Thursday 23/05/24

1. In MACRO & COMMODITIES NEWS, Sunak calls an election, inflation doesn’t behave, the US gets pernickety and BHP’s final offer looks insufficient
2. In TECH NEWS, Nvidia’s revenues climb, China has hopes for “Chat Xi PT” and OpenAI signs a deal with the WSJ’s owner
3. In RETAIL NEWS, Amazon pumps up its distribution, Target announces weaker sales and M&S booms
4. In CAR NEWS, China asks carmakers to buy local, EU car registrations jump but Tesla sales drop
5. AND FINALLY, I bring you some amazing kitchen gadgetry…

So Sunak calls an election, inflation misbehaves, the US gets funny and BHP looks set to fail in its bid…

Hello everyone! It’s me again! Yes, as I have said before, I am NOT officially publishing Watson’s Daily this week as I am taking this week “off” to build a library of extra materials. I just needed some time to write and film them whilst also formulating new social media content. HOWEVER, I FELT THAT I COULDN’T LEAVE YOU HANGING AFTER YESTERDAY’S ANNOUNCEMENT BY SUNAK, so here it is 👍 Watson’s Daily will officially return on Tuesday 28th May. You may not see the updates instantly, but I shall let you know when the big “switch-over” takes place this summer. I think you will love what’s to come!

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:

Rishi Sunak bets the house by calling snap election for July 4 (The Times, Steven Swinford, Oliver Wright, Chris Smyth and Geraldine Scott) shows a rather damp Rishi Sunak announcing an early general election, saying that “now is the moment for Britain to choose its future”. He even took his own Cabinet by surprise with the announcement. The economic stars aligned for an early election. The Tories had nothing left to lose (Daily Telegraph, Jeremy Warner) observes that with a much better-than-expected Q1 GDP growth, rare positivity from the IMF saying that the UK is likely to have the fastest growth rate over the next five years of any G7 country other than the US and inflation getting closer to normalising, Sunak probably thought that the economic news isn’t going to get much better than this and that he might as well surf this wave. The fact that there’s not much wiggle room to dole out the tax cuts even if the government waited until November also probably forced Sunak’s hand. How Rishi Sunak shocked Westminster with a snap general election (Financial Times, Lucy Fisher, George Parker and Rafe Uddin) shows that he has been thinking about a summer election over the last six weeks, but particularly over the last fortnight. Still, the snap election announcement caught even close allies by surprise. An end to Britain’s uncertainty and drift (Financial Times, the editorial board) contends that although the decision to call an election may not prove to be in the government’s best interest, it’s probably in the country’s best interest because it means that the country won’t be in limbo – which it would have been had things been allowed to drag on until November. After all, Labour currently has a 20 point-plus lead in the polls and the Conservatives lost a ton of seats in the most recent local elections! Labour leader Sir Keir Starmer promises change and an end to Tory ‘chaos’ (Financial Times, Jim Pickard) shows that Starmer’s Labour Party stands ready to “return Britain to the service of working people” and promised a break from the “chaotic” Conservative governments of the last 14 years. If he manages to keep the lead that the polls are giving him at the moment, he will get a big House of Commons majority which means he will find it much easier to push through big changes. Still, Wages, the NHS and migration: the Tories’ record in charts (Financial Times, Anna Gross) is quite an interesting read as it shows that real wages are only slightly higher than they were in 2010, NHS waiting lists have swelled considerably over the last decade (although Sunak will argue that this has been largely due to the backlog stemming from the pandemic), net immigration has soared despite Brexit and home ownership has become increasingly unaffordable. Ouch. * SO WHAT? * Although the government has come under a lot of fire it is worth saying that our current situation could be far worse – in the dark days of the Truss-Kwarteng mini-budget aftermath, the Bank of England was predicting one of the longest recessions in

recent memory and a doubling of unemployment by 2025 – both of which have been avoided with the dynamic 🤣 duo of Sunak and Hunt. Also, the government provided a reasonable support package to help households through the energy price shock – all of which has led us into what looks like a potential economic “soft landing”. Despite all this, prices are still high (they’ve gone up by over 20% over the last three years) and although mortgage costs have cooled off of late, they are still much higher than they used to be – so voters are not likely to be keen about “more of the same”. An end to Britain’s uncertainty and drift (Financial Times, the editorial board) highlights four areas that need to be addressed by the next government – firstly, how to ease the strains on the NHS and social care, education, police and the courts, local authorities and defence spending; secondly, how to raise the money to finance the improvements; thirdly, how to level up areas and bolster efforts to make the green transition; fourthly, how to improve the UK’s competitiveness via the City and financial services and benefit from new growth sectors such as AI (and maybe even crypto!). If Labour does get into power, it will have been an impressive turnaround from 2019 when Corbyn managed to deliver the Labour Party’s worst result in almost a hundred years as BoJo romped it with a big majority in the Commons. Meanwhile, NatWest share sale thrown into doubt by UK election in July (Financial Times, Akila Quinio) shows an immediate implication of the election announcement as UK government plans to launch a share sale to the UK public could potentially be postponed.

