Tuesday 30/04/24

  1. In MACRO, BUSINESS & CONSUMER TRENDS NEWS, China’s factory activity increases, German inflation remains stubbornly high, Scotland’s in a kerfuffle, ad jobs are hit by spending cuts, Getir goes back there and non-food shop prices fall
  2. In TECH & MEDIA NEWS, Apple poaches Google staff, the FT signs a deal with OpenAI and Meta faces EU investigation
  3. In RETAIL & LEISURE NEWS, Frasers Group hoovers up MatchesFashion assets, Vinted gets minted and McDonald’s doubles down on China
  4. In MISCELLANEOUS NEWS, Tesla gets a China boost, Ford faces safety issues, house sales rise, rents hit new highs and WeWork comes up with a way to shut out Neumann
  5. AND FINALLY, I bring you an example of making the moment count…

1

MACRO, BUSINESS & CONSUMER TRENDS NEWS

So China gets a boost, German inflation stays sticky, Scotland’s in a spin, ad jobs disappear, Getir goes back home and non-food shop prices slow down…

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 China’s high-tech output drives growth in factory activity (Financial Times, Joe Leahy and William Sandlund) we see that China’s factory activity has expanded for the second month in a row, according to the latest PMI, led by rising high-tech manufacturing output. * SO WHAT? * This is good news for an economy that is continuing to suffer from sluggish consumer demand and ongoing debt problems in the real estate sector. President Xi is due to do a tour of Europe next week where he will meet leaders including France’s Macron. This should be quite interesting as the EU is currently conducting a number of investigations into whether Chinese state subsidies have given companies and industries an unfair advantage versus European counterparts in a number of areas.

Then in Sticky German inflation curbs investors’ ECB rate cut expectations (Financial Times, Martin Arnold) we see that German inflation increased by more than expected in April thanks to strong food and energy prices. Consumer prices rose by 2.4% in the year to April, up from 2.3% a month earlier. Economists polled by Reuters had expected a flat reading. * SO WHAT? * Given that Germany is the biggest country in the EU, this unexpected rise in inflation will make it harder for the ECB to justify an interest rate cut as sceptics will say that this shows that inflation is yet to be tamed. I thought that the economist at ING, Carsten Brzeski, made a good point when he said that this rise in inflation was “a good reminder of how difficult the last mile of bringing inflation sustainably back to 2 per cent will be for the ECB”. Still, as things stand currently, the expectation is that the ECB will start to cut rates at their meeting in June.

Closer to home, Scotland’s business leaders cry out for a helping hand (The Times, Greig Cameron) shows that Scotland is now in a kerfuffle after the resignation yesterday of its First Minister Humza Yousaf. Business leaders are calling for the next person in the hot seat to prioritise the economy, cut taxes and make more efforts to attract inward investment. * SO WHAT? * If this isn’t a golden opportunity for Labour in Scotland I don’t know what is! After years of scandals and failure with the SNP you would have thought that Labour will be in pole position to benefit.

Then in Ad land faces job crunch as companies scale back spending (Daily Telegraph, Lucy Burton) we see that the number of job postings in advertising, marketing and PR dropped by 11% in March versus the previous month, according to jobs search engine Adzuna. * SO WHAT? * This is notable because it was the biggest fall of any sector over the same period as companies cut their marketing budgets. You’ll be sick of me saying this by now but the health of the advertising sector is often seen as a bellwether – and leading indicator – of the economy because ad spend is cut quickly in a downturn but is one of the first things to rebound in an upturn. Given the positive data we’ve been seeing recently and the overall uptick in confidence I would expect to see a bounce-back in the not-too-distant future.

Meanwhile, Delivery firm Getir to quit UK, Europe and US and focus on Turkey (The Guardian, Sarah Butler) shows that grocery courier Getir is going to shut down in the UK, Germany, the Netherlands and the US to go back home to concentrate on its domestic market in Turkey. * SO WHAT? * This just goes to show how competitive the marketplace is – and it also reflects a weakening demand for rapid home deliveries. I think that the whole idea of people HAVING to get their food order within 20 minutes was always a bit tenuous because I think that its need is questionable if you live in a metropolis but very handy if you live in the middle of nowhere. Unfortunately, you can only get this service in a metropolis because of where their warehouses are – and I think this is one of those things that is very much something that booms when the economy booms because people become cash-rich and time-poor. Most of Getir’s rivals have sold up or shut down and the ones that remain have really reined things in, culling rider numbers and selling off warehouses. Now Tesco has Whoosh, Sainsbury’s has Chop Chop and Ocado has Zoom. Of the “specialists”, only Gopuff (Bristol, Manchester, Liverpool, Newcastle, Birmingham, Leeds and Cardiff) and Zapp (London) remain. IMO even if they do incredibly well in an upturn they are ALWAYS going to be vulnerable in a downturn given that they are very much a luxury.

