Category: Uncategorized

1. In CARS NEWS, Nissan makes a shock decision and Ford outlines its January performance
2. In RETAIL NEWS, Ikea tries furniture leasing and HMV gets another bidder
3. In INDIVIDUAL COMPANY NEWS, we take a closer look at Nintendo and a changing Maersk
4. In OTHER NEWS, I bring you the Peppa Pig effect and a dog dryer. For more details, read on…

So Nissan goes for Japan with the X-Trail and Ford looks forward…

In Nissan blames diesel tax for U-turn (Daily Telegraph, Alan Tovey) we see that the Japanese car manufacturer is using new diesel regulation and weakening sales as an excuse for deciding to make its X-Trail car in Japan rather than in the Sunderland factory which makes the Qashqai, Juke and Leaf. This came as a shock given that the company had pledged to make the X-Trail in the UK back in 2016 having apparently been reassured by the government over Brexit. * SO WHAT? * Bad news for Sunderland, but you can’t really blame Nissan given all of the uncertainty and weaker car sales generally. Unfortunately, this could be a precedent that other manufacturers in this country decide to follow.

Ford starts key year with strong January (Wall Street Journal, Mike Colias) looks at the positives for Ford as it announced a 7% increase in January US sales as chief exec Jim Hackett outlined his turnaround plan. He is having to address concerns over the company’s credit rating and its ability to pay the current dividend by cutting costs in the ailing overseas business and boosting domestic operations by churning out more high-margin trucks and SUVs. * SO WHAT? * The measures have yet to have the desired effect as operating profit for 2018 fell by 27% and if they don’t work soon, there is a danger that the company’s credit rating will fall to junk status with Moody’s saying that it is “critical that Ford’s fitness program show evidence of progress in 2019”. If things continue to drag, a rating downgrade will increase Ford’s cost of borrowing (because it is perceived as being “riskier”) at a time where the company is trying to keep a lid on expenses. Hackett sent an e-mail to employees last week describing the results as mediocre and that they should put 2018 behind them to focus on 2019 goals.

Ikea looks at trying something new and HMV gets another bidder…

Ikea to trial furniture leasing in business overhaul (Financial Times, Richard Milne) heralds a rather radical departure for the flat-pack king as it is about to trial furniture leasing in Switzerland later this month. The company is experimenting with new ways for customers to own its wares, according to Inter Ikea chief exec Torbjorn Loof, who explained in an interview with the Financial Times that “We will work together with partners so you can actually lease your furniture. When that leasing period is over, you hand it back and you might lease something else”. He added that “…instead of throwing those away, we refurbish them a little and we could sell them, prolonging the lifecycle of the products”. * SO WHAT? * What an interesting company! The fact that an industry leader really is doing something substantial to ensure its longevity is to be applauded. These tests are moving towards”scalable subscription services” for different types of furniture where you could effectively rent your kitchen or office furniture as part of a circular business model where it not only sells 

products but subsequently reuses them to make new items. The company is also trying to reduce its climate footprint by 15% in absolute terms and is designing products that are more easily recyclable as well as looking at launching a spare parts business for customers to buy replacement components for furniture that they no longer stock. The company really is experimenting with a lot of new initiatives at the same time so I am sure that they will come up with a very exciting permanent and widespread offering.

Canadian may join Ashley in bidding to buy troubled HMV (The Guardian, Rupert Jones) signals an interesting development as Doug Putman, who runs fast-growing Canadian record retailer Sunrise Records and who was the one who bought about 70 HMV sites in Canada after the chain went bust there in 2017, has thrown his hat in the ring along with Mike Ashley to buy HMV. * SO WHAT? * Putman’s previous form with HMV could make his bid an interesting alternative to Sports Direct’s Ashley as he has shown success in growing Sunrise Records from only five stores in 2014 to 80 currently, benefiting from a resurgence in the popularity of vinyl. There’s no word on how many of HMV’s current 125 outlets (including nine Fopp stores) will be saved, but clearly talks aren’t quite at that stage yet. This looks like it could get interesting.

Nintendo gets a buffeting and shipping giant Maersk gets closer to a break-up…

Does Nintendo deserve a higher valuation? (Financial Times, Leo Lewis) takes a look at the Japanese gaming giant after its share price suffered a 9.2% one-day kicking when it announced that it would cut console sales forecasts. This happened despite a strong performance in the 2018 holiday season, three massive hit titles and third quarter results that showed a 36% uplift in operating profits. * SO WHAT? * Naysayers will cite historic wisdom that console makers’ profits are highly volatile and are dependent on hardware sales (i.e. the more consoles that are sold, the more games will be sold – meaning that if console sales are weak, software sales will also be weak). Others say that this traditional boom-bust cycle is becoming less volatile as online gaming extends console lifespans (look at the continued success of Sony’s PS4 which is now in the seventh year of its cycle and still sold 5.6m units in the 2018 holiday season alone) and supplies alternative revenue streams to each software title. It seems that the naysayers are holding sway for now as Nintendo’s 

share price has fallen by 30% since February 2018, but Nintendo supporters believe its fortunes could turn up if it brings out a no-frills version of the Switch that lowers the effective entry price, if investors start to value the Switch as a handheld device – like its very popular 3DS machine – rather than a fixed console, or if it cut the price of a Switch to increase volumes.

Shipping giant Maersk steams ahead with break-up plans (Financial Times, Richard Milne) looks at the current state of affairs at the world’s biggest container shipping line which has been shedding businesses left, right and centre in a bid to address its massive debts and focus on more profitable businesses. It has, so far, cut its oil and gas tankers business and plans to spin off its drilling rig unit this year as part of plans to concentrate on shipping, port terminals and logistics (the latter with a view to becoming the UPS or FedEx of containers). * SO WHAT? * Although it’s doing all the right things in slimming itself down from a conglomerate with eight divisions down to one, the company is also fighting against a weakening credit rating that could make future acquisitions more difficult while other deals are going on among its competitors. The container shipping business, which is still central to Maersk, continues to face an uncertain outlook against a backdrop of US-China trade tensions choking world trade.

And finally, in other news…

I thought I’d leave you today with ‘Peppa Pig effect’ which has hit toddlers leaves mums mortified (The Mirror, Robyn Darbyshire https://tinyurl.com/ycwhr8t4) which tells us that kids around the world are picking up “posh” accents and snorting at the end of sentences as a result of watching too much of the TV show. Presumably they’re also starting to think that daddies are a bit thick and useless (not that I’m bitter or anything ????).

AND FINALLY, I thought I’d sign off with news of a gadget I could have done with yesterday when I shampooed the dog in the bath (something that she really hates and that can often become a rather messy affair!): Bizarre device claims to dry your dog in minutes – here’s where you can buy it (The Mirror, Courtney Pochin https://tinyurl.com/ya4b7b5h). It looks like some kind of canine sumo-wrestler costume!

1. In MACRO AND COMMODITIES NEWS, a Trump/Xi summit seems to be on the cards, the Eurozone slows, Italy falls into recession and central banks buy gold
2. In TECH NEWS, Samsung suffers, Facebook consolidates and Nintendo’s profits soar
3. In RETAIL NEWS, Amazon announces record profits and a debate starts on UK business rates
4. In OTHER NEWS, I bring you some interesting earrings and a cute puppy. For more details, read on…

So another US/China summit looks likely, the Eurozone slows right down, Italy falls into recession and central banks buy gold…

Trump floats fresh Xi summit to settle trade war (Financial Times, James Politi) heralds the latest development on the US/China trade wars after two days of negotiations in Washington between Robert Lighthizer, US trade representative, and Liu He, China’s vice-premier appeared to go well, although no-one gave any specifics. In Trump gives upbeat assessment of trade talks with China (Wall Street Journal, Lingling Wei, Bob Davis and Michael C. Bender) the President even bigs up the next stage by saying “This isn’t going to be a small deal with China…This is either going to be a big deal or it’s going to be a deal that we’ll just postpone for a while” but if neither side can come to an agreement by March 1st, tariffs on $200bn of Chinese goods will rise from 10% to 25%. * SO WHAT? * The stage is set for Trump the Statesman to make a dramatic – and potentially defining – deal with the Chinese on trade. He wants to be at the centre of it all and if the past has proved anything, no deal is worth the paper it’s written on until Donnie T gets properly involved. If he manages to negotiate something decent, he will increase his chances of a second term in office exponentially IMHO.

Meanwhile, over in Europe, Eurozone slowdown fears mount as growth fails to recover in 2018 (Financial Times, Claire Jones) follows on from what I said on Tuesday as figures from Eurostat, the European Commission’s statistics bureau show that the Eurozone economy grew just 0.2% between the third and fourth quarters in 2018 –

the lowest growth rate for more than four years and Italy back in recession after economy shrinks by 0.2% (The Guardian, Phillip Inman and Graeme Wearden) highlights Italy’s official fall into recession (defined as showing falling GDP growth for two consecutive quarters), making things even harder for the country’s shaky centre-right coalition to put right. As James Athey of Aberdeen Standard Investments put it, “The growth forecasts on which the budget was based have already been blown out of the water and eurozone growth continues to weaken. Italy is going to have to face up to some real problems”. * SO WHAT? * Italy continues to be a basket case living in its own fantasy land with its leadership playing political games, Europe is in a right state and I would NOT be very surprised to see the ECB backtracking on plans to increase interest rates above zero to paper over the cracks. The Eurozone’s top three economies (Germany, France and Italy) are having an absolute nightmare at the moment, so I don’t expect the situation to improve any time soon. Add Brexit into the mix and you’ve got complete chaos!

In Gold stocks up 74pc as central banks build their reserves (Daily Telegraph, Helen Chandler-Wilde) we see that central banks bought more gold last year than they have done since 1971 – and the only time that gold stocks have been higher was in 1967! They have bought for various reasons like hedging against volatile currencies and reducing counterparty risk between banks. * SO WHAT? * Gold is seen to be a safe haven in uncertain times because of its intrinsic value and so concerns about Brexit, currency weakness and wavering stock markets – among other things – have fuelled purchases. The gold price is often seen as a contrary indicator of economic sentiment – i.e. a rising price equates to weakening sentiment and vice versa.

Samsung’s profits weaken, Facebook consolidates its apps and Nintendo’s profits soar…

Samsung Electronics warns of weak earnings after 30% drop (Financial Times, Song Jung-a) heralds tough times for the consumer electronics giant as it warned of weaker earnings in 2019 following the announcement of a 30% drop in fourth quarter net profit due to weakening chip prices and smartphone sales. The company said that it expected weakness in chip prices to continue for the first half as tech companies cut budgets and the US/China trade war continues. It did, however, say that the outlook would improve in the second half on a recovery in demand for chips and premium displays. Samsung will pour more money into Bixby, its voice assistant, and plans to release a foldable phone this year that it hopes will turn things around on the handset front. * SO WHAT? * Tough times, but I think they have been well-flagged by the company. If Trump and Xi get their act together on trade negotiations, this company’s share price is among the many that could shoot right up as an agreement could unlock delayed investment and turn consumer sentiment.

Facebook seeks to knit Instagram and WhatsApp with core app (Financial Times, Hannah Murphy) follows on from what I said yesterday about Facebook’s results and sounds like a perfectly logical progression as it aims to integrate Instagram (which it bought in 2012) and WhatsApp (which it bought in 2014) by sharing more tech and resources.

“Whatsabook” is, however, garnering criticism from those who believe that it could invade privacy by allowing Facebook to cross-reference user information on the different apps. Zuckerberg tried to head off such criticism by saying that he wanted the integrated WhatsApp, Instagram and Facebook Messenger to become one encrypted system by 2020 and that encryption was “the direction we should be going in”. * SO WHAT? * From a company point of view, I think that this makes absolute sense and will make Facebook an even more integral part of our lives as it could reduce the need for people to go outside the Facebook “walled-garden”, meaning that users will spend more time on it which in turn will no doubt lead to even greater ad revenue potential. However, end-to-end encryption could cause problems with law enforcement and concerns about data privacy in a large-scale app integration will also be very real given Facebook’s conduct to date. The other thing is that barriers to entry for any new start-up in the space will be prohibitively high and will stifle hope of any kind of competition. All of this just goes to show how integral companies like Facebook have become in our daily lives. IMHO, as long as Facebook continues to add users at a decent clip, ad revenues will continue to roll in and it will just get bigger and bigger. Yes, there will be bumps in the road but I just think that Facebook is an entity that is too powerful to stop.

Nintendo profits soar despite revision of Switch console sales (Daily Telegraph, Tom Hoggins) highlights a strong performance by the games giant as its operating profits were up by an impressive 40.6% and net sales were up by 16.4% on 2017 as Switch console sales had a strong third quarter. It did, however, lower its sales forecasts for the console from 20m to 17m for the financial year, which is a mild concern.

Amazon announces a strong performance but a weaker outlook and UK business rates are up for discussion…

Amazon notches third record profit in a row (Wall Street Journal, Laura Stevens) shows that the e-tailer put in another great performance (profits increased by 63% versus the same quarter a year earlier) but added that uncertainty in the Indian market due to incoming government restrictions and a potential increase in spending on infrastructure could cut the winning streak short. * SO WHAT? * The restrictions in India will make growth in that market more difficult and spending on infrastructure was inevitable after a pause in 2018, but there are still plenty of areas where Amazon is continuing to see strong growth – sales for Amazon Web Services were up by 45% for instance, and it is also seeing a decent uptick in the digital advertising business, so there’s still plenty to be optimistic about.

I thought I’d mention Business rates inquiry amid fears for shops (Daily Telegraph, Ashley Armstrong) because MPs are about to embark on an inquiry that could have big repercussions on UK retailers. Traditional retailers have been saying that online retailers have an unfair advantage in that they don’t have to pay the same taxes so it is impossible to compete on price and that this is a major factor in the current parlous state of the high street. * SO WHAT? * It’s difficult to say at this stage whether this will really save the high street or whether it’ll just delay its demise. As I keep saying, I believe that retailers need to invest in customer experience in order to tempt customers to part with their cash in a shop rather than online. Having said that, it seems to me that business rates create an unlevel playing field between offline and online retailers and so if this balance can somehow be redressed it would at least give some retailers a fighting chance of survival.

And finally, in other news…

I thought I’d leave you today with a very enterprising Twitter user in A Twitter user cleverly turned their AirPods into earings so they’d never lose them (Insider, Daniel Boan https://tinyurl.com/yaa9recf) and a super-cute story about a little doggy in Bet she was dog-tired! Marathon competitor runs 19 miles carrying a puppy after finding it in the road during her race (Daily Mail, Danyal Hussain https://tinyurl.com/y8ng38fo).

Have a great weekend!

1. In MACROECONOMIC NEWS, the Fed keeps rates on hold
2. In CAR NEWS, VW develops its EV platform, Ford’s China JV underperforms, Tesla announces profits and UK car production hits new lows
3. In CONSUMER/RETAIL NEWS, UK consumer borrowing falls, Alibaba revenue growth slows, McDonald’s benefits from coffee and burgers and Caffe Nero makes an acquisition
4. In TECH NEWS, Facebook reports a huge profit boost
5. In OTHER NEWS, I bring you a Game of Thrones study. For more details, read on…

So the Fed leaves rates on hold…

Fed keeps US rate on hold amid fears of slowdown (Daily Telegraph, Tim Wallace) is a headline that does what it says on the tin. Chairman of the Federal Reserve Jerome Powell seems to have changed tack somewhat since the end of last year when he was hinting at more interest rate increases for 2019 and, in true verbose Fed style, said that “In light of global economic developments and muted inflation pressures, the committee will be patient as it determines what future adjustments to the large target range for the federal funds rate may be appropriate to

support these outcomes”. Why use a few word when many will do, eh ????? * SO WHAT? * This is an interesting development that will calm nervy markets and Trump will no doubt take credit somehow for “controlling” the wayward Jay Powell in his previous enthusiasm for raising rates (although the Fed Chair is supposed to be independent) as he specifically attacked Powell’s original stance last year. America has been able to raise rates because of the strength of its economy, but other countries have been quite some way behind on this (the Eurozone is still on 0%!). In theory, this pause may give others time to catch up, but with a global growth slowdown on the cards I would argue that raising rates in many countries is not really going to be an option.

VW continues to develop its new generation EV platform, Ford’s China JV hits a sales drop-off, Tesla announces decent results and the UK sees record lows for car production…

Volkswagen’s plan to kill off Tesla (Financial Times, Patrick McGee) is a really interesting article that takes a look at the company’s MEB platform that will become the company’s main building block for 50 different models by 2025. It will be used for the majority of its electric vehicles and will have a wide-ranging impact on the whole organisation in addition to the supply chain and quality. VW is throwing €30bn at electric car development over the next five years and the key thing about the MEB “skateboard chassis” is that it is designed specifically for EVs and is not one that was adapted from the design of a traditionally-powered car platform to shoe-horn in the batteries. * SO WHAT? * VW believes in this platform so much that it thinks it could become the industry standard and it is in talks with many other carmakers – including its new BFF Ford – to supply it to them. This could be HUGE news because, until now, car producers have tried to differentiate their offering by making proprietary powertrains, but trends are changing such that batteries are likely to become commoditised with the differentiation coming elsewhere in things like electronic and infotainment features. As Chris Borroni-Bird, an ex-GM and Waymo exec, put it, “If you don’t have to spend so much money on architecture [the chassis], you could refocus your efforts on electronics, user experiences, and autonomous systems”. There are some huge potential dangers here as well, though, because if the electric car remains a tiny niche product VW will have to wear billions in losses and if there are glitches the number of car recalls could be massive. FWIW, I believe that there will be a lot more collaboration (and mergers) between manufacturers than there used to be as they pool resources to develop a new generation of vehicles. Still, the development of decent charging networks and more efficient batteries will be key for EVs to go mainstream IMHO.

Ford’s China joint venture suffers 54% fall in sales (Financial Times, Tom Hancock) is a rather dramatic headline that is yet further evidence of the slowdown in

vehicle sales in China as Chongqing Changan Automobile announced a sales drop of 54% – with unit sales at their lowest level since 2012. If you include sales of its own brands, sales actually fell by an eye-watering 93% last year. * SO WHAT? * Ford has suffered more than other manufacturers on its China exposure because it was relatively late to the party (and thus didn’t benefit as much from the boom times). It launched a new JV in 2017 with Anhui Zotye Automobile in a bid to boost its EV lineup as it plans to launch 15EVs in China by 2025 but in the meantime Changan has suffered by a sudden downturn in SUV sales due to a combination of more appealing offerings from its competitors and the evaporation of a tax break policy. Ford really is getting a kicking at the moment. Doing things like reviewing its JVs and cutting costs may be short-ish term fixes, but they don’t really solve the underlying problem of falling sales.

