Start your week right!
Review of business & financial markets news August 8th - August 12th 2022, preview of w/c August 15th 2022. Edition #8

Start your week right!

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.

*** NB THIS REPORT WILL BE TAKING A SHORT BREAK, RETURNING ON TUESDAY 30TH AUGUST ***

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.

I WOULD REALLY APPRECIATE IT IF YOU COULD SEND THIS TO PEOPLE YOU THINK WHO WOULD BENEFIT FROM READING IT!?This report is FREE and everyone benefits from being better informed, so please don't hog this to yourself ??!

It would really help me out, so please tell your colleagues/friends!

"The Review"

IN BIG PICTURE NEWS...

The drama continued with energy, the heatwave continued to call all sorts of problems and SoftBank had a historic moment regarding its stake in?Alibaba

  • IN THE US – Inflation eased versus July (Thursday)?on lower petrol prices, taking the pressure off the Fed and Biden for the moment, who continue to battle against rising prices.?US factory prices fell as well (Friday), in another sign that inflation may be easing.
  • IN CHINA?– we see that the mainland’s zero-Covid policy continues to have negative effects as?Hong Kong’s population declined by the sharpest rate in at least 60 years (Friday)?as Hong Kongers emigrated to destinations including Australia, Portugal and Canada. Tensions between China and Taiwan continue to be stoked as?Taiwanese authorities are trying to stop Foxconn from investing $800m in China’s Tsinghua Unigroup (Thursday)?as it wants to align more with the US. Foxconn investing such a sum in a Chinese company may be seen to go against this.
  • IN EUROPE?– some say that?Europe is going to be in a worse inflation crisis in the UK because of its greater reliance on Russian energy supplies (Monday), something that was alluded to by?Germany’s finance minister who talked about how “fragile” his country’s economy was thanks to this (Friday), which is serious because Germany is the bloc’s main economic driver.
  • IN THE UK?–?fears among UK businesses about inflation reached their highest ever level (Monday), according to a monthly report by BDO. This was all down to a weaker pound, higher labour costs, labour shortages and supply chain problems. This won’t have been helped by the Bank of England saying last week that it expects UK inflation to hit 13%.

The topic of energy is never far from the conversation and there were more developments this week as countries panic about not getting enough…

  • Russian oil flow to central Europe stopped this week (Wednesday), putting loads of pressure on countries like Slovakia, the Czech Republic and Hungary and?European electricity prices hit new highs (Friday). The?IEA said that western sanctions intended to make life difficult for Russia haven’t worked (Friday)?as oil shunned by the West is just going to countries like India, China and Turkey.
  • Elsewhere,?German utility company E.ON cut the value of its stake in Nord Stream 1 (Thursday), the pipeline connecting Western Russia to Germany via the Baltic Sea. It owns a 15.5% stake that they had valued at €1.2bn in March but they decided that this was now worth about €500m.?Norway decided to cut power exports (Tuesday)?as hydroelectric plants aren’t generating nearly as much power as normal thanks to the European heatwave, and this may have negative implications for the UK. Also, Danish wind turbine manufacturer?Vestas posted disappointing Q2 results (Thursday)?and it said that it was looking forward to the positive impact of upcoming renewables subsidies in the US.

There was more bad news in crypto this week…

  • Coinbase, one of the world’s biggest crypto exchanges, posted a big swing into a chunky Q2 loss (Wednesday)?with trading volumes halving as many expect a “crypto winter”.

WE CONTINUE TO MONITOR THE CONSUMER MINDSET...