Then in consumer trends news, UK non-food shop prices fall in April, industry data shows (Financial Times, Valentina Romei) we see that prices of non-food items in UK supermarkets have actually dropped year-on-year for the first time since 2021, according to the latest figures from the BRC! Overall annual shop price inflation has fallen from +1.3% in March to +0.8% this month. However, non-food items came in at -0.6% in April versus +0.2% in March – the lowest reading since October 2021 and the first negative reading since December 2021. * SO WHAT? * This SHOULD be good news for household and reflects the trend of the OFFICIAL inflation reading, which includes services, energy and travel (the BRC figures don’t include these) which fell to a two-and-a-half year low of 3.2% in March.

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 & MEDIA NEWS

Apple poaches Google staff, the FT signs a deal with OpenAI and Meta faces an EU investigation…

In Apple targets Google staff to build artificial intelligence team (Financial Times, Michael Acton) we see that Apple has poached a number of AI experts from Google, according to FT analysis of LinkedIn Profiles, and created a secret European lab in Zurich in order to take on rivals in developing new AI models and products. The Zurich lab (known as “Vision Lab”) evolved from the acquisition of two local AI start-ups – VR group FaceShift and image recognition company Fashwell. Maybe we’ll get more on AI developments at the company’s Worldwide Developers Conference in June but current thinking is that Apple’s emphasis in AI is to make advances such that everything can be self-contained on the phone rather than be powered by cloud services in data centres.

Then in The Financial Times and OpenAI strike content licensing deal (Financial Times, Madhumita Murgia) we see that the FT has struck a deal with OpenAI so that the latter can train AI models on the FT’s archived content. The deal will also enable ChatGPT to respond to questions with summaries from FT articles that then link back to FT.com. * SO WHAT? * This is the fifth deal of its type to be struck by OpenAI over the last year after agreements with Associated Press, Axel Springer, Le Monde and Prisa Media but financial terms have not been disclosed. This is good news for quality because an AI model is only as good as the content that is fed into it. As you all know, I am a massive fan of newspapers but the FT in particular – so this is a positive development. However, when I first saw this I thought “Oh no – will this kill Watson’s Daily?” but then actually I thought no it won’t! There are a couple of reasons for this – firstly, in writing Watson’s Daily, I’m trying to help you change the way you consume the news by actively thinking about it rather than letting it wash over you (which is what happens with most people – and as a result they forget loads).

Watson’s Daily gives you the facts and then tells you why the story is important. Over time, the hope is that you start thinking like that too – and that will help you enormously in terms of your knowledge – but it will also help you to think more proactively about the future implications of current events. ChatGPT can’t do this because it is just going to answer your questions. Secondly, there is a specific method in choosing the stories which involves a “scientific” approach and a more holistic view, which also encompasses the experience I’ve had as a stockbroker selling ideas to a very demanding client base over a number of years. The stories do not appear at random – although it may perhaps appear that way at times! You would have to put very specific prompts into ChatGPT to get this and even they might not work well enough. However, I DO think that ChatGPT will be brilliant for asking questions like “why are interest rates important” or getting clarification of other concepts. Better quality underlying training materials will improve answers. I also wonder how current the information is going to be and whether there will be a delay. When I typed in “Why are interest rates important?”, I got a pretty good answer. However, when I typed in “Why did Humza Yousaf resign?” the answer started with “As of my last update in January 2022, I can’t provide real-time information or access current news.” – but maybe this will change. I would have thought there will be some sort of delay otherwise there would be no point in buying the FT and the newspaper would be shooting itself in the foot!

Then in Facebook owner faces EU investigation over spread of Russian propaganda (Daily Telegraph, Matthew Field and James Titcomb) we see that Brussels is aiming to launch an investigation into Meta’s handling of Russian disinformation as we head towards European parliamentary elections, the UK general election and the US presidential election. * SO WHAT? * Policymakers have accused Putin of using social media as a “weapon of mass manipulation”. The European Commission is concerned that Meta hasn’t done enough to stop Putin’s disinformation campaign and is now investigating Meta for suspected breaches of the Digital Services Act which could lead to billions of euros in fines. Russian disinformation group “Doppelganger” emerged earlier this month as an entity that has been targeting French and German Facebook users.

