Watson’s Weekly 26-04-2025

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.

IN UKRAINE & DEFENCE NEWS…

• Putin seemed to offer to halt the Ukraine invasion, Trump promptly blamed President Zelenskyy for being an obstacle to a peace deal while Putin conducted a major airstrike on Kyiv. The drama continues…
• US defence secretary Pete Hegseth is in hot water again, this time regarding revelations of discussing sensitive military information with members of his family. Meanwhile, US aerospace and defence groups are warning of higher costs from the Trump tariffs and  some of them are already reining in their earnings forecasts. Germany continues to repurpose its manufacturing capabilities from automotives to military equipment. Meanwhile, Britain is about to expand the manufacture of explosives as BAE Systems has adopted new production methods.

IN TARIFFS/TRADE NEWS…

• OVERALL – the IMF said that “Global financial stability risks have increased significantly” because of Trump’s tariffs, US Treasury Secretary Scott Bessent tried to calm fears by implying that a de-escalation in the US-China trade war is being pursued but US trade officials are still on the attack on Chinese companies manufacturing and exporting from Asia. Back in the UK, Ed Miliband made a major policy U-turn and will force GB Energy to avoid all “slavery and human trafficking” in its supply chain, meaning that all solar panels, wind turbines and batteries must not contain materials that could have been produced using slave labour. A lot of the world’s polysilicon originates from the Xinjiang region, which is where human rights abuses of the Uighur population are alleged to be taking place.
• REACTION – China demanded that the US “completely cancel all unilateral tariff measures” if it wanted any kind of engagement on trade talks. It also confirmed that there are are currently “no economic and trade negotiations between China and the United States” despite Trump’s comments to the contrary. Beijing warned countries not to get trade deals with the US “at the expense of China’s interests”. Chinese state-backed funds have been pulling back on investment in the funds of US-headquartered private capital firms in response to pressure from the government. Meanwhile, DHL has suspended high-value shipments to the US due to customs clearance bottlenecks in the wake of new US rules.
• CONSEQUENCES – Gold pushed through $3,500 for the first time and the dollar weakened against the pound as investors continued to be sceptical despite US markets rebounding. Corporate America has turned very pessimistic and pharma bosses are calling for higher drug prices in the EU to narrow the differential with US prices. UK luxury brands are being hit as DHL has decided to suspend shipments to the US because of the extra costs, jobs at UK luxury car plants are looking tricky (because they export a lot to the US) and UK manufacturers will start cutting jobs “within weeks unless ministers can strike a trade deal”. In terms of individual companies, independent vendors on Amazon and Walmart are letting stock pile up in Canadian warehouses in the hope that the White House will roll back its massive tariffs on China while Boeing investors are bracing for the impact of Trump’s tariffs.
• OPPORTUNITIES – Air India said that it’s keen to buy jets from Boeing that would have gone to China but are being rejected because of the tariffs, Swiss Alps ski village Andermatt has benefited from nervous rich Americans buying bolt-holes to escape to outside the US and, going the other way, America is going to benefit from Swiss pharma giant Roche’s promise to build a massive weight-loss drug manufacturing facility somewhere in the US as part of plans to invest $50bn in the US to head off expected tariffs.

IN MARKETS NEWS…

• US markets fell earlier this week because it sounded like Trump wanted to fire Fed chief Jerome Powell but then they rebounded when he backtracked on this and added that he was going to be “very nice” to China in trade talks.

IN TRUMP THINGS…

• Harvard Uni continues to be under attack via a funding freeze and is fighting back in the courts to get access to funding. He went on to accuse US universities more widely of breaching foreign donation laws.

IN INDIVIDUAL COUNTRY NEWS…

SOUTH KOREA – the country’s economy contracted over Q1, which is unsurprising given domestic political turmoil and rising concerns about the effects of the Trump tariffs. GDP fell by 0.2% quarter-on-quarter over the period, according to the latest data from the Bank of Korea.

THE UK – the UK economy had a tough time in April thanks to the impact of tax (and bill!) rises as well as Trump’s tariffs and UK borrowing costs soared as business activity contracted at its fastest rate for two years. Elsewhere, Rachel Reeves looks like she’ll follow Donald Trump in closing the “de minimis” loophole that has benefited the likes of Temu and Shein so much while negotiations with the EU about a youth working visa deal are getting closer.

IN COMMODITIES NEWS…

• Oil price weakness continued and Ryanair took the opportunity of locking in low fuel prices for the next two years via “hedging” a “significant” amount of its future fuel requirements.
• Petrol prices are falling as a result of weak oil prices and activist hedge fund Elliott Management has increased its stake in BP via various instruments and will continue to pressure the oil major to cut its green ambitions.

