Category: Uncategorized

1. In MACROECONOMIC NEWS, China growth slows down and the Italian budget hits a wall
2. In UK-RELATED NEWS, retail sales relent and New Look leaves China
3. In INDIVIDUAL COMPANY NEWS, Uber moves into the temp market, Unilever backpeddles and another European airline hits turbulence
4. In OTHER NEWS, I leave you with something AMAZING. For more details, read on…

So China growth slows and the Italian budget gets some stick…

Cue mass hysteria following China growth slows to 6.5%; Finance officials scramble to soothe investors (Wall Street Journal, Lingling Wei) as official statistics showed China’s weakest growth rate since the first quarter of 2009. Industrial output and consumption slowed down in the third quarter although exports have so far managed to weather the US-China trade war storm. Chiefs at the People’s Bank of China and the banking and insurance regulator issued statements before the data was released calling for calm. The Shanghai Composite Index has been the worst performer among global benchmarks, having fallen 25% so far this year and fell 1.1% on the news initially, but recovered in late morning trading. Some of the weakness is due to Beijing’s continued efforts to curb debt growth and risk appetite which has led to a drop-off in infrastructure spending, amongst other things. * SO WHAT? * No doubt everyone will be tearing their hair out at this news, but the fact is that China is still on track to make its full-year growth target of 6.5%. If there is further sluggishness, Chinese officials and government advisers say that they will implement further growth measures such as giving banks more funds to make loans, increasing spending on infrastructure and lowering corporate tax rates. Although such data can sap belief in China’s growth 

prospects, it seems to me that the government has a plan B and is ready to implement it, so I am not overly concerned. I guess it could blunt China’s power at the negotiating table with the US as the latter is firing on all cylinders at the moment, but only a bit.

Funnily enough, Rome rebuked by Brussels for breaking EU budget rules (Financial Times, Mehreen Khan, Jim Brunsden and Miles Johnson) has not gone down well in Italy as the EU issued a formal rebuke for breaking EU deficit rules in the populist government’s first budget. If this carries on, the European Commission will have to take the unprecedented action of rejecting a eurozone member’s spending plans. If Italy’s governing coalition does not come up with a revised plan by next week, Brussels will make a formal demand for one by the end of this month and if that doesn’t shock them into doing anything, the EU can fine them up to 0.5% of GDP. Italy’s PM Giuseppe Conte is arguing that he wants to use his budget to implement structural reforms to kick-start the economy, but other EU members believe that giving Italy a “free pass” puts the implementation of wider reforms of the bloc at risk. * SO WHAT? * Conte and his chums must have known this was coming as it has been well-flagged. When you reveal a target budget deficit triple the amount of the EU-mandated target, you are bound to ruffle feathers. Italy’s debt pile is second only to Greece in the Eurozone, where it is also the third biggest economy. Bailing out Greece is one thing, but doing the same for Italy will be on another level and could potentially have far worse consequences.

Retail sales take a breather and New Look abandons China…

Hopes for an economic boost falter as food spending dips by 1.5pc (Daily Telegraph, Tim Wallace) cites the latest figures from the Office for National Statistics which showed that families cut back on food spending last month after a bumper summer. Having said that, it wasn’t all bad as clothes sales volumes rose by 1.2pc and household goods volumes were up by 2.2% with the overall trend still positive. Ruth Gregory at Capital Economics observed that “Although September’s retail sales figures were weaker than expected, sales still rose strongly over the third quarter as a whole…and with sustained rises in

real pay now in prospect, this should pave the way for a gradual recovery in consumer spending growth in the year ahead”.

New Look to pull out of China after poor sales (The Guardian, Sarah Butler) shows that the Chinese dream has ended for New Look as it announced that it’s going to close all of its 120 shops there by the end of the year due to disappointing sales after giving it a go for four years. The closure of its Shanghai head office will bring the curtain down on the overseas expansion ambitions of the previous boss, Anders Kristiansen as the company continues its struggles with its domestic market. * SO WHAT? * New Look went through an insolvency process as recently as March so this latest development is hardly surprising. It has GOT to prioritise what’s going on at home first. As it is, that is going to be difficult enough without all this international distraction.

In individual company news, Uber tries something different, Unilever abandons plans to abandon and another European airline faces difficulty…

Uber takes a detour with plan to provide temporary staff (Financial Times, Tim Bradshaw and Shannon Bond) highlights a new area for Uber as it turns out that it is developing a new short-term staffing business called Uber Works. It is using its existing “on demand” model and is building a big database of contractors that will provide temps for events and corporate functions in a B2B service offering. The project has been in development for a number of months in Chicago after an earlier trial in LA, but there is no sign of an official launch date as yet despite the fact that it is stepping up recruitment. * SO WHAT? * This is an interesting concept that will no doubt have existing operators quaking in their boots. It also adds another string to Uber’s bow and further fuels the argument that Uber isn’t just a one-trick pony – which will come in useful when it comes to flotation next year. I would recommend you read this article in full if you can – there’s a really useful table at the bottom that summarises all of Uber’s business interests.

