Watson’s Weekly 05-04-2025

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.

What a week! Trump caused global chaos, markets tanked and Le Pen was banned for standing for office…

IN WAR NEWS…

• IN UKRAINE NEWS – Trump threatened more tariffs on Russia if Putin didn’t stop dragging his feet on Ukraine negotiations. In the meantime, Baltic countries are concerned that a Ukraine ceasefire would see the Russians regroup and potentially invade.
• IN ASIA – China embarked on major military and coastguard drills around Taiwan but the Taiwanese military conducted its own snap readiness drill for only the second time ever outside its normal annual training schedule. Meanwhile, US defence secretary Pete Hegseth said that America has already begun upgrading its military forces in Japan as part of efforts to build a more robust deterrence against China.

IN DEFENCE NEWS…

• Europeans continue to talk about a post-Ukraine war peace force and will potentially use the existing NATO structure. Discussions are ongoing.
• The UK has put forward an informal paper suggesting the formation of a multilateral fund for a “coalition of the willing” that could borrow on markets at cheaper rates and support defence spending.
• Norway is looking at getting rid of a ban that stops its sovereign wealth fund, the biggest in the world at $1.8tn, from investing in defence companies. It’s about time!!!
• Italy’s Leonardo just won a £165m UK military helicopter contract, an extension of the existing one with the MoD and potentially a sign of things to come with a “buy European” shift.
• Realistically, it’s going to be difficult for Europe to wean itself off American defence equipment know-how for the short-to-mid term. The Stockholm International Peace Institute reckons that, between 2019 and 2023, 55% of Europe’s defence imports came from the US! Still, this represents an opportunity for the likes of Hensoldt, Thales, Saab, Airbus, Leonardo, BAE Systems, Dassault, OneWeb/Eutelsat, MBDA and Rheinmetall

IN TARIFF NEWS…

• Everyone was getting nervous about “Liberation Day”, the day that Trump was going to announce a huge raft of tariffs. Even Musk asked for a special exemption for two pieces of manufacturing equipment from China that SpaceX needs to make Starlink broadband terminals. Starmer was bracing for tariff impact, the EU was talking about retaliatory tariffs and investors were buying gold, which sent it to new heights.
• …and then it came! There was a universal 10% tariff on all imports but there were tariffs that ranged up the scale to around 50% depending on the country. The tariffs announced on this day were additional to those already announced. Apple and other US tech groups got hit badly as they have complicated supply chains that involve some of the most heavily targeted countries.
• Trump’s “Liberation Day” tariffs caused a $2.5tn rout on Wall Street as stocks were sold off on tariff impact. The dollar took a pounding as well and top Republicans were not happy. The tariff “reset” will hit businesses and households domestically and some are saying that this is likely to push the UK, Europe and Asia into recession. America’s effective tariff rate will now be about 22%, its highest level since before WW1.
• Will anyone benefit from the new tariff regime? Potentially companies like TJX (owner of TK Maxx) who resell stock they bought at a discount because “normal” shops are likely to see their inventory pile up as consumers decide not to buy at the higher prices. Supposedly, UK firms could do better because we only got “slapped” with a 10% import tax and this could even things out for us.

IN TRUMP vs THE WORLD…

• vs LAW – Trump’s attack on the law seems to be working as big US law firms aren’t offering “unconditional support” to companies like Perkins Coie who have been targeted by Trump’s regime.
• vs CONSULTANTS – Deloitte has been hit hardest by Trump’s sudden clampdown on spending on consultants as it had more than double the number of government contracts than any other consultancy. Meanwhile, consulting firms offered concessions on how much they were billing the government in a number of ways after being “encouraged” to do so.
• vs MEDIA – Trump continues to push to control his narrative by suppressing the media. Associated Press has been banned from media events because it refuses to call the Gulf of Mexico the Gulf of America. AP is still banned from Air Force One and the Oval Office as it refuses to compromise.
• vs ACADEMIA – Trump continues to attack academic institutions and is currently reviewing the $9bn in federal grants that go to Harvard following allegations of antisemitism. Meanwhile, academics are leaving the US but it’s difficult to tell whether this is markedly different from what normally happens.
• vs EMPLOYEES – the National Labor Relations Board has frozen two cases against Apple just days after Morgan Lewis & Bockius partner Crystal Carey, who acted in Apple’s defence, was made head of of the US labour watchdog. Conflict of interest?? Also, the administration is now telling European companies to comply with Trump’s anti-DEI order and confirm or face consequences. He also fired a number of senior officials from the National Security Council on the advice of far-right activist and conspiracy theorist Laura Loomer for not being “on message” enough.
• vs GREENLAND – the new leader reiterated that the US will not take control and said that Greenlanders want to determine their own future. The US administration continues to refuse to rule out military force to invade and take it over.

