Start your week right!

This report will show you how news developed over?last week?and some key things to look out for?this week.

Written by Peter Watson, ex-stockbroker.

This report includes a?Review?and a?Preview.

If you are a subscriber to?Watson's Daily, you will get this much earlier in the day.

The?REVIEW?is an amalgamation of the “best bits” of the daily weekday newsletter/blog?Watson's Daily?last week, woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week.

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The?PREVIEW?is a summary of some of the key developments expected this week, plus a bit of extra comment from me.?Scroll DOWN to see the preview.

Reading this report should only take about 10 minutes and it will set you up for the week ??

THE DAY IN BRACKETS REFERS TO THE EDITION WHERE THE STORY APPEARED IN?WATSON’S DAILY.?Clicking on the day will take you to the appropriate edition of?Watson’s Daily?if you want to know more.?You will need to be a subscriber to access the extra information, but it is easy to get a free trial.?You can do that?HERE.?Watson's Daily?gives you the essence of daily newsflow, sourced from major broadsheets, in the business and financial markets overlaid with opinion from an experienced ex-stockbroker (me!). I give you a synopsis of the stories and tell you?why?they are important in an easily-digestible way.

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"The Review"

IN BIG PICTURE NEWS...

This week was marked by European gas price rises, more FTX repercussions and the return of?Disney’s Jedi Master…

• IN GENERAL – the UN climate summit ended in discord (Monday)?as there was agreement on giving financial help to poorer nations but disagreement on commitment to COP26 targets on global warming (particular from major oil producing companies Russia and Saudi Arabia!). Also, the?OECD published a report that trashed the UK (Wednesday), saying our inflation will be the highest in the G7 in 2022 and that our economy will contract the most in 2023.
• IN EUROPE?–?business confidence hit new lows (Thursday), according to research by the European Round Table (an industry lobby group) and the Conference Board (a US think-tank) thanks to sky-high energy prices and a slowdown in demand. Whatever anyone says, I am still of the belief that the key to Europe’s fortunes is how the Ukraine war ends and who is then in charge of Russia. Meanwhile,?Spain implemented windfall taxes on banks and energy groups (Friday)?and?Sweden hiked up its interest rates to their highest level since the financial crisis (Friday)?as the Riksbank governor stepped down after being in his post for 17 years.
• IN ASIA?–?Malaysia got a new PM, Anwar Ibrahim (Friday)?after a very close election result.

IN ENERGY NEWS…

• IN FOSSIL FUELS – European gas prices increased as Russia threatened to restrict flows (Wednesday),?China’s state-owned Sinopec signed with Qatar Energy for the latter to supply the former with?LNG?for 27 years (Tuesday)?as China continues to soak up the world’s supply of?LNG?in its quest to reduce reliance on coal. This is probably the biggest single?LNG?sale and purchase agreement in history!
• IN RENEWABLES?–?Rolls-Royce is pressuring the government to fund its Small Modular Reactors (Thursday)?in order to help it reach its launch targets while?the government gave ￡100m in extra funds for?nuclear fusion?research (Tuesday).
• IN COMPANY-SPECIFIC DEVELOPMENTS?–?South Africa’s Eskom is running out of money to buy diesel for back-up power plants (Tuesday), which means that the government will have to bail it out to avoid more rolling blackouts and?it sounds like the cost of bailing out Germany’s Uniper will be almost double previous estimates (Thursday)?thanks to it being tied into long-term supply contracts that were signed before the Ukraine war (before the price?really?shot up).

IN CRYPTO NEWS…

• FTX businesses owe over $3bn to their biggest creditors (Monday), which is being made even more complicated by?a hacker of FTX currently laundering millions it stole from FTX (Monday).?FTX’s collapse could have affected around 80,000 Britons (Wednesday)?as most FTX users were unsecured users of the exchange.
• Crypto investor Digital Currency Group revealed a series of investments between its units (Friday)?which have now backfired in the wake of FTX’s collapse. Maybe it can avail itself somehow of?Binance’s newly-unveiled “crypto recovery fund” (Friday)?which aims to buy out collapsed crypto exchanges (and presumably help to stem the loss in sentiment of crypto assets).

SOME INTERESTING BUSINESS TRENDS ALSO EMERGED THIS WEEK…

• There are?increased concerns that European industry could decamp to the US (Monday)?because of the massive cash incentives on offer as part of the Inflation Reduction Act (IRA) versus the “paltry” ones available in Europe for certain types of tech and manufacturing. Northvolt is one such company considering a move.
• IN THE UK?–?67% of the UK’s business advertisers polled in a recent survey intend to cut spending on TV (Monday), which is concerning as advertising is often seen as a leading economic indicator. This move implies that there is more gloom to come. Meanwhile?sales at the world’s biggest caterer, Compass, have exceeded pre-pandemic levels (Tuesday)?as workers return to the workplace and people go about their lives more normally. I just wonder how long momentum will continue as inflation continues to rise and more companies go out of business.

IN EMPLOYMENT, CONSUMER & RETAIL TRENDS...

• IN EMPLOYMENT TRENDS?– it was interesting to see that some employers are actively trying to recruit older employees.?Halfords?is targeting the over-50s to fill 1,000 roles (Thursday)?and?easyJet is seeking over-45s in cabin crew recruitment (Thursday). It will be interesting to see whether this is part of a longer-term trend or whether it will revert back to the norm when the labour market loosens up.
• IN CONSUMER TRENDS – UK consumers aren’t going to as many Christmas parties these days (Monday), which isn’t been made any easier by?rail strikes timed to hit the hospitality industry at a key time (Thursday) although they will be given broader fast food options in the future as Wendy’s is looking at serious UK expansion (Monday)?over 20 years since it left these shores. And?although around 50% of shoppers are putting spending limits in place for Christmas (Wednesday),?Jet2 says that they are seeing decent bookings for next summer (Friday).
• IN RETAIL TRENDS?– we see that?online retailer lockdown heroes have become post-pandemic zeroes as consumer spending patterns didn’t change permanently (Thursday). The likes of Deliveroo, THG, Victoria Plumbing and Music Magpie are among the lockdown darlings who are now having a very hard time. Made.com has gone that one step further by falling into administration. On the subject of online retailers,?AO World actually upgraded its outlook (Wednesday)?and investors probably took heart when they heard its intentions to stick to its knitting and focus on the domestic market and not international expansion. Elsewhere,?Halfords?warned that year-end profits would be at the lower end of expectations (Thursday)?thanks to rising costs and thriftier consumers while?B&Q’s owner Kingfisher managed to unveil higher sales (Friday)?due to customers buying energy-efficient products and?Pets at Home saw profits fall short (Thursday)?thanks to rising heating costs incurred by keeping their pets warm overnight.

THE TECH SECTOR SAW SOME KEY DEVELOPMENTS...

• IN CHINA – it looks like the authorities might be relenting on the gaming sector (Wednesday)?as the Game Industry Group Committee has now officially declared children’s gambling addiction to be “resolved”, which is surely great news for the likes of?Tencent?and NetEase who have endured a tricky few years as the authorities have clamped down severely on the amount of time that minors can play games.
• IN THE UK?–?Apple?and Google face an inquiry by our Competition and Markets Authority (Wednesday)?over the power they have in internet gaming and cloud gaming tech. On the subject of regulation,?the UK’s Digital Services Tax (DST) has managed to bring in ￡360m from US tech giants in its first year of operation (Wednesday), which is above expectations. The DST will, however, be phased out fairly soon in order to avoid retaliatory tariffs on British products in the US.
• IN COMPANY-SPECIFIC NEWS?–?HP is the latest company to report weakening PC demand (Wednesday)?and will be cutting 10% of its workforce as a result.?IN SOCIAL MEDIA,?Meta was told to overhaul its content removal policy (Wednesday)?after controversy involving drill music on Instagram while?Twitter shed more jobs (Tuesday)?–?but then started hiring again (Wednesday)?– and?postponed its Twitter Blue relaunch (Wednesday). Meanwhile,?Apple’s Foxconn woes continued (Friday)?as Foxconn announced a payoff to quell protests at its biggest China factory and?UK chip designer Arm had its London listing postponed (Monday), presumably because of adverse market conditions.

IN AUTOMOTIVE SECTOR/CHARGING NEWS...

• IN BATTERY-RELATED NEWS – Australia’s Syrah Resources, the world’s biggest natural graphite producer outside China, warned that Western supplies of graphite could get very tight over the next ten years (Tuesday)?as the material is used in battery anodes.?Electric car charger Pod Point issued a profit warning (Tuesday)?on delayed installations of home EV chargers while?the family behind?Ikea?is pouring ￡177m into electric car charging sites (Tuesday)?run by ABB E-mobility.
• IN EV NEWS?–?Sony and Honda announced a joint venture to make EVs with an emphasis on entertainment (Monday), ailing electric bus maker?Arrival?announced a new CEO (Friday), who is most well-known as the man who sold Marvel and?Domino’s Pizza is buying a fleet of EV delivery vehicles in the US (Tuesday)?to attract more drivers who don’t own their own cars.
• IN “NORMAL” CAR NEWS?–?carmakers push back on America’s move to cut China components out of the EV manufacturing process (Wednesday)?as it would make life more difficult and render them ineligible for juicy incentives that make their vehicles more appealing to buyers.

THE FINANCIAL AND REAL ESTATE SECTORS CONTINUE TO ADAPT...

• IN FINANCIALS – we saw a number of investors change classification of their “green” funds (Wednesday)?as ESG investment continues to evolve.?It sounds like the FCA is getting increasingly antsy about the gamification of trading apps (Tuesday), which may mean an investigation might be on the cards. Elsewhere,?Societe Generale and AllianceBernstein announced an equities joint venture (Wednesday)?with SocGen having the option to buy the venture outright after five years. This could be big, or it could just be a whole load of hot air in terms of whether it will actually change the day-to-day running of either institution.
• IN REAL ESTATE?–?China’s state banks announced $30bn in additional credit lines for real estate developers (Thursday), which is good news for the hugely indebted sector.?IN UK COMMERCIAL REAL ESTATE NEWS,?the occupancy rate remains low (Monday)?and?property values look likely to weaken further (Thursday,?Friday).?IN UK RESIDENTIAL PROPERTY NEWS,?rental demand is shooting up because of rising prices and the lack of landlords (Friday)?and although?five-year mortgage rates dipped below 6% for the first time since that dreaded mini-Budget (Wednesday),?Virgin decided to withdraw 5% deposit mortgages (Thursday)?in what I think is a vote of no-confidence in the near-term for the market overall.

IN OTHER NEWS...

• Disney’s old chief, Bob Iger returned as CEO, replacing Bob Chapek (Monday) in a boardroom coup (Tuesday).
• Deere & Co saw its sales rise as supply chain problems receded (Thursday). The outlook for sales of large farm equipment looks particularly strong as farmers invest thanks to higher commodity prices.

COMING UP THIS WEEK ("The Preview")...

Here's what's on the menu for this coming week (NB this is not exhaustive):

MONDAY

• EU -?ECB president Christine Lagarde speaks before the Committee on Economic and Monetary Affairs of the European Parliament in Brussels. Everyone will be looking out for her latest thoughts on inflation and the energy crisis.
• Germany?- meeting of G7 justice ministers in Berlin

TUESDAY

• US -?consumer confidence data release
• Japan -?October unemployment and retail sales numbers
• Switzerland -?Q3 GDP figures
• Results?-?Amigo Holdings?(are they seeing - or do they expect to see - rising business levels as consumers look at all ways of financing Christmas? How will they be protecting against a rise in potentially bad loans?),?easyJet?(what are bookings like? What are they like versus Ryanair's recent strong performance?),?Marston's?(what's footfall like? Is the World Cup helping?),?Shaftsbury?(much action in London's West End? Are people actually spending or are they just looking?),?Topps Tiles?(any trends here? Builders seem to be slowing momentum).

WEDNESDAY

• US -?revised Q3 GDP figures (how close did they actually get to recession (officially)?)
• China -?November manufacturing and non-manufacturing PMI (ongoing effects of zero-Covid policy lockdowns?)
• Japan -?monthly industrial production numbers
• Germany -?November unemployment numbers (any effects of the energy crisis on manufacturing?)
• Results?- Hornby?(expectations for Christmas??),?Mulberry?(still seeing customers spending on high end product?),?Loungers?(news on the new roadside diner format and how is everything going on the high street? Any trends?) and?Salesforce?(are corporates reining in spending?)

THURSDAY

• EU -?October unemployment numbers (is the energy crisis affecting jobs?)
• India -?S&P Global manufacturing PMI numbers
• Brazil -?Q3 GDP numbers (will Brazil's new leader use this opportunity to "kitchen sink" all the country's economic problems onto Bolsonaro's regime?
• Results - Peel Hunt?(how's current trading? What's the latest on its venture to provide IPO access to retail clients?)

FRIDAY

• US - November labour market data
• Canada - November unemployment numbers

BANTER

This week, I thought I’d choose the story that you may find the most useful:?Best and worst Christmas sandwiches of 2022 – classic wows but Aldi bargain steals show (The Mirror, Courtney Pochin). Merry Christmas!