Category: Uncategorized

1. In MACRO NEWS, the Fed cut interest rates, but not by as much as everyone was hoping
2. In TECH NEWS, Alphabet overtakes Apple, Spotify disappoints and TikTok runs into India trouble
3. In RETAIL-RELATED NEWS, Next bucks the gloom but Intu is wallowing in it
4. In INDIVIDUAL COMPANY NEWS, EssilorLuxottica agrees a deal for GrandVision, Aston Martin has another shocker and Travis Perkins wants to offload Wickes
5. In OTHER NEWS, I bring something that’ll make your eyes go funny…

So the Fed cut interest rates, but markets were hoping for more…

Fed cuts rates by a quarter point in precautionary move (Wall Street Journal, Nick Timiraos) signals the first cut in US interest rates since 2008 as the central bank tries to head-off an economic slowdown. The federal funds rate was cut by 0.25% to the 2-2.25% range, disappointing the markets which had been hoping for a 0.5% cut, or at least some kind of commitment to potentially making more cuts. * SO WHAT? * Trump used the opportunity to slag off 

Jerome (aka “Jay”) Powell, chair of the Federal Reserve, on Twitter (where else??) by saying “What the market wanted to hear from Jay Powell and the Federal Reserve was that this was the beginning of a lengthy and aggressive rate-cutting cycle…As usual, Powell let us down”. He would say that because if Powell had chopped the interest rate by 0.5% and stated that more cuts were to come, the markets would have shot up, making Trump look good (which he wants, going into election year next year). The thing is, Trump’s trade war against China is one of the main causes of the global slowdown and it seems to me that he’s trying to shift the blame of economic sluggishness on the Fed instead.

Alphabet overtakes Apple, Spotify slows down and TikTok hits problems in India…

Google parent Alphabet overtakes Apple to become new king of cash (Financial Times, Richard Waters) signals quite a significant development as Apple, which has been the company with the largest cash reserves for the last ten years, has lost the top spot to Google due to putting a $122bn dent in its cash pile by buying back stock and paying dividends over the last 18 months. Alphabet has been far less generous on the buy-back front spending, on average, only $1.7bn a quarter over the last four years. As things stand now, Alphabet has $117bn in cash and marketable securities versus Apple with “only” $102bn – down from $163bn at the end of 2017. * SO WHAT? * It’s probably not a great moment for Alphabet to have such a huge amount of cash sloshing around given that it has paid €8.2bn in antitrust fines to the EU over the last two years and is now under investigation in Washington amid allegations of Big Tech companies being “too powerful”. I think that the most interesting thing here is that Alphabet’s cash comes almost entirely from its search advertising business and strong growth from YouTube. Other businesses like cloud computing, smartphones and home automation are believed to have been consuming cash at a rapid rate. I think that if Alphabet is restricted in making major acquisitions (regulators will be on them like a ton of bricks in the current climate) and that they are already pouring money into existing businesses, surely the only way to satisfy shareholders is with higher dividends and share buy backs. Windfalls to come, possibly?

Spotify’s slowing subscribers is music to ears of rivals (Daily Telegraph, Natasha Bernal) shows that Spotify fell short of market expectations in terms of new subscribers, but the total number of paying subscribers now stands at 108.5m. The number of active users has also risen by about 20% thanks to an increase in demand and expansion of its podcast capability. The shares weakened a bit on the news, but given that they have strengthened by over a third this year, this just seems to be small beer.

TikTok runs into Hindu-Muslim furore in India (Financial Times, Stephanie Findlay) highlights problems in the viral video app’s #1 overseas market following the arrest of three of its biggest stars for inciting religious violence. The three are part of a group of five Muslim men (called “Team 07”) in their early twenties who produce short comedy videos which have amassed them tens of millions of TikTok followers. However, earlier this month, Team 07 made a serious video about a Muslim man who was tied to a pole and brutally beaten in northern India on suspicion of theft, which went viral. The stars went on to say that if the man’s children wanted to avenge his death, they shouldn’t be labelled as terrorists. This created an almighty furore between the Hindu majority and Muslim minority and the Hindu nationalist political party is now pressing charges. * SO WHAT? * TikTok, which is owned by ByteDance, has over 120m users in India and it has already come under fire from critics as “degrading culture and encouraging pornography”. It maintains that it complies with all regulations and recently announced plans to build a $100m data centre in India in an attempt to appease an increasingly annoyed New Delhi. Clearly it could do without this hassle in its biggest overseas market. I suspect, though, this will be a good learning experience for the company for when they expand into other countries.

Next bucks the gloom while retail landlords get bogged down by it…

In Next is all smiles after boost from online sales (The Times, Ashley Armstrong) we see a buoyant apparel retailer (yes, they do exist!) announcing a 4% rise in full-price sales (boosted by a solid online performance) over the second quarter, prompting it to lift full year guidance. Its shares climbed to their highest level this year to £60.64. Well done, Next! It just goes to show that success is possible in this area…

However, it’s back to the gloom in Intu shares hit record low as rental income tumbles (The Guardian, Sarah Butler) as Intu Properties, which owns properties such as the Trafford Centre in Manchester and Birmingham’s Merry Hill, saw its share price fall off a cliff in trading yesterday (30% – ouch!) as it said that it might have to raise money to reduce its £4.7bn in debt. The fact that this was announced

at the same time as it unveiled worsening losses, scrapped the dividend and warned of continued weakness in rents made for a rough day. Funnily enough, Retail landlords lose £1bn after Intu warning (The Times, Louisa Clarence-Smith) shows that other landlords exposed to retail such as Hammerson, Capital & Counties, Newriver Reit, British Land and Landsec were all weaker following Intu’s statement. * SO WHAT? * The company’s new strategy is to turn its  emptying spaces into homes, hotels and hot-desking offices over the next five years – but TBH, is it actually going to be able to last that long?? Property prices and rents are falling and tenants are leaving. This is the same for the whole sector exposed to retailers – which means that all of the companies are going to be selling off properties (but who to??) meaning that prices will get even worse in some kind of death loop. They need money and they need it quick – but the problem is that I think this is going to become a money pit that may have no end. Analysts at Peel Hunt said that it would be good for all concerned for the company to go private, so that it can get on with what it needs to do under less public pressure – and I would be inclined to agree.

EssilorLuxottica’s €7bn deal for GrandVision, Aston Martin’s nightmare continues and Travis Perkins puts Wickes on the block…

EssilorLuxottica agrees €7bn deal for rival GrandVision (Financial Times, Rachel Sanderson and David Keohane) heralds a deal that will expand EssilorLuxottica’s retail footprint mainly in Europe by adding over 7,200 stores (including the Vision Express chain) globally, over 37,000 employees and €3.7bn in annual revenue. The company bought HAL Optical Investments’ 76.72% stake in GrandVision at €28 per share and it sounds like the company will be looking at further acquisitions in places like Latin America, India and China.

Aston Martin shares plunge after carmaker posts near-£80m loss (The Guardian, Mark Sweney and Sean Farrell) highlights continued challenges for the luxury carmaker as it warned that sales of its special edition higher-priced cars were falling, which led to a further sell-off only a week after it announced a shock profit warning. The shares which floated at £19 last October fell 12% in trading yesterday to just £4.98. * SO WHAT? * News like this just makes the launch of its 4×4, the DBX, later on this year that much more important.

Wickes set for DIY in Travis sale (The Times, Ashley Armstrong) shows the rather unsurprising news that Travis Perkins is to sell its Wickes retail chain. Profits at Wickes have dropped by almost a third in the last two years (although it made a “strong recovery” in the second quarter) and Travis Perkins is keen to move away from the retail customer to concentrate on the far more lucrative trade customer segment. * SO WHAT? * DIY chains aimed at retail customers have all been having problems over the last few years as real estate activity has slowed and people have become less inclined to Do It Themselves, so this doesn’t come as too much of a surprise. It’ll be interesting to see if this prompts any consolidation in the sector, but I’m not sure there will be the appetite for it among its competitors as business is pretty slow for all of them. Maybe a private equity investment where they can get in and get costs down to the bone etc. would be the most likely scenario. Or what about someone completely random with loads of cash like Ikea perhaps?? 

And finally, in other news…

I thought I’d bring you something that will make your eyes go funny today in Optical illusion: Are these images black and white or colour? (Sky News, Catrin Rutland https://tinyurl.com/y3brxnyo). Tricky.

1. In MARKETS & CURRENCY NEWS, markets wobble as Trump chastises China and the pound hits record lows
2. In TECH-RELATED NEWS, Huawei sales defy the US ban, Apple sees strong revenues, Samsung’s nightmare continues and the Grindr IPO gets back on track
3. In INDIVIDUAL COMPANY NEWS, Centrica’s chief resigns, P&G triumphs, Reckitt Benckiser disappoints and Greggs powers ahead
4. In OTHER NEWS, I bring you a man vs dog noodle eating race…

So Trump’s tweets spook markets and the pound weakens even more…

Markets fall sharply as Donald Trump attacks China over trade talks (The Guardian, Sean Farrell) cites Trump’s latest tweet outburst, which says that China’s economy was “doing very badly” and that its negotiators “just don’t come through”. He went on to suggest that China might be holding out for a delay in a trade agreement until after the 2020 US election to get an easier ride from the next president. Given that Trump had only recently said that talks were back on track last month, this latest Twitter salvo appeared to pull the rug from under any hopes of an imminent breakthrough. * SO WHAT? * All markets fell as a result, with Germany’s falling most sharply given its particularly heavy exposure to exports – and the resulting tariffs involved. You just can’t predict what Trump will do

next! The only certainty with him is that he will definitely stir things up…

The pound at record low against world’s top currencies (Daily Telegraph, Louis Ashworth) highlights the effect of the looming prospect of a no-deal Brexit on the pound as it fell to its lowest level ever against a basket of major global currencies. If that depresses you, then Run for money: the currencies suffering more than the pound (Daily Telegraph, Tom Rees) might make you feel slightly better because it highlights other currencies that have fallen through the floor over the last year. While the pound has fallen by 7% versus the dollar over the last 12 months, Argentina’s peso has fallen by 38%, Pakistan’s rupee by 22%, Iceland’s krona by 14% , Turkey’s lira by 12%, Sweden’s krona by 8% and even the Aussie dollar by 7% as fears over the prospect of Australia’s first recession for 28 years take hold. Overseas summer holidays are going to be a bit more expensive than usual this year…

Huawei powers through, Apple sees higher revenues, Samsung’s profits crater and the Grindr gets back on the IPO track…

Huawei’s sales rise 23% despite US blacklisting (Financial Times, Yuan Yang) highlights the company’s 23% sales increase in the first half of the year despite US efforts to cut it off at the knees by blocking it from buying components from US suppliers. It managed to achieve this mainly because domestic smartphone sales over the period were up by 24%. Having said that, it is worth treating these figures with some caution as Huawei is a private company and the numbers are unaudited so there is, in theory, room for massage. * SO WHAT? * Huawei’s smartphone and smart device sales to overseas markets are obviously most vulnerable to the ban, but Huawei is currently waiting on a decision by the US government to issue licences to some US companies that will allow them to continue doing business with it as long as these exports do not threaten national security. The danger here is that the Huawei ban could well backfire in a few years. OK, so the company is damaged in the beginning, but Chinese will undoubtedly want to support Huawei against American aggression and will probably have enough purchasing power to tide the company over until it has the capability to operate independently of US (and other) suppliers. In the end, the likes of Intel, Micron, Qualcomm, Xilinx, Flex and Nvidia could be among those to suffer more long term.

Apple’s revenue rises despite continued iPhone slump (Wall Street Journal, Tripp Mickle) shows that although iPhone sales fell for the third consecutive quarter, revenues rose in every other area of the business. Interestingly, it was the first time since 2013 that iPhones didn’t represent the majority of Apple’s quarterly revenues. * SO WHAT? * Apple is in transition at the moment. There have been some top management changes (including design chief Jony Ive’s recent departure) as the company tries to move away from relying on hardware to relying more on software and

services. The only other “cloud” on the horizon is the recent launch of the Justice Department’s antitrust review on whether Big Tech companies are unlawfully stifling competition. Apple has probably not taken quite as much flak as its peers so far, but there is still time!

Samsung suffers hit from softening smartphone demand (Wall Street Journal, Timothy W. Martin) highlights continued problems at Samsung as its net profit fell by a chunky 53% over the second quarter due to general smartphone and device fatigue among consumers. It, like others, has been suffering from the fallout of the US-China trade war – but most recently, it has been experiencing collateral damage from worsening relations with Japan. The good news is that the decline wasn’t as steep as analysts had been expecting and the company is about to unveil the Galaxy Note 10 and “re-unveil” its foldable screen device, the Galaxy Fold, after making much-needed modifications. * SO WHAT? * The company has been making about 75% of its operating profits via memory chip sales but demand has fallen sharply since the end of last year as orders from smartphone makers and data server companies have dried up. Samsung said in April that it would invest $116bn in areas outside semiconductors to diversify into other growth drivers, but obviously that is more of a slow burner. Having said that, the company says that it expects overall chip demand to turn upward after it has been running down inventories for DRAM and NAND Flash memory chips over the second quarter, meaning that supply and demand will be more balanced going forward. In short, the core business should trend better from now – but it’s also putting some serious money into diversifying future income streams.

Meanwhile, in Grindr owner revives listing plan after US backs down (Daily Telegraph, Natasha Bernal) we see that the Chinese parent company of gay dating app Grindr, Kunlun Tech, has revived its plans for a public listing after the US government abandoned its opposition. The government had deemed it to be a national security risk, but the LGBTQ-focused app with 27m users worldwide now appears to be free to follow the likes of Match Group (which owns Match.com, Tinder and PlentyOfFish) onto the stock market.

Centrica loses its chief, P&G and Reckitt Benckiser have contrasting fortunes and Greggs is on a (vegan sausage) roll…

Centrica boss to quit after shares slump (The Times, Emily Gosden) highlights a share price fall of almost 20% in trading yesterday as investors reacted to the drastic dividend cut, a 49% fall in first half adjusted operating profits and the departure of Centrica’s chief exec Iain Conn, who will leave after next year’s AGM. * SO WHAT? * Centrica just appears to be in freefall at the moment and I guess that the clouds will not clear until “Conn-man’s” successor is found. Conn even announced yesterday that he’d be scaling back Connected Home, which sells smart technology to households, in North America and Italy. It’s tough to see much upside from here given that Conn is now a dead man walking…

In the competitive world of consumer goods, P&G sales rise by most in 13 years as turnaround takes hold (Financial Times, Alistair Gray) shows success across all of the company’s five main divisions as recent price rises seemed to be absorbed with no adverse effect but things were a bit different at one of its main competitors as Reckitt Benckiser cuts full-year revenue growth target (Financial Times, Jonathan Eley) highlights the cutting of the company’s full year growth target after a slow start to the year.

There was good news for pastry fans in Changes mean healthy profits at Greggs (The Times, Ashley Armstrong)  as Britain’s biggest baker unveiled an impressive 14.7% hike in sales for the half year. The vegan sausage role hype helped get punters through the door and the company has benefited over the years from broadening its product range. The share price actually fell, however, as the company failed to increase its full year guidance due to taking a cautious approach on Brexit and investment in its sites.

And finally, in other news…

I thought I’d leave you today with an absolutely brilliant video that shows man vs dog in a noodle eating competition: https://tinyurl.com/y4xrf5hl I am not ashamed to admit I have been watching this over and over since it came up on my Twitter feed this morning. Go on – have a watch! It will brighten up your day! 👍

1. In M&A NEWS, the Pfizer/Mylan deal goes official, the Just Eat/Takeaway.com merger delivers excitement and the LSE/Refinitiv deal puts LSE back into play
2. In UK HIGH STREET NEWS, Grant Thornton quits as Sports Direct’s auditor while falling rents on retail/commercial property make waves
3. In INDIVIDUAL COMPANY NEWS, Netflix pays up for expensive new films, Beyond Meat aims for profitability, Ryanair gets downbeat and Fortnite’s creator wants to launch a gaming league
4. In OTHER NEWS, I bring you stinging nettles…

So Pfizer/Mylan, Just Eat/Takeaway.com and LSE/Refinitiv cause a lot of excitement…

Following on from what I was saying yesterday, Pfizer and Mylan to combine off-patent drugs business (Financial Times, Hannah Kuchler, Eric Platt and Donato Paolo Mancini) shows that the deal went official as Pfizer will combine its Upjohn unit with Mylan to create an off-patent pharmaceutical group (i.e. a group that specialises in making drugs whose patents have expired*). This will help Pfizer to focus more on its higher-value innovative medicines and, as chief exec Albert Boula put it, the new company will be a “champion for global health…by bringing Mylan’s growth assets to Upjohn’s growth markets, we will create a financially strong company with true global reach”. Pfizer shareholders will own 57% and Mylan’s 43% of the enlarged entity, which will have an equity value of around $25bn.

* when pharmaceutical companies come out with a new drug, they get a patent that protects others from copying it for a number of years so they can make money, which is fair considering the MASSIVE costs of getting a drug to market (it takes years of trials and approvals). When this expires (or comes “off-patent”), generics drug makers are allowed to start making it. As you can imagine, when the drug is protected by a patent the pharmaceutical company that makes it can charge quite a lot of money and makes decent profits, but when it goes off-patent and generics makers use the same “recipe” to make the drug the price they can charge falls off a cliff.

Just Eat £9bn merger plan sends shares soaring (The Guardian, Julia Kollewe) shows that investors got excited not only by the prospect of Just Eat and Takeaway.com combining to form one of the world’s biggest online food delivery companies but also that another company could spoil the party by lobbing in a counter-bid. Potential candidates for counterbids include Germany’s Delivery Hero, South Africa’s Naspers, Japan’s SoftBank, Amazon (!) or private equity. As far as the current deal is concerned, though, the new group would be headed up by Takeaway.com’s chief exec Jitse Groen, it would have its HQ in Amsterdam and listed on the London Stock Exchange. * SO WHAT? * As I said yesterday, the deal sounds fair enough from a strategic standpoint, but I would personally be more excited by a merger where there was more overlap because then you can have a bit of integration going on and some cost savings into the bargain. Scale is vital for this business and it is just ripe for more M&A in my opinion, as there are still a lot of smaller operators in this space.

Refinitiv bid puts LSE back in play (Daily Telegraph, Harriet Russell), much like the Just Eat/Takeaway.com deal above, is expected to put the London Stock Exchange back into play as it has, in the past, fended off two approaches from Deutsche Borse and others from Australian bank Macquarie, Nasdaq and the Toronto Stock Exchange. Berenberg analysts said that “LSE has been the target of a bid approach once every two-and-a-half years on average since it listed in 2000. LSE is more than simply the right size and able to be acquired, it also owns assets with real strategic merit”. * SO WHAT? * I guess that if anyone has harboured a desire to own the LSE, yesterday’s news of a deal is surely going to smoke out bidders given that if the Refinitiv acquisition goes ahead, the LSE might be too big to swallow. Exciting times!

Sports Direct loses its auditor while plummeting retail rents are hitting commercial property values…

Grant Thornton to quit as Sports Direct auditor over €674m tax bill (Financial Times, Tabby Kinder and Jonathan Eley) just adds to the catalogue of headaches for the embattled retailer Sports Direct as Grant Thornton notified regulators that it will be quitting as auditor in September. Apparently, the final straw came when Sports Direct revealed a €674m tax bill only hours before the accountancy firm was due to sign off on the annual accounts. * SO WHAT? * I think that Sports Direct is in a very dark place right now. The number of top brass departures is pretty shocking and when you have the “main man” ranting and raving and talking about a 29-year old (whose only qualification appears to be that he’s about to marry Mike Ashley’s daughter) as being the future of the company, it’s all sounding rather desperate. If you compound that with massive and expensive failure with House of Fraser, accountancy firms all turning down the prospect of doing the company’s accounts and major sportswear manufacturers shying away from supplying the company’s core business with their best gear, you’ve just got to wonder whether Ashley’s empire is all going to come

crashing down. On the auditing front, if no-one sticks their hand up to do the accounts, the Department for Business can force an appointment. Like I said yesterday, I bet Debenhams are quite pleased they didn’t get involved with him – but then again, they’ve got their own problems. I would be willing to put a tenner on Debenhams going out of business completely/shutting down if not before Christmas, shortly after.

