Wednesday 22/02/23

  1. In MACRO & OIL NEWS, US concerns about rate rises hit markets, chances of UK recession recede, Russian oil exports to China rise and Ineos moves into US oil and gas
  2. In TECH NEWS, we look at further developments in AI, Apple’s influence on Gen Z, Microsoft’s Nintendo and Nvidia deals and de-influencing
  3. In CAR NEWS, Bentley moves towards electrification, lithium prices drop and the pursuit of hydrogen continues
  4. In MISCELLANEOUS NEWS, fresh produce is rationed, McKinsey announces cuts, HSBC rakes it in, Bao Fan is (possibly) located, Visa and Mastercard face a class action while Eurosport and BT Sport announce a rebrand
  5. AND FINALLY, I bring you a very clever magic trick…

1

MACRO & OIL NEWS

So there’s US kerfuffle, potential for UK “I told you so”, Russian oil exports to China rise and Ineos makes a US oil and gas move…

📢 I’ll shortly be publishing my annual P/Review where I roundup the news of the year in 2022 and then outline predictions for themes in 2023. Because it’s such a big report 😱, I will be publishing it in stages. There is nothing like this anywhere else, and it will help your understanding of what’s going on enormously so keep an eye out for it! In the meantime, I’ve recorded a special podcast where Ralph Hebgen and I talk through some key themes to watch out for this year. You can listen to it HERE or watch it HERE.

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 US stocks record worst day in two months on rate rise worries (Financial Times, Martha Muir, Jaren Kerr and Kate Duguid) we see that the S&P500 fell by 2% and the NASDAQ by 2.5% as investors prepare themselves for another Fed rate rise.

Back in the UK, Chances of recession ‘fall considerably’ despite dire IMF forecast (Daily Telegraph, Szu Ping Chan) cites the latest S&P Global flash PMI as showing that services and manufacturing

📢 *** I will be doing my monthly roundup next Tuesday 28th February at 5pm with Jake Schogger of the Commercial Law Academy. It’s FREE – so why not come along and join us for a fun look back on the month where AI went a bit crazy 🤣?!? You must register HERE to attend 👍 ***

activity increased for the first time for seven months this month – and by a decent amount. If this is borne out by other stats, this would imply that IMF predictions of doom for the UK will have been misplaced (it recently said that Britain would be the only G7 country to have a lengthy downturn) while the eurozone’s biggest economy, Germany, actually faces recession. Meanwhile, Jeremy Hunt gets boost from high tax receipts (The Times, Arthi Nachiappan) highlighted an unexpected boost in income and corporate tax revenues for January, according to the ONS, which is quite nice timing given that it comes ahead of the budget announcement next month. It remains to be seen as to whether Hunt decides to share the love with some freebies next month (unlikely IMO), uses the extra to give public sector workers pay rises or stashes it away somewhere to be used further down the line.

In oil news, Russian exports of oil to China hit record high (Daily Telegraph, Rachel Millard) shows that China is supporting Russia by importing record amounts oil, denting the impact of western sanctions on buying Russian. That said, Russia’s oil revenues still fell by 48% in January. * SO WHAT? * The increase in demand comes as China’s economy rebounds after relaxing strict Covid restrictions – and the record amount imported no doubt took advantage of the big price discount on it! To give you an idea of the size of that discount, Russia’s Ural grade for export had an average price of $49.48 per barrel in January versus $82 per barrel for Brent Crude.

Then in Ineos breaks into US oil and gas (The Times, Robert Miller) we see that Sir Jim Radcliffe’s petrochemicals group has bought some of Chesapeake Energy’s oil and gas assets in South Texas for $1.4bn, in its first foray into the US market. The acquisition is likely to complete in Q2.

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 NEWS

We look at misadventures in AI, Apple’s influencing, Microsoft’s deals and the de-influencing trend…

There were some very interesting stories on AI in today’s news! Sci-fi magazine swamped by AI-penned tales as fantasy gets real (Financial Times, Madhumita Murgia) shows that US-based Clarkesworld, a well-known and regarded science fiction magazine, has stopped accepting stories for submission as it has been inundated with stories that have either been written by or enhanced by AI! The magazine received over quadruple the number of submissions thus far for February than it had for the whole of January and the editor said he just couldn’t physically get through it all! He didn’t say how he detected the AI-generated content (he didn’t want to help rogue writers!) but it is interesting to note that OpenAI released a tool (which isn’t finished yet) to detect AI-generated content, but researchers said it only detected such content 26% of the time! Then in JP Morgan cracks down on traders’ use of ChatGPT (Daily Telegraph, Matthew Field and James Titcomb) we see that JP Morgan and Accenture are among those who have curtailed employees’ use of ChatGPT due to data security concerns and the veracity of what the chatbots come out with. Meanwhile, Microsoft Softens Limits on Bing After User Requests (Wall Street Journal, Joseph de Avila) shows that Microsoft is relaxing some of the limits it imposed on its ChatGPT-enhanced Bing search engine. There were a lot of glitches when it was released initially and so it decided to restrict the number of questions users could ask to prevent the search engine from getting “confused”. It initially imposed limits of five questions per session with a total of 50 questions per day but has now increased this to six and 60, with a view to increasing this to 100 soon. * SO WHAT? * As you can probably tell, I find this whole area absolutely fascinating! Although I don’t think chatbots are quite up to it right now, I think that mass adoption will only serve to accelerate the development of AI. They WILL be capable and it won’t take too long before they are.

