Watson’s Weekly 19-04-2025

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.

Tariff turbulence continues, Nvidia has a nightmare and ad spending falls amid global economic uncertainty…

IN TARIFF NEWS…

• There was a lot of initial excitement about a tech tariff exemption that could have helped the likes of Apple and Nvidia but the edge was taken off when US commerce secretary Howard Lutnick said this would only be temporary because they are going to be hit by subsequent semiconductor tariffs.
• IN TERMS OF REACTION TO TARIFFS – Xi Jinping said that there won’t be any winners from the tariffs but also downplayed tariff risks as China has become accustomed to being targeted for many years now! China’s leader also urged Vietnam to resist Trump’s tariff “bullying” as his government told state carriers to cease purchases of Boeing jets and aircraft-related equipment from American companies. Meanwhile, the European Commission is telling US-bound staff to use burner phones over spying fears and UK-US law firm Norton Rose Fulbright’s global managing partner directed staff not to mention “the Trump administration in any way other than factual” and “using emotive language”. He added that “any content relating to President Trump and/or his administration’s policies” should be vetted by the firm’s “US editorial team”. In the US, consumers rushed to buy cars before Trump’s tariff deadline, according to the Census Bureau.
• IN TERMS OF TARIFF CONSEQUENCES – American consumers are going to face difficulties going forward as 90% of microwaves, over 80% of smartphones, about 75% of kids’ toys, 66% of laptops and 50% of ceramic sinks were imported from China last year. Threats of imminent tariffs on pharmaceutical companies has already hit the likes of AstraZeneca and GSK and such tariffs could also hit Botox users as over 90% of US aesthetic injectables are imported. Hopes of a luxury industry revival in 2025 have been dashed and it looks like the number of visitors to the US is falling. The UK government is trying to ease the pain for businesses by suspending import tariffs on 89 products and UK drivers are bracing themselves for price rises on luxury British cars because the makers are likely to want to spread the financial hit across the whole market and across all of their customers.

IN MARKETS NEWS…

• The FTSE100 rallied initially on news of Trump’s latest climbdown on reciprocal tariffs but it’s not clear as to whether Wall Street is fully pricing in the risk of recession, particularly given that there’s still a lot of uncertainty on tariffs and policy.

IN INVESTMENT-RELATED DEVELOPMENTS…

• IN START-UP NEWS – UK start-ups are considering incorporating in the US despite being based over here because they want to get access to deeper pools of capital stateside. British start-ups raised just £16.2bn in 2024, the lowest amount since 2020. Self-driving truck start-up Kodiak announced plans for a SPAC-backed IPO and, while we’re on the subject of flotations, Chinese tea chain Chagee announced plans for its own market debut in New York. Chagee’s IPO could be the second-biggest Chinese listing in the US for over three years, beaten only by EV maker Zeekr in May last year.
• IN INVESTMENT TRENDS – the latest fund manager survey from Bank of America highlighted the ongoing trend of institutional money flowing out of America. It is worth noting that in times of turmoil, the dollar has often been seen as a safe haven asset – but that’s not the case now as it has fallen by almost 10% from the peak it hit in January.
• Disgraced former star fund manager Neil Woodford is launching a subscription-based investment service offering to retail investors. He plans on launching a “community platform” called W4.0 where investors can use his strategies for their own benefit. I think this is a very interesting idea and, who knows, maybe it could become an acquisition target in the future for the likes of Robinhood/eToro etc.

IN TRUMP THINGS…

• Trump is looking to put pressure on the EU to join in with restricting trade with China while China is looking at this as an opportunity to forge deeper ties. China’s recent banning of the delivery of Boeing aeroplanes and parts, which would give Airbus a near-monopoly in China is a recent example of this in action…
• The president is continuing to put pressure on Harvard Uni as $2.2bn of funds are being stopped in retaliation for it defying the government over civil rights laws. Federal funds have also been stopped for other universities including Columbia and the University of Pennsylvania. Trump is also threatening to scrap Harvard’s tax-exempt status.
• The Trump administration has just put a stop to Equinor’s $5bn New York energy project, in the latest nail in the coffin for renewable energy. This doesn’t bode well for other US offshore wind projects.