I thought I’d mention Unilever overhaul may be axed after backlash (The Times, Alex Ralph) because there’s been a ton of to-ing and fro-ing between the company and

investors about simplifying its structure and having one HQ (they currently have one in Amsterdam and one in London) on the one hand and creating uproar and discontent on the other by abandoning the company’s roots. * SO WHAT? * TBH a lot of this is noise and the whole structure thing gets wheeled out from time to time but it got a right kick in the pants after last year’s failed Kraft Heinz hostile takeover approach. However, it looks more likely now that the current dual structure will remain in place. The company still needs to slim down its offering and just get leaner generally – but it’s probably going to have to do that within its existing parameters.

Cobalt Air the latest airline to suspend operations (The Guardian, Julia Kollewe) heralds the demise of an airline that I’ve quite frankly never heard of (it was formed in the wake of the failure of state-run Cyprus Airways in 2015, had six aircraft and 200 staff), but following Flybe’s profits warning, it does make you wonder what’s going to happen with Europe’s smaller airline operators. After Cobalt, will more European airlines go bust (The Guardian, Gwyn Topham) does a decent summary of the story so far and mentions British Airways parent IAG as saying consolidation was on the cards as rising fuel costs and Brexit worries loom large on the immediate and near-term horizon respectively. * SO WHAT? * Consolidation of routes, planes and airports seems to happen from time to time, but at the moment, rising fuel costs are as good a reason as any for airlines to huddle together to avoid getting left out in the cold.

And finally, in other news, I propose a toast(ie)…

I must admit I was scrabbling around somewhat this morning, trying to find something to put in this section – and then I stumbled on this beauty: You need to check out this really cool coin that has an amazing hidden feature (Mashable, Xavier Piedra https://tinyurl.com/y78snhpf). This is super-impressive artistry!

1. In CONSUMER/RETAIL-RELATED NEWS, UK inflation calms down and Asos sees sales rise
2. In UK REAL ESTATE NEWS, UK house prices slow and Crest Nicholson has another profit warning
3. In AIRLINE NEWS, business fliers mitigate fuel price increases but Flybe has a ‘mare
4. In INDIVIDUAL COMPANY NEWS, eBay takes Amazon to court
5. In OTHER NEWS, I bring you a really cool TV advert. For more details, read on…

So UK inflation slows and Asos gains ground…

UK inflation rate falls more than expected in September (Financial Times, Gavin Jackson) highlights a broad-based fall after a sharp rise in August, according to the latest figures from the Office for National Statistics (ONS). The annual rise in the Consumer Price Index (CPI) fell from 2.7% to 2.4%, which was a steeper fall than consensus estimates. Mike Hardie, head of inflation at the ONS said that “food was the main downward pull on inflation as last year’s September price rises failed to reappear, while ferry prices dropped after their surprisingly high summer peak”. * SO WHAT? * Coupled with news of wage rises, this should ease pressure on the UK consumer for now.

Asos is sitting pretty on £102m profits (The Times, Deirdre Hipwell) heralds an impressive 28% rise in profits last year, even after the online fashion retailer invested £242m in the business over that timeframe. The investment is part of efforts to upgrade its infrastructure to give it a better base from which to launch further

expansion and it has earmarked a further £230-250m in capex over the next few years. Sales in the UK were up by 23% to £861.3m whilst international sales rose by 27% to reach £1.5bn and it continues to add new bits like a fragrance division and a gender-neutral label called Collusion. Chief exec Nick Beighton boasted that “Investors own us for growth. UK online penetration in fashion is 24 per cent. It’s forecast to rise to 32 per cent by 2023. Why wouldn’t we keep investing to capture that growth? You can easily see how Asos could become a £6 billion (sales) company”. The shares were up by 16.9% at the close yesterday. * SO WHAT? * Great news from this online retailer made all the more impressive by knocking it out of the park DESPITE spending a fortune on expansion. They have had a few wobbles in the past, but hopefully their hefty investment in an infrastructure upgrade will consolidate the company’s current position and help its future expansion. Asos now has a 7.5% market share in the UK, but in Europe and the US it is 1.6% and 0.5% respectively – so there’s plenty of room for upside. Asos: all-weather gear (Financial Times, Lex) points out that even with yesterday’s gains, the company’s share price is 25% down on the year – twice as big a fall as the MSCI Europe Retailing Index. This seems quite harsh considering the company’s strong performance.

