Wednesday 10/05/23

1. In BIG PICTURE & OIL NEWS, China investment in Europe drops, Erdogan dishes out pay rises, firms hire temps, confidence in the UK property market has a wobble and Saudi Aramco sees profits fall
2. In CONSUMER & RETAIL NEWS, bills look set to stay big, supermarkets face scrutiny over prices and John Lewis’s chair faces a vote
3. In TRAVEL NEWS, holidaymakers spend, Ryanair goes shopping and Airbnb has a mixed outlook
4. In INDIVIDUAL COMPANY NEWS, Glencore plans a battery recycling plant, LinkedIn shuts down in China and Direct Line has a tough time
5. AND FINALLY, I bring you little-known facts about crisps and why pubs have weird names…

So China investment falls, Erdogan pays up, temp employment rises, UK property has a wobble and Saudi Aramco disappoints…

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:

Chinese investment in Europe falls as watchdogs increase scrutiny (Financial Times, James Kynge) cites findings of a study by Rhodium Group (a research company) and Merics (a think-tank) which show that Chinese investment into Europe dropped to its lowest level since 2013. Researchers found that at least 10 out of 16 investment deals initiated by the Chinese last year did not complete in the tech and infrastructure sectors, mainly because of objections by regulators in the UK, Germany, Italy and Denmark. Covid was also probably a factor. * SO WHAT? * Given that more countries are becoming increasingly paranoid about dealing with China, this is hardly surprising. I would imagine that there will be more tightening to come – and there may be actions that are taken retroactively!

Meanwhile, Erdogan hands pay rise to 700,000 public workers ahead of Turkish vote (Financial Times, Adam Samson) shows that the Turkish president has decided to bribe offer a fat pay rise of 45% to a huge number of lower-level public workers just days before an election that is expected to be very tight. * SO WHAT? * This vote is set to be the closest one that Erdogan has had to face in his long reign and he will no doubt be hoping that this would swing it for him. However, although these workers will no doubt be pleased about their rise, they need it because he’s responsible for the quite frankly ridiculous levels of inflation (currently at 43.68%)! His mismanagement of the economy is what could swing it for the opposition if they manage to get their act together.

In the UK, Firms hedge bets by hiring temps instead of permanent staff (The Times, Arthi Nachiappan) cites the latest monthly poll

by REC and KPMG which shows that the number of people hired for permanent roles dropped at the sharpest rate for over two years in April while the number of temps being hired increased by the sharpest rate in seven months! The number of candidates also increased, though, thanks to redundancies and more people looking for higher-paid roles as inflation continues to hit spending power. * SO WHAT? * This would imply that employers are getting jittery about the prospects for the economy and that temps are easier to cull than permanent staff. However, this does sound somewhat at odds with other recent surveys which show renewed confidence. I also wonder whether the findings reflect increased efforts on the part of companies doing more permanent recruiting in-house and perhaps bypassing headhunters to save money on the fee they charge given that there is a receptive pool of candidates out there in the market.

Then in UK housing market fears as Marshalls and Purplebricks shares slide (The Guardian, Julia Kollewe) we see that the combined gloom of landscaping supplier Marshalls and online estate agent Purplebricks sent their respective share prices south whilst also putting pressure on the wider sector. The market was particularly harsh to Purplebricks which saw its share price decimated by an eye-watering 60% yesterday to leave it at just 2p! * SO WHAT? * Clearly there are company-specific problems here and the worry is that they reflect underlying problems elsewhere in the sector. Marshalls blamed an uncertain macroeconomic environment, lower rates of new housebuilding and sluggishness in maintenance and investment activity – but I think that investors would have taken to heart its observation that the National House Building Council (which dishes out warranties for buyers of new-build homes) reported a 27% fall in the number of new homes started in Q1. Purplebricks, though, is already on the rocks after putting itself up for sale in February, so I guess this latest gloomy outlook is no surprise.

