Tuesday 30/08/22

  1. In MACRO, ENERGY & CURRENCY NEWS, Russia sees GDP contraction, the UK heads towards recession, Europe unveils energy measures, Shell predicts prolonged energy shortages while businesses forecast a major hit and the Euro gets a kicking
  2. In EV-RELATED NEWS, Honda and LG announce a US gigafactory, Britishvolt comes unstuck and Chinese manufacturers focus on the UK
  3. In COST-OF-LIVING NEWS, smaller businesses could get hit harder by rising interest rates, workers forego pensions and students suffer
  4. In INDIVIDUAL COMPANY NEWS, Deloitte reckons Amazon and Neflix will bounce back, Pinduoduo surprises on the upside and a British cybersecurity start-up suffers from tech fatigue
  5. AND FINALLY, I bring you some hospital bag packing errors…

1

MACRO, ENERGY & CURRENCY NEWS

So Russia puts on a positive spin, the UK continues to suffer, Europe tries to tackle energy nightmares  while UK businesses worry and the Euro takes a pasting…

I’m back from holiday! Having not had one for ten years, I can now see why they are so popular 😁. Podcasts and all that other good stuff will return next Monday 👍. Also, don’t forget:

*** I WILL BE DOING THE AUGUST ROUND-UP ON WEDNESDAY, AUGUST 31ST WITH JAKE SCHOGGER OF THE COMMERCIAL LAW ACADEMY. You need to sign up HERE to attend. It’d be great to see you there! ***

In Sanctions-hit Russia says its economy will shrink by 3pc (Daily Telegraph, Lauren Almeida) we see that Russia’s first deputy PM, Andrei Belousov, has said that Russia’s GDP will fall by just “a little more than 2pc” this year, followed by a contraction of a maximum of 1% in 2023. * SO WHAT? * Clearly the Russians will be talking a good game to play to the domestic gallery and everyone else will be saying that this is 🐂💩 given the weight of sanctions that have been imposed upon them. Given current circumstances and the limited amount of reliable data being released at the moment, it’s difficult to quantify what the real impact is. Mind you, when you consider that Russia has seen an exodus of companies that have represented an estimate of about 40% of its GDP, the limited impact does seem to be rather “optimistic”…

Recession is on the way and will last until 2024, Goldman warns (The Times, Robert Lea and Katie Prescott) highlights the latest predictions from the bods at Goldman Sachs, which represent a sharp downgrade on their previous stance. * SO WHAT? * TBH, I think you’d be hard-pressed to find other predictions out there but I think we might be able to stave it off for a bit longer because I would have thought that a new PM is going to want to implement a lot of voter-pleasing measures at this time to avoid a massive further drop-off in spending and confidence otherwise it could prove to be re-election suicide. I don’t, however, think recession will be avoided altogether, though…

In energy news, EU to unveil emergency measures to curb soaring energy prices (Financial Times, Sam Fleming and Valentina Pop) shows that the EU is going to be unveiling emergency measures to

address the skyrocketing price of electricity. EC chief Ursula von der Leyen made a lot of “high level” references like separating out electricity and gas prices and lowering the cost of renewables but has been light on specifics thus far. Uniper and Wien Energie seek state support as energy crisis deepens (Financial Times, Tom Wilson, Philip Stafford, Sam Jones and Guy Chazan) shows that utilities companies in Germany and Austria are in a desperate situation as they call for more help from their respective governments following the European gas price shooting up by almost a third last week and European gas shortages likely to last several winters, says Shell chief (The Guardian, Gwyn Topham) is the less-than-cheery prediction from Ben van Beurden, raising the prospect of ongoing energy rationing.

All of this is having a real effect on the ground as per High street firms forced to pay energy suppliers millions up front (Daily Telegraph, Tom Rees) which shows that a number of energy providers, including SSE and EDF, are asking firms for massive deposits to cover many months-worth of bills as concerns increase about a rise in the number of small businesses going bust. Thousands of pubs ‘face closure’ without energy bills support (The Guardian, Rob Davies) captures the mood of the hospitality sector that is increasingly worried about the potentially terminal effect of utility bills particularly as companies aren’t protected by price cap. Mind you, if it isn’t energy bills that are going to put them out of business, Interest rates: hikes set to hit smaller companies harder (Financial Times, Lex) says it’ll be the interest rate hikes that make borrowing and debt servicing that kill them. The pressure will be on the new PM to get stuck in and impose some big measure to avoid a massive economic decline.

