Wednesday 07/12/22

1. In MACRO & LEGISLATION NEWS, the EU mulls sanctions on Russian mining, both TikTok and Amazon face the music and Sunak is pressured on anti-strike laws
2. In CONSUMER, LEISURE & RETAIL NEWS, pump prices face scrutiny, Christmas dinner price rises, Marston’s satisfies, SSP’s profits take off, Black Friday impact is meh, Lidl and Aldi benefit, Asda plans convenience stores and Fenwick makes a big decision
3. In EV-RELATED NEWS, battery prices rise, Chinese battery makers look set to dominate and a plucky electric 4×4 contender emerges
4. In MISCELLANEOUS NEWS, airlines turn a profit, Airbus deliveries suffer and Morgan Stanley announces cuts
5. AND FINALLY, I bring you a fail-safe Turkey basting hack and parkour vs climbing…

So the EU mulls more Russia sanctions, TikTok and Amazon face the music and Sunak is under pressure on strikes…

Did you know that there is a podcast to go with Watson’s Daily? In this podcast, I discuss two stories from the day’s edition in a bit more depth with a Watson’s Daily Ambassador, my mate Ralph (on the Weekly podcast) or a special guest. The idea of this is to help to give you more of an idea of what talking about this stuff could sound like 👍 You can find the podcasts on the buttons below:

EU to propose sanctions on Russia’s mining industry (Financial Times, Henry Foy and Sam Fleming) shows that the European Commission is considering the implementation of a ban on new investments in the Russian mining sector (with some exceptions) as part of a new package of measures to put pressure on Russia and its ability to finance its war effort in Ukraine. * SO WHAT? * This could be painful for Russia as it has a massive mining sector that produces commodities including gold, iron ore, uranium and phosphates. It was also a very useful source of inward investment as it has in the past accounted for around 25% of foreign investment in the country. If this goes ahead, it will be the ninth EU sanctions package and the first time Russia’s metals sector has been directly targeted. It has to be agreed by the 27 member states by the end of next week…

Meanwhile, TikTok national security deal faces more delays as worry grows over risks (Wall Street Journal, John D. McKinnon, Aruna Viswanatha and Stu Woo) shows that the expected conclusion of talks with the Biden administration around year-end is facing delays as everyone tries to hammer out agreement amidst ongoing concerns about how its algorithm uses data and whether this might pose a risk to national security. A tentative deal between TikTok owner ByteDance and the government had been reached in the summer but senior officials don’t think it goes far enough. So far both parties have agreed that US user data will be stored on Oracle servers in the US while TikTok maintains that it does not collect search and browsing history outside the app. The drama continues…

Then in Amazon agrees to final deal to close EU antitrust probes (Financial Times, Javier Espinoza) we see that Amazon and the EU regulators have come to an agreement about concerns over its unfair advantage over rival sellers given its access to massive

troves of data. Amazon has now promised to increase visibility of rival products by giving them equal priority on the “buy box”, which generates most of the purchases on the site. In addition to this, it will introduce an alternative featured offer for those who don’t prioritise speed of delivery. The deal will be officially announced on December 20th, barring any last-minute hiccups. The commitments will be in place for five years and have already been agreed between rivals and EU officials. * SO WHAT? * This is a definite tick in the box for the EU as this could be used as the template for its compliance with the new Digital Markets Act (DMA), which is designed to rein in the power of Big Tech. By coming to this agreement, Amazon will avoid being fined up to 10% of global revenues for breaking EU law! The DMA is a big deal given that it is the first major update for rules governing tech in over two decades, so this is an important step. It’s no doubt particularly satisfying given that it’s taken three years of wrangling between Amazon and Brussels to get to this point as the EU investigated anti-competitive practices in how it handles data from rivals.

Meanwhile, Rishi Sunak under pressure to accelerate anti-strike legislation (Financial Times, Jim Pickard, Delphine Strauss, Federica Cocco and Philip Georgiadis) highlights increased pressure on the PM from Conservative MPs to bring in anti-strike laws as quickly as possible given ongoing public sector strikes. * SO WHAT? * On the one hand, you have public sector workers demanding more pay and on the other side you have the government who will have to foot the bill. When I’ve seen this happen before, everyone starts being very sympathetic but as things drag on and the strikes end up killing businesses (strikes over Christmas will no doubt be the last straw for businesses like pubs and restaurants, for instance), the public mood changes. I think this change will happen faster than normal because of the wider economic malaise but at the end of the day even if the government does manage to push through transport strike legislation early next year it will not take effect until late 2023. It looks like we’re in for a Winter Of Discontent 2.0…

*** NEWS JUST IN – China scraps most testing, quarantine requirements in Covid-19 policy pivot (Wall Street Journal, Selina Cheng) shows that the State Council announced an easing of quarantine and testing requirements in addition to limiting the power of local officials to shut down entire city blocks and impose barriers to domestic travel. What a climb-down by the government! ***

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!

