new tech revolution, some jobs become obsolete but others take their place. In AI’s case, for some jobs at least the boring bits will disappear, leaving the main high margin bits to the humans. This could mean that humans will have the capacity to carry out more tasks faster. Having said that, there was some interesting research from Morgan Stanley which suggested that AI will cost the UK more jobs than it creates. Can the UK can retrain quickly enough to avoid major job losses.

CONSUMER TRENDS

• IN THE US – Visa posted higher Q1 revenue and profit thanks to strong consumer spending over the holiday period. On the flipside of that, Becle, maker of Jose Cuervo, said that anxiety and insecurity are driving Hispanic consumers to rein in spending on tequila. It echoes the weakness Constellation Brands has already seen in Modelo beer sales among Hispanic consumers who are staying home more to avoid ICE raids. What a terrible state of affairs.
• IN THE UK – BRC data showed monthly shop price inflation rising again in January, driven by higher meat, fish and fruit prices. That is disappointing because many had thought shop price inflation had peaked and it adds to the gloom after last week’s data showing UK inflation rising for the first time in five months over Christmas.
• Data from TutorCruncher data showed that there’s boom going on in private tutoring as parents try to get children into decent state and grammar schools. Lessons costing over £60 an hour in subjects like maths, English and languages are up 56% since 2022 and 27% since 2023, fuelled by the decision to impose VAT on school fees from January last year. That being said, the Tutor’s Association suggests the biggest surge is among high net worth families, with less dramatic impact across the wider tutoring market.

RETAIL NEWS

• ONS data showed that retail sales rose unexpectedly in December, the crucial final month of the year. Overall, food spending was strong but discretionary spending remained underwhelming.
• IN SUPERMARKETS – Morrisons said it would continue to strengthen its middle-aisle bargain offering as the new CEO introduced its own middle aisle in November, aping its German discounter rivals. It started poorly, but the offer seems to be improving. If Morrisons pulls this off, it could materially strengthen its proposition because a former Aldi UK chief says middle-aisle sales at Aldi account for 10-15% of sales and deliver higher margins than groceries.
• Asda’s gloom continues as it ranked poorly in the latest UK customer satisfaction index, coming in at second from bottom ahead of only Co-Op. Chairman Allan Leighton must surely be starting to sweat as the company he joined to save just over a year ago seems to be going nowhere.
• Ocado faced another setback as Canadian partner Sobeys announced the closure of a robotic warehouse after disappointing online grocery growth. This comes less than three months after Kroger scrapped three US warehouses.

CONSUMER GOODS

• Footwear group On is looking to push beyond sports shoes into broader lifestyle positioning, aiming to become more of a lifestyle brand such as Lululemon.
• Anta Sports announced that it would be buying a 29.06% stake from the Pinault family, putting to bed months of speculation and becoming Puma’s biggest shareholder as Puma works through an overhaul. Anta wants to grow outside China and the deal could provide Puma with a potential path to strengthen its position in India and China. Anta already owns brands including Fila and Jack Wolfskin.
• Deckers’ Q3 sales were up thanks to strong demand for Hoka running shoes. Demand is rising globally and the company expects this trend to continue.
• Luxury groups are leaning into the US, aiming to capture growth from wealthy consumers. Richemont has already benefited from US exposure, with strong demand for Cartier and Van Cleef jewellery. LVMH had a strong Q4, beating expectations and adding to the sense of a luxury recovery and it also saw decent performance from watches and jewellery.

LEISURE NEWS

Hospitality businesses in Devon and Cornwall are bracing for a rough ride from the chancellor’s tax rises, with business rates looking like the real kicker as they are set to double over the next three years.