High street pushes rents into reverse across the board (The Times, Louisa Clarence-Smith) cites findings from property advisory firm CBRE which show that rentals for high street shops, shopping centres and retail warehouses fell by 1.1%, 1.2% and 3.1% respectively in the three months to June. CBRE senior research analyst Robin Honeyman said that “Downward pressure from the retail sector [is] pushing ‘all property’ rental growth into negative territory. A decline of 0.2 per cent in the second quarter is the largest fall in ten years”. * SO WHAT? * Fall in retail property values deals hammer blow to profits (The Times, Louisa Clarence-Smith) shows the effect that all this is having on landlords such as Hammerson as lower rents are hitting the value of property portfolios. The proliferation of CVAs – plus now, the successful retailers negotiating improved rental terms – will keep the downward pressure on retail property valuations, which could then spiral lower because landlords will resort to selling off properties to shore up their balance sheets. With more properties coming onto the market, prices will edge down even further. Not a great time to be a retail landlord.

Netflix invests big in films, Beyond Meat aims for profitability, Ryanair cites turbulence and Fortnite’s creator wants to launch a gaming league…

Netflix splurges on big-budget movies (Wall Street Journal, R.T. Watson and Ben Fritz) highlights Netflix’s decision to spend over $520m on making three major films (Red Notice, 6 Underground and The Irishman, if you wanted to know!). The company says that its movies attract around a third of viewers, while the rest want the TV series. It is spending big in order to retain its over 150m existing subscribers and get new ones. * SO WHAT? * TBH, I think that many of the Netflix Originals movies are distinctly average – surprising when you consider who stars in them and what the budgets must be. I mean, “Bird Box”, anybody?? I just hope that they won’t just keep chucking money at Hollywood studio cast-offs forever because even Netflix can run out of money. Let’s hope that the company finds a winning formula soon that will keep existing and attract new subscribers. Proprietary content costs a huge amount to produce, but at least it’s yours and you can’t get it snatched from under your nose like other content. Still, I believe that there will come a time when people reach “peak subscription” and the streaming industry will have to consolidate IMHO.

Beyond Meat on track to deliver profit this year (Wall Street Journal, Jacob Bunge) highlights the company’s success in its first quarterly results announcement as the company hiked up its 2019 sales forecasts to triple the

2018 level and aims to hit profit from 2020 onwards. It had almost quadrupled its sales over the quarter and its share price has shot up by almost 800% since it floated in May. HOWEVER, it then announced that there would be a big sale of 3.25m shares, which prompted a 13% fall in the share price in after-hours trading. If you want to get a bit more detail on Beyond Meat and its meat-alternatives brethren, have a look at my short guide HERE. * SO WHAT? * Given that the distribution and demand for its product continues to grow from strength to strength, it would seem to me that this share sale is a blip (as long as there’s nothing sinister lurking). I agree that it’s not cheap, but it’s products are already getting a reputation and the demand is increasing all the time – not just domestically, but abroad too. There’s still plenty of growth to be had here IMHO.

Things weren’t quite so rosy in Ryanair warns of possible job and flight cuts (Wall Street Journal, Doug Cameron) shows that the continued grounding of Boeing’s 737 MAX could lead to job cuts and fewer flights in next year’s peak summer season. Ryanair had been due to get delivery of its first 135MAX jets that it ordered last April, but it hasn’t happened because of the grounding. * SO WHAT? * Tough times for Ryanair, but even tougher for Boeing as it has the ever-present threat of Airbus breathing down its neck.

Then in Fortnite developer to launch gaming league worth ‘millions’ (Daily Telegraph, Tom Hoggins) we see that Epic Games is to introduce a new competitive esports league called the Fortnite Championship Series, full details to be disclosed at a later point. It is due, however, to start during Fortnite Season 10 and will “bring together the world’s best players”. * SO WHAT? * A great idea and something I expect to catch on in a VERY big way.

And finally, in other news…

I thought I’d leave you today with Man becomes World Stinging Nettle champion after devouring 58ft of the plant (The Mirror, https://tinyurl.com/y2o8cre2). A pointless way of spending time IMO, but maybe it’s something quirky to put on his CV 😜 The women’s winner said “I am thrilled to have won. My tongue is black today but I feel fine”. Can’t argue with that!

1. In MACRO NEWS, the UK jobs market continues to look buoyant despite Brexit uncertainty
2. In MERGER & ACQUISITION NEWS, the amount of merger activity increases with LSE, Just Eat and Pfizer currently mulling moves
3. In UK RETAIL NEWS, Sports Direct disappoints, Primark tries to get a rent cut and Sainsbury’s considers restaurants
4. In OTHER NEWS, I bring you a brilliant birthday cake…

So there seem to be plenty of jobs sloshing around in the UK despite Brexit uncertainty…

Weak growth fails to dent jobs boom (The Times, Philip Aldrick) cites a survey from the British Chambers of Commerce which shows that 30% of 6,500 companies surveyed said that they were planning on growing their

workforce over the coming quarter. This follows on from the survey in the last quarter to June when 60% of respondents said they had tried to add staff and the previous one where 53% had said so. * SO WHAT? * Given the parlous state of the economy at the moment, with Brexit causing chaos and a slowdown in investment, you would have thought that confidence would be shot to pieces. However, the unemployment rate remains stubbornly low and is currently the lowest its been in 45 years! Whether it will remain the case I don’t know – but at least there is underlying confidence from employers.

The number of UK deals rises, London Stock Exchange eyes something transformational, Just Eat and Takeaway.com get closer and Pfizer wants to merge part of its business with Mylan…

City eyes deal spree after strong start to year (The Times, Ashley Armstrong and Ben Martin) highlights a sudden deluge of M&A deals in the UK as the latest stats from data company Dealogic show that the City has had one of its best ever starts to the year. Last week saw a whopping £55bn-worth of merger activity alone and Dealogic showed that the value of private equity takeovers in the UK hit £13.6bn for the year to date – a level not seen since 2007. It also showed that June turned out to be the busiest month for private equity takeovers of public UK businesses in over ten years. * SO WHAT? * This is particularly interesting given that in an edition of Watson’s Daily only last month, Dealogic said that flotations have slowed down to their lowest level until at least 2009. At that point, there had only been 14 IPOs (raising $3.1bn) on UK exchanges in 2019 versus 65 (raising $18.3bn) in the same period in 2014. I went on to say that “I suspect that there are many potential deals waiting in the background for some kind of clarity on the situation” and consultancy firm Bain pointed out that private equity had built up a huge pile of cash (£1.6tn), indicating that there will be more deals to come. It seems that it isn’t just the weather that’s hotting up!

Talking of which, LSE lays high-stakes $27bn bet that data is the future (Financial Times, Arash Massoudi, Richard Henderson and Richard Blackden) shows that the London Stock Exchange is now trying to bounce back from its failure to merge with Deutsche Borse 18 months ago by eyeing an acquisition of data and trading venue group Refinitiv for $27bn including debt from a consortium that includes Blackstone. * SO WHAT? * If this deal goes ahead, it would result in a group with the scale to take on American big hitters including the Intercontinental Exchange, the CME Group and Bloomberg in a seismic shift away from “just” matching buyers and sellers to the business of selling information. This deal won’t be a walk in the park as LSE’s investors, who have seen its shares jump by over 30% in the last year, will have to be convinced that

taking on $12bn of Refinitiv’s debt in exchange for exposure to (very lucrative) pastures new will be worth it. It is also likely to take a while to get the official go-ahead, but if it does, Blackstone in particular will be sitting very pretty. It, along with the Canadian Pension Plan Investment Board and Singapore’s GIC state fund, put together $3bn of equity and $1bn of debt into buying 55% of Thomson Reuters’ financial and risk division, which was subsequently rebranded as Refinitiv. If this deal goes ahead, the stake will be worth $8bn – not a bad return in less that two years! Very exciting times (potentially)…

Then in Just Eat and Takeaway.com in talks over all-share bid (Financial Times, Tim Bradshaw and Arash Massoudi) we see the possible creation of a £9bn online food ordering business that would rival Uber Eats and Amazon-backed Deliveroo. The potential Anglo-Dutch combo would be particularly tasty for hedge fund Cat Rock Capital, which has a stake in both companies and has been pushing for a deal. The two companies have until 24th August to agree a deal under takover rules. * SO WHAT? * This looks like an interesting deal as it will result in a much broader-based group due to there being very little geographical overlap. As far as food delivery apps are concerned, though, I think that scale in their chosen markets is key – not how many countries you cover – because it’s only by going deeper in the markets in which you operate that you can drive costs down in a meaningful way. Having said that, it could be a stepping stone to going deeper in their respective markets. In my opinion, this sounds fine on a strategic basis, but I wouldn’t be getting too excited about it because of the lack of overlap. Easy to say, but if it were me, I’d rather be the #1 go-to in a market and then “export” that elsewhere or get bought out by Uber or something. Much cleaner IMHO.

Pfizer nears deal to combine off-patent drug business with Mylan (Wall Street Journal, Jonathan D.Rockoff and Cara Lombardo) heralds a potentially big deal as Pfizer has indicated an interest in merging its off-patent drugs business with Epi-Pen maker Mylan to create a major global seller of lower-priced medicine. The two companies have been just bumbling along recently, but it is hoped that a combination of the two could reignite sales growth. * SO WHAT? * This is all part of Pfizer chief exec’s plan to concentrate on the much higher margin patent-protected prescription drugs and vaccines. If this went ahead, it could well start another wave of consolidation among other generics-makers  

Sports Direct has a ‘mare, Primark pushes for lower rents and Sainsbury’s mulls restaurants…

OK, so it happened last Friday after markets closed, but Ashley sinks to new low in already frayed ties with the City (The Times, Ashley Armstrong) highlights the disappointing performance by the company in results that were delayed until 5.19pm. It announced that its CFO, John Kempster, would be departing and that it would be revising full year guidance due to the performance of House of Fraser, which made £54m in losses. * SO WHAT? * This sounds like a pretty disastrous performance and the fact that the results had already been delayed from the previous week – and then again on Friday, from 7am to 5.19pm) – stinks. If he slagged off House of Fraser that badly, thank God he didn’t succeed in buying Debenhams as well! It all sounds very suspicious to me and there seems to be a lot going on behind closed doors. Ashley seems to have a constant love-hate relationship with the City – and, at the moment, it seems to be all hate (and I think that the feeling is mutual). As many of you will know, I think that both House of Fraser and Debenhams are terminal – it’s just a question of how quickly it will happen. If House of Fraser and Sports Direct’s collective businesses don’t turn around soon, I would be willing to bet that House of Fraser will be the one to get the chop as its losses can rack up at an alarming rate.

Primark takes on landlords in push for rent cuts (The Guardian, Kayleena Makortoff) sounds like it’s not only troubled retailers who are pushing landlords for lower rent – the successful ones are now coming forward! You will no

doubt be aware of a number of retailers (e.g. Arcadia’s Top Shop, Miss Selfridge etc. and Accessorize Monsoon, among others) who have basically forced landlords to take massive rent haircuts in order to keep shops open – well it seems that successful ones want to get in on act and Primark, being one of those, is negotiating 30% cuts on new leases. * SO WHAT? * Good on them – and why not?? Given the sheer number of CVAs these days, successful retailers are effectively becoming victims of their own success by having to pay more rent than their failing neighbours. Landlords such as Intu and Land Securities will come under increasing pressure to take these moves into account when valuing their property portfolios as existing values could look inflated given the outlook.

In New restaurant chain may be on the menu at Sainsbury’s (Daily Telegraph, Laura Onita) we see that Sainsbury’s is looking at potentially launching a chain of in-store restaurants. In addition to providing an “eat-in” option, customers would also be able to order via delivery apps on their phones. * SO WHAT? * This smacks of desperation IMO. Mike Coupe, Sainsbury’s chief exec, is clearly trying to look proactive after his disastrous pursuit of Asda ended in very public failure. It just looks to me that he’s trying to jump on any current bandwagon in an attempt to justify his existence – but restaurants?? Really?? Maybe I’m being too harsh, but it sounds like it’ll cost loads of money to roll out and will take up loads of resource for not much in return. Maybe Coupe is hoping that this will distract investors and give him a bit of wiggle room. I just don’t see this working – the fad for in-store cafes fades in and out over time, but can you really see restaurants taking off in supermarkets? For that to happen, they will have to be good and cheap (= cr*p margins) and be something that you can’t get elsewhere. 

And finally, in other news…

You just have to see this – it’s absolutely brilliant: A woman got a birthday cake shaped like an Amazon package from her husband because she loves online shopping (Insider, Ian Burke https://tinyurl.com/yy6ah7gx). This is genius!

1. In MACRO NEWS, the ECB announces stimulus, Germany weakens, Spain’s PM loses the vote and South Korea’s economy rebounds
2. In TECH NEWS, Amazon’s winning streak ends, Google’s continues and Apple buys into smartphone modems
3. In HIGH STREET NEWS, the UK high street hits new lows and Mothercare mulls selling its UK business but Starbucks and Sephora show strong performances
4. In CIGARETTE & ALCOHOL NEWS, Imperial buys into cannabis and Diageo thinks about it
5. In OTHER NEWS, I bring you flaming noodles…

So the ECB aims to stimulate, Germany suffers, Spain’s vote goes against PM Sanchez and the South Korean economy stages a rebound…

It has been very well flagged but ECB signals it will move to boost growth amid fears of low inflation (The Guardian, Larry Elliott) shows that it will go the same way as the Federal Reserve and try to boost global growth by implementing stimulus measures to stave off deflation – including the resumption of quantitative easing. * SO WHAT? * The ECB is clearly trying to restore confidence in the Eurozone’s flagging economy which has been hit hard by slowing exports. It said that the current inflation rate of 1.3% was far short of its usual target of 2% necessitating “the need for a highly accommodative stance of monetary policy for a prolonged period of time”. The IMF supported its decision.

ECB on red alert as Germany teeters on the brink (Daily Telegraph, A. Evans-Pritchard) highlights the weakness of the Eurozone’s biggest economy as the closely-followed IFO Institute’s business confidence survey showed that over 80% of Germany’s factories are in contraction across the board – this isn’t just in the automotive sector phenomenon – as the ongoing US-China trade conflict takes its toll. IFO Institute president Clemens Fuest observed that “All the problems are coming together. It’s China, it’s increasing protectionism across the board, it’s distruption to global supply chains” and he went on to say that he disagreed with the ECB’s stance regarding stimulus because this could prompt Trump into taking an even more

entrenched stance on European exports deeming any stimulus as giving the bloc unfair competitive advantage via a weakened currency.

Spain’s Pedro Sanchez fails to form government as talks collapse (Financial Times, Ian Mount) highlights big problems in Spain as caretaker PM Pedro Sanchez failed to get MPs’ approval to form a new government for the second time in three days because he just couldn’t mange to form a coalition with the far-left Podemos party. * SO WHAT? * Sanchez’s lack of progress takes Spain a step closer to another election – his centre-left PSOE socialists only won the last one in April! Mind you, he still has two months to get something agreed and appease Podemos complaints that they were only being offered “decorative” government roles. Sanchez became PM of a minority government last year after kicking out conservative Mariano Rajoy in a parliamentary confidence vote.

Although I mentioned weakness in South Korea’s economy in yesterday’s Watson’s Daily (the Bank of Korea last week cut its GDP growth forecasts – for the first time in three years – from 2.5% to 2.2% with both exports and imports falling), South Korean economy rebounds on heavy government spending (Financial Times, Song Jung-a) shows that the economy actually grew at its fastest rate for almost two years in the second quarter as major government spending mitigated the slowdown in China, worsening trade relations with Japan and, of course, the US-China trade war. * SO WHAT? * GDP grew by 2.1% compared with the second quarter of last year, but pressures may well increase as Japan makes trade harder and the other factors continue to drag on. Interestingly, the data showed that the economy would have contracted had it not been for government spending.

Amazon wobbles, Google triumphs and Apple invests $1bn…

Amazon’s streak of record profit ends (Wall Street Journal, Dana Mattioli) shows that even the mighty have to pause for breath every now and again as its second quarter profits were hit by higher shipping costs (the company invested a lot in making one-day delivery the standard for its Prime members), a loss in momentum for its cloud computing business (as competition in this space increases – although it’s still a good growth rate!) and problems in overseas businesses in India (where the government favours domestic players) and Europe (where it’s currently facing an antitrust investigation by the EU). On the plus side, Amazon’s sales growth jumped after contracting for four straight quarters and revenues increased by 20% – above consensus estimates.

On the other hand, Google posts strong profits as hazards mount (Wall Street Journal, Rob Copeland) shows that Google’s parent company, Alphabet, posted revenues up by 19% in the quarter as Google continues to be dominant in the internet search space. The company is expected to continue to put more ads into Maps and YouTube and it said that its cloud business was on track (although it didn’t say whether it was profitable). Alphabet is the worst performing “Big Tech” stock this year, but the share price bumped up by 9% on this news although it, like its peers, faces potential headwinds in the form of a Justice Department antitrust investigation

Apple takes $1bn bite of Intel’s smartphone modem business (Daily Telegraph, James Titcomb) signals a chunky investment by Apple as it buys Intel’s smartphone modem business, taking on 2,200 Intel employees and the thousands of patents on wireless technology. * SO WHAT? * Apple is trying to reduce its exposure to external suppliers (just ask Qualcomm) and so this deal gives the company a bit more control over the tech that goes into its phones.

The UK high street hits new lows Mothercare looks to sell its UK business but then Starbucks and Sephora buck the gloomy trend…

High street decline is worst for eight years (The Times, Philip Aldrick) is the decidedly unsunny conclusion of the latest CBI survey which found that retail sales fell for the third month in a row – the first time this has happened since 2011. Department stores, apparel retailers were among those who were hit hard and the CBI’s chief economist Rain Newton-Smith observed that “It is still hugely concerning that sales have fallen for the longest period in almost eight years”. * SO WHAT? * This is just more evidence of the continued weakness of the high street and shows the worrying fact that although disposable household incomes are being boosted by wages outpacing inflation, the high street isn’t currently reaping the benefits. As I keep saying, I think that all retailers REALLY need to concentrate on enhancing the shopping experience they offer to their customers to get them over the threshold. If they can balance this will a compelling online offering, then all the better. If they just stick with what they’ve always done, I think they are toast.

In Mothercare ‘poised to announce sale’ of ailing UK business (Daily Telegraph LaToya Harding) we see that the ailing baby/maternity goods retailer is likely to sell its UK business to concentrate on its global brand and online business after it negotiated more support from lenders. This move comes not that long after the company entered a company voluntary arrangement (CVA) last year. * SO WHAT? * Whenever people mention “CVA”, relief tends to ensue – but we are seeing an increasing trend these days of companies failing despite entering into a CVA because they can’t do enough to alleviate the pressures that got

them into the position in the first place. Mothercare is just the latest example and it is sad to see yet another well-known retailer bite the dust.

On a more positive note, Starbucks boosts sales with help from new drinks, store upgrades (Wall Street Journal, Heather Haddon) shows that sales were up in its key US and China markets  – and that global same-store sales growth of 6% was its strongest growth rate in three years. The company’s share price has risen by a chunky 40% this year – outperforming both the S&P500 and larger US restaurant chains. * SO WHAT? * Starbucks manages to keep its head above water in an ever-competitive market and continues to invest in its China business (where it is facing increasing pressure from the ridiculously fast-growing domestic rival Luckin Coffee) and systems. TBH, I think that’s all it can do – so it just needs to keep going!

