Wednesday 29/06/22

1. In MACRO & ENERGY NEWS, NATO talks China/Finland/Sweden, the ECB makes hints, Sunak faces tax choices and coal demand rises
2. In CONSUMER/RETAIL NEWS, China lifts restrictions while in the UK consumers pay higher prices, buy frozen food and avoid scratchcards as the Boots sale evaporates
3. In CAR NEWS, VW reckons it’ll beat Tesla and Lotus says bye-bye to petrol cars
4. In INDIVIDUAL COMPANY NEWS, Meta and TikTok face addiction allegations, Diageo pulls out of Russia and Wise has a tough time
5. AND FINALLY, I bring you Ninja Warrior in the Olympics and Marmite pasta…

So NATO makes decisions, the ECB makes hints, Sunak faces choices and coal demand rises…

📢 I’m going to be doing a roundup of the month of June TODAY at 5pm with Jake Schogger of the Commercial Law Academy. I will whip through the major events of the month in the business and financial markets news and show you how they’ve developed and Jake will give you legal insight into many of those events. You need to REGISTER to attend this even (which is FREE), and you can do that HERE. See you LATER!

Nato to confront China risk alongside Russia threat at leaders’ summit (Financial Times, Henry Foy) shows that Nato is pushing China further up the agenda for its new 10-year doctrine that is to be agreed this week. It looks like it will be classed as “a challenge to our interests, our security and our values”. Unsurprisingly, China didn’t like that (although Nato says that “China is not our adversary”), particularly as China was not even mentioned in NATO’s previous 10-year strategic concept. Then Turkey backs NATO membership for Sweden, Finland (Wall Street Journal, Daniel Michaels and Jared Malsin) shows that Turkey has relented on its resistance, paving the way for the two Nordic countries to become members of NATO. The price of this was that Sweden and Finland committed in writing not to support groups Turkey deems to be Kurdish terrorists and to work to extradite accused terrorists. Cold War 2 here we come…

Then ECB opens the door to half-point increase in interest rates in July (Daily Telegraph, Tom Rees) shows that the president of the ECB, Christine Lagarde, seems to be getting more eager to rein in inflation via raising interest rates. She talked about the ditching of “gradualism” that many interpreted as meaning the ECB could raise interest rates by 0.5% rather than the more usual 0.25%. I’ll believe it when I see it!

Meanwhile, the UK chancellor appears to have his plate full what with Rishi Sunak cooling on windfall tax on UK electricity generators (Financial Times, Jim Pickard, George Parker and Nathalie Thomas), which sounds like he’s having a wobble in the face of fierce lobbying by would-be affected generators (similar to the windfall tax imposed on oil and gas companies), Sunak rejects calls to cut corporation tax (Daily Telegraph, Ben Riley-Smith, Tony Diver and Tom Rees) shows that he appears not to be caving to pressure to dismiss an expected rise in corporation tax in the autumn budget (something that BoJo wants) and Fuel duty cut on table amid row over record petrol prices (The Guardian, Alex Lawson) indicates that he’s considering an additional cut to fuel duty in order to help motorists who are suffering from big prices at the pump. It’s a tough old job, but someone’s got to do it!

As countries around the world scramble to get energy sorted as they try to wean themselves off Russian supplies, Demand for coal heats up in wake of lockdown (The Times, Alex Ralph) shows that coal consumption has, unsurprisingly, increased over the last year in Europe and North America, bucking a ten year trend where it had been falling. According to BP’s annual review of energy, coal consumption rose by 5.9% in Europe and by 13.5% in North America. * SO WHAT? * This is surely only going to get worse as countries prolong the lives of existing coal-fired power plants or bring old ones out of retirement in a bid to get energy capacity quickly. I have no doubt that the previous trend will resume at some point but I think needs must at this stage because Russia turning the taps off is a very real prospect.

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!

China relaxes, UK consumers continue to feel the pinch and the Boots sale falls by the wayside…

In China slashes quarantine restrictions as Covid cases fall (Financial Times, Tom Mitchell) we see that China has cut its quarantine period for international travellers to one week (it was two weeks) in early signs that the country is trying to move on from recent Covid lockdowns. The State Council also cut post-quarantine “home health monitoring” from seven days to three days and raised thresholds where positive tests kick in. Nike/China: consumer market is yet to fully open (Financial Times, Lex) is a bit cautious in its welcoming of the relaxation of restrictions because lockdowns could happen again all too easily and the downbeat earnings in China that Nike outlined in its results earlier this week (overall, Nike reported flat sales overall and rising inventories while sales in China were particularly badly hit) could be indicative of what is likely to happen with other US consumer goods companies with China exposure. They won’t just be hit by the lockdowns – a stronger dollar, higher costs and what looks like an imminent recession in the US are all going to contribute to potentially anaemic returns for quite some time.

