Category: Uncategorized

1. In MACRO NEWS, Brexit takes another turn but the UK economy rebounds
2. In CAR NEWS, VW targets electric, Nissan’s Infiniti production stops in the UK and Pendragon focuses on secondhand
3. In HIGH STREET NEWS, Mothercare sells its toy business, French Connection is a mixed bag and Dick’s Sporting Goods stops selling guns in 125 stores
4. In OTHER NEWS, I bring you a birthday idea and Pigcasso. For more details, read on…

So the Brexit drama continues while the UK economy has a bit of a rebound…

Power over Brexit slips from May’s damaged hands (Financial Times, George Parker, Jim Packard and Alex Barker) highlights May’s latest Commons defeat as her slightly reworked Brexit was rejected by a big margin yesterday evening by MPs. There will now be a Commons vote today to block a no-deal exit on March 29th followed by a second vote tomorrow that would let MPs get an extension to the formal Article 50 process from the EU. * SO WHAT? * It would seem that we are no further along than we were before as the current deal is scuppered, we face an extension that could cost us money and still get us nowhere and the prospect of no-deal is still on the table. Some argue that taking a no-deal option off the table would remove one of the last bargaining chips we have with the EU, Labour is desperate for an election (which I believe will just make things worse and merely serve to kick the can down the road) and more MPs are calling for Theresa May’s head (but again, what’s that actually going to do?). There’s

still the possibility of a “People’s Vote” (which is a term, by the way, that I find annoying – it was the “people” who voted for Brexit in the first place! 75% of MPs in the House of Commons voted for Remain!) but I don’t know at the moment the mechanics of how that would come about. The drama/farce continues…

UK economy rebounds in January despite Brexit uncertainty (The Guardian, Richard Partington) is a headline that runs somewhat at odds with everything else that’s going on at the moment, but data from the Office for National Statistics shows that monthly GDP actually grew by 0.5% in January – the biggest jump since December 2016! This appeared to be down to  stronger performances from the services, production, manufacturing and construction sectors following a weak ending to 2018 when they all fell. * SO WHAT? * Although January’s stats are good news, it is worth noting that monthly data can be rather volatile and Suren Thiru, head of economics at the British Chambers of Commerce, observed that “The data for the longer three-month period recorded an economy that was continuing to slow under the weight of uncertainty over Brexit and weakening global trading conditions”. Clarity on Brexit will be needed to get Britain out of the rut it is currently in – and this is something that a deadline extension will not help.

VW targets electric, Nissan halts Infiniti production in the UK and Pendragon focuses on secondhand…

Volkswagen sets bold targets as it steps up electric ambitions (Financial Times, Peter Campbell) highlights VW’s renewed commitment to making electric vehicles (EVs) as the company outlined some concrete targets for battery car sales and promising to cut carbon emissions. This sounds like great news for the environment (targeting 70 fully electric models by 2028 – up from an earlier target of 50 by 2025 – and 40% of group sales by 2030 to be battery-powered versus an earlier estimate of 25% by 2025) but not so good for employees, whose numbers will be cut according to chief exec Herbert Diess at VW’s annual press conference yesterday. The company also outlined a goal to be completely carbon-neutral by 2050 including its factories, offices and cars and will adopt shorter-term measures like moving plants to using renewable energy and “trying” to reduce executive use of private jets (!). * SO WHAT? * This all sounds rather lovely, but the fact is that these are just wishes. They’re close enough to sound sort of within reach but far enough away to tweak according to the whim of whoever’s in charge at the time. Shareholders will be more concerned about what the company is going to do about falling margins at marques like Audi, Porsche and Bentley and near-term strategies for an environment where sales are generally falling.

Just when you thought that British car manufacturing was nursing its wounds in a dark alley having been given a right kicking from Honda, Nissan halts production of Infiniti vehicles at Sunderland (Daily Telegraph, Alan Tovey)

shows another Japanese company sticking the boot in. Nissan has decided to stop production this summer of the Q30 hatchback and QX30 crossover at the giant Sunderland plant as sales in Europe have been poor. Nissan’s premium marque added that the decision would be part of a broader restructure “in anticipation of a planned withdrawal from western Europe in 2020”. Infiniti said that it will focus its efforts on the growing markets of America and China. * SO WHAT? * A nightmare for car manufacturing in the UK. Jaguar Land Rover announced in January that it would cut 10% of its workforce (about 4,500 jobs), Nissan’s withdrawal from Swindon will put 3,000 jobs on the line and although Infiniti will “only” shed/redeploy 200 employees who were working on Infiniti out of 7,000 staff at the Sunderland plant, EVERYONE is going to be pretty nervous. The uncertainty of Brexit is obviously a factor, but the overall downward trend in car sales is affecting all manufacturers. If I was working in a car factory right now I’d be trying to retrain and get skills that I could use to apply to other jobs. 

Talking of falling sales, Pendragon focuses on used-car market as new car sales slide (Daily Telegraph, Alan Tovey) shows that UK new car registrations were down by 6.8% last year as customers became increasingly wary of making a big ticket purchase ahead of Brexit. Pendragon is one of the UK’s biggest car dealers with almost 200 outlets and its chief exec, Trevor Finn, said that the company is focusing more on the secondhand market – which is triple the size of the new car market – because it offered a “more stable and reliable supply chain”. * SO WHAT? * This sounds like a decent-enough move as punters still want cars – but they are getting less enamoured by the new car smell and more conscious of the depreciation of a new car as it rolls off the forecourt. Pendragon wants to double its sales of used cars by 2021 and part of that effort has involved the company developing its online sales.

Mothercare sells off Early Learning Centre, French connection sees revenues fall but profits rise and Dick’s Sporting Goods cuts its sale of guns…

Mothercare sells Early Learning Centre to rival in £13.5m deal (The Guardian, Zoe Wood) highlights the sale of ELC to competitor chain The Entertainer. Back in the day, ELC had over 200 UK stores but time has not been kind and the brand is currently sold in Mothercare outlets as well as other chains. The Mothercare chief exec, Mark Newton-Jones, sounded somewhat wistful when he said “It is a brilliant brand and we simply don’t have the resources to nurture it” but Mothercare is still scrabbling around to survive and will use the £13.5m proceeds from the sale to reduce its £21.5m of bank debt, which is hoping to clear by the end of this year. It will also give The Entertainer control over the running of its toy departments. * SO WHAT? * This was a tough but necessary part of Mothercare’s efforts to survive as it follows a cull of 40% of its branches against the backdrop of ongoing competition from online retailers and increasingly thrifty customers. The Entertainer, on the other hand, has bought a business for a steal. Gary Grant, founder and exec chairman of The Entertainer said that he would review the business in the first instance and then think about reintroducing it to the high street.

Black is in fashion as retailer makes profit (The Times, Deirdre Hipwell) shows that French Connection managed to make its first profit in seven years, but sales have continued to fall in the UK in difficult trading conditions. * SO WHAT? * This announcement came as founder and chief exec Stephen Marks continues to try to offload his 42% stake in the business. Oh how times have changed since the company’s heyday in the 90s with its naughty FCUK logo as it has long since been overtaken by the likes of Zara and H&M. Well done in turning a profit, but it’s going to take a brave company to buy a fashion chain that has lost its way in these current economic circumstances. FWIW, I think it still has intrinsic value and is long overdue a major overhaul. 

Although I assume that most readers of Watson’s Daily don’t normally have the urge to go and buy a gun, Dick’s Sporting Goods to remove guns from 125 stores (Wall Street Journal, Sarah Nassauer) says that the American sporting goods retailer will stop selling firearms at 125 of its outlets. It will use the space to sell higher-margin products such as licensed sports gear and outdoor recreation equipment after the company decided last year to tighten up its policies on gun sales. Would-be massacre merchants will be dismayed to hear that the decision was hastened due to falling sales after the company stopped selling to those under 21 and curtailed the sale assault-style weapons (!). Although stock in the company fell by 9% in trading yesterday, its share price has risen by 25% since the start of the year.

And finally, in other news…

Today, I thought I’d bring you an original birthday idea in Sons wish dad happy birthday with huge billboard (Inside Edition, https://tinyurl.com/y2ehxpj4) and a very talented pig in Painting sow Pigcasso hogs the limelight at South Africa farm (Reuters, Alexandra Hudson https://tinyurl.com/yy8pg4ha).

1. In MACRO NEWS, Turkey hits recession, Mexico tries to avoid it, Venezuela’s Maduro feels the heat and German Industrial Production hits the skids
2. In TECH-RELATED NEWS, Microsoft moves into biological computing and Nvidia splashes $6.9bn on an Israeli chipmaker
3. In INDIVIDUAL COMPANY NEWS, Tesla makes a U-turn and Levi Strauss prepares for market
4. In OTHER NEWS, I bring you one flatmate’s plea to her fellows. For more details, read on…

So it’s all kicking off in Turkey, Mexico and Venezuela while German IP weakens…

Turkey falls into recession as currency crisis takes toll (Financial Times, Laura Pitel) highlights the country’s first fall into recession for a decade at the end of last year as its currency fell off a cliff and its interest rates sky-rocketed. This isn’t great news for Turkish president Erdogan ahead of nationwide local elections at the end of this month. Opposition parties have criticised his ruling party presiding over the country’s current 20% inflation rate and rising unemployment – so they can now add recession to the list. * SO WHAT? * The currency crisis that was triggered by the spat between Trump and Erdogan last summer was always going to have consequences but the depth of economic contraction for the fourth quarter was worse than the market had been expecting. The sudden interest rate hike to 24% in September arrested the slide in the lira but caused a massive fall in bank lending, business confidence and consumer spending. Industrial production, car and house sales have all cratered. Turkey is highly reliant on foreign financing and so would be especially vulnerable to any shifts in sentiment given its current precarious state.

In Mexico’s Lopez Obrador rejects recession fear in ‘100-day’ speech (Financial Times, Jude Webber) we see that Mexico’s President Andres Manuel Lopez Obrador (aka “AMLO” – a bit like “J-Lo” but more boring) is talking a good game by saying “There is no hint of recession as our political adversaries and conservatives want, or analysts forecast with bad faith” at a speech marking his first 100 days in office. He talked about some key infrastructure projects to be completed during his six-year term in office and vowed to ensure that Mexico lived within its means whilst also committing to eliminate corruption and simplify bureaucracy. * SO WHAT? * Decent enough sentiment, but it’s early days yet. I suspect that Mexico’s fortunes will be highly dependent on Trump’s whims across the border.

Blackouts raise political heat on Venezuela’s Nicolas Maduro (Financial Times, Gideon Long) gives us a snapshot of Venezuela as its power outage extended into a fifth day yesterday, leaving thousands of homes without

electricity. Shops and businesses have had to close as the government ordered them to stay at home. President Maduro blames the nationwide blackouts on US-based sabotage, but the opposition says that the outages are due to government incompetence and years of neglect regarding the country’s creaking infrastructure. Opposition leader Juan Guaido, who is trying to oust Maduro, is pushing for the National Assembly to declare a national emergency. * SO WHAT? * The situation is getting pretty dire as people in Caracas are starting to troop up the Avila mountain, which looks over the city, to find water and supermarkets have been selling food at discount prices before it rotted. The metro is also out of action, phonelines don’t work and many people don’t have mobile signal. The pressure is building on Maduro to quit as the US and about 50 other countries are now recognising Juan Guaido as the country’s interim leader. Having said that, Maduro still has the support of Russia, China and his military. Ironically, Venezuela sits on the world’s largest energy reserves, but oil output has fallen by two-thirds since 2001 to about 1m barrels per day. Clearly, if Maduro’s regime gets cleared out, the next lot will have to sort out corruption and turn its oil industry around as a matter of urgency.

German industrial production drops unexpectedly (Financial Times, Claire Jones and Sarah Provan) cites the latest data from the German statistics office which show that industrial output fell sharply in January indicating sluggish exports due to weaker global demand and political uncertainty. * SO WHAT? * This just confirms other recent business surveys which show that manufacturers are really feeling the pinch in Europe’s largest economy. Although there’s a lot of pessimism abounding in the market about the current state of Germany’s economy, some are painting a more upbeat picture with JP Morgan economist Greg Fuzesi saying that “The IP weakness in January was entirely due to a 9.2% month on month slump in motor vehicle production. This does not make much sense and could reflect the one-week strike at a Hungarian engine plant in late January” and Oliver Rakau, of Oxford Economics, saying that “A normalisation in the car sector is under way with factory orders over the past two months up by 9 per cent from the third quarter’s low, and already published February car production data strongly suggesting a bounceback”.

Microsoft goes biological and Nvidia makes a chunky acquisition…

Microsoft moves into biological computing with Platform B (Financial Times, Clive Cookson) heralds a major move by Microsoft into biotechnology as it is launching a new system that helps scientists engineer living cells using machine learning and data analysis. The company is partnering up with Princeton University researchers and two UK companies – Oxford BioMedica and Synthace – to roll out the new system, called Platform B. Basically, Platform B analyses huge volumes of biomedical data and advises scientists how to proceed with their research. Oxford BioMedica’s chief business officer Jason Slingsby said that the aim of Platform B was to “dramatically lower the costs of life-saving treatments and put them within the reach of more patients”. * SO WHAT? * This sounds like a good move and adds another string to Microsoft’s bow as it tries to diversify away from almost complete reliance on Windows.

Nvidia to acquire Israeli chipmaker Mellanox for $6.9bn (Financial Times, Eric Platt, James Fontanella-Khan, Mehul Srivastava and Tim Bradshaw) highlights Nvidia’s acquisition of Israeli rival Mellanox in the biggest deal ever done by a US semiconductor company as it tries to boost its business in data centres. The deal is all-cash, at a 14% premium to Mellanox’s closing price on Friday, and will go some way to reducing the company’s reliance on the gaming industry. Nvidia beat Intel’s rival bid for the company. Mellanox makes cables and switches that transfer data between servers, storage systems and infrastructure equipment and will fit in nicely with Nvidia’s graphics processors which are increasingly being used in machine learning systems. * SO WHAT? * This is a major deal which will give Nvidia a real boost in what is expected to be a growth business as increased use of AI will necessitate growth in the number and power of data centres to do all the processing. The combined entity will serve every major cloud computing services provider and power over half of the world’s fastest supercomputers with clients including the likes of Dell, Alphabet and IBM. The deal is expected to complete before the end of this year after getting regulatory approval in the US, China and other areas.

Musk does a U-turn and Levi Strauss prepares for market…

In a quick scoot around other news stories today, Tesla, in reversal, to keep more stores open (Wall Street Journal, Kimberly Chin and Esther Fung) shows Elon Musk going back on his recent pronouncement where he said that almost all Tesla sales outlets would be closed to save costs, with all sales going online-only. Funnily enough, there was a lot of resistance to this from landlords, car

dealers and lawmakers and some prospective customers also complained. Tesla will instead raise vehicle prices by about 3% worldwide to offset some of the costs of keeping the stores open (although the price of the Model 3 will remain unchanged).

Then in Levi Strauss seeks $6.2bn valuation in stock market listing (The Guardian, Rob Davies) we see that the company announced plans to go back into public ownership after over thirty years as a private company as demand for denim surges around the world. * SO WHAT? * The company said that it will use the profits to fund acquisitions.

And finally, in other news…

I thought I’d bring you the plight of one girl who I think many of us can sympathise with in Woman hilariously gets her own back on housemates who never put the bin out (The Mirror, Courtney Pochin https://tinyurl.com/y3dxwyq6). Good move!

1. In BANKS NEWS, Deutsche starts talks with Commerz while Revolut bolsters its governance
2. In HIGH STREET NEWS, footfall weakens and Debenhams continues its anti-Ashley efforts
3. In TECH NEWS, we see how big tech has powered ahead and that TikTok’s owner could be another candidate for flotation
4. In OTHER NEWS, I bring you the right way to eat a pineapple and a troubled running man. For more details, read on…

So Deutsche Bank and Commerzbank start talks while Revolut beefs up its governance…

In Deutsche Bank begins talks over merger with rival Commerzbank (The Guardian, Patrick Collinson) we see that the two German banks have begun merger talks which could lead to the creation of Europe’s second biggest bank behind HSBC. It is thought that both banks have been under political pressure to consider a merger in order to avoid a foreign takeover of the smaller Commerzbank in particular as Berlin is keen to create a bigger national champion. * SO WHAT? * Deutsche has had to deal with a lot of flak in the last few years what with money laundering issues, unstable leadership and being the biggest lender to Trump’s business empire – and although its chief exec Christian Sewing has been opposed to such a merger, pressure has been building from investors to reconsider given that the share price has fallen from €32 five years ago to the current €7.68. Commerz might not be all that keen to merge either given that it has slimmed down its investment banking activities to become a simpler – and less volatile – retail and corporate lender. Although I can see the political logic behind this, it just sounds like the two banks are going in opposite directions – and certainly for Commerz, I think it would be a strategic step backwards

given that it has made great efforts to distance itself from the rollercoaster world of investment banking. If the two banks don’t really want to merge, I just don’t think it’s going to work as it would just be a merger for size’s sake and to please politicians and shareholders.

Under-fire digital bank Revolut bolsters its governance (Financial Times, Nicholas Megaw) highlights the latest developments at the fast-growing challenger bank that has faced recent criticism for shortfalls in compliance and encouraging unhealthy working practices like long hours and unpaid work. It has just appointed Standard Life Aberdeen co-chief exec Martin Gilbert as an adviser in addition to a number of other senior hires in regulatory compliance and governance but the company said that it had actually initiated the search last year, before any of the recent criticisms came to light. * SO WHAT? * This is a positive development – but I guess that these new employees will have to put in a decent stint to counter Revolut’s reputation for being a tough working environment. I’m pretty relaxed on all this because I believe that this is part of the growth trajectory of a start-up as it transitions from fleet-footed disruptor to having more mainstream appeal. Let’s hope there aren’t any more unsavoury bits of news to come out (e.g. involvement with the Russians etc.) and that the bank can concentrate on growing for the future (it was valued at $1.7bn at its most recent funding round last year).

Footfall drops and Debenhams continues to try to fend off Ashley’s advances…

Little cheer on the high street as footfall drops to five-year low (Daily Telegraph, Vinjeru Mkandawire) is the latest kick in the teeth for Britain’s high street as the latest figures from Springboard show shopper footfall dropped by 2%, taking it down to its lowest level for five years and its 15th consecutive month of decline. High street footfall was down by 1.9% but shopping centre footfall dropped by 3.4%. Retail park visitor numbers also fell sharply. Helen Dickinson, chief exec of the British Retail Consortium said that “While real incomes have been rising over the last year, the uncertainty surrounding Brexit appears to be driving a needs-not-wants approach to shopping” and warned that a no-deal Brexit “would likely result in higher costs, higher prices and less choice for consumers – all of which would further harm struggling retailers”. * SO WHAT? * Lower shopper numbers implies lower spending – and this would seem to chime with the overall gloom in the lead-in to Brexit. This is just the latest piece of evidence to reflect that.

Debenhams eyes larger refinancing to fend off Mike Ashley (Financial Times, Jonathan Eley) shows that the ailing department store is continuing its attempts to fend off a takeover by Mike Ashley, the billionaire chief exec of Sports Direct, by trying to increase the size of its upcoming refinancing. It had originally said that it would need around £150m to cover it over the coming year and had secured £40m of this last month in an additional credit facility. However, following Mike Ashley’s dramatic move last week where he demanded an extraordinary meeting of shareholders to kick out all but one of the company’s directors and install himself as chief exec, it sounds like the management is looking at ways to structure the refinancing in a way that will scupper any of his advances –  including targeting a larger amount. * SO WHAT? * Given the calls for an EGM, Debenhams HAS to respond to Ashley’s request within 21 days and hold the meeting within 28 days of that response, which gives the department store until late April to sort something out. The clock is ticking, but I have to say that the amount the company asks for will have to strike a balance between being high enough to scupper Ashley’s chances but low enough that investors don’t just run off. I think that giving more money to Debenhams is just throwing good money after bad as it’s in terminal decline anyway. We’ll just have to see how the drama unfolds for now.

Big tech bounces back and TikTok looks like a potential flotation candidate…

How big tech has powered global stocks (Wall Street Journal, Akane Otani) highlights a recovery in global tech shares since the beginning of the year as companies including Facebook, Netflix, Alibaba and Rakuten have all risen by over 25% in 2019, marking a sharp change following the tech weakness we saw going into the end of 2018. * SO WHAT? * Some companies, including Facebook, Tencent and Dutch semiconductor firm ASML Holdings are trading below last year’s earnings multiples but brokers including RBC Capital Markets and Morgan Stanley have advised caution on tech stocks this year, citing the potential for disappointing growth and tighter regulation. This has been particularly true of Tencent, which has fallen foul of a government that’s trying to clamp down on video game and gambling addiction. Mind you, lthough tighter regulation is definitely a trend, investors will have to decide what’s more important – regulatory risk or missing out on further (untapped) growth potential.

Talking of China tech, Clock ticking as next big thing looks to float (The Times, Simon Duke) takes a look at the potential of popular video-sharing app TikTok’s owner ByteDance. TikTok is the international version of the original Douyin video app that came out in China in 2016 and has sky-rocketed in popularity, becoming the first ever Chinese app to cross over to the mainstream in developed economies including the US and UK. Bytedance was valued last November at a chunky $75bn and TikTok has given it international recognition as it now has over 200 million international users, including 3.7 million in the UK in addition to the 500 million users it has on Douyin. * SO WHAT? * TikTok offers huge potential for exposure to a teenage audience, but it is facing growing doubts over whether it is a safe place for young people online and how the company collects childrens’ personal information. Still, if it can sort this out, it could be even bigger than it is already. Definitely one to watch! 

And finally, in other news…

Today, I thought I’d let you in on something that may surprise you in Man reveals we’ve all been eating pineapples wrong – and our minds are blown (The Mirror, Courtney Pochin https://tinyurl.com/y3rpt5xo). Also, were any of you out in the strong winds yesterday? I was, and I can really identify with the protagonist in this story: Man running race dressed as Big Ben has absolute nightmare in the wind – with hilarious results (The Mirror, Zoe Forsey https://tinyurl.com/yy6wscu4).

1. In MACRO AND OIL NEWS, the ECB does a U-turn while Exxon and Chevron make a big statement in shale
2. In RETAIL NEWS, Kroger suffers, Greggs sales top £1bn but LK Bennett, Primark and Quiz have a ‘mare while John Lewis cuts its staff bonus and Mike Ashley continues his pursuit of Debenhams
3. In INDIVIDUAL COMPANY NEWS, Airbnb buys Hotel Tonight
4. In OTHER NEWS, I bring you the correct way to reheat a sausage roll and an interesting candle. For more details, read on…

So the ECB does a U-turn and Exxon and Chevron put their might into shale…

After quite some time pretending things are going OK in Europe, ECB unveils fresh bank stimulus amid rising eurozone gloom (Financial Times, Claire Jones and Michael Hunter) shows that the European Central Bank has decided to reverse its policy of the last two years of weaning the bloc off economic stimulus measures, and reintroduce them. It will, once again, offer cheap loans to eurozone banks and hold off any interest rate rises until next year as ECB policymakers slashed GDP forecasts from 1.7% (which they announced only three months ago) to 1.1% as well as their inflation forecasts (they will be below the 2% target until 2021). * SO WHAT? * It seems to me that the ECB has been burying its head in the sand and hoping that all of this will just go away. ECB President Mario Draghi was probably hoping to eek out his remaining time in office and then hand his successor the mother of all hospital passes, but things have just got so bad that he couldn’t put things off any longer. There are hopes that a tight labour market, rises in government spending and a recovery in Germany will drag things back from the brink, but the fact is that the ECB is in a very tricky position. It can’t cut interest rates and Germany is in a  right old state at the moment what with a leadership crisis, the looming prospect of Trump turning the tariff screws even more on its car industry and banks in a state of turmoil and scandal. And then there’s the unknown quantity of Brexit, of course.

