Thursday 04/05/23

  1. In MACRO, MARKETS, OIL & GAS NEWS, the Fed raises interest rates, LSE listing rule changes cause debate, oil majors rake in the trading revenues and France is left behind on gas
  2. In TECH NEWS, AI faces a UK review, Microsoft warns of AI harm, Meta faces a ban, Qualcomm gets gloomy, refurbished iPhones in India are a hit and TikTok launches an ad product
  3. In CONSUMER-RELATED NEWS, Eurozone jobless numbers fall, food price rises prove to be chunky, Heck gives up on vegan, Ryanair has a storming April, Airbnb goes back to basics and Flutter sees success
  4. In MISCELLANEOUS NEWS, European carmakers pour money into China, Thailand sees investment as well, Porsche and Aston Martin benefit from luxury spending, Lloyds profits boom, Icahn fights back (kind of) and Eli Lilly is close to another breakthrough!
  5. AND FINALLY, I bring you a very annoying illusion…

1

MACRO, MARKETS, OIL & GAS NEWS

So the Fed raises rates, LSE listing rule changes ruffle feathers, oil majors come out on top and the French fall behind on gas reserves…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

After much prior speculation, US Federal Reserve votes to increase interest rates to 16-year high (The Guardian, Lauren Aratani) shows that the Fed decided to increase interest rates by 0.25% to 5.25%, its tenth hike since March 2022 (when interest rates were zero – how long ago does that feel??). Fed chief Jay Powell hinted that the end is in sight for further interest rate hikes but he obviously left the door open for some wiggle room just in case. * SO WHAT? * Although the headline inflation figure has been coming down, a lot of that has been due to a calming down of prices in the energy sector. CORE inflation – which takes out volatile energy and food prices – actually went UP in March, though – and it’s this measure that the central bank has probably got in its sights along with the stubbornly tight labour market. That said, consumer spending appears to be losing momentum…

UK investors sound alarm over London exchange rule changes (Financial Times, Emma Dunkley, Nikou Asgari and Laura Noonan) shows that proposed changes by the FCA of the London Stock Exchange listing rules to make London more attractive as an IPO destination (and stop leakage over to New York) have resulted in investors voicing concerns about the erosion of shareholder rights because it could dilute voting rights and leave them more vulnerable to dodgy stocks. * SO WHAT? * OK, so it all boils down to London losing out on listings because it is perceived as being too strict and, as a result, companies are avoiding listing here or dropping their London listing and heading to New York instead.

Something needs to be done to stop the exodus and the changes essentially lower existing standards to allow more companies in (which is one of the things causing the kerfuffle). However, UK listing rules: watering down investor safeguards won’t turn London’s tide (Financial Times, Lex) argues that it’s not lower safeguards that attract companies to the US – it’s because there is a bigger tech ecosystem in the US that regularly churns out IPO candidates to a more receptive and liquid market. Faffing around with the listing rules isn’t going to change that – the whole investment landscape has to change.

Shell, BP and Total out-trade Vitol, Trafigura, Mercuria and Gunvor (Financial Times, Tom Wilson) shows that the European energy majors’ commodity trading businesses made more money trading oil gas and power last year than the biggest private energy traders, according to new estimates by Bernstein Research. It was all thanks to the Ukraine war which caused ructions in energy markets and put the boosters under oil and gas prices. * SO WHAT? * This is quite interesting because while you DO hear about how the energy traders are doing, you tend not to hear how the trading divisions of the oil companies are doing as they tend to mix the performance in with other stats to make it more opaque. They say it’s done like this so as not to help their privately owned competitors, but the cynic in me wonders whether they don’t want to attract attention to a part of the business that makes a big contribution to profits which could potentially draw even more criticism from politicians and activists.