Tesla looks to keep profits rolling (Wall Street Journal, Tim Higgins) highlights the company’s announcement of a £140m profit for the fourth quarter and founder Elon Musk went on to say that his company is now targeting a profit in every quarter. This is going to get increasingly difficult to do as Tesla plans to reduce its car prices (to boost demand) just as the federal tax credit for EVs starts to tail off. Musk reckons that he needs to sell between 360,000 and 400,000 cars this year in order to remain profitable. * SO WHAT? * Musk seems to be doing all the right things at the moment to ensure survival as he is cutting costs, selling more vehicles and investing in production capacity. The Model 3 is clearly going to be the main driver for the company at this stage, but he’s also got another model – the Model Y compact SUV – waiting in the wings for mass-production in 2020 that shares 75% of its components with the Model 3, meaning that production costs will be relatively low. Still, I think it’s going to be a question of timing – will he be able to get the company to survive independently for long enough to be successful or will he have to merge with another manufacturer?

The downbeat trend continues in Biggest brake on car production since 2007 (The Times, Robert Lea) as the latest data from the Society of Motor Manufacturers and Traders shows that car production in the UK had its worst year-on-year fall since 2007 at a time when investment in the UK automotive industry has also been drying up. Britain is the 11th biggest car manufacturer in the world and the fourth biggest in Europe after Germany, Spain and France with Jaguar Land Rover, Nissan and Mini making up 75% of production. * SO WHAT? * Not great, but this is more evidence of the general slowdown in automotive sales.

UK consumer borrowing falls, Alibaba shows slowing revenues, McDonald’s perks up on a diet of coffee and burgers and Caffe Nero buys into another chain…

Brexit blamed for fall in consumer credit growth to 4-year low (The Guardian, Richard Partington) highlights the trend of shrinking credit growth – now at its lowest annual growth rate for four years at 6.6% according to the latest stats from the Bank of England – as households tighten the purse strings. The Bank said that credit card borrowing was particularly weak and Howard Archer, chief economic adviser to the EY Item Club, observed that “Heightened concerns over the economic outlook amid Brexit uncertainties and the very low household savings ratio are seemingly limiting willingness to borrow”. * SO WHAT? * The UK economy is largely drive by consumers so if they’re not spending wages that are outpacing inflation or money that they haven’t got (on credit), then things could get very painful – as it won’t just be retailers who get hit from all this household budget tightening.

Alibaba revenue growth ebbs as Chinese shoppers exercise caution (Financial Times, Louise Lucas) shows that it’s not just the UK consumer that’s getting increasingly reluctant to spend as the Chinese e-tailing

behemoth saw its lowest revenue growth rate for three years. Still, at 41% growth, it was still comfortably more than China’s overall 16% year-on-year retail sales growth for November and the company’s net income was ahead of consensus estimates. * SO WHAT? * Alibaba generates over 90% of its sales in China and so is seen as a bellwether for the market. Yes, growth is still pretty chunky but if a company like Alibaba is experiencing a slowdown, you would have thought that smaller players will be feeling it even more.

Other than that, Coffee and burgers have McDonald’s sales sizzling (The Times, James Dean) show the fast food chain publishing its 51st consecutive quarter of growth in the UK and Ireland as the parent company beat consensus estimates despite increasing competition in the American market. Results were boosted by sales of popular items on the Saver Menu as well as its coffee from its McCafe brand.

And on the subject of coffee, Caffe Nero buys slice of coffee chain (The Times, Dominic Walsh) heralds the coffee chain’s broadening of its presence across Wales, the Midlands and Southern England after buying a majority 70% stake in the Coffee#1 chain from SA Brain, the Welsh brewer and pub operator. This will give Nero an additional 92 shops plus an additional brand to add to Harris+Hoole and Aroma. Coffee#1 will operate as a standalone business.

Facebook puts the bad press to one side to announce strong results…

Facebook defies crises with huge leap in profits reported (Daily Telegraph, Margi Murphy, Olivia Field and Olivia Rudgard) shows that the tech giant shrugged off bad press to announce revenues that outperformed consensus estimates. Interestingly, in the final quarter of 2018, when it was going through GDPR issues and fallout from the

Cambridge Analytica scandal, it still managed to see revenues up by 30% year on year and the number of daily active users increased by 9%. Separately, Microsoft announced a 12% increase in quarterly revenues due to a strong performance from its cloud division and increase in revenues from LinkedIn and its Office software products. * SO WHAT? * As I have said before, I believe that although there was definitely some froth in valuations of the FAANGS last year, the fact is that they provide us with stuff that we need in areas where there are high barriers to entry and so I think that any apparent weakness is only temporary.

And finally, in other news…

Today, I thought I’d leave you with this key bit of research: Which Game of Thrones characters will survive Season 8? Scientists calculated the odds (Mental Floss, Jennifer Fabiano https://tinyurl.com/y92kmbje).

1. In REAL ESTATE NEWS, Chinese sell out of US property and Crest Nicholson suffers with London
2. In TECH NEWS, Apple disappoints and a new tax crackdown looms for big tech
3. In INDIVIDUAL COMPANY NEWS, PG&E’s bankruptcy sets it up for an overhaul, Norwegian drops 30%, Harley-Davidson gets a tariff-sized dent and Mike Ashley goes shopping again – this time for Sofa.com
4. In OTHER NEWS, I bring you a very expensive and smelly fruit. For more details, read on…

So Chinese cool on US real estate and Crest Nicholson experiences a London drag…

Chinese exiting US real estate as Beijing directs money back to shore up economy (Wall Street Journal, Esther Fung) cites research from Real Capital Analytics which shows that Chinese net purchases of US commercial real estate in 2018 fell to their lowest level since 2012 as Beijing continued to pressure Chinese investors to repatriate cash. Altogether, they were net sellers of $854m of US commercial property in the fourth quarter, which marks the third consecutive quarter where they sold more US property than they bought. It’s not limited to commercial property either as the number of Chinese homebuyers fell by 4% between April 2017 and March 2018 versus the same quarter in the previous year with economists blaming it on higher prices, a stronger dollar and US-China trade tensions. * SO WHAT? * This is quite a turnaround as Chinese investors have been chucking their money about and forking out for prime assets for the last five years after Beijing relaxed restrictions on foreign investment. However, the pendulum swung too far the other way with Chinese 

investors taking vast amounts of money out of the country to make more stable returns in the US property market and now the government is now trying to crimp the outflow of money in order to stabilise its currency, reduce debt and arrest the economic slowdown. It’s just another example of how the economic slowdown in China is having knock-on effects elsewhere.

Meanwhile, back at home, London slowdown hits Crest Nicholson (Daily Telegraph, Jack Torrance) shows a subdued housebuilder that has suffered versus some of its competitors due to its weighting in high-priced homes in London and the South East. Profits fell by 15% in the year to October although sales were actually up by 3% and revenues by 9%. Chief exec Patrick Bergin said that he expected demand to be depressed until there was more clarity over Brexit. * SO WHAT? * Crest Nicholson’s sluggish performance contrasts with other builders who have reported record profits in recent months but this is due to its greater focus on London and the South East – where the market has been weaker – and the fact that it builds a higher percentage of homes worth more than £600,000, meaning that it can’t get that bump from the government’s Help To Buy scheme. The company’s shares were up by 6% in afternoon trading as cash flow was better than expected and the dividend held steady.

Apple shows a drop in revenues and tax rumblings are getting louder for Big Tech…

In Apple shares rise despite first fall in revenue for a decade (The Times, James Dean) we see that Apple reported a fall in first quarter profit and sales for the first time in over ten years. This came shortly after Apple cut its quarterly sales forecast for the first time in 16 years earlier this month. Revenues from China fell by almost 27% in the three months to December 29th but only fell slightly in Europe and Japan whilst they actually rose in the Americas. On a slightly more positive note, Apple and Aetna team up on new healthcare app (Financial Times, Tim Bradshaw and Oliver Ralph) heralds an interesting tie-up with US insurer Aetna that will give the company access to a massive amount of health data in a new app for the Apple Watch. It’ll be called Attain and is set to launch in the next few months. Basically, it will track and reward healthy behaviours as well as giving users personalised notifications like nudges to take their medication or to get jabs. Chief exec Tim Cook has identified healthcare as a key area for Apple and this latest development is clearly a step in that direction. * SO WHAT? * The first quarter is seen to be the company’s most important quarter because 

it includes the holiday season and so poor numbers at this point are not ideal. However, we all know that the smartphone replacement cycle is getting ever-longer as handsets have become more expensive to buy and there’s less of an incentive to replace given that new models only show very incremental improvements these days. iPhones still make up 60% of Apple’s revenues and so it seems to me that we are entering a transition period where the company tries to move towards providing more and better quality services to its user base – as evidenced by this new healthcare app – and away from the emphasis on hardware. Services are going in the right direction, but at the moment they are not strong enough to eclipse the importance of handset sales.

I thought I’d mention Global tax crackdown on tech giants (The Times, Philip Aldrick) because I expect that this is going to be one of those GDPR-type stories that bore everyone to death but that are actually quite important. The Organisation for Economic Cooperation and Development (OECD) is about to review the fundamentals of tax law in order to “address the tax challenges of the digitalisation of the economy” and end years of tax jiggery-pokery by big tech companies and other multinationals. * SO WHAT? * This is set to be the biggest fundamental reform of global tax in generations and the OECD is to come up with a plan and a report by June and will aim to agree principles by October next year. Set those alarm clocks and write it in red on your wall calendars. This is going to be one wild ride.

PG&E’s bankruptcy might herald a new beginning, Norwegian experiences turbulence, Harley-Davidson gets trumped and Mike Ashley goes sofa.com shopping…

Wildfires drove PG&E to bankruptcy, where utility must change to survive (Wall Street Journal, Russell Gold and Katherine Blunt) highlights the fact that the troubled utility yesterday became the biggest public company to go bankrupt in the US for ten years – and America’s sixth biggest bankruptcy ever – as growing liabilities for its part in triggering California wildfires via its power lines pushed it over the edge. * SO WHAT? * The company has, until now, enjoyed a monopoly in power supply as it provided electricity and gas to 16 million Californians but its identity is likely to change drastically following its Chapter 11 filing. Potential outcomes include breaking up the company, selling off its natural gas business and/or some of its more than 100 hydroelectric dams. The company itself wants to end hundreds of long-term power contracts with wind farms and solar farms, which could have a knock-on effect to renewable energy companies.

Norwegian nosedives 30pc over rights issue (Daily Telegraph, Alan Tovey) heralds a massive share price drop for struggling airline Norwegian Air Shuttle as it announced an emergency fund raising to stop it breaching debt covenants. This happened only one week after British Airways owner IAG decided to sell its 4% stake as it abandoned a takeover bid. Norwegian is Europe’s third-

-largest low-cost carrier and has been struggling due to ticket pricing pressure, overcapacity and over-ambitious expansion.

Trump’s trade war slams brakes on Harley-Davidson (Daily Telegraph, Alan Tovey) shows more evidence of the fallout from Trump’s trade tariffs as the company announced annual results yesterday with motorbike deliveries falling by 5.3% over the year. Domestic demand fell by 10%, which is a concern given that the US is the company’s biggest market accounting for more than 50% of demand. Any profits were wiped out in the final quarter by the impact of new trade tariffs but execs said that tariff impact would be eliminated in 2020 once the ongoing work to its Thailand production plant is completed.

Ashley targets sofa retailer as next addition to his empire (The Guardian, Zoe Wood) shows that Mike Ashley is embarking on yet another shopping trip – this time in the form of a purchase of online sofa specialist Sofa.com which was put up for auction by current owner LGT European Capital. Ashley’s shopping trips are enough to make your head spin as last year alone he snapped up House of Fraser and Evans Cycles – and he’s currently in talks to buy HMV. He is up against sofa retailer ScS Group in the final round of bidding, so it’s not yet done and dusted. * SO WHAT? * We don’t know what the price is going to be, but you would have thought Sofa.com would go cheap given that so many other furniture companies have had such a rough ride. Their fortunes are very much tied to the direction of the housing market (and economic sentiment) and given that this has been a mixed picture for a while, you can understand consumer reticence in buying big ticket items such as sofas.

And finally, in other news…

I thought I’d leave you today with Smelly fruit on sale in Indonesia for three times average monthly wage (Sky News, https://tinyurl.com/yc5nuw3o). £750 for one durian fruit is hefty price for anyone!

1. In MACROECONOMIC NEWS, US/China talks are set to continue, South Korea trade collapses, Italy slides into recession and German business confidence takes a kicking (so no drama there then…)
2. In TECH NEWS, Apple looks at new areas and NVidia feels the pain of China’s slowdown
3. In INDIVIDUAL COMPANY NEWS, we see Saudi Arabia slashing its exposure to Tesla and various possibilities for M&S and Ocado
4. In OTHER NEWS, I bring you a Ferrero Rocher wrapper sculptor. Yep – that’s a thing. For more details, read on…

So more US/China talks are due, South Korea’s exports collapse, Italy heads into recession and Germany business confidence tumbles…

Big divides remain as US-China trade talks resume (Wall Street Journal, Bob Davis and Lingling Wei) heralds the resumption of Cabinet-level trade negotiations between the US and China tomorrow. There’s still a lot to be done before anyone gets too excited and US authorities unveil sweeping set of charges against China’s Huawei (Wall Street Journal, Kate O’Keeffe, Aruna Viswanatha and Dustin Volz) potentially throws a massive spanner in the works as the Trump administration has now levelled a comprehensive set of criminal charges against China’s Huawei Technologies alleging that the company violated US sanctions on Iran and stole trade secrets from a US business partner. * SO WHAT? * The timing of these charges isn’t going to make the negotiators’ jobs any easier and will effectively hand China an easy excuse to exit talks in a huff. However, I guess that getting this all out in the open now will be a test of how serious China really is about getting these talks done. We’ll see soon enough…

South Korea’s trade collapse may signal China contagion (Daily Telegraph, Tom Rees) suggests that China’s economic slowdown is now spreading to its neighbours as prelimenary data for January shows that South Korea’s exports contracted by an eye-watering 15% year-on-year while imports also fell by 9.5%. Although official figures say that Chinese GDP growth was 6.6% in 2018 – the lowest level for almost 30 years – many think that the real situation could be worse as the Chinese government has a reputation for “massaging” figures. * SO WHAT? * The US and China are South Korea’s biggest trading partners and so the whole tariff thing between them is really hitting South Korea hard. The fact that the Baltic Dry index – which measures shipping costs for commodities and is therefore seen as a bellwether on global trade – fell by 47% in five months to its lowest level since the summer of 2017 would also imply that the effects from the ongoing spat are spreading. Observers will be monitoring further economic indicators to judge whether this is a blip rather than a trend.

Meanwhile, in Europe, Italy entering ‘self-defeating loop’ as it slides into recession (Daily Telegraph, A. Evans-Pritchard) highlights the latest figures on corporate lending which fell by 5.5% in December, which could in turn lead to a debt crisis. Italian banks are having to curtail their credit activities in the face of the European Central Bank’s ultra-strict capital requirements as the whole country faces a major slowdown. Economic output is 4% below its previous peak, debt has shot up – and now equates to 132% of GDP – whilst core inflation bumps along at a very anaemic 0.5%. A big slug of cheap ECB money would be a welcome boon to the country but Mario Draghi, the ECB’s president, effectively shut that door when he said last week that the credit problems were mainly Italian in nature and that the ECB would not do anything about “country-specific” matters. * SO WHAT? * This could get very bad for Italy as it could fall into its third recession in ten years. And if it goes this way, it will probably drag others down with it. It seems to me that Draghi is just looking to bury his head in the sand for the rest of his term in office (which runs towards the end of this year) and is hoping that it will all just go away.

German export confidence falls sharply (The Times, Gurpreet Narwan) shows that things aren’t going great for Europe’s largest economy either as confidence among German exporters has taken a big hit, according the latest closely-followed Ifo survey which covers 7,000 companies. Continued weakness in the automotive and chemical industries have been the main factors in this fall in confidence. * SO WHAT? * Germany is the world’s #3 exporter, which makes it particularly susceptible to the vagaries of global demand – so you can see why the whole US-China trade thing is having knock-on effects. If you couple that with other recent data from the federal statistics office which shows falling output, energy production and construction products as well as recently leaked reports that say the economics ministry only expects annual growth of 1% rather than the previously touted 1.8%, it sounds like Germany’s economy is on the rack – which is NOT good for the EU as a whole. If you throw Germany’s weakness, France’s rebellious uprising and Italy’s financial problems into the mix, the future’s not looking particularly great on the continent at the moment.

Apple looks for new opportunities but Nvidia suffers from China blues…

Apple eyes game-streaming service as new battleground (Daily Telegraph, Tom Hoggins) suggests that Apple is looking at making a gaming subscription service, with the idea that it will become a “Netflix for games”. There are no details as to what sort of games they may be but apparently Apple has been looking into this with games developers since the second half of last year. * SO WHAT? * If this proves to be true, it could be a decent boon for Apple’s services business – which includes Apple Music, iTunes, healthcare apps and cloud storage – as it aims to pretty much double existing service division revenues to $50bn by 2020 in order to take up at least some of the slack of sluggish iPhone sales. The company is also hoping to launch its own TV streaming service this year and so I guess, in an ideal world, the two could be announced 

together as a really compelling proposition. I would have thought, though, that a strong games line-up on launch is absolutely key for success – as console-makers will all attest.

Nvidia blames $500m hole on China gaming slowdown (Daily Telegraph, James Titcomb) heralds some bad news from the American chip maker Nvidia as it blamed the economic slowdown in China for its weaker-than-previously indicated fourth quarter revenues. Its chips are used in powerful computers and robotic systems and China is the world’s biggest video games market, especially when it comes to PC gaming as games consoles were banned until 2015. Shares fell by 17% on the news yesterday, meaning that they have actually halved since the summer. * SO WHAT? * I suspect this is going to become a theme – that everyone’s going blame their woes on the “China economic slowdown bandwagon”. Mind you, to be fair, Nvidia said that it wasn’t ALL down to this – it admitted that the high price of its latest graphics cards had put off customers and that companies had delayed spending on data centres.

Tesla gets a slap and the M&S/Ocado thing garners continued interest…

In Saudi Arabia slashes exposure to Tesla via hedging deal (Financial Times, Arash Massoudi and Richard Waters) we see that Saudi Arabia has, rather dramatically, cut its exposure to Tesla only four months after founder Elon Musk settled charges relating to the kingdom allegedly being ready to back a management buyout. The Saudi Public Investment Fund hedged most of its 4.9% stake in Tesla in a technical trade which basically means that although it still holds the shares, it cuts its exposure to the downside drastically. Musk tried to brush this aside in an interview with the Financial Times when he said “To the best of my knowledge, there has been no communication with PIF for months…I thought they had probably sold their shares. We don’t know if they own any at all”. Tesla/Saudi Arabia: collars for dollars (Financial Times, Lex) does a great job of explaining the details of the PIF/JP Morgan trade, and surmises that it was done either to lock-in a

long-term relationship with Tesla without having exposure to a volatile share price OR it could be a means to selling a large stake slowly. * SO WHAT? * Musk will probably be hoping for the former scenario to be the case rather than the latter. If it turns out that the Saudi’s have had enough of him, it could be bad for the share price and turn Musk’s headache into a migraine at a very tricky time. I’m not that sympathetic TBH, as he brought the whole situation on himself by shooting his mouth off.