  • IN REAL ESTATE – UK builder Bellway posted record revenues and an outlook for a strong 2023 (Wednesday)?while?mortgage lenders are having to turn away customers (Wednesday)?who are flooding in with applications in an attempt to beat more expected interest rate rises – which then lead to higher mortgage rates. That said,?estate agents are reporting a continued fall in buyers (Thursday)?while?top-end estate agent Savills is getting a bit wobbly about global property markets (Friday), mindful of the effects of inflation and tricky prospects for the office market. It seems to me, then, that the UK residential property market is being driven by a shortage of supply, not because of red-hot demand. This is something that is true of the current state of the UK rental market as?London tenants are still facing “increasingly unaffordable rents” (Tuesday)?with weird things like tenants competing in bidding wars and having to pay 12 months of rent in advance (sure signs of an overheating market!) occurring.
  • CONSUMER SPENDING IS CHANGING?– and it was interesting to see the figures from the BRC and KPMG which showed that?UK consumer spending?grew?in July versus the previous month (Tuesday), something that was?echoed in the latest update from Barclaycard (Tuesday), which showed that spending increased by 7.7%, although that was probably more due to rising prices rather than higher spending volumes.?WE?ARE?SPENDING?on?travel (Wednesday), as air fares have shot up;?hotels (Wednesday), as IHG had a storming first half; and?high-end fashion (Wednesday)?as the likes of Ralph Lauren and Michael Kors were the latest labels to announce strong performances.?WE ARE?NOT?SPENDING?so much on?used cars (Wednesday)?as supply chain problems mean that there just aren’t as many available;?takeaways (Thursday)?as Deliveroo, aka “Flopperoo” thanks to its dire share price performance since flotation, published its latest set of disappointing numbers; and?gambling (Friday)?as Entain, the owner of Ladbrokes and Coral, saw punters betting less.
  • IN EMPLOYMENT?–?IWG’s poor results suggested the the return to office wasn’t as good as it had predicted (Wednesday), recruiter?PageGroup reported early signs of a job market slowdown (Tuesday)?and?German investment bank Berenburg said it would cut 5% of its staff (Tuesday). I think we’ll see more job cuts among investment banks as deal flow continues to get patchier. In other trends, a report from the International Labour Organisation said?lockdowns had hit youngest workers hardest (Friday)?and it turns out that?larger companies have been raising wages (Friday)?to help staff counter the rising cost-of-living. Although?City workers have continued to get big pay raises (Monday), there is?a rise in demand for companies who offer pay advances (Monday), like Wagestream, which provides employees of signed-up employers the ability to draw on their wages before they get paid.

IT WAS ANOTHER WEEK OF FINANCIAL SECTOR REPORTING...

  • Abrdn announced a big pre-tax loss for the first half of 2022 (Wednesday)?as customers withdrew their cash at a faster-than-expected rate due to tricky market conditions while?Prudential suffered from repeated Hong Kong lockdowns (Thursday)?and said that it expected market conditions to be “challenging” for the rest of the year. Meanwhile,?L&G benefited from more companies wanting to offload their pension schemes (Wednesday)?and?Aviva did better-than-expected in generating cash (Thursday), which prompted a buy-back.?Admiral had a disappointing time as its first-half profits almost halved (Thursday)?and the much-hyped?Robinhood saw its nightmare continue (Thursday)?as users continued to abandon the platform.

TECH WAS ALSO PRETTY ACTIVE IN TERMS OF NEWSFLOW...

  • IN SEMICONDUCTORS?–?some chip-makers, including Micron Technology, reckon there will be a slowdown in demand (Wednesday)?while?Intel continues to appeal to the UK to put money into chip production (Tuesday).
  • SoftBank had a bad week this week as it announced a massive €23bn loss (Tuesday)?shortly followed by?a big sell-off of one of its most famous investments, Aliababa (Thursday).
  • Gloom in the tech sector continued as Microsoft is cutting costs (Wednesday)?and I wonder whether we are going to see redundancies next.

AND IN OTHER NEWS...

  • IN EV NEWS – Elon Musk sold about $7bn-worth of?Tesla?stock the period of over a few days (Wednesday)?as the Twitter thing drags on and?Rivian?saw its losses nearly triple (Friday)?although the Q2 results were largely in line with expectations.
  • IN HEALTHCARE NEWS –?GSK?and Haleon could lose billions (Friday)?as there are fears that?GSK’s common stomach ulcer treatment, Zantac, may be carcinogenic.?If it is proved to be the case, there could be huge damages to pay, something that another rival company is aware of as?Johnson & Johnson?said it would withdraw talc-based baby powder globally next year (Friday)?a few years after it was withdrawn from the US and Canada for harming some female users.
  • IN MEDIA NEWS?–?US TV networks and new publishers reckon they are seeing a slowdown in the advertising market (Monday), but?Fox (Thursday) and News Corp (Tuesday) were quite upbeat about it. It was also interesting to see that?Disney?reported an earnings surge (Thursday), with success in?Disney+ subscriber numbers playing a part.
  • IN LEISURE?–?Tui?suffered a Q3 loss thanks to flight disruptions (Thursday)?while?hotels increased prices (Monday)?and?restaurants remained in the red (Monday)?thanks to higher debt costs, staff shortages and rising energy bills.
  • THE HEATWAVE?is also having some serious consequences as?UK farmers are warning of potential vegetable shortages (Monday)?and?olive oil prices are rising (Wednesday)?because the lack of water is ruining harvests while?water levels on the Rhine have fallen significantly (Thursday), which will put further pressure on supply chains.
  • ELSWHERE,?Siemens had its first quarterly loss in 12 years (Friday),?Britishvolt’s Northumberland gigafactory is on “life support” (Friday)?and?Next?said it would take a £15m stake in struggling apparel retailer Joules (Tuesday).

