Category: Uncategorized

1. In MACRO NEWS, more US tariffs irk the Chinese and dent small US firms while Hong Kong braces itself for a general strike and in the UK, we look at the impact of a no-deal Brexit and the potential impact of a Labour share grab
2. In FINANCIALS NEWS, HSBC puts more pressure on mortgage lenders and Revolut plans a hiring spree
3. In INDIVIDUAL COMPANY NEWS, US shale companies continue to go bankrupt and Musk dabbles in insurance
4. In OTHER NEWS, I bring you a cafe that makes your eyes go funny…

So more tariffs come in, Hong Kong faces a general strike and, in the UK, we look at the potential impact of a no-deal Brexit and Labour’s proposal to raid companies of their shares…

China lashes out at US as Trump brings in new tariffs (The Times, Callum Jones) heralds the latest round of tariffs at the US slapped 15% duties on Chinese imports worth $125bn over the weekend. China counter-punched with 10% duties on around 1,700 American products including crude oil. This is the first of two waves of tariffs, the second of which is to be imposed by Washington on December 15th. Prior to yesterday’s move, Trump put duties on $250bn-worth of Chinese goods and China put duties on $110bn worth of US goods in retaliation. China’s state media responded to the latest round by saying “The United States should learn how to behave like a responsible global power and stop acting as a school bully”. Mind you, even though the US is taking the lead on all this, Tariff uncertainty weighs on small businesses (Wall Street Journal, Ruth Simon) shows that current actions are hurting “the little guys” by creating an atmosphere of uncertainty. A monthly survey for the Wall Street Journal showed that economic confidence among small firms fell in August has fallen to its lowest level since November 2012 as 40% of respondents expect the economy to worsen over the next 12 months versus 29% in July and 23% a year ago. Some are supportive of Trump’s actions and are willing to take short term pain for long term gain, but it seems that it is the uncertainty that is hurting the most as it makes planning very difficult.

Meanwhile, things are hotting up in Asia as Hong Kong braces for general strike after chaotic weekend (Financial Times, Sue-Lin Wong, Jamil Anderlini and Nicolle Liu) highlights today’s general strike following weeks of protests that are continuing to escalate despite Chinese efforts to quell them. Protests were originally sparked by a controversial extradition bill that would enable suspects to be tried in mainland China but have broadened to include demands for an independent inquiry into the police and universal suffrage. The strike will continue tomorrow and will undoubtedly cause a great deal of chaos as a previous strike last month crippled the city’s transportation network and resulted in hundreds of flight cancellations. The increasingly heavy-handed crackdown by authorities on protesters continues.

Back in the UK, Javid’s hard sell to City chiefs (Daily Telegraph, Jack Torrance) highlights chancellor Sajid Javid’s rather tricky task of trying to sell business chiefs the “opportunities” of a no-deal Brexit in a meeting scheduled for today with over a dozen bosses of companies such as Barclays, the London Stock Exchange and RBS. Talks are expected to focus on “Brexit opportunities and challenges”. Talking of no-deal, House prices could nosedive after no-deal Brexit – report (The

Guardian, Richard Partington) highlights a report by accountancy firm KPMG which concludes that a no-deal Brexit could result in house prices falling by up to 20%, hitting prices in London and Northern Ireland particularly hard. In the midst of all this, Boris Johnson vows to purge rebels who vote against no-deal Brexit (Financial Times, George Parker) shows a PM attempting to take control in the Brexit debate by taking extreme measures to ensure the threat of a no-deal won’t be scuppered. * SO WHAT? * Opponents of no-deal are teaming up across party lines currently in order to pass a law to stop BoJo executing a no-deal departure on October 31st, but the clock is ticking as they will have to get such legislation through this week. Having said that, Michael Gove, minister for no-deal planning, implied on TV yesterday that BoJo could actually ignore the law even if the legislation DID get through. The drama continues…

And talking of opposition, but moving away from Brexit for a moment, UK’s Labour would cost companies £300bn by shifting shares to staff (Financial Times, Jim Pickard) cites a report compiled by the Financial Times and Clifford Chance that shows companies and landlords alike stand to lose big time if Labour got into power in the event of an imminent general election. They would seize about £300bn of shares in 7,000 large companies and “give” them to workers, in what would be one of the biggest state raids on the private sector in a western democracy, and attack private landlords by imposing higher taxes on them and implementing a “right to buy” scheme for private tenants. The report looks at what could happen in the event of a Labour government and extrapolates what this would actually cost. * SO WHAT? * I guess that the most staggering conclusion is that Labour would basically seize £300bn versus the £4.8bn Tony Blair’s government expropriated from utilities companies in a “windfall tax”. The consequences would be catastrophic as there would be huge legal challenges from companies, shareholders and whole countries, such as China and the US, complaints from the WTO and then potential retaliation from other countries. Shadow chancellor John McDonnell says that more employee ownership is good for productivity and encouraged long-term thinking, saying that “It’s right that we all share in the benefits that investment process produces” but Matt Kilcoyne at the Adam Smith Institute observed that “Our largest investors are pension funds and they’ll see billions of pounds wiped off their books. So we’ll all see the value of our pensions fall. It’s the biggest raid of all our nest eggs in living memory”. As for landlords, McDonnell said that he wants to attack the buy-to-let market and make it easier for tenants to buy the homes they live in but suggested that they won’t have to pay market price when he said “You’d want to establish what is a reasonable price, you can establish that and then that becomes the right to buy”. Incredibly, he added that “You (the government) set the criteria. I don’t think it’s complicated”. WHAT???? Erm, surely what will happen is that the tenant will buy the house for less than it’s market value and then they’ll just sell it and pocket the difference. And who will decide market value?? Good old comrade McDonnell. Putin would be proud.

HSBC continues to cause ripples in the mortgage market and Revolut embarks on a hiring spree…

On the subject of housing and mortgages, HSBC to lend extra £35bn to UK home buyers (Financial Times, David Crow) shows that HSBC, which until now generates almost 80% of its profits in Asia, is pushing forth into the mortgage market by increasing its current £100bn exposure to UK mortgages to £135bn. It has traditionally lagged other mortgage lenders but has expanded its market share following the introduction of legislation in 2014 that forced British banks to separate their UK operations from their international and investment banking business. * SO WHAT? * Rivals are whinging that HSBC’s rapid expansion is distorting the mortgage market by providing cheap mortgages to grow their book making it harder for competitors to maintain or increase their own margins. Some players, such as Tesco Bank, have had to abandon the mortgage market as a result and there are concerns

that the squeezing out of other players could ultimately damage competition. Having said that, HSBC’s mortgage market share of 7% is still way lower than Lloyds on 20.4%, Nationwide on 13% and Santander UK on 11.2%. Customers are clearly benefiting from the availability of cheap mortgages in the meantime.

Then in Revolut plans hiring spree in customer service and compliance (Financial Times, Nicholas Megaw) we see that the banking disruptor has plans to increase its staff numbers by almost a third in a drive to strengthen in two key areas. Its customer base continues to expand rapidly and its £4m investment in Portugal with 400 new staff is intended to meet criticisms that it is having trouble coping with the influx. * SO WHAT? * This follows similar moves by rivals N26 and Monzo to make sure they meet new customer expectations and comes as it looks for backers in its next big investment round, expected by the end of this year. On another note, it seems that Portugal is becoming an increasingly popular FinTech hub because of its low costs, high quality of education and good standard of life. Companies such as Google, BNP Paribas and Euronext have all opened tech centre there in recent years. 

US shale companies continue to go bust and Elon Musk talks about insurance…

It’s interesting to see that, following on from last week’s news about BP selling out of its Alaskan interests to concentrate on shale, Oil and gas bankruptcies grow as investors lose appetite for shale (Wall Street Journal, Rebecca Elliott and Christopher M Matthews). So far, 26 oil and gas producers including Sanchez Energy and Halcon Resources have filed for bankruptcy this year as shale producers borrowed big in the last few years to up production and are having trouble refinancing debt that’s coming up for renewal as oil prices continue to hover at around $60 a barrel. This has meant that investing more money in shale has become a less compelling option for investors, leaving some of the operators high and dry. 28 producers went bankrupt in the whole of 2018, so you can see why concerns are increasing about the acceleration in bankruptcies this year. * SO WHAT? * It’s the smaller operators who have suffered the most thus far, but maybe this is where the majors such as BP can step in and buy

them up for decent prices and squeeze out better economies of scale.

Musk moves into insurance to cut premiums for Tesla owners (Financial Times, Robert Armstrong and Oliver Ralph) heralds the beginnings of Tesla becoming a bona fide motor insurer as the company decides to do something about the perception that its vehicles cost too much to insure. Currently, specialist insurer Markel underwrites Tesla’s auto insurance, but Tesla said that it is moving towards becoming an insurer in its own right and use its own balance sheet to underwrite car insurance. Musk argues that Tesla’s access to data captured by their cars will give his company an advantage in pricing over third party insurers as they use “anonymised fleet data” rather than driver-specific data. It hopes to slash insurance rates for its drivers by 20-30% as a result. * SO WHAT? * At first glance, this looks like it will be a nightmare given that insurance is an extremely complicated business to be in for anyone, let alone an electric car company! However, Tesla is in the unique position of knowing more about its drivers than any other insurer possibly could so will be in a much better position to judge the safety of its drivers. Still, it does sound like it’s taking an unnecessary risk here by wading into another complicated and highly competitive industry.

And finally, in other news…

I thought I’d bring you a very unusual cafe today in Tokyo’s amazing 2D Cafe looks like an illustration, but it’s an actual restaurant you can eat in! (SoraNews24, Casey Baseel https://tinyurl.com/yymoydhn). This really does make your eyes go funny!

1. In MACRO & ECONOMIC INDICATOR NEWS, US growth wobbles on the trade war, Boris Johnson tries to head off opposition and Ukraine gets a new young PM while UK consumer spending looks vulnerable and Hays rejigs its business
2. In TECH NEWS, Dell sees record PC revenues and Micro Focus falls through the floor
3. In INDIVIDUAL COMPANY NEWS, YouTube reconsiders its paywall, Juul faces more scrutiny, Amigo has a shocker and Lewis Hamilton invests in a new meat-free burger chain
4. In OTHER NEWS, I bring you an amazing Airbnb…

So US growth wobbles, BoJo speeds momentum, Ukraine gets a new PM, UK consumer spending looks increasingly vulnerable and Hays shuffles its business…

Trade war hits US growth as Trump renews attack on Fed (Wall Street Journal, James Dean) cites an estimate downgrade from the commerce department of Q2 GDP growth from 2.1% to 2% due to exports and business investment being weaker than it had originally thought. Trump is currently trying to find a balance between re-setting the trading relationship with China and ensuring that his own economy continues on a growth track, but some observers think his efforts are starting to slow things down on the domestic front. Trump resorted to his tried-and-tested strategy of blaming anything negative on someone else and tweeted yesterday that “The economy is doing great, with tremendous upside potential! If the Fed would do what they should, we are a rocket upward!”. The market is expecting a 0.25% cut in interest rates at the Federal Reserve’s next policy meeting to avert potential recession in the US.

Meanwhile, Boris Johnson seeks to avert defeat by accelerating Brexit talks (Financial Times, George Parker and Jim Brundsen) shows that BoJo is trying to up the tempo in talks with Brussels to hammer out a revised Brexit deal in order to avoid defeat at the hands of his opponents next week. His chief Brexit negotiator, David Frost, is to meet his EU counterparts twice a week throughout September to get a new deal before the summit set for October 17th-18th. * SO WHAT? * Basically, BoJo wants to keep the soft border in Ireland and Europe has thus far refused any such overtures. He is said to be hoping to ensure this ahead of the EU October summit. MPs who are opposed to a no-deal are trying to get together to stop him from using the threat of no-deal to get a better deal and things are likely to come to a head when they return from their summer recess next Tuesday.

Elsewhere, Oleksiy Honcharuk named as Ukrainian prime minister (Financial Times, Roman Olearchyk) heralds the approval of 35-year-old lawyer Oleksiy Honcharuk as the country’s next prime minister under President Volodymyr Zelensky’s administration. He’ll be Ukraine’s youngest PM and will aim to increase economic growth and investment by accelerating privatisation plans, lifting restrictions on selling agricultural land, speeding up deregulation and strengthening the rule of law. The new parliament is also expected to implement more legislation to crack down on corruption.

In terms of economic indicators, Brakes could go on consumer spending as confidence falls (Daily Telegraph, Tim Wallace) cites the latest GFK survey that shows confidence in consumer spending, which makes up a significant chunk of the UK’s economy, is falling. The last time the reading has been this low is in the eurozone crisis in 2013 and concerns of recession are increasing. GFK’s Joe Staton siad that “Unless there is major good news impacting the hearts and minds of consumers, my concern is this [indicator] will fall, and if it falls people will stop spending and the brakes will come on the economy, as we saw at the beginning of the last downturn”. On the plus side, wage growth is continuing and employment is tight – so things could be worse.

Talking of employment, Recruiter’s profits hit by slowdown in Europe (The Times, Ben Martin) shows that the UK’s biggest recruiter, Hays, struck a cautious note in its results yesterday as it spoke of a weakening German market and tougher conditions in the UK. It has had to cut managers in the Netherlands, Belgium and France as part of a European restructuring due to an increasingly inhospitable business landscape. * SO WHAT? * The company, which recruits people into white-collar industries, is often seen as an economic bellwether considering its size and breadth of exposure to the job market. Although things haven’t been great of late, chief exec Alistair Cox maintained high hopes for the German business – which he wants to double over the next few years – but said that, for the moment, weakness in manufacturing and automotive companies as well as the possibility that Germany could tip into recession is proving to be a dampener.

Dell posts solid PC revenues while Micro Focus tanks…

Dell reports record revenue in PC division (Wall Street Journal, Maria Armental) heralds a solid performance by the company which saw its quarterly profits boosted by a big tax benefit and record revenues from sales of PCs, notebooks and workstations to commercial clients. Dell’s vice chairman Jeff Clarke observed that “We are in the early stages of a technology-led investment cycle”. If that is indeed the case, then the next year or two could bring more joy for the company that returned to public markets in December after a five-year absence.

Micro Focus suffers £1.7bn wipeout over sales shock (Daily Telegraph, Matthew Field and Michael O’Dwyer) is a

story doing the rounds of the broadsheets today as Britain’s second biggest tech group saw its share price crater by 32% yesterday after issuing a profit warning in an unscheduled trading update. Micro Focus, which specialises in prolonging the life of legacy computer systems, has continued to struggle with the integration of the acquisition of HP’s software business in 2017. Chief exec Stephen Murdoch, said it would now undertake a strategic overhaul of the business, leaving all options open. * SO WHAT? * This is serious stuff – and if there’s any more share price weakness, the company will have to face the prospect of being ejected from the FTSE100 next week, when there is a rebalancing. This news has really thrown the cat among the pigeons, leaving investors wondering whether there will be more M&A, whether the company will go private or whether there will be some disposals.

YouTube reconsiders its paywall, Juul faces more accusations, Amigo has a nightmare and Lewis Hamilton invests in a meatless burger joint…

YouTube drops paywall for new shows as streaming war heats up (Financial Times, Anna Nicolaou) signals an interesting development in streaming as YouTube announced that it is going to make its original programming – including cult hit Cobra Kai – free to watch, moving away from the subscription model and back into its ad-supported model just as the likes of Apple and Disney wait in the wings to launch their subscription channels. The Google-owned platform has decided not to mix it with the likes of Netflix et al in what will be a crowded market and said that all future original shows will be available for fixed time periods with ads, but for free. Cobra Kai, for instance, saw its first season moved in front of the pay wall on Thursday and season 2, which will be broadcast next month, will also be available for free. All other shows in its existing library will stay behind the paywall because of contracts YouTube has with producers. * SO WHAT? * I think that this is a good move because people have become accustomed to seeing ads on YouTube over the years – and it means that it will be able to mitigate the high costs of creating content in a tried-and-tested way. As I keep saying, I think that people will reach subscription fatigue when all these other channels throw their hats into the ring, but YouTube will continue to attract users who don’t mind ads in return for free access to content.

Following on from all the Philip Morris International/Altria merger chat that’s going on at the moment, Juul’s marketing practices under investigation by FTC (Wall Street Journal, Jennifer Maloney) says that the Federal Trading Commission (FTC) is conducting an investigation into whether vaping start-up Juul Labs has used influencers and other marketing to target minors. The FTC sent Juul a letter requesting more information about its marketing last September and it has been deepening its investigation ever since. The Food and Drug Administration (FDA) is also investigating Juul’s marketing practices. * SO WHAT? * Juul’s slick campaigns have been seen to be

instrumental in the skyrocketing popularity of vaping as the practice among teens shot up by 78% from 2017 to 2018, according to federal data. The FDA has been just one party looking to kill its use among youngsters and news of the FTC’s investigation just ratchets up the pressure – something that Altria, the owner of a 35% stake in Juul, and Philip Morris International will have to take into account in their merger talks.

Talking of regulatory crackdowns, Amigo shares plummet as regulatory crackdown looms (The Guardian, Kalyeena Makortoff) shows that the share price of the loans group Amigo dropped by over 50% yesterday after it warned that growth would evaporate due to increased scrutiny by regulators and a Brexit-led economic downturn. Amigo specialises in guarantor loans where the borrower uses friends and family to guarantee payments on loans to those with trickier credit histories. The company said that “While past recessions have demonstrated the resilience of our business, we believe it is prudent to factor a deteriorating economic outlook into our impairments model. We will continue to monitor the potential impact and will review our position again at the half year”. * SO WHAT? * The Financial Conduct Authority is concerned about the practice of re-lending to existing borrowers, so Amigo is having to find new customers which is, presumably, more expensive to do. They are also going to be more cautious in their lending conditions, which may also dent growth prospects…

And finally, I thought you might be interested to see Lewis Hamilton invests in meat-free burger chain (The Guardian, Sarah Butler) as the F1 driver is teaming up with a few other investors to back a meat-free burger chain called Neat Burger. The first one will open just off London’s Regent Street on Monday, to be followed by others in Covent Garden and Kings Cross. There are plans to open in the US next year and 14 outlets across Europe over the next two years. Fellow investor Ryan Bishti said that “We are not aiming for vegans or a plant-based niche, we are aiming to convert meat eaters. We are part of a movement happening when you look at the world today in the Amazon with deforestation for crops and agri-farming. This is a perfect way to make a change”. Neat Burger’s chefs have spent 10 months working with Beyond Meat to develop their own patty. * SO WHAT? * The vegan revolution rolls on! For more on meatless, see my more detailed write-up HERE.

And finally, in other news…

I thought I’d bring you an amazing Airbnb today in You can rent a snow igloo in Finland on Airbnb for $122 a night (Insider, Alison Millington https://tinyurl.com/y22navcl). Wow!

1. In BREXIT NEWS, BoJo makes a bold move – and we look at the reaction
2. In RETAIL, RESTAURANT AND BLING NEWS, Guess shrugs off tariffs, Tiffany suffers from HK protests, Ted Baker signs a deal in Japan, WH Smith does well in hospitals, Pizza Express/Franco Manca/Loungers have contrasting results and De Beers loses its lustre
3. In M&A AND IPO NEWS, PMI/Altria gets a muted reception, Thomas Cook finalises a rescue from Fosun and Peloton aims to float
4. In OTHER NEWS, I bring you a dancing baby…

So BoJo goes nuclear and we see the reaction…

Uproar as Boris Johnson shuts down parliament to protect Brexit plan (Financial Times, Sebastian Payne) highlights BoJo’s announcement yesterday that he will be shutting parliament down for five weeks in his efforts to stop a no-deal Brexit on October 31st (although the official reason is to give BoJo a chance to unveil a “bold and ambitious” package of legislation in the Queen’s Speech on October 14th). Parliament will be suspended (or “prorogued”) from the second week of September until October 14th in the longest suspension since 1945. * SO WHAT? * This move will undermine a plan by opposition parties to use legislation next week to try to delay Brexit beyond October 31st because it means they won’t have time to push through legislation to stop it. They will probably try to table a motion of no confidence in the government but, at the moment, there don’t seem to be enough MPs who would vote for this and one insider added that “If MPs pass a no-confidence vote next week, then we won’t resign…we won’t recommend another government. We’ll dissolve parliament [and] call an election between November 1st and 5th”. There is a very useful timeline breakdown of events in What is Boris Johnson trying to achieve? (Financial Times, George Parker and Jim Pickard) for those of you who crave more detail on this. You no doubt know already, but you will be hearing LOADS of noise and commentary on this for the next couple of

months as people get increasingly hysterical/smug about this latest action. I shall try to pick through the noise in the meantime and bring you the facts so you can decide for yourself. FWIW, I think that people who disagree with BoJo’s actions will say that no-deal is disastrous for British businesses and must be avoided at all costs (hence opposition parties who would never normally come together, coming together to try and stop it), those in the middle will say that keeping no-deal on the table will give us a powerful bargaining chip in the Brexit negotiations giving us the best chance of a better deal and those who agree will say that BoJo is just following through on his promises to deliver Brexit, without any extensions or further interference. If we get an improved deal as a result, BoJo will look like a hero and win the resulting general election – but if he fails to secure better terms and powers on with a no-deal, his continued tenure as PM will look decidedly dicey. Given that many businesses are preparing for a no-deal scenario, we might have an interesting situation where a no-deal Brexit proves NOT to be as disastrous as everyone is predicting – which would further fuel BoJo’s cause, especially if he manages to hammer out a decent trade deal with Trump in the meantime.

