Tuesday 14/06/22

1. In MACRO, MARKETS & CRYPTO/CURRENCIES NEWS, the Fed could get super-aggressive, US and UK markets take a pasting, the Yen and Sterling reach new lows versus the Dollar while Bitcoin falls further
2. In TECH NEWS, Big Tech makes concessions, Chinese edu-tech adapts and Oracle smashes sales
3. In M&A NEWS, Prologis does a massive deal, Go Ahead accepts a bid and Countryside puts itself up for sale
4. In MISCELLANEOUS NEWS, Omicron rears its head in Beijing, Sanofi-GSK’s booster beats rivals, supermarket fuel gets investigated, Lightyear provides a solar solution to EV worries and Netflix announces Squid Game 2
5. AND FINALLY, I bring you the most fantastic movie trailer I have ever seen…

So the Fed might go further than expected, US and UK markets tumble while the Yen and Sterling reach lows versus the Dollar and crypto takes a bashing…

Fed likely to consider 0.75 percentage point rate rise this week (Wall Street Journal, Nick Timiraos) suggests that America’s central bank could take even more drastic action than expected when it meets this week to discuss interest rates. A 0.5% change is considered pretty wild, so 0.75% would really be a statement of intent to calm runaway inflation. Fun fact: the last time the Fed raised interest rates by 0.75% was in 1994!

Given inflation fears and therefore concerns about subsequent interest rate hikes to calm things down (which equity markets generally don’t like), Wall St in bear territory amid fears over inflation (The Times, Tom Howard) shows that the S&P 500 fell again in trading yesterday. It is officially in “bear market” territory, which is defined as when a stock market falls by 20% or more from its most recent high. Fears mount over health of UK economy after sharp sell-off in markets (The Guardian, Richard Partington) shows that investors are getting increasingly worried about the prospects for the UK economy after the latest release by the ONS, which said that GDP fell by 0.3% on the month after a fall of 0.1% in March.

This concern was reflected in our currency in Sterling falls to 2-year low against dollar after UK economy contracts (Financial Times, Valentina Romei and Tommy Stubbington), shortly after the pound hit a one-month low

against the Euro. British holidaymakers will have to be determined given the plunging pound, rising petrol prices, train strikes and now BA facing summer of strikes by cabin crew (Daily Telegraph, Charles Hymas and Louis Ashworth).

Yen sinks to 24-year low as BoJ keeps buying bonds (Daily Telegraph, Louis Ashworth) highlights Japan’s currency as being the worst performer among major global currencies as it has fallen by 15% versus the Dollar so far this year. The governor of the Bank of Japan has promised to work with the government to support the yen, particularly as a weaker yen could drive inflation higher (because imports become “more expensive”, pushing prices up) although this also makes exports “cheaper”.

Meanwhile, in Binance suspends bitcoin withdrawals as price slides (The Times, Russell Hotten and Simon Freeman) we see that Bitcoin fell by 15.5% yesterday as the world’s biggest crypto exchange, Binance, suspended customer withdrawals. It was the first time that Bitcoin fell below $25,000 since December 2020 and had a knock-on effect in the wider cryptocurrency market. Ether, Solana and Dogecoin all cratered. In addition to this, Celsius Network, which is a lender in the crypto industry, suspended customer withdrawals and account transfers “due to extreme market conditions”. * SO WHAT? * Crypto is having a nightmare at the moment and it seems that all previous talk of Bitcoin acting like a defensive asset when markets look uncertain turns out to be complete 💩. How much lower can it actually go?? I was also wondering the other day whether Russia could change its stance on crypto and adopt it more officially as a way to get around at least some sanctions.

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!

Big Tech relents, Chinese edu-tech evolves and Oracle smashes sales expectations…

Big Tech makes concessions on EU’s new anti-disinformation code (Financial Times, Javier Espinoza) shows that the world’s biggest tech companies are about to sign up to an updated version of the EU’s anti-fake news code, which involves the likes of Facebook, Twitter, Google, Microsoft and TikTok sharing data with individual countries in order to address disinformation on their platforms. The revised “code of practice on disinformation” will make tech platforms disclose how much they remove, block or restrict harmful content in advertising and content promotion. * SO WHAT? * This certainly fits into the current theme of “taming” Big Tech and sounds like a step forward. I wonder whether concessions like this will be used in the lobbying in the US of the antitrust bill.

Elsewhere, Chinese edtech company sidesteps Beijing’s ban through livestream steak sales (Financial Times, Ryan McMorrow) is pretty weird in that Chinese edtech company New Oriental has managed to get around Beijing’s

crackdown on the sector for making money from teaching the national curriculum that decimated the once booming sector. Its teachers have been using English lessons to sell steaks 😱 – and have gone viral in the process!!! New Oriental’s live streaming channel on Douying (China’s TikTok) has gained more than 1.5m followers between Thursday and Saturday alone and teachers increased goods sales by $2.8m over three days!!! One teacher, now being referred to as “steak bro”, appealed for his audience to buy a package of 12 steaks, 24 seasonings and a bonus frying pan and audiences are loving it. * SO WHAT? * New Oriental’s share price shot up by 25% yesterday, but it’s still over 90% below the highs it enjoyed last year before the crackdown. New Oriental is now surviving by pushing livestreaming ecommerce (which is very popular in China) and education-adjacent businesses like consultancy for Chinese students wanting to study abroad. Incredible!