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

RETAIL & LEISURE NEWS

Frasers Group buys up assets, Vinted gets minted and McDonald’s wants more China presence…

In retail news, Frasers Group snaps up assets from collapsed MatchesFashion (The Times, Isabella Fish) we see that Frasers has bought the brand and IP of MatchesFashion out of administration, for an undisclosed sum, that excludes its stock and employees. The stock will be sold off by administrator Teneo to raise some money for creditors. Frasers bought Matches from Apax Partners less than three months ago for just £52m but decided to place it into administration last month for continually missing targets. * SO WHAT? * There is an argument here that the future of luxury online marketplaces is bleak given that shoppers have been returning to physical outlets since the pandemic. Farfetch only just avoided collapse last year when it managed to secure a last-minute $500m rescue deal and Net-a-Porter is currently up for sale. I keep banging on about the importance of the retail experience – and when you go high end, experience becomes much more important.

In the more “normal” part of the market, Secondhand fashion seller Vinted moves into profit after 61% sales rise (The Guardian, Sarah Butler) highlights the online secondhand fashion

retailer Vinted’s 61% increase in sales, making it profitable for the first time! It has managed to do this via expansion into Denmark and Finland and into the higher-end used fashion website Rebelle, which it bought in 2022. * SO WHAT? * This sounds like a great idea and feeds into the whole concept of sustainability but then rivals Depop and RealReal reported losses last year. Then there’s the elephant in the room, eBay, which recently removed all seller fees for pre-owned fashion. I think this is going to be a tricky market in the short term but when economies perk up I’d suggest that people will return to “buying new”.

Then in McDonald’s Supersizes China Bet as Corporate America Pulls Back (Wall Street Journal, Newley Purnell) we see that the fast-food company is planning to almost double the number of its restaurants in China by the end of 2028 after recently dropping $1.8bn to buy back a bigger portion of its business there. China is currently McDonald’s fastest growing market and its second-largest in terms of store numbers. * SO WHAT? * You can understand why McDonald’s is keen to expand here, but I have to say that, given what happened with its business in Russia when Russia invaded Ukraine – and the evasive action it had to take thereafter – you would hope that it would have some kind of emergency plan in place for if China invaded Taiwan and how that might look.

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

Tesla gets a China boost, Ford faces issues, UK house sales rise, rents hit new highs and WeWork finds a way to cut Neumann out…

In a quick scoot around some of today’s other interesting stories, Tesla clears China’s data rules, paving way for self-driving cars (The Times, Jessica Newman) shows that Musk’s China trip has worked a treat as the China Association of Automobile Manufacturers said that the company’s Model 3 and Model Y cars, produced at Tesla’s Shanghai factory, had passed the requirements of China’s data security rules and Tesla also announced an agreement with Baidu, for its mapping licence for data collection on China’s public roads – all good news for Tesla’s self-driving tech. Staying with cars, Regulator Investigates Ford’s Hands-Free Driving System After Fatal Crashes (Wall Street Journal, Ryan Felton and Denny Jacob) shows that the US automotive safety regulator has launched an investigation into the safety of Ford Motor’s hands-free driving system after two recent crashes that resulted in three fatalities. Both incidents involved Ford Mustang Mach-E SUVs. This just goes to show it’s not just Tesla that gets done for this!

In real estate-related news, UK house sales rise 12% in April (Financial Times, Valentina Romei) cites the latest data from Zoopla which shows that lower mortgage rates are powering a market rebound, causing UK house sales to rise for the seventh month in a row in April! Meanwhile, Average rents in Great Britain climb to record high (The Guardian, Rupert Jones) cites Rightmove as saying that average rents have reached record levels both within and outside London with annual rental growth in Reading and Coventry running at almost 20% and those in London rising by 8.5%. This has been blamed on demand outstripping supply. Ouch.

Then in WeWork agrees restructuring deal that shuts out Adam Neumann’s comeback bid (Financial Times, Sujeet Indap) we see that the company’s senior creditors are about to take control of the reorganised WeWork after injecting $450m into the company, effectively bringing an end to founder Adam Neumann’s efforts to buy it back.

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…

Unfortunately, in life, we don’t always get a chance to shine. That’s why it’s important to grab every opportunity and run with it – take this guy for instance! Gotta love the joy here!

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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)