Then in How Apple captured Gen Z in the US — and changed their social circles (Financial Times, Patrick McGee) we see just how embedded with Gen Zs (those born after 1996) that Apple has become as this demographic makes up 34% of all iPhone owners in the US versus “just” 10% for Samsung, according to the latest data from adtech data platform Attain. This will no doubt have helped iPhone increase its market share of overall phone usage from 35% in 2019 to 50%  in 2022! This will have helped Apple no end in the sales of peripherals like Watches, Airpods and, of course, MacBooks but it seems that social pressures are now building to the extent that if you don’t have an iPhone, you may be socially ostracised (although I’d argue if that happens, you need to take a long hard look at who your friends are!). * SO WHAT? * A lot of this seems to be centred around things like its iMessage system that doesn’t play nicely with Android’s system and the comforting way that Apple products just seamlessly connect with each other.

Although I do think that the massive price differentials between Apple products and Android ones can lead to the opposite of inclusivity (= if you’ve got money, welcome to the Apple fun bus! If you don’t have quite so much, then welcome to the cheaper, cheerful and usually-better-specced Android also-rans 😁 is the implication here!), I don’t think it’s quite enough for competition regulators to get involved as it just seems to me like Apple is better at creating FOMO than, say, Samsung is. Clearly Android has more to do to get the Gen Zs on board!

Meanwhile, Microsoft strikes deals with Nintendo and Nvidia to extend Xbox games (The Times, Katie Prescott) shows that Microsoft has announced that it has signed 10-year deals with Nintendo and Nvidia to allow Xbox gamers access to Nvidia’s GeForce Now streaming services and Nintendo consoles in a bid to address concerns that its proposed acquisition of Activision Blizzard would reduce competition, particularly in cloud gaming. * SO WHAT? * There is a lot of manoeuvring going on at the moment, particularly since the UK’s Competition and Markets Authority recently threatened to block the deal unless Microsoft sold the Call of Duty series. Its final decision on the matter is due on April 26th, so there is plenty of time yet for negotiation.

I thought that What de-influencing tells us about the state of the creator economy (Financial Times, Elaine Moore) was a very interesting article as it suggests that we may be reaching an inflection point as growth in the influencer economy appears to be slowing down – even on TikTok! Other data suggests that last year’s hottest media app, BeReal, has seen the number of its daily active users almost halve from their peak. This article argues that, in a world of shrinking ad revenues, “de-influencing” (where creators will go out of their way to seem more authentic by making their videos look less polished and giving negative reviews) seems to be the way to go to stand out from the pack! * SO WHAT? * However you want to dress it up, influencing or de-influencing are just names for advertising fads du jour. The fact of the matter is, ad spending is decreasing and creators will expend a lot of effort into making sure they continue to attract ad spend from an increasingly harried customer. There has been a trend of helping creators to monetise their content on whatever platform you care to name over the last year or so – and that’s because there’s a tacit admission that, great though some platforms may be, they wouldn’t be nearly as compelling if there wasn’t decent content there. I get the feeling that we are in a period where platforms and creators are less keen on growth for the sake of it (just look at Twitter and Meta with their new paid-for offerings) and more eager to monetise what they provide. This is likely to prove difficult in tricky economic circumstances – but I think if you can get a decent following in a downturn, things will bounce back strongly when finances improve.

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

CAR NEWS

Bentley heads EV-wards, lithium prices fall and the pursuit of hydrogen continues…

Bentley phases out 12-cylinder engine as electric switch gathers pace (Financial Times, Peter Campbell) heralds a historic moment for the venerable luxury marque as it announced that production of the last of its V12 flagship engines will cease in April 2024 as the company moves towards electrification. Rivals including Rolls-Royce and Ferrari are still planning on producing such engines beyond Bentley’s deadline but Bentley is aiming to have an entirely electric line-up by the start of the 2030s. Talking of electrification, Chinese lithium prices fall 30% as demand for electric vehicles weakens (Financial Times, Harry Dempsey and Gloria Li) highlights falling lithium prices as the world’s largest car market is seeing a slowdown in demand for EVs. * SO WHAT? * Lithium prices have been rocketing since the middle of 2021 on hot EV demand but a subsequent cooling off in demand has led to weaker prices. In spite of this, Chinese lithium prices are still eight times what they were a year ago! It was also interesting to note that there were reports by local media that the world’s biggest battery producer, CATL, has just signed a number of battery contracts with a number of Chinese EV manufacturers at discounted prices.

