Thursday 23/11/23

  1. In MACRO, OIL & CRYPTO NEWS, we look at yesterday’s Autumn Statement and kerfuffles about the German budget, Opec+ and Binance’s new direction
  2. In TECH NEWS, OpenAI gets back to “normal”, Nvidia remains calm and Sage announces booming profits
  3. In MANUFACTURING-RELATED NEWS, Thyssenkrupp has a writedown, John Deere proves to be too dear, Nissan plans to build new EVs in Sunderland and GM’s Cruise draws up a plan of action
  4. In MISCELLANEOUS NEWS, business closures outnumber openings and B&Q’s owner issues a second profit warning
  5. AND FINALLY, I show you how a real Chicago deep dish pizza is made…

1

MACRO, OIL & CRYPTO NEWS

So we take a look at the Autumn Statement and kerfuffles in Germany, OPEC and the future of Binance…

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So – yesterday was Autumn Statement day! Hunt gambles fiscal tailwind on voter-friendly tax cuts (Financial Times, Sam Fleming) shows that the chancellor used whatever wiggle room he had to unveil a package intended to win votes at the next election. Think-tanks including the Resolution Foundation and Institute for Fiscal Studies were sceptical but Hunt did his best, boosted by the unexpectedly positive piece of news that public borrowing during the current fiscal year was actually £16.9bn lower than the Office for Budget Responsibility’s projection of £115.2bn (but then again the OBR has been pretty useless in forecasting – it said in March that CPI inflation would be 0.9% next year, which was way below consensus – but it has now upgraded it to 3.6% 🤣). He was faced with consolidating public finances further in the Autumn Statement or gambling it all on spending increases and/or tax cuts to win votes. Autumn statement 2023: key points at a glance (The Guardian, Anna Isaac and Aletha Adu) is a decent summary of the areas that Hunt addressed – public spending (there will, in effect, be a £19bn cut in spending on public services), growth forecasts (GDP will grow by 0.6% this year and by 0.7% next year), inflation expectations (it’ll fall to 2.8% by the end of 2024), wages and benefits (those on benefits will have to face mandatory work experience if they don’t get a job within 18 months, a £1+ rise in the “national living wage” that will also be extended to 21 year-olds, a 6.7% rise in benefits, an increase in the state pension of 8.5% and a rise in the local housing allowance), borrowing (he aims to reduce it), business tax (which will allow businesses to offset investment in items such as new IT equipment and factory machinery against tax, a reform of taxes for the self-employed that will effectively cut their taxes and business rates discounts for hospitality, retail and leisure) and investment in the economy (an extra £4.5bn to go into manufacturing between 2025 and 2030). Then Autumn statement 2023: what it means for people on a range of incomes (The Guardian, Miles Brignall) does the usual job of looking at how the measures will affect different groups of people – single low income, single parent, average earner, unemployed married couple with two children, married couple with two children and one higher income, rich couple with no kids, single pensioner on a new state pension and married pensioners with a state pension and £8,000 private pension – and they will all see more money. Chancellor’s tax cut opens door to early election – and sets a trap for Labour (The Guardian, Rowena Mason) suggests that the chancellor went for an Autumn Statement with broader appeal (perhaps most notably ditching a mooted cut to inheritance tax) and that earlier-than-expected tax cuts could imply that there could be an election in spring rather than autumn next year. Even so, whoever wins the next election will have to deal with slowing growth, falling living standards and big public spending cuts. Given that Hunt has pretty much spent all the “spare” money on these tax cuts, if Labour got in at the next election it would not be able to raise personal taxes so soon after they’d been cut – so the only alternative would be to raise taxes elsewhere and/or squeeze the public sector even more, which is also not an attractive

prospect. UK tax: Hunt woos business with full expensing, partial truths (Financial Times, Lex) implies that Hunt’s claim to have provided “the largest business tax cut in modern history” does have quite a lot of holes, but on the plus side the UK is seeing an increase in levels of foreign investment in the UK, particularly when compared to the EU. UK businesses give their verdict on Autumn Statement (Financial Times, Michael O’Dwyer) takes a look at the immediate reaction from some SMEs in hospitality (national insurance cuts won’t be enough to get people spending, the business rates relief extension is welcomed but its existence is still annoying but there won’t be enough support for energy costs), manufacturing (wants more of a long-term vision, particularly where AI is concerned, welcomes the extension of the full expensing regime and reduction of national insurance, more trade deals with other countries and more help with cutting trading admin) and engineering (disappointed about the government not cutting corporation tax which went up from 19% to 25% this year, likes the extension of full expensing). * SO WHAT? * Overall, it seems to me that this Autumn Statement was pretty reasonable, given the turbulent last few years. Of course opposition parties will talk about incompetence etc. (that’s their job after all!), but it seems to me that the government has tried to make the best of a tricky hand. Whether these measures will actually work against the difficult current economic backdrop is another question! Will they serve to differentiate the Conservatives going into the next election?? I have to say that I would have thought that there will have to be some kind of miraculous macroeconomic turnaround for there to be an early election. However, you never know – cessation of war in Ukraine, resolution of conflicts in the Middle East and improved relationships with China could cause a global uptick just as interest rates and inflation are falling. I mean, that is the “blue sky” scenario – but whether THAT happens is very much a moot point! 

Over in Europe, German parliament cancels 2024 budget vote amid political crisis (Financial Times, Sam Jones) shows that Germany’s government has been forced to suspend a vote on the country’s budget for 2024 indefinitely after the country’s highest court concluded last week that the government’s plans to move €60bn to a climate fund breached fiscal rules designed to limit debt! * SO WHAT? * This has a direct knock-on effect to other spending commitments and if a budget is not agreed, automatic spending restrictions will come into force across all federal government departments from January 1st until a budget IS finalised. Things could also get worse from here as vice-chancellor Robert Habeck of the Green Party warned that a €200bn fund set up to protect consumers and businesses from rising energy prices may also be judged as being unconstitutional. Things just aren’t going right for Germany at all at the moment…

In oil news, Fallout between Opec+ members sends price of crude tumbling (The Times, Emily Gosden) highlights yesterday’s 5% fall in oil prices after the Opec+ alliance postponed a meeting where oil producer nations where scheduled to talk about continued output cuts. The expectation has been that the group will extend or perhaps even deepen production cuts, which would provide support to oil prices. However, it seems that there is discord among the members as to who should cut and by how much.

Meanwhile, in crypto news, New chief at Binance calls for calm (The Times, Katie Prescott) shows that the new boss taking over the world’s biggest cryptocurrency exchange from the founder who had to leave because he was found to be guilty of money laundering, is insisting that all is still well within the business. Richard Teng has stepped into the CEO hot seat and is committed to reassuring users and regulators. He is the former global head of regional markets at Binance and, before that, the CEO of Abu Dhabi’s financial regulator. * SO WHAT? * This guy has certainly got his work cut out for him! Given that the naysayers have been proven right about Binance’s dodgy dealings, you do wonder what’s going to happen to the whole sector. The FCA previously said in 2021 that Binance was “not capable of being effectively supervised” and it estimates that five million Britons own crypto, with 70% of them doing so via online exchanges. Binance is the second most popular way of trading crypto after 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

TECH NEWS

OpenAI returns to “normal”, Nvidia is sitting pretty and Sage puts in a strong performance…

It seems that things are starting to calm down a bit at OpenAI now that Altman is back at the company! How Oppenheimer of AI beat the doomsayers (Daily Telegraph, James Titcomb and Matthew Field) gives a useful roundup of the events that led to last Friday’s ousting and concludes that the balance of power has now shifted. Is it business as usual at OpenAI as boss returns? (The Times, Katie Prescott) observes that there still hasn’t been a full explanation as to why Altman was ousted in the first place and that Emmett Shear has now updated his profile as “interim ex-CEO of OpenAI” while The OpenAI meltdown will only accelerate the artificial intelligence race (The Guardian, Sarah Kreps) makes the point that although the company had to morph from a not-for-profit to something more commercial (developing AI uses a lot of cash – which is where Microsoft and others came in) it still has safety in mind. That said, AI development may now accelerate as Microsoft and VC firms put their full resources into the company while safety may become more difficult to control as everyone aims towards Artificial General Intelligence. * SO WHAT? * The dust is still settling on this, but I think that the overall effect of what’s happened over the last six days has perhaps brought the company together, strengthened resolve and shown where

loyalties really lie. The naysayers have been banished and Microsoft in particular has earned some major brownie points by taking such supportive action so swiftly.

