Watson’s Weekly 29-03-2025

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE COLOURED HIGHLIGHT 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.

It was another week of drama, tariffs and tantrums…

IN WAR NEWS…

• IN UKRAINE NEWS – US-Ukraine talks resumed in Saudi Arabia, the US pushed for a new critical minerals deal and then angled for more while Europe seems to be cobbling together a “reassurance force” for a post-war Ukraine.
• IN GAZA – Hundreds of Gazans protested in the streets against Hamas. Protestors wanted Hamas out and Hamas accused protestors of betraying the cause.
• ELSEWHERE – Taiwan held its first realistic and broad-based civil defence drill since the end of the 1990s, reflecting just how seriously it’s taking the threat of China. Also, the EU is looking at calling for households to stockpile 72 hours of food as the risk of war from Russia rises while Sweden announced plans to jack up spending on defence from 2.4% of GDP to 3.5%.
• IN DEFENCE NEWS – Britain’s leading manufacturer of military gas masks and breathing apparatus, Avon, announced new NATO and European navy deals as European defence spending rises. The MoD also awarded a £1bn contract to Babcock to develop and maintain tanks, armoured vehicles and other equipment for the British Army. There was an interesting article in the Daily Telegraph debunking the fear of Americans switching off jet fighters/weapons that we use but I think that the Trump administration’s disdain for Europe and transactional style of diplomacy is reason enough for Europeans to make a concerted and long-term effort to rely much less on American-made defence equipment.

IN TARIFFS/TRADE NEWS…

• Moody’s joined the chorus of voices saying that Trump’s tariffs “weigh on business investment, dampen consumer confidence and prevent the Fed from reducing rates”. He remains undeterred though!
• The US extended its existing export blacklist to make it even more difficult for Chinese companies to develop advanced AI chips.
• Trump announced a 25% tax on all imports from countries that buy oil from Venezuela. Top buyers of Venezuelan oil include China, India, Spain and Italy.
• Carmakers ramped up the shipping of vehicle exports to the US before Trump imposed 25% car import taxes. He’ll be announcing more tariffs next week on what he calls “Liberation Day”.

TRUMP TOOK ON THE LAW…

• The week started with the chairman of major US law firm Paul Weiss doing a deal with Trump after it became subject to an executive order that the former said “could easily have destroyed our firm”. This followed censure of Perkins Coie and Covington & Burling but although Paul Weiss’s chairman was criticised for not standing up to Trump, no other firms were willing to side with him so he had to do a deal where his firm would have to provide $10m worth of legal services pro bono on an annual basis for the next four years. Trump then went on to attack Jenner & Black and rounded off the week with targeting WilmerHale. Trump seems to be working his way down a list of targets that he believes wronged him in the past.

MUSK FELT SOME HEAT…

• Utah’s Republican voters were up in arms about DOGE’s massive cuts to local IRS offices. Things have got so heated that the party leadership has advised members to hold virtual town hall meetings instead of in-person ones. Well they are the ones that voted Trump in…
• Starlink’s global rollout has been losing momentum as potential customers react to Musk’s political actions – and this could be a problem for him because about 50% of Musk’s net worth is now tied to SpaceX, Starlink’s owner.