Elsewhere, Investors increase bets against euro as energy crisis intensifies (Financial Times, Martin Arnold and Nikou Asgari) shows that investors aren’t pulling their punches on the Euro as more of them think that raging energy prices will pull the bloc into recession. A strengthening dollar stands in stark contrast to what’s going on with the Euro as investors chase the rising US interest rates that aren’t accompanied by energy dramas. * SO WHAT? * The Euro has already lost 15% versus the dollar over the last year. If the movements of the Euro are currently a function of what’s going on with energy prices and Shell’s predictions are right, the currency could be in for a tough few years.

Want to engage with myself and the team at Watson’s Dail about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

2

EV-RELATED NEWS

Honda and LG announce a new gigafactory, Britishvolt’s looks shaky and Chinese EV manufacturers plan a UK assault…

Honda and LG to build $4.4bn US battery plant (Financial Times, Kana Inagaki and Christian Davies) shows that the Japanese and South Korean giants are to invest a sizeable amount of cash into a joint venture where LG Energy Solution will have 51% and Honda 49% of a plant in an as-yet-unnamed US location. Construction is to commence next year with the first lithium-ion battery cells due to roll off the production line by the end of 2025. * SO WHAT? * Both companies want to get ahead of the EV curve and get their hands on the cash on offer from the US government (via the US Inflation Reduction Act) to develop manufacturing assets that wean them off Chinese suppliers. I suspect that we will be seeing more deals like this, particularly as the US is splashing the cash on moving its supply chains in a meaningful way. Fun fact: South Korea’s three biggest battery companies – SK On, Samsung SDI and LG Energy Solution – account for over 25% of the world’s market share in batteries. SK On recently announced a JV with Ford to build three battery plants in the US, LG Energy Solution and GM announced a venture earlier this year and Samsung SDI is believed to be closing in on a partnership with Stellantis. Honda/LG: US battery deal boosts EV power of friends electric (Financial Times, Lex) makes the interesting observation that this is a bit of a slap in the face for Panasonic, which you would expect to be the natural supplier to

Japanese car manufacturers. It adds that, as the US accounts for nearly a third of global sales for Honda, this development will be particularly welcome as it looks to an electrified future.

Meanwhile, Britishvolt delays opening battery plant until late 2025 (Daily Telegraph, Lauren Almeida) highlights difficulties being experienced by British electric battery start-up Britishvolt as it has been forced to postpone production at its £3.8bn gigafactory until late 2025. The delay has been blamed on rising energy costs, which have knock-on effects on its construction. * SO WHAT? * Hailed as a leading force in the bid for Britain to be at the forefront of EV battery development and production, the company that was founded in 2019 and attracted £2bn in fundraising has already lost two of its co-founders, with the CEO Orral Nadjari resigning just last week. Tough times ahead…

Then in Chinese pair join electric car chase (The Times, Robert Lea) we see that Chinese carmakers Great Wall (via its Ora brand) and BYD are holding talks with dealer networks to get their cars in showrooms before Christmas. * SO WHAT? * This all sounds lovely, and the dealerships will be salivating at the prospect to represent more brands (that will presumably will give them better terms to build market share), but I really do wonder whether punters will be willing to shell out on EVs from unknown marques. I think that marques take years to build trust with potential buyers so I reckon this will be a slow burn. 

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

COST-OF-LIVING NEWS

The cost of living continues to impact the lives of many…

Workers cut pension contributions amid cost of living crisis (Financial Times, Siddarth Venkataramakrishnan, Josephine Cumbo and Emma Dunkley) cites the Trades Union Congress as observing that workers are leaving pension schemes or cutting their contributions in increasing numbers as the cost-of-living crisis bites deeper. * SO WHAT? * Clearly this isn’t good for long-term financial health, but whaddayado?? If you have to pay the bills, this seems like one way of taking the edge off. The irony of all this is that unions putting pressure on companies to pay higher wages will ultimately fuel even more inflation and, arguably, put the futures of the members they are supposed to be protecting in jeopardy as vastly higher wage bills will surely result in job cuts in the not-too-distant future. As I keep saying, I don’t think that raising salaries is the answer to what we are facing now – it would be better for companies to pay one-off lump sums as salaries are more difficult to reduce longer term whereas lump sums could address the problem now without putting a longer term cost burden on the