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

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

Monday

  • China?- July retail sales, Industrial Production numbers
  • Japan - monthly Industrial Production figures
  • Canada - monthly manufacturing data, wholesale trade figures
  • India - monthly trade data
  • UK - Rightmove house price index
  • Results?-?Hello Fresh (are people now realising how expensive this is or is it still being seen as an "affordable treat"? I'm thinking that they are going to have to cut staff numbers) and Saudi Aramco

Tuesday

  • US?- July Industrial Production, residential construction figures
  • EU?- international goods trade numbers
  • Germany?- ZEW economic sentiment survey
  • UK - flash Q2 productivity estimates, employment data
  • Results?-?BHP Billiton (how is it doing versus rivals?), Home Depot (have Americans stopped participating in DIY like they have over here?), Pandora (any news on the popularity of man-made diamonds?), Watches of Switzerland (is this company still knocking it out of the park re high-end watch sales?) and Walmart (how is it keeping competitive for an increasingly cost-conscious consumer)

Wednesday

  • US?- FOMC publishes minutes of its July meeting (should actually be quite "interesting" because it raised interest rates by 0.75% following this meeting!)
  • UK?- July Producer Price Index (PPI), ONS data on private housing rental, house price index
  • Interesting indicators - France will publish its wheat harvest quality report, Dubai International Airport - the world's busiest for international passenger traffic, will report passenger traffic data for H1.
  • Results?-?Balfour Beatty, Carlsberg (what's the situation re passing on higher prices? Are they doing better than, say, Heineken?), Cisco (are corporates still spending or are they reining it in?), Persimmon (has the developer come up with a plan after last month's admission about its building target shortfall?), Target (are consumers spending any less on basics?), Tencent (is it able to come out of the other side of the crackdown from the Chinese authorities?)

Thursday

  • Canada?- July Consumer Price Index (CPI)
  • EU?- inflation numbers for July
  • Results?-?AO World (how's it going now following its relatively recent decision to focus on the UK domestic market?), Estee Lauder (are consumers still buying makeup to cheer themselves up as they go in greater numbers to the office?), Kohl's (how are department stores doing currently? Do consumers treat them as an "escape" or are they swerving them due to higher prices in a cost-of-living crisis?), Macy's, Rank Group (can its fortunes improve after two profit warnings in two months? Are gamblers returning to its casinos?)

Friday

  • Japan?- July CPI numbers
  • Canada?- monthly retail trade figures
  • Germany?- monthly PPI numbers for industrial products
  • UK?- GfK confidence survey (it would be a surprise if this was anything other than depressing, given the results of other surveys!), ONS July retail sales numbers (what are consumers spending their money on now? Has discretionary spend pretty much disappeared?) and monthly trade figures
  • Results?-?Deere & Company (how are farmers doing? Are they reining in spend on new hardware?), Foot Locker (are consumers buying trainers to cheer themselves up or is this slowing down?)

BANTER

My favourite “alternative” story of the week was?Tourists duck as plane makes extremely low landing on Greek island of Skiathos (SkyNews), which is just incredible!

REMEMBER - IF YOU LIKE THIS NOTE, PLEASE RECOMMEND IT TO YOUR FRIENDS/SIBLINGS/COUSINS/PEOPLE YOU MEET DOWN THE PUB/PARTNERS/PARTNERS' FRIENDS ETC. This would really help me out??!

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