Wednesday 02/11/22

1. In COMMODITIES NEWS, oil majors put targets on themselves and central banks buy gold
2. In CONSUMER & RETAIL NEWS, shop prices rise, WFH jobs get rarer and house prices weaken while Ocado gets a boost, Morrisons shuts McColl’s stores and Made.com brings in the administrators
3. In CAR-RELATED NEWS, Toyota’s profits plummet, Bentley sees record profits and the Britishvolt saga continues
4. In MISCELLANEOUS NEWS, Johnson & Johnson buys Abiomed for $16.6bn, Pfizer gets more upbeat and Uber beats pre-pandemic numbers
5. AND FINALLY, I bring you an unusual sight (and a bit of music)…

So oil supermajors do incredibly well while central bankers load up on gold…

📢 I will be doing the usual monthly news roundup with Jake Schogger of the Commercial Law Academy later on TODAY at 5pm. To attend, you will need to register HERE. It’s FREE – and given that it’s been yet another incredibly eventful month, I think it will be particularly useful to attend this call in order to make sense of what’s been going on !

Bumper profits raise pressure on oil majors (Financial Times, Tom Wilson, Leslie Hook and David Sheppard) shows that profits boomed at two of the world’s biggest oil producers, BP and Saudi Aramco, thanks to high energy prices. Saudi Aramco posted its second-highest quarterly profits since its 2019 IPO while BP’s earnings more than doubled. President Biden accused oil companies of “profiteering” from Russia’s invasion of Ukraine and the subsequent effect on the oil price, which BP: having a good war – but losing battles for hearts and minds (Financial Times, Lex) also refers to, adding that BP’s swagger at its stellar results only makes it easier for the government to justify windfall taxes. It also needs to put more of the profits into renewables rather than dividends, although BP has said that renewables will account for up to 40% of capital spending by 2025 and 50% by 2030. * SO WHAT? * The optics on these sorts of performances aren’t great when

consumers around the world are tightening their belts and governments are looking high and low for money! All the swagger does is make them easier targets.

Then in Central banks go on gold rush as countries protect currencies (Daily Telegraph, Tom Rees) we see that central banks have been buying record amounts of gold over Q3, according to the latest statistics from the World Gold Council. The amount bought by central banks including those of Turkey and Qatar is four times the amount that was bought a year ago. Purchases of gold by central banks for the first nine months of 2022 have overtaken all annual totals since 1967, with Turkey being the biggest buyer this year. It is thought that the banks have been buying in order to protect against the fall in their currencies (they can sell gold and use the money to buy their own currency if it falls through the floor, for instance), although in some cases they may have been taking advantage of weaker prices thanks to investors rotating out of gold and into other assets that have become more attractive in the recent market turmoil. * SO WHAT? * Gold is often bought at times where there is market uncertainty as it has intrinsic value and is easily tradeable. Given the fact that many countries are teetering on the edge of recession and currencies are going haywire, you would have thought that the gold buying trend is likely to continue.

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!

Consumers continue to face hurdles and there are mixed fortunes for retailers…

Christmas presents tough challenge for consumers as shop prices surge (The Times, Tom Howard) cites the latest data from the British Retail Consortium which shows that the prices of goods in shops are rising faster than ever! Retailers have been passing on at least some of their rising costs to customers and this is expected to continue. Prices at shops in October were 6.6% higher than they were in October last year and prices of fresh food are rising particularly quickly. * SO WHAT? * This is a nightmare for retailers and consumers alike, but I do wonder whether consumers will, on seeing things like this, start buying earlier in “the golden quarter” to avoid potentially even higher prices later in the year. If this happens, it COULD mean that year-end sales may be stronger than expected, particularly of items that have a long shelf-life. Pressures on household budgets continue!