Consumers face ongoing pressures, Marston’s does well, SSP looks to the future, Black Friday proves to be disappointing, Lidl and Aldi continue to rake it in, Asda plans convenience stores and Fenwick departs…

In UK petrol and diesel retailers accused of ‘rocket and feather’ tactics (The Guardian, Alex Lawson) we see that the Competition and Markets Authority is going to deepen its investigation into fuel retailers as it has found evidence of them putting prices up rapidly but cutting them slowly, particularly on diesel. Funnily enough, the CMA has found that this is more likely to happen in areas where there are only a few competitiors in the vicinity and where there is no local supermarket petrol station. As if the price of petrol isn’t bad enough, Cost of Christmas dinner rises by almost 10% (Financial Times, Daria Mosolova and Mark Webridge) cites findings by Kantar which say that the average price of a turkey meal for four will be about £31 this season, 9.3% more than it was in 2021. Disappointing…

On the plus side, World Cup fever boosts drinks sales at Marston’s pubs (The Guardian, Mark Sweney) reflects decent trading at the pub chain as drink sales were up by 50% and Christmas bookings were running above pre-pandemic levels. The chain put this down to the World Cup along with the first “undisturbed” Christmas for three years! Marston’s almost doubled its revenues for the year to October 1st. On the downside, though, it said that operating costs rose considerably due to increased bills for food, drink, labour and utilities. Meanwhile, Airport caterer plans to take off in America after soaring profits (The Times, Dominic Walsh) shows that SSP, the company behind Upper Crust and Caffe Ritazza, posted a return to profit and plans to expand in North America, particularly in airports as they only have a presence in 30 of the largest airports there. The chief exec even went as far as saying that he reckons its US business will overtake its UK business over the next 18 months or so. * SO WHAT? * I guess that SSP has done well to survive through Covid and it now wants to take advantage of the spaces that have been left by businesses who have disappeared. Given an uncertain economic environment, it is a ballsy call to expand – but I guess that this is either going to work or fail spectacularly! The chief exec’s aim is to get SSP into the FTSE100 within the next five years!

I thought that Black Friday status dims as sales in stores fall short (Wall Street Journal, Kate King) was interesting because it highlights the fact that Black Friday, in the US at least, seems to be losing its appeal as sales over the Thanksgiving weekend were disappointing. Most retailers didn’t offer that many promotions connected to Black Friday, instead electing to offer discounts earlier in the season. Given the effect of inflation and what it’s doing to consumer sentiment, I don’t think this is too surprising!

Still, in the UK, Shoppers turn to Lidl as grocery price inflation dips (The Times, Emma Taggart) shows that discounters Lidl and Aldi, according to the latest figures from Kantar. Aldi is still the UK’s fastest growing retailer – and it now has a 9.3% market share versus Lidl’s 7.4% (which is a record for Lidl). Morrisons, on the other hand, continues to lose market share. At the moment, Tesco has a 27.7% market share, Sainsbury’s 15.2% and Asda 14%. I think Aldi and Lidl’s march will continue as I have said many times before, the perception is that they are cheap (well, they are!). No matter how much price matching Tesco and Sainsbury’s do, I think that those searching for bargains will continue to seek out the German discounters. Staying on the subject of supermarkets, Asda plans 300 new UK convenience stores, creating 10,000 jobs (The Guardian, Sarah Butler) shows that the supermarket has plans to come to a high street near you (what is going on here?? We had B&Q saying something similar!). It seems that it has ambitions to overtake Sainsbury’s with its Asda On the Move stores. * SO WHAT? * Great! Just what we need in an economic downturn – more places where we can’t spend money 😭! Still, seeing Asda and B&Q popping up on the high street will be better than vaping and betting shops!

Meanwhile, Fenwick cuts bond with famed home of 130 years (The Times, Tom Howard) marks a sad day for the posh Bond Street department store as it has decided to sell the site to Lazari Investments for a rumoured £430m in a deal that is expected to complete early next year. Even so, the store itself will remain open until the beginning of 2024. Currently, Fenwick trades from nine department stores, including the Bond Street store. * SO WHAT? * Another department store bites the dust! This is just more evidence of the effect of changing consumer behaviour as more people gravitate towards e-commerce.

