Thursday 05/09/24

1. In MACRO NEWS, Biden sticks the boot in, global stocks slide, US job openings drop, the BCC warns on UK inflation and the UK’s private sector outperformed
2. In TECH & MEDIA NEWS, AI can play a role in better cancer diagnosis, insurance groups call for support on cyber risks, AI is used to match lawyers, marketers threaten X and Starlink caves in Brazil
3. In REAL ESTATE NEWS, we look at Tritax/Segro, Barratt’s profit collapse and landlords selling up
4. In MISCELLANEOUS NEWS, South Korea tries to learn EV fire lessons, Volvo ditches plans for an all-electric line-up, the Nordstrom family looks to take the chain private, dynamic pricing for tickets looks likely to stay, Amazon announces a pay increase and DLA Piper breaks the £3bn revenue barrier
5. AND FINALLY, I bring you square melons…

So Biden joins in, global stocks slide, the US labour market softens, the BCC warns on UK inflation and the UK’s private sector outperformed…

*** THERE WILL BE NO WATSON’S DAILY PUBLISHED TOMORROW (FRIDAY 6TH) AS I WILL BE AWAY. I SHALL RETURN ON MONDAY 9TH) ***

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:

In Biden Prepares to Block $14 Billion Steel Deal (Wall Street Journal, Bob Tita) we see that the US president is getting closer to blocking Nippon Steel’s proposed acquisition of US Steel. US Steel’s boss argues that the company needs the $3bn investment in its older plants that its potential Japanese acquirors are offering but unions are sceptical and blame the company’s woes on his “mismanagement”. * SO WHAT? * I think this is more about pre-election optics than anything else. It’s all very well to block the deal – but what do you replace it with? Presumably the president will have to come up with some plan to help the ailing steelmaker – but this will be a tricky balancing act to give it the help it needs whilst not raising the shackles of other competition regulators who could argue that the company is getting unfair state assistance (I bet the Chinese in particular will be highly likely to raise concerns!).

Meanwhile, Global stocks slide as fears mount over US growth (Financial Times, Philip Stafford and Arjun Neil Alim) highlights renewed fears of a US economic slowdown that were at least partly thanks to the weaker-than-expected US labour department’s Job Openings and Labor Turnover Survey in US job openings fall to lowest level since 2021 (Financial Times, Taylor Nicole Rogers, Colby Smith and Harriet Clarfelt), which reflects a slowdown in the jobs market. Investors will looking even more intently than usual at tomorrow’s non-farm payroll figures as to whether this trend is confirmed or not. * SO WHAT? * I think that this makes a Fed rate cut at the next meeting even more likely as it can be used as a sign that the economy is cooling down. Although this latest release implies that there is a slowdown, if this gains momentum it could lead to a recession. However, this is not implied at the moment – it’s just something to look out for! As things stand, the futures market suggests that there will be at least a 0.25% rate cut at the Fed’s next policy meeting.

Back home, UK inflation to rise and stay above target until 2027, warns BCC (The Times, Mehreen Khan) reflects the latest forecasts from the British Chambers of Commerce which say that inflation will run above the 2% target until early 2027 thanks to high energy prices, strong wage growth and ongoing global trade uncertainty. Meanwhile, UK’s private sector economy grew faster than expected in August (The Times, Jack Barnett) cites the latest S&P Global’s PMI, which shows a reading that came in way above analyst expectations and reflects the same conclusion that was reached by the most recent CBI survey that I mentioned on Monday.

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!

AI is used to improve cancer diagnosis, more support is called for in cyber risks, AI is used to match lawyers, marketers threaten X and Starlink caves in Brazil…

AI breakthrough raises hopes for better cancer diagnosis (Financial Times, Michael Peel) highlights a new model, called “Chief”, which can accurately detect numerous cancer types. It is an important breakthrough because of the breadth of tumours that it can analyse and its capacity to predict outcomes for patients. * SO WHAT? * This is pretty exciting as it shows how AI is able to spot features that even an experienced eye can miss and the model could be used to identify cancer at an earlier stage. AI advances are proceeding apace – and although they’re not perfect, they can still help in triage, give a second opinion or highlight things that a doctor may have missed or not known. It’s a nice change to see a positive story about AI rather than all the ones that talk about it being the end of employment!

