Category: Uncategorized

1. In TECH NEWS, Apple changes its tune and Samsung gets gloomy about the outlook
2. In CAR NEWS, UK sales continue to fall and Tesla aims for China production this year
3. In RETAIL NEWS, Aldi and Dunelm toast a solid Christmas
4. In FLEXIBLE OFFICE NEWS, SoftBank scales back its proposed WeWork investment big time
5. In OTHER NEWS, I bring you a nice origami idea. For more details, read on…

So Apple relents and Samsung gets real…

Apple changes strategy to stream video on Samsung TVs (Financial Times, Tim Bradshaw) heralds a big change in strategy for Apple as this is the first time that it has allowed a TV manufacturer to integrate iTunes – previously, it had encouraged iTunes users to buy its £179 Apple TV box to watch content from the iTunes store. Take up was very low due to the number of alternative (and cheaper) devices and it seems that Apple is now acknowledging this by opening up. This means that owners of Apple’s devices will be able to stream content from their gadgets to the newest TV sets from Samsung, LG and Vizio using AirPlay 2. This deal follows a partnership announced late last year with Amazon to put Apple Music on its Echo speakers that are controlled by Alexa. * SO WHAT? * I think this is a great – and much needed – move by Apple. I suppose there are different ways you could look at this latest development. On the one hand, you could say that this is an admission of weakness for Apple in that it can no longer rely on people buying its stuff and staying in Apple’s walled garden. On the other, you could say that this is an important moment for the company as it tries to move away from being predominantly hardware-focused to becoming more software/services oriented. Increasing the number of Apple-compatible devices should be very lucrative – in the past, when Apple brought iTunes to 

Windows in 2003, the popularity of Apple’s iPod music player exploded! Video is likely to be its next major focus as it tries to take on the likes of Netflix, Amazon Prime Video and Hulu with the upcoming launch of its new streaming service with $1bn-worth of new TV shows and films, so I think this opening up is a no-brainer. Mind you, if it REALLY wanted to do something impressive in TV it could, of course, buy Netflix given that it has a massive $130bn net cash pile…

In Samsung echoes Apple’s gloomy outlook as tech woes get worse (Wall Street Journal, Timothy Martin) we see that the South Korean consumer electronics giant has painted a downbeat outlook by announcing expectations that its fourth-quarter operating profit will fall by 29%, which is way below analyst expectations. The company said that it was due to “mounting macro uncertainties” and blamed “lacklustre demand” for memory chips and “intensifying competition” in its handsets business. * SO WHAT? * This is rather disappointing given that the company has, for the last 18 months, regularly delivered record profits, but it seems that even the mighty Samsung is catching the tech-lurgy that has been infecting previously invincible tech companies. Samsung is a bellwether for the global tech industry given its size and broad product array – and so news of its downbeat expectations won’t sit well with investors. Even the company’s memory business – which has accounted for 75% of operating profits in recent quarters – is likely to be subdued for the first quarter (although the company expects this to turn around in the second half).

UK car sales continue to slow down…

Plunge in new car sales the worst since 2008 financial crisis (Daily Telegraph, Sophie Christie and Alan Tovey) just tells us what we all probably expected anyway, given the current economic backdrop. Full year figures from the Society of Motor Manufacturers and Traders (SMMT) showed new car registrations down by 6.8% on the previous year as the trade body blamed uncertainty about the future of diesel and tighter new emissions testing regimes causing supply bottlenecks. Petrol-powered car sales rose by 8.7% for a 62.3% market share and alternatively fuelled vehicle (AFV) demand rose strongly to take 6% market share overall – a new record. Petrol-electric hybrids and plug-in hybrids proved to be popular in the AFV segment with sales growth of 21.3% and 24.9% respectively. Sales of electric-only cars grew by 13.8%, but they still only account for a miniscule 0.7% of the overall

market. * SO WHAT? * Another day, another day of bleating by the SMMT, blaming its woes on policymakers. Still, despite the overall negative mood, demand for new cars is quite stable overall and the British automobile market is still the second biggest in the EU, behind Germany.

Elon Musk’s China factory – now a field, soon a plant – aims to pump out its first Tesla this year (Wall Street Journal, Trefor Moss) highlights the start of the construction of Tesla’s new China factory, the first wholly foreign-owned car plant in the country. Musk said that he aims for the plant to be built “in record time” so that the first Model 3 could roll off the production line by the end of this year with volumes ramping up sharply next year. * SO WHAT? * Tesla needs this thing to work. The China market has huge potential and this factory will give the company a proper foothold, but it also has to get its skates on as all the other established manufacturers – both Chinese and foreign – are all trying to crash the EV party that Musk started. Tesla’s form on hitting deadlines isn’t great, but the pressure will now be even more intense to meet this one given the growing competition.

Aldi and Dunelm toast good Christmas cheer…

Christmas luxuries increase sales at Aldi to almost £1bn (The Guardian, Rob Davies and Sarah Butler) shows just how successful the German discounter was over Christmas as its sales were boosted by rising demand for its luxury ranges. The UK’s 5th biggest supermarket said that the week beginning 17th December was its busiest ever, with sales 10% higher than last year. Aldi has 827 stores in the UK, with plans for 70 more this year, burnishing its reputation for being the UK’s fastest-growing supermarket. Market share data and supermarket sales figures will continue to be announced during the course of this week.

Dunelm upgrades profit forecasts after very merry Christmas (Daily Telegraph, Julia Bradshaw) shows that it’s not all doom and gloom on the high street as homewares specialist Dunelm benefited from brisk sales of brushed cotton and teddy-themed bedding, sheepskin rugs and unicorn pillowcases. Total sales were up by 2% despite the cost of closing down its Worldstores and Kiddicare websites and selling off its Achica site. Even profitability had gone up, due in part to a stronger pound, but also to the company’s ditching of low-margin products and incorporation of higher margin ones on its website. The company’s shares shot up by 12% but chief exec Nick Wilkinson was keen not to get too excited as he said that “Despite our strong performance in the year to date, we remain cautious on the outlook for the second half given the ongoing uncertainty in the UK economy”.

SoftBank cuts its commitment to WeWork as the flexible office space frenzy calms…

SoftBank to slash planned WeWork investment (Financial Times, Eric Platt and Arash Massoudi) will be a bit of a shock to the trendy WeWork as Japan’s SoftBank has put the brakes on proposed investment in the office space supremo. SoftBank had been talking about a $16bn investment this year, but this has been slashed dramatically to “only” $2bn. It will not include participation from SoftBank’s Vision Fund (which has already put $8bn in to WeWork thus far) and an official announcement is expected to be made this week. Flexible office providers may fail as rents fall (The Times, Louisa Clarence-Smith) predicts that other flexible office space providers will fail this year as they are forced to lease out property below the

rate they are paying their own landlords. Mat Oakley, head of commercial research at Savills, pointed out that “There is very little product differentiation in the sector. There are new entrants piling in…and if you’re only competing on price, it’s very much a downward spiral. I think we will start to see some failures in that sector from this year”. * SO WHAT? * The flexible office segment has been going bananas in the last few years and so it was bound to come a cropper at some point. The danger here is that the sudden slowdown of SoftBank’s investment in WeWork could start off a chain reaction in the sector with smaller operators starting to hit the panic button. I don’t think it’s an unmitigated disaster for WeWork (SoftBank and the Vision Fund could just as well change their minds further down the road), but it’s not going to be great for them in terms of sentiment. Given the rough ride that tech shares have had in the last few months it’s not surprising that members of the Vision Fund are wary of making big new investments. Maybe this development will give everyone a welcome pause for breath.

And finally, in other news…

You are probably going to think that I am mad sharing this, but I think Origami memory jars: Japanese Twitter’s beautiful way to collect happy memories like a coin bank (SoraNews24, Casey Baseel https://soranews24.com/2019/01/08/origami-memory-jars-japanese-twitters-beautiful-way-to-collect-happy-memories-like-a-coin-bank/) is actually a rather nice way of keeping your sanity with a useful little reward at the end of it.

1. In MACROECONOMIC NEWS, the US and China hold trade talks and China announces a massive stimulus
2. In RETAIL NEWS, there are wobbles in the US, Selfridges enjoys a good Christmas and Morrisons slashes prices
3. In TECH NEWS, FB dating is looking good, Chetwood is the new banking disrupter and we look at what to expect at CES
4. In OTHER NEWS, I show you a video that will make you shudder, but is strangely compelling. For more details, read on…

So the US and China head into more trade talks and China announces big fiscal stimulus…

US and China’s face-to-face talks seen as first step towards ending trade war (The Guardian, Lily Kuo) heralds a new round of talks between the two sides that will be the first since Donald Trump and Xi Jinping agreed a truce at the G20 meeting at the end of last year. The US delegation, who are travelling to Beijing for the talks, does not include any top US officials which would suggest that there will be higher level meetings to follow. * SO WHAT? * No-one’s really expecting anything earth-shattering from these talks – and even if some kind of agreement IS made, another major sticking point will be how to monitor whether both parties are holding up their side of the bargain. This will continue, but at least things are going in the right direction for now.

In China approves $125bn of rail projects in fiscal stimulus (The Financial Times, Tom Hancock) we see that $125bn worth of new projects have been approved in the

past month by the National Development and Reform Commission, the country’s top planning agency, as part of an overall plan to mitigate against China’s current economic slowdown. China will roll out 6,800km of railway lines this year – an impressive 40% above the amount added last year – including 3,200km of high-speed rail. This is in sharp contrast to this time last year when Beijing stopped investment in subway lines to stem the growth in local government debt. * SO WHAT? * This sounds like a reasonable enough reaction to an economic slowdown, but I always shudder when I hear about sudden massive spend on infrastructure as it can sometimes be a desperate measure when nothing else is working. I think that it is a classic way of kicking the can down the road as infrastructure takes tons of time and tons of money to start working – and is often used to bat away criticisms that nothing is being done to stimulate the economy (they can always say something along the lines of “yes, in the short term, things are difficult – but we’re thinking about long term growth, hence this big expenditure on infrastructure” etc.). Still, $125bn is a decent chunk of change, so it may just work. It’ll take us quite some time to see whether this works out and whether it just benefits domestic companies or whether foreigners can get a piece of the action.

US retail looks strong – but concerns remain, Selfridges had a good Christmas and Morrisons are cutting prices by 20%…

US retail recovery under new scrutiny on Wall Street (Financial Times, Alistair Gray) shows that, although holiday sales have been breaking records, there are concerns over the strength of the recovery as new data from analytics group ShopperTrak shows that footfall in stores is falling, rental growth at malls is looking pretty sluggish and demand for consumer electronics appears to be hitting the buffers (for now) as the exodus to online retail continues. Having said that, initial numbers from Mastercard gave reasons for cheer as festive sales rose at their fastest rate for six years – and we will see whether the joy continues as companies such as Macy’s, Target and Costco are due to report trading updates for the period in the next few days. * SO WHAT? * The key concern here is of whether Amazon-paranoia is leading retailers to cut their margins – and therefore profitability – in order to compete with the e-tailing giant. Retailers are continuing to attempt to address the balance between their online and offline offering and Brian Field, director of retailing at ShopperTrak observed that the “overall impact [of the shift online] has begun to slow down, indicating that both retailers and shoppers alike are starting to find a balance of activity between shopping channels”. 

Negative newsflow on UK retail has become the norm these days, so Selfridges a lonely star on the high street (The Times, Deirdre Hipwell) stands out in a good way as

figures set to be published today will show that sales at its stores and online rose by 8% in the 24 days to Christmas versus the same period in the previous year. Selfridges is made up of four stores in the UK and has an online business that ships to 130 countries worldwide. Interestingly, the department store put some effort into the customer experience – with in-store entertainment and new and exclusive products – and sales in the Oxford Street flagship rose by 10% in the same period. * SO WHAT? * I keep saying this – so apologies to regular readers of Watson’s Daily – but department stores need to concentrate on improving the customer experience they are providing in order to survive e-tailer domination because they sure as hell won’t be able to beat them on price alone. Trading updates will be trickling out this week from the likes of Tesco, Sainsbury’s, M&S and John Lewis – so we’ll know soon enough whether this was a one-off or not.

Morrisons to slash prices by 20% to defend market share against discounters (The Guardian, Miles Brignall) brings us back down to earth, however, as it seems that the UK’s fourth biggest supermarket has hit the panic button in the face of a continued German onslaught from Aldi and Lidl. Morrisons announced that it would continue to protect its market share by cutting 20% of the prices of “store cupboard favourites” like tinned tomatoes, cereal, sandwich fillers, ready meals and multivitamins. An Aldi spokesman sounded quite relaxed when he said “We see this every January, and Morrisons is unlikely to be the last one to cut some specially chosen prices”. * SO WHAT? * Will this spark a proper price war, I wonder? If so, this could be the start of a race to the bottom in terms of pricing – and with Brexit uncertainty hanging over everyone at the moment – it won’t be a great backdrop. We’ll find out more as the week progresses.

We see how Facebook’s dating experiment is working out, a new fintech challenging the banks and what’s coming up at CES…

Inside Facebook’s dating experiment in Colombia (Financial Times, Gideon Long) gives us an update on how things are going with Facebook’s foray into dating services. It started Facebook Dating in Colombia in September and has, since then, rolled out the service to Canada and Thailand in November. Facebook says it wants to differentiate itself from other dating websites by moving away from a quick yes/no model to something more considered and suggests dates based on your Facebook behaviour and interests. Users can also use Facebook Events and Groups to find matches. The share price of Match Group, which owns OKCupid, PlentyofFish, controls Tinder and has a 31% market share in Canada, fell by about 20% since Facebook said it was launching there. * SO WHAT? * I think that this sounds like a winner as far as Facebook is concerned – and everyone else in the space is right to be nervous given their installed user base and the fact that their lives are already on there anyway. Yes, Facebook has trust issues at the moment – and maybe people will be paranoid that their dating life will mix with their Facebook life, but I think that people will be quite relaxed about it ultimately. I see it as a bit of a development of the “People you may know” feature that could have more consequences ????????.

Chetwood seeks to lure customers from big UK banks (Financial Times, Nicholas Megaw) heralds the arrival of

yet another disruptive upstart to stir things up in UK banking as the Elliott Management-backed fintech lender announced that it has received a full banking licence in the UK. Chetwood began lending last year and got Bank of England approval to start taking deposits in December, which made it the only new retail bank to get a licence in 2018. The former deputy head of HSBC’s UK retail bank and now current chief exec of Chetwood, Andy Mielczarek, said that the bank would use data science and new tech to target customers with innovative products. Chetwood joins the likes of Monzo, Revolut and N26 in the digital banking world. Mielczarek believes that Chetwood would be profitable in between 18 and 24 months and that it would partner up with existing companies to distribute its products rather than building a single customer-facing brand. Chetwood’s co-founder Mark Jenkinson also said he was open to the possibility of licensing out the bank’s core banking platform, called Yobota. * SO WHAT? * Another day, another digital bank, it seems. This is great in theory, but I wonder whether the market for these types of banks is starting to look a little crowded. Anyway, as far as I’m concerned, this sounds like a particularly interesting prospect given that it’s willing to sell its platform – could it become the Ocado of banking??

I thought I’d include What to expect at CES 2019: from smart speakers to intelligent toilets (Financial Times, Tim Bradshaw) given that the annual tech jamboree is kicking off tomorrow in Las Vegas. It is likely to feature loads of 5G related stuff, more on smart speaker and virtual assistant connectivity with other devices, as well as developments in EVs and scooters amongst other things. I’ll keep you informed of anything interesting as it develops!

And finally, in other news…

I thought I’d leave you with a video that is simultaneously a bit creepy, but also strangely compelling in Hikers’ horror discovery after thinking they’d poked ‘furry hibernating animal’ (The Mirror, Laura Forsyth https://tinyurl.com/y7spl9kj) * shudders *. Have a great day!

1. In UK MACRO NEWS, the Bank leaves our interest rate unchanged, we look at current Brexit options while UK car manufacturing and consumer confidence fall to new lows
2. In UK HIGH STREET/CONSUMER NEWS, retail sales figures are surprisingly good, Loungers eyes a float and Boots faces cuts whilst in consumer goods, Bang & Olufsen hits hurdles, mattresses get competitive and Nike has strong sales growth
3. In INDIVIDUAL COMPANY NEWS, Naspers makes a big investment, the Siemens-Alstrom deal hit trouble, Huawei gets another kick and Twitter falls on harassment
4. In OTHER NEWS, I bring you festive feasts from around the world. For more details, read on…

So UK interest rates remain steady and we look at current Brexit options but it’s bad news for UK car manufacturing and consumer confidence…

Bank keeps rates on hold as Brexit dampens UK growth (The Guardian, Richard Partington) tells us that the UK interest rate remains unchanged at 0.75% as the Monetary Policy Committee (MPC) voted unanimously to do so. Governor Mark Carney remarked that “The further intensification of Brexit uncertainties, coupled with the slowing global economy, has also weighed on the near-term outlook for UK growth”. * SO WHAT? * Basically, the Bank of England will wait and see how the Brexit thing unfolds. If it is anything less than smooth, they probably won’t be raising rates for a while by the sounds of it.

Brexit: the risk rises of delay beyond March 29 (Financial Times, James Blitz) takes a look at what might happen re Brexit given that we are now within 100 days of the deadline for leaving the EU. Scenario one: MPs approve May’s Brexit in the Commons in the second week of January, which means that we would be leaving the bloc. Given the delay, however, many think that there will be too little time to get the necessary legislation through before the March 29th deadline, so Article 50 may have to be extended. Scenario two: Norway Plus or full customs union membership. The Norway Plus option would keep us in the EU’s single market and the latter option does what it says on the tin. Both of these options would involve major changes to May’s deal, which could take a long time debate and legislate on, which could again result in the need for an extension to Article 50. Scenario three: a second referendum. This would definitely necessitate an extension – and the EU is bound to accept this. The Constitution Unit at University College London estimate that the whole process for this would take a minimum of 22 weeks. Scenario four: No deal. Some think that the EU may be open to delaying the exit date to allow all sides to

prepare, but others think that the EU wouldn’t grant an extension because it would hurt the UK more than the EU – which might force the UK back to the negotiating table. So there you have it. If you love this kind of stuff (and who doesn’t?!?) there is actually a VERY good short video on this in the article – so if you have about three minutes to spare, you should definitely watch it.

Meanwhile, UK car manufacturing drops to lowest level in a decade (Financial Times, Peter Campbell) highlights the rather gloomy news that British car factories suffered their worst November for ten years in November, with a 20% fall in output reflecting concerns over the effect of Brexit as well as falling demand from Europe and Asia. 80% of cars produced here are destined for export, with over 50% going to Europe and Mike Hawes, chief exec of the Society of Motor Manufacturers and Traders which compiled the figures, warned that “Thousands of jobs in British car factories and supply chains depend on free and frictionless trade with the EU. If the country falls off a cliff edge next March the consequences would be devastating”. * SO WHAT? * This is hardly surprising. If you couple this with the continued plummeting of demand for diesel-powered vehicles, the motor industry has got a crisis on its hands. It still amazes me to think that the motor industry did not do more to curtail the production of diesel cars given the VW emissions thing AND the fact that major European cities had already started the trend of banning diesel-powered cars. I think this shows huge arrogance that this whole thing would die down and now the whole industry is paying the price.

Consumer confidence slumps to five-year low (The Guardian, Phillip Inman and Sarah Butler) cites the findings of the GfK index – used by the European Commission to gauge consumer confidence – which shows UK consumer confidence hitting new lows. This is mainly due to concerns over the economy rather than on personal finances. * SO WHAT? * Given all of the recent newsflow, this is hardly a surprising finding – but I guess this is just evidence of what we already know!

So UK retail sales actually RISE, Loungers considers a flotation, Boots looks down-at-heel and then in the world of consumer goods, we see problems for Bang & Olufsen and mattresses while Nike announces strong figures…

Shoppers defy forecasts as Christmas sales rise (Daily Telegraph, Tim Wallace) cites the latest figures from the Office for National Statistics which show that total retail sales volumes were up by 3.8% versus November last year – which was way above forecasts with rising pay, falling inflation and robust consumer confidence (presumably in personal finances rather than anything else) thought to be behind the unexpected surprise. Unsurprisingly, online sales were strong and broke through the 20% market share barrier, accounting for 21.5% of all retail purchases. * SO WHAT? * I don’t mean to say “I told you so”, but, hey…”I told you so” ;0). TBH, I think that while the overall mood is rightly downbeat and retailers really do need to be prepared for the worst, there are so many predictions of a doomsday scenario that the risk was very much on the upside when it came to actual performance. ANYONE who manages to conjour up some half decent sales numbers over the festive period will get an almighty boost to their share price because I think that disastrous performance is largely priced in already. There’s still time for retail calamity, having said that, but maybe it won’t be quite as widespread as some have been predicting.

In other news bits on the high street, Stiff drink in hand, Loungers is set to float (The Times, Dominic Walsh) shows us that one of the few bar/restaurant operators doing well at the moment is pushing forward with plans for a £250m+ stock market listing, with a number of City advisers – including Numis, Peel Hunt, Berenberg and Liberum – in the mix to handle the potential Initial Public Offering. Performance of the owner of Lounge and Cosy Club contrasts starkly with the likes of Prezzo and Byron et al. * SO WHAT? * I really am guessing here, but I reckon the fact that Loungers is 60% owned by private equity company Lion Capital has a lot to do with Loungers’ haste at coming to market. If you consider overall consumer sentiment and all the uncertainties around both domestic and international growth you would have thought that they’d want to wait for better market conditions. If I was being cynical, I would say that Lion Capital are pleased to have weathered a difficult time on the high street for the last few years and want to crystallise some of that value while the going is good at Loungers. Clearly there are a number of risks next year, so if they can get some money

while Loungers is still doing well, then you can’t really blame them.

There’s some more downbeat news in Boots braced for cuts as US owner seeks $1bn savings (The Times, James Dean) as the owner of the high street pharmacist, American company Walgreens Boots Alliance, is reviewing its businesses following a deterioration in performance at the parent level. Walgreens now has 18,500 shops in 11 countries and employs around 415,000 people so there would seem to be a lot of scope for “right-sizing”. The company said that the cost-cutting would involve digitising existing operations among other things.

Meanwhile, in the world of consumer goods, Bang & Olufsen dives 27% as logistics problems hit sales (Financial Times, Camilla Hodgson) shows how the Danish headphone and speaker maker took a tumble after it cut its sales outlook for the year due to a number of logistical problems thrown up by store closures and openings as well as supplier changes.

No bed of roses as multiple mattress start-ups vie for sales (Daily Telegraph, Sophie Christie) is a really interesting read as it does a really good snapshot overview of a mattress market that has seen players like Eve Sleep, Casper Sleep and Simba enter the fray. All of them are having to spend a ton of money on marketing to get in consumers’ faces (they are mainly aimed at the younger end of the market) and there’s always the prospect of players like Amazon entering the playpen and shaking things up (Amazon does its own memory foam mattress that ships to a buyer’s door for less than £115, with others charging £200 upwards). * SO WHAT? * Given the high margins on mattresses, it is hardly surprising that there’s been so much activity in the last few years. The only thing is that the products are all pretty similar, making differentiation quite difficult. As Duncan Brewer of consultancy firm Oliver Wyman put it, “There are lots of identical businesses all competing in a fairly small market (how frequently does anyone change their mattress?). The key to success boils down to offering customers a clear reason to shop with you”. I suspect that there is a load of scope for M&A in this area – and we will no doubt see consolidation in the next few years.

I thought I’d end this section with something a bit uplifting in Nike Strides to strong sales growth (Wall Street Journal, Patrick Thomas) as the apparel and footwear seller unveiled strong figures after a tricky period following their backing of NFL-quarterback-turned-social-activist Colin Kaepernick in its advertising campaign. The apparel business saw a sales increase of 10% and footwear saw an increase of 8%, with sneaker sales in China rising by a very healthy 26% over the quarter. The company’s shares rose by 8% on the news.

Naspers puts $660m into India’s Swiggy, the Siemens-Alstrom merger hits a blockage, Huawei gets more bad news and Twitter tumbles over harassment claims…

Naspers leads $1bn funding round for India’s Swiggy (Financial Times, Amy Kazmin) heralds an interesting development for the Indian food-delivery service Swiggy as the South African e-commerce and media investor plunges yet again into India’s fast-growing tech sector as part of a big funding round. Swiggy is the self-styled biggest food delivery platform in India and enables diners to order from over 50,000 restaurants in 50 Indian Cities using 120,000 “delivery partner” drivers. Naspers is chucking $660m into the pot and will be joined by the likes of DST Global, Coatue Management and Meituan Dianping (China’s Swiggy equivalent). * SO WHAT? * This is a VERY hot area at the moment as the food delivery market is growing at break-neck speed due to rising incomes in the country. Naspers recently made a nice 32% return when it sold its stake in Indian e-commerce platform Flipkart to Walmart last year for $22bn, so it has some decent form!