Then in French gas reserves fall to lowest in Europe as strikes hobble imports (Daily Telegraph, Rachel Millard) we see that France now has the lowest level of gas reserves in Europe (just 28% full as at the end of March versus 56% across Europe) thanks to all the strikes against Macron’s planned pension reforms interfering with imports. The IEA said that supplies of LNG into France dropped by 55% in March versus the previous year because of the strikes and this has meant that the country has had to eat into its reserves already. I guess that the problem is made worse by the fact that a lot of France’s nuclear power plant fleet is still closed for maintenance. They may be striking now, but you wonder whether they will be regretting this if there is a cold winter…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

2

TECH NEWS

AI faces more scrutiny, Meta faces a ban and Qualcomm faces slow demand while reconditioned iPhones are a hit in India and TikTok launches an ad product…

In UK competition watchdog launches review of AI market (Financial Times, Kate Beioley and Madhumita Murgia) we see that the UK Competition and Markets Authority is looking into the world of AI – and specifically how the markets around so-called foundation models are developing. The aim is to seek out opportunities on the one hand whilst also considering the development of guardrails, principles and user protection. It it interesting to note that AI will cause ‘real damage’, warns boss at Microsoft (Daily Telegraph, Gareth Corfield) reflects Microsoft’s concerns about the consequences of bad actors using AI for their own gain. * SO WHAT? * Other regulators around the world are already looking into how to regulate and guide AI’s development – and the chief execs of Google, Microsoft and OpenAI (among others) are due to meet US vice-president Kamala Harris today to discuss the safety of their products. AI regulation: controversial forecasts could mean strident oversight (Financial Times, Lex) makes the interesting point that the more wide-ranging the rules, the longer they will take to implement – and so for the moment, AI companies will still pretty much have free rein.

Elsewhere, FTC Proposes Barring Meta From Monetizing Young Users’ Data (Wall Street Journal, John D. McKinnon) shows that the FTC suggested yesterday that Meta Platforms should be banned from monetising the data that it collects from young users, saying that the company has violated a 2020 privacy order. Meta has 30 days to respond. * SO WHAT? * After a brief respite with some positive news about its Q1 performance, it seems that the pressure is back on Meta. This will be the third time that the FTC has taken action against it for failing to protect user privacy and

this time it said that the company continues to give third party app access to users’ private information, reneging on previous promises not to do so.

Then in Qualcomm Sees No Immediate Smartphone Demand Recovery (Wall Street Journal, Asa Fitch) we see that the gloom about chips continues as Qualcomm, which specialises in chips for mobile phones, unveiled a downbeat sales outlook. It said that demand had fallen by more than it had expected in mobile handsets. It seems that the ongoing cost-of-living crisis is making people hold off replacing their phones, PCs and other devices. Mind you, on the subject of mobile phones, Refurbished iPhones boost Apple’s share of Indian market (Financial Times, Patrick McGee and Chloe Cornish) highlights a major boost in demand in India thanks to a significant uplift in the sale of refurbished iPhones. Market intelligence group Counterpoint Research said that the iPhone was the “fastest-growing refurbished brand in India” and now has an 11% market share for secondary smartphone sales. It sounds like Apple’s move in India, the world’s third largest smartphone market, is proving to be a canny move…

Elsewhere, TikTok Is Launching Ad Product for Publishers and Giving Them 50% Cut (Wall Street Journal, Alexandra Bruell) shows that the platform is going to launch a new product (called “Pulse Premiere”) that will enable publishers to sell ads next to their posts. This is an extension of their Pulse programme which allows its top 4% of creators to get half the revenue from the video ads that appear straight after their TikTok posts. The new product will offer the same perks for a select group of publishers including Condé Nast, BuzzFeed and Watson’s Daily (🤣 I’m kidding about the last one, but hey a guy can dream, right??). The trend for monetisation of creator content on social media platforms continues…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

3

CONSUMER-RELATED NEWS

The Eurozone’s jobless rate falls, food prices rise and we see how consumers are spending money…

In consumer news, Eurozone jobless rate at record low (The Times, Mehreen Khan) cites the latest official figures which show that the unemployment rate in Q1 fell to its lowest level (6.5%) since the launch of the single currency in 2000! * SO WHAT? * This will probably mean that the ECB will be more likely to increase interest rates in order to calm inflation and a hot jobs market.