I mentioned early stage talks between Ocado and Marks & Spencer yesterday and a number of broadsheets have had a go at predicting potential future outcomes. Future as a tech provider would be helped by sale (The Times, Deirdre Hipwell) highlights the fact that Ocado’s sudden growth is down to its perceived bright future as a technology provider rather than being an online supermarket and that a deal that would help Ocado focus on this would free up cash to fund further expansion. It also pointed out that Ocado’s contract with Waitrose comes to a close next year and that the M&S talks are a means to persuade Waitrose to extend. FWIW, analysts at Bernstein say that Ocado should sell its British arm as M&S would not be able to provide anywhere near the same volumes as Waitrose, but then it just doesn’t have the financial firepower to do it.

And finally, in other news…

I only seem to tuck into Ferrero Rocher at Christmas, but I think that I might be tempted to buy more in order to have a go at this: Man creates gorgeous sculptures out of Ferrero Rocher wrappers (Metro, Hattie Gladwell https://tinyurl.com/ya65y3pf). Impressive!

1. In CHINA RELATIONS NEWS, US manufacturers feel the slowdown and Apple continues to seek alternatives
2. In ENERGY NEWS, Germany commits to phasing out coal-fired power and a new energy company is set for flotation
3. In CONSUMER/RETAIL NEWS, US consumers look set for a nice boost, but UK consumers continue to look downbeat whilst Tesco aims to cut more and M&S is in talks with Ocado
4. In UK REAL ESTATE NEWS, London property transactions fall and Lloyds Bank favours rich kids

So US manufacturers feel the heat of the slowdown and Apple continues to look outside China for production…

Manufacturers take a sales hit in China (Wall Street Journal, Austen Hufford and Patrick McGroarty) shows that an increasing number of US manufacturers are finding that their sales are slowing down in China after a storming three years. They’ve invested heavily over the years to get a piece of the action in a country with 1.4billion people in it and so stand to take a hit as the country’s economy slows down. Companies like Caterpillar and 3M make about 10% of their sales in China and are due to report figures today and tomorrow and will be closely watched as bellwethers for their respective industries. Other companies that have experienced slowing sales are HB Fuller (industrial glue maker), PPG Industries (car coatings), Stanley Black & Decker (tool makers) but smaller companies will probably suffer much more. Horween Leather (a tannery) exports 40% of its premium hides to high-end shoe and luggage manufacturers in China and reported sales falling by 10% last year. On the other hand, companies with more US domestic exposure are seeing a sales uptick (which, I guess, is what Trump has been after). * SO WHAT? * The thing is that a lot of the growth that has been experienced in the last few years is down to exports and so a global economic slowdown is starting to have a negative impact on US factory output after reaching its highest point in the third quarter since the financial crisis – as evidenced by the sharper-than-expected fall in US factory activity in December cited by the Institute for Supply Management. A 

stronger dollar and higher costs due to tariffs on foreign goods are adding to the slowdown in activity. As I have said before, I believe that a resolution to the current US-China trade stand-off could do wonders to turn this all around as I would expect activity to make a sharp recovery that could at least provide a short-term boost to global growth.

Further to what I have been saying recently about Apple looking to move at least some production out of China due to the current trade impasse and uncertain prospects for selling to the Chinese consumer, Apple suppliers step up expansion outside China (Financial Times, Kathrin Hille) identifies two of Apple’s biggest contract manufacturers – Foxconn and Pegatron – as companies looking to expand production capacity outside China. Foxconn told the Taiwan Stock Exchange on Saturday that it had invested up to $213.m in its Indian subsidiary since September and had bought land use rights in Vietnam. Pegatron – which accounts for almost a third of Apple’s assembly orders – said yesterday that it was planning to build production capacity in Indonesia, Vietnam and India. * SO WHAT? * The spectre of increased tariffs has really forced gadget manufacturers to take a long hard look at their supply chains and made them consider other options. I think that this is a good thing as currently it all seems rather unbalanced to me. There will no doubt be infrastructure problems initially in these countries but surely the number of jobs and boost to the respective economies will be incentive enough to get governments to support these potential moves. I continue to believe that Apple needs to concentrate its efforts on India rather than China as I think that there is more upside potential if they can get their pricing right – and China has so many more domestic manufacturers that it will want to support in preference to the American outsider.

Germany promises a coal-free future and a new energy company is about to float…

Germany plans to phase out coal-fired power stations by 2038 (Financial Times, Tobias Buck and Guy Chazan) shows the country’s commitment to weaning itself from coal as a government-appointed commission announced on Saturday that it would join an increasing number of countries promising to end the use of coal due to its contribution to greenhouse gas emission. * SO WHAT? * This sounds lovely, but isn’t going to come cheap as German taxpayers are likely to have to stump up for the bill to compensate coal miners, coal producing regions and power station operators. Interestingly, the country has been dragging its feet on this issue versus other western economies given that it had to make a sudden u-turn on its previously pro-nuclear strategy in 2011 (Merkel had to do this to win votes to continue in power in the aftermath of the Fukushima disaster-sparked anti-nuclear backlash). Currently, coal-fired plants account for about 40% of Germany’s electricity, but under the new proposals this will 

diminish over time to be replaced by renewable sources, which are projected to account for 65% of power generation in the country by the close of the next decade.

In Energy giant set for £23bn float (Daily Telegraph, Ben Marlow) we see that former BP boss Lord John Browne and Russian billionaire Mikhail Fridman are on the verge of bringing about a new energy giant by merging their LetterOne business with Germany’s BASF into something called Wintershall DEA and floating it on the market for a valuation mooted to be around £23bn. It is expected to extract enough crude oil by the end of the year to make it the biggest independent oil and gas explorer on the Continent – with only the Spanish state-backed producer Repsol being larger. Its production output will be more than double American producers Anadarko and Apache Corporation and will even be greater than BG Group when it was taken over by Shell in 2016. The enlarged company will be German majority-owned and is likely to float on the Frankfurt Stock Exchange. * SO WHAT? * This is a big deal and will throw another major player into the ring in terms of drilling rights etc and with someone as well-known as Lord Browne behind it, you would have thought it could quite conceivably grow much bigger given his deal-making reputation.

The US consumer is looking forward to a boost and the UK consumer feels the pinch while Tesco wants to cut more costs and M&S engages with Ocado…

US workers set to enjoy ‘nice tax surprise’ (The Times, James Dean) heralds some potentially welcome news for the American consumer as it looks likely that they will be getting much bigger tax refunds than they were expecting as many have overpaid taxes because they didn’t update their status with the Internal Revenue Service (IRS) following the big tax cuts that came into effect at the start of last year. Expecting a big tax refund? Don’t be so sure (Wall Street Journal, Richard Rubin) is more cautious in terms of how many people are likely to benefit, but for many it is going to come as a nice little boost. * SO WHAT? * This could prove to be a nice little boost for consumption over the first quarter of this year as people spend the money. UBS analysts believe that, if ALL of the tax refund money was spent, it would add between 3 to 6 percentage points to retail sales in February and March.

On the other hand – and on the other side of the pond – Shoppers keep purses closed as Brexit chaos bites (Daily Telegraph, Tim Wallace) provides yet more evidence of the downbeat mood in the UK as Deloitte’s quarterly consumer tracker showed spending getting more cautious despite wages outpacing inflation. As Deloitte’s chief economist Ian Stewart put it, “Recent data, in the form of record employment, higher earnings and falling inflation, are great news for UK consumers. But consumers are more focused

on Brexit worries at home and the clouds gathering over the global economy”.

Meanwhile, Tesco to cut up to 15,000 jobs and close deli counters (Daily Telegraph, Tim Wallace) heralds the latest potential round of cost cuts as the UK’s #1 supermarket in terms of market share aims to make £1.5bn in savings by 2020 to increase company profitability. * SO WHAT? * On the one hand, it’s good that the supermarket is not resting on its laurels in terms of finding ways to stay ahead of increasingly stiff competition, but it’s not great news for the workers. Tesco did not comment on the reported 15,000 job cuts. You do wonder whether other supermarkets will follow suit in making cuts, using Tesco’s action as an excuse.

M&S in talks with Ocado to enter online food fight (Daily Telegraph, Tim Wallace and Natasha Bernal) highlights talks between the two companies regarding online groceries. Talks are in the early stages, but possible outcomes could range from M&S using Ocado’s state-of-the-art distribution centres to the purchase of their delivery fleet and warehouses. * SO WHAT? * If such a partial takeover of Ocado occurred, it would leave the latter more focused on the tech business which designs and licences out its online grocery tech to supermarkets around the world. It would also herald a change of direction for M&S which has, thus far, only dabbled with the online grocery shopping market. I would have thought that such a tie-up/partial takeover would be very well received by all because it would boost M&S’s online capabilities and allow Ocado to concentrate on the “s3xy” side of the business, the recent success of which has propelled it into the FTSE 100. Potential losers could be UK retailers who have an existing agreement with Ocado as there could be conflicts of interest.

London property transactions fall and Lloyds Bank favours rich kids…

You will no doubt be used to hearing gloomy noises emanating from the UK real estate sector – and London property transactions drop to decade low (Financial Times, Judith Evans) won’t change this state of affairs as figures from LonRes, a research firm, show that the number of transactions in the central London housing market are now at their lowest since 2008. Roarie Scarisbrick, a buying agent at Property Vision, observed that “The market is massively suppressed. Everyone is concerned about what’s going to happen in the future, every buyer is extremely cautious and counting every penny”, but then if you have a bob or two to spare, there are some bargains to be had. Take hedge fund supremo Ken

Griffin who recently purchased a townhouse in London for the bargain-basement price of £95million – a steal considering that the asking price was actually £125million!

At the other end of the market, Lloyds offers 100% mortgages for first-timers with well-off relations (The Guardian, Patrick Collinson) tells us that the UK’s biggest lender is going to offer 100% mortgages (i.e. no deposit required) to first-time buyers of properties worth up to £500,000 if a member of the family can put up a sum equal to 10% of the value of the property into a Lloyds savings account. This represents a major expansion into the first-time buyer market as other lenders still ask for a minimum of a 5% deposit. * SO WHAT? * In practice, this is already being done anyway IMHO as the “bank of mum and dad” just give their kids the money. However, I think it is a canny way of giving kids with doshed-up parents (and relatives!) more ammo to pressure them into giving them a hefty slug of cash.

1. In TECH NEWS, China bans Microsoft’s Bing and Apple cuts staff working on Project Titan
2. In CARS NEWS, Ford’s profits get dinged and JLR announces a production shut down
3. In RETAIL NEWS, Starbucks sees sales growth, New Look slides deeper and shopping centre owner Capital & Regional cites a fall in the value of its portfolio
4. In OTHER NEWS, I bring you some epic shoe throwing. For more details, read on…

So China removes the last foreign search engine and Apple cuts staff from its “secret” division…

China blocks Bing access in curb on last foreign search engine (Financial Times, Yuan Yang) heralds the latest development in China’s clampdown on access to information as Microsoft’s Bing search engine has now been blocked nine years after Google quit the country in 2010. It has become the latest American tech company to be shut out in China since WhatsApp was blocked in 2017. Apparently, state-owned telecoms company China Unicom got an order from the government to block Bing for “illegal content”, a blanket category to justify censorship. * SO WHAT? * Even though Bing only had a 2% market share in China versus local hero Baidu with 70%, I guess it’s the idea of the state having such overt control over information access for its citizens that’s concerning. No doubt this is all part of the whole US-China trade war – and China is turning the screws. A pain for Microsoft, though. 

In Apple’s self-driving car project stalls (Daily Telegraph, Tom Hoggins) we see that Apple has axed 200 staff from its super-secretive self-driving car team, known internally as “Project Titan”. The project was said to have involved over 5,000 employees at its height directly or indirectly, but it seems that the project has been subject to some internal shuffling, or as an Apple spokesman put it, “As the team focuses their work on several key areas for 2019, some groups are being moved to projects in other parts of the company, where they will support machine learning and other initiatives, across all of Apple”. * SO WHAT? * This is no great shakes from an Apple perspective, but I think it is somehow indicative of just how difficult things really are with driverless vehicles. I continue to believe that we are YEARS away from any semblance of it being widely available. I think that, with regard to cars, hybrid is now and for the next five years, electric in the next five to ten years (and by that, I mean PROPERLY adopted, not just by the few) and driverless somewhere towards the back end of that. Tech FROM driverless, however, will continue to drip-feed its tech to “normal” cars in the form of improving driver aids.

Ford takes a beating and Jaguar Land Rover announces a shut down…

Ford profits halve in 2018 as losses in China and Europe bite (Financial Times, Patti Waldmeir) shows how weaknesses in two major markets dragged the company’s profits down by over 50% last year, in complete contrast to the company’s profitable domestic business. Bob Shanks, Ford’s CFO, had a difficult year in 2018 as he had to deal with $750m in tariff-related costs, $1.1bn in commodity costs, $750m in adverse currency moves and $775m related to Takata airbag recalls. Chief exec Jim Hackett talked a good game for 2019 but didn’t really give many details about how this was going to happen. * SO WHAT? * You can see why Ford announced its recent alliance with VW given its weakness in Europe. Car sales in Europe and China look like they will continue to be weak and so unless consumer confidence gets a massive bounce in the near term I don’t see where growth is going to come from. I was 

thinking the other day about my “fantasy” car manufacturer combo – VW and Tesla. My argument for this would be that a combination of Tesla’s tech knowhow and VW’s production muscle would be tough to beat – and if you combined that with Ford as well, then that would surely be a killer combination! Who knows – maybe desperation will drive them all together?

Jaguar Land Rover plans to halt production in April (Daily Telegraph, Alan Tovey) details the ongoing travails of the embattled JLR as it announced that it would stop production lines for a week in April as it continues to struggle with the sales slowdown. Staff will be paid, but will have to put in extra hours when the production lines are up and running again. * SO WHAT? * This comes shortly after the company announced it would be cutting 10% of the workforce, which followed production cuts last year. The company is trying to cope with the fact that it has had overexposure to China (where sales have been slowing down) and diesel (which everyone now hates). Production and employee cuts are short-term fixes IMHO – the company really needs to get its strategy sorted quickly otherwise it will be curtains.

Starbucks has good news, but it’s less good for New Look and UK shopping centres…

Starbucks beats expectations with focus on operations (Wall Street Journal, Julie Jargon) highlights some improved results from the company as revenue and earnings beat expectations following bit of a refresh from chief exec Kevin Johnson, who has streamlined the number of outlets, rejigged product line-ups and broadened its distribution in partnership with Nestle. Starbucks is also rolling out delivery in more US cities and growing its digital offering, with the number of active loyalty programme members increasing by 14% in the same quarter a year ago. It’s also expanding in China (it now has almost 3,700 outlets there) and is now working with Alibaba there on delivery. * SO WHAT? * It’s good to see that the company is experiencing some positive growth – but I have to say that I expect increased competition in China with the likes of mega-growth domestic chains like Luckin Coffee. 

New Look on the rack, with refinancing plans likely to force sale (Daily Telegraph, Sarah Butler) appears to be on the brink of putting itself up for sale following a year where

it closed 86 stores after announcing massive losses. The company is in the throes of a financial restructuring but sent a note to bondholders saying that the company “may be required to launch a sale process for the group in which other interested parties could participate”. * SO WHAT? * More woes for the embattled clothing retailer that suffered from losing focus on what its customers wanted and an international over-expansion.

You may recall the other day when I highlighted British Land’s change of focus for its retail estate, well Shopping centre owner counts cost of downturn (The Times, Louisa Clarence-Smith) provides more evidence as to the current state of affairs in retail real estate as Capital & Regional announced that the value of its properties outside London fell by over 10% in the second half of 2018. * SO WHAT? * C&R owns or has stakes in eight shopping centres in the UK and said that its rental income in 2018 took a hit when 20 of its retail tenants closed stores or reduced rents via CVAs. Debenhams is currently in discussions about reducing the size of some of its stores and M&S just announced the closure of its Luton store in C&R’s Mall shopping centre. That said, its trading update was actually OK but surely the prospect of more suffering in the retail sector isn’t boding well for them as things could snowball in a bad way if retailers think that downward negotiation in rents is becoming more common.

And finally, in other news…

I thought I’d leave you today with the very skillful lady in Mum throws shoe at teen from huge distance – but can’t believe what happens next (The Mirror, Courtney Pochin https://tinyurl.com/ybgmte23). This is brilliant (and, on balance, I don’t think it’s fake!). It reminds me a bit of that scene in Crocodile Dundee when the driver uses that thing stuck on the back of his limo as a boomerang.

1. In UK HIGH STREET NEWS, we take stock of job losses so far, Patisserie Valerie attracts a serious bidder and John Lewis closes a Southsea department store whilst Wetherspoons and Joules unveil decent sales figures
2. In BANKS NEWS, Metro shares crater on a loans blunder, Santander announces job cuts and branch closures and Lloyds switches computer systems
3. In CONSUMER GOODS NEWS, P&G raises its outlook
4. In OTHER NEWS, I bring you some unusual noodles. For more details, read on…

So retail job losses continue, Patisserie Valerie might get saved and John Lewis announces a closure but Wetherspoons and Joules are altogether more upbeat…

UK retailers shed 70,000 jobs and plan more cuts (The Guardian, Sarah Butler) cites the latest figures from a British Retail Consortium survey which show that 70,000 jobs were lost in the retail sector going into the close of 2018 and almost a third of businesses are planning on cutting staff numbers further in the next few months. The survey also showed that hours for both full-time and part-time staff had been shortened and the BRC’s chief exec Helen Dickinson observed that “The retail industry is undergoing a profound change and the latest employment data underpins those trends”. The news that John Lewis to shut store as strain grows (The Times, Alex Ralph) only served to emphasise the point as the company announced that it is to close its first store for 13 years with 127 jobs hanging in the balance. The company said that this was branch-specific and that they had no more closures planned.

Following on from Patisserie Valerie’s collapse, it seems that there may be some hope in Bid to save Patisserie Valerie stores (Daily Telegraph, Oliver Gill) as David Scott, a restaurateur who sold his former Druckers business to Pat Val over ten years ago, has assembled some advisors with a view to making a bid for the outlets that haven’t been shut down. If a successful bid does not materialise, 2,000 jobs will be under threat. If you want to know more detail about Pat Val and what the hell happened there, The questions piling up about the fall of Patisserie Valerie (Daily Telegraph, Oliver Gill) is a great place to look – and it also lists the huge amount of jobs that chairman Luke

Johnson has! The tone of this article suggests that any buyer is going to have to take a big leap of faith as the dodgy books – which caused all the problems in the first place – will make it very difficult for anyone to make a decent estimate of how much the business will cost to run. Then there’s the prospect of future legal action as shareholders will no doubt try to claim that they invested on the basis of false data. It’s been a rough ride for the company, but I think that there are still storms ahead.

In Higher wages bite into profits as sales rise at Wetherspoon (Daily Telegraph, LaToya Harding) we see that like-for-like sales were up by 7.2% for the latest quarter and 6.3% over the half year but chairman Tim Martin pointed out that “Costs, as previously indicated, are considerably higher than the previous year, especially labour, which has increased by about £30m in the period, but also in other areas, including interest, utilities, repairs and depreciation”. * SO WHAT? * £30m is a fairly chunky sum and you would think that there is scope for this to rise considerably if there is a messy Brexit.

