Friday 16/05/25

Trump administration considers adding Chinese chipmakers to export blacklist (Financial Times, Demetri Sevastopulo) highlights more potential Trump clampdowns as his administration is debating the addition of a selection of Chinese chipmaking companies onto the dreaded “entity list”. SMIC and YMTC are already on the list but companies including ChangXin Memory (CXMT) and subsidiaries of the aforementioned are potential candidates, although there is some push-back in the Bureau of Industry and Security because they say it might adversely affect ongoing US-China trade discussions. * SO WHAT? * Being on the “entity list” is a big deal because it means that American companies can’t sell to Chinese groups without government licences – and those licences have been getting harder to obtain.

US Supreme Court weighs power of judges to halt Donald Trump’s orders nationwide (Financial Times, Stefania Palma) is an interesting article which highlights debate in the Supreme Court about whether individual federal judges are able to block Trump’s executive orders on a national basis. * SO WHAT? * Given that Trump seems to be dishing out executive orders at a rate of knots, the implications here could be pretty big. At the moment, opinion is split. A decision on this is expected by June or early July.

In EU leaders urge Starmer to improve mobility deal in last-ditch ‘reset’ talks (Financial Times, George Parker and Andy Bounds) we see that European leaders will today try to urge PM Starmer to relax his stance on youth mobility and fisheries as everyone jockeys for position ahead of Monday’s UK-EU summit. These two areas have been sticking points so I guess we’ll just have to wait and see what happens!

Meanwhile, UK economy defies gloomy warnings to grow 0.7% in first quarter of year (The Guardian, Richard Partington) cites the latest ONS data which shows that the UK economy grew at its fastest pace in a year in Q1 this year despite fears of a collapse in activity. This was driven by the dominant services sector and GDP rise and a less scary outlook offer Rachel Reeves some rare cheer (The Guardian, Heather Stewart) suggests that this will have taken a bit of the pressure off the government which has been under a bit of pressure recently over tax and spend and the rise of Reform in the local elections. They will be keen to take the 0.7% increase in Q1 GDP as a win and vindication of its policies.

In Chinese ‘kill switches’ found in US solar farms (Daily Telegraph, Matt Oliver) we see that “kill switches” have been discovered in American solar farms that can render equipment useless remotely. They were found inside inverters manufactured by some unnamed Chinese companies but such inverters are key components for solar and wind farms. It is thought that having such equipment creates “a built-in way to physically destroy the grid”. * SO WHAT? * The Chinese have dismissed this but it’s caused a commotion in the US and Ed Milliband has been urged to suspend his green energy push to see whether UK solar plants are also vulnerable. The problem is that China’s dominance in solar panels has all but killed off everyone else’s capability. Whether or not this is sensationalist propaganda designed to fuel paranoia, it’s another blow to Milliband’s net zero targets.

Walmart Becomes Biggest Retailer Yet to Pass Through Tariff Price Increases (Wall Street Journal, Sarah Nassauer) shows that the American retailer announced that it would be raising prices this month and early this summer as goods affected by tariffs hit its shelves. It has already had to raise some prices. Fun fact: Walmart counts 90% of Americans as customers! Walmart’s Price Hikes Open Door to Increases From ‘Everybody Else’ (Wall Street Journal, Jeanne Whalen, Inti Pacheco and Justin Lahart) suggests that this is just going to be the beginning of broader price hikes – and that it’s going to start pushing up inflation. Given that retail runs on very thin margins, Walmart has had no choice but to take this course of action.