Exxon and Chevron place long-term bet on Permian shale boom (Financial Times, Ed Crooks) heralds a major development for the US shale industry as two of the world’s biggest oil companies have decided to make up for lost time and ramp up production in the Permian Basin, an area stretching from west Texas to east New Mexico. Output in the region has doubled since the summer of 2016 and now accounts for a third of total US daily production, so Exxon and Chevron’s commitment to the region is going to keep the party going (and then some). Thus far, it’s been small and medium-sized exploration and production (E&P) companies, such as Pioneer Natural Resources and Concho Resources, that have been leading the development of shale production in the Permian basin. However, they’ve had trickier times over the past two years because investors’ initial excited frenzy has cooled somewhat and it has been increasingly difficult for shale operators to raise the cash needed to develop. * SO WHAT? * With Exxon and Chevron throwing their considerable resources wholeheartedly into the Permian Basin, financing operations shouldn’t be a problem. Also, Chevron happens to own a lot of assets in the region outright, which means that its breakeven costs are the lowest in the US and both companies’ respective size should help to develop large areas in a co-ordinated way to maximise production. This will have the effect of lowering oil prices and, if they can apply the lessons learned in this region to shale operations elsewhere this will result in even more downward pressure. OPEC will no doubt be monitoring this development very closely.

Kroger’s profits get dented, Greggs passes a sales milestone while LK Bennett, Primark and Quiz suffer, John Lewis’ staff bonuses get cut and Mike Ashley continues in his pursuit of Debenhams…

Kroger shares fall as online investments dent profit (Wall Street Journal, Heather Haddon) highlights the struggles of America’s biggest supermarket chain as its share price fell by 10% in trading yesterday following news that its revenues and profits were hit by its investment in online operations. * SO WHAT? * Kroger is investing heavily in improving its offering in an environment where Walmart and others, including Aldi and Lidl, are fighting over the same customers whilst simultaneously fending off the might of Amazon. Supermarket shares have had a bit of a sell-off recently following the announcement by Amazon that it was going to launch a chain of urban grocery stores which would offer a broader product range than what is currently on offer at its existing Whole Foods stores. I guess that Kroger is at a stage where it is investing for the future but the benefits are yet to filter through. Let’s hope for Kroger’s sake that it doesn’t have to wait too much longer and/or that Amazon continues to make massive inroads to its existing business.

Savoury tale of the great £1bn British bake off (Daily Telegraph, Jon Yeomans) is a really interesting article which takes a closer look at the company that just passed the impressive mark of £1bn in sales. Not bad for a company that opened its first bakery in 1949 and now has 2,000 outlets across the UK! Greggs has, over the years, rejigged its product lineup (including the famous vegan sausage roll, of course!) and invested in technology by expanding its click and collect service for breakfast orders and experimenting with home delivery via Uber and Deliveroo. * SO WHAT? * This is an impressive landmark, but it’s not all sunshine and rainbows. Greggs thinks that there is “greater risk of a slowdown” in the second half of this year as it has tough 2018 comparisons to beat and it

will also have to deal with supply chain disruption from Brexit as well as a potentially weak pound pushing up ingredients costs. Still, it remains a compelling retail proposition with a robust position in its market and a tenant that many retail landlords value highly.

Retail nightmares persist for others, however, in LK Bennett, latest victim of high street, falls into administration (Daily Telegraph, LaToya Harding) where 500 jobs are now at risk at its 41 shops unless it finds a buyer (Mike Ashley again, I wonder?!? We might have to stop calling it the High Street at this rate and rebadge it Ashley Avenue!), Questions raised as Quiz reveals falling sales (Daily Telegraph, Oliver Gill) highlights a massive profit warning that sent shares of the fast fashion retailer south to the tune of 52% and Primark tells 200 UK staff to move to Dublin or risk redundancy (The Guardian, Rob Davies) shows the impossible dilemma facing almost half of the staff at Primark’s UK office in Reading as the clothing retailer continues to adjust to the UK’s competitive environment and changing consumer behaviour.

If that wasn’t enough drama for you on a Friday morning, in the tricky world of department stores, John Lewis cuts staff bonus pot to lowest level in 65 years (Daily Telegraph, Vinjeru Mkandawire) signifies a tough period in the venerable retailer’s history as bonuses were cut for the sixth year in a row due to falling consumer demand, economic uncertainty and weaker sterling. It also announced that it would close five “unprofitable” Waitrose supermarkets in June that would involve the loss of 440 jobs. Then in Ashley starts Debenhams power grab (The Times, Tabby Kinder) we see that Mike Ashley is intensifying efforts to get on the board of the ailing department store, even offering to step down from running Sports Direct if he is successful! Debenhams’ responded to the surprise attack by saying “The board has been engaging with Sports Direct and our other stakeholders and is disappointed that Sports Direct has taken this action”. * SO WHAT? * Mike Ashley really isn’t going to let this one go and I guess that this rather drastic action has come about following news of imminent attempts of a refinancing that could severely dilute Ashley’s 29.7% stake in the company. Get popcorn and sit back – this could get very interesting! 

Airbnb buys Hotel Tonight…

In Airbnb agrees to buy Hotel Tonight (Wall Street Journal, Maureen Farrell) we see that the home-sharing company has decided to buy the hotel booking site Hotel Tonight, which sells discounted hotel rooms for last minute

travellers, for an undisclosed sum. * SO WHAT? * Airbnb is trying to boost its inventory ahead of an expected IPO. Hotel Tonight was last valued at $463m in March 2017, its most recent funding round.

And finally, in other news…

Given that I mentioned Greggs earlier, I thought it only right to make you aware of this: Man’s bizarre trick for re-heating a Greggs sausage roll – without making it soggy (The Mirror, Courtney Pochin https://tinyurl.com/yyzqfrj7). Classy. Alternatively, if you have more of a penchant for burgers, how about this: McDonald’s cheeseburger scented candle has fans’ mouths watering and lasts ages (The Mirror, Zahra Mulroy https://tinyurl.com/y3vsrejn). A suitable gift for Mothers’ Day, perhaps?!?

1. In TRADE-RELATED NEWS, Trump’s tariff tampering leads to deficit as Volvo and Jack Daniel’s talk about tariff impact
2. In INDIVIDUAL COMPANY NEWS, US regulators approve the first drug to treat depression since Prozac, Grab grabs $1.5bn to expand in Indonesia, Paddy Power has a flutter and Amazon closes its pop-up shops
3. In OTHER NEWS, I bring you the future of broadcasting. For more details, read on…

So Trump’s trade war comes home to roost while Volvo and Jack Daniel’s talk tariff troubles…

Trump’s tariff war pushes US trade deficit to 10-year high (The Guardian, Phillip Inman) highlights the gap between the the amount of goods US companies sell to China and the amount of Chinese imports to the US as being the largest in ten years and occurred despite a surplus in services trade. Trump’s $1tn of tax cuts and higher government spending had boosted domestic consumption, but had also increased imports as customers continued to buy imported goods. On the other side, the strong dollar made American goods more expensive, meaning that consumers outside the US looked for more competitive goods. The US imported from 60 countries in 2018, with most imports coming from China, Mexico and Germany. * SO WHAT? * If you just look at this data, it would seem that Trump’s efforts to reduce the gap have failed spectacularly. These disappointing figures may even make him less likely to sign off on a deal with China later this month but it will also intensify subsequent negotiations with Europe.

In Volvo’s Polestar electric car brand warns of US tariff impact (Financial Times, Peter Campbell) we see that Volvo Cars is already assuming the worst as it said that it will cut sales targets for its all-electric model in the US if Trump imposes higher tariffs on exports from China. The Polestar 2, a new potential competitor for the Tesla Model 3, was shown at the Geneva Motor Show this week and will

go on sale next year as one of the first mid-market all-electric cars from a volume car manufacturer (it’ll be priced at $63,000, which includes a 27.5% tariff on Chinese auto imports). * SO WHAT? * Trump has obviously instigated the whole tariff war in an effort to protect/nurture the US automotive industry, but his actions have resulted in some manufacturing leaving the US already (BMW and Daimler have moved some production out of the US to avoid sanctions) and a reduction in the number of models available (e.g. Ford cancelled plans to sell the Focus, which is made in China, in the US). Although Volvo’s new factory in South Carolina could be tooled up to produce the Polestar 2, it is deemed to be too risky if it doesn’t build brand recognition in the US first. This just goes to show that it is too simplistic to assume that slapping tariffs on imported vehicles will automatically help the US automotive industry. Globalisation has made this much less clear-cut than it would have been in the past.

Whiskey tariffs drag on sales for Jack Daniel’s maker (Financial Times, Matthew Rocco) highlights the effects of the trade war on Jack Daniel’s maker Brown-Forman as tariffs on American Whiskey took a sizeable chunk out of its sales growth in the last quarter. Investors took fright, sending the stock price down by 6.9%, but the company said that it expected to limit tariff impacts in 2019. * SO WHAT? * It seems that the spirits industry has been an easy target as Trump’s tariffs have prompted China, Canada, Mexico and Europe to impose their own. Clearly, the longer this drags on, the more painful things are going to become. 

A new anti-depressant gets approval, Grab grabs a chunk of dosh to expand, Paddy Power rebrands and Amazon shuts its pop-ups…

US approves first depression drug in decades (Financial Times, Hannah Kuchler) heralds a huge moment as the US Federal Drug Administration (FDA) has approved a new antidepressant, called esketamine and branded Spravato, to treat patients who have already tried at least two other antidepressant treatments. Johnson & Johnson make the drug and it will be sold as a nasal spray. The drug was given a “Breakthrough therapy” classification, which meant that it was fast-tracked through the approval process. * SO WHAT? * This is huge news because it is the first new antidepressant to get approval since Prozac was released 30 years ago. Although tests have shown that it can work fast (sometimes in as little as two days), there are risks of serious side-effects (particularly sedation and dissociation), which mean that it must be administered at a doctor’s office or clinic with patients having to be monitored for two hours after getting a dose. Despite this breakthrough, and the fact that it could be a life-saver for a third of people with major depressive disorders who have not yet responded to existing therapies, Johnson & Johnson’s share price stayed pretty flat after the approval was announced. Allergan, a Dublin-based pharmaceuticals company, is developing another antidepressant based on similar principles and will announce the results of its phase III clinical trials on Rapastinel soon.

Grab pockets $1.5bn from SoftBank to expand in Indonesia (Daily Telegraph, James Cook) heralds a nice little boost for South East Asian ride-hailing service Grab as it just got $1.5bn in new funding from SoftBank’s Vision Fund and will use most of it to expand its operations in Indonesia. * SO WHAT? * Including this latest injection, Grab has managed to raise more than $4.5bn over the past year and the company has grown rapidly since it bought

Uber’s regional ride-hailing and food business in March last year. The company will continue to grow its existing services and add additional ones like on-demand video, digital healthcare, insurance and hotel bookings. It certainly sounds like it is “crushing it” in the region.

Paddy Power has flutter on value of new name (The Times, Dominic Walsh) is a story cropping up in a few of the broadsheets today as it turns out that the company is intending to rebrand itself as Flutter Entertainment to reflect the “increased diversity of our brands and operations”. A vote on the change will be held at the company’s AGM in May. * SO WHAT? * I guess that this is an effort to simplify things after a period of consolidation in the industry as Flutter Entertainment is much less of a mouthful than Paddy Power Betfair (which came from the merger of the Irish bookmaker Paddy Power and Betfair back in 2016). It is aiming to buy more brands in the US and other emerging gambling markets as it searches for new growth.

I thought that Amazon to shut all US pop-up stores as it rethinks physical retail strategy (Wall Street Journal, Esther Fung) was worth mentioning because it seems that it has been expanding its footprint of physical stores of late. However, it’s now shutting down all of its 87 US pop-up stores, which were small and showcased devices like its voice assistant speakers, Kindles and other new products. On the other hand, Amazon is expanding its number of bookstores and its so-called 4-star stores (which sell products rated four stars or more by Amazon customers) which provide a broader product range – as well as rolling out a new line of grocery stores and more Amazon Go cashierless outlets. * SO WHAT? * Amazon really is trying to find its feet in the physical retail space and I think that initiatives like the pop-up shops have probably provided valuable insight into the real world by giving the company exposure to the end customer. It’s rare for a retailer to have deep enough pockets to finance this kind of experimentation, but having pretty much conquered online retailing, Amazon is now coming for the high street. Competitors should be very scared.

And finally, in other news…

You know that I’m always trying to bring you new trends – well, this could be the future of newsreaders: Chinese news agency unveils world’s first AI news presenters in jaw-dropping videos (SoraNews24, Koh Ruide https://tinyurl.com/yxswyarf). Although this is impressive, you won’t get TV gold like this with a robot: https://tinyurl.com/y25np3da (BBC newsreader Simon McCoy was clearly having a bad day!).

1. In MACRO AND INDUSTRY NEWS, China cuts its growth forecasts and the FDA loses its chief
2. In HIGH STREET/CONSUMER-RELATED NEWS, Debenhams has a profits warning, Superdry announces cuts and Papa John’s calls a truce with its founder
3. In INDIVIDUAL COMPANY NEWS, BMW and Toyota make Brexit warnings and Harley-Davidson goes electric (well, sort of)
4. In OTHER NEWS, I bring you unusual pancake toppings. For more details, read on…

So China’s growth forecasts are cut and the FDA’s chief departs…

China’s ‘tough struggle’ as growth falls to 29-year low (Daily Telegraph, Tom Rees) shows that China is steeling itself for its slowest annual GDP growth rate for almost thirty years by targeting a range of 6-6.5% (although I would add that China cuts taxes in bid to stimulate economy (The Times, Didi Tang) says that this is the lowest rate since 1993 – whatevs, it’s a long time!). Li Keqiang, the Chinese Premier, warned that “There will be more risks and challenges that are either predictable or unpredictable and we must be fully prepared for a tough struggle”. The Chinese government announced a major stimulus package worth £227bn in higher spending and tax cuts whilst also saying that VAT would be lowered for the manufacturing sector to help it out of the rut it has found itself in (it contracted for the third straight month in February). * SO WHAT? * If you were a glass-half-full sort of person, you might say that this is a very sizeable stimulus that is meaty enough to do something meaningful, but if you were in the glass-half-empty camp, you could say that the size of this stimulus belies the fact that the trade war has done a lot of damage and that it reflects

uncertainty about the outcome of the current negotiations. It is possible, however, that China’s industrial sector could get a boost sooner-than-expected because the trade deal that is currently expected to be signed at the end of this month may prompt Trump to lift taxes on over $250bn-worth of goods, but it’s not in black-and-white yet and the longevity of any accord will hinge on China sticking to what it says otherwise we’re all back to square one.

FDA chief Scott Gottlieb to leave Agency (Wall Street Journal, Thomas M. Burton and Jennifer Maloney) looks like a bit of a “meh” story at first glance because you may be tempted to think “Oh it’s just some suit resigning – he’ll just get replaced”. However, Scott Gottlieb has been head of America’s very powerful Food and Drug Administration (FDA) and been instrumental in pushing some major initiatives during his tenure – including a proposed ban on menthol cigarettes, the speeding up of generic medicine approval and restriction in the use of flavoured e-cigarettes among teenagers (after having helped the growth of vaping in the first place). He’ll be in place for the next month after which he’ll hand over the reins to someone else. It’ll be interesting to see whether his successor will carry on his initiatives or concentrate on other things – the tobacco industry in particular will be following events very very closely!

Debenhams continues to suffer, Superdry announces cuts and Papa John’s calls a truce with its founder…

Debenhams isssues profit warning as sales continue to slump (The Guardian, Julia Kollewe and Sarah Butler) heralds yet another bit of bad news from the troubled department store as it issued a profit warning only two months after issuing its most recent profit forecasts and three weeks after it got a cash injection of £40m. Chief exec Sergio Bucher came out with the usual BS, saying “We are making good progress with our stakeholder discussions to put the business on a firm footing for the future. We still expect that this process will lead to around 50 stores closing in the medium term” but Debenhams’ forecasts ‘no longer valid’ – like its shops (Daily Telegraph, Ashley Armstrong) makes some valid points in that the only reason why it avoided a profit warning in January was because it just came up with £50m of cost savings from nowhere and that the company’s appeals to landlords and councils for rent and rates cuts sounds like it’s asking for charity. * SO WHAT? * The company’s performance continues to be poor but Mike Ashley may yet exit this situation smelling of roses if Debenhams fails to refinance successfully because if it goes into administration, he’ll be able to cherry pick the best bits WITHOUT all the nasty pension liabilities via a pre-pack administration. I think that Debenhams is an absolute disaster, Sergio Bucher is just rearranging the deckchairs on the Titanic and Mike Ashley is in a souped-up RNLI lifeboat waiting to whisk away the fittest survivors.

The gloom continues in Superdry to axe up to 200 jobs as part of £50m cost-cutting plan (The Guardian, Zoe Wood) as the fashion retailer announced that it would be cutting 20% of the workforce at its Cheltenham HQ as part of a broader plan to make £50m-worth of cost savings over the next three years. * SO WHAT? * Current chief exec Euan Sutherland is having a tricky time at the moment with his company performing poorly on the one hand and then the constant threat of co-founder Julian Dunkerton returning to sort things out on the other. Superdry will be holding an extraordinary meeting this month to consider Dunkerton’s plan that would involve installing Peter Williams, current chairman of online fashion retailer Boohoo, as a non-exec director. Dunkerton is arguing that Sutherland doesn’t know what he’s doing and Sutherland is arguing that it’s Dunkerton’s thinking that got them into this current mess. The weaker the share price gets, the more compelling Dunkerton’s actions will become. I think that Sutherland is going to have to turn things around pretty quickly in order to survive this battle.

Then in Pizza chain Papa John’s calls truce in battle with its founder (Financial Times, Pan Kwan Yuk) we see that founder John Schnatter struck a deal yesterday with Papa John’s International whereby he will vacate his seat on the board and drop all lawsuits against the company in return for being allowed to chose a replacement director. * SO WHAT? * Things have been pretty heated between John Schnatter, who started the company back in 1984, and Papa John’s since he was pushed out of the company last summer after a series of high-profile gaffes. The company has been doing all sorts of things to stop him from regaining control and he had been fighting it in the courts over the circumstances of his removal. Shares in the company have fallen by around 30% in the last 12 months and rose slightly on the latest news. The company still has a (pizza) mountain to climb in turning around sluggish sales, but at least this cloud has now gone, leaving everyone to get on with things.

BMW and Toyota sound warnings over Brexit and Harley-Davidson goes sort-of electric…

Threat to Mini factory as BMW and Toyota raise no-deal alarm (Daily Telegraph, Jillian Ambrose and Chris Johnson) highlights carmaker concerns about the impact of Brexit as BMW said that the production of some or all of the Mini could move to Holland (which would be another blow for Swindon, which is still reeling from the recent Honda announcement) in a no-deal Brexit scenario and Toyota said that such circumstances would make it very difficult to justify making new models in its Derbyshire plant. * SO WHAT? * I can see where they are coming from, but I would suggest that car sales are generally on a downward trend anyway and Brexit is a convenient excuse to justify pulling production that shifts the blame onto something outside the company. Obviously it is a factor, but there are so many others – like tighter emissions

regulation, the increasing need for electrification, changing ownership trends etc.etc. – which form part of these moves. The companies are just rattling cages IMHO.

Harley-Davidson aims to put tykes on bikes with StaCyc deal (Financial Times, Eric Platt and Pan Kwan Yuk) shows that Harley-Davidson just bought StaCyc, a small producer of electric bikes for kids. This is part of an overall effort to diversify the company’s client base away from old men with handlebar moustaches and bandanas and they justified this acquisition by saying “The StaCyc electric two-wheelers will provide an entry point for the youngest riders to enjoy the thrill of riding”. * SO WHAT? * My *rse. This smacks of desperation to me! The fact is that the company’s share price is now 50% below its 2014 high and no amount of tinkering around the edges with opening stores selling H-D branded sweatshirts and jeans or buying kiddie bikes is going to mask the fact that it has been killed by the tariff wars. I don’t think it’s going to get much better soon either as Trump’s next battle (if he manages to sort the Chinese) will be with Europe.

And finally, in other news…

I thought I’d let you know about this “unusual” topping for pancakes that some people were enjoying in yesterday’s Shrove Tuesday celebrations: People are putting gravy on their pancakes – and the internet is divided over it (The Mirror, Courtney Pochin http://tinyurl.com/y69yrv34). Although my first reaction was ????, the ingredients for Yorkshire puddings and pancakes are actually the same – so really it makes perfect sense. One for next year, maybe?

1. In INDUSTRY NEWS, China’s tech sector sees cuts and UK construction stalls
2. In CAR NEWS, we see the contrast between Ford’s failure and Toyota’s triumph in China plus Tesla’s new model
3. In HIGH STREET NEWS, we see weaker sales, “Mr” Ted Baker standing down, more restaurant closures and Paperchase’s woes
4. In OTHER NEWS, I bring you a ninja training opportunity. For more details, read on…

So China’s tech industry gets a dose of austerity while the UK construction sector weakens on Brexit…

Chinese tech scene hit by job cuts as austerity bites (Financial Times, Louise Lucas and Nian Liu) looks at how previously red-hot start-ups are cutting costs as the wider economy slows down after years of seemingly-unlimited cash flows. Didi Chuxing (ride-sharing) has cut free snacks and gym membership, ByteDance (internet tech company operating various content platforms, also developer of TikTok) cut its new year bonuses and others are cutting staff, fruitbowls and other perks. Online recruitment site Zhaopin.com, which has 180m registered users, is showing record numbers of CVs doing the rounds and Li Qiang, exec VP, pointed out that after a long period of growth, internet user numbers have plateaued while competition has intensified, margins have shrunk and regulations have got tighter. Investors believe that there will be more job cuts in the pipeline and, according to estimates from brokerage firm Jefferies, advertising budgets are only going to grow by 17% this year – half the rate it’s been for the last two years – which is notable considering that advertising spend is often seen as a leading economic indicator (i.e. reduced ad spend is a sign that the economy will slow down). * SO WHAT? * It was inevitable that the exponential growth that big Chinese tech names like Didi, JD.com, Alibaba, ByteDance and Meituan Dianping (food delivery app) have experienced in the last few years was bound to

hit the buffers given the broader economic slowdown. I guess that for them, what happens next will be important. I think that a pause for breath with a reshuffling of staff is not a bad thing but companies are clearly concerned that any sign of weakness could be pounced upon and negative chat could become a self-fulfilling prophecy – which is probably why many of the names above are keen to put a brave face on things. Having said that, I suspect that the Chinese government will be keen to support its tech industry and so would expect it to swoop in to help if things get really bad given that it is an area it has targeted as being key to its future economic success.

This is a bit of a “no-sh!t-Sherlock” kind of story but Construction industry stalls amid disquiet over the future (The Guardian, Richard Partington) cites the latest findings of the IHS Markit/CIPS Purchasing Managers’ Index (PMI) which show that, after 10 months of expansion, construction companies reported a drop in activity levels in February with commercial building and civil engineering projects being particularly weak. The no-sh!t-Sherlock conclusion is that the slowdown was due to Brexit uncertainty slowing down decision making, leading to weaker demand. Tim Moore, the economics associate director at IHS Markit, observed that “Risk aversion in the commercial sub-category has exerted a downward influence on workloads throughout the year so far. This reflects softer business spending on fixed assets such as industrial units, offices and retail space”. Interestingly, some companies found that stockpiling by manufacturers had led to shortages of transport availability, which meant that builders had to wait longer for products and materials.