Sterling slumps as fears grow that worst is yet to come (Daily Telegraph, Tom Rees) shows the initial reaction to BoJo’s announcement yesterday as the pound had one of its steepest falls of the year in its immediate aftermath as fears of a “disorderly” departure from Europe increased. Sterling could be heading even lower in the build-up to October’s crucial EU summit as investors mull over the prospect of a messy Brexit and potential general election.

Guess strengthens, Tiffany suffers, Ted Baker signs a Japanese deal, WH Smith heads for profits, Pizza Express/Franco Manca/Loungers have contrasting fortunes and De Beers loses its sparkle…

Guess sees little effect from potential China Tariffs increase (Wall Street Journal, Micah Maidenberg) highlights a strong performance from Guess?Inc as it said that it had managed to mitigate China tariff risks by reaching agreements with vendors. Along with its strong results and a lift in full year profit forecasts, the share price rose by 11% in aftermarket trading, although it has fallen by 28% so far this year. The company is scheduled to announce a new strategic plan by the end of October.

Tiffany’s summer sales fall as tourist spending continues slowing (Wall Street Journal, Dave Sebastian) shows that the jeweller suffered weaker sales in the second quarter on fewer tourists loading up at its US stores and disruption to stores in Hong Kong as protests continued to rage. It did, however, keep its full year guidance intact and talked about opening more flagship stores in Hong Kong and Shanghai. * SO WHAT? * It’s good that the company has kept its full-year guidance unchanged, but there are a couple of big potential headwinds in Asia – firstly, no-one knows how long the Hong Kong disruption will last for and secondly, sales consumption tax (Japan’s VAT) is to rise from 8% to 10% in October, which could potentially dent sales.

Talking of Japan, Japan’s new dawn for Ted Baker (Daily Telegraph, Mason Boycott-Owen) heralds a new five-year licencing deal with Sojitz Infinity where the latter will use its local knowledge to sell Ted Baker merch in Japan’s department stores. Ted Baker has had a Japan presence since 2012 and now has five outlets, but the business is still in loss. This follows a venture between Ted Baker and Shanghai LongShang Trading Company to promote Ted Baker in China, Hong Kong and Macau. * SO WHAT? * Japan has been the death of many a UK retailer over the years, but having an agreement with “a local” at least gives you a fighting chance (although that’s no guarantee of success either). This sounds good in theory and maybe Ted Baker stores will benefit from a halo-effect from having an increased presence in Japan’s classy department stores,

but exposure to the latter sounds like a half-baked hope to me given how department stores worldwide are generally in terminal decline. BTW, Japanese department stores are pretty special – if you ever get the chance to go to one in Japan you will be amazed! A proper experience, for sure, but it comes at a price…

WH Smith on track for profits (Daily Telegraph, Laura Onita) shows that WH Smith is on track to meet profit targets as it concentrates its efforts on higher margin stationary and adding Post Offices to its stores. Sales at airport outlets continue to lead sales growth, but hospital outlets are now outpacing railway outlets in terms of sales. Its high street stores continue to get weaker, however. * SO WHAT? * Sometimes I do wonder how WH Smith can survive on the high street given that you can get pretty much everything it sells quite easily online. However, as long as the cash cows in airports, hospitals and railway stations continue to crack on I would have thought that they will continue to enjoy a stay of execution.

Then in the troubled world of casual dining, Pizza Express sees profits fall as Franco Manca grabs a bigger slice of the market (The Guardian, Sean Farrell) shows the contrast between two pizza chains as Pizza Express suffered in the first half of the year and put new restaurant openings on hold while Franco Manca continued to benefit from its sourdough pizza, green cola and vegan cheese offering. Peter Martin, VP at food and drink consultancy CGA observed that “In a very fast-moving, competitive market, consumers want something new and there is plenty of choice. Franco Manca has benefited from being different in that Italian space”. Loungers and Franco Manca chains seize on high street malaise (Financial Times, Alice Hancock) points out that smaller restaurant chains are managing to keep outlet opening costs down by refusing to pay high rents as they take advantage of landlords’ weakening position.

In Diamonds lose their sparkle as sales at De Beers plunge (Daily Telegraph, Jon Yeomans) we see that the global slowdown in the diamond market is hitting industry leader De Beers as it reported a massive 44% fall in sales at its latest sales round. Diamond pricing is a very opaque affair with De Beers and its Russian rival Alrosa having a stranglehold on the market. The diamond market as a whole is suffering from a combination of changing consumer tastes, the rise of synthetic diamonds, rupee devaluation hitting the Indian market, US-China trade tensions hitting the China market and tighter lending criteria from banks meaning that some producers have had financing issues.

The PMI/Altria deal has failed to excite so far, Thomas Cook finalises a survival deal and Peloton aims for an IPO…

Following on from the announcement of a reunification of Philip Morris International and Altria, Investor doubts put $200bn Morris-Altria merger at risk (Financial Times, Andrew Edgecliffe-Johnson, Richard Henderson, Eric Platt and James Fontanella-Khan) shows that investors have been underwhelmed by the terms of the deal so far as share prices of both companies are now lower than they were before the news came out. * SO WHAT? * PMI shareholders are probably worried about dilution and exposure to the mature US market whereas Altria shareholders will probably argue that their shares should be more highly valued. The all-paper deal will have to be approved by shareholders of both companies to go through. The debate will rumble on…

Thomas Cook agrees terms of £900m rescue deal with Fosun (The Guardian, Kalyeena Makortoff) shows that the troubled travel agent is closing in on survival in a deal that

will give Chinese congolmerate Fosun control of its holiday business. Fosun already owns Club Med and an 18% stake in Thomas Cook and the £900m cash injection may be completed in early October. Tough times, but Thomas Cook survives to fight another day.

Elsewhere, Exercise bike firm Peloton to float with potential value of $8bn (The Guardian, Sarah Butler) heralds the latest firm with massive losses itching to float on the stock market. * SO WHAT? * It touts itself as being the Netflix of fitness but TBH, I think there is limited upside for a firm that relies on customers using a £2,000 bike or treadmill where they can livestream or download classes. On top of that, subscription costs £39 per month for access to online classes for full interaction with other users and instructors or £19.49 without the interactive element. Chief exec Foley says “Peloton is so much more than a bike – we believe we have the opportunity to create one of the most innovative global technology platforms of our time”. What a load of w*nk. This has all the hallmarks of a disaster, IMHO – it sounds like it is completely up itself and its losses have tripled in the last year alone! It is exposed to a very narrow customer base who have a number of alternatives (like Zwift, for example) and just screams “fad” as far as I’m concerned. Maybe I’m wrong, but I just think it sounds like a “POS”.

And finally, in other news…

I thought I’d bring you something that will melt even the stoniest of hearts in Adorable Baby Busts a Move to Jonas Brothers’ ‘Sucker’ While Holding a French Fry (Inside Edition, https://tinyurl.com/y6j3xufs). It’s always great to see a happy baby!

1. In M&A NEWS, Philip Morris and Altria consider reuniting, BP sells Alaska operations to concentrate on shale and Harry Ramsden’s gets swallowed up
2. In RETAIL NEWS, CostCo opens in China, UK shop prices fall and Arcadia shuts US stores
3. In MACRO NEWS, Rouhani refuses talks with Trump and UK mortgage approvals rise
4. In OTHER NEWS, I bring you a pizzadilla gone viral…

So Phil and Altria consider getting back together, BP ditches Alaska for shale and Harry goes Deep Blue…

Falling tobacco demand spurs Philip Morris, Altria to talk merger (Wall Street Journal, Jennifer Maloney and Cara Lombardo) shows that the two tobacco companies, who split apart in 2008, are considering getting back together again. If they managed to do so, the enlarged entity would have a market value of about $200bn – yes, that’s $200bn. Philip Morris is the larger of the two entities and would control 59% of the enlarged group in an all-stock deal if it all went ahead. * SO WHAT? * Basically, things have now come full circle as the two split over ten years ago because it was deemed that the original company was trading at a discount to its sum of the parts and so it split into Altria, which had a US focus, and Philip Morris International, the overseas business. The boundaries between the two businesses have become increasingly blurred over the years and now it seems that the two are considering a reunification because of a weakening global trend of cigarette sales and a desire to pool their resources in cigarette alternatives. Crudely speaking, Philip Morris has its heat-not-burn IQOS product and Altria has a 35% chunk of vaping supremo Juul (which it bought for $12.8bn in December last year) and you could argue that getting together would mean that they could have a much broader product line-up in the cigarette-alternatives space. This isn’t yet a done deal, as there will no doubt be regulatory

hurdles to overcome that will inevitably result in the sale of various brands, but a reunification sounds reasonable on a strategic basis given evolving consumer behaviour.

BP to sell Alaska operations to Hilcorp for $5.6bn (Financial Times, Anjli Raval) heralds a major moment for BP as this sale signals the end of its 60-year history in Alaska, with a view to the funds raised being funneled into its shale operations. The Alaskan business includes its exploration and production business as well as its pipelines division, which includes its stake in the Prudhoe Bay field and Trans Alaska Pipeline. BP plans to dispose of $10bn-worth of assets over the next couple of years to pay for last year’s acquisition of BHP’s US shale operations. * SO WHAT? * BP is currently developing its US shale business, which includes assets in the Permian and Eagle Ford basins, in competition with rivals like ExxonMobil and Chevron who are also planning on increasing production.

In Harry Ramsden’s gobbled up by rival Deep Blue (Daily Telegraph, Alan Tovey) we see that the fish and chip shop chain has been bought from Boparan Restaurant Group (BRG) by rival Deep Blue Restaurants. Deep Blue currently owns 26 chip shops whose number will be boosted significantly by Ramsden’s 34 sites. The deal was done for an undisclosed sum and BRG will retain a stake in Ramsden’s. * SO WHAT? * This deal will make Deep Blue the go-to company for fish and chips, but it will also allow BRG to concentrate its efforts on Giraffe, Ed’s Easy Diner and Fishworks whilst also keeping a hand in fish and chips. Given ongoing problems in the casual dining sector, it’s probably just as well for BRG to concentrate on a smaller portfolio.

CostCo has a busy opening day in China, UK shop prices continue to weaken and Arcadia is allowed to shut US stores…

What trade war? China’s first Costco draws crowds of shoppers (Wall Street Journal, James T. Areddy) highlights the apparent success of Costco’s first store in China. The Shanghai store opening was so successful, as it turned out, that it had to shut its doors at 1pm – a full eight hours before it was supposed to! Chinese shoppers poured in to get grand-opening prices on Pampers, Ocean Spray and Samsonite products, among others. Things got so bad that shoppers had to contend with elbowing for sale items, huge checkout queues and a 20-minute wait for the toilet! * SO WHAT? * This sounds pretty spectacular as openings go, but what will matter more is whether shoppers continue to stream in over the longer term. It does show, however, that Chinese shoppers are not really deterred by the US-China tariff rollercoaster – especially if there is a bargain to be had!

Shop prices fall at fastest rate in a year (Daily Telegraph, Tom Rees) cites the latest stats from the British Retail Consortium which show that the prices that we pay in shops have fallen at their fastest rate in a year (-1.5% year-on-year). The trade body blamed “weak consumer spend and intense competition” as retailers have been forced to rely more on discounting to shift product. * SO WHAT? * More signs of an increasingly nervous consumer, but at least the employment market is tight and wages are on an upward trend – for the moment.

Arcadia set to shut stores after US deal (The Times, Ashley Armstrong) highlights the fact that Arcadia – Philip Green’s retail group that includes the likes of Topshop, Burton and Dorothy Perkins – is now free to go ahead with US store closures as part of its original CVA, which had been held up in the US by two landlords. It is believed that the legal challenges had been dropped following an out-of-court settlement with Vornado and Caruso. * SO WHAT? * This smooths the path for Arcadia to pursue its turnaround plans, but don’t expect any quick wins here – Green is just clearing the decks at the moment. There’s a lot that needs doing to get Arcadia back on track and it’s going to take quite some time. In the meantime, the pressure continues on the UK high street as many of its competitors continue to struggle.

Rouhani pours cold water on Trump talks and UK mortgage approvals see a sudden rise…

Following on from yesterday’s prospect of conciliation, Iran’s president Rouhani rules out talks with Donald Trump (Financial Times, Monavar Khalaj, Michael Peel, Andrew England and Demetri Sevastopulo) tells us that Iranian president Hassan Rouhani said on state television yesterday that he wouldn’t meet Trump until the US lifted sanctions on Iran. * SO WHAT? * Clearly, this makes France’s President Macron look like a bit of a kn0b as he was trying to look heroic by saying he could get both sides together. Neither side on the US-Iran looks like wanting to give an inch at the moment, so any kind of agreement still looks pretty far off.

Home loans up as lenders drop rates (The Times, Gurpreet Narwan) cites the latest data from UK finance, which shows that mortgage approvals rose to their highest level in over ten years in July as buyers took advantage of very competitive rates. The growth was driven by remortgaging, although approvals for home purchases were also up strongly. * SO WHAT? * Under “normal” circumstances, rising mortgage approvals would imply brighter economic prospects as they are often seen as a sign of increasing confidence (because people don’t want to spend big chunks of money when things are looking a bit iffy on the economic front). However, many economists are saying that this isn’t a sign of optimism – just that lenders have had to drop their rates to attract more customers. It may also be that people are wanting to get any house purchases/sales out of the way ahead of the October 31st Brexit deadline – so activity could drop very sharply in the run-up.

And finally, in other news…

I thought I’d bring you something edible today in the form of A fried deep dish BBQ chicken ‘pizzadilla’ is breaking the internet and even Chrissy Teigen wants to try it (Insider, Ian Burke https://tinyurl.com/yy4flmdp). This looks like a LOT of hassle to make, but I bet it’s pretty darn tasty! However, if I make one, I shall be sure to film it and tell you what it’s like!

1. In MACRO NEWS, Trump looks to meet Iran and makes positive noises about China while Germany continues to wobble, the UK services sector takes a beating and Indonesia plans to move its capital city
2. In RETAIL NEWS, the UK high street is promised a BoJo boost, M&S looks like it’ll fall out of the FTSE100, KFC experiments with pseudo-nuggets and Indian dining apps face pressure
3. In INDIVIDUAL COMPANY NEWS, Amgen buys Celgene’s Otezla while Johnson & Johnson faces a big fine
4. In OTHER NEWS, I bring you two memorable gift ideas…

So Trump softens his stance slightly on Iran and China, Germany stares the prospect of recession in the face, the UK services sector suffers Brexit buffeting and Indonesia’s capital looks like moving…

Given Trump’s track record, I wouldn’t get too excited by either Trump ready to meet Iran’s Rouhani for new nuclear deal (Financial Times, Victor Mallet and Michael Peel), where France’s President Macron has offered to broker a meeting between the two sides to hammer out a new nuclear agreement with Iran, or indeed Trump’s warmer words on China rally Wall Street (The Times, James Dean) where he appeared to be open to the possibility of delaying proposed tariffs on Chinese imports. My conclusion? Nice words at the G7 summit – which stabilised falling Asian markets – but we need to see some action, especially as Latest US-China tit-for-tat tariffs drive yuan down to 11-year low (The Guardian, Martin Farrer) shows just what effect the current war of words/tariffs has been having on China (weak currency, job losses etc.). You just have to take what Trump says with a pinch of salt as he is liable to backtrack/change his mind at any given time!

Germany on brink of recession as business confidence nosedives (The Guardian, Graeme Wearden) cites the closely-followed Ifo survey which shows that business confidence has fallen to its lowest level for seven years. This confirms similar recent rumblings from the Bundesbank and Ifo’s head, Professor Clemens Fuest, pointed out on CNBC that “Everything we see at the moment means there are ever more indications of recession in Germany, meaning two quarters of negative growth”. * SO WHAT? * Europe’s growth engine is not currently running on all cylinders. Mind you, it would be greatly helped if Trump sorted the whole tariff malarkey given Germany’s reliance on exports. Also, Germany’s finance minister Olaf Scholz has said that he’s prepared throw €50bn at the economy to avert a potential recession – so that could help. Maybe this will tip him closer to the edge. As an aside, I have been wondering whether all this European weakness will actually make BoJo’s task easier in negotiating a “better” (or slightly less bad, depending how you look at it) Brexit because when the original agreement was being negotiated, Europe looked like it was doing pretty well for the most part. I think that it should, in theory, if he was negotiating with one party – but the problem is

that he’s negotiating with 27 other member countries at the same time, which makes things rather trickier. Also, he’s doing this against the clock, which may mean that he runs out of time.

Vital services sector hit by Brexit fallout (The Times, Louisa Clarence-Smith) cites a CBI poll which shows that British consumer service firms including hotels, bars, restaurants and leisure-related companies had their fourth consecutive quarterly fall in business activity and things ain’t looking any prettier in the immediate future. In fact, expectations are at their lowest level since early 2012. Even professional services firms, like lawyers and accountants, have experienced their steepest profitability drop-off since 2011. Rain Newton-Smith, chief economist of the CBI, observed that “The outlook for services firms is bleak at the moment, with Brexit uncertainty holding back investment and expansion plans…the idea of a no-deal Brext is clearly weighing down the economy and is affecting businesses both big and small”. * SO WHAT? * Everyone wets themselves about the services sector because it accounts for 80% of the UK’s GDP, so bad health in this area is baaaad news. Basically, businesses tend to hate uncertainty and therefore want clarity ASAP over any withdrawal agreement. In the meantime, many are hoping for the best (abandoning Brexit? A better deal?) but preparing for the worst (no-deal).

Although Joko Widodo names Borneo site for new Indonesian capital (Financial Times, Primrose Riordan) sounds a bit random (and possibly like one of those headlines you see around April Fool’s Day), it is a very serious matter. Indonesia’s current capital, Jakarta, is actually situated on swampland and is currently one of the fastest sinking cities in the world. Some experts believe it could be completely submerged by 2050, so when President Widodo announced a site in East Kalimantan on Borneo yesterday, it was a major historical moment. The site was chosen for a number of reasons, including its lower risk to natural disasters like “floods, earthquakes, tsunamis, forest fires, volcanoes or mudslides” and construction is hoped to commence in 2021, with government functions expected to transfer there from 2023-2024. It is expected to cost $32.7bn and will be funded by public-private partnerships, the private sector and state-owned companies. * SO WHAT? * This will be a MASSIVE undertaking and it could well be undone by any number of current politicians or successors when he leaves office in 2024. Critics will say that he’s just avoiding the problem of how to make Jakarta more habitable by completely upping sticks. Still, this will be a huge boost for construction in the region.

The UK high street gets a boost, M&S faces demotion from the FTSE100, KFC trials meatless nuggets and Indian dining apps face push-back from restaurants…

More towns to benefit as fund for struggling high streets hits £1bn (The Guardian, Zoe Wood) highlights an enlarged pot of cash allocated to Britain’s high streets (from £675m in last year’s budget to £1bn now) by the Ministry for Housing, Communities and Local Government (MHCLG) for specific projects designed to boost city centres. 100 towns are now in the running to get their hands on the cash for projects like new bus services and turning empty shops into homes with BoJo saying that “This scheme is going to re-energise and transform even more of our high streets – helping them to attract new businesses, boost local growth and create new infrastructure and jobs”. * SO WHAT? * Critics will say that this is p!ssing in the wind and that the fund is nowhere near large enough to save the rapid demise of our high streets. Traditional retailers continues to complain about an outdated business rates system and the imbalance of tax demands on offline and online retailers. It seems to me that this is a sticking plaster being put on a massive gaping wound and is probably designed as a vote-sweetener ahead of a potential general election. The structural problems on our high streets run deep and I think that much more needs to be done if they are to survive in their current form. The problem is that this won’t happen quickly enough – certainly not if BoJo has got a general election on his mind in the near-future.