Although we’ve become accustomed to a very tight labour market, Fewer work-from-home jobs offered by employers (Daily Telegraph, Tom Rees) suggests that the WFH boom has peaked, according to the interpretation of data scraped from LinkedIn which now shows that fewer than 12% of ads were for fully remote working in September versus a peak of 16% in January. * SO WHAT? * This would suggest that the power is tipping back towards employers who are keen to get staff back in. The LinkedIn study also found that 75% of execs are looking to cut flexible working as we head into trickier economic conditions despite its popularity. France, Germany, India and the US are also showing the same trends. This really does feel like a peak, particularly because the number of vacancies is falling while the current 3.5% unemployment rate is close to 50-year lows.

With economic uncertainty increasing, UK house prices fall for first time in 15 months after Liz Truss mini-budget (The Guardian, Julia Kollewe) shows that concern is now seeping further into people’s consciousness as the shock caused by the disastrous mini-budget frightened both lenders and buyers alike. Some fixed rate mortgages have become cheaper in the last few days but everyone will be looking at what the Bank of England does at its next interest rate meeting (which is tomorrow). Everyone is expecting another big hike. * SO WHAT? * We need to wait a bit longer in order to ascertain whether this was just a one-off or the beginning of another trend. As things stand currently, although mortgage prices have come off their peak, they are still a lot higher than they were even as recently as early to mid-September. As other costs start to bite deeper, I would have thought that demand is likely to tail off going into the end of the year.

In retail, Ocado shares soar on new South Korea retail partnership (Financial Times, Sarah Provan and Jonathan Eley) shows that Ocado’s share price jumped by 32% in trading yesterday on the back of news that it would be providing its retail tech to Lotte Shopping, one of South Korea’s biggest companies. Everyone got excited because this is the company’s biggest deal since 2019 (when it signed up Japan’s Aeon) and will entail Ocado helping the company develop both its online business and its clever warehousing. * SO WHAT? * This is particularly interesting because Lotte is already a seasoned online grocer – normally, Ocado’s partners aren’t and need help – in a market where 20% of total grocery sales are online (which is almost double the rate in the UK, which stands at 11%). It will have come as a welcome development, particularly given that Ocado’s share price has fallen by 60% so far this year. This deal won’t have an immediate impact on revenues but will obviously kick in at some point in the near-ish future. It will also quieten critics who have been saying that Ocado has been slow on the deal-making front.

Meanwhile, Morrisons to cut 1,300 workers at McColl’s loss-making stores (Daily Telegraph, Hannah Boland) shows that Morrisons is planning to close 132 McColl’s outlets just one week after it got permission from the Competition & Markets Authority to buy the struggling retailer out of administration. This will put 1,300 workers at these loss-making stores at risk of redundancy and the majority of the 132 will be shut down by Christmas. Morrisons had initially said that the takeover would protect most jobs and it is said to be offering workers alternative roles in its stores and warehouses. Morrisons is planning on rebranding most McColl’s stores as Morrisons Daily over the next two to three years.

Then in Made.com to appoint administrators as shares suspended (Financial Times, Jonathan Eley) we see that the inevitable is happening as the online furniture retailer that floated to great fanfare just over a year ago with a £775m valuation is calling in the administrators. No potential buyers emerged from the woodwork, so PwC’s insolvency consultants are now on board to help the company sell parts of the business or to find new investors. * SO WHAT? * Oh how the mighty fall! Made.com floated at £2 and hit 0.5p last week! I suspect that its main problem that it got stuck with massive inventory just as economies look like they’re going to drop off a cliff (along with demand because of the cost-of-living crisis). Not all furniture sellers are doing badly, though – Ikea and Dunelm are recent examples of those who are managing to eke out a decent existence. However, I do wonder how they will fare next year after the initial flurry of customers buying stuff to make their abodes warmer subsides.

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!