Joules bucks gloom in high street with 17pc surge in sales (Daily Telegraph, Charlie Taylor-Kroll) sounds an altogether brighter note as total sales rose by an impressive 17% in the six months to November versus the equivalent period in 2017 with burgeoning online sales making up almost 50% of revenues. Pre-tax profits were up by 11% as it seems that the company has its offline/online retail offering balance just right. Licensing deals in the offing will no doubt add to the appeal as Joules’ patterns will be used on branded DFS sofas, branded toiletries at Boots and Vision Express glasses. * SO WHAT? * This sounds like a pretty impressive performance and goes to show what can be done when you strike the right balance between offline and online offerings. I’m not sure how those licensing deals will work out (who wants a sofa to match their trousers??) but it’s all money in the bank for Joules in the meantime – and if it DOES work, then this sort of thing is scaleable.

Metro Bank takes a beating, Santander announces cuts and Lloyds gets a new IT platform…

Metro Bank shares drop 40% after loans blunder revealed (The Guardian, Patrick Collinson) highlights a rather tricky revelation from the challenger bank as it turns out that it made major mistakes in how it classifies its loan book, news of which sent the company’s share price down by 39% as panic spread about the bank having to raise more capital only six months after the last raising as a result. The main problem was that it gave many commercial property loans a 50% risk weighting when they should have been at 100% – and it was worse in the commercial buy-to-let book where many loans were given a 35% rather than a 100% risk weighting. The bank also said that difficult trading conditions had meant underlying profits had been almost 20% below expectations, although they were 136% higher than the previous year. Chief exec Craig Donaldson put a brave face on it all and said that “Metro Bank remains well positioned to support our growth strategy as we navigate an uncertain period for the UK”. * SO WHAT? * Accountants seem to be getting a bad rap at the moment, what with the Big Four trying to defend themselves against been forcibly broken up and high profile business failures such as Carillion and, most recently, Patisserie Valerie being casualties of dodgy accounting. I suspect that investors will be trying to sniff out other banks who might have made the same mistake – so I would not be surprised to see other banks coming out with statements saying that their risk weightings were all above board to reassure the market. If this is a one-off, then there will be some short-

-term trading opportunities here, but if others have the same problem then this thing could snowball.

Santander puts 1,200 jobs under threat in cut to 140 branches (The Guardian, Jasper Jolly) heralds even more bad news for the banking sector as the Spanish-owned bank announced that it is going to close almost 20% of its UK bank branches, which will put 1,200 jobs at risk. The bank said that branch transaction numbers had fallen by 23% in the last three years whilst digital transactions have doubled. * SO WHAT? * Given the changing behaviour of the bank’s customers, it is unsurprising that the cuts are continuing.

Talking about cuts, Lloyds plans to cut costs with start-up’s IT platform (Financial Times, Nicholas Megaw) shows that Lloyds Banking Group is planning on cutting annual tech costs by changing its computer systems over to a new platform developed by fintech start-up Thought Machine. If the initial trial is successful, it could roll the system out across all of its businesses in the next few years as it hopes that this will help to reduce costs further whilst also allowing it to offer new, more personalised products to its customers. Thought Machine’s “Vault” core banking platform is cloud based, unlike mainframe based systems of yore, which means that it will be cheaper to run, more scaleable and offer better insight on customer data. * SO WHAT? * This sounds like a sensible decision as it has thus far, like other banks, relied on incremental improvements to increasingly creaky IT systems. During this time, digital banking upstarts have been able to catch traditional banks off-guard with cutting-edge systems that enable new products that customers value, so at least Lloyds is taking action. It will be interesting to see whether others buy in something like this or whether they will attempt to invest in something proprietary. 

Proctor & Gamble announces a positive outlook…

P&G raises outlook after another quarter of strong sales (Wall Street Journal, Aisha Al-Muslim) highlights some good news for the consumer products giant as it announced strong quarterly sales, with profits for the maker of Pampers rising 28%, even before planned price rises kick in. This contrasted with rival Kimberly-Clark Corp,

the company behind Huggies and Kleenex, which announced weaker sales in the final quarter of 2018 due to rising commodity costs and currency fluctuations. * SO WHAT? * Both P&G and Kimberly-Clark have been subject to increasing competition with consumers moving towards smaller brands as well as higher raw material and transportation costs but it seems that P&G edged K-C with a more aggressive pricing strategy. There are tough times ahead, but P&G seems to be getting it right at the moment.

And finally, in other news…

Today seems to be a quiet day on the “alternative news” front, so I thought I’d leave you with this: Noodle lovers – you need to feast on these 12ft noodles at Murger HanHan (Metro, Bar Fox https://tinyurl.com/y9pobcgx). I can’t vouch for it as I’ve not been there, but it does look good!

1. In MACROECONOMIC NEWS, UK pay growth rises as employment levels reach record highs
2. In TECH NEWS, Dyson moves HQ to Singapore and Foxconn mulls a move to India
3. In UK RETAIL NEWS, I highlight the flaws in the data, Patisserie Valerie goes bust and Dixons Carphone puts hope in a new gimmick to attract customers
4. In OTHER NEWS, I bring you optimal ways to defrost your windscreen. For more details, read on…

So UK pay growth and employment are looking good…

UK pay growth surges as employment levels reach record high (The Guardian, Phillip Inman) cites the latest figures from the Office for National Statistics which show that average weekly earnings excluding bonuses rose by 3.3% – the biggest rise since 2008 – and ahead of inflation which currently runs at 2.3%. Figures also showed that the employment rate – expressed as a percentage of working age people with a job – went up to 75.8%, up from 75.3% a

year earlier. Interestingly, director of the Jobs Economist consultancy John Philpott observed that self-employed people accounted for two-thirds of the latest rise in employment suggesting that there was “an element of caution on the part of some employers in the face of prolonged Brexit uncertainty who may for the time being prefer to hire self-employed contractors rather than employees”. I thought that Jeremy Thomson-Cook, chief economist at currency dealer WorldFirst made a very valid point when he said that “employment in itself is a lagging indicator. It is slow to react to positive or negative changes in the economic cycle so, although these numbers are ostensibly for what happened in November, they are more a representation of what happened in the summer”.

Dyson decides to b*gger off and Foxconn considers a move to India…

Billionaire Dyson exports headquarters to Singapore (Daily Telegraph, Alan Tovey) is a major story doing the rounds today as arch-Brexiteer Sir James Dyson has decided to move his corporate HQ. He insisted it had nothing to do with Brexit and his minions have been playing it down (I am sure some corporate PR company is behind this!) as chief exec Jim Rowan said that “we have been investing in Singapore for many years and we want to take advantage of the opportunities presented in south east Asian markets”. This news was announced alongside its annual results which showed sales and profits up by 28% and 33% respectively. Dyson products are now made in south-east Asia, but its main engineering base remains in Malmesbury, Wiltshire. * SO WHAT? * Dyson’s actions would appear to be the height of hypocrisy given his very vocal support for Brexit – at least another vocal supporter, Wetherspoon chairman Tim Martin is actually practicing what he preaches. However, it seems to me that the guy is a great engineer and pioneer and he’s moving his business closer to a much bigger – and growing – customer base as middle classes who value the brand highly are growing rapidly in the region. Dyson’s not a saint – he’s an old man moving his business closer to where the action is. Cold though this sounds, if his company continues to smash expectations – and especially if he manages to come up with properly ground-breaking battery technology – I am sure this will all be forgotten.

Foxconn looks beyond China to India for iPhone assembly (Wall Street Journal, Yang Jie, Yoko Kubota, Newley Purnell and Rajesh Roy) shows what could be the future

for Apple as its main iPhone assembler, Foxconn Technology Group (formerly known as Hon Hai Precision Industry), is looking at producing devices in India. Sources say that senior execs are planning to visit India after Chinese New Year to discuss plans. Neither side gave official comment on this rumour. * SO WHAT? * If a shift to India goes ahead, this could be absolutely MASSIVE news. Current trade tensions between the US and China have highlighted Apple’s vulnerability in particular to China as most of its iPhones are assembled there. One of Apple’s other contractors, Wistron Corp, began assembling the “cheap” SE model in India in 2017, but it has moved on to assembling the 6s there as well – so Apple does have some form. IMHO, Apple should ditch China (well not completely, they might as well have some presence there) and throw its might into India. I think that Apple will be on to a whipping if it just leaves things as they are because a) it is a convenient and high-profile political football and b) there are just too many low-cost local rivals that will obviously get preferential treatment from the Chinese government. India ALSO represents huge growth potential, but the main problem so far has been the prohibitively expensive handset costs as far as locals are concerned. I have said before that if Apple can manufacture in India and export to the world – as it has been doing in China – it could still keep high prices everywhere else and use that margin to balance out the lower margins (but substantially higher volumes) in India. Another angle could be that Apple is stoking this story in the background as a veiled threat to China – but TBH Apple is diddly over there and Xi Jinping probably doesn’t care that much. It’ll probably be a minor inconvenience and one less lever available to him to control the economy.

We see that retail sales figures aren’t always what they appear to be, that Patisserie Valerie has thrown the towel in and that Dixons Carphone is resorting to gimmicks…

‘Flawed’ retail data hits assessment of UK economic strength (Financial Times, Jonathan Eley and Gavin Jackson) is a really good article that highlights the strengths and weaknesses of the various data series pertaining to the retail sector. Just by way of example, figures published by the British Retail Consortium (BRC), the retail industry’s lobby group, says that UK retail sales in December were the weakest in a decade, but then the Office for National Statistics (ONS) said that they were, in fact, up by 2.7% over the same period. The main thing to remember here is that each data series has its flaws. The BRC’s figures are generally considered to be good on food retailers’ sales (because most of the sales are still made in shops and therefore a bit easier to track), but weaker on online (did you know that Amazon does not supply its figures to the BRC?) and non-food sales. They are also skewed more by companies like Debenhams, House of Fraser and New Look – and so paint more of a dire picture of the overall environment. The ONS monthly survey is mandatory and involves 4,000 small businesses and 5,000 shopping chains – whereas the BRC sample is only 95. ONS figures are seasonally adjusted to take things like Easter and Christmas into account, but the BRC’s don’t – which means that their data is likely to be more volatile. Footfall data from Springboard measures shopper traffic, but doesn’t cover online sales and can’t distinguish whether shoppers are spending or just having a look (to later buy online, perhaps?). Then you have Barclaycard and Visa estimates of consumer spending amongst other data

series. * SO WHAT? * Consumer spending in the UK plays a MASSIVE role in the economy and so decent stats are particularly important. The above just goes to show how inexact a science the collection of accurate data really is – and so many people will favour the ONS stats or a combination of different data series. My own preference would be for a mix of ONS with Barclaycard and Visa data because their samples are bigger and they don’t have an axe to grind.

Talking about flawed data, Patisserie Valerie goes bust as rescue talks fail (The Times, Tabby Kinder) brings a sorry saga to a predictable end putting over 3,000 jobs at risk after an alleged £40m fraud left it unable to pay back its massive overdrafts. The company, which was valued at £511m at its peak in June, started on its journey to becoming terminal when parent company Patisserie Holdings found a £40m hole in its accounts. KPMG has been appointed as administrator and it will try to sell the business as a going concern. Some 70 of the 200 cafes and restaurants will shut immediately and Luke Johnson, its exec chairman, will lend £3m to the business to make sure wages for January are paid to all staff.

Dixons Carphone looks to gamers as phone sales slide (Daily Telegraph, Charlie Taylor-Kroll) heralds a new sales gimmick by the mobile phone retailer that has continued to struggle with the lengthening handset replacement cycle. CEO Alex Baldock said that the retailer is going to roll out 140 gaming “arenas” in its stores by the end of the year which will invite gamers to compete against each other in store. * SO WHAT? * Sounds like an expensive pile of sh!te to me. I would argue that the sorts of people that this will attract won’t necessarily be ones who have loads of money to spend on electronic gadgetry and phones and it could turn the shops into virtual arcades with non-buying clientele clogging up the aisles and potentially putting off those who actually want to purchase something. Good luck with that.

And finally, in other news…

I thought I leave you today with some practical tips for the current chilly weather we’re having in How to stop your windscreen freezing and defrost your car – and deter opportunist thieves (The Mirror, Jo-Anne Rowney and Joshua Barrie https://tinyurl.com/ydeh968u).

1. In MACROECONOMIC NEWS, the IMF frets about growth and China slows down
2. In TECH NEWS, a SoftBank and Virgin satellite nears take-off and Google gets a GDPR fine
3. In RETAIL NEWS, we see that British Land changes its retail strategy and how the fortunes of Mountain Warehouse contrast with William Hill
4. In OTHER NEWS, I bring you an amazing skateboarder. For more details, read on…

So the IMF shows concern and China slows down…

In Britain’s growth to beat Europe’s big players (The Times, Philip Aldrick and Gurpreet Narwan) we see that the latest forecasts from the International Monetary Fund (IMF) show that Britain will grow at least as fast as its continental neighbours in the next two years due to a slowdown in the EU that will hold back global growth. It downgraded growth forecasts for Germany and Italy and the only countries of the G7 that it thinks will grow faster than the UK are the US and Canada. The major caveat here is that the central assumption is that the UK will be able to thrash out an exit from the EU. The IMF identified three risk “triggers” that would damage world economic prospects (I said the same thing in Watson’s Yearly HERE): Brexit, escalating US-China trade tensions and a Chinese slowdown.

Talking of which, China’s annual economic growth rate is slowest since 1990 (Wall Street Journal, Lingling Wei) turns up the gloom as the 6.6% growth rate for 2018

reported Monday was the worst for almost 30 years as the economy slowed down considerably in the final quarter. Tariff uncertainty is putting the mockers on investment and hiring to the extent that jobs are now getting cut – the official unemployment rate rose to 4.9% in December from 4.8% in November. Recent data released by the National Bureau of Statistics has shown weakening property sales, industrial output and retail sales – so things aren’t looking too bright for 2019. * SO WHAT? * China growth has been dented by the US-China trade conflict most recently, but the economy has also decelerated at least in part because President Xi Jinping has been clamping down on debt and financial risk over the last three years. This has resulted in reduced borrowing by local governments and businesses as well as a sharp drop-off in spending on things like new subway lines and factories. So far, Beijing has yet to unveil a major all-encompassing growth package and is just chipping away here and there with individual measures and injections of liquidity. It is expected to bring in more tax cuts for businesses and individuals especially in the tech sector, for instance. If trade talks worsen, however, Xi Jinping may have to come to the rescue with a joined-up growth strategy to at least arrest the slide.

A satellite start-up prepares for take-off and Google gets fined…

SoftBank and Virgin-backed satellite group finally nears take-off (Financial Times, Tim Bradshaw) highlights the latest developments at OneWeb, a start-up that has raised over $2bn from SoftBank and Virgin Group, which has edged closer to its ambitions of bringing wireless broadband to the whole world with a launch date for its first satellites of February 19th. The company continues to raise money and will need many billions more in order to complete its global satellite network. * SO WHAT? * This is one hell of a company – its stated mission is to “connect everyone, everywhere” and it signed a deal a year ago with Airbus, Delta, Sprint and Bharti Airtel to form the Seamless Air Alliance which enables airline passengers to use their existing mobile connections in the air. The main difficulty here, though, is not the satellites but the receiving devices 

on the ground as flat panel receiver tech has not kept pace. This is very much a “jam tomorrow” company, but it has indisputably admirable ambitions.

French data watchdog fines Google record €50m (The Guardian, Alex Hern) looks at how France’s data protection watchdog, CNIL, has slapped Google with a record fine for failing to provide users with transparent and understandable information on its data use policies under the terms of the “new” (well it’s actually a year old) European GDPR framework. The maximum fine for breaching GDPR is 4% of annual turnover which, in Google’s case, could be almost €4bn. In addition to the data protection gobbledygook, the CNIL said that even when user consent was collected it was not “specific” and “unambiguous” as per GDPR guidelines. * SO WHAT? * This is the world’s biggest data protection fine so far – and comes one month after Italy’s competition regulator fined Facebook €10m for misleading users over data practices. It’ll be interesting to see what these giants do next and how effectively individual regulators show their teeth. I suspect there will be more and more fines rolling in for GDPR breaches as time goes on.

So we see British Land changing its strategy and the contrasting fortunes between Mountain Warehouse and William Hill…

Two bosses to leave as British Land makes a retail retreat (Daily Telegraph, Jack Torrance) sounds like a real estate story, but it has direct implications for the retail sector because two of its most senior bosses – one who is the head of offices and the other, who is head of the FTSE 100 landlord’s retail, leisure and residential arm – will stand down at the end of March as one person, Darren Richards, will lead the combined two divisions to become head of real estate. The idea is that a combination of the divisions will be part of its focus on mixed-use “campuses” that combine shops, homes and office space. * SO WHAT? * British Land has been cutting down its exposure to stand-alone retail property as competition has been intensifying and costs have been increasing over the last few years. I really do think that this is the way forward for malls and shopping “zones” in general because a more concerted effort to combine an offering of retail, office and residential space can create its own “buzz” with a built-in customer base that then attracts outsiders as well. I have mentioned it from time to time, but I think that Mike Ashley will 

increasingly be able to do something like this given the acquisitions he has been making of late. With House of Fraser already in the bag, an HMV acquisition looking increasingly likely and the potential for snapping up Debenhams in the near future, Ashley will have brand power and real estate square footage to make this sort of development trend a reality without having the same baggage as long-time landlord like British Land.

Retailer thriving in the great outdoors (The Times, Deirdre Hipwell) shows that Mountain Warehouse had its best Christmas sales ever and that it was on track for another year of record profits. Total sales were boosted by 12% in the 13 weeks to January 6th and online sales shot up by 24.6% in the same period. As if that wasn’t enough, it also said that it had its best ever Black Friday – up 20%. Nice!

On the other hand, William Hill to close hundreds of high street betting shops (Daily Telegraph, Oliver Gill) paints a rather more downbeat picture for the bookmaker as it counts the cost of a government crackdown on fixed-odds betting terminals (FOBTs). William Hill, like many of its competitors, is trying to concentrate on overseas business following the relaxation of US sports gambling rules. The company currently has a bigger footprint across the Atlantic but is expected to be overtaken by GVC, which has a joint venture with MGM Resorts and could nab 25% of US sports betting.

And finally, in other news…

I thought I’d leave you with an AMAZING video of a skateboarder steaming down Alpine roads in Incredible video shows teenager skating down the hill through French Alps at 68mph (Daily Motion, https://tinyurl.com/y93m2juc). Wow!