• IN COFFEE/PUBS/RESTAURANTS – Starbucks posted growth in same-store sales across all regions in the last quarter, suggesting the turnaround effort is starting to gain traction under CEO Brian Niccol, who has been in the top job for about 16 months. Caffè Nero hit record turnover last year despite a tricky trading environment thanks to new products including a matcha range. This is particularly impressive given other chains are struggling.
• Pubs are going to get £100mn a year support package from the Treasury after industry pressure ramped up. Although this was welcomed by the pub industry, trade bodies say it does not go far enough and does not cover other struggling corners of hospitality. None of this will be relevant for the Revel Collective, formerly Revolution Bar Group, as the chain has filed for administration after years of tough trading. And as if this wasn’t bad enough, there are rumblings about new alcohol labelling rules that will involve explicit labelling on beer, wines and spirits warning against cancer and other health risks. Clearly this isn’t going to do wonders for demand…

TECH NEWS

• AI – Anthropic’s chief warned that ‘Humanity needs to wake up’ to dangers of AI, adding to the growing chorus of voices cautioning about the future impact of AI, as Anthropic’s boss Dario Amodei published a 20,000 word essay on what happens if development is left unchecked. It is sobering to hear one of AI’s architects saying current safeguards are insufficient but the awkward question remains, but who actually has the ability to rein it in?
• DeepMind’s chief Demis Hassabis said that AI investment looks ‘bubble-like’ even as he argued that Google’s scale and tech leave it well positioned if weakness appears. That contrasts with the Davos vibe last week where Nvidia and Microsoft leaders said bubble fears were overdone.
• South Korea has launched new AI rules that some see as the most comprehensive in the world. They require the labelling of AI-generated content, require human risk assessments and documentation for “high impact AI” used in areas like medical diagnosis, hiring and loan approvals and demand safety reports for the most powerful models. The fines look paltry at up to £15,000 and there is at least a year before penalties kick in, so the rules feel strict on paper but soft in practice. Still, this is the most comprehensive AI legislation to be fully enforced by a country.
• Abu Dhabi’s Mohamed bin Zayed University of Artificial Intelligence launched K2 Think, an open AI model that independent researchers say compares well with top open models from the US and China and was trained very cheaply. This is an important milestone given Abu Dhabi’s huge spending on AI infrastructure.
• CHIPS – the AI chip boom is spreading into other areas as demand surges and supply stays tight. Data storage name SanDisk has seen its share price nearly doubling since the start of January and up almost 1,100% since August last year, while Micron, Western Digital and SK Hynix have tripled over the same period! These names may be doing brilliantly in the build-up phase, but this isn’t going to last forever.
• In the meantime, Sandisk reported strong results as its revenues boomed thanks to AI demand while Samsung Electronics and SK Hynix warned confirmed that demand for AI chips is currently outstripping supply. Even Texas Instruments is saying that it’s going to post earnings growth in the current quarter – a quarter that is traditionally weak – as its exposure to datacentre expansion is powering demand.
• DATACENTRES – There’s a growing movement to to ban datacenters in parts of the US, with lawmakers in Georgia, Maryland and Oklahoma looking at state-wide moratoriums because consumers feel datacentres get tax breaks while household utility bills rise. Georgia is leading the push and the obvious question is whether moves like this could slow the AI build-out.
• Nvidia announced a $2bn investment in CoreWeave aimed at speeding CoreWeave’s build-out of specialised datacentres by 2030. Nvidia first invested in 2023 and it now owns over 11% of the company. CoreWeave is seen as a barometer of AI excitement…
• HARDWARE – Apple had a fantastic quarter powered by strong iPhone sales over the holiday period. It also saw a much-needed rebound in China. There are still rumblings about how long the boom can last and Apple’s sluggishness on AI, so it was interesting to see Apple buying Israeli start-up Q.AI for close to $2bn, its second biggest ever acquisition after Beats in 2014. Q.AI has tech that can analyse facial expressions to understand “silent speech” and patents suggest uses in headphones or glasses, so it will be fascinating to see how Apple deploys it.
• SOFTWARE – The French government has decided to ditch Zoom and Microsoft Teams across all state services in favour of the French equivalent Visio, citing security and pushing “technological sovereignty”. The European parliament has also backed the idea of reducing reliance on foreign providers across chips, cloud, software and AI systems.
• Microsoft shares took a hit despite quarterly sales expectations coming in above expectations because investors are still worried that massive AI capex will not translate into profits. The pressure on Big Tech to prove that huge spending turns into fat profits is ratcheting up fast.