Then in For Sephora, the store is core to its beauty (Financial Times, Harriet Agnew) we see that investment in the company’s store portfolio continues to pay dividends – its sales have quadrupled in the last eight years on the back of a strong beauty market. I agree with chief exec Chris de Lapuente’s observation that “A lot of people are scared of the retail apocalypse so they’re not investing in stores, and that becomes a self-fulfilling prophecy…we’re investing in our stores, taking our top 100 stores in the world and renovating them to the best possible standard”. He then went on to say that “Experiential retail is crucial to our success. Sephora is a place where people come for advice, they come to listen. We teach, inspire and play…you’re not going to get this online. Online you can do your research…here you can come and experiment”. * SO WHAT? * I am in full agreement with this approach and I guess that the hard thing now is for Sephora to keep this momentum going! However, against a backdrop of a booming beauty industry and a line-up of several exclusive brands (including Rihanna’s “Fenty”, among others) they stand a good chance of doing so – especially as they are targeting big opportunities in Asia.

Imperial Brands invests in cannabis and Diageo eyes it with interest…

Imperial smokes out growth with investment in cannabis (Daily Telegraph, Oliver Gill) shows that the tobacco company behind Lambert & Butler and Golden Virginia (among others) has decided to pay £75m for a 20% stake in Canada’s Auxly Cannabis Group as part of its plans to diversify its portfolio and invest in new products. Imperial already has a stake in Oxford Cannabinoid Technologies, which develops “cannabinoid-based compounds and therapies”, but Auxly is focused on the development of “derivative” cannabis products such as edibles, vaping products and lotions. * SO WHAT? * This sounds like a

really interesting area of potential growth. I think that there is a lot of scepticism in the market about cannabis products, but the fact is that where cannabis has been legalised, demand for related products has sky-rocketed. This is an area that is well worth watching.

Diageo keeps an eye on cannabis as gin and tequila sales soar (The Guardian, Rob Davies) highlights a decent performance by the company as its pretax profits increased by 12% on higher sales. Gin and tequila were particularly strong and a whisky tie-up with Game of Thrones (“White Walker” – geddit??) also helped to boost scotch. The company is clearly conscious that its rivals, such as Constellation Brands – are starting to invest chunky sums into cannabis and have admitted that they are monitoring the situation as chief exec Ivan Menezes said that “We’re looking into the sector, it’s nascent and we just want to understand the consumer behaviour”.

And finally, in other news…

I thought I’d bring your attention to some rather dramatic noodles in Kyoto’s awesome fire ramen: a one-of-a-kind dining experience our reporter Mai just tried (SoraNews24, Casey Baseel https://tinyurl.com/y5h3py5y). This looks superb! Maybe it needs a side of flaming Sambuca – just watch out for your eyebrows…

1. In TRADE & INVESTMENT NEWS, Hyundai Heavy Industries warns of the US-China trade war impact and tensions increase between South Korea and Japan while investors pile in to Vietnam
2. In CAR NEWS, Nissan cuts 9% of its workforce, Aston Martin has a shocker, Tesla’s tech chief leaves and Peugeot actually does quite well
3. In BANKS NEWS, Deutsche announces its worst losses since 2015 and Metro Bank’s controversial chairman “steps down”
4. In OTHER NEWS, I bring you snail racing…

So one of the world’s biggest shipbuilders calls out the US-China repercussions on trade, South Korean/Japan relations get tetchy and Vietnam sees investment inflow…

South Korea’s biggest shipbuilder warns over US-China trade war (Financial Times, Edward White) highlights the ongoing repercussions of the US-China trade war as Hyundai Heavy Industries expects flat new order growth. * SO WHAT?  * South Korean shipbuilders have about 25% market share in shipbuilding globally and so the health of their order books are often used as a bellwether of global trade. Clearly, it ain’t doing all that well currently…

Tensions between Japan and Seoul boil over in summer of discontent (Daily Telegraph, Julian Ryall) shows that tensions between two of Asia’s largest economies are rising as anti-Japan protests have been flaring up with vehicles bearing Japanese logos being smashed up and Japanese beer being poured down drains, among other things. Relations between the two countries have worsened since Moon Jae-in was elected president of South Korea in 2017 and the economy has not been firing on all cylinders of late – the Bank of Korea last week cut its GDP growth forecasts from 2.5% to 2.2% while both exports and imports also fell. Japan managed to p!ss off South Korea earlier this month by putting new controls on exports of three key chemicals that South Korean electronics companies use in flat screens for TVs and mobile phones as well as for semiconductors – something that will disrupt the Koreans because Japan has a virtual monopoly on them and they are thought to be running low with no alternative options. The Japanese alleged that South Korea is allowing banned chemicals to be shipped to North Korea (which the South Koreans deny) and is now considering making trading with them much more

difficult by removing them from their “white list”, meaning loads more admin for the South Koreans. * SO WHAT? * Put bluntly, Japan did some terrible things to South Korea when they occupied it from 1910 until the end of WW2 and South Koreans are taught from an early age what Japanese did to them. Conversely, you would be very surprised by how much WW2 history is sanitised in the Japanese education system – so you can see already that this is a recipe for disaster. It seems to me that every time things start to go a bit pear-shaped for the South Korean economy, nationalism is stirred up and you get scenes like you’re getting at the moment. Given that trade is already tricky enough with the whole US-China drama going on at the moment, you’d think that the Asian economy could do without this right now.

You will be aware that a lot of manufacturing has been leaving China and going elsewhere in Asia – and it seems that money is heading that way as well in Venture capital piles into Vietnamese technology companies (Financial Times, John Reed, James Kynge and Mercedes Ruehl) as VCs such as VinaCapital, Monk’s Hill Ventures and private equity firm Asia Partners are putting increasing amounts of money into firms like FastGo (cheaper version of Asian ride-sharing company Grab), Abivin (logistics for Vietnamese enterprises) and Logivan (the “Uber of trucking”). Trade publication Asian Venture Capital Journal states that the country saw 24 deals worth $128m in the first half of this year versus 6 worth $12m in the same period last year. * SO WHAT? * Vietnam is one of south east Asia’s biggest countries with a population of almost 100m people, but is still behind Indonesia in terms of population and Singapore as its richest. Given how things are changing in the country at the moment as companies try to diversify production out of China due to US-China tensions and rising wages, it would seem that the country will be enjoying a bit of a golden period. Whether this will last long-term is another question (this has happened before), but I think that the US-China tensions have just acted as a catalyst to what was going to happen anyway.

Nissan makes big cuts, Aston Martin has a nightmare, Tesla loses a very important guy and Peugeot actually does quite well…

There’s more trouble for car manufacturers as Nissan to cut 12,500 jobs as its profit plunges (Wall Street Journal, Sean McLain) highlights the Japanese company’s decision to axe 9% of its global workforce following disastrous quarterly profits. The company is still reeling from the whole Carlos Ghosn debacle and its increasingly fraught relationship with Renault. The cuts are supposed to be completed by March 2023 (so I guess that’s something) along with shaving over $2.8bn from operating costs. The biggest cuts will be in the US, but India and Indonesia will also get hit following the failure of the attempted Datsun relaunch. Production will also be cut in the UK and Spain. * SO WHAT? * All manufacturers are having a rough time of it at the moment as they try to trim costs and adapt to new emissions regulations, new technology and increased spending on R&D.

Aston Martin shares plunge after slump in sales across Europe (The Guardian, Rob Davies and Mark Sweney) highlights the whopping 26% share price dive in trading yesterday as the luxury carmaker announced sluggish European sales, blaming ongoing economic uncertainty. The fall in demand was way more than analyst had been expecting (particularly in the UK!), hence the share price cratering. It also rubbed salt into the wound by lowering its annual sales forecast. * SO WHAT? * The company’s share price has HALVED since it floated to great fanfare last October, when its shares cost £19 a pop. The stage is set

for Aston’s new DBX 4×4, which it hopes will ride to its rescue when it launches in December. Given that it is supposed to cost £140-160,000 I can’t see it selling like hot cakes – but the company is hoping that it will become the company’s most popular model. It doesn’t half need it! However, if it doesn’t do as well as they hope, Aston Martin will be in a whole world of trouble. I love the brand and their cars, but if economic uncertainty persists (and let’s not forget, the latest Brexit date is October 31st!) the company could have a nightmare on its hands.

Tesla’s tech chief’s exit is latest high-profile departure (Wall Street Journal, Tim Higgins) would suggest that things continue to be tricky at the top in Tesla as JB Straubel, the company’s long-serving chief technology officer (since 2005, no less!), is leaving. His is the latest departure from Tesla’s top management – and Tesla’s share price fell by 14% on the news, made worse by disappointing quarterly earnings. * SO WHAT? * Although Straubel was at pains to say that there was nothing sinister in his departure (“I’m not disappearing and I just want to make sure that people understand that this is not some lack of confidence in the company or the team”), things just don’t seem to be going well. We’ll just have to see who comes next – but whoever does has some very big shoes to fill. In the meantime, incumbent car manufacturers continue to build more electric models with no production problems…

Putting all the gloom aside, however, Peugeot owner defies global car downturn (The Times, Gurpreet Narwan) highlights record profits for the PSA Group, going against the generally downbeat industry trend. PSA’s pricing and profitability benefited from new Citroen models (the C5 and the Aircross SUV), three commercial van launches and the integration of Opel-Vauxhall in 2017. Well done to PSA!

Deutsche’s nightmare continues and Metro Bank’s chairman steps aside…

Deutsche suffers worst losses in 4 years (The Times, Oliver Moody) shows that the bad times for the bank are continuing as the announcement of its €3.2bn quarterly loss marked its worst quarter since 2015. * SO WHAT? * It’s obviously too early for his massive cuts to feed through, but the latest loss just shows how difficult things are going to be. Chief exec Christian Sewing tried to put a brave face on things when he said “If you leave aside the restructuring costs, the bank would be turning a profit and, in the

more stable parts of our business, revenues either held steady or grew”. Time will tell, but I don’t think investors are going to be too patient…

Metro Bank shares tumble to record low on chairman concerns (Financial Times, David Crow, George Hammond and Patrick Jenkins) highlights investor reaction to the clumsy plans to replace colourful co-founder and chairman Vernon Hill. Hill sounded like he’s going to be a back-seat driver to whoever takes the helm after him and the company’s share price fell by 16% in response – bringing the price down by 76% this year. Customers withdrew £2bn of deposits in the first half of this year following the scandal where the company mis-categorised its loan book. * SO WHAT? * Metro Bank is in a tough spot at the moment, but at least deposit outflows appear to have stabilised.

And finally, in other news…

I thought I’d bring you Dozens of snails race for gold at world championships (Inside Edition, https://tinyurl.com/y57xwm3k) just because, well, it’s so darn exciting!!!

1. In POLITICAL NEWS & TRADING IDEAS, Spain’s PM Sanchez faces a tricky time and we look at industries who might benefit from BoJo as PM and the hot weather
2. In SOCIAL MEDIA NEWS, Facebook takes its medicine and Snap posts strong user growth
3. In FINANCIALS NEWS, the Bundesbank acknowledges positives of Libra while UBS and Santander disappoint
4. In CAR NEWS, China’s BAIC buys a 5% slice of Daimler and Tesla suffers
5. In OTHER NEWS, I bring you some coffee sneakers…

So the pressure ratchets up on Spain’s PM Sanchez and we look at which industries could benefit from BoJo and the current heatwave…

Spanish parliament votes against Pedro Sanchez as PM (Financial Times, Ian Mount) highlights the tricky situation in Spanish politics at the moment because although Sanchez won the election in April, his party only has 123 of the 350 seats in parliament. He’s been unable to form a coalition and if he doesn’t win tomorrow’s vote, the country may have to run another election in November. He lost his latest bid to form a government failed in yesterday’s vote and success in tomorrow’s may well depend on his centre-left PSOE party coming to some agreement with the radical left Podemos party. * SO WHAT? * Given Europe’s relative instability at the moment, what with German weakness, Italian unpredictability and Brexit, Spain’s situation will be problematic – especially as its recent economic performance has actually been pretty good. The drama continues…

So Boris Johnson achieved his goal of becoming PM amid much uproar yesterday. You’ll no doubt see loads of anti-BoJo press (his antics are a gift to journos), but I thought that UK equities: the Boris Johnson trade (Financial Times, Lex) has an interesting alternative spin on the situation as it looks at which industries might be affected by his leadership. IF he manages to surprise everyone and extract the UK out of Europe relatively painlessly, the pound would strengthen. If that happens, housebuilders could benefit as sentiment on home ownership would improve (Crest Nicholson, for instance, has been heavily sold by short-sellers, so the potential upside in a market uptick would be that much greater), retailers might benefit from a renewed sense of empowerment meaning that the likes of M&S and Morrisons could be among those to prosper

(especially because big short positions have been built up against them) and banks that have decent exposure to high street businesses – like Lloyds Bank and RBS – should also benefit. IF BoJo managed to deliver a reasonable Brexit, this would reduce the likelihood of a Labour government – which would be beneficial to utilities companies (who would get an absolute panning under Labour). Well he’s got 100 days (or thereabouts) to get things sorted re Brexit!

While we’re on the subject of possible trades, It’s a glorious summer, but we can’t all stand the heat (Daily Telegraph, Tim Wallace and Mason Boycott-Owen) takes a look at who benefits and who suffers when temperatures start to rise. Zelica Carr, chief exec of the Ice Cream Alliance (yes, that is a thing), pointed out that “If last year is anything to go by, [ice cream parlours] will see a doubling of sales on heatwave days. There are up to 5,000 ice cream vans plying their trade and they can do up to 10 times as much business in the middle of a heatwave”. Pubs are estimated to sell an extra 1m pints per day in a heatwave and the British tourism industry benefits as well (which will also benefit from the whole weaker pound and Brexit uncertainty malarkey). Construction can also benefit as they are able to finish more jobs and the energy industry also sees upside as demand for power for air conditioning shoots up. Or, to put it more exactly, Dr Iain Staffell of Imperial College London explained that “While the UK is not synonymous with air conditioners, demand rises by 350MW for each degree that the temperature rises above 20C”. On the downside, “indoor trades” tend to have a tough time. A spokesperson from William Hill, the bookmaker, said that “We imagine people will remain indoors or in their gardens over the next couple of days” and some retailers may suffer. Usually, retailers complain about sales being affected by poor weather – but Anne Alexandre from the British Retail Consortium pointed out that “Unfortunately, the fashion industry may not benefit, as most summer ranges are already approaching end-of-season clearance sales to make room for autumn”.

Facebook takes its medicine and Snap grows its user base…

Facebook expected to settle SEC claims of inadequate disclosures over privacy practices (Wall Street Journal, Emily Glazer) heralds the imposition of a chunky fine (north of $100m) by the Securities and Exchange Commission on Facebook for failing in its privacy practices regarding Cambridge Analytica’s use of its data. The official announcement is expected to be made today. Facebook settlement requires Mark Zuckerberg to certify privacy protections (Wall Street Journal, Ryan Tracy and John D McKinnon) looks at a settlement with the Federal Trade Commission (FTC) where Zuckerberg himself will have to certify that Facebook is taking steps to protect consumer privacy every quarter. If he doesn’t, there will be punishments (although I don’t know what they will be. Fines, perhaps?). A settlement with the FTC, which is also to be announced today, will include a $5bn fine for Facebook plus the imposition of various conditions regarding how Facebook treats the privacy of its users. Facebook, for its part, does not have to admit or deny breach of privacy allegations as part of the deal. * SO WHAT? * This is a bit of a slap on the wrist for Facebook – they don’t have to admit to much and they get away with a few words and a big fine (although it’s not exactly crippling for them!). Making Zuckerberg personally responsible for data privacy is a good thing – it’ll hopefully keep him on his toes. However, this is hardly going to change things IMHO.

The Facebook machine will continue to roll on – unless the current investigations into Big Tech deem a break-up to be necessary! From an investment point of view, this takes away some uncertainty that has been hanging over the company – so I think that we could potentially see some outperformance from here, especially if Facebook makes a big song and dance about new data protections etc. to pander to the sceptics.

Snap posts record user growth (Wall Street Journal, Georgia Wells) highlights a strong performance from the company as it posted its best user growth figures so far since its listing as Snapchat app improvements and a management overhaul took effect. The company’s daily user base increased by 7% – way above market consensus forecasts – and second quarter revenues increased by 48% – so its share price had a 11% upward bump in after-hours trading. The company has yet to report a profit, but company founder and CEO Evan Spiegel said that there is an outside chance that it will be in the black by the end of this year. * SO WHAT? * This is a real achievement for the company – and marks a major turnaround since last year when its new updates were roundly panned. The company has introduced new augmented reality features and is moving into gaming – all of which is good news. Yes, it is still burning cash – but it is inching ever-closer to profitability, which is great. I still think that Snapchat is a one-trick pony – but at least it is trying new areas. The only thing is, I wonder whether Facebook will do what it always does and copy anything good that Snapchat does – and do it on a larger scale. It’s been rather distracted of late, but now it seems to be emerging from various investigations it can get back on it.

Germany’s Bundesbank looks at the positives of Libra while UBS and Santander disappoint…

Bundesbank: Facebook’s libra can aid reform (The Times, Oliver Moody) is quite an interesting story that in that it is a notable departure from the current mass slagging-off that Facebook’s cryptocurrency has been getting of late. Basically, Germany’s central bank said that Facebook’s plans could have a major effect on finance by pushing down costs for consumers moving their money around as it would force banks to do something about their antiquated and expensive systems. The Bundesbank also said that it could be a catalyst for the EU to bring its rulebook up to date. * SO WHAT? * Given that most politicians, regulators and central banks have been slagging Libra off, it is quite interesting to see that the Bundesbank, the most powerful member of the European Central Bank (ECB), is actually looking at some of the positives that might come out of it. I, for one, agree with its cautiously positive stance in that while there are reservations regarding data privacy and proper oversight it

may well push traditional banks and lawmakers to adapt to the evolving market.

European banks themselves appear to be having a tough time of it, though, as UBS earnings hit by declines in main profit engines (Financial Times, Stephen Morris) shows a mixed set of results with its wealth management and investment banking units reporting big earnings declines on the one hand while, on the other, profits at the retail bank and asset managment divisions were up. Earnings at the investment banking division have fallen now for the third quarter in a row – and this is likely to increase the volume of calls for the business to be overhauled.

Santander’s profits fall by a third (The Times, Katherine Griffiths) shows a bank whose profits have been badly dented from tough competition in the mortgage market and branch closure costs in the UK. Santander is Spain’s biggest bank and, over the years, bought Abbey National, Alliance & Leicester and the savings arm of Bradford & Bingley. * SO WHAT? * I don’t see this situation changing any time soon – and the court case it is fighting a €100m claim with Andrea Orcel will be a cloud hanging over the stock until it’s resolved. Orcel was offered the job to be chief exec – only for it to be withdrawn after he’d resigned from his previous position at UBS.

China’s BAIC buys into Mercedes-Benz and Tesla sales stumble…

In vehicle-related news, Chinese carmaker BAIC takes 5% stake in Daimler (Financial Times, Christian Shepherd) shows a cementing of its partnership, preventing rival Geely from getting to cosy. Geely (which owns Volvo Cars and Lotus) bought a 9.69% chunk in Daimler (which owns Mercedes-Benz) for $9bn early last year as part of its overseas strategy, so this latest move shows that BAIC is keen for Geely not to get its own way.

Tesla’s higher-end sales erode in key market amid Model 3 gains (Wall Street Journal, Tim Higgins) shows that Model 3 sales appear to be cannibalising sales of the higher-end

(and more profitable) Model S and Model X, according to research from Dominion Enterprises. Registrations of the new Model S in the second quarter fell by 54% in California and those for the Model X fell by around 40% over the same period. This stands in direct contrast to the near-doubling of Model S registrations. * SO WHAT? * I guess that this is the price the company is having to pay in order to get more mass-market appeal. As I keep saying, Tesla has lost its first-mover advantage as other more established manufacturers are getting their act together and offering attractive alternatives at different price points. Tesla is having to cut into its margins to sell the Model 3 – and if it loses out on volume as well as consumers choose electric vehicles from other manufacturers, the company could get itself into a tough spot.