In other news bits, Competition watchdogs join to block Siemens-Alstrom merger (Daily Telegraph, Oliver Gill) highlights unprecedented action to block the mega-merger that was originally announced in September 2017 because it “raises very serious and extensive competition concerns” and remedies suggested so far “fall far short of what would be required to address all concerns”. There’s more bad news for the Chinese telecoms equipment company-of-the-moment in Some global banks break ties with Huawei (Wall Street Journal, Margot Patrick and Julie Steinberg) which just means there will be fewer banks for them to choose from – although TBH I reckon that’s probably a bit of an annoyance rather than anything more serious at this stage. And then there’s Twitter shares tumble as it is called out over harassment (Daily Telegraph, Olivia Field) which highlights the 18% fall in Twitter’s share price yesterday after a report from Citron Research accused the company of being “the Harvey Weinstein of social media” for failing to deal with harassment.

And finally, in other news…

Given that this is the last Watson’s Daily of 2018, I thought I’d leave you with this: Mouth-watering photos show what different holiday feasts look like around the world (Insider, Rachel Askinasi https://tinyurl.com/y72k2uoc). Apart from our own, I’m liking the look of the Finnish and South Korean spreads!

I hope you have a brilliant Christmas and a fantastic New Year!

1. In MACRO, MARKETS & CRYPTO NEWS, US rates rise, the EU and Italy come to an arrangement, UK inflation hits a new low and there’s some bad news for crypto fans
2. In NEWS ON CIGARETTES AND ALCOHOL, AB InBev announces a cannabis alliance and Altria is close to buying 35% of America’s biggest e-cigarette producer
3. In INDIVIDUAL COMPANY NEWS, GSK strikes a major deal with Pfizer
4. In OTHER NEWS, I tell you how not to beat the breathalyser test. For more details, read on…

So the US raises interest rates, the EU and Italy compromise over the budget, UK inflation hits a new low and there’s bad news for crypto fans…

Fed shrugs off Trump’s pleas and increases US rates again (The Guardian, Dominic Rushe) highlights yesterday’s decision by the US Federal Reserve to raise interest rates by 0.25% to a new range of 2.25-2.5%, despite increasing pressure from President Trump. * SO WHAT? * The Fed funds rate is closely watched as it sets the pace for interest rates around the world and is seen as an indicator of the strength of the US economy. Despite everyone and their dog expecting this rate rise, markets reacted by falling (I guess some held out the hope that Trump’s bullying tactics would carry some sway), taking the December decline to a magnitude not seen since the Great Depression of 1931. Jerome Powell sounded like he was keeping his options open for interest rate moves next year.

EU and Italy strike budget agreement to avoid fines (Financial Times, Jim Brunsden and Mehreen Khan) shows that Rome and Brussels appear to have come to an agreement after a two-month impasse where both sides dug their heels over the proposed deficit in Italy’s 2019 budget. Italy will now have a budget deficit of 2.04% of GDP versus the proposed level of 2.4% and will achieve this by delaying some of its spending plans, including the planned introduction of a basic income programme. * SO WHAT? * This sounds to me like Brussels kicking the can down the 

road because of EU parliament elections next year – if the EU was too firm, it would have given Eurosceptic parties ammo. Italy is still a basket case as far as I’m concerned, but let’s see how things pan out.

UK inflation rate cools to 20-month low (Financial Times, Gavin Jackson) cites the latest data from the Office for National Statistics which shows that the consumer price index rose by 2.3% in the year to November, weaker than the 2.4% for the previous month. * SO WHAT? * This slowdown would suggest that real incomes have actually grown during the course of 2018 as inflation fell and wage growth accelerated (the most recent data says that average weekly earnings grew by 3.3% in the year to October). However, rising wages have not yet filtered through to power inflation back up and I suspect that economic uncertainty surrounding Brexit will keep things that way for the time being at least.

There were a couple of interesting developments regarding cryptocurrencies that I wanted to mention today. One was Crypto miners fight for survival as market turmoil continues (Financial Times, Hannah Murphy) which highlights major problems for bitcoin miners whose numbers are dwindling fast due to high overheads and falling cryptocurrency prices. The other one was Blow to Bitcoin investors as HMRC closes tax loophole (Daily Telegraph, Hannah Boland) which says that HMRC has ruled that Bitcoin investors in the UK will NOT be allowed to classify their investment in the cryptocurrency as “gambling” (where winnings are tax free). Investments will now be classed as “chargeable assets” which will attract capital gains tax. Talk about shutting the stable door when the horse has bolted!

So AB InBev moves into cannabis and Altria gets closer to a deal with Juul…

In AB InBev in cannabis drinks tie-up (Financial Times, Alistair Gray and Nicole Bullock) we see that the world’s #1 brewer is getting together with Canadian marijuana company Tilray to research cannabis-infused drinks – but only in Canada for the moment. The two companies will invest $50m in researching how to get such drinks to market, taking into account factors like flavouring and the length of the high. This comes hot on the heels of Tilray’s announcement earlier on this week of a partnership deal with pharmaceuticals group Novartis to develop medical marijuana. Shares in Tilray shot up by 17% yesterday on the news in after-hours trading. * SO WHAT? * This is a really interesting development and is something that will continue to raise pulses as companies scramble to make a new market. Marlboro cigarettes maker Altria announced it was taking a C$2.4bn stake in Canadian marijuana company Cronos earlier this month and earlier on this year, Constellation Brands invested almost $4bn into Canopy Growth, another pot company. Then there was Aurora 

Cannabis’ $2bn purchase of medical marijuana group MedReleaf back in May – not to mention all the excitement that raised share prices of all pot companies when Coca-Cola was rumoured to be thinking of a foray into cannabis-infused beverages. I think there are going to be some interesting developments in this market in 2019.

Altria is nearing a deal to take a 35% stake in Juul (Wall Street Journal, Dana Mattioli, Jennifer Maloney and Dana Cimilluca) heralds the latest development in something that has been rumoured for the last few months. People familiar with the deal say that a $12.8bn cash injection could even be announced this week and would value Juul Labs at a whopping $38bn – potentially making it one of the world’s most valuable private companies (after only three years in existence!). Just to give you an idea of scale, this would make it bigger than Airbnb, Elon Musk’s SpaceX and Pinterest – and it would be on a par with companies like Delta Airlines, Target and Ford! * SO WHAT? * Through getting together, Altria would get access to markets outside the US and to Juul’s rather impressive 75% profit margin while Juul would get a deep-pocketed backer to help it through the new FDA clampdown on e-cigarettes and access to better shelf space at retailers. This pursuit of Juul implies a lack of confidence of its heat-not-burn IQOS product in the US, which has seen success in Japan and other countries.

GlaxoSmithKline announces a JV with rival Pfizer…

GlaxoSmithKline to break up after striking Pfizer joint venture (Financial Times, Sarah Neville and Arash Massoudi) sounds an important moment for the company that has been undergoing a major overhaul under the auspices of its chief exec Emma Walmsley as it will split into two, creating a new £9.8bn consumer health business via a joint venture with Pfizer. The new UK-based group will take in Pfizer brands such as Advil, Centrum and Caltrate

into GSK’s established brands such as Sensodyne, Nicorette and Excedrin, making it the world’s biggest provider of over-the-counter medicines. In exchange, Pfizer will get a 32% stake in the new business. GSK said that it will spin off the division within the next three years via a UK stock market listing, leaving its prescription drug and vaccine business for existing shareholders. The tie-up is expected to complete by the second half of next year. * SO WHAT? * This sounds like a good deal strategically and gives investors the option to focus better on different areas by separating them out. It also means that the company’s core business could shed some of its debt quite neatly. Share prices of both firms rose on the news.

And finally, in other news…

You’ve probably made it through peak Christmas party season by now, but the following is worth keeping in mind: Can sucking on 2p coins help you pass breathalyser test? (Metro, Adam Smith https://tinyurl.com/y8tx9pga). Don’t drink and drive, folks!

1. In MARKETS AND OIL NEWS, we look at why markets are falling and whether we’re heading for global recession plus the reasons behind oil price weakness despite OPEC cutting production
2. In RETAIL NEWS, John Lewis and Angling Direct report strong numbers
3. In INDIVIDUAL COMPANY NEWS, Japan’s SoftBank shares disappoint on its market debut and Apple continues to face problems in India
4. In OTHER NEWS, I bring you THE best family Christmas cards ever! For more details, read on…

So US markets recover, the FTSE hits a two-year low and oil prices fall despite production cuts. WHY??

In US stocks close higher as oil prices slide (Wall Street Journal, David Hodari and Corrie Driebusch) we see that US markets staged a late rally yesterday after generally sluggish trading due to energy company share prices being hit by weaker oil prices. Volumes were lower as investors steel themselves for the Federal Reserve’s policy decision due today. Despite yesterday’s small rise, both the Dow Industrials and the S&P are down by over 7.5% in December. If things continue like this, it will be the indexes’ worst month since the world was in the midst of the European debt crisis in May 2010.

FTSE falls to two-year low over US interest rate fears (Daily Telegraph, Tom Rees) reflects investor nervousness on this side of the pond regarding the Federal Reserve’s meeting today as Trump attempted to put pressure on it not to raise interest rates against a backdrop of global growth concerns. The FTSE 100 fell to a 13-month low and European stock markets fell for the fourth day in a row. * SO WHAT? * Investors are nervous about the Fed raising rates because it would increase the cost of borrowing at a time when world growth looks like stalling.

Why are markets falling, and are we heading for global recession? (The Guardian, Richard Partington) does a good job of explaining why everyone is getting rather antsy

about markets at the moment. Basically, the US Federal Reserve (aka “the Fed”) looks like it’s going to raise interest rates for the fourth time this year, which raises borrowing costs. The fear is that further interest rate hikes could hold growth back because companies and individuals will be reluctant to invest if it costs more – and if you couple that with concerns surrounding the ongoing US-China trade war, you’ve got a recipe for nervy markets. * SO WHAT? * Despite Trump attempting to stick his oar in by trying to dissuade the Fed from raising rates in the way that everyone is expecting, it looks unlikely that his protests will work. The Fed has been dropping very big hints in the last few months that it will raise interest rates by 0.25% from the current level of 2%-2.25%, but it is possible that soothing words from the Fed about NEXT year’s rate hike schedule (i.e. that it will be slower than expected) could go some way towards mitigating outright panic.

Price of oil hit by booming shale (The Times) looks at why the oil price is getting weaker despite OPEC recently deciding to cut production by 1.2m barrels per day – and it’s mostly down to booming shale oil production in the US. The Brent crude price has fallen by a third since it reached its highest level for four years in October and forecasts from the US Energy Information Administration show that production is going to continue to increase. Interestingly, the Russian oil industry is also booming with crude output reaching record levels. * SO WHAT? * At the moment, it’s looking like the OPEC cuts won’t be enough to offset a potential oil glut going into next year.

So John Lewis and the mighty Angling Direct provide some much-needed Christmas cheer in the retail sector…

John Lewis bucks trend with good week for fashion and beauty sales (The Guardian, Sarah Butler) heralds some rare good news in an otherwise tricky sector as it reported a sales rebound last week as discounts managed to tempt shoppers into parting with cash. John Lewis’ beauty, wellbeing and leisure sales were up by 16%, womenswear was up by 8.5% and menswear by 7.2% although sales of electrical goods were down by 4.3% and homeware sales fell by 1.7%. * SO WHAT? * It really does seem to be a mixed bag at the moment from the high street stalwart. It just goes to show that there is still all to play for this Christmas!

And the good news doesn’t just end there – you’ll no doubt be glad to see Gone fishing: Angling Direct sales rise 32% after a record Black Friday (Financial Times, Camilla Hodgson) as the UK’s largest specialist fishing tackle and equipment retailer posted excellent numbers, which sent the shares up by 5% in early trading. It’s not clear how much of this was due to discounting, but investors seemed to applaud the trading update anyway. The company continues to invest in its international business in France and Benelux markets. * SO WHAT? * Sorry to sound so cynical, but I think things really are dire when you’ve got broadsheets trumpeting the triumphs of such a niche retailer! It just goes to show how bad things are elsewhere in the sector that any good news is immediately pounced upon!

SoftBank has a disappointing float and Apple continues to face problems in India…

SoftBank telecom unit shares open below IPO price – then drop 8% (Wall Street Journal, Suryatapa Bhattacharya and Mayumi Negishi) highlights a disappointing first day of trading on the Tokyo Stock Exchange for SoftBank’s mobile phone unit as it fell by up to 8.1% from its issue price due to investors showing concern about an imminent price war between its major rivals. SoftBank’s mobile carrier unit is the third biggest in Japan but is way behind its bigger rivals – NTT DoCoMo and KDDI – who account for 75% of the market. The problem is that these guys are looking to cut prices by up to 40% next year – not to mention the fact that e-commerce company Rakuten is also preparing to enter the market with low-cost services. * SO WHAT? * This is clearly a bit of a pain for parent SoftBank Group as the mobile unit has proved to be a useful cash cow, but it seems that its attention is being drawn increasingly to amassing big stakes in some of the world’s most exciting tech start-ups via its famous Vision Fund.

I’ve mentioned this before, but ‘It’s been a rout’: Apple’s iPhones fall flat in world’s largest untapped market (Wall Street Journal, Newley Purnell and Tripp Mickle) shows that Apple is continuing to have problems in what is thought to be the world’s biggest untapped market as its handsets are just too darn expensive – there are 1.3 billion consumers in the country, only 24% of Indians own smartphones and the number of users is growing faster than in any other country, according to research firm eMarketer. The number of iPhones shipped to India has dropped by 40% so far this year versus 2017 and Apple’s market share has halved from about 2% to 1% as it continues to cling to its existing business model of selling a limited number of handset models at high prices with fat margins. Rivals, in the meantime, have adapted their India offering by doing things like increasing battery life and offering less expensive models, for instance. * SO WHAT? * When all’s said and done, Apple needs to make a conscious effort to up its game in India if it wants to get a proper slice of the action. It set up a plant last year near Bangalore to assemble its cheapest model, the SE, but I think that it also needs to rejig its supply chain to use more Indian suppliers to make a real difference and avoid attracting import taxes. Given the unpredictable nightmare that China is proving to be, I would have thought that Apple should make a special effort here. At the end of the day, why not throw more resource at India, increase production and perhaps take up some of the assembly/production capacity from China and supply the world. It would keep the Chinese on their toes, broaden the supply chain, help lower costs in India but also make Apple’s margin even fatter by supplying the world with phones assembled in India as well as China.

And finally, in other news…

When I saw this, I just thought I HAD to bring it to your attention: People can’t get enough of this family’s hilarious “real life” Christmas cards (bestlifeonline.com, Diana Bruk https://tinyurl.com/y9ktmssp). This is hilarious!

1. In MACROECONOMIC AND MARKETS NEWS, May sets a date, a second referendum looks more likely and markets fall on renewed US-China trade worries
2. In RETAIL NEWS, Asos shocker topples the whole retail sector
3. In MISCELLANEOUS NEWS, there’s more evidence the UK property sector will stagnate and Hitachi buys into ABB to the tune of $6.4bn
4. In OTHER NEWS, I bring you some very amusing dog photos. For more details, read on…

So Brexit pressures continue and markets take a bath on US-China trade concerns…

Theresa May sets mid-January date for vote on Brexit deal (Financial Times, George Parker, Henry Mance and Laura Hughes) sets out the latest development in the Brexit saga as, shortly after Theresa May set a date for MPs to vote on her unpopular Brexit deal in the week commencing 14th January, Jeremy Corbyn tabled a motion of no confidence in her leadership (i.e. an attack on her personally, rather than the government). Some observers say that this was just a stunt to embarrass the PM and that he would shy away from calling a vote of no confidence in the government because he’d lose (conservatives don’t want a general election). * SO WHAT? * There are still some vague hopes that the deal can be tweaked before the January deadline and MPs are actively urging her to test other variations of Brexit in a series of Commons votes. 

Is Britain heading towards a second Brexit referendum? (Financial Times, George Parker) looks at how possible a second referendum would actually be despite the PM publicly rejecting the idea currently. An idea that appeared not so long ago to be a Remainer pipe dream seems to be gaining more traction because May’s current deal is so unpopular. She is being urged at the moment to test out alternative variations to see if a plan B could galvanise enough votes, but success for this option is looking unlikely. A “Norway-style” economic partnership where the UK would remain closely integrated with the EU and governed by its rules was roundly rejected in a Commons vote last June, with many believing that this could be even worse than May’s deal. Which leaves the second

referendum option. The idea has been gathering cross-party momentum since the voting down of the Norway option and although Labour has kept the option of a second referendum open, Corbyn’s not been keen to push it too much because it could split his party. After all, in the 2016 referendum, Labour party members voted overwhelmingly for Remain whilst most Labour MPs’ constituencies voted Leave. * SO WHAT? * Given that many of the “conventional” options look likely to meet major resistance, momentum for a second referendum is certainly building. However, if it DID happen, it would take some time to sort out. Although LibDem leader Vince Cable says that legislation could be passed “within a matter of weeks” (but then again he would say that as a second referendum is central to his party’s policies) holding a vote before the original March 29th deadline would seem to be nigh on impossible as a lot of admin would have to be sorted to allow it to go ahead (e.g. primary legislation, the question that would appear on the ballot paper, preparing the poll and a campaign period of at least 10 weeks etc.). Still, EU officials have said that there could be an extension of a few weeks granted to allow us to get things sorted. Also, the European Court of Justice ruled this month that the UK COULD unilaterally revoke the Article 50 notification, which means that in theory Britain will have another option of calling Brexit off. We’ll just have to wait and see.

Dow Industrials fall 508 points as investors fret over growth (Wall Street Journal, Jessica Menton) shows how nervy investors are getting about friction in the US-China trade negotiations and concerns ahead of the meeting tomorrow of the Federal Reserve about the interest rate (if they put it up, markets will probably go down). The latest declines have now put the tech-focused Nasdaq into negative territory for the year, the Russell 2000 index of small-caps is now in a bear market, having suffered a drop of over 20% since its August 31st peak and US crude has now dipped below $50 a barrel for the first time in 14 months. Tricky times.

Asos sneezes and the whole sector takes fright…

Asos raises fear that high street woes have moved online (The Times, Deirdre Hipwell) shows the effect of yesterday’s surprise trading update by Asos where it halved its profit forecast following a disastrous November. Investors took fright as it followed last week’s profit warnings from Superdry and Bonmarche and sold off shares in Next and Marks & Spencer, amongst others in the sector. Conventional wisdom has highlighted the ongoing customer migration from offline to online retailing but what people are really concerned about now is that high street problems are now becoming online retailer problems. * SO WHAT? * This is obviously bad news, but the key thing to consider here is whether this is an Asos problem or a retail sector problem, because if it’s just an Asos thing other retailers are being oversold. On the other hand, if this can be taken as a sign that consumers are reining in spending across the board, then the sell-off can be justified. Whitman Howard retail analyst Tony Shiret says that the profit warning could have been due to overly-punchy sales targets and/or failing to get the right price offering around the Black Friday period and that there is still all to play for in both the run-up to Christmas and the subsequent aftermath. Shares in smaller rival Boohoo have not seen the same problems, but then again shares in Zalando – Europe’s biggest online-only fashion retailer – have suffered due profit warnings this year. I think that this kind of news throws up all sorts of opportunities for finding investment gems as investors panic and sell everything.

If you fancy a bit of bah humbug today, then look no further than It’s beginning to look a lot like a miserable

Christmas for retail (Daily Telegraph, Tim Wallace, Jack Torrance and Tom Rees) because it does a good job of painting a very downbeat picture of the current state of UK retail. On the consumer side, things are actually looking quite good – the lowest unemployment rate since the seventies, a record number of job vacancies, pay rises now running ahead of inflation and ultra-low interest rates meaning that borrowing money is still very cheap. However, this does not seem to be filtering through to retailers as the list of failures continues to lengthen with Toys R Us, Poundworld, Maplin going under this year and Mothercare, Homebase, Carpetright, New Look and many others having to sign controversial Company Voluntary Arrangements with landlords and creditors to keep trading. As a result, retailers have been forced to make some deep discounts in order to entice customers, with average discounts running at 43%, according to Deloitte, and the situation has been made worse for apparel retailers as extremes in weather have resulted in having the wrong amount of stock at the wrong times. In addition to this, consumer sentiment appears to be on the slide with young people being particularly pessimistic (which might explain Asos’ current state) about their personal finances. * SO WHAT? * Yes, things are not great currently but there are still some bright spots – entertainment is still seeing some action with Barclaycard’s latest figures showing spending in this area up by 8.7% on the year as ticket sales (up 30.5%), pub spending (up 11.3%) and restaurant spending (up 8.3%) show that consumers are not yet abandoning civilisation to live in a cave. An improvement in customer confidence (that could probably be assisted by more clarity on Brexit) is obviously key for the short term but, as I keep saying, in order for retailers to survive for the long term I believe that they have to take note of this willingness to spend on “experiences” and up the ante in what they offer in their stores to consumers to make them WANT to go there rather than buy online.

There’s more evidence of a UK property slowdown and Hitachi buys into ABB…

Property market will stagnate in 2019 as house sales fall, says Rics (The Guardian, Patrick Collinson) cites forecasts from the Royal Institute of Chartered Surveyors which show that house price growth will go sideways in 2019 as the number of sales fall amid Brexit uncertainty and affordability constraints. Prices are expected to fall in London and the South East, rise in Northern Ireland, the north-west, Scotland and Wales and stay neutral in East Anglia and the South West. Rics observed that “House prices are now a greater multiple of earnings than at any point since records began. Such high house prices are shutting more and more people from accessing the market”. * SO WHAT? * The report backs up what Rightmove said recently, but pours cold water on the Bank 

of England’s assumptions that house prices will fall by 30% following a disorderly Brexit as it said that there is still a shortage of supply and fewer forced sellers in the market meaning that “many vendors will be under no real pressure to sell, meaning they can choose to avoid listing their property at a time when the market is weakening”.

Elsewhere, Hitachi to pay $6.4bn for 80% of ABB’s power grids division (Financial Times, Kana Inagaki and Ralph Atkins) heralds some big news as Hitachi bids to become a global industrial force and its Swiss rival gets to concentrate on its digital and robotics business. ABB will keep a 19.9% stake in the divested division but it also announced further restructuring measures to boost its performance. This will no doubt go some way towards addressing the issue of its share price having fallen almost 25% over the last year. The deal is expected to close by the first half of 2020. * SO WHAT? * This deal puts the already precarious £15bn Wylfa Newydd nuclear power station project in Wales into jeopardy as the ABB deal stretches its finances, although a final decision has not yet been made.

And finally, in other news…

With all the doom and gloom going around at the moment, I thought you might welcome this: Making a dog’s dinner of it! Hilarious snaps show playful pooches pulling some VERY funny faces as they try to catch flying treats in new calendar snaps (Daily Mail, Dianne Apen-Sadler https://tinyurl.com/y7w7uf7v). Some brilliant photos!

1. In REAL ESTATE-RELATED NEWS, Overseas landlords abandon the UK and average asking prices fall by £10,000
2. In RETAIL NEWS, US retailers face a big sell-off, UK shops face disappointment, Laura Ashley is to close outlets BUT some restaurant/bar chains are lifted by office parties
3. In MODES-OF-TRANSPORT NEWS, JLR announces that it’ll axe more jobs and Uber moves to e-bikes
4. In OTHER NEWS, I bring you Brussels sprout ice cream and some amazing paper craft. For more details, read on…

So overseas landlords ship out and average asking prices fall…

Overseas landlords retreat from UK property market (Financial Times, James Pickford) shows the current trend of overseas landlords abandoning Britain’s property market on a combination of lower expectations of house price growth, a tougher tax regime and the impact of expected Brexit-fuelled sterling weakness on rental returns. According to the latest data from Hamptons International, the share of new lettings for overseas landlords has more than halved since 2010 from 14.4% then to 5.8% up to now. It’s an even steeper fall in London, where such landlords had a 26% share versus 10.5% now. * SO WHAT? * This is hardly surprising given the economic backdrop, but at least it gives domestic buyers a bit more leeway in that there is slightly less competition for them – great for buyers, less good for sellers.

