Tuesday 16/05/23

1. In MACRO & COMMODITIES NEWS, the EU gets more positive, Italy scrambles to change its spending plans, Erdogan nears another victory and Newmont seals a $19bn deal with Newcrest
2. In CONSUMER, RETAIL & LEISURE NEWS, UK petrol prices are criticised, retailers jack up prices of own labels, Currys sees better sales, John Lewis hires a different ad agency, Center Parcs is put up for sale and Travelodge benefits from staycations
3. In FINANCIALS NEWS, HSBC doubles down on Asia and Nationwide launches a 0% green loan
4. In INDIVIDUAL COMPANY NEWS, the EU approves the Microsoft/Activision Blizzard takeover, BAT sees drama at the top and Vice Media files for bankruptcy
5. AND FINALLY, I bring you a tricky problem to solve…

So the EU gets more optimistic, Italy struggles with spending plans, Erdogan gets closer to victory and a big gold consolidation gets announced…

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:

In European economy expected to grow faster than forecast, says EU (The Guardian, Phillip Inman) we see that the European Commission is getting more optimistic about the EU’s economic performance, nudging its forecast for GDP growth for 2024 from 1.6% to 1.7%. Concerns about recession are receding and EU growth so far this year has been better than expected. In contrast, the Bank of England is expecting UK GDP to grow by just 0.25% this year and 0.75% next year. * SO WHAT? * This is quite interesting when you consider that recent figures have shown that Germany, which contributes 24% of Europe’s GDP, is flirting with recession. If Germany’s having problems, then so is the rest of Europe! There may be an element of the EC talking up its own book, but I guess we’ll just have to see who is more right with their forecasts – the EC or the Bank of England!

Staying with Europe, Italy overhauls plans for €200bn in EU Covid recovery funds (Financial Times, Amy Kazmin and Giuliana Ricozzi) shows that Italy is scrambling to come up with plans of how it’s going to spend a chunky sum of money by the June 2026

deadline. * SO WHAT? * The country managed to win the biggest share of EU Covid-19 recovery funds to level-up its economy but it is failing to find decent projects that it will be able to execute in time. It wants to avoid spending the money on futile projects or leaving money on the table. The country is going to present a revised plan of action to the EU by the end of June. The money is supposed to be used to bolster infrastructure, reduce social inequality and boost its growth prospects. Perhaps somewhat alarmingly, Italy has had problems in the past spending money from Brussels as it only spent a measly 34% of the €126bn in EU cohesion funds that it had access to between 2014 and 2020! The country definitely wants to avoid that again!

Meanwhile, in Turkey, Erdogan holds upper hand as Turkish election goes to run-off (Financial Times, Ayla Jean Yackley and Adam Samson) shows that the country’s incumbent leader looks like he’s on track to win the presidential election as it went to the second round of voting yesterday after the first proved indecisive. Turkish default protection costs soar as Erdogan leads presidential vote (Financial Times, Mary McDougall, George Steer and Jonathan Wheatley) shows that the price of buying insurance against default on Turkish bonds has shot up to levels not seen since November as markets brace themselves for more Erdogan economic madness. The uncertainty continues…

Then in commodities news, Gold miner Newmont seals $19bn deal for Australia’s Newcrest (Financial Times, Nic Fildes) shows the world’s biggest gold miner, Newmont, tightening its grip on the sector in a deal that will now be subject to a shareholder vote and regulatory approval. * SO WHAT? * There’s a lot of consolidation going on among miners at the moment as they all try to improve scale. For instance, BHP bought Oz Minerals, Rio Tinto did a buyout of Turquoise Hill and Allkem is now merging with Livent.

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!

