Thursday 15/02/24

1. In MACRO & COMMODITIES NEWS, US aid for Ukraine gets another go, UK inflation remains unchanged and Hunt considers more public spending squeezes while BP does a deal in Abu Dhabi, Shell predicts rising LNG demand, hydrogen navigates the hype cycle and BHP unveils write-downs
2. In BUSINESS TRENDS NEWS, car-carrier WW reveals record profits but Red Sea disruption will continue to disrupt
3. In REAL ESTATE NEWS, the UK housing market shows further signs of recovery and Canary Wharf has more problems
4. In MISCELLANEOUS NEWS, Altium agrees to a $5.9bn takeover by Renesas, Lyft shares boom, Uber announces a share buyback, Waymo updates its tech and the maker of “Clash of Clans” searches for its next big hit
5. AND FINALLY, I bring you Uncle Gordon and Uncle Roger showing you how to cook properly…

So the US gets another go at funding Ukraine, the UK inflation rate remains unchanged, Hunt looks to cut public spending, BP does a deal, Shell is bullish on LNG, hydrogen rides the hype and nickel hits BHP…

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 aid for Ukraine: a new chance for $60bn to get through Congress (Financial Times, Lauren Fedor) shows that Joe Biden is pushing for a vote in the House of Representatives on a $95bn national security bill that includes $60bn worth of military aid for Ukraine “immediately”. The bill passed the Senate early on Tuesday this week. It also includes billions in aid for Israel and Taiwan in addition to humanitarian aid for Gaza. Ukraine really needs the aid as it’s running out of ammo but the Republicans have been digging their heels in on aid to Ukraine (critics have been saying that it has been misspent) and they have been complaining that the current bill doesn’t go far enough with border security with Mexico. Trump has yet to let his feelings known on the bill. The drama continues…

Back home, UK inflation holds steady (Financial Times, Delphine Strauss and Mary McDougall) shows that inflation remained unchanged last month at 4%, coming in lower than forecasts (the market expected 4.2% while the Bank of England expected 4.1%). This prompted speculation that interest rates would start to come down in June but Bank of England governor dampens hopes of interest rate cut (The Guardian, Richard Partington and Larry Elliott) shows that Andrew Bailey was keen to pour water on speculation that any interest rate cuts would be imminent as he said that he wants to see more evidence of a cooling off of wage increases before doing anything with the interest rate. *** NEWS JUST IN – UK economy contracts more than expected (Financial Times, Valentina Romei) *** shows that UK GDP contracted by more than expected in the final quarter of last year – by 0.3% – after contracting by 0.1% in the previous quarter. This means that we are in recession (that’s two consecutive quarters of economic contraction). So it looks like the naysayers were right after all! Still, if you were being optimistic about it, you could say that this is a very mild recession and that both business and consumer confidence is improving – as are the prospects for the global economy – which would suggest that we will soon bounce back. However, I think that there is a risk that if this current quarter shows further contraction, that confidence could drain away. In the meantime, Hunt explores fresh squeeze on public spending to fund tax cuts (Financial Times, George Parker, Mary McDougall and Anna Gross) shows that the chancellor is looking at cutting public spending plans by billions to finance pre-election tax cuts. At the end of the day, the government wants to give itself the best chance of winning the next election and it presumably thinks that voters are more likely to vote for something that affects them directly (tax cuts) than something that everyone wants but can’t necessarily see (public spending cuts). If this happens it could be a bit of a hospital pass to Labour if it wins the election because

they would either keep things as they are (which wouldn’t be popular with the public sector) or rescind any tax cuts (which wouldn’t be popular with the electorate that just voted them in). The Budget is due to be announced on March 6th.

Then in commodities news, BP strikes deal with Abu Dhabi oil giant in Middle East expansion (Daily Telegraph, Jonathan Leake) shows that the British oil major has signed a deal with the Abu Dhabi National Oil Company (Adnoc), the UAE’s state-owned oil company as part of BP’s moves to deepen ties with the region. This is a joint venture that will involve BP transferring its interests and exploration rights in three gas fields into the joint venture and Adnoc putting a ton of money into it. BP and Adnoc have worked together in this region for many decades, so this is just a deepening of the relationship.