1. In MACROECONOMIC NEWS, we see side-effects of the US government shutdown and Brexit as well as their combined knock-on effects on Davos
2. In UK HIGH STREET NEWS, Mike Ashley circles HMV and Patisserie Valerie awaits its fate
3. In INDIVIDUAL COMPANY NEWS, Huawei outlines the consequences of the global sport of Huawei-bashing
4. In OTHER NEWS, I bring you stress relief for students. For more details, read on…

So we see who’s benefiting from the US shutdown, what could be next for Brexit and the many absences from Davos…

Pawnshops and payday lenders surge on US government shutdown (Financial Times, Nicole Bullock) shows who is actually benefiting at the moment from the longest ever government shutdown. The current impasse on Trump’s plans to build the wall on the border with Mexico has meant that hundreds of thousands of government employees and contractors haven’t been paid. Shares in short-term lender World Acceptance and pawnshop EZ Corp have risen by 22% and 20% since the shutdown started a month ago as a result. Shares in Lending Tree, a consumer-loans portal, are up by a whopping 42% in the same time period, but given that 78% of American workers live pay cheque to pay cheque, according to a 2017 study by CareerBuilder. and that almost half of American families could not cover a $400 emergency expense without borrowing or selling something, according to another survey by the Federal Reserve – it is hardly a surprising state of affairs. Some banks are offering to defer mortgage payments or small loans, but they seem to be reluctant to go all out to help these people who’ve done nothing wrong. * SO WHAT? * I know this isn’t strictly a macroeconomic story, but I thought I’d mention it here because it is a macroeconomic event that has had immediate consequences. It just seems crazy that Trump going into a huff about a wall that is probably going to get torn down when he eventually leaves office is affecting so many people in a very real way – right now. Still, it just goes to show that one person’s nightmare is another person’s profit – and the pawnshop and payday lenders are getting a nice little bump in demand – plus a potential introduction to a broader client base for the future.

Meanwhile, back home, Theresa May on Brexit collision course with MPs (Financial Times, Henry Mance) shows that May is really up against it as MPs bay for a Plan B given her massive defeat last week on her original agreement. How the Brexit options would affect the economy (Financial Times, Chris Giles and Delphine Strauss) looks at the various possible options and consequences. No deal would mean higher costs due to tariffs at the UK-EU border and restrictions on trade in services as well as an 80% drop in the number of EU migrants. Estimates say that after 15 years, the economy would shrink by 9.1% versus the size it would have been remaining within the EU. A Canada-style trade deal, the option that most Brexiteers favour, would avoid tariffs and some non-tariff barriers but many hurdles would remain – particularly with the Irish border issue. Estimates say the economy would be 6.3% smaller in 15 years with this option. A customs union with alignment on goods regulations was what May’s agreement was alluding to, would have meant the UK could maintain an infrastructure-free border with Ireland along with minimal disruption at the Dover-Calais border. The main disadvantage of this option is that Britain wouldn’t be able to have substantive deals with other countries. Estimates say that this option would mean the economy shrinking by 2.2% in 15 years versus staying in the EU. The Norway+ model, which means that we would remain in the EU single market and customs union but leave its political structure. Britain would not be able to set its own migration or regulatory regimes, which would be the main price of going for this

option. Estimates suggest this would be neutral on the economy versus leaving the EU over a 15 year period. Remain in the EU after a second referendum would remove the immediate uncertainty but actually holding a second referendum would subdue economic activity in the short term. Consensus among economists both within and outside the government suggests that abandoning Brexit would lead to more rapid growth in both the short term and over time. * SO WHAT? * FWIW, I think that, until we get any kind of certainty – whatever that may be – the UK economy will stagnate because no-one is going to want to invest. I think that businesses have done their best to accommodate different outcomes to the best of their ability, but they just want to know what the upshot of all this is going to be on a practical basis so they can move forward. Political impasse can be crippling and the pressure to come up with something concrete is going to increase as the days go by. Generally speaking, I believe that holding another election is a pointless exercise that will create even more uncertainty (if that’s possible!) AND delay things even further. Most of the other options above don’t look likely to gain a majority backing as things currently stand and so the least bad option from the above is to hold a second referendum. That way, the politicians can say that “the people have spoken” and get on with it – either way. If we vote to remain, I think there will be a big economic rebound for both the UK and Europe and if we vote to leave I think that the UK and Europe will slide into recession, with the added spice of Europe potentially falling apart as internal divisions widen.

I referred to this before, but one of the consequences of Brexit uncertainty is resulting in Storage costs soar as Brexit stockpiling leads to shortage of warehouse space (The Guardian, Sarah Butler) as 75% of UK warehouse owners say that their space is full and that storage costs have shot up by 25% in the last three months, according to the latest stats from the UK Warehousing Association (UKWA). A survey by the Association shows that 85% fielded Brexit-related inquiries and about 75% were unable to take on more business from new customers. UKWA chief exec Peter Ward said that “We are facing a perfect storm in the warehousing and logistics industry” because, on the one hand, demand is increasing (especially from online retailers) due to Brexit. On the other hand, from the warehousing point of view, the supply of new warehousing space has slowed down because urban land has been prioritised for homebuilding and staffing is becoming an issue as workers from eastern Europe continue to abandon the UK – all of which has contributed to the cost of providing the space. * SO WHAT? * Warehousing companies will be making a ton of money at the moment and will continue to do so at least until the uncertainty subsides.

All of the current macro difficulties have meant that a lot of the leaders of the world’s major economies won’t be in attendance at the World Economic Forum in Davos as per Domestic crises force world leaders to skip Davos (Financial Times, Chris Giles and Andrew Edgecliffe-Johnson) which says that Trump pulled out more than a week ago as he’s grappling with the government shutdown, Theresa May won’t be donning her snowboarding attire as she’s dealing with Brexit, France’s President Macron is still dealing with the gilets jaunes, and neither President Xi Jinping of China nor India’s Narendra Modi will be in attendance. * SO WHAT? * It seems to me that whatever is discussed there will have no bite at all as the world’s main players won’t be there, so it’ll all be more of an academic exercise than it normally is.

Mike Ashley looks like he wants to add to his “Retail Bag of Cr@p” with HMV and Patisserie Valerie’s future continues to look shaky…

Ashley circles HMV in fresh move to add to his empire (Daily Telegraph, Ashley Armstrong, Lucy Burton and Jack Torrance) shows that the canny Sports Direct chief Mike Ashley is looking to bag a bargain in the January sales as it turns out that he’s in proper talks to buy the business out of administration, having lodged a formal offer last week. * SO WHAT? * Well Ashley certainly likes a bargain, but you do wonder if he’s going to bite off more than he can chew given that his House of Fraser acquisition isn’t going that well and that he’ll potentially be in the running to buy Debenhams. If he DOES buy HMV and Debenhams, 

however, he will have bought them for rock bottom prices and will actually end up with a lot of major prime real estate space and brands/infrastructure. In theory, he could cherry-pick all the best bits, collect rent as a landlord for the bits he doesn’t want and cut the fat off the rest. All joking aside about his penchant for buying cr@p, if he played it right he could have some of the ingredients to make something really special – or he could just sell bits off at a massive profit if he wants to see a quicker return. It’s going to be really interesting to see what he does.

Patisserie waits to hear if trading can go on (The Times, Tabby Kinder) chronicles the ongoing debacle at Patisserie Valerie as the company is to be told today if it will be able to continue trading as talks between its chairman, Luke Johnson, and the company’s banks are to come to a head regarding the extension or not of loan facilities. Tough times for the employees and nervy times for shareholders who bought into the deeply discounted £15.7m placing in October.

Huawei gets gloomy…

Further to the bashing the company is getting from all sides, Huawei chief warns of job losses amid 5G security concerns (Financial Times, Kathrin Hille) is hardly surprising as founder and chief exec Ren Zhengfei acknowledged that forecasts will have to be revised given

the massive moves made by whole countries against the involvement of his company in their 5G expansion programmes. Things sound ominous for his workers as he said that “Things went too smoothly for us in the last 30 years. We were in a phase of strategic expansion, our organisation expanded in a destructive way. We have to review carefully if all geographical subsidiaries are efficient…In order to achieve overall victory, we need to conduct some organisational streamlining”. Sounds like a lot of imminent job losses…

And finally, in other news…

I thought I’d leave you with an unusual idea from Bristol University today in Students offered bubble wrap to help calm their nerves (Metro, Richard Hartley-Parkinson https://tinyurl.com/y8qcpwpy). Hmm. Something tells me that won’t quite be enough for most people…

1. In MACROECONOMIC NEWS, Germany raises Brexit concerns and Japan’s economic data looks dodgy
2. In TECH NEWS, Germany looks at shutting Huawei out of 5G and Apple supplier TSMC expects a slowdown
3. In CONSUMER/RETAIL NEWS, credit card borrowing looks likely to fall while retail gloom continues with a £1 shopping centre and N Brown but Primark provides some cheer
4. In INDIVIDUAL COMPANY NEWS, Hitachi shelves the Welsh nuclear plant, Netflix announces new highs for a subscriber increase, Whitbread slims down to being a hotel operator, Lotus starts production in China and Morgan Stanley misses the boat
5. In OTHER NEWS, I bring you some funky ramen. For more details, read on…

So Germany gets antsy about Brexit and there’s a flaw with Japanese economic data…

Prepare for post-Brexit trade rupture: German business leaders (Daily Telegraph, A Evans-Pritchard) signals concerns over in Germany about Brexit. Dieter Kempf, head of the German Federation of Industry (BDI), warned that “A chaotic Brexit is now getting dangerously close to happening…our companies are looking into the abyss”. Clemens Fuest, head of the respected IFO Institute in Munich said that “Both parties should now return to the negotiating table and modify the agreement so that it is acceptable to all sides”. * SO WHAT? * Given that Germany accounts for over half of the EU’s £95bn goods surplus with the UK and that our market is its most profitable market for their cars (with profit margins way above those in China), you can understand why they aren’t looking forward to the prospect of this profit tap being turned off in ten weeks. Having said that, there is no indication of a softening from the European side and neither side will want to look like they’re giving too much away.

Still, if rumblings like these spread, this may create some wiggle room for the current agreement.

Simple statistical error puts Japan economic data in doubt (Financial Times, Robin Harding) is probably a bit of a storm in a teacup but worth mentioning as errors have been found with the nation’s wage data going back to 2004. Basically, wages have been understated because 20 million people have not contributed enough to their unemployment insurance.  * SO WHAT? * This has rocked the establishment and revealed cracks in the way Japan collects data as this revelation comes shortly after a sizeable gap between GDP data sources was highlighted. The problem stems from the fact that Japan’s stats come from a variety of sources that come up with different conclusions. At the end of the day, the current shortfall is marginal, but if they get people to pay higher contributions now to make up for it, this could end up curbing individual spending power until it gets paid back depending on how quickly the government wants to get repaid. Fortunately or unfortunately, depending on how you look at it, Japanese wage growth has been incredibly sluggish in this time period so at least this means that the amounts involved should be manageable.

Germany is the latest country to give Huawei a good kicking and TSMC announces a downbeat outlook…

Germany looks to ban Huawei from 5G (Financial Times, Guy Chazan and Robert Wright) shows that Germany is joining the US and UK in making moves to stop (or at least, severely limit) China’s Huawei from supplying its next generation mobile phone network. Spectrum licences are going to auction this spring and telecoms companies will need to know who they can or can’t deal with to build the network, so this is a crucial development. * SO WHAT? * This is a significant move and represents a major U-turn for Berlin, which has thus far been more circumspect in the face of US ranting about Huawei. The main issue here is that there are increasing concerns that Chinese groups – such as Huawei – could be ordered by Beijing’s intelligence services to build back doors in their systems so that they can access sensitive information. This is turning out to be 

a major headache for the company – and it looks like it will get worse.

Apple chipmaker TSMC sees slower growth ahead (Financial Times, Edward White) continues the downbeat newsflow relating to Apple these days as the company that supplies core processor chips for the newest Apple and Huawei smartphones is projecting a major fall in revenue growth for the first quarter of 2019. TSMC’s chief exec CC Wei highlighted a sudden drop in high-end smartphone demand, a dramatic fall in demand for chips used in cryptocurrency mining and a worsening global growth outlook as factors behind the projected 22% fall in revenues versus the previous quarter. * SO WHAT? * Both Apple and Samsung Electronics have recently blamed a China economic slowdown for downbeat forecasts, but I would also add that punters are getting jaded with smartphones that are increasingly expensive whilst only offering incremental improvements as well as a broader economic slowdown in Europe. As I have said before, I don’t think 5G is really going to make much meaningful difference this year BUT if bendy phones are released by mainstream manufacturers, consumers may be tempted to upgrade once more and break out of this smartphone rut.

Credit card borrowing looks set to fall while there are more retail woes (apart from Primark)…

Credit card borrowing looks likely to fall following big drop in mortgage lending (The Guardian, Richard Partington) cites Bank of England statistics which predict that borrowing on credit cards will fall to their lowest levels since 2007 as households try to cut borrowing as we head into the uncertainty of leaving the EU. The figures also point to further weakness in mortgage lending as banks prepare for a no-deal Brexit. Unfortunately, it is looking very much like this period of limbo could be extended into the middle of 2019 given the various defeats the government has suffered on Brexit-related votes. * SO WHAT? * The Bank of England has been trying to reduce debt levels over the last year or so as flexing the plastic has resulted in borrowing surpassing levels last seen before the financial crisis. However, the problem is that if the pendulum swings too far the other way that it starts to have a negative impact on economic growth as people just stop spending.

Doom and gloom continues with £1 shopping centre highlights retail crisis (The Times, Patrick Hosking and Greig Cameron) highlighting a Scottish shopping centre in Kircaldy being put up for auction for an eye-catching reserve price which some are saying is another nail in the coffin for UK retailing. As Miles Gibson, of property consultant CBRE put it, “It’s an extreme case. It’s the first time I can remember a starting price so low for a property of this type. But it is symptomatic of the difficulties facing the sector”. Lord Oakshott was even more dramatic about

it when he said “This is stark evidence that many shopping centres are obsolete in their current use. Frankly, many have a negative value”. The mall (called The Postings) has suffered from the ongoing onslaught of online retailing as well as competition from a more modern and attractive local rival called the Mercat (simples!). * SO WHAT? * I think this is just a one-off and, by the sounds of things, this place is in need of a decent revamp/complete redevelopment. Still, the price is eye-catching and may serve as a warning to other landlords of ageing shopping malls.

In other retail news bits today, Ignoring web sales helps Primark to buck high street trend (The Guardian, Sarah Butler) heralds some good news for the UK’s biggest clothing retailer (in terms of volume) as it managed to increase sales whilst reducing discounting over Christmas by focusing on its shops and continuing to stay away from the internet (it still doesn’t sell online). John Bason, FD at Primark’s owner Associated British Foods, cited a combination of low prices, good stock control and individual fashion hits as being the main factors behind its success. He added that “Not having the cost of servicing home delivery does allow us to have these lower price points. I know people love the convenience of that but the cost around it is massive”.

However, Shine comes off plus-size retailer (The Times, Deirdre Hipwell) brings retail back down to earth with N Brown (the owner of brands such as Jacamo, Simply Be and JD Williams) reporting a tough festive season. Shares in the company fell by 12% on the news as the market digested news of its particularly weak catalogue-focused business, which includes Marisota, Figleaves and High & Mighty.

Hitachi abandons its Welsh nuclear plant, Netflix announces solid subscriber growth, Whitbread slims down, Lotus starts production in China and Morgan Stanley misses the boat…

Hitachi pulls the plug on £16bn Welsh nuclear plant (Daily Telegraph, Jillian Ambrose) puts a big question mark over the future of UK energy as the Japanese conglomerate decided to abandon the £16bn Wylfa Newydd plant that would have supplied around 6% of the UK’s electricity. This comes only three months after plans to build a £15bn nuclear power station at Moorside in Cumbria collapsed. * SO WHAT? * Something drastic needs to be done here either by burning more fossil fuels in the short term and/or upping the spending considerably in terms of renewables – but I suspect that this will just get put on the backburner for the moment given Brexit…

Netflix reports paid customers rise on strength overseas (Wall Street Journal, Joe Flint and Micah Maidenburg) shows that the company managed to add 8.8 million paying subscribers in the final quarter of 2018 exceeding both their own and analyst estimates. * SO WHAT? * This is great, but investors are getting increasingly worried

about the sums of money they are spending on content and the impact on revenues and profits.

Whitbread’s stalling profit takes shine of shares payday (Daily Telegraph, Oliver Gill) highlights Whitbread’s first major announcement since selling its Costa Coffee business to Coca-Cola. Whitbread looks rather different now than it used to when it was once simultaneously a brewer, restaurant owner, gym operator, pizza franchise and coffee barista with now just the hotels business, Premier Inn, remaining. Detractors think that it is now a one-trick pony that will suffer more according to the vagaries of the wider economy as demand tends to move in line with it and that it could now be vulnerable to takeover given that it is now only in one area.

Further to what I was saying yesterday about foreign companies overexpanding into a weakening China market, Lotus to start production in China under new owner Geely (Financial Times, Sherry FEi Ju and Tom Hancock) sounds like a good move (it’s the first “prestige” brand to have production in China) with bad timing (falling vehicles sales overall) and Poor Morgan Stanley results end Wall Street winning streak (Financial Times, Robert Armstrong) shows that the US bank didn’t manage to join the banking fun bus I mentioned yesterday due to the lack of a consumer banking business and weak trading revenues.

And finally, in other news…

Although most of us can’t get to this place easily, I thought I’d share this with you because it looks really amazing: A glow-in-the-dark ramen shop makes food that looks like something out of an alien world (Insider, Lucy Yang https://tinyurl.com/y9ua8plq). I hope you have a great weekend!

1. In MACROECONOMIC NEWS, the US government shutdown continues to bite and the Chinese government splashes the cash to boost the economy
2. In UK CONSUMER/RETAIL NEWS, inflation and house prices weaken and we see more retail winners and losers
3. In CAR NEWS, sales in China and Europe slow down
4. In INDIVIDUAL COMPANY NEWS, US banks defy downbeat forecasts, Fiserv takes on First Data and Niantic gets a chunky valuation
5. In OTHER NEWS, I bring you some Marie Kondo chat. For more details, read on…

So the US shutdown bites and China tries to stimulate its economy…

Government shutdown begins to harm US economy (Financial Times, Sam Fleming and Brooke Fox) highlights the knock-on effects the shutdown is starting to have on the broader US economy after four weeks of impasse. White House economists believe that the effect of work not being carried out by 380,000 federal workers will cut around 0.08 of a percentage point off GDP per week and the loss of work by federal contractors will cut an additional 0.05 percentage point. Employment and payroll data will also be affected as federal employees stuck at home not getting paid could be classified as unemployed. Furthermore, a study published by the Scott Baker of Northwestern University’s Kellogg School of Management and Constantine Yannelis of NYU Stern School of Business points to a 10-15% drop in consumer spending by federal workers who went unpaid when a shutdown occurred in 2013. * SO WHAT? * The rather obvious conclusion of all this is that a prolonged shutdown is a bad thing – not just for the workers themselves, but for the wider economy as

services provided by the US government go downhill and businesses and individuals lose confidence (although I’d argue that this bounces back if everything else remains the same). It does call in to question, though, the government’s ability to lead. At least the economy is doing well – this will give Trump some breathing space although I’m not sure how many more official dinners he can hold serving up fast-food burgers and pizza to his guests ???? (if you don’t know what I’m talking about, have a look at this story from The Mirror https://tinyurl.com/ybhl9ge9)

China injects record $84bn to boost economy and avoid cash squeeze (Financial Times, Gabriel Waldau) shows some pretty punchy action by the Chinese government as the country’s central bank injected $84bn into the country’s banking system to boost liquidity and promote increased lending in its flagging economy, according to data released on Tuesday. * SO WHAT? * Although authorities have been keen to implement measures to boost the economy, People’s Bank of China officials have tried to calm expectations of a repeat of monster stimuli in 2008-10 and 2014-15 that ended up leading to massive increases in debt levels – which they have been trying to clear ever since. It’s all a question of getting the balance right – and this is easier said than done!

