Wednesday 03/07/24

1. In MACRO & ENERGY NEWS, pressure mounts on Biden, EU inflation falls and Shell halts construction of a biofuel factory
2. In AUTOMOTIVE NEWS, Hyundai and LG Energy open a battery cell factory, Tesla deliveries fall, China EV sales rise and BYD has to watch its back
3. In RETAIL & CONSUMER NEWS, Amazon’s international division rebounds, the EU takes aim at Temu and Shein (and Sainsbury’s sticks the boot in), Sainsbury’s expects anaemic trading at Argos, M&S sees a change, rich people sell up and rents are on the rise
4. In TECH NEWS, Apple joins OpenAI’s board and Google emissions jump because of AI use
5. AND FINALLY, I bring you the worst chat-up line ever…

So pressure mounts on Biden, EU inflation falls and Shell rolls back on biofuels…

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:

Joe Biden under new pressure to quit race as Democratic disquiet spreads (Financial Times, Lauren Fedor and Joshua Chaffin) shows that things are closing in on the old duffer as Democrats can see power slipping through their fingers. A prominent lawmaker from his party publicly called for Biden to step aside saying that “too much is at stake to risk a Trump victory”. Others continue to jump on this bandwagon (mainly privately, at this stage). Democratic governors are to meet Biden today and it is thought that they are going to discuss the president’s condition. Polling published yesterday showed that Biden’s approval rating had fallen to a new low after last week’s disastrous TV debate performance.

Nearer home, EU inflation rate falls as fears grow over French bonds (The Times, Mehreen Khan and Jack Barnett) shows that

the eurozone’s inflation rate in the bloc fell again last month to 2.5% although services price inflation was still high at 4.1%. Heightened concerns about the situation in France are prompting speculation of a massive bond sell-off should Le Pen win the election. Speculation is brewing around the potential inability of the ECB to bail France out because Le Pen’s spending plans would breach the central bank’s fiscal rules on debt, meaning that it would not be able to use its emergency tool (aka the “transmission protection instrument”). Nasty.

Then in Shell halts construction of giant biofuel factory (Daily Telegraph, Jonathan Leake) we see further evidence of oil majors walking back their climate commitments as Shell has now decided to stop construction work at one of Europe’s biggest biofuel plants, putting a spanner in the works of airlines’ ambitions to offer passengers lower-carbon flights. The Rotterdam plant is designed to convert waste into jet fuel, producing about 820,000 tons of biofuels a year. Half of this capacity was to be dedicated to sustainable aviation fuel made from animal fat and cooking oil. * SO WHAT? * At the end of the day, there’s no getting away from the fact that Shell is an oil company! However, this does show an increasing trend of oil companies easing back on their commitments to the environment. After all, only last week we heard that BP was suspending all of its new offshore wind projects. I wonder whether they are at least partly doing this to hold governments to ransom regarding windfall taxes on the industry – in other words, make the windfall taxes too high and you can go and do your own renewables rollout!

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!

Hyundai and LG Energy open a battery cell factory, Tesla deliveries drop, China EV sales rise and BYD has to worry about its domestic rivals…

Hyundai and LG Energy open Indonesia’s first battery cell factory (Financial Times, A. Anantha Lakshmi and Diana Mariska) shows that the two companies have opened a $1.1bn battery cell plant in Indonesia as part of the country’s efforts to move further up the global EV supply chain. At the moment, it is very much at the gritty end with the world’s biggest reserves of nickel, which is a key ingredient in EV batteries and steelmaking. The factory in Kawawang, a city east of Jakarta, is the first of its type in Indonesia and is projected to have an annual production capacity of 10 gigawatt hours. About 90% of its products will be exported to South Korea and India. * SO WHAT? * President Joko Widodo banned nickel exports in 2020 in order to force foreign companies to invest directly into the country and, up till now, most of the investment has come from Chinese companies into the nickel processing sector. It seems that his tactic is working as BYD and Vietnam’s VinFast will start manufacturing EVs in Indonesia and CATL, the world’s biggest EV battery manufacturer, is also planning to build a battery plant there this year.

Then in Tesla Deliveries Slump but Not as Much as Feared (Wall Street Journal, Sean McLain) we see that Tesla’s share price had

a nice little bump as it announced that although its vehicle sales that fell for a second straight quarter, this was by a smaller amount than the market was expecting. * SO WHAT? * This just goes to show how difficult things are getting as competition continues to intensify while demand from EVs continues to weaken.

Meanwhile, China EV Sales Rallied in June on Policy, Price Cuts (Wall Street Journal, Jiahui Huang) shows that Chinese EV makers posted a strong sales performance in June thanks to government subsidies, tax breaks and steep discounts. Nio, Leapmotor and Zeekr all announced record sales volumes for the month while Li Auto bounced back from the poor numbers it had earlier in the year. XPeng and Seres also did well on both year-on-year and month-on-month metrics. As Tesla slows, the bigger threat to BYD is home grown (Financial Times, Lex) makes the observation that although many observers focus on whether BYD can overtake Tesla on sales once again, it seems that BYD’s most dangerous competition is going to come from its own backyard in the form of domestic rivals. * SO WHAT? * China now makes up about 60% of global EV sales and although BYD is increasing its market share, so are Zeekr and Nio. In fact, Nio’s deliveries more than doubled in Q2 alone! Chinese makers continue to benefit from the trend of smart EVs that have impressive driver tech. And all of this is happening while EV demand is weakening on a global basis!