In UK real estate news, house price growth slows and Crest Nicholson issues another profit warning…

UK house prices grow at slowest rate for five years (The Guardian, Angela Monaghan) cites the latest data from the ONS and Land Registry which show that the average price of a UK home increased by 3.2% in the year to August to £232,797, making it the lowest level of growth since August 2013. London was the only region where prices fell (they dropped by 0.2%) but the average price remained punchy at £486,304. Kevin Boa, property partner at law firm Pinsent Masons, observed that “Interest rate increases, government policy changes that have shrunk the buy-to-let market, Brexit upheaval and the reduction in EU and overseas buyers, particularly in London, all contribute to

this decline. Despite this, there remains a huge undersupply of housing, which will only become more acute over time”. If you love this kind of stuff, you should have a look at this article because there’s a really good map showing the regional breakdown.

Crest Nicholson issues third profit warning in two years (Daily Telegraph, LaToya Harding) highlights an altogether downbeat story as the housebuilder announced a profit warning and the departure of its CFO, Robert Allen. The FTSE250 company is more exposed to the south of England where buyers are being particularly cautious and the shares fell by 8.2% on the news. Stephen Stone, executive chairman, said that the company will now “focus on shareholder returns by prioritising cash flow and dividends, maximising the value in our portfolio and improving operational efficiency”. I would interpret this as meaning “OMG, we’ve had a ‘mare so we’re going to shut up and keep our heads down”.

In airlines news, business class passengers offset higher fuel prices and Flybe takes a nosedive (but you know, not literally)…

In United, Delta climb on business-class demand (Wall Street Journal, Alison Sider and Andrew Tangel) we see that airlines are using revenues from business class passengers to mitigate the 40% rise in jet fuel costs seen in the past year. Airlines are benefiting from the strong US economy and super-low unemployment rate with United Continental and Delta Airlines amongst those citing a rise in business class revenues.  United’s president Scott Kirby even went as far as saying “This is one of the best revenue environments we’ve ever seen” and the company believes that it is benefiting not only from raising prices – it’s filling more seats. American Airlines is due to report third-quarter earnings next Thursday and investors will be keen to see whether or not the world’s biggest carrier has also managed to boost revenues to cover higher fuel costs. * SO WHAT? * Great news for airlines, but fuel prices do not look like weakening any time soon so filling more business 

class seats is a real priority. No doubt seat manufacturers and companies that fit them (especially if they are being retrofitted) will be doing pretty good business themselves! 

Meanwhile, Flybe warns losses will be £18bn higher than expected (Daily Telegraph, Oliver Gill) heralds some rather bad news for budget airline Flybe as it announced a profit warning yesterday, blaming adverse currency movements and increased fuel costs, although Numis analyst Kathryn Leonard said it had more to do with weakening passenger demand. The shares fell by an eye-watering 40% in trading on the news. Flybe boss Christine Ourmieres-Widener said that “Stronger cost discipline is starting to have a positive impact across the business”, but clearly these efforts are just p!ssing in the wind. * SO WHAT? * This is just the latest lurch in what has been a white-knuckle ride for Flybe shareholders. Shares shot up in February when Stobart Group, the FTSE250 infrastructure and aviation conglomerate expressed an interest in buying Flybe, but then they crash-landed when this all fell through. Getting hit by rising fuel costs and adverse currency movements is particularly tricky for budget airlines as they can’t rely on revenues from higher-margin business passengers so they have to make up shortfalls elsewhere. Will they be able to survive this turbulence, I wonder?

In individual company news, eBay gets shirty with Amazon…

eBay sues Amazon, alleging sellers were illegally poached (Wall Street Journal, Laura Stevens) highlights the filing of a lawsuit against Amazon yesterday where the latter is accused of illegally poaching sellers for its own marketplace using eBay’s internal member messaging system. The lawsuit alleges that “Amazon has been engaged in a systematic, coordinated effort to infiltrate and exploit eBay’s proprietary M2M system on eBay’s

platform to lure top eBay sellers to Amazon…the scheme is startling in breadth – involving large numbers of Amazon representatives (“Amazon reps”) targeting many hundreds of eBay sellers, and spanning several countries overseas and many states in the United States including California)”. * SO WHAT? * The two sides have been competing for merchants and buyers for years and have been increasingly reliant on independent sellers to boost sales as Amazon, for instance, makes more money from these transactions because it takes a cut of the revenues to cover warehousing, advertising and other fees. A lot is at stake here, but I don’t expect this to get resolved for quite some time.

…And finally, in other news…

I thought I’d leave you with a very artful Japanese TV advert. Some of you will think I’m mad, but there’s something quite beautiful about it: Shiseido promises confidence for the lovelorn with their spellbinding new makeup ad (SoraNews24, Katy Kelly https://tinyurl.com/yaa5bc92).