In oil, Aramco sweetens its profit slide with dividend pledge (The Times, Emily Gosden) shows that the world’s biggest oil company actually unveiled a 20% fall in profits (because of lower oil prices and a cut in production) but cushioned the blow by announcing additional dividends.

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!

Bills are set to stay high, supermarkets face scrutiny and John Lewis is set to vote…

Households face another year of £2,000 energy bills (Daily Telegraph, Rachel Millard) cites the latest research from Cornwall Insight which reckons that household bills are set to stay at elevated levels until at least Q1 of 2024. Whilst this figure is a lot less than the current level of £3,280 it is still higher than the £1,138 price cap that was set in mid-April 2021. * SO WHAT? * Higher utility bills will linger for a while longer and I wonder whether prices will go up later in the year as France in particular buys in gas due to its depleted storage capacity (UK prices tend to move in line with those of Europe, so more frenzied buying from the French will probably put upward pressure on prices).

In retail, How supermarkets are keeping their prices up (Daily Telegraph, Daniel Woolfson) shows that supermarkets are facing pressure as politicians, shoppers and farmers are accusing supermarkets of profiteering and “greedflation”. In response, Sainsbury’s announced that they would cut the price of bread and butter thanks to weaker wheat and dairy prices. Although the price of a loaf has now been cut by 10p to 75p now, this is still 20p above what it was in February 2022, according to data from Assosia. Lib Dem leader Sir Ed Davey is calling for an inquiry into “greedflation”, saying that supermarkets and food manufacturers are using inflation as an excuse to pump up their own prices. * SO WHAT? * This sounds like the whole petrol thing all over again with the “rocket and feather” phenomenon (when oil prices go up, petrol prices go up rapidly, like a rocket – and when oil prices come down, prices at the pump fall slowly, like a feather), which sounds plausible, particularly since the ONS got in on the act earlier this year by pointing out that the cost of food had risen by 19.2% in the year to March despite international food prices falling. Supermarkets plead innocence though, saying that their profits have fallen thanks to higher energy, transportation and labour costs. Ultimately, I think that this is a dangerous game for

supermarkets (especially the “Big Four”) to play as it will just mean that Aldi and Lidl will continue to take market share because, as I have said before, perception counts for a huge amount. If people think that they are being over-charged, they will just end up going to the discounters…

Then in John Lewis boss faces confidence vote as business considers ways to seek new funds (The Guardian, Sarah Butler) we see that the chairman of John Lewis, Dame Sharon White, is going to be facing a vote of confidence today as she considers dramatic moves to bring in money and boost revenues. She will today give an update to the 61 members of the John Lewis Partnership council at a two-day meeting. There will be two votes – one on whether it has confidence in the progress of the partnership under her leadership and the other on whether it can continue to support the chairman to take the business forward. Interestingly, although the vote isn’t binding, the business is owned by the staff and the council has the power to give the chairman the boot at any point should the members seek to do so. * SO WHAT? * As regular readers of Watson’s Daily will know by now, I think that Dame Sharon White has done a pretty mediocre job at John Lewis at best. She’s got zero background in retail (although she was a bit of a legend in the public sector prior to joining), has weird ideas that faff around at the periphery of the business and has repeatedly shirked what she should be doing all along – sorting out the core businesses of department stores and supermarkets. She’s now even threatening the partnership structure of the company. I think they should vote her out. She’s done a lot of the unpopular stuff like closing down stores (but I’d argue that she’s had an easy ride on that because she could use Covid as an excuse to close stores) so now maybe she should get the boot in favour of someone who actually knows what they are doing. She even brought in another no-hoper with zero retail experience (presumably a stooge who could just carry out what she said). If employees keep her in, it would be like turkeys voting for Christmas IMO 🦃 🎄.

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!