Then in Dick’s Sporting Goods to Buy Foot Locker for $2.4 Billion (Wall Street Journal, Lauren Thomas) we see that America’s biggest sports retailer has announced a bid for the embattled Foot Locker that will give it a global presence. It’s an all-cash offer and is pitched at a near-90% premium to Foot Locker’s share price, which has cratered this year. Dick’s said that it will keep Foot Locker as a stand-alone business division and maintain its brands. Dick’s deal with Foot Locker is a risky retail two-step (Financial Times, Lex) reckons that this is an expensive gamble and a lot of work will be required to revamp the increasingly-tired looking Foot Locker after the latter’s revenues have been shrinking for the last three years. * SO WHAT? * This comes shortly after 3G Capital bought Skechers and is presumably a reaction to Trump’s tariffs. It seems that this sector is ripe for consolidation! As far as this deal is concerned, if the merger is approved, footwear will account for almost 50% of Dick’s total sales, a major increase from 28% last year. Dick’s will no doubt hope that it will be able to leverage its size to get decent prices from suppliers like Nike.

Back home, Is Burberry’s job-slashing shake-up enough to save the troubled brand? (The Guardian, Lauren Cochrane) highlights Burberry’s current travails as it announced 1,700 job cuts following a 117% drop in profits. It would be fair to say that Burberry has been a victim of the global slowdown among most luxury goods companies (with Hermès and Prada being notable exceptions) but some if its problems have been of its own making as it has allowed things to slide somewhat. Why the new Burberry is worth checking out (Financial Times, Lex) shows that the brand seems to have stemmed its decline and it has fared less badly versus its peers since Christmas, which might explain why investors seemed to give it the better of the doubt on this latest news.

At the more realistic end of retail, Ex-Tesco executive Tjeerd Jegen to head B&M European Value Retail (The Times, Isabella Fish) shows that experienced retail exec Tjeerd Jegen has just been made the new CEO of B&M and will replace the interim guy on June 16th. His annual base salary would be £928,000 but he could earn an additional maximum annual bonus of 250% of his base. This guy has got his work cut out for him but perhaps current consumer uncertainty will work in his favour…

I thought that Weight-loss drugs boost health food sales at Holland & Barrett (The Times, Isabella Fish) was an interesting article because it provides yet another example of how consumer behaviour has changed since the advent of weight-loss drugs (remember recent news of Weightwatchers filing for bankruptcy??). * SO WHAT? * The retailer has benefited from people on weight-loss drugs increasing their consumption of healthier snacks and drinks and is now reformulating a lot of its products to keep up the momentum! The firm has been on a bit of a roll and said that “strong growth” momentum was continuing.

In consumer trends news, US beef off the menu despite trade deal, says sandwich boss (Daily Telegraph, Eir Nolsoe) reflects the view of Greencore, the sandwich-making giant that supplies all major UK supermarkets, which is that although a US-UK trade deal has been signed, it won’t mean anything if consumers don’t believe in American food standards because they just won’t buy them! * SO WHAT? * OK, so Greencore doesn’t currently source from the US, but I think it makes a valid point. Any kind of rise in American food imports is going to need a decent marketing campaign given all the bad press on chlorinated chicken and hormone-treated meat. At the same time, I think that the pandemic in particular taught us the value and importance of growing our own food. Pressures on farmers have been intensifying already, what with new government legislation – so this is the last thing they need right now.

Elsewhere, British holidaymakers ditch US for Canada over Trump (Daily Telegraph, Christopher Jasper) shows that contrary to what it said recently, British holidaymakers are increasingly switching holidays to the US for ones in Canada, according to Tui. That being said, Virgin Atlantic has been reporting strong bookings for American breaks, partly thanks to the improved pound-dollar exchange rate. Tui’s client base appears to be robust currently against the trickier macro backdrop. * SO WHAT? * It’s interesting to see this “Trump effect” take hold but I wonder whether it will just fade away as everyone just gets inured to his dramatic policy actions.

Meanwhile, going in the opposite direction, US homebuyers seek UK haven to escape ‘Trump effect’ (The Times, David Byers) cites research by Rightmove which shows that the number of inquiries from the US about UK homes rose by 19% in Q1 this year versus the same period last year. Edinburgh seems to be the most inquired about place (but I bet that falls off when they see the somewhat “unique” way property is sold in Scotland!) but I’d rather go to Andermatt 😁. Some wealthy Americans have been looking at moving their money and would-be students have been looking at going to uni in the UK all as a result of concern prompted by Trump’s economic policies.