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

1. In MACROECONOMIC AND MARKETS NEWS, the Saudi drama continues, Macron reshuffles his Cabinet, UK wages are up and US markets surge strongly
2. In US COMPANY NEWS, Goldman Sachs and Morgan Stanley power ahead, Netflix unveils a great Q3 and the IPO race is on between Uber and Lyft
3. In EUROPEAN COMPANY NEWS, Aldi and Lidl continue to trounce everyone else and BAT cuts its vaping target
4. In OTHER NEWS, I bring you tidings of a new toastie shop. For more details, read on…

So the Saudi Arabian drama continues, Macron reshuffles the deck, UK wages get a lift and US markets make up lost ground…

Trump alleges rush to judgment in Khashoggi case (Financial Times, Demetri Sevastopulo, Katrina Manson and Simeon Kerr) heralds the latest in the murder/disappearance of the dissident journalist saga as Trump is now backpeddling like mad after his initial threats to punish Saudi Arabia as he said in an interview yesterday that “We have to find out what happened first. Here we go again with…you’re guilty until proven innocent. I don’t like that. We just went through that with Justice Kavanaugh and he was innocent all the way as far as I’m concerned”. Saudi Arabia pulls planned deal with Hyperloop (Financial Times, Simeon Kerr and Andrew Edgecliffe-Johnson) serves as a warning to the regime’s critics as it pulled out of a planned deal with Sir Richard Branson’s Virgin Hyperloop One after The Bearded One said he’d cuts ties with the kingdom until more details came to light about Khashoggi. * SO WHAT? * This whole charade is continuing apace with Trump’s assistance basically because he can’t afford to p!ss off the Saudis. My prediction is that once this whole Khashoggi thing gets buried, Saudi Arabia will magically increase oil production to ease prices as a “thank you”. On the other hand, things could get pretty entertaining if Khashoggi turned up alive and well spotted at the local Apple store buying an upgrade for his Watch OR if Turkey just decided to “leak” the footage of the alleged murder. If the latter happened, all hell could break loose as all sides scramble to discredit the source and big sanctions come into force (although I really wonder how long THAT would be sustainable) but I would be amazed if that happened because Turkey could gain so much more by NOT releasing it. Talk about having an ace up your sleeve.

Following on from recent reports of the French president’s flagging popularity amid a raft of senior resignations, Emmanuel Macron unveils new cabinet in long-awaited reshuffle (Financial Times, Harriet Agnew and David Keohane) highlights his efforts to give a “second wind” to his sputtering administration. He’s installed Christophe

Castaner as interior minister to plug the gap left by Gerard Collombe who resigned two weeks ago and ousted several others whilst bringing in eight newbies – one of whom is Gabriel Attal who, at 29, was named as junior education minister and became the youngest member of government in France’s modern history. * SO WHAT? * Clearly a refresh was needed, but it still won’t detract from people’s perceptions that Macron remains out of touch with the electorate. Mind you, in his first year in office, Macron has managed to push through reforms of France’s wealth tax, taxes on dividends and the labour market. Next up in his crosshairs will be pension reform and huge job cuts in France’s civil service – so he’s going to need all the support he can get.

UK pay growth reaches highest level since 2008 crisis (The Guardian, Larry Elliott) cites the latest data from the Office for National Statistics (ONS) which shows that regular pay excluding bonuses was 3.1% higher in the three months to August than in the same quarter in 2017. Having said that, it pointed out that real pay – which takes into account the impact of price increases – was £11 a week lower than it was before the financial crisis. As the ONS head of labour market statistics, David Freeman, put it “People’s regular monthly wage packets grew at their strongest rate in almost a decade but, allowing for inflation, the growth was much more subdued”. * SO WHAT? * Good news for workers, but there’s still room for improvement. Let’s hope that the Bank of England looks at the real rate of pay rather than the headline figure when it decides the next interest rate move.

Stocks surge, erasing some recent losses (Wall Street Journal, Akane Otani) highlights a solid market performance yesterday on the back of positive jobs data and continued strength in corporate profits. The Dow was up almost 500 points and the tech stocks that had taken a bath recently rebounded strongly. * SO WHAT? * Yes, there are some hurdles on the horizon but corporate America is on a winning streak at the moment. As I said the other day, tech stocks in particular as still producing real stuff that punters crave so any concerns about some kind of tech bubble bursting right now look a bit overdone. Having said that, trade war chat-related fears are valid because no-one knows what the outcome is going to be. It would be ideal for Trump if he could solve this before the midterm elections because I’m sure we’d see a major boost to the financial markets in a sort of relief euphoria – but it seems that we are not anywhere near a settlement at the moment.

Goldman Sachs, Morgan Stanley and Netflix announce strong figures while the IPO race is on for Lyft and Uber…

In Goldman, Morgan Stanley show Wall Street charging ahead (Wall Street Journal, Liz Hoffman) we see that both companies announced much higher third quarter earnings – profits up 19% and 20% respectively – after a week of big banks unveiling strong numbers. All six of the biggest US banks have now reported higher profits versus last year.

