Thursday 14/04/22

  1. In MACRO, GAS & SUPPLY CHAIN NEWS, Finland considers NATO membership, US factory gate prices rise, Canada and New Zealand raise interest rates, the UK sees another inflation hike, Germany has gas issues and Shanghai continues to cause problems
  2. In CONSUMER, RETAIL & REAL ESTATE NEWS, heating and seafood costs rise, Tesco tries to keep a lid on prices and UK real estate keeps chugging along
  3. In TECH NEWS, TikTok enjoys a great run, investors sue Musk over Twitter and Darktrace stock falls
  4. In INDIVIDUAL COMPANY NEWS, JP Morgan is hit by the Russia/Ukraine war, GSK buys Sierra and Starbucks’ boss tries to discourage unionisation
  5. AND FINALLY, I bring you Aldi’s outrageous controversy…

1

MACRO, GAS & SUPPLY CHAIN NEWS

So Finland considers NATO, inflation runs riot, Germany has weaning problems and Shanghai causes all sorts of issues…

📢 It’s Thursday – so it’s time for the one hour weekly ZOOM call for SILVER and GOLD subscribers. *** THIS CALL WILL RUN FROM 6PM TILL 7PM, WHICH WILL BE THE NEW REGULAR TIME ***. As usual, during this call, I will do a round-up of the week’s news and then open it up to questions from you. After that, depending on how much time we have, we will also debate the following:

  • What do you think would be the impact of Finland and Sweden joining NATO and what could the economic implications be on industries and companies?
  • Do you think the UK will enter recession this year? Why/why not?

You can just listen into the debate if you want to, but I thought I’d give you the heads up on topics for if you would like to engage. You will definitely get more out of this call if you take part in the debate, though 😜!

*** PLEASE ALSO NOTE THAT THERE WILL BE NO WATSON’S DAILY TOMORROW AS IT IS GOOD FRIDAY. STAY TUNED, THOUGH, AS THERE ARE MORE DEVELOPMENTS TO COME…***

Finland to decide within ‘weeks’ whether to join Nato (Financial Times, Henry Foy) highlights what could be a ground-breaking story about Finland – and possibly Sweden – considering membership of NATO in light of what Russia is doing to Ukraine. * SO WHAT? * If this actually happened, it would be a huge deal and could potentially enrage Russia which said it would “rebalance the situation” if they went through with it. Interestingly, the most recent poll suggested that the vast majority of Finns believe the country should be a member of NATO, and NATO said that both countries would be welcomed if they applied to join. Swedish PM Magdalena Andersson’s party, the Social Democrats, has traditionally been against NATO membership but public opinion is shifting and there’s an election coming up in the autumn.

Meanwhile, US factory gate prices makes record-breaking jump (The Times, Mehreen Khan) cites the latest data from the US bureau for statistics which said that producer price inflation rose by its steepest rate since records began in 2009. It rose by 1.4% in March versus 0.9% in February. * SO WHAT? * This will no doubt give Jay Powell and chums at the Fed even more reasons to raise interest rates aggressively sooner rather than later, if they even needed more reasons to raise them after we heard the latest US inflation figure.

Inflation continues to run riot, prompting central banks into action. Bank of Canada lifts interest rate 0.5% in effort to anchor inflation expectations (Financial Times, Alexandra White) highlights a pretty punchy interest rate rise to 1%,

although this had been widely expected, and New Zealand raises rates by most in 22 years on surging inflation (Financial Times, James Fernyhough) shows that the Reserve Bank of New Zealand also raised interest rates by 0.5% to 1.5% in order to tame rising prices. Inflation hits 7% in March as Britain’s cost of living soars (The Guardian, Richard Partington) highlights what we are already feeling anyway – that prices are rising all over the shop – although the rise came in above expectations – and Inflation rise wipes out Sunak’s gains from tax raid (Daily Telegraph, Tom Rees and Tim Wallace) shows that Sunak’s recent raid on National Insurance now has been wiped out. It’s getting increasingly tough out there…