IN INDIVIDUAL COUNTRY NEWS…

• IN THE US – Fed chief Jerome Powell warned that Trump’s policies will make it much more difficult to achieve the goals of keeping inflation under control whilst maximising employment. The WTO warned that the tariffs will hit global trade this year and expressed concern about the “decoupling” of the US and China. Goldman Sachs’ boss David Solomon reckons that the chances of a recession have increased because of the tariffs but he’s hoping that Trump will listen to what corporate America is saying.
• IN CHINA – the latest data from China’s National Bureau of Statistics showed that the country’s GDP grew by a solid 5.4% in Q1 this year, but I guess that the tariff/trade shenanigans aren’t completely reflected just yet…
• IN THE UK – inflation unexpectedly fell to 2.6%, making it more likely that the Bank of England will cut interest rates but the positive effects may be snuffed out by the effects of the trade war and rising household bills. That being said, the CEO of WH Smith reckons that the tariff war could lead to a fall in UK inflation as east Asian suppliers look for alternative trading partners to the US. The UK government came to the rescue of the ailing steelworks in Scunthorpe and secured raw materials for British Steel’s furnaces whilst also prompting questions about the shortcomings of having Chinese owners of critical national infrastructure.

IN COMMODITIES NEWS…

• Oil and gas companies with North Sea assets have been merging operations with each other to save on taxes. By having loss-making companies team up with profitable ones, they are collectively saving billions in tax liabilities!
• The gold price broke $3,300 for the first time as investors continue to seek out safe havens to weather the current economic storm.

IN CURRENCY NEWS…

• Bank of America’s Global Fund Manager Survey reflected the highest level of investor pessimism about the dollar since May 2006! It also said that a net 53% of global investors plan to reduce their exposure to US equities – another record high.
• Meanwhile, Russia’s rouble is the world’s best-performing currency, according to Bloomberg stats, as it has strengthened by 38% against the dollar since the start of the year! It’s even outperformed gold over the same time period!

IN CONSUMER TRENDS…

• Hispanic customers are reining in their spending in the US as Trump’s administration is threatening mass round-ups of illegal immigrants. Research from Circana says that Hispanic shoppers are spending less on discretionary items than other groups after two years of spending more.
• A Barclays survey shows that 71% of people are planning on buying more items that are “Made in Britain” as concerns increase about the effect of tariffs on British businesses.
• UK consumers are seeing asking prices for homes hitting new highs, according to Rightmove, so it’ll be interesting to see whether an expected mortgage war among lenders will stoke this further,
• Consumers are being bombarded on social media with appeals to buy direct from suppliers in China and “cut out the middleman” but suppliers like Nike, Lululemon and others say that the only way to buy their merchandise is through official channels.

IN EMPLOYMENT TRENDS…

• ON JOBS – Job vacancies have now fallen below pre-Covid levels, according to the latest data from the ONS, while unemployment stayed unchanged at 4.4%. It’s worth saying that these stats don’t take into account the effect of Trump’s tariffs. Meanwhile, Hays became the latest recruiter to warn about an uncertain outlook for the job market.
• ON WAGES – UK wage growth increased in the three months to February, according to the latest ONS data – and this was before the implementation of the higher employer NICs and increase of the national living wage. Meanwhile, business groups continued to warn about the detrimental effects of the forthcoming Employment Rights Bill. One of the major worries is that the legislation will make it easier to strike.