Talking of problems on the high street, FTSE100 disappearance looms as M&S falls out of fashion (Daily Telegraph, Louis Ashworth) shows that high street stalwart M&S could fall out of the prestigious FTSE100 when it rebalances next week – and looks likely at the moment to be replaced by Russian gold and silver miner Polymetal, which is now worth £5.24bn after its shares have risen by an impressive 40% since the start of May. * SO WHAT? * In terms of the day-to-day running of the business, dropping out of the FTSE100 to the FTSE250 is no great shakes in the scheme of things, but it usually means that FTSE100 index funds in particular will be forced to sell the shares (because they can only invest in FTSE100 companies) that will depress the price even more (although this may be mitigated to some extent by mid-cap

index funds buying into M&S). Still, M&S has managed to scrape through in the past when it’s come close to relegation and the rebalancing is due to take place a week tomorrow.

There’s good news for vegetarians/vegans/flexitarians in First the vegan sausage roll – now KFC to test out meat-free nuggets (The Guardian, Zoe Wood) where KFC said that it is working with Beyond Meat to launch plant-based chicken nuggets and wings in the US. The product is called “Beyond Fried Chicken” and will come in green containers. The nuggets (which are made from plant-based wheat protein) will be given away in a one-day free trial to be rolled out in restaurants across the US if successful. Shares in Beyond Meat rose by 4% and in Yum! (which owns KFC) by 1.3% on the news. * SO WHAT? * The meat-free revolution rumbles on! Currently, meat-free alternatives in supermarkets aren’t that cheap compared to their meaty counterparts, but as distribution increases and production costs come down, they will no doubt get cheaper for the average punter. If this momentum continues, it will change the face of the agricultural industry on a global basis. If you want to read more about the meat-free industry, have a look HERE at my latest monthly.

In Indian dining apps face restaurant exodus over discount ‘epidemic’ (Financial Times, Benjamin Parkin) we see that there’s a growing revolution by restaurants in India against the increasing might of dining apps such as Zomato, EazyDiner and Gourmet Passport because they are being forced into making discounts of up to 50% to stay on the apps. Dining apps in India have exploded in popularity as “Foodtech” has grown from a $120m industry in 2015 to an estimated $5bn currently, but the National Restaurant Association of India is now encouraging members to opt out of platforms that offer massively discounted meals to diners. * SO WHAT? * Thus far, the campaign has concentrated on dining platforms, but it sounds like it will spread to cover online delivery companies next such as Swiggy and Uber Eats. Rohan Agarwal, a manager at consultancy firm Redseer, observed that “This is the first consolidated pushback from the restaurant side so far, in an industry where otherwise the aggregators were trying to push for the terms”. It seems to me like the dining apps have reached the next stage of maturity after a frenzied period of stellar growth and will have to wind in their bid for rapid expansion via discounted offers and spread the love by letting the people who actually make the food get more money. That way, everyone’s happy – but there is a lot more negotiation to come to get to this state of affairs.

Amgen buys Celgene’s Otezla for $13.4bn and Johnson & Johnson gets slapped with a big fine…

Drug sale clears path for Celgene merger (The Times, James Dean) shows that Bristol-Myers Squibb is one step closer to a successful $74bn ($90bn, if you include debt) takeover of Celgene as the latter has agreed to sell its hugely popular psoriasis treatment, Otezla, to Amgen for $13.4bn. * SO WHAT? * This will go some way to satisfying the US competition regulator over the latter’s concerns about the combined entity having too much power in anti-inflammatory drugs. On the other side of the equation, this should enhance Amgen’s strong psoriasis and anti-inflammatory treatment portfolio. The Otezla sale is contingent on the Bristol-Myers Squibb and Celgene deal going ahead, but if it does, it will be an even bigger pharmaceutical acquisition than Pfizer’s acquisition of

Warner-Lambert in 1999.

Johnson & Johnson ordered to pay $572million in Oklahoma opioid case (Wall Street Journal, Sara Randazzo and Jared S.Hopkins) heralds the possibility of further findings of liability for drugs companies regarding the ongoing spread of opioid abuse. This upsurge in cases being brought by state and local municipalities is coinciding with more concerted efforts by the Justice Department to investigate the over-prescription of opioids by doctors. The Oklahoma case was the first to go to trial and focused on J&J because the other two drugmakers settled out-of-court. * SO WHAT? * The crux of all this is whether drugmakers such as J&J made misleading claims in their marketing campaigns about addiction risk and the breadth of efficacy for a number of chronic pains. J&J is going to appeal the judgment. The whole industry will be watching this very closely to gauge whether they need to build up funds for future litigation costs. It never rains but it pours for J&J, which is continuing to face massive lawsuits on its baby powder, pelvic mesh and hip devices and other pharmaceutical products.

And finally, in other news…

I thought I’d bring you TWO intriguing gift ideas. The first one sounds great for frustrated golfers who want a short-cut in Nissan develops golf ball that automatically finds the hole every time (SoraNews24, Master Blaster https://tinyurl.com/yy7g95he), but then Couple mortified by mother-in-law’s engagement gift with very awkward design flaw (The Mirror, Courtney Pochin https://tinyurl.com/yyvblatu) shows how kind intentions can sometimes go awry…

1. In POLITICAL NEWS, South Korea-Japan relations get even worse
2. In INDIVIDUAL COMPANY NEWS, Hasbro buys Peppa for $4bn, e-cigarette companies get called in and NMC Health stuns short-sellers
3. In RETAIL NEWS, UK high street sales drop like a stone, Laura Ashley disappoints, Links goes up for sale, Morrisons closes stores and Ocado has another warehouse fire
4. In OTHER NEWS, I bring you the world’s most instagrammable cafe…

So South Korea-Japan relations continue to worsen…

South Korea scraps intelligence-sharing pact with Japan (Financial Times, Song Jung-a and Kana Inagaki) charts the latest development in the worsening relations between the Asian neighbours as South Korea retaliates against Japan following the latter implementing trade restrictions on the former. Everyone had expected the General Security of Military Information Agreement to remain in place despite the increasingly frosty relations between the two countries, so this latest move has come as a surprise to many. Kim You-geun, deputy director of South Korea’s presidential National Security Council, stated that “We have determined that it would not serve our national interest to maintain an agreement we signed with the aim of exchanging military information which is sensitive to

security”. * SO WHAT? * Some may dismiss this as a storm in a teacup – just a bit of a flare-up of tensions that have always been bubbling under the surface. However,  this seems to be more serious than usual. The Americans will be getting nervous about regional stability in that such moves imply that South Korea is favouring China as its superpower backer and Russia will no doubt be quite keen to poke the hornet’s nest by using this situation to needle Japan with its constant territorial battles in the Kuril Islands. Trump has been keen to take troops out of the region and let them just get on with it, so an escalation of rhetoric between South Korea and Japan is not in US interests because they might have to beef up presence there once more. The thing is that neither side appears to want to climb down and the longer this goes on, the worse things are going to get as nationalism on both sides continues to escalate to potentially damaging proportions. Let’s hope tensions ease for the sake of regional stability.

Hasbro buys the company behind Peppa Pig, e-cigarette makers face more scrutiny and NMC Health confounds the short-sellers…

Hasbro picks up Peppa Pig in $4bn deal (Wall Street Journal, Micah Maidenberg) highlights Hasbro’s purchase of Entertainment One, the entertainment company famous for Peppa Pig, PJ Masks and Ricky Zoom. Hasbro’s chief exec, Brian Goldner said that “These brands have many of the characteristics and profitability of our franchise brands”. Entertainment One is based in Toronto and also produces TV and film for adults in addition to operating a music business. Hasbro said that it expected to squeeze out $130m in annual cost savings by 2022 as it will bring part of Entertainment One’s toy business in-house and raise profitability of its licencing and merchandising activities. * SO WHAT? * Toymakers have been having a nightmare in the last few years as kids increasingly turn to mobile device-based gaming and away from “traditional” toys – which has ultimately led to the demise of companies such as Toys R Us. Having said that, although Hasbro shares fell by 5% in after-market trading, they have actually gone up by over 40% so far this year. Toymakers have been trying to broaden the appeal of their assets in order to attract more customers – so, for example, Hasbro has developed a Fortnite version of Monopoly and Mattel has launched a film studio to make movies based on Barbie and other toys. I think that the Entertainment One purchase will give Hasbro access to more popular content – but it’s what it does with it that counts!

Then in E-cigarette makers quizzed over health risks to smokers (The Times, Alex Ralph) we see that the US House of Representatives energy and commerce committee has asked e-cigarette makers to give them details about the health impact of their products. Fontem

Ventures (a subsidiary of Imperial Brands and owner of the Blu brand), Reynolds American (the US business of British American Tobacco), Japan Tobacco International (which owns the Logic brand) and Juul (the vaping supremo which is 35% held by Altria, the company famous for the Marlboro brand) have all had to submit details of their marketing practices, any research they have on the health impact of their products on adolescents and adults along with a list of the influencers who are paid to peddle their products. * SO WHAT? * I’m all for cigarette alternatives to wean people off smoking, but I think that concerns over young people getting IN to smoking via vaping are worth looking at more closely (especially if their long-term health suffers as a result). Given that no-one really knows what the health impacts are of e-cigarettes, it’s good to see that there are moves afoot to monitor it properly. The letters were sent out after the Centers for Disease Control and Prevention voiced concerns over a “cluster of pulmonary illnesses possibly related to to e-cigarette product use…primarily among adolescents and young adults”. You can find more out about this in Vaping is suspected in sever lung illnesses (Wall Street Journal, Betsy McKay). The debate rumbles on…

Bid talk is shot in the arm for health firm (The Times, Alex Ralph) is a popular story in today’s broadsheets as it highlights the reasons behind the 42% share price rise of FTSE100 private healthcare provider NMC Health yesterday – basically, there were rumours of a bidding war between two investor groups for a 40% chunk of the company. NMC remained tight-lipped on the development that coincided with the company’s better-than-expected first half results statement. * SO WHAT? * The shares have been a favourite of short-sellers due to scepticism over the company’s accounting policies, sending the price down by 53% since August last year, so this news will be painful for them. More detail is needed before getting too excited about this, however. Still, what a move! If bid rumours prove to be false, these things will fall through the floor…

UK high street sales hit new lows, Laura Ashley disappoints, Links is up for sale, Morrisons sheds stores and Ocado has another warehouse fire…

Today’s retail stories don’t make for an uplifting read as UK high street sales fall at fastest rate since 2008 (The Guardian, Phillip Inman) cites the latest report from the CBI which showed that sales volumes and orders fell at the fastest rate for a decade due to rising costs and increasing Brexit uncertainty, Laura Ashley is off the pace – could it soon be off the stock market too? (Daily Telegraph, Laura Onita) highlights Laura Ashley’s disappointing results

dashing hopes of an iminent turnaround and Owner tries to find buyer for Links (The Times, Robert Miller) shows another British retailer potentially biting the dust if a buyer isn’t found. The jewellery chain’s current owner, Folli Follie, bought Links back in 2006 and is asking for offers next week.

The bad news continues in Morrisons shuts four supermarkets, putting 400 jobs at risk (The Guardian, Zoe Wood) following a performance review. Recent Kantar data showed that Morrisons was the worst-performing supermarket incumbent. Then Ocado orders hit by second warehouse fire (The Times, Ashley Armstrong) heralds Ocado’s second fire in six months, this time in Erith, east London. Customer orders will be disrupted as a result but it doesn’t sound quite as serious as the one they had in Andover, which took four days to put out. The retail sector really could do with a boost at the moment, but I don’t see one coming any time soon.

And finally, in other news…

I thought I’d bring you something pretty spectacular today in the form of This Is Officially the Most Instagrammable Café in the World (BestLife, Diana Bruk https://tinyurl.com/y4oqkyga). If the food in there tastes as good as it looks, then it’s clearly a winner! I’m not normally into this kind of thing, but it really is very impressive…

1. In RETAIL NEWS, Target hits the spot, Lowe’s goes higher, Nordstrom disappoints and Tesco’s pledges a packaging crackdown
2. In TECH NEWS, Alibaba pulls its Hong Kong listing, Waymo shares data and Libra gets the EU treatment
3. In INDIVIDUAL COMPANY NEWS, WeWork rival Knotel attains unicorn status
4. In OTHER NEWS, I show you how to stop Facebook tracking you…

So Target and Lowe’s results show that the US consumer is still spending (although not at Nordstrom) and Tesco cracks down on packaging…

Target extends growth streak with strong sales and profit (Wall Street Journal, Kimberly Chin and Khadeeja Safdar) highlights solid performance in the second quarter, powered by investment in its stores, merchandise and online offering. The “big box” retailer, which sells homewares, clothing, electronics and beauty products in the US, also raised its full-year guidance and its share price shot up by 19.5% in midday trading! The stock has risen by 55% in the year to date. Particular highlights included digital sales that were up by a chunky 34% versus a year ago plus some impressive cost cutting. * SO WHAT? * The US retail landscape is looking pretty mixed at the moment as Walmart reported a relatively decent quarter in contrast to Macy’s, Kohl’s and JC Penney, who fell short. The current US-China trade war-related tariff increases aren’t going to help either as their cumulative effect will undoubtedly continue to filter through to the prices being paid by the consumer. I think that there is still some wiggle room for passing on higher prices to customers as wages continue to rise and the labour market continues to be tight, but if the economy slows down as per the expectations of some, the wheels could fall off very quickly.

Lowe’s reports higher profit, beating estimates (Wall Street Journal, Kimberly Chin) paints a contrasting picture to results from larger rival Home Depot as it reported stronger earnings in the latest quarter due to recent aggressive cost-cutting bearing fruit. * SO WHAT? * Lowe’s has had to take some pretty drastic steps recently including the layoffs of thousands of workers that resulted from the company’s switch to outsourcing certain tasks (e.g. barbecue assembly and cleaning) as well as a winding down of its retail operations in Mexico. Chief exec Marvin Ellison has been busy sorting out the company’s inventory, customer service and work processes in the year since he’s been at the helm and the company is getting a much better grip on focusing on faster-selling items and ditching

slower-selling ones. It seems to me that the effects of drastic cost-cutting are the main driver behind this performance as its same-store sales were up by 2.3% versus Home Depot’s same store sales up by 3%. Cost cuts and the improvement of processes are good – but there’s only so far that can go if sales prove to be sluggish.

Sales, profit fall again at Nordstrom (Wall Street Journal, Micah Maidenberg) shows that the gloom in department stores continues as sales and profits fell below Wall Street expectations in the latest quarter. This is the third consecutive year-over-year fall in revenue for the company and the mood wasn’t enhanced by cutting its full year sales forecast. Having said that, the share price climbed by 14% in after-hours trading, although Nordstrom shares have fallen by 43% so far this year. * SO WHAT? * The share price reaction sounds somewhat counter-intuitive, but then again maybe investors were heartened by the lowering of inventory levels and the prospect of new leadership, given pressure by the existing board to replace the current chiefs who are the great-grandsons of the founder. Once again, I say that department stores are in terminal decline and need to act quickly to capitalise on what they’ve got (great locations and the potential to create great customer experiences) and adapt to changing consumer trends.

Then in Tesco promises to ban brands that use excessive packaging (The Guardian, Jasper Jolly) we see that the UK’s biggest supermarket is increasing its efforts to do its bit for the environment by implementing various measures including the banning of brands that use excessive packaging. Tesco gave its suppliers a list of preferred materials in May last year, but will be implementing the ban starting from next year onwards. As Tesco’s chief exec Dave Lewis said, “We have all looked at the settled contents of a cereal packet and puzzled over the comparative size of the bag and box. Or opened a bag of crisps and wondered why the packaging is twice the size of the contents”. * SO WHAT? * It’s great to see Tesco leading from the front, although it is not alone in making efforts to make packaging more environmentally-friendly. The more supermarkets get on board, the greater the pressure they can exert on suppliers to make the effort to use alternative materials. Will this be a catalyst for M&A among recycling companies to get better scale in order to cope with increased volumes??

Alibaba pulls its planned Hong Kong listing, Waymo decides to share and Libra gets EU scrutiny…

Alibaba halts Hong Kong listing (The Times, Simon Duke) shows that the protests currently going on in Hong Kong are spilling over into the corporate world as Chinese e-commerce giant Alibaba has decided to shelve plans to sell around $15bn of shares on the Hong Kong stock exchange. It had planned to do so this month as part of a wider strategy (prompted by the current US-China trade war) of diversifying its funding sources and investor base, but will potentially revisit the plan in October. * SO WHAT? * Alibaba – the world’s second-biggest e-commerce company with a $460bn market cap, which floated on the NYSE in 2014 raising $25bn and which boasts over 700 million monthly users – can afford to sit things out but this is a major blow for the Hong Kong Stock Exchange as other companies who were mulling either flotations or money-raising might use Alibaba’s action to postpone as well. Political turmoil tends to spook investors (or would-be investors).

Waymo to make self-driving data set public to fuel research (Financial Times, Patrick McGee) heralds an important development for Alphabet’s self-driving car unit as it as it announced yesterday that it would make “the largest fully self-driving data set ever” freely available to all “in the hope of accelerating the development of machine perception and self-drive technology”. The data has been collected using cameras and sensors on Waymo vehicles

in various environments and road conditions. * SO WHAT? * Waymo was at pains to point out that this action wasn’t tantamount to admitting that things aren’t progressing as quickly as it’d hoped, but let’s be honest – that’s surely what’s going on here. General Motors’ self-driving unit Cruise last month decided to postpone the rollout of its ride-hailing service that had been scheduled to kick off this year, saying that it needed more testing. I think that we are WAY off driverless taxis being commonplace in cities so Waymo has probably looked at the current situation and weighed up whether it wanted to be the market leader in b*gger all or share some of its toys and have a smaller part of SOMETHING. The latter is definitely the way forward, but I don’t expect to see self-driving taxis in London any time soon! Still, if you wanted to be part of this wave, I would have thought that getting exposure to companies making the sensors wouldn’t be a bad idea.

Facebook’s digital currency set for scrutiny by EU regulators (Daily Telegraph, Hasan Chowdhury) shouldn’t come as a big surprise given that virtually every central banker, regulator and politician in developed countries has been giving Libra a good kicking – and it sounds like the European Commission is now getting involved by sending out questionnaires to groups involved in the project. * SO WHAT? * They are concerned, like everyone else, that Libra could result in “possible competition restrictions” on consumer data usage and how information will be exchanged. The cryptocurrency is slated to launch in the first half of next year, but I am sure that regulators will do their darndest to delay it as much as possible (to give time for someone/something to come up with a more universally “acceptable” option).

WeWork rival Knotel achieves unicorndom…

WeWork rival Knotel achieves ‘unicorn’ status after $400m funding (Financial Times, Judith Evans) marks a historic moment for the company that started only three years ago as its latest funding round has tipped its implied valuation at over $1bn – the level needed to achieve unicorn status! The New York-based company is one of many serviced office providers who have popped up in the wake of WeWork’s astronomic success. The company now has over 4m square feet of office space in 200 locations

worldwide. It differs from its “louder” competitor because it offers unbranded space in urban markets to medium-sized companies rather than having its own name splashed all over the place. Competitors such as Convene, The Office Group – and even the seasoned IWG (formerly known as Regus) – are all dwarfed by WeWork, which was recently valued at $47bn.* SO WHAT? * This rapid expansion is all very well, but when property prices start to fall and rents settle on a downward trend, many of these companies are likely to be exposed and have their valuations decimated. I would be much more comfortable with pursuing profitability here rather than rapid expansion as a more robust longer-term strategy. 

And finally, in other news…

I thought I’d leave you today with How to stop Facebook tracking your web browsing activity (The Independent, Anthony Cuthbertson https://tinyurl.com/y6o2dblo). Interesting, no?