Meanwhile, UK inflation falls by less than expected to 2.3%, reducing chance of June rate cut (The Guardian, Phillip Inman) highlights UK inflation falling to within spitting distance of the Bank of England’s 2% target, but the market had been expecting it to fall to 2.1%. It seems that annual services inflation remains stubbornly high at 5.9% for April, just a whisker down from March’s 6%. UK inflation: which goods and services have changed most in price? (The Guardian, Phillip Inman) is an interesting read that goes more into the detail – did you know that the price of olive oil has gone up by 41.7% over the last year?!? – but Why a summer rate cut is still in play despite inflation ‘shocker’ (Daily Telegraph, Szu Ping Chan and Eir Nolsøe) shows that although markets have pushed back expectations of the first interest rate cut back from June to November, the fact that both the governor and deputy governor of the Bank of England have very recently made strong hints that interest rates will be cut this summer means that it’s still on the cards. In fact, Bank of England will cut interest rates in August, says Goldman Sachs (Daily Telegraph) shows that Goldman Sachs and BNP Paribas reckon that August will herald the first cut.

In news that isn’t about elections or the higher-than-expected inflation figure, US questions UK claims that China is providing ‘lethal aid’ to Russia (Financial Times, John Paul Rathbone and Max Seddon) shows that US national security adviser Jake Sullivan questioned Britain’s defence secretary Grant Shapps over his allegations that China provided Russia with “lethal aid” for it to use in the war with Ukraine, saying that he would seek further clarification. * SO WHAT? * Although China has stopped short of endorsing Russia’s invasion of Ukraine thus far, if what Shapps says is true, it would then show that China’s stance has shifted. If that is acknowledged by the Americans then you would have thought that there will be even more sanctions to come…

In mining news, Anglo American extends deadline for BHP takeover after rejecting improved bid (Financial Times, Harry Dempsey and Tom Wilson) shows that the two companies are keeping takeover talks alive and now BHP has until 5pm UK time on May 29th to make a formal bid after making a third proposal. Anglo American says that it still has “serious concerns” about the deal structure but BHP’s ‘final’ offer doesn’t look enough to woo Anglo American (Financial Times, Lex) suggests that the bid looks like it will fail as things stand currently.

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!

Nvidia does it again, China makes advances in AI and OpenAI signs a deal with the owner of the WSJ…

Nvidia’s revenue soars 262% on record AI chip demand (Financial Times, Michael Acton) shows that Nvidia’s revenues skyrocketed over the last quarter, coming in above already high expectations, thanks to super hot demand for its AI chips. Chief exec Jensen Huang added that the break-neck growth rate was going to continue this year thanks to the launch of a new line of even more powerful chips! Nvidia continues to smash it! The company said that demand for the existing Hopper chips continues to be strong ahead of the launch of the new Blackwell line…

China’s latest answer to OpenAI is ‘Chat Xi PT’ (Financial Times, Ryan McMorrow) highlights the launch of China’s newest LLM which has been trained on Xi Jinping’s political philosophy, known as “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era”, in addition to other content approved by the Cyberspace Administration of China (CAC). The model is currently being used at a research centre, overseen by the CAC, but the intention is to roll it out more widely. It can answer questions,

generate reports, summarise information and translate between Chinese and English. * SO WHAT? * I’d say that this further cements Xi’s position as leader as the rollout of this model will make it much easier for people to easily access his philosophy. I guess the main danger here is of the AI “hallucinating” and pumping out incorrect information…

Then in OpenAI, WSJ Owner News Corp Strike Content Deal Valued at Over $250 Million (Wall Street Journal, Alexandra Bruell, Sam Schechner and Deepa Seetharaman) we see that News Corp, the owner of the Wall Street Journal, has just signed a major content-licensing agreement with OpenAI to access News Corp’s consumer-facing news publications to answer user questions and train its tech. The deal is thought to be worth over $250m over five years. * SO WHAT? * This is the latest content licensing deal to be announced between OpenAI and publishers including Axel Springer, the Associated Press, Le Monde and the FT. It bodes well for the quality of content but a balance needs to be found where the quality of journalism can be maintained or improved 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!