In gas news, Berlin faces €220bn hit without Moscow gas (Daily Telegraph, Rachel Millard) reminds us just how painful it would be for Germany to ditch Russian gas supplies as it imports about a third of its needs from there and Germany’s addiction to Russian gas risks making it a global pariah (Daily Telegraph, Ben Wright) puts it even more bluntly regarding impact – that by not cutting off gas ties with Russia, Germany is effectively helping to bank-roll Putin’s war machine. Germany has, in the past, directly or indirectly influenced other countries on their financial affairs (Italy, Spain and Portugal being forced into austerity in the wake of the Lehman Brothers’ collapse, Greece between 2009 and 2013 when its economy was in a disastrous state are two examples that come to mind) and so it is perhaps time for it to take some of its own medicine for a change, particularly as it only has itself to blame for increasing its reliance on Russia in the first place. It also shut down three nuclear power plants at the beginning of January this year and has thus far refused to reopen them although this would obviously reduce its need to rely on Russia (having said this, I imagine this won’t be easy – a change in the law is required to do this for starters). Right now, I would agree with the writer of this article when he said “At the moment, Berlin is giving the strong impression that it is more anti-nuclear than anti-war”. Perhaps this is why Germany’s Chancellor Olaf Scholz has so far chickened out of going to Ukraine.

Then in Shanghai lockdown stokes global supply chains anxiety (Financial Times, Kathrin Hille and Thomas Hale) we see that ongoing lockdowns continue to make China’s economy look increasingly precarious as they affect production, trade in general, trucking companies, EV makers such as Nio, PCB maker WUS and electronics firms. This is something that is referred to in Apple suppliers stop production in Shanghai because of lockdown (Daily Telegraph, Gareth Corfield) which focuses on Pegatron (makes iPhones) and Quanta (which makes MacBooks), who have had to suspend production as a result of the strict lockdowns.

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

CONSUMER, RETAIL & REAL ESTATE NEWS

Consumers continue to bear the brunt of rising prices while Tesco battles on…

Most consumers are having a nightmare at the moment. Heating costs double for rural homes (Daily Telegraph, Hannah Boland) highlights how homeowners in rural areas are facing a doubling of their bills versus last year as domestic oil fuel prices have now breached £1,000 for 1,000 litres of oil for the first time since records began in 2011. About 40% of rural homes rely on oil as their primary energy source and police are reporting rising levels of oil thefts. The situation could get worse as heating oil is not covered by the energy price cap. Then Seafood prices to rise as fuel crisis keeps trawlers in port (Daily Telegraph, Matt Oliver) shows that prices are expected to rise because “red” diesel is proving to be prohibitively expensive for many British fishermen, meaning less supply. Prawn, scallop and white-fish vessels look like being the worst affected at the moment – so you’d better satisfy your bouillabaisse and fish pie cravings sooner rather than later!

Amid all of this, Tesco focused on keeping prices ‘in check’ as profits double (The Guardian, Mark Sweney) shows that although the supermarket doubled pre-tax profits last year, it has warned about profits this year as it attempts to “keep the cost of the weekly shop in check”. It is cautious as to how customer behaviour will change

given the plethora of pressures hitting household budgets at the moment but Tesco: a cautionary inflationary tale (Financial Times, Lex) points out that supermarkets historically do well in an inflationary environment – and given that it has 27% of the UK’s grocery market, it should do quite well in theory at least. Generally speaking, it is likely that inflation will cause more pain to shoppers rather than the supermarkets. * SO WHAT? * I do wonder what is going to happen to all these rapid grocery delivery companies as paying for deliveries seems like an easily-cuttable expense to me. Networks has been building up at great expense, but if everyone is going to tighten their belts and cut out extraneous expenses like this, then I would have thought they will be one of the first to suffer.

Despite all these pressures, Housing market stays on course despite inflation and rising rates (The Times, Arthi Nachiappan) cites the latest RICS survey which shows that the number of new homes listed on the market has gone up for the first time in 12 months and Renters in bidding battle as landlords exit market (Daily Telegraph, Melissa Lawford) cites the latest figures from Rightmove which show that the supply of rental properties is shrinking as landlords sell up to cash in on rising prices, prompting bidding battles among tenants. Rents have grown by 11% year-on-year but in London, rental properties are often going for 20% above their guide prices, according to Savills estate agents.