And finally, in other news…

I thought I’d leave you today with These waterproof sneakers are made from recycled coffee (Mental Floss, Michele Debczak https://tinyurl.com/y3axvguv). I haven’t worn them myself, but I think the pictures look good! I don’t get a kick-back if you buy them – but what a great idea!

1. In MARKETS & OIL NEWS, China’s “Nasdaq” has a stellar debut and the oil price says “meh” to Iranian actions
2. In TECH NEWS, Equifax pays a big settlement for a data breach, China’s ByteDance builds an Indian data centre and Microsoft invests $1bn in OpenAI
3. In RETAIL NEWS, hopes of Mr Ted Baker’s return buoy shares, Homebase takes on Bathstore and Sports Direct drops its lawsuit with Debenhams
4. In INDIVIDUAL COMPANY NEWS, ABInBev sells off its Aussie beer to Asahi and Starbucks gets tecchie
5. In OTHER NEWS, I bring you an optical illusion…

So China’s “Nasdaq” has an auspicious start and oil prices don’t move on Iran’s actions as much as you might have thought…

Chinese tech shares leap up to 500% as Nasdaq-style market launches (The Guardian, Kayleena Makortoff) heralds a positive start for Shanghai’s new Nasdaq-inspired stock exchange on yesterday’s debut. * SO WHAT? * The launch of this Chinese alternative to the Nasdaq (called the Star market) came against the backdrop of continued US-China trade tensions, gives Chinese tech companies with US exposure an escape route (although that’s not how it’s officially billed!) and provides such companies a way to tap into a domestic investor base that is arguably more hungry for tech than its American counterpart. It is also part of the overall efforts of Chinese authorities to take back their tech darlings who have preferred the liquidity, brand name and prestige of listing in the US. Volatility loomed large on the debut as most Chinese stock markets limit share price gains to 44% during the first five days of trading – but Star has no such limit. This meant that the AVERAGE stock gain across the index was a whopping 140% and, to take one example, Suzhou Harmontronics Automation Technology fell by 30% at market open but finished up 113% on the day. China stocks: Star market to burst (Financial Times, Lex) pointed

to a previous attempt by the Chinese to ape the Nasdaq, called ChiNext, that happened ten years ago. This also had a stellar debut but it is now 60% short of its peak. Although Star will undoubtedly attract a lot of interest, the fact that “proper” companies like Alibaba’s Ant Financial and video app-maker ByteDance haven’t yet joined the party would suggest that it will need to build more credibility before everyone should get properly excited.

Oil tankers/Iran: dire straits (Financial Times, Lex) takes a look at what has happened to the oil price since Iran’s Revolutionary Guard captured the Stena Impero last week – virtually nothing. Spot rates to charter the biggest oil tankers from the Gulf to Asia also remain largely unmoved and the share prices of listed oil tanker companies including Euronav, Frontline and Scorpio Tankers have also been pretty meh – surprising, considering that something like this usually causes a spike in prices (because it reduces the supply of oil, meaning prices rise because of its “scarcity”). US shale production and Opec cuts will affect oil more than ship seizure (Daily Telegraph, Julia Bradshaw) says that longer term oil price movements will depend on how much US and Opec oil producers pump out versus demand. Consensus thinking would suggest that US shale output (which Opec can’t control) will continue to rise and production there will continue to get cheaper due to ongoing technical advances – and that this will easily mitigate any attempts by Opec to restrict supply. Conclusion: Iranian aggression won’t have too much of a long-lasting effect on the oil price unless things really start to escalate.

Equifax settles and ByteDance shifts production due to data breach allegations while Microsoft invests in AI…

Equifax to pay almost $800m in US settlement over data breach (Financial Times, Martin Coulter and Kadhim Shubber) heralds the conclusion of a July 2017 hack that exposed the personal data (including social security numbers, names and DOBs) of over 150m people tracked by the credit reporting agency. The $800m settlement with federal and state authorities – as well as a class action lawsuit – brings this matter to a close and Joseph Simons, chairman of the Federal Trade Commission, summed things up by saying “This settlement requires that the company take steps to improve its data security going forward, and will ensure that consumers harmed by this breach can receive help protecting themselves from identity theft and fraud”. To put this fine into context, Equifax earned $300m in net income in 2018, but its revenues were $3.4bn. * SO WHAT? * It looks like this settlement means that Equifax can now put this whole thing behind them. This was a shocker, though, and the fact that the company gathered information about individuals who may never have dealt with them directly is particularly questionable on a moral basis. Data protection will rightly be a huge area for developments in regulation in the coming years – and I would expect lawyers in particular to earn big fees from this!

Following on from that, ByteDance building India data centre to avert TikTok trouble (Financial Times, Stephanie Findlay) shows that TikTok’s creator is to build a $100m data centre in India in an attempt to appease an increasingly annoyed New Delhi as local lawmakers and lobbyists accuse it of spreading obscene content and sharing user data with the Chinese government. India is ByteDance’s biggest overseas market and it is hoping that this gesture will be taken positively by a government that is currently developing a data protection bill. This investment is part of a $1bn wad of cash that the company has earmarked for spending in India over the next three years. * SO WHAT? * ByteDance is unusual for a Chinese company in that it has a larger user base overseas than it has at home (so surely there is growth potential there! Easy win or what??), so it is pretty sensitive to criticism – hence the efforts being made to make peace. It’ll be interesting to see if ByteDance’s viral 15-second videos continue to be popular – remember what happened to Vine?? I’d say that the company needs to be thinking seriously about its next play otherwise all of the hype could just go up in smoke.

Microsoft invests $1bn in OpenAI effort to replicate human brain (Financial Times, Richard Waters) heralds Microsoft’s move to win the race to full Artificial General Intelligence (AGI), a system that can equal and then surpass humans, to make sure it can be used for “good”. The OpenAI project was started four years ago by the likes of Elon Musk (yes, the one who is a massive critic of AI) and Peter Thiel (Facebook geezer) to stop AI from destroying the human race, but the project has had a reshuffle this year as Musk pulled out to be replaced by LinkedIn founder and venture capitalist Reid Hoffman. * SO WHAT? * It is hoped that Microsoft’s cash injection and access to its Azure computing platform will give it the extra push it needs to coming to fruition. 

Ted Baker climbs, Homebase takes on Bathstore and Sports Direct drops its Debenhams lawsuit…

I referred to weekend rumours of Ted Baker’s founder being interested in taking the company private (i.e. buying it so that it is no longer quoted on the stock market) in yesterday’s Watson’s Daily, and Ted Baker back in fashion with talk of private buyout (The Times, Miles Costello) shows that the shares rose 13.5% in trading yesterday as a result. * SO WHAT? * For all the scandal of Ray Kelvin’s inappropriate behaviour, the fact is that recent performance would imply that he still is very much “Mr Ted Baker” and that the company just can’t run as well without him. Given the current price, even including yesterday’s jump, a buyout could come at a knock-down price versus historical valuations. Plus the company would get back its Ray Kelvin mojo. Cynical though this sounds, I would expect Kelvin and his chums to buy out the company and take a big one-off hit by way of an employee settlement for the inappropriate workplace behaviour allegations in the short term before getting back to “business as usual”.

Elsewhere on the UK high street, Homebase sweeps up after collapse of Bathstore (The Times) highlights Homebase’s acquisition of failed retailer Bathstore. The acquisition includes the website and 44 stores, potentially

saving 150 jobs on the shopfloor and 25 at head office. Homebase, which is controlled by corporate turnaround specialist Hilco, said that it will roll out a number of Bathstore concessions in its stores over the next 18 months or so. * SO WHAT? * Great for those who are saved, but this does smack of the blind leading the blind. Basically, both Homebase and Bathstore desperately need the UK housing market to pick up pronto, but I don’t see that happening at least until we get more clarity on Brexit (and I don’t think we’re going to get that for ages). Homebase’s acquisition of yet another entity that is exposed to this area just puts even more pressure on a DIY/homewares business that is in rapid decline IMHO. The question is whether they will have enough money to wait out the current “storm”.

Then in Sports Direct scraps legal action over Debenhams’ closure plans (Daily Telegraph, LaToya Harding) we see that Mike Ashley’s company has decided to give up on its action against the department store’s recent CVA – but it will be giving money to another landlord (CPC) to continue the action. M&G Real Estate also decided to drop its action after holding “constructive” talks. * SO WHAT? * It sounds like this is looking like a lost cause. If Sports Direct, which had a 30% stake in Debenhams before all this kicked off and is probably THE most incentivised to give this the beans, abandons its challenge I think that others will be put off as well. OK, so it’s still kept some skin in the game by funding someone else, but walking away would imply that it thinks it can’t win.

ABInBev makes a swift disposal and Starbucks gets all technical…

It would seem that brewing giant ABInBev has acted quite quickly following the abandonment of the intended IPO of its Asian business as in Asahi/ABInBev: amber nectar, amber warning (Financial Times, Lex) we see that it has agreed to sell its Aussie beer operations to Japan’s Asahi for an enterprise value of $11.3bn. ABInBev shares rose by 6% on the news but Asahi’s fell by 9%. On the one hand, Asahi needs to get more overseas exposure, but then the Aussie business isn’t going that well as beer drinking in the country has been falling. This would explain Asahi’s weaker share price as investors fret about where the money will come from plus they will be doubtful as to the prospects

for the acquisition itself. * SO WHAT? * It seems to me that ABInBev has come out of this deal better than Asahi as it now has a lump of cash to pay down some of its debt AND it now has a smaller Asian business to sell, which could mean that another crack at an IPO of its Asian business may be easier for investors to swallow.

Starbucks takes stake in tech mobile company Brightloom (Wall Street Journal, Heather Haddon) highlights’s Starbucks’ announcement that it will be investing in – and getting a board seat on – Brightloom, a company founded in 2015 under the “eatsa” name, in order to accelerate its technological capabilities. The company makes automation technology for restaurants. There were no specifics on the terms. * SO WHAT? * Lots of restaurants are trying to up their tech game in order to drive down prices and increase convenience for their customers – this is just the latest one.

And finally, in other news…

I thought I’d leave you today with something very impressive in An optical illusion that seems to be both a circle and a square is baffling the internet – here’s how it works (Insider, Gili Malinsky https://tinyurl.com/y5kaje9c). Very clever!

1. In MACRO NEWS, expectations of both the Fed and ECB cutting interest rates increase
2. In RETAIL & RESTAURANT NEWS, US retail gets squeezed by rents and online while restaurants are having to offer more to attract staff and “Mr” Ted Baker mulls taking the company private
3. In FUTURE TRENDS NEWS, internet advertising growth looks like slowing and graphene ain’t all it’s cracked up to be
4. In INDIVIDUAL COMPANY NEWS, Johnson & Johnson faces a major test from today on talc litigation
5. In OTHER NEWS, I bring you a pizza wedding…

So expectations of interest rate cuts build both in the US and Europe…

Federal Reserve sets sights on quarter-point rate cut (Financial Times, James Politi) shows that recent public appearances by Fed officials indicate that a 0.25% cut in the interest rates looks increasingly likely. If this happened, it would be the first cut in almost ten years. They are thinking of doing this to simultaneously stimulate the economy and avoid a potential slowdown (the latter of which may occur as a result of the US-China trade war, amongst other things). * SO WHAT? * Some Fed policymakers have been urging a more dramatic 0.5% cut, but I don’t think that the market is pricing this in at the moment. Central banks tend to favour more gradual moves unless something really drastic happens – they usually don’t like to play all their cards all at once.

ECB ponders rate cut to spur on eurozone (Daily Telegraph, Tom Rees) heralds an action that markets seem to be expecting will take place this Thursday – that the ECB

could cut interest rates to stimulate a sluggish European economy. You read that correctly – yes, the interest rate in the Eurozone at the moment is ZERO, but the market is thinking that ECB could cut the rate to -0.5% (or at the very least drop a very heavy hint that this is the way things are going). Germany has been having car (and leadership!) troubles and Italy has had a brush with recession as manufacturing activity and trading have slowed down due to the whole Trump tariff/ongoing US-China trade shenanigans, so a certain amount of economic stimulation is needed. * SO WHAT? * I think that Europe has kept its interest rate artificially low for quite some time, meaning that it has no more powder to keep dry (unlike, say, the US). Going to negative rates is pretty drastic on a regional basis – and although it will surely increase lending, I think that there’s a real risk of this resulting in an increase in bad debt. If trade conditions worsen, this could become a nightmare death spiral as indebted industries go bust in increasing numbers. On the other hand, if Trump and Xi reach some kind of agreement to sort out their differences sooner rather than later we could well start to see things turning around quite quickly – which would be handy for Trump as he will be seeking a second term next year.

US retail suffers high rents and online competition (sound familiar??), restaurants have to offer more to attract staff and Ted Baker might go private…

US retailers quicken exit from malls as online shopping bites (Financial Times, Alistair Gray) shows that it’s not just UK retailers who are suffering from being squeezed from online competitors and greedy landlords as the latest figures suggest that retailers have exited US malls at the fastest pace in almost a decade. Over 74,000 shops have been closed this year alone, with Sears, Victoria’s Secret and Charlotte Russe being among those to abandon – and JC Penney could be going the same way as investors took fright at its nigh-on $4bn debt pile on Friday, sending its shares down by 17%. It’s not been bad across the board, however, as some chains have been supported by increased consumer spending (on higher wages caused by a tight labour market) – and some landlords are getting creative with filling vacant spaces with other tenants including hotels and storage companies. * SO WHAT? * The landscape is clearly changing, but one of the more worrying aspects of these figures is that a two-tier performance track is emerging as A++ grade malls are continuing to see average occupancy rates of 97% while D grade centres are seeing occupancy rates of around 67%, according to Green Street Advisors. It just goes to show that retail is changing EVERYWHERE.

Following on from this, With so many vacant stores, e-commerce is only part of the problem (Wall Street Journal, Suzanne Kapner and Esther Fung) looks at how retailers’ problems are being made worse by landlords continuing to demand high rents. For instance, Barneys New York has just called in the advisers and is mulling over several options, including filing for bankruptcy, as it seeks to renegotiate the lease on its flagship Madison Avenue store and other locations after the landlord asked for a rent hike from $16.2m to $27.9m earlier this year. Commercial rents in San Francisco are up by 53% from a decade ago and in Miami, the uptick has been 46% meaning that some chains would end up paying away over 30% of their sales in rent! * SO WHAT? * Basically, tenants argue that rents are too high

while landlords say they can’t reduce rents because it would violate their loan agreements and lower the valuation of their properties making it harder for them to borrow in future. Many landlords are opting to sit it out and wait for a rebound in the market, but if retailers are opting for fewer outlets due to changes in customer behaviour landlords will die a drawn-out death. I think that the spaces have to be repurposed – but if the rents are high, the case for having physical prescence in a mall (especially if you’re not a retailer) is not going to be that compelling. If that’s the case, then rents would have to come down – which is the problem that retailers are having in the first place!!! Surely lower rents with shorter contracts is the best way forward for everyone, no?

As I mentioned earlier, given the currently tight US labour market, Restaurants sweeten pay and perks to find scarce workers (Wall Street Journal, Heather Haddon) shows how workers are benefitting as employers are having to offer more money and other attractions to retain and attract employees. Many places have upped their wages but McDonalds, for instance, is using the $150m windfall it got last year from Trump’s tax code change to offer more college scholarships for employees and their families. Chipotle started offering performance bonuses last month of a week’s wages for those who help them to hit targets. * SO WHAT? * This is obviously great news for employees and it’s something that restaurants will have to do for now. However, these perks will be the first things to go in the even of a downturn – so let’s hope that employees get the benefits while they can.

Former boss ready to dress Ted Baker for private party (The Times, Gurpreet Narwan) contends that the founder of Ted Baker, Ray Kelvin, is thinking about plans to take the company private. The founder of the FTSE 250 company, who owns over a third of the shares, agreed to step down as CEO in March after allegations of inappropriate workplace behaviour from his staff. However, it is generally thought that Ray Kelvin IS Ted Baker and that he needs to make a return to get the company back on track. Given the current allegations hanging over him, this would be nigh on impossible for a quoted company – but it MIGHT be possible if the company was taken private with the right backers. At the moment, this is all speculation, but it does sound quite juicy!

Internet advertising growth may be pausing for breath and graphene promises look like pipe dreams…

Internet advertising to grow at slowest rate since 2001 dotcom bust (The Guardian, Mark Sweney) cites some research by global media agency group Zenith which suggests that the internet could lose its crown for being the fastest growing sector of the advertising market for the first time in 20 years as brands opt to move away from riskier space towards the traditional areas of cinema, billboards and posters. According to this research, internet advertising is set to grow by 10% worldwide next year – its lowest level since 2001 – meaning that cinema advertising will leapfrog it with a projected 12% growth rate as it takes advantage of more people heading to the multiplexes. Interestingly, the report shows that smaller local businesses prefer to spend heavily, if not exclusively, on platforms such as Google and Facebook, while bigger brands prefer to spend most of their advertising budgets on traditional media. * SO WHAT? * Let’s not get too carried away here – internet advertising will still account for half of the $650bn global advertising market. Although I can see that brands are conscious of being tarnished with scandals involving the likes of Facebook and Google, I still think that online advertising effectiveness is far more measurable

than traditional advertising and is therefore more efficient in terms of judging bang for buck (as long as the data is correct). I’m sticking my neck out here, but I think that if there is any dip in online advertising I think it’ll be short-lived. If Facebook and Google manage a good PR campaign to get in everyone’s good books again, I think they will start to motor once more.

Graphene is less wonderful as an investment material (Financial Times, Kate Burgess) is a really interesting article on where we are currently with the much-hyped super-material discovered in 2004 by some Manchester University scientists that is billed as being ultra-thin, ultra-flexible, ultra-strong and superconductive. The problem is that it is incredibly expensive (it can cost up to £125,000 per kg) meaning that manufacturers would rather use cheaper and well-known materials that graphene – no matter how amazing it is. London-quoted Versarien said last week that “revenues of any material amount have yet to be achieved” but still harbours hopes of producing 30 tonnes of the stuff over a year when it become commercially viable. * SO WHAT? * Graphene really is a super-material and new uses for it are being found all the time. However, it’s still not being produced in enough quantity at a price that makes it commercially viable and so after much hype, companies such as Haydale Graphene, Applied Graphene Materials and Directa Plus have continued to struggle. Let’s hope that they can hang on long enough to benefit from this amazing material.

Johnson & Johnson faces an important test today…

Johnson & Johnson faces key test in defence against talk-safety lawsuits (Wall Street Journal, Peter Loftus and Sara Randazzo) heralds the commencement of pre-trial proceedings in Trenton, New Jersey, of talcum powder-related lawsuits. Complainants allege that J&J’s baby

powder and other talc products cause cancer – but J&J says that it doesn’t. It is facing 14,200 claims and was last year ordered by a St Louis jury to pay $4.69bn to 22 women and families who blamed ovarian cancer diagnoses on baby powder. * SO WHAT? * If the judge decides there is a sound scientific base for the claims, it will trigger 12,000 current federal court cases (and probably kick-start many more). If that happens, things could get extremely bad for J&J (although they are already bad for the complainants).

And finally, in other news…

Given that we are at the start of the wedding season, I thought it would be appropriate to mention this as an option to pizza fans: Chicago Town creates bridal package with six-tier pizza cake and pepperoni dress (The Mirror, Courtney Pochin https://tinyurl.com/y68pnpyy). Couples wanting a pizza the action 😜 need to be getting married in the UK on or before December 21st, with the honeymoon to be taken before the end of 2020. Yum.

