This new 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.
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.
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...
Pelosi caused a splash, crypto wallets got drained and the Saudis ignored Biden…
- Speaker Nancy Pelosi caused all kinds of problems with a visit to Taiwan (Thursday)?as she stopped over as part of her tour of Asia where she’ll be popping in to Japan, South Korea and Malaysia. China responded by conducting military exercises close to Taiwan and a lot of angry rhetoric. I think that this may just be sabre-rattling by?Biden whose pleas to the Saudis to produce more oil were ignored (Thursday)?as his administration considered?sanctions against those found to be supporting Iranian oil shipments (Monday)?and?strong intentions to restrict Russian oil trading were also walked back (Monday)?because it would be too disruptive to European countries. Biden seems to be pretty ineffectual at the moment and we also heard that?US jobless claims rose (Friday), powered in part by layoffs in the tech sector.
- IN CHINA?–?manufacturing activity shrunk last month (Monday)?as the country continued to suffer repercussions from ongoing Covid lockdowns. Its GDP growth target for year-end is looking very dodgy. The lockdowns had knock-on effects as?Hong Kong fell into recession for the second time in two years (Tuesday)?with exports and tourism taking a particularly bad knock.
- IN THE UK?–?manufacturing growth slumped to its lowest level since May 2020 (Tuesday)?according to the latest S&P/CIPS stats and?the all-important services sector grew at its lowest rate since February 2021 (Thursday). No wonder?UK firms are getting increasingly nervous about investment (Monday)?according to the latest survey by the Institute of Directors.?The Bank of England hiked interest rates by the largest margin in 27 years (Friday)?in order to fight inflation that it thinks will hit 13% by year-end. Bad though this is,?spare a thought for the Turkish people whose rate of inflation is now just shy of 80% (Thursday), its highest level since 1998.
There was, as always at the moment, a lot of newsflow on ENERGY.
- In its infinite wisdom,?the IMF is urging European countries to pass on energy costs to customers (Thursday). The rationale here is that passing on all the costs will encourage “energy saving” and accelerate the shift to renewables. Commerzbank analysts joined the chorus of warning voices saying that?Germany will suffer particularly acutely if Russian gas gets cut off (Thursday)?and?analysts at Cornwall Insight reckon that British businesses will face a 500% jump in energy bills (Thursday)?when wholesale prices rise. Individual companies are thinking of ways to reduce energy consumption.?French retailer?Carrefour?is thinking of turning the rotisseries on earlier and dimming the lights (Monday)?while UK retailer?Iceland faces massive cost increases (Monday)?given that it has way more freezers than other supermarkets.?Energy-intensive firms will have to shorten operating hours (Monday).
- IN COAL NEWS?–?we see that Glencore is raking it in from the energy chaos (Friday)?as it smashed profit records in the first half thanks to the rising price of coal. Prior to the Ukraine war it had invested a lot in this area and clearly the gamble is now paying off handsomely.
- IN RENEWABLES NEWS?–?nuclear fusion?technology continues to progress.?Oxford?nuclear fusion?start-up First Light Fusion is seeking to raise more funds (Wednesday)?to finance the next stage of its research, which sounds like it’s going well.
There were some interesting developments in CRYPTO this week:
- Thousands of?crypto wallets linked to the Solana blockchain were drained by hackers (Thursday), in a major blow to all things cryptocurrency. An incident like this isn’t going to do anything to enhance crypto’s reputation!
- There was one incremental bit of good news for crypto, though, as?Coinbase signed a deal with BlackRock to hook its clients up to digital asset markets (Friday).
CONSUMER SPENDING HABITS CONTINUE TO EVOLVE...
- US CONSUMERS are cutting back and going to dollar stores (Tuesday)?in order to cut costs and?eBay put in a solid performance (Thursday), something I would expect to continue as people look for ways to raise money by searching their homes for items to sell and buyers look to save money by buying on such platforms. Despite everything,?US consumers are still ordering takeaways at DoorDash (Friday)?and it was even confident enough to have a positive outlook, despite the cost-of-living crisis.
- GERMAN CONSUMERS are also reining in spending as retail sales fell by the steepest rate on record (Tuesday).