Supermarket petrol gets blamed, own label prices rise faster, Currys has solid sales, John Lewis ditches its ad company, Center Parcs is up for sale and Travelodge surfs the staycation wave…

UK regulator blames supermarkets for higher petrol and diesel costs (Financial Times, Laura Onita) shows that the Competition and Markets Authority has put some of the blame on supermarkets for higher fuel prices, saying that they were less than “sufficiently forthcoming” about providing evidence to show that they weren’t diddling customers. * SO WHAT? * Some say that Tesco, Sainsbury’s, Asda and Morrisons have become less competitive at the pump as a way of taking some of the heat off the pressure they are seeing on grocery sales from the likes of Aldi and Lidl. The CMA is due to publish its final conclusions and recommendations in a report by the beginning of July.

As if customers weren’t suffering enough already, UK retailers raise prices of own-label ranges faster than those of brands (Financial Times, Laura Onita) cites research from data group Circana which shows that UK retailers have been jacking the price up of their own-label brands faster than branded goods. In the last 12 weeks, branded goods prices rose on average by 10% versus own-label goods by 17%! * SO WHAT? * Given that sales of own-label goods have boomed by 46% year-on-year as increasingly cash-strapped customers have turned to them in an effort to save money, this feels like it’s a bit naughty. The likes of Sainsbury’s, Tesco and Morrisons have made a big thing about reducing prices of breakfast items last week in response to accusations by politicians and others of “greedflation”. However, reports of this nature don’t seem to be going away – they will be piling more pressure on the supermarkets to respond with more price cuts. The trend of “trading down” seems to be a global phenomenon at the moment but I guess that the supermarkets would argue that if their own-brand products are still cheaper than branded ones, they are still offering the consumer a good deal. At the end of the day, they are not charities – but then again you would hope that they’d throw customers a bone given the sustained pressure we’ve all been feeling on household incomes.

In retail news, Currys sales improve as shoppers ‘chase deals’ with credit (The Guardian, Kalyeena Makortoff) shows that the consumer electronics retailer announced improving sales as customers in the UK are opting to pay for energy-saving items by using loans in increasing numbers. Currys, the UK’s biggest electrical retailer, added that emphasis on the sale of more profitable goods and services had improved its margins. On the downside, it says that there is an element of uncertainty regarding full year earnings which it says are likely to come in lower for the

full year. * SO WHAT? * It seems that consumer demand is still well and truly alive but they are looking at alternative ways of getting their retail fix in the form of increasing use of credit. That can’t last forever, though. Will the UK economy recover in time to take the slack??

Then in John Lewis hires Saatchi for revamp after festive TV flop (Daily Telegraph, Hannah Boland) we see that the department store/supermarket chain has decided to ditch ad agency adam&eve that it’s used for the last 14 years and take on rival Saatchi & Saatchi to work on all of its upcoming ad campaigns – including the all-important Christmas ad! S&S will also help to launch John Lewis’s new loyalty programme. * SO WHAT? * This does have more than a whiff of the “rearranging the deckchairs on the Titanic” about it. As I keep saying, the company needs to focus on boosting its core business of department stores and supermarkets (or at least coming up with a proper plan of what to do in future!).

In leisure, Center Parcs UK owner seeks double what it paid with near-£5bn price tag (The Guardian, Sarah Butler) shows that private equity firm Brookfield Property Partners is looking to cash in on the boom in staycations by putting Center Parcs up for sale for double what it paid to buy it in 2015. Fun fact: Center Parcs was actually established in the Netherlands in 1967 and then grew a lot in Europe before the UK arm split off from the European division (which continues to operate separately in Germany, the Netherlands, France and Belgium) in 2001. Brookfield/Center Parcs: short break group is first resort for buyout returns (Financial Times, Lex) observes that although Brookfield hasn’t been able to grow Center Parcs at the rate it would have liked to, selling it for this price would still represent a decent return. However, the next owner will face the challenge of growing it faster!

Meanwhile, Travelodge soars above rival budget hotel chains (The Times, Dominic Walsh) shows that the budget hotel chain has reported record profits and revenue growth as it has been able to take full advantage of the booming staycation trend. Clearly it is now sitting pretty after a nightmarish pandemic when it went through a CVA to keep it in business. It said that it was targeting 300 new locations and expects to open eight hotels this year. * SO WHAT? * Staycations and vacations seem to be doing well across the board at the moment, don’t they! It seems that pretty much anything that has anything to do with holidays is doing brisk business (unless there are one-offs to take into account). Given that this is the case while there is a cost-of-living crisis going on, you would have thought that things will get even better when economies start to stage a proper rebound – and that could be even bigger still if the war in Ukraine ends peacefully!

