Would you prefer to listen to Watson's Daily?
Click below to hear me read it. No AI here 😉!!!
IN MACRO & ENERGY NEWS
There's a Gaza ceasefire, global leaders warn of conflict risk, US inflation rises, Germany's economy shrinks, UK inflation falls and we look at the latest on SMRs and nuclear fusion in the UK
- THE PODCAST WILL START AGAIN TODAY. I recorded one yesterday about the prospects for bitcoin and gold in 2025, so will publish that today. I also have plans to record two more tomorrow with a couple of other specialists in their field. Other than than, the weekly podcast with Ralph will return and I will be doing a monthly podcast with a compliance lawyer at an investment bank to give you very interesting insights on regulation matters and how they are actually affecting what’s going on right now. I hope to re-start the daily podcast as well after a bit of a hiatus and ongoing technical issues – so there’s more to come!
- HAVE YOU NOTICED THE NEW AUDIO FUNCTION? A number of you asked for this last year, so I’m pleased that it could be sorted! I tried it initially with AI and didn’t like it – so it’s me reading it out loud 😁. I hope that you find this new functionality useful! I just thought that AI doesn’t love this stuff like I do, so thought it would be better for a human to read it…
- I’VE PUBLISHED A “WATSON’S YEARLY COMPETITION”. This is only be open to paying current subscribers. One of the prizes will be working with me in person at my office where you will be helping me to write Watson’s Daily for a day. You can enter HERE…
In war-related news, Gaza ceasefire announced after 15 months of war (Financial Times, James Shotter, Andrew England and Felicia Schwartz) highlights a welcome development as Israel and Hamas have agreed a ceasefire in a multi-phased agreement which is to come into force on Sunday, the day before Trump’s inauguration. More details have yet to be finalised but this is clearly a move in the right direction. Meanwhile, Escalating armed conflict is most urgent threat for world in 2025, say global leaders (The Guardian, Heather Stewart) reflects concerns being expressed ahead of the World Economic Forum that will be held in Davos next week. Staying on the subject of war, US announces ‘Trump-proof’ sanctions against Russia (Financial Times, Chris Cook) highlights the Biden administration’s attempts to ensure that its sanctions against Russia can’t be dismantled by the incoming president. New measures will allow legislators to block/restrict sanctions against Russia. The law doesn’t seem to have held Trump back so far, so good luck with that…
In economic news, US inflation ticks up in December and remains above Fed’s 2% target rate (The Guardian, Callum Jones) highlights the stubborn nature of US inflation as it just refuses to hit the Fed’s 2% target – it rose at an annualised rate of 2.9% in December and Trump’s not even in the White House yet (his policies are expected to push inflation up, or at least make it less likely that they will weaken further). The good news is that the “core” inflation number, which cuts out
more volatile food and energy prices, slowed down slightly from 3.3% in November to 3.2% in December.
Back on this side of The Pond, German economy shrinks for second successive year (Daily Telegraph, Eir Nolsoe) cites the latest stats which show that Germany’s nightmare continues as it has now been in recession for the second year in a row, the first time since the early 2000s that this has happened. * SO WHAT? * Germany’s economy continues to suffer from the effect of high energy prices and weak demand from China as it is highly exposed to manufacturing and exports. It could get even worse from here as well if Trump follows through on his threats to slap big taxes on imports to America…
Back home, Unexpected drop in inflation lifts pressure off Rachel Reeves (The Guardian, Richard Partington) cites the latest inflation figures from the ONS which show that inflation rose by 2.5% in December versus 2.6% in November. This was better than the market had been expecting and Fall in UK inflation to 2.5% paves way for Bank of England rate cut (The Guardian, Richard Partington and Heather Stewart) suggests that this could make it easier for the Bank of England to justify an interest rate cut at its next meeting in February. * SO WHAT? * Inflation is, however, still above the 2% target but at least it’s going in the right direction – and the economy could do with the small boost that an interest rate cut can give. Although, in reality, it takes a good few months for interest rate movements to take effect on the real economy, it can act as a boost to sentiment.