IN MUSK THINGS…

• Brands are trying to spend just enough on ads on X to keep Musk happy but not so much that they’ll catch the Tesla-lurgy. Talking of which, the anti-Tesla protests went global as demonstrators called for people a) not to buy a Tesla, b) sell Tesla stock and c) join the “Tesla Takedown” movement.
• Musk seems to be pushing his influence in space by getting one of his mates, Jared Isaacman, to head up NASA. His ultimate ambition is to send people to Mars.
• A Musk-backed candidate lost the race to become Supreme Court judge in Wisconsin, despite Musk backing his campaign to the tune of $25m! Some are now suggesting that his days working in the White House are numbered but he dismissed this as false news.

IN INDIVIDUAL COUNTRY NEWS…

IN THE AMERICAS…

• IN THE US – Trump maintains that he’s up for getting a third term in office, pointing out that there are various ways of getting around the two-term limit. Goldman Sachs reckons there’s a 35% chance that the US falls into recession, revising its previous forecast of 20%.
• IN ARGENTINA – the poverty rate is falling as President Milei’s policies seem to be working.  The poverty rate is now at its lowest level since 2022. He’s still fighting high inflation but the economy seems to be going in the right direction!

IN ASIA…

• IN CHINA – ratings agency Fitch downgraded China’s sovereign debt because it thinks that the government is going to have to spend its way better and because it’s likely to take a big hit from Trump’s tariffs.
• IN SOUTH KOREA – president Yoon Suk Yeol was finally removed from office less than three months into his five-year term. He’ll face criminal proceedings on April 14th and an election will be held in the next 60 days to choose his successor.

IN EUROPE…

• IN FRANCE – Rassemblement National leader Marin Le Pen was convicted of embezzling EU funds, will be fined €100,000 and banned from standing for office for the next five years. This will make standing for the 2027 election impossible as things stand. Will this scupper RN’s bid for power or will it act as a rallying point??

IN MARKETS…

• US stocks had their worst quarter of performance since 2022 as investors worried about the effect of tariffs on world trade, gold prices rose to new heights as investors sought “safe haven” assets and Americans are mixed about the consequences of “Liberation Day”, according to the latest polls.

IN COMMODITIES…

• Trump revoked permits for oil companies in Venezuela, putting further pressure on president Maduro after last week imposing a 25% tariff on all imports from any country that buys oil from Venezuela.
• Thanks to America’s shift in defence commitment to Europe, a number of minerals are seeing a spike in demand. Such minerals include antimony (used to harden lead bullets and making flame-retardant materials), rhenium (used for high-pressure turbine blades for jet engines) but also tungsten, chromium, tanatalum, niobium, cobalt, molybdenum and vanadium.
• Commodity trading houses like Trafigura, Vitol, Gunvor and Mercuria are now spending the collective $57bn in net profits they’ve earned since 2022 on expanding in new areas.

IN CONSUMER TRENDS…

• US consumer spending figures were weaker than expected, stubbornly high egg prices due to the avian ‘flu outbreak are putting shoppers off and dealerships have been doing brisk business as people buy cars before the tariffs kick in.
• UK shoppers boosted retail sales volumes by more than the market was expecting but then again they are now facing “Awful April” where bills for council tax, energy, water, car tax and stamps etc. are all going up. Also food inflation increased as shoppers bought Easter eggs early.
• House prices are up by 4% thanks to the buyer stampede to beat the stamp duty deadline but I would have activity will take a breather for a bit as everyone gets used to higher bills and digests the impact of the Trump tariffs.