1. In MACRO NEWS, Italy’s PM resigns, Trump mulls measures to avert slowdown and UK factory orders turn a corner
2. In RETAIL NEWS, Home Depot goes downbeat, Walmart sues Tesla, Shopify aims for Amazon, Lidl and Sainsbury’s make strides and Asos asks suppliers for discounts
3. In TECH NEWS, Apple puts a chunk of cash into TV and gun sellers thrive on Facebook
4. In INDIVIDUAL STORIES, Bayer sells off its animal health unit and bananas look seriously endangered
5. In OTHER NEWS, I bring you a golden toilet…

So Italy’s PM resigns, Trump considers economic stimulus and UK factory orders stabilise…

Giuseppe Conte resigns as Italy’s prime minister (Financial Times, Hannah Roberts and Davide Ghiglione) shows that the well-documented political turmoil in Italy has come to a head, plunging Italy further into turmoil as it now has to cobble together a new administration if it is to avoid having another election. Italy’s coalition government, comprising of the League and Five Star (the political party, not to be confused with eighties group Five Star), have only been together for just over a year but have been squabbling the entire time. It has locked horns with the EU on a number of occasions over its spending plans, which the EU says do not comply with its budgetary rules. The size of Italy’s debt is second only to Greece in the eurozone. * SO WHAT? * Italian politics is always a complete mess – and things are just going to get messier. Unfortunately, it’s the people who will suffer the consequences of each political party’s thirst for a bit of power – but then again, it is the people who voted. God knows what this latest situation will throw up, but it’s unlikely to be any good. In the meantime, the debt just gets larger and Germany isn’t going to be able to cover for them…

In Trump weighs options to spur the economy (Wall Street Journal, Rebecca Ballhaus, Andrew Restuccia and Richard Rubin) we see that the US president is trying to style out an economic slowdown by saying “we’re very far from a recession”, whilst at the same time considering various measures to boost the economy. Such actions could include more tax cuts (and specifically, a cut in capital

gains taxes) and piling the pressure on the Fed to slash interest rates. * SO WHAT? * Cutting capital gains tax is not necessarily a sure-fire way of boosting the economy and the Fed is supposed to be independent – so should, in theory, be immune to Trump’s tweet barrage. Trump is going to have to have some kind of  plan in the background, though, if he wants to get re-elected next year and he has been talking about introducing a payroll tax cut, which is separate to income tax and would be another way to boost workers’ take-home pay. Clearly, the elephant in the room here is the ongoing US-China tariff war, which is creating log-jams everywhere. IMO, if he manages to hammer out a half-decent deal with China, I think all of this could all go away. However, China has the power to make Trump’s life harder by refusing to sign any deal, knowing that this will increase pressure on him and force him to take other measures to stimulate the US economy. If that were to be the case, Trump could lose the election and the Chinese would get another crack at negotiation with his successor. Is this a gamble the Chinese are willing enough or patient enough to take?

Factories pick up pace after new orders tumble (The Times, Gurpreet Narwan) cites the latest report on industrial trends from the CBI which shows that a fall in orders appears to be stabilising. Factory orders had fallen by the steepest margin for ten years in the three months to July, which was attributed to businesses running down stocks they’d built up in the run-up to the original Brexit date. However, CBI deputy chief economist Anna Leach pointed out that “Despite signs of stabilisation in the data this month, UK manufacturers remain on the receiving end of a double whammy: the slowdown in the global economy and Brexit uncertainty. Trade tensions between nations such as China and the US only exacerbate the demand uncertainty facing UK manufacturers”.

Home Depot suffers, Walmart sues Tesla, Shopify takes aim at Amazon, Lidl and Sainsbury’s make ground and Asos asks for discounts…

Home Depot cuts sales outlook as it warns on hit from tariffs (Financial Times, Naomi Rovnick) highlights difficulties at the US home improvement retailer as it blamed the ongoing US-China trade war for denting its sales growth this year. The world’s biggest home improvement retailer, which has almost 3,000 stores in 50 states, left its full-year earnings per share forecast unchanged as chief exec Craig Menear believes that the “stable housing market” would continue to underpin the business.

Walmart sues Tesla over solar cells that allegedly sparked fires (Wall Street Journal, Patrick Thomas) brings to light allegations by Walmart that Tesla’s solar panels have been the cause of at least seven roof fires at some of its outlets. It wants Tesla to remove the roof-mounted panels from over 240 Walmart locations and swallow the cost. Walmart started using solar panels made by SolarCity (which was bought by Tesla in 2016) in 2010. * SO WHAT? * This just piles on the misery for Tesla – something it could well do without given the problems with its cars at the moment. It just goes to show that although you may be seen as an innovator and environmental champion with cutting edge technology, success isn’t guaranteed. No comment from either side on this, but I’m sure there will be updates.

Now bigger than eBay, Shopify sets its sights on Amazon (Financial Times, Tim Bradshaw) looks at the world of e-commerce and Shopify in particular, which has seen its share price shoot up by over 150% so far this year, giving it a higher valuation than Twitter, Square, Spotify – and eBay.

Retailers use Shopify’s tools to build websites, list products and take payments under their own brand name without thrusting their own name in everyone’s faces. The Canadian company announced that it is now moving into logistics, to help their customers Amazon-like fulfillment capability. * SO WHAT? * This is an important development and fans would probably say that Spotify is the acceptable face of e-commerce that lets the little guys compete against big, bad Amazon. Good luck to it! Many have tried and failed, so let’s hope this one succeeds as Amazon could do with some competition! It will be a very expensive gambit, though, as providing back-end software will be rather different to growing a robust logistics network.

Meanwhile, in the world of UK supermarkets, Lidl attains its biggest UK grocery market share at 5.9% (The Guardian, Kalyeena Makortoff) highlights the ongoing success of the German discounter as its continues to attract new customers and Sainsbury’s outperforms its big rivals (The Times, Ashley Armstrong) shows Sainsbury’s relatively stable sales performance versus its major rivals, as evidenced by the latest figures from Kantar Worldpanel. Having said that, analysts at HSBC were keen to point out that “Sainsbury’s improved momentum appears largely voucher-driven. It will not be sustainable without improvement in the underlying offer”. Just in case you were wondering, Aldi’s market share is currently 8.1% 😜.

Asos asks suppliers for 3% discount in effort to repair finances (The Guardian, Rob Davies) shows that online fashion retailer Asos is trying to squeeze discounts from suppliers following two profit warnings in seven months, the most recent of which was last month. It’s asking for a 3% discount from September 1st, with a view to cutting even more costs to improve profitability. * SO WHAT? * This just goes to show that continued stellar growth for e-tailers isn’t a given. Asos emphasises that their own growth/survival is good for everyone, so I suspect that suppliers will probably take the hit. If they don’t, then Asos could be in big trouble.

Apple splashes the cash on TV while gun sellers use Facebook…

Apple splashes $6bn on new shows in streaming wars (Financial Times, Anna Nicolaou and Tim Bradshaw) highlights Apple’s $6bn spend on original shows and movies prior to the launch of its new video streaming service, TV+, that should be going live over the next two months. Although this sounds like a lot, it’s way lower than Netflix, which is spending $15bn on content this year. * SO WHAT? * We all knew that this was going to happen when the TV+ stuff was announced back in March, but there are still no details on pricing and offering beyond chat about the more high-budget series offerings like “The Morning Show”, which will cost more per episode than “Game of Thrones”! I think that original content will be the way to go, but TV+’s success will also depend on pricing – precise details of which aren’t available at the moment. TV+ will launch around the same time as Disney+ and

trailers for both services were released on Monday. I predict a content “arms race” which will eventually result in industry/channel consolidation as consumers hit subscription fatigue. It will take a few years, though.

Gun sellers are sneaking onto Facebook’s booming secondhand marketplace (Wall Street Journal, Parmy Olson and Zusha Elinson) highlights a rather unsavoury element to Facebook’s e-commerce offering as gun sellers are placing ads on Marketplace for very expensive gun cases or boxes (which have guns in them, details of which are kept off the selling page) to get around the ban on arms sales. One seller offered a gun case for $950 (it should cost $30), but then revealed in subsequent communication that there was an AR-15 style semiautomatic rifle with 670 rounds of ammo and six magazines included 😱. * SO WHAT? * This is clearly not right and puts more pressure on the social media giant to get its house in order. Facebook is coming under a lot of pressure at the moment for data usage and dodgy ethics in general and so stories like this are a bit of a PR headache that could get much worse if it turns out that a shooter in a future massacre has bought a gun via this method.

Bayer makes a $7.6bn disposal and bananas come under threat…

In Bayer to sell animal-health unit to Elanco for $7.6billion (Wall Street Journal, Ruth Bender) we see that Bayer is selling a division for a chunk of cash as part of its bid to shore up its coffers in anticipation of massive liabilities from the Roundup weedkiller/cancer litigation. The enlarged entity would be a powerful force in the prevention and treatment of diseases for pets and livestock and would become the #2 in this space after Zoetis.

I know this isn’t really a company story, per se, but I think that the consequences of Deadly banana fungus reaches

Latin America (Financial Times, Gideon Long and Emiko Terazono) are pretty shocking as it turns out that the spread of a fungus that stops plants from producing fruit is threatening the Cavendish banana, a variety that accounts for half of global production and 95% of the world’s exports. The Colombian agriculture and fishing institute (ICA) has declared a “national emergency” and expanded preventative measures across the whole country. Latin America’s plantations account for two-thirds of the global trade in bananas. * SO WHAT? * This could be a complete nightmare for the whole of Latin America with Colombia, Ecuador, Costa Rica and Guatemala being particularly vulnerable . There are no new resistant varieties and no effective treatment for Panama disease once its infection has taken hold. Given the lack of investment in new varieties in recent years, researchers say that the introduction of a saleable new variety could take at least five or six years. Conclusion: treasure your bananas!!!

And finally, in other news…

I thought I’d bring you some important information today: Blenheim Palace set to install £1million gold toilet for visitors to use (Evening Standard, Harriet Brewis https://tinyurl.com/y2nxsx4c). Get booking those toilet slots, people – before they get flushed away!

1. In MACRO NEWS, Japan’s exports fall, Germany edges closer to recession and Brit consumers get downbeat
2. In TECH NEWS, Big Tech faces Big Investigation, Huawei gets a reprieve, Baidu has a shocker and Waymo abandons car manufacturing
3. In MERGER & ACQUISITION NEWS, Greene King is “Ka-shing” in while Tilney and Smith & Williamson get together
4. In OTHER NEWS, I bring you battered sprouts…

So Japan’s exports slow, Germany faces recession and Brexit worries hit UK  households…

Japan exports fall in July as shipments to Asia slip (Financial Times, Alice Woodhouse) shows that trade tensions in the region are denting Japan’s exports, albeit at a slower rate than expected, according to official figures released yesterday by the Ministry of Finance. Exports to Asia as a whole fell by 8.3% year-on-year, with Singapore falling particularly sharply (down 22.3%!). Shipments to China, Japan’s biggest trade destination in the region, fell by 9.3% and exports to South Korea, with whom they are having increasingly frosty relations, fell by 6.9% in July. * SO WHAT? * Japan relies heavily on exports, so this situation is definitely something PM Abe will want to address. However, given that he’s riding high in the polls at the moment as he benefits from public support against South Korea, I don’t expect him to make any knee-jerk reactions. Still, the situation regarding exports is something that needs addressing before it becomes more serious.

Germany on brink of recession as slump in exports continues (The Guardian, Phillip Inman) highlights Germany’s central bank, the Bundesbank, warning that the country is on the verge of recession as a combination of a fall in its exports, Brexit and the US-China trade war has led to a 0.1% fall in GDP in the latest quarter, with another fall in the next quarter being on the cards. A recession is defined as two consecutive quarters of GDP contraction

(aka “negative growth” – I’ve always thought this is a weird way of expressing it, but there you go!) and Germany is the engine of the European machine, so this will have consequences. * SO WHAT? * At the moment, Germany’s finance minister Olaf Scholz says that he’s prepared to splash the cash (to the tune of €50bn) to avert a potential recession. However, it looks increasingly likely that the ECB will begin quantitative easing (QE) before Germany has to resort to stimulus of its own as Mario Draghi, the ECB’s outgoing president, said last month that he was considering QE in response to worsening economic conditions in the eurozone as a whole.

Meanwhile, Recession threat deals heavy blow to household confidence (The Times, Gurpreet Narwan) cites the latest survey from IHS Markit which shows that people are losing confidence about their finances, which is translating into lower spending on big ticket items like cars, holidays and houses. IHS Markit economist Joe Hayes observed that “The Brexit haze, uncertainty over the political environment and the increased possibility of the UK entering recession appear to have dented expectations. Pessimism towards job security also intensified during August, explaining why households have withdrawn into a more risk-averse approach”. * SO WHAT? * This is a survey – which generally tends to measure sentiment. It is dangerous to rely on such things in isolation and I always think that you have to look at other measures as well, such as real spending figures from Mastercard and Barclaycard in addition to real housing sales and car purchases. Mind you, all of those are painting a mixed picture at best at the moment, so it’s not looking too hot for the UK currently, which is to be expected given Brexit.

Big Tech faces a major antitrust investigation, Huawei gets a delay, Baidu sees profits plummet and Waymo says it won’t make cars…

States to move forward with antitrust probe of big tech firms (Wall Street Journal, John D. McKinnon and Brent Kendall) heralds a major joint antitrust investigation by a group of states (some say it could be up to 20 or more), which is expected to launch officially next month. It will probably focus on whether a tight number of major tech platforms are using their market might to strangle the competition. This could potentially coincide with the Justice Department’s antitrust investigation announced in July meaning that the likes of Google, Facebook, Amazon and Apple will be under a great deal of pressure over the coming months. * SO WHAT? * So far, this is all talk but it looks highly likely that it’ll happen. I reckon that this is going to blunt the teeth of the FAANGs for a bit (#seewhatididthere) and their share prices won’t be quite as perky while the investigations carry on. These companies have powerful lobbies and friends in very high places, so I really can’t see any proper break-ups (maybe there will be some business disposals here and there) because too many people stand to make too much money. Maybe some of their working practices will have to change slightly to accommodate competitors, which would be good news for the smaller operators. Having said that, the possibility of two big investigations combining gives the best chance of forcing Big Tech to make some decent concessions IMHO.

Markets rally after Trump eases off Huawei (The Times, James Dean) shows that US pressure on China’s Huawei has relented slightly ahead of US-China trade talks set for next month. The US Department of Commerce granted Huawei a 90-day grace period during which it will be allowed to continue to trade with American companies, giving markets cause for muted relief. * SO WHAT? * Markets have been going up and down depending largely on how talks between the US and China are perceived to be going – and so this softening of stance has meant investor

hopes of a resolution to the US-China trade impasse are currently in an uptick. However, given Trump’s track record, the true position is anyone’s guess as things can change quite quickly with him! The fact is that Trump has already burned his bridges with Huawei to a large extent given that his administration has done such an extensive hatchet job on Huawei. The company’s reputation has been under attack not only in America itself, but US allegations that it is spying for the Chinese have been taken on tour around the world to anyone who would listen. I think he’s using Huawei as a short-term political/negotiation scapegoat, but this will probably damage US tech companies in the longer term as Chinese companies will be increasing their efforts to wean themselves off relying too much on the Americans in case this kind of thing repeats itself.

Baidu, China’s private-sector bellwether, reports 62% profit drop (Wall Street Journal, Shan Li and Maria Armental) shows that all is not well for the Chinese search engine giant (aka “the Google of China”) as it just announced its weakest quarterly revenue growth for over two years, a massive drop in profits and muted prospects for its key advertising business. Its main problem is that it has been slow to capitalise on its users migrating to smartphones in recent years, to the extent that is now out of the top five most valuable publicly traded Chinese internet companies. Having said that, its revenues were better than market expectations, so its share price shot up by 9.4% in after-hours trading. * SO WHAT? * Baidu has tried to diversify from its search business by pushing into AI-related areas like autonomous driving, smart speakers as well as video streaming, but all these activities are in the periphery as far as contributions to profits are concerned. It seems to be doing all the right things – just not fast enough.

Then in Google venture backs out of cars (Wall Street Journal, Olivia Rudgard) we see that Waymo, Alphabet’s self-driving car venture, has decided NOT to build its own vehicles from scratch because it is “really hard”. Waymo was founded by Google in 2009 and currently runs a driverless taxi service in Phoenix, Arizona. * SO WHAT? * This sounds like an eminently sensible decision and means that they can continue to work broadly with other car manufacturers and stick to what they are good at. At least there will be less waste this way!

UK pub operator Greene King gets a new owner and Tilney goes into merger talks with Smith & Williamson…

Greene King toasts £5bn takeover bid from Hong Kong (Daily Telegraph, Oliver Gill) heralds a bid from Hong Kong’s richest man, Li Ka-shing, as he suddenly became a massive player in the British beer business. Greene King owns 3,000 pubs and CK Hutchinson, controlled by Li Ka-shing, made a surprise bid yesterday at an eye-watering 50% premium to what it was trading at before. Li Ka-shing has just increased his exposure to the UK via this purchase as he already owns Superdrug and the mobile network Three, among other things.  * SO WHAT? * There seems to be a thirst for pub deals at the moment. Last year, Fuller’s,

one of London’s oldest breweries, was bought by Japan’s Asahi and private equity firm TDR Capital struck a £3bn deal for Stonegate to buy Ei, Britain’s biggest pub group, a few weeks ago. Some feel that this could be the beginning of the end for traditional pubs, but clearly purchasers see some mileage in the business. That and the fact that they can buy assets cheaply with a cheap pound!

In Tilney confirms Smith & Williamson merger talks (Financial Times, Alice Ross) we see that UK wealth manager Tilney confirmed yesterday that it’s in exclusive talks to merge with competitor Smith & Williamson to create a group managing a whopping £45bn of assets. MiFID II regulations that came into force in January last year have resulted in a wave of consolidation in the sector as pricing transparency and rising costs of regulatory compliance have hit asset managers’ finances. Tilney has been hoovering up smaller outfits in a fragmented market in a bid to get scale, but would be a biggie if it all goes ahead.

And finally, in other news…

I thought I’d leave you today with food for thought ahead of Christmas in Tesco unveil battered sprouts on Christmas menu – and they actually sound nice (The Mirror, Zahra Mulroy, https://tinyurl.com/y3o7ta5b). I just don’t think this sounds right – but maybe this is because I am a sprout-lover. Maybe this method of preparation could convert some of the haters??

1. In MARKETS & MACRO NEWS, markets weaken on recession fears, French unemployment falls and Italy’s in a pickle
2. In CONSUMER & RETAIL NEWS, UK inflation rises while house prices in the south fall, Lookers sees its profits falling dramatically, Sports Direct has auditor problems and Macy’s turnaround hits the buffers
3. In INDIVIDUAL COMPANY NEWS, WeWork says “YouPay”, Tencent has a great quarter and Monzo announces loans
4. In OTHER NEWS, I bring you some impressive pizza-making…

So markets took fright, French unemployment falls and Italy is having a right drama…

Markets spiral downwards on fears of German recession (The Guardian, Phillip Inman) highlights investor fright as the prospect of Germany sliding into recession (because its economy contracted by 0.1% in the second quarter of this year), continued US-China trade tensions, China’s weak industrial production figures and the inversion of US yield curve for the first time since 2007 (which is seen by many to be a leading indicator – or at least a gauge of optimism/pessimism) combined to get them scrambling to sell.

Meanwhile, French unemployment fall eases pressure on Emmanuel Macron (Financial Times, Hannah Copeland and Victor Mallet) shows that unemployment in France fell to its lowest level in 10 years, which is going to come in useful as Macron pushes ahead with controversial labour market reforms. However, things are getting tetchy in Italy in Italian government on the brink – what happens next? (Financial Times, Hannah Roberts) as Deputy PM Matteo Salvini is making his move by calling for snap elections in October – three years earlier than scheduled. If you are interested in Italian politics, you should have a read of this because it looks at various different scenarios. However, my read of it is that Italy continues to be a European basket case and its uncertain economic future can’t be swept under the carpet because Europe’s engine (Germany) is sputtering as we speak. Europe is coming into some very tricky times. And then there’s Brexit, of course…

Inflation and southern house prices rise, Lookers’ profit craters, Sports Direct’s auditors abandon and Macy’s suffers from discounts…

Rising inflation dampens rate cut chances (The Times, Gurpreet Narwan) cites the latest figures from the Office for National Statistics which show that the annual consumer prices index (aka the CPI) rose to 2.1% versus 2% last month and market expectations of 1.9%. Inflation is continuing to rise because of falling unemployment and wages growing at their fastest rate for 11 years. * SO WHAT? * When inflation rises, usually central banks tend to raise interest rates to prevent overheating (encourages more saving and less spending) but the Bank of England has signalled a reluctance to raise rates while the prospect of Brexit is lurking in the background. The Bank has an inflation target of 2%, but if inflation keeps going up it could be hard to continue to resist raising rates.

House prices fall in whole of the south for first time since 2009 (The Guardian, Richard Partington) mentions the latest figures from the Office for National Statistics which reflect current consumer unease as muted pricing in London is spreading to the regions. House price growth across the UK has been slowing down since the Referendum and now average house prices are only up by 0.9% on the year – the weakest national growth rate since 2012. The average house price is 5.59x average earnings (which is way higher than the long-term average ratio of 4.29x between 1983 and 2019) and home ownership rates are falling, particularly among the under-35s. * SO WHAT? * Clearly, consumers are keeping their hands in their pockets when it comes to spending big on houses and cars but I think that affordability is pretty horrendous – especially given that buyers have to stretch so much even in the downbeat market we’re in at the moment. No wonder younger people are having difficulties – and the entry end of the market will continue to be pumped up by Help To Buy artificially supporting it.