Holidaymakers keep spending, Ryanair buys a load of planes and Airbnb has a mixed outlook…

High-spending holidaymakers fill airlines’ first-class and business seats (Financial Times, Philip Georgiadis, Sarah White and Claire Bushey) highlights great momentum for airlines as Lufthansa has seen strong demand for first-class and business class flight bookings (with leisure travellers snapping them up and more than making up the lack of business travel!), something that Air France-KLM has also seen trending. Global airlines body IATA said that premium passenger numbers hit 86% of 2019 levels in February. Recent results from US carriers like American Airlines, United Airlines and Delta Air Lines also pointed to the same phenomenon. Etihad, Lufthansa, Delta and Qantas are among those who have invested in their premium offerings.

However, it’s not just premium flights that are “flying” off the shelves, Ryanair to buy up to $40bn worth of Boeing aircraft and create 10,000 jobs (Financial Times, Sylvia Pfeifer and Philip Georgiadis) shows that cheapo airline Ryanair is now feeling

confident enough to put in a chunky order for planes and employ a whole raft of staff. The airline said that this would enable it to boost traffic by 80% over the next ten years. * SO WHAT? * What a turnaround for the whole industry! It was not so long ago that staff were being culled in epic proportions and I think that the thirst to travel is particularly impressive considering the backdrop of a cost-of-living crisis. This confidence really does seem to stretch across the board in the whole travel industry. When business travel eventually starts to kick in again, I would expect airlines to get another boost!

That said, Airbnb Shares Fall as Company Issues Mixed Outlook (The Guardian, Konrad Putzier) shows that although Airbnb posted better-than-expected revenue and profits for Q1, customers made fewer-than-expected stays and it was also fairly downbeat about the outlook. Its share price fell by 11% in trading yesterday, but I expect that was down to the growth of its gross booking value (the total amount that customers spend on bookings on Airbnb) not being as impressive as at rivals Booking Holdings.

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!

Glencore makes a big announcement, LinkedIn China shuts down and Direct Line has a rough ride…

In a quick scoot around some of today’s other interesting stories, Glencore plans Europe’s biggest electric car battery recycling plant (Financial Times, Harry Dempsey) shows that the natural resources giant is planning to build Europe’s largest battery recycling plant whilst simultaneously growing its core business to supply the electric vehicle industry. It’s launching a joint study with China’s Li-Cycle into building it in Italy by 2027! * SO WHAT? *This makes a lot of strategic sense IMO as it will help Glencore control more of its “food chain” – and if there’s an area that’s even more ripe for growth than EVs, it’s EV battery recycling IMO! Amazing! The feasibility study is due to complete around the middle of next year.

LinkedIn Cuts More Than 700 Jobs Worldwide, Closes China App (Wall Street Journal, Newley Purnell and Rachel Liang) shows that

LinkedIn is shutting down its China-focused jobs app, InCareer, and cutting 716 jobs worldwide as it reacts to slowing revenue growth and evolving customer behaviour. InCareer, which is basically a simplified version of LinkedIn without social feeds, will be phased out by August 9th as it cited major competitive pressure and a difficult economic backdrop. * SO WHAT? * Fair enough really when you consider that domestic players 51job.com, Zhaopin and Liepin.com had a combined market share of over 70% as at 2021!

Then in Direct Line warns of fresh pressure on earnings from inflation (Financial Times, Ian Smith) we see that the company warned that rising costs of vehicle repairs could dent its earnings this year. Direct Line: new chief executive must repair dented car insurer (Financial Times, Lex) shows that the incoming chief exec has got a job on their hands to bring the company back to profitability. The relative success of rival Admiral shows that it can be done, though – even in this environment!

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…

There’s a bit of a pub theme going on in this section today! Firstly, here’s something about crisps: People are just learning all Walkers crisps have unusual ‘best before’ detail on packet (The Mirror, Danielle Kate Wroe) and here’s a very convincing explanation as to why pubs have unusual names. These are two amazing bits of knowledge that you can throw into any conversation that will instantly make you the most interesting person in the room. Maybe.