IN CURRENCY NEWS…

• A new bitcoin acquisition vehicle called Twenty One Capital is about to launch thanks to a reverse merger with Cantor Equity Partners, Brandon Lutnick’s SPAC. Brandon is the son of US commerce secretary Howard Lutnick.
• Trump’s memecoin shot up in value by over 50% on the announcement that the president himself would have dinner with the top 220 holders next month at the Trump National Golf Club in Washington on May 22nd where they will hear him talk about “the future of crypto”.

• “BIG” NEWS – the EC fined Apple and Meta €500m and €200m respectively for breaking rules on fair competition and user choice under the new Digital Markets Act. Alphabet beat forecasts for Q2 thanks to robust sales in its search advertising business and announced a whopping $70bn share buyback programme as well!
• CHIPS – SK Hynix saw its profits double as customers stocked up on memory chips ahead of the US tariffs. It also overtook Samsung Electronics – for the first time – to become the world’s biggest DRAM chipmaker. Meanwhile, Intel announced job cuts as part of broader cost reductions as the new CEO continues efforts to turn the company’s fortunes around.
• SOCIAL MEDIA – Ofcom announced codes of practice for social media platforms to follow in order to protect children from adult content under the Online Safety Act. This is one of the biggest set of changes regarding how we access social media in the UK.
• MEDIA – Comcast’s revenues managed to beat market expectations but profits fell by 12.5% and it lost more broadband customers than expected as LA fires hit theme park revenues.

IN CONSUMER TRENDS…

• UK consumer confidence hit its lowest level since 2023, according to the latest GfK stats, thanks to Trump tariff concerns and higher bills incurred during “Awful April”.

IN CONSUMER GOODS NEWS…

• Adidas almost doubled operating profits in Q1 despite trade tensions and continues to pull away from rivals. It was interesting to see, though, that the company did not mention its 2025 targets at its preliminary results announcement. More details to come next week.

IN RETAIL NEWS…

• Asda is aiming to double the number of convenience store openings this year as part of plans to turn the company around. I think that this is a tired strategy that’s been used before and if Asda does what everyone else has done, it’ll just get lost in what all its rivals have already done. Could it try to be brave and be more like a Japanese “combeni” to differentiate itself rather than be just a smaller version of its larger stores??
• Momentum at Halfords is gathering pace, according to its latest trading update. Its motoring business now accounts for about 80% of sales while biking accounts for 20%. Could we see Halfords ditch bikes and concentrate on motoring?
• Kering sales fell in Q1 as Gucci sluggishness continues. This is going to be a big turnaround job for the newly-appointed creative director!

• China’s CATL announced a major breakthrough with an EV battery that can absorb a 520km charge in just 5 minutes! This is even better than the battery announced last week by BYD and could be an absolute game-changer for EV take-up. Ralph and I talk about this in the weekly podcast HERE 🎙️
• Chancellor Reeves is looking at cutting US car import tariffs and Trump is considering a tariff exemption for car parts.
• Musk said he’s planning on stepping back from his White House work to concentrate more on Tesla, which is just as well considering sales have plunged dramatically in Europe despite overall EV sales in the bloc rising. On the plus side for Musk, it sounds like the US transport secretary is going to loosen the rules on self-driving cars on US roads. Ralph and I talk about what the future might hold for Tesla in the Weekly podcast HERE 🎙️
• Nissan slashed its annual guidance and announced major cuts to its global production capacity and headcount. Tariffs won’t make things any easier either.

• Nomura is buying Macquarie’s US and European asset management units in a $1.8bn all-cash deal as part of efforts to shift its focus towards wealth and asset management.
• Private equity firms are having a tricky time at the moment because volatile markets are a) making the offloading of assets much harder/impossible and b) making investors nervous, prompting them to want fund withdrawals (which is difficult because PE firms generally hold illiquid assets).
• Specialist M&A firms are facing difficulties because expected deal flow has not materialised because of US policy and tariff concerns. They can only last so long without deals given their big cost base of expensive bankers.
• Revolut saw its annual profits breach the £1bn mark for the first time and it’s now on track to offer a banking service in the UK this year.
• Former EY and PwC bosses are launching a new accounting and consulting firm, Unity Advisory, to become an alternative to the Big Four. It’s PE-backed and will offer tax and accounting but not audit, which might help speed things along. Meanwhile, Grant Thornton US is expanding its global footprint with PE backing by buying smaller sister firms in Europe and the Middle East. Mid-tier accountancy firms continue to consolidate.

• The office vacancy rate has started to fall for the first time since 2020, according to data from CoStar, as office workers continue to return.
• Current focus on our exposure to China following what’s happened at Scunthorpe and what’s going on with tariffs is highlighting the difficulties of having China as an investor in key infrastructure.
• Democratic lawmakers are warning top law firms that the deals they’ve made with Trump could violate federal and state laws and pointed out that there are many “conflicts of interest” in the deals. This sounds pretty toothless to me as there appears to be no stopping Trump and what he wants to achieve.

My fave video this week was the one about “Beerbonara” 🤣! How anyone could have come up with that is still beyond.