Insurance groups urge state support for ‘uninsurable’ cyber risks (Financial Times, Ian Smith) feeds into the whole aftermath of the CrowdStrike debacle as two of the world’s biggest insurance players, Zurich and Marsh McLennan, conclude in a new report that cyber threats are “outpacing the ability of traditional insurance and risk management approaches to fully mitigate them”. In order to address this, the report made a number of recommendations, including the sharing of losses from “uninsurable” events among public-private partnerships and the need for state support, particularly when impacts affect society (such as in the case of the widespread breakdown of key infrastructure). Interestingly, Lloyd’s of London estimated last year that a major cyber attack on a global payments system could cost the world economy $3.5tn, a risk that would be too large for the insurance sector to cope with. * SO WHAT? * Cyber insurance is quite a new area for the industry (it’s “only” a few decades old!) and it took in around $14bn in premiums last year. Reinsurer Munich Re reckons this will reach $29bn by 2027. So far, policymakers in the US, UK and other countries have discussed how to absorb losses in various scenarios and insurers have said that some kind of state “buffer” could help more insurers to offer policies and cut prices which would benefit everyone. At the moment there are lots of exclusions because insurers want to limit liability that could put them out of business.

Digital ratings aim to speed up purchase of legal services (Financial Times, Jane Croft) is a really interesting article about a company called Persuit, a legal tech business. It helps in-house lawyers to source and compare proposals for work they want done by outside counsel. This is quite a new area in law (whilst it is common in other areas, such as sourcing tradespeople for example). Until now, many legal in-house teams use lawyers and firms they are familiar with but there has been an uptick in the number of services that are using data to help users make a more objective decision. Persuit’s platform enables in-house lawyers detail the scope of legal work they need and then compare proposals and pricing from competing law firms (it sounds like Carwow for lawyers!). * SO WHAT? * I find it particularly interesting that Persuit collects anonymised data on prices for legal work which helps more accurate benchmarking for both clients and law firms. Other firms mentioned in this in-depth piece include Hence Technologies (a legal risk platform) and Priori Legal (which finds external lawyers for specific projects and uses an algorithm to match work requests with the appropriate firms or individuals). It looks like law + AI isn’t all about taking work away from juniors after all!

In the latest on X-related (not X-rated!) drama, Marketers threaten to cut spending on Elon Musk’s X in record numbers (Financial Times, Daniel Thomas) shows that a record number of advertisers intend to pull ads on X next year due to concerns about being associated with extreme content. 26% of respondents in a global survey by Kantar plan to cut ad spend on X next year, in what would be the biggest pull back on any single major global advertising platform as trust in X has plummeted over the last year. Meanwhile, Elon Musk’s Starlink agrees to block X in Brazil (Financial Times, Bryan Harris) shows that Starlink has reversed its previous stance of not complying with the Supreme Court order to block X and will in fact block it after all. It was threatened with losing its licence to operate in Brazil. * SO WHAT? * I think that Musk is going bonkers. He overpaid for a social media platform that he seems to be killing off by refusing to address serious concerns about security and the spreading of hate and misinformation. Advertisers quite rightly don’t want to be associated with a platform that seems to be increasingly free-wheeling and have other platforms to choose from. Musk said in the early days that he didn’t want to be reliant on advertising revenues and you can now see why! The drama continues. I sincerely hope that decency wins the day here.

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!

We look at Tritax/Segro, Barratt’s weakness and landlords selling up…

Real estate soap opera: will Tritax EuroBox run off with Segro? (The Times, Tom Howard) is an interesting discussion about Segro swooping in with an all-share offer to buy Tritax EuroBox, owner of a sprawling £1.2bn logistics business, potentially scuppering talks that had already been in progress with Canadian property giant Brookfield. At the moment, the EuroBox board is recommending Segro’s offer but other contenders could yet spoil the party! Who knew that warehouses could be so exciting?! If the market in warehousing has bottomed out, something that Segro’s boss has been saying recently, buying now could prove to be quite canny…

In residential property news, Barratt profits plunge amid property market downturn (The Times, Tom Howard) highlights disappointing profits for Britain’s biggest housebuilder as sales plummeted last year and its profitability was further damaged by

the cots of having to fix dangerous cladding at some of its older properties. The chief exec did say, however, that confidence was starting to return in the market after a tough couple of years and sales have been recovering over the summer. * SO WHAT? * It’s unlikely to be able to take full advantage of a potential property upswing as it has fewer developments on the go at the moment. That said, you would have thought that the Labour government’s push to ease planning restrictions to encourage house building should help over the longer term.

It looks like the prospect for renters is getting worse in Landlords sell up amid fear of rise in capital gains tax (The Times, Jessica Sharkey) as research from Rightmove shows that 18% of properties for sale on its site were previously on the rental market versus 8% in 2010. It concluded that landlords’ fears of Capital Gains Tax (CGT) rises in the upcoming Budget were the main driver. London has seen a particularly sharp uptick in landlords selling up as momentum has increased over recent months. It looks like already-expensive rents won’t be getting cheaper any time soon…

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!