Inflation and house prices get weaker and we see more winners and losers on the high street…

There’s some good news for the consumer as Inflation hits two-year low as petrol prices fall (The Times, Gurpreet Narwan) cites Mike Hardie, head of inflation (interesting job title!) at the Office for National Statistics saying that “Inflation eased mainly due to a big fall in petrol, with oil prices tumbling in recent months. Air fares also helped to push down the rate, with seasonal prices rising less than they had last year”. House prices falling at fastest rate for six years (The Guardian, Julia Kollewe) will be good news for buyers but less good for sellers as figures from the Royal Institution of Chartered Surveyors (Rics) show the effect of Brexit uncertainty on the housing market as we face the worst outlook for sales in twenty years. Lack of supply and affordability were also cited as reasons for the current weakness, but people sitting on their hands ahead of Brexit is clearly the biggest factor.

Meanwhile, the high street continues to be an eventful place to be what with Patisserie Valerie books skewed with ‘thousands of false entries’ (The Guardian, Sarah Butler) showing how not to do your financials and getting

deeper into trouble and Clarks’ UK shoe-making to get boot for second time (Daily Telegraph, Alan Tovey) giving us yet more evidence of problems with anything to do with shoes in this country (shoe retailers have been having a ‘mare over the last year or so haven’t they!) as it shuts down a cutting-edge manufacturing facility less than two years after opening it.

On the plus side, The Works issues first dividend as record sales buck retail trend (Daily Telegraph, Ashley Armstrong and Charlie Taylor-Kroll) heralds some good news for the small arts and crafts retailer with 484 stores across the country and more to come this year as sales rose by 15% in the six months to October 28th. It is continuing to make efforts to expand its online offering with a recent rebrand to TheWorks.co.uk but only 10% of its sales are made online, with 40% of those being collected in stores. Also, Superheroes are the stars at Cineworld (The Times, Dominic Walsh) highlighted a strong full-year trading update with revenues up by 7.2% and box office takings up 5.8%, in line with expectations. * SO WHAT? * Reasonably priced experiences continue to be key to attracting customers IMHO. The Works features interesting product at low prices and cinemas provide a cheap-ish way of forgetting about Brexit for a couple of hours.

…and there’s more doom and gloom for car manufacturers in Europe and China…

Carmakers face cuts and gloom as China sales shift into reverse (Financial Times, Tom Hancock) talks about the difficulties facing the automotive industry after three decades of stellar growth as shrinking car sales dent their profitability which is likely to lead to production cuts, job losses and a price war that is likely to spread around the world. Bernstein analysts warn that “if we don’t get a large and determined policy response – and we’re talking a big macro stimulus, not just a tax cut on cars – then the industry is going to need to make substantial production cuts” and Michael Dunne, an industry consultant and ex-GM exec also suggested that “The shift we saw last year takes us into uncharted territory. Everyone will be super-

focused on how to adjust because they don’t want to be left with too much inventory”. * SO WHAT? * Foreign brands that have been investing like crazy in the world’s biggest car market look increasingly likely to get caught with their pants down as many have been announcing big investments in production recently – with Ford, VW and JLR being cases in point. It’s looking more and more likely that China will start to become a drag rather than a boon, although car sales elsewhere aren’t going to be up to much either for the foreseeable future.

European car sales suffer first annual drop for five years (Daily Telegraph, Alan Tovey) piles on the misery for the car industry as the latest data from the European Automobile Manufacturers’ Association shows that registrations of new vehicles fell in December for the fifth month in a row (by 8.6%) bringing the annual sales number fractionally lower than the previous year and marking the first fall since 2013. The trade body blamed bottlenecks in supply as manufacturers tried to get their cars certified to the new WLTP standards.

US banks buck the trend, Fiserv buys First Data and Niantic gets a chunky valuation…

In financials news today, Goldman leads rebound as US banks defy gloomy forecasts (Financial Times, Laura Noonan and Robert Armstrong) highlights better-than-expected fortunes of Goldman Sachs and Bank of America as investors appeared to have underestimated the health of the real economy and the strength of their banks. Citi and JP Morgan Chase also announced strong performances although their bond trading revenues were down.

Payments processor Fiserv to buy rival First Data in $39bn deal (Financial Times, Eric Platt and James Fontanella-Khan) identifies a major deal as Fiserv has agreed to buy a rival in an all-stock purchase valuing the company at around $39bn, making it one of the biggest financial services deals in the last ten years – the only one bigger

than this was PayPal’s spin-off from eBay in 2015. * SO WHAT? * This is part of the wave of consolidation in the payments industry between traditional financial services providers looking for new exciting areas of business and tech groups who need money. The offer represents a 30% premium to First Data’s closing price on Tuesday.

Elsewhere, Pokemon Go game-maker Niantic valued at $4bn in funding round (Daily Telegraph, Margi Murphy) shines a light on the company behind Pokemon Go which is due to launch a hotly-anticipated Harry Potter game later on this year. The company managed to get a $245m investment in its latest funding round, making it one of the largest investments in augmented reality so far and giving the company behind it the equivalent valuation of $4bn. The money will be ploughed into AR, machine learning and building its “real world platform” which powers its games and will be made available for other developers to use. * SO WHAT? * Making a follow-up to a major games hit is an extremely tricky business – as many companies will attest to. However, I think that making its platform available to other developers in future is a great idea and may give this company better prospects of long-term survival.

And finally, in other news…

In case you haven’t yet noticed, there’s a bit of a kerfuffle going on at the moment with an unassuming Japanese lady called Marie (pronouned “marry-eh”, with the “eh” as in “festering”) who is to tidying what Mary Poppins is to childcare. Have a look at what effect she’s having on America in Marie Kondo’s Netflix series inspires a national decluttering frenzy (The Denver Post, Jura Koncius https://tinyurl.com/y8kebrhx) and further discussion of whether it all works in Marie Kondo – does tidiness really equal a clean mind? (BBC, Flora Drury https://tinyurl.com/y7kdpaj3). So now you know!

1. In MACROECONOMIC NEWS, we see what’s next for Brexit and that Germany only just avoids recession
2. In RETAIL NEWS, India tries to protect the Davids against the Goliaths and we look at more UK retailing winners and losers including Boohoo and Games Workshop with good news and M&S and Paperchace with bad
3. In CARS NEWS, Ford and VW announce a tie-up and Volvo buys into a wireless charger
4. In INDIVIDUAL COMPANY NEWS, Netflix hikes its prices (but not in the UK)
5. In OTHER NEWS, I bring you expensive cauliflower “steaks” and aphrodisiac crisps. For more details, read on…

So May’s Brexit plan gets the boot and Germany avoids recession…

Theresa May’s Brexit plan falls by 230 votes (Financial Times, George Parker, Laura Hughes and Michael Peel) heralds a rather tricky ending for a deal that was two years in the making as the House of Commons rejected it by 432 votes to 202, making it the biggest defeat inflicted on any government. Jeremy Corbyn immediately tabled a vote of no confidence in the government but May is expected to win the vote tonight because neither the Conservatives nor the Democratic Unionists want a general election. May has until Monday to come up with another plan and announced immediate talks with senior MPs from all sides to decide exactly which changes would win the Commons over. At the moment, Europe is not keen on offering much in the way of concessions and all sorts of possibilities are being mooted. There were suggestions that the government is “running down the clock” until March 29th in order to pressure MPs to change their mind, that Article 50 exit

process could be extended (but that is unlikely unless there is a clear alternative plan in place) and that May could start to try to test a number of different Brexit options to see what would actually fly in the Commons in addition to all the usual stuff like a second referendum, a Norway-style economic partnership or a permanent customs union. The saga continues…

Germany ‘narrowly avoids’ recession as economy slips (Daily Telegraph, Anna Isaac) cites the latest data from the Federal Statistics Office which show that although Germany had its worst economic performance for five years in 2018, it managed to avoid recession thanks to a smidgen of growth in the final quarter. The country, which is Europe’s largest and the world’s fourth largest economy, appears to be slowing down across the board with weakening consumer spending (despite low unemployment and higher wages), sluggish exports due to trade wars and lower global trading volumes. Given the current leadership limbo and prospects of a further hit to Germany’s car industry if Brexit goes ahead, 2019 isn’t looking great right now.

India makes moves to protect smaller retailers and we see more winners and losers amongst UK retailers…

India’s ecommerce crackdown upends big foreign players (Financial Times, Simon Mundy) highlights efforts by Indian Prime Minister Narendra Modi, four months before the general elections, to address complaints by mom-and-pop-shops who feel they are getting unfairly undercut by the likes of Amazon and Walmart-owned Flipkart. New restrictions announced late last month will come into force next month which state that no seller on foreign-funded online marketplaces can get more than 25% of its inventory from a wholesaler linked to the marketplace (a loophole used by the giants thus far to buy in bulk and sell at a loss by using their respective massive balance sheets) and that no entity will be allowed to sell on these marketplaces if any of its equity is owned by the marketplace or by any of its group companies. * SO WHAT? * This is going to be a headache for the likes of Amazon and Flipkart because they are likely to get lumbered with a lot of inventory in the short term, plus this rule change moves the goalposts for them considerably making it harder for them to operate freely in this potentially enormous market. On the flip-side, this is likely to benefit local companies such as Reliance, which operates the country’s biggest retail chain, and Snapdeal, which is an online marketplace for small vendors. As the latter’s co-founder Kunal Bahl, pointed out, “If they were providing great pricing while generating a profit, it would be a different conversation. But everyone knows that these companies are haemorrhaging cash while giving out all these promotions, and at some point they’ll want to pull this back. They’re not charitable organisations”. Walmart bought Flipkart for $16bn last year while Amazon committed $5bn to its Indian operation, so this is a big deal for both companies. Their plan of squeezing out the locals by charging artificially low prices appears to have backfired in spectacular fashion.

What recent trading updates reveal about UK retailers’ health (Financial Times, Jonathan Eley) does a good roundup so far of the winners and losers on the UK high street and it starts off with the conclusion that, overall, the reality has been a lot less gloomy than everyone had been expecting – although spending has been driven largely by discounts. Generally speaking, retailers that were already looking shaky continued along the same lines (e.g. Debenhams, Mothercare, Halfords and Footasylum) although DFS and Dunelm managed to turn things around a bit. Those at the top of their respective markets, such as Selfridges and Fortnum & Mason did well from tourists bagging bargains because of the weak pound and even Ted Baker managed to shrug off pre-Christmas concerns over its founder’s alleged behaviour towards employees. Most recently, Boohoo bucks trend with jump in revenues (The Times, Deirdre Hipwell) and Record Games Workshop sales cheer investors (Daily Telegraph, LaToya Harding) are further examples of retailers doing well whereas M&S deals latest blow to high street with closure of 17 stores (The Guardian, Zoe Wood) – the equivalent of one in three of its main stores selling clothing, homewares and food in the same shop – and Paperchase hires advisers KPMG for store closures (Daily Telegraph, Ashley Armstrong) are two examples of retailers who are feeling the pinch. It sounds like Paperchase is considering a Company Voluntary Arrangement (CVA) but there has been no official confirmation of this. * SO WHAT? * Consumers are spending less overall, but it seems that Christmas wasn’t actually as bad as everyone expected and those who did well saw chunky rises in their share prices as a result (as per what I said last year). The whole sector got mullered, so winners stood out. Anyway, IMHO, now would be a great time for retailers to “kitchen-sink” their problems (i.e. bunch them all together and get rid of them) and do some major strategic overhauls because they can blame everything on the currently sluggish consumer and Brexit uncertainty. If things turn up unexpectedly, then they will have a cushion to implement new measures, but if they go bad at least they will be doing something about it – and pronto! At the end of the day, consumer behaviour and tastes are changing and so I think that senior management will be much more open to radical change than they otherwise might be.

Ford and VW team up and Volvo invests in wireless vehicle charging…

Ford and Volkswagen pair up in face of technological revolution (The Guardian, Dominic Rushe) heralds a new alliance between the two companies who will share resources on autonomous vehicles, mobility services and electric vehicles. This alliance would be the largest of its kind in the industry and Ford CEO Jim Hackett even suggested that VW could be building Ford-branded cars in Europe. * SO WHAT? * Both companies are having a hard time (as are other car manufacturers) what with sales slowing down globally and the cost of meeting tighter regulations. Both of them have electric ambitions and it seems like a reasonable idea to pool their resources to find what works. I suspect that there will be more alliances – and maybe even mergers – to come as auto 

manufacturers collectively brace themselves for sea-changes in their industry in terms of product and trends in car ownership.

Sweden’s Volvo invests in wireless vehicle charging company (Financial Times, Kate Beioley) highlights the announcement that Volvo is investing in Momentum Dynamics, a high-power wireless charging company, as it continues its efforts in the electric vehicle market. The Philadelphia-based company develops high-power wireless charging systems for trucks, buses and construction equipment. Systems currently in development by other manufacturers include BMW and Daimler’s induction pads, which can be installed in conventional garages, whilst Renault is looking into under-road charging which works via pressure points in the road which detect the vehicle and pass electricity up into the car, charging it as it moves. * SO WHAT? * This all sounds great, but I suspect that we are years away from any of them becoming reality. In the meantime, charging networks need to see exponential improvement (although I would say that wireless charging should help that enormously) in order for electric vehicles to get wider adoption.

Netflix ups its prices…

Netflix slaps biggest ever price increase on US subscribers (Daily Telegraph, Margi Murphy) heralds subscription price hikes of 18% for its “unlimited”

streaming package from $11 to $13 a month, with its cheapest service price rising from $ 7 a month to $8. A company spokesman said that “Price increases are specific to each country and the US increase does not influence or indicate a price change in the UK”. Phew! Netflix is due to publish its fourth quarter results tomorrow.

And finally, in other news…

Someone is clearly taking the p!ss here in Pub chain ridiculed for selling two cauliflower steaks for £28 during Veganuary (The Mirror, Natalie Evans https://tinyurl.com/ycpffm9v) as punters are given the choice of paying £28 for two Aberdeen angus sirloin steaks with chips or two CAULIFLOWER “steaks” with mash, mushrooms and tomatoes. Hilarious.

AND FINALLY, here’s an idea for something classy on Valentine’s Day: Aphrodisiac crisps are now a thing – and they have ‘provocative’ effect on body (The Mirror, Courtney Pochin https://tinyurl.com/yclws9cf). We all know that nothing says “I love you” more than a bag of (limited edition) crisps ????

1. In MACRO AND MARKETS NEWS, China and Eurozone growth declines whilst Brazil’s markets mask deeper woes
2. In UK HIGH STREET NEWS, JD Sports has a cracker, Revolution has a profit warning and New Look faces a painful recovery
3. In INDIVIDUAL COMPANY NEWS, Netflix expects and Continental voices concerns
4. In OTHER NEWS, I bring you raining spiders and a baby with big hair. For more details, read on…

So China and Eurozone growth weakens whilst Brazilian markets hide deeper problems…

Fears grow for global economy as China and eurozone suffer decline (The Guardian, Richard Partington) highlights official figures showing Chinese exports were down by 4.4% in December – the biggest drop since 2016 – on weakening demand and Eurostat data showing that eurozone industrial output fell by 1.7% in November and 3.3% over the year. The Organisation for Economic Co-operation and Development (OECD) also warned that most of the world’s major economies are showing signs of slowing down, with French and British growth slamming the brakes on the hardest. It also said that its leading indicators showed slowing growth in the US, Germany, Canada, Italy and the euro area. * SO WHAT? * There certainly seems to be increasing momentum behind figures indicating a downturn. As I have said before in Watson’s Yearly, I believe that this trend could turn around dramatically if the US and China hammered out a 

solution on trade and if the UK did NOT leave the EU (I’m not saying that as a Remainer, I’m saying that in the belief that markets – and the EU itself – would breathe a MASSIVE sigh of relief if we didn’t leave because of the major hassle it will cause for years to come). 

Brazil’s soaraway stock market masks deeper troubles (Financial Times, Jonathan Wheatley) shows how the joy that has met Jair “Tropical Trump” Bolsonaro’s accession to the presidency has translated so far into the real being the best-performing currency of 2019 and Brazil’s Bovespa stock market hitting a number of record highs. Despite this recent fillip, the currency is still around 60% below its dollar value in mid-2011 and Brazilian stocks are still worth less than half their level just before the financial crisis hit, so there’s still a lot of room for upside. * SO WHAT? * He’s taking the plaudits at the moment but the fact is that new measures have been announced and retracted and there are reports of in-fighting among senior ministers. For the moment, Brazil appears to be gripped in a Bolsonaro honeymoon, but reality will hit when he tries to sort out welfare and other reforms. Here’s hoping! Many will be looking to what he comes up with after the congressional recess in February.

JD Sports has a strong showing, Revolution Bars has a shocker and New Look’s recovery is looking painful…

In JD Sports shows rivals a clean pair of heels (The Times, Deirdre Hipwell) we see that the UK’s biggest sportswear retailer dodged the retail gloom and benefited from strong sales from Black Friday and the holiday period. The other good news was that it had managed to protect its margins by not having to do too much discounting and upgraded its profit outlook. * SO WHAT? * This is a great performance against a difficult backdrop and stands in stark contrast to rivals such as Footasylum, which had its third profit warning in 14 months last week, and Sports Direct, whose chief exec Mike Ashley was quoted as saying that November trading had been “unbelievably bad”. Its strength in the British athleisure market and overseas expansion have helped to double revenues over the last three years.

Having said that, there’s still plenty of high street gloom to go around as Revolution Bars’ profit warning sparks investors’ flight (Daily Telegraph, Chris Johnston) highlighted poor performance that led to the shares

tanking by 20% in trading yesterday. Although there was an increase in sales in December, they were down by 4% over the 26 weeks to December 29th. However, rivals Greene King and Stonegate did way better in the same timeframe. * SO WHAT? * It just goes to show that even in this tricky economic backdrop, it IS possible to make money – as other operators have shown. Stonegate must be glad it dodged a bullet as it put in an offer for Revolution at 203p per share over a year ago that was rejected. Revolution’s share price was 96p yesterday. The good news is that its new format Revolution de Cuba is trading well, so things may yet improve.

Pain for investors in New Look survival plan (The Times, Deirdre Hipwell) shines a light on New Look’s woes as it tried to address its massive debt pile after a poor Christmas and a profit warning. The company said that it agreed a debt-for-equity swap with its lenders, taking away majority control from its South African owner (Brait SA) in a bid to stay alive. New Look has had a bad three years through a combination of stiffer competition, buying too much of the wrong stock and losing focus of its core customers. Good luck, New Look – it looks like you’re going to need it!