IN INDIVIDUAL COUNTRY NEWS…

• IN THE US – top US officials shared classified details of military strikes with a journalist in an unofficial Signal chatgroup. Trump professed to know nothing about it and efforts continued throughout the week to dismiss it as a serious matter. FWIW, I think that this is a serious matter but maybe Trump deems it to be too early in his tenure to get the axe out. However, if any of the main actors in it muck up in future I’m sure this will be raked up…rich Americans in America and around the world seem to be moving their assets to Switzerland due to the uncertainty about the effect of Trump’s policies. One specialist wealth manager observed that the last time there was a surge in interest like this was during the financial crisis!
• IN CANADA – current PM Mark Carney declared the old Canada-US relationship to be “over” and committed troops to “take on a greater, sustained and year-round” Arctic presence at a time when Russia and America seem to be jockeying for position in the region for shipping and other strategic purposes.
• IN CHINA – Beijing decided to punish Hong Kong billionaire Li Ka-shing, whose CK Hutchison did a deal to sell its interest in two ports in the Panama Canal to the Americans after pressure from Trump, by ordering state-run companies not to do any deals with the conglomerate. This means that the deal done with Blackrock could yet get reversed!
• IN EUROPE – Spain’s GDP grew by an impressive 3.2% last year versus Germany’s 0.2% contraction and France’s more sedate growth of 1.1% but you do wonder what’s going to happen to this if the government decides to up its defence spending…meanwhile, the main credible opponent for Turkey’s president Erdoğan, Ekrem İmamoğlu,  got arrested on allegations of corruption. İmamoğlu accused Erdoğan of “weaponising the judiciary” to cling on to power. Sound familiar??
• IN AUSTRALIA – current PM Anthony Albanese called for a May 3rd election, kicking off a five-week campaign. He’s probably trying to lean into his momentum in the polls as his main opponent, Peter Dutton is suffering from being seen as a “Temu Trump”.
• IN THE UK – chancellor Reeves announced the Spring Statement but the welfare spending cuts and shrinking of the civil service had been well-flagged. However, it’s still possible that Trump’s policies could eclipse any savings she could make with tariffs. Confidence is evaporating among UK food and drink manufacturers and businesses continue to express frustration and anger to the CBI about rising labour costs resulting from the government’s policies. Meanwhile, the government is looking at how to minimise the impact of its digital tax on US tech groups, presumably to suck up to the Americans in order to encourage them to be more lenient on us.

IN MARKETS…

• Trump’s policies continue to weigh on the dollar and US equities and they have resulted in market volatility, which makes trading very tricky.

IN COMMODITIES…

• Orange juice prices have fallen from record highs as consumers have been ditching the increasingly bitter drink (crop quality has got worse over the last few years so OJ just isn’t as sweet as it once was).

IN CRYPTO NEWS…

• World Liberty Global, the crypto venture backed by Trump and his family, is going to launch a stablecoin called USD1 that will be fully backed by US treasuries, dollars and other cash equivalents. It will use the ethereum network and a blockchain created by Binance. He wants to be the crypto president and it looks to me like he’s got the freedom of doing whatever he likes here and no-one’s going to stop him! Will everyone pile into this?
• Fidelity announced plans to launch its own stablecoin which is designed to act as cash in crypto markets. Will more asset managers follow?

IN BUSINESS TRENDS…

• UK private sector growth hit a six-month high, according to the latest S&P UK PMI, showing that output growth in this segment hit a six-month high in March. Services companies have said that order books improved for the first time this year thanks to a rise in both domestic and international sales. This is welcome good news for the UK in all the 💩 that’s going on at the moment.
• Chinese exporters are struggling with the reality of losing trade with the US and are looking at ways to mitigate it. This will be difficult because the US has been such a key market for so long.
• European satellite companies such as Hispasat, Eutelsat and SES are now in a race to catch up with Starlink in order to bridge the massive lead that Musk’s company has built up. It’s going to take a long time as Starlink is waaaaaaay ahead at the moment!

IN CONSUMER TRENDS…

• IN THE US – the latest Conference Board figures shows that US consumer confidence is its lowest point for four years and future expectations hit a 12-year low, sinking below a level that is usually associating with an economic downturn.
• IN UK PROPERTY – the latest ONS figures show that housing affordability in England and Wales has returned to pre-pandemic levels of 7.7 (the multiple of wages to house price), down from a peak of nine times in 2021. Separately, the government boasted about spending £2bn per year on building affordable homes in the 2026-2027 financial year, but this is actually less than the amount identified by the previous government…

• BYD’s annual sales broke the $100bn barrier for the first time as it benefited from selling both EVs and hybrids.
• Tesla’s sales in Europe fell by almost 45%. Some say that this is a function of an ageing model line-up and a pause ahead of the launch of the new Model-Y, but it could also be a result of the pushback from his political involvement kicking in.
• Trump imposed 25% tariffs on car imports, wiping billions of dollars off the valuation of most carmakers. Makers from Mexico, Canada, Japan and Korea were hit hardest. Carmakers who make most of their product in American (like Tesla) and those who mainly avoid the market (like Renault and Chinese EV makers) stand to gain the most.