Netflix crowns excellent third quarter (The Times, James Dean) shows a company back on track after it suffered a 13% sell-off in its shares when it announced weaker-than-expected subscriber numbers in July this year. It added seven million new subscribers – a full two million more than it had forecast back in July – and announced a bullish forecast for the fourth quarter of 9.4m subscriber adds. The shares jumped by 14.3% in after-hours trading. * SO WHAT? * This is great news for the 

company. The fact that it is spanking the cash on more and more proprietary content is a given, which makes everyone super-sensitive to subscriber numbers, hence the wild share price movements when the company delights or disappoints. As far as I’m concerned there is still a lot of growth to go for here as I don’t think we’ve reached “subscription saturation point” just yet. That time will come, but not for a while longer.

I thought that Uber and Lyft in race for Wall Street listing (The Times, Tom Knowles) was worth mentioning because of the sheer amounts of money being bandied about. People are talking about Uber being valued at a whopping $120bn if it lists next year – which would make it bigger than General Motors, Ford and Fiat Chrysler combined!Its smaller rival Lyft is expected to float in the first half of next year for a more “modest” amount north of the $15.1bn it was valued at this year. Given that Lyft made 375 million rides last year versus Uber’s 4 billion, you can see why the valuations are a teensy bit different. Fun fact for you: Uber only has to offer around 21% of its shares to be the biggest IPO ever. If co-founder Travis Kalanick sold off his entire stake at that valuation, it would net him a rather nice $8bn! Think of the number of “Appropriate Behaviour in the Workplace” and Anger Management courses he could do for that ;0)

In European company news, it’s onwards and upwards for Aldi and Lidl and British American Tobacco cuts its vaping target…

Aldi and Lidl leap ahead as big four rivals struggle to make up ground (Daily Telegraph, Rhiannon Curry and Ben Woods) shows that the discounters are putting further clean air between themselves and the likes of Tesco and Sainsbury’s, according to the latest stats from Kantar Worldpanel. * SO WHAT? * Although this is obviously disappointing for the big four, in some ways Sainsbury’s and Asda might be secretly pleased because it is something that the Competition and Markets Authority 

(CMA) will have to take into account when scrutinising their proposed £15bn merger. Continued strength by the discounters and other newer players will make the deal more likely to go ahead and less likely to get scuppered because the enlarged entity would be too dominant.

BAT cuts vaping target and profit forecasts as new CEO steps up (Daily Telegraph, Oliver Gill and LaToya Harding) shows that the mighty BAT – the largest listed tobacco company in the world – has cut full-year vaping targets and overall profit growth due to problems in Japan and the US and adverse currency movements respectively. * SO WHAT? * The Food and Drug Administration (FDA) is currently looking to crack down on vaping, which could be highly problematic (and possibly terminal) for purer vaping players such as Juul – but could be an unexpected boon for Big Tobacco which has far deeper pockets and a more diversified earnings stream.

And finally, in other news, I propose a toast(ie)…

Here’s to the continued enjoyment of the toasted sandwich! Long may it live! Here’s somewhere to go if you get the urge: Toastie restaurant with completely bonkers fillings to open in UK – would you try any of them? (The Mirror, Robyn Darbyshire https://tinyurl.com/y7a5sx8y)…

1. In MACROECONOMIC AND CURRENCY NEWS, we see something funny going on with the US and Saudi Arabia, SoftBank suffering from its association with the kingdom and Bitcoin’s latest move towards legitimacy
2. In INDIVIDUAL COMPANY NEWS, Superdry’s not looking so super, Convatec takes a bath and Aston Martin plunges further
3. In OTHER NEWS, I bring you a talented man making sweet music on calculators. For more details, read on…

So Trump and Saudi Arabia set us up for a BS story, SoftBank suffers by association and Bitcoin gets a boost…