Amazon focuses on logistics, Target announces weaker sales and M&S booms…

Amazon Is Reviving Its Logistics Expansion and Reshaping Its U.S. Distribution (Wall Street Journal, Liz Young) shows that the post-pandemic pullback in logistics expansion is now being reversed and it is now buying up industrial property whilst streamlining its existing network to accelerate package delivery and push shipping costs down. Amazon has now bought, leased or announced plans for over 16m square feet of new warehouse space in the US, adding to its existing footprint of about 413m square feet of industrial real estate in the country. It is also planning to double the number of its same-day fulfillment sites. * SO WHAT? * There is a really interesting change in strategy going on here as Amazon is now aiming to get sellers on its platform to spread inventory across more locations rather than in fewer centralised places, which will enable much faster delivery. I guess that companies like Amazon and Walmart want to compete with the likes of Temu and Shein on delivery if they can’t compete on price…

Target Reports Another Sales Drop (Wall Street Journal, Sarah Nassauer) shows that comparable sales fell for the fourth quarter in a row as sales of home goods, furniture, apparel and food weakened. CEO Brian Cornell said that this was thanks to squeezed household budgets leading to consumers spending

more on services, which meant that there was less to spend on other purchases. That being said, he did say that the company was seeing some signs that discretionary spending was improving. * SO WHAT? * Discretionary items form a significant part of Target’s sales, which explains the weakness to some extent – but then again it seems to be losing market share in food and other items to rivals. The company is trying to boost performance by doing an overhaul of its member-discount programme and focusing on lowering prices, particularly on everyday items such as food.

Marks & Spencer boss hails ‘growth story’ as annual profits rise 41% (The Guardian, Sarah Butler) highlights a stellar performance from M&S thanks to decent grocery sales and winning new customers – particularly the under-30s. It also announced its first dividend payment since 2019, cost cutting is proceeding apace and CEO Stuart Machin boasted that the company was in “the best financial health it’s been in decades”. He also sounded pretty optimistic about the outlook and Why this M&S turnaround should finally stick (Financial Times, Lex) observes that initiatives to modernise are bearing fruit. However, even though M&S still faces big obstacles in the form of IT upgrades and how to improve the performance of its international business and its digital presence you’d be inclined to give it the benefit of the doubt and let the momentum continue – its share price has shot up by almost 80% over the last year! It certainly seems to be doing the right things.

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!

China asks carmakers to source domestically and EU car registrations rise but Tesla’s sales weaken…

In a quick scoot around some of today’s other interesting stories, China asks carmakers to use up to 25% local chips by 2025 (Financial Times, Cheng Ting-Fang, Lauly Li and Shunsuke Tabeta) shows that China’s Ministry of Industry and Information Technology has asked carmakers including SAIC Motor, BYD, Dongfeng Motor, GAC Motor and FAW Group to increase their use of locally-procured automotive-related chips to 20-25% by next year, with an eye to increasing that ratio further. At the moment, local automotive chip supplies currently only make up 10% of chips used. * SO WHAT? * At the moment, this is not mandatory, but makers will be incentivised via an award or credit system. The goal is “to eventually use all locally made chips for automobiles” – another example of China decoupling from Western supply chains. Still I imagine this will take some time given that the current share is so low and that reliability and safety concerns make car-makers reluctant to change suppliers. Texas Instruments, Infineon, ST Microelectronics, NXP and Renesas are among the foreign suppliers benefiting from use of their chips in Chinese vehicles.

In EU Car Registrations Jump on Growth in Major Markets, Extra Sales Days (Wall Street Journal, David Sachs) we see that new car registrations were up strongly in April thanks to Spanish, German, French and Italian customers snapping up vehicles and two extra selling days over the Easter holiday. Fully electric vehicles registrations were up by almost 15% giving them a market share of around 12%, ICE vehicle sales rose but market share weakened to 36% while hybrids continued to perform strongly. However, Tesla suffers sales slump as European electric car subsidies slashed (Daily Telegraph, Matt Oliver) shows that Tesla’s sales fell off a cliff as countries including Germany and France took the knife to EV subsidies. It saw its sales fall by 8% across Europe and the UK over the first four months of this year. Tesla had already warned that sales would be “notably lower” this year thanks to higher interest rates and tougher competition. * SO WHAT? * It is a well-known fact that tariff cuts have an immediate effect on EV sales. This just proves the point!

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…

Jake Schogger sent this over to me the other day, saying that it was “Watson’s Daily-worthy” 🤣 and I agree with him! The guy on this reaction video is very amusing – and some of the gadgets are pretty impressive as well!