Housing market: average UK asking price dips £10,000 (The Guardian, Angela Monaghan) cites figures from property website Rightmove which show that the average asking price of a UK home fell by 3.2% between October and December to £297,527 which means that asking prices rose by their weakest rate since 2010, with London and the south-east being the weakest areas this year. Price falls are common at this time of year as everyone is thinking about Christmas, but this has been the biggest November-December fall for six years. * SO WHAT? * I keep banging on about the property market because it is a major driver of consumer spending, from DIY to furniture, carpets and electrical goods. However, when you have what we have at the moment – people sitting on their hands – it is unsurprising that the slowdown in the housing market has had repercussions elsewhere in the economy. Although housing market activity slows down in the run-up to Christmas, it usually reignites again in the new year – Rightmove says that it tends to see activity tripling between Christmas Day and New Year. FWIW, I would have thought that 2019 will surely see a weaker beginning to the year because of Brexit, so talks of a new year bounce could be premature.

US retailers are facing a big sell-off, UK retailers are facing tough conditions and Laura Ashley will be closing stores – but party spirit is lifting some areas of the UK high street…

US retail stocks on track for biggest sell-off since 2008 (Financial Times, Alistair Gray) highlights the fact that the S&P’s index of 95 listed leading retailers has fallen by a hefty 17% this quarter, putting them on track to becoming the most sold off since the financial crisis. * SO WHAT? * Some observers say that this is due to pessimism surrounding their expected performance next year as increased stockpiling by retailers keen to stay ahead of “trade war tariffs” could mean that they will have to shift a large amount of stock at discounted prices, thus affecting profits. The share prices of retailers as diverse as Tiffany and Target have suffered as a result – down 36% and 23% for the quarter respectively – and even those who have survived the onslaught of Amazon have been caught up in the sell-off, with Best Buy’s share price falling by 30% being a good example. This pessimism has wiped out all gains from earlier this year which were powered by a strong US economy and big tax cuts. Separately, figures published on Friday show that retail sales in China grew at their slowest pace for 15  years in November adding to concerns of the possibility of a global downturn.

Shops counting on last minute splurge ‘will be disappointed’ (The Guardian, Angela Monaghan) piles on the misery for the UK high street as the latest forecasts by retail analysis firm Springboard say that footfall is expected to drop by 3% this week as Diane Wehrle, insights director at the firm, pointed out that “Consumers are feeling nervous about what might happen in the new year, particularly around Brexit. So people are not prepared to splash out this Christmas and are reining back on spending”. She argues that this isn’t an online vs offline thing – people are just spending less overall especially given that rail fares and utility bills are set to rise next year.

Laura Ashley prepares to close stores (The Times, Miles Costello) heralds some bad news for employees at the venerable and once-wildly-popular retailer as the new chairman, Andrew Khoo, announced plans to shut 40 of its 160 stores but tried to soften the blow by saying that some existing stores could get larger and take on some staff affected by the cuts. Khoo also said that he planned to expand in Asia once the company gained a foothold online. * SO WHAT? * Bad news for yet another retailer. I would have thought that a concerted push in Asia may be a good idea – my impression is that Laura Ashley was the precursor to Cath Kidston – which proved to be very popular in the region – so maybe if it positions itself as “the original” it could get some traction and trade off its British vibe.

I thought I’d include Party spirit can be found on high street (The Times, Dominic Walsh) given the altogether gloomy stories about retailers knocking around at the moment. According to the Coffer Peach Business Tracker, like-for-like sales across the pub and restaurant sector in November grew by 1.5% versus the same month last year. The data included companies such as Zizzi, Mitchells & Butlers and Pizza Hut. * SO WHAT? * As I have said before, although people seem to be reining in their spending, they still seem to be willing to spend on “experiences”. Retailers need to take note and make their outlets a destination as much for experience as for just buying stuff IMHO.

Jaguar Land Rover announces more cuts and Uber looks at e-bikes while e-scooter companies go south…

Up to 5,000 JLR jobs to go in carmaker’s cutback plan (Daily Telegraph, Oliver Gill) sounds troubled times for the carmaker as it’s suffering from weakened demand from China (sales fell by 44% in the three months to September), tougher regulation on diesel cars (not to mention customers shunning them in increasing numbers) and concerns over Brexit (which is making customers less keen to buy big-ticket items). The company announced plans to cut costs by £1bn over the next 18 months, shrink capital investment by the same amount and target £500m of inventory and working capital savings. Job losses could affect 1 in 8 of its UK employees. * SO WHAT? * Tough times, but I guess the writing was on the wall when it announced 1,000 agency job losses and working hour reductions earlier this year. It’s hard enough for big car companies to cope with all these economic factors, let alone a “tiddler” like JLR. 

In Uber bringing e-bikes to Britain (Daily Telegraph, Olivia Rudgard) we see that Uber is planning on bringing electric bikes to these shores in a bid to broaden its current offering of ride-hailing and food-delivery services. Its Jump business, which it bought in April, lets users rent e-bikes and e-scooters via an app is hiring a general manager for the UK. It has expanded to 12 US cities and Berlin since the company bought it. * SO WHAT? * My gut feel is that e-bikes could be quite popular (as long as they can solve the problem of vandalism and getting nicked) – and are certainly a better prospect than e-scooters which, for my money, could be a bit of a fad. The other thing with e-scooters in this country, as it stands, is that they aren’t road legal.

And finally, in other news…

I thought I’d leave you today with something seasonal in Ice cream parlour serving Brussels sprout flavour for the Christmas period (The Mirror, Luke Kenton and Sarah Ward https://tinyurl.com/ybskglsv) and something absolutely gobsmacking in Expert paper crafter fashions more wondrous creations from popular Japanese snack packaging (SoraNews24, Koh Ruide https://tinyurl.com/yc8kwwl4). This is astounding.

1. In MACROECONOMIC NEWS, the US posts strong job numbers, Italy’s latest budget fudge falls short and the EU orders the reinstatement of tougher diesel emission rules
2. In RETAIL NEWS, Mike Ashley warns of dire retail situation, Bonmarche craters and Ocado continues to pursue tech partnerships
3. In INDIVIDUAL COMPANY NEWS, Serco gets a boost
4. In OTHER NEWS, I bring you the world’s oldest skydiver. For more details, read on…

So US employments continues its strength, Italy’s deficit re-jig is unconvincing and stricter diesel emissions look likely…

Strong US job numbers bolster case for rate rise (The Times, James Dean) cites the latest figures from the US Labor Department which show that new claims for unemployment benefits fell last week by the biggest margin in about three-and-a-half years, showing continued strength in the US jobs market. * SO WHAT? * Given this figure – and the fact that US unemployment is at its lowest level for almost 50 years, it does look like fears of a slowdown are looking misplaced and that the pressure is building for the US Federal Reserve to raise interest rates to ensure the economy doesn’t overheat.

In Italy budget U-turn does not go far enough, Brussels warns (Financial Times, Miles Johnson) we see that Rome’s plan to cut its budget deficit may not be enough to placate Brussels, according to the EU’s economy

commissioner Pierre Moscovici as he said that “It is a step in the right direction but we are not there yet, there are still steps to be taken, perhaps on both sides”. * SO WHAT? * Rome’s conciliatory noises are fine in themselves but they haven’t provided any details at all about how they are going to achieve this sudden budget deficit reduction magic trick. We’ll just have to wait and see how this pans out, but I am very sceptical.

EU ordered to reinstate tougher diesel emission rules (Financial Times, Rochelle Toplensky and Peter Campbell) reverses a decision to relax diesel emissions two years ago, which means that car manufacturers will face more onerous requirements to produce cleaner vehicles. * SO WHAT? * This decision means that manufacturers have one year to comply with the tighter Nitrogen Oxide limit unless the EU appeals or passes new laws to raise the limit. Car makers have already spent billions ensuring their vehicles meet the new real-world testing regime, called WLTP, so I guess they won’t be best pleased at yet more hoops to jump through. No doubt an appeal will be made on behalf of the manufacturers!

Mike Ashley paints an apocalyptic picture, Bonmarche falls off a cliff and Ocado continues to do its thing…

Mike Ashley issues dire warning for UK retail industry (Financial Times, Jonathan Eley) shows the Sports Direct’s founder in full doom-and-gloom mode as he unveiled the company’s first half results saying “November was the worst on record, unbelievably bad. I don’t blame the guys, no-one could have budgeted for that”. His words were followed by a 16.5% fall in the share price, although they recovered a bit after the company later issued a “clarification statement”. Shares in Debenhams, Next and M&S fell in trading yesterday and the news came just a day after Superdry issued a profits warning. As it happens, profits from its core UK sportswear division were pretty robust in the first half and growth in its premium lifestyle business was also good – but the whole lot was dragged down by the dire performance of House of Fraser and losses on its 29.7% stake in Debenhams. Everyone no doubt enjoyed the rare sight of pigs flying over their heads when the company predicted that it would break even next year. * SO WHAT? * Call me a cynic, but I think that Ashley is massively talking his own book here. His core business appears to be surviving quite well – but he has got a monumental task in turning House of Fraser into something halfway decent. As far as I’m concerned, he’s managing down expectations to potentially get concessions from government and local councils and will no doubt use his predictions when rents come up for 

review. Ashley is a high profile “character” in the retail industry and I suspect that many failing companies will use his apocalyptic assessments to justify their own failures. He is one wily operator!

Talking of which, Bonmarche discount retailer crashes in high street ‘storm’ (Daily Telegraph, Charlie Taylor-Kroll) highlights the women’s discount fashion chain’s whopping 48% share price fall yesterday as it issued its second profit warning in three months, blaming “unprecedented” trading conditions and Brexit uncertainty causing consumer wobbles. The retailer, with over 300 stores across the country, also reported a poor Black Friday performance despite discounts on a large number of items. On the positive side, Cantor Fitzgerald Europe’s retail analyst Mark Photiades pointed out that the company’s online performance was decent and that the company’s relatively short leases (3.6 years) gave it reasonable flexibility on exiting unprofitable stores.

Ocado targets supermarket sweep of tech partnerships (Daily Telegraph, Ashley Armstrong) focuses on Ocado’s future in selling its warehouse technology to overseas retailers following some momentous deals with retailers in the US, Canada, France and Sweden. Ocado Solutions is the division that licences the company’s technology and software to third parties and CFO Duncan Tatton-Brown said that “we expect 2019 is going to be busy…we expect more commitment [from partners] next year, and our sales team is busy looking for the next Ocado Solutions partner”. * SO WHAT? * The company’s results were otherwise OK, but obviously the Ocado Solutions business is the thing that everyone is interested in given it meets a very urgent need for retailers in general.

Serco has good news…

Serco provides a source of optimism (The Times, Robert Lea) showed that it’s not all bad in the world of outsourcing as its predictions of a 30-40% uplift in underlying profits this year was enough to boost its shares by 10% in trading yesterday.

Shares in outsourcing companies have been having a torrid time since Carillion’s collapse at the beginning of this year and shares in Kier and Interserve have suffered a lot recently – so this is a rare bright spot.

And finally, in other news…

I thought I’d leave you today with something inspirational to end the week with: 102-year-old great-granny becomes ‘oldest’ skydiver (MSN, Bryce Sellick and Matt Teager https://tinyurl.com/y9p6hr25). Wow!

1. In MACROECONOMIC NEWS, we see what’s next for the PM, Italy sounds like it’s trying to comply on its budget and markets turn up on hopes that US-China negotiations are nearing a happy place
2. In RETAIL NEWS, Zara owner feels a slowdown, Ikea pops up in town, Carphone Dixons has a shocker and things hot up at Superdry on continued woes
3. In INDIVIDUAL COMPANY NEWS, Revolut gets a European banking licence
4. In OTHER NEWS, I bring you a man who invents useless – yet entertaining – things. For more details, read on…

So we look at what’s next for May, Italy makes conciliatory noises and markets rise on US-China trade hopes…

Well after all the drama last night, What next for Brexit after Theresa May’s victory in confidence vote? (Financial Times, Alex Barker and Rochelle Toplensky) takes an interesting look at imminent potential scenarios. As the 27 remaining EU states hold an emergency summit on Brexit today, they may be considering the following: that the PM’s victory could hasten the Brexit process both in Brussels and Westminster because it could encourage both sides to move faster – EU leaders could offer concessions on particularly sticky items such as the Northern Ireland backstop which could help May to schedule a House of Commons vote on Brexit before Christmas (it is currently scheduled to be held before January); that she might have to keep stalling on a Brexit vote, which could make things trickier for the Europeans in terms of the timing of any concessions and there are concerns about whether she will be able to deliver on a Brexit deal anyway even if she does win a “meaningful vote” on the package. * SO WHAT? * At the end of the day, German chancellor Angela Merkel and European Commission President Jean-Claude Juncker have stated very publicly that there is absolutely no wiggle room to amend the treaty, but diplomats handling the process appear to be less categorical although they admit the margin for negotiation is very small and that more fundamental changes are highly unlikely. Although Theresa May has bought herself some time, there seems to me a high likelihood that we could get to January with a very slightly amended deal and she will STILL lose the vote or aggravate everyone by continuing to kick the can down the 

road by moving the vote. Surely this makes a second referendum more likely?

Italy promises budget cuts to avoid EU sanctions (Financial Times, Miles Johnson, David Keohane and Federica Cocco) shows that those rebellious Italians appear to be reluctantly falling back into line as PM Giuseppe Conte promised a significant cut to its budget deficit target for 2019 (from 2.4% to 2.04%) in an effort to avoid EU sanctions for breaching budget rules. Conte seemed to climb down from his previously defiant tone and tarted up his furious back-pedalling thus: “Our proposal allows us to say that we do not betray the trust of Italians and that we will respect the commitments we have made with the measures that have the greatest impact”. * SO WHAT? * Time will tell if these are just empty promises. After all, if Conte could find the wherewithal to comply with the EU down the back of the sofa, why didn’t he do this in the first place??

In Markets rally as investors hope US-China trade battle is easing (The Guardian, Richard Partington) we see that financial markets strengthened on early signs of progress in the US-China trade negotiations. This thawing was inferred by China prepares policy to increase access for foreign companies (Wall Street Journal, Lingling Wei and Bob Davis) which shows that the country’s top planning agency is drafting a replacement for the “Made In China 2025” that will play down China’s efforts to dominate manufacturing and allow more access for foreign companies – as well as Trump offering the tantalising carrot of making the whole Huawei CFO arrest thing go away. Saying that “If I think it’s good for the country, if I think it’s good for what will be certainly the largest trade deal ever made – which is a very important thing – what’s good for national security, I would certainly intervene if I thought it was necessary” would seem to imply willing, if nothing else.

Zara has a slowdown, Ikea goes urban, Carphone Dixon has a profit warning and Superdry intrigue increases…

Zara owner feels the heat after slowdown (The Times, Tabby Kinder) shows that even super-retailer Inditex (the owner of Zara) has off days as it blamed unseasonably warm weather in the autumn for a slowdown in sales that was greater than expected. Euro fluctuation was also a factor as it generates over half of its sales in other currencies with shops in China, Russia and India. It’s also particularly sensitive to currency movements because suppliers worldwide have to get their clothes to shops via distribution centres in Spain which means that a big part of the company’s costs are in Euros. * SO WHAT? * I think it would be fair to say that all apparel retailers are feeling the same pain to a greater or lesser extent. If Inditex is feeling the pinch, I suspect that many others will be getting it far worse.

Following on from Ikea’s recent declaration of a major change in its business model, Ikea takes next step into town (The Times, Emma Yeomans) talks about another “planning studio” format in Bromley to follow the October opening of its Tottenham Court Road outlet. The idea is to increase face-to-face contact with customers and provide better and more personalised service than is possible in its out-of-town outlets. * SO WHAT? * This is just Ikea showing that it is following through on its business overhaul and is a great example of how retailers can help themselves by improving the customer experience.

Dixons Carphone posts massive losses and hits all-time low (Daily Telegraph, Ashley Armstrong) shows the damage being caused to the group by its struggling mobile phone business as customers hold on to their phones for longer and opt for SIM-only contracts. The shares fell by 6% on the profit warning, taking the price down to its worst level since Carphone Warehouse and Dixons merged over four years ago. * SO WHAT? * I must say that I am myself guilty of going to an electrical retailer to do a physical

inspection of gadgetry before inevitably buying it cheaper online – and I suspect that I’m not the only one. I don’t think that the retailer helps itself either by staffing its stores with largely uninspirational sales people and so its announcement yesterday that it would give its 30,000 staff at least £1,000 in shares each to motivate them and give them the feeling of being part of the business is at least a move in the right direction. At the end of the day, we as consumers will spend more when we get paid more AND, crucially, when we are feeling a bit more confident of our jobs and economic outlook. Yes, the job market is tight at the moment – but that could all change if things fall apart due to Brexit.

Superdry co-founder: I’m the only one who can rescue the brand (The Guardian, Zoe Wood and Jasper Jolly) highlights some fighting talk from co-founder Julian Dunkerton who is obviously itching to get back in the driver seat of Superdry. He clearly smells blood after the company had its second profit warning in two months and called on shareholders to support his comeback when he said “This has to be the moment where we say enough is enough and it’s time for a change. We are now at the position where we have to act. The numbers are there and everyone can see I was right”. * SO WHAT? * The share price has fallen by over 80% this year (they fell by 38% yesterday alone!) and current CEO Euan Sutherland’s protestations of poor weather and heavy discounting by rivals is likely to fall on deaf ears. Things are getting so bad that James Holder – the guy who came up with the brand’s Japanese-style logos and still owns a 10% stake in the company – also said he was willing to get involved again. So far, Dunkerton’s efforts have been batted away as the chairman Peter Bamford bluntly pointed out that “Julian signed off on most of the products that are available today in his role as product and brand director. It was his departure in March of this year that has allowed the current innovation programme” (which includes slimming down its product range and moving into children’s wear). It seems to me that momentum is gaining and the current management team will have to do something monumental in order to stop Dunkerton from steamrollering them. Given what’s happening to the share price I don’t think current management has a leg to stand on.

Banking upstart Revolut gets a European licence…

Revolut granted licence to operate in Europe next year (Daily Telegraph, Natasha Bernal) heralds an important development for the free-to-use digital payment company as it has just been given a licence to operate in Europe from 2019. The challenger bank also unveiled plans to

offer a range of current accounts, consumer lending and commission-free share trading in Continental Europe. Although founder and chief exec Nik Storonsky sought an additional full banking licence in Lithuania earlier this year, he maintains that there are no plans for Revolut to quit London, saying that these additional applications were “just to be on the safe side”. The company has plans to expand into the US, Canada, Singapore, Hong Kong and Australia – and this is likely to happen in early 2019. This is one VERY exciting bank IMHO.

And finally, in other news…

I like innovation. Don’t you? Well how about this: How a welder with a useless invention – a meat cleaver cellphone cover – became an accidental viral video star (Los Angeles Times, Robyn Dixon https://tinyurl.com/y8tqutna). Nice.

1. In CAR-RELATED NEWS, China cuts tariffs in a drastically weaker sales environment and Hyundai champions fuel cells
2. In RETAIL AND CONSUMER-RELATED NEWS, Christmas ain’t looking good for the high street, pensions get hit by falling retail property values and yet wages jump
3. In INDIVIDUAL COMPANY NEWS, Verizon takes a big write-down, WPP makes big cuts and Tencent Music prices low
4. In OTHER NEWS, I bring you Kim Jong Un moisturising facemasks and a gym breakup letter. For more details, read on…

So China relents on car tariffs – although the market itself is a lot weaker – and Hyundai puts weight behind fuel cells…

China to cut tariffs on imported US cars (Financial Times, Demetri Sevastopulo and James Politi) heralds a welcome move for US car manufacturers as the government agreed to cut tariffs on imported American cars from 40% to 15%, the level set earlier on this year. Carmakers on a roll amid talk of a China deal (The Times, Callum Jones) shows how shares in General Motors and Ford were buoyed by the news as well as European carmakers VW, Daimler and BMW. * SO WHAT? * This shows a softening of the stance between the two sides, but TBH, this can change on a dime and there’s a long time between now and the self-imposed March 1st deadline on the trade truce. If you couple that with a US holiday season and Chinese New Year Celebrations, the window of negotiating opportunity is not as wide as it at first seems. The good news is that both sides have intimated that the Huawei sideshow won’t derail anything and that China has also made noises about resuming the purchase of American agricultural products.

Although that is clearly good news, China car sales suffer steepest monthly fall in 6 years (Financial Times, Sherry Fei Ju) is quite a worrying sign as the world’s biggest car market is heading for its first annual decline in sales for 30 years, with sales down by almost 14% in November versus the same month last year according to the China Association of Automobile Manufacturers. This is due to a mixture of the removal of government subsidies on vehicle purchases this year as well as weakening consumer

sentiment as the wider economy slows down. The ongoing trade war and a wobbly stock market also haven’t helped as all of this makes consumers more likely to hold off on big purchases. * SO WHAT? * I guess it would be possible to stimulate more demand by reintroducing the subsidies now, but then again if the slowdown in consumer confidence is really taking hold, I would have thought the boost would be limited. For this to really work, I think that the whole trade war thing needs to be straightened out first. Let’s hope the positive noises between the two sides result in something more concrete and long lasting.

In Hyundai Motor Group commits $7bn to fuel-cell technology (Financial Times, Bryan Harris and Song Jung-a) we see that South Korea’s second-largest conglomerate is putting a chunky bet on the success of hydrogen-powered systems for cars, drones and ships as it belatedly throws itself more wholeheartedly into the electric vehicle party after some disappointing dabbles with battery-powered vehicles. The group’s automaker Hyundai Motor announced the launch of the world’s first fleet of commercially-made hydrogen powered trucks in conjunction with Swiss hydrogen company H2 Energy as recently as September, but this latest move signifies a deeper dive into the tech as it earmarks $6.7bn over the next decade to boost production of fuel-cell systems and engines. Fans of the hydrogen fuel cells say that it is better suited to long-distance transport than electric vehicles because the latter tech has a limited range, long refuelling times and battery degradation. Naysayers of hydrogen fuel cells say that the process of extracting hydrogen from water is environmentally unfriendly. * SO WHAT? * This is an exciting development but, as with electric cars, existing infrastructure is a long way off being optimal and current sales of fuel cell vehicles are miniscule. As I keep saying, I think hybrid is currently the way to go until charging networks etc. improve by a huge margin. 

Christmas isn’t looking great for UK retailers, falling retail property values are hitting pensions but then wages are going up strongly…

Political turmoil takes toll on Christmas cheer for retailers (The Guardian, Zoe Wood) does a good job of giving us a snapshot of how things are looking for UK retailers in the run-up to Christmas. Last week, John Lewis said that department stores sales were slowing, Primark warned of “challenging” conditions with weaker footfall – a trend confirmed by Springboard figures which showed the number of shoppers visiting the high street falling by 3.2% last month – and now Kantar Worldpanel figures show that the overall grocery market is only growing at 2% – its slowest pace since March 2017. The data also showed Tesco, Sainsbury’s and Waitrose all losing market share whilst Aldi and Lidl continue their upward trajectory. Clive Black, an analyst at Shore Capital, observed that “Recent news flow from the British retail trade has been more mellow than not, including a subdued Black Friday and weak UK trading from apparel discounter Primark. That mellow mood has been filtering into the supermarket segment…where the discounters [are] sustaining strong momentum as the supermarkets flatline”.

Ongoing weakness in the retail sector is having knock-on effects in other areas as per Pensions suffer as retail property values fall (The Times, Louisa Clarence-Smith) which highlights the fact that shops, shopping centres and

retail parks saw the biggest monthly fall in value since May 2009 (apart from the period immediately following the Referendum in 2016), according to figures from CBRE, Britain’s largest valuer. Some think that this is only the start – with Fidelity International last week warning that the value of retail property could fall between 20% and 70% depending on the individual asset (a rather large range, but still). Ongoing weaknesses in this area will have a big impact on pension funds who invest in this area. * SO WHAT? * Given the number of retail failures, this is hardly surprising and I think that valuers are only reacting to what they see in front of them. I would be inclined to agree that there’s probably going to be more downward momentum from here – which is great if you are a buyer! As I’ve said before, this could be a bonanza for a company like Ikea which is looking to build up city centre presence – and with retail property values going this way, they could be bagging some real bargains.