Trump signals backing of Saudis over Khashoggi disappearance (Financial Times, Andrew England, Tony Barber and Demetri Sevastopulo) shows us a prime example of the makings of what I think is an extremely clumsy cover-up. Trump sent his secretary of state, Mike Pompeo, to “get to the bottom” of the disappearance of dissident journalist Jamal Khashoggi whilst at the same time saying that “rogue killers” could be responsible for the killing. CNN and the Wall Street Journal have said that Saudi Arabia was thinking about saying that the journalist was killed “by mistake” in an interrogation by some mysterious operatives. Meanwhile, a joint investigation between the Saudis and the Turks has been instigated well after the incident was alleged to have taken place and apparently a few hours after what appeared to be a visit from a group of cleaners entering the embassy through the main entrance (although that could admittedly be innocent – or a double-bluff! Oooh, controversial…). * SO WHAT? * I will bet my mortgage on the fact that Trump will be satisfied with the findings of the investigation and do his level best to calm the increasing hysteria surrounding this incident – which is why he’s clearly softening everybody up with this theory of “rogue operators”. The fact that the Saudis have gone from outright denial of any incident to suggesting that it may have happened, albeit via the hands of some unidentified “rogue operators” AT A CONSULATE, sounds highly suspicious to me. I would also be willing to bet that the joint investigation by the Turks and Saudis will unveil no fault and that this whole thing will just drift away over time via a mixture of clever PR (probably bankrolled by the Saudis) and a willingness by everyone who makes money from dealing with Saudi Arabia to move on. The fact that Mohammed bin Salman (aka “MBS”) has consistently been jailing those who don’t agree with him has been successfully overlooked by the international community so far and I see no reason why this will stop, especially with the country’s enormous power over oil. Everyone just has too much to lose from p!ssing off the Saudis…

…which brings me to SoftBank/Saudi Arabia: present value (Financial Times, Lex) where SoftBank’s close association with Saudi Arabia saw the Japanese company’s share price sold off by 7% (almost half of its massive flagship Vision Fund comes from the kingdom) as investors feared the worst. * SO WHAT? * Unless this whole controversy goes away, the ability of the Vision Fund to do more deals will get trickier and any talk of additional investment by MBS – supposedly up to $45bn in a new fund – will go quiet for now at least. Having said that I personally think that, as far as SoftBank is concerned, this will prove to be a storm in a teacup and the share price will bounce back IF the whole Khashoggi thing gets swept under the carpet (which, unfortunately, looks likely). At the end of the day, everyone knows about the Vision Fund and I’m pretty sure that most businesses chasing big investment are not going to say no to getting finance from it.

I think that Fidelity says it will trade Bitcoin for hedge funds (Wall Street Journal, Justin Baer) is a major step in Bitcoin’s history as Fidelity Investments has announced that it will store and trade Bitcoin and Ether for hedge funds and other professional investors in the new Fidelity Digital Asset Services business.  This division will execute trades through various digital currency exchanges and platforms but there are no plans to broaden its coverage to retail customers at the current time. * SO WHAT? * Most large financial services firms thus far have turned their noses up at the prospect of trading digital currencies due to concerns about risk, regulation and volatility so this is a huge step towards legitimacy for Bitcoin and Ether. The new business will expand into other assets as time goes on, but this move by such a respected firm may well prompt others to follow.

JUST A LITTLE THOUGHT FOR YOU: I’ve been looking at the oil price since this whole Khashoggi thing exploded with evidence from the Turks and it seems that the price has not really moved as much as I thought it would have done given all the initial rhetoric, outcry and threats of sanctions flying about. This would imply to me that the market sees this event as noise – and interestingly enough I don’t know whether you’ve noticed, but the oil price seems to be weakening further – which suggests to me that the market may be thinking that the Saudis could increase oil production as a way to keep the Americans sweet – after all, this is what Trump asked the Saudis to do when he imposed sanctions on Iran. We’ll just have to see…

In individual company news, Superdry and Convatec crater and Aston Martin continues its downward slide…

Superdry profit warning knocks £1.5bn off shares (The Guardian, Julia Kollewe) highlights a bad day for the apparel retailer as it announced an £18bn dent in its profits due to warm autumn weather, generally tricky trading conditions and unexpected forex costs. The shares were walloped by 20% as a result. As chief exec Euan Sutherland put it, “Superdry is a strong brand with significant growth opportunities, backed by robust operational capabilities, but we are not immune to the challenges presented by this extraordinary period of unseasonably hot weather”.

Talking about big share price drops, Convatec shares

plunge as CEO departs and it cuts sales forecast (Daily Telegraph, Jack Torrance) details a one-day share price drop of over 30% as colostomy bag and catheter maker Convatec announced a major cut in forecasts and the “standing down” of its CEO Paul Moraviec with immediate effect. The downgrade was largely caused by its biggest infusion pump customer deciding to cut the amount of inventory it carries but Convatec also cited tougher trading conditions and price pressure in supplying the NHS.

Luxury cars left battered (The Times, Louisa Clarence-Smith) highlights a new low for the much-hyped Aston Martin Lagonda as selling pressure has seen the share price fall from a flotation price of £19 to the current £14.87. Jefferies had initiated coverage of the car maker with a £14 price target, saying that although it had a credible growth plan the flotation price wasn’t sufficiently pricing in execution risk as it entered into competitive areas. It argued that the £19 price put it up with the likes of Hermes and Ferrari, both of whom have more of a track record.