Toyota crashes, Bentley rises and Britishvolt faces an uncertain future…

Toyota profit plunges 25% on chip shortages and surging costs (Financial Times, Eri Sugiura) highlights the plight of the world’s biggest car manufacturer as its quarterly operating profit dropped by 25% versus the previous year as it failed to cope with yen volatility, rising interest rates in the US and production interruptions in China due to Covid lockdowns. * SO WHAT? * The company had previously been sitting pretty as it had decent inventory of semiconductors while rivals got caught short and although it should have benefited from a weaker yen given that it exports a decent number of cars, it seems to have fallen short of expectations. The economic outlook isn’t looking great either as consumers are getting increasingly wary about buying big-ticket items like cars.

Meanwhile, Bentayga sports utility vehicle drives record profit at Bentley Motors (Daily Telegraph, Matt Oliver) shows that wealthy customers with absolutely zero taste 🤣 are powering record profits at the luxury car manufacturer as the Bentayga made up

41% of sales (have you noticed how a black Bentayga looks like a London taxi cab?? All you need is that light on the roof 🤣) with the Flying Spur taking a 27% slice and the Continental GT/GTC accounting for another 32%. Western markets were particularly strong and Asia-Pacific as a region was strong although sales in China, Hong Kong and Macau were weaker. Sales were sluggish in the Middle East, Africa and India. The company expects a decent year next year with the advent of the Bentayga’s extended wheelbase model 🤮. Good on ’em – but it does show that the wealthy just aren’t feeling this whole cost-of-living thing!

Then in Britishvolt site eyed by former Aston Martin chief (Daily Telegraph, Oliver Gill), we see that Andy Palmer, who is now chairman at Slovakia’s InoBat is eyeing up the possibility of buying Britishvolt’s site in Northumberland if the latter falls into administration. * SO WHAT? * As things stand, it will not be falling into administration (for now, anyway!), but this does show that the vultures are circling! InoBat is currently looking at an alternative site in Teeside, but it is likely to go for the Blyth option if it becomes available because it is a better site. The saga continues…

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!

J&J’s big whopper deal, Pfizer lifts outlook and Uber passenger numbers are up…

In a quick scoot around other interesting stories today, Johnson & Johnson bucks global M&A slowdown with $16.6bn Abiomed deal (Financial Times, Donato Paolo Mancini, James Fontanella-Khan and Jamie Smyth) highlights a rare mega-deal as the US pharmaceutical group agreed to buy cardiovascular tech group Abiomed in an effort to broaden its focus on drugs and medical devices. J&J/Abiomed: healthcare giant pays high price to bulk up on medtech (Financial Times, Lex) suggests that this is a full price, given that it is equivalent to a 51% premium to Abiomed’s pre-deal closing price, although it is a decent enough purchase on a strategic basis given that heart disease is still a massive killer in America. * SO WHAT? * This does show that there is potentially life in the American M&A market after all as things have been rather quiet of late. Although I don’t expect a slew of domestic deals given the economic backdrop, I DO expect there to be more overseas acquisitions given the ongoing strength of the dollar.

Then in Pfizer lifts revenue outlook as Covid jab price rise boosts sales (Financial Times, Jamie Smyth) we see that the US drugmaker was confident enough to raise its sales forecast for its Covid vaccine thanks to higher prices offsetting a slowdown in demand ex-US. * SO WHAT? * Pfizer has almost doubled the price of its Covid vaccine since its launch in December 2020! Thus far, the US government has paid $30 a shot for Pfizer’s new bivalent booster, but prices will switch over to commercial rates next year, which means that vaccine makers will be more able to raise prices.

Elsewhere, Uber passenger numbers surpass pre-pandemic levels (Financial Times, Time Bradshaw and Ian Johnson) highlights a bullish message from the ride-hailer as it unveiled Q3 revenues that came in above analyst expectations. The CEO said that the company had not experienced “any signs of consumer weakness” despite the tricky economic backdrop. The share price jumped by 15.3% in response! Can this momentum continue??

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…

I bring you something unusual in Giant Christmas baubles roll through Tottenham Court Road causing traffic chaos (The Mirror, Rafi Mauro-Benady and Reanna Smith). If this isn’t some kind of clever camera trickery, it’s pretty amazing! A tough one to explain to insurance companies on a claims form, I’d imagine!