Lookers faces up to 40% fall in profit (The Times, Robert Lea) confirms what I said above re consumer spend on big ticket items as one of Britain’s leading motor dealers, Lookers, yesterday announced a whopping 40% drop in half-year profits to £25m despite revenues rising by 3%. Margins have been slashed as dealers fight over the dwindling number of customers  and they’ve also been hit by rising wage costs, taxation on apprenticeships and automatic pension enrollment. * SO WHAT? * Things aren’t great for the company as new car registrations continue to fall for everyone and economic uncertainties continue to stop customers forking out. Lookers is also facing an

investigation by the Financial Conduct Authority over allegations of how finance packages are sold to buyers. Could this be the next PPI?? I doubt whether they will be unique in their sales practices…

Sports Direct shares tumble as Grant Thornton quits as auditor (Daily Telegraph, Laura Onita) continues Sports Direct’s sorry saga as accountancy firm Grant Thornton told Sports Direct last night that it was resigning after over ten years as its auditor. Grant Thornton threatened to do this before after the recent delayed results announcement, but it seems that it’s now official (although, weirdly, the company had said in a report earlier this week that “We are pleased that Grant Thornton have agreed to remain as our auditor, which makes sound commercial sense during these increasingly challenging times for UK retail”. Oops!). Sports Direct now has to find a new auditor to take on the reins from September 11th – and its share price fell by 10% on the news. The government may have to step in to appoint a suitable auditor if Sports Direct can’t get one themselves. * SO WHAT? * So far, companies including the Big Four of KPMG, PwC, Deloitte and EY don’t want to touch Sports Direct with a barge pole, so it will be interesting to see who gets the “prize” of auditing it in future. There is even talk of the company having to go private if they can’t find anyone – and I think it might help it restructure more freely away from the prying eyes of the City. Whether or not this is actually feasible is another question, however. Mind you, I guess the price of taking it private is getting cheaper by the day! The company sounds like a massive minefield to me…

Macy’s turnaround hits harsh retail reality (Wall Street Journal, Suzanne Kapner and Aisha Al-Muslim) highlights disappointment at the US department store as it lowered its full-year earnings forecast heading into the back-to-school and holiday season. Its share price fell by 13% on the announcement at its second quarter results, meaning that it has now fallen by around 58% in the last 12 months. Share prices of rivals Nordstrom, Kohl’s and JC Penney were also sold off as they took collateral damage from investors. * SO WHAT? * Department stores just haven’t been able to benefit from customers getting higher wages and the relatively strong economic backdrop in the US. Barneys New York recently filed for chapter 11 bankruptcy, the owner of Sears and Kmart filed for bankrupcy last autumn and JC Penney said last week that it might get delisted from the New York Stock Exchange because it has not managed to maintain an average share price of $1 or above for 30 days in a row. As I keep saying, I think that ALL department stores are an anachronism and they need to adapt their offering fast or just die. It’s sad, but then many of them have suffered from under-investment for years, leaving them as tired, drab and expensive places to do your shopping. 

WeWork has flotation in mind, Tencent announces strong profits and Monzo announces its entry into personal loans…

WeWork burns the cash (Daily Telegraph, Matthew Field) highlights the office space company’s ambitions to raise a shedload of cash in a flotation that could happen as early as next month. It burned through an impressive $905m in the first six months of this year in its ongoing quest for growth. However, WeWork: you pay (Financial Times, Lex) shows that its ambitions to raise over $3bn will come at a very high price. It was valued last year at $47bn and continues to grow at a rapid pace. * SO WHAT? * The fact is that WeWork (which is now part of the parent company The We Company) has never turned a profit and is seemingly in no hurry to do so. In contrast to this, London-listed rival IWG is actually more profitable but because its growth prospects aren’t as s3xy and it lacks the backing of a massive tech sugar daddy (WeWork has Japan’s SoftBank), its valuation suffers in comparison. To me, WeWork sounds like a lot of style over not much substance (plus there’s the danger of it going spectacularly wrong if the market changes) but I bet investors will just lap it up when it comes to market.

Tencent posts surge in quarterly profit (Financial Times, Louise Lucas) heralds a turn in fortunes for the tech giant as it announced a 26% year-on-year increase in profits, although revenues proved to be disappointing. Tencent has been cutting back on marketing spend, discounts and even M&A as domestic economic growth weakens. * SO WHAT? * Chinese tech companies have been facing a squeeze from the weaker macroeconomic outlook in China and a much tighter regulatory backdrop. Tencent has suffered in particular from moves by the government to crack down on online gaming and has also seen regulators dragging their feet on licencing any new games, although the situation on the latter has vastly improved.

Monzo launches personal loans (Daily Telegraph, Adam Williams) is another story doing the rounds in today’s newspapers as digital bank Monzo unveiled its first range of personal loans. It will charge customers interest rates of between 3.7% and 20.4% for loans of £7,500 to £15,000 rising to between 6% and 20.4% for loans of £200 to £7,499. This sounds expensive compared to loans from rivals such as John Lewis Finance, M&S Bank, Sainsbury’s Bank, Tesco Bank and Zopa who have a headline interest rate of 2.9% for loans up to £10,000. However, Monzo doesn’t have any early repayment charges, late repayment charges and can change their repayment date. * SO WHAT? * Nice one. It’s early days yet, but it’s all part of the growing up process!

And finally, in other news…

I thought I’d leave you today with Domino’s worker makes perfect pizza in just 27 seconds – and is fastest in Europe (The Mirror, Courtney Pochin https://tinyurl.com/y58e9lbl). This is soooo impressive!

1. In MACRO, TRADE & OIL NEWS, US CPI strengthens, UK wage growth hits new highs, US/China trade tensions ease, Japan/South Korea trade suffers, ExxonMobil looks to offload North Sea assets and US shale gets buffeted
2. In RETAIL NEWS, Steinhoff aims to sell off assets and Poundland rejigs its prices
3. In INDIVIDUAL COMPANY NEWS, Boeing causes problems for Tui while CBS and Viacom reunite
4. In OTHER NEWS, I bring you a very cool bike…

So US inflation rises, UK wage growth strengthens, US/China tensions ease while Japan/South Korean tensions continue and ExxonMobil looks to offload North Sea assets…

In a whistle-stop look at macro-events, US consumer price inflation up 1.8 per cent in July (Financial Times, Brendan Greeley) shows that prices are on the rise in the US – especially those of airline tickets, fruits and veg – which puts a question mark over how aggressive interest rate cuts need to be in the near term. * SO WHAT? * Under “normal” circumstances, a rise in inflation would result in a tendency to INCREASE interest rates to encourage more saving and less spending (thus taking the “heat” out of price rises), but given that Trump called for deeper interest rate cuts to stimulate the economy, data like this shows inflation pulling in the opposite direction. In short, those who want interest rate cuts will say that the latest CPI figures are just a blip and those who don’t will say that these figures show early signs of higher inflation – which will either mean that they will want interest rates to stay as they are or go higher (although I wouldn’t expect the latter anytime soon given the Fed just cut them – and a reversal of that would make them look stupid).

Meanwhile, UK wages rise at fastest rate for a decade despite Brexit risks (The Guardian, Richard Partington) cites the latest figures from the Office for National Statistics which show that annual average pay – excluding bonuses – rose by 3.9% in the latest quarter – making it the highest growth rate since June 2008. Unemployment rose slightly by 3.8% to 3.9%, but is still at levels not seen since the 70s. Mind you, Economists warn UK jobs boom may have peaked (Daily Telegraph, Tim Wallace) contends that the jobs boom is losing momentum as the number of vacancies fell for the second consecutive quarter and productivity showed its biggest drop since 2013. * SO WHAT? * The economists haven’t got a clue and they will change their forecasts as appropriate. We are heading into Brexit – something that has never been done before – and “experts” are proved wrong time and time again. They just give everyone predictions of what MIGHT happen and back it up with statistics which, to be honest, can generally be used to convincingly illustrate the opposite argument. What I DO think, though, is that employment is increasing, which is tightening the labour market and raising wages. Logic would suggest that large-scale hiring of permanent employees will slow down as we get closer to Brexit and then speed up again once we get any more certainty as to

outcome. But hey, no-one really knows! Then if you throw in the prospect of an early election etc. you get even more uncertainty…

Early Christmas for markets as US delays China tariffs (Wall Street Journal, Callum Jones and James Dean) highlights stock market rebounds as the US surprised everyone by backpedaling on newly-proposed tariffs on Chinese imports for certain goods. The Office of the US Trade Representative move will allow American retailers stock up on popular goods ahead of the key Christmas period and share prices of companies with China links rose in a relief rally. * SO WHAT? * Ultimately, this is just noise as the true trade war rumbles on in the background. Markets rise and fall according to Trump’s tweets on China and he has been proved to be full of BS on a number of occasions. Until we see a real deal in black and white and both leaders being photographed with those fake smiles and fake handshakes, it ain’t over. Even then you are relying on both sides honouring their side of the bargain, but at least it’ll be something everyone can work with.

As you know, I have been banging on a bit about rising Japan/South Korean tensions but I thought I’d highlight Japan/South Korea trade war: guilt edged (Financial Times, Lex) which makes some really good points about the current situation. Japanese exports to South Korea are almost twice the amount of imports. Although the materials Japan exports to Korea are key to the latter’s key semiconductor industry, it is possible for the likes of Samsung and LG to rejig their supply chains to drastically reduce their reliance on Japan given time (Samsung aims to cut out Japanese goods entirely from its supply chain by January next year, for example). This would imply that although both the South Korean president and Japanese PM have seen their approval ratings rise as a result of all this, it is actually businesses that will suffer more – and for longer.

In oil news, ExxonMobil plans £1.6bn sale of North Sea oil and gas stakes (The Guardian, Jillian Ambrose) shows that the world’s biggest listed oil company is looking to pull out of the North Sea as it puts its $2bn of oil and gas assets up for sale after almost 50 years in the UK’s oil basin. The company produces about 5% of the UK’s oil and gas via a joint venture with Royal Dutch Shell. * SO WHAT? * This will make ExxonMobil the third US oil major to exit the North Sea after Chevron and ConocoPhillips as they are all concentrating more efforts on North American shale projects which show much faster returns on investment, although Shareholders have no love for shale companies (Wall Street Journal, Rebecca Elliott) shows that share prices of shale players are weakening at the moment as borrowing costs are rising and expectations of big production growth lose momentum.

Steinhoff looks to offload and Poundland rejigs prices…

Steinhoff to sell assets in push to survive debts and lawsuits (Financial Times, Joseph Cotterill) highlights the travails of the South African global retailer following its decision to offload a number of businesses and assets to address massive debts and shareholder lawsuits. This is in response to ongoing difficulties that were kicked-off by the revelation of a €6.5bn hole in its accounts two years ago. Steinhoff owns Poundland, Harveys and Bensons for Beds in the UK and Conforama in France but is facing a number of lawsuits from shareholders who are basically saying that they were lied to as a result. * SO WHAT? * Settling the lawsuits will unlock other finance options for the struggling company, so selling off assets to enable them to do this will have a sense of urgency. 

Talking of which, Poundland to sell products priced between 50p and £5 (The Guardian, Zoe Wood) highlights the company’s new pricing strategy as it moves away from its “everything’s a pound” mantra. The discount retailer is testing out the new prices in 24 pilot stores and managing director Barry Williams said that “This is a way to broaden our proposition in a measured way that stays true to why people love Poundland”. The shop started selling products at £2 and £5 in 2017, but now has new price points of 50p, 75p, £1.50, £3 and £4. When faced by questions over whether shoppers would be confused by Williams came out with the best quote I’ve seen in a long time when he said “Have you ever been to Currys and tried to buy a biryani or gone into Greggs and asked to speak to Gregg? Sometimes what it says over the door isn’t reflected in the shop” 😂. * SO WHAT? * I think that this is long overdue and will give it far more freedom in terms of its product lineup, but it’s been having a tough time and the possibility of its owner Steinhoff potentially having to offload it to pay its legal bills won’t be great.

Boeing’s nightmares continue, Tui suffers and CBS and Viacom reunite…

Boeing’s plane deliveries tumble as 737 MAX Jet stays grounded (Wall Street Journal, Patrick Thomas and Austen Hufford) gives us the numbers to back what we already knew – that the grounding of the 737MAX jets have put a massive dent in deliveries. July proved to be its quietest month since November 2008, with deliveries for the year so far being at their lowest since 2007. July was the fifth consecutive month with no new orders. * SO WHAT? * No surprise here as Airbus continues to benefit from Boeing’s disasters in terms of stronger orders, but there isn’t any light at the end of the tunnel as the company’s hopes for a flight resumption this year run contrary to what many regulators are saying – that it will take longer.

Brexit and Boeing 737 Max dent Tui profits (The Guardian, Julia Kollewe) shows that it’s not just Boeing that’s suffering from the grounding of its jets – travel firm Tui saw a massive 46% fall in quarterly profits due to weak

bookings, Brexit uncertainty and the costs involved in grounding the 737 Max aircraft. The company has already had two profit warnings this year, but it stuck to its full year guidance. * SO WHAT? * It’s a really tricky time for travel operators at the moment – just ask Thomas Cook! Tui wants to transform from being a tour operating business into an online platform selling holidays and actually announced the sale of two specialist German tour operators earlier this week. That’s probably a reasonable idea in theory, but it won’t happen overnight and it’s a crowded market. Having said that, it does have decent experience and if it manages to sell off assets, it could become a consolidator and buy other businesses that align with its new strategy.

Then in That’s a rap as media firms merge (The Times, James Dean) we see that CBS (owner of Showtime etc., catering to an older audience) and Viacom (owner of Nickleodeon and MTV etc., catering to a younger audience) are to merge to form a $30bn company after being broken up back in 2006. There have been two other attempts at merging the companies since 2016, but they fell down on price. This deal, though, looks like sticking and will give both media giants even more power as well as the potential to cut costs.

And finally, in other news…

I thought I’d leave you today with A Swedish bike is made from 300 Nespresso coffee pods (Quartz, Anne Quito https://tinyurl.com/yxh2737l). How amazing is this??

1. In MACRO & OIL NEWS, Argentina’s peso falls 30% on Macri concerns and Saudi Aramco makes a big Indian investment
2. In CAR NEWS, hybrids fall out of favour for some makers and India’s electric car industry gets a jolt
3. In RETAIL & CONSUMER GOODS NEWS, retailers call for tax cuts, Thomas Cook asks for more money, Sleep and Simba climb into bed together while Doc Martens’ benefits from vegan boots
4. In OTHER NEWS, I bring you some epic DIY fails…

So Argentina gets a shock and Saudi Aramco invests in Reliance…

Argentinian peso falls 30% to record low as investors fear populist leader’s return (The Guardian, Richard Partington) heralds a bit of drama yesterday as the markets/business-friendly centre-right president, Mauricio Macri failed miserably in yesterday’s election primary – a precursor for next month’s presidential election. It now looks like the centre-left opposition leader Alberto Fernandez could be a shoe-in for president as a result given that he won a massive 47.4% of the vote to Macri’s 32.3%. * SO WHAT? * Analysts are worried that a left-leaning Argentinian government would increase the risk of it defaulting on its debt, which is what sent the markets into a tailspin. However, it’s not clear whether these fears are well-founded as there is still a chance that Fernandez may keep some of Macri’s reforms in place and not return to the populist

policies of his predecessor Cristina Fernandez de Kirchner, which dragged Argentina into the economic mire that it’s currently in at the moment. If that proves to be the case, the sell-off may be overdone…

Saudi Aramco to acquire 20% of Reliance’s oil refining unit (Financial Times, Benjamin Parkin and Anjli Raval) highlights a big deal as the world’s biggest crude oil exporter puts money into the world’s fastest-growing energy consumer. The deal values the business at $75bn including debt and counts as one of the largest ever foreign investments in India. It has yet to be finalised, is still subject to regulatory approval and is expected to complete in March 2020. * SO WHAT? * This seems to be a canny deal from a strategic perspective given that India’s middle classes are growing quickly, which is raising energy demand. Oil and gas majors have become very keen of late to get a piece of the action and so Saudi Aramco obviously saw a chance. Reliance also gets to reduce its debt pile that has been building up due to massive investments over the years.

Some makers decide to ditch hybrid in favour of fully-electric vehicles but India faces immediate problems with the government’s push in EVs…

GM, Volkswagen say goodbye to hybrid vehicles (Wall Street Journal, Mike Colias) shows two of the world’s biggest car manufacturers have decided to put all their eggs into a fully electric basket. They both said that they saw no future for hybrids in their US lineups and are concentrating their investment on fully electric vehicles (EVs). They see the tech as only being a bridge between now and when everything inevitably goes electric. This stands in stark contrast to other makers such as Toyota and Ford who are actually increasing their hybrid offerings in the US. * SO WHAT? * I’m going to stick my neck out here and say that I think GM and VW got it completely wrong. EVs still account for a tiny fraction of overall vehicle sales and, in a country where “gas” is king with SUVs and pick-ups being a common vehicle of choice, I think the makers are shooting themselves in both feet. Charging networks are still rubbish, the country is massive (so it will take decades to sort out any kind of viable network) and I

think that hybrids will prove to be a VERY long bridge between petrol and full electric. VW and GM have effectively cut themselves off from this (although if things really got that bad they could probably start importing them from outside).

Reforms drain India’s electric car industry (Financial Times, Benjamin Parkin) highlights difficulties in India following the government’s decision to push EVs in the country. This sounds counter-intuitive at first, especially because ministers announced a three-year $1.5bn subsidy package in March followed by the announcement last month of a cut in sales tax on EVs and chargers from 12% and 18% respectively down to 5%. However, the kicker here is that the new subsidy programme stipulated that about half of EV components should be produced in India to qualify. * SO WHAT? * Clearly this will benefit local suppliers in the long term, but the effect has been to kill short term sales as customers wait for more qualifying vehicles to come to market. Mind you, given that EVs only represent less than 0.1% of the market in India, perhaps the more pressing problem is the sharp recent slowdown in demand for conventional vehicles. Still, longer term, you can see why the government is pushing for EVs given that India has the world’s worst air pollution and a huge dependency in imported oil.

Retailers call for tax cuts, Thomas Cook asks for money, Eve and Simba cuddle up and Doc Martens’ rides the vegan wave…

In Retail chiefs demand tax cuts to protect high street businesses (The Guardian, Richard Partington) we see that the chief execs of over 50 major UK retailers, including M&S, John Lewis and Iceland, have sent a letter to chancellor Sajid Javid, demanding tax cuts from the government to save the UK high street. They said that the system of business rates is outdated and Clive Lewis, chief exec of River Island, observed that “The burden that rates places on all high street businesses not only stifles growth but is a major contributor to the closure of stores and the resulting decline in towns across the country”. * SO WHAT? * Retailers are the biggest private sector employers in the UK. The sector accounts for about 5% of GDP but pays about 10% of all business taxes and about 25% of business rates. Given that retailers have been facing growing costs (higher minimum wage, higher import costs because of the Brexit-weakened pound etc.), tough market conditions and ongoing pressure from online competition (which now accounts for about 20% of sales) it’s no wonder that gaps on our high street continue to increase. Just to give you an idea, Amazon pays £63.4m in business rates versus around £100m that Next pays – despite having double the sales! Whether this pressure works or not remains to be seen – but given that Boris Johnson is keen to get votes, you would have thought that addressing this high profile sector would be a decent move.

Thomas Cook asks for bailout as holiday firms take pounding (The Guardian, Jasper Jolly) reflects ongoing problems for the travel agent as the company announced that it wanted to raise another £150m from investors – after already raising £750m from investors – to help tide it over for the Christmas period when travel operators are usually skint due to bulk-buying hotel space. Its shares took a 20% hit in trading yesterday. A share will now cost you the princely sum of 7.5p – a far cry from what it was in

May last year when it was 140p! * SO WHAT? * Thomas Cook is in all kinds of trouble at the moment as it struggles with massive debts, intensifying online competition and the problem of wearing an expensive  network of physical outlets. It tried to sell off its airline in February to raise some money, but failed – and instead turned to its biggest shareholder Fosun to rescue the business. Although it stepped in, it has yet to reveal anything in the way of turnaround plans, which has led to concern among Thomas Cook’s 21,000 employees. Being a holiday operator these days is a tricky business as LateRooms and Super Break (owned by the Malvern Group) collapsed at the beginning of this month and On the Beach had a profit warning only last week due to the weak pound making their offering more expensive. Exposure to the UK market has been made more problematic as well because Brexit has led to people delaying their bookings and/or deciding to stay in the UK because of the weak pound.