…and finally, in other news…

Every now and again you see something that makes you think “this person clearly has too much time on their hands”, but then you are rather glad they did. This is one such example: Japanese netizen kills time by learning to play a hit J-pop song on…calculators (SoraNews24, Dale Roll https://tinyurl.com/y9mxtvhf). That’s serious dedication to something completely pointless right there!

1. In MACROECONOMIC NEWS, Saudi Arabia threatens retaliation and Germany’s Merkel has a setback
2. In RESTAURANT-RELATED NEWS, Patisserie Valerie survives for now and UberEats plans virtual restaurants
3. In INDIVIDUAL COMPANY NEWS, military electronics companies L3 and Harris merge and Sears files for bankruptcy protection
4. In OTHER NEWS, I bring you one of those photo optical illusions. For more details, read on…

So Saudi Arabia gets nasty and Merkel suffers a defeat that could help her…

Trump, Saudis escalate threats (Wall Street Journal, Vivian Salama and Margherita Stancati) shows that the war of words between Washington and Riyadh is hotting up over the suspected killing of a dissident Saudi journalist. On the one side, Trump pledged “severe punishment” on Saudi Arabia if an investigation shows that it did indeed murder (and chop up, if you believe Turkish intelligence sources) journalist Jamal Khashoggi who disappeared after he entered the Saudi consulate on October 2nd – and then on the other, you have Riyadh threatening to retaliate in spades. Various companies and individuals (including JP Morgan’s chief exec Jamie Dimon and media companies such as Bloomberg and CNN) are starting to pull out of attending the kingdom’s premier business conference later this month in protest and one former State Department official said that “this is the most damaging blow for Saudi Arabia and the United States since 9/11…at a minimum MBS (Mohammed bin Salman, the Crown Prince) is damaged goods”. Riyadh says it will hit back at any US sanctions over missing journalist (The Guardian, Patrick Wintour) highlights a statement by Riyadh which said that “The kingdom affirms its total rejection of any threats and attempts to undermine it, whether through economic sanctions, political pressure or repeating false accusations…the kingdom affirms that if it is [targeted by] any action, it will respond with greater action” and Ledger on oil and arms gives kingdom huge global influence (The Guardian, Rob Davies) emphasises that, as the world’s biggest oil exporter, Saudi Arabia has enormous influence on the world economy. An editorial in the Arab News by Turki Aldhakhil claims that Riyadh is looking at up to 30 retaliatory measures if the US decides to punish them, including an oil production cut that could drive prices from around $80 a barrel to over $400 that would not only drive up pump prices – it would also jack up the costs of all goods transported by road. Saudi Arabia also supports huge numbers of American jobs via its arms purchases as it is the world’s #2 importer of arms (India is #1) and a massive 61% of those imports are from the US. Saudi Arabia was America’s biggest arms customer last year, with the $17.5bn-worth of deals looking set to continue after Trump signed a $110bn defence agreement with the country last year. * SO WHAT? * If what the Turkish intelligence sources are saying is true, this is truly a horrific reflection of a country that is trying to change under its

modernising Crown Prince – murdering a journalist in a particularly grisly manner is not the way to win friends and give them that warm cuddly feeling. However, I fear that there is b*gger all that anyone can do about it. At the end of the day, Saudi Arabia has the rest of the world by the balls with its oil – and it would not be that difficult for the country to switch from being America’s BFF to Russia’s new BFF (after all, they already have regular relations on the oil front), if Riyadh felt slighted. Call me cynical, but I suspect a massive stitch-up is on the cards – and Turkey could be the big winner here if President Erdogan plays his cards right. He has already agreed to a joint Turkey-Saudia Arabia investigation (can you imagine how impartial THAT is going to be??) and you would have thought that he could be incentivised by both the US AND Saudi Arabia to make this all go away. What a brilliant move by that old dog Erdogan – this  could well have saved his ailing economy. Unfortunately, you have one (probably) dead journalist on the one side and then MASSIVE repercussions for economies and jobs on the other – and I suspect that the latter will be prioritised over the former no matter how uncomfortable that is.

In rather less violent political developments, Bavarians deliver stunning rebuke to conservative Merkel allies (Financial Times, Guy Chazan) shows that voters in Germany’s southern state of Bavaria struck a huge blow to the ruling Christian Social Union (CSU), which saw its share of the vote collapse from 47.7% in the election five years ago to 36.2% yesterday with the Green party and extreme-right AfD taking advantage. The CSU has ruled in the region without a break since 1957 and had been trying to take the wind out of the sails of increasing support for the anti-immigration AfD by picking fights with Angela Merkel over asylum policy. However, it seems that this tactic has backfired in spectacular fashion as voters abandoned them for the Greens in their droves as the party saw its share of the vote increase from 8.4% in 2013 to yesterday’s 18.1%. * SO WHAT? * This result goes to show the rather fragile nature of Germany’s coalition government with the CSU and Social Democrats (SPD) all weakening along with Merkel’s Christian Democratic Union (CDU) and raises the question of whether it will actually be able to last a full term. Result may strengthen Merkel’s hand, but fear of alternative is what holds coalition together (The Guardian, Jon Henley) puts an interesting spin on the result in that it could act in her favour by forcing some of her fiercest critics to back down after such a chastening defeat because if they don’t, the danger is that they could end up handing power to the extreme-right AfD party, which would put Germany and the EU in a very difficult position.