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!

Electric car battery prices rise, China is in pole position and a British electric 4×4 emerges…

In Electric car battery prices rise for first time in more than a decade (Financial Times, Harry Dempsey) we see that the price of lithium-ion batteries rose for the first time since 2010 thanks to rising raw materials costs. Prices of battery materials such as lithium, cobalt and nickel continue to rise strongly – and I expect that will just continue given that we are all going to have to drive electric vehicles soon enough! It is expected that prices could equate to $152 per kWh next year while the car industry itself continues to aim for a level of $100 per kWh, which is the point at which electric cars will become comparable with combustion engine vehicles. Chinese battery makers set to dominate Europe’s car industry (Financial Times, Peter Campbell and Harry Dempsey) shows that Chinese companies are set to benefit enormously from electrification as their super-strong presence in electric battery making is particularly key given that around 40% of the value of an EV is its battery. According to statistics from Benchmark Materials, China will have a whopping 322 gigawatt hours of battery production capacity in Europe by 2031 with South Korea coming in second at 192 kWh, followed by France and Sweden. It is worth noting that Chinese car brands including the likes of BYD, Great Wall and Nio are all planning major expansion in Europe, so having a battery partner will be particularly useful in helping them to make cars at attractive price points. Battery companies like CATL and

Envision AESC stand to benefit hugely. * SO WHAT? * This is pretty amazing, don’t you think? However, I believe that there is a risk here of relying too much on China as batteries could be to China what gas is to Russia – a very potent weapon to be used in macro discussions. It seems that we are all sleep-walking blindly into this. This is also why I think it is imperative that alternative technologies (like hydrogen) are still pursued because raw materials prices for batteries are just going to go through the roof – even more than they have done already and we will have an even bigger problem then as more people will own electric vehicles.

Then in Britain to build its first all-electric 4×4 after founders get inspiration in Scots Highlands (Daily Telegraph, Daniel Sanderson) we see that Glasgow start-up Munro Vehicles is aiming for its all-electric 4×4 to become the first one to be fully designed and built in the UK, with first deliveries expected to be made next year. Munro reckons it will help firms in the mining, construction, farming and defence industries to cut their carbon fooprint. 50 cars are expected to be made next year at its facility in East Kilbride before it moves to a purpose-built facility near Glasgow in 2024 where it aims to scale up production from 250 to 2,500 units per year by 2027. The car will be priced from around £50,000, be able to run up to 16 hours on a fully-charged battery (about 190 miles on the tarmac) and have a top speed of 80mph. Sounds exciting, no? Mind you, the track record of electric vehicle start-ups has been mixed to say the least – I’d be willing to put a fiver on the fact that deliveries will be delayed 😜.

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!

Airline profits take off, Airbus deliveries hit turbulence and Morgan Stanley announces plans to cut headcount…

In a quick scoot around other interesting stories today, Airlines set for first profit since 2019 next year (Financial Times, Philip Georgiadis) cites the International Air Transport Association (IATA) as saying that it believes the global airlines are going return to profit for the first time since 2019 as the effects of Covid recede. Profits will be very small, but they will be profits nevertheless! There will no doubt be concerns as to how long travel demand will last in the face of recession. Elsewhere in aviation, Airbus cuts full-year delivery target amid supply chain woes (Financial Times, Sylvia Pfeifer) highlights more potential problems as the French

aircraft manufacturer has had to cut year-end delivery targets due to supply chain issues. I suspect the danger here is that demand for flying decreases, resulting in airlines either cutting orders or just not making any new orders.

Then in Morgan Stanley to cut 2,000 jobs amid global recession fears (Daily Telegraph, James Warrington) we see that the US investment bank is cutting headcount as fears increase of a global economic slowdown. * SO WHAT? * Investment banks are all having to rein things in due to lack of IPOs and M&A deals. This is also the time of year that a lot of culling takes place anyway. The deal bonanza of the last few years has meant that this hasn’t been so deep, but that situation was never going to last forever.

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…

I’ve never tried this, but it sounds like it’s worth a shot: Chef swears by ‘fail-proof’ ingredient for moist turkey meat – and it’s not butter (The Mirror, Freddie Bennett). On the other hand, I’ve never tried this, but I am never going to either – climber vs parkour hanging from a bridge: who wins?? Weirdly, this video is actually about ten minutes’ walk from where I live! I have to say that the climber is incredible! He’s trying to out-hang seven parkour guys who hang one-after-the-other. This really is compelling! BTW, I do not recommend you try this – particularly on that bridge! These guys are trained athletes…