1. In RETAIL NEWS, sales rise, Waitrose cuts, Debenhams asks for more money and Asos has another profit warning
2. In CIGARETTES & ALCOHOL NEWS, ABInBev lines up asset sales, TDR buys Ei and Philip Morris International invests more in alternative ciggies
3. In TECH NEWS, Qualcomm gets an EU fine, Microsoft puts in a solid performance, Netflix’s business model gets a buffeting and N26 becomes Europe’s most valuable digital bank
4. In OTHER NEWS, I bring you a humourous Uber driver…

So retail sales rise, Waitrose cuts, Debenhams begs and Asos suffers…

Strengthening picture for retail sales as shoppers hunt for value (Daily Telegraph, Tim Wallace) cites the latest figures from the Office for National Statistics which show that retail sales rose last month as a tight labour market and wages-rising-above-inflation helped shoppers spend. Families all spent more and secondhand shops did particularly well. Department stores continued to disappoint and online sales fell again, meaning that they have fallen for every month of this year so far. Online sales now make up 18.9% of all retailing by volume and online sales of clothes continued an upward trend, now equating to almost 20% of all apparel sales. * SO WHAT? * Not too shabby given economic uncertainties at the moment! Still, it’s interesting to see online sales growth slowing down.

Waitrose to axe seven more stores putting 700 jobs at risk (The Guardian, Sarah Butler) brings our attention to the group’s second round of closures this year – and three of the seven have been sold to Lidl. Another one in Sandhurst will be sold to an unnamed buyer while outlets in Marlow, Stevenage and a convenience store near Heathrow Airport will just be shut down. This comes only a few months after it sold off five unprofitable shops in March. * SO WHAT? * All supermarkets have been trimming underperforming stores as it appears that only Aldi and Lidl are really grabbing more customers. Waitrose says that it will be concentrating on differentiating its offering, adding better services and new products rather than size. I personally

think that is the way to go – don’t copy something that you can’t! I think that all supermarkets need to focus on the things Waitrose says and cater properly to their target customer.

Elsewhere, Debenhams seeks £50m to ease Christmas trading period (The Guardian, Sarah Butler) sounds rather worrying as the ailing department store is trying to get a £50m cash buffer to help it trade through Christmas. It is scheduled to close at least 22 of its 166 UK stores in January that will involve 4,000 job losses out of its current 20,000. * SO WHAT? * I don’t want to sound hysterical, but surely alarm bells should be ringing here? Debenhams is a business that is out of touch and has no chief executive going into the most crucial stage of its history. Lenders are said to continue to be supportive but this just sounds like a car crash waiting to happen.

Asos issues second profit warning in seven months as shares fall (The Guardian, Zoe Wood and Julia Kollewe) shows how even online retailers can suffer – this time the online fashion retailer blamed IT problems in its overseas warehouses in Germany and the US. Shares in Asos cratered by 23% on the news after the previous profit warning saw its shares dive by 60% in December. Although sales were up by 12% in the latest quarter, growth in Europe and the US was below expectations. * SO WHAT? * These problems sound like they are more with the management rather than anything else, so pressure ratchet up on chief exec Nick Beighton in particular. It may be that he survives for now, but if he doesn’t turn things around by Black Friday, he could be in for the chop.

ABInBev opts for sell-offs, Ei’s pubs are bought for £3bn and Philip Morris puts more into cigarette alternatives…

ABInBev lines up $10bn of asset sales after failed IPO (Financial Times, James Fontanella-Khan and Leila Abboud) shows ABInBev moving quite quickly after it decided to pull a recent IPO of the Asian business. This “Plan B” involves the selling off of brands that could raise at least $10bn, which would help to put a dent in its $106bn debt pile. * SO WHAT? * Some will be questioning the need for doing this as Bernstein analysts think it could pay down $7bn of debt per annum by using the cash generated from selling its products, but maybe the company just wants to do things faster.

Fears that £3billion swoop will call time on traditional pubs (Daily Telegraph, Oliver Gill) heralds the acquisition by buyout giant TDR Capital of Ei (which used to be known as Enterprise Inns) which has the country’s biggest pub estate at 4,000 pubs. The price was at a near 40% premium to the price before the bid, which is great for shareholders but not so good for those who fear the demise of the traditional British pub. TDR-owned Stonegate, which owns pub chains including Slug & Lettuce, said it will write to the

Competition and Markets Authority to get permission for the deal. * SO WHAT? * TBH, pubs are dying out anyway – some research says that 14 shut every week. If they can be saved by a big company willing to invest, then surely that is a good thing? Purists will bang on about how they are the heart of the community blah blah but these are probably the same people who moan about the death of the high street and that their local Debenhams shouldn’t close down. Fair enough, but there’s a reason why these things collapse – if you wanted to save your department store, don’t shop at Amazon – and if you don’t want your pub to close down, stop buying alcohol from supermarkets and drinking at home! Simples! No doubt there will be some closures involved if this deal gets past the CMA.

Marlboro maker bets $100m more on alternative cigarettes (Financial Times, Alistair Gray) highlights Marlboro-maker Philip Morris International’s efforts to get people to use their cigarette alternative IQOS by earmarking another $100m to accelerate innovation in this product. * SO WHAT? * Competition is intensifying in cigarette-alternatives and PMI clearly wants to stay ahead of the curve. Critics say that these new products are just a way of introducing nicotine to a new generation whereas the company itself will say that it is doing “the right thing” in weaning people off cigarettes. Alternatives would appear to be the lesser of two evils, so it’ll be interesting to see who wins out in this arena. PMI certainly has a lot of money to throw at it!

Qualcomm gets an EU fine, Microsoft posts decent results, Netflix has a lot to think about and N26 become Europe’s most valuable digital bank…

I spoke earlier this week about Amazon getting investigated but EU hits Qualcomm with €242m fine over pricing (Financial Times, Madhumita Murgia and Alex Barker) shows that European Competition Commissioner Margrethe Vestager continues to clamp down on Big Tech as she heads into the final strait of her tenure. Qualcomm was fined for abusing its dominant market position, marking the end of a nine year case. This comes one year after the company was fined €997m for paying Apple billions of dollars to use its products exclusively in its iPhones and iPads, shutting out any competition. Qualcomm is, unsurprisingly, going to appeal.

On a lighter note, Microsoft’s cloud business drives record sales (Wall Street Journal, Asa Fitch) highlights the strong performance in the company’s cloud-computing division this quarter, with both revenues and profits coming in above Wall Street estimates. Revenues in cloud-computing business Azure shot up by a whopping 39% as companies continue to shift away from buying applications towards paying subscriptions and renting computer power. * SO WHAT? * The company is pretty bullish about the full year as well, so it seems that its transition from its previous business model of selling Microsoft Windows is working well.

I spoke about Netflix losing subscribers in yesterday’s Watson’s Daily but Netflix: house of cards (Financial Times, Lex) makes some interesting observations – that the cost of finding and retaining subscribers is increasing, that making proprietary content has higher upfront costs and that the ability of punters to binge watch means that more and more content is required to keep them from leaving. At the end of the day, this is just one weak quarter, but the fact that it comes just before a slew of powerful competitors launch their own offerings will give many investors who bought in on hope a reality check. It concludes that if Netflix wants to keep bumping up the subscriber numbers, it either needs a massive smash hit show or to cut its prices.

N26 most valuable digital bank in Europe (The Times, Katherine Griffiths) sounds like the answer to a pub quiz question but N26, which launched in 2015 and hit these shores only nine months ago, has just reached a record valuation as its latest funding round raised $170m. This now implies a valuation of the company of £2.8bn, versus Monzo’s of £2bn and Oaknorth at £2.2bn. The company is still loss-making if you take into account the investments it makes in its growth, but if you strip that out (and, let’s be honest, you can’t!) it is profitable according to Will Sorby, its general manager in Britain. Hahaha – he’s not biased at all, noooooo. * SO WHAT? * Fintech valuations are getting pretty punchy these days, but it’ll be interesting to see how well they do in a Brexit downturn. As Warren Buffett once said “You never know who’s swimming naked until the tide goes out”. I have a feeling that some of these companies will have one eye on the clock in terms of making sure that they can make themselves some swimming trunks before the Brexit tide goes out!

And finally, in other news…

I thought I’d leave you with An Uber driver made a hilarious ‘ride menu’ for his passengers, offering everything from ‘life lessons’ to complete silence (Insider, Ian Burke https://tinyurl.com/y2dqocxc). I suspect that a lot of people will want Uber to make this standard practice!

1. In TECH NEWS, G7 nations can’t agree on digital tax, Neuralink announces some amazing stuff and South Koreans complain about 5G
2. In ONLINE NEWS, Netflix loses subscribers, eBay lifts profit forecasts and FaceApp is accused of dodgy data usage
3. In CONSUMER/RETAIL NEWS, UK inflation steadies, Watches of Switzerland enjoys good times, Hotel Chocolat puts in a solid performance and GVC benefits from online gambling
4. In OTHER NEWS, I bring you a cautionary tale involving a vacuum robot as well as some arty buildings…

So G7 can’t agree, Neuralink announces some amazing developments and 5G ain’t all it’s cracked up to be…

G7 nations struggle to reach compromise on digital tax (Financial Times, Victor Mallet) shows how difficult it has been for the US, Japan, Germany, UK, France, Italy and Canada to agree on how to tax big tech companies who minimise what they pay by booking profits in low-tax countries. Funnily enough, the US is against measures like France’s new 3% turnover tax given that America is the country whose companies are going to be hit hardest. * SO WHAT? * It seems like everyone wants some kind of tax harmonisation to make it harder (or, ideally, impossible) for companies to just shuffle their profits around the world so they can make the minimum tax spend. Given that the G7 can’t decide with seven nations in the room, prospects for an OECD decision when this is debated in a year or so’s time – with its 129 member states – don’t look all that great. Big Tech lobbyists will obviously do their best to delay/disrupt any decision and in the meantime, places like Ireland will continue to rake in the revenues!

Elon Musk unveils plans to build mind-reading implants: ‘The monkey is out of the bag’ (The Guardian, Julia Carrie Wong) is a very exciting story about the “brain-machine interface” startup Neuralink which announced some major advances in a presentation on Tuesday night at the California Academy of Sciences in San Francisco. Basically, the company implants tiny chips into the brain which

communicate with machines and can enhance the functionality of “implantees” in conjunction with AI. Neuralink is hoping to get FDA approval for a human clinical trial next year on a version of its device that is “only intended for patients with serious unmet medical diseases”. * SO WHAT? * This sounds great, but like most of Musk’s ventures, it sounds very costly, time-consuming and is beset with practical challenges. However, everyone loves a trier – and wouldn’t it be amazing if Neuralink (and other such companies in this field) could achieve its goals! Parkinson’s could be cured, blind people could be given their sight back etc. Wow.

Then in South Koreans complain at poor quality of 5G network (Financial Times, Song Jung-a) we see that the world’s biggest 5G network is getting criticised for poor quality, slow connections and a lack of apps that take advantage of the new tech. The country launched 5G in April and over 1.6m people went 5G by the end of last month, accounting for 77% of 5G users globally. * SO WHAT? * First World problems and all that, but it would seem that these teething problems are due to a shortage of base stations and the whole US/whole world vs Huawei thing could make rapid expansion more difficult. Samsung is aiming to release a 5G smartphone next month with Apple’s offering expected next year. This sort of thing happens with every new generation – and it gets better every time. I’m sure the situation will improve vastly in the next year or so – and when it does, whole new possibilities will open up. Game-streaming, for instance, will get more popular and will ultimately kill the use of stand-alone consoles – and possibly gaming computers – as download speeds go ballistic, IMHO.

Netflix takes a beating, eBay stays positive about the future and FaceApp data usage attracts attention…

Netflix reports first drop in US users in nearly a decade (Wall Street Journal, Joe Flint and Patrick Thomas) heralds the rather big news that Netflix’s subscriber numbers are in trouble. The news sent its share price down by 11% in early after-hours trading. The company added 2.7m subscribers over the quarter – way less than the 5m it had expected and the 5.5m it added in the same period last year. * SO WHAT? * This ain’t great given that the likes of Disney, Apple, WarnerMedia and NBCUniversal are all lining up to launch their offerings later this year – you would have thought that numbers are going to go down further as rivals take away their content from the platform (they’ve already lost their two most-watched shows – “The Office” and “Friends”). Netflix will clearly hope that more good quality proprietary content will stem at least some of the tide of deserters – but it is in for a rough ride. I think that Netflix will suffer for the short-to-medium term, but its new rivals will soon come to realise how expensive the business is and potentially consolidate – I just can’t see them all operating separately forever because surely there are only so many subscriptions their customers can take!

Ebay lifts profit outlook amid tepid revenues (Wall Street Journal, Sebastian Herrera) highlights an upbeat eBay

which managed to publish better-than-expected results and up its forecasts although its revenue growth suffered. It also announced a partnership with Indian e-commerce startup Paytm Mall and sold its German flash-sale site brands4friends. The news sent its share price up by 5% – impressive, considering it has shot up by around 40% so far this year already. * SO WHAT? * This is all good, but the company has been facing increasing pressure from rival Amazon and from activist investors which will probably result in a sale of some of the assets such as StubHub and its classifieds. Personally, I don’t think that eBay is the force it once was as new rivals continue to muscle in on its core business. However, new ventures and more focus on other revenues such as advertising should help it to pull through an increasingly competitive ‘marketplace’. 

In FaceApp data use comes under scrutiny (Daily Telegraph, Natasha Bernal) we see that the sudden spike in popularity of a smartphone app that can “age” you has highlighted privacy concerns about what AI could do with a massive archive of people’s faces. The “age challenge” spread on social media has helped to push it up the app charts. FaceApp is made by the Russian company Wireless Lab and when you sign up, the Ts and Cs say that you are giving it a “perpetual, irrevocable, non-exclusive, royalty-free, worldwide, fully-paid, transferable sub-licensable licence” to use and reproduce your image. Clifford Chance lawyer Jonathan Kewley said that the app could be in serious breach of Europe’s GDPR laws. * SO WHAT? * There are all sorts of things that these photos could be used for, so let’s hope that something gets down about this pronto.

UK inflation stays steady, Watches of Switzerland has a great time, Hotel Choc continues to perform and GVC benefits further from online gambling…

Levelling fuel prices keep inflation steady at 2pc – for now (Daily Telegraph, Tim Wallace) cites the latest figures from the Office for National Statistics which show that consumer prices were up 2%, in line with the Bank of England’s target. * SO WHAT? * This is potentially good news for most as wages rose by 3.6% over last year. Having said that, prices could potentially go up sharply in the event of a no-deal Brexit as the pound would be expected to weaken, thus lifting prices of imports. If prices go up, the Bank of England may raise interest rates to keep a lid on them but consensus at the moment is that the Bank will not raise rates.

Then in a swift scoot down the high street, Time serves Watches of Switzerland very well (The Times, Ashley Armstrong) highlights the strong performance of this high end watch retailer in its first set of results since its flotation in May. Watches of Switzerland has 128 shops under the Goldsmiths, Mappin & Webb and Watches of Switzerland brands as well as the American jewellery chain Mayors. It announced a 180% hike in pre-tax profits and a 28% rise in luxury watch sales – a segment that represents 82% of the business. It is the largest retailer in the UK of Rolex, Cartier, Tag Heuer and Breitling. Average spend per customer is

£4,000 and 19% of sales are to tourists – half of them Chinese. * SO WHAT? * This looks like a great little business. Presumably, sales to tourists will rise in the event of a no-deal Brexit if the pound goes through the floor.

Further down the high street Hotel Chocolat making a mint as it spreads overseas (The Times, Ashley Armstrong) shows that the British chocolatier continues to go from strength to strength as it saw a 14% rise in sales and predicts profits to be in line with expectations despite splashing out on 16 new shops and expanding into the US (for a second time). It now has 167 stores in the UK and 10 abroad. Chief exec and co-founder Angus Thirlwell said that the chain’s success was due to the fact that “we aren’t just sitting around and waiting for people to come into our shops”. Good on them!

GVC’s online gambling bet pays off as retail business suffers (Financial Times, Alice Hancock) shows how the owner of Ladbrokes Coral has mitigated some of its disastrous UK performance with an 18% increase in revenues from its online operations, despite a strong performance in the same period last year that included the Football World Cup. * SO WHAT? * I think that this is signalling the direction that bookies have got to go as their cash cow business of FOBTs has been cut off at the knees by recent legislation. Everyone and their dog in this business is shutting shops and online is way cheaper. UK gambling groups are scrambling to make inroads into the US market at the moment following the recent trend of legalising sports betting but GVC is lagging behind the likes of William Hill, which is now the only UK gambling company to operate in all eight states that have legalised sports betting. 

And finally, in other news…

I thought I’d leave you with two “alternative” stories today. The first one is not for the squeamish: Man left ‘traumatised’ as robot vacuum causes havoc after encoutering dog p00 (The Mirror, Zahra Mulroy https://tinyurl.com/yy39pvjy). Yes, it went about as well as you’d expect it to…clearly the owners were rather clumsy on this. Then to balance that out, I thought I’d highlight An artist is leaving mind-bending optical illusions on buildings worldwide, and they’ll make you do a double-take (Insider, Darcy Schild https://tinyurl.com/y37gmng2). Some of these paintings are incredible!

1. In TECH NEWS, Congress puts Big Tech under pressure and Amazon’s faces the European Competition treatment
2. In PLANT-BASED PROTEIN NEWS, cheese and yoghurt substitutes rise in popularity and Blue Apron gets a Beyond Meat Boost
3. In INDIVIDUAL COMPANY NEWS, AG Barr’s profits lose their fizz, Ryanair cuts flights, Vornado puts a spanner in the works for Arcadia and Burberry checks out OK
4. In UK CONSUMER NEWS, wage growth continues to climb but James Reed warns of tricky times ahead
5. In OTHER NEWS, I bring you a doughnut (well, sort of)…

So senators put Big Tech under pressure in Congress and Amazon faces a European investigation…

Tech giants draw fire in Congress (Wall Street Journal, Ryan Tracy) shows that politicians from all sides were demanding more regulatory oversight of Big Tech’s sprawling businesses and asking about future expansion plans. The House Trust Subcommittee Chairman, David Cicilline said that the result of the businesses being largely self-regulated thus far was that “the internet has become increasingly concentrated, less open and growingly hostile to innovation and entrepreneurship”. The companies, on their side, argued that there was still competition and that their platforms enabled the growth of many smaller companies. Facebook questioned on cryptocurrency, but battle looms with global regulators (Wall Street Journal, Dave Michaels and Paul Vigna) shows that Facebook played down its cryptocurrency ambitions by saying that it has no intention to act like a central bank and that it won’t be an investment vehicle – but it still faced a lot of heat from sceptical politicians who don’t trust the social media giant to operate a cryptocurrency on a global scale. Facebook’s Libra hits bitcoin (The Times, Tom Knowles) shows that all this Libra chat had knock-on effects to bitcoin, which fell below the $10,000 mark for the first time in a fortnight as fears of increased scrutiny prompted weakness.

Trump takes aim at Google’s China ties, citing billionaire investor Peter Thiel (Wall Street Journal, Sarah E.Needleman and Rob Copeland) shows that Google will be put under the microscope after Peter Thiel, who is also on rival Facebook’s board, called for the FBI and CIA to investigate the company, which he said was working with China’s government instead of the US military. Obviously,

Trump didn’t like that and tweeted “Billionaire tech investor Peter Thiel believes Google should be investigated for treason. The Trump Administration will take a look!”. As an interesting aside, Google confirmed for the first time that its plans for a censored search engine in China, codenamed “Dragonfly” have been pulled.

Meanwhile, over in Europe, European watchdog set to launch inquiry into Amazon (Daily Telegraph, Natasha Bernal and James Titcomb) shows that another FAANG (you know, the group of Facebook, Apple, Amazon, Netflix and Google) is about to get bitten as Margrethe Vestager, the European competition commissioner, is planning on a formal inquiry into Amazon’s use of data from third party sellers. When she did a preliminary investigation into the company last year she said “If you, as Amazon, get the data from smaller merchants that you host…do you then also use this data to do your own calculations as to what is the new big thing, what is it that people want, what kind of offers do they like to receive, what makes them buy things?”. Vestager is the woman who slapped Google with €8.2bn in fines, investigated Apple on taxes and Facebook on data – so it’s perfectly possible that she could push for restricting Amazon’s operations in some way.

