Tuesday 29/06/21

1. In MACRO AND OIL NEWS, the Swedish PM resigns and Opec is expected to up production
2. In JOBS, CONSUMER & HIGH STREET NEWS, employee shortages continue, UBS champions WFH, buyers face a stamp duty hit, the staycation bonanza has its wings clipped, Greggs is on a roll and JD Sports buys Spanish
3. In CAR-RELATED NEWS, Tesla looks vulnerable in China, Nissan is about to boost Sunderland, EV charging rollout may leave some behind and Lookers sees strong vehicle sales
4. In MISCELLANEOUS NEWS, Facebook joins the $1tn club, a Coca-Cola bottler buys Italian coffee, Leon is to open its first drive-through and Juul has to pay out $40m
5. AND FINALLY, I show you how to make a Percy Pig McFlurry…

So the Swedish PM resigns and OPEC meets up this week…

Sweden’s prime minister resigns but warns against snap election (Financial Times, Richard Milne) highlights discord in the country as the speaker of the parliament now has four attempts to put together a new government following the PM’s decision to resign. The nationalist Sweden Democrats have been making a lot of ground since they first entered parliament in 2010 and are the country’s third biggest party. * SO WHAT? * I think that coalition governments are a nightmare because everyone has different agendas, making it extremely difficult to get anything done (especially if it’s difficult). The current crisis was sparked by the Left party joining the Sweden Democrats and others in the opposition, which then led to a no-confidence vote in the PM, Stefan Lofven. At the moment, everyone is in limbo because Lofven doesn’t want an election during a pandemic (or because he’d lose?) that would take four months to organise.

Meanwhile, in Oil/Opec: new supply should cap prices below $100 (Financial Times, Lex) we see that although some observers are mooting the possibility of oil prices at $100 per barrel, this article argues that OPEC is likely to decide to increase production at its meeting this week, which will therefore cap its upside potential for the moment. * SO WHAT? * The oil price is up by 48% so far this year, world demand remains strong and oil majors including BP and ExxonMobil, have cut exploration spending by 39% in the three years to 2020. On the other hand, there’s still loads of room to pump out more oil as output is still way below pre-pandemic levels and with demand arguably likely to increase as economies continue to open up, if you were an oil producer and knew you could sell all your product YOU’D want to sell more of it wouldn’t you?? We’ll see soon enough, though. If they decide NOT to produce more you wonder whether all the members and non-members will hold to it as I would have thought that the temptation will be too great to sit tight.

Employee shortages continue to emerge, UBS touts WFH, buyers are increasingly likely to face a big stamp duty hit, the staycation boom may not reach its full potential, Greggs powers through and JD Sports buys a Spanish business …

In news on jobs, Lorry driver shortage: UK government and retailers in emergency talks (The Guardian, Sarah Butler) shows that officials from the Department for Environment, Food and Rural Affairs (DEFRA) have been talking to retailers, logistics groups and wholesalers about the shortage of lorry drivers as it looks increasingly likely that gaps will start to appear on supermarket shelves. * SO WHAT? * Various industries, including hospitality and agriculture, have been making increasing noise about employee shortages as a combination of Brexit and the pandemic have sent a number of non-British workers back to their home countries. For instance, truck driving in the UK has been dominated by eastern European drivers in the last few years, but they have left – meaning that deliveries don’t get made and stock gets left behind (or perish). The overarching official line will no doubt be something along the lines of “well that’s what Brexit’s all about – encouraging the employment of British as opposed to foreigners”, but I guess if there aren’t enough Brits to do the job, exceptions are going to have to be made to encouraged foreigners back in. It’ll be interesting to see if there’s a change in visa laws to allow foreigners to come back to professions where demand is particularly acute, something that Combat staff shortages by relaxing immigration rules (The Guardian, Richard Partington) deals with. I would have thought that this will have to happen sooner rather than later otherwise problems will just escalate at a time when the economy is just starting to get back on its feet again.

I’ve been talking a lot recently about how the workplace is changing in a world that is slowly emerging from Covid and it has been interesting to see investment banks getting increasingly feisty about returning to the office. Many employers want the freedom to make their own decisions on this without outside interference, Deutsche Bank wants juniors to return to the office full time, while companies like JP Morgan, Morgan Stanley and Goldman Sachs are really upping the pressure to get people back into the office.

Most UBS staff given option to work at home (The Times, Katherine Griffiths) shows that the Swiss bank is moving against the grain by saying that up to two thirds of UBS employees are to be allowed to work from home part-time. Staff will need to get confirmation from their line managers about their roles being “eligible” for hybrid working, but I don’t think it’s going to be completely flexible! Still, nice attempt to get people to join their lovely cuddly bank instead of stay on at those nasty hard-hearted ones who actually want you to go into the office 😂.

In consumer news, Buyers face bigger stamp duty hit as house prices soar (Daily Telegraph, Rachel Mortimer and Louis Ashworth) shows that house price rises, powered by buyers trying to beat the stamp duty holiday, are pushing more properties into the 5% stamp duty bracket, meaning more money for the Treasury! Things are so hot in the property market at the moment that homes sold in an average of 22 days in May, the fastest rate for five years! Estate agents are talking a good game at the moment, saying that they expect house prices to continue to increase past the stamp duty deadline and that there will be a second wave of city-dwellers moving out to the ‘burbs. * SO WHAT? * Real estate agents have to be positive given that have a massive vested interest. They could well be right, but a rise in interest rates and higher unemployment due to the end of furlough could still cause a shock. Also, it’s possible that the whole WFH thing proves to be ephemeral, meaning a stop to the exodus from cities. There is talk about a return of foreign buyers, but I think that will also depend on the strength of the pound.