IN TECH NEWS…

• IN CHIPS – Nvidia announced plans to build supercomputer factories in the US as part of a wider plan to build $500bn of AI infrastructure in the US but then the market reacted badly to news that its H20 chip, which had been designed to get around the chip export restrictions to China, is covered by new rules that will require Nvidia to get a special licence to sell it into China. This was a shock for Nvidia, other tech stocks were sold off on the news, and the US House of Representatives China committee is now looking into whether and how DeepSeek managed to source export-controlled chips to power its AI app that caused a storm earlier this year. Elsewhere, Intel sold a 51% stake in its programmable chip business to PE firm Altera as part of efforts to raise cash and catch up with rivals like Nvidia. It was also shocking to hear that ASML, the company that makes the machines that makes the chips, said that orders over Q1 were weaker-than-expected and that the outlook wasn’t great.
• Google is being sued for £5bn in a class action in the UK facing allegations that it has excluded rivals in internet search and is using its dominance in the market to overcharge businesses for advertisements.  This is going to be a case to watch!
• IN SOCIAL MEDIA – The FTC is accusing Meta of becoming a “monopoly power” thanks to its acquisitions of Instagram and WhatsApp and the blockbuster trial could potentially end with Meta’s break-up! Separately, it was also interesting to hear that research from the Fair Tax Foundation showed that the “Silicon Six” (Amazon, Meta, Alphabet, Netflix, Apple and Microsoft) have paid almost $278bn less in corporate income tax over the last decade than they should have done whilst also inflating their stated tax payments by a whopping $82bn over the same period. Naughty naughty. It was also very interesting to see that OpenAI’s founder Sam Altman is talking about building a social media platform to rival X. This could be pretty interesting, particularly if it incorporated ChatGPT in some way. We talk about this on Episode 926 of the podcast this week…

IN MEDIA NEWS…

• Advertising giant Omnicom is cautious about the outlook for 2025 because it’s not sure how tariffs are going to affect marketing budgets. Temu and Shein have slashed their US advertising budgets considerably on Meta, X and YouTube and say that they will raise prices later on this month.
• In the UK, advertisers have cut their spending for the first time in four years thanks to tariff turmoil. I guess they’re all limiting outgoings until there’s more certainty on tariffs.

• IN THE US – home improvement retailer Lowe’s is to buy Artisan Design Group in a deal worth $1.33bn from PE firm Sterling Group. The deal is expected to close in Q2 this year.
• IN EUROPE – LVMH sales dropped sharply over Q1, allowing rival Hermès to take its spot as Europe’s most valuable luxury company. I think that this is particularly impressive because LVMH is a collection of some of the world’s most powerful brands whereas Hermès is “just” Hermès!
• IN THE UK – the latest data from KPMG and the BRC showed rising sales in March, British retailers are pushing for the government to act and stop the likes of Shein and Temu flooding the UK with cheap product and B&M saw its business in France save the overall business from the UK’s sluggish performance.

• Carmakers got a brief respite as it looked like Trump might suspend/reduce the 25% import tariffs he threatened – but he didn’t give any details.
• Tesla sales fell in Cali over Q1. The aging product line-up and backlash at Musk’s political affiliations and DOGE activities aren’t helping Tesla’s cause.
• In the UK, the AA warned that EVs break down more than petrol vehicles, contrary to popular belief. Meanwhile the head of Polestar UK moaned about the government’s decision to ease ZEV targets – but then again, of course he would given what he does for a living!

• IN FINANCIALS NEWS – Wall Street banks had a bumper Q1! Goldman Sachs, JP Morgan Chase, Morgan Stanley, Citigroup and Bank of America all benefited from volatility caused by Trump tariff and policy uncertainty. However, the key question is whether this is “good volatility” (where trading opportunities abound and banks make money from being at the centre of it all) or “bad volatility” (where Trump’s unpredictability leads to eventual inaction and banks make no commissions). Either way, volatility has led to falling merger and underwriting activity.
• Hitachi Rail’s British train factory has managed to develop a new type of battery system that can power intercity trains rivalling more established operators Siemens and Alstom! This sounds like a great development!

My fave video this week was the one about how to spend $40m on a private jet 😎! At least you now know what to do when you are in that position 👍