We look at where Ford’s going wrong and Toyota’s going right in China as well as the imminent unveiling of Tesla’s new model…

Why Ford is stalling in China while Toyota succeeds (Financial Times, Tom Hancock) takes a look at how foreign manufacturers are faring in the Chinese market. There is a definite contrast in fortune between “losers” like Ford, which is one of many carmakers cutting production in China, and “winners” including makers like Toyota – whose joint venture with Guangzhou Automobile saw sales up 35% last year – and BMW, whose venture with Brilliance Auto saw a 20% rise. Ford was a late starter in China, now the world’s largest car market which accounts for 30% of global car sales, but enjoyed some good years initially until its sales started to fall at its main joint venture with Changan in 2017. Many believe that sales have continued to fall because their model line-up is too old – Jochen Siebert of consultancy JSC Automotive pointed out that “Their problem is really the model cycle, the majority of their cars are in year five or six, that’s when sales drop rapidly”. Ford then introduced new models last year, but this was when the whole market started to slow down. PSA Group (which owns the Peugeot and Citroen brands) saw sales at its joint venture with Dongfeng fall by 44% last year and, although it also introduced new models like Ford did, it suffered from its mid-market position as less flush customers felt the pinch of the economic downturn and stopped buying cars or went secondhand instead. The group also suffered as Chinese brands like Geely and BYD continue to climb the value chain and become more

competitive. JLR has suffered from a dent in its reputation following a number of safety recalls and inventories have been building up while Toyota, in contrast, sold a record 1.5m vehicles in China last year, and benefited from having a reputation for selling good quality, fuel efficient cars and consistently bringing new models to market. Mercedes, BMW and Audi all did pretty well as wealthier customers have been more insulated from the economic slowdown. * SO WHAT? * The main consolation for Ford is that because it was later than others to the market, its China business is not as key to worldwide sales as it is to players like GM and VW. Still, I think that it needs to get its act together otherwise it will just continue to drift. There may be opportunities for a refresh soon, though, as China’s abolition of the joint venture rule means that foreign companies will be able to buy majority stakes in their partners in 2021. Some of the Chinese partners won’t like this and will seek out alliances with other manufacturers – which is where Ford may be able to do a bit of a reset.

Tesla gets set to unveil new compact SUV next week (Daily Telegraph, Hannah Boland) heralds the imminent arrival of the Model Y SUV next week which Elon Musk says will cost about 10% more than the Model 3 and have slightly less range for the same battery. The Model Y is expected to go into volume production next year and will share many components with the Model 3 (and no, it won’t have those Falcon Wing doors of the larger Model X). Morgan Stanley’s Adam Jonas put a positive spin on the new model, saying that an “all-new mid-sized crossover/SUV is Tesla’s chance to take the learnings from the Model S, X and 3 in design and manufacturing to offer a product in a far larger and faster growing global segment” although there was a danger that something as “exciting” as this might cannibalise potential sales of the Model 3.

UK retail sales weaken, Ted Baker’s founder resigns, more restaurants suffer and Paperchase tries not to fold…

UK retailers suffer weaker sales due to Brexit uncertainty (The Guardian, Richard Partington) cites some research from the British Retail Consortium (BRC) and KPMG (the accountancy firm) which showed that retail sales weakened last month in the tense run-up to Brexit and the latest figures from Barclaycard, which processes about 50% of the UK’s credit and debit card transactions, also back that up. Hardly surprising, but evidence for if you needed it!

Then in a quick scoot around the UK high street, Ted Baker chief resigns after allegations of misconduct (Financial Times, Jonathan ELey and Camilla Hodgson) heralds a difficult ending for the clothing retailer’s founder, Ray Kelvin, who has decided to resign amidst allegations of inappropriate behaviour – the investigation into which is continuing. Acting chief exec Lindsay Page is to continue in the role, Kelvin is bound by a non-compete agreement and

still holds a 35% shareholding in the company. How will Ted Baker fare without Ray Kelvin at the helm? (Daily Telegraph, Julia Bradshaw) asks the question on everyone’s lips, given that he is so closely associated with its success and is widely seen to be a retailing genius. * SO WHAT? * Given yesterday’s share price reaction (they were up by about 5%), it seems that the market has come to terms with the loss for the moment and maybe it’s a good time for the company to have a bit of a shake-up. Long term, maybe this will help the culture and I guess it brings forward succession plans that were bound to come up at some point in the future anyway – they always do when one person is seen to be the main reason behind a company’s success.

Giraffe and Ed’s Easy Diner branch closures put 340 jobs at risk (The Guardian, Jasper Jolly) highlights the latest casualties in the casual dining sector as the owner of Giraffe and Ed’s Easy Diner, Boparan Restaurant Group (BPR), said yesterday that the brands would be entering into a company voluntary arrangement (CVA) which is likely to see restaurant closures and rental renegotiations. Paperchase prepares to close stores (The Times, Ben Martin) identifies another high street casualty which is also starting a CVA, closing some loss-making stores and renegotiating rents. * SO WHAT? * The high street carnage continues…

And finally, in other news…

I’ve got some great news for all you would-be ninjas out there in VR ninja dojo: battle as a shadow warrior at new virtual reality world in Tokyo (SoraNews24, Oona McGee https://tinyurl.com/y39g9xdv). Nice!

1. In POLITICAL NEWS, a US-China deal seems to be closer, we look at what a no-deal Brexit might bring and highlight the upcoming Spanish election
2. In TRANSPORT-RELATED NEWS, we look at future plans and thoughts for Germany’s electric cars and trucks while America’s U-turn on high speed rail fuels doubts over our HS2
3. In INDIVIDUAL COMPANY NEWS, Amazon makes a stir with its new store plans and Tencent ups its investment in esports
4. In OTHER NEWS, I bring you an eye test. For more details, read on…

So an agreement seems closer between the US and China on trade, we see what a no-deal Brexit might look like and how Spain’s Pedro Sanchez is relying on far-right fear…

US, China close in on trade deal (Wall Street Journal, Lingling Wei and Bob Davis) heralds an important step in the ongoing trade negotiations between the US and China. It seems that the two countries are in the final stage of completing a trade deal that could be finalised at a summit between the two presidents around March 27th, after Xi completes his trip to Italy and France. China is offering to lower tariffs and other limits on a variety of American products and the US is looking at lifting most – if not all – restrictions that it slapped on China since last year. * SO WHAT? * There are a number of hurdles yet to be overcome between now and then, but it does seem like there is some light at the end of the tunnel. Next up – US vs Europe?

How would a no-deal Brexit affect the UK economy? (Financial Times, Chris Giles and Delphine Strauss) takes a look at the potential consequences for a no-deal Brexit. If MPs reject May’s latest Brexit agreement again, she has promised a vote on a no-deal Brexit by March 13th at the latest. If that got voted through, we would leave the EU without an agreement in place on March 29th. Generally speaking, pro-EU supporters see this as a nightmare scenario which could cause chaos on the roads and shortages of food and medicine – but then Brexiteers see a no-deal as a positive that would allow the country to accelerate plans to make trade deals with the rest of the world. The article takes a look at the effect a no-deal might have on ports, food and services – and what the policy response would be. In short, there would be a lot of disruption at ports because although Brussels has announced measures to give UK road hauliers point-to-point access to EU markets for the rest of 2019 and HMRC has simplified border-related paperwork, new procedures will be a lot to digest for customs officials, clearance agents and freight forwarders. The implication here is that the nightmare gridlock scenario predicted by Remainers will probably be mitigated to some extent by emergency measures being put in place, but they won’t be enough to stop delays. Food would be hit hardest as delays in transportation would be very bad for perishable goods – and although supermarkets and suppliers have been stockpiling, there’s only so much they can do. Consumers

could also face big price rises on meat and dairy (so we might all want to go vegan!) due government plans to use import tariffs to protect our own farmers, but then again this could be mitigated by the fact that our own meat might face export restrictions. With regard to services, the sector that makes up 80% of our GDP, the main concern is whether a no-deal Brexit will kill some existing businesses and/or render new opportunities permanently out of reach. London will probably lose some of its financial services business, but it will be difficult to quantify because it will take time for it to become apparent. There will also be difficulties for lawyers, accountants, architects and doctors and nurses, among others, as the UK has said that it will recognise EU-acquired professional qualifications, but the EU has not agreed to reciprocate. The tech industry has also expressed concerns about the flow of data, because to comply with EU regulations, incoming data flows would be stopped unless contracts were updated to include specific permissions. This could affect hundreds of thousands of contracts and many companies just wouldn’t be ready for it. What would the policy response be? Well, the Bank of England will probably cut interest rates to limit or avoid a drop in demand, but as they are pretty low already, some say that a temporary cut in VAT might be the best way to support spending by lower earners. Chancellor Philip Hammond has already indicated he’s willing to splash a certain amount of cash to help cushion the blow but whether that really filters through is a moot point. * SO WHAT? * Whichever way you look at it, a no-deal Brexit is going to be disruptive. Although I don’t think it’ll be the doomsday scenario that some are predicting, it certainly won’t be a walk in the park. 

Pedro Sanchez pins Spain election hopes on fear of far-right (Financial Times, Ian Mount) highlights the upcoming Spanish election next month as Spain’s parliament dissolves tomorrow. This means that Sanchez will have been the leader of the shortest-lived administration in modern Spain as he only came to power in June last year! He was forced to announce early elections two weeks ago when the two Catalan secessionist parties that supported his minority government rejected his 2019 budget. * SO WHAT? * Interestingly, it seems that Sanchez may actually benefit from this as both he and his socialist party (PSOE) are actually doing better in the polls and taking support from the centrist Ciudadanos party. His tactic of painting his opposition as being pawns of the extreme right appears to be working – and so the question is, if he wins the election, will he be able to get a majority or will Spain have a repeat performance of a super-fragile coalition?

Germany looks to the future of electric cars and trucks while America’s U-turn puts the future of our own HS2 in doubt…

In Germany revs up for electric cars and driverless tech revolution (Daily Telegraph, Hasan Chowdhury) we see that the president of the VDA, an industry body representing Germany’s car sector, said in a statement that “We will invest over €40bn in electric mobility during the next three years, and another €18bn will be invested in digitisation and connected and automated driving” as vehicle sales worldwide have slowed down amid fears of “peak car”. Daimler Trucks chief backs higher taxes for commercial diesels (Financial Times, Patrick McGee) takes a look at the future of trucks as, ironically, Daimler Trucks’ chief exec Martin Daum said that “We need to make, basically, the usage of diesel trucks more expensive…We need a CO2-based penalty-reward system out there that is really strictly CO2-based” in order to hasten the advance of emissions-related technology. * SO WHAT? * I thought I’d mention this because it’s all very

interesting hearing about the future of vehicle-related technological advances, but the fact of the matter is that we are still way off mass-adoption of electric vehicles. It’s good that the debate continues and we will undoubtedly see an explosion of growth for battery manufacturers as the take-up of electric vehicles increases – but let’s be honest about this, it is all from a VERY low base.

American rail U-turn fuels doubts over HS2 (Daily Telegraph, David Millward) makes for nervous reading for those involved in the massively expensive HS2 project as moves in America to significantly scale back a high profile high speed rail project in California bring attention to what might happen over here with our own HS2. The incoming California governor Gavin Newsom, said that building the network “would cost too much and take too long” (and Trump seems to have agreed wholeheartedly with this, branding it a “failed fast train” and a “green disaster”) and has scaled back original plans significantly. * SO WHAT? * Our own HS2 has soared in cost from £32.7bn in 2013 to £55.7bn in only two-and-a-half years and, given the fact that the main engineering work won’t start until the end of this year, whispers that the project could be abandoned have been getting louder. This is a major headache for the UK government, but I guess that it will be drowned out by Brexit for the time being at least.

Amazon continues to stir things up for retailers and China’s Tencent pours more money into esports…

Grocers brace for another blow from Amazon (Wall Street Journal, Heather Haddon and Esther Fung) follows on from news over the weekend that Amazon is planning to launch urban grocery stores that will stock beauty products (high margin) alongside food (lower margin). Initial details about these stores suggests that they will be smaller than many traditional supermarkets but bigger than many convenience stores, which could mean that they will be trampling on the turf of the likes of Kroger, Walmart and Target. Amazon has been looking for leases that won’t limit what it sells, enabling it to sell cosmetics and skin-and-hair products in addition to other retail items. At the moment, it’s not clear whether the new format will have the Amazon brand name, although it is expected to be distinct from Whole Foods Market, which it bought two years ago. * SO WHAT? * Just as the “traditional” retailers are trying to catch up with it, Amazon goes and does something like this. It’s obviously great news for the consumer because of the increased choice that will be made available (and this move into beauty appears to be bang “on trend” as Kroger recently signed an agreement with Walgreens Boots Alliance to combine groceries and cosmetics in some stores), but the entry of another retailer into an already-crowded market place isn’t going to make life easy for the incumbents, especially as Amazon has been the retail sector’s nemesis. You could possibly argue that Amazon does not have the same “bricks-and-mortar” expertise that the likes of Kroger, Walmart and Target have about things

like product placement and how to get customers to buy more, but it does have the expertise of Whole Foods to call on and it’s not like you can say that Amazon is a slow learner. Price war??

Tencent eyes more esports competitions in China (Financial Times, Tom Hancock) highlights a big increase in investment in esports tournaments in China by Tencent, the world’s biggest video games company by revenues. The company already invests in two of the world’s most-watched tournaments where players compete in its mobile-based Honour of Kings and PC-based League of Legends, which get 80m online viewers per match. Esports is a very fast-growing area and China is expected to generate revenues of $210m this year, that will put it ahead of western Europe. Honour of Kings has seen sponsorship by McDonald’s, Mars and VW and Nike just announced a four-year sponsorship deal with Tencent’s League of Legends Pro League, thought to be worth $7.5m per year. Local governments are keen to boost the growing industry via subsidies and players have found that it can all be a highly lucrative way of earning as one team, called Invictus Gaming, has won over $840,000 in prize money from playing League of Legends at the world championships last November (fun fact – League of Legends is the world’s most played video game!). * SO WHAT? * This is an area with huge potential and when you have big hitters like Tencent involved, you have to sit up and take notice. The increasing popularity of esports as entertainment not just for players, but for observers as well, could well provide a welcome growth channel for developers who have generally been having a rough time of it lately. I would have thought it would also be increasingly lucrative for promoters of such events who could see massive growth in advertising at increasingly-watch tournaments.

And finally, in other news…

I thought I’d leave you with this eye test today: Can you name the animal based on a close-up of its eye? Take our tricky nature quiz (The Mirror, Keir Mudie https://tinyurl.com/yxhpanhl). They say that eyes are the windows to the soul – but in this case, they are the passport to quiz-related glory…

1. In MACROECONOMIC NEWS, the US has solid growth but India’s growth slows right down
2. In RETAIL NEWS, online retailer Zalando puts in a good performance and Gap splits off Old Navy
3. In CAR NEWS, Tesla launches its cheapest Model 3 while Aston Martin rues the cost of its IPO
4. In REAL ESTATE NEWS, US home ownership hits new highs but in the UK, Nationwide charts sluggish house prices and Foxtons reports its first annual loss since 2013
5. In OTHER NEWS, I bring you the new toast scale. For more details, read on…

So growth continues for the US and Indian economies, but at a slower pace…

US economy grew 2.6% in the fourth quarter (Wall Street Journal, Harriet Torry) highlights a solid performance against the backdrop of a slowing global economy, a trade war with China and a partial government shutdown at the end of the year. Consumer spending was strong thanks to a tight job market, tax cuts and rising wages and business investment also rose in the final quarter of the year, potentially setting the scene for further growth in the future. Although GDP growth was 2.6%, this was slower than the 3.4% growth in the third quarter and 4.2% in the second but higher than consensus forecasts of 2.2%. The White House predicts GDP growth of around 3% this year, but Federal Reserve officials believe it will slow down thereafter. * SO WHAT? * These look like robust figures, but it seems to me that the “sugar-rush” from Trump’s massive tax cuts last year are running out. Fortunately, America Inc. looks like it’s capable of taking up the slack, but Trump would do it a huge favour by sorting out the whole trade war thing (firstly with China and then with the rest of the

world) as soon as possible. As we all know, business HATES uncertainty and if this continues to drag on it could potentially clip the wings of business investment which may have longer-term consequences. However, for now, things are looking pretty good.

Indian economy grows at slowest quarterly pace in more than a year (Financial Times, Stephanie Findlay) puts a dent in Prime Minister Narendra Modi’s claims that he can deliver robust growth in the run-up to the general election in April/May this year. Having said that, many countries would love to have 6.6% GDP growth, but the figures released by India’s statistics ministry yesterday showed the lowest growth rate in five quarters as the economy is being held back by weaker consumer spending and manufacturing growth. The government shaved its growth forecast for the fiscal year from 7.2% to 7%. * SO WHAT? * This isn’t ideal so close to the election as it highlights Modi’s shortcomings and will give his opponents ammo to say that he can’t keep his promises – including creating enough jobs for India’s millions of unemployed youths. Earlier this month he tried to curry (see what I did there) favour with distressed farmers by releasing $2.8bn in direct payments as well as announcing sizeable tax breaks for the middle class. Will it be enough, though? 

Online retailer Zalando bounces back and Gap announces a split…

In Zalando bounces back with stronger growth at end of 2018 (Financial Times, Tobias Buck) we see that the online fashion retailer bounced back in style with stronger-than-expected results and the announcement of plans to grow like Netflix and Spotify. It’s already the biggest online fashion retailer in Europe – bigger than Amazon and Asos – with 26.4m active customers and sales of €5.4bn last year, which isn’t bad for a company that started up in Berlin just over ten years ago. * SO WHAT? * This is great news for the company whose numbers faltered in the third quarter due to unseasonably warm weather that stunted jacket and coat sales. The share price had fallen by more than 40% year-on-year before yesterday, but it shot up by 25% on the good news. Chief exec Ruben Ritter outlined ambitions to be “the starting point of fashion in Europe…where a customer can fulfill all her fashion needs”. In order to do this, Zalando will have to deepen and broaden their relationships with fashion brands. One way of doing this is to expand the company’s existing partner programme which allows brands to sell and ship their own stock via the Zalando site, which takes a commission. At the moment, this programme accounts for 10% of gross merchandise volume (GMV) but is forecast to rise by 40% by 2023/2024.

Gap to split into two public companies (Wall Street Journal, Khadeeja Safdar) heralds a rather dramatic move by the clothing retailer stalwart as Gap announced that it will separate the fast-growing budget business of Old Navy from the rest of the business to create two separately quoted companies. This has come about because Old Navy has outperformed sister brands Gap and Banana Republic for a number of years to the extent that it now accounts for over half of Gap Inc’s $16.6bn 2018 sales. Current Gap CEO Art Peck will continue to run Gap, Banana Republic, Athleta, Intermix and new brand Hill City with about $9bn in annual revenue under a new company name while Old Navy CEO Sonia Syngal will run the new company, which has about $8bn in annual revenues. The separation is expected to complete in 2020. * SO WHAT? * The thinking behind this is that it will allow both companies to act more quickly and focus investment decisions and investors seemed to like what they heard as the stock shot up by 25% in after-hours trading. Investors tend to like having focus in a company – be it in specific product areas, geographies or strategy – as it allows them to see a clearer picture of what they are putting their money into. This sounds like a good move for a company badly in need of a refresh. Fun fact(s) – Old Navy was founded in 1994 by former Gap CEO Millard “Mickey” Drexler to compete with Gap’s then-lower-cost rivals and he named it after a bar in Paris. Sales reached $1bn within four years…

Tesla unveils a new low-price Model 3 and Aston Martin has a bad day…

Price cut brings Tesla to the masses (The Times, Tom Knowles) marks a significant milestone for the electric vehicle manufacturer as it has become the first to offer an electric vehicle to the mass market after cutting the price of its most popular model from $44,000 to $35,000. This means that the company will at last be fulfilling the the promise it made back in 2016 and said that customers in the US would get deliveries within the next two to four weeks and in the next three to six months for customers in the UK and Europe. Elon Musk added that ALL sales of Tesla vehicles would now be made online with existing stores being converted into information centres and showrooms. * SO WHAT? * Better late than never, I guess. I do wonder what current owners feel like now that their car will undoubtedly be worth way less in the aftermarket. Clearly, the staff at Tesla’s 378 stores and service centres won’t be feeling too chuffed either. Musk said in a

conference call that moving sales online would cut costs by 5-6% – savings that would be used to cut the prices of its Model S and Model X. It’ll be interesting to see what effect this has on sales.

Aston Martin shares crash as it reveals £136m IPO costs (The Guardian, Julia Kollewe) highlights investor disappointment as its shares cratered by 20% yesterday because it announced the £136m bill to take it to market, which put it into a £68m annual loss. Shares in the company have fallen by a whopping 42% since it floated to great fanfare last year and some are saying that this poor performance will increase the likelihood of the company crawling back to investors to beg for more money. On the plus side, revenues were up by 25% and car sales rose by 26% as special editions remained in high demand. * SO WHAT? * This is not great given that the company also has to contend with Brexit as well, like all the other manufacturers. This will put a lot of pressure on the success of the new crossover SUV, the DBX, which starts production trials this April and June with a view to moving to full production at its new St Athan factory in south Wales early next year. If that model proves to be a damp squib, I suspect CEO Andy Palmer will start to get pretty nervous.

US home ownership climbs while things remain pretty bleak in the UK according to Nationwide and Foxtons…

US home ownership rate hits highest level since 2014 (Wall Street Journal, Laura Kusisto) cites the latest figures from the US Census Bureau that show the share of American households that own their own home increased to 64.8% in the final quarter of last year versus 64.2% a year earlier in further evidence that momentum is shifting away from renting back to owning. * SO WHAT? * This is

good news because new owners tend to power demand for new construction, renovations, furniture and real estate-related services and it also shows a greater confidence in the wider economy.

The picture is rather different in the UK, as evidenced by House price remain sluggish as Brexit nears, reports Nationwide (Daily Telegraph, Sophie Smith) which shows that price growth has slowed right down to 0.4% versus the same time last year according to Nationwide’s latest house price index. Funnily enough, London property slump pushes Foxtons to first annual loss since IPO (The Guardian, Julia Kollewe) also paints a negative picture of the current housing market and it’s all being blamed on Brexit uncertainty making buyers less willing to fork out. Unsurprising, but evidence for if you needed it.

And finally, in other news…

I thought I’d leave you today with an interesting guide to toast in A ‘burnt toast’ scale has been devised and it’s sparked a fierce dispute online (The Mirror, Zahra Mulroy https://tinyurl.com/y4j7o2mj). I’m more of a #4 or #5 man myself…

1. In POLITICAL NEWS, we see two faces of Trump and Pakistan/India escalates
2. In RETAIL NEWS, M&S shareholders balk at the price of the Ocado deal, Ted Baker issues a profits warning and Best Buy benefits from Fortnite
3. In INDIVIDUAL COMPANY NEWS, Spotify launches in India, Lego has a turnaround and Metro Bank gets hammered
4. In OTHER NEWS, I bring you a heart-warming story. For more details, read on…

So Trump is a peacekeeper, racist, conman and cheat (according to what you read) and tensions rise between Pakistan and India…

A day of jarring images for President Trump (Wall Street Journal, Gerald F. Seib) highlighted the contrast between images of Trump as Nobel Peace Prize winner-in-waiting for work with North Korea in the summit with Kim Jong Un in Vietnam or Trump the racist, conman and cheat as portrayed as being by his former personal counsel Michael Cohen back in DC. What a day for Donnie T! * SO WHAT? * In short, nothing’s been achieved yet in Vietnam – but the question is whether Trump will demand full denuclearisation from North Korea before lifting sanctions or will he take a stepped approach lifting specific sanctions here and there as gradual progress is made (surely it’ll be the latter?). The Cohen hearing, although monumental IMHO (I watched the first few hours of it as it was live-streamed yesterday and was transfixed – I NEVER watch that sort of stuff, but it was seriously riveting), seemed to be met with indifference by the markets despite the serious allegations being made. Basically, Trump’s Republican supporters concentrated on attacking Cohen’s character rather than asking any questions about the allegations. Cohen talked about payoffs for women who Trump had affairs with (which could imply a campaign finance violation as he tried to hide the expenditures) and knowledge of the imminent release of damaging e-mails. *** NEWS JUST IN *** the Trump/Kim talks in Vietnam have ended early due to no agreement being reached over the sanctions – Kim wanted them lifted completely and Trump said no

stolen from Hilary Clinton (which suggests he could be involved in the dissemination of stolen goods) as well as various racist remarks. If any of this can be proven, things could get interesting. For the moment, however, it seems that Trump’s Republican support appears to be robust as things stand, which is why markets didn’t tank.