On a more positive note, Wages rise at fastest pace in a decade to defy Brexit worries (Daily Telegraph, Tim Wallace) shows average annual pay rises of 3.3% as employers compete to keep/attract staff – the biggest rise since the end of 2008 – meaning that wages have now overtaken inflation, which stands at 2.4% over the same period. The unemployment rate remained unchanged at 4.1%, its lowest level since the 70s. * SO WHAT? * This sounds great – and is the reason why there may be a tiny glimmer of hope for the retailers yet for a Christmas splurge. However, if Brexit goes badly, employers will stop taking people on, meaning that the jobs market will loosen, which then means that wages will either go static or downwards.

Verizon makes a bit writedown, WPP makes cuts and Tencent Music makes a lower price on its IPO…

Verizon takes $4.5billion charge related to Digital Media business (Wall Street Journal, Sarah Krouse and Micah Maidenberg) highlights a painful accounting charge for its Oath media business, which was created by the $9bn acquisition of AOL and Yahoo. Unfortunately for Verizon, it was unable to make any headway in the competitive digital advertising space and has decided to bite the financial bullet. * SO WHAT? * Oh how the mighty fall. Mind you, other operators such as Vox Media, BuzzFeed and Vice Media have also failed to meet ambitious revenue growth targets and put any kind of dent in the likes of Facebook and Google – so Verizon is not alone. It just goes to show how difficult the world of digital advertising is right now as even something as big as this can fall flat on its face!

Talking of advertising, WPP to cut 3,500 jobs and close 80 offices in bid for sales growth (Daily Telegraph, Christopher Williams) is further evidence of how tricky things are getting in this space as WPP’s new chief exec Mark Read tries to cut costs and revive sales growth. Half the savings will be reinvested, including the hiring of 1,000 staff to give a shot in the arm to the creative side of the business. The share price rose by 7% on this news.

It seems like the increasingly lukewarm reception being felt by tech firms is continuing as Tencent Music prices its IPO at bottom of range (Wall Street Journal, Corrie Driebusch and Maureen Farrell) shows that the Chinese music-streaming company decided to price its IPO at the bottom of the stated $13-$15 range. Having said that, it will still be one of the biggest traditional IPOs by market value in the US with an implied valuation of $21.3bn versus Alibaba’s valuation of $169.4bn when it floated in 2014.

And finally, in other news…

We are now well and truly into that time of year where I recommend unusual stocking fillers for your nearest and dearest this Christmas. For that special someone in your life who appears to have everything, I bet they had everything apart from THIS: Kim Jong Un moisturing face masks prove big hit in South Korea (Sky News, Alix Culbertson https://tinyurl.com/ybbr3ttd). As we all know, nothing says Christmas more than some tasteful Kim Jong Un merch…

AND FINALLY, I thought I’d give you some helpful guidance for if you want to extricate yourself from your gym membership: Man writes hilarious break up letter to gym after he couldn’t cancel by phone (The Mirror, Robyn Darbyshire https://tinyurl.com/ydyeqqwb).

1. In MACROECONOMIC NEWS, May has a ‘mare, UK growth stutters, the French central bank slashes growth forecasts and Macron caves to protester demands
2. In RETAIL NEWS, US retailers shake things up and Dunkerton hankers for a return to Superdry
3. In INDIVIDUAL COMPANY NEWS, China helps Qualcomm, Interserve starts down the Carillion path and ISS sacks 20% of its workers
4. In OTHER NEWS, I bring you cockroach farmers and Baba Vanga’s predictions for 2019. For more details, read on…

So May and Macron cave on either side of the Channel…

Theresa May to restart EU negotiations after aborting Brexit vote (Financial Times, George Parker, Laura Hughes and Alex Barker) heralds continued economic uncertainty as May was forced at the last minute to cancel the House of Commons vote on her Brexit plan (which was due today). She will now run around Europe to see if she can squeeze any more concessions from the Europeans. The pressure continues to intensify as Carolyn Fairbairn, director-general of the CBI business lobby said that “This is yet another blow for companies desperate for clarity. Investment plans have been paused for two-and-a-half years. Unless a deal is agreed quickly, the country risks sliding towards a national crisis”. The drama continues…

Meanwhile, Economy cools after summer heatwave (The Times, Gurpreet Narwan) shows that the UK economy slowed in the three months to October due to sluggish activity in manufacturing and construction, according to the latest figures from the Office for National Statistics. This comes after a strong performance in the previous quarter which was boosted by higher consumer spending due to the unusually warm summer. John Hawksworth, chief economist at PwC, stated the bleedin’ obvious when he said “Until [Brexit] is resolved, the UK economy is likely to remain in the doldrums as businesses will be reluctant to invest and households may also be reluctant to commit to big-ticket items”.

Pound falls as Brexit fears hit business (The Times, Patrick Hosking) highlights a weakening of the pound following the vote news yesterday to 20-month lows as markets and businesses digested the news. Hardly surprising.

Hopping over the Channel, French central bank cuts growth forecast in half amid protests (Daily Telegraph, Anna Isaac) shows that the Banque de France has had to adjust its forecasts to take into account the impact of the Gilets Jaunes protests and issued a statement saying that “Services activity has slowed under the impact of the movement. Transport, the restaurant and auto repair sectors have gone backwards”. It now predicts GDP growth of 0.2% for the last three months of the year versus the previous prediction of 0.4%.

Macron pledges tax cuts, minimum-wage boost to placate protesters (Wall Street Journal, Stacy Meichtry and Noemie Bisserbe) shows a seemingly contrite version of Macron as he said he planned to “take the pulse of the country” by meeting mayors across the country to talk about governance, taxes, climate change, public services and immigration. He also announced a rise in the minimum wage by €100 per month, starting in 2019 “without costing one euro more to employers” and a roll-back of a recent tax increase affecting some pensions and suggested making overtime pay tax exempt.

* SO WHAT? * It looks to me like Europe is in a right state at the moment – the #1 economy (Germany) is having a leadership crisis and faces continued pressure from the rise of the far-right, the #2 economy (France) is having some major wobbles at the moment with Macron’s steamrollering p!ssing off the electorate and the #3 economy (Italy) has a ragbag coalition of extremists in charge threatening to upset the EU applecart with its fantasy-filled budget that will get it into even more debt than it’s already in. Macron’s caving to protester demands now is going to make any kind of future reform even more difficult – if not impossible – as anyone opposing him will have been emboldened by the success of the Gilets Jaunes. Having said that, he had to do SOMETHING – but still, he’s made his job harder.

US retailers shake-things up and Superdry’s co-founder sounds like he wants to return…

US retailers shake up supply chains as tariffs bite (Financial Times, Alistair Gray) looks at how US retailers and consumer goods companies are re-jigging their supply chains in order to protect profits margins as tariffs start to bite in the US-China trade war. Some of this has involved switching sourcing to other countries and leaning on suppliers for better terms and then there are others who have been rushing shipments through to avoid additional tariffs that will come into force next year. * SO WHAT? * The shake-up is not only time-consuming, it is also having an effect on profitability. For instance, Ohio-based discounter Big Lots announced yesterday a downward revision in its full-year forecast which sent its shares down by 23%, which was partly due to higher inventory levels. Gary Friedman, chairman and chief exec of luxury home furniture retailer Restoration Hardware observed that “China is the biggest, most sophisticated manufacturing country in the world – there’s no one close. You can’t shift all this business to these small countries without massive 

dislocation risk”. Even if other Asian countries have the skills to manufacture what’s needed, they just don’t have the capacity that China has. It sounds like it’s only a matter of time before the cost of these complications get passed on to the consumer.

Superdry co-founder steps up campaign to return (The Guardian, Jasper Jolly) is a very juicy-sounding headline, don’t you think? Only months after getting remarried, Superdry’s co-founder looks like he’s hankering for a return by voicing his concerns in a retail analyst note from Liberum thus: “The interaction between stores and the internet is going to be so fundamental to the future of retail. Consumers have adopted the internet and, by doing so, have moved away from the limitations of the high street and towards a world of unlimited choice. The premise here is if one does not participate in this world you will get left behind”. * SO WHAT? * Basically, Dunkerton’s beef is with Superdry’s current strategy of slimming down its product line-up, but it doesn’t seem to be working as the company’s share price has fallen by over 60% this year. Dunkerton still owns 18% of the company and only fully quit earlier this year to turn around and say, after a profit warning in October, that he would be willing to return “in any capacity” (a la Steve Jobs??) to help get the company back on track. This could get interesting!

China gives Qualcomm a boost, Interserve hits the skids and ISS makes drastic job cuts…

Blow for Apple as China bans iPhone sales in Qualcomm row (Daily Telegraph, James Titcomb) is a story that’s doing the rounds of the broadsheets this morning as the Fuzhou Intermediate People’s Court granted two injunctions against Apple subsidiaries in China forcing them to block imports and sales of iPhones from 2015’s iPhone 6s to last year’s iPhoneX as part of a patent fight between Apple and Qualcomm. * SO WHAT? * Apple and Qualcomm are engaged in legal battles around the world currently over royalties and patents and this is just the latest development. Apparently, Apple should be able to get around this as the ruling is not believed to apply to the latest version of iOS, so it is conceivable that they could keep selling them there anyway. Still, Apple’s shares fell by 2% yesterday down to levels below which it started the year. Apple just isn’t doing its usual thing in China and remains particularly vulnerable to the current US-China trade war.

Another story that’s hitting many of the business pages is Will Interserve be the next Carillion? (Daily Telegraph, Jack Torrance) as Interserve – the contractor that cleans

hospitals, provides catering to prisons and builds roads – announced that it was in rescue financing talks, prompting a slide of over 70% in its share price when the news came out yesterday morning. It employs 75,000 people worldwide, 45,000 of whom are in the UK. Interserve, like others such as Kier and Capita, has been suffering from rising costs of labour and materials and a trend of banks reducing their exposure to the sector making it more difficult and more expensive to get credit. * SO WHAT? * Interserve is in a lot of trouble currently, hence the comparisons with Carillion – and it lacks enough scale to raise cash from shareholders via a rights issue. A restructuring will need shareholder approval but the fact that Carillion’s fate is still very much at the forefront of everyone’s mind could mean that they – and the government – will be more accommodating towards efforts to help it survive, however dilutive it may be to existing shareholders.

Talking about outsourcing, Danish cleaning group ISS to axe 100,000 jobs (Financial Times, Camilla Hodgson) heralds a dramatic development for the 117-year old Danish company as it announced plans yesterday to focus on key markets and quit 13 countries including Thailand, Brazil, Israel and the Czech Republic that will mean 20% of its 490,000 staff will lose their jobs – although these businesses will be sold off. The company blamed the hit it has taken from acquisitions and disposals as well as adverse currency movements.

And finally, in other news…

I thought I’d leave you with something a bit creepy today. What do you think of Bug business: cockroaches corralled by the millions in China to crunch waste (Reuters, Thomas Suen and Ryan Woo https://tinyurl.com/y9hpdcvg)? Yeeeeeuck!!! I HATE cockroaches!!!

AND FINALLY, when we could all do with a bit more certainty in our futures, we could probably do worse than turning to Blind mystic Baba Vanga’s 2019 predictions – after foreseeing 9/11 and Brexit (The Mirror, Neil Murphy https://tinyurl.com/yblmj666). Spooky!

1. In MACRON NEWS, the French president faces serious challenges
2. In UK CONSUMER/HIGH STREET NEWS, footfall is expected to fall sharply, Pizza Express has dough woes but then Hollywood Bowl is looking good
3. In TECH-RELATED NEWS, the Huawei saga intensifies, driverless cars are still a faraway prospect and the electric scooter frenzy eases up
4. In OTHER NEWS, I bring you the fire noodle challenge and a Riverdancing baby. For more details, read on…

So Macron continues to face tough challenges in his bid to reform France…

Protests threaten Macron’s campaign to remake France (Wall Street Journal, Noemie Bisserbe and Stacy Meichtry) shows us just how tricky things have become for the French president as France endured a fourth consecutive weekend of protest from the “Gilets Jaunes” in Paris and other major cities. Macron has been using his powerful majority to work through and implement big changes in the labour market, taxes, public spending and pensions but it was his proposals for a new “green” tax on fuel that proved to be the final straw for many who had

been grumbling about his dictatorial style of leadership. Pressure is increasing for him ease middle-and-working-class household budgets by doing things like cutting taxes that retirees pay on pensions, lifting the minimum wage, increasing social welfare payments and telling banks to stop charging overdraft fees. * SO WHAT? * Macron has blinked for the first time in his eighteen months in office and I think that if he caves to more demands from an “organisation” (the Gilets Jaunes), he is finished and everything he has done will unravel. As far as I can see it, France needed wide-reaching reforms to modernise after years of mismanagement and weak leadership and the French people gave Macron a huge mandate to change things. Now that he is doing that, it seems that a traditionally socialist country is having a serious wobble. Will he cave? We’ll see soon enough…

Footfall for shops is expected to drop, Pizza Express gets a slap in the face from Moody’s but Hollywood Bowl shows punters are still spending…

Christmas gloom settles on high street (The Times, Philip Aldrick) cites the latest figures from Springboard, the retail insights company, which predict that shopper visits to the high street will fall by 4.2% this month versus the same period last year. This follows on from a 3.2% drop in footfall last month, with Black Friday being blamed for shoppers spending online in preference to, you know, going outside. Springboard’s marketing director, Diane Wehrle, observed that “The 3.2 per cent drop in November is indisputable evidence that Black Friday delivers no tangible benefit for bricks-and-mortar stores”. Another rather sobering finding was published by Intrum, a credit management company, which says that British consumers are more overstretched than anywhere else in Europe apart from Greece, with 29% of respondents saying that they “have maxed out their credit card or borrowed money in order to pay a bill or bills, apart from mortgages, during the past six months”. * SO WHAT? * As I keep saying, I think that pretty much everyone is expecting doom and gloom from the high street which means that any retailers who do well will probably see particularly sharp rises in their share price if they even offer a tiny glimmer of hope.

Pizza Express downgraded by Moody’s as woes pile up (Daily Telegraph, Tim Wallace) shows that Pizza Express is creaking under the strain of debt, rising costs and a competitive landscape and credit ratings agency Moody’s has decided to put the boot in by downgrading it as rising leverage ratios “may cause the company difficulties in effecting a timely and cost effective refinancing in due course” and added that “the downgrade to the ratings of Pizza Express reflects declining profitability [and that] fierce competition and sustained cost pressure means a turnaround during 2019 is unlikely”. * SO WHAT? * This is not what the company needs right now as it gets closer to facing the prospect of refinancing debts of £465m falling due in August 2021 and £200m a year later. It faces a tough time ahead if it is to avoid a similar fate to the likes of Jamie’s Italian, Byron Burgers, Carluccio’s, Gourmet Burger Kitchen, Prezzo and Strada.

On a more positive note, Hollywood Bowl lines up another dividend (The Times, Dominic Walsh) shows that people are still willing to spend money on amusing themselves as the tenpin bowling operator is expected to announce a special year-end dividend for the second year in a row along with some strong results. Hollywood Bowl is the UK’s biggest tenpin bowling operator, ahead of Ten Entertainment Group, and is forecast to do well despite a hot summer and World Cup (which usually dent revenues). * SO WHAT? * Once again, here is more evidence that consumers are willing to spend money on “experiences” – something that all retailers really need to embrace, given that they aren’t really going to be able to compete with online specialists on price.

The Huawei saga hots up and we see why driverless cars are still a way off and that the e-scooter frenzy is pausing for breath…

In China warns US of action if Huawei executive is not released (The Guardian, Simon Goodley) we see that diplomatic pressure is intensifying over the recent arrest of Huawei’s CFO, with the Chinese demanding that she be released on the one side and the US alleging that she misled banks about Huawei’s business with Iran in order to avoid international sanctions on the other. Two British banks ensnared in Huawei dispute (Wall Street Journal, Margot Patrick and Eva Dou) identifies HSBC and Standard Chartered as being among the institutions told by Huawei that it wasn’t conducting business in Iran via a Hong Kong company called Skycom Tech. The banks relied on this assurance and proceeded to clear hundreds of millions of dollars worth of transactions which authorities said “exposed the banks to the risk of fines and forfeiture [and] serious harm”. * SO WHAT? * This really is a massive mess. For the moment, at least, it seems that the Huawei situation is running separate to the trade talks between China and the US as both sides appear to be treating it as a stand-alone issue but I would be willing to bet my mortgage on it coming up in negotiations as things progress. It could be a very useful bargaining chip for either side.

Following on from last week’s development with Waymo announcing its “driverless” taxi service for paying passengers, The driverless car is still a long way from passing a test (Daily Telegraph, James Titcomb) does a really good job of summing up the history thus far of driverless car capabilities but also identifies the many issues facing a successful universal roll-out. * SO WHAT? * Basically, the tech has come a long way but we are still a way away from “level 5 automation”, where a car is fully automated (i.e. no safety driver). Although the promise of lower congestion, more free time and fewer deaths are all admirable goals to pursue, all the big players in this area 

have pulled back on their bold predictions. Waymo is seen to be the most advanced in driverless, but is restricted to a small group of users in very defined locations, Uber is going to restart testing in the coming weeks following the well-publicised fatality in March (but even then, this is only going to be in a mile-long loop between two of its offices in Pittsburgh) and Tesla has recently stopped offering buyers the option of having their car “fully self-driving” via a future software update as its capabilities are not as advanced as they might have hoped. The time when we can order a robot taxi to wherever we want to go is still some way off.

Investor frenzy for scooter start-ups cools (Wall Street Journal, Eliot Brown, Greg Bensinger and Katie Roof) highlights a recent cooling in investor excitement about e-scooters as both Bird Rides and rival Lime have scaled back their valuation assumptions due to a lack of interest. Valuations are still high and there is still activity going on (Uber said it is talking to both companies about an acquisition, but Bird said it isn’t in talks and Lime hasn’t commented) but as the frenzy wears off, investors are facing the reality of scooters breaking down more quickly than originally thought (two months, on average) and vandalism. An illustration of this came when Scoot Networks, a small San Francisco operator of electric Vespa-style scooters, launched a fleet of 600 scooters in October, in an attempt to jump on the Bird/Lime bandwagon. Within two weeks, over 200 of its scooters had been stolen or damaged beyond repair. * SO WHAT? * I’ll stick my neck out here and say that this is a fad that will fail sooner rather than later. Yes, there are some big names throwing their weight around in this area (Ford, Uber and Lyft all have fingers in the e-scooter pie to varying degrees), but in the scheme of things their investment is small relative to their existing core businesses and they can afford for it all to fall flat. Unfortunately, there are always more idiots around than you expect and the scooters are far easier to chuck in the river than a shopping trolley, for instance. What starts as a well-intentioned way to get people around will, I think, result in a big blot on the environment as initial excitement will fade to operations involving fishing these things out of canals etc. Which is a pity, because they look like fun and I like the idea.

And finally, in other news…

I thought I’d leave you today with What is the Fire Noodle challenge? Why this Korean food craze has YouTubers in tears (Inside Edition, Johanna Li https://tinyurl.com/ybcyjzff) and the very cute Irish dancing baby could give Michael Flatley a run for his money (The Mirror, Lisa Trainer https://tinyurl.com/y7fds5nx). Ahhh!

1. In MARKETS AND OIL NEWS, markets shudder from Huawei drama and an oil production cut might not be a done deal
2. In HUAWEI NEWS, China gets angry and the Japanese government considers cutting Huawei off
3. In SECTOR NEWS, gambling companies restrict TV advertising and carmakers face massive fines
4. In OTHER NEWS, I bring you a sumo wrestler’s autograph technique. For more details, read on…

So markets fret over the US-China truce and OPEC production cuts aren’t a done deal…

Arrest of Huawei CFO sparks rout of stock markets around the world (Daily Telegraph, LaToya Harding) shows the market repercussions of the arrest of Meng Wanzhou, daughter of Huawei’s founder, as investors worldwide show their concern that this could be a hammer blow to the recently-agreed truce between the US and China. Asia markets fell first and were then followed by Europe and the US. The arrest would appear to reinforce two of Trump’s previously stated foreign policy goals – to follow through on the sanctions regime against Iran and to address Chinese companies suspected of corporate espionage.

In Saudi minister casts doubt on planned deal to cut Opec oil production (The Guardian, Adam Vaughan) we see that doubts seem to be creeping in about Opec cutting oil production, as there appears to be a delicate balancing act going on between protecting member revenues and not annoying Trump, who reiterated his calls on Wednesday to keep production as it is in order to keep a lid on prices. Even if production cuts are agreed, there is still the knotty question of how to split it between Opec and non-Opec members as, for instance, Russia (which is outside Opec, but still an ally) is not keen on making a big cut. * SO WHAT? * Khalid al-Falih’s comments have thrown a bit of a cat amongst the pigeons as many observers had been assuming a cut. Still, it’s not over yet – but even if production cuts are made it doesn’t sound like they will be major.

China gets angry about Meng Wanzhou’s arrest and Japan is the latest country to consider its relations with Huawei…

China demands release of Huawei CFO held on US charges (Financial Times, Louise Lucas, Demetri Sevastopulo, James Kynge and David Crow) shows just how angry China is getting about this whole thing as the Chinese embassy in Ottawa said that US and Canadian authorities have “seriously harmed the human rights” of Weng Wanzhou. The CFO of Huawei was detained by Canadian authorities over the weekend on behalf of the US which is seeking her extradition to the Eastern District of New York as part of a criminal investigation related to alleged attempts by Huawei to sell US-made equipment to Iran, flouting sanctions against the country. Supposedly, Trump didn’t know about the extradition request when he was cooking up the truce with Xi Jinping, although the latter apparently did but decided to push past it in the

interests of resolving trade tensions. * SO WHAT? * The fact that Huawei’s founder was an officer in the People’s Liberation Army is making everyone increasingly suspicious about potential links to the military despite strenuous protestations to the contrary. So much so, in fact, that US telecoms networks are banned from using Huawei equipment, with Australia and New Zealand also blocking Huawei and other Chinese suppliers on security grounds. As I said yesterday, I get the feeling that Huawei is going to be used as a bargaining chip with the Chinese – it’s like ZTE all over again.

Talking of which, Japanese government edges closer to restrictions on Huawei and ZTE (Wall Street Journal, Mayumi Negishi) cites a report from the Yomiuri daily newspaper that says Japan will effectively ban Huawei and ZTE equipment from being used in government contracts following the recent America-led anti-Huawei campaign and subsequent meetings between government officials. This is probably particularly pertinent in Japan’s case because of the number of American bases there. * SO WHAT? * I suspect more of this kind of thing to follow – but then it’ll be interesting to see whether China decides to retaliate the other way and how far it decides to push it.

Gambling companies face more restrictions on advertising and carmakers face big emissions fines…

Gambling companies to curb TV advertising during sports games (Financial Times, Camilla Hodgson) heralds an agreement between the UK’s big gambling companies to stop TV advertising during some live sports broadcasts in order to head off potentially more drastic action from regulators. William Hill, Ladbrokes-Coral, Betfred and Bet365 have all agreed to this and although no details are available re timing, it is thought that it could come into force next year. This change will apply to games that start before the 9pm watershed but will exclude horseracing, which relies heavily on ad revenues from betting companies. * SO WHAT? * Shares in William Hill, Ladbrokes-Coral owner GVC and 888 Holdings all fell as it seems to be the latest bit of negative news in the sector following closely on the heels of the maximum stake 

for Fixed Odds Betting Terminals being slashed from £100 to £2 in April. Football is likely to be the most affected by this move, with betting ads being very common during half time. Betting charity GambleAware said that around 90minutes of gambling ads were shown during the World Cup. This sounds like a move in the right direction, but I guess more details are needed in order to gauge whether or not the regulator still has to step in.

Carmakers facing massive CO2 fines (The Times, Graeme Paton) cites a study by PA Consulting – due to be published today – which shows that 8 out of Europe’s 13 big carmakers will face huge fines from the European Union for failing to hit new limits on carbon dioxide emissions. It said that continued reliance on petrol and diesel-powered cars (and of 4x4s in particular) could put them in line for fines worth up to 20% of profits. Fiat-Chrysler, Ford, VW, Mazda, PSA, Hyundai, BMW and Daimler would all breach the new CO2 standards. * SO WHAT? * This is a nightmare for the manufacturers concerned, but they have until 2021 to hit the new standards, which are the most stringent in the world. Talk about incentive to innovate!

And finally, in other news…

Everyone loves an autograph, don’t they? Well I bet you’ve not seen anyone sign them like the guy in Sumo wrestler goes viral with video of him signing autographs (Nextshark, Carl Samson https://tinyurl.com/y72swrn4). This is superb!

