Thursday 12/09/24

1. In MACRO & OIL NEWS, US inflation falls, the UK economy flatlines and oil weakens
2. In TECH NEWS, OpenAI aims high, the Data Protection Commission investigates Google, UK data centres get a new designation and Huawei brings out a trifold phone
3. In APPAREL RETAIL NEWS, Inditex leads the way, Boohoo loses to Shein and shuts its US warehouse
4. In MISCELLANEOUS NEWS, Rightmove observes CGT-prompted property sales, house prices rise, Rentokil suffers stateside and Campbell’s changes its name
5. AND FINALLY, I bring you rebellion…

So US inflation drops, the UK economy flatlines and oil weakens…

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:

US inflation fall paves way for interest rate cut (The Times, Louisa Clarence-Smith and Jack Barnett) cites the latest data from the US Bureau of Labor Statistics which shows that inflation fell by 2.5% on an annualised basis over August. * SO WHAT? * This was a weaker-than-expected figure and means that inflation is now at its lowest level for three years. It now appears even more likely that the Fed will cut rates at their meeting next week – but because it was a weaker-than-expected figure, it’s more likely to be a 0.25% cut than a previously-mooted 0.5% one.

UK economy unexpectedly flatlines for second month in row (The Guardian, Larry Elliott) shows that the UK’s economy moved sideways for the second month in a row, according to the latest ONS release. Although the economy actually expanded by 0.5% in the three months to July, growth momentum is slowing down. That being said, the OECD decided to up its growth forecasts for

the UK after stronger-than-expected performance in the first half. * SO WHAT? * I am just going to put it out there but I wonder whether the Starmer-Reeves’ collective managing down of expectations and the clinging to the £22bn-financial-black-hole thing (without really backing it up) is all part of a plan to announce a more-generous-than-expected Budget that will spark renewed confidence and jolt the economy back into life. They can kitchen-sink all the bad stuff they like, but if the government shoots itself in the foot at this early stage of their time in power we are going to be letting ourselves in for years of misery. It seems to me that the economy has gone sideways because people are sitting on their hands to see what Reeves comes up with in the Budget next month – and if things don’t turn out to be as dark as expected, I really think there could be a relief rally that will gather momentum. Here’s hoping!

Meanwhile, Oil tumbles out of narrow trading range as recession fears grow (Financial Times, Lukanyo Mnyanda and Alan Livsey) observes that the oil price has now fallen below its year-long trading range as investors get increasingly nervous about slowdowns in the the world’s largest economies (but particularly China’s). Brent crude traded yesterday at its lowest level since December 2021 and the US equivalent, WTI, hit its weakest point since May 2023. Last week, Opec+ extended voluntary production cuts by two months and then followed that up by this week downgrading its forecast for 2024 oil demand growth for the second month in a row. The outlook isn’t looking great for the next few months at least…

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!

OpenAI aims high, Google faces another investigation, UK data centres are redesignated and Huawei brings out a trifold phone…

OpenAI aims to raise at least $5bn at $150bn valuation (Financial Times, George Hammond and Cristina Criddle) highlights the latest developments in the ChatGPT maker’s efforts to raise money from investors including Apple, Nvidia, Microsoft and Thrive Capital in a deal that could effectively double its valuation. It was valued at $86bn at the start of this year, but it looks like it could be heading towards $150bn. The total size of the funding round could still change…

Meanwhile, Europe’s privacy watchdog probes Google’s use of data for AI model (Financial Times, Cristina Criddle) shows that Google is now under investigation by the Data Protection Commission (DPC) regarding the way in which it processes personal data in the development of its PaLM2 LLM. One of the DPC’s jobs is to enforce General Data Protection Regulation (GDPR) and it will ascertain whether Google has breached it by handling such sensitive data in a reckless way. * SO WHAT? * This is just the latest investigation in a series of investigations being conducted by the DPC against Big Techs who are developing LLMs. Meta and X are among those who have been under the gaze of the DPC in recent months!

Back home, UK data centres to be designated critical infrastructure (Financial Times, Lucy Fisher and Anna Gross) heralds a new classification for data centres which means that they will be given greater protections from cyber attacks and IT

outages in order to boost investor confidence in the UK. The designation will entitle them to additional government support in preparing for potential threats and recovering from emergencies. * SO WHAT? * The idea of all this is to minimise any impact that data centre attacks, environmental disasters and extreme weather events may have on the broader economy and comes after two major incidents this year – the ransomware attack that affected thousands of patients at London hospitals and the outage caused by CrowdStrike. This move is notable in that it is the first Critical National Infrastructure designation since the space and defence sectors got the status in 2015.