Trump says he has a ‘little problem’ with Tim Cook over Apple’s India production (The Guardian, Dan Milmo) highlights a potentially very tricky problem as the president has expressed his annoyance at Apple’s plans to switch production of iPhones from China to India. He said “Tim, you’re my friend. You’re coming here with 500bn but now you’re building all over India. I don’t want you building in India”. * SO WHAT? * On the one hand, I just don’t think that building iPhones in the US is possible without handset prices skyrocketing to levels that customers won’t be willing to pay (read this for more of an explanation). On the other, I also think that Trump is keen to do a lot of business with India. Therefore, I think that he is going to negotiate some kind of deal here because there is no sense in intentionally hobbling one of America’s best tech companies and annoying a trade partner with huge potential.

Meanwhile, Nvidia plans Shanghai research centre in new commitment to China (Financial Times, Zijing Wu) shows that the chip giant is looking at building an R&D centre in Shanghai that would help it to remain competitive in the Chinese market. Sales have weakened of late because of the tightening of US export controls, so this could be useful for Nvidia. Core design and production will still remain overseas, however.

Then in EU takes action against TikTok over online content rules (Financial Times, Barbara Moens) we see that the European Commission announced yesterday that it is getting closer to fining TikTok following an in-depth investigation under the EU’s Digital Services Act regarding transparency in online advertising. TikTok is currently under a huge amount of pressure so this is just another headache to add!

In a quick scoot around some of today’s other interesting stories, Japan’s electric car battery bet is running out of juice (Financial Times, Lex) highlights the nightmare situation of Japan’s EV battery industry. Back in the day, Panasonic was the world leader in EV battery tech but that position has been chipped away at by Chinese makers over the intervening years. Now, its share of the EV battery market has fallen from its dominant position in the early 2010s to less than 5% in 2024 versus Chinese rival CATL’s almost-40% of the market. * SO WHAT? * Japan’s once-powerful carmakers have grown weaker over the years as they failed to capitalise on the early advantage they had with hybrid technology and their finances just haven’t been able to power a renaissance. If they don’t sort this out soon, their EV battery industry will just die.

Online brokers: More animal spirits than London Zoo (Finanical Times, Lex) highlights Wednesday’s flotation of online broker eToro, whose share price rose 29% on its debut! It seems that there’s a tangible uptick in retail investors trading to the extent that the NYSE and other exchanges are looking at extending out-of-hours trading to capitalise on it. Crypto trading in particular is growing strongly. * SO WHAT? * There’s such an array of different types of online brokers out there including the likes of Robinhood, Charles Schwab, Futu, Tiger Brokers and XP all with different types of customers with different regional strengths. It sounds to me like there is a lot of scope for consolidation here!

Elsewhere, EY delays start dates for consulting recruits for third year in a row (Financial Times, Stephen Foley and Ellesheva Kissin) shows that the new intake for its EY Parthenon US strategy and deal advisory business have been told that they will now be needed “no sooner than March 2026” due to “uncertain and evolving market conditions”. * SO WHAT? * This is clearly the impact of a deal pipeline that has just dried up! It seems to me, though, that deals and flotations are starting to pick up. Current activity seems to be involving rivals getting together to weather tariff storms and those that just desperate to float and get a currency. IMO, it will take longer for the juicier deals to get going, but momentum seems to be building.

Business investment in UK expands at fastest pace in two years (The Times, Mehreen Khan) cites the latest data from the ONS which shows that business investment in the UK expanded at its fastest rate in two years over Q1. Most of the business investment was in transport, aircraft, IT and machinery. * SO WHAT? * Along with that higher-than-expected GDP growth figure I mentioned earlier, it seems that the UK economy is not in as dire a state as some had been fearing. Have we now passed the worst of the wage rise and NIC impact??

I haven’t made this dip yet – but it does look pretty spesh, don’t you think?? I will definitely try to make this…