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!

Amazon’s international business rebounds, the EU aims at Temu and Shein, Sainsbury’s is downbeat about Argos, M&S attracts younger customers, rich people start to abandon and rents are rising…

Amazon’s international unit on track to swing into annual profit (Financial Times, Camilla Hodgson) highlights the success of Amazon’s international business which is now on course to move into profit as a streamlining of its logistics operations is now starting to bear fruit. A poll from Refinitiv reflected market expectations of $1.6bn in operating profits this year rising to more than $5bn next year, which is impressive considering that the business posted a $2.7bn operating loss last year. * SO WHAT? * CEO Andy Jassy reckons that the overseas division would “be a big, profitable business for us” while its growing advertising business and broadening warehouse automation are expected to make meaningful contributions to profitability.

Meanwhile, EU takes aim at China’s Temu and Shein with proposed import duty (Financial Times, Andy Bounds and Paola Tamma) shows that the European Commission is considering imposing customs duties on cheap goods bought from Chinese online retailers including Temu and Shein to stem the tide of poor quality items flooding in from China. It is looking at scrapping the current €150 threshold under which items can be bought duty free and it is thought that the etailers to be targeted will be Temu, Shein and AliExpress. The new regime would apply to any online retailer shipping to EU customers directly from outside the bloc. It is also thought that large platforms would be forced to register for VAT payments online whatever their value. * SO WHAT? * Chinese retailers benefit from subsidised postage costs which actually makes it cost-effective to use air freight – which is probably one of the reasons why air freight prices have been going up. TBH they are just doing what they need to in order to get around the rules. Stop Shein and Temu exploiting tax loophole, says Sainsbury’s boss (The Times, Isabella Fish) shows that Sainsbury’s is just one of the growing number of UK retailers who are pushing for a level playing field, complaining that the Chinese e-tailers get around import duties because they send items in small packages, meaning that they are more able to undercut everyone. Clearly the rules need changing…

Sainsbury’s expects sluggish trading at Argos until rates fall (The Times, Isabella Fish) shows that like-for-like sales rose over the

recent quarter but at a slower pace than the same time period last year as Argos dragged on performance. The supermarket said that discretionary spending was likely to be muted until we start to see interest rate cuts.

M&S increases stocks of smaller womenswear sizes due to higher demand (The Guardian, Sarah Butler) highlights an interesting observation – that M&S has been seeing more gaps on shelves as younger customers snap up smaller sizes. The CEO said that three years ago, around 21% of the items sold from its main seasonal collection were size 6 to 10 – but that has now risen to 35% as younger customers have been buying. * SO WHAT? * This also goes to show M&S’s increasing popularity, which in itself highlights the success of its efforts to offer wider ranges and a broader array of services as well as being smarter about marketing, even going as far as training its own staff as influencers!

In consumer news, Wealthy sell UK assets amid fears Labour would raise capital gains tax (Financial Times, Emma Dunkley) shows that some rich people in the UK have started to sell assets including shares and property ahead of the ascension of Labour government that is likely to increase capital gains tax. Although shadow chancellor Rachel Reeves says that Labour won’t actually raise CGT, she has not ruled out increasing it at some point over the next few years. One chartered financial planner at Quilter Cheviot observed that buy-to-let owners are now selling. * SO WHAT? * I guess that this is always bound to happen – particularly given that Labour would traditionally target such “rich people” taxes. There are many who fret about a “brain drain” of people who run big businesses and I think that it is true to say that people who are more affluent tend to be more “mobile” in where they live. If big landlords sell off their properties, though, there is a risk that the number of rental properties available will decrease even further (unless they are sold to other landlords) which will raise rents.

Talking of which, UK property rents on the rise again (Financial Times, James Pickford) cites the latest figures from Rightmove which show that advertised residential rents outside London have hit a record £1,316 per month, continuing to put pressure on household finances. Meanwhile, advertised rents in London have hit a wallet-busting £2,652 per month as the latest stats from Zoopla say that the proportion of gross earnings spent on rent are at a record high. In London that equates to an eye-watering 41% of earnings 😱! Ouch. One for the next government to sort…

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!

Apple joins OpenAI’s board and Google’s emissions have an AI-powered boom…

In a quick scoot around some of today’s other interesting stories, Apple to join OpenAI’s board in observer role (Financial Times, Tabby Kinder) shows that Apple will become an observer on the board of OpenAI, giving it a unique and closer insight into the AI company at the cutting edge. This came as part of the deal announced last month to integrate ChatGPT into Apple devices. It’s quite interesting to see how arch rivals Apple and Microsoft are heavily invested in the same company – it just goes to show how key OpenAI is!

Meanwhile, Google emissions jump nearly 50% over five years as AI use surges (Financial Times, Camilla Hodgson and Stephen Morris) shows that the tech giant’s greenhouse gas emissions have shot up by 48% in the last five years thanks to the expansion of data centres that power AI systems. * SO WHAT? * This could put its “net zero” by 2030 targets in jeopardy. Surely this is going to get worse as more data centres are built as AI becomes increasingly embedded into the fabric of our daily lives. It just underlines the importance of more and better power generation.

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…

This has got to be the worst chat-up line ever 🤣! Do people even do this sort of thing any more??