Netflix is surfing a wave and Continental gets gloomy…

Netflix earnings aim to show “Bird Box” effect pays off (Financial Times, Anna Nicolaou) looks ahead to Thursday, when Netflix announces its fourth quarter results to investors on the back of a very successful Christmas period where it released what turned out to be a blockbuster in Bird Box (that even spawned a rather dangerous #BirdBoxChallenge) and put in a decent showing in the Golden Globes. Netflix spent an estimated $13bn on content in 2018 in its ongoing bid to chase subscriber and revenue growth and we’ll soon see whether it is worth the hype. * SO WHAT? * It’ll be interesting to see how Thursday works out. I think that it’s all about subscriber growth at the moment and as long as Netflix 

continues to knock it out of the park on that front, investors will keep cheering it on and ignore the increasingly massive amounts of money it is spending. Competition will be increasing not only from Amazon, but also from new kids on the block Disney, Apple and AT&T, so things could get interesting (and probably even more expensive). 

Continental piles on the misery (The Telegraph, Alan Tovey) confirms tough times for the car industry as the world’s #2 supplier of vehicle parts and tyres forecast weak demand for at least the first half of the year. The German company had two profit warnings last year and yesterday continued to paint a downbeat picture of the immediate future as its CFO, Wolfgang Schafer said that “The main reasons are continued weak demand in China, the trade dispute between the US and China [and] general uncertainty around Brexit”. * SO WHAT? * This just confirms the overall mood in the automotive sector at the moment as Continental is seen one of the main bellwethers of the industry given that it supplies everyone.

And finally, in other news…

I sent you something creepy last week on spiders – so I thought why not send you something else this week that might freak you out as well ????????. Have a look at ‘Spider raining’ in Brazil leaves student who filmed phenomenon “stunned and scared” (The Mirror, Amber Hicks https://tinyurl.com/ybnq9axz). This gives me the heebie-jeebies.

AND FINALLY, the following is bizarre but in a different way. Check out the impressive hair on this little girl: Baby Chanko: Internet hair sensation becomes face of Pantene (Sky News https://tinyurl.com/y6ulacvj). Presumably “because she’s worth it”. Amazing!

1. In MACROECONOMIC NEWS, we look at the latest options for Brexit and an update on UK employment
2. In CAR NEWS, India rises up the rankings and VW has its eyes on the China prize
3. In REAL ESTATE NEWS, a landmark case could cause chaos in the UK and mortgage rates are set to rise
4. In INDIVIDUAL COMPANY NEWS, Apple’s TV moves could be too little too late and a Debenhams recovery could see come big cuts
5. In OTHER NEWS, I bring you things to do whilst waiting for your flight and an “anger room”. For more details, read on…

So we look at the latest options for Brexit and changes in UK employment…

There is, understandably, a whole lot of noise going on about Brexit at the moment, but I think that Plan B options narrow ahead of historic vote (Financial Times, George Parker and Henry Mance) does a decent job of giving us the current lowdown with an overview of some of the main options. At the moment, it’s looking like Theresa May is facing heavy defeat in this week’s House of Commons vote on her withdrawal agreement, so here are some current options on the table: No-deal Brexit – which is widely seen to be the least appealing option, but is backed by an estimated 80-100 Eurosceptic Conservative MPs, and would mean departing the EU with no agreement and the prospect of restarting the relationship with the bloc from the outside. It would use the recent EU-Canada trade agreement as a template and work from there. The problem with this option for Conservative Eurosceptics is that the pro-EU House of Commons has shown it will probably block a no-deal Brexit meaning that May’s deal is – in practice – the best they’re going to get; a second referendum – aka the people’s vote (what a load of BS – what was the first one then?!? Remember, 75% of the House of Commons voted for Remain, so the first referendum was very much a people’s vote) – which Remainers hope will reverse the 2016 victory for Leave. Opponents say that it flies in the face of democracy as it will, in effect, ignore the result of the first one. It’s also not clear whether this would get a majority in the Commons. Having said that, if May’s withdrawal agreement gets voted down, more people would get on board with the idea of a second referendum. Some say that this option currently has 150-180 MPs in support across all parties and that this could rise to 210 – but they will need more than 300 to get a Commons majority. Corbyn has so far not shown any interest in this option or to reverse the decision to leave; Norway-plus/customs union – one of the more popular “soft Brexit” options where Britain would stay in the EU

customs union, its single market or both. Opponents of this option say that this would make a mockery of Brexit and would mean that we have to obey Brussels whilst having less say in the rule-making. One other option that is being mooted by some is having a general election. FWIW, although Labour would love to do this, I don’t think the Conservatives will and I’m not sure how popular this option would be to the British public. To my mind, all it would do re Brexit would be to kick the can even further down the road and cause even more delay and uncertainty. However, you never know…

South Yorkshire tops jobs growth table as low-employment regions catch up (The Guardian, Richard Partington) cites a report from the Resolution Foundation thinktank which shows how employment has changed since the financial crisis in 2008. South Yorkshire and Merseyside recorded the strongest levels of jobs growth during this period and the report also found that low-income households benefited more than higher-income ones. It contends that the current record national employment rate of 75.7% has been driven by lower-employment regions “catching up”. Having said that, it seems that the growth has been very much in the bigger cities, with the surrounding areas failing to keep pace. Also, the nature of work has changed with the advent of zero hours contracts and the gig economy which means that while the headline employment figures look good, job security is poor, especially for younger workers. Stephen Clarke, senior economic analyst at the Resolution Foundation, observed that “while the jobs surge has not been as dominated by London or low-paid work as some claim, new challenges have developed – particularly for younger workers and with a big rise in insecure work”. * SO WHAT? * This is quite interesting, but you have to take stuff like this with a massive pinch of salt as the organisation’s stated aim is to improve the standard of living for low and middle-income families. You are unlikely to ever see a report from the Resolution Foundation saying “hey, everything is fine – no dramas here”! I’m not saying that you shouldn’t believe it – it’s just that this organisation has an axe to grind and it is unlikely to publish a report that doesn’t fit in with its overarching beliefs or purpose. 

India overtakes Germany and VW targets China…

India displaces Germany to become fourth-largest auto market (Financial Times, Patrick McGee and Simon Mundy) heralds a big moment for India as momentum continues to build in sales of commercial and passenger vehicles helping it to overtake Germany and putting it on the road to being bigger than current world #3 Japan within three years, according to data from LMC Automotive and McKinsey respectively. It seems that there is huge market potential as Fitch estimates that car density – a measure of how many passenger cars there are per 1,000 people – was just 27 last year versus 145 in China and 570 in Germany. Fitch analyst Anna-Marie Baisden observed that “India has not really undergone the same kind of economic boom as China, which has created a consumer class ready to spend. Buying a car is about either a first car or a move up from a motorcycle. We are not seeing as much ‘status symbol’ buying”. * SO WHAT? * Clearly, the potential is enormous, but don’t you think that this current state of affairs sounds eerily similar to the problems being faced by Apple in India? In that case, smartphone penetration is miniscule – so the market potential is huge in theory. However, the average cost of an iPhone there is astronomical – and unless it manages to reduce this, it 

just won’t be able to get a piece of the action. The same is true in the car industry – and it has been holding back many manufacturers’ progress as a result. The company that DOES appear to be in pole position for any upswing, however, is Suzuki as it formed a joint venture with the Indian government in 1982 called Maruti Suzuki and now has a 54% market share in the country. Amazingly enough, Maruti Suzuki’s market cap is now $31.3bn – $5.6bn more than the Japanese parent company Suzuki Motor! The latter owns a 56% stake in the JV.

Volkswagen eyes the prize of electric sales in China (Financial Times, Patrick McGee) looks at the continued market potential in China since the size of its car market overtook America’s #1 spot in 2009 and is now on track for being almost twice as big. Even so, car density is still low – with Fitch estimating it to be 145 per 1,000 people versus 570 in Germany. * SO WHAT? * What is particularly exciting for VW, though, is that 60% of battery-powered electric vehicles sold globally in 2018 were sold in China – and this is a rapidly growing segment. The company is investing €30bn over the next five years on electric technology and by next year will have four factories specifically designed to manufacture a wide range of electric vehicles – two of which will be in China, where VW aims to have the widest range of battery-powered vehicles (30 different models within two years). For the moment, though, the company is suffering with China’s overall slowdown in car sales, so ambitions may have to be tempered for the time being.

One landmark case could spell disaster for UK real estate and mortgage rates are likely to rise…

Landmark case threatens property ‘disaster’ (The Times, Louisa Clarence-Smith) highlights what could be a very worrying development for UK real estate as there is a legal dispute going to court this week between the European Medicines Agency (EMA) and the Canary Wharf Group (CWG). The EMA, which is moving to Amsterdam after Brexit, is trying to get out of an office lease it signed in 2011 with CWG arguing that Brexit was an unforeseen event and so it should therefore be allowed to exit the 25-year lease for 10 floors of office space. CWG argues that EU membership has been contentious for a number of years and therefore something that the EMA should have considered. * SO WHAT? * Basically, if the EMA wins, this could open the floodgates for any UK-based business with big EU operations arguing that Brexit is a valid reason for nullifying their contracts. As Alison Hardy, partner and head of real estate dispute resolution at Ashurst put it, “If the 

EMA is successful, and depending on how wide the court opens the floodgates, that could have disastrous consequences not only in the property market, but for the UK economy as a whole. It is possible that all sorts of contracts, well beyond leases, could be frustrated by Brexit, and not just where the contracting party is an EU agency. It could extend as far as any entity that conducts a large proportion of its business in the EU”. Nightmare.

In Mortgage rates to rise as funding costs grow (The Times, Katherine Griffiths) we see that homeowners are likely to have to pay more for their mortgages as specialist lenders are having to pay higher funding costs because of Brexit and the global economic slowdown. This could all cut the number of mortgage deals available and potentially hasten mergers within the sector. The number of smaller lenders targeting specific groups of customers has mushroomed in the last few years, but increasing risks have resulting in increased costs. * SO WHAT? * Although wages have been rising, something like this could put a dent in consumer spending power and if any of these companies goes bust, there could be some potentially serious aftershocks. We’ve not quite reached this state of affairs yet, but it could be the slight headache that turns into a migraine for a government embroiled in Brexit strife.

Apple’s TV solution might be lacking and Debenhams faces a tough future…

Further to last week’s news about Apple allowing access to AirPlay on non-Apple devices made by the likes of LG, Sony, Samsung and others, Apple’s new TV service may not be a game changer (Daily Telegraph, James Titcomb) argues that competition is very stiff in TV streaming with companies like Netflix and Amazon having enjoyed a very long head-start. Netflix has built up around 150m subscribers in ten years and Amazon Prime has over 100m – and there is now the prospect of more entrants with Disney and other giants offering their own subscription

channels. It will be operating in a tricky marketplace and the prospects of it selling more iPhones in the meantime remains remote. Relying on TV streaming is unlikely to make up for this shortfall.

After last week’s drama, Debenhams rescue plan may cost 10,000 jobs and 90 stores (Daily Telegraph, Ben Marlow) sounds like history is repeating itself after similar rumblings in 2016 with BHS. It sounds like the company has earmarked 90 out of its 165 shops in the UK and Ireland for closure as, apparently, 90% of the company’s pre-tax earnings are generated from a core of 80-90 shops. Chief exec Sergio Bucher is expected to propose a three-stage turnaround proposal with lenders in the next few weeks but there are many obstacles to overcome. The Fat Lady isn’t quite singing just yet, but it sounds like she’s warming up in the aisles.

And finally, in other news…

Getting delayed is always frustrating. However, turning this frustration into something positive has proven to be quite popular as per Law student who missed her flight embraces a four hour wait at the airport by dancing around the terminal – and even her cat joins in (Daily Mail, Bryony Jewell https://tinyurl.com/y7coyuup).

AND FINALLY, if you really can’t bring yourself to look at the bright side, how about just venting those frustrations as per All the rage: Beijingers vent their stress in ‘anger room’ (Reuters, https://tinyurl.com/y74swo5t). I think that anger rooms could definitely become the next escape rooms ????

1. In RETAIL/HIGH STREET NEWS, Macy’s cuts its guidance and we see more winners and losers on the UK high street
2. In CARS NEWS, JLR and Ford announce job losses and Fiat Chrysler pays a chunky fine
3. In INDIVIDUAL COMPANY NEWS, Tencent gets the cold shoulder, Xiaomi falls again and Ofo abandons London
4. In OTHER NEWS, I bring you an unusual job. For more details, read on…

So Macy’s suffers in the US and there are retail winners and losers on “Super Thursday”…

Strong economy can’t save Macy’s from retail shifts (Wall Street Journal, Sarah Nassauer) highlights the travails of the US department store as it failed in the ongoing battle with discounters and e-tailers going into the year-end as chief exec Jeff Gennette observed that “The holiday season began strong – particularly during Black Friday and the following Cyber Week, but weakened in the mid-December period”. Previously upbeat expectations were dashed by the news and the company’s shares took an 18% dive, dragging others – like Kohl’s and L Brands – down with it (although they were down by around 4.5% each). Discounters Target and Costco also took a share price ding despite actually doing OK – Target was on track for its biggest annual sales gain for 13 years and Costco’s sales were also up. * SO WHAT? * Macy’s has actually been trying to embrace change by investing in stores that they call “magnets” with a fresher format whilst simultaneously shrinking poorer performing stores, but it seems that it has not been enough to boost sales as the “magnets” actually performed really well. Kohl’s announced that it was closing two stores and introducing a voluntary retirement programme for workers over 55. Target and Costco (as well as Walmart) have been focusing a lot more on their online businesses of late and it would appear that this is starting to bear fruit.

It’s been a big week for retailer results announcements and there continued to be winners and losers in the battle for consumers’ hard-earned cash. Of the winners, Pub group M&B pips its rivals with a double-digit sales boost (Daily Telegraph, Oliver Gill) showed strength in the leisure end of the high street (rivals Green King and Stonegate also had a merry Christmas, but not quite as good as M&B) as the owner of Harvester, All Bar One and Toby Carvery benefited from milder weather and the fact that both Christmas and

New Year fell in the middle of the week. Its shares were up by 7.7%. Tesco leaves rivals trailing with strong Christmas performance (Daily Telegraph, Ashley Armstrong) showed up the likes of competitors Sainsbury’s and Morrisons and Discounter B&M pledges to open more British stores (Daily Telegraph, Charlie Taylor-Kroll) shows that it’s not just the German discounters who enjoyed brisk trading over the festive period, with toy sales being a particular highlight.

Department stores had some negative news. Once they got 20%, now staff at John Lewis may lose bonus (The Times, Alex Ralph) shows that although Christmas trading wasn’t a disaster, the partnership behind John Lewis and Waitrose is getting sufficiently jittery about overall trading that it’s considering axing the staff bonus completely for the first time since 1953 after five consecutive years of cutting it. Mike Ashley ousts CEO and chairman from Debenhams board (Financial Times, Jonathan Eley) highlights some dramatic goings-on at the ailing department store as Sports Direct supremo Mike Ashley used his 29% shareholding in the company to gang up on the chairman and CEO with Landmark, another major shareholder, to vote against their reappointment. Chairman Sir Ian Cheshire resigned, but CEO Terry Duddy opted to stay on to run the company but will no longer be on the board. * SO WHAT? * Ashley is clearly gunning for a takeover here – and who can blame him given that the company’s share price has cratered by 90% since the current top team were in place. Sports Direct was put on the naughty step last year for talking in public about a possible takeover when it shouldn’t have, but that punishment runs out in mid-March – so Ashley could yet bag himself this bag of cr*p for next to nothing. I would imagine that the share price will start to rise in the run-up to this deadline as speculators bet on some kind of bidding war but TBH, you’d have to be one kind of masochist to want to buy it. At least if Ashley buys it he can do some kind of Frankenstein operation on it, keeping the best bits and selling off the rubbish. Surely anyone else buying it would want it for the real estate or at least repurpose it. The current team has presided over an absolute disaster.

There’s bad news for JLR and Ford employees and Fiat Chrysler faces a big fine…

Jaguar Land Rover cuts 4,500 jobs as Ford considers UK future (Daily Telegraph, Alan Tovey) heralds some bad news for JLR employees as chief exec Ralf Speth announced that it would be cutting 10% of the workforce to “protect the future” of the business (and this is in addition to all the contractor roles they cut last year). Ford piled on the misery in the sector as its European boss Steve Armstrong said that there was going to be an overhaul of the loss-making European operations that will likely lead to major job cuts to its 53,000 European staff as the parent group seeks out $14bn of cost savings worldwide. Speth warned that “the industry is facing unprecedented geopolitical, technical and regulatory challenges. They are coming not singly or in pairs but in hordes in a way not

witnessed in the past and the impact…is severe”. * SO WHAT? * Neither of these actions is particularly surprising given the general backdrop of weakening car sales globally, fears of economic slowdown, tighter regulation and chunky tariffs. JLR has just been hit particularly hard because it’s smaller than many others, and was was hugely exposed to China (which is seeing weakening sales) and diesel (which everyone now hates). 

Fiat Chrysler pays $800m to settle claim (The Times, James Dean) heralds the latest aftershock of the diesel emissions scandal sparked by VW back in September 2015 as the $25bn Italian-American carmaker has agreed to pay up to $800m to settle charges that it cheated on diesel emissions tests by installing defeat devices to beat emissions tests. Fiat did not admit any wrongdoing as part of the settlement and states that it “did not engage in any deliberate scheme to install defeat devices”. The shares ticked up by 1.5% as I guess this draws a line under the issue (although it is still under criminal investigation by the Department of Justice and the Securities and Exchange Commission).

Tencent gets frozen out, Xiaomi’s suffering continues and Ofo flees London…

In China’s Tencent again left off list of approved video games titles (Financial Times, Louise Lucas) we see that the tech giant has yet again failed to win approval for new video games as China’s media regulator snubbed their offerings for the second time in a fortnight. There has been a nine-month freeze on the issuance of commercial licences for games as the Chinese government tries to crack down on gaming addiction and fears that it is affecting childrens’ eyesight. Tencent’s stock suffered a major kicking for this last year as it is a major player in gaming – but it started to perk up on news that the regulator resumed issuing commercial licencing on December 29th. * SO WHAT? * Tencent isn’t the only one suffering from this licence issue at the moment. China’s second-biggest video games maker NetEase also didn’t get any of its games approved either – but some are saying that the games being approved at the moment are very low-tech and easy to review whereas the offerings from Tencent and NetEase are more complex and will require more time. Some analysts reckon it’ll take six months to clear the backlog of applications, but no-one really knows as it will also depend on how many new games are developed in the meantime.

Shares in China smartphone maker Xiaomi fall for third day in row (Financial Times, Yuan Yang) signals some tricky news for the cheap-and-cheerful handset maker after the lock-up period following its recent IPO (which valued it

at $54bn) came to an end. Some employees and early investors sold out after the restriction ended but chief exec Lei Jun and other major shareholders committed to not selling their shares for at least a year. Xiaomi’s shares have fallen by 58% since it listed in July last year, but it remains the world’s fourth biggest smartphone maker. * SO WHAT? * Xiaomi is clearly having a tricky time at the moment and it is in a very competitive market. However, IMHO there are still many markets that it doesn’t yet have a presence in, so there is definitely some growth potential.