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

TECH NEWS

TikTok’s march continues, Musk’s Twitter trade ruffles feathers and Darktrace falls…

Following on from what I said the other day about ad revenues, TikTok: never-ending scroll and young audience boost advertising gains (Financial Times, Lex) shows that TikTok is growing faster than any other US social network, has a younger user base and estimates from Insider Intelligence reckon that the platform has managed to triple last year’s ad revenues. It’s small-fry at the moment in terms of advertising versus other platforms but the market is changing, which could well work in TikTok’s favour as data privacy clampdowns elsewhere are taking the sheen off other offerings like Facebook etc. It is highly likely to keep growing IMO.

Then in Musk sued over ‘delayed disclosure’ of Twitter investment (The Times, Callum Jones) we see that drama is never very far away from Elon Musk’s life as the world’s richest man is now being taken to court by investors for not disclosing his stake-buying in the proper timeframe. They argue that delaying disclosure enabled him to buy at cheaper prices than he otherwise would have done and want to be compensated. Never a dull day, eh?!

Nearer home, Darktrace stock falls as staff poised to sell £90m shares (James Titcomb) shows that tech start-up Darktrace is likely to go weaker in the near-term as employees will be out of a lock-up period after May 1st and free to sell their shares. Despite yesterday announcing upgraded forecasts for the full year due to signing up hundreds of new customers, the company’s share price fell by almost 7%.

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

INDIVIDUAL COMPANY NEWS

JP Morgan suffers, GSK does a deal and Starbucks tries to push back against unionisation…

In a quick scoot around other interesting stories today, JP Morgan profits hit by Ukraine crisis and mounting US recession fears (Financial Times, Joshua Franklin) shows that Q1 profits for the banking giant were hit by a combination of a slowdown in dealmaking, a rise in reserves to act as a buffer in the event of a US recession and a $524m loss related to market turbulence caused by the Russia/Ukraine war. The results came in below analyst expectations and I suspect that other banks will be reporting poor results as well.

Glaxo agrees £1.5bn deal for Sierra (The Times, Alex Ralph) highlights a chunky deal for pharma giant GlaxoSmithKline as it buys a rare blood-cancer specialist to shore up its drugs pipeline ahead of the spin-off of its consumer healthcare business this summer. * SO WHAT? * This will boost its cancer portfolio and complement its

current haematology franchise. FDA approval is expected in Q2 this year for the deal to go ahead. GSK is wanting to narrow its areas of focus, which is one of the reasons why it is separating out some of its businesses.

I thought I’d include Starbucks prepares to expand worker benefits that might exclude unionised staff (Wall Street Journal, Heather Haddon) because it shows that new/old CEO Howard Schultz is trying his best to discourage unionisation at its US outlets by cooking up new benefits for employees that won’t be available for union members. Given that he recently suspended share buybacks, he has a lot of money to play with to make this compelling. He hasn’t come up with any specifics yet or any dates, but I guess that just announcing this is a shot over the bows intended to buy him time while he comes up with something compelling. Ironically enough, interest in unionisation among employees has increased since Schultz started in his third stint as CEO. It sounds like he’s got a battle on his hands!

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…

Aldi is just sooooo rebellious isn’t it. There was that whole Colin vs Cuthbert thing not so long ago and now it’s doing this: Aldi under fire after suggesting customers eat full English out of an Easter egg (The Mirror, Zahna Eklund). The scandal, the outrage 😱😱😱!

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Some of today’s market, commodity & currency moves (as at 0756hrs 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 **
7,581 (+0.05%)34,564.59 (+1.01%)4,446.59 (+1.12%)13,643.59 (+2.03%)14,076 (-0.34%)6,542 (+0.07%)27,172 (+1.22%)3,226 (+1.22%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$102.90$107.53$1,973.081.314341.09168125.3121.2039541,204.7

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