Pakistan and India face worst conflict in decades (Financial Times, Amy Kazmin and Farhan Bokhari) shows that things are hotting up between the two neighbours as Pakistani forces shot down an Indian military jet and captured a fighter pilot. India said that it was carrying out a “pre-emptive strike” on a terrorist training camp in the disputed Kashmir region on Tuesday, but Pakistan denounced it and carried out a bombing raid of its own (although there was no loss of life). * SO WHAT? * Tensions between the two countries (who both have nuclear weapons) are ever-present but they escalated hugely following a suicide bombing on February 14th that killed 40 paramilitary police in India’s Kashmir region, which was claimed by the Pakistan-based Jaish-e-Mohammad (JEM) militant group. Pakistan’s Prime Minister, Imran Khan, immediately called for talks with India but there was no immediate response. Commercial flights were cancelled and airports close to the border were shut down. This is the most serious escalation in hostilities between the two countries since 1971. Looking further out, you do wonder whether this could take the edge off India’s stellar growth prospects in the short term. Cynically, this kind of thing will be great news for defence equipment and fighter plane manufacturers as spending on both sides could well increase (although I’m thinking that India’s got more money to splash than Pakistan at the moment).

The Marks & Spencer/Ocado tie-up gets official, Ted Baker has a profits warning and America’s Best Buy benefits from Fortnite…

So after the rumours and then confirmation of talks between the two sides, M&S chief defends ‘extravagant’ Ocado deal (The Times, Ben Martin and Miles Costello) puts a £750m price tag on the food-delivery tie-up between them but shows that investors weren’t that impressed with M&S’s plans on how it was going to pay for it. M&S said that it planned to raise as much as £600m via a rights issue and cut its dividend by a whopping 40% to pay for a 50% stake in Ocado UK’s retail division. M&S chief exec Steve Rowe defended it as a “fair price” and pointed to annual cost savings of £70m that the company would expect to extract from the deal, adding that “this is not a gamble”. Shares in M&S dropped by 12.5% but Ocado’s price rose by 2.90% on the news. In terms of the day-to-day, Can I buy Marks & Spencer food online today: Q&A (The Times) says that you won’t be able to buy M&S food on Ocado until September 2020 (at which time it will stop offering Waitrose groceries), that food will be sold online initially (but will be broadened to other products like clothing as time goes on) and that customers who want to buy Waitrose products will have to do so via Waitrose.com after September 2020. * SO WHAT? * It probably is a high price to pay, but when you’ve dragged your feet on e-commerce for as long as M&S has, then it’s what you have to pay for turning up late to the party. It’ll be interesting to see whether these initial grumbles gather momentum or whether investors eventually decide to just suck it up and get on with it. The pressure will now be on Waitrose to come up with a Plan B. Amazon, perhaps?? That might not fly, though, given Amazon’s ownership of Whole Foods and its existing agreement with Morrisons.

Ted Baker issues profit warning after writing off £5m of unsold stock (The Guardian, Rupert Neate) heralds some bad news for the clothing retailer despite last month reporting that it was all business “as usual”. The company said that profits for the year to the end of January would be about £63m versus previous expectations of £73.5m and does not include any costs incurred by the independent investigation into founder Ray Kelvin’s “hands-on” behaviour. The company said that the £10m shortfall was due to a £5m write-down of unsold stock, a £2.5m loss on forex and £2.5m of product costs following a systems upgrade. * SO WHAT? * Not great news for a company that’s used to knocking it out of the park and this trading update served to highlight the negative aspects of what’s going on. Now I may be overthinking things here, but it looks to me like the company could be “kitchen-sinking” bad news now to clear the decks for future performance. The main remaining unknowns now will be about how much it’s going to cost to solve the Ray Kelvin thing and whether he will be forced to resign or just sit on the naughty step for a while.

Meanwhile, on the other side of the Pond, Best Buy’s profit, comparable sales rise (Wall Street Journal, Khadeeja Safdar and Aisha Al-Muslim) shows how the popularity of Fortnite has translated into strong sales of headphones and other accessories at the electrical goods retailer. Sales at the company’s stores and on its website increased for the fifth consecutive year and chief exec Hubert Joly (what a great name!) said that “We continue to see a favourable consumer environment”. He also expects to benefit from the rise of 5G and other new tech like foldable smartphones. Its share price was up by 14% on the news. * SO WHAT? * This is great news from a retailer that has struggled in recent years, but what with its services revamp, the prospect of new tech tempting customers to spend and participation in other initiatives like health-monitoring services for aging consumers, it seems that things are going in the right direction. Maybe our own Dixons Carphone could learn a thing or two!

Spotify launches in India, Lego stages a turnaround and Metro Bank gets deeper into trouble…

Following what I said on Tuesday, Spotify takes next step towards world domination (Daily Telegraph, Natasha Bernal and Hannah Boland) highlights the launch of the streaming giant’s service in India this week despite being embroiled in a legal battle with Warner Music, the world’s third biggest record label, who want to block Spotify from offering Indian consumers songs from artists like Michael Buble, Twenty One Pilots, Green Day, Katy Perry and Ed Sheerhan. * SO WHAT? * Spotify now has 200m active users across the globe and its arrival in a market with over 1.3bn people has been a long time in coming. Although the Warner Music thing is a pain, I expect this will all be sorted soon enough as it’s not really in either side’s interest.

In other bits, I thought Lego defies toy industry woes to return to growth (Financial Times, Richard Milne) was worth mentioning because it announced strong sales and profits in an industry beset with problems due to the

success of its Harry Potter and Star Wars lines. Toy makers have continued to suffer from the continued onslaught of tablets and distribution problems following the demise of Toys R Us and others, but Lego appears to have turned a corner after two difficult years.

Then in Metro’s share price tanks after second cash call in seven months (The Guardian, Kayleena Makortoff) we see that the challenger bank’s share price fell even further (down by 26%!) to new lows after it shocked markets by announcing plans to ask investors for £350m just months after a previous cash call. It also admitted that it is currently under investigation by the Financial Conduct Authority and Prudential Regulation Authority over the major accounting failure (relating to the mis-classification of real estate loans) it first disclosed last month. The share price has now fallen by 50% since the accounting issue was flagged. * SO WHAT? * Tough times for the challenger. Investors hate being asked all the time for cash – unless it’s an electric car company run by Elon Musk ???? in which case they whinge but then pony up anyway because of all the promises of riches in the future! It’s unlikely they’ll feel the same about a boring old bank.

And finally, in other news…

I thought I’d leave you with this heart-warming story today: ‘Smallest ever’ baby boy born the size of an onion breaks world survival record as he is discharged from Tokyo hospital (Evening Standard, Michael Howie and James Morris https://tinyurl.com/yy8tbpvo). Brilliant.

1. In MACROECONOMIC NEWS, we look at the current options for Brexit and Trump’s wall
2. In NEWS ON CARS, Peugeot relaunches in North America and Fiat Chrysler invests in Michigan Jeep plants
3. In MOBILE PHONE NEWS, Xiaomi pledges to triple the number of European stores and there’s discussion about whether bendy phones are “a thing”
4. In RETAIL NEWS, M&S confirms talks with Ocado, the outlook for retail workers looks cloudy, Hotel Choc continues to rock and Walmart tries to muscle in on advertising
5. In OTHER NEWS, I give you an example of a Street View opportunist. For more details, read on…

So we’ve got to buckle up for more Brexit shenanigans and we look at the latest on Trump’s wall…

In May bows to MPs’ quit threats and signals Brexit delay (Financial Times, Jim Pickard) we see that Theresa May has made a U-turn and said that Brexit might be put on hold if MPs decide not to support a revised deal next month, bowing to pressure from pro-EU Conservative MPs who threatened to resign en masse. The current situation is such that MPs will be given a vote on a revised exit deal by March 12th but if they reject this, May would bring forward a second vote by March 13th where MPs would be asked if they wanted a no-deal Brexit (it is unlikely that this will be supported) and then there would be a third vote by March 14th on whether parliament would want a “short, limited extension” to the Article 50 exit process (May wants an extension to the end of June at the latest). The drama drags on…

House passes bill blocking Trump border emergency (Wall Street Journal, Joshua Jamerson and Kristina Peterson) gives us the latest on Trump’s border wall as the House of Representatives voted to stop the White House appropriating federal funds to build it. It is the first time since the 1976 National Emergencies Act came into force, giving Congress the power to stop an emergency declaration, that such a measure has passed the House (and it looks like the Senate is getting closer to the same conclusion). * SO WHAT? * Trump recently declared a state of emergency over the southern border that enabled him to appropriate $6.7bn from the military and other sources to secure the wall. He has already said that he will veto this move if it is passed by Congress after the Senate vote in the next few weeks and if THAT happened, it might be very difficult to overturn because to do so would require supermajorities in both the House of Representatives and the Senate with Republicans having to join up with their Democrat rivals. TBH, I think this is all so pointless! I think that they are chucking huge amounts of money and resource into something that is largely symbolic and that will ultimately be ripped down again by a future administration.

Peugeot relaunches in North America and Fiat Chrysler invests in Michigan…

Peugeot to relaunch in North America after 30-year absence (Financial Times, Peter Campbell) signals a return to the North American market as part of a broader plan by French owner PSA to diversify away from its European heartland. This news came as PSA announced a record set of results, which also saw Opel-Vauxhall’s first annual profit in 20 years after PSA bought the brands from General Motors in 2016. PSA wants to increase sales outside Europe by 50% by 2021 in the face of slowing sales in both Europe and China. The group will return to America with its Peugeot brand and will also launch Citroen in India and Opel in Russia. The company also raised its profit guidance following its strong performance. * SO WHAT? * It is interesting to note that PSA’s purchase of Opel-Vauxhall from GM gave them access to engineers in Germany who specialise in getting vehicles to meet US and Canadian regulations – which has clearly helped their cause. There are still worries about Brexit and PSA has said that it may have to close plants in Ellesmere Port and Luton, but the group’s chief exec Carlos Tavares added that it might become “the survivor of the auto industry in the UK” via its Vauxhall brand and pointed out that its other brands – Peugeot, Citroen and DS – have doubled profits in

the UK since the Brexit vote. While I think it’s great that PSA is trying to spread its wings, it is obviously going to be key to getting the offering right in each country – I think it’s less about the brand itself and more about the right vehicle line-up in the right place.

Fiat Chrysler to invest $4.5bn in Michigan Jeep plants (Financial Times, Peter Campbell) highlights a big investment in a new plant in Michigan and extending two existing ones to produce new Jeep models. In a move that will no doubt delight Trump, the carmaker said that its investment would create 6,500 new jobs and it would begin to produce new Jeep models – including hybrid and then electric models – at the three sites from next year. * SO WHAT? * This will no doubt be seen as vindication for Trump’s stance on supporting car manufacturing on American soil and is symptomatic of the current trend of customers “upgrading” from saloons to SUVs. Having said that, not all manufacturers are feeling quite so chirpy about the US market as General Motors last year mothballed four US plants and laid off 8,000 workers and Ford is moving some sites to just one production shift whilst cutting jobs. On the other hand, Toyota’s building a new site in Alabama with Mazda, Volvo began production this year at its new $1.1bn South Carolina plant and both BMW and VW have also pumped a lot of money into their US operations with a view to manufacturing electric vehicles in the US. FWIW, I think that any new plants have to have flexibility built into them as trends ebb and flow – SUVs are doing great right now, but if the oil price goes bananas again then smaller, more frugal cars will become de rigeur once more.

Xiaomi announces expansion in Europe and we look at whether bendy phones are here to stay or just a gimmick…

China’s Xiaomi set to triple its European smartphone stores (Daily Telegraph, James Cook) heralds the planned expansion of China’s Xiaomi into Europe as part of its overall strategy to take a larger slice of the global smartphone market. The company has 50 shops in Europe currently (including one in London’s Westfield shopping centre in White City) and plans to increase this to 150 by the end of this year. * SO WHAT? * This is an interesting move for the fast-moving Chinese electronics manufacturer, but it’s a competitive market with compatriots Huawei, Oppo and ZTE in addition to the likes of Samsung and Apple all fighting for consumer attention.

I think that smartphones either have to be cheaper – but keeping the same functionality that everyone wants – or more technologically innovative to get people buying once more. Bendy phones could be the answer, but the new crop just look far too expensive to garner any kind of widespread adoption at this moment.

Talking of which, Are foldable phones more than just a gimmick? (Financial Times, Tim Bradshaw) is a really interesting article that discusses the longer-term viability of this new technological advance as it appears to be the most radical recent innovation amongst a crop of new features on display at the current Mobile World Congress being held in Barcelona. * SO WHAT? * Although many believe that the $2,000 (and upwards) price tags of Samsung’s Galaxy Fold and Huawei’s Mate X will be too high for wider adoption, these innovative models are likely have a “halo effect” on each brand – and if the popularity of foldables catches on, it will leave other slower-adopter manufacturers like Apple behind.

Ocado and M&S confirm talks, prospects for workers in retail don’t look great but Hotel Chocolat and Walmart target growth…

M&S prepares for online fightback with Ocado tie-up (Daily Telegraph, Ashley Armstrong) confirms that the two companies are in talks to form a major joint venture that would give M&S a full online food delivery service after years of dragging its feet. Shares in M&S and Ocado rose by 3.2% and 11.7% respectively on the news which confirmed what everyone had sort of known anyway following recent rumours. Ocado/M&S tie-up spells bad news for Waitrose (Daily Telegraph, Ashley Armstrong) points out the downside of this potential deal for Waitrose, with overall theme being that Waitrose will suffer without Ocado because its own online offering is quite clunky in comparison and has less choice. * SO WHAT? * This sounds like a positive development for both M&S and Ocado and will enable Ocado to concentrate more on its fast-growing technology and solutions business while giving M&S much-needed (and much-delayed!) online capability. Clearly, we will need more detail, but the idea sounds pretty good at this stage.

In other retail “bits”, Retail workers facing high unemployment, thinktank finds (The Guardian, Richard Partington) cites findings by the Resolution Foundation thinktank which show that workers in the retail sector are more likely to face unemployment rather than finding another job as job losses continue to increase on the high street, but on a more positive note, Hotel Chocolat looks to prime sites as UK sales soar (Financial Times, Alice Hancock) shows that the purveyor of posh choc is seeing the current high street malaise as an opportunity to snap up prime sites. Chief exec Angus Thirlwell said he was “excited by the smell of blood in the water when we find conditions like this and prime spaces coming into our orbit” as his company continues to go from strength to strength following its latest results.

I thought that Walmart joins Amazon in chase for ad dollars (Wall Street Journal, Sarah Nassauer) was also worth mentioning as the retailing giant announced plans to tempt suppliers and other marketers with its own ad space and shopper data a la Amazon in order to boost ad revenues. * SO WHAT? * Thus far, Walmart has used an outside firm to sell space on its websites but it is now bringing this in-house. Clearly it sees an opportunity and has the heft to back up its efforts. I can’t see it realistically competing with Amazon, but even a small slice of the ad revenue action could be a nice little earner.

And finally, in other news…

I thought I’d leave you today with a story about someone who decided to take an opportunity when he saw it for global immortalisation in Google Maps users spot something very rude in background of Street View shot (The Mirror, Zoe Forsey https://tinyurl.com/y4otob32). There was certainly a bit of quick thinking involved there…

1. In US-CHINA RELATED NEWS, Trump keeps everyone guessing and US companies pause China investment
2. In BIOTECH NEWS, GE sells its biotech business for $21bn and Crispr Therapeutics makes a breakthrough
3. In INDIVIDUAL COMPANY NEWS, Spotify has India troubles, Tesla has SEC troubles and Hammerson has retail troubles
4. In OTHER NEWS, I bring you today’s key question – is Theresa May better at pool or dancing? For more details, read on…

So Trump keeps everyone guessing and US companies hold off on China investment…

Analysts urge caution over hopes for US-China trade solution (The Guardian, Richard Partington) shows that Trump likes to keep everyone guessing as he told a group of US governors yesterday that a trade deal “Might not happen at all” although he then added “But I think it’s going to happen and it could happen fairly soon. The relationship [with China] is great”. As a result, some economists cautioned against getting too excited because an agreement is far from a foregone conclusion. * SO WHAT? * It’s all noise until we see something signed and in black-and-white – and even then it’s not over because, as I said yesterday, China can be a bit slippery when it comes to actually living up to promises.

Given the whole trade war thing, it’s hardly surprising to see US firms dial back China plans amid trade fight (Wall Street Journal, Chao Deng and Julie Wernau) as an annual survey by the American Chamber of Commerce in China shows that about 32% of the 314 US companies that

responded said they have either no plans to expand investment in China or will expand less this year, versus 26% last year. The survey was conducted between November 13th and December 16th – and Trump declared the “ceasefire” in early December. The same survey also showed that almost 75% of companies expect US-China relations to either get worse or remain unchanged this year, with 28% postponing or cancelling decisions because of trade tensions, with 19% saying that they are looking to source and/or assemble products outside China. * SO WHAT? * China is not the insatiable growth engine it once was and many large US companies have been going lukewarm on their China businesses. McDonald’s and Hewlett-Packard have reduced their stakes in Chinese businesses and Viacom is currently in talks to sell a majority stake in some of its Chinese operations. It just seems to me that, in previous years, companies chucked money at China no matter what – and now, because it is slowing down, they are looking more closely at what they actually have and are becoming more careful. Clearly, there are still opportunities there, but the prospect of corporate espionage, the dangers of becoming a bargaining chip (like Apple) in political negotiations and the unpredictable enforcement of legislation all make investment there rather trickier these days than the no-brainer that it used to be.

GE disposes of its biotech unit and Crispr Therapeutics makes a big step…

GE to sell its biotech business to Danaher for $21 billion (Wall Street Journal, Thomas Gryta) heralds a chunky disposal by GE to Danaher – in cash – of its fastest-growing business. The proceeds will be used to pay down some of GE’s $100bn debt but marks a change in direction for CEO Larry Culp (who used to be CEO at Danaher for about 14 years) because it looked like he was lining the company up for a spinoff IPO later this year as part of its entire healthcare division. Now that it has been separated out, the IPO of the rest of the division that makes MRI machines and hospital equipment will have to be re-visited as Culp focuses on pushing through the Danaher deal, which is expected to complete in the fourth quarter. * SO WHAT? * GE has been struggling in the last couple of years as it has been hit by falling profits in its core power business and losses in its GE Capital unit which prompted a change in CEOs, two dividend cuts and a renewed focus on its aviation and power divisions. GE previously said it would raise $30bn in cash from asset sales, so this one disposal to Danaher has gone a long way to meeting that target – but there will be more to come. It closed the sale

of its transportation business to Wabtec Corp yesterday and it has also been reducing its stake in oilfield services firm Baker Hughes. Some will look at the $21bn disposal as a desperate move (and therefore conclude that there are more problems behind it), but others will see it as a decent stride towards what the company is trying to achieve. GE shares are now 65% above their December low but 25% short of the level they were at a year ago. There is more work to be done, but this seems to be a move in the right direction.

In Crispr Therapeutics treats its first human with gene editing (Financial Times, Hannah Kuchler) we see that the Boston-based biotech company announced that it had treated its first human suffering with the blood disorder beta thalassaemia (which affects the movement of Oxygen around the body and restricts growth) with its Crispr gene-editing technology. The process involves using stem cells to created blood cells which are then collected, edited and then placed back into the body in a stem cell transplant. The company is also testing the same technique to treat sickle cell disease. * SO WHAT? * This is a major breakthrough and the company’s share price shot up by 25% on the news. Biotechs that specialise in gene therapies seem to be really hot right now – as recent news of Roche’s $4.8bn acquisition of Spark Therapeutics (which I mentioned yesterday) shows.  No doubt there will be more M&A activity in the sector.

Spotify hits India problems, Tesla his SEC problems and Hammerson has retail problems…

Warner legal barrier to Spotify’s hopes of expanding into India (Daily Telegraph, Natasha Bernal) highlights a blip in Spotify’s expansion as recording company Warner Music Group launched a legal action in India to block it from offering songs from artists including Katy Perry, Bruno Mars and Ed Sheeran. * SO WHAT? * This is a right pain for Spotify given that it is due to launch in India imminently. It has been the culmination of months of acrimonious negotiations between the two companies and is a fly in the ointment for Spotify as it tries to gain a foothold in a growth market that saw music sales climb by 17% in 2017. No doubt it will make things work somehow, but for the moment this will be a bit of a pain.

SEC asks Manhattan federal court to hold Elon Musk in contempt (Wall Street Journal, Dave Michaels and Tim Higgins) highlights Musk’s latest run-in with authorities as the Securities and Exchange Commission asked a federal judge to hold Musk in contempt over tweets he made last week about Tesla’s 2019 production volumes because he violated a condition of his settlement last year where he agreed to run any price-sensitive announcements by them. * SO WHAT? * This is a pain for Tesla, but the punishment is unlikely to be too serious because he issued a

clarification tweet shortly afterwards. Maximum punishment for something like this could be a ban on him being an officer of a public company,  but it’s more likely to be something that further restricts his behaviour. It’s difficult to tell whether he does stuff like this to bring the attention onto himself (and away from questions about vehicle production) or whether he just enjoys p!ssing off authorities.

There’s more evidence of the travails of the UK high street in Hammerson and investor ‘in this together’ amid asset sales (The Times, Louisa Clarence-Smith) as shopping centre landlord Hammerson has stepped up disposals of its retail parks and other assets following pressure from activist investor Elliott Advisors, which owns over 5% of the company. Most of Hammerson’s properties are in Britain (where assets include the Bullring in Birmingham and Brent Cross in London), but it also operates in France, Ireland, Spain and Germany. It made £570m of disposals last year and plans on selling £900m-worth this year. * SO WHAT? * In return for agreeing to up the pace of disposals and setting up a committee to oversea it all, Elliott has promised not to vote against any ordinary resolutions at the upcoming general meeting and has put a ceiling on its voting and economic interests for the next 12 months. This really is a sign of how bad things are getting in UK retailing with such a high profile landlord throwing the towel in on so many assets. Still, if they have to focus in order to survive, then so be it. It would be interesting to see what the other side of this is – are rivals like Intu hoovering up its unwanted assets or are they going to smaller landlords scaling up? I’ll let you know when I know!

And finally, in other news…

I think we’d all agree that Theresa May is having a tough time at the moment – so it’s good to see her unwinding in Theresa May and Giuseppe Conte practice pool (BBC https://tinyurl.com/y5b4fp23). I must admit that part of me wanted to see her being master of the baize and chalking her cue with practiced aplomb – but sadly I was disappointed. The question is what is she better at – pool or dancing? It’s a close call…maybe she could challenge him to a game of “arrers” at the local pub next time ????

1. In TRADE WAR NEWS, Trump decides to push out the tariff deadline
2. In NEW INNOVATION NEWS, Microsoft makes AR strides and Huawei is the latest to announce a bendy phone
3. In CAR-RELATED NEWS, BMW-Daimler’s ride-hailing unit has big expansion aspirations and Aston Martin is about to publish its first full-year numbers
4. In INDIVIDUAL COMPANY NEWS, Roche nears a big deal and KKR eyes up Asda
5. In OTHER NEWS, I bring you two friends reunited. For more details, read on…

So Trump delays the tariff deadline for China…

Trump to delay Tariff increases on Chinese imports (Wall Street Journal, Bob Davis and Lingling Wei) heralds a significant move by President Trump who said yesterday that he would push out the deadline for tariffs on Chinese goods that was originally scheduled for the end of this week. He didn’t say what the new deadline was, but he did say that there had been “substantial progress” on sticky

issues including “intellectual property protection, technology transfer, agriculture, services, currency, and many other issues”. He also intimated that if things were to continue to progress, the US would meet with President Xi Jinping to “conclude an agreement” that could run to over 100 pages. * SO WHAT? * It ain’t over till it’s over – and there is still a lot to sort out. The other major issue is how each side can monitor compliance with any kind of agreed deal because China has thus far had a poor record in following through on its promises. We’ll just have to see how this pans out. Chinese markets were up a bit in early trading on this development.

