Tuesday 07/05/24

1. In MACRO & CRYPTO NEWS, global trade is expected to grow sharply, the EU and France appeal to China, the Bank of England remains divided, a Labour government could be a boost, the SNP gets a new leader and Robinhood warns of a lawsuit
2. In CONSUMER & EMPLOYMENT NEWS, spring sales are dampened, Pandora benefits from lab diamonds and employers rein things in
3. In REAL ESTATE NEWS, Savills does a U-turn on house prices, the London exodus runs out, there’s doubt about a lab rescue and Heineken plans a pub refresh
4. In MISCELLANEOUS NEWS, EV taxes are imposed, a British driverless car start-up raises $1bn, Qualcomm is to get an AI boost and Boeing slips up yet again
5. AND FINALLY, I thought I’d bring you some plane passenger initiative…

So global trade is expected to rise sharply, the EU and France appeal to China, the Bank of England feels the pressure, a Labour win could boost markets, the SNP gets a new leader and Robinhood warns of a lawsuit…

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:

Global trade growth set to more than double this year (Financial Times, Sam Fleming, Valentina Romei and Martin Arnold) shows that the OECD, IMF and WTO are all forecasting a sharp rebound in trade this year after a very meh 2023 that suffered from high prices, high interest rates and anaemic demand. Nice.

Meanwhile, EU and France press Xi for more balanced Chinese trade ties (Financial Times, Sarah White, Alice Hancock and Joe Leahy) shows that the French and Europeans are trying not to p!ss China’s president off too much with the prospect of slapping big taxes on Chinese imports. At the same time, China is being urged to curb support for Russia in the Ukraine war. President Xi is in Paris at the moment for talks over the next few days with much to discuss! * SO WHAT? * The EU will want to press its case for protecting industries and Xi will want to limit any fallout. This is going to be one very delicate balancing act on both sides! I would say that the main areas for concern from the European standpoint will be EVs, batteries, solar panels and other green-energy related products which have already flooded (or are just about to flood) the market.

Back in the UK, BoE likely to flag future rate cuts as divided policy committee meets (Financial Times, Sam Fleming) shows that the Bank of England is widely expected to leave interest rates unchanged at 5.25% when the MPC meets on Thursday this week.

Having said that, there have been signs that some of the interest rate-setting group are up for rate cuts despite this meaning the prospect of diverging with their US counterparts, who are experiencing unexpectedly strong and persistent inflation.

Following the Conservatives’ disastrous performance in the local elections last week, Labour will boost ‘appetite’ for London stock market, says City broker (Daily Telegraph, Eir Nolsøe) puts a positive spin on the prospect of a Labour government as it suggests that a Labour win will be a boon to the London stock market as it will offer a break with the political instability of the last few years. A lot of this has been self-inflicted (partygate, Truss-Kwarteng etc. most recently, but also Brexit and Scottish independence) although some of it has been due to global factors that have been beyond its control (Covid, wars etc.). * SO WHAT? * If you combine more stability (a government with an action plan and four years in power), the prospect of falling interest rates and  cheap valuations of British companies, sentiment (and markets) could rebound. The election is very much Labour’s to lose. Sunak is going to need a miracle to stay in office.

Then in John Swinney appointed new leader of Scottish National party (Financial Times, Simeon Kerr) we see that the SNP has a new leader. He has got a lot to do to unite his party and fend off the challenge of Scottish Labour after a ton of scandals. I think that the recent implosion of the SNP presents Starmer with a big opportunity to make inroads in Scotland…

Meanwhile, in the world of crypto, Robinhood warns of SEC lawsuit threat over crypto business (Financial Times, Will Schmitt) shows that the retail brokerage has warned of an imminent lawsuit from the SEC over its crypto business in the ongoing US regulatory clampdown on digital assets. Robinhood has around 23m customers, $119bn in assets under custody and cryptocurrencies accounted for $135m of its $785m in transaction-based revenues last year. * SO WHAT? * It looks to me like this is more of a pain for the company rather than a disaster and it is worth saying that Robinhood’s share price has increased by about 47% since the beginning of this year. It is due to report its Q1 results tomorrow.