Then in Oracle sales top expectations against uncertain economic backdrop (Wall Street Journal, Denny Jacob) we see that sales for the tech company rose in Q4, with total cloud revenues up by 19% from a year earlier. It has benefited from companies’ continued digitisation of their businesses.

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!

Prologis does a big deal, Go Ahead gets an offer and Countryside puts itself up for sale…

In M&A news, Prologis to buy Duke Realty in $26billion deal, including debt (Wall Street Journal, Konrad Putzier and Chris Wack) highlights a massive deal involving Prologis, the world’s biggest warehouse operator, buying one of its rivals further putting a divide between those thinking that e-commerce growth has peaked and those that don’t. This represents the culmination of months of talks and a rejected $24bn offer last month.

On an altogether smaller scale, Go-Ahead accepts £650m takeover offer from Kinetic and Globalvia (The Guardian, Gwyn Topham) shows that one of the UK’s biggest transport companies, the Go-Ahead Group, has agreed to be taken over by Aussie bus operator Kinetic and

infrastructure specialists Globalvia for £650m in cash. Go-Ahead is a leading UK bus services provider and is the operator of the UK’s biggest commuter rail network, Govia Thameslink Railway. * SO WHAT? * This sounds pretty decent and was done at a 24% premium to the price before the announcement. Given the nightmare that the UK transport sector has had through Covid and beyond, it’s not surprising that a number of companies have been subject to takeover bids. FirstGroup rejected one last week and Stagecoach accepted one in March. Will this be money down the drain for the purchasers, though?

Then in Countryside submits to activist pressure and starts sale process (Daily Telegraph, Matt Oliver) we see that the housebuilder has put itself up for sale following sustained pressure from its shareholders and instructed advisers at Rothschild & Co to run the bidding process. This comes just a fortnight after it rejected two takeover approaches from US hedge fund Inclusive Capital.

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!

Omicron hits China, Sanofi-GSK’s booster looks good, retail fuel gets investigated, Lightyear provides an interesting solution and Netflix announces another series of Squid Game…

In a quick scoot around other interesting stories today, ‘Ferrocious’ Omicron outbreak in Beijing sparks closures and mass testing (Financial Times, Eleanor Olcott) shows that Beijing is facing a serious outbreak of Omicron, prompting more lockdowns just a week after the city relaxed restrictions. This sudden reversal reflects what happened in Shanghai. Meanwhile, Sanofi-Glaxo Covid booster beats rivals in variants test (The Times, Alex Ralph) shows that the booster vaccine developed by the French and British drugs companies managed to prompt a stronger immune response to coronavirus variants than competitors. * SO WHAT? * There really does seem to be a contrast between the stuttering and severe lockdowns in China, that are creating havoc with its economy, and the feeling that the west is moving out of the worst of the pandemic – to the extent that we are talking about different boosters!

Given fuel prices at the pump at the moment, Retail fuel market faces probe by UK competition watchdog as prices soar (Financial Times, Kate Beioley) shows that the Competition and Markets Authority is going to look into competition in the retail fuel market given how ridiculous the situation has become. * SO WHAT? * The cost of filling a 55-litre family car with a tank of petrol or diesel hit £100 for the first time last week versus the £71 it would have cost a year ago, so I think this is definitely something worth looking at, no? BP and Shell (and their sub-brands)

dominate the sector via independent franchisees along with big supermarkets. As things stand currently, about 45% of petrol and diesel prices are accounted for by tax but petrol forecourt owners have some freedom to set prices. They will no doubt argue that their own costs have increased via higher staff wages and energy bills, but I guess that the government has to at least show that they are looking into it.

On the subject of fuel, Lightyear heralds dawn of the solar-powered vehicle (Daily Telegraph, Howard Mustoe) highlights an interesting concept – a solar powered car! The Dutch company, founded in 2016, is beginning deliveries of the world’s first commercial solar car this year. Before you get too excited, it is available for pre-order for a whopping £216,000 and will only add 44 miles to the vehicle’s 388 mile range. * SO WHAT? * This is a great solution to the lack of chargers and it is something other manufacturers are looking into. Mercedes-Benz, for instance, used roof solar panels to add 16 extra miles to the Vision EQXX’s quoted 621 mile range. It certainly looks like this tech will continue to improve over time…

Netflix aims for lift from Squid Game (The Times, Constance Kampfner) heralds some good news for Netflix as it announced the second season of the wildly popular Squid Game. It didn’t say when it would hit the screens, but it will no doubt be hoping that it could arrest the decline in subscriber numbers. * SO WHAT? * As I’ve said before, I think that Netflix needs to get a bit old-school and not release all episodes of a series at the same time to allow people to binge-watch. Even if Squid Game 2 is a hit, all people will do is take up a Netflix subscription, watch the lot and then cancel. I think Netflix needs a strategy and should use this as bait.

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…

Have you seen Top Gun: Maverick yet? I’ve seen it twice so far 🤣! The first time I went with my wife and kids and the second time I went with Ralph (my mate who does the Weekly podcast with me) and his missus to the IMAX in Waterloo (which I highly recommend, BTW). Someone has done a Lego version of the trailer and it is absolute genius! THIS VIDEO does a side-by-side comparison and it just blew me away! If you want the unfettered Lego version, CLICK HERE and if you want the “pure” official version CLICK HERE 👍