Then in LNG demand to surge 50% by 2040 in clean-fuel transition, forecasts Shell (Financial Times, Shotaro Tani) we see that Shell is painting a bullish picture of LNG’s future, particularly as China and developing Asian nations transition from dirtier coal to comparatively less dirty LNG. Energy majors reckon that LNG demand will rise strongly as the world tries to get to net zero carbon emissions by 2050. * SO WHAT? * LNG demand has boomed since Russia invaded Ukraine as everyone suddenly panicked about their reliance on Russian gas, prompting a dash for more energy independence. This resulted in delayed shutdowns of aging nuclear power plants, coal-power plants and more talk of renewables – but it also boosted demand for LNG as a more immediate way to plug the energy gap. On a longer term basis, though, it is thought that China will be a steady source of demand as it moves towards industrial decarbonisation. Shell is keen to push LNG as a transition fuel as the world aims to decarbonise.

Hydrogen is starting to navigate the hype cycle (Financial Times, Lex) is a really interesting article about hydrogen, the possibilities for it and how expectations for the future of hydrogen are shaping up. It talks about electrolyser maker Thyssenkrupp Nucera (electrolysers are used to make hydrogen) which was listed in July 2023 and the fact that deliveries are going well, the order book is growing – as is interest in what it’s doing. It just hasn’t made a profit yet. * SO WHAT? * Basically, everyone’s getting excited about this because of the potential uses for “green hydrogen” (something I mentioned yesterday). Nucera is not just some flakey start-up in a hot area – and it has managed to secure the biggest hydrogen project in the world – Saudi Arabia’s green Neom city, which currently makes up over 80% of current revenues. However, its share price has fallen by a third since its IPO. Expectations are still high, though – and if you want to know more about the hype cycle, why don’t you listen to the podcast I did about this with Ralph! The one you want to listen to is episode 855 👍.

Then in BHP Signals $5.7 Billion of Write-Downs From Nickel Crash, Dam Failure Fallout (Wall Street Journal, Rhiannon Hoyle) we see that the world’s biggest miner, BHP, announced a massive $2.5bn write-down of its nickel operations due to the metal’s price plunge since last year (prices pretty much halved over 2023!). It is even considering mothballing the whole operation if prices don’t improve. Glencore said earlier this week that it had decided to cease nickel production at its Koniambo mine because of weak prices. Nickel nightmares continue…will anyone swoop in to this area and become the new nickel king??

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!

Car-carrying proves to be lucrative but fashion might get delayed by the Red Sea…

Car-carrier line WW makes record profits on Chinese EV exports (Financial Times, Robert Wright) highlights the record annual profits reported by Norwegian company Wallenius Wilhelmsen, the world’s biggest operator of car-carrying ships, thanks to growing exports of Chinese EVs. It is worth noting that car-carriers aren’t facing the same problems as other non-car related container lines (they are facing immediate and future over-capacity, meaning that prices have been falling) because a significant number of vessels were scrapped during the pandemic – and new ones won’t come online until next year! Other companies doing well in the business of transporting cars from

Asia to Europe and North America include Höegh Autoliners, NYK Line, MOL and K Line. The company remains bullish on its prospects for 2024 despite Red Sea issues.

Talking of which, Red Sea disruption may delay launch of spring fashion lines (Daily Telegraph, Eir Nolsøe) highlights another knock-on effect of troubles in the Red Sea as ratings agency Moody’s has warned that European fashion retailers may have to go into the new season with old stock as shipping disruption will cause delivery delays for new stock. Moody’s identified Next, Adidas and Abercrombie & Fitch as companies that will be most vulnerable to delays and higher costs. Still, I guess this is just a case of “first world problems” but it could have an impact on performance of those companies.

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!

The UK housing market shows more signs of recovery but Canary Wharf problems continue…

Signs of UK housing market recovery as price falls ease (The Guardian, Phillip Inman) shows that the housing market is expected to rebound in 2024 as the latest figures from the ONS showed that average house prices fell by only £4,000 last year. * SO WHAT? * This would suggest that last year’s slowdown, driven by high interest rates, may be over. Maybe the estate agents really do have cause to be optimistic as the overall expectation is for interest rates and mortgage rates to fall from current elevated levels!