Microsoft makes advances in AR and Huawei is the latest company to reveal a bendy phone…

Microsoft proves pioneer in ‘augmented reality’ with Hololens 2 (Financial Times, Tim Bradshaw) shows continued advances in wearable tech as Microsoft edges ahead of a pack including the likes of Apple, Facebook and Snap – who are all trying to develop augmented reality glasses (remember Google Glass and the ridicule attached to the “glassholes” who wore them?) – as it unveiled the latest version of its “mixed reality” HoloLens headset at the Mobile World Congress in Barcelona yesterday. Microsoft is aiming this creation squarely at corporate and commercial consumers and it combines physical and digital worlds through its transparent visor – the first version of which is currently being used by factory, warehouse and other industrial workers who can’t sit behind a PC. One really interesting example of this at work is Thyssenkrupp, which has given its elevator repair engineers the HoloLens so they can see schematics in the display and communicate with colleagues back at the office whilst remaining handsfree. The HoloLens 2 will be commercially available later this year for $3,500 and comes with a new optical system which more than doubles the field of view versus the older version, is less bulky and has faster chips. * SO WHAT? * This sounds very exciting, no? Demand for industrial use is certainly there and a more

user-friendly product is good news but it would seem that we are still quite a way from such devices being more prevalent for consumer use given tech and cost restraints. However, I would have thought that industrial usage could increase to an extent that any future advances will eventually filter through to a cheaper and more comfortable consumer version. Google Glass was definitely ahead of its time!

Only days after Samsung unveiled its bendy phone, Huawei unveils Mate X foldable phone at Mobile World Congress (Financial Times, Tim Bradshaw) shows that the race is on to persuade rich punters to part with over $2,000 for a phone (the Mate X will cost an eye-watering $2,600). Richard Yu, chief exec of the company’s consumer business group, said that it was the “world’s fastest foldable 5G phone” due to its in-house processor and modem and was much slimmer than Samsung’s Galaxy Fold (11mm versus Samsung’s 17mm). * SO WHAT? * Sounds great, but this is surely way too expensive for ordinary punters to buy. The interesting thing here is that attendees were allowed to handle the phone – something that Samsung did not allow – which has prompted some observers to say that they think the Galaxy Fold is not quite ready versus Huawei’s offering. As I said before, if Samsung and now Huawei are offering bendy phones at this price point, I dread to think how much Apple’s version will cost when it comes out! I like the overall idea, however, as this sort of technical innovation could really prompt people to upgrade their phones – just not at this price.

BMW-Daimler’s ride-hailing venture has big ambitions and Aston Martin is on the verge of reporting its first full-year numbers…

BMW-Daimler ride hailing unit plans ‘tenfold’ expansion (Financial Times, Patrick McGee) highlights the ambitions of Free Now, the $1bn “urban mobility” joint venture between German carmakers BMW and Daimler, as it announced plans for a roll-out in almost 90 cities this year and to 900 in the next three years. The two big rivals have invested €1bn in joint ventures that cover areas including ride-hailing (Free Now, five brands in 130 cities), scooters (Hive, currently in Lisbon but expanding to Athens, Vienna and Paris shortly), car rentals (Share Now with 4m customers in over 30 cities), parking (Park Now with 27m users across 1,100 cities in North America and Europe), electric car charging (Charge Now, which is a payment app for electric car charging with over 100,000 charging stations across Europe) and booking public transport (Reach Now) and believe that the key to success is building scale. * SO WHAT? * Clearly this venture isn’t doing things by halves and I guess that by broadening its offering at this stage it is allowing itself to see what works and what doesn’t. I thought it was very interesting to see the head of Free Now saying “If we really want to get cars off the street and we really want people to stop buying their own cars, we have to have a much denser network”, which sounds quite

surprising given who Free Now’s owners are! Still, car manufacturers around the world are in various stages of preparation for what seems to be a car ownership apocalypse where consumers opt not to own cars but to hire them instead. This has led to them investing in all sorts of transportation-related ventures in a bid to find profitable areas that will offset the negative impact of the abandonment of its traditional model. I guess if you throw enough mud, some of it will stick because at the moment, I think the companies are effectively chucking money into a void. Still, I suppose that they have to be seen to be doing something!

Aston Martin to publish first full-year figures since float (The Guardian, Rob Davies) looks ahead to the company’s first full-year figures due out this Thursday as focus will turn to their performance following a 36% share price fall since it floated in October. Although the share price has been disappointing, the company has performed pretty well since the float with third quarter figures showing an 81% increase in year-on-year revenue with a 93% increase in underlying profit with the company on course to meet full-year targets. * SO WHAT? * It’ll be interesting to see how the company performs – especially with Brexit (which CFO Mark Wilson said could be “semi-catastrophic” for the company) around the corner. Although you could say that the company will be insulated against worsening economic conditions due to the wealth of their clientele, uncertainty on the macro outlook is never good. The company has made contingency plans for a no-deal but, as is the case with everyone, no-one knows what’s going to happen and we will just have to sit tight and wait.

Roche closes in on a $5bn acquisition and KKR appears to be eyeing Asda…

Roche agrees to buy biotech firm Spark Therapeutics (Wall Street Journal, Dana Cimilluca, Dana Mattioli and Jonathan D. Rockoff) heralds the acquisition by the Swiss drugmaker of Philadelphia biotech company Spark Therapeutics for about $4.8bn in an effort to boost its treatment capabilities in gene therapies. The deal is expected to close in the second quarter and was struck at a 122% premium to Spark’s closing price after Friday training. * SO WHAT? * This is an example of how advances in gene therapy have attracted increasing amounts of attention as the likes of Pfizer and Novartis have also been trying to expand their offerings of such

treatments. For example, Spark’s Luxturna treats a condition that can cause blindness and was the first gene therapy for an inherited disease to get FDA approval and it is currently developing a gene therapy to treat inherited blood disorder haemophilia. How amazing is this?? Anyway, I suspect there will be more biotech acquisitions by big pharma companies as they try to restock their drug pipelines.

Following all the recent “Sasda” drama, KKR eyes bid for Asda (The Times, Gurpreet Narwan) shows that the American private equity group is circling the supermarket following the potential imminent collapse of its deal with Sainsbury’s. It is said to be working with Tony De Nunzio, a former Asda chief exec, who would become chairman if a KKR bid came to fruition. * SO WHAT? * If KKR managed to snap up Asda, it would be the first ever time that a big four supermarket chain has fallen into private equity ownership. A sign of the times as supermarkets continue to suffer??

And finally, in other news…

Alas, I don’t have an amusing story to end with today – but I do have a heart-warming one in the form of Slovak-speaking parrot found on airport runway reunited with owner (Sky, Lucia Binding https://tinyurl.com/y36o98zt). Ahhhhhhh!

1. In GLOBAL TRADE-RELATED NEWS, Trump softens on Huawei, Maersk warns on trade war escalation and German export orders hit new lows
2. In CONSUMER GOODS NEWS, Kraft-Heinz has a poorly-received reveal and Johnson & Johnson has talc issues
3. In INDIVIDUAL COMPANY NEWS, Apple and Goldman Sachs work on a credit card, Pinterest aims for a summer flotation, Tesla fields another blow and both Purplebricks and Centrica shares get pummeled
4. In OTHER NEWS, I bring you something that could save your life. For more details, read on…

So Trump softens on Huawei, Maersk stays nervy and German exports weaken…

Donald Trump appears to offer an olive branch to Huawei (Financial Times, Kiran Stacey, Demetri Sevastopulo and Camilla Hodgson) heralds a very interesting development as Trump tweeted that “I want the United States to win through competition, not by blocking out currently more advanced technologies”, signalling a potential softening of his administration’s hard line stance on Huawei. * SO WHAT? * This tweet is now been interpreted as potentially being a precursor to some kind of trade deal – which it might be – but I have to say that surely a lot of the damage has already been done by his administration who have been touring the world slagging off Huawei. This has already resulted in major seeds of doubt being planted in various countries to the extent that Huawei’s tech has been banned or blacklisted in many places. So why this apparent softening? Maybe it’s intended to be a symbolic climb-down so that Trump can look like a benign statesman and Xi can make it look like a US concession that he won through diplomacy. I do, however, think that some kind of compromise on the Huawei thing is a necessary step towards any kind of agreement.

In Maersk chief expects escalation of global trade war (Financial Times, Josh Spero) we see the Soren Skou, chief exec of AP Moller-Maersk, the world’s biggest container shipping line, saying at his company’s full year results announcement that he expects the global trade war

to continue even if the US and China come to an agreement and that “the US moves its attention more on Europe and we have another round there”. Skou offered a downbeat assessment of the coming year due to trade tariffs, volatile fuel prices, the switch to more expensive low-sulphur fuel from 2020 and forex movements. On the plus side, the company managed to increase earnings and reduce debt last year by doing things like selling Maersk Oil, its shares in Total and getting cash from separating out Maersk Drilling. * SO WHAT? * It’s definitely worth listening to what Maersk says when they comment on world trade as their performance is a closely watched bellwether. I get the feeling that everyone is so focused on the US-China talks that they are forgetting the potential bun fight that could be coming up between the US and Europe. Just THINK of the concessions that the US could force in negotiations when Europe is in flux with EU elections, Brexit and weakening economic conditions.

German export orders sink to six-year low as bloc weakens (Daily Telegraph, Helen Chandler-Wilde) cites the latest Purchasing Managers’ Index (PMI) for German manufacturing which shows a contraction in February that was largely blamed on slowing demand from Asia. Export orders are now at their weakest levels since 2013. The services sector did well, but this only came after January hitting its worst levels in five and a half years. Jan von Gerich of Nordea Bank voiced his concerns thus: “The bad news is that there are no signs that the weakness in the more cyclical German manufacturing sector would be temporary, and the outlook is frankly scary. In light of these numbers, it is crystal clear that the challenges currently facing the German economy go well beyond the car sector”.

Kraft Heinz gets probed and J&J has talc problems…

Kraft Heinz swings to loss and discloses SEC probe; shares plunge (Wall Street Journal, Annie Gasparro) highlights some difficult announcements from the company as it wrote down the value of its Kraft and Oscar Mayer brands by a whopping $15.4bn, revealed that it was being investigated by federal securities regulators and took a knife to its dividend – all of which led to a 20% drop in the company’s share price.  It wrote down its brand values due to customers shifting to simpler ingredients and healthier food and the Securities and Exchange Commission is currently investigating the company’s accounting practices regarding the procurement of ingredients and other expenses that went unrecorded in previous quarters. * SO WHAT? * The company will no doubt be embarking on a sale of brands which its deems have “no clear path to competitive advantage” and a merger with another food maker is not out of the question. It did try to merge with Unilever a couple of years ago but was rebuffed – and since then, Kraft Heinz has been quiet on this front.

It never rains but it pours in Johnson & Johnson subpoenaed in baby powder probe (Financial Times, Hannah Kuchler) as the company has now received subpoenas from the US Department of Justice and the US Securities and Exchange Commission who are investigating allegations of asbestos contamination in its baby powder products. This comes at a very difficult time for the company following a December when Reuters reported that the company had known for decades that there was asbestos in baby powder and when a judge in Missouri awarded 22 women $4.7bn who said that the asbestos in baby powder and other J&J talc-based products caused their ovarian cancer. Johnson & Johnson hit back with “Decades of independent tests by regulators and the world’s leading labs prove Johnson & Johnson’s baby powder is safe and asbestos-free, and does not cause cancer. We intend to co-operate fully with these injuries and will continue to defend the company in the talc-related ligitation”. * SO WHAT? * This could turn into a nightmare of epic proportions for the company – and if it does not manage to convince the public of its innocence I think we could potentially see huge class action lawsuits. I mean for instance, I don’t know anyone who has had kids who will not have used J&J’s baby powder at some point or other – and they will have used it because of the trust in the J&J name. If that has been based on lies, then it could cost the company very dearly indeed.

Apple and Goldman Sachs team up on a credit card, Pinterest announces plans to list, Tesla gets dented and both Purplebricks and Centrica faced a tough day of trading…

Apple plans credit card with Goldman Sachs (The Times, Tom Knowles) brings our attention to plans for Apple to launch a credit card with Goldman Sachs in the next few months that would link to the iPhone. The idea is that this would be a new addition to the Wallet App and would give you extra features like letting users set spending goals, track rewards and manage balances – something along the lines that Monzo and Revolut are already offering. * SO WHAT? * This new development is part of a broader push into increasing revenues for Apple’s services division as handset sales continue to mature. Apple would get to potentially boost the use of Apple Pay and Goldman would increase its exposure to younger, digitally-savvy “ordinary” consumers as it continues to broaden its offering away from its traditional investment banking business.

Following on from yesterday’s announcement by Lyft to

float, Pinterest set for summer flotation (The Times) shows that the American social media site filed paperwork with the SEC for an Initial Public Offering (IPO) that may give it a valuation of at least $12bn. If things proceed smoothly, the flotation could happen in June. * SO WHAT? * It seems that tech companies are getting more confident due to a beginning-of-year recovery that followed a pretty disastrous sell-off in the final quarter of last year. I get the impression that there’s a lot of pent-up IPO action that might have happened last year spilling over into this year.

There were some rather dramatic share price moves yesterday with Purplebricks shares plunge 40% on lower revenue forecasts (The Guardian, Rob Davies) detailing a massive fall for the UK’s biggest online estate agent following a dramatic cut in its revenue forecasts and the sudden departure of its US and UK bosses and Centrica hits 20-year low (Daily Telegraph, Vinjeru Mkandawire), which highlights investor shock at British Gas owner Centrica’s announcement that its cashflow could take a big hit this year. * SO WHAT? * Purplebricks cited sluggish growth in its US and Australia business as the main reasons behind the revenue drops and Centrica is facing all sorts of problems including a haemorrhaging of customers, declines in nuclear output and a drop-off in volumes at its oil and gas division. Given all these issues, some investors are assuming that a dividend cut is increasingly likely.

And finally, in other news…

I thought I’d bring your attention to this: How the simple 40 push-up test could save your life – if you’re a man (The Mirror, Zahra Mulroy). Drop down and give me forty!

1. In CAR-RELATED NEWS, we look at Honda fallout, emissions difficulties, and the latest on Lyft, Uber and Tesla
2. In RETAIL-RELATED NEWS, “Sasda” looks dead, retailer landlord Intu suffers and so does Laura Ashley
3. In INDIVIDUAL COMPANY NEWS, Samsung launches a bendy phone
4. In OTHER NEWS, I bring you some haircut inspiration . For more details, read on…

So we look at Honda implications, emissions challenges, Lyft’s “lysting” on NASDAQ, Uber’s delivery plans and Tesla’s revolving door…

Honda closure fallout to hit scores of companies (Financial Times, Michael Pooler) looks at some of the implications of Honda’s announcement to close its Swindon production facility, with the loss of 3,500 jobs. Apparently, the general rule is that each job in a car assembly plant supports between one and four additional jobs elsewhere and the impact is likely to be particularly heavy on small and mid-sized businesses with high exposure to the Japanese company. This news is the latest kick in the teeth to an industry that is currently in flux due to tighter new regulations, changing ownership patterns and weakening demand. * SO WHAT? * Things could be worse (but not by that much). Britain’s car manufacturing industry hit a low when MG Rover went bust in 2005 which prompted a major overhaul of the whole supply chain. This has led to domestic auto part production going in the right direction in recent years with the average domestic content in a UK-built car going up from 36% to 44% since 2011. Having said that, there’s still a gap between this and cars built in Germany and France which contain nearer 60% of locally-produced parts. The other good thing is that the shut-down isn’t just happening overnight – there will be a tail-off – which means that suppliers will at least have some time to steel themselves and/or change their business models. HOWEVER, I’m trying to put a positive spin here on a very negative development – the fact is that Honda’s announcement could be a catalyst for other manufacturers to follow suit and that would be very bad.

Carmakers warn of huge hit from deadline for EU emissions tests (Financial Times, Jim Brunsden and Patrick McGee) highlights continued difficulties facing manufacturers who are trying desperately to comply with “real world” emissions limits for nitrogen oxides of 80mg per litre. Manufacturers say they need more time to comply, saying that up to 7.5m cars slated for production by the end of February next year would not be able to meet these limits. Erik Jonnaert, secretary-general of the European Automobile Manufacturers Association (the ACEA – it’s in French, don’t worry ????), said that if the EU court stuck to its guns, “the impact could indeed be enormous [and could] create legal uncertainty for the entire industry”. The ACEA also warned that vehicles “would have to undergo extensive re-engineering – something which would require far more time than is allowed by the judgment of the court”. * SO WHAT? * This is just another example of the current problems facing car manufacturers at the moment. Car makers are obviously going to claim maximum doom-and-gloom to give them the best possible breathing space to make changes whereas the environmental lobby want to keep the pressure on to force change. Whichever way you look at it, the tighter emissions regulation is costing manufacturers money at a time where

it ain’t exactly growing on trees for them.

In Lyft is planning to list shares on Nasdaq (Wall Street Journal, Corrie Driesbusch and Maureen Farrell) we see that the ride-hailing company is planning a flotation by the end of March after much hype. The timing is better than it was when Lyft originally filed with the Securities and Exchange Commission (SEC) last year in the midst of a tech downturn as the NASDAQ has risen by 13% so far this year but Lyft founders to tighten grip with supervoting shares in IPO (Wall Street Journal, Maureen Farrell and Cara Lombardo) warns that although founders John Zimmer and Logan Green (president and chief exec, respectively) only hold less than 10% of the company, they are working together with underwriters and lawyers to create a new class of shares with extra voting powers. * SO WHAT? * There’s been a lot of hype surrounding Lyft and Uber, particularly around who’s going to get to market first. Well, Lyft is obviously going to win that race but the founders also look like becoming the latest Silicon Valley entrepreneurs to get way more influence over their company than their shareholding would imply. Facebook, Alphabet and Snap are all high profile examples where founders have been able to keep an iron grip on their companies due to these unusual share structures and when things are going well, no-one really cares. It’s only when things start going down the toilet that shareholders realise that they have no sway over what is going on with the company, so it’ll be interesting to see what investors think of these plans as there is a lot more scepticism now about these structures. It may yet prove to be a good thing that Lyft gets to market first as any existing goodwill in this regard could start to dry up somewhat before Uber floats.

Talking of Uber, Uber to cut food delivery fees in battle with Deliveroo and Just Eat (Financial Times, Aliya Ram and Shannon Bond) heralds the latest development in the battle of the deliverers as competition continues to intensify with its rivals. Uber Eats, the company’s food delivery arm, will limit the fees it charges to restaurants to 30% of the value of an order versus the current maximum of 35%. It will also let restaurants use its app but make their own deliveries. The pressure was always on – but it’s just gone up a notch!

Tesla’s top lawyer steps down after just two months in the job (Daily Telegraph, Hannah Boland) highlights yet another senior departure at Tesla, with general counsel Dane Butswinkas returning to his law firm Williams & Connolly after describing the job as a “unique and inspiring opportunity” when he was appointed at the end of December. He’ll continue to work with Tesla, but as an “outsider”. * SO WHAT? * It must be pretty windy in Tesla’s reception area with the continued departure of senior execs turning the revolving door into a something resembling a fan. I think that investors can forgive some staff turnover given the pressure that the company is under, but then again I am sure many are hoping to see things on a more even footing in the not-too-distant future. The more senior bods leave, the more uneasy investors will feel as they will interpret this as Elon Musk being unable to hold on to top people.

“Sasda” dies while Intu and Laura Ashley suffer…

Just in case you found yourself living under a rock yesterday, Sainsbury’s-Asda merger in doubt over ‘extensive competition concerns’ (The Guardian, Julia Kollewe and Jasper Jolly) shows that the initial findings of the Competition and Markets Authority (CMA) on the Sainsbury’s/Asda merger pretty much put the mockers on hopes of the deal going ahead, despite the fact that a final report is not due until April 30th. The CMA said in a statement that the merger would create a “substantial lessening of competition at both a national and local level” on both groceries and petrol. It added that major store and asset disposals would be needed to even stand the faintest chance of going through but many investors think that this would cut too deep. * SO WHAT? * Sainsbury’s shares fell by 15% on the news, but other retailers who stood to benefit from picking up its asset disposals also suffered, with Morrisons falling by 4.6%. I still think that there is time for this deal to fly but it will be a major test of resolve for the parties concerned and how deep they really want to cut things to keep the party going.

There’s more evidence of a tricky retail climate in Intu

slumps to £1.2bn loss on lower shopping mall valuations (Daily Telegraph, Jack Torrance) as shopping centre owner Intu announced a massive annual loss due to its properties (which include Lakeside in Essex and Manchester’s Trafford Centre) shedding £1.4bn of their value and a scrapping of its final dividend. Investors didn’t take kindly to this and sent Intu’s shares down by 7.8%. * SO WHAT? * Although there is obviously potential for more downside due to general weakness in the retail sector and continued Brexit uncertainty, I would have thought that this is going to be the big downgrade. I suspect that investors will be trying to guess which landlord(s) will be the next to do something like this.

Talking of tricky retailing, Laura Ashley lays bare decline in sales (The Times, Gurpreet Narwan) shows a weak first-half for the homewares and fashion retailer. Group sales fell by about 9% but furniture and decorating saw sales falling by 14% and 13.5% respectively over the six-month period. * SO WHAT? * This bad news comes at a time when the company is trying to effect a turnaround under new chief exec Andrew Khoo, including the closure of 25% of its 146 high street shops and an expansion in China. He said that “Given the continued market turbulence and having reviewed the revised management forecast for the second half-year, the board now holds the view that the performance for the entire year will fall short of market expectations”. The shares fell by over 13% on the news.

Samsung has a new phone in the fold…

I know I’ve been going on about it for a while now – so imagine my “joy” when I saw Samsung has new phone in the fold (The Times, Tom Knowles) as the South Korean conglomerate announced its first foldable handset, called the Galaxy Fold, at an event in San Francisco for the bargain (!) price of $1,980 when it hits the shops in April.

The device’s 4.6inch screen folds out to a 7.3inch tablet screen – how crazy is that?!? It has six cameras and allows three apps to be open at the same time meaning that users can look at their e-mails while being on a video call and surfing the web. * SO WHAT? * Samsung released other phones as well, but this is the one that got the attention! I think that foldable phones could be the tech development that gets people excited again – but not at this price. That is just eye-watering. Still, pretty cool. If Samsung is going to charge $1,980, I dread to think what Apple is going to charge when it comes out with something bendy!

And finally, in other news…

Tired of the same old haircut/style? Want some inspiration? How about Vietnamese hairdresser giving out Trump and Kim cuts (Sky News, Emily Mee https://tinyurl.com/yxz3p53b). Impressive.

1. In MACROECONOMIC NEWS, Trump makes positive noises on China trade talks, Germany’s trade surplus increases chances of retaliation, Germany sides with France against the EU and the UK labour market remains tight
2. In RETAIL/HIGH STREET NEWS, Walmart triumphs, Asda sales slow, Iceland freezes and Greggs is on a roll
3. In INDIVIDUAL COMPANY NEWS, HSBC has a ‘mare
4. In OTHER NEWS, I bring you an interesting service business. For more details, read on…

So Trump softens on China, Germany’s trade surplus puts it in the crosshairs, Germany and France align over EU competition and the UK labour market stays tight…

Trump eases off hard deadline for China tariffs (Wall Street Journal, Bob Davis and Alex Leary) will no doubt get people excited because Trump said to reporters yesterday that the self-imposed deadline to conclude talks with China on tariffs by March 1st was “not a magical date”, implying that there could be a delay in bringing those tariffs in. * SO WHAT? * This could mean that the deadline will actually be pushed forward to an expected Trump-Xi meeting to take place within the next few weeks. If nothing is achieved, Trump has threatened to raise taxes on $200bn-worth of Chinese goods from 10% to 25%. No doubt all the US negotiators so far will be frustrated by Trump’s latest remarks as they have been banging on about having a hard and non-negotiable deadline all along, but he seems to like using this tactic of undermining his underlings in an attempt to show them that he’s the daddy.