company. Unions like to simplify things in terms of the workers versus “fat cat” bosses, but it is not always as simple as that (although there are obviously a lot of big companies making a killing from current prices that they aren’t passing on to their staff – but this doesn’t apply to everyone). I get the feeling that unions are enjoying a last hurrah before companies wield the axe – and all those “quiet quitters” out there may start regretting their (in)actions as they move to the top of the hit list.

Meanwhile, Housing crunch leaves UK university students without halls (Financial Times, Bethan Staton) highlights problems that uni students are likely to face when they commence their studies next month as some first year undergrads at the Unis of Glasgow, Manchester Met and UWE in Bristol are going to be left with no accommodation due to the lack of space in halls. Rental markets have become ridiculously tight in many UK cities, driving costs right up (as if things weren’t bad enough already!). Clearing students are particularly vulnerable. Private landlords servicing this market will, of course, be raking it in…

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

INDIVIDUAL COMPANY NEWS

Streamers will recover, Pinduoduo surprises on the upside and a cybersecurity start-up suffers from the tech sell-off…

In a quick scoot around other interesting stories today, Netflix and Amazon woes are temporary, says Deloitte (Daily Telegraph, Ben Woods) cites research from Deloitte as concluding that the current fall in subscriber numbers at Netflix and Amazon will return when the cost of living crisis gets better. Wow. And they pay people to come up with this conclusion! Perhaps the title of their next oeuvre will be “Yes, bears do in fact 💩 in the woods”. Still, it will perhaps give the streamers something cheerful to grab onto…

China’s Pinduoduo surprises market with 36% revenue rise (Wall Street Journal, Shen Lu) highlights a strong performance from the Chinese e-tailer as it benefited from its “618” shopping event (the

event originally held on June 18th created by rival JD.com but now used by others including Pinduoduo. It’s now the second biggest online shopping event in the world after Alibaba’s Singles’ Day on November 11th). This is certainly a positive sign given all the downbeat news we are getting about the Chinese economy at the moment!

Back home, Cybersecurity start-up axes staff as global tech slowdown hits UK (Daily Telegraph, Matthew Field) shows that Immersive Labs, a British cybersecurity company backed by Goldman Sachs and advised by the former director of GCHQ, has announced that it will be cutting 10% of its staff as the global tech sell-off takes its toll. * SO WHAT? * Tech start-ups in the UK are having a rough ride at the moment as much-needed venture capital is drying up and tech company valuations go south. There will no doubt be more to come.

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…

When you (or your partner) are pregnant you prepare a “go-bag” so you have one less thing to think about if you have to suddenly rush off to the hospital – and you usually get some kind of guidance of what to put in it. However, sometimes, you might have to get one together if you think you’re going to stay in overnight for other reasons – which can put some people in a bit of a fluster as per Man slammed for hospital bag packing blunder – as he brings girlfriend pie and talc (The Mirror, Ellie Fry). It’s not clear whether he packed the pork pie to calm his own nerves or whether it was for his partner’s benefit 🤣. This prompted a lot of comment on social media along with examples of other “packing errors” that included the hilarious “”My teenage son packed me a bag and put my post in just incase [sic] I wanted to catch up on my bills whilst I was nearly dying”. Ahhhh. How thoughtful!

Watson's Daily is a hard-working start-up striving to help people get a better understanding of the business world. I would really appreciate your involvement in spreading the word and recommending it to your friends, colleagues, relatives etc. by clicking and sharing on the links below. Please help me to help you and I will throw in a small thank-you!

Some of today’s market, commodity & currency moves (as at 0630hrs 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 **
HOLIDAY32,098.99 (-0.57%)4,030.61 (-0.67%)12,017.67 (-1.02%)12,893 (-0.61%)6,222 (-0.83%)3,227 (-0.42%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$96.708$104.405$1,734.431.170200.99993138.4441.170320,401

(markets with an * are at yesterday’s close, ** are at today’s close)