1. In MACROECONOMIC NEWS, Macron cancels his proposed fuel tax, Italy offers to “tweak” its budget and UK services has a disappointing month
2. In TECH NEWS, BT strips out Huawei equipment, Huawei’s CFO gets arrested and Waymo’s driverless taxis start charging punters
3. In RETAIL-RELATED NEWS, Thomas Cook stages a dramatic comeback and Joules unveils strong figures
4. In OTHER NEWS, I take you on a journey. For more details, read on…

So Macron abandons his fuel tax, Italy offers to backpedal and UK services have a poor month…

Macron cancels fuel tax increase in wake of ‘gilets jaunes’ protests (Financial Times, Ben Hall, Harriet Agnew and David Keohane) shows that Macron’s government has caved to protester demands and moved from postponing the fuel tax cuts by six months to saying that they are “cancelled for the year 2019”. Interestingly, the government sounded like it would be open to the possibility of reinstating the country’s controversial wealth tax which was replaced last year with a much narrower tax based just on property in an effort to boost investment and entice French entrepreneurs back home. * SO WHAT? * This is indeed a sticky situation for the youthful president as the riots have forced him to listen to the masses. Unfortunately for him, the “gilets jaunes” seems to be an amorphous mass born on social media with no real leader atop a ragbag of supporters from across the political spectrum making varied demands. This means that it will be far more difficult to quell the uprising because there’s no-one to really negotiate with. Macron has opened a massive can of worms here and caving in is going to embolden anyone with a gripe. Given that he was/is about to embark on an even trickier reform programme of pensions and the public sector he has made his job MUCH harder (although obviously he had to do something to stop the civil unrest). The unions must be loving this.

Italian PM willing to ‘tweak’ budget plan to avoid EU sanctions (Financial Times, Miles Johnson) highlights

conciliatory noises emanating from Italy over its rejected budget. Italian PM Giuseppe Conte said that he would be willing to amend his government’s proposed budget as long as its expensive welfare policies remain unchanged. On the other hand, Pierre Moscovici, the European commissioner for economic affairs, is adopting an I’ll-believe-it-when-I-see-it approach in waiting for “credible” details from Rome about exactly how it is going to make the necessary adjustments that will help it to avoid formal sanctions from Brussels. * SO WHAT? * If a compromise isn’t reached, the European Commission will put Italy into an “excessive deficit procedure”, a disciplinary process that could lead to fines starting at 0.2% of Italy’s GDP, which will be painful, especially as Italy’s GDP is currently shrinking.

Worst month for services since 2016 drags growth to near zero (The Guardian, Richard Partington) cites data from IHS Markit and the Chartered Institute of Procurement and Supply (Cips) which shows that the biggest sector of our economy – services (which includes things like banks, hotels and restaurants) – had its weakest level of growth since the immediate aftermath of Brexit in July 2016. The services sector accounts for about 80% of the UK’s GDP, so this is not great. * SO WHAT? * Bad though this is, anything else would have been a surprise given the uncertainty we are facing. That is not to say that it should be left to fester – it’s just that we’re in limbo right now heading into Brexit. Mind you, things could hot up quite considerably at a time of year where everyone tends to start winding down as we have the parliamentary vote on Brexit next week which could then be followed by all sorts of shenanigans (including a second referendum). Strap in, people – this could be one hell of a (sleigh)ride!

Huawei continues to hit obstacles and Waymo starts charging passengers…

Following all the recent hoo-ha surrounding Huawei, BT to strip Huawei equipment from its core 4G network (Financial Times, Nic Fildes) sounds like security threats are being taken seriously as BT announced that it will take Huawei equipment out of its core 4G network within two years as part of its overall policy to keep the Chinese company’s equipment away from the heart of our telecoms infrastructure. The US, Australia and New Zealand have all moved to block the use of Huawei’s 5G equipment for security reasons and there has been heightening sensitivity elsewhere about the trustworthiness of Huawei’s equipment. Removing all the Huawei equipment in the 4G network is expected to take between 18 months and two years. * SO WHAT? * This comes at a crucial point as auctions are about to start for 5G, a superfast service that will usher in a new era of products and services. Shutting Huawei out of things like this is going to be a real headache for the company – especially if more governments around the world get antsy and jump on the “no-to-Huawei” bandwagon. 

Canadian Authorities arrest CFO of Huawei Technologies at US request (Wall Street Journal, Kate O’Keeffe and Stu Woo) shows that it doesn’t rain but it pours for the embattled telecoms equipment firm as Meng Wanzhou, CFO and daughter of Huawei’s founder, was actually arrested on the weekend and scheduled for extradition by the US, with a bail hearing tentatively scheduled for Friday. Details on why she has been arrested remain sketchy, but the US has been doing a bit of a number on Huawei recently in encouraging other countries not to use its equipment due to perceived national security

threats. Huawei is the world’s biggest maker of cellular tower equipment, internet equipment and related telecoms infrastructure and is the world’s second biggest mobile phone brand. * SO WHAT? * Basically, Washington has said for years that the Chinese government could force Huawei to tap in to the hardware its sells worldwide in order to spy on or disrupt communications. China denies it (obviously) and the US is doing its best to spread its concerns. No doubt the Huawei situation will be used as a bargaining chip in the ongoing US-China trade negotiations. This is just speculation, but I guess if China threatens Apple’s progress in the country, the US could throw a massive spanner in the works for Huawei – look what happened with Huawei’s smaller rival ZTE. The US all but put it out of business – and it could threaten the same for Huawei.

Waymo starts charging autonomous car riders in Arizona (Financial Times, Shannon Bond) heralds the latest developments for driverless cars as Waymo (whose parent company is Alphabet) launched its commercial self-driving car service – called Waymo One – in Arizona yesterday. This means that chief exec John Krafcik has met his goal of bringing robo-taxis to market before the end of the year as competition from the likes of Uber, General Motors’ Cruise and start-ups Zoox and Voyage intensifies. Don’t get hysterical yet, though, as the service is restricted to a very small amount of users (ones who have been part of the development programme thus far) and only in a limited number of areas. All rides will initially have a safety driver to “supervise” the vehicles, but they will gradually be phased out. Pricing details are yet to be released but the service is to be available 24/7. * SO WHAT? * This sounds like an interesting development but they are right to take baby steps – all they need now is another fatality like Uber had and the project gets booted into the long grass. Everyone is going to be watching this with interest.

Thomas Cook makes a comeback and Joules unveils strong figures…

Thomas Cook flies thanks to shift in outlook (The Times, Dominic Walsh) highlights the MASSIVE 51% share price hike for Thomas Cook in trading yesterday as its biggest holder – Invesco, with 15.2% of the shares – said that last week’s sell-off was an overreaction. The company’s chairman also threw his weight behind the shares by buying £80,400 of stock as other brokers started to turn positive. Having said that, Moody’s downgraded its corporate debt rating from B1 to B2 and its outlook from “stable” to “negative”, saying that Brexit uncertainty may lead to later bookings. * SO WHAT? * If you were being cynical about this, you could say that Invesco is just talking its own book, the chairman could find 80 grand down the 

back of his sofa and Moody’s is just telling everyone what they already know (“What? You mean a travel operator that sells flights and holidays to Europe might be affected by Brexit uncertainty? Wow! I never knew that” etc.). The company is going to need to do more to turn things around on a sustained basis IMHO.

Joules sales rise as fashion brand braces for hard Brexit (Daily Telegraph, Ashley Armstrong) shows a positive outlook for the company as chief exec Colin Porter said that “I am delighted to update on what has been another period of strong performance for Joules despite challenging trading conditions. We have an outstanding brand, good momentum and a growing customer base, and we look forward to the second half of the financial year with confidence”. Even so, the company has joined the list of companies – including the likes of AstraZeneca and Majestic Wine – in stockpiling product ahead of Brexit to lessen any impact of Brexit disruption.

And finally, in other news…

I thought I’d take you on a journey for a change today in Gorgeous funicular route in China is so beautiful, it looks like somethin out of a movie (SoraNews24, Koh Ruide https://tinyurl.com/y8jdomqb). It is pretty stunning, I have to say!

1. In POLITICS AND MARKETS NEWS, May suffers more defeat, Macron U-turns on fuel tax, France and Germany chicken out of digital tax and US markets tumble on lack of tariff clarity
2. In RETAIL-RELATED NEWS, Kroger gets with Walgreens, UK department store spending slides, Travis Perkins mulls shedding Wickes and Thomas Cook’s nightmare continues
3. In SECTOR NEWS, UK construction is actually looking OK
4. In OTHER NEWS, I bring you a food challenge. For more details, read on…

So May and Macron taste respective defeats, France and Germany back down on an EU-wide digital tax and US markets stumble on tariff wobbles…

The day May lost control (Daily Telegraph, Gordon Rayner) shows that Theresa May lost three Brexit-related votes in the space of an hour yesterday, making her the first PM in 40 years to be defeated three times in one day. Firstly, she was told that she would have to hand control over Parliament if her Brexit deal was voted down on Tuesday next week (to formulate a “Plan B”) making a no-deal Brexit is almost impossible and secondly, she lost two votes that mean she will have to publish the full legal advice she had on Brexit from the Attorney-General rather than get away with a “highlights” version. * SO WHAT? * There’s still a lot of jockeying for position ahead of next week’s vote, but interestingly the defeats May suffered yesterday could actually help her campaign as she could say to Eurosceptics that if they DON’T back her Brexit plan, there won’t be a Brexit. The drama continues…

Following on from what I said yesterday, French government suspends fuel tax rise after riots (Financial Times, Harriet Agnew, David Keohane and Demetri Sevastopulo) shows that Macron has just bought himself some time by postponing the fuel tax rises by six months following violent protests over the weekend. * SO WHAT? * This is the first time in Macron’s 18-month presidency that he has backed down on proposed measures and it is estimated that this action will cost about €2bn. However, Emmanuel Macron fails to buck trend of French Presidential U-turns (Financial Times, Ben Hall) suggests that this is just the tip of the iceberg with analyst Nicolas Bouzou saying that “the troubles are much deeper than fuel tax increases…we have a real problem with living 

standards and there is real hatred for political elites and authorities. The fuel tax increases were nothing more than a trigger”. Given that the weight of taxation in France is the highest in the EU – at 48.4% of GDP – you can see why many French are feeling disgruntled, especially given that they feel that the fuel tax would have disproportionately hit poorer people in rural areas. On the one hand, Macron could use this public anger over tax to streamline the public sector to fund tax cuts, but then on the other, his blinking in this game of fuel tax chicken with the French public could be the beginning of the end for him as he still has contentious reform programmes to push through. Given that his approval rating BEFORE the riots was only 26%, his rivals will be circling…

In Technology giants to escape Europe-wide digital tax plans (Daily Telegraph, Natasha Bernal) we see that France and Germany have proposed a much-diluted version of an EU-wide digital tax which would impose a 3% levy on advertising sales. Originally, the tax was supposed to include activities from data sales and online marketplaces, but this latest digital tax-lite would not cover these areas meaning that advertising-focused entities such as Facebook and Google will be affected while Amazon and Apple won’t be. * SO WHAT? * I think that this is a sign of weakness and a general unwillingness of Europe to bite the hand that feeds it and provides so many jobs. It is understandable in many ways, but it does show that for all the previous European posturing on a digital tax, it all proved to be BS when it came to the crunch.

US markets tumble after trade war truce weakens (The Times, Callum Jones and Tom Knowles) shows how US markets fell sharply last night on renewed concerns about the apparent ceasefire in the ongoing US-China trade war as Trump stirred things up again by saying he was a “tariff man” and that imposing levies was the best way to impose America’s economic power. I suspect that there will be a lot more market volatility over the next 90 days as trade talks continue (if they last that long without either side abandoning, that is).

US retailer Kroger teams up with Walgreens, UK department store spending continues to shrink, Travis Perkins mulls a Wickes sale and Thomas Cook’s nightmares continue…

Kroger to sell groceries in Walgreens Stores (Wall Street Journal, Heather Haddon) shows how US retailers are trying to address changing consumer tastes as Kroger the supermarket plans to sell groceries in branded sections (called “Kroger Express”) at Walgreens Boots Alliance the pharmacy. Kroger won’t sell own-brand items that compete with Walgreens’ private label products but it will take over its supply for branded goods. * SO WHAT? * I think this smacks of desperation as two retailers try a tie-up to diversify revenue streams and attract more customers. Interestingly, this mirrors an attempted merger earlier this year between grocer Albertsons and pharmacy chain Rite Aid that failed mainly because of price. I guess a tie-up is less risky than a full-blown merger and, hey, if it works out maybe a merger can happen further down the line. For now, though, I think this is p!ssing in the wind because it doesn’t really address fundamental problems fully – that consumer behaviour is changing and they have to provide what online retailers can’t. I don’t think that a little light cross-selling is really going to cut it.

Spending at UK department stores falls for 13th month in a row (The Guardian, Sarah Butler) cites figures from Barclaycard which show that spending at department stores across the UK fell for the 13th consecutive month. On the other hand, spending at pubs, restaurants and on entertainment such as concerts, films and shows, was up. * SO WHAT? * This is going to give Sports Direct’s Mike Ashley ammo to justify the closure of more House of Fraser stores. It also shows that EXPERIENCES are what people are after at the moment and this is something that dying areas of the high street need to take note of IMHO. Customer experience will be key to long term retailer survival. 

Travis Perkins mulls Wickes’ sale to focus on trade customers (Daily Telegraph, Ashley Armstrong) highlights the possibility that builders’ merchant Travis Perkins could sell its Wickes DIY chain in a move to focus more on trade customers and cut costs. * SO WHAT? * Ongoing competition with B&Q as well as the overall decline in the DIY market has proved to be a drag on profits, hence the possibility of a Wickes disposal as chief exec John Carter said “We have developed a clear plan to focus on delivering best-in-class service to our trade customers”. UK DIY stores: their Wickes’ end (Financial Times, Lex) points out that Wickes has had its own sales cannibalised by ToolStation, which is also owned by Travis Perkins, as well as other online competitors such as Screwfix, which is owned by B&Q-owner Kingfisher. Travis Perkins may not be able to get a great price for this troubled business at the moment, but the sooner it gets rid, the better.

Thomas Cook to slip out of FTSE250 index in quarterly review (The Guardian, Jasper Jolly) highlights the coup de grace for the travel agent, whose shares have fallen by 70% in the last three months, as it is on the verge of dropping out of the FTSE250, according to index provider FTSE Russell. Changes to the latter’s indices will be announced later on today after a quarterly review that was finalised by yesterday’s closing prices. Other FTSE250 fallers look like including fellow travel agent On the Beach and motoring services, insurance company AA and outsourcing and construction company Kier Group but companies that will take their place include peer-to-peer lender Funding Circle, retirement housebuilder McCarthy & Stone, Restaurant Group and Aston Martin Lagonda. Royal Mail looks likely to drop out of the FTSE 100 to be replaced by insurance firm Hiscox. * SO WHAT? * This is worth knowing as companies that are promoted often see a share price boost as index funds have to buy them and those that are demoted suffer share price weakness as they fall outside fund remits. This is obviously a bit simplistic (as there are other factors at play) but is a general rule of thumb. TBH, there’s probably more of a move leading up to the announcement as investors bet on the changes.

It looks like UK construction is doing OK…

Construction sector enjoys eight months of growth in a row (Daily Telegraph, Helen Chandler-Wilde) cites the latest Purchasing Managers’ Index (PMI) figures which show that the construction industry increased output to its highest level

since July. IHS Markit, which conducts the survey, said that there was some evidence of future spending being put on hold pending Brexit and Duncan Brock, group director at the Chartered Institute of Procurement and Supply, cautioned that “This rise in the overall index was small. Even with optimism at a three-month high, there is currently no indication that this will become a sustained rise as we approach the end of the year”.

And finally, in other news…

I brought you one kind of challenge yesterday – well here’s news of another one: Astonishing moment food blogger takes on 50oz burger in epic restaurant challenge (The Mirror, Courtney Pochin https://tinyurl.com/yauhlsju). Yuck.

1. In POLITICAL NEWS, Macron faces fuel tax pressure and Spain’s far-right gains ground
2. In MERGER & ACQUISITION NEWS, GSK buys Tesaro to boost its cancer drug pipeline, Unilever buys GSK’s consumer nutrition business and Altria has talks to buy marijuana company Cronos
3. In UK RETAIL-RELATED NEWS, Black Friday fails to boost sales, shop space continues to fall, Mike Ashley calls for a 20% online sales tax, Ted Baker falls on hugging, McColl’s has a profit warning and Thomas Cook gets another kicking
4. In OTHER NEWS, I bring you an interesting challenge. For more details, read on…

So Macron faces further fuel tax pressure and Spain’s far-right gain ground…

French opposition tells Macron to abandon fuel tax increase (Financial Times, Ben Hall) looks at how the situation is developing in the aftermath of the Paris riots that were initially sparked by protests against rises in the fuel tax. Prime Minister Edouard Phillippe held separate meetings with party leaders yesterday ahead of an emergency debate in Parliament on Wednesday and all of them, apart from the Greens, recommended that he should at least abandon plans to raise taxes on petrol and diesel. Even members of Macron’s party are saying the same thing. Protests against the taxes have been continuing – yesterday, striking students closed down 100 high schools and fuel shortages were being reported in some areas because of blockades at ports. * SO WHAT? * Macron’s stated intentions behind raising the fuel tax were to lower consumption and reduce France’s carbon emissions, but the protestors have been arguing that a rising fuel tax punishes those who can’t afford to live in town centres – thus feeding into the feeling that Macron is playing to the rich who can afford to live the urban life and NOT the masses. Clearly he has to tread very carefully on this one, because if he caves here he could be opening up a massive can of worms and tons more protests on everything under the sun. On the other hand, he would be fighting against his own people if he just carried on regardless – an opinion 

poll by Harris Interactive taken AFTER the violence puts support for the gilets jaunes on a 72% approval rating, which was the same level before the clashes happened. Macron is on very shaky ground at the moment and if he loses that mojo, the EU’s #2 economy could go backwards – which isn’t great because Germany (the #1 economy) is having leadership and far-right issues and Italy (the #3 economy) continues to be a basket case led by extremists who are only just holding a weak coalition together.

Far-right poll breakthrough deepens Spain’s political turmoil (Financial Times, Ian Mount) highlights trouble in Spain as the far-right Vox party won 12 seats in Andalucia’s 109-seat regional parliament on Sunday whilst the centre-left PSOE, the party of Spain’s Prime Minister Pedro Sanchez, looks likely to lose control of Spain’s most populated region after 36 years. Sanchez came to power after a vote of no-confidence in his predecessor and now this electoral failure is leading to increased calls for immediate national elections. * SO WHAT? * This is a disaster for Spain’s ruling party and heralds the gathering momentum for the anti-immigration, anti-Muslim Vox, which was formed in 2014. While everyone else will inevitably start the blame-game, Vox now has a real opportunity to stir things up and potentially get a seat at the top table of politics with other regional elections due in May. The other thing that is interesting here is that voters shifted further to the RIGHT – and not the left, which would have played into the very left-wing Podemos’ hands. This is yet more evidence of the seismic shift in European politics from the left to the right and shows the increasing difficulties being faced on the European continent.

GSK boosts its cancer capabilities, Unilever buys Horlicks and Altria wants to smoke something different…

GSK pays $5bn for US cancer drug specialist – and sells Horlicks (Daily Telegraph, Julia Bradshaw) heralds a big deal as it paid $5.1bn for US oncology specialist Tesaro, which is a loss-making biotech at the cutting edge of cancer treatment development. The acquisition gives the company access to its established Zejula drug for ovarian cancer that is already on the market in the US and Europe but it also gives them access to Tesaro’s pipeline of other experimental cancer treatments. * SO WHAT? * This signals a change in direction for GSK as it sold most of its cancer assets to Novartis about four years ago. It seems that investors balked at the $5bn price tag and GSK’s share price fell by 7.6% in trading yesterday.

Unilever agrees €3.3bn deal for GSK’s consumer nutrition business (Financial Times, Leila Abboud and Amy Kazmin) means that Unilever gets to expand its operations in India (after nosing ahead of Nestle and Coca-Cola in the battle to buy the business) while GSK’s chief exec Emma Walmsley gets more cash to plough into drug R&D. The deal is expected to close within 12 months.

In Marlboro-maker in takeover talks with Canadian marijuana group (Financial Times, Eric Platt, Alistair Gray and James Fontanella-Khan) we learn that Atria is in early-stage talks to buy Canadian marijuana company Cronos which would be the first big takeover by a tobacco company of a pot producer if it came to fruition. Shares in Cronos jumped by 14% in trading yesterday but it said in a statement that “No agreement has been reached with respect to any such transaction and there can be no assurance such discussions will lead to an investment or other transaction involving the companies”. Altria has also held talks with Tilray and Aphria. * SO WHAT? * The increasing legalisation of cannabis is creating a lot of excitement what with Constellation Brands investing almost $4bn into Canopy Growth (another pot company), Aurora Cannabis buying medical marijuana group MedRedleaf for $2bn in May and then Coca-Cola talking to Aurora to develop cannabis-infused beverages and Diageo, the drinks group, also sniffing around for investment opportunities in the sector. I think this makes strategic sense for Altria and could well hasten further M&A action – especially from tobacco companies as it seems like a natural fit. It’s all going on with Altria at the moment what with its interest in buying a stake in US vaping supremo Juul Labs!

The gloom in retail continues with disappointing sales, shrinking floor space, Mike Ashley calling for a levelling of the playing field, Ted Baker’s hugging no-no, McColl’s profit warning and another Thomas Cook kicking…

Black Friday fails to lift retail sector gloom (The Times, Emma Yeomans) paints a sorry picture for retailers as figures from the British Retail Consortium (BRC) and KPMG show that although Black Friday sales were actually better than last year, they weren’t enough to lift an otherwise weak month. Helen Dickinson, chief exec of the BRC, observed that “Weak consumer demand and falling confidence man that retailers are in for a nerve-racking run-up to Christmas. Conditions in the industry have been particularly tough since the vote the leave the EU in 2016 and the current uncertainty has only compounded the challenges. Only when the UK secures a transition period with the EU that ensures tariff-free, frictionless trade will retailers be able to breathe a sigh of relief”. Separately, figures published by Barclaycard showed that consumer spending had fallen to its lowest level of growth since March and consumer confidence continues to erode.

Quarter of shop space lost after 2008 crash, report reveals (The Guardian, Jasper Jolly) paints a sorry picture for retail as a study conducted by academics at Northumbria University showed that over 25% of all retail floor space in England and Wales has disappeared since the 2008 financial crisis as the continued rise in online shopping has killed off traditional retailers who failed to reinvent themselves in time. And if that wasn’t bad enough, the rateable value of retail property has also fallen considerably in areas outside London. * SO WHAT? * Not great reading, but it’s probably not that surprising. Local authorities get to keep a certain amount of the money collected from business rates, so a fall in the total rateable value will hit their budgets hard.

Given all of the above, you can see the thought process behind Mike Ashley wants tax on retailers with online sales of more than 20% (The Guardian, Sarah Butler) as he argues that “It is very simple why the high street is

dying. It is the internet that is killing the high street” and that retailers with over 20% of online sales should have to pay a 20% tax on those sales. He said that this would force existing retailers to and pure online players to invest in their high street presence. * SO WHAT? * There’s obviously an element of Ashley talking his own book here as he battles to save as many House of Fraser department stores as he can. However, I think that he has a very valid point about the advantage that online retailers have over physical stores but I’m not sure how much backing he is really going to get. I suspect that if consumers were really forced to choose between lower online prices or subsidising the high street, they’d choose low online prices. Maybe I’m just being cynical!

Meanwhile, Ted Baker under pressure as staff demand end to ‘forced hugging’ (Daily Telegraph, Lucy Barton) is a rather unusual headline that you don’t see every day as 2,496 staff signed a petition to stop “forced hugging” amid allegations of inappropriate behaviour by the group’s founder Ray Kelvin. The share price fell 15%. * SO WHAT? * This is not good for the company as Ray Kelvin is seen as a shining light in the retail world and he is so closely associated with the company that he founded in 1988 that investors will no doubt be nervous about any potential repercussions. The hugging allegations refer to a “policy” whereby people are encouraged to hug him before they talk. I suspect that this will be an ongoing story that will play out in the press.