German surplus stokes talk of trade war (The Times, Oliver Moody) highlights Germany’s massive (over €100bn) trade surplus – the world’s largest and bigger than the second and third biggest surpluses from Japan and Russia combined – which could hand Trump a very easy excuse to launch a trade war with Europe as he’s currently considering putting a 25% tax on car imports. Mind you, Timo Wollmershauser, senior economist at the Institute for Economic Research in Munich observed that “the EU has exported more goods to the US than vice versa for many years and Germany is responsible for a lot of that, but the US sells far more services to the EU than the other way around and achieves big profit transfers from foreign investment in America. If you put all this together, the trade balance between the US and EU points to a small surplus in favour of the Americans”. * SO WHAT? * I suspect that Trump will use the stat that aligns most closely to his

agenda and so he may well just concentrate on the trade surplus and play to his supporters’ gallery. We’ll see soon enough.

In Germany backs French call for right to overturn EU merger decisions (Financial Times, Guy Chazan) we see that Germany has put its support behind France’s calls for an overhaul of EU competition law that would give member states the right to overturn merger decisions made by the European Commission. This has all come about because of the recent failure of the Seimens-Alstom rail merger that would, they argue, have produced a European champion. German economy minister Peter Altmaier presented a five-page manifesto that he said was designed to make sure that “Europe remains a successful player in global markets in the future”. * SO WHAT? * It’s ironic that the two biggest economies in the European Union – who generally go on about putting on a united front – are actually arguing for individual member states to be able to override Brussels. The fear is that if “European champions” are not allowed to emerge, European industry could be crushed by China. I suspect that this will rumble on for quite some time.

Employers squeezed as job vacancies grow to record levels (The Guardian, Richard Partington) cites the latest figures from the Office for National Statistics (ONS) which show that the number of vacancies in the British jobs market have risen to their highest level since records began in 2001. Stats showed that pressures were particularly acute in hotels, food services, IT and communications and health and social care and Samuel Tombs, chief UK economist at Pantheon Economics, concluded that “With surplus labour extremely scarce and job vacancies rising to a new record high, workers are having more success in obtaining above-inflation pay increases”. * SO WHAT? * This is good news for workers, but despite the super-tight labour market, pay growth is still way off the 6.6% recorded in February 2007, just before the financial crisis. Under “normal” conditions, this would imply that wage growth will continue to climb, but I would have thought that Brexit will hold back at least some of the potential upside for time being.

Walmart posts strong sales, Asda and Iceland not so much while Greggs is on a (vegan) roll…

Walmart posts strong holiday sales gains in US (Wall Street Journal, Sarah Nassauer) heralds a strong performance from the world’s biggest retailer as it announced better-than-expected grocery sales, online orders and holiday purchases, including toys. The retailer reiterated its forecasts for fiscal 2020. * SO WHAT? * US retailers had a solid 2018 overall due to a strong US economy, high employment and rising wages but recent government data showed December sales falling at their sharpest rate since September 2009, causing some investors to conclude that the boom times might be over. Recent results from retailers have been a mixed bag with Target and Costco saying that they’d had the best holiday sales for years, but others including Macy’s and Kohl’s reported sluggish growth. Walmart has clearly benefited from its exposure to groceries, but big investments in its overseas operations – like Flipkart in India – will no doubt hit margins.

On the other hand, Asda sales slow ahead of verdict on merger with Sainsbury’s (Daily Telegraph, Ashley Armstrong) paints a rather more downbeat picture of the

Walmart-owned supermarket that is currently trying to merge with Sainsbury’s. Although it managed to put in a seventh consecutive quarter of sales growth, it is slowing down versus the previous quarter. * SO WHAT? * Although I’m sure that there’s nothing funny going on in the background, it probably serves Asda well to paint itself in a “poor me” light in order to persuade the Competition and Markets Authority (CMA) to look favourably on the merger with Sainsbury’s. The deal will hinge on the CMA deciding that the success of Aldi and Lidl has changed the grocery landscape sufficiently and whether the enlarged company will be able to make the requisite number of store disposals as part of any deal.

Constrasting fortunes continue to be evident on the UK high street in Iceland was out in the cold over Christmas (The Times, Miles Costello) which shows that frozen food retailer Iceland had a disappointing festive period for trading according to a report released to bondholders, suffering from tough competition and weak consumer confidence, but then Greggs enjoys profits boost due to vegan sausage roll (Daily Telegraph, Sophie Christie) heralded an “exceptionally strong start to 2019” putting annual profits on course to beat expectations. Shares in Greggs climbed by 11% on the news and the company put some of its success down to the “extensive publicity” it garnered from the launch of its vegan-friendly “sausage” roll at the beginning of the year. Greggs is scheduled to announce full-year results on March 7th.

HSBC announces tricky results…

Market turmoil damages HSBC profits (The Times, Ben Martin) highlights the fragile nature of its profits as it suffered badly from the turmoil in markets in the final quarter of last year. It has had a good start to 2019 but is hunkering down ahead of Brexit. * SO WHAT? * HSBC is Europe’s biggest bank but is currently getting hit from all 

sides due to political tensions in its main markets – especially the US-China trade war and Brexit. The new chief exec, John Flint, said that customers were getting much more cautious and added that the bank was likely to slow its pace of investment over the next few years.

And finally, in other news…

I thought I’d leave you today with a rather unusual service that you never knew you needed in This store in Tokyo will pull out your grey hairs for you, leave you looking years younger (SoraNews24, Krista Rogers https://tinyurl.com/y45w4e5y). Who needs plastic surgery when you can pay someone to pluck 30-70 hairs in ten minutes?!?

1. In VEHICLE-RELATED NEWS, Honda closes Swindon, US dealers offer bigger SUV discounts and Ford does e-vans
2. In CONSUMER/RETAIL NEWS, UK consumers are nervous but not changing their spending and JD Sports takes a slice of Footasylum but not the whole cake
3. In INDIVIDUAL COMPANY NEWS, Samsung plans new phones and Citi looks to robots
4. In OTHER NEWS, I bring you a new hobby. For more details, read on…

So Honda plans to close Swindon, US dealers are offering bigger discounts on SUVs and Ford gets with an electric van start-up…

Honda set to close Swindon plant in fresh blow to UK manufacturing (Financial Times, Michael Pooler, Slyvia Pfeifer and James Blitz) just gives us the lowdown of what you’ve probably seen already when the news came out yesterday – that the Japanese car manufacturer is expected to close the factory by 2022, which would spell the end of Honda’s only manufacturing site in the EU. This news comes hot on the heels of Nissan’s recent announcement that it won’t be building the X-trail in its Sunderland plant. The company was at pains to say that this wasn’t just because of Brexit and pointed to the fact that it will also be closing its factory in Turkey, with production being reshored back to Japan. Why Honda’s ‘cornerstone’ operation is being driven out (Daily Telegraph, Anna Isaac) does a good job of summarising the various reasons driving this decision which include the Japan-EU trade deal coming into force this month where the current 10% tariff on Japanese car imports will be phased out over the next seven years (90% of Honda Civics made in Swindon are exported to the EU), the continued demise of diesel (Swindon makes the 1.6litre engines for the new Civic model and the CRV), Brexit (tariff uncertainty and potential problems with the supply of car parts will cause problems) and Trump’s tariffs on cars imported from the EU. * SO WHAT? * A consultant who works with Japanese businesses, Pernille Rudlin, believes that it won’t be just the 3,500 Honda workers who will lose their jobs – 6,000 additional jobs that rely on Honda in Swindon will also be at risk. The decision (which is expected to be confirmed officially today) could also have wider implications on Britain’s car manufacturing industry with the futures of Vauxhall’s Ellesmere Port in Cheshire (which makes the Astra), Toyota’s Burnaston site in Derbyshire and Ford’s UK operations all potentially at risk. The fact is that the car industry is changing rapidly at the moment and the uncertainties of Brexit are a convenient excuse for people to jump on. Car manufacturers are dealing with changing ownership patterns, ever-tightening regulation on emissions and a transition from “traditional” technology to something completely new, which explains why so many of them are branching out into other business areas (such a e-scooters, ride sharing etc.) in order to survive for the long term because the old model just ain’t going to work. I think that the whole industry has displayed a great deal of arrogance for a number of years by not changing – and this

has now come home to roost. The writing for diesel should have been on the wall when increasing numbers of cities banned diesel-powered vehicles – AND when the whole VW “dieselgate” thing happened a few years back – but the manufacturers just reacted by making a few promises here and there while actually just churning out more diesels. I would expect much more manufacturer co-operation and M&A (both between manufacturers and smaller companies with attractive tech) as time goes on because the costs of evolving successfully with the market will be enormous.

I mentioned recently that US car dealers were experiencing higher inventories than usual but Discounts on SUVs are getting bigger as dealer inventories rise (Wall Street Journal, Adrienne Roberts) shows that manufacturers’ increased production of their more profitable SUVs is now causing a build-up of inventory to the extent that, in January, the availability of unsold SUVs and trucks grew by 12% versus the previous year according to research by WardsAuto. This has meant that average discounts for SUVs and trucks have risen for the fourth consecutive year, according to data from JD Power. * SO WHAT? * Things seem to be OK for now in terms of the American market (the US has been the one bright spot in sales for many manufacturers recently) but if this discounting malarkey continues, the amount of money manufacturers spend on incentives like bonus cash, low interest rate financing and lease specials will have to increase, which will ultimately impact profitability – and they’ll be back where they started. I would have thought they will have to rein in production a bit to restore balance but if they did this it could have repercussions further down the chain on things like car parts.

Ford teams up with electric van start-up for parcel deliveries (Daily Telegraph, Matthew Field) heralds a very interesting development as Ford announced that it will be working with London-based start-up Gnewt on its parcel delivery service. The idea is that Gnewt’s vans will use an app built by Ford that will send one van to a location picked by its software where it will meet several bike and foot couriers who will then take the package on its “last mile”, rather than sending several vans on multiple drop-offs. This is meant to reduce congestion and take more vans off the road. * SO WHAT? * This sounds like a brilliant idea, no? The consumer wins by getting a quicker delivery, the environment wins by having less polluting vehicles on the roads – but ironically van makers may lose out because of potentially slower sales. This is another example of a big automobile company diversifying its business in order to find other niches in which to operate that could help long term survival. There’s a lot of this going on at the moment – and I expect agreements like this to become increasingly common.

UK consumers lose confidence but aren’t making wholesale changes to spending habits while JD Sports buys a chunk of Footasylum…

In two separate surveys, Job worries damage consumer confidence (The Times, Gurpreet Narwan) highlights the latest IHS Markit’s survey’s findings that people’s confidence in their finances has fallen to the lowest level since March 2018 while Most shoppers say Brexit has not affected spending habits (The Guardian, Richard Partington and Kayleena Makortoff) cites a survey of 2,000 shoppers, carried out by accountancy firm PwC, which shows that over half of respondents said that they had not and will not change their spending habits due to Brexit. Funnily enough, areas that had higher proportion of Brexiteers were the most adamant. * SO WHAT? * Surveys are always interesting, but I think that they don’t give the whole picture because they are trying to measure something that is inherently intangible and easily changed – opinion and how people might act in the future. However,

if you combine this with hard data, like releases from the ONS for example, then it becomes more compelling.

In JD Sports rules out bid after it takes stake in Footasylum (Daily Telegraph, Charlie Taylor-Kroll) we see that JD Sports bought an 8.3% stake in the struggling trainer retailer “for investment purposes” and may increase the holding to 29.9% (the max level before having to make a proper takeover bid), whilst stopping short of making a full offer. Footasylum’s share price rocketed up by 91% but the current price of 55.2p is way lower than the 164p it floated at in November 2017. * SO WHAT? * I had to double-take when I saw this as I didn’t see Mike Ashley’s name anywhere – he seems to be buying up the high street one brand at a time at the moment! Unlike things such as Patisserie Valerie, a trainer retailer is much more in line with his current businesses. Mind you, considering that the family of JD Sports co-founder, David Makin, are major shareholders and that Makin’s daughter is Footasylum’s chief exec with a 20% stake in the company you can see why Sports Direct is unlikely to get a sniff. David Makin is also a co-founder of Footasylum. Surely there will be some kind of takeover given the links between the two! If it did go through with a full acquisition, it could give JD Sports a juicy cost-cutting opportunity – but would it be juicy enough??

Samsung has announced plans for new phones and Citi is looking at robots to provide better services…

Samsung plans trio of phones to stem sales fall and head off Apple (Daily Telegraph, Matthew Field) shows that the South Korean handset maker is continuing in its battle to stay ahead of the competition and boost global phone sales by launching three new smartphones at events in London and San Francisco. The main device is expected to be its flagship S10 smartphone, which will have a triple lens camera as well as a larger “Plus” derivation model. It also plans to unveil a cheaper phone to its main line-up. * SO WHAT? * It’s a bit meh, but worth mentioning. As far as I’m concerned, handset makers need to announce something truly innovative in order to get pulses racing and cash registers ringing (well the latter is metaphorical – maybe “beeping” is a better word). If not, smartphone sales

will continue to decline as replacement cycles lengthen and new models continue to be only slightly better than previous ones.

There’s bad news for some in Citigroup CEO says machines could cut thousands of call centre jobs (Financial Times, Laura Noonan and Patrick Jenkins) as Mike Corbat commented in an interview with the Financial Times that tens of thousands of people working in its call centres could be replaced by machines that will be cheaper and provide better service to customers. The bank is facing continued pressure to cut costs and last summer warned that as many as 10,000 operations staff in its investment bank could be replaced by machines. * SO WHAT? * This just provides more evidence of how Artificial Intelligence will change the identity of the workforce and said that the “30 most common customer journeys” were relatively easily automated. I think that any job that is predominantly process driven will be particularly vulnerable to AI and automation.

And finally, in other news…

Today, I thought I’d give you an idea for a new hobby: In France, the Force is strong with lightsaber dueling (Associated Press, John Leicester https://tinyurl.com/y5o55xpy). Sounds like fun!

1. In CONSUMER/RETAIL NEWS, UK worker pay rises on skills shortage, house prices are at their most affordable for years, Microsoft’s on the verge of a London shop and Walmart’s due to reveal the cost of taking on Amazon
2. In CAR-RELATED NEWS, US import tariffs loom and EV metals stutter
3. In INDIVIDUAL COMPANY NEWS, Baidu hits a sticky patch and Dyson ships 100 jobs out of the UK
4. In OTHER NEWS, I bring you a neighbour’s worst nightmare. For more details, read on…

So UK pay rises, house prices get affordable, Microsoft’s about to open a London shop and Walmart’s going to show what it costs to compete with Amazon…

Skills shortage in UK pushing up workers’ pay, says survey (The Guardian, Richard Partington) cites research from the Chartered Institute of Personnel and Development and recruitment group Adecco which shows that skills shortages in the UK are driving up wages, with pay rising by 2.5% on average versus 2% at the end of last year. Two-thirds of survey respondents said that they have had to increase their starting salaries to attract candidates – up from 56% in the final quarter of last year. * SO WHAT? * This is overall good news for consumers as wage rises are outpacing price rises, which should lead to a better standard of living. It’s interesting to see that Brexit uncertainty hasn’t had more of a negative effect as yet.

If Brexit doesn’t seem to have had much of a detrimental effect on wages, Houses ‘at most affordable since 2011’ (The Times, David Byers), which cites findings from the latest monthly figures from Rightmove, shows that asking prices have only risen by 0.2% versus the previous year – the weakest growth at this time of year since 2009. Miles Shipside, an analyst for Rightmove, observed that “Sellers’ subdued pricing is now being outstripped by higher average wage growth, meaning that buyer affordability is on the rise at the fastest rate in nearly eight years. In theory the scene would be set for an active spring, if it were not for the uncertain political backdrop”. * SO WHAT? * Sellers have been dropping their prices in recent months but wage growth has fallen way behind house price growth over the years with recent data from the Office of National Statistics showing that the average home in England and Wales was

7.8 times the average salary versus 3.55 times in 1997 (and it’s a whopping 9.7 times the average wage if you’re buying a brand new home!). It’s great that wages are rising in real terms, but they’ve got a long way to go to reach previous levels. I would have thought that house prices aren’t going to rise in a meaningful way until there’s some Brexit clarity.

Microsoft to open UK store (Daily Telegraph, Hannah Boland) heralds the imminent arrival of its first ever UK shop this summer after a very long wait. According to its job adverts, the store will be offering “hands-on experiences with innovative technology to unique programmes” including things like Xbox game design sessions. There are already Microsoft stores in US, Canada, Australia and Puerto Rico, but this will be the first one in Europe. The London store will be on the crossroads between Oxford Street and Regent Street (a few doors down from the Apple store then!). Construction on the building is expected to complete in April.

Walmart to reveal costs of battle with Amazon (Financial Times, Alistair Gray) brings our attention to Walmart’s upcoming results which will give us a better picture of how it has performed versus Amazon over the Christmas period. At the moment, Wall Street analysts are expecting the company to report rising sales but very weak profit margins due to increased investment in future-proofing its offering and higher labour costs. It has been pursuing offline initiatives like offering grocery pick-up and, online, it has relaunched Walmart.com and Jet.com, so investors will be hoping that they have made a positive impact. * SO WHAT * Recent economic data suggests that US retail sales are slowing down, so observers will be looking for evidence to either confirm or dispel resultant fears. I think that Neil Saunders of GlobalData Retail put it best when he said that “If Walmart’s sales have done well it would kind of suggest that the government numbers are off. Walmart is a bellwether for the economy. It’s almost representative of how people are spending”.

Potential US tariffs get carmakers nervous and metals involved in EVs underperform…

The tariff drama continues with US car import tariffs could ‘backfire politically’ (The Times, James Dean) as the EU ambassador to the United States, David O’Sullivan, argues that imposing tariffs on European cars would have a “knock-on effect” on car-making in the US – as a US-EU trade war would probably result – just as Wilbur Ross, the US commerce secretary, was due give Trump a report recommending whether or not imported vehicles pose a national security risk. Merkel fears US may hit German cars with ‘security threat’ tariffs (Daily Telegraph, Jorg Luyken) shows that Germany is particularly worried about what might happen to them given how important their car-manufacturing business is. * SO WHAT? * This is clearly a big deal – especially for countries with major exposure to the car manufacturing industry. The IFO Center for International Economics, a major German thinktank, has forecast that 60% of the damage done to the EU by imposing tariffs would hit Germany, although increased exports to other countries may help to mitigate this.

Investors get burned after betting on electric-car metals (Wall Street Journal, Amrigh Ramkumar) is an interesting article that highlights the stubborn weakness of commodities that many thought would be red hot in terms of demand because of their importance in the manufacture of rechargeable batteries. Cobalt prices have fallen by over 30% so far this year to their lowest level in two years and lithium prices fell for the tenth consecutive month in January to a multiyear low. Miners rushed to produce commodities that investors thought would skyrocket in value because of increased demand for batteries, but this turned into oversupply as China – which is a huge player in the supply chain for electric car batteries – saw its economy slow down. Lithium is relatively abundant in South America and Australia and cobalt has seen a glut of supply from the Democratic Republic of Congo (the country which produces about 70% of global supply), sending prices down. * SO WHAT? * This over-exuberance has meant that share prices of a number of small publicly-traded cobalt and lithium suppliers and producers have suffered major share price falls in the last year – with First Cobalt Corp and Lithium Americas Corp seeing their share prices drop by 83% and 57% respectively. I still believe in the long term prospects of companies exposed to these metals until such time as other major technological improvements diminish or eliminate their importance. Even though EVs account for just 2% and 4% of overall car sales in the US and China, sales growth in both countries in percentage terms is huge.

Baidu hits some tough times and Dyson takes more jobs out of the UK…

‘Difficult years’ for Baidu as China’s internet goes mobile (Financial Times, Yuan Yang, Nian Liu and Louise Lucas) highlights the difficulties of China’s leading search engine – the dominant player in its market for most of the last twenty years – as it faces heavy criticism for prioritising its own platforms above relevant results (for instance, a serious scandal occurred in 2016 when a man died after buying an experimental cancer treatment found through Baidu, which then exposed its huge exposure to medical advertising – 20-30% of its revenues at that point), a slowdown in advertising growth as the wider economy continues to lose momentum and the migration of online

content to social media platforms which it can’t capture. * SO WHAT? * Baidu’s traditionally strong search business is looking tricky and some feel that it is currently just throwing money at anything in the hope that it sticks, like its driverless car project Apollo – but these projects have yet to come to fruition. Martin Bao of Industrial and Commercial Bank of China, points out that “the cash cow is not growing, the ones that are growing are not making a lot of money, and some parts are only burning money”.

I thought I’d mention Dyson sweeps 100 back office jobs out of the UK (Financial Times, Michael Pooler) because it follows on from the announcement it made last month to move its HQ to Singapore. * SO WHAT? * Some people will go mental over this because Dyson is a vocal Brexiteer, but when you consider that the company has more than doubled its UK workforce over the last five years (to around 4,800), 100 jobs does seem to be a drop in the ocean. I’d be more worried about the money the company is pouring into a “new” battery tech. If that turns out to be an expensive failure, then things could get properly serious IMHO.

And finally, in other news…

I thought I’d leave you with a rather embarrassing situation for all concerned in Dog rips open neighbour’s parcel and finds something very unexpected (Metro, Joe Roberts https://tinyurl.com/y3fqs96a).

1. In MACROECONOMIC NEWS, Trump calls an emergency, May loses another vote and Germany avoids recession
2. In RETAIL NEWS, US retail sales weaken, Amazon abandons HQ2 in New York and looks at London store openings, Patisserie Valerie gets a lifeline and the Restaurant Group loses its chief exec
3. In FINANCIALS NEWS, Ant Financial buys WorldFirst and JP Morgan dabbles in crypto
4. In INDIVIDUAL COMPANY NEWS, Airbus abandons the A380
5. In OTHER NEWS, I bring you a double-strike trick shot. For more details, read on…

So Trump ploughs on, May gets defeated yet again and Germany just scrapes through…

Trump to sign spending deal, declare national emergency (Wall Street Journal, Rebecca Ballhaus, Kristina Peterson and Natalie Andrews) is good news for government employees on the one hand – as Trump’s plans to sign a new spending bill will avoid a second government shutdown – but will annoy people on the other as it looks like he’s planning to shift either military construction or US Army Corps of Engineers funding to build more border barriers. He is scheduled to talk about border security at 10am today. In the meantime, opponents to his border wall are gathering together and questioning the legality of his calling for a national emergency when actually there isn’t one. The Trump show continues.

Theresa May suffers Commons defeat on Brexit plan B (Financial Times, Henry Mance) means that she’s officially

got just over 40 days to reach an exit agreement with the EU, get MPs onside and then get all the legislation through by March 29th! Clearly, this will be a tall order and expectations are increasing about a delay in the Brexit date.

Meanwhile, UK grows faster than Germany as eurozone shows weakness (Daily Telegraph, Anna Isaac and Tim Wallace) cites the latest figures from Eurostat which show that Britain was the third fastest growing economy among Europe’s “big five” with 0.2% growth (the same as the eurozone as a whole) versus Spain at 0.7% and France at 0.3%. Germany managed to escape recession (two successive quarters of contraction) by posting zero growth after the previous quarter contracted by 0.2%, but Italy’s economy shrank by 0.1% taking it into its third recession this decade. * SO WHAT? * All is not well in Europe at the moment – and it’s not just Britain that’s suffering. Spain did well – but is coming from a very low base – France did OK considering the whole gilets jaunes malarkey, Germany’s contraction looks like it’s due to more than merely automobile industry woes and Italy just continues to be a disaster.