In the UK, Price of cheddar, milk and eggs soars above UK headline inflation (Financial Times, Valentina Romei) cites the latest data from the ONS which shows that the cost of basic goods has been particularly painful. The cost of making the humble cheese sandwich, for instance has increased by more than a third in just one year as prices have gone up for sliced white bread (+29%), butter (+30%), cheddar (+42%), cucumber (+55%), lettuce (+39%) and tomatoes (+16%). All of this is clearly having a detrimental effect to disposable income and affects the poorest households much more given that they spend a higher proportion of income on basics.

So what is everyone spending (or not spending) their money on at the moment? Sausage maker scraps vegan bangers (Daily Telegraph, Daniel Woolfson) says that it’s not meat-free meals as Heck is cutting its vegan range from 15 products to just two due to relative lack of interest, but Ryanair records third busiest month in April as demand for flights soars (The Guardian, Joanna Partridge) shows that it may well be holidays as the budget airline said it had its third busiest month for traffic last month and Airbnb goes back to basics with renewed focus on private room rentals (The Guardian, Alex Hern) shows that the short-term rental app is trying to adapt to changing consumer behaviour by putting more emphasis on travellers renting out single rooms rather than whole properties. However, I imagine this is also a move to mitigate criticism that local people are being priced out of areas by the number of Airbnb properties that may once have been rented out to tenants, shrinking the housing stock.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

4

MISCELLANEOUS NEWS

Carmakers pour money into China, Porsche and Aston Martin benefit from the luxury boom, Lloyds Bank posts impressive profits, Icahn fights back and Eli Lilly announces another major development…

In a quick scoot around some of today’s other interesting stories, European carmakers play catch-up in China with record investment (Financial Times, Edward White) cites data from US research group Rhodium, which says that direct European investment in China’s automotive sector has reached a record high in an effort to reclaim market share from resurgent domestic makers. It’s particularly interesting to see the deepening of ties despite ongoing friction between the US and China on the trading front. * SO WHAT? * IMO, either the gamble by the European manufacturers is going to work and they sell more cars in the world’s biggest market whilst competing successfully with local rivals or they are going to come unstuck when sanctions bite even further. In the meantime, manufacturers are wary about too much exposure to China and are considering plans to expand elsewhere in the region to get around any current or future curbs. Thailand: auto hub history provides head start in race to electric (Financial Times, Lex) shows that the country’s history with Toyota and Honda in particular may help attract more manufacturers as they look for facilities to make EVs.

Meanwhile, Luxury demand buoys Porsche and Aston (Daily Telegraph, Howard Mustoe) shows that strong sales of 911s and DBXs helped to power the respective marques as rich people just can’t get enough! Lloyds profits jump by 46% amid higher interest rate charges (The Guardian, Kalyeena Makortoff) shows yet another example of a bank benefitting from higher interest rates as it reported better-than-expected Q1 profits and Icahn hits back in ‘glass’ fight (The Times, Callum Jones) highlights the activist investor’s pretty anaemic response to Hindenburg Research’s damning report on his company, Icahn Enterprises. Icahn basically said that Hindenburg’s report was motivated by pure self-interest, but I have to say that I expected more of a robust response – particularly if he has nothing to hide! The share price fell by yet another 20% in trading yesterday.

Then in Eli Lilly to seek US approval after Alzheimer’s drug trial success (Financial Times, Jamie Smyth) we see that the pharmaceutical giant will apply for FDA approval of its Alzheimer drug that can slow the onset of the disease, particularly if it is caught in the early stages. How amazing is this?? It’s not perfect, but it is progress. Eli Lilly seems to be on fire at the moment what with this and the recent news of its obesity drug!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

5

...AND FINALLY...

…in other news…

It’s been a while since we’ve had an illusion in this section, so see if you can do this: You have eyes like a hawk if you can find the number 218 among 278s in tricky illusion (The Mirror, Grace Hoffman). Do you have an eye for detail??

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Some of today’s market, commodity & currency moves (as at 0633hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq*DAX *CAC-40 *Nikkei **Shanghai **
7,788 (+0.20%)33,414 (-0.8%)4,901 (-0.7%)12,025 (UNCH)15,815 (+0.56%)7,404 (+0.28%)HOLIDAY3,350 (+0.82%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$69.163$72.882$2,044.521.258951.10871134.4641.135529,169

(markets with an * are at yesterday’s close, ** are at today’s close)