Elsewhere, McColl’s shares plunge as it issues profit warning (Daily Telegraph, Charlie Taylor-Kroll) highlights the 29.7% share price fall in the newsagent as investors expressed their disappointment at the company’s announcement that its profits would fall 20% short of expectations. The profit hit was blamed on the collapse of wholesaler Palmer & Harvey last year, the rise in the national living wage, a competitive environment and weak consumer spending.

Thomas Cook falls 20% as short-sellers pile in (The Times, Dominic Walsh) shows the embattled travel agent getting another kicking as short-sellers smelling blood helped to power the share price to new lows, meaning that they have more than halved since last week’s profit warning. Nightmare. And there’s not really much the company can do about it.

And finally, in other news…

Do you like a challenge? Well how about giving this a go: Bus driver can lick his own forehead with his tongue in unusual trick (The Mirror, Laura Forsyth https://tinyurl.com/ya43nwyz). Classy.

1. In MACRO, MARKETS AND OIL NEWS, a G20 truce cheers markets, Macron has a domestic, UK manufacturing gets a boost and oil prices ain’t what they used to be
2. In RETAILER NEWS, Amazon trials cashierless and Spain’s Dia faces tough times
3. In VEHICLE-RELATED NEWS, electric driverless truck approval nears the go-ahead and Uber eyes e-scooters
4. In OTHER NEWS, I leave you with Wetherspoon’s Christmas menu. Ho Ho Ho. For more details, read on…

So Trump and Xi reach an important truce, markets have a relief rally, Macron faces trouble at home, UK manufacturing gets a boost and oil prices face crunch time…

So generally speaking the weekend’s G20 meeting fell short of a lot of expectations although Trump agrees ceasefire in China trade war (Wall Street Journal, Emily Gosden) showed at least some progress as both the US and China agreed a ceasefire in trade hostilities as Trump postponed a scheduled increase in tariffs on $200bn of Chinese goods (albeit for 90 days unless there were major changes in overall trade relations) to give both sides time to conduct further negotiations. The US said that China had agreed to purchase “a very substantial amount of agricultural, energy, industrial and other product from the United States” and later on added that the new deal would see China “getting rid of tariffs”. Global markets rally after Trump-Xi ceasefire eases trade worries (Wall Street Journal, Mike Bird and Robb M. Stewart) shows the impact these remarks had as Japan’s Nikkei, China’s Shanghai Composite and South Korea’s Kospi all gained between 1.6% and 2.2%, with the S&P500 futures up by 1.5% ahead of the open and then came the big news in Trump: China to ‘reduce and remove’ tariffs on American cars (Wall Street Journal, Trefor Moss) which referred to a late night tweet from POTUS who said that “China has agreed to reduce and remove tariffs on cars coming into China from the US. Currently the tariff is 40%”. * SO WHAT? * The G20 thing is a decent enough development, but this news on American autos is HUGE news. The US exported $9.5bn worth of new passenger vehicles and light trucks to China in 2017 but I think that the car company that is going to benefit most at the moment will be Tesla. Only last week we heard that the number of Tesla cars sold in October fell by a whopping 70% because of tariffs and that it had to cut prices of some of its models to stem the slide.

Meanwhile, Paris rioting puts Macron’s economic overhaul to the test (Wall Street Journal, Matthew Dalton) looks at Macron’s reaction to the aftermath of a weekend of riots as he convened a crisis meeting of ministers on Sunday morning. This all started with protests at fuel tax rises from the “gilets jaune” (yellow vests) which became a broader rallying point for all those who believe his pro-business policies favour the rich at the expense of the working class. The gilets jaune have gained in popularity due to Macron’s imposition of policies such as the elimination of wealth tax for all assets except real estate, reduced job protections for workers, cuts in housing aid and a resistance to increasing the minimum wage. * SO WHAT? * There’s not really that much that can be done in the immediate aftermath apart from increasing police presence and bringing vandals swiftly to justice. Although Macron probably has the power 

to push on with his economic overhauls as his party has an iron grip on the legislature, he has been facing increased calls to do a u-turn on the fuel tax for the sake of public order. I suppose it is possible that maybe some of his reforms get postponed but I wouldn’t expect a wholesale rethink given that these changes will take time to bear fruit, meaning that he doesn’t really have the luxury of delaying too much.

Back home, it seemed that UK manufacturing got a boost but Stockpiling for Brexit flatters manufacturing sector’s figures – for now (The Guardian, Phillip Inman) contends that this is only fleeting as it’s due to manufacturers stockpiling goods ahead of March’s Brexit date to smooth over expected delays at Britain’s ports. Figures from the quarterly survey by EEF, the manufacturers’ trade body, showed that production remained strong across the sector as firms got nervous about raw material imports. The uncertainty continues…

OPEC is due to meet this Thursday in Vienna and Oil’s deja vu moment: OPEC meets amid price rout (Wall Street Journal, Stephanie Yang and Amrith Ramkumar) highlights the backdrop against which it is taking place as oil prices have had their worst month since October 2008 as both US crude and Brent have fallen by 22% last month, making the forthcoming meeting the most crucial one they’ve had in four years. Back in 2014, OPEC’s decision not to cut oil production in similar circumstances led to the price falling from $110 a barrel to $27 a barrel, which then triggered fears of a global slowdown and consequent market panic. Russia’s Putin agrees with Saudis to renew OPEC pact (Wall Street Journal, Benoit Faucon and Summer Said) shows that non-OPEC countries, spearheaded by Russia, are willing to toe the OPEC line on any production decision – which many believe should be to cut in order to stem the price slide – but interestingly, Cheaper oil isn’t the US boon it used to be (Wall Street Journal, Paul Kiernan and Christopher M.Matthews) poses the theory that, actually, lower oil prices don’t actually provide the economic output boost that they used to for the US economy. Basically, this has happened because the US has changed from being a net importer of oil to the world’s biggest oil producer (a title it earned this year) which now means that when oil prices fall, it has a detrimental effect on investment and employment in important areas of the economy. Also, fuel-efficient vehicles, a transition away from heavy industry and a trend towards more energy-efficient living overall has led to the US economy consuming a lot less oil than it used to. * SO WHAT? * It seems to me that the US is in transition. The fact that Trump continues to cheer on (and ask the Saudis for assistance with) lower oil prices would suggest that the belief that lower oil prices = greater output is still the prevailing opinion, but the signs are there that this is going to change. If/when this happens, there will be a major change in oil price dynamics with OPEC and non-OPEC countries having to take US production impact even more seriously, potentially weakening each group and – who knows – maybe even resulting in the birth of new alliances.

Amazon tests out new checkout tech and Spain’s Dia hits serious challenges…

Amazon tests its cashierless technology for bigger stores (Wall Street Journal, Heather Haddon and Laura Stevens) heralds a new technological development that could put more pressure on physical retailers to make their businesses more convenient for customers. The tech, where systems track what shoppers buy and charges them automatically when they leave the store, currently works in small-format stores (the cashierless system is already in use at its seven Amazon Go convenience stores) but now the e-tailing giant is trialing it in larger-format stores. * SO WHAT? * There are various challenges with larger format stores for the technology, but when Amazon gets it nailed I suspect that the retail landscape could change quite rapidly. A major step would be to introduce it in its Whole Foods stores, but there is no official word on the timing of that.

Spanish supermarket group Dia faces crunch time (Financial Times, Ian Mount) highlights the travails of an altogether more traditional retailer as recent resignations of the chairwoman, chief exec and firing of the head of finance – not to mention a severe slashing of the dividend and debt downgrade – have been the inevitable consequences of a difficult few months for Spain’s third biggest supermarket chain whose share price has cratered by over 80% this year. The good news is that it has a big network across Spain, Portugal, Brazil and Argentina with a successful store format but it has suffered from a very competitive market with Mercadona (which has a 25% market share) and discounters Aldi and Lidl continuing to vie for customers’ affections as well as debt problems. * SO WHAT? * The recent departures have been rather dramatic, but there is hope that Russian billionaire Mikhail Fridman’s holding company, LetterOne, which already has a 29% stake in Dia, will bid for the rest of it in order to revive its fortunes. Fridman has form in retail, having turned X5 Retail Group around into becoming Russia’s biggest food retailer with over 13,000 stores. I suspect that this is in the price, so if it doesn’t come to fruition, Dia’s share price will fall even more. Time will tell!

The advent of the electric driverless truck gets closer and Uber considers e-scooters…

In Electric driverless truck set to gain approval for public roads (Financial Times, Patrick McGee) we see that Swedish autonomous vehicle start-up Einride and German logistics group DB Schenker are on the verge of regulatory approval for an all-electric driverless truck to carry freight on public roads. The two groups say that this would be a world first and follows a testing phase in November. The 7.5 ton “smart container on wheels” is called the T-Pod has no steering wheel, foot pedal or driver cabin (the latter of which can often account for half of the cost of building a truck), which maximises the room for carrying cargo and is powered by the Nvidia Drive platform. A remote operator,

sitting hundreds of miles away, can supervise up to 10 vehicles simultaneously and take over in order to navigate difficult terrain. * SO WHAT? * This sounds amazing, but before you get too excited about it, a T-Pod can only travel six miles per day and is only eligible to travel on 100miles of public roads at the moment, but it does give you the feeling that something quite exciting is happening!

Uber eyes electric scooter start-ups for the UK market (Daily Telegraph, Natasha Bernal) adds to recent rumours about Uber making moves in electric scooters as a report in The Information says that the ride-hailing company wants to deepen its involvement in alternative transport after buying bike hire start-up Jump for $200m in April. A deal to buy Lime or Bird, could be signed by the end of this year according to the report. Uber is already an investor in Lime, although Uber also has links with Bird given its founder was an ex-employee and the company has a number of ex-Uber staff. None of the companies involved commented.

And finally, in other news…

We’re in the final strait in the run-up to Christmas now, so I thought I’d leave you with something seasonal thus: Wetherspoons reveals its Christmas menu – including a pigs in blankets pizza (The Mirror, Zoe Forsey https://tinyurl.com/yc36wgbb). Ho ho ho (at a reasonable price)!

1. In UK CONSUMER NEWS, borrowing and confidence are down but mortgage lending goes up
2. In TECH NEWS, Amazon feels heat from the Germans and Apple axes Chinese apps
3. In INDIVIDUAL COMPANY NEWS, AT&T announces streaming plans, Bayer makes big cuts and Intu’s woes continue
4. In OTHER NEWS, I bring you doctors eating Lego for research and a sausage-balancing dog. For more details, read on…

So borrowing slows down, consumer confidence takes a dive while mortgage lending goes up…

Borrowing slows and consumer confidence wanes, data show (Financial Times, Gavin Jackson) cites the latest figures from the Bank of England which show that the annual rate of growth in consumer borrowing fell to its lowest level since May 2015 during October. In addition to this, the closely-watched GfK index – which measures consumer confidence – showed consumer confidence falling to its lowest level for 11 months, with the joint lowest reading for five years.

Interestingly, given the overall slowdown in the UK property market, Bank data shows mortgage lending hits nine-month high (Daily Telegraph, Helen Chandler-Wilde) shows that there’s still an appetite for mortgages as approvals hit their highest level since January (although they are still trending below the long-term average).

However, it would seem that consensus still expects a slowdown in the overall property market which could be made worse if we have a no-deal Brexit.

* SO WHAT? * It seems to me that more people are hunkering down ahead of the unknown of Brexit. Maybe these mortgage approvals are the last hurrah for the time being before we launch into 2019 and the reality of it all starts to hit. You’d have to be pretty bullish (and have balls of steel/loads of money hanging around) to make big ticket purchases at the moment because no-one really knows how Brexit will affect jobs, wages and employment prospects generally. Consumers have, in the last few years, been happy to spend on credit cards or buy cars on PCP (Personal Contract Purchases, not the drug!) but I think that a combination of the Bank of England cracking down on profligate lenders and the impending reality of Brexit is putting the brakes on. I actually wonder if there is a chance that the high street will actually benefit because although people might get nervous about spending on big ticket items, they might still want to spend – just on smaller stuff. Fingers crossed for the UK retailers – let’s hope they can prove everyone wrong this Christmas season!

Amazon comes under the spotlight and Apple reluctantly axes some Chinese apps…

In German regulator scrutinises Amazon over dominance (Daily Telegraph, Hasan Chowdhury) we see that the Federal Cartel Office has started an investigation into Amazon’s dual role of being, on the one hand, the country’s largest retailer and, on the other hand, being the biggest online host for small businesses. Andreas Mundt, head of the Federal Cartel Office (aka Bundeskartellamt), pointed out that “Amazon functions as a kind of gatekeeper for customers. Its double role as the largest retailer and largest marketplace has the potential to hinder other sellers on its platform”. * SO WHAT? * This investigation will be closely followed by other countries in the EU and could well result in more scrutiny elsewhere. It follows hot on the heels of the European Commission announcing that it is going to investigate Amazon’s use of the data it holds on third-party sellers and whether it is benefiting from it. I suspect that this will be a bit of a cloud over the company until the investigations reach their conclusion because if regulators decide to come down hard, there could be some sizeable knock-on effects – especially if more regulators start to jump on the bandwagon as a result.

Rule-breaking Chinese apps removed by Apple (Daily Telegraph, James Titcomb) highlights Apple’s removal of over 700 iPhone apps from China for ignoring App store rules that stop making changes to their apps without Apple’s permission. New features and security improvements are examples of updates that should be approved by the company, but this has been going by the wayside. Chinese state media has been putting concerted pressure on Apple to control its App Store more closely – and given that it is a) the only foreign app store available in China (Google’s Play is banned, for instance) and b) Apple’s biggest source of app revenue (according to Macquarie analysts) you can see why it feels it has to play ball. This follows a removal of thousands of apps back in August which were deleted for breaching Apple’s rules. * SO WHAT? * This isn’t disastrous by any means, but it is yet another fly in the ointment for Apple’s efforts in a country where it is desperately trying to make inroads. As I’ve said before, I think that Apple is super-vulnerable in China because of its iconic status and is highly likely to be a focus for Xi Jinping’s trade negotiations with Trump i.e. play nice and we’ll let Apple in, play not nice and we’ll put the barriers up.

AT&T unveils its streaming plans, Bayer sacks employees and Intu just doesn’t catch a break…

AT&T plans 3-tiered WarnerMedia streaming service to take on Netflix (Wall Street Journal, Drew Fitzgerald) heralds AT&T’s plans to capitalise on its acquisition of Time Warner by offering three versions of its new streaming video service from the fourth quarter of 2019 that will have original movies and TV series from Warner Bros, Turner and HBO. WarnerMedia (as TimeWarner is now known) plans an entry-level service focusing on movies, a second tier with original programming and more films and a third tier with all of the above plus classic films, comedy and children’s programming. * SO WHAT? * Whatevs. Nothing here to get too excited about as we really need to know more specifics about the content and what will be pulled from other sites like Netflix. This will just pit it against the likes of Netflix, Amazon and now Disney. Ultimately, I think that punters will just get subscriber fatigue (there are only so many subscriptions one can take) and there will be another wave of consolidation. IMHO, Netflix and Amazon will be the ultimate winners because they not only have broader reach – they are also developing their own high quality content that makes them compelling. I don’t think Apple is really spending enough to be a proper player while Disney and now AT&T maybe have the content but not necessarily the distribution power.

Bayer to cut 12,000 jobs, shed Coppertone and Dr. Scholl’s brands (Wall Street Journal, Ruth Bender) highlights Bayer’s announcement that it will be cutting 10%

of the global workforce in an effort to stem the slide that it is experiencing in most of its businesses. To make matters worse, the inventor of Aspirin is also facing almost 10,000 lawsuits from users of weedkillers made by the relatively recently acquired Monsanto. The company’s share price has fallen by about a third since a San Francisco jury found, in August, Monsanto’s Roundup weedkillers caused cancer. Bayer has said that the cuts are part of an effort to squeeze out €2.6bn of cost savings by 2022. The shares ticked up on the news initially, but then ended flat. * SO WHAT? * Although it’s good that Bayer is trying to streamline itself, the timing isn’t great as it is about to enter a period of slow growth as patents for its top-selling drugs Xarelto and Eylea are due to expire in 2023, with nothing particularly in the pipeline to fill the gap. You do wonder whether they are going to be able to get decent prices for their disposals given that they look rather like a distressed seller. The company’s woes continue…

Intu’s woes are part of a trend that shows no sign of abating (The Guardian, Zoe Wood) is a story that is in many of the broadsheets today as the collapse of a takeover bid for shopping centre landlord fell though, sending shares down by 41%. * SO WHAT? * This is clearly a function of potential buyers getting the jitters over the fragile nature of the UK high street at the moment. I suspect that property values will continue to fall unless there is a massive uptick in activity – but that doesn’t look like happening at the moment. As Fidelity International’s Adrian Benedict put it, “Bricks-and-mortar retailers are in a fight for survival. Online shopping is transforming retail but at a time when consumption is struggling and the role of consumption in growth is waning. The level of rents and amount of floor space are uneconomic for many bricks-and-mortar retailers”.

And finally, in other news…

There are occasions when you wonder about scientists and how they spend their time on dubious research projects as per Doctors eat Lego to discover how long it takes to pass through digestive systems (Sky News, https://tinyurl.com/ybctkblj). Nice.

And finally, just to balance that out, I thought I’d leave you with Police dog balances sausage on nose (Sky News, https://tinyurl.com/yaono4pd). Impressive!

1. In MARKETS AND BITCOIN NEWS, the US markets breathe a sigh of relief and Bitcoin perks up
2. In FAANG NEWS, Netflix commits to more production as Google and Facebook fuel a UK ad boom
3. In RETAIL-RELATED NEWS, Ikea’s profit falls by 40% and the Wagamama deal goes through
4. In INDIVIDUAL COMPANY NEWS, Altria takes a drag of Juul Labs and On the Beach kicks sand in Thomas Cooks’ face
5. In OTHER NEWS, I bring you some giant animals and “Skip Lady”. For more details, read on…

So US markets rally and Bitcoin gets a boost…

Fed Chairman’s remarks spark a market rally (Wall Street Journal, Amrith Ramkumar and Nick Timaraos) highlights the reaction to what Jerome Powell said in a speech at the Economic Club of New York yesterday where he said interest rates are “just below” general estimates of what would be a neutral level (i.e. the optimal level for the economy). This signals a change in direction given that, in early October, he said that the Fed’s interest rate was a “long way” from neutral, which prompted a market sell-off. The Fed is still expected to raise the federal funds rate band to between 2.25% and 2.5% next month, though. * SO WHAT? * This is a significant climb-down from the Chairman’s previous position where it looked very much like there were going to be a few more gradual raises over the course of next year. Generally speaking, markets tend to go weaker when interest rates go up because a higher interest rate makes borrowing more expensive for both companies and individuals which means that companies may be less inclined to borrow money to invest and 

individuals may have less disposable income to spend because household debt costs increase. Trump has been vocal about his opposition to too many interest rate rises because he believes that it will choke off economic growth. Clearly a severe cooling off of the economy would not be good for votes at the next election, but if it does cool off, you can bet your bottom dollar that he will dump all the blame on Powell.

Bitcoin is back as markets eye currency (The Times, James Dean) heralds a return to form for Bitcoin as it had its best day for seven months in trading yesterday after a torrid time last week, when it had its worst week in five years. It eventually gained by 10.7% versus the dollar yesterday on reports that the Nasdaq exchange is going to offer bitcoin futures next year, following CME Group and CBOE – which would enhance its credibility amongst investors. Intercontinental Exchange is also expected to start offering bitcoin derivatives in January. * SO WHAT? * It seems to me that Bitcoin is continuing to gain credibility bit by bit from the mainstream – with more markets offering legitimate ways to trade the cryptocurrency and Fidelity Investments getting involved a few months back. It is volatile, but it seems to me like it is here to stay.

In FAANG news, Netflix commits to more as Facebook and Google ads power forward…

In Netflix to boost shows made on Continent and UK by a third (Daily Telegraph, James Cook) we see that that the streaming giant has committed to increase the amount of European shows it produces by a third next year as it continues to put pressure on traditional broadcasters. Out of 221 news shows, 150 will be original. * SO WHAT? * This is a serious move by Netflix and will put enormous pressure on incumbent broadcasters to up their game. It also makes efforts from the likes of Apple look pretty pathetic in comparison. As far as I am concerned, once you have scale, content is key to keeping your subscribers – and if you OWN that content, it makes your offering far stickier. This is clearly what Disney is hoping with its new channel and separation from Netflix, but I don’t think that they necessarily have the scale – or at least not to the same extent as Netflix. Still, this is something that will develop over the coming years as streamers aim to provide quality AND quantity for their customers.

Google and Facebook fuel UK advert boom despite print slump (The Guardian, Mark Sweney) cites findings from advertising media company GroupM which show that overall spending on traditional media – including TV and newspapers – is on the wane whilst digital advertising with the likes of Google and Facebook continues its meteoric rise. Despite current uncertainty in the UK economy ad spend is set to break the £20bn barrier for the first time next year and Adam Smith, the futures director at GroupM, pointed out that “digital is now around 60% of all advertising investment and accounts for all net UK advertising growth. Digital is commanding a rising share of overall marketing effort from a wider base of marketeers large and small”. Most of the growth is coming from small and medium-sized companies as the giants are currently trimming their digital ad budgets. * SO WHAT? * This is quite an impressive stat, don’t you think? It’s particularly impressive given that ad spend is often seen to be a leading economic indicator in that it is one of the first expenditures to get cut in an economic downturn and one of the first to trend positively in an upturn. No wonder the likes of WPP are trying to streamline their offering in the face of this massive and unrelenting competition. 

In retail-related news, Ikea’s profit falls by 40% and the Wagamama deal goes through…

Ikea profits plunge 40% as strategic overhaul costs bite (Financial Times, Richard Milne) highlights some tricky times for the big retailer as it grapples with its transition from its existing model (out-of-town stores) to its new model (a mix of out-of-town plus smaller town centre outlets and a better online offering) which will involve lower profits for the next three years and some big staff cuts. The Swedish company’s performance was hit by increased costs involved in investing in its logistic and digital operations to power this transformation. When asked about the falling profits, CFO Juvencio Maeztu gave a quite unusual answer when he said “It’s part of the plan. We decided a year ago that we did not want customers to pay for the transformation. It’s a conscious decision to lower the profit to finance the business transformation [and] we expect to keep the same level of profit for the next three years”. * SO WHAT? * It’s interesting to see a company like Ikea being so candid about its transformation given that it’s actually doing quite well. Usually, you only see this kind of stuff after a company has been on the skids and some

new CEO comes in all guns blazing. The CFO said that the transformation process is expected to take four years and that the business model needed changing after 75 years of operating the current one. He then sounded quite philosophical when he observed that “the world is changing and we have to be humble and we have to be critical with ourselves. It’s good to have this feeling of being strong and being weak at the same time”. It sounds to me like Ikea has got its feet planted firmly on the ground and has a good grasp of what it needs to do to survive for the long term. It just needs to execute now! If only more companies were like this!

The Restaurant Group prevails as Wagamama deal is passed (Daily Telegraph, Oliver Gill) heralds the end of a somewhat nervy period for the Restaurant Group as it battled with shareholders to buy Wagamama for £559m since it announced its intentions. Most investors thought that the acquisition was good strategically, but balked at the deeply discounted rights issue to finance it. 40% voted against the acquisition, so it was not exactly a ringing endorsement and the shares fell by 15% on the news. * SO WHAT? * Any disgruntled shareholders selling out now would crystallise a huge loss considering that the shares have tanked since the deal was first announced. It’s a question of whether they should just shut up and hang on for the ride or sell out and take the hit.

In individual company news, Altria takes an interest in Juul Labs and On the Beach kicks sand in Thomas Cook’s face…

Following on from the recent high-profile heavy FDA crackdown on e-cigarettes, Altria in talks to take significant minority stake in Juul Labs (Wall Street Journal, Dana Mattioli and Jennifer Maloney) shows that the Malboro maker is willing to take a risk by taking up a big slice of e-cigarette startup Juul Labs in to get greater access to an increasingly fraught area of the tobacco market. A deal isn’t imminent, but if it happened it would be big as Juul was most recently valued at $16bn this summer (but that was when everything was hunky dory and before the FDA decided to urinate over its rather

popular parade). Juul Labs’ products are thought to account for 75% of the e-cigarette market, so Altria would get a significant boost in that product segment while Juul would be able to benefit from Altria’s distribution.