US retail sales weaken, Amazon abandons its NY HQ2 and looks at opening London outlets, Patisserie Valerie gets a lifeline and Restaurant Group loses its chief exec…

US retail sales fall at fastest rate since 2009 (Daily Telegraph, Helen Chandler-White) shows a possible loss in momentum for the world’s largest economy as retail sales fell by 1.2% over the Christmas trading period – the worst drop since 2009 and way worse than market expectations. * SO WHAT? * On some measures, retail sales fell at a rate not seen since the immediate aftermath of the 9/11 attacks in 2001 and particular areas of weakness included department stores, furniture and clothing. These figures could mean that fourth quarter GDP growth may be weaker than originally thought.

In Amazon news today, there’s a lot of comment about Amazon cancels HQ2 plans in New York City (Wall Street Journal, Laura Stevens, Jimmy Vielkind and Katie Honan) as the e-tailer cancelled much-trumpeted plans to build a $2.5bn New York HQ following growing political opposition to the amount of subsidies (like $3 billion in tax incentives) being given to one of the world’s richest companies. * SO WHAT? * This will cost New York 25,000 potential jobs and will be very embarrassing for New York Governor Andrew Cuomo and New York City Mayor Bill de Blasio, given their very high profile backing of the project. Plans to open another HQ in northern Virginia are still going ahead and jobs that would have gone to New York will be spread across other offices. I would imagine that quite a few high end realtors (and property developers) will be crying into their wheatgrass smoothies on the back of this news as well.

Staying with Amazon for a moment, Amazon looks to London for new stores (The Times, Deirdre Hipwell) shows that the company is close to trialling its first checkout-free

food stores in London as it is believed to have secured sites for its first Amazon Go stores according to The Grocer trade magazine. The first Amazon Go opened in Seattle in 2016 and there are now ten sites in Seattle, Chicago and San Francisco, with another being planned for New York. * SO WHAT? * Sounds great but it’s all going to be in the execution. Let’s hope that Amazon Go doesn’t go the same way as Ofo and fall foul of Londoners with light fingers! No doubt others will be watching with interest, but I don’t think anyone else has really got the tech to do this at the moment.

Meanwhile, Patisserie Valerie saved in buyout backed by Irish private equity firm (The Guardian, Sarah Butler) heralds some good news for the embattled pastry emporium as Irish private equity firm Causeway Capital has backed a management buyout that will save around 100 cafes and 2,000 jobs. Causeway specialises in investing in small and medium-sized companies and already owns BB Bakers + Baristas, which has just over 60 outlets in the UK and Ireland. It said that it wanted to “refresh and renew” the brand. * SO WHAT? * This brings a temporary close to a very turbulent time in Patisserie’s history. The dramatic turn of events following the discovery of a £40m black hole in its accounts last year will now hopefully calm down so that the new owners can implement their strategy.

Talking of turbulence, Restaurant Group chief leaves the table (The Times, Dominic Walsh) highlights the unexpected departure of its chief exec Andy McCue only two months after he pushed through the controversial (because it was expensive) acquisition of Wagamama “due to extenuating personal circumstances”. He will remain in the role until a successor is found but already weakened shares fell by another 11% on the back of this news. The Restaurant Group owns brands including Frankie & Benny’s and Chiquito and caused a right old stir when it agreed to pay £559m for Wagamama. * SO WHAT? * McCue’s departure timing is not great as he was the main driver behind the controversial deal that only just squeaked past disgruntled shareholders. This will put a cloud of uncertainty over the whole thing until a new leader emerges.

Ant Financial goes shopping and JP Morgan tries crypto…

In China’s Ant Financial agrees to buy WorldFirst in $700m deal (Financial Times, Nicholas Megaw) we see Jack Ma’s biggest push yet into western markets as Alibaba’s fintech affiliate buys British payments group WorldFirst for around $700m. * SO WHAT? * This is Ant Financial’s first major deal in the UK and follows the company’s failed attempt to buy US cross border payments group MoneyGram – which was blocked due to security concerns. Ant Financial is the world’s most valuable tech start-up, being valued at $150bn in its latest funding round last year and is best known for its Alipay mobile payments platform, although it also has credit rating and cloud computing businesses. WorldFirst provides international money transfers and currency exchange for businesses and individuals.

JP Morgan creates own digital currency (The Times, James Dean) highlights JP Morgan’s creation of its own – non publicly-tradeable – digital coin called JPM coins, which have been given a fixed value of $1 each. They will be used to send and receive money within the bank’s wholesale payments business which move around $6tn every day for banks, broker-dealers and other corporate clients. Chairman and chief exec Jamie Dimon has been a long-time vocal critic of bitcoin but has always been supportive of the blockchain technology behind it. Other banks such as HSBC and Santander are also experimenting with their own digital coins. * SO WHAT? * It’s early days, but it seems to me that this could be the start of banks attempting to make a proper and more widely accepted “legit” cryptocurrency. Umar Farooq, head of digital treasury services and blockchain at JP Morgan pointed pointed out that “Ultimately, we believe that JPM coin can yield significant benefits for blockchain applications by reducing clients’ counterparty and settlement risk, decreasing capital requirements and enabling instant value transfer”. It’ll be interesting to see the long term effects this has on bitcoin.

Airbus announces the end of the A380…

The superjumbo falls off the radar (Daily Telegraph, Tim Wallace) spells the end of the world’s biggest aircraft, the A380, as production will wind down and end in 2021. The biggest customer for the superjumbo, Emirates, has reduced its order book and production will be shut down as

there are no other orders in sight. * SO WHAT? * This could put 3,500 jobs at risk although at least some staff can be redeployed to the production of other aircraft. Basically, it all went wrong for Boeing because of a combination of regulation changes, poor ticket sales as the plane came into service just before the financial crisis hit and because anticipated demand for two-part flights – with passengers going to big hubs to then take smaller planes to their final destination – proved to be completely wrong.

And finally, in other news…

I thought I’d leave you with an impressive ten-pin bowling trick I saw on my Twitter feed today here. Enjoy!

1. In MACROECONOMIC NEWS, Xi joins the trade talks, China exports surge and UK inflation falls
2. In DRINKING AND DRIVING NEWS, Heineken profits, driverless players jockey for position and an electric car startup gets an Amazon and GM boost
3. In RETAIL NEWS, Ikea looks at trying a new sales platform, Dunelm defies gloom and New Look turns a corner
4. In OTHER NEWS, I bring you Tinder for cows and some cat foot socks. For more details, read on…

So Xi’s involvement pumps up the optimism, China exports surprise on the upside and UK inflation slows further…

China raises hopes of US deal as Xi joins talks (The Times, James Dean) highlights the unexpected presence of President Xi at the US-China trade talks in Beijing as US Treasury Secretary Steven Mnuchin and US trade representative Robert Lighthizer come to the conclusion of the latest round of trade talks following the impasse that has run since last summer. * SO WHAT? * This sounds like a positive development – and markets were cheered by the news first reported by The South China Morning Post – but it ain’t over till it’s over and the real talking has to be between Xi and Trump. At least it looks more likely that they could ACTUALLY meet.

China’s 9% surge in exports surprises economists (Wall Street Journal, Liyan Qi and Grace Zhu) cites the latest data from the General Administration of Customs which

shows that exports rose by a chunky 9.1% in January versus January 2018. Some say this was due to exporters banging out orders before February’s Lunar New Year holiday and before the March 1st deadline for the US-China trade war ceasefire. This was an unexpected fillip as it followed a 4.4% decline in December. On the other hand, imports fell for the second month in a row – although it wasn’t by as much as consensus expectations.

Fall in energy prices drags UK inflation to two-year low (The Guardian, Phillip Inman and Richard Partington) shows that inflation fell to 1.8% last month after the biggest monthly drop in gas prices since records began in 1988. Between December 2018 and January 2019, consumer gas prices fell by 8.5% – the sharpest fall for thirty years. * SO WHAT? * This latest fall in inflation brings the level below the Bank of England’s 2% target after peaking at a five-year high of 3.1% in November 2017. Stephen Clarke, senior economic analyst at the Resolution Foundation thinktank, said that “This will provide a welcome boost to people’s spending power and means that next month we’re likely to see real wage growth of around 1.5%, the fastest since mid-2016”. Great for the moment, but no-one knows what Brexit is going to bring!

Heineken raises a glass, self-driving car makers continue the race for supremacy and one electric car startup gets a major boost…

Heineken profits refresh the parts other brands just cannot reach (Daily Telegraph, Oliver Gill) highlights the best performance of its flagship beer in over ten years, with volumes increasing by 7.7%, which helped the company to beat expectations. The world’s #2 brewer, which owns brands such as Amstel, Tiger, Sol and Strongbow cider, employs over 80,000 staff globally and owns 165 breweries in 70 countries and is second only to Budweiser owner AB InBev in terms of size. Sales last year were boosted by the hot summer in Europe last year (remember that?!) and the footy world cup. Europe was very strong, but the US and Asia Pacific regions weren’t so good. Non-alcoholic beer: a sober assessment (Financial Times, Lex) looks at the increasing success of non-alcoholic beers as brewing technology over the years has improved to the extent that they are actually palatable – some UBS research found that almost two-fifths of people trying low or no-alcohol beers said that they drank non-alcoholic because they liked the taste. It would seem that there is a decent amount of potential in this market as in Spain they account for 12% of beer sales! * SO WHAT? * It’s great to hear Heineken doing well – but it’s important that it continues to change along with the market. All brewers are looking to broaden their product portfolios and investment in fruit juice, energy drinks and (local laws permitting) cannabis-infused sparkling water is a testament to that. Given that European alcohol consumption has fallen by 20% in the 11 years to 2016, brewers clearly need to adapt their respective offerings.

Leading self-driving car start-ups accelerate away from the pack (Financial Times, Tim Bradshaw) gives us a

snapshot of where we are in the driverless car stakes after a period of frenzied investment. In terms of start-ups, Nuro, which is developing autonomous delivery vehicles, raised $940m this week from SoftBank’s Vision Fund (one of the biggest “Series B” funding rounds ever) only one week after rival Aurora raised $530m from investors including Amazon and Sequoia Capital and Zoox (which is designing sensors, autonomous systems and a new type of vehicle) raised $500m in funding last year. So far, so impressive. However, they are dwarfed by the likes of Alphabet’s Waymo (which is generally seen to be the most advanced in this space and valued at an enormous $175bn by analysts at Morgan Stanley) and General Motor’s Cruise. * SO WHAT? * You should definitely read the whole of this article if you are at all interested in driverless cars, but I guess that the key message here is that the world of autonomous driving has some noticable behemoths at the forefront with a pack of well-financed start-ups behind them followed by a huge number of smaller companies. All of them are trying to iron out existing problems with technology and execution, but I think the reality is that this area is going to continue to be a massive money pit that many smaller companies won’t be able to survive. The possibilities for M&A activity are almost endless if investors can avoid the landmines…

Talking of investment, Electric car maker plans to power up (The Times, James Dean) heralds some good news for Rivian, a ten-year-old company based near Detroit that is developing a platform for pick-up trucks and SUVs that could be used by other carmakers, as Amazon and General Motors are talking about taking minority stakes in the company that would value it at the equivalent of $2bn. * SO WHAT? * Interestingly, none of the big carmakers are in advanced stages of developing an electric pick-up or SUV! Given the continued popularity of SUVs, it would make sense to make electrified ones available – and if you could buy a platform off the shelf from Rivian, it would save a massive amount of development costs and mean that you could bring an SUV to market much more quickly than if you develop it on your own.

Ikea looks at trying yet another new thing, Denelm banishes gloom and New Look turns a corner…

Ikea looks to launch sales platform that would include rival products (Financial Times, Richard Milne) shows that Ikea is still at it – innovating like crazy – and is currently looking into launching an online sales platform offering not just its own furniture – but also product from rivals such as Alibaba or Amazon. Inter Ikea’s Torbjorn Loof highlighted the example of the success of Zalando, which has become Europe’s biggest online fashion retailer by selling multiple brands, none of whom own the German website. He said that “We are always exploring. You could say within the digital arena we’re exploring the third-party platform, Ikea engaging on other platforms, the platform business in the industry as a whole, how can we make our own ikea.com much stronger and better”. * SO WHAT? * Yes, he’s talking a load of management gobbledygook but at the end of it all, it’s really good to see a big retailer taking the bull by the horns and show a willingness to embrace real change and search all potential avenues for growth. Loof has got time to experiment while the traditional business trundles on – but he’ll have to come up with some proper plans and

concepts in the not-too-distant future otherwise everyone will think he’s just full of it. I do think, however, that some of the company’s innovations could work really well – city centre stores and furniture rental being particular favourites of mine – but the magic will all be in the execution. I think once the company puts together a proper concept, it has the financial firepower to make it happen.

Meanwhile, Dunelm defies gloom on the high street as sales rise 6.9% (Daily Telegraph, Charlie Taylor-Kroll) highlights the success of online sales for Dunelm which helped to drive pre-tax profits up by 17% at the soft furnishings retailer. The company had a decent enough winter but remains cautious over Brexit and said that it was worried about port disruption and that it was stockpiling goods in the run-up to our European departure.

New Look back in shape as its shift from millennials pays off (Daily Telegraph, Ashley Armstrong) heralds some good news for the troubled fashion chain as it returned to profit and staged a recovery in sales following a difficult period where it was forced to make a lot of store closures and refinance. * SO WHAT? * It seems that the company’s shift in customer focus away from the millennial and towards 30-year-old female shoppers is working for now as it had lost its way somewhat in the last few years. This is a highly competitive area, but hopefully it will continue this positive momentum.

And finally, in other news…

Given that it’s Valentine’s Day today, I thought I’d leave you with ‘Tinder for cows’ matches livestock in the mood for love (Reuters, Matthew Stock https://tinyurl.com/yxgaetdf). I hear that it is a bit of a meat market, though – BOOM! Sorry – I couldn’t help it ????.

AND FINALLY, how about this as a gift idea for the cat-lover in your life: These “cat foot” socks from Japan are so realistic they look terrifying on human feet (SoraNews24, Dale Roll https://tinyurl.com/y2oeza3q). Weird…

1. In MACRO AND OIL NEWS, US-China talks make progress, the Baltic Dry hits new lows and Aramco looks overseas
2. In TECH AND GAMING-RELATED NEWS, Apple has China issues and grumbling from publishers, Sony replaces its PlayStation chief and Activision Blizzard announces a restructure
3. In CAR-RELATED NEWS, Nissan’s nightmare continues and Michelin’s shares go higher
4. In OTHER NEWS, I alert you to a potential real estate opportunity. For more details, read on…

So US-China trade talks progress, the Baltic Dry hits new lows and Aramco looks at overseas opportunities…

China, US seek broad outline of a trade pact this week (Wall Street Journal, Lingling Wei and Bob Davis) would suggest that talks are going in a positive direction and increasing tensions were eased when Trump, in response to a question about whether he was going to stick to this week’s deadline for increasing tariffs on China to 25%, said that “If we’re close to a deal…I could see myself letting that slide for a little while”. Funnily enough, Stocks surge on US-China trade hopes (Wall Street Journal, Avantika Chilkoti and Michael Wursthorn) shows that markets got quite excited by Trump’s remarks but, let’s be honest here, this is all noise until something proper has been hammered out by Trump and Xi. Trump can be particularly unpredictable and can sometimes completely undermine his minions, so it’s too early to get even mildly excited by this IMHO.

Meanwhile, world trade is looking pretty rubbish at the moment in Baltic Dry index falls to new low as shipping sector stalls (Daily Telegraph, Tom Rees) as the closely watched global trade bellwether fell to its lowest level for two-and-a-half years on the back of slowing China growth

and fallout from the Brazilian dam disaster. The Baltic Dry Index measures shipping costs for raw materials like iron ore and coal and fell by a whopping 58% in less than two months as global trade continues to lose momentum. * SO WHAT? * US-China trade talks will be a key driver of the Baltic Dry – either way – and it rose yesterday for the first time in 17 sessions, presumably on the positive noises I referred to earlier in this section. Bank of England governor Mark Carney made dire warnings yesterday that a continued impasse between US and China could lead to an economic crunch not seen since the mid-seventies oil shock which choked off growth and sent inflation through the roof.

Then in Aramco wants to expand overseas (The Times, Emily Gosden) we see that the chairman of Saudi Aramco, the state-owned oil group and world’s biggest oil company, announced that the company has plans to build an international exploration and production business for the first time and that it would no longer be “focused on monetising the kingdom’s resources” and was eager to develop a global gas business. * SO WHAT? * So much for Crown Prince Mohammed bin Salman’s ambitions to wean the kingdom off oil revenues!!! Saudi Arabia has invested abroad in refineries and petrochemicals for years, but these remarks from Khalid al Falih, Saudi Arabia’s energy minister and Aramco chairman, are a much clearer signal of the company’s future overseas intentions.

Apple loses to Huawei and causes a kerfuffle among with publishers while Sony changes its PlayStation chief and Activision announces a restructure…

Apple loses ground to Huawei as China shipments slump 20% (Wall Street Journal, Dan Strumpf) cites the latest figures from International Data Corp which show that Apple’s smartphone shipments in China for the last quarter of 2018 fell by 20% versus the previous year in contrast to Huawei’s shipments rising by 23%, giving it a 29% market share versus Apple’s 11.5%. IDC analyst Xi Wang said that “the high price point of the iPhone X in 2017 has lengthened the replacement cycle of users, while the new models of 2018 don’t have enough innovations to make users buy” whereas Huawei’s handsets did deliver more compelling offerings with noticeably improved photography, gaming and business applications. * SO WHAT? * This just shows how much of an uphill battle Apple continues to have in China and is a rare bit of good news for the embattled Huawei (well, embattled internationally – clearly it’s doing pretty well in its own backyard!). I continue to think that Apple would be better off funneling more of its efforts into making a splash in India because I get the impression that it is flogging a dead horse in China.

In Publishers chafe at Apple’s terms for subscription news service (Wall Street Journal, Benjamin Mullin, Lukas Alpert and Tripp Mickle) we see that some news organisations are balking at Apple’s demands for 50% of the subscription revenues for a new service expected to launch later this year aiming to be a “Netflix for news”  that would allow users to have unlimited access to content from participating publishers for a monthly fee. At the moment, Apple is thinking of charging $10 per month, but this has yet to be finalised – and it could be bundled in with other new offerings like its much-anticipated TV programming and iCloud. The New York Times and Washington Post are among major titles that have NOT signed up yet – and the

Wall Street Journal is also voicing concerns over the proposed terms. Publishers will also be concerned that they will lose any access to subscriber data that they use to market directly to subscribers. * SO WHAT? * Clearly this is a work in progress for Apple, but if it is bundled well or there is some flexibility on how it splits the revenues, then a solid offering could be pretty attractive for consumers. Publishers are right, however, to be cautious as there is a big danger of cannibalising their own customer bases. However, as the saying goes, better to have a small part of something rather than own 100% of nothing!

Things really seem to be hotting up in the gaming industry at the moment. Sony’s management reshuffle means that it’s game for a dogfight (Daily Telegraph, Tom Hoggins) highlights a reshuffle at the top of Sony Interactive Entertainment as it has promoted Jim Ryan to replace John Kodera as the company heads towards launch of a “PS5” that some say will be launched in 2020. * SO WHAT? * It would be fair to say that Sony kicked Microsoft’s @ss with its PS4 in terms of unit sales, but it will face yet another bun fight with its American nemesis in the next generation of consoles. Cloud gaming is likely to become a key battleground as each one tries to become the “Netflix of games”. The race is well and truly on! Gotta love a console launch – the hype is very enjoyable!

Activision Blizzard to cut staff in broad restructuring (Wall Street Journal, Patrick Thomas and Sarah E. Needleman) heralds some tough times for games developers as one of the “biggies” has announced plans to cut 8% of its 9,800-strong workforce as it is feeling the pinch from changing gamer behaviour. Developers are increasingly finding that gamers are spending money and time on fewer games that they can play in perpetuity (with Fortnite being the top dog at the moment), meaning that their vacillation can have much bigger financial ramifications. Having said that, Activision Blizzard announced that it will boost its numbers of developers by around 20% in order to beef up content for existing franchises like Call of Duty – a key strategy that has powered the continued success of Epic Games’ Fortnite. * SO WHAT? * In the same way that retailers are having to adapt to changes in the way consumers shop, I think we are at the beginning of a major change in the way gamers interact with content and anyone who doesn’t recognise this is going to find life very difficult. At least Activision Blizzard is recognising this.

Nissan’s woes continue but Michelin shoots the lights out…

Nissan cuts profit forecast as it takes £65m Carlos Ghosn charge (The Guardian, Julia Kollewe) highlights Nissan’s ongoing woes as the car giant cut its full-year profit forecasts and announces a £65m charge relating to the whole Carlos Ghosn scandal that’s going on at the moment. The main reason behind the full-year cut was cited as being weaker global car sales. Tensions continue between Nissan and Renault and this latest bit of bad news for the company shows further evidence of weakness for all carmakers.

Michelin shares soar on improved full-year profit guidance (Financial Times, David Keohane) heralds some surprise good news for the French tryemaker as it upped its profit guidance for the year despite tricky trading conditions that prompted a profit warning last October that resulted in its steepest share price drop for eight years (so this latest rise is from a low base!). There will be some changes at the top of the company over the next few months as COO Florent Menegaux will step up to the CEO position as the current incumbent, Jean-Dominique Senard moves to Renault to replace the embattled Carlos Ghosn as chairman. Other suppliers Pirelli and Continental both got a boost in their share prices as the mood lightened. * SO WHAT? * Clearly, the automotive sector is in a right pickle at the moment (heading for “car-mageddon”), but I guess that the overarching thing is that even though new car sales are generally falling globally, drivers will still have to replace their tyres.

And finally, in other news…

I thought I’d leave you today with the news that the house where Jeff Bezos started Amazon is up for sale in Beginning of a billionaire’s empire: three-bedroom one-story house in Seattle – with the garage where Jeff Bezos founded Amazon – hits the market for nearly $1.5million (Daily Mail, Faith Ridler https://tinyurl.com/y3ak9a76). Nice!

1. In MACRO AND COMMODITIES NEWS, China engages in more US talks, UK growth hits the buffers (surprise, surprise) and there’s rising demand for both copper and cobalt
2. In RETAIL-RELATED NEWS, Burger King’s parent seeks out growth, Iceland readies itself for “Sasda” castoffs and Debenhams gets a cash injection
3. In INDIVIDUAL COMPANY NEWS, Mercedes suffers weaker sales, Morgan Stanley invests in millennials and EA’s answer to Fortnite proves to be a hit
4. In OTHER NEWS, I bring you an interesting potential job. For more details, read on…

So the US and China engage in more talks, UK growth has a shocker and demand rises for both Copper and Cobalt…

China hopeful of trade war breakthrough (The Times, Callum Jones) heralds the latest round of talks between the US and China as they get closer to the March 1st truce deadline. Clearly, the China side is just bigging it all up as they host this round in Beijing but a meeting between the people that really matter, Xi Jinping and Donald Trump, is not on the cards at this moment. Talks are scheduled to last five days.

Growth in Britain’s economy tumbles to nine-year low (Daily Telegraph, Tim Wallace) cites the latest data from the Office for National Statistics (ONS) which shows that economic growth equaled its lowest level in nine years at the end of 2018 – just 0.2% in the final quarter – and it’s not expected to improve during 2019. Rob Kent-Smith, of the ONS, observed that “GDP slowed in the last three months of the year with the manufacturing of cars and steel products seeing steep falls and construction also declining. However, services continued to grow with the health sector, management consultants and IT all doing well”. * SO WHAT? * This just confirms what we already know – that things are not looking good as we head into the uncertainty of Brexit. Buckle up, people!

