Wednesday 26/06/24

  1. In MACRO NEWS, the Philippines warns over the South China Sea, Milei pushes Argentina into recession and combined support for the Conservatives and Labour hits a new low
  2. In CAR NEWS, Tesla recalls Cybertrucks again, Rivian booms on VW’s investment, Stellantis threatens UK factory shutdown and Labour walks a fine line
  3. In LEGAL/LEGISLATION NEWS, the EU charges Microsoft over Teams and fears rise over the effect of potential class actions
  4. In MISCELLANEOUS NEWS, China looks good for Novo Nordisk’s obesity drug while generic versions look set for a boom, we look at what Shein needs to do, how Morrisons’ turnaround is being held back, why Chapel Down wants to sell and how Airbus sheds $12bn in value
  5. AND FINALLY, I bring you the genius of Mariam Marks’s face painting…



So things get testy in the South China Sea, Milei prompts recession and support for the main UK parties drops…

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Philippines warns of region-wide conflict over South China Sea reef dispute (Financial Times, Demetri Sevastopulo) cites the Philippine ambassador to Washington who is warning that conflict with China over a reef (called the Second Thomas Shoal) in the South China Sea could suck in countries across the region, even escalating into nuclear war. Over the last few months, the Chinese coast guard has been forcibly blocking Philippine boats from resupplying marines who are on stationed on the Sierra Madre, a boat that is stuck on the reef. Manila purposely grounded the ship there back in 1999 to bolster its claim to the reef and the Americans continue to warn China that the reef is covered by the 1951 US-Philippine Mutual Defense Treaty. * SO WHAT? * It is interesting to note that the ambassador said that recent incidents in the Second Thomas Shoal and the South China Sea in general are actually more dangerous than China’s prodding of Taiwan

because Beijing claims most of the South China Sea, through which trillions of dollars-worth of trade pass. The situation remains tense…

Elsewhere, Javier Milei’s shock therapy pushes Argentina into recession (Daily Telegraph, Tim Wallace) shows that Argentina slipped into recession in Q1 this year as massive cuts to public spending made as part of President Milei’s bid to tame finances made their mark. This means that there were two consecutive quarters of contraction, meaning that Argentina is officially in technical recession. Throughout his election campaign, he espoused “chainsaw economics” to tackle Argentina’s massive debts and immediately got stuck in when came to power by devaluing the peso in December (which halved its value verses the dollar), suspending public infrastructure projects and cutting the value of pensions and public sector wages. Unemployment rose from 5.7% in Q4 of 2023 to 7.7% at the beginning of 2024 (the highest level since 2021), consumer spending fell by 6.7% on the year and investment dropped by almost 25%. It remains to be seen as to whether the shock treatment is working…

Back home, Combined support for Labour and Tories hits lowest since 1918 (Financial Times, Jonathan Vincent and George Parker) cites a tracker from the FT which shows that the combined vote share of the UK’s two main parties will hit its lowest level since the current system emerged after WWI. * SO WHAT? * This is clearly an attention-grabbing headline but the two will still have 63% of the vote and I think it’s inevitable that it will be diluted by the rise of other parties over the course of the last hundred years. Reform, the LibDems and Greens are all making advances at the moment, but I don’t think that Labour or the Conservatives are going to be overly concerned. At the moment, Labour looks like it could win a whopping 72% of the seats in Parliament with about 42% of the total vote.

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!



Tesla recalls Cybertrucks, Rivian has a VW-powered boom, Stellantis threatens a UK shutdown and Labour treads a fine line…

Tesla Recalls Thousands of Cybertrucks Over Trunk, Wiper Issues (Wall Street Journal, Alyssa Lukpat and Don Nico Forbes) shows that Tesla is doing a recall of its Cybertrucks – again! This time it issued two recalls for issues with the trunk and windscreen wiper. This comes after two recalls earlier this year. What a nightmare. * SO WHAT? * Tesla isn’t having a great time at the moment. It had to recall some Model 3, Model S, Model X and Model Y vehicles due to seat belt issues earlier this month while in February Tesla announced a recall of almost all the vehicles it sold in the US between 2012 and 2024 because the font for some of the visual warnings was deemed to be too small. It all comes at a time when the company is facing increasing competition in China and waning demand for EVs generally elsewhere.