* SO WHAT? * I would say that, while all of these things are absolutely valid criticisms, it will end up being mostly noise because too many people are making too much money out of the FAANGs. Vestager may well be able to drum up some funds by giving Amazon big fines, but I would doubt we’re going to see much in the fundamental way in which Amazon does business. Overall, I think that the companies under scrutiny will pay expensive lawyers fat fees to drag the proceedings out at long as possible. The companies could well address some of the biggest areas of criticism in the meantime so that by the time any investigation comes to any conclusion, the sting will be lost and any momentum will just peter out.

Cheese and yoghurt substitutes ride the “alternatives” wave while Blue Apron benefits from a Beyond Meat boost…

Plant-based food demand transcends meat substitutes (Financial Times, Emiko Terazono) cites research from Spins and the Good Food Institute (GFI) which shows that yoghurt and cheese substitutes are growing in popularity faster than plant-based meat as consumers look for alternatives to dairy. Plant-based meat sales were up by 10% in the 12 months to April 2019 whereas cheese substitutes were up by 20% and yoghurt substitute sales by 39%. Plant-based milk like soy and almond milk is the biggest plant-based food category and GFI’s Caroline Bushnell points out that “Forty per cent of US households now buy plant-based milk, and other products such as cheese are following in its footsteps”. * SO WHAT? * So it’s not just “meat” that is feeling the love – other dairy substitutes are getting a boost from a major “alternatives”

boom. Product is getting better all the time – and the more it gains in popularity, the more money is going to be poured into R&D to improve production efficiency and making the product even better. If this area continues its pace of growth, it could change the face of the whole agricultural industry.

Blue Apron’s bombed-out shares surge on Beyond Meat tie-up (Financial Times, Alistair Gray) shows that Beyond Meat is sprinkling its pea-protein-based magic on troubled meal kit delivery service Blue Apron as the latter announced it will be selling Beyond’s vegan burgers. Blue Apron has been among the worst IPOs in the last ten years as subscriber numbers fell shortly after its flotation in June 2017. However, its shares shot up by 70% on news of the Beyond Meat partnership. Blue Apron will offer Beyond’s vegan sausages and meatballs later on. * SO WHAT? * It’s really interesting to see this halo effect happening with Beyond Meat, whose shares have gone from $25 to $172 a pop. This will be great for Beyond, because I suspect this will result in loads of other companies vying for partnership to get a similar boost – and Beyond will be able to pick and choose the best of the bunch as a result. Mind you, Beyond’s rivals will obviously be keen to make their own partnerships as well.

Irn-Bru’s maker warns, Ryanair cuts flights, Vornado sticks its oar in Arcadia’s CVA and Burberry checks out…

In a quick scoot around other individual stories in the broadsheets today, AG Barr steels itself for a slide in profits (The Times, Dominic Walsh) highlights the Irn-Bru maker’s profit warning as it suffered from poor early summer weather and consumers increasingly opting for healthier drinks and Ryanair to cut 30,000 flights owing to Boeing 737 Max crisis (The Guardian, Gwyn Topham and Julia Kollewe) shows that the discount flier has had to

make tough choices following the delayed deliveries of their Boeing 737 Max aircraft, with the future of some jobs and airport bases hanging in the balance.

US property group Vornado challenges Arcadia CVA (Financial Times, Alice Hancock) highlights a potential spanner in the works for Philip Green’s Arcadia Group as it will now have to fend off a legal challenge from US property firm Vornado, which didn’t like the terms of its recently-agreed CVA and Tisci is the toast of the town for Burberry (Daily Telegraph, Laura Onita) shows a turnaround of sorts for Burberry as demand for new designer Riccardo Tisci’s accessories and clothes have proved to be very popular. The shares were up by 14% in trading yesterday – their best one-day performance since they floated 17 years ago. Let’s hope that the momentum continues!

UK wages continue to grow but Reed warns on jobs…

Wages rising now at fastest rate since the 2008 crash (Daily Telegraph, Tom Rees and Tim Wallace)  cites the latest data from the Office for National Statistics which show that average pay growth is now 3.6%, with public

sector pay growth seeing its highest growth rate since 2010. * SO WHAT? * This is all part and parcel of tight current employment  conditions but Britain ‘facing the end of its employment miracle’ (Daily Telegraph, Tom Rees) highlights employment agency Reed’s chairman’s warning that this wage growth won’t last as the UK is “heading for a recession”. Sobering words, but hardly surprising. It will all depend on how Brexit goes (or doesn’t).

And finally, in other news…

I thought I’d leave you today with this: Can you spot the doughnut among these pool floats? (Insider, Gili Malinsky https://tinyurl.com/y4bqwhbk). Yum. Doughnuuuuuuuts….

1. In TECH NEWS, US senators grill the tech titans with Facebook in line for Libra inquisition
2. In CAR-RELATED NEWS, Yandex and Uber buy Russia’s #1 taxi company and Jaguar Land Rover gets a loan
3. In DEAL NEWS, AB InBev gets canned and Thomas Cook’s deal looks shakey
4. In INDIVIDUAL COMPANY NEWS, Sports Direct postpones its results and GSK has good news on an ovarian cancer drug
5. In OTHER NEWS, I bring you some amazing examples of anamorphic art…

So senators get to grill the tech giants on everything including Libra…

In US senators to question tech titans on ‘tremendous’ power (Daily Telegraph, Laurence Dodds) we see that Apple, Google and Amazon are going to have to defend themselves in front of a Senate justice committee today who will accuse them of using their dominance to obliterate any competitors both domestically and in Europe. This comes a week after the Federal Trade Commission (FTC) approved a $5bn settlement with Facebook regarding the Cambridge Analytica scandal and amid rumours that the FTC and US Justice Department are looking into conducting competition inquiries. Critics of big tech say that they should be broken up. There will also be a separate hearing for Facebook who will be in front of the Senate banking committee to answer questions about Libra, as per Facebook confronts bipartisan resistance to cryptocurrency plans (Wall Street Journal, Dave Michaels,Kate Davidson and Sam Schechner), which highlights the

enormity of the task for Facebook convincing the naysayers of its proposed new cryptocurrency. The G7 industrialised nations will also be discussing Libra and other cryptocurrencies this week in France. * SO WHAT? * Big Tech is facing a wave of vocal criticism concerning its enormous power and stranglehold on the markets in which it operates as well as how the data it collects is utilised and protected. Having said that, I really don’t know how one would go about breaking up a company like Google, for example – and I imagine that, given that the companies concerned are unlikely to be willing participants, any efforts to do so will be dragged out by lawyers for as long as possible. As far as Libra is concerned, Facebook is going to take a lot of heat given its reputation for what it does with the data it skims from users and it seems to me that there are too many parties that stand to lose out from Facebook’s success with Libra. Governments and central banks would have no control over its movements and legislators are worried that Libra – and other cryptocurrencies – could be used for malign purposes. That said, I think it still has some powerful backers and remains an interesting concept, so I would expect some kind of compromise to be reached. It’ll be interesting to see how this all unfolds.

Yandex and Uber buy Russia’s #1 taxi service and JLR gets a loan…

Yandex and Uber buy Russia’s largest taxi company (Financial Times, Max Seddon) heralds the purchase of Vezyot, that will dramatically increase the market share of Yandex Taxi, the joint venture between Russian search giant Yandex and Uber. Vezyot has 12.3% market share versus Yandex Taxi’s 10.4%. * SO WHAT? * This sounds like a bold move and will clearly ruffle the feathers of Mail.ru-backed Citymobil, which has been on a growth track of late. This deal will give Yandex Taxi a big boost outside the big cities.

JLR’s electric dreams get boost from taxpayers (Daily Telegraph, Alan Tovey) highlights a final flourish from Theresa May in her last days in office as JKR will get a £500m loan from UK Export Finance, the state-backed credit agency, that will help to ease the strain on JLR’s balance sheet significantly. The outgoing PM said the loan would help the company to boost exports of its new generation of electric cars. * SO WHAT? * Nice idea, but is this just throwing half a billion quid into a black hole? I also wonder how this would be seen by others – some countries get pretty angsty about governments giving companies “unfair advantages”. Mind you, JLR is a tiddler in the scheme of things, so maybe it’ll just go under the radar.

ABInBev postpones the IPO of its Asian business and Thomas Cook’s rescue looks shakey…

I must admit that I should have put this in yesterday’s Watson’s Daily as I do recall seeing this bit of news over the weekend BUT here it is: AB/InBev/Asia IPO: glass struggle (Financial Times, Lex) highlights the postponement of what would have been the largest Initial Public Offering this year as the parent company decided to pull the sale of a minority stake in its Asian business because investors thought the asking price was too high. The company will wait for better market conditions (presumably once the US-China trade dispute gets sorted) and the share price hardly moved on the news. * SO WHAT? * This is a bit embarrassing for the company and will prompt pessimists

to say that this could stifle its growth prospects, especially in the Asian region. It could have done with getting $10bn from the IPO to pay down some of its $100bn of debt, but clearly it’s going to have to wait.

Thomas Cook rescue under threat (Daily Telegraph, Alan Tovey) shows that the drama ain’t over for the troubled tour operator as Fosun’s offer to take a majority stake to rescue the company still requires the approval of the banks and hedge funds that hold £1.6bn of Thomas Cook debt. Citigroup analyst James Ainley sent Thomas Cook shares off a cliff two months ago when he said that the business was worthless and has since said that its shares would be worth just 3p. * SO WHAT? * Thomas Cook must have been relieved with the lifeline thrown to them by Fosun given the turbulent time it’s been having and any uncertainty thrown up by a City analyst will obviously not be welcome at all. It just goes to show that this is not yet a done deal and Thomas Cook could yet come crashing down.

Sports Direct has a shocker and GSK announces a breakthrough…

Sports Direct delays results amid House of Fraser woes (The Guardian, Sarah Butler and Julia Kollewe) highlights woes at Sports Direct as it postponed its results, warning that it could miss its profits forecasts due to the impact of its acquisition of House of Fraser. Investors took fright at the news, selling the stock down 10% and Appetite for acquisitions: Ashley’s new interests (The Guardian, Sarah Butler) highlights other acquisitions/investments that the company has made that are still being digested and that could also cause it problems. They include Evans Cycles, Sofa.com, Game Digital, Goals Soccer Centre, French

Connection and Findel. * SO WHAT? * This is very bad news – companies don’t do this unless something really serious is going to happen. If Ashley goes down, there’s a chance that he could take a big chunk of the UK high street down with him. Yes, he’s only one guy, but he’s the face of the company and very much the one in charge of his sprawling empire.

GSK hails encouraging trial of new drug to fight ovarian cancer (Daily Telegraph, Julia Bradshaw) shows that GSK had some promising results from a late-stage trial of cancer drug Zejula, which it inherited when it bought US oncology biotech firm Tesaro for over $5bn last year. The price it paid then raised eyebrows, but these latest results seem to have vindicated their decision to invest. Ovarian cancer is the fifth most common cause of cancer death among women, so this breakthrough could be big.

And finally, in other news…

I thought I’d leave you today with this: Anamorphic art makes the beach your canvas (Stars Insider, https://tinyurl.com/yyg4fkzf). Inspiration for when you next go to the sea-side!

1. In MACRO & CURRENCY NEWS, China’s economy faces challenges and Huawei-bashing sees consequences while emerging markets could be facing another currency crisis
2. In UK CONSUMER NEWS, high street footfall weakens and the housing market’s not looking too hot either
3. In INDIVIDUAL COMPANY NEWS, a karaoke machine maker aims for a flotation
4. In OTHER NEWS, I bring you quite possibly the cutest kitten ever…

So China has some issues and emerging markets face another potential currency crisis…

China’s soaring pork inflation threatens key central bank rate (Financial Times, Hudson Lockett) sounds like a joke title for an article – but it’s not. China’s pig stocks are still suffering in the wake of the outbreak of African swine fever and prices are accelerating so quickly that the country’s consumer price index (CPI) is on track to exceed the central bank’s target rate. * SO WHAT? * China’s pork market is the biggest in the world and pork has a major influence on China’s CPI. It seems that outbreaks are now slowing down after a huge cull (although there appears to be widespread evidence of under-reporting) but the last time something like this happened in 2008, the pork price shot up by over 80% and pushed the CPI to 8.7%. China’s agricultural ministry estimated in April that the pork price could rise by more than 70% in the second half of this year.

China growth at its slowest since 1992 as Beijing struggles to juice economy (Wall Street Journal, Chao Deng) shows that China’s GDP growth fell 6.2%, its slowest pace since at least 1992. This figure undershot market expectations but Mao Shengyong, a National Bureau of Statistics spokesman, said that China had “sufficient policy reserves” to sort things out in the second half, including more tax cuts and an increase in infrastructure spending. * SO WHAT? * It just goes to show how much the US-China tariff war is now feeding through to the economy as investments for the quarter were weak and exports fell.

Talking of which, Manufacturers move supply chains out

of China (Wall Street Journal, Austen Hufford and Bob Tita) shows how American companies are moving production outside China (we’ve already seen Japanese companies like Nintendo do this) as trade tensions between the two countries continue. Interestingly, many companies have said that once they move, they will stay moved – but then again, I think that this was bound to happen anyway given that rising wages mean that China isn’t as cheap as it used to be and Vietnam, India, Taiwan and Malaysia have all become more attractive production destinations in relative tersm. Companies that make Crocs, Yeti beer coolers and GoPro are among those making the shift. Mind you Huawei plans extensive layoffs in the US (Wall Street Journal, Dan Strumpf) shows the other side of this as the constant Trump administration Huawei-bashing continues to have an effect as the company announced that it will be cutting a lot of staff, particularly in its US-based R&D subsidiary Futurewei Technologies. * SO WHAT? * Markets may well get excited each time Xi and Trump look like even touching a telephone, but the fact is nothing’s really going to change until a real deal is on the table. We’ll just have to wait and see. When/if they get to an agreement, there will be the mother of all relief rallies IMHO, but who benefits long term will obviously depend on the detail.

Then in Inflation rise fuels currency crisis (Daily Telegraph, Tom Rees) we see that Nomura believes that the currencies of Argentina, Turkey, Pakistan, South Africa, Sri Lanka and Ukraine are all potentially in danger due to its proprietary indicator, which has a strong track record for predicting currency crises, showing them up as being particularly vulnerable. Turkey’s lira took a pasting last week after President Erdogan p!ssed of the Americans and in Argentina, the peso dropped by 35% as inflation hit an eye-watering 60%.

The UK high street sees lower traffic and the housing market continues to look downbeat…

High street suffers ‘summer slump’ as Brexit and wet weather bite (The Guardian, Rupert Jones) cites the latest figures from the British Retail Consortium (BRC) which show that customer footfall was at its lowest level for June for seven years. Mind you, as the BRC’s chief exec Helen Dickinson pointed out, “Poor footfall this June led to a significant fall in the sales figures for the month…Last year’s World Cup and glorious sunshine set a high bar which 2019’s slow consumer spending and Brexit uncertainty failed to live up to”. Disappointing, but hardly surprising!

Then in Survey hits hopes of housing market recovery (The Times, Miles Costello) we see that asking prices for

residential property have fallen for the first time in a year, according to the latest monthly survey by online estate agent Rightmove, with particular weakness in houses with four bedrooms or more. * SO WHAT? * The interesting thing about this is that it stands in contrast to recent stats from RICS (which last week showed its strongest reading since August last year) and Nationwide (which found that house prices had risen slightly in June) although Halifax said that house prices had fallen slightly. The differences in each survey come down to the different methodologies used and demographics. For instance, Halifax and Nationwide base their findings on approved mortgages but Halifax has more customers in the north and Nationwide’s are more in the south. The RICS measure uses property valuations of chartered surveyors and is based on the balance of those reporting rising prices and those reporting falling prices and Rightmove looks at asking prices – NOT what the houses actually sold for. You can see why it’s best not to rely on any one of the above, but to know what you are looking for (e.g. trends in asking prices in the north of England) and pick the most appropriate survey!

Roxi has something it wants to sing about…

Yes, I will admit that it is an unusually slow news day today, but Music service sitting pretty on float plans (The Times, Simon Duke) makes the cut today as the “upstart” music streaming business backed by Robbie Williams and Sheryl Crow is aiming for a stock market flotation in the autumn for a valuation of about £50m. Roxi Music makes a karaoke

machine that connects to your TV and offers music streaming, games and karaoke for £99.95, including 12 months’ access to its 30m-strong song catalogue. Once you’ve gone over the year, it costs £5 a month and the device is targeted specifically at the older user who wants something simple. * SO WHAT? * Sounds like a reasonable enough idea but I would say that its appeal is quite niche at the moment. There are so many other apps out there that can do roughly the same thing, so although Roxi has a hardware device, I think it needs to expand into something else. If Spotify turned around and decided to get into karaoke, for instance, Roxi would be dead IMHO.

And finally, in other news…

Many of you will know that I am very much a dog person – but I do actually like cats as well! I defy any of you not to at least want to say “ahhhhh” when you see Tiny munchkin kitten sleeps like an angel in the cutest position, winning hearts of Instagram (SoraNews24, Dale Role https://tinyurl.com/y2ju83cf). A nice way to start the week!

1. In BREXIT NEWS, the Bank of England warns of a No-Deal shock
2. In BIG TECH NEWS, a UK/US clash is in the offing on digital tax, Amazon aims to futureproof its staff, Facebook wants to go shopping for gaming studios, Nintendo jumps on Switch Lite while Google and Apple have privacy issues
3. In INDIVIDUAL COMPANY NEWS, Reckitt pays to settle an opioid case and M&S loses yet another fashion chief
4. In OTHER NEWS, I bring you an annoying picture…

So the Bank of England sounds a no-deal warning…

Bank of England warns no-deal Brexit could trigger economic shock (The Guardian, Richard Partington) highlights the central bank’s thoughts on what could happen if we had a no-deal Brexit – that it could result in a massive shock to the UK economy and disrupt EU companies by cutting them off from London-based banks. The Bank’s governor, Mark Carney, said that “Although such disruption would primarily affect EU households and businesses, it could amplify volatility and spill back to the UK in ways that cannot be fully anticipated or mitigated. * SO WHAT? * No-one knows what’s going to happen because something of this magnitude has never

been done before – and that includes the “experts”! I have to say that this all reminds me of the Millenium Bug (remember that, anyone??) where everyone was getting hysterical about systems failing and planes falling out of the sky because they couldn’t cope with going from 1999 to 2000 – and then nothing happened. I really think that even if we get a no-deal, countries will try to work together to make things happen – because they have to. It’s all very well for the politicians in Brussels and Westminster to squabble amongst themselves as part of a massive (and expensive) game of chicken and who has the biggest cojones – but people on the ground are going to have to deal with some pretty dramatic stuff at borders and in supermarkets etc. and I believe they will make things work. Yes, there will be disruption, but I am hoping that everyone will come to their senses and minimise any potential madness quickly otherwise things could get very nasty. 