After a bit of a dip going into the end of 2018, China’s demand for electric vehicles charges copper (Financial Times, Henry Sanderson) highlights a turnaround in the copper price – it’s rallied by 5% so far this year to $6,139 a ton – as we head into a period of higher demand driven by a rise in production of electric cars in China, according to analysts at Citigroup. Three times as much copper is used in an electric vehicle versus a conventional one and

Citigroup analysts believe that the number of petrol cars produced in China will fall by 9% while electric car production will increase by 53% – a net copper demand growth of 0.3%. Longer term, Citi thinks that copper for electric cars will account for two-thirds of demand growth between 2018 and 2030. * SO WHAT? * This is really interesting and worthy of note as the copper price was really rather weak going into the end of last year. I think that a rising copper price is a long term story given its use in electric vehicles and although there could be some bumps along the way, this is ultimately going to see a rising trend as EV take-up increases around the world.

Australia hopes to cash in on new cobalt rush (Financial Times, Jamie Smyth and Henry Sanderson) looks at another commodity that will benefit from an increase in electric vehicle production – cobalt. Two-thirds of the world’s cobalt is currently mined in the Democratic Republic of Congo but Australia is looking to get a piece of the action as Asian battery makers are seeking out more stable sources of supply. George Heppel, an analyst at consultancy CRU, points out that “the DRC is to the cobalt world what Saudi Arabia is to oil when it comes to the availability of supply, there’s nowhere else where you can get large volumes like you can in the Congo”, but the thing is that the DRC is very unstable politically and is notorious for child labour exploitation, making it difficult to trade openly. Asian battery makers are now looking at building relationships Aussie cobalt miners such as Cobalt Blue (South Korea’s LG International bought a 6% stake last year) and Clean TeQ (Chinese conglomerate Shanghai Pengxin bought a 16% stake). Canadian-listed First Cobalt is looking at building a North American cobalt supply via its mine in Idaho and unlisted KazCobalt, which operates in Kazakhstan, is also aiming to mine cobalt and nickel in the east of the country. * SO WHAT? * For the moment, the immediate prospect for cobalt price upside is limited as a huge amount of DRC supply is expected to hit the market – cobalt prices have fallen by over 40% since mid-November – but it is probably wise for battery makers to diversify their supply chains for the longer term.

Burger King’s parent seeks more growth, Iceland gets ready to take on some “Sasda” surplus and Debenhams announces a cash injection…

In Burger King’s parent aims for more global growth (Wall Street Journal, Kimberly Chin) we see that Restaurant Brands International, which also owns Tim Hortons and Popeyes Louisiana Kitchen (aaaaaaaargh – what happened to the apostrophes?!?!?), is looking to expand the international footprint of all three brands as they seem to be hitting maturity in the US and Canada. * SO WHAT? * This sounds like a reasonable idea, but it will need to think hard about how to slot in Tim Hortons and Popeyes into its existing international system. Fortunately, it has a lot of experience in franchising on a global scale so this shouldn’t be insurmountable.

Meanwhile, back in the UK, Iceland weighs moves for Sainsbury’s and Asda stores (Financial Times, Jonathan Eley) shows that the “mums’ favourite” is thinking about bidding for any stores that Sainsbury’s and Asda will have to dispose of to get their merger to go ahead. Clearly, stores are likely to be way bigger than their usual outlets

and so Iceland MD has proposed to redevelop them. They could also be used for the company’s larger format, The Food Warehouse, which are about double the size of their town centre outlets. * SO WHAT? * Interestingly, it seems that Iceland has been on the lookout for premises on out-of-town retail parks as traditional tenants such as Homebase, Carpetright, Mothercare and Toys R Us have been closing down or downsizing. However, they are not the only ones looking to increase their footprint – general merchandise discounters B&M, Home Bargains and Irish-owned toy chain Smyths are also sniffing around. No doubt landlords will be keen to see some competition to take up the vacant space!

Debenhams to announce £40m short-term cash injection (The Guardian, Sarah Butler) shows that lenders are going to extend the company’s overdraft limit in order to give it time to refinance its debts , but in return there will have to be more store closures and the banks will take a stake in the company. * SO WHAT? * This sounds pretty darn desperate to me – at the moment, all talk is about the financing and store closures but no-one seems to be coming up with a proper plan to turn the business around! I know that immediate survival and financing takes priority right now but the company really needs to come up with a solid plan for the future PDQ or it will just die – and all of this faffing around will have been for no reason.

Mercedes sees sales slide, Morgan Stanley announces a big acquisition and the EA rival to Fortnite gets a warm reception…

Mercedes dented by sales decline in January (Financial Times, Patrick McGee) shows that the world’s best-selling luxury car brand saw a steep fall in sales last month as problems in Asia, the EU and US came home to roost after a very strong 2018. * SO WHAT? * It seems that no automaker is really immune to the global economic slowdown at the moment.

Morgan Stanley, in its biggest deal since crisis, courts future millionaires (Wall Street Journal, Liz Hoffman) highlights the bank’s purchase of Solium Capital, which manages stocks that corporate employees receive as part of their pay packages, for $900m in the biggest takeover by a major Wall Street firm since the financial crisis. Solium has 3,000 corporate clients covering one million employees and includes startups like Stripe and Instacart whose

potential IPOs could make some of their respective employees millionaires. Morgan Stanley chief exec James Gorman is hoping that these employees could become clients of Morgan Stanley. * SO WHAT? * Morgan Stanley has an existing stock-plan administration business that has about 330 clients covering 1.5million employees, so this new acquisition looks like it’ll fit quite nicely as Solium’s millennial-and-start-up focus will slot in with Morgan Stanley’s top-exec-and-Fortune500 company focus. Morgan Stanley is paying a 43% premium to Solium’s Friday closing price and Morgan Stanley expects the deal to close by June 30th.

I mentioned this last week but Electronic Arts’ Fortnite rival powers stock (Financial Times, Matthew Rocco) shows that its new free-to-play “battle royale” game Apex Legends, a direct competitor to Fortnite, got a warm reception on release as Respawn Entertainment (the EA unit behind the game) announced that it got more than 10m players and overtook 1m concurrent players within the first 72 hours of launch. EA shares rose by 16% on Friday – the company’s best single-day performance for over four years – and continued to rally yesterday. * SO WHAT * It’s a bit early to say yet, but Apex Legends is looking like a hit and could well mean that other “traditional” developers go down the road of online gaming.

And finally, in other news…

I thought I’d leave you today with a potential job: Royal Caribbean wants to pay someone to explore the world for a month (Mental Floss, Emily Petsko https://tinyurl.com/yxl4ydk6). Sounds like a VERY nice job indeed!

1. In MACROECONOMIC NEWS, Japan loses steam and there’s more evidence of a UK slowdown
2. In UK HIGH STREET/CONSUMER NEWS, Office profits take a shoeing, Paperchase tries not to fold, Patisserie Valerie refuses Mike Ashley’s proposal to have his cake and eat it and US consumers are in for more price rises
3. In INDIVIDUAL COMPANY NEWS, Tesla has service problems and meat-free alternatives continue to expand
4. In OTHER NEWS, I bring you embarrassing parental moments. For more details, read on…

So Japan loses momentum and the UK shows more evidence of slowdown…

Japan Inc hit by China slowdown and trade disputes (Financial Times, Kana Inagaki and Leo Lewis) highlights Japan’s slowing economy as corporate third quarter profits fell at the steepest rate since the Fukushima aftermath in 2011 due to the China/global slowdown and the US-China trade dispute. Companies such as Nidec (small motors), Panasonic (consumer electronics) and Fanuc (industrial robots) are among those who announced profit downgrades and were hazy on the timing of a recovery. Downward revisions in the latest quarter were particularly rife in the electronics devices, transport and chemical sectors because of their exposure to the US-China trade shenanigans as well as slowing Chinese car and smartphone sales. Founder and chief exec of Apple supplier Nidec said that “In the 46 years of my management, I have never seen such a drastic fall in monthly orders” as he had to cut the company’s full year forecasts by an eye-watering 24% (as an aside, I’ve seen and been in meetings with Nagamori san on numerous occasions in my former life as a stockbroker, and he really is very straight-talking! Things must be really bad for him to say something like this…). * SO WHAT? * It certainly seems like the tide of news from Japanese corporates is turning

bad – and investors are getting so nervous these days that they seem to be looking for any excuse to sell. For instance, Sony’s share price fell by 14% last week after it warned that sales of image sensors and smartphones were slowing down, despite the fact that it was still on course to record a second consecutive year of record profits. Japan, like many other countries, will be hoping that a solution to the US-China impasse will be found sooner rather than later otherwise this negative sentiment could snowball, gathering momentum that will be difficult to stop.

UK economic growth expected to halve in final quarter of 2018 (The Guardian, Angela Monaghan) cites figures from the Office for National Statistics that are to be published today which will show that UK growth slowed right down in the last quarter of 2018 on deepening Brexit concerns. * SO WHAT? * This is just the latest bit of evidence of the UK slowdown in the face of major economic uncertainty and follows on from the Bank of England keeping interest rates unchanged last week whilst also downgrading previous growth forecasts. From a consumer perspective, the accompanying sluggishness in inflation (it’s expected to fall to 2% from 2.1% in December) and wage rises, means that we should be feeling richer as household incomes have stopped falling in real terms. However, this has not translated into buyer confidence as we continue to shun big purchases. Retail sales figures for January are due out this Friday and will offer a snapshot of whether this has changed in any way as we get closer to Brexit.

Office takes a big profit hit, Paperchase tries to restructure, Mike Ashley walks away from Patisserie Valerie and US consumer goods prices are about to rise again…

The gloomy mood continues on the UK high street with Office profits fall 40pc after collapse of House of Fraser (Daily Telegraph, Ashley Armstrong) which highlights how badly affected the South African-owned retailer was by House of Fraser’s demise as it said it was owed £700,000 from concession sales at the ailing department store and “according to administrators it is unlikely that this amount will be received by the company”. Office has 116 stores and 40 concessions and is trying to negotiate its position with House of Fraser’s new owner. * SO WHAT? * What is it about shoe shops?? Jones and Clarks are among those having problems at the moment – if people are avoiding buying shoes you would have thought that companies like Timpson (who repair them) may benefit. It seems that economic worries will quite literally make everyone down-at-heel.

Then there’s Paperchase restructuring plan to link rent to turnover (Daily Telegraph, Ashley Armstrong) which heralds a potential new type of Company Voluntary Arrangement (CVA) where the stricken tenant would link rent to store turnover which they argue give them more leeway to survive. KPMG is still looking for rescuers for Paperchase while the company simultaneously pursues this line of inquiry. A decision on what will happen to the business will have to be reached by the end of this month in order to give landlords enough warning in advance of its next rent payment. * SO WHAT? * CVAs have exploded in prevalence over the last 18 months as high street shops and restaurants have taken a pounding. They’ve become so common, in fact, that landlords are starting to complain that they are increasingly seen to be the easy way out of liabilities as Carpetright, New Look and Mothercare are

among the troubled chains who have sought refuge in such agreements. British Land and Hammerson are going one step further as they are currently in a legal battle with Supercuts owner Regis for what they see as “unfair” reductions to lease terms. Paperchase has 2,000 employees with 130 UK stores and 30 in Europe and the Middle East. Clearly some kind of common ground has to be found that will satisfy both sides otherwise everyone will suffer.

I was half-joking a few weeks back when I suggested that Mike Ashley might buy Patisserie Valerie, but then he only went and threw his hat in the ring on Friday to whip it back again (!) in Ashley abandons Patisserie bid after two days (The Times, Tabby Kinder, Dominic Walsh) where it turns out that he made a bid of over £15m, but was told by KPMG that he should pay at least £18m for it. * SO WHAT? * TBH, I think that Pat Val is toxic and could well face all sorts of investigations of its directors, auditors and lenders who all failed to spot the problems before they got ridiculously out of hand (which is probably why Ashley thought he could bowl in with a low-ball offer). Whoever ends up with this chain will have a serious job on their hands turning it around. I know Ashley likes a challenge, but surely this isn’t worth it?

Meanwhile, over in the States, Prepare to pay more for diapers, Clorox and cat litter (Wall Street Journal, Aisha Al-Muslim) shows that consumer goods companies such as Church & Dwight (whose brands include Arm & Hammer and OxiClean), Proctor & Gamble, Colgate-Palmolive and Clorox are confident enough to pass on increased raw materials, transportation and forex costs to their customers in a reversal of the trend of price cuts over the last ten years as consumers increasingly went for own-branded goods and online start-ups like Dollar Shave Club. However, earnings are now rising and the companies feel confident enough to raise prices. * SO WHAT? * It’s great to see such confidence, but then again finding the right price rises is a real balancing act between keeping/increasing your margin and losing your customer (possibly forever). With so many lower-priced options out there, I would have thought that brand loyalty won’t quite be what it once was, but if consumers are feeling richer they may not notice these price rises as much as they have done in the past.

Tesla has service issues and meat-free alternatives continue to advance…

Tesla is cranking out Model 3s – now it has to service them (Wall Street Journal, Tim Higgins) takes a closer look at issues facing Tesla in the aftercare market as owners have been finding that getting their cars repaired is a complete nightmare because of really long waits for car parts. * SO WHAT? * Although everyone has been concentrating on getting production numbers up, if Tesla doesn’t get the aftercare market right, sales will definitely suffer as more competitors encroach on this space with superior and battle-tested networks that people already know. Tesla fell six places to 27th out of 29 car brands on reliability in a survey by Consumer Reports last year – and if that doesn’t improve, pressure will intensify even more on the embattled brand. I still say that I think that the way forward for Tesla is to link up with an established manufacturer – like VW. Both companies would benefit – the established manufacturer would get better tech and Tesla would get instant distribution muscle. On the downside, an established manufacturer would also get massive debt (and an egotistical Elon Musk!) into the bargain.

You may have seen my video review of the Beyond Meat burger last year, so you know I’m actually quite interested to follow what’s going on in meat alternatives as per Moving mountains for meat-free tastes (The Times, Hazel Sheffield) which shows another “meat-free-meat” company, Moving Mountains (which is London-based), growing fast. It’s just signed a distribution deal with Jan Zandbergen, one of the biggest suppliers of meat in Europe, worth €25m in sales over three years –  which will obviously annoy the vegan/veggie purists – but Moving Mountains’ chief exec Simeon van der Molen explained that “partnering with the competition is the best solution to get our product out there fast”. Moving Mountains burgers are based on oyster mushrooms, whilst Beyond Meat burgers are based on pea protein – but they both have that juicy texture with “blood” being courtesy of the beetroot content. * SO WHAT? * These are exciting times for people who would like meat but don’t want to/can’t eat it for various reasons and the market seems to be really hotting up. It is highly fragmented at the moment, but with more meat producers looking to provide alternatives to their core offering there will no doubt be more deals to be done – and when the meat producers are on board, distribution just gets way better. I like the way that companies such as Beyond Meat and Moving Mountains are targeting meat-eaters and non-meat-eaters alike – and I think that this is the only way they can grow from being some niche product that’s only available in health food shops to something that’s available to everybody.

And finally, in other news…

I thought I’d leave you with what must be just one example of parental embarrassment in Adorable little girl caught doing something VERY rude in mum’s wedding photos (The Mirror, Zoe Forsey https://tinyurl.com/yxopkran). Flipping the bird at inopportune moments was hilarious for onlookers, but not so great for the parents I would have thought! Any of you reading this who are parents are probably thinking “I’m glad mine don’t do that” ???? Mind you, I recall doing something along the same lines when I was about five years old. I genuinely thought that I was “waving goodbye” to my dad when I was walking to school – turns out that I wasn’t ????

1. In MACROECONOMIC NEWS, the Bank of England hunkers down on interest rates
2. In MEDIA-RELATED NEWS, Twitter turns its first ever full-year profit, Publicis suffers slowing sales and the BBC nears a transformational deal
3. In CAR-RELATED NEWS, Amazon invests in Aurora and JLR has a shocker
4. In HIGH STREET NEWS, Tui and Thomas Cook react to turbulence and Superdry feels the heat
5. In OTHER NEWS, I bring you some breakfast trolling. For more details, read on…

So the Bank of England gets cautious on the outlook…

Bank warns of weakest UK economic growth in a decade (Daily Telegraph, Tim Wallace) heralds an altogether cautious tone as the Bank of England forecasts UK GDP growth of just 1.2% this year – the lowest growth rate since 2009 – versus the previously-predicted level of 1.7%. Funnily enough, it’s down to the overall global slowdown and Brexit uncertainties as well as stubbornly sluggish

inflation and so the Monetary Policy Committee kept interest rates on hold at 0.75%, indicating that the rate is only likely to rise once over the next three years versus previous expectations of two or three times. * SO WHAT? * TBH, the Bank’s predictions have been pretty cr@p – they predicted GBP growth of 1.7% in NOVEMBER (!!!) and average earnings growth of 2.75% in 2018 when it actually turned out to be 3.5% – so I think a lot of what Carney says these days is just noise. Having said that, we are living in very unpredictable times at the moment, so I don’t think anyone is capable of making consistently good predictions – especially as far as Brexit is concerned.

Twitter turns a profit because of ads, Publicis suffers on poor ad sales and the BBC continues to be on the verge of something big…

Twitter’s push for healthier discourse lifts revenue, hurts user growth (Wall Street Journal, Georgia Wells) highlights the company’s first ever full year of profitability as it posted record quarterly revenues on the back of a decent performance from ad sales – but there was also investor disappointment with a 1.5% drop in the number of monthly users, which was probably the main reason behind the company’s 10% share price drop in morning trading. Interestingly, the company is planning on foregoing the disclosure of monthly users but has just started to disclose the number of daily users. Chief exec Jack Dorsey talked about continued efforts to crack down on trolling, which is a move that marketers like because they don’t want to be associated with negative content. * SO WHAT? * It seems that Twitter is yet another beneficiary of the increase in digital advertising spend that has benefited Facebook and Snap and it’s good to hear that it is at least doing SOMETHING about trolling. However, the fact that it is planning on abandoning a data point that it has used for years (the disclosure of monthly user figures) would suggest that it is not particularly confident about further expansion in this area. This is a classic move – if your stats aren’t painting the picture you want, kill or change them to something else – just ask Apple! Ads are definitely the way forward for Twitter – and 126 million daily users is not something to be sniffed at by advertisers (although that compares with 1.52 billion for Facebook and 186 million for Snap). The more Twitter can do to snuff out the trolls the better it will be for all concerned.

Ad shop Publicis knocked by slowing sales (Financial Times, Matthew Garrahan and Myles McCormick) signals

tricky times for the world’s third biggest advertising group by revenues as it revealed organic revenue growth of 0.3% versus market expectations of 2.5%, blaming a slowdown in spend from big consumer packaged goods companies. The share price of Publicis, which also owns agencies including Starcom and Zenith, fell by almost 15% and sparked a wider sell-off in the sector with WPP falling by over 8% in London, Dentsu by 4.4% in Tokyo and Omnicom by 5.5% in the US on fears of a structural slowdown in ad spend. * SO WHAT? * Actually, Publicis reported profits ABOVE expectations for 2018 but there’s no denying the continued shift of ad spend to digital, with the likes of Facebook, Google, Snap and Twitter increasingly muscling in on their turf. Traditional advertisers will have to continue to streamline their complicated structures in order to cut costs and change their respective focus in order to survive.

UKTV CEO quits as BBC prepares to take full control of broadcaster (The Guardian, Mark Sweney) takes the story on a bit from what I highlighted in Wednesday’s edition of Watson’s Daily as the chief exec of UKTV is leaving the company ahead of a £1bn break-up of the broadcaster. UKTV is currently owned by BBC Studios (the BBC’s commercial division) and Discovery and the deal I mentioned on Wednesday is expected to leave the BBC in control of up to seven UKTV channels, whilst Discovery will get UKTV’s lifestyle channels and all of the BBC’s natural history content. Some are saying that this could be a precursor to the launch of a streaming venture with ITV as a “Best of British” rival to the likes of Netflix and Amazon. ITV’s chief exec Carolyn McCall is expected to reveal more details on the service at ITV’s annual results on February 27th. * SO WHAT? * This sounds like it could be a really compelling proposition, but a break-up of UKTV (which includes channels like Dave and Gold) is likely to be bad news for Channel 4 which handles its £250m-a-year ad sales contract and it’s not yet clear how they would fare in the aftermath as Discovery uses Sky to sell TV advertising on its channels. Exciting times for the ITV and BBC, though!

Amazon makes a driverless investment and JLR announces a record loss…

Amazon backs self-driving car start-up Aurora in $530m round (Financial Times, Shannon Bond) shows Amazon throwing its hat in the ring for making self-driving cars a reality by joining the likes of T Rowe Price, Lightspeed Venture Partners, Geodesic Capital, Shell Ventures and Reinvent Capital in the latest funding round that values Silicon valley start-up Aurora at over $2.5bn. Aurora will use the money to increase headcount from the current 200 and for further development of the software and hardware it puts into cars made by Volkswagen, Hyundai and Byton, a Chinese EV start-up. Amazon is exploring ways of using autonomous vehicles for deliveries and logistics – it is about to test small autonomous delivery robots in Seattle suburbs, has bought a stake in a French company developing tech for self-driving forklifts in warehouses and

has been using self-driving systems made by Embark to haul Amazon freight trailers – so it should be a good strategic fit. * SO WHAT? * This all sounds great and there is a ton of money flying around in this area into the likes of GM’s Cruise, Ford’s investment in Airgo AI, Waymo, Uber’s Advanced Technologies Group and Zoox – but ultimately I think that development will be so costly that there is bound to be more consolidation further down the line. Everyone is talking a good game now, but I just think that we are way off having self-driving cars in the mainstream. I do, however, think that they will come much sooner to warehousing and logistics because there will be fewer moral and legal issues to worry about. It’s an interesting one to follow, though…

We are brought down to earth, however, with Jaguar Land Rover to record £3.4bn quarterly loss (Daily Telegraph, Jack Torrance) as the troubled car manufacturer that has been suffering from over-exposure to diesel and China continues the misery by announcing a record quarterly loss as it its forced to write-down the value of its assets by over £3bn. * SO WHAT? * It never rains but it pours for JLR – and the outlook isn’t good. Unfortunately for employees, I suspect there are going to be a lot of job losses to come.

Travel turbulence affects Tui and Thomas Cook while pressure mounts on Superdry…

Thomas Cook off to flyer while Tui struggles (The Times, Dominic Walsh) highlights a contrast between the two travel companies as Thomas Cook’s share price shot up by 10% yesterday after it announced plans to sell off its airline while Tui, its much larger rival, announced a profit warning that sent its shares down by a whopping 19%. Tui’s warning was particularly shocking given that it only announced its fourth consecutive year of double-digit growth as recently as December when Thomas Cook was struggling with its second profit warning in two months. * SO WHAT? * These are turbulent times for holiday operators, with Brexit impact being the big unknown. A spokeswoman for Thomas Cook said that “We don’t think it’s necessarily putting people off travel, but it is clear to us that the protracted uncertainty is causing some to delay the decision of when and where to book their holidays, no matter how much reassurance we give them that flights will continue as normal”.

Chain tries to weather the storm of criticism (The Times, Deirdre Hipwell) shows pressure mounting on Superdry as it reported another quarter of “subdued trading” in the midst of a turnaround programme that is trying to diversify its offering. Shop sales were down sharply while online sales were slightly weaker – and the only bright spot was in its wholesale division where revenues were up by 12.7%. The company blamed mild weather in November and December hitting outerwear sales and “ongoing legacy product issues”. * SO WHAT? * Co-founder Julian Dunkerton, who resigned in March, disagrees with the current chief exec’s strategy of streamlining the number of products available online (he thinks they should be going the other way) and decreasing its traditional reliance on sales of cold weather clothing. The board is currently backing current chief exec Euan Sutherland but he has been having a tricky time of it what with having to announce profit warnings twice in the last 12 months, so at least the company didn’t have to announce a profit warning this time around. This will no doubt give Sutherland a bit of breathing space but I expect that this won’t put Dunkerton off breathing down his neck as he wants his old job back to become the Steve Jobs-like saviour of the company he founded all those years ago.

And finally, in other news…