Patisserie Valerie survives and Uber Eats is on the verge of launching 400 virtual restaurants…

Café chain could sue auditor over £40m hole (The Times, Dominic Walsh) heralds the latest development in Patisserie Valerie’s current drama as the exec chairman and 37% shareholder Luke Johnson staged a rescue bid for the company on Friday by providing a £10m interest free loan with a £10m bridging facility to be repaid after the completion of a £15.7m share placement with institutional shareholders in which Johnson will buy about £5m of the shares to be priced at 50p versus the 429.5p the shares were at before this news hit and the shares were suspended. This means that the company’s market cap will suddenly drop from £446m to £68m. Although Johnson has not directly referred to suing Grant Thornton, its auditor since 2006, for its failure to notice a £40m black hole in its finances, you would have thought that the auditors aren’t going to get away with it. * SO WHAT? * Well at least the company isn’t going to go under for now. However, this MASSIVE decline in value is going to be extremely painful and I suspect that there are going to have to be some pretty dramatic cuts in jobs and outlets for the sake of its ongoing survival.

There’s potentially good news for those who live in areas with few restaurant options in Uber Eats to launch 400 virtual restaurants in UK (Daily Telegraph, Matthew Field and Olivia Rudgard) as the company is planning on a roll-out of “virtual restaurants” which basically increase takeaway food choices by optimising the use of existing kitchen space. Basically, the way it works is this: UberEats finds out what foods people in specific neighbourhoods are searching for and if  that food isn’t served in that location, Uber will approach an existing restaurant and see if they want to serve the missing cuisine. If that establishment agrees to do so, Uber will “build” a virtual restaurant that only exists in its app (i.e. you can’t go to it in person) that people can order from. This means that, say, a restaurant will suddenly be able to utilise its existing equipment to make a whole host of other dishes whilst making more money by reacting to real-time demand. One of the great things here is that with a virtual restaurant, you can test individual menu items or completely new cuisines without having to build or invest in a real world presence. Pretty amazing, no? * SO WHAT? * I think that this is a very interesting concept indeed and is great not only for the consumer but also the restaurants in question as it gives them the ability to react to reliable customer “intelligence” and broaden their offering with lower financial risk. This could be particularly good at the moment (and possibly in the near future) given the tough times restaurants are experiencing as it will either offer existing restaurants a potential lifeline or will give customers a viable “replacement” for outlets that have to shut down.

In individual company news, L3 and Harris get together, Sears files for bankruptcy protection and Tencent continues to suffer…

In L3 and Harris merge in $33bn all-stock military electronics deal (Financial Times, Sylvia Pfeifer, James Fontanella-Khan and Eric Platt) we see that the two defence technology companies are merging in an all-paper deal to create the sixth biggest defence company in the US, with estimated combined net revenues of $16bn. * SO WHAT? * There’s a lot of consolidation going on at the moment in aerospace and defence as companies combine 

to get greater market share of Trump’s promised increase in military spend. The chairman and CEO of L3, Christopher Kubasik, has said that he wants to be a challenger to the likes of Boeing, Lockheed Martin and Northrop Grumman. 

Sears files for Chapter 11 bankruptcy (Wall Street Journal, Lillian Rizzo and Suzanne Kapner) follows on from what I was talking about last week as it filed for bankruptcy protection from creditors early this morning. Under a deal reached with its lenders, it will keep hundreds of its stores open for now although it will close 142 loss-making stores by year end with liquidation sales to begin shortly. Sears currently operates around 700 Sears and Kmart stores and employs about 70,000 people. Edward Lampert will step down as CEO but stay on as chairman. Talk about how the mighty fall!

And finally, in other news, I bring you one of those photo illusions…

I suspect this won’t be quite as viral as the whole blue/gold dress thing but this is quite amusing: Back or neck? Thousands baffled by optical illusion as they attempt to work out what they are looking at (The Mirror, Courtney Pochin https://tinyurl.com/y8zg6ytd). It’s definitely a back. Or a neck…

1. In MACROECONOMIC AND MARKETS NEWS, Turkey looks like it’ll release the pastor and markets take a bath
2. In NEWS ON CARS, China sales continue to slow and BMW ups its commitment in the country
3. In RETAIL NEWS, Amazon ups its pay to long-timers, an online trainer and bag market is coming to you, Coast gets rescued, Patisