Thursday 16/06/22

  1. In MACRO, ENERGY & CRYPTO NEWS, the Fed makes a drastic rate hike, gas prices rise, BP invests big in renewables and crypto continues to take a massive drubbing
  2. In CONSUMER & RETAIL TRENDS, US consumers hold back, China retail sales fall, WH Smith benefits from the return to travel, Whitbread does well but is less certain of the future, H&M is the same and Sainsbury’s deepens its beef with Aldi
  3. In EV BATTERY NEWS, Foxconn builds a plant in Taiwan and Britishvolt educates its workforce
  4. In MISCELLANEOUS NEWS, Apple signs a big MLS deal, YouTube shorts catch up with TikTok and BTS causes a stir
  5. AND FINALLY, I bring you little bloke with a massive appetite…

1

MACRO, ENERGY & CRYPTO NEWS

So everyone gets gloomy about the UK’s economic prospects and Sunak is pressed to help…

📢 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 ***. 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:

  • Are we going into a crypto winter? Why?
  • Was the UK right to cut all EV incentives? Why?

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 😜!

Federal Reserve announces biggest interest rate hike since 1994 (The Guardian, Dominic Rushe) shows that America’s central bank decided to take major action to tackle the highest inflation for 40 years by raising its interest rates by a whopping 0.75% to 1.75% (well actually, it’s a range between 1.5%-1.75%, but don’t worry too much about that). Most observers had expected a 0.5% hike until this week, but then Fed chief Jerome Powell said at a press conference that a bigger hike was needed – and here we are! He added that a similarly big hike could be on the cards at the next meeting unless he sees signs of prices slowing down.

Meanwhile, Surge in gas prices continues as Russia cuts Europe’s supplies (The Times, Emily Gosden) shows that gas prices in Britain and Europe rose for the second day in a row yesterday as Russia decided to further limit gas volumes to Germany and Italy. Prices shot up by 28% on Tuesday after Gazprom announced it would make the cuts. It said this was due to “technical issues” but Germany said it was political. This is bad but then again at least we are going into summer. If this happens in winter it will be much more painful…

Then in BP takes 40% stake in vast $30bn Australian renewables project (Financial Times, Tom Wilson and James Fernyhough) we see that the oil supermajor has made a massive bet on renewables by buying a 40.5% stake in a massive solar, wind and green hydrogen project in Western Australia, called the Asian Renewable Energy Hub, pending Australian regulatory approval. It has the potential to be one of the biggest renewable power hubs in the world and has designs on generating 26GW of solar and wind power – the equivalent of a third of the country’s power generating capacity. * SO WHAT? * This is a serious investment and will bring BP closer to its stated aim of taking a 10% market share of global hydrogen markets and its objective of cutting emissions to net zero by 2050. This is not yet a done deal and environmental concerns have been voiced. You should try and read this article in full if you have access as it has a handy little table which tells you what green, blue, pink/purple, grey, brown and turquoise hydrogen is 👍.

The crypto market is continuing to suffer. No let-up in brutal crypto sell-off as Bitcoin slips towards $20,000 (Daily Telegraph, Gareth Corfield) highlights Bitcoin’s current plight as it almost fell through $20,000 yesterday for the first time in two years and Cryptocurrency ‘bloodbath’ threatens multibillion-dollar hedge fund (The Guardian, Alex Hern and Dan Milmo) highlights repercussions as hedge fund Three Arrows Capital (aka 3AC) resorted to using Twitter to scotch rumours that it was insolvent thanks to the cryptocurrency’s collapse. It is massively exposed to cryptocurrencies and crypto businesses, hence the speculation. Crypto doesn’t fool me, says Gates (The Times, Callum Jones) is quite interesting because Bill Gates said that cryptocurrencies and NFTs are based on nothing more than “greater fool theory” – that one investor is just willing to pay more than another is. On the other hand, it was worth noting that Binance’s chief exec said yesterday that his company was looking to fill 2,000 roles – a stark contrast to the job cuts announced at Coinbase.

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 TRENDS

US and Chinese consumers hold back, UK travellers benefit WH Smith and Whitbread, H&M sees higher sales and Sainsbury gets feistier with Aldi…

US retail sales declined in May as inflation stings customers (Wall Street Journal, Harriet Torry and Rina Torchinsky) cites the latest figures from the Commerce Department which show that retail sales – which includes spending at shops, online and restaurants – fell by a seasonally adjusted 0.3% in May versus the previous month. This is the first month-on-month decline so far this year. China retail sales slide as lockdowns hit world’s biggest consumer market (Financial Times, William Langley and Edward White) cites the latest official data which shows that retail sales in China fell for the third month in a row in May as lockdowns and mass-testing campaigns took their toll. Although the rate of decline versus April slowed down, it is still evidence of the difficulties that China has faced it getting its economy back on track. Any kind of recovery here is likely to be fragile given that outbreaks could occur at any moment.

It seems that holiday-makers – and travellers in general – are boosting businesses in WH Smith takes off as holidaymakers return (The Times, Ashley Armstrong), which shows an uptick in WH Smith’s airport and travel shops boosting the company’s confidence and Whitbread beats forecasts but faces darkening UK economic outlook (Financial Times, Oliver Barnes), which shows that the UK’s biggest budget hotel operator (it owns Premier Inn)

has also benefited from a rise in travelling as its sales overtook pre-pandemic levels this year. That said, it warned that costs could rise because of a tight labour market. * SO WHAT? * It is good to see that this sector is seeing a recovery, but if you combine the effects of the cost of living crisis and the ongoing shortage of labour you have a tricky mix that makes future predictions that much more difficult.