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!

HSBC doubles down on Asia and Nationwide offers a new 0% green loan…

HSBC redoubles efforts to grow business in Asia (The Times, Ben Martin) shows that HSBC made a point of re-emphasising its commitment to the Asia business and disclosed new targets less than two weeks after it saw off an attempt by an activist investor to split the bank. Three years of putting resource into the Asia business are now bearing fruit, according to HSBC’s CEO. I guess all eyes will now be on the execution of its new plan!

Then in Nationwide launches 0pc loan for green home improvements (Daily Telegraph, Alexa Phillips) shows that

mortgage borrowers will now be offering interest-free loans to make energy-efficient home improvements for the first time. It will let up to 5,000 of its customers borrow anywhere between £5,000 and £15,000 to make green improvements via the “0pc Green Additional Borrowing home loan”, which will be launched on June 1st. This can include non-structural improvements as well as structural ones – and will also cover things like electric car charging stations! * SO WHAT? * This sounds like a great idea and I’m sure that the government will be right behind this private sector solution! It’ll be interesting to see what the take up of this loan is like! Surely it will be pretty good given that I don’t think there are many interest-free loans available at the moment…

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!

The EU stirs it up with Activision Blizzard, BAT’s CEO departs and Vice Media files for bankruptcy…

In a quick scoot around some of today’s other interesting stories, EU approves Microsoft’s takeover of Activision Blizzard (The Guardian, Dan Milmo and Alex Hern) shows that the EU has approved Microsoft’s proposed $69bn purchase of Activision Blizzard after Microsoft made concessions on cloud gaming. This comes shortly after our own competition regulator, the Competition and Markets Authority, rejected the acquisition. UK hits back at Brussels over $69bn Microsoft deal (Daily Telegraph, Gareth Corfield) highlights the CMA’s unusual move of coming out publicly to justify its previous stance on the deal and saying that the European Commission was wrong not to reject it. * SO WHAT? * The CMA’s decision to block the deal still means it won’t go ahead UNLESS the CMA’s decision is overturned on appeal. Activision’s chief exec Bobby Kotick hinted yesterday that this move by Europe means he will now be more disposed for the company to expand in Europe rather than the UK. I wonder whether this is just a 🍆-swinging contest between regulators. If the CMA wants to show it is now a “third power” in Europe re competition, it is going to have to stick to its guns. Given that Activision’s share price did nothing in response to this latest news, investors don’t seem to be convinced that the EC’s decision is going to do anything. It ain’t over till it’s over though!

Elsewhere, BAT chief quits as tobacco giant struggles with switch to vaping (Daily Telegraph, Oliver Gill) shows that BAT’s chief exec quit unexpectedly from the tobacco company, to be replaced by the current financial director. It looks like he’s the fall guy for the failure of its efforts to wean itself off cigarettes and onto alternatives like vaping.

Then in Vice Media to Sell Itself as It Files for Bankruptcy (Wall Street Journal, Alexandra Bruell, Alexander Gladstone and Dave Sebastian) we see that former media darling Vice Media has received a rescue offer and filed for bankruptcy protection. It follows the failure of another “alt-media” firm BuzzFeed which closed BuzzFeed News due to ongoing losses. Its media brands will continue to produce content. * SO WHAT? * The company has suffered in recent years due to the booming popularity of TikTok as an information source for its target audience as well as a major drop in advertising revenues, something that other platforms have also suffered from. It is interesting to note, however, that there are still some digital news outlets out there, hustling away! A new one launched this week, called Messenger, with $50m in funding and punchy growth targets but it joins the likes of Semafor and BuzzFeed News.

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…

Do you like riddles? Well I think you’ll find this one tricky! Good luck!