I thought I would mention On the beach growth leaves Thomas Cook in the shade (Daily Telegraph, Oliver Gill) because the market value of this online holiday start-up founded in a terrace house in Macclesfield in 2004 briefly rose above that of the rather larger Thomas Cook in trading yesterday! The FTSE 250 company announced a 24% rise in annual pre-tax profits despite this year’s extremes in temperature. Interestingly, On the Beach generated annual sales of £104.1m versus revenues of £9.6bn for Thomas Cook over the same period. The company’s chief exec said that they probably did better than rivals because they do not have an agreement to fill hotel rooms, which meant that Thomas Cook and the like were left wearing capacity they couldn’t sell, contributing to their poor performance. What a contrast, though!

…And finally, in other news…

Do you like animals? Well how about the big ones in Knickers the giant cow to Bopper the dog – these are the world’s biggest animals (The Mirror, Rhian Lubin https://tinyurl.com/ycz83m3p). MASSIVE!

And finally, I thought I’d leave you with Skip woman wanted to help customers but turned into a meme sensation instead (Metro, Basit Mahmood https://tinyurl.com/yaojxtx9).

As always, thank you for reading Watson’s Daily!

1. In CAR-RELATED NEWS, European manufacturers get dinged by Trump and Tesla has a shocker in China
2. In RETAIL-RELATED NEWS, John Lewis hails Black Friday, Greggs warms investors but Pets at Home has a vet-shaped nightmare
3. In TECH NEWS, major players target healthcare and an Apple Watch study shows big possibilities
4. In INDIVIDUAL COMPANY NEWS, Salesforce comes through but Thomas Cook needs a holiday
5. In OTHER NEWS, I bring you a frightening hang glider story and a silent disco ban. For more details, read on…

So European carmakers take a dive and Tesla’s China sales are shocking…

Following on from what I said yesterday Trump tariff fears loom for Europe’s giant car companies (The Times, Callum Jones) shows that German car manufacturers’ shares fell by up to 4% yesterday after Trump said that he was thinking about slapping a 25% tax on car imports as early as next week. The official line from the White House is that no additional levies will be imposed while it is conducting negotiations with the EU and Japan, but Trump has often threatened a tax on foreign car imports. Currently, US cars shipped to the EU face a 10% import tax whereas European cars being shipped to the US face a

2.5% US duty. The stage is set for high stakes negotiations at the G20 summit this weekend!

Woeful China sales are a shock for Tesla (The Times, James Dean) shows what punitive import taxes can do to sales as the China Passenger Car Association said that Tesla sales had fallen by 70%, meaning that the company only sold 211 cars last month in the whole of China versus a year ago. Tesla imports all the cars it sells in China, but the government imposed a hefty 40% tax on car imports coming from the US in response to Trump’s tariffs going the other way. * SO WHAT? * Well now you can see why Tesla recently announced a price cut of 12% of its Model S saloon and a 26% price cut for its Model X SUV in China in an attempt to offset the tariffs. Clearly this is a short-term solution, but longer term Tesla is looking to build a car factory in Shanghai that could make 500,000 cars per year. Tesla just has to survive that long to see it through!

In retail news, John Lewis reports a healthy Black Friday and Greggs brings strong sales out of the oven but Pets at Home has its tail between its legs…

John Lewis reports record sales in Black Friday week (The Guardian, Sarah Butler and Phillip Inman) heralds some good news for the retailer as it shattered its sales records last week to clock up its biggest week ever as shoppers bagged deals on gadgets, beauty products, clothing and beds. Sales were up 7.7% in the week versus the same period last year and sales in the fashion and beauty department were up by 13.1%. It said that both online and offline trading was good, with some stores actually reporting a record week! * SO WHAT? * This is great news as everyone has been predicting doom and gloom across the high street. Yes, it is still possible that Black Friday sales may just be bringing forward sales that would otherwise have been made a bit later on in the run-up to Christmas, but if I was John Lewis I’d be celebrating this mini-win! Having said that, the CBI’s head of economic intelligence Anna Leach, continued to be downbeat on retail as a whole when she said “While it is encouraging to see headline retail sales growth strengthen in November after a weak outturn in October, the quarterly survey continues to paint a gloomy picture of the sector. Business sentiment remains poor, investment intentions are flat, and headcount continues to decline”. Bah humbug. But like I’ve said before, EVERYONE is expecting a poor performance, and while I don’t think it is fully priced-in to the respective share prices, there would be HUGE upside potential for share prices if companies confounded expectations.

Greggs has treat for investors (The Times, Deirdre Hipwell) shows that the surprise profit warning Greggs had in May was just a blip as Greggs unveiled excellent sales for the latest quarter that means a higher-than-expected profit could be on the cards for the end of the year. Greggs is the UK’s biggest bakery chain with about 1,900 outlets and, although it has built its reputation on sweet and savoury treats it has been trying to introduce healthier options such as porridge, cold-pressed juices, low-calorie soups, salads and gluten-free products. * SO WHAT? * This is great news for the baker and signals a return to form. Or as Peel Hunt analyst Jonathan Pritchard put it, “Greggs has enjoyed a stellar start to its fourth quarter, even if footfall passing its stores has been under a cloud. The patchy late spring is now a distant memory and we’d own up to overreaching to it. This is clearly a very consistent performer”. The shares were up 11% on the news.

Fiasco of vet expansion sees Pets at Home profit fall 80pc (Daily Telegraph) highlights the problems facing the animal goods retailer as it announced a big write-down on its veterinary business as it recorded a drop in profits from £40.8m to just £8m in the six months to November 11th. Chief exec Peter Pritchard said that the company has taken the view that some vet practices would struggle to pay back the £300,000 of debt needed to start a practice and will buy out 55 of its 471 joint venture vet practices at a cost of £49m by 2020. Additionally, 30 of its joint venture practices are slated for closure, potentially putting around 300 jobs on the line. On the other hand, the retail business is doing pretty well after it overhauled its pricing strategy two years ago. * SO WHAT? * This is actually an interesting example of the effect wage inflation is having on retailers as vets – and other staff – have had become more scarce, thus increasing labour costs. This could get worse going into Brexit, so Pritchard has a tough job on his hands.

In tech news, we see healthcare as an attractive area for companies and an Apple Watch study shows potential for preventative medicine…

Big tech expands footprint in health (Wall Street Journal, Melanie Evans and Laura Stevens) takes a look at the opportunities big tech companies are seeking out in the arena of healthcare. Amazon, for instance, is starting to sell software that searches patient medical records for data that will help doctors and hospitals improve treatment and cut costs. IBM’s Watson Health and UnitedHealth Group’s Optum are already in this area – which shows that there’s a market for this kind of stuff. Apple is in talks with the Department of Veterans Affairs about software that would transfer veterans’ health care records to iPhones. * SO WHAT? * Healthcare is ripe for a shake-up in the area of data because it has lagged other data-heavy industries like banking and retail, in transitioning analogue data to digital due to technical and regulatory hurdles. However, tech has evolved to such an extent that data analysis of patient records with good accuracy is now possible and it 

can now do things like help identify suitable patients for experimental drugs, amongst other things.

Apple Watch study could have benefits for preventative medicine (Financial Times, Sarah Neville and Oliver Ralph) also looks at the possibilities for tech in healthcare as a global study – with 400,000 participants – conducted by a big insurance company in conjunction with Apple has shown that people are prepared to dramatically increase their exercise levels if they are given tangible rewards. Vitality Insurance rewards customers who look after their health by giving them benefits when they hit specific health targets. For instance, participants in the study paid a lump sum – £99 for an Apple Watch 4 or £9 for an Apple Watch 3 – plus a monthly payment of up to £12.50 depending on how much exercise they took. Those who did the most exercise were rewarded with not having to pay the monthly fee! It seemed that “loss aversion” meant that the danger of losing access to a free gadget was a more powerful motivator than the desire to get the benefit in the first place! Vitality has also worked with John Hancock, a life insurance provider, to offer Apple Watch and Fitbit devices to its life insurance policyholders and Fitbit has signed a deal with Humana, a US health insurer, for its coaching app. * SO WHAT? * I think that this is a very exciting area with huge potential and takes a nice-to-have gadget up a notch to being a must-have device but it is early days yet.

In individual company news, Salesforce has strong results and Thomas Cook has a shocker…

Backlog and revenue growth power Salesforce results (Wall Street Journal, Patrick Thomas) heralds good news for the business software maker as it upped its revenues forecasts, sending its shares up 7% in after-market trading, adding to the 24% rise it has seen over the last 12 months.

Salesforce is benefitting from heavier use of its Customer Success Platform, which was behind over 20 million e-commerce orders between Black Friday and Cyber Monday.

Thomas Cook shares plunge after second profit warning (Daily Telegraph, Oliver Gill) is a story doing the rounds this morning as it announced its second profit warning in the space of two months sending its shares down by 22.6%, blaming “legacy and non-recurring charges” and poor winter bookings. Yesterday’s profit warning came just two days before it was due to publish annual results. It’s not looking good but I guess we’ll hear more at the results.

…And finally, in other news…

Are you a bit of an adrenaline junkie? Then maybe this is for you: Hang glider clings on for his life after pilot fails to attach safety harness (Sky News, https://tinyurl.com/y7c4b5kx). OMG OMG OMG. Having survived, you can clearly see that this guy is a nutter – and master of understatement – when he said “I will go hang gliding again as I did not enjoy my first flight”.

With both feet planted firmly on the ground for the next story, you may be surprised to read Silent discos face ban by Edinburgh City Council because they’re ‘too noisy’ (Metro, Richard Hartley-Parkinson https://tinyurl.com/yatuvdmk). Shhhh.

As always, thank you for reading Watson’s Daily!

1. In MACRO AND OIL NEWS, Trump talks more China tariffs, Italy hints at a budget climbdown and US shale drillers could be affected by low oil prices
2. In UK HIGH STREET NEWS, pubs adapt to change and Cake Box has big ideas
3. In INDIVIDUAL COMPANY NEWS, GM announces closures and WPP merges J Walter Thompson and Wunderman
4. In OTHER NEWS, I bring you KitKats and a fit cat. For more details, read on…

So Trump has more China tariffs in mind, Italy hints at a climbdown and oil weakness threatens the shale drillers…

Trump expects to  move ahead with boost on China tariffs (Wall Street Journal, Bob Davis) shows that POTUS is in a belligerent mood as, days before the G20 summit where he’ll meet with China’s Xi Jinping, he has indicated that he expects to move forward with increasing tariff levels on $200billion of Chinese goods to 25% despite China asking for a postponement. He went on to say that if the trade talks don’t produce anything favourable he will slap on 10% or 25% tariffs on goods that are currently exempt from duties. Mind you, it wasn’t just the Chinese who were being targeted – he reiterated his threat to levy tariffs on car imports that would be bad for the European, Japanese and South Korean automotive industries. * SO WHAT? * This seems to be classic Trump posturing as he heads into talks rattling cages. God knows whether any deals will get hammered out, but I wouldn’t hold your breath. The US economy’s momentum is still good and China’s economy is officially on track to achieve its 6.5% GDP growth target so I suspect that both sides will be willing to play a waiting game given that there doesn’t seem to be much urgency – at the top level, at least – to get anything done. Companies like Apple, however, will probably be tearing their hair out as they could well become the whipping boy both in China and back home as Trump is threatening to slap taxes on Apple products made outside the US and imported on the one hand, and then China could easily put tariffs up to effectively choke off any of Apple’s China growth ambitions on the other.

In Italian shares rise on hint of climbdown in Brussels budget talks (The Guardian, Larry Elliott) we see that whispers of reconciliation between the European Commission and Italy’s populist leaders over the disputed budget sent Italian bank shares – a bellwether for the Italian stock market – up by 5% in trading yesterday. It sounds like Rome was willing to cut its budget deficit from 2.4% of national output to 2% – which has been a major stumbling block up until now. * SO WHAT? * This sounds like a mild positive and markets across Europe were boosted by this chat but it’s unclear as to whether this would go far enough to satisfy the Europeans – or even whether they’d actually be able to hit this target anyway given that Italian economic growth is expected to fall over 2019. The saga continues.

Oil’s tumble threatens US shale drillers (Wall Street Journal, Christopher M. Matthews) highlights challenges posed by recently weakened oil prices as two large shalers, EOG Resources and Whiting Petroleum, identified $50 a barrel as the lowest level that they can still make a worthwhile profit as US benchmark prices fell recently to $51.91. The implication here is that if the price keeps going lower, US shale drillers will have to curtail production. * SO WHAT? * Fracking techniques continue to improve and so profitability continues to improve along with it. Shalers are also in a much better position than they were in the last oil downturn and have reduced debt levels considerably, but if oil prices continue to bump around at levels just above their minimum comfort levels, you can’t blame them for potentially shelving production. Having said that, they are themselves partly to blame (because of increased production) so it’s difficult to know whether they will stay or go at this point in time. Opec will be meeting shortly and it sounds like members are mostly vying to cut production to increase prices – so this would benefit the US producers anyway.

It seems that pubs they are a-changin’ and Cake Box has big ambitions…

Pub closures are more than a local difficulty (The Times, Dominic Walsh) cites figures from the Office of National Statistics in a report entitled Economies of Ale (who said that the ONS wasn’t capable of witty puns??) which charts big changes in the pub industry in the 21st century. The total number of pubs has fallen from 52,500 to 38,815 since 2001 – 11,000 of which have closed in the last ten years in the wake of the smoking ban, the financial crisis and rising overheads due to the higher minimum wage and beer duty amongst other things. Generally speaking, closures tend to be highest amongst small independent and tenanted pubs run by individuals. On the other hand, the increase in the number of large food-led managed pubs means that there are actually 6% more jobs in pubs and bars than there were in 2008. * SO WHAT? * I think that this is just evolution. A much-needed crackdown on drink-driving has no doubt adversely affected pubs in 

the middle of nowhere and I think that a gradual increase in expectation levels when you go out and spend your hard-earned money these days is no bad thing. This is clearly bad news for people who like to step into a time-warp with a broken juke-box, sticky floors and a few old men talking b0ll0cks whilst stringing out a few pints, but higher customer expectations are making these places up their game.

I thought I’d mention Cake Box targeting a shop on every UK high street, says boss (Daily Telegraph, Julia Bradshaw) as a bit of a contrast to what’s going on at Patisserie Valerie at the moment because this is a bakery that has ambitions. It makes eggless celebration cakes and has a franchise structure which appears to be very popular. It is planning to open two production facilities in Bradford and Coventry next year to service its growing amount of shops in addition to a warehouse and distribution centre. It unveiled its first results yesterday since listing on London’s junior Aim market in the summer. * SO WHAT? * This sounds great and it’s good to hear some positive news from a baker for a change! Keeping things simple by “only” selling cakes is clearly working for this company and maybe now is a good time for it to expand given rising store vacancies on the  high street.

General Motors decides to make some big cuts and WPP merges two of its agencies…

GM to cut 14,700 jobs as car sales flag and US tariffs bite (The Guardian, Dominic Rushe) heralds bad news for many carworkers as General Motors announced that it would stop production at five of its North American facilities and cut 14,700 jobs in response to sluggish sedan sales and the impact of Donald Trump’s tariffs. Trump himself was clearly annoyed at this decision because it makes him look bad, but GM’s chief exec Mary Barra explained that “we are taking this action now while the company and the economy are strong to keep ahead of changing market conditions”. * SO WHAT? * Investors seemed to think this was a good thing (the shares were up by 5.5% on the news) as they approved of its proactive action as part of a broader shift towards changes in car ownership trends (more people will share cars rather than 

actually own them) and vehicle electrification. As America’s biggest car maker, I would have thought there are more areas that could be cut if needs be. No doubt others will follow.

WPP to merge J Walter Thompson and Wunderman (Financial Times, Matthew Garrahan) highlights the continued streamlining of WPP’s stable of advertisers as it tries to make itself leaner and meaner in order to fight back against the onslaught of digital advertisers such as Facebook and Google. The new group will be called Wunderman Thompson and follows another merger of Young & Rubicam and VML within WPP’s stable. * SO WHAT? * WPP has been built up over the years by the acquisitive previous chief exec Sir Martin Sorrell and the current environment would suggest that simplifying its structure to make itself more client friendly whilst at the same time responding to the ongoing threat of Facebook and Google, is a move in the right direction. I expect more of this to occur given the complexity of WPP’s structure – but I also think that others, such as Publicis will also continue to slim their operations for the same reasons.

And finally, in other news…

I’ve mentioned this before, but Japan has a real fascination with KitKats to the extent that you can get all sorts of weird and wonderful flavours! Well it sounds like they decided to put them all in one place in a special gift set in All the best KitKat flavours together in one exclusive anniversary box for limited time (SoraNews24, Oona McGee https://tinyurl.com/y7dbz9lc). Amazing!

But what is even more amazing is this: Cat performs sit-ups underneath car (Newsflare, https://tinyurl.com/yd9zfkrl). Work it, kitty!

1. In MACRO, MARKETS AND BITCOIN NEWS, we take a look at what could happen if the UK parliament rejects Brexit, markets continue to wobble and Bitcoin investors have their worst week for five years
2. In BLACK FRIDAY NEWS, we compare and contrast US and UK performance
3. In INDIVIDUAL COMPANY NEWS, BDO and Moore Stephens look to combine and Loungers considers an IPO
4. In OTHER NEWS, we see whether Gary Lineker has “still got it”. For more details, read on…

So we take a look at what COULD happen if parliament rejects May’s Brexit deal, markets stay in a rut and Bitcoin investors have a painful week…

The next part of the Brexit process is getting the deal that May has negotiated through Parliament, which means that the British PM will now embark on a two-week campaign to persuade MPs to vote for it. What will the EU do if UK parliament rejects Brexit deal (Financial Times, Jim Brunsden, Alex Barker and Mehreen Khan) outlines what is theoretically negotiable and what could happen if it gets thrown out. In terms of flexibility of the current deal as it stands, EU officials are unlikely to alter anything in the legally-binding 585-page withdrawal document given the hassle it took to craft it plus the fact any renegotiation would mean that there may not be enough time left before the March deadline. Germany’s chancellor Merkel implied that the UK would not be able to get better terms without conceding in other areas. The other part of our exit deal is the political declaration on future relations which, unlike the withdrawal document, would be easier to change because this is a non-binding statement rather than a legal treaty. This statement is a set of guidelines for trade talks during the transition period after Brexit occurs and could have wiggle room as long as the UK accepted EU rules. As for what would happen in the case of a “no-deal”, Brussels and national governments have been drawing up contingency plans for the financial markets and practical things like keeping the Channel tunnel open as interim measures until a more permanent arrangement can be made. It is also possible that we could get a deadline extension as long as the 27 EU member states agree, but this will largely depend on what Britain is asking for – if it’s just more time to hammer out a better deal then it will probably be a no-goer, whereas if it is asking for time for the UK to hold elections or even a second referendum, then it may possible. I suspect that many will be suffering from Brexit fatigue over the next few weeks, but we must follow it given its profound current and future impact.

No refuge for investors as 2018 rout sends stocks, bonds, oil lower (Wall Street Journal, Akane Otani and Michael Wursthorn) shows that the decline of stocks, bonds and commodities is putting global markets on course for one of their worst years ever – data from

BlackRock Inc shows that both global stocks and bonds could end the year lower than they started for the first time in at least 25 years. Major indexes in the US, China, Europe and South Korea have all fallen by at least 10% from recent highs, the crude oil price is well within bear market territory (i.e, off more than 20% from recent highs), emerging currencies have fallen versus the dollar and bitcoin fell to below $5,000 last week for the first time since October 2017. * SO WHAT? * This sell-off is clearly concerning – especially given its breadth. However, although some of the shine of US growth is likely to dull going into next year, it is still expected to be robust. I think that the interesting thing here would be to see how this could ultimately affect the rise and rise of tracker funds, although we’d need a proper bear market to see that. It seems to me that there is a rare confluence of unpredictable factors at work – US-China trade tensions, unusually negative pressure/focus on big sectors (tech in particular), Brexit, the uncertainty of Europe (given troubles with both Germany and Italy’s respective leadership), growing concerns about a China slowdown and a weakening oil price. The “good” news is that I would have thought that many of these issues will become clearer over the course of next year, but in the meantime uncertainty looks like prevailing.

Bitcoin investors endure their worst week in five years (The Times, James Dean and Harry Wilson) looks at the Bitcoin aspect of what I was talking about above and observes that, after several months of Bitcoin seeming to stabilise above the $6,000/dollar mark, it has fallen by over 33% in the last seven days. Bitcoin traders and analysts attributed last week’s decline to a “hard fork” in Bitcoin cash where the splitting-into-two of offshoot of bitcoin caused liquidity problems which then led to a sell-off in the wider market. There was also a major upswing in the demand for bitcoin futures, which let traders profit from a price fall, but perhaps the biggest negative of all is the imminent prospect of regulatory intervention. The US Department of Justice is currently investigating allegations of an artificial inflation of last year’s bitcoin price and the US Securities and Exchange Commission is continuing to investigate and fine companies that tried to benefit from last year’s boom without filling in the requisite paperwork. * SO WHAT? * It seems that whenever regulators take an interest in things to do with bitcoin, investors fear the worst and run! At the end of the day, I’m sure that many early investors will have made a ton of money, but “gurus” who jumped on the bandwagon and espoused the benefits of easy money are looking less clever now. Having said that, bitcoin is now reaching such low levels that I am sure traders will be monitoring the situation to either average down or find another entry point.

We take a look at initial indications of how Black Friday went on both sides of the Atlantic…

Store traffic falls again on Black Friday but not all news is bad (Wall Street Journal, Sarah Nassauer and Khadeeja Safdar) portrays a bit of a mixed bag as, on the one hand, footfall at US stores on Thanksgiving and Black Friday fell by between 5% and 9% versus the same days last year according to RetailNext as consumers continued to migrate online, but on the other, it seems that sales to lower-income consumers were on the rise as Mark Zandi, a Moody’s Analytics economist, observed that “it should be a banner Christmas for lower-income households, and the increase in their spending this holiday season should

outpace the growth in spending by middle and higher income households”.

Meanwhile, back home, Black Friday hurts UK retailers as footfall declines (Financial Times, Chris Giles) shows early data which suggests that the Black Friday weekend was not great as the rise in online business was not enough to offset poor sales in physical shops that saw a sharp drop in footfall. * SO WHAT? * This is only going to add to the pressure on UK retailers’ Christmas prospects. Shopping centres saw the worst decline in visitors and Barclaycard stated that, on Friday, the number of transactions went up by 10% versus the same day a year ago, but the transaction value actually went down by 12%. It’s not looking good for UK retailers at the moment, although now EVERYONE is expecting them to have a shocker. If ANY retailer manages to buck the consensus, their share prices will get a major boost as a result.

Accountants BDO and Moore Stephens look at getting together to take on the big boys and Loungers is a rare light on the high street…

BDO and Moore Stephens in plan to challenge top auditors (The Guardian) heralds merger talks between the two accountancy firms which, if successful, would create a fifth firm capable of advising FTSE 100 companies outside the usual “Big Four” (PwC, EY, Deloitte and KPMG), leapfrogging current #5 Grant Thornton in the process. Talks are believed to be at an advanced stage and Accountants merger ‘to be first of many’ (The Times, Deirdre Hipwell) contends that this is move is likely to result in further consolidation in the industry as everyone jockeys for position in taking on the giants. * SO WHAT? * The Big Four will probably be loving this as they are currently under a lot of pressure – even to the extent that their business should be broken up. They will no doubt point to this move as “proof” that the market is getting 

more competitive. However, Rachel Reeves, who is the chairwoman of the Commons business committee that is currently investigating the state of auditing said that “A shake-up of the Big Four market domination is long overdue, but there is a vast gulf between the size of the Big Four and the challenger firms, so while increasing competition is urgently necessary, it can only be one part of the solution. Wider reform will be needed to deliver improvements to audit quality”.

No lounging around amid flotation talk (The Times, Dominic Walsh) highlights a bright spot on the UK high street as café-bar operator Loungers (which owns the Lounge and Cosy Club brands) is due to unveil a strong trading update today, showing a 31.9% jump in revenues due to new store openings. Its robust performance in tricky market conditions is attracting the interest of several brokers looking for a fat flotation fee. * SO WHAT? * This is a very impressive performance for a sector that has seen the likes of Byron, Prezzo, Carluccio’s, Gourmet Burger Kitchen and Jamie’s Italian fall by the wayside and chief exec Nick Collins attributes the group’s success to the broad appeal of its all-day menu. Let’s hope it continues!