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!

Wet weather dampens sales, Pandora benefits from synthetic diamonds and employers rein things in a bit…

In consumer trends news, Wet weather and early Easter damp UK spring sales (Financial Times, Valentina Romei) shows that UK retail sales and spending dropped in April thanks to wet weather and Easter being earlier than usual, according to the latest figures from the BRC. * SO WHAT? * This would suggest that consumer sentiment isn’t quite there yet and that the end is not yet in sight after a tricky last couple of years for retailers. This means that concerns still remain over the UK economy although, more broadly, expectations are that the economy will rebound as wages are now outpacing inflation after a long period where they were lagging.

Then in Young consumers drive sales boom in lab-grown diamonds, says Pandora (Financial Times, Richard Milne) we see that Pandora, which is the world’s biggest jewellery maker by volume, said that young consumers have been powering the boom in lab-grown diamonds that have dented sales of mined ones. Lab-grown diamonds are typically a third of the price of mined ones and Pandora became the first major jeweller to ditch selling mined diamonds in 2021. Lab-grown diamonds have identical optic and chemical characteristics of the mined ones. * SO WHAT? * The success of lab-grown diamonds has helped Pandora

outperform its peers and grow revenues outside of what it has been generally known for – selling charms for bracelets and necklaces. While diamond miner De Beers moaned last month about its output falling by 23% in Q1 while natural rough diamond prices have cratered by 25% in the last two years, Pandora’s CEO observed that close to 50% of all stones in the US are now lab-grown – and Pandora is in prime position to benefit! Its revenues increased by 18% in Q1 and it was confident enough to raise its sales growth forecasts for the full year. A sparkling performance!

In employment news, Employers ‘cutting hours and hiring less to offset minimum wage rise’ (Daily Telegraph, Eir Nolsoe) cites the CEO of Reed, one of Britain’s biggest recruiters, as saying that employers are currently cutting back on hours and reining in hiring plans in reaction to the recent 9.8% increase in the National Living Wage. The increase has come at a delicate time for companies that are already suffering with inflationary pressures. * SO WHAT? * I would have thought that we are going to see things go sideways until the next government now in terms of any major initiatives because they will surely lack bite because most people will believe that they could be changed (or ditched) after the next election. Businesses will be hoping that an economic uptick will bring in the revenues so that they can pay their staff the higher wages.

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!

We look at current developments in residential and commercial property…

In residential property news, Savills says UK house prices will rise this year in U-turn on earlier forecast (The Guardian, Hilary Osborne) shows that property company Savills has reversed the forecast it made in November last year when it said that it expected the average price of a home to drop by 3% in 2024. Now it thinks that increased competition among mortgage lenders has prompted more activity in the market to the extent that Savills now expects prices to rise by 2.5% in 2024! * SO WHAT? * It’s certainly looking more possible now but I guess we’ll have to see what rivals say as well. Separately, it is also interesting to note moving patterns, as per Fewer Londoners leave for the country as pandemic-era exodus eases (Financial Times, Joshua Oliver) which cites Rightmove statistics which show that the exodus from London to the ‘burbs has slowed down considerably. The stats say that the number of house-hunters looking to move out from London has reverted to the pre-Covid norm of about a third versus the peak of a half in August 2021. I would have thought that the return-to-office trend will have put paid to the exodus to a great extent. 

In commercial property news, Lab space cannot breathe life into London’s office market (Financial Times, Lex) is an interesting article which refers to Canary Wharf’s efforts to diversify from predominantly finance tenants to attracting life sciences companies. The rationale here is that labs attract high rents (about £130 per sq ft versus prime offices at £100 per sq ft) but there are a few problems: firstly, building costs are higher and secondly that there’s only so much demand. There are already a number of projects that are underway and due for delivery this year and next so going in this direction is going to be a bit of a gamble.

