- In MACRO, ENERGY & CRYPTO NEWS, China cuts its interest rate, Russia splits Germany’s coalition, UK inflation continues to soar, China coal production hits new highs, Scottish wind turbine plans makes waves and Spain cracks down on crypto
- In CONSUMER/RETAIL NEWS, UK energy payment options are being considered, luxury cars see brisk sales, Covent Garden grows in value and Amazon ditches the Visa threat
- In MISCELLANEOUS NEWS, Macao casinos breathe a sigh of relief and Unilever gets flak
- AND FINALLY, I bring you some egg-cellent advice…
MACRO, COMMODITIES & CRYPTO NEWS
China cuts its interest rate, Russia causes a German kerfuffle, UK inflation looks set to go higher, China mines more coal, Scotland looks to wind power and Spain takes on crypto influencers…
I published Watson’s Yearly on Sunday night. I will be updating this regularly. Given how long this document is, I would recommend that you dip into it rather than read it all in one sitting! Also, you’ll get the most out of it if you regularly come back to it. I’ll let you know when we’ve updated it as well via an update section in Watson’s Weekly. There is no other document like this as far as I am aware because it will update throughout the course of this year. Have a read HERE. Silver subscribers and above can access this. If you want to upgrade your subscription – and lock in current prices before they go up at the end of this month – please click HERE.
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China rate cut: Winter Olympics helps push economy downhill (Financial Times, Lex) shows that the country’s extreme caution about being able to hold the Winter Olympics as planned has meant it has closed roads and suspended plane, train and bus services. These sorts of actions are not great for economic growth! The country cut its policy interest rate yesterday for the first time in almost two years in a bid to stimulate a flagging economy as a turbulent property market, power shortages and lockdowns are all taking their toll on growth.
Russia pipeline fuels German coalition split as Ukraine tension rises (Financial Times, Guy Chazan) shows that cracks are now forming in the newly-minted German coalition government as Russia’s gas pipeline across the Baltic Sea, Nord Stream 2, is pitting the Greens against the Social Democrats. The Greens do not want to go ahead with certification of the pipeline if Russia invades Ukraine, but Olaf Scholz’s Social Democrats are more ambivalent, prioritising the importance of gas supplies. * SO WHAT? * I’ve said it before, and I’ll keep saying it, but I think that coalitions are a recipe for disaster. Two-way coalitions are bad enough, but Germany’s ground-breaking three-way coalition is surely the absolute pits. The more parties you have involved in making serious decisions, the less likely they are to MAKE a decision, especially if their core ideologies are diametrically opposed. The end result is nothing (or almost nothing) gets done. I’m all for democracy and taking opinions into account, but this coalition is about five minutes old. It doesn’t look good for the next few years if this is anything to go by! And if Germany goes down the toilet, it will take Europe with it as well. Let’s hope that German politicians manage to put their big boy pants on and make the difficult decisions they are paid to make.
UK inflation set to hit 30-year high as rate rise expectations mount (Financial Times, Valentina Romei) shows that UK inflation looks like it’ll hit a 30-year high when December’s data is released tomorrow as prices continue to rise. At the moment, economic “experts” say that inflation will peak in April which implies that the Bank of England will hike its interest rate a few times this year, but things are just so unpredictable at the moment. Demand for goods and services far outstrips supply at the moment, mainly because of supply chain disruptions. The Bank of England reckons that inflation will fall “quite quickly” from the second half of this year, but let’s face it, folks, they’ve been completely wrong so far about their inflation predictions 🤣. I know I’m being a bit nasty here, but I’m just saying that it’s so hard to predict this (especially during a pandemic) even if this is something you are paid to do!
In energy-related news, China’s coal production hit record levels in 2021 (The Guardian, Jillian Ambrose) says that the rise in China’s coal production last year was due to miners ramping up production to maximum capacity – a move prompted by the government – in order to protect energy supplies over the winter. The International Energy Agency (IEA) predicted that global coal power consumption would reach record highs over the course of 2021 due to the massive demand for energy to get economies back on track. On the other hand, Scottish wind turbine plan would treble UK capacity (Daily Telegraph, Rachel Millard) highlights the latest results of an auction regarding the rights to build offshore wind power plants that will bring in about £25bn of investment in Scottish supply chains. * SO WHAT? * First Minister Nicola Sturgeon is putting huge store on this and says that it will bring “massive economic benefits” for the country as 17 projects were chosen from a selection of over 70 proposals. Then again, the Scottish Fishermen’s Federation expressed concerns about the potential impact to their industry and conservationists will object because of the potential negative impact on offshore wildlife. This just goes to show you can’t please everyone! However, with oil revenues potentially going into decline, revenues for Scotland are going to have to come from somewhere.