Meanwhile, in retail news, Higher costs take gloss off H&M sales (The Times, Ashley Armstrong) shows that although H&M (which owns Cos, Arket, Monki, Weekday and Other Stories) saw higher-than-expected sales, they are still short of what they were pre-pandemic. It is interesting to note that rival Inditex (which owns Zara, Bershka, Stradivarius, Pull & Bear) recently said that its sales were now above pre-pandemic levels. Analysts believe that Q3 may not be great as they expect H&M to have to sell a lot at discount to shed the stock that would have gone to their stores in Belarus, Russia and Ukraine – which are now closed.

Then in Sainsbury’s ramps up price war with discounter Aldi (Daily Telegraph, Laura Onita) we see that the UK’s second biggest supermarket is intensifying its price war against the German discounters by price-matching its top 20 best-selling lines, adding to the existing number. It will now have 250 products price-matched to Aldi in an effort to stop customers defecting. * SO WHAT? * I think that this is the only thing that Sainsbury’s can do to minimise the number of people who could move to shopping at Aldi thanks to the cost of living crisis. Great for the consumer, not so great for Sainsbury’s (and perhaps its suppliers).

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

EV BATTERY NEWS

Foxconn builds in Taiwan and Britishvolt educates its staff…

Foxconn starts building a plant for electric vehicle batteries in Taiwan (Wall Street Journal, Yang Jie) shows that the tech giant famous for assembling iPhones has started building its first facility to produce electric car batteries. It said that it wants to invest about $200m on battery production lines and an R&D centre. It will produce lithium iron phosphate batteries and plans to test production in early 2024. * SO WHAT? * This is a really interesting development as it signifies a major step towards the company diversifying into the EV industry, where it aims to supply 3m EVs per year by 2027. The ultimate aim is to have a Taiwanese battery supply chain.

Then in Gigafactory to train staff in electric battery technology (Daily Telegraph, Howard Mustoe) we see that Britishvolt, the start-up building a gigafactory in the North East, is jointly developing a syllabus on battery technology with Northumberland College to train local workers and could see many earn up to a PhD-level qualification. * SO WHAT? * What a brilliant way to level-up the region and boost jobs! It wants to employ 3,000 workers at its new factory to help make battery packs for 300,000 electric cars per year.

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

MISCELLANEOUS NEWS

Apple signs an MLS deal, YouTube catches up with TikTok and BTS causes a stir…

In a quick scoot around other interesting stories today, Apple scores deal for Major League Soccer streaming rights worth $2.5bn (Financial Times, Sara Germano and Anna Nicolaou) shows that the two parties have just agreed to a broadcasting rights package worth $2.5bn over 10 years. This means that all live fixtures will air on a dedicated MLS streaming service on the Apple TV app. It’s not yet clear how much a subscription would cost. * SO WHAT? * This sounds good but we all know how expensive sports broadcasting rights can be. It remains to be seen how much of a draw this can be, but I don’t think that this on its own is going to be hugely compelling.

Elsewhere, YouTube says it is gaining on TikTok in short-video race (Wall Street Journal, Miles Kruppa) shows that YouTube Shorts has reached a similar scale to TikTok just two years after launching, according to Google. The short-form video format is a highly competitive area and it seems that viewership of TikTok, Douyin (both owned by China’s ByteDance) and YouTube are actually quite similar. * SO WHAT? * I have to say that I found this quite surprising given how seemingly ubiquitous TikTok is, not to mention Reels. Still, as a creator, I would say that there seems to be mileage in making content and then putting it on all formats to maximise exposure. Short videos are apparently excellent for engagement and I don’t see any reason why this would slow down for quite some time.

Then in Boy band BTS rattles K-pop shares by announcing temporary break (Financial Times, Song Jung-a) we see that all good things come to an end as the group announced that it will take a break to allow members to pursue solo projects. Their management company Hybe saw its share plummet by 28% on the news to their lowest levels since its IPO in October 2020. * SO WHAT? * This has always been on the cards, particularly as members are facing the prospect of military conscription due to their ages. There is a bill pending at the moment that would give global pop stars an exemption from mandatory conscription in recognition of their contribution to raising the country’s standing abroad. One government minister described enlisting BTS would be a “cultural loss for mankind” (what???). K-pop/BTS: boy band is not bulletproof – nor is its talent agency (Financial Times, Lex) says that BTS is estimated to account for about 70% of Hybe’s total operating profit. It is interesting to note that this article sounds doubtful as to their enduring fame when they enter their 30s, but I would point to the example of Japan “boy band” SMAP as an example of enduring popularity. This band started in 1991 and eventually split in 2016 after many successful songs, TV shows and movies. It seems to me that this model of “boy bands” is different to what we have in the west and is much more regimented, which makes me think that another successful band will crop up sooner or later. It’s just a question of time. Now that they have the expertise in “unlocking” the western market (which its J-pop rivals have failed to do) I think that they can do it again.

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…

They say that breakfast is the most important meal of the day. I don’t know where this comes from but I have heard the saying “breakfast like a king, lunch like a prince and dinner like a pauper”! It seems that this guy decided to eat like all the kings put together: ‘Skinny’ man downs UK’s biggest breakfast with 8,000 calories then goes back for pudding (The Mirror, Matthew Norman and Lauren Beavis). Incredible!

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Some of today’s market, commodity & currency moves (as at 0755hrs 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 **
7,273 (+1.2%)30,668.53 (+1%)3,789.99 (+1.46%)11,099.16 (+2.5%)13,485 (+1.36%)6,030 (+1.35%)26,445 (+0.45%)3,285 (-0.61%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$116.35$119.43$1,8301.212211.04194134.4671.633621,754.0

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