Meanwhile, Heineken to pump £39m into reopening and revamping UK pubs (The Guardian, Jane Croft) shows that the world’s second largest brewer is going to come to the rescue (to some extent) of British pubs by spending a ton of money on reopening 62 UK pubs and upgrading “tired” ones in suburban areas in order to attract consumers who are working from home. It already owns 2,400 pubs via its Star pub and bars division, so this is kind of a drop in the ocean – but it’s still a positive move! * SO WHAT? * It does sound like there’s a mood shift going on in this sector at the moment after the mass closures we’ve been seeing in the last few years during and since Covid. JD Wetherspoon has indicated an interest in opening more pubs and Greene King announced last week that it would be spending £40m on a new brewery in East Anglia. Fingers crossed for better times!

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!

EV taxes get imposed, a British driverless start-up raises a ton of money, Qualcomm looks set to benefit from AI and Boeing slips up AGAIN…

In a quick scoot around some of today’s other interesting stories, Governments slap taxes on EVs as $110bn fuel duty shortfall looms (Financial Times, Jamie Smyth and Amanda Chu) shows that global policymakers in the UK, New Zealand, Israel and most US states are among those imposing new taxes on EVs to make up for the shortfall in revenues they normally get from fuel duties on petrol-powered cars. There is an array of different taxes. * SO WHAT? * EV fans (particularly owners!) will moan that they are being hit by punitive taxes and warn that this will slow the take-up of EVs because it will make one of the key advantages of ownership much less attractive. Things don’t seem to be going well for EVs at the moment what with price wars, Tesla’s shutdown of its Supercharger division and moves on taxes like this. I wonder whether governments just think that their respective charging infrastructures aren’t enough and that they might as well make some money from EV owners rather than nothing. This is all very well at the moment but the danger is that if measures become too punitive and the attractions of going electric get much narrower, development of the charging infrastructure may also slow down – which will make the situation even worse (until battery tech advances to an extent that range anxiety becomes a thing of the past).

In other car-related news, British driverless car start-up raises $1bn (The Times, Katherine Prescott) shows that Wayve has just

raised a massive sum of money from SoftBank, Nvidia and Microsoft to help develop its AI software that will make any vehicle hands-free. * SO WHAT? * Wayve’s approach to driverless differs from other approaches up till now as Wayve’s tech “teaches” driverless vehicles how to drive from real life videos versus “just” feeding computers with huge numbers of rules to cover every eventuality. This sounds great from a finance perspective, but this will also give the company access to the computer power needed to process all this data!

Elsewhere, Qualcomm’s Smartphone Future Looks Brighter With AI (Wall Street Journal, Dan Gallagher) shows that AI-enabled smartphones and PCs are likely to boost Qualcomm’s fortunes as it makes modem chips used in the iPhone and other wireless devices. The prospect of on-board AI means that there will be a need for more advanced processors. * SO WHAT? * This is kind of ironic in the sense that Apple has been doing its level best to cut Qualcomm out of the supply chain over the last few years – but Apple’s push into AI could deepen the need for Qualcomm’s tech!

Then in Boeing calls off Starliner spacecraft launch after problem with valve (Financial Times, Claire Bushey) we see that Boeing has slipped up again – this time the launch of a Boeing spacecraft has been called off due to an issue with a component. Boeing’s CST-100 Starliner spacecraft was supposed to be launched from Cape Canaveral to take two astronauts to the International Space Station. When will Boeing’s nightmare end???

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…

When you’re at the airport, have a little bit too much luggage and don’t want to pay the extra for going over your allowance you have to improvise like this guy! It reminded me of what I did back at uni when I went to Japan to study. Unfortunately, the luggage allowance was the same for whether you were going for a few weeks on holiday (25kgs) or, like me, for a year. Picture a much younger Peter Watson, then, stepping out onto the tarmac at Narita airport on an August morning with the temperature hitting 35°C and 100% humidity wearing a t-shirt, a polo shirt, a cricket jumper, a suede jacket, hiking socks, tracksuit bottoms, jeans, heavy walking boots and an extremely heavy rucksack bursting at the seams with my Japanese dictionaries (yes, hard copy), notes,