Rivian shares soar on Volkswagen plan to invest up to $5bn (Financial Times, Arjun Neil Alim) is a very exciting bit of news as VW has promised to invest up to $5bn in a 50/50 joint venture with the American start-up. Rivian’s share price boomed by over 35% on the news. Under the agreement, VW will get immediate access to Rivian’s EV software for use in its own cars. * SO WHAT? * This sounds like a great deal as VW’s in-house software developer Cariad has proved to be 💩. Given the rapid advance of the Chinese makers, VW had to address this weakness and in pursuing the JV it will also get more access to the premium segment in the US. From Rivian’s side, this means that the company is getting a deep-pocketed and experienced partner. As the likes of Fisker, Lordstown Motors and others have found, EV development takes up a LOT of money so I actually think that a partner with deep pockets AND expertise is a big win for Rivian. I have often said in the past that it would be great if VW got together with Tesla because you’d have VW’s distribution networks and quality control combined with Tesla’s innovation and EV know-how – so although this isn’t quite the same, I think it should be good for both sides as long as Rivian’s existing cash burn doesn’t get out of control.

Back in the UK, Stellantis threat to shut UK factories over electric-car subsidies (The Times, Robert Lea) shows that the boss of Stellantis UK is threatening to close down production at its Luton and Ellesmere Port van factories unless the next government stumps up some cash and provides tax incentives to encourage demand for EVs. The CEO also said that the UK must cut zero emission volume targets for manufacturers. * SO WHAT? * Although this might just be a typical CEO rattling cages, I think Maria Grazia Davino has a point. Whether or not the next government will take any notice or not is another matter…

Talking of which, Why Labour’s electric car crusade risks crushing Britain’s auto industry (Daily Telegraph, Matt Oliver) shows that if Labour gets into power, it is going to have to tread a very fine line between pushing its green agenda (for instance, where it is talking about reinstating the 2030 ban on the sale of new petrol cars) and not alienating entire industries. * SO WHAT? * FWIW, I think that the new government has to get real about EVs. The infrastructure is still rubbish, the grid is going to face increasing electricity demands from data centres and EV costs are still high (as is depreciation!). If it undoes the 2035 commitment and everyone goes and buys an EV there will be all sorts of trouble. Why throw money at something that people don’t necessarily need? I would personally stop short of more incentives because it would cost a ton of money and you could end up with a load of people buying the cars and getting frustrated about the whole charging situation, which would then bring you (needlessly) back to square one if they go back to petrol. We’re already seeing some examples of this. I would prefer to see the money that would be used for incentives go into power generation and power storage so that we can cope with rising demand as it grows.

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!



The EU gets even feistier and fears rise over the effect of class actions…

In Microsoft faces huge antitrust fine over Teams app (The Guardian, Lisa O’Carroll) we see that the European Commission yesterday accused the tech giant of abusing its market power by including Teams with its Office 365 productivity software suite following the announcement of its preliminary antitrust findings yesterday. * SO WHAT? * This whole thing was triggered by Slack’s original complaint made in 2020. Earlier this year, Microsoft tried to head off regulatory action by announcing plans to unbundle teams from Office 365 but regulators have clearly found this to be insufficient. Even if Microsoft is slapped with an enormous fine, you would have thought it would represent a hollow victory because the money should arguably NOT all go to EC – it should go to the companies affected to make up for the money they lost!

What are the battle lines between the EU and Big Tech? (Financial Times, Javier Espinoza) is a timely read given that the EC seems to be getting feisty at the moment with its taking on of Apple and now Microsoft. These cases represent a major step forward after years of complaints from start-ups and other campaigners failing to gain any traction. Regulators can now wield the Digital Markets Act as a powerful weapon to prise open markets and opportunities that had effectively been shut out to smaller players.

Under the DMA, an initial breach of the rules could attract fines of up to 10% of global revenues while repeat offences could see that rise to 20%. * SO WHAT? * This could be substantial. Apple raked in $383bn in revenues last year – so that means it could face a fine of up to $40bn, although it is unlikely that such a large fine would be imposed in practice. It looks like the EU will also be targeting the likes of Meta and Google over their respective powers in advertising. Big Tech is expected to push back in the courts for years, delaying the impact of Brussels’ enforcement measures and the companies will push the idea that regulation kills innovation (Apple said last week that it would delay the rollout of its new AI features on the iPhone, for instance).