Mattress sellers set to get into bed together (The Times, James Hurley) highlights the getting together of two struggling online mattress retailers as shares in Eve Sleep were suspended on news of a possible merger with Simba Sleep. Eve Sleep has lost over 95% of its value since it floated in 2017, but believes that an acquisition of one of its rivals will help a restructure. Simba had to cuts its own valuation from £200m to £20m in February to secure new finance. * SO WHAT? * This sounds like a nightmare coupling – two weak companies generally don’t make one strong one! You get the feeling that they would be like that last scene in Thelma and Louise where the two plucky heroines clasp hands in a show of strength before driving off the edge of a cliff. Which is probably what their share price will do if they remain a quoted company.

I thought I’d mention Vegan shoes no bovver at all for Dr Martens (The Times, Elizabeth Burden) because it’s a story that’s all over the newspapers today. Basically, sales of its vegan products (plastic replaces the leather upper) shot up by 70% and now make up 4-5% of total sales. Like-for-like sales were also up by a healthy 18%. Interestingly, its current private equity owner Permira is looking to exit the business next year – so news like this will be even more welcome than usual.

And finally, in other news…

I thought I’d leave you today with this gem: A woman asked people to send her the ‘worst’ design and architecture pictures they have, and the dozens of responses are hilarious (Insider, Frank Olito https://tinyurl.com/yytjcyl6). No wonder people are doing less DIY these days…

1. In AUTO MAKER NEWS, China goes international and Tesla continues to disappoint owners
2. In UK RETAIL NEWS, the number of empty shops increases, Sports Direct aims to go “upmarket” and Asda’s fridges help to keep us warm this winter
3. In INDIVIDUAL COMPANY NEWS, BlackRock buys a chunk of Authentic Brands and UPS has an Amazon dilemma
4. In OTHER NEWS, I bring you a Darth Vader balloon…

So Chinese manufacturers look further afield while Tesla owners face disappointment…

Chinese auto makers go global as sales slow at home (Wall Street Journal, Trefor Moss and Vibhuti Agarwal) shows that Chinese car makers are pouring money into overseas markets such as India, Africa and Europe. Chinese cars have made great leaps in terms of quality and are very attractively priced. For instance, China’s biggest auto maker SAIC Motor Corp, tested the Indian market by supplying 21,000 of its MG Hector SUV in June – and they sold out in four weeks (they’d originally assumed it would take six months to shift them)! The company has opened plants in Indonesia and Thailand over the last two years to supply the southeast Asian region. It has been joined by Great Wall Motors – which opened its first overseas plant in Russia in June – and state-owned BAIC Motor Corp, which started production at a $772m facility in South Africa last year. Zhejiang Geely Holding Group (aka “Geely”), which owns Volvo Cars, opened its first overseas plant in Belarus in 2017 to supply Russia and Eastern Europe and launched its first vehicle for the southeast asian market last December after buying a 49.9% stake in Malaysian maker Proton in the same year.  * SO WHAT? * Chinese auto manufacturers have had to look outside their domestic market because, as everyone else is finding, it has been slowing down after decades of

stellar growth. Chinese companies like FAW Group and Chery Automobile have tried and failed to expand overseas in the past but it seems that others are learning from these moves and have the long-term goal of making a mark in mature markets such as the US and Europe. However, for now, they are concentrating on emerging markets but will no doubt have an eye on how Japanese and Korean manufacturers transformed themselves in the 70s and 80s to the global powerhouses they are today.

Tesla drivers in UK ‘are waiting months’ for parts and repairs (Daily Telegraph, Olivia Rudgard) shows how Tesla is continuing to fall short in looking after its customers. Some drivers are saying that they are having to wait for up to 10 months to get their cars fixed and that previous high standards are in notable decline, with the company getting a lowly 3.1 out of 10 on Trustpilot. One poor guy ended up selling his Model S for a £25,000 loss after he was told it would take 7 months to replace his windscreen! * SO WHAT? * I think that customer service and support is vital for any car company’s growth given that cars are a major purchase and most people do a great deal of research before buying. If you combine shipping delays and poor aftersales, you are basically going to hand your opposition customers on a platter. The irony of all this is that Tesla has, arguably, been the one to make electric cars that appeal to the masses – but all the other incumbent manufacturers will benefit from the demand that it created with superior production and aftercare. I still maintain that Tesla should combine with a “traditional” manufacturer to give it production capacity and a better distribution network.

Vacant shop numbers hit a new high, Sports Direct aims high and Asda offers up its fridges to warm us all…

Most empty shops for four years (Daily Telegraph, Laura Onita) cites the latest data from the British Retail Consortium (BRC) which shows that town centre vacancy rates now stand at 10.3%. The travails of former retail stalwarts like Toys R Us, Maplin, New Look, Debenhams, Mothercare and others have been well-documented and the situation is unlikely to get better any time soon considering that the same report showed that footfall was also down in July by 2.7% in high streets and 3.1% in shopping centres. * SO WHAT? * Everyone bangs on about how we should save our high streets, but then at the same time go on to order things online at cheaper prices! Clearly, the government really needs to step in here to either lower taxes on physical stores or impose taxes for online retailers. Neither option is clear cut, though, as lowering taxes on existing stores could be too-little-too-late for many and cut valuable income for local authorities etc. Imposing taxes on online shopping, on the other hand, will hurt consumer spending power – which isn’t likely to go down well either. Conclusion: retailers need to find the optimal balance between offline and online offerings and ideally provide an offline experience at their stores that can’t be replicated by keyboard-shopping. As I keep saying, you are never really going to be able to compete with the internet on price – but you can make your shops fun and interesting places to go.

In Sports Direct elevation head says brands will get lift-off (The Times, Ashley Armstrong) we see that Michael Murray, chief exec Mike Ashley’s future son-in-law and heir-apparent, is having to fight against a great deal of scepticism over Sports Direct’s ambitions to go “up market”. New-look stores with better womenswear ranges, a wider selection of sports and lifestyle brands like Tommy Hilfiger and Timberland as well as e-sports arenas (which is where its acquisition of Game Digital will come in) are the aspiration – but in the meantime, the company has got

to sell off the rest of its cr*ppy stores. Nepotism’s poster child Murray says that “There will be a point when Sports Direct becomes better known for its elevated shops, but it will take a number of years”. * SO WHAT? * Sports Direct has skillfully surfed the “athleisure” wave and made its money by piling it high and selling it cheap, but Mike Ashley’s trolley dash down the UK high street has resulted in a number of interesting acquisitions at knock-down prices. The problem is that he has garnered a reputation for strangling brands (just look at Lonsdale and Slazenger, for instance) and there is a real possibility that he will do the same with his latest acquisition, Jack Wills. FWIW, I think that he has bought a number of decent-enough brands that have fallen on hard times, but I just think he is spreading himself too thinly at the moment to be able to turn these things around in time. Surely the company needs someone in the driving seat who has proper experience at consolidating and turning brands around than some kid who can only boast a degree in Real Estate (really??) and the fact that he’ll be marrying the boss’ daughter.

Asda signs up its fridges to keep the UK warm this winter (The Guardian, Jillian Ambrose) is an intriguing-sounding headline, don’t you think?? Apparently, Asda has signed up 300 of its stores and 18 of its distribution depots to act as a virtual battery pack for the energy grid this winter. Basically, Asda will turn off its fridges in sync with peak electricity demand, earning it money from the National Grid whilst simultaneously contributing to its carbon emissions reduction targets. All industrial fridges are turned off at least once a day for defrosting purposes, so doing this to coincide with peak electricity demand is not a big deal. * SO WHAT? * I think that this is a really interesting idea – and if more companies could do this, it would make a massive difference. Tesco is trialling mini-power cuts to its freezer aisles with the electricity being made available to the National Grid, for instance, but if ALL supermarkets (and other outlets) could do something similar, it could prove to be a major boost – especially as more people are buying electric cars these days, necessitating an increase in power supply. Power generation is no doubt going to have to increase in future as demand for electric vehicles increases, but this is something that can be done NOW to help the cause without causing too much disruption.

BlackRock buys a big chunk of Authentic Brands and UPS has an Amazon dilemma…

BlackRock buys $870m stake in Authentic Brands (Financial Times, Richard Henderson) heralds a major buyout deal for BlackRock to purchase the celebrity and clothing licensing group Authentic Brands, which owns brand rights to Marilyn Munroe and Muhammad Ali along with Sports Illustrated magazine and a majority shareholding in retailer Nine West. This is part of a push by the asset manager into the world of private equity as its clients seek out juicier returns from the ones they are getting from stock and bond markets. Authentic Brands licences 50 brands that combine to generate $9.3bn in annual retail sales. * SO WHAT? * This sounds like a decent enough deal, but private equity returns are not risk-free by any means. Still, BlackRock has the funds and the brainpower to have a dabble in the private equity world and everything will be fine as long as the returns roll in. Things could turn sour, however, if they don’t as you would have thought that investors in BlackRock will be more conservative than most private equity veterans so maybe

the margin for error will be that much narrower, meaning that they’ll probably be paying higher prices for less risky assets.

Following on from FedEx deciding last week not to renew its ground delivery contract with Amazon, UPS bets on Amazon, for now (Wall Street Journal, Paul Ziobro) shows that UPS is also wondering whether to keep doing business with a fast-growing competitor or to ditch it now and broaden its client base. For now, it seems, it is content to keep the status quo as UPS gets almost 10% of its revenues from Amazon. Now that FedEx has stepped away, UPS is probably in quite a strong position with Amazon as it heads into the busier second half of the year where Amazon relies more heavily on third party providers such as UPS. * SO WHAT? * FedEx had been weaning itself off Amazon for a while, to the extent that it only accounted for less than 1.3% of overall revenues last year before it decided to cut the cord last week. UPS will no doubt benefit short-term by taking up the slack but you’ve got to admire FedEx’s spirit to step away from Amazon’s volume (at lower profit margins) to free it up to tout its “independence”. This will no doubt be used as a selling point to companies who want an alternative – like Target and Walmart, for instance. UPS will need, however, to ensure that it has a strategy in place so that it won’t be left high and dry when Amazon outgrows it.

And finally, in other news…

I thought I’d leave you today with Darth Vader Hot Air Balloon Floats Over British City — and Mark Hamill Loves It (People, Georgia Slater https://tinyurl.com/yykja4md). This must have been an amazing sight!

1. In RIDE-HAILING NEWS, Lyft prospers while Uber has a ‘mare
2. In STREAMING/ONLINE NEWS, UK consumers push through the £100m a week barrier on digital entertainment services, the esports market continues to boom and Roku punches above its weight
3. In INDIVIDUAL COMPANY NEWS, Samsung works with Windows, Carlsberg raises profit guidance and KraftHeinz has a shocker
4. In OTHER NEWS, I bring you some cathedral fun…

So Lyft delights and Uber disappoints…

Lyft: theory test (Financial Times, Lex) follows on from what I said yesterday about Lyft’s latest results, which showed positive momentum for the ride-hailing company that benefits from being “not Uber”. However, there are some clouds on the horizon as legislators are currently considering whether to classify their drivers as employees – which will increase Lyft’s costs and potentially negate any price rises or scaling back of sales and marketing. Although the company is sticking with the US and Canada, avoiding more broad-based geographical expansion and throwing vast amounts of money at the world of food delivery, future profitability will very much depend on it being able to charge much higher prices and/or being able to rely on a fleet of driverless vehicles. I think that most people would agree that neither of those things is likely to happen in the near term. In the meantime, the company will stay permanently in loss territory.

Uber posts record quarterly loss of $5bn after listing charge (Daily Telegraph, Olivia Rudgard) highlights the cost of a stock market flotation for the already-loss making company as $3.9bn of its loss was a charge related to stock-based compensation to staff. The ride-hailer also unveiled its slowest-ever growth rate, which undershot analyst expectations and so the company’s share price fell by 12% in after-hours trading – a record low since its May IPO. * SO WHAT? * I really think that ride-hailers (and especially Uber, because of its geographic reach and exposure to other expensive businesses like food delivery) are a massive and never-ending money pit. They bang on about expansion and promise great things, but the fact is they don’t make any money! Scale is a key factor in reducing costs, but when you have a company like Uber with a bro-culture history, an obsession with food delivery and a tendency to funnel vast amounts of money into things that may-or-may-not work (like driverless taxis) surely you just have a recipe for disaster that will collapse very quickly if people get tired of throwing money at it. At least Lyft is sticking to its knitting and keeping things real in terms of geographical expansion – mind you, even they are operating on fantasy and need to put their fares up to proper levels sharpish.

UK consumers’ love for digital entertainment grows, the esports market continues to boom and Roku’s David does well against the Goliaths…

Streaming helps UK pass £100m digital milestone (The Guardian, Mark Sweney) cites the latest figures from the Entertainment Retailers Association (ERA) which show that UK consumers spent over £100m per week on digital entertainment services, including Netflix, Amazon, Spotify and Apple Music over the first half of this year. This is especially notable considering that the first half is supposed to be the weaker half for entertainment sales (the second half includes Christmas, for instance!). Digital music and video sales are more than compensating for the continued decline in CD and DVD sales – echoing the trend in video games as digital downloads are more than making up for sales of physical copies of games. * SO WHAT? * I don’t think any of you would be surprised by this, but the report does give some concrete evidence of the trend we all probably expected anyway.

Similarly, Booming European esports market pulls in £212m revenue (Daily Telegraph, Matthew Field) cites a report from Deloitte which confirms a trend we all probably suspected – that the market for esports is growing, as it is

now €50m higher than it was in 2017. Tournaments for games such as Fortnite pulled in over 86m in Europe last year and this audience is forecast to rise to 105m next year. The report also suggests that European revenues are expected to shoot up by 23% by 2023. * SO WHAT? * This is an area with huge potential. I also think that the advent of 5G – and particularly the speeds it offers – will  turbo-charge the popularity of gaming on all devices. Having big tournaments will keep gamers enthused and make them want to play more so they too can hit the big time. We are in the early stages of something really massive!

In Tiny Roku fends off Amazon and thrives by selling ads (Wall Street Journal, Abigail Summerville) we see that the streaming device maker reported quarterly earnings above expectations on the back of particularly strong advertising sales. Although its media-streaming sticks and and boxes continue to outsell those from the likes of Apple, Google and Amazon, advertising revenues are where it’s at. The company’s share price shot up by 20% after the earnings announcement. * SO WHAT? * The beauty for Roku is that it doesn’t have its own content, so it can pretty much partner up with anyone. Roku already has deals in place with Netflix, Amazon Prime, Hulu and others while services that are on the cusp of launching (like Disney+, Apple TV+ and HBO Max) are expected to jump on board the Roku fun bus. For the moment, Roku hasn’t strayed much from its own backyard in the States, but it sounds like it is considering an international expansion strategy. I think that it looks very well placed to take advantage of the ongoing streaming frenzy!

Samsung tries to go seemless, Carlsberg raises a glass and KraftHeinz has a shocker…

Samsung phones to share seamlessly with Windows PCs (Financial Times, Tim Bradshaw) shows that Samsung has announced a broad alliance with Microsoft that will mean users will be able to wirelessly synchronise files and notifications to their Windows PC (much like Apple does with its devices). Samsung will also promote Microsoft’s apps like OneDrive and Outlook email. Samsung also unveiled its new Note 10. The company is extending its lead as the world’s biggest smartphone maker, according to data from IHS Markit, with Apple falling into the #4 spot behind China’s Huawei and Oppo. * SO WHAT? * This is an important development as the ability of Apple’s products to operate seemlessly across apps and devices has been key to keeping its customers loyal. No doubt it is hoped that this tie-up will do the same for Samsung and Microsoft. This will be a powerful partnership IMO.

Carlsberg cheers investors as it raises profit guidance (Financial Times, Richard Milne) heralds reason for cheer as shares in the world’s #3 brewer rose by 10% yesterday on the back of a solid performance and the hiking up of its

guidance for the full year. The company has been in turnaround mode under its Dutch chief exec Cees’t Hart, who has built up a reputation for underpromising and over-delivering on profit guildance, and is reaping the benefits of concentrating on craft beer and Asia. * SO WHAT? * Carlsberg’s upbeat assessment caught analysts and investors by surprise as they were still reeling from news of Heineken’s first half profit-miss only a few days previously. It certainly seems to be bucking the trend of European companies reigning in profit guidance due to ongoing economic uncertainty and wobbles in global trade.

Kraft Heinz writes down $1.2billion as brands wither (Wall Street Journal, Heather Haddon and Micah Maidenburg) highlights more disappointment for the food making giant as it announced that sales had fallen again and that it had to write down the value of its brands for the second time in six months. The stock was down 9% yesterday, but an altogether chunkier 34% this year. * SO WHAT? * Kraft Heinz is not alone in its gloom as General Mills, Kellog Co. and Campbell Soup Co are just some of its competitors who have also been suffering from an overall trend of consumers moving towards healthier and less-processed food. Competition has also been fierce from own-label products and higher ingredient and input costs. The company has tried to launch new products and marketing campaigns in the last few months but I guess it is too soon to see the benefits at the moment.

And finally, in other news…

I thought I’d leave you today with ways to have fun in a cathedral in Norwich Cathedral: Helter-skelter offers new experience (BBC, https://tinyurl.com/y45zepda) which follows on from the recent Rochester Cathedral’s crazy golf course divides opinion (BBC, https://tinyurl.com/y6kx6kod). Fun in cathedrals?? What’s going on??

1. In MACRO NEWS, German recession fears rise, Japan-Korea relations worsen and gold hits a new high while UK house price growth falls and wages rise
2. In RETAIL NEWS, Walgreens cuts 200 pharmacies and Debenhams gets the doctor in
3. In INDIVIDUAL COMPANY NEWS, FedEx stops ground deliveries for Amazon, Continental looks to electric vehicles, Lyft adds users and Diageo invests in a non-alcoholic beverage
4. In OTHER NEWS, I bring you the world’s most expensive burger…

So fears of a German recession rise, Japan/Korea relations worsen and gold hits new highs while UK house price growth dips and wages rise…

Biggest German factory slump for 10 years stokes fears of recession (Daily Telegraph, Tom Rees) highlights tough times for the Eurozone’s biggest engine as industrial production fell by 5.2% year-on-year in June, with output falling 1.5% versus the previous month. Given the importance of manufacturing to Germany’s economy, it looks highly likely that the announcement of its second quarter GDP growth figures next week is going to be baaaad – unless exports surprise on the upside. It seems that a perfect storm is brewing for Germany in the form of the US-China trade war (Germany is heavily exposed to exports – and therefore tariffs), Brexit worries (slowdown in trading activity), China’s economic slowdown (falling demand for Germany’s exports) and weakening global car sales (because its car industry is a major economic driver). And then there’s the possiblility of a currency war in the offing.

I know that many of you won’t really think much about this BUT South Koreans vent anger with growing boycott of Japanese goods (Financial Times, Song Jung-a, Edward White and Kana Inagaki) highlights a very serious – and growing problem – between two of Asia’s biggest economies. Relations have soured between the two because of a flare-up of the perennial problem that Koreans think Japanese aren’t showing enough remorse for how they treated Koreans (especially women) in the occupation and Japanese say that they’ve already apologised and compensated them years ago, so the Koreans should just get over it.  The powder keg was ignited by a south Korean court ruling last year that allowed individuals to make compensation claims for how they were treated in the War by the Japanese. The resulting needle between the two has so far taken the form of Japan putting obstacles in the way of free-flowing trade to Korea – and on the other side, Koreans have been smashing up THEIR OWN Japanese cars, signs being put up in supermarkets saying that customers should not buy Japanese products – and sales of Japanese beer and cigarettes have ceased in recent weeks – while petrol stations and garages aren’t allowing Japanese cars fill up or be serviced. Even the number of flights between the countries are being cut and there is growing pressure for a complete travel ban. * SO WHAT? * China will be loving the whole Japan/Korea thing and they will no doubt stoke tensions in order to get at Trump as part of the ongoing US-China trade tensions. The problem with the latest flare-up is that it looks unlikely to abate anytime soon as Japanese are giving their PM Abe a hefty 71% approval rating on the one side and the Koreans seem to be surfing a growing wave of nationalism on the other that will be increasingly difficult to unpick. Just so you know – and I know how

basic this is going to sound, but bear with me – Japanese are taught about WW2, but textbooks (which are approved by the government) are light on details in terms of what they did to other countries like China and Korea when they occupied them (e.g. chemical weapons testing on civilians, forcing Koreans to adopt Japanese names and speak Japanese, forcing Korean women into prostitution for the “use” of Japanese soldiers etc.) whereas Koreans are taught from a young age what Japan did to them. This leads to Japanese being in a near state of denial, while Koreans continue to feel deep-seated bitterness. Right now, this is driving a massive wedge between the two countries that could have implications on the whole region. Ultimately, I think that Japan will lose out because Korean companies such as Samsung and LG etc. will be looking hard at their supply chains and will plan to de-emphasise reliance on Japan. Other countries in the region could benefit as a result.