- SPENDING TRENDS ARE EMERGING?as?Starbucks’ strong sales show consumers still want their daily cup of coffee (Wednesday), they also?spend some of their money on?Airbnb?breaks (Wednesday)?and getting around in minicabs as?Uber reported a doubling of revenues (Wednesday)?– while its Uber Eats business also continues to do well.?Brits are also spending on summer outfits and suits, according to?Next?(Friday).?WE ARE?GOING TO HAVE TO?SPEND OUR MONEY ON?air fares as?BA has decided to extend its suspension of Heathrow ticket sales (Wednesday)?and?Direct Line is going to put motor insurance premiums up (Wednesday)?after having to contend with higher claims costs while?Greggs is putting its prices up for the third time this year (Wednesday).?WE ARE?NOT?SPENDING OUR MONEY?on dating apps like Tinder (Wednesday)?and its CEO had to take the fall for it (NB Tinder is a brand of Match Group).?We are also not spending money on trading stocks as Robinhood laid off 23% of its staff (Wednesday),?drinking oat milk (Wednesday)?,?video streaming subscriptions (Friday)?– with the exception of?Disney+ and?Apple?TV+ – or?DIY (Wednesday).
- Alibaba?is slowly but surely going back to China. Although it wants to keep its New York listing,?the?SEC?plans to kick?Alibaba?out in 2024 (Tuesday)?for insufficient disclosure and?SoftBank has been selling down its stake in a big way (Thursday). So much for international expansion to get some growth. The Chinese authorities’ constant pressure is clearly taking its toll.
THERE WERE SOME INTERESTING DEVELOPMENTS IN REAL ESTATE AND CONSTRUCTION...
- IN UK RESIDENTIAL PROPERTY – we see that first-time buyers are looking outside London (Monday)?as they are increasingly being priced out while?at the other end of the scale, equity release is on the increase (Wednesday), according to the Equity Release Council as homeowners are withdrawing cash from their properties to cover the rising costs of day-to-day living. Despite?demand in the housing market remaining strong (Tuesday)?and some?development in west London being curtailed because the electricity grid has run out of capacity (Monday), thus further limiting the supply of properties, estate agent?Purplebricks has somehow managed to make a loss (Wednesday), which is so bad as to be impressive. If an estate agent can’t make money in a market like this, things will surely get terminal when the market falls.?Worries about household finances have prompted Nationwide to focus on wealthier clients (Thursday)?as they are less likely to default.
- IN OFFICE PROPERTY?–?some are saying that there are tough times ahead (Tuesday)?due to a combination of the fading away of cheap financing (rising interest rates forcing up borrowing costs) and the push for more environmentally-friendly working environments (which entail costly upgrades for the landlord) although actually?WeWork?has been recovering nicely (Friday)?as people return to the office, helping its occupancy rate return to pre-pandemic levels.
AND IN AUTOMOTIVE NEWS THIS WEEK...
- The luxury end of the car market is still going strong –?Ferrari reported record profits (Wednesday)?and it was even confident enough to raise its full-year revenue forecasts. Mind you?BMW sales lost momentum (Thursday)?as they were hit particularly badly by supply chain problems – although you do wonder, given arch-rival Mercedes-Benz announced strong results.
- Among Japanese makers,?Toyota saw its profits halve (Friday)?due to supply chain problems and the effect of China lockdowns – but it did leave its full-year figures unchanged.?Rival Nissan said it was going to offer long-term rental EVs in Japan (Thursday)?in an effort to stem the flow of its cars (and the precious metals within them) for sale secondhand abroad. Elsewhere,?Lucid cut production due to – you’ve guessed it – supply chain and logistics problems (Thursday)?and have become the latest EV start-up to discover that the automotive industry isn’t that easy.
- In the UK, car sales continue to slide (Friday), according to the latest figures from the SMMT. This is the fifth consecutive month of falling car sales and I suspect it’s not going to get much better.
AND IN OTHER NEWS...
- IN SEMICONDUCTOR NEWS – Samsung and Hynix are facing tricky decisions – whether to appease the US or appease China (Thursday)?as they want to be able to get access to the $52bn in grants the US is offering to build semiconductor factories in America. If they do so they will have to curtail any further investment in China, which will no doubt irk the Chinese.?TSMC is in a similar dilemma (Wednesday)?while there were?contrasting fortunes for fellow chipmakers as?AMD?prospered and Intel struggled (Wednesday).