Then in Huawei takes on Apple in China with $2,800 trifold phone (Financial Times, Eleaonor Olcott) we see that the Chinese telecoms group has launched a $2,800 10-inch trifold phone, called the MateXT, just hours after Apple unveiled the iPhone 16. This is the first commercially available phone that folds out into three segments. * SO WHAT? * Huawei’s website boasts that there are already 5m pre-orders for the MateXT but analysts point out that plenty of people could cancel ($2,800 is a lot of money!) and there are also doubts as to whether the company could actually produce that many units. * SO WHAT? * This is impressive from a technological viewpoint and shows that Huawei is fighting back after US sanctions imposed in 2019 cut it off from supplies of the most advanced chips. Still, it seems to me that this is a very niche product (I mean, how many of those Samsung Fold phones do you actually see out and about??) but at least it shows that Huawei is pushing forward. I would have thought that this will have a halo effect on Chinese-made handsets in China and take the battle to Apple and Samsung.

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!

Inditex leads the way and Boohoo’s woes continue…

Inditex profits show fashion rivals the way (The Times, Emma Taggart) highlights strong sales at the apparel retailer after a slow start to the summer. As a result, it announced record profits for the first half of the year! Zara’s parent said that its autumn-winter collections had been “very well-received” by shoppers. * SO WHAT? * Inditex continues to shine where rivals, including H&M, blamed unseasonable weather on slower sales. Its tightly controlled supply chain definitely helped them to quite literally weather the storm!

Meanwhile, UK fast fashion can’t match Shein’s style (Financial Times, Lex) highlights ongoing woes at Boohoo and Asos as they continue to lose ground to to the likes of Shein and Temu. The article argues that, even with potential investor interest in a Shein IPO, the two Brits won’t benefit from an apparel retailer frenzy given their respective inventory and financial issues. Boohoo scraps ‘game-changing’ US warehouse after only a year (Daily Telegraph, Ben Marlow) just reinforces the perception that things continue to go from bad to worse for the cheap-and-cheerful apparel retailer as it announced that it would shut down its US distribution centre and go back to fulfilling orders from Sheffield, South Yorkshire. Ouch.

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!

More larger homes come onto the market, house prices rise, Rentokil has American issues and Campbell’s changes its name…

In a quick scoot around some of today’s other interesting stories, Surge in larger homes for sale amid capital gains tax fears, Rightmove says (The Guardian, Rupert Jones) cites Rightmove research which speculates that fears of an increase in CGT in the upcoming Budget is behind a surge in the number of bigger homes (four beds+) being put on the market. This was particularly noticeable in the east and south-west of England. Meanwhile, House prices rise for first time in two years (The Times, Tom Howard) cites the latest RICS survey which showed that house prices have risen for the first time since October 2022 as expectations of a strengthening market – powered by falling interest rates – increase. It’s all going on!

Elsewhere, Rentokil says American slowdown will hit profits (The Times, Emma Powell) shows that the momentum of the world’s biggest pest control company has been hit by a slowdown in its

key North American market. The downgrade of its profit forecasts disappointed investors who sent the share price down by 20%. It had to contend with a drop-off in demand and rising wage/hiring costs and it is the third time in less than 12 months that it has had to rein in growth expectations in the North American business. * SO WHAT? * Rentokil Initial dramatically increased its exposure to the North American market back in 2021 when it bought Terminix, a termite treatment specialist, for $6.7bn and the region now accounts for over 50% of Rentokil’s sales. It seems that the company’s not getting the balance right yet between Rentokil’s traditional B2B focus and Terminix’s B2C focus.

Then in Campbell’s chief executive defends name change (Daily Telegraph, James Warrington) we see that the Campbell Soup Company is looking to rebrand as The Campbell’s Company, reflecting the fact that it also makes things other than soup! Specifically, it makes V8 juices, Prego pasta sauces and Goldfish cheese crackers. A lot of people seem to be up in arms about this, but I think it’s fair enough! The name change will have to get shareholder approval at this year’s AGM.

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…

This is a humorous guide on how to break Italian etiquette! I think most of these rules make sense when you think about them – but I didn’t know them all! Did you??