And finally, in other news…

I thought I’d leave you today with a bit of Gary Lineker. Not a sentence I’d ever thought I’d say, but if you fancy seeing whether your favourite footy pundit and Walkers’ crisps ambassador has “still got it”, then have a look at the “outtakes” of a recent BT Sport advert: https://tinyurl.com/y8ak2j6q.

1. In CAR-RELATED NEWS, Tesla cuts prices in China and Nissan sacks Ghosn
2. In TECH-RELATED NEWS, we see that Tencent and Alibaba’s investments are behind a big chunk of profits, that the US is telling everyone to avoid Huawei and that Apple is thinking about a dongle
3. In RETAIL-RELATED NEWS, Mitchells & Butlers sounds caution over staff and Dolce & Gabbana get into very hot water in China
4. In OTHER NEWS, I bring you the top 10 worst things (everyone loves a list). For more details, read on…

So Tesla gets fruity in China and Nissan votes Ghosn out…

Tesla rides out trade war by slashing prices in China (The Times, Tom Knowles) shows just how important China is to Tesla as it has cut its selling prices to absorb the cost of rising tariffs in the ongoing US-China trade war. It said that it would cut the prices of the Model S by 12% and the Model X by 26% to make them more affordable in a country that is aiming to be at the forefront of EV technology. * SO WHAT? * Tesla is clearly keen to have a seat at the table in China and is willing to do whatever it takes to get it. Given that the major chunk of future growth in the country is likely to come from lower-income customers who can’t afford a Tesla, maybe taking some short-term pain will be worth the long-term gain, especially as the market for electric vehicles is likely to become much

more crowded in future.

Nissan board unanimously votes to fire Ghosn as chair (The Guardian, Justin McCurry) spells out the inevitable as the drama continues to unfold about the fallen car god Carlos Ghosn. Renault appointees on the Nissan board also backed the decision, which might serve to mitigate the rift that could have worsened between France and Japan had they not done so. Nissan said that it would form a special committee that will seek advice on how to improve its management system and governance of directors’ pay in addition to another committee that will oversee Ghosn’s successor. Not a peep has been heard from Ghosn since his arrest. * SO WHAT? * Speculation continues that the Renault/Nissan/Mitsubishi alliance will be broken up as Ghosn has in the past been perceived to be the glue that held them all together. All sorts of dirty laundry is going to be aired during this investigation it seems – we’re only at the beginning! 

It turns out that Tencent and Alibaba’s investments are earning them tidy sums, the US is rattling cages by steering countries away from Huawei and Apple considers its dongle…

We’ve been treated to a lot of Singles’ Day chat and what’s going on with gaming these days from the Chinese tech behemoths, but Investments fuel a third of profits at Tencent and Alibaba (Financial Times, Louise Lucas) takes a look at another way they make money – investments. Both companies generated almost one third of their profits from their investment portfolios in the latest quarter, a big jump from previous years. Tencent made 7% of profits from investment in 2016 and then 22% in 2017, with Alibaba netting 14% in 2017 and 30% this year in investment profits. The gains have come in particularly welcome at Tencent as its gaming division is currently coming under fire. * SO WHAT? * Given how much cash these companies generate it seems eminently sensible for them to diversify their income streams via investment – and the bigger they get, the more opportunities they will see as their growing in-house M&A teams increasingly become the first port of call for companies looking for serious investors. One other major side benefit of investing in different (but largely related) businesses is that it gives them access to much broader data sets – information that they would otherwise not have so much access to, which in turn helps them in their core businesses. I suspect this trend of investment will continue for some time to come.

Washington asks allies to drop Huawei (Wall Street Journal, Stu Woo and Kate O’Keefe) is a move that is unlikely to help its trade negotiations with China as the US government is trying to persuade wireless and internet

providers in “friendly” countries not to use telecoms equipment from China’s Huawei for fear of cybersecurity risks. Apparently, it is also considering increasing financial aid for telco development in countries that commit to not using Chinese-made equipment. Huawei is the world’s second biggest smartphone maker behind Samsung and is the global leader in telecom equipment that includes things like the hardware that goes into cellular towers, internet networks and other communication infrastructure. * SO WHAT? * We are at a crucial moment now because wireless and internet providers around the world are gearing up for 5G that promises superfast connections that will facilitate self-driving cars and the Internet of Things where increasing numbers of devices “talk” to each other. US officials are concerned about the prospect of Chinese telecom equipment companies placing themselves in the chain in key positions that could give them access to sensitive information and the power to disable tech at will and are therefore keen to minimise the risks. Huawei has effectively been shut out of the US after a 2012 congressional report accused it of being a threat to national security but the company itself protests its independence from government and the fact that it is employee-owned. However, these efforts may prove to be too little too late as some allied countries already have Huawei embedded in their networks (including the UK). The Cold War tech war is well and truly on. This might be good for non-Chinese tech providers in the long term but it’s too early to tell yet.

Apple may launch dongle to give access to streaming service (Daily Telegraph, Matthew Field) tells us that Apple is considering releasing a “dongle” device that could plug directly into TVs (a la Amazon Fire Stick, for example) to give users more access to its streaming service. The company is currently developing its own TV streaming service with original shows and hopes to launch it in March 2019. * SO WHAT? * Apple is not known for being first to market, but I think in this case it faces a MASSIVE uphill battle given how far ahead everyone else is. Also, it seems to me that Apple is investing the least amount of money into its content versus its rivals, so I’m not confident that it will do all that well as things stand.

Mitchells & Butlers sounds a note of caution over staffing and Dolce & Gabbana faces Chinese ire…

Mitchells & Butlers cautions over staff as profit rises 69pc (Daily Telegraph, Oliver Gill) warned at its results meeting yesterday that Brexit could have “material impact” on labour costs and lead to a shortage of staff at its bars. Currently, it employs 44,000 people, 13% of whom are non-British EU nationals and the company pointed out that “Any restriction on the free movement of labour would have a material impact on both the cost of labour and access to talent”. * SO WHAT? * Most employers are facing the same problems but we’re not really going to know the effects of leaving Europe until Brexit actually happens and/or if we get definitive guidance on labour mobility. I suspect that retailers and those in the hospitality industry will suffer more than most, however.

Dolce & Gabbana goods pulled from Chinese ecommerce sites (Financial Times, Yuan Yang and Nian Liu) highlights a major disaster for the Italian fashion house as some of the country’s leading luxury e-commerce platforms are pulling the brand after the Italian company was accused of racism in its latest ad campaign. This was then followed by explicitly racist messages posted on D&G’s official Instagram account and that of the G in D&G, Stefano Gabbana. * SO WHAT? * The company said that it had been hacked, but the resulting backlash led to the company having to cancel a high-profile fashion show in Shanghai. This is serious stuff because China is the world’s largest luxury market – and one that Stefano Gabbana has identified as one of its most important for sales – and if this snowballs to the extent that offline shops and the government get involved it could be curtains for their prospects. Nasty. 

And finally, in other news…

Everyone loves a list, don’t they? Well I thought that this one was quite unusual: Top 10 worst of absolutely everything revealed – from foods and films to places (The Mirror, Sam Jordison https://tinyurl.com/ya9m8axx). One entry in the “Ten saddest places to visit” category sounded like quite a good place to get a selfie – a place called Sh!t, in Iran. Who knew?

1. In MACRO AND MARKETS NEWS, the Italians remain defiant after a second budget rejection and markets recover
2. In RETAIL NEWS, Ikea unveils plans to cut staff and increase small stores and Kingfisher gets more focused
3. In INDIVIDUAL COMPANY NEWS, Amazon has a breach, Foxconn looks at big cost cuts and Johnson Matthey coins it in from tighter emissions regulation
4. In OTHER NEWS, I bring you an unusual kitchen feature. For more details, read on…

So the Italians get shirty and the market rout takes a break…

Salvini ‘ready to confront EU leaders’ as Italy’s budget is rejected again (The Guardian, Angela Giuffrida) shows that things are about to get more interesting as Italy faces sanctions for not confirming to the EU’s fiscal rules after the amended draft budget following its original submission was rejected. Italy’s coalition government leaders have refused to change their deficit target of 2.4% of GDP. * SO WHAT? * This refusal to bow to Europe’s demands will lead to Italy having to pay an initial fine of 0.2% of GDP – or €8bn – which will just make their tricky debt situation even worse. If it continues to refuse to comply, the fine could rise to 0.7% of GDP. However, the fantastically-named 

Wolfango Piccoli, of research firm Teneo Intelligence pointed out that “Given the complexity of the overall procedure and the fact that political considerations might prevail ahead of the May 2019 European elections, Italy is not expected to face sanctions until late spring at the earliest, if they materialise at all”. So it seems that there’s plenty of time for more Euro-baiting from the Italians.

Technology, oil stocks help markets stabilise (Wall Street Journal, Georgi Kantchev and Michael Wursthorn) highlights a rebound for tech and other growth stocks, dabbing the brakes on the current stock market sell-off. Trading volumes were light in the day before Thanksgiving and oil stocks also enjoyed a recovery on a higher oil price and some positive earnings reports. One of the best performers of the S&P 500 yesterday was Foot Locker which notched up a healthy 15% share price rise on the announcement of strong same-store sales.

Ikea rings in the changes and Kingfisher decides to focus…

Ikea cuts office jobs to focus on smaller stores (The Times, Deirdre Hipwell) shows that the Swedish furniture retailer is getting serious about its future transformation as it announced that it would be cutting over 7,000 jobs worldwide as it evolves its business model to take into account changing customer behaviour and preferences. Ikea’s parent, Ingka Group, said that it wants to invest in its online business as well as its traditional out-of-town stores and the smaller ones in town. It believes that this transformation could, over the next two years, actually result in the creation of 11,500 jobs at its smaller outlets. To put this all into context, Ikea employs 160,000 staff worldwide and has 422 stores (of which 21 are in Britain) in over 50 markets. * SO WHAT? * This is all in line with the company’s desire to reinvent itself and sounds like a decent enough direction. I think that Ikea’s timing could be quite good if it is looking to take on smaller in-town stores in the UK as a lot of retail space is getting freed-up at the moment. I have said before that I think Ikea is one of the only retailers I can think of who could take up big city-

-centre retail space given that furniture shops tend to need a lot of room. They’d probably be able to get a decent price as well given who they are (i.e. they’d attract a lot of foot traffic) and landlords’ current situation. Everyone’s a winner!

In Kingfisher to exit smaller markets as French woe deepens (Financial Times, Jonathan Eley) we see that Kingfisher has decided to exit peripheral markets such as Russia, Portugal and Spain and concentrate on fixing its troubled French operations. Kingfisher has been a tricky place to be what with a load of senior management departures and widespread scepticism that the current chief exec, Veronique Laury, can deliver the £500m of additional profit she promised back in 2016 as part of her streamlining of the company. * SO WHAT? * Although the French operations have been troublesome, the UK has been doing OK. B&Q is still the market leader, but has benefited somewhat by the travails at rival Homebase which is closing 42 stores after being sold for £1. Screwfix, which concentrates more on trade, has been doing rather better – so much so that there is speculation that it could be spun off but the slimmer the overall operation gets the harder that will be to execute. I think that for B&Q and Screwfix to “get back on it”, the housing market needs to get out of the current rut it’s in – but I don’t expect that to happen until we get more clarity (!) on Brexit. 

Amazon has a data breach, Foxconn cuts on Apple slowdown and Johnson Matthey cleans up…

Amazon admits data breach just before Black Friday sales (Daily Telegraph, Hannah Boland) heralds a bit of an embarrassing revelation in the run-up to Black Friday as it had a data leak where names and e-mail addresses were disclosed due to a technical error on its website as opposed to it being hacked. The issue has been fixed and customers have been informed. * SO WHAT? * If Amazon’s explanation of the cause of the breach is true, then there’s probably not too much to worry about. The company did not reveal when the incident happened or how many people were affected, but it must have been pretty recent as GDPR requires data breaches to be reported to users within 72 hours of discovery.

Apple iPhone maker Foxconn to cut costs and axe thousands (Daily Telegraph, Matthew Field) adds to the worrying trend for Apple-watchers as Foxconn (the Taiwanese behemoth that assembles iPhones) announced that it will cut billions of pounds in costs and thousands of workers as the global smartphone slowdown continues.

The company employs a whopping 800,000 people across Taiwan and China but said that it will cut the numbers of non-technical staff by 10%. * SO WHAT? * This is just the latest big of bad news to come from an Apple supplier in the last few weeks as the reality of a maturing smartphone market bites. Given that Apple is now refusing to disclose unit sales of its devices I suspect that the spotlight will be well and truly on suppliers like Foxconn as indicators of Apple’s fortunes.

Johnson Matthey cleans up as carmakers target emissions (Daily Telegraph, Alan Tovey) highlights the 13% share price spike in the company’s shares as the maker of catalytic converters showed a rise in revenue and profits due to strong demand for the devices that clean vehicle exhaust emissions. The company’s clean air division makes up 65% of the company’s sales and this uptick is particularly impressive given concerns about a fall in demand for catalytic converters due to the general slowdown in car sales. Johnson Matthey is also preparing for the migration to electric vehicles with its own battery business that is getting closer to launching its first products. * SO WHAT? * This all sounds great and rising sales for its battery materials shows that it is moving with the times, whilst still keeping one foot planted firmly in the present.

And finally, in other news…

Are you bored of conventional kitchen layouts? Maybe this could be a bit of a conversation starter for you: A Beijing apartment has a totally transparent bathroom in its kitchen, and it’s the stuff of nightmares (MSN, Jacob Shamsian https://tinyurl.com/yb98pnjs). At least you will be able to carry on conversations that you started in the kitchen…

1. In MARKETS, OIL AND CRYPTO NEWS, the tech rout continues, oil goes weaker and crypto falls attract attention
2. In RETAIL NEWS, US retailers weaken going into Black Friday, Gap eyes store closures and AO World suffers
3. In INDIVIDUAL COMPANY NEWS, Samsung pushes Bixby, Ghosn continues to cause panic and the Wagamama deal continues to face opposition
4. In OTHER NEWS, I bring you a startling invention that’ll stop you nodding off. For more details, read on…

So markets continue to crater, oil prices weaken further and crypto faces scrutiny…

Tech giants in $1trillion wipeout as rout widens (Daily Telegraph, James Titcomb) highlights the phenomenon of FAANGs losing their teeth, leaving the tech-heavy Nasdaq Composite at its lowest point for seven months. David Older, head of equities at fund management firm Carmignac, observed that “Software has been the most predictable growth story in the economy. [Now] you have this fear in the market of slowing growth trajectory. People are looking forward to 2019 and saying expectations are too high”. * SO WHAT? * When momentum stocks are going well, no-one really bothers to look too closely. However, when they start to show signs of a wobble, everyone starts wheeling out the negative arguments and saying things like “I told you so” (although they often fail to mention that their negative outlook has cost them a lot of upside). It’s true that global growth is slowing, trade wars are creating uncertainty, demand for some hardware products is maturing and that there are some serious issues to be address regarding data protection BUT these companies are supreme in their field, have fingers in many lucrative and potentially lucrative pies (e.g. cloud hosting, software services etc.) and are making money. Some of them also have very little in the way of comparable competition, so I think that ultimately, they remain fundamentally good companies despite the doomsayers. If you wanted to put a positive spin on this, the environment could change pretty quickly if global growth got back on track due to a trade agreement, new tech in mobile phones spurred an upswing in smartphone unit sales (already on the cards with that bendy phone I keep banging on about) and social media firms agreed to adopt GDPR or something similar to address privacy concerns. Until then, I suspect that there will be further volatility. Mind you, if someone 

like Warren Buffett waded in with his wads of cash saying that the FAANGs were oversold, this could also reverse their fortunes.

Oil prices fall further after Trump’s Saudi Arabia remarks (Wall Street Journal, Dan Molinski and Stephanie Yang) highlights US oil prices reaching their lowest levels for over a year following President Trump’s remarks supporting the Saudi Arabian government thus: “After the United States, Saudi Arabia is the largest oil-producing nation in the world. They have worked closely with us and have been very responsive to my requests to keeping oil prices at reasonable levels – so important for the world”. Some observers have interpreted this as being an attempt to dissuade Saudi Arabia from recommending production cuts at the next Opec meeting at the beginning of December.

Analysts warn of ‘bloodbath’ as value of cryptocurrencies falls (The Guardian, Julia Kollewe) highlights the 30% tumble in the value of Bitcoin over the past week to a level it hasn’t seen since October last year. This could be partly due to an overflow of negative sentiment following the US Securities and Exchange Commission’s imposition of civil penalties on two cryptocurrency startups (Airfox and Paragon Coin) for conducting unregistered cryptocurrency tokens last year. It was also said to be due, according to Pressure builds on regulators over cryptocurrency irregularities (Financial Times, Don Weinland, Emma Dunkley and Federica Cocco), to a change in protocols used by bitcoin cash last week that caused confusion and spread to the “original” bitcoin. * SO WHAT? * It’s quite interesting that this weakness should happen now because recent developments would suggest that cryptocurrencies are edging closer to the mainstream what with Fidelity Investments announcing last month that it was launching a new company for institutional clients to enable them to trade and store cryptocurrency assets and central banks increasingly talking about launching their own digital currencies as cash is being used less and less.

US retailers are having a wobble ahead of Black Friday, Gap considers store closures and AO World suffers…

We are used to seeing doom and gloom on our own high streets but US retailers shed $50bn in market value (Financial Times, Alistair Gray, Pan Kwan Yuk and Mamta Badkar) shows that it’s not all rosy stateside either as gloom from retailers such as Gap, L Brands (owner of Victoria’s Secret) and bookshop chain Barnes & Noble contributed to a 3.4% fall in the S&P Retail Index yesterday. Target, Kohl’s and Ross Stores also fell sharply despite being quite bullish about the upcoming holiday season. Only electronic retailer Best Buy managed a rise in its share price as it continues to compete successfully with Amazon. News of Gap looking to close hundreds of weaker stores (Wall Street Journal, Khadeeja Safdar) did not instil investors with much confidence. * SO WHAT? * Rising wages (because of a tight labour market), narrower 

margins (in an attempt to stay competitive with e-tailers such as Amazon) and higher freight costs are hitting the retail sector and there are worries that potentially rising inventories could be a precursor to retailers having to sell off too much stock at a discount in the coming months.

Meanwhile, back in the UK, AO World’s ‘challenges’ after six-month loss (The Times, Harry Wilson) heralds a disappointing time for the online electrical goods company in its main markets of the UK and Germany with analysts at Jefferies saying that “The pace of growth has slowed significantly in the second quarter, impacted by a tough macro environment that is unlikely to change whilst Brexit concerns dominate and competitors remain aggressive”. The shares fell by over 5% yesterday, but they are down by almost a third over the last six months. The company tried to find a positive needle in a negative haystack by pointing out that it has managed to maintain its market share – but keeping share of a shrinking market ain’t great is it?? * SO WHAT? * It seems that AO World is suffering like most of its competitors and that it, perhaps more than some of the others, really needs a good Black Friday and Christmas period to drag it out of its current rut.

Samsung promotes Bixby, Ghosn continues to create waves and the Wagamama deal continues to attract criticism…

In other news bits today, Samsung doubles down on virtual assistant in growth push (Financial Times, Song Jung-a) shows that the consumer electronics giant is going to roll out Bixby, its voice assistant that is currently only on its high end phones, to all of its products by 2020. * SO WHAT? * This is part of its continued push for supremacy in the Internet of Things. Bixby has been slow in terms of functionality versus the more seasoned Siri (Apple), Assistant (Google), Alexa (Amazon) and Cortana (Microsoft) but Samsung is keen to broaden its appeal by introducing more foreign languages as it is currently only available in US English, Mandarin and Korean. The company is also going to release a software developer kit to help app makers use Bixby as an interface for their services. Better late than never, I guess!

Fall of Carlos Ghosn marks end of an era (The Times, Richard Lloyd Parry) is just one of many such stories on the downfall of the man who rescued Nissan in the late 90s and held together Renault, Nissan and Mitsubishi. Carlos Ghosn was planning Nissan-Renault merger before arrest (Financial Times, Peter Campbell, Kana Inagaki and Leo Lewis) suggests elements of a stitch-up, but I guess this drama will continue to play out. * SO WHAT? * Ghosn has been such a key figure in the world of car manufacturing that everyone is still reeling in shock. This would be like the Queen suddenly announcing that she had an ongoing crack cocaine habit. Expect to see tons more comment on this for a while to come…

In Investors warn on Restaurant Group takeover of Wagamama (Financial Times, Jonathan Eley) we see that a number of major investors in Restaurant Group are thinking about voting against the company’s proposed purchase of Wagamama due to the toppy price and the rather tricky economic backdrop. * SO WHAT? * The vote will go ahead on November 28th and if the deal doesn’t pass the vote, Restaurant Group will have to pay a £5.98m break fee to Wagamama’s current owners.

And finally, in other news…

Do you ever find yourself falling asleep at inopportune moments? Well then maybe you need this in your life: Body part-shocking device is here to stop Japan from nodding off at the wheel, work or school (SoraNews24, Katy Kelly, https://tinyurl.com/ybx7742s). There’s nothing quite like getting an electric shock through your earlobes to keep you alert!!! A practical stocking-filler for Christmas perhaps?

1. In MACROECONOMIC AND MARKETS NEWS, we see the tough situation facing investors at the moment as markets fall
2. In TECH NEWS, Tencent ventures outside China to avoid the freeze, Xiaomi turns a profit and Apple cuts production
3. In MEDIA NEWS, traditional TV continues its terminal decline and the Disney/Fox deal gets Chinese approval
4. In INDIVIDUAL COMPANY NEWS, Renault-Nissan’s Carlos Ghosn faces the music
5. In OTHER NEWS, I bring you a Christmas puzzle. For more details, read on…

So investors are facing tough times as markets fall…

Turmoil everywhere for investors…and it’s not about to get better (Daily Telegraph, Tom Rees) does a decent job of summarising the main reasons behind current investor jitters that have sent the markets tumbling. There’s the US-China-rest of the World trade war, a slowing-down of global growth and a perceived weakening of demand – particularly from China – that has depressed commodity prices, while currency crises in Argentina and Turkey have sown doubt in emerging markets. Interest rates are trending up (well they are in the US and the UK – the ECB still has European interest rates stuck at zero) and fiscal stimulus is expected to wear off going into next year. If you couple that with a resurgence in Europe for populist parties

that threaten the stability of the eurozone (e.g. Italy’s populist coalition government rejecting EU demands related to its budget) and throw in the uncertainty of Brexit for good measure, jitters seem perfectly understandable! 2019 looks like it could be a rocky ride.

More specifically, US markets slump as tech stocks drop and trade war fears return (The Guardian, Dominic Rushe) highlights the tech sector-led downfall in markets as Facebook fell by 5.7%, Apple 4% and Amazon 5% as FAANG stocks are all in bear market territory as they have dropped by over 20% since recent highs. Indexes had gained a bit last week on hopes that the US-China talks were going in the right direction but then that all evaporated when the two sides clashed at the Asia-Pacific Economic Cooperation summit over the weekend where no-one could agree on a joint declaration on world trade – the first time this has happened for 30 years. Talks are continuing between the US and China ahead of the G20 meeting planned for later on this month.

In tech news, Tencent tries to get around the China freeze, Xiaomi turns a profit and Apple cuts iPhone production…

Chinese gaming and media giant Tencent has had its wings seriously clipped by the Chinese government recently, so Tencent looks to counter China freeze with Sea deal (Financial Times, Louise Lucas) heralds a welcome deal for the company with the Singapore-based Sea to publish and distribute its online games in south-east Asia. Sea’s digital entertainment arm, called Garena, now has the right of first refusal to sell Tencent’s mobile and PC games in Indonesia, Taiwan, Thailand, the Philippines, Malaysia and Singapore for five years. Sea is 34% owned by Tencent and already distributes some of its games – including Arena of Valor and League of Legends. * SO WHAT? * This will go some way to mitigate the logjam caused by the Chinese government that has not approved the commercial licences of any new games since March, leaving around 7,000 games in limbo as publishers can still launch but are unable, crucially, to make money from them. The government has had a crackdown on online games as part of a drive to tackle shortsightedness in children as well as “gaming addiction” and the current freeze in new titles is expected to last until next year. The freeze has effectively chopped 40% off Tencent’s share price since its January peak.

Xiaomi earnings boosted by higher smartphone sales (Wall Street Journal, Dan Strumpf) highlights good news for device maker Xiaomi as it announced a third quarter profit after a difficult few months. The company’s share price has been dragged down by the wider tech sell-off and is now 16% below the price it floated at in its Hong Kong