Bike-share company Ofo withdraws from London (The Guardian, Julia Kollewe and Niamh McIntyre) shows that not all start-ups are successful – whoever their backers are (in this case, it’s the Chinese e-tailing giant Alibaba). There are rumours that Ofo is on the verge of bancruptcy – and you can see why after they already withdrew from Norwich, Sheffield and Oxford to focus on London due to poor take-up and vandalism. According to China Entrepreneur Magazine, Ofo has shut its international operations (which includes the UK) and offered its 50 remaining employees a choice between leaving before Thursday or take a 50% pay cut and join the Chinese business. Ofo originally had 6,000 bikes across London, Norwich, Sheffield, Oxford and Cambridge in 14 local authorities – and it has now withdrawn completely from seven of them. Critics of Ofo have said that the bikes were of poor quality and hard to find. * SO WHAT? * The UK had a massive influx of Chinese bike hire startups with big ambitions, but Bluegogo went bust in September 2017, GoBee pulled out of Europe after 60% of its bikes were damaged or destroyed only four months after launch and Mobike has also changed its tune recently after it withdrew from Manchester last September due to “unsustainable losses” from vandalism and theft. Clearly, the China model cannot be applied elsewhere without a considerable amount of adjustment.

And finally, in other news…

Looking for an alternative career? Step forward Meet the professional cuddler who makes $80 an hour snuggling clients (Inside Edition, https://tinyurl.com/yazr6ak6). This is strictly platonic and above board, but it has be said that it is a rather unconventional way of earning a crust. Not for everyone…

1. In MACRO NEWS, US-China talks make progress, the Eurozone jobless rate hits a new low and France vows to continue reforms
2. In RETAIL NEWS, we look at the festive season’s winners and losers
3. In CAR NEWS, China sales hit new lows, Rolls-Royce does nicely and scepticism increases on driverless
4. In TECH NEWS, Apple announces a cut in iPhone production and we look at developments for Amazon
5. In OTHER NEWS, I bring you an inadvisable dress and some entertaining snow monkeys. For more details, read on…

So the latest US-China trade talks conclude, Eurozone unemployment goes lower and Macron vows to continue his reforms…

It’s obviously too early to crack open the Bolly and get the cigars out, but US and China make progress on trade, but major hurdles remain (Wall Street Journal, Lingling Wei) suggests that some ground was made in the first talks between the two sides since the “truce” was declared at last month’s G20 meeting. Progress was made on things like the additional purchase of US goods and services and better access to China markets for American capital. However, agreement on more difficult issues like getting the Chinese to cut subsidies to domestic firms to level the playing field and protection of intellectual property are still to be addressed. Both sides made positive noises at the conclusion of the talks and it looks like there will be more to come, probably at a higher level. * SO WHAT? * Waaaaaaay too early to get positive – and with someone as petulant as Trump in the driving seat, who knows what will happen?! But I guess that’s how he likes it – to keep everyone on their toes. Still, at least the talks didn’t finish early and both sides seemed to want to go to the next step.

Eurozone jobless rate slips below 8% for first time in a decade (Financial Times, Valentina Romei) cites the latest figures from Eurostat which show the unemployment rate dipping under the 8% level – at 7.9% – for the first time since 2008. Oxford Economics’ chief exec James Nixon observed that “[the figures] suggest that the eurozone economy may be in better health than the string of recent poor numbers have suggested”. Clearly, unemployment

levels across the ‘zone vary widely with tighter markets being in places like Germany (3.3%) and the Netherlands (3.7%) versus the rather higher levels in Greece, Spain, Italy and France. * SO WHAT? * It’s great that this rate has dropped below 8% and I think it’s even better news that the level of eurozone youth unemployment has dropped to below 17% in November for the first time since September 2008. Still, I think there is a boatload of other factors that need to be taken into account before everyone starts to celebrate overall eurozone strength and stability. As I keep saying, the biggest economies in the eurozone are facing leadership crises (Germany and France) and then there are the Italian and Spanish economies that could still go either way. Europe is NOT out of the woods yet.

Speaking of which, France to forge ahead with reforms despite ‘gilets jaunes’ protests (Financial Times, Victor Mallet) shows France’s President Macron’s defiance in the face of continued violent protests against his reform agenda. Pensions and unemployment benefits are coming under the microscope now and he faces an uphill battle what with increasing opposition and the continued exodus of some of his senior ministers. * SO WHAT? * Macron is in trouble at the moment and I think that the dissenters smell blood. I believe that if he continues to cave to the violent protesters and puts off some of the knottier problems too long he will lose what remains of his credibility, not to mention the wave of popularity that he surfed in order to get into office. France is in dire need of root-and-branch reform and if Macron can’t do it with the mandate that he got when he assumed the presidency, then I doubt anyone can. Having said that, I think that it is important for him to listen to what his people have to say in the three month “national debate” otherwise he’ll just cement existing opinion that he’s a president who is out of touch with his people.

Let’s have a look at the winners and losers…

UK retailers endured worst Christmas since 2008, data show (Financial Times, Jonathan Eley) isn’t the most uplifting headline you’ll ever see, but data compiled by KPMG and the British Retail Consortium (BRC) leads to this rather depressing conclusion. BRC chief exec Helen Dickinson observed that “Squeezed customers chose not to splash out this Christmas with retail sales growth stalling for the first time in 28 months”. Separate data from Barclaycard appeared to confirm this observation as it said that consumer spending in the month to December 22nd increased 1.8% year on year – which lags consumer price growth – propped up by strength in the casual dining sector, with spending in pubs up by 12.9% and restaurants up by 9%. Esme Harwood, a director at Barclaycard, cautioned that “Many shoppers are anticipating price increases over the next three months, particularly around the cost of fuel, household utilities and groceries”. * SO WHAT? * This doesn’t sound good, but at the end of the day, there are always some bright spots – and again, I point to spending on “experiences” rather than “things”. ALL retailers need to take this to heart and improve their customer experience IMHO. Just as an aside, I think that stats from the likes of Barclaycard will become increasingly important as we continue to use our cards more and more and progress towards what will probably become a cashless society at some point. TBH, I take Barclaycard stats much more seriously than stats from surveys because it’s hard data based on real spending rather than more touchy-feely stuff you get on questionnaires. 

So, in the Battle of The High Street, Winners: sweet success for Greggs and Majestic Wine (The Guardian, Sarah Butler) applauds the performances of Greggs (which

benefited from mince pie and festive bake sales – but didn’t include the runaway success of its vegan sausage roll), Majestic Wine (which did great in sales, but took a hit on margins due to the heavy use of promotions) and Ted Baker (which had strong sales despite all the shenanigans going on with its founder Ray Kelvin). Ted Baker’s share price shot up by 31% on the news. Topps Tiles courts trade customers as DIY trend flags (Daily Telegraph, Charlie Taylor-Kroll) was also a “winner” due to the success of its commercial arm (sounds a lot like what Travis Perkins and Kingfisher are finding).

On the other side, Losers: festive gloom for Sainsbury’s and Mothercare (The Guardian, Sarah Butler) lists the casualties who include Sainsbury’s (the performance of its subsidiary, Argos, proved to be a drag – and lacklustre sales of non-food generally was disappointing), Mothercare (which seems to be continuing its terminal decline) and FatFace (who did badly on the domestic front, but actually did quite well overseas and online).

* SO WHAT? * I said before Christmas that the overall default setting for investors regarding the retail sector was very pessimistic and so anyone who did well was likely to see a steep rise in the share price – well that is turning out to be the case. There will always be SOME winners. Of the winners, I have more faith in Greggs and Majestic Wine (the latter especially, because they are doing some very exciting stuff at the moment whilst also keeping a very close eye on costs and performance), whereas maybe Ted Baker could be more fleeting because of the whole Ray Kelvin thing. Out of the losers, I think that it’s actually quite useful for Sainsbury’s to look cr*p because they want to buy Asda (that’s just my opinion, but I’m sure they’ll say that they are really really doing their best ????), Mothercare just looks like a disaster (what is it about places that sell kids’ clothes?? There is a serious gap in the market here…) but it looks like there may be a glimmer of hope for FatFace given its overseas strength. Ditch shops and strengthen overseas marketing and capability, perhaps?

China car sales fall, Rolls-Royce sales rise and scepticism increases on driverless…

Chinese car sales go into reverse for first time in two decades (Daily Telegraph, Alan Tovey) cites the latest figures released by the China Passenger Car Association (CPCA) which make grim reading for automotive manufacturers with Chinese ambitions as car sales in the world’s biggest car market have fallen by 6%. * SO WHAT? * Basically, the trade war with the US, a slowing economy and the exponential growth of ride-hailing services are coming together to brew up the perfect storm. UK-based Jaguar Land Rover has been particularly badly hit as China was, until recently, its biggest and most profitable market, but it has now fallen into 4th place behind the US, UK and mainland Europe. A further decline in overall car sales is widely expected to continue this year.

On the flip-side to this, Rolls-Royce enjoys record car sales after US tax cuts (Financial Times, Peter Campbell) shows that there was something to cheer about in the automotive sector as the BMW-owned marque saw a massive 22%

sales rise following the launch of its flagship Phantom and the newer Cullinan SUV models. Ultra-wealthy US buyers snapped up the vehicles emboldened by Trump’s tax cuts. * SO WHAT? * Enjoy it while it lasts! Rolls-Royce hand-builds ALL of its cars at Goodwood and imports 92% of its parts from overseas, which could potentially be a bit of a disaster following Brexit. They could also suffer a double-whammy as they can’t really stockpile parts like everyone else because their cars have a lot of bespoke elements. They must be praying for a Remain post-Christmas miracle…

Carmakers temper their enthusiasm for driverless technology (Financial Times, Richard Waters) highlights a changing mood amongst carmakers and tech companies as participants in the current Consumer Electronics Show (CES) in Las Vegas seem to be less strident in their ambitions for “level 3” (properly driverless) autonomy where, in the past, the implication has been that it is only around the corner. At CES this week, Audi in particular has wound its neck in and instead talked about the advances in road safety and that the “technical challenges of creating driverless vehicles are solvable”. * SO WHAT? * This is a really interesting article which charts the current progress of the “race to Level 3”, but it does show that there are still a great number of hurdles to be overcome in order to fully transfer full responsibility and legal liability from the driver to the car.

Apple cuts iPhone production and Amazon may hit a small bump in the road…

Apple to cut iPhone production by 10 per cent (The Times, James Dean) heralds a production cut for the first three months as sluggish handset sales continue. Suppliers were told about the reduction at the end of December and it will affect manufacture of the iPhone, Xr, Xs and Xs Max. * SO WHAT? * Not good news for Apple, but after it cut its quarterly sales forecast last week, this move should have 

been expected. The nightmare continues.

I thought I would quickly mention Bezos divorce clouds his stake in Amazon (Wall Street Journal, Laura Stevens and Sara Randazzo) because chief exec Jeff Bezos was married to his wife MacKenzie for 25 years, meaning that the settlement is likely to be humungous however “amicable” the split (you should see the official statement – you may need to take a sick bucket with you). I wouldn’t normally mention this kind of thing in Watson’s Daily, but Amazon is clearly a major company and big divorces can have consequences as per For some CEOs, divorce spilled into the corporate realm (Wall Street Journal, Micah Maidenberg). The settlement will no doubt be eye-watering.

And finally, in other news…

I’m sorry but when I saw this I just laughed so much I had to share it with you: Newsreader mocked for wearing ‘p3nis jacket’ on TV – people ‘can’t unsee it’ (The Mirror, Robyn Darbyshire https://tinyurl.com/yddheyta). Apologies.

With that in mind, I thought I’d balance this out with the altogether much cuter Japanese snow monkeys find novel way to travel during winter (SoraNews24, Oona McGee https://tinyurl.com/yatmwn85). Ahhhhhh.

1. In MACROECONOMIC AND COMMODITIES NEWS, the EU gets tough on Iran, Germany edges closer to recession while palladium prices hit new highs and US steel prices fall to pre-tariff levels
2. In GROCER AND HIGH STREET NEWS, Morrisons, Sainsbury’s and Waitrose report varying degrees of disappointment whilst Joules and Footasylum have contrasting fortunes
3. In INDIVIDUAL COMPANY NEWS, Apple turns to trade-in and Safestore gets a boost on stockpiling
4. In OTHER NEWS, I bring you an edible insect vending machine. For more details, read on…

So the EU cracks down on Iran, Germany heads towards recession, palladium prices benefit from petrol car demand and US steel prices fall…

In EU backs new sanctions on Iran (Financial Times, Michael Peel) we see that the EU has frozen the assets of an Iranian intelligence organisation and two of its agents for allegedly organising assassinations in Europe. It shows that the EU is taking a tougher stance on Tehran, which is going to make salvaging the international nuclear deal that much harder. These are the first punitive measures taken against Iran since the 2015 agreement was made to curb the country’s nuclear programme. A Dutch government letter was sent to the Iranians saying “Iran was informed that involvement in such matters is entirely unacceptable and must be stopped immediately…Further sanctions cannot be ruled out”. The new sanctions will come into force from today. Tehran has denied all knowledge of any assassination plots. * SO WHAT? * Call me cynical, but it sounds to me that the Europeans are giving themselves a way of easing themselves out of the nuclear deal without looking like they are cow-towing to Trump, who abandoned the agreement in May last year. Alternatively, they could be being canny and using the allegations as leverage with Iran, i.e. “we’ll throw this in your face if you don’t give us what we want”. The US is continuing to put pressure on countries to follow its course of action, but the Europeans have been trying to resist.

German industry hits brakes (The Times, Gurpreet Narwan) cites the latest German industrial production figures for November which show that output fell for the third month in a row. The data published by Destatis, the German federal statistics office, showed a drop of 1.9% versus market expectations of 0.3%. Main areas of weakness included consumer goods, energy production and construction products. * SO WHAT? * This kind of stuff is important because Germany has always been the growth engine of the EU, so any sign of weakness (especially now

as they are, in effect, in political leadership limbo) is likely to filter through to the rest of the bloc. These figures have added fuel to the theory that Germany could be heading towards recession after the most recent Purchasing Managers’ Index (PMI) also pointed to weakening manufacturing activity

In commodities news, Palladium hits fresh record high as petrol car sales stoke demand (Financial Times, Henry Sanderson) signals the commodity’s longest continuous bull-run as it hit its highest ever level of $1,329 per ounce on Tuesday. The metal’s price has shot up by 140% since the beginning of 2016 as it is benefiting greatly from sales of petrol cars due to the fact that over 70% of production goes into making catalytic converters for them. Given that we appear to be in a bit of a limbo period in automotive development as we transition towards electric and hybrid vehicles, customers are playing it safe in the meantime and abandoning diesel in favour of cars that used palladium-rich catalysts. The other factor behind the upward rise is the shortage of palladium supply versus demand – something that is likely to continue. * SO WHAT? * This is clearly great for palladium suppliers right now, but it will not last forever as electric vehicles don’t use catalysts. Also, car sales continue to fall around the world as consumers seem to be shying away from major purchases. Still, I think there will be plenty of good times for palladium suppliers for the next few years because although EV sales is a fast-growing category, it is from a very low base.

US steel prices fall to pre-tariff levels amid China slowdown worries (Financial Times, Ed Crooks) is an interesting one in that US steel prices, which got the rocket boosters put under them when Trump announced big tariffs on imports last year, are now below the levels pre-tariff as steel prices have slowed down across the board in response to China’s economic slowdown. * SO WHAT? * China is a key player in the steel market and accounts for a massive 50% of global production and consumption, so you can see why any kind of slowdown there is going to have worldwide repercussions. I guess that recent talk of China making massive investments in new infrastructure could potentially boost demand – but the key is to what extent China will allow foreign producers to get a look in. 

Supermarkets and high street retailers report contrasting Christmas fortunes…

I said that this week was going to be a biggie for retailers – and it seems that it is one of contrasting fortunes. Christmas to celebrate ends a little ‘wonky’ for Morrisons (The Times, Deirdre Hipwell) shows that although the supermarket actually had its fourth consecutive Christmas of sales growth, its shares fell by 3.2% because investors focused on the “disappointing” performance of its wholesale business which supplies Amazon and McColl’s Retail Group (although the company itself was actually quite upbeat about the wholesale business).

No holiday cheer for Sainsbury’s and Waitrose as numbers slide (Daily Telegraph, Sophie Christie) highlights weaker

sales at the two supermarket stalwarts, according to data from Kantar Worldpanel. All the other supermarkets, however, saw positive sales over the festive period and the overall sales figure for the sector hit a new record. Fraser McKevitt of Kantar observed that “The discounters have continued to make their mark over Christmas: two thirds of all households shopped at either Aldi or Lidl over the 12-week period culminating in a highest-ever combined Christmas market share of 12.8%”.

There were contrasting fortunes on the high street as well, what with Joules joins the Christmas winners’ circle with Next and John Lewis (The Guardian, Zoe Wood) highlighting Joule’s impressive sales growth of 11.7% in the seven weeks to 6th January, which sent the share price up by over 4% on the one hand and Footasylum in profit warning as discounting wipes out margins (Daily Telegraph, Ashley Armstrong) on the other. The company’s shares fell by 15% on the news adding insult to injury as the shares have now fallen by 86% since it floated on AIM in 2017. This sounds like an absolute shocker. Will they be the next high street operator to go bust, I wonder?

Apple turns to trade-ins and Safestore benefits from stockpiling…

Yesterday, I talked about Apple transitioning away from being a hardware-powered company to a services-powered one, but in the meantime, Apple’s answer to slower iPhone sales? Getting customers to trade in (Wall Street Journal, Sarah Krouse) looks at ways for Apple to boost iPhone sales. Basically, it is trying to attract more phone buyers by offering generous prices when trading old models in for new ones. Trading in has been happening for donkey’s years at mobile phone vendors, but Apple is trying to muscle in and get the customers coming to it directly instead. * SO WHAT? * This sounds decent enough, but it 

hasn’t helped arrest the slowdown of iPhone sales – and I don’t think it ever will do. As far as I’m concerned, the only thing that will significantly boost unit sales is a big change in the design – which is where bendy/foldable phones will come in (I talk about this in the FULL VERSION of Watson’s Yearly).

You may well have heard about various companies in the UK stockpiling product ahead of Brexit in order to prevent bottlenecks – well Safestore doubles profits as business stockpiling increases (Daily Telegraph, Jack Torrance) shows that there are some beneficiaries of this as Safestore more than doubled its profits from last year as the UK’s #1 storage provider continued to do well from booming demand. Rivals Big Yellow and Lok’nStore have also benefitted from the stockpiling trend as they have seen higher occupation levels. * SO WHAT? * This situation is clearly not going to last forever, so I just hope that the companies don’t get too excited and overexpand.

And finally, in other news…

Many people kick-off the new year with noble intentions of changing their diets and, perhaps, doing more to save the planet. Well you could accomplish two things at once with Vending machine selling edible bugs is an instant hit in Kumamoto, generates about $4,600 a month (SoraNews24, Koh Ruide https://tinyurl.com/yav78zwn). Mmm. Yum.

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!