Elsewhere, A legal threat overhanging London market’s revival bid (Financial Times, Matthew Vincent) suggests that the rise in the availability of third-party litigation funding and “after-the-event” insurance in the UK mean that the prospect of class action lawsuits is becoming more attractive. Thus far, the UK legal system doesn’t allow US “opt out” class actions (where all shareholders are automatically assumed to be included in the claim) but there is pressure for this to change. * SO WHAT? * The worry here is that this could increase the danger of class action lawsuits in the future – and if that happens it could arguably become another reason for companies NOT to list on the LSE.

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!



Obesity drug upside grows, we look at what Shein needs to do, Morrisons is held back, Chapel Down considers selling and Airbus’s valuation hits turbulence…

In a quick scoot around some of today’s other interesting stories, China is an open goal for Novo Nordisk’s obesity drug (Financial Times, Lex) highlights the fact that Novo Nordisk, the maker of Wegovy, has very little competition at the moment – and with expectations that the number of overweight adults in China will triple by 2030 versus 2000 levels the prospects are looking good although ‘Skinny jabs’: weight-loss drugs set for new boom as generic versions emerge (The Guardian, Nicola Davis and Julia Kollewe) shows that Israel’s Teva Pharmaceutical Industries, the world’s biggest generic drugmaker, and other companies including Pfizer, Viatris and Novartis are working on cheaper alternatives. Cheaper alternatives will grow a market that is already red hot and they are also likely to bring pricing in the overall market right down. The big turning point for all this will be when the patent for semaglitude – the active ingredient for Ozempic and Wegovy – can be made as a generic. That will take a few years, so the companies will be making as much money as possible in the meantime!

In retail, What Shein needs to avoid a London IPO bust (Financial Times, Lex) suggests a number of items that Shein should try to address if it carries out an IPO in the UK. Firstly, it will need to provide more detail on why it wants to list. Secondly, it will need to address supply chain concerns (particularly with regard to allegations of forced labour). Thirdly, it will need to provide more assurance on its corporate structure which is somewhat convoluted. * SO WHAT? * As a result of all this, you would have thought that pricing won’t be allowed to get too outrageous from the off (no-one wants another Deliveroo, for instance!) but there are other things that could yet stop a London listing. Beijing has to approve an IPO outsidfe China and it’s still possible that the IPO might happen in Hong Kong. Whatever happens, I really do think that Shein is going to have to come up with more detail in order to enhance credibility and allay investor concerns.

Meanwhile, Morrisons’ turnaround dented by slowing sales growth (The Times, Isabella Fish) shows that the UK’s fifth biggest supermarket reported a slowdown in sales growth as it is feeling competition particularly keenly from the German discounters. * SO WHAT? * Morrisons continues to lag the performance of its competitors since it was bought by PE firm Clayton, Dubilier & Rice in 2021. It seems like massively debt-fuelled acquisitions of supermarkets aren’t going particularly well at the moment – just ask Asda!

Elsewhere, Britain’s biggest winemaker for sale as demand for English wine soars (Daily Telegraph, Daniel Woolfson) shows that the London-listed winemaker is considering selling itself in order to raise £30m to help it satisfy growing demand for English wines just seven months after it listed on AIM! This is part of a strategic review that follows a strong year for England’s biggest winemaker and Chapel Down’s sale would reflect British wine going global (Financial Times, Lex) suggests that the company is doing this in order to take advantage of growing interest by overseas wine/champagne companies in England, given climate change. In order to scale up, it needs access to deep pockets.

Then in Airbus Sheds $12 Billion in Market Value After Slashing Guidance (Wall Street Journal, Mauro Orru) we see that the European plane maker lost a big chunk of its market value yesterday after it lowered its commercial aircraft delivery and financial targets for the year thanks to supply chain problems and impairment costs relating to its space activities. * SO WHAT? * I guess this is a bit of a shock for investors considering strong demand for planes and the ongoing nightmares of its arch-rival Boeing. Still, what’s bad for them is perhaps good news for China’s plane makers who could take advantage…

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…

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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£/$€/$$/¥£/€$/₿

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