The big bet on hydrogen vehicles (Financial Times, June Yoon) takes a look at what’s going on in alternative fuels as lithium-power faces increasing limitations (potential shortage of supply and volatile prices). Toyoto and Hyundai are leaders in hydrogen fuel cells with their respective Mirai and Nexo models but sales remain pretty miniscule compared to their lithium-ion-powered rivals. Mind you, although performance in passenger vehicles isn’t anything to write home about, hydrogen-powered vehicles like trucks and buses are seeing much more traction around the world. This is probably because Xcient trucks and the Mirai can, for instance, travel over 800km on a single charge and be charged in just minutes! * SO WHAT? * There are a number of obstacles to overcome for hydrogen-powered vehicles – whose only byproduct is water vapour – not least of which is the production cost. However, there is another big problem – currently, 95% of all hydrogen fuel is generated from fossil fuels (mainly natural gas) so greener ways to produce the hydrogen need to be developed (and remember, this is one of the things that has been discussed recently in the UK and in Europe). I continue to maintain that we really need to look at alternatives to lithium-ion batteries given the scarcity of the materials used to build them and hydrogen is just one of those alternatives.

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

Fresh produce gets scarce, McKinsey cuts, HSBC profits, Bao Fan’s location is ascertained while Visa and Mastercard face a lawsuit and BT Sport gets a rebrand…

In a quick scoot around some of today’s other interesting stories, Asda and Morrisons ration fresh produce including tomatoes and peppers (The Guardian, Sarah Butler and Joanna Partridge) follows on from what I was saying yesterday as supermarkets are now limiting the number of items each customer can buy in order not to run out as imports from Europe and North Africa were adversely affected by unseasonable weather and UK crops were badly damaged by pre-Christmas frost. * SO WHAT? * It was interesting to note that Lee Stiles, secretary of the Lea Valley Growers Association, observed that UK production of crops in greenhouses were probably going to be 30% lower than previous years because growers had to leave some of them empty because of the rising cost of heating them. The shortages are expected to last for the next few weeks. The Tories have abandoned farmers – and risk losing the rural vote (Daily Telegraph, Daniel Woolfson) shows that tensions are reaching fever pitch among the farming community as it had previously warned of the UK “sleepwalking” into a food security crisis – and they are all now saying “I told you so!”. This doesn’t bode well for the government’s prospects at the next election.

Elsewhere, McKinsey Intends to Eliminate as Many as 2,000 Jobs (Wall Street Journal, Kathryn Hardison) shows that even the mighty McKinsey is having to cut costs in one of its biggest ever headcount reductions. This is all part of a wider restructuring plan and it looks like the cuts will come in non-client facing areas.

In banking news, HSBC quarterly profits more than double after interest rate rises (The Guardian, Kalyeena Makortoff) highlights yet another high street bank that has made a killing in Q4 as profits almost doubled, prompting it to plan its highest annual shareholder payout for four years and Missing Chinese banker was working to set up Singapore family office (Financial Times, Mercedes Ruehl, Tabby Kinder and Leo Lewis) shows that China Renaissance’s Bao Fan may well have disappeared from view for nothing more sinister than to set up a family office in Singapore to manage his own personal wealth. This is according to well-placed sources, but he doesn’t seem to have surfaced physically yet!

Staying with financials, Class action claims earned lawyers £1bn (The Times, Jonathan Ames) shows that class actions in the UK are getting more popular – but more specifically that lawyers yesterday announced a class action lawsuit against Visa and Mastercard, thought to be worth in the region of £7.5bn, for unlawful and excessive debit and credit card fees. Big paydays for the lawfirms involved!

Then in Eurosport and BT Sport will disappear after TNT Sports rebrand (The Guardian, Mark Sweney) we see that Eurosport and BT Sport will be rolled into a new brand called TNT Sports, according to BT and media giant Warner Bros Discovery (WBD). WBD has an option to take full control of the joint venture in September 2025.

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…

I’m not sure whether I’ve shown you how to do a magic trick before – but here goes! This is strangely hypnotic

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Some of today’s market, commodity & currency moves (as at 0632hrs 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 **
7,978 (-0.46%)33,129.59 (-2.06%)3,997.34 (-2%)11,492.3 (-2.5%)15,398 (-0.52%)7,309 (-0.37%)27,104 (-1.34%)3,291 (-0.47%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$75.781$82.438$1,835.551.210401.06556134.8321.1359423,998

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