With regard to other things that we spend our money on, Lack of hotel beds to curb staycation economic boost (Daily Telegraph, Tom Rees) shows that the current staycation boom may not reach its full potential because of capacity constraints, Greggs on a roll as recovery in sales arrives piping hot (Daily Telegraph, Julia Bradshaw) shows that the people’s baker is coming back strongly after a nightmare year as customers returned in higher-than-expected numbers post-lockdown and JD Sports snaps up Spanish online retailer for £120m (Daily Telegraph, Laura Onita) highlights the acquisition of an 80% share in Deporvillage, a Catalonia-based online retailer of cycling, running and outdoor equipment. JD Sports has been on a bit of an acquisition spree as it aims to spread its wings in the US and Europe.

Tesla feels the heat, Sunderland is about to get a Nissan boost, the EV charging rollout looks uneven and Lookers announces strong vehicle sales…

Tesla/China: software glitch charges up local rivals (Financial Times, Lex) shows that Tesla is having problems in its number one overseas market as Chinese officials are saying that drivers can accidentally engage the autopilot function. Tesla is going to solve this with an over-the-air software update, but this is not great PR for the EV specialist. Tesla earns almost a third of its sales in China, but bad publicity recently over its customer service and reliability has tarnished its reputation somewhat and is now playing into the hands of local makers including Xpeng and Nio, who have seen their sales increase by 483% and 100% respectively over the last year! * SO WHAT? * I think that this was bound to happen and I wonder whether it is being used unwittingly as a political football in the whole US vs China thing that’s been going on for the last few years. It should give cause for Tesla to take action on its reliance on China and investors a cause to review Tesla’s valuation given that it appears to be flailing for air in the world’s biggest EV market.

Elsewhere in EV news, Nissan plans Sunderland ‘gigafactory’ (The Times, Louisa Clarence-Smith) shows that Nissan is on the cusp of building a massive EV battery factory in Sunderland after months of talks while Europe risks ‘two track’ rollout of electric car charging points (Financial Times, Peter Campbell) makes the very good point that although Brussels has good intentions in mind regarding the rollout of EVs and the necessary charging network, it may leave poorer EU countries behind because they can’t afford the necessary upgrades. A trade body that represents the European car makers, the ACEA, says that almost 75% of Europe’s car charging points are in three EU countries: the Netherlands has 66,665 charging points while France and Germany have about 45,000 each. In contrast, Romania has 493 and Lithuanua has 174. * SO WHAT? * The European commission is due to meet next month to discuss the rules for carbon reduction in the car industry, but the ACEA is pushing for them to include country-specific charging point targets. This sounds logical, but there are obviously no guarantees. A decent charging network across Europe will be a key factor for large-scale EV take-up and as things stand, it looks like Europe could be heading towards being a two-tier EV continent unless it helps out all the countries.

Meanwhile, it’s interesting to see ‘Strong’ car sales drive profit forecasts higher at Lookers (Daily Telegraph, Louise Moon) shows that car dealership Lookers is getting upbeat about full-year sales, saying it will beat current market estimates following strong demand in May and June. Good to see!

Facebook joins the $1tn club, Coke buys into more coffee, Leon gets its first drive-through and Juul pays a fine…

In a quick scoot around some of the other big stories today, Facebook’s value leaps after court win (The Times, Robert Miller) highlights the social media giant’s rising valuation as it became the latest US Big Tech company to breach the $1tn market cap level after Amazon, Microsoft and Apple before it. It breached the momentous mark following a significant win against the Federal Trade Commission as the judge dismissed its antitrust lawsuit saying that the action was “legally insufficient” in proving that it had monopoly power in the social networking market. This is just goes to show how incredibly difficult it is to get anything to stick with Big Tech! Just ask Margrethe Vestager!

Coca-Cola bottler has a taste for Italian coffee (The Times, Dominic Walsh) shows that one of Coke’s biggest bottlers, called Coca-Cola HBC, has just bought a 30% chunk of Italian coffee roaster Case Del Caffè to boost its coffee credentials after Coca-Cola itself bought Costa Coffee from Whitbread back in 2019. I guess this is a part of Coca-Cola’s overall plan to broaden its range of beverages. The deal was for an undisclosed sum and is expected to complete by the end of this year.

Elsewhere, Leon plans to open its first drive-through restaurant after Issa brother takeover (Daily Telegraph, Laura Onita) heralds a new direction for the purveyor of healthy fast-food after the Issa brothers, who own petrol station giant EG Group, bought it for about £100m in April. It is expected that the concept will be rolled out to many other locations as time goes on. * SO WHAT? * It’ll be interesting to see how well this does because whenever I rock up to a service station, there are always massive queues for the unhealthy stuff (burgers, fried chicken etc.) and nothing at anywhere that looks remotely healthy 😂. I think that Leon is good, though, so hopefully it will do well!

Then in Juul to pay $40million to settle lawsuit alleging it targeted teens (Wall Street Journal, Omar Abdel-Baqui and Jennifer Maloney) we see that the e-cigarette supremo has agreed to pay $40m to the state of North Carolina to put a line under a lawsuit the alleged it was targeting underage users. This is the first of hundreds of cases alleging the same thing. Things really have changed for this once super-hot start-up! Juul did not admit wrongdoing as part of this out-of-court settlement.

…in other news…

I thought I’d leave you today with a bit of summer fun in McDonald’s fans are making Percy Pig McFlurries and they’re gamechangers (The Mirror, Emma Rosemurgey). Nice 👍