MEDIA NEWS

IN SOCIAL MEDIA

• The European Commission wants to classify WhatsApp Channels as a Very Large Online Platform under the Digital Services Act, meaning tougher obligations to protect users from illegal and harmful content. Meta has until mid-May to comply.
• Meta posted strong revenues but narrowing profits as capex rose further on AI infrastructure. Fortunately, chunky advertising income is funding massive datacentre build-outs.
• TikTok US suffered a blackout in the US that it blamed on a data centre power failure. There were rumours that it was to suppress criticism of Trump and ICE. Subsequently, California’s Democrat governor launched an investigation into such allegations.

AUTOMOTIVE NEWS

• TRENDS – EVs outsold petrol cars in Europe for the first time ever as companies like BYD keep pushing deeper into the Continent. This is happening even with the recent chat about relaxing petrol car deadlines.
• UK car output at its lowest in 70 years, according to the latest SMMT figures. That said, it arguably leaves the door wide open for a Chinese manufacturer to come in and revive production. The UK is one of the few markets where Chinese EV makers cannot simply be taxed out and demand is clearly there at the right price point.
• TRAD CARMAKERS – GM is expecting stronger-than-expected cashflows this year and promising to return more cash to shareholders through a 20% dividend hike and a $6bn share buyback. I think that this is a bold call given the tariff backdrop, the cost of its retreat from EVs and the fact that cars are big ticket items at a time when consumers are feeling the pinch.
• IN EV MAKERS – Tesla scrapped the Model S and Model X and announced that it would invest $2bn into xAI as part of a pivot towards AI and robotics, alongside reporting its first ever annual revenue decline.

• IN PHARMACEUTICALS – AstraZeneca announced that it would invest £11bn in China after rowing back on UK expansion. It’s going to expand manufacturing and R&D in China and spread its wings after pulling back on UK plans.
• The MHRA found that there is a small risk of severe inflammation of the pancreas for people using GLP-1 weight-loss drugs. This isn’t great but the upside is that the symptoms are hard to miss, so it should be relatively easy to spot.
• Investment in Europe’s chemicals sector plummeted by over 80% in 2025, according to a European Chemical Industry Council report showing investment collapsing and plant closures doubling. The danger is that Europe will become increasingly reliant on China for raw materials needed across automotive, healthcare and defence if the investment drought continues.
• Ministers announced measures to be implemented after an investigation into the UK veterinary sector, with proposals focused on pricing and clearer information for pet owners. Given that the CMA found that vet fees have risen at nearly double the rate of inflation and that 60% of UK households own a pet, something clearly needs to be done! A final report is to be published in February or March this year.
• Boeing reported its highest quarterly revenue since 2018, suggesting the company’s fortunes may finally be turning after years of blowback from serious quality control problems.
• UPS announced plans to cut up to 30,000 jobs – or 6% of its global workforce – and shut down facilities as Amazon shipments fell. Amazon has been its biggest customer. UPS stressed that Amazon is not its most profitable customer and it will keep pushing into areas like healthcare logistics.
• Carvana shares dropped by 14% after report by short seller Gotham published a brutal report on it, suggesting that sister company DriveTime Automotive’s cash burn is dodgy. Carvana narrowly avoided bankruptcy in 2022, then became profitable in 2023, so with short sellers circling again, get the popcorn ready because this could get spicy.
• About 24 Waymo robotaxis are now training on London streets, learning things like zebra crossings ahead of a public rollout planned for the last quarter of this year. It would be the first time Waymo rolls out outside the US, so London is about to become a pretty high-profile test case.
• The pay gap between partners of mid-tier firms and those of Big Four firms narrowed thanks to mid-tier firms winning more higher margin work that used to go to the biggies. Meanwhile, pay for KPMG partners overtook that of PwC to become the second-best paid in the Big Four. The broader takeaway is that corporate advisers, whether investment banks, law firms or accountants, tend to thrive in uncertainty and given all the disruption since Trump returned to power, it would not be surprising if they did well last year and could do even better this year if hopes of a 2026 IPO and M&A bonanza actually land.

My favourite video of the week was the one with the new ultra-rapid shoelace tying technique! Yes, I probably need to get out more…