Gold rises to $1,500 an ounce for first time in six years (The Guardian, Sean Farrell) highlights new heights for the precious metal as investors buy into “safe haven” assets. Gold is considered such an asset because of its intrinsic value and is thus where people park their money when stock markets and economies are looking a bit iffy. * SO WHAT? * The gold price has now risen by 17% so far this year as US-China trade tensions continue to grow and other economic indicators around the world – such as German industrial production cuts, interest rate cuts in New Zealand, India and Thailand – spooked investors. As you may know, Bitcoin is also being seen increasingly as a sort of safe haven asset, but I just don’t know why considering that every other such asset has intrinsic value whereas Bitcoin has nothing! 

Meanwhile, closer to home, House price growth is slowing, says Halifax (The Times, Gurpreet Narwan) cites the latest figures from Britain’s biggest mortgage lender which show that house price growth is losing momentum. Having said that, Howard Archer, chief economic adviser to the EY Item Club, put a positive spin on things when he said “should the UK leave the EU with a deal at the end of October, we believe reduced uncertainty and modestly improved economic activity could see house prices rise by around 2 per cent over 2020”. * SO WHAT? * Interestingly, different data series have painted varying pictures of the UK housing market, with Nationwide, Halifax and Office for National Statistics all having their nuances (e.g. Nationwide has a more southern bias and Halifax has a more northern one) but overall, the UK housing market appears to be slowing down.

Staff shortages trigger pay rises (Daily Telegraph, Tim Wallace) is a heartening headline for workers as a report by the Recruitment and Employment Confederation and KPMG shows that skills shortages are translating into employers paying higher wages to retain existing staff and attract new ones. Job vacancies are rising, but there just aren’t enough candidates to fill them – with IT and computing being particularly starved of the right people.

Walgreens cuts pharmacies and Debenhams gets a doctor in the house…

Walgreens to close 200 American pharmacies (The Times, James Dean) shows that Boots’ American owner, Walgreens Boots Alliance, has announced that it will close 200 stores in the US as part of a cost-cutting drive in a global restructuring. Walgreens has 18,500 shops in 11 countries but makes most of its profits in America. However, it’s suffering at the moment because of falling prices of generic drugs (which are less profitable). * SO WHAT? * OK, so it already announced 200 closures of

Boots pharmacies in the UK as well as 350 job losses at its Nottingham HQ but given that things aren’t sounding much better for the company I wouldn’t have thought that’d be the end of it.

Troubled Debenhams calls in doctor (The Times, Robert Miller) is quite an interesting development for the terminal troubled department store as it has decided to replace the executive chairman, Terry Duddy, with turnaround specialist Stefaan Vansteenkiste when Duddy departs next month. * SO WHAT? * The fact that they went for a “company doctor” rather than a retail veteran would suggest to me that the company is going to undergo some serious surgery. I suspect the new guy will be sizing up the assets with an eye to maximising returns on a break-up – but that’s just my opinion.

FedEx halts Amazon ground deliveries, Continental looks to an electric future, Lyft adds users and Diageo buys alcohol-free…

FedEx to end ground deliveries for Amazon (Wall Street Journal, Paul Ziobro and Dana Mattioli) heralds a historic moment for FedEx as it announced that it was ending its contract with Amazon, deciding to create space in its trucks to deliver other companies’ goods. The current contract expires at the end of this month and shows that the company is positioning itself to be the main carrier for Target, Walmart – and any other retailer that wants to take on Amazon. * SO WHAT? * This sounds dramatic, but then according to the parcel consulting firm (I never knew such a thing existed!) SJ Consulting, Amazon used its own drivers to deliver 45% of its July orders, the US Postal Service for 28% and UPS for 21%, with FedEx not getting any deliveries last month. I suspect that other delivery services will be looking at broadening their exposure to retailers other than Amazon given that Amazon continues to pour money into improving its own logistics network.

Continental to make big switch to electric vehicles (Financial Times, Myles McCormick) highlights the aspirations of Europe’s largest listed auto technology supplier as it said that it would stop investing in the production of injectors and pumps for petrol and diesel engines and switch to making parts for electric vehicles. Andreas Wolf, head of its power-train division, said that “Our customers are increasingly turning to the electrification of drive systems, so we are concentrating systematically on this area”. * SO WHAT? * Will this be too little too late? The fact is that this company had two profit

warnings in 2018 followed by another one last month that also came with a massive cut in its full-year forecast – so you get the feeling that it is clutching at straws. Nice (but late) move strategically, but EVs still make up a tiny percentage of cars sold, so aligning yourself with this sector of the market while car sales continue to decline on a global basis is like p!ssing in the wind IMHO. More disappointment to come, I suspect…

On a positive note, Lyft raises 2019 outlook and sees smaller annual loss (Wall Street Journal, Eliot Brown) shows that things are going quite well for the San Francisco-based ride-hailer as its user numbers increased, powering its share price up by 11% initially in after-hours trading yesterday. * SO WHAT? * Good news for Lyft but, like rival Uber, it’s still far from profitable. The respective market shares are largely unchanged (Lyft had 28% market share in the US in June and Uber had 70%) and Lyft’s share price is still “under water” at about $60 versus the $72 a share it floated at. Surely, fares need to increase over the longer term to even stand a chance of profitability, but as long as they are trying to maintain and grow market share I don’t think this will happen any time soon.

Diageo gets into spirit of non-alcoholic drink (The Times, Ashley Armstrong) shows that the distilling giant is continuing its efforts to broaden its non-alcoholic beverage offering by buying a majority stake in Seedlip, whose non-alcoholic clear spirit is derived from herbs, peas, hay and botanicals and is designed to be a gin/vodka substitute. A bottle of this stuff can set you back over £25 – more than bottles of Bombay Sapphire or Hendrick’s. * SO WHAT? * Given that fewer people are drinking these days, according to the latest figures from the Office for National Statistics, and that people continue to have a thirst for gin, Seedlip ticks both boxes quite nicely. Hardly a transformative deal for the giant, but a sign of more non-alcoholic things to come in this space! 

And finally, in other news…

I thought I’d leave you today with This is the most expensive burger in the world (The Daily Meal, Dan Myers https://tinyurl.com/y36rxz3x). Perfect for if you are feeling flush (and hungry!).

1. In MEDIA & INTERNET NEWS, Tencent is in talks to buy 10% of Universal Music, Disney gets weighed down by Fox and Match Group outperforms
2. In HEAVY INDUSTRY NEWS, shipbuilding gets feisty, Glencore halts cobalt production and Sirius’ mine plan looks shaky
3. In INDIVIDUAL COMPANY NEWS, Boohoo.com’s deal with Karen Millen has repercussions and Klarna becomes the biggest fintech company in Europe
4. In OTHER NEWS, I bring you a very annoying optical illusion…

So Tencent has talks about a Universal Music stake, Disney gets dragged by Fox and Match Group outperforms…

Tencent in talks to buy 10% of Universal Music from Vivendi (Financial Times, Nic Fildes and Mercedes Ruehl) highlights the Chinese group’s latest effort to expand its global music industry aspirations. Vivendi, which own’s Universal Music, announced that it was in talks to sell the stake to Tencent that would effectively value Universal Music, the world’s biggest music group, at €30bn. It also has the option to take this stake up to 20% within a year on the same terms. * SO WHAT? * Vivendi has been looking to offload a chunk of Universal since last year and so the opportunity to do it at top dollar with Tencent was clearly too good an opportunity to miss. Interestingly, it is also talking about “areas of strategic co-operation” with Tencent, which looks like it could be a very powerful ally in cracking the Chinese market. Tencent, for its part, has been buying into music services worldwide like India’s Gaana, Asia’s Joox and karaoke app Smule and this stake in Universal represents its latest move into content, rather than tech. There had been speculation that Vivendi could offload a 50% stake in Universal, but clearly that did not turn out to be the plan.

Disney’s quarterly revenue surges but profit drops (Wall Street Journal, Erich Schwartzel and Maria Armental) highlights Disney’s success being dragged down by 21st Century Fox, which disappointed analysts and sent its

shares 3% lower in after-hours trading yesterday. Fox movies like X-Men: Dark Phoenix flopped and Fox’s Star India, heralded as a key asset in its international expansion strategy, suffered from cancelled cricket matches while Disney’s movies, like Avengers: Endgame, broke records. * SO WHAT? * The entertainment behemoth will be turning its focus on the launch of its streaming service later this year that will pitch it head-to-head against the likes of Netflix and marketing for it is expected to begin in earnest at the end of this month. The bare-bones Disney+ service will be priced at $6.99 per month at launch whereas the premium service, which also includes ESPN+ and Hulu, will be at $12.99. I would have thought that Disney could be dead money for the short-to-medium term as it is going to have to pour a LOT of resource into streaming and making more compelling content to catch up with the industry leaders. The saying goes that you have to spend money to make money – and I think Disney is going to have to spend enormous amounts in order to become a proper player.

Match Group shares rise as company outperforms expectations (Wall Street Journal, Dave Sebastian) highlights a stunning performance by the online-dating specialist – which owns Hinge, Match.com, OkCupid and Tinder – which posted quarterly revenues up by 18%. The better-than-expected quarterly results sent the shares 18% higher. All platforms continued to add users and the company has also expanded its presence in Latin America, Japan, South Korea and India as it targets an estimated 600 million singles. * SO WHAT? * This is a great performance, but “danger” is coming with none other than Facebook announcing expansion plans for its own dating app. When Facebook announced it was going to enter the dating arena last year, Match’s stock fell by over 22% in a day – but as of yesterday’s close, its share price has shot up by 92% over the last 12 months. An already interesting area is certainly going to get even more interesting!

Chinese shipbuilder consolidation causes South Korean concern, Glencore stops cobalt mining and Sirius faces a tricky situation…

South Korean shipbuilders brace for fight after Chinese mega-mergers (Financial Times, Edward White and Lucy Hornby) shows that the former’s shipbuilders are readying themselves for intensifying competition from China after the two biggest state-backed shipbuilding groups, China State Shipbuilding and China Shipbuilding Industry Corp announced plans to merge last month. The resulting Chinese giant will rival Hyundai Heavy Industries, the world’s biggest shipbuilder by orders, even after HHI buys Daewoo Shipbuilding & Marine Engineering. To give you an idea of scale, the new Chinese group will have over $120bn of assets versus an enlarged Korean group of $33bn – although it has to be said that South Korea had a 39% market share of worldwide orders last year versus China’s of 30%. * SO WHAT? * Overcapacity in  the last decade has resulted in industry consolidation to the extent that many once mighty companies are reduced to consolidating to survive. It’s not going to be plain sailing ahead either as slowing global trade due to the US-China ructions have dented order flow and new emissions rules may mean shipowners spend money on tech upgrades to their vessels rather than spend money on new ones that run on cleaner fuels. Tough times.

Glencore to halt production at world’s largest cobalt mine (Financial Times, Neil Hume and Henry Sanderson) shows that the mining and commodities giant is taking drastic action by shuttering production at the world’s biggest cobalt mine – the Mutanda mine in the Democratic Republic of Congo (DRC) – due to a massive fall in prices for the metal used in lithium ion batteries. The mine is “no longer economically viable” as cobalt prices have fallen by over 40% due to the DRC producing too much, so it will continue to operate until the end of the year upon which time it will be mothballed. Glencore is due to present its financial results today. * SO WHAT? * This is pretty major given the importance of cobalt – but understandable given the fall in its price. Talk about getting production plans completely wrong! Mind you, I guess any mistakes you make in your projections are magnified when your country makes about 70% of the world’s supply…

Meanwhile, closer to home, $5bn Sirius mine plan in doubt as bond pulled (The Times, Emily Gosden) shows that plans for a $5bn fertiliser mine in the North Yorkshire Moors are hanging by a thread as the developer, Sirius Materials pulled a $500m bond sale. The FTSE250 company decided to take this drastic action because of “instability in the market” and its share price dropped by a chunky 29% on the news. The company had warned that it might go bust if it couldn’t raise money on the bond sale and it would have unlocked $2.5bn in funding from JP Morgan had it gone ahead. Its future is looking decidedly uncertain now.

Boohoo.com’s deal could put 1,100 jobs at risk and Klarna becomes Europe’s biggest fintech compay…

1,100 jobs at risk in Boohoo’s Karen Millen deal (Daily Telegraph, Laura Onita and Yolanthe Fawehinmi) highlights risks for employees as the online retailer bought Karen Millen and Coast’s online business for £18.2m. The two upmarket retailers have a total of 32 stores and 177 concessions in the US and administrators Deloitte said that stores would continue trading for the moment. * SO WHAT? * Boohoo’s purchase will give it access to older and more affluent customers, but it won’t necessarily be great for employees. This is just further evidence of the consolidation of the retail sector – but it’s also quite interesting to see how an online retailer is dabbling in shops. 

In Sweden’s Klarna becomes biggest fintech firm in Europe (The Guardian, Kalyeena Makortoff) we see that the Swedish payments company has just become Europe’s largest private fintech firm after its latest financing round, where it raised $460m, gave it an implied valuation of $5.5bn. Klarna is a disruptor in the payments sector as an alternative to credit cards and lets users shop now and pay later via lump sums or installments (and with NO interest on most items) as long as they pay back on time. It now has 60m users worldwide, is on track to make $1bn in annual revenues and has agreements for flexible payments with the likes of H&M, Ikea, Nike, AliExpress, Sephora, Zara and Agent Provocateur with another 1,000 in the pipeline. * SO WHAT? * This all sounds very exciting, but providing credit is a tricky business to get right. For now, though, things are looking good.

And finally, in other news…

I thought I’d leave you today with the very annoying optical illusion in Simple arrow illusion causes headaches and confusion as ‘it can’t turn left’ (The Mirror, Zahra Mulroy https://tinyurl.com/yxzleo2a). Annoyingly clever!

1. In MARKET, CURRENCY & MACRO NEWS, US-China developments cause a kerfuffle, Facebook’s Libra gets ganged up on and a weaker £ helps the UK services industry
2. In RETAIL/CONSUMER NEWS, UK retail sales and car sales dive, the M&S/Ocado rationale is questioned, Tesco axes staff and Sports Direct buys Jack Wills while in the US, Barneys files for bankruptcy
3. In INDIVIDUAL COMPANY NEWS, Just Eat and Takeaway.com agree terms
4. In OTHER NEWS, I bring you cat batteries…

So the US-China thing spills over into currencies, Libra faces more pressure but a weak pound is helping the UK services sector…

Market meltdown as trade war with China hots up (Daily Telegraph, Tom Rees) highlights market turmoil as both US and UK markets had their worst day of trading so far this year as major markets dropped between 1.7% and 3.1% yesterday following China’s decision to halt American agricultural imports. China also let its currency fall below $7 to its lowest level in 11 years, angering Trump who tweeted that “China has always used currency manipulation to steal our businesses and factories, hurt our jobs, depress our workers’ wages and harm our farmers’ prices”. * SO WHAT? * Clearly this is a reaction to Trump slapping taxes on almost all Chinese imports – but what is different this time is that China is weaponising its currency to get its point across, presumably because there’s only so much it can do on the trade front (because it exports more to America than it imports). If this continues – or gets weaker, even – it could well negate the effect of tariffs and Chinese imports will start to rise again. Some recent comment has suggested that China is willing to play the waiting game and watch Trump squirm while they dig in until the presidential election next year, hoping that he will not be re-elected. They win either way in that scenario – if he stays in, his bargaining position may get weaker (the US economy might not be in such good shape by then) and if he gets replaced, they could get a better deal with his successor. The key is how long they are prepared to wait and take the pain because there will be some domestic collateral damage in the meantime.

Facebook’s cryptocurrency raises privacy questions, say

regulators (Financial Times, Hannah Murphy) shows that regulators from the US, EU, UK, Australia and Canada have issued a joint statement voicing concerns over the privacy risks pertaining to Facebook and its 27 partners who may “instantly become the custodian of millions of people’s personal information”. They said that there wasn’t enough detail on how data would be treated and asked for further information. * SO WHAT? * Regulators, central bankers and politicians really do seem to hate the idea of Facebook making a successful cryptocurrency under their noses – and you can understand why, given Facebook’s track record on their treatment of data. I just wonder whether the pressure will be enough to scupper Libra before it’s even born and whether these parties are trying to get banks to sort something out in the background to make a more “legitimate” alternative. I don’t think that the current financial commitment to Libra so far is that big in the scheme of things and it could die a death without causing too much damage to its consortium members. However, I think that if the central bankers, politicians et al. really want to kill Libra, they need to come up with a viable alternative – and quickly.

Continuing on the subject of currencies, Weak pound helps UK services sector activity improve in July (Financial Times, Valentina Romei) shows that activity in the the all-important UK services sector actually improved last month, slightly offsetting the nightmare that manufacturing and construction are having at the moment. The IHS Markit purchasing managers’ index for services rose in July to its highest level since October, but Chartered Institute of Procurement & Supply group director Duncan Brock observed that “While services activity grew in July, the marginal improvement on last month is a smokescreen. Fundamental weaknesses remain in a sector pinned down by Brexit uncertainty and increasingly stagnant global economic growth”. * SO WHAT? * Things could definitely be worse, but this is not going to be enough to crack open the Bolly. There’s still plenty of uncertainty out there!

UK retail sales and car sales fall, the M&S/Ocado rationale is questioned, Tesco cuts Metro staff and Sports Direct buys Jack Wills while in the US while Barneys files for bankruptcy…

It’s carnage in the UK at the moment with UK retailers experience worst July since sales records began (The Guardian, Richard Partington) citing the latest data from the British Retail Consortium (although figures released by the Office for National Statistics reflect a less dire picture). Barclaycard, which processes almost half of all credit and debit card transactions in the UK, said that families are cutting down their spending on essential items and one of its directors, Esme Harwood pointed out that “Spending has remained relatively subdued over the past few months, with an underlying uncertainty about the wider economic and political landscape causing many to hold off making purchases on bigger ticket items”.

Then in Car sales fall but electric vehicles up 71% (Daily Telegraph, Michael O’Dwyer) we see that the latest stats from the Society of Motor Manufacturers and Traders (SMMT) show continued weakness in car sales (which backs up what Esme Harwood said above) as the number of new car registrations fell for the fifth consecutive month in July. The number of electric car sales was a small highlight with Britons tripling their purchases in the space of a year – but as I always say, this is from a really low base.

Meanwhile, in retailers, M&S broker raises doubts on Ocado deal (The Times, Ben Martin) highlights a very unusual situation where M&S’s broker questioned the rationale behind the retailer’s £750m tie-up with Ocado. Morgan Stanley analysts said in a research report that they weren’t convinced that it should even enter the online food delivery market given that it only accounts for just over 5% of the UK food market “and is no longer showing much growth”. I say this is unusual because Morgan Stanley is paid by M&S to be its broker, which usually means it tries to

emphasise the positives. * SO WHAT? * M&S has heralded the Ocado deal, announced in February, as something that will transform its online offering. Given that M&S has been struggling for quite some time now, you can see why it wanted to trumpet its new development. FWIW, I think that it IS a transformational deal given that their online offering (like its offline offering) has been pretty lacklustre as a whole, and if you want to do online properly, then Ocado is the company you want to work with. I also wonder, but I can’t prove it, whether M&S will be different to others in terms of online food delivery because I suspect that fewer people do their “main” shop with M&S – they tend to buy various favourite bits. If this is the case, then actually ordering online won’t be a hassle (less items to deal with) and they may actually do better than supermarkets.

Elsewhere on the high street Tesco cuts 4,500 jobs in store revamp (The Times, Elizabeth Burden) highlights more cuts at Tesco as it has decided to cut jobs mainly from its Tesco Metro shops, which are going to undergo a widespread overhaul. Then in Ashley adds Jack Wills to stable as clothing chain collapses (Daily Telegraph, LaToya Harding) we see that Sports Direct sealed the deal to buy Jack Wills for £12.7m. This includes all of its 100 UK and Ireland stores and its distribution centre. Given the recent disastrous performance of Sports Direct, you do wonder whether this is a case of out of the frying pan into the fire.