IN RETAIL NEWS…

• Shop prices fell, according to the latest numbers from the BRC, thanks to clothing and footwear retailers discounting in order to stimulate demand.
• Lloyds Business Barometer reflected retailer optimism about profit and growth reaching its highest level since August 2015! This sounds like a real contrast to the doom and gloom we’ve been hearing so far!
• WH Smith’s branding on the high street will disappear under new ownership. It will be rebranded “TG Jones” for no apparent reason 🤷‍♀️.
• Primark lost its chief as he had to step down due to “inappropriate behaviour”. This will be tough as he’s been there 16 years and is closely associated with its success. Let’s hope it doesn’t go the same way that Ted Baker did when its founder Ray Kelvin had to leave suddenly. At least Primark has a parent company to help ease things, but still…

IN TECH NEWS…

• IN FUNDRAISING – OpenAI raised $40bn in its latest fundraising round, giving it an implied valuation of $300bn. Google DeepMind’s drug discovery spin-off Isomorphic Labs raised $600m at its first external funding round as investors bet on it “solving” disease.
• IN CHIPS – Samsung has had to pivot from its underperforming US business to increased reliance on China. Samsung said last month that the value of its exports to China boomed by 54% between 2023 and 2024.
• IN SATELLITES – Amazon’s Project Kuiper is on the verge of deploying its satellites to rival those of Starlink. It has a lot of ground to make up but European defence companies are also trying to pool resources to rival the American offering as well.
• Nintendo announced the follow-up to its Switch console. The Switch 2 will launch on June 5th at a starting price of $450 in the US. Hopes are high because it’s been a longer-than-usual gap between launches.
• Raspberry Pi announced its first annual results as a listed company and although they fell, they beat market expectations.
• Microsoft was 50 this week! It has survived a lot and seems to be leaning into AI quite successfully at the moment.

IN MEDIA NEWS…

• Trump-friendly TV company Newsmax floated this week and saw its share price shoot up by 2,200%! It calmed down a bit but still put in a good performance! It’s all a bit strange because its valuation is now akin to that of the much longer-established – and much more revenue-generative – Fox Corp. That being said, it has yet to fully spread its wings regarding monetisation, but there’s a lot of hype here…

IN SOCIAL MEDIA NEWS…

• xAI bought X for $45bn, bringing together two of Musk’s main businesses in an all-stock deal that valued xAI at $80bn. This will combine xAI’s AI capability and X’s sheer reach – a formidable combo!
• Trump initiated a process to ease the sale of his $2.3bn stake in Truth Social. TMTG said this was just a routine filing and was not a sign that he would be selling out (yeah right, they would say that!).
• The White House is getting closer to approving the sale of TikTok’s US unit to investors and is offering to cut tariffs on Chinese goods as an incentive for a deal to be done.

• Chinese megabanks’ net interest margins (NIMs), the measure of profitability, are now at their lowest ever levels thanks to a slowing economy and pressure from the state to boost credit.
• Klarna’s hit a bit of negativity ahead of its much-vaunted IPO. A recent announcement that it would bring BNPL loans to food delivery app DoorDash caused a major wave of derision. Will this PR faux pas delay a flotation?

• BYD’s Q1 sales were flying thanks to domestic demand for its hybrids and solid progress in overseas markets.
• Tesla sales hit their lowest level since Q2 of 2022 but the share price got a boost when the market heard rumours that Musk might be leaving the White House to concentrate on his companies once again!
• Aston Martin just got a nice £125m cash boost from a consortium led by F1 boss Lawrence Stroll to shore up its iffy finances.
• McLaren is going to merge with British EV start-up Forseven as part of a major makeover of the supercar company under its new Abu Dhabi owners.

• Rocket Companies, one of America’s biggest mortgage lenders, announced plans to buy loan servicing giant Mr Cooper. The combined entity will have a loan book worth $2.1tn across 10m clients – the equivalent of one in every six US mortgages!
• Drugmakers including Moderna, Pfizer and GSK were sold off as US Health Secretary Robert F Kennedy’s decided to oust Dr Peter Marks from the FDA. . Kennedy is a known anti-vaxxer and was accused by Marks in his resignation letter of pursuing “subservient confirmation of his misinformation and lies”.
• The UK government decided to overrule planners planners and allow the Luton Airport expansion to go ahead. I guess this is an example of the government cutting red tape in order to ease growth.

It turns out that I included quite a lot of videos of “interesting facts” this week – and my favourite one was this one about the difference between a million and a billion!