Meanwhile, Nvidia: plans to become one-stop chip shop will boost shares (Financial Times, Lex) just confirms what we already know – that Nvidia is in pole position to take advantage of the massive demand for advanced chips despite potentially weakening demand from China (due to US sanctions). * SO WHAT? * Its lead over the competition is about to be extended by the introduction of another new specialist AI chip and analysts reckon that annual revenues will more than triple over the next three years. It will need to keep an eye on rivals (especially ones in China) who will be putting a lot of resource into closing that gap.

Then in Sage plans buyback as shares hit record (The Times, Katie Prescott) we see that Sage Group shares hit an all-time high following the unveiling of a 20% increase in profits at its results! Its software for accounting, HR and payroll will be further enhanced by a mooted “copilot” AI product that it’s been testing as it will provide additional “game-changing” benefits to SMEs. The company continues to be on the lookout for more acquisitions.

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

MANUFACTURING-RELATED NEWS

Thyssenkrupp has a steel writedown, John Deere proves to be too dear, Nissan has EV plans for Sunderland and GM’s Cruise regroups…

Thyssenkrupp writes down value of steel business by €2.1bn (Financial Times, Patricia Nilsson) shows that Germany’s biggest steelmaker has written down the value of its steel business by a whopping €2.1bn due to low demand and falling prices. It posted a net loss of €2bn for 2023 and blamed high prices for gas and other raw materials. There is now talk that its steel business could be spun off as its value has now fallen to more “achieveable” levels. * SO WHAT? * I would have thought that the prospect of the Chinese flooding the market with cheap steel that it can’t shift in its own market won’t make things any easier. The nightmare for German manufacturing continues…

In John Deere too dear for farmers (The Times) we see that the world’s biggest farm equipment provider has made some downbeat profit forecasts for 2024 as higher borrowing costs and squeezed budgets have hit demand for machinery. Deere & Company outlined expectations for weaker sales in agriculture and construction equipment across the board, confirming analysts expectations that earnings will fall from here. Tough times. * SO WHAT? * I would have thought that it will take a bottoming out of the interest rates to really pep things up here –

but even then I’d expect a delayed effect as farmers are likely to continues to be cautious.

Meanwhile, in automotive news, Nissan to build new EVs in Sunderland (Daily Telegraph, Alex Singleton) highlights some good news for UK car manufacturing as Nissan is expected to announce that it will build new versions of its electric Qashqai and Juke models in the UK, following a deal with the government. * SO WHAT? * This is great news for the 6,000 workers at the Sunderland factory, not to mention the 24,000 workers thought to be in the supply chain! 

Then in GM’s Cruise Draws Plans to Resume a Downsized Robotaxi Service (Wall Street Journal, Mike Colias and Meghan Bobrowsky) shows that GM’s autonomous car unit, Cruise, plans a more conservative reintroduction of its robotaxi service following the most recent safety disasters. Cruise’s new co-president is looking to rein things in and concentrate on one city (not over a dozen as it had previously promised) and the development of Origin, a GM-built driverless taxi, will be postponed. * SO WHAT? * As I have said before, I would not be surprised if GM stayed on to get Cruise back on track, but then sells it off. From what I can see, it’s way more trouble than it’s worth and is just a money pit. It could then retain a minority stake to give it some skin in the game if/when driverless actually takes off.

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

Business closures outnumber openings and Kingfisher has a ‘mare…

In a quick scoot around some of today’s other interesting stories, More businesses are closing than opening (Daily Telegraph, Melissa Lawford) cites the latest data from the Office for National Statistics which shows that, for the first time since 2010, more businesses are shutting down than starting up. Transport and storage businesses were hit hardest as rising energy prices, inflation and bigger wage bills took their toll. Ouch.

Then in B&Q owner issues second profit warning as sales fall (Daily Telegraph, Hannah Boland) shows that Kingfisher, the

owner of B&Q (and Screwfix) announced its second profit warning in two months yesterday thanks to falling sales in its French business (where it owns Castorama and Brico Dépôt). This followed a previous downgrade in September but the company said it would prioritise growing market share in Britain, France and Poland next year whilst making more efforts to keep a lid on wage inflation.* SO WHAT? * Kingfisher really needs the property market to pick up significantly because that’s when demand will start to rise from both amateur DIY-ers and contractors. At the moment, I guess they just have to hunker down to weather the current storm.

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…

I have to say that, when it comes to pizza, I’m very much a thin base kind of guy – but then again I’ve never had a Chicago deep dish pizza like this before! It looks pretty substantial and not exactly healthy but hey it must be good as the venue that makes this pizza has been around for almost 100 years!

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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/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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