In energy news, ‘A viable business’: Rolls-Royce banking on success of small modular reactors (The Guardian, Jasper Jolly) highlights the opportunities and frustrations of SMRs in the UK, the advent of which keep getting pushed back, but Rolls-Royce is still in the mix along with three North American competitors to get fat orders from the UK government. Mind you, Small nuclear reactors are coming, but big is still better (Financial Times, Lex) points out that there are risks with the new technology (planning issues, high initial costs etc.) that may make potential investors a bit wary, but as time goes on they will gain traction.
Meanwhile, Ministers pledge record £410m to support UK nuclear fusion energy (The Guardian, Jillian Ambrose) shows that the government has committed to invest a chunk of change in nuclear fusion that will include the development of a prototype power plant in Nottinghamshire by 2040. Great news, but one for the looooooooooooong term future I think…
IN CONSUMER & EMPLOYMENT TRENDS
UK house sales rise, Guinness rivals benefit from rationing, Mitchells & Butler rues gloomy weather, the number of advertised jobs falls and Hays cuts profit forecasts
In a look at what consumers are facing and how they’re behaving, UK house sales rose again in December, say estate agents (The Times, Emma Taggart) cites the latest RICS survey which shows that the property market ended on a high last year with the majority of estate agents reporting rising volumes and more buyer inquiries. I suspect this is going to get increasingly frenzied as we head towards the stamp duty rises that will come into force on April 1st. Respondents remain bullish on the prospects for the market this year and 37% of letting agents reckon that rents will continue to rise over the next few months. * SO WHAT? * I wonder whether we’re going to see much of a rise in fortunes for DIY (e.g. Kingfisher’s B&Q, Wickes etc.) and furniture companies (e.g. IKEA, Dunelm etc.) as people either move and “put their stamp” on a property or upgrade their current surroundings because moving elsewhere will cost too much!
It seems that consumers are continuing to drink all the while and Rival stout sales surge 600pc in wake of Guinness rationing crisis (Daily Telegraph, Daniel Woolfson) shows that Heineken, which owns Murphy’s (an Irish stout rival to the black stuff), enjoyed a massive resurgence in Murphy’s sales as a result of supply restrictions of rival Diageo’s Guinness over the festive period. Having said that, Gloomy weather clouds festive cheer at Mitchells & Butlers (The Times, Jessica Newman) highlights a decent Christmas but a not-so-happy-New-Year for the All-Bar-One owner which said recent sales were disappointing due to the bad weather. Overall, though, it reported a strong quarter and a successful Christmas. The company sounded pretty positive about the outlook. Cheers!
In employment news, Number of advertised jobs in UK falls to pre-pandemic levels (The Times, Robert Lea) cites the latest Labour Market Tracker from recruitment industry body REC which shows that the number of advertised jobs in the UK dropped to pre-pandemic levels. The gloom is unlikely to be lifted following the government’s decision to increase employer National Insurance Contributions and raise the National Minimum Wage.
The downbeat mood persisted in Hays nudges profit forecast lower as recruitment slows (The Times, Fintan Hogan) as it reported a continued slowdown over the last quarter and warned that “ongoing economic uncertainty” was hitting the jobs market across the board. It stated that hiring in the UK and Ireland dropped by 14%, with the public sector falling by 21%. Rivals Robert Walters and PageGroup have also been pretty gloomy about their prospects while the BCC’s most recent recruitment outlook survey found that fewer companies were planning on growing their headcount in the final quarter of the year versus the quarter preceding it. * SO WHAT? * Recruiters charge fat fees and when the prospects for the economy waver, employers tend to either rein in hiring and/or try to do more of it themselves by bringing it in-house. I am sure that business will pick up when business confidence gets more positive and hiring managers start to get overwhelmed. However, that’s not going to happen in the near term…
IN FINANCIALS NEWS
JP Morgan and Goldman Sachs clean up and Hindenburg Research shuts down
On a more upbeat note, JPMorgan Chase and Goldman Sachs Post Surging Profits (Wall Street Journal, Alexander Saeedy, AnnaMaria Andriotis and Gina Heeb) shows that big bank profits boomed in Q4 thanks to the acceleration of deal activity, rising demand for financing and decent trading revenues. Citigroup and Wells Fargo also put in decent performances over the quarter as well.