IN “TOP DOWN” NEWS…

• Malaysia said it would crack down on Nvidia chip flows to China but China imposed some new energy efficiency rules that could severely hit Nvidia’s existing chip business in the country. Nvidia is going to be conducting talks to resolve this issue as it could put a massive hole in their revenues if the Chinese enforced this as is.
• The European Commission is looking at making more of the AI Act voluntary rather than compulsory despite criticism that this could blunt its protections and faced criticism for watering down the rules.
• The EU is looking at cracking down on Big Tech in response to Trump’s 25% tariffs on car imports. Potential measures at the EU’s disposal include restricting the IP of Big Tech companies and banning Starlink from winning government contracts.
• Chinese AI start-ups are rapidly responding to DeepSeek’s success and widespread adoption. Zhipu, 01.ai, Baichuan and Moonshot have all changed their respective focuses in order to remain relevant so it’ll be interesting to see how this works out.
• London-based AI start-up Synthesia has started to offer company stock to the human actors that bring its digital avatars to life. The new stock programme will be offered to its most in-demand avatars and this represents an alternative way to pay them that could be adopted by others in the industry.
• CoreWeave did its flotation after all but raised way less than it had intended to. Volatile markets aren’t good for IPOs, so this perhaps made the company look pretty desperate.
• Nintendo said that it would announce more details of its forthcoming Switch 2 console next week on “Liberation Day”.
• Ubisoft got a $1.25bn investment from Tencent for a new gaming division that will comprise of its biggest titles. This should held to bolster its balance sheet and take the pressure off a bit.

• Morrisons announced the closure of convenience stores, cafes and counters as part of efforts to “optimise its operations and to help mitigate recent significant cost increases”. It’s thought that 300 jobs would go as a result.
• Next announced strong results as it breached the £1bn mark in annual profits for the first time and announced a positive outlook. However, it warned that Labour’s worker rights reforms are going to be a “huge burden” for employers.
• H&M had a tricky Q1 and fell short of market expectations. It blamed a rise in discounting, higher marketing spend and “negative external factors” as the main drains on profit.
• Lululemon’s quarterly performance was good but it said that it thought that increasingly cautious customers will result in slower sales growth this year.

• The FCA is going to cut over 100 pages out of its regulations that cover consumer finance, investments and mortgage lending. This sounds great until you realise that there are over 10,000 pages in its rule book 🤣.
• Standard Chartered’s chairman said that he thought turmoil in the US market might give London the opportunity to shine in IPOs. I think he’s living in an alternate universe if he really believes this. If markets are volatile over there then they make markets volatile everywhere and, as I’ve said before, companies hate floating in such conditions. That being said, the LSE should lean into this and see if it works…
• Jefferies had a disappointing quarter, implying that its rivals will also underperform market expectations due to economic uncertainty and tariffs chipping away at investor confidence. Jefferies is a purer play than most on advisory because, unlike its rivals, it doesn’t have a commercial banking business. It looks like the IPO prospects for 2025 have been overhyped…
• HSBC fired investment bankers on bonus day and gave them zero bonuses. It’s not usually done this way and fired bankers often get some part of their bonus when this happens because the bonus is supposed to reflect what they’ve done rather than what they are about to do. However, I think the new leader is trying to make a point.

• IN REAL ESTATE NEWS – Segro entered into a JV with Pure Data Centres to develop a £1bn data centre in Park Royal to the west of London to tap into the ongoing AI frenzy. This will be Segro’s first fully-fitted data centre, with hopes of completion in 2029. In construction news, Vistry is pinning its hopes on the government’s £2bn affordable homes promise after a torrid 2024. I would imagine that investors will temper any excitement here with a huge dose of scepticism here given what a turkey this company has proved to be.
• Fevertree announced a strong performance in the US for the full year – in fact, so much so that its US revenues overtook those of the UK!

For me, my favourite video this week was the one of the very skilful chocolate cake maker! Amazing!