Back in the UK, consumers continue to face challenges. Fertiliser and food behind rapid rise in shop prices (The Times, Arthi Nachiappan) cites the latest data from the BRC and NielsenIQ

which shows that shop prices increased at their sharpest rate in 14 years in June as fertiliser, food and fuel price rises continued to filter through, Shoppers buy frozen food instead of fresh to cut bills (Daily Telegraph, Hannah Boland) cites Sainsbury’s chief exec observing a shift in shopper behaviour in a bid to cut grocery bills and National Lottery hit by slump in demand for scratchcards (Daily Telegraph, Oliver Gill) shows that lower sales of scratchcards were to blame for weaker overall sales while people also seem to be playing less frequently than before. Consumers continue to tighten their belts.

Then in Walgreens abandons Boots sale (The Times, Callum Jones) we see that the American owner of the high street stalwart, Walgreens Boots Alliance, has decided to postpone plans to sell Boots due to an “unexpected and dramatic change” in market conditions. Basically, it couldn’t get anyone to pay the £7bn it thought Boots was worth. * SO WHAT? * I am sorry to say that I think that this is bad news for Boots. It’s unlikely that the owner is going to invest any money in an asset it doesn’t want to own and I suspect that it will use this lack of sale and worsening economic conditions as an excuse to cut jobs and store numbers to make it “leaner” and possibly more attractive to a potential buyer.

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!

VW throws the gauntlet down to Tesla and Lotus goes all-electric…

VW chief claims carmaker can overtake ‘weakening’ Tesla by 2025 (Financial Times, Joe Miller and Peter Campbell) highlights punchy comments from the VW chief, who reckons that Tesla will be held back by the challenge of scaling production at his gigafactories. VW has invested over $52bn in EV development and plans to sell around 750,000 units worldwide this year versus Tesla’s 1.5m, so this is indeed a confident statement to make. However, VW has been catching up over the years and will be heartened by Tesla’s gigafactory problems. * SO WHAT? * This is quite a ballsy call, but then VW is a proper automotive company with long-established production, networks and reliability. I really do think that  sleeping giants like VW are properly in the EV game now and there is no doubt in my mind that they will continue to make up ground with Tesla (and surpass it).

Talking of car companies being in the EV game, Lotus to leave petrol-fuelled cars in rear-view mirror (Daily Telegraph, Howard Mustoe) shows that the British sports car maker (which is owned by Chinese automotive behemoth Geely) is going to phase out all new petrol models from next year and transition to an all-electric line-up. The Emira is its final car powered by an internal combustion engine but an all-electric SUV (called the Eletre) was announced earlier this year – and this will be joined by a four-door sports saloon later this year. A second SUV is to follow in 2025 and then a lightweight sports car after that. In the short term, though, the company is having to contend with rising costs and supply chain issues that are hitting lead times. A sign of the times, eh?

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!

Meta and TikTok face challenges, Diageo pulls out of Russia and Wise has a tough day…

In a quick scoot around other interesting stories today, Meta, TikTok could face civil liability for addicting children in California (Wall Street Journal, Sarah Donaldson and Christine Mai-Duc) shows that social media companies including Meta Platforms and TikTok could potentially be sued by the government in California for having features that are specifically designed to get children addicted after a bill that cleared the Senate yesterday outlawing unfair business practices. Companies could face civil penalties of up to $25,000 for a violation or $250,000 if it knowingly used harmful features. * SO WHAT? * This could be VERY bad for the social media companies but then again maybe this will prompt them to make kid-friendly sites or increase the age of users. It all just adds to the general pressure that Big Tech is feeling at the moment. Whether or not such pressure will actually work is another thing altogether, though!

Meanwhile, Diageo calls time on its Russian arm (The Times) highlights the drinks giant’s decision to wind down operations in

Russia, following an increasingly well-trodden path. It had already ceased shipping to and selling goods in Russia in March but will retain a business licence there that requires a skeleton staff to stay behind. * SO WHAT? * The speed of foreign departures is quickening at the moment because a law is expected to come in that will enable Moscow to seize assets and impose criminal penalties.

Then in Wise investors make transfer of their own after margin dip (The Times, Patrick Hosking) we see that the share price of the money transfer group fell by 15.2% yesterday on news that its profit margin was lower than market expectations. Margins had been hit by the company cutting its prices and a chunky 48% rise in admin costs. * SO WHAT? * OK so this is disappointing, but the fact is that the company has made a name for itself in the money transfer market by undercutting high street bank prices. You would have thought that its lower prices would be particularly appreciated in tricky economic times, so perhaps volume will make up for a shortfall in margin…

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…

This is a story that sounds like it’s made-up, but looks like it’s true: Sasuke: Ninja Warrior may be coming to the Los Angeles Olympics in 2028 (SoraNews24, Master Blaster). It’s not clear yet whether they will have a Mount Midoriyama or Cammy as a commentator/cheerleader, but this could make for interesting viewing. If you’ve worked up an appetite when watching that, how about some tasty pasta as per ‘I tried Nigella Lawson’s 42p Marmite pasta for first time – then she messaged me’ (The Mirror, Amber O’Connor). I actually think this sounds quite good. If this is seen as a cheap snack/meal, I have to say that my go-to snack is a traditional Japanese favourite: rice with a raw egg and soy sauce (then you mix it all together). For me, the rice has to be cold. For some reason, most people I say this to think it’s disgusting 🤣…