The UK is about to poke the bear with a sharp stick, Amazon aims to retrain, Facebook aims at gaming takeovers, Nintendo gets a Lite boost while Google and Apple have privacy problems…

Britain set for clash with US on digital tax (The Times, James Dean) shows that we have decided to go ahead with a special tax on Amazon and Google, amongst other tech giants, despite Trump telling US trade rep Robert Lighthizer to investigate where a similar plan by France was “dicriminatory or unreasonable”. France yesterday approved a 3% digital sales tax in the Senate, which will apply retrospectively from the beginning of this year. * SO WHAT? * US tech giants pay tiny amounts of tax in Europe because they funnel all their sales through places that have very generous tax regimes, like Ireland and Luxembourg. Chat about imposing a digital sales tax ostensibly started after the US put tariffs on steel and aluminium imports from the EU last year (but there have been rumblings about this for ages). The new UK digital sales tax will come into force in April next year and apply to companies with over £500m in global revenues and over £25m in UK revenues. This tax is going to be an interim measure while talks with the OECD continue over how to tax companies in a digital age. Call me cynical, but I wonder whether this tax will ever really see the light of day. The timing of this announcement comes BEFORE the next Prime Minister has been chosen, it’s an “interim measure” and it’s already p!ssed Trump off as he gets closer to election year – surely this is a massive gift to whoever ends up in Downing Street? I say that because it could be used as a lever to get a trading deal/some concessions from the US (who have thus far given us nothing). The incoming PM can probably kill it IF a better trade deal is hammered out with the US, but they could also use it for getting a better deal with the Europeans – i.e. we’ll kill this tax if you don’t give us a better deal and leave you on your own (which could lead to big tech companies coming to the UK, especially if we brand ourselves a new tax-friendly country). Obviously, it wouldn’t be as clearcut as I’m describing it, but I certainly think this tax could be a useful negotiation tool. BoJo must be loving it as this could hand him (if he gets the top job) an instant win with his BFF Donnie T.

Amazon mass retrains US staff for tech future in £558m drive (Daily Telegraph, Natasha Bernal) highlights Amazon’s plans for the future as it has earmarked over $700m to up-skill over a third of its workforce (100,000 out of 275,000 full-time workers in the US) by 2025 as it pushes to automate tons of manual roles. This will be with a view to them using these skills within Amazon or outside it. It’s unclear at the moment whether this would be rolled out overseas. * SO WHAT? * This is a massive declaration of intent that it will be automating big time. Although

current robot capability is limited, it is obviously going to grow. At least Amazon is offering the opportunity for employees to do this, rather than just wittling them down over time. I suspect that other companies planning to automate processes won’t be quite as generous.

In gaming, Facebook looks to raise game with takeovers (The Times, Tom Knowles) signals the social media giant’s desire to get more of its 2.3/2.7bn users (depending on whether you measure this by “just” Facebook, or whether you include Insta, WhatsApp and FB Messenger) playing games on its virtual reality headsets, sales of which have been disappointing since it bought Oculus for $2bn in 2014. It looks like they have set aside about $1bn to make acquisitions of entire gaming studios to boost their offering. The new Oculus Quest costs $399 and doesn’t require a computer and Facebook has already signed deals to make VR versions of games such as Assassin’s Creed and Tom Clancy’s Splinter Cell. * SO WHAT? * What’s taken it so long?? This sounds great, but I also think that VR headsets are still too big and clunky for truly widespread adoption. At least the games offering is likely to get better – which may tempt more people into the joys of VR. Gaming is going to get very exciting over the next few years what with the advent of Google Stadia (the “Netflix of games” platform), Apple’s Arcade (a gaming subscription service) and Snap’s moves in this area – and 5G is going to give it the tech backdrop it needs to all become possible.

Nintendo shares jump after Switch Lite announcement (Financial Times, Daniel Shane) highlights Nintendo shares hitting a nine-month high in trading yesterday on the announcement of a new, cheaper version of its popular console. It will be released on September 20th, will sell for $199.99 and have more basic functionality than its older and pricier sibling. * SO WHAT? * Investors are clearly hoping that this will boost demand for the Switch and lengthen the life of this hit product!

Then it appears that there are some privacy issues that need to be ironed out in Google contractors listen to recordings of people using virtual assistant (Wall Street Journal, Sarah E.Needleman and Parmy Olson) as Belgian public broadcaster VRT NWS said in a report this week that Google employs contractors around the world to listen into recordings of people’s conversations with Google Assistant. * SO WHAT? * I guess that they have to do this in order to improve voice recognition functionality, but it is spooky nevertheless. Not great PR, but I don’t think people will be abandoning their smart speakers en masse.

Talking about privacy, Apple pulls walkie-talkie app after glitch creates eavesdropping vulnerability (Wall Street Journal, Sebastian Herrera) shows that Apple has temporarily disabled the Walkie-Talkie app on Apple Watches to solve a glitch which can let someone listen in to someone else’s iPhone conversation without consent. Apple remained tight-lipped on the details while it tries to fix the issue. * SO WHAT? * This just goes to show how data privacy is an issue for even large, deep-pocketed firms.

Reckitt pays a massive $1.4bn to settle an opioid case and M&S loses yet another fashion chief…

In Reckitt pays $1.4bn to settle opioid case with US government (Daily Telegraph, Julia Bradshaw) we see that Reckitt Benckiser has agree to pay $1.4bn to the US government to settle the investigation into its alleged involvement in dodgy sales and marketing of an anti-addiction drug, Suboxone Film. * SO WHAT? * This will lift

some of the cloud off the stock for the moment, but its spinoff Reckitt Pharma (renamed Indivior), is still facing a $3bn fine in a related criminal case. However, this current deal would suggest that another deal could be done with Indivior – and if that is the case, there will be a lot of relief at Reckitt.

M&S ousts boss of its struggling fashion arm (Daily Telegraph, Laura Onita) highlights the ongoing turmoil at M&S as it continues to try to get its fashion offering right. Jill McDonald has been ousted after less than two years in the job. The turmoil continues…

And finally, in other news…

I thought I’d leave you with Can you spot the bee in this flower-filled brainteaser (MSN, Gili Malinsky https://tinyurl.com/y26qms5x). I warn you – this is very annoying!

1. In MACRO & MARKETS NEWS, the UK economy returns to growth and Wall Street buzzes on rate decrease hopes
2. In CAR NEWS, sales in both China and India weaken while JLR continues to suffer
3. In UK HIGH STREET NEWS, we look at Superdry’s downbeat outlook, Wetherspoon’s relative success and the probe into Heineken
4. In OTHER NEWS, I bring you an optical illusion…

So the UK economy returns to growth and Wall Street gets a boost on hopes of an interest rate cut…

UK economy returns to growth as carmakers end Brexit shutdown (The Guardian, Richard Partington) cites the latest figures from the Office for National Statistics (ONS) which say that UK GDP went up by 0.3% in May versus the previous month as production stoppages by carmakers that coincided with the original Brexit “leave” date fired back up again. Carmakers normally shutdown over the summer period for maintenance but this was brought forward in order to avoid difficulties related to border delays. On the services side of things, growth remained steady at 0.3% in the same time period, although the ONS pointed out that the sector – which accounts for about 80% of UK GDP and includes areas such as banking, hospitality and leisure – has seen a notable slowdown since July 2018. The British Chambers of Commerce head of economics, Suren Thiru, observed that “The continued slowdown on the underlying three-month measure is

further evidence that the UK economy is faltering under the weight of relentless Brexit uncertainty and tougher global economic conditions”.

In Wall Street climbs with cuts on horizon (The Times, James Dean) we see that US Federal Reserve chairman Jerome Powell said that a combination of Brexit uncertainty, international trade wars, sluggish global growth and inflation is leaving the American economy vulnerable – and markets strengthened on hopes that interest rates would be cut at the next meeting of the Fed which concludes on July 31st. Separately, Powell also dampened enthusiasm for Facebook’s new digital currency, Libra, by saying that he was concerned about its potential impact on consumers and markets and that there were “many serious concerns regarding privacy, money laundering, consumer protection and financial stability”, which took a bit of the shine off Bitcoin’s recent rally. * SO WHAT? * Everyone monitors the Federal Reserve’s actions and observations very closely due to its huge influence on world markets being the central bank of the world’s largest economy. The last meeting prepared the ground for an interest rate cut, so it seems that Powell’s remarks are edging closer to making this a reality.

China, India and Jaguar Land Rover all face weakening car sales…

No turnaround in sight for China car sales (Wall Street Journal, Trefor Moss) heralds continued weakness in car sales in the world’s biggest market following thirty straight years of growth. The latest data from the China Association of Automobile Manufacturers showed June sales down by 9.6% versus the previous year, falling for the 12th month in a row as consumers continued to tighten the purse strings against the US-China trade war backdrop. US automakers Ford, GM and FiatChrysler’s Jeep division suffered the most among the foreigners – and European competitors such as VW are also suffering – but domestic players such as Zhejiang Geely, which announced a profit warning on Monday this week, are also suffering a rough ride. On the flipside, Japanese makers Honda and Toyota actually saw sales rise. * SO WHAT? * Clearly, economic uncertainty exacerbated by the US-China trade conflict is making potential buyers sit on their hands so I think it’s just a case of the manufacturers having to weather the current conditions. There’s not really much they can do apart from

keep their operations lean IMHO.

If that’s not bad enough, India car sales plunge by a quarter as credit crunch bites (Financial Times, Benjamin Parkin and Hudson Lockett) shows a MASSIVE drop in Indian car sales – the biggest in over ten years – as a credit crunch bites into the whole country. * SO WHAT? * The latest figures from the Society of Indian Automobile Manufacturers show three continuous months of decline of 20% or more as credit growth has dried up, suddenly leaving customers with fewer financing options. Given that non-banks had come to account for 40% of new vehicle loans, according to Capital Economics, this sudden drop-off is hardly surprising. Tough times ahead for car sales in India – and it’s not being made any better by unemployment being at its worst level in decades.

Jaguar Land Rover sales add to British motor industry woes (Daily Telegraph, Alan Tovey) highlights poor sales figures for the embattled car maker as its global sales fell by 11.6% in the latest quarter versus the same time period a year ago. Sales of the new Evoque are helping to stem the decline, but then again sales are suffering to some extent because customers are waiting for the new version of its popular Discovery Sport model. * SO WHAT? * The tough times continue…

Superdry gets bleak, Wetherspoon outpaces rivals and Heineken gets investigated…

Superdry founder dampens early revival hopes amid $85m loss (Daily Telegraph, Laura Onita) shows that things continue to be tricky for the Japanese-themed fashion retailer as it made £85.4m in losses for the year to April versus a profit of £65.3m the previous year. Returning co-founder Julian Dunkerton obviously blamed the cr*p performance on the previous management and said that a turnaround would take up to two years. * SO WHAT? * I think that the company needs a MASSIVE overhaul. There are surely only so many t-shirt/polo shirts/hoodies you can sell – the company surely has to come up with something new otherwise I fear it could go the way of previous stars such as French Connection.

Elsewhere, Wetherspoon still leads the pack despite refusal to increase prices (Daily Telegraph, Oliver Gill) shows that the pub group is still managing to pull ahead of peers such as Young’s and Greene King despite its refusal to increase prices squeezing their margins. Despite this, it is still investing in upgrades to its pubs and buying up freeholds of sites where it used to be a tenant. Then in Heineken’s pub and bar business investigated by PCA over ‘beer tie’ (The Guardian, Rob Davies) we see that Heineken’s pub chain is going to be under scrutiny by the Pubs Code Adjudicator for imposing unfair terms on landlords who try to cut links with the brewer. * SO WHAT? * If the PCA finds against Heineken, it could be fined up to 1% of UK turnover – about £11m. This could also lead to other similar investigations in the sector.

And finally, in other news…

I thought I’d leave you with A new optical illusion on Twitter has people mistaking a car door for the beach (Insider, Gabbi Shaw https://tinyurl.com/yxkvswbv). What do you see?

1. In MANUFACTURING-RELATED NEWS, Airbus is on track to overtake Boeing, Switch production goes to Vietnam and BMW pulls some engine production from the UK
2. In STREAMING NEWS, China’s DouYou aims to raise almost $1bn in a US IPO and live event streaming hots up
3. In UK HIGH STREET NEWS, M&S warns of more store closures, as does Patisserie Valerie’s owner
4. In OTHER NEWS, I bring you a solution to excess baggage…

So Airbus is on track to beat Boeing, Nintendo Switch production goes to Vietnam and BMW pulls some engine production from the UK…

Airbus poised to overtake Boeing as biggest plane maker (Wall Street Journal, Doug Cameron and Robert Wall) shows how the whole 737 MAX disaster is denting Boeing as Airbus looks set to replace it as the world’s biggest plane manufacturer after seven years of being the bridesmaid. Boeing said yesterday – for the third consecutive month – that it had no new orders for the MAX. As things stand, most analysts think that the aircraft won’t fly again until at least the end of September as Boeing fixes the aircraft’s flight control systems. Boeing’s second quarter earnings are due out on July 24th, so more detail will be available on the cost of the MAX’s grounding. * SO WHAT? * Whoever gets to be the world’s biggest aircraft manufacturer, they are both facing a slowdown in orders as tensions continue between the US and China – the biggest markets – so a resolution between both sides would surely help widen the current order bottleneck.

Nintendo Switch to be made in Vietnam (Financial Times, Kana Inagaki) shows another consequence of the US-China trade wars as Switch consoles will be made in Vietnam for the first time as Nintendo moves away from reliance on China. * SO WHAT? * Apparently, Nintendo had been talking about diversifying some of its production away from China  anyway (where it currently makes virtually all of its consoles via contract manufacturers including Foxconn), but I’m sure that the escalation of tensions gave this chat a kick up the backside. Although this is just one company, given who it is, you would have thought it would give cause to others such as Sony and Microsoft to at least consider something similar as all sorts of companies face the same difficulties. Vietnam continues to benefit from the ongoing trade dispute…

BMW moves some engine production out of UK over Brexit fears (The Guardian, Jasper Jolly) shows ongoing consequences of Brexit uncertainty as the carmaker said that it had moved manufacturing of engines destined for South Africa from the Hams Hall factory in the West Midlands to Germany. * SO WHAT? * This is just more evidence of how Brexit uncertainties are continuing to hit UK manufacturing – especially in automotive.

China’s DouYu aims to raise money in the US and live event music streaming looks like The Next Big Thing…

Chinese streaming site DouYu seeks up to $944 in US IPO (Financial Times, Hudson Lockett) shows that the Tencent-backed game-streaming start-up – which streams esports matches and other game-related content – is trying to raise a chunky slug of money on the Nasdaq despite ongoing US-China trade tensions, especially in the field of technology. It is rumoured that DouYu is trying to raise money to build a warchest to take on competitors like Huya as well as giving an early angel investor an exit route. * SO WHAT? * It’s particularly interesting that a Chinese tech company still wants to list in the US despite all the trade shenanigans going on at the moment. SenseTime and Megvii, two Alibaba-backed rival facial recognition companies, have already reconsidered and other expected

listings of ByteDance and Didi Chuxing have also failed to come forward this year. After the listing, Tencent will have about 37% of the outstanding shares via its wholly-owned subsidiary Nectarine.

Music-streaming services tap live events (Wall Street Journal, Anne Steele) highlights ongoing trends in streaming and music as both come together to build massive audiences for fans. Apple and Spotify have been trying out various types of live events (concerts, album-listening parties and fan Q&A sessions) to keep subsribers happy – and Taylor Swift’s concert tonight in New York City will be live streamed via Amazon’s Prime Day promotion. * SO WHAT? * I think this is a great new revenue stream for all concerned. The streamers get great content that justifies the subscription without having to pay the stars (they get massive exposure instead and promotion on the websites concerned) and fans get more access more often to their idols. I think that the Marshmello concert hosted on Fortnite back in February was a real landmark and this area is only going to grow. Just think – if you could add VR into it as well, it will be buzzing!

Both M&S and Patisserie Valerie warn of more store closures…

M&S warns even more stores at risk as £350m savings ‘on track’ (Daily Telegraph, LaToya Harding) cites chief exec Steve Rowe as saying that the company is now suffering because of “not shutting stores 10 or 20 years ago” and that the original plan to shut down 110 shops could increase. The company has a £350m savings target as part of its current bid to overhaul the business but was also keen to highlight the future potential of its tie-up with Ocado. * SO WHAT? * What a load of BS. M&S has had all sorts of highs and lows over the years – and to say now that they should have shut a load of stores 10 or 20 years ago is just a useless thing to say. It seems to me that M&S does quite well for a bit, then slides as it gets more boring, someone new comes in to revamp formats etc. and then it

happens all over again (I’ve seen this happen over the last 20 years or so!). M&S is currently in “consolidation mode” – but the difference this time around is that consumer behaviour undergoing a seismic shift. At least the chief exec can kitchen sink everything and blame predecessors for now, but he’s got to come up with the goods sooner or later. The Ocado deal is a step in the right direction, but he’s going to have to do more than that.

Patisserie trims fat with another 14 closures (The Times, Dominic Walsh) shows that Patisserie Valerie’s “new” owner, Irish private equity firm Causeway Capital, will be closing 14 cafes in addition to the 71 that were closed by KPMG when the company went into administration. Causeway Capital said “Patisserie Valerie has today confirmed it has closed 14 of its smaller patisseries. The difficult decision was reached following a detailed review of the size, trading performance and location of each store over the past five months”. Sad news, but hopefully good for the future of the firm.

And finally, in other news…

I thought I’d leave you today with Man puts on 15 layers of clothing rather than pay airline’s excess baggage fee (Newsweek, Daniel Avery https://tinyurl.com/yypxx3p3). This reminds me of something that happened to me back when I went to Tokyo to study for a couple of years at uni. Unfortunately, my baggage allowance was still 25kg even though I was going there for a year (initially), so I was wearing all my heavy clothing (hiking socks, Timberland boots, trackie bottoms, jeans, polo shirt, cricket jumper, leather jacket) to save on weight. Unfortunately, it was August and when the plane touched down at Narita at about 7.30am it was already about 30 degrees C with 100% humidity. This was made worse because the airline had left my luggage at a connecting airport – so I ended up having to wear the clothes I was standing in for three days 😱😱😱. Tough (and sweaty) times 😜

1. In BANKS NEWS, Deutsche suffers after the cull and banks are slow to endorse Facebook’s Libra
2. In CONSUMER/RETAILER NEWS, spending hits the skids, online shopping is expected to overtake high street shopping in ten years, Jack Wills brings in KPMG and Matalan falls under the weather
3. In INDIVIDUAL COMPANY NEWS, BA gets a hefty fine and Virgin Galactic aims to float
4. In OTHER NEWS, I bring you a dancing cockatoo…

So Deutsche sinks after the cuts and banks are slow to get involved in Libra…

Deutsche falls 5% on fears global restructuring is not enough (Financial Times, Olaf Storbeck) shows the initial reaction to yesterday’s dramatic announcements, reflecting doubts that its revenues may fall faster than its costs given that it is likely to lose customers. Deutsche’s CFO, James von Moltke, didn’t pump up the feelgood factor by saying that after sinking into loss this year, the bank could well continue to lose money in 2020, citing “significant uncertainty” about profit forecasts. On the other hand, life goes on in Deutsche commits to the City after cuts (The Times, Katherine Griffiths) as the embattled bank stated that it would continue to press ahead with moving into its new London HQ at 21 Moorfields in the City in 2023. Before yesterday’s cuts, it had 7,000 staff in London and 1,000 in Birmingham – but the new building has space for 5,000 (so I guess any Deutsche employees who knew this would have seen the writing on the wall). * SO WHAT? * Obviously, it’s early days in terms of determining whether the cuts that were made will be enough to satisfy investors who had long been baying for blood, but it would seem that the initial reaction, at least, would be scepticism. Mind you, given Deutsche’s recent track record, you can forgive investors for not really giving them the benefit of the doubt.

In Banks in no rush to join Facebook’s crypto project (Financial Times, Laura Noonan, Robert Armstrong, Nicholas Megaw and Stephen Morris) we see that banks are, unsurprisingly, not keen on endorsing Facebook’s new cryptocurrency. This is unsurprising because they don’t want to rub the regulators up the wrong way (regulators really don’t like Libra at the moment, so banks will feel that they might be collateral damage if they jump on the Libra bandwagon too joyfully), Libra is viable competition to their own cryptocurrency projects and it could also harm their position in the financial “food chain” as “the gatekeepers of the global financial system”. Having said that the leader of Facebook’s Libra project, David Marcus, said that “We have had conversations with banks. We still have conversations with banks. And my expectation is that by the time this thing launches next year you will have banks that are going to be members of this”. * SO WHAT? * I think that traditional banks are going to find this a tough one because of all the baggage of previous financial crises – but given that it’s “only” a $10m buy-in to get into the Libra Association, surely some challenger/digital banks will be all over this. And if THAT happens, I would have thought it will only be a matter of time before other “traditional” banks join the Libra party. There’s a long way to go yet, though, and Facebook will face very intense scrutiny given its track record thus far in trustworthiness!