We look at the latest in EVs, a Nordstrom development, dynamic pricing, Amazon giving workers a rise and DLA Piper breaking the £3bn revenue barrier…

In a quick scoot around some of today’s other interesting stories, The real lessons South Korea should learn from an EV fire (Financial Times, Christian Davies) ponders the aftermath of that recent EV fire in an apartment block car park. This resulted in panic selling of EVs and suggestions that it was “inferior” Chinese batteries that were to blame. * SO WHAT? * The fact of the matter is that Korean manufacturers have had “combustion problems” of their own in the past and that this latest development has highlighted a wider issue of China encroaching on Korea’s traditional areas of expertise. It seems to me that China is doing to Korea what Korea has been doing to Japan for the last couple of decades – and basically eating its lunch. At the beginning the two countries worked together (just like Korea and Japan did in areas like consumer electronics, for instance) but then one started overtaking the other in capacity and then quality (Japan and Korea respectively had argued that their products were superior in quality – until that gap narrowed), which brings us to current times. In short, the lesson that should be taken from this latest incident should not be “don’t buy Chinese batteries”, it should be that Korea needs to realise that China is overtaking it.

Staying with EVs, Volvo abandons plan to sell only electric cars by 2030 (The Times, Robert Lea) highlights the company’s dramatic announcement that it is ditching its pledge to have an all-electric model line-up by 2030. It has revised this to say that it expects at least 90% of its production will either be all-electric or plug-in hybrid by 2030. * SO WHAT? * This is surprising in that Volvo’s doing a U-turn, but not surprising given that EV demand globally has been weakening. You do wonder whether the next step is for governments to roll back their guidance on the diesel/petrol car deadline.

In retail news, Nordstrom Family Bids Again to Take Retailer Private (Wall Street Journal, Suzanne Kapner) shows that the founding family of Nordstrom is putting forward a $3.8bn bid to take it private in order to keep it alive. The family runs the company and still holds around a third of its shares. It will join up with Mexican retail group El Puerto de Liverpool and would end up as majority owner if the deal went ahead. The board will now

review the proposal. * SO WHAT? * If it went private, it wouldn’t be alone! JC Penney and Saks Fifth Avenue are among the former big names to go private so they could restructure outside the constant view of whinging shareholders. Department stores around the world have been in terminal decline and Nordstrom is no different. It will be interesting to see how this develops!

Roll with it: TicketMaster’s dynamic pricing is here to stay (Financial Times, Lex) follows the whole Oasis ticket saga but ultimately concludes that dynamic pricing, which is commonplace in the US, is not likely to go away despite both the CMA and EC promising to look into the recent Oasis ticketing debacle. At the moment, UK consumer protection law allows dynamic pricing – and it’s already common in airline tickets, hotel rooms and minicabs. * SO WHAT? * OK so it’s not great from a consumer point of view but actually from an artist and management point of view it makes sense. Without surge pricing, touts can get hold of tickets and sell them on at many times their value – and the artist sees none of it. Surge pricing, on the other hand, allows artists and their management to benefit from high demand. Ticketmaster (and others like them) make money from their cut from added fees (which is also subject to separate controversy!). The problem in Oasis’s case is that people were not aware of just how much prices would rise – but in future, this could be addressed by an upfront statement. Unless the CMA and EU can come up with anything, it looks like surge pricing will be here to stay…

Meanwhile, Amazon announces near 10% pay rise for tens of thousands of UK workers (The Guardian, Heather Stewart) shows that e-tailing giant has just announced a hefty pay rise for tens of thousands of its employees after narrowly defeating the GMB’s overtures to represent its workers. The pay rise will kick in from 29th September. Amazon is clearly celebrating victory while the union licks its wounds. Labour has promised to make it easier for workers to strike, so Amazon has won the battle – but it may yet lose the war!

Then in DLA Piper is first English law firm to break £3bn revenue barrier (The Times, Jonathan Ames) we see that the law firm that started life in Yorkshire 30 years ago recorded a 6.3% rise in earnings over the last year, helping it to cross the £3bn threshold in annual revenues, putting it ahead of “magic circle” firms by some distance. Impressive though this is, revenues are way less than those of US rivals in terms of average revenue per lawyer.

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!

…in other news…

For no particular reason, I thought that today was the day to tell you how square melons come about! Enjoy!