In news just in, Barneys files for bankruptcy, plans to close most stores (Wall Street Journal, WSJ Staff) heralds the demise of a famous institution as it has come to an agreement with lenders that will give it time to find a buyer. The luxury retailer currently operates 13 department stores and nine warehouse stores, but most would have to be closed as part of the chapter 11 process. The New York, Boston, San Francisco and Beverly Hills stores along with two Barneys Warehouse outlets will remain open, but all other physical stores will shut down. * SO WHAT? * I know I keep banging on about this, but department stores are just an anachronism IMHO. They can’t compete on price, so they have to offer superior experience – but not everyone can/is willing to shell out more for their merch than they need to. It’s sad, but it’s just another sign of how consumer behaviour is changing.

Just Eat and Takeaway.com agree merger terms…

Takeaway.com and Just Eat agree food delivery tie-up (Financial Times, Tim Bradshaw and Myles McCormick) highlights a deal whose terms were agreed yesterday after merger talks came to light last week. The combined group will be worth over €10bn and will be the biggest food delivery service outside China – surpassing Uber Eats. This is the latest deal in a fast-consolidating

sector as operators go for scale to improve the economics of their expensive operations. Mind you, Just Eat shareholders await a sweeter deal (The Times, Simon Duke) points out that some shareholders want a better deal as Takeaway’s share price is sliding more than Just Eat’s and they argue that, although it is the smaller partner, it will be providing around two-thirds of the enlarged company’s revenues and therefore Just Eat shareholders should own more of the business. * SO WHAT? * The deal isn’t done and dusted just yet as 75% of Just Eat’s shareholders must approve before it all goes ahead. We’ll just have to wait and see what happens here.

And finally, in other news…

I thought I’d leave you today with something really random in Charge up your phone with the power of a portable cat battery from Japan (SoraNews24, Oona McGee https://tinyurl.com/y3dhsgeu). ?? This is very strange, even by normal Japanese standards 😂

1. In RETAIL NEWS, US retailers shed jobs and Sports Direct gets closer to Jack Wills
2. In LEISURE-RELATED NEWS, Disney closes in on channel launch and Netflix is accused of falsifying figures
3. In INDIVIDUAL COMPANY NEWS, FiatChrysler relies on Jeep, KKR buys German payments group and Just Eat gets a massive tax bill
4. In OTHER NEWS, I bring you the BODMAS vs PEMDAS debate…

So US retailers are feeling the pinch as well, despite the economy doing well – and Mike Ashley edges closer to buying Jack Wills…

US retailers shed 50,000 jobs as boom bypasses stores (Financial Times, Alistair Gray) shows that it’s not just UK retailers who are suffering at the moment. Although the US economy is currently doing pretty well, retailers are warning that Trump’s trade spat with China will force their collective hand to accelerate employee cuts as higher costs will snuff out already-thin margins – especially for smaller shops – which will hasten cuts or even closures. Data published on Friday showed that there were 49,000 fewer jobs in the retail sector in July this year versus July 2017, with department store, apparel and electronics retailer employees suffering particularly acutely. When you consider the ongoing effect of Amazon on retail, it is also interesting to note that, over the same time period, the number of employees in transport and warehousing has gone up by about 370,000. * SO WHAT? * Things could have been worse in the latest ramp-up of rhetoric between the US and China as Trump “only” imposed a 10% tariff on the additional $300bn-worth of goods rather than the 25% he had previously threatened, but that didn’t stop the share prices of retailers such as Best Buy, Gap and Macy’s tanking last week. For the moment, things in US retail are quite twitchy, but the longer this p!ssing contest goes on,

the more Americans are going to suffer. The fact that this is all happening while consumer behaviour continues to evolve isn’t making things any easier, but at least the American economy is still doing OK. If it wasn’t, the wheels would be falling off much faster…

It’s the sound that many retailers don’t want to hear – the approach of Sports Direct’s Mike Ashley and the opening of his chequebook in Now Ashley eyes up Jack Wills (Daily Telegraph). The preppy fashion retailer has been struggling of late – to the extent that is on the verge of administration – meaning that Sports Direct’s chief exec Mike Ashley senses that there’s a bargain to be had. Apparently, Sports Direct is now looking like the front-runner to buy it, although rival retailer billionaire Philip Day is also in the running. * SO WHAT? * Good Lord, Ashley is a deal machine. He just can’t help himself! Even though Sports Direct is having a rough time at the moment and Ashley himself had a good old rant about buying House of Fraser only very recently, it seems that his thirst for a bargain remains unabated. From Ashley’s point of view, I would have thought that Jack Wills would sit quite well with his stable of apparel retail brands but you just have to wonder how stable Sports Direct really is at the moment. If the core business continues to suffer (and remember, it’s not going brilliantly at the moment with some big names withholding their best product because they don’t like his stores) there is a risk that his whole house of cards falls over and Jack Wills would be caught up in it. I just think that Ashley needs to slow down, do a proper job on what he’s already got and then possibly do more deals – but hey, that’s just an opinion. We’ll just have to see how this turns out…

Disney moves closer to launching its new channel, Netflix is accused of lying about subscriber numbers and Juul launches a new type of e-cigarette…

OK – so Disney’s new streaming channel Disney+ isn’t expected to launch until November 12th in the US, but Disney, king of the box office, now primed to do battle with Netflix (The Guardian, Mark Sweney) highlights a strong performance from the world’s biggest entertainment company as it broke its annual worldwide box office record, taking $7.67bn after only seven months, thanks to the likes of Avengers: Endgame, Captain Marvel, Aladdin and The Lion King with Frozen 2 and Star Wars: The Rise of Skywalker yet to come. The company appears to be in good shape heading into its results announcement tomorrow and now controls a staggering 40% of the US movie market after a number of key acquisitions such as Pixar, Marvel Studios and Lucasfilm between 2012 and 2016. * SO WHAT? * This all sounds great, but the fact is that Disney is going to have to spend big in order to catch up with the likes of Netflix and is aiming to nab subscribers with an offering priced at $6.99 per month (almost half of Netflix’s most popular subscription option). It is going to swallow a big chunk of lost revenues to make a splash and won’t expect to be profitable until 2024. Streaming is about to get tougher as other services from NBC Universal, HBO and Apple are also going to be launching at about the same time. It’ll be interesting to see how successful they are – but I do think Disney is likely to have a compelling offering – and it will also be interesting to see how long it takes for users to reach “subscriber fatigue” and cut back.

Talking of streaming, Investors sue Netflix over ‘false’ subscriber figures (Daily Telegraph, Margi Murphy) heralds a fly in the ointment for Netflix that could yet make them choke as Deepak Venkatachalapathy, an IT analyst for the

Royal Bank of Canada, is aiming to launch a class action lawsuit against the company on behalf of shareholders. He is alleging that Netflix “artificially inflated” its subscriber numbers despite raising its prices. He’s arguing that Neflix bosses knew that user growth was losing momentum but still made “materially false and misleading” statements to public investors which led them to buying the stock under false pretences. Vankatachalapathy’s lawyers implied that “hundreds of thousands” may be able to claim damages if the action is successful. * SO WHAT? * This comes at a tricky time for Netflix as it is about to face a sudden increase in competition (as per the previous paragraph) and if it was proved to be true, could be very damaging to its reputation and its share price as investors would start to question the veracity of its statements. That would no doubt lead to the company leaders being ousted, leaving the company potentially rudderless just when things are starting to properly kick off in streaming.

Then in Juul launches ecigarettes that monitor users’ vaping (Financial Times, Alice Hancock) we see that the US vaping supremo Juul has just launched its first in a series of bluetooth-connected e-cigarettes – called the Juul C1 – that can track vaping habits of its users, amid fears of an increase in take-up by youngsters. It will go on sale in the UK this week after it tested successfully in Canada. The device links to a smartphone app which has very strict age verification checks and users will be able to see how many puffs they take per day, find their vape if they misplace it and lock other users out if their phone is out of range. British American Tobacco launched a similar connected product called the Vype iSwitch in December and has sold over 2,000 units. It is still assessing its viability (but 2,000 units sounds pretty cr*p, no?). * SO WHAT? * This all sounds quite nice from a user point of view, but privacy experts have rightly raised concerns about how all this data is going to be collected, stored and used. If anyone can make a success of this, Juul probably can, but with issues surrounding “data privacy” being ultra-sensitive at the moment the launch may be more problematic than it was expecting.

FiatChrysler relies on Jeep, KKR lands a payments purchasing group and Just Eat gets a massive tax bill…

Fiat Chrysler’s growth hinges on Jeep expansion (Wall Street Journal, Nora Naughton) shows that the company is trying to offset industry-wide weakness by expanding it popular Jeep brand over the next three years. This will include adding bigger SUVs to its showrooms, boosting growth in China and launching plug-in hybrid versions of its models in the US and Europe. The Jeep brand already accounts for a third of sales. * SO WHAT? * Sounds like a plan as SUVs are obviously popular and the company has a well-known brand that specialises in this segment (I think that the only other brand that truly evokes “SUV” more is Land Rover!). Still, whether or not it succeeds – as everyone else and their dog is launching their own lineup of SUVs – is another question.

Deal activity in the “boring” world of payments processing continues apace in KKR wins race to buy German payments group for €600m (Financial Times, Javier Espinoza) as the private equity group managed to buy Heidelpay in a hotly contested bid. Bidders who lost out included Sweden’s Nordic Capital and EQT as well as payments specialists Worldline and Nets. Heidelpay

enables its clients to accept online and mobile payments and is already used by over 30,000 merchants globally, including L’Oreal. * SO WHAT? * Payments is a HOT area at the moment as players try to lock in scale in order to grow. KKR was involved in the $39bn sale of First Data to Fiserv – one of this year’s biggest payment deals – as the former’s biggest shareholder. It’s all part of KKR’s bid to build up its presence in Germany and also heralds the latest acquisition in the payments space. Given the interest this attracted I suspect that consolidation in payments won’t stop here…

Following on from all the excitement of the Just Eat/Takeaway.com merger that hit the headlines last week, Taxman delivers £126m demand to Just Eat (The Times, Simon Duke) highlights a rather unwelcome tax bill from Denmark of £126m for failing to pay sufficient tax when the company moved its HQ from Copenhagen to London in 2012. Just Eat says the claim is “without merit” but has made a £21m provision to cover potential related payments, although it does admit that having to pay the whole thing is not impossible. A decision on this is expected next year. * SO WHAT? * Interesting timing for a massive tax bill, eh?? I’m not sure whether this will scupper the proposed merger (surely this would have been taken into account in the due diligence) but I wonder whether it will scare off any rival bids. Just look at what happened when Bayer bought Monsanto – disaster! This is obviously not on the same scale, but it is a recent example of how legacy issues have blown up in the face of an acquiror.

And finally, in other news…

I thought I’d leave you with one of those maths problems that often crop up on your Facebook feeds from time to time in Mathematician gives answer to simple sum that has been dividing the internet (The Mirror, Tiffany Lo https://tinyurl.com/y5hynaan). It’s BODMAS vs PEMDAS. Fiiiiiiiiiight!

1. In MACRO NEWS, Trump hits more Chinese goods with a 10% tariff, Asian manufacturing suffers, Japan/Korea relations are about to get worse and the Bank of England leaves the interest rate unchanged
2. In FINANCIALS-RELATED NEWS, LSE buys Refinitiv, Barclays raises profits and Revolut offers share trading
3. In INDUSTRY NEWS, German car manufacturing suffers and consumers hold off smartphone purchases for 5G
4. In OTHER NEWS, I bring you the cutest fist-bump ever!

So Trump pokes China with his tariff stick, Asian manufacturing suffers (as do Japan/Korea relations) and the Bank of England leaves interest rates unchanged…

Trump threatens new Chinese tariffs, rattling investors across markets (Wall Street Journal, William Mauldin and Vivian Salama) highlights the latest development in the ongoing US-China trading spat – that Trump has decided to extend tariffs to pretty much ALL Chinese imports (10% tariffs on an additional $300bn-worth of Chinese goods). This will include various consumer products like smartphones, apparel and toys and will come into force on September 1st. * SO WHAT? * The US already has tariffs on $250bn-worth of Chinese goods, so I suspect orders will get pretty frenetic as buyers try to beat the deadline. Interestingly, the tariff hike was apparently opposed by the US Trade Representative Robert Lighthizer, Treasury Secretary Steve Mnuchin, White House economic adviser Lawrence Kudlow AND national security adviser John Bolton – but Trump just went ahead and did it anyway! Markets didn’t like this and were weaker across the board – and oil prices cratered by 8%, their steepest drop since February 2015. High level discussions are due to start again next month and Trump maintains that he wants to reach “a comprehensive Trade Deal”. One unfortunate consequence of this action is that Apple’s US sales of iPhones and other Apple products will be affected because most of them are made in China. It would either have to absorb the costs or pass them on to the consumer. The other thing is that Apple is likely to be a target for retaliation in China – so it’s going to get hit from both sides. However, it’s not just Apple that will suffer – toymakers and other manufacturers are going to have to either absorb higher prices or pass them onto consumers. 

Asian economies gripped by manufacturing woes (Financial Times, Siddarth Shrikanth, Daniel Shane and Edward White) cites various data releases yesterday that show manufacturing conditions in south-east Asia weakened for the second consecutive month in June as factory output fell for the first time in two years – as did manufacturing activity across Japan, South Korea and Taiwan. China’s manufacturing slowdown continued, but wasn’t as bad as analysts had been expecting. Asia’s

economies have been hit by a combination of US-China trade frictions and slowing global demand – and it doesn’t look like things are going to improve much in the near term at least.

I mentioned worsening Japan/South Korea relations last week but Japan set to remove South Korea from export ‘white list’ (Financial Times, Robin Harding, Edward White and Song Jung-a) shows that the dispute is going up a gear as, according to one former minister, Japan is about to take South Korea off Japan’s list of friendly countries and make exporters obtain licences when they ship a variety of products, including chemicals and electronic goods, to South Korea. The South Koreans are threatening to cancel an intelligence-sharing agreement in response. Japan has already restricted exports of three chemicals that South Korea’s semiconductor industry relies on heavily – fluorinated polymide, photoresists and hydrogen fluoride etching gas. Japan has a near-monopoly on all of them. * SO WHAT? * This all goes back to Japan’s use of Korean “comfort women” in WW2, which the Koreans have obviously never forgiven and that the Japanese want to forget – and this issue flares up every few years. Going ahead with taking South Korea off the “white list” will cause major disruption to the tech supply chain – for instance, research from Korea Investment & Securities suggests that South Korean companies will have to get individual approvals for 857 of the 1,120 strategic materials they import from Japan. This will no doubt result in a surge of effort to make South Korea less reliant on Japanese imports in the long term – but they are scuppered in the short-term.

Bank of England holds rates but struggles to hold line on Brexit forecasts (Financial Times, Delphine Strauss) shows that our central bank has gone against the trend in the US (where the Fed cut interest rates) and Europe (where the ECB is about to cut interest rates) and kept our interest rate unchanged despite sharing everyone’s gloomy outlook on the global economy. * SO WHAT? * There’s a lot of noise going on about this but TBH, it seems to me that the main reason why the Bank is keeping things unchanged is that it wants to keep its powder dry for Brexit – where it might have to make a big cut (at least initially) to help boost the economy. Our current interest rate is only 0.75%, so you can see why it would want to give itself the most wiggle room to cut before having to resort to what the ECB is expected to do – have negative interest rates.

The LSE/Refinitiv deal gets official, Barclays announces higher profits and Revolut offers commission-free share trading…

LSE buys Refinitiv in £22bn bid to be global data leader (The Guardian, Mark Sweney) has now agreed to buy Refinitiv in a transformational deal that will make it into a UK-based rival to the market information behemoth that is Bloomberg. It’s an all-share deal and LSE will be in the driving seat. LSE’s chief exec David Schwimmer (no relation to the bloke who plays Ross on Friends) described the move as “a rare and compelling opportunity to combine two world class businesses and create a global financial infrastructure leader. We will continue to be a global business headquartered in the UK” and the company’s shares rose by 5% on news of the confirmation of the deal. Inevitably, there are going to be job losses as part of the £350m of cost savings targeted over the next five years, but there aren’t any further details at the moment. Given that LSE has 5,000 staff versus Refinitiv’s 19,000 I suspect that there will be a lot of pain to come.

Talking about job losses, Barclays cuts 3,000 jobs despite profit rise (Daily Telegraph, Lucy Burton) shows that the bank announced its best performance since 2010 with pre-tax profits shooting up by 83%. This headline figure looks good, but it’s actually down to the fact that the company hasn’t had to face the massive £1.4bn misconduct charge it faced this time last year for selling toxic mortgages. Although Barclays cut its staff numbers by 3,000 in the second quarter, it plans to continue to reduce costs further and will not necessarily replace roles that it has cut. * SO WHAT? * I guess this is good news from an investor point of view, but the pressure will continue from activist

investors such as Ed Bramson who want Barclays to downsize its investment bank. Any performance weakness will make such voices louder – so this performance has probably bought it a bit of breathing space.

Revolut launches commission-free share trading (Financial Times, Nicholas Megaw) heralds another innovative new service from the challenger bank that will pit it against major trading platforms like Hargreaves Lansdown and further differentiate it from the likes of Monzo and Starling Bank. Customers who pay for its £12.99 “metal” subscription will be able to trade US stocks from Thursday, with the service rolling out to those on cheaper subscriptions over the next few weeks. There’s a sliding scale of how many free trades you can get depending on your subscription level, there will be no minimum investment size and Revolut will be the first European company to let investors buy fractions of shares. This contrasts with Hargreaves Lansdown, which charges between £5.95 and £11.95 per trade and AJ Bell and Barclays who charge between £4.95 and £10. Revolut believes it will make money by encouraging users to sign up for the subscription service. * SO WHAT? * OK, so the likes of Hargreaves Lansdown won’t be quaking in their boots just yet given that Revolut’s trading options are limited to US shares and can’t be held within tax wrappers such as ISAs or SIPPs. However, it seems that Nik Storonsky, Revolut’s chief exec, intends to democratise stock market investment as he said that “Investing in the stock market has been closed off to ordinary people for far too long, which has led to real problems for people as they search for effective ways to make the most of their savings”. I think that Revolut provides some very interesting and useful products for its customers and this is just another extension of that. The incumbents should definitely take note – and if they don’t, Revolut could soon start eating their lunch.

German car manufacturing continues to suffer and smartphone sales tail off ahead of wider 5G adoption…

Car industry woes weigh on Germany’s prospects (Financial Times, Guy Chazan) highlights the continued tough conditions facing Germany’s all-important car manufacturing industry as the insolvency of small equipment manufacturer Eisenmann this week symbolises the cumulative toll of the US-China trade war, Brexit and weakening Chinese car market. At the moment, the wider economy is still generally in good shape as unemployment continues to be around post-reunification lows but business confidence continues to slide, with the exception of construction. Claus Michelson, of the DIW think-tank says that “Orders are deteriorating, consumers are becoming more sceptical and even the labour market, which has been robust until now, is losing momentum. These are not good prospects for the current [third] quarter”. * SO WHAT? * The car industry is a key component of Germany’s economy as it accounts for

820,000 jobs domestically and 5% of the country’s GDP as over 77% of cars made there are exported. All car manufacturers are facing the same problems as mentioned above and the problem is now spreading to suppliers such as Continental and Shuler, among others. Tough times for the industry and its related suppliers.

Smartphone users hang on for 5G as global sales decline by 2.5% (Daily Telegraph, Natasha Bernal) cites a report by the well-repected research firm Gartner which suggests that global smartphone sales are expected to fall by 2.5% this year as consumers hang on to their existing phones and wait for 5G handsets next year. The research also suggested that demand for 5G network services next year is likely to increase handset sales by 2.8% in the second half of next year. * SO WHAT? * New generations of tech always have teething problems, but I really think that, once 5G gets more established, things will change considerably. Sluggish smartphone sales will see a big uptick as consumers see the cumulative benefits of superfast speeds that will enable not only existing services, but facilitate new exciting ones such as game streaming on mobile devices. New phone technology  – such as foldable phones – could also get consumers excited enough to part with their money after years of mobile phones showing only incremental improvements.

And finally, in other news…

I thought I’d leave you with something to brighten your day in Boy Shares Sweet ‘Fist Bump’ With Pro Soccer Player Who Also Has No Forearm (Inside Edition, Johanna Li https://tinyurl.com/y2ffebhf). What a great photo!

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…