Consumer spending hits new lows, online shopping is expected to overtake high street shopping while Jack Wills and Matalan have problems…

Consumer spending at weakest since mid-90s amid Brexit chaos (The Guardian, Larry Elliott) cites the latest figures from the British Retail Consortium (BRC) which show that annual consumer spending is at its weakest level since records began in the mid-90s. Surprise, surprise – Brexit uncertainty is being blamed for this one. Helen Dickinson, chief exec of the BRC, said that “June sales could not compete with last year’s scorching weather and World Cup, leading to the worst June on record…the picture is bleak: rising real wages have failed to translate into higher spending as ongoing Brexit uncertainty led consumers to put off non-essential purchases”. The report also showed that online shopping continues to rise and Shopping online to overtake high street in next decade (Daily Telegraph, Tim Wallace) mentions a report by Retail Economics that

takes it a step further by saying that by 2028 over half of all shopping will take place online. * SO WHAT? * This just shows how important it will be for retailers to get the balance of their online and offline offerings right ASAP – otherwise they will be toast. In the short-term, though, Brexit clarity is obviously sorely needed.

The high street gloom continues in Jack Wills appoints advisers to assess all options – including sale (The Guardian, Sarah Butler) which shows that the preppy apparel retailer continues to be problematic and has brought in KPMG to look at options, including selling itself. It is currently owned by private equity company Bluegem Capital, who bought it in 2016, but trading isn’t looking great. Then Matalan warns that profits could be hit by discounting (Daily Telegraph, Laura Onita) shows that Matalan is having to use big discounts to lure customers into its shops, which will put pressure on profits in the second quarter. Matalan is often compared to Primark, but as Sofie Willmott of research firm GlobalData puts it, “Unlike Primark, Matalan is also able to capitalise on retail spend shifting online with its digital channel significantly boosting overall performance”. Still, not great…

BA gets a massive fine and Virgin Galactic aims for the stars a listing…

BA to appeal against £183m fine over customer data hack (Daily Telegraph, Oliver Gill) highlights the handing down of a massive fine against the company for a customer data breach last year which resulted in the details of 500,000 customers being accessed by hackers. The fine was larger than everyone had been expecting and BA will appeal. * SO WHAT? * Airlines are having a tough old time at the moment, so the timing of this fine isn’t great. BA will presumably want to string this out for as long as it can in an effort to pay less, but Information Commissioner Elizabeth Denham said that “People’s personal data is just that – personal. When an organisation fails to protect it

from loss, damage or theft it is more than an inconvenience. When you are entrusted with data you must look after it”.

Richard Branson’s space unit to go public (Wall Street Journal, Maureen Farrell) heralds The Bearded One’s latest PR opportunity as Virgin Galactic is preparing for a public listing. Social Capital Hedosophia Holdings Corp, a special-purpose acquisition company, is going to invest about $800m for a 49% stake which Virgin Galactic reckons will give it enough money to play with until spaceship operations become commercially viable. Virgin Atlantic is currently engaged in a space race with the likes of Jeff Bezos’ Blue Origin and Elon Musk’s SpaceX. * SO WHAT? * Sorry, but I think this sounds like a humungous money pit. I expect delays, massive expense and, ultimately, failure. Branson has a chequered history with listing his companies, so success is most definitely not guaranteed!

And finally, in other news…

After all this rather downbeat news, I thought I’d leave you with Snowball: Cockatoo who can pull off 14 different moves is first non-human animal known to dance to a beat (The Independent, Phoebe Weston https://tinyurl.com/y5wf2al4). Man, this cockatoo has some moves!

1. In FINANCIALS NEWS, Deutsche Bank takes drastic action, digital banks grow up and fintech evolution continues
2. In CAR-RELATED NEWS, SUVs “pile up” on the sales lot, energy suppliers pledge to get EV fleets and JLR’s chief says batteries are key to UK car manufacturing’s future
3. In INDIVIDUAL COMPANY NEWS, Boeing loses a chunky order to Airbus and Tesco experiments with Amazon Go-style shopping
4. In OTHER NEWS, I bring you Mariah Carey’s bottle cap challenge attempt…

So Deutsche Bank cuts deep, digital banks aim higher and fintech gets crowded…

Deutsche Bank to exit equities trading in radical overhaul (Financial Times, Stephen Morris and Olaf Storbeck) heralds some sobering news for Deutsche Bank employees as the company announced it is to cut 18,000 jobs and siphon off €74bn of its riskiest assets into a “bad bank”, effectively canning its ambitions to be a Wall Street-beater. This will involve the shutting down of its loss-making equities trading business and the downsizing of its bonds and rates trading operations. Job cuts are to kick off this morning in London and New York and will trim numbers from the current 91,500 to around 74,000. The company said that it won’t be raising any additional capital, won’t be paying a dividend for the next two years and concluded that these actions “are designed to allow Deutsche to focus on and invest in its core, market-leading business of corporate banking, financing, foreign exchange, origination and advisory, private banking and asset management”. * SO WHAT? * This has been a while in coming, but should go some way to address critics who have been saying that reforms of the troubled German lender have not gone deep enough. Only time will tell whether this has been sufficient, but it should at least buy management some breathing space. No doubt employees of other banks will be feeling more nervous as they fear getting replaced by “better” and/or now cheaper Deutsche bank casualties – or because competitors will use Deutsche’s example to make more culls of their own.

Digital banks seek to turn popularity into profits (Financial Times, Nicolas Megaw) looks at the evolution of the “digital disruptors” in the banking space like Monzo, Revolut and N26 as they strive to move towards profitability – although they’ll be making more losses in the meantime. Interestingly, these three banks have a higher valuation than the “challenger banks” who launched in the wake of the 2008 financial crisis but they now need to morph their popularity seamlessly into doing the boring “banky”-type stuff – i.e. providing a service to its customers whilst actually making some money. One of the ways they are

diversifying their revenues is by providing different services via premium subscription like travel insurance, savings accounts, insurance or mortgage broking from third party providers. * SO WHAT? * All this extra service stuff looks to me like fiddling around the edges, but it does seem that the digital banks are getting better at convincing customers to use them as their “main” bank (which is no mean feat) and broadening their appeal from the early adopters. I’m sure that, over time, this will only get better – but it won’t happen overnight. The main key here, though, is to make sure that they make enough progress towards profitability in order to survive a downturn. 

Are we at peak fintech, or is this actually just the start (Daily Telegraph, James Cook and Matthew Field) poses the question as we start London Fintech Week today. Fintech has become an increasingly crowded area in the last few years and the number of related advertising campaigns have served to increase customer awareness. Having said that, customers in the challenger banking space still seem to be slow to switch everything over and as Accenture fintech expert Julian Skan observed, “We’re probably at peak interest. They are attracting a very high percentage of people opening bank accounts and the question is how long that continues”. British fintechs have so far raised $1.3bn in funding, according to PitchBook data – a record year – but the number of deals has actually slowed. * SO WHAT? * I completely disagree with the Accenture guy – I think that we are nowhere near “peak interest” at all! I think that interest in digital banks etc. is growing all the time. Let’s face it, there was some statistic way back when saying that people are more likely to get divorced than change their bank account (in the UK, anyway) – so it’s pretty impressive that these banks have managed to make any dent at all in the incumbent banks’ business. Although it’s probably a bit of a slow burn, once customers get the hang of the way these things work, the trust will build and build and more customers will get sucked in. In the meantime, I think that there will be a LOT of consolidation either among the disruptors themselves or by the big banks wanting to accelerate their game. I would have thought that big banks would do better to preserve the branding of their more exciting acquisitions so they could have the best of both worlds – a forward-thinking digital offering backed by a “boring” bank that everyone knows.

SUVs “pile up”, energy suppliers commit to an EV fleet and car batteries are the future…

SUVs are bumper-to-bumper on dealer lots, with more on the way (Wall Street Journal, Ben Foldy) highlights the opinion that we are reaching SUV saturation as customers are faced by more and more models from all the manufacturers who have been keen to tap into the current penchant for big vehicles. Sales of crossovers and SUVs are losing momentum and are taking longer to sell, meaning that there are more deals around for savvy buyers. And it’s not going to end there – manufacturers are lining up even more new SUV models as they focus in on this more profitable segment. Putting this all in numbers, 70 individual models of SUVs were available in the US in 2014, versus 96 now that will, according to a Bank of America report, rise to 149 by 2023. * SO WHAT? * The problem with all this is that if there are too many SUVs going on sale, the competition amongst manufacturers to sell them will be so fierce that prices will have to fall, making them less profitable – which is why they built them in the first place! Crossovers and SUVs currently make up over 47% of the new vehicle market in the US, with sales of sedans and hatchbacks only representing 30% of the market (versus 50% in 2012). It’ll be interesting to see how this plays out, but you do get the feeling that SUVs are becoming the norm these days!

You may recall that last week I said that big companies need to switch their fleets to EVs to encourage wider adoption – well, in Energy suppliers vow to switch all of their vehicles to electric (Daily Telegraph, Julia Bradshaw) we see that two of the UK’s biggest energy suppliers – Centrica and SSE – have said that they will convert their entire fleet of commercial vehicles to electric by 2030. Centrica has the UK’s third largest commercial fleet in the

UK and SSE has the seventh – and they both said that they’d install charging services for employees and customers. Services company Mitie is also aiming to go down the same road and by the end of 2019, it will have switched 20% of its vehicles to electric and installed 800 new charging points. * SO WHAT? * This is a big deal, no? If more companies decide to do this – and, importantly, sort out the charging network – the EV thing could really take off. Still, it’s not going to be overnight. Like I’ve said before, if I were to buy a car now, I’d buy petrol (because I don’t want to do diesel, don’t do high mileage and think that the current charging network is useless) – but I think that the one after that would probably be a hybrid (not electric – although let’s see how the charging network develops!).

UK car industry future hinges ‘not on Brexit, but on batteries’ (The Guardian, Jasper Jolly) highlights the belief of JLR boss Ralph Speth that “if batteries go out of the UK, then also the automotive production will go out of the UK”. * SO WHAT? * Manufacturers are scrambling amongst themselves to increase their EV model line-ups and these new cars will need lithium ion batteries. Interestingly, the UK has already come close to leading the world in battery technology as the lithium ion battery was actually invented at Oxford University in the late 70s – but then Sony took the baton and commercialised it. We have some battery capacity in the UK at the moment – AESC in Sunderland and Hyperbat, a JV between Williams (the F1 lot) and Unipart – but this needs to be upped considerably. The scale of the task is huge – but with China having already poured billions in to this area, the need to improve our capabilities is growing all the time. I would have thought that the government has to step up big time to give this area the boost it needs – although I do wonder whether we should hedge our bets and possibly invest more in solid state tech, which is more stable (won’t blow up on you) and which is currently pretty expensive. Surely we can add more to that area than the rather crowded field of lithium ion batteries…

Boeing loses more orders and Tesco trials Amazon Go-like tech…

Boeing loses MAX deal to Airbus (Wall Street Journal, Robert Wall) highlights Boeing’s latest chunky loss in the wake of the 737 MAX disaster. The discount airline arm of Saudi Arabian Airlines Corp, Flyadeal, switched from its original Boeing order to buying up to 50 Airbus A320neo planes, as Boeing’s 737 MAX planes continue to have problems following two terrible crashes. The deal was thought to be worth over $5.5bn – so not an insignificant amount. * SO WHAT? * I expect this to continue. No doubt when Boeing sorts its problems, it’s going to have to offer big discounts to entice customers back, which will also affect profitability for a while. The tough times continue for Boeing while Airbus gets an unexpected tailwind.

Spurred by Amazon, supermarkets try swapping cashiers for cameras (Wall Street Journal, Parmy Olson) shows us that Tesco is experimenting with Amazon Go-like technology that lets customers walk in, pick up their goods and go without faffing around with a cashier. It’s using the same idea as Amazon in its cashierless shops – using loads of cameras – and any developments in this area will be monitored with interest by American counterparts. Tesco says that it plans to offer “frictionless shopping” to the public next year, after testing with employees, with a view to rolling the system out to its smaller stores. It says that the tech it is using differs from Amazon’s in that it only uses cameras, whereas Amazon Go stores use cameras and sensors. French retailer Carrefour is also running similar trials. * SO WHAT? * This all sounds great but I think it will take quite some time for it to become normal. Still, it sounds fun though – no? This could be quite an interesting way for Tesco to differentiate itself from its rivals.

And finally, in other news…

Last week, I alerted your attention to the bottle cap challenge where various stars of a martial arts-persuasion unscrewed bottle caps via a spinning kick. Well diva-in-chief Mariah Carey had a go in Mariah Carey hilariously masters the bottle cap challenge using just her voice (Yahoo! Rachel DeSantis https://tinyurl.com/y48njgjw). Nice 👍

1. In HIGH STREET NEWS, William Hill announces shop closures and Primark eyes US expansion
2. In CAR-RELATED NEWS, UK plug-in car sales disappoint and India’s Ola gets a London licence
3. In TECH-RELATED NEWS, Samsung forecasts a big fall in operating profit and Niantic could do better
4. In OTHER NEWS, I bring you the “invisible challenge”…

So William Hill wields the axe and Primark looks to the US…

William Hill to shut 700 shops (Daily Telegraph, Michael O’Dwyer) heralds the inevitable move by the bookmaker following the government’s crackdown on fixed-odds betting terminals (FOBTs) which cut the maximum bet from £100 to £2 in April to limit gambler losses. Betting shops earned huge amounts of money on these things – often referred to as the “crack cocaine” of gambling – and so their sudden demise has hit hard. GVC, which owns Ladbrokes and Coral, also plans to close up to 900 of its shops for the same reason. In all, this will put nigh on 10,000 jobs under threat. * SO WHAT? * The betting shops have seen this coming for ages, so this should come as no surprise. From a business standpoint, though, things could be worse as the US sports betting market opened up this year due to a change in the law and so British bookmakers have been scrambling over themselves to get a piece of that growing (American) pie. In the meantime, though, store closures will hit costs and put yet more holes in our high street.

Primark still hot despite wet start to summer (The Times, Ashley Armstrong) highlights strong sales at the Associated British Foods-owned clothing retailer despite experiencing a wet May. Fun fact: ABF owns brands like Ovaltine, Ryvita, Jordans and Twinings but makes over half of its sales and profits from Primark (hey – I’ve got your back on interesting conversation topics 👍). Actually, while I’m at it, did you know that Primark is Britain’s #1 retailer by volume and #3 in terms of value after M&S and Next?? Anyway, trading was strong despite the weather and tough comparisons with the same time the previous year which saw a royal wedding, the World Cup and a heatwave. ABF left its full-year outlook unchanged. * SO WHAT? * I think that this is an impressive performance on the domestic front given current difficult trading conditions. Outside the UK, Primark targets Chicago for next stage of US expansion (Financial Times, Jonathan Eley) looks at the company’s US ambitions which follow a difficult period where it had to cut space at a number of its stores to improve sales density. The US market has been the graveyard of many a UK retailer – the most recent casualty of which has been Philip Green’s Arcadia which is closing Topshop there – so clearly it has its work cut out.

UK plug-in sales suffer and Ola gets a London licence…

Subsidy cuts blamed for fall in UK sales of electrified vehicles (The Guardian, Jasper Jolly) shows that – surprise, surprise – when punters are faced with higher prices for electric vehicles, they don’t buy them. And yes, bears do indeed sh!t in the woods. Anyway, the latest figures from the Society of Motor Manufacturers and Traders show that sales of alternative-fueled vehicles (which includes hybrids as well as fully-electric) fell by 11.8% in June versus the same month last year. The geniuses at SMMT put this down to the government reducing the subsidy for electric vehicles from £4,500 to £3,500 and eliminating the hybid subsidy altogether in October. Funnily enough, sales of diesels continued to fall – this time by 20% year-on-year – given that this is now seen as the fuel of Satan. * SO WHAT? * The SMMT consistently belly-aches over falling car sales, but the fact of the matter is that people just aren’t spending money (from their higher wages) on big ticket items like cars because of economic uncertainty. Also, the quicker manufacturers shift production away from diesel the better. God knows what’s going to happen to all the old secondhand diesels out there that everyone bought because we were all told the wrong information! FWIW, I

think that a major force in boosting sales of electric vehicles would be for company car fleets to increasingly go electric. This would also increase the impetus for building a viable charging network which is, let’s face it, probably the biggest issue when people are faced with the choice between electric, hybrid or “traditional”. I would personally go down the hybrid route if you wanted to go green, but to be honest if I had the money to go and buy a car tomorrow I would buy petrol because I don’t do massive mileage and I just think charging capability in this country isn’t capable – and won’t be for years to come.

Ola wins licence to take on Uber (Daily Telegraph, Natasha Bernal) signals the arrival of Indian ride-hailing company Ola in London where it will compete with that little-known taxi thingamajig Uber. The Softbank-backed company got its licence from Transport for London yesterday and is expected to start offering its services in September and joins the likes of Bolt, Kapten and ViaVan as new challengers to Uber. Ola says it will differentiate itself by focusing on passenger safety and letting black cabs use the service. Ola launched in Bristol last year and now has 10,000 drivers in Liverpool, Birmingham, Cardiff, Reading, Bath, Bristol and Exeter. * SO WHAT? * Nice one – but it is a rather crowded market! Still, Ola has some major backers in the form of Japan’s Softbank, car makers Hyundai and Kia, China’s Didi Chuxing and Sequoia Capital India. That doesn’t guarantee success (because many of these investors also invest in other ride hailers) but it does mean that it should be taken seriously by the competition.

Samsung has a downbeat profit outlook and Niantic falters…

Samsung Electronics expects quarterly operating profit to fall more than 50% (Wall Street Journal, Eun-Young Jeong) highlights a rather disappointing announcement from the consumer electronics giant. It said that its second quarter operating profit would take a 56.3% hit from the previous year due to poor demand for memory chips, with profits and revenues also taking a dive. Having said that, market expectations for its operating profits turned out to be too pessimistic as Samsung’s current situation was improved by a weaker-than-expected domestic currency and a “one-time gain related to the display business” (thought to be from compensation fees from Apple, which uses Samsung’s OLEDs in some of its iPhones). * SO WHAT? * Falling chip sales hit Samsung badly because it’s where it earns most of its operating profit – 75%  in 2018, to be exact – so you can see why the current slowdown is

painful. The company has also suffered fallout from the US-China spat because, although it’s a competitor to Huawei in smartphones, Huawei also buys Samsung’s memory chips.

I must say I thought that Niantic, the maker of the wildly popular Pokemon Go who recently released a new Harry Potter augmented reality game, would have been taking the plaudits by now but Mobile gaming: spell check (Financial Times, Lex) shows that the reception of Harry Potter: Wizards Unite, has been largely disappointing (according to market research company Sensor Tower, the Harry Potter game is expected to make $10m in its first month versus Pokemon Go, which made over $200m). What is interesting, though, is that Niantic is creating a platform for other augmented reality products – something that Epic Games, creator of Fortnite, is also doing. I think that AR is like VR in the sense that although many look at the respective technologies in terms of gaming, it actually has other much broader and better uses in training and other areas – IMHO, gaming is the cherry on the cake.

And finally, in other news…

I thought I’d leave you this week with The “invisible challenge” is the internet’s latest dog craze (BestLife, Diana Bruk). When I find a cat equivalent, I’ll let you know (but tbh, I think cats would work this out quite quickly). Have a great weekend!