Then in Spain leads European crackdown on crypto promotions (Financial Times, Daniel Dombey, Joshua Oliver and Sam Fleming) we see that the country is going to be the first country in the EU to have its regulator preside over crypto advertising. New rules will come into force in one month’s time and will require influencers and their sponsors to notify authorities of certain posts and warn of risks before they are published, or face fines. * SO WHAT? * About time! This all came to a head in November last year as footballer Andrés Iniesta didn’t inform his followers of the risks of crypto when he got paid to promote Binance, the world’s biggest cryptocurrency exchange. EU-wide regulations are being discussed, but have not yet been agreed. This whole thing about influencers and crypto is just ridiculous. Mind you, if people think it’s a good idea to follow a footballer for financial advice then I think they deserve whatever the consequences are (although really I think they should be protected from themselves – which is where regulation comes in). After all, if I wanted to find a good plumber, would I seek out the advice of an Arctic explorer, for instance?!? Well done Spain, I say, for taking the initiative over the ditherers in Brussels! I don’t know what the hold-up is. Just make sure everyone is up front about it being a paid promotion and force them to state the risks very clearly. Simples.
The government considers measures to lessen the impact of higher energy bills, luxury cars sell well, Covent Garden gets its mojo back and Amazon calms down…
Given all the worries that people have about impending hikes in energy bills, UK looks at payments to energy suppliers to shield consumers from high bills (Financial Times, George Parker, Nathalie Thomas and Jim Pickard) shows that the government is looking at the possibility of the state making payments to energy suppliers when wholesale gas prices go through pre-determined thresholds. This would be a real boon for energy consumers because it would mean that they would be shielded from the worst. Supposedly this would finance itself over a number of years as the energy companies would have to pay the money back to the government when wholesale prices traded below the pre-determined level. * SO WHAT? * This temporary price stabilisation mechanism could really help consumers who will potentially be facing huge utility bill increases – and given how desperate BoJo will be to curry favour with a disapproving electorate it sounds like something that could help him if brought in (especially if he brings in other crowd-pleasing measures as well). Other measures like a VAT cut on domestic energy and more targeted measures for poorer households are also currently under consideration.
It seems like at least some consumers are, in the meantime, splashing the cash. Rolls-Royce, Bentley, BMW sales surge as cheaper brands lag behind (Wall Street Journal, William Boston) shows that luxury brands announced record sales last year due to ongoing demand and manufacturers prioritising chips towards their most profitable models. Interestingly, the sales head at Bentley said that the centralised process for allocating chips meant that Bentley pretty much had no problem at all – which probably explains why they managed to sell 31% more cars last year than in the previous year, hitting record levels. Porsche also did extremely well and both saw solid sales in the US, Europe and China. VW itself, on the other hand, struggled. * SO WHAT? * I just thought it was worth reinforcing the point I made last week on this story and found it interesting to hear how Bentley got its chips! It’ll be interesting to see how 2022 pans out!
Elsewhere, Covent Garden grows in value as footfall recovers (The Times, Tom Howard) highlights the value of Covent Garden as its owner, Capital & Counties, has seen a big increase in shops, bars and restaurants paying their rent on time as restrictions lifted. It collected 86% of rent due this quarter versus just 42% it collected in the same time the previous year. The value of the estate is still short of the valuation it enjoyed pre-pandemic, but it is going in the right direction and is another manifestation of the economy slowly pulling itself out of the pandemic.
Following on from what I said yesterday, Amazon calls off threat to block Visa credit cards from its UK site (Daily Telegraph, James Titcomb) shows that there may be an imminent agreement being struck between the two parties as Amazon has withdrawn its threat. For now, though, customers can rest easy!
Macao gets a boost and Unilever hits a backlash…
In Macao casino shares rally after gaming law offers reprieve to US companies (Financial Times, Hudson Lockett and Chan Ho-him) we see that stocks like Sands China, MGM China and Wynn Macao all got a boost yesterday (by 14.6%, 11% and 9% respectively) as Chinese officials said that they would keep the number of licences available to gaming operators unchanged. The threat of a reduction had been hanging over the casino operators and they would also have been cheered by the fact that the gaming tax – which many thought would rise – also remained unchanged. * SO WHAT? * I guess this was quite surprising given the Chinese government’s crackdown on activities and/or business practices that don’t fit in with the
values of “common prosperity”. Still, Macao will be pretty relieved about this given how massively reliant its economy is on gambling. It is the only city in China where casino gambling is legal!
Then in Unilever swoop for Glaxo’s healthcare arm leaves City cold (Daily Telegraph, Hannah Boland) we see that Unilever’s share price fell sharply in trading yesterday as it became the biggest faller in the FTSE100 due to news coming to light over the weekend that it tried and failed three times to buy GSK’s consumer health arm. CEO Alan Jope reiterated that the company’s main ambition was to focus its business on three areas: health, hygiene and beauty. Consumer health for Unilever has been an underperformer so I guess that Jope is hoping that the acquisition of GSK’s assets in this area would give it a major boost. The drama continues, but GSK sounds like it is going to get rid of this division one way or another…
…in other news…
I thought I’d include this today because I think it will come in quite handy: Chef shares tips for perfect fried eggs – and says we’ve all been doing it wrong (The Mirror, Zahna Eklund). You’re welcome!
Some of today’s market, commodity & currency moves (as at 0758hrs 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 **|
|7,611 (+0.91%)||35,911 (-0.56%)||4,662.85 (+0.08%)||14,893.75 (+0.59%)||15,934 (+0.32%)||7,202 (+0.82%)||28,257 (-0.27%)||3,570 (+0.80%)|
|Oil (WTI) p/b||Oil (Brent) p/b||Gold Per t/oz||£/$||€/$||$/¥||£/€||$/₿|
(markets with an * are at yesterday’s close, ** are at today’s close)