- IN OTHER TECH NEWS?–?Nintendo’s Q1 performance was disappointing (Thursday)?thanks to the ongoing global chip shortage but it expects to get back on track by the end of summer. There was a lot made about?Instagram’s chief basing himself in London for the next few months (Wednesday)?but it just seems to me that he’s over here to build out its presence and then go back, so no biggie IMO.
- ELSEWHERE?– consolidation in the satellite sector seems to be gathering pace as?SES and Intelsat are now in deal talks (Friday),?traditional ad agencies (apart from S4 Capital, which is having its own problems) are doing OK relative to their digital counterparts (Tuesday)?as their “secret sauce” of customer targeting has been severely damaged by?Apple’s privacy changes and?Pearson is continuing with its migration from analogue to digital delivery (Tuesday), even talking about ways to use NFTs to help it get more revenues on its published works. It was also unsurprising to hear that?container shipper Maersk knocked it out of the park again (Wednesday)?due to the ongoing effect of supply chain disruptions.
COMING UP THIS WEEK ("The Preview")...
There's another deluge of company results coming this week (NB this is not exhaustive):
Monday
- Japan - trade balance numbers
- Results?- AIG, BioNTech (how are they doing now that demand is cooling in many places?), News Corp (it'll be interesting to see what's happening to ad revenues), NTT Group and Porsche (any more details on the spinning-out from VW?)
Tuesday
- US - flash Q2 non-farm productivity data
- Brazil - monthly inflation data (this will be something President Bolsonaro will be very interested in given the general election in October)
- UK - publication of the BRC/KPMG July retail sales report (more evidence as to what consumers are - and are not - spending on)
- Results?- Continental (any visibility re improvement in supply chains?), InterContinentalHotels Group, IWG (is IWG seeing the same uptick in business as WeWork as employees return in greater numbers to the office?), Legal & General (how have rising interest rates affected capital levels? Will there be a dividend payout?), Mazda (will they see profits tank like Toyota's did last week?), Ralph Lauren (will the "luxury" trend continue?), PageGroup (presumably results will be strong as per the other recruiters, but it'll be interesting to see what they think of the outlook) and Standard Life Aberdeen
Wednesday
- US?- July CPI data
- China - July CPI and PPI (Producer Price Index, not Payment Protection Insurance ??) figures
- Russia - July CPI numbers
- Germany - final July CPI data
- Results?- ABN Amro, Admiral (it'll be interesting to see how it has performed versus rivals Direct Line and Sabre, who had recent profit warnings), Aviva, Cathay Pacific (how much has it been affected by China lockdowns?), Coinbase (get the popcorn for this, it'll be interesting to say given what's happened in crypto over the last month!), Deliveroo (what's the outlook like and how are they going to deal with it?), Fox Corp, Foxconn (I'd like to see any contingency plans for if China invades Taiwan - but I think that's unlikely to happen - as well as an update on the automotive-related business), Lenovo (will it confirm recent PC demand trends?), Prudential (how have lockdowns affected this Asia-focused insurer?), Toshiba (is demand falling?), Tui Travel (presumably the summer's been good - but what about the outlook?) and Walt Disney (how are theme parks doing versus expectation? What's the movie pipeline looking like and will there be more news about the prospects for Disney+?)
Thursday
- US - July PPI numbers
- Oil - the IEA and OPEC publish their respective monthly oil market reports
- Results?- Aegon, Deutsche Telekom, Siemens (what are their plans for energy usage cuts?), ThyssenKrupp (ditto, plus what's their take on steel demand currently?), Savills (is high-end still hot in the property market? Forecasts for the rest of the year?) and Zurich Insurance (how is it doing in the face of a rising inflation environment).
Friday
- Russia - Q2 GDP estimate
- India - July CPI and industrial production figures
- EU - monthly industrial production numbers
- France - final July CPI numbers
- UK - monthly and quarterly flash GDP estimates (many economists reckon GDP will contract after surprising growth in May, particularly because there were more bank holidays than usual), monthly UK trade numbers, Industrial production figures and construction output data.
- Results?- Flutter, 888 Holdings (any gambling trends? Is business picking up as punters try to win money to help with the cost-of-living?)
BANTER
My favourite “alternative” video of the week was the one of?Spider-Man dancing in a supermarket. Superb!
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