Then in Canary Wharf tower sale shelved (Daily Telegraph, James Warrington) we see that US private equity firm Blackstone has decided to postpone plans to sell a £250m tower in Canary Wharf – the 15-storey Cargo building at 25 North Colonnade – to an Asian investor. Discussions broke down and Blackstone remains adamant that it is not a forced seller. * SO WHAT? * Canary Wharf is going through a rather tricky patch at the moment as we heard only last week that a building that was once owned by Bear Stearns was sold at a £160m discount. HSBC, Credit Suisse and Clifford Chance are all leaving the area – and this sort of sentiment is putting pressure on prices.

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!

Renesas goes shopping, Lyft booms, Uber does a share buyback, Waymo updates and Clash of Clans maker searches for another hit…

In a quick scoot around some of today’s other interesting stories, Altium Agrees to $5.9 Billion Takeover by Japan’s Renesas (Wall Street Journal, Stuart Condie) shows that the Aussie tech company agreed to an all-cash takeover by the Japanese chip company. The deal is expected to close in the second half of this year and it marks the latest foreign acquisition of an Aussie tech company. Renesas said that the integration of Altium would help to streamline design processes for engineers.

In the world of ride-hailing, Lyft Shares Surge as Strong Earnings Report Offsets Typo Confusion (Wall Street Journal, Preetika Rana) shows that Lyft’s share price hit a 52-week high following the company’s strong Q4 results. There was a typo in the release that added another zero to profit margins in 2024, which caused a buying frenzy but the stock was still up strongly as investors digested the solid performance. It sounded pretty positive about the outlook as well! Meanwhile, its big rival had a big announcement of its own in Uber debuts $7bn share buyback as tech groups step up capital returns (Financial Times, Camilla Hodgson and Tim Bradshaw) as the company announced a massive share buyback programme – its first ever! – just days after reporting its first full year of operating profit. It also announced details about its growth strategy and financial targets for the next three years. It really does sound like Uber is growing up!

Elsewhere, Waymo updates driverless taxi technology after crash (Daily Telegraph, Matthew Field) shows that the Google-owned Waymo driverless car company has been forced to update its

driverless taxi software for the first time after two of its vehicles hit a pickup truck! This truck was in the process of being towed away in Arizona! The incident occurred on December 11th, no-one was hurt and damage was minor – but the thing with driverless is that it has to be perfect. * SO WHAT? * Although I really would like driverless taxis/cars to work (because I’d like them to drive me around when I get older 👴) I just think that we are WAY off them becoming a proper reality. The thing is that will companies continue to pour money into it or will they just lose interest? Given the cost of developing this, you can understand why companies like GM and its Cruise driverless division got cold feet about the whole thing. I guess that Google (and its parent Alphabet) has incredibly deep pockets and is one of the only companies that could continue to soldier on through and keep throwing money on the fire. When it DOES manage to crack it, though, the rewards could be pretty huge.

Then in ‘Clash of Clans’ maker to ‘take more risks’ in search of billion-dollar hit (Financial Times, Richard Milne) we see that Supercell, the Finnish mobile gaming group, said that it will take more risks and try more genres in order to find its next mega-hit after Clash of Clans and Hay Day. Supercell came into being in 2010, it was bought by China’s Tencent in 2016 but its most successful games are over ten years old and it’s only actually released five games in total! Fun fact: Clash of Clans has raked in over $10bn in revenues over the past decade! How amazing is that?!? * SO WHAT? * It seems that mobile gaming is starting to wane for the first time in the smartphone era – gaming data company Newzoo said that global sales from mobile games fell by 7.3% in 2023 versus the previous year. This is quite surprising, but then again I do think that many users expect more for free these days. It just goes to show how incredibly difficult it is to replicate massive success in gaming – but particularly in mobile gaming!

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…

Today I thought I’d bring you the dynamic duo of Gordon Ramsay and Uncle Roger in the kitchen, showing kids how to cook. Although Gordon Ramsay may be a tad “animated” when he’s with adults I think he is absolutely brilliant with kids! Uncle Roger is…just Uncle Roger 🤣