I thought that it was also interesting to read Goldman Sachs chief David Solomon questions start-ups’ need to list (Financial Times, George Hammond) but I suspect that Solomon is at least partly talking his own book given that I said earlier this week that the bank was setting up its own private credit business (or at least making the existing one more high profile). In today’s article he said that the depth of capital available in private markets these days means that there are fewer reasons to list. I bet those in his investment banking division won’t be thanking him for saying this! He did make a very interesting observation, though, when he said “If you are running a company that’s working and it’s growing, if you take it public, it will force you to change the way to run it and you really should do that with great caution”. * SO WHAT? * FWIW, I think that private credit is just the latest evolution of the financial sector and for now it seems that there is a lot of money sloshing around. If and when interest rates drop to lower levels, there could be an even bigger amount of money available. However, stock markets have been around for a long time and they are tried and tested whereas I suspect that the availability of private credit will wax and wane at least as much as markets do. On the plus side, I think that
it’s good that companies can potentially be allowed to develop away from the public eye but then again I am sure that those lending the money are not shy about putting the pressure on. I do, however, believe that private credit really needs to be regulated as it means that banks are trying to fight in a very competitive environment with one hand tied behind their backs (in the form of regulation). This is where I think Goldman Sachs will shine – because it’s also a bank, so it will win either way! As the saying goes, “heads I win, tails you lose!”.
I found it quite sad to see Wall Street’s Pre-Eminent Short Seller Is Calling It Quits (Wall Street Journal, Ben Foldy) as the article heralded the end of Hindenburg Research due to its founder shutting the whole thing down because of the toll it took on his well-being. Nathan Anderson started Hindenburg in 2017 and built it into a giant killer as it became the scourge of Carl Icahn, the Adani family and, of course, Nikola – among many many others, taking them to task and questioning them where others feared to go. He said that he will, in future, “open source” the company’s tactics and processes so others can continue to fight on. I have always said that their reports were like no others I have ever read (and I have read a lot in my time!) so I shall definitely miss them! I hope Anderson and his team have a bright future ahead of them whatever they decide to do. What they have managed to achieve in such a short amount of time is remarkable in my opinon.
IN MISCELLANEOUS NEWS
Mistral signs a deal, Synthesia hits a $2bn valuation and GM signs a deal for the supply of EV battery materials
In a quick scoot around some of today’s other interesting stories, Mistral signs AFP deal for fact-based chatbot in riposte to ‘free speech’ rivals (Financial Times, Tim Bradshaw) shows that French AI start-up Mistral has signed a deal with Agence France-Presse to use thousands of its articles in its chatbot in a bid to provide a bit of competition for its US rivals! This will feed over 2,000 AFP news articles in six languages every day into Mistral’s chatbot (“Le Chat”!) which gives users access to rich content. Does this mean that Europe will follow a quality over quantity approach to training chatbots?? That being said, Google signed a similar deal with Associated Press yesterday.
Back home, UK artificial intelligence start-up Synthesia hits $2bn valuation (Financial Times, Cristina Criddle) highlights some success for London-based AI start-up Synthesia as it said yesterday that it had closed a new $180m funding round led by US venture capital group NEA.
Synthesia makes proprietary AI models that replicate humans and develop avatars that can be powered by text and deliver speech in realistic video and it said that it would use the new money to make its avatars even better! Competitors include HeyGen and ElevenLabs. It’s certainly nice to see a UK company forging a path in AI!
Then in GM Signs Multibillion-Dollar Deal for Supply of EV Battery Materials (Wall Street Journal, Dominic Chopping) we see that GM has signed a big deal with Norway’s Vianode for the supply of anode graphite, a key material for EV batteries. Vianode will build production facilities in North America with the view to producing the material from 2027. The deal will run through to 2033. * SO WHAT? * Anode graphite is the biggest component of a lithium ion battery by weight. This sounds like a prudent deal for GM given that the EVs are coming!
...AND FINALLY...
...in other news...
I’ve never heard of this comedian before but I think he’s got it spot on regarding what the next generation of old people will be like 🤣!
Some of today’s market, commodity & currency moves (as at hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!
FTSE 100 * | Dow Jones * | S&P 500 * | Nasdaq* | DAX * | CAC-40 * | Nikkei ** | Shanghai ** |
Oil (WTI) p/b | Oil (Brent) p/b | Gold Per t/oz | £/$ | €/$ | $/¥ | £/€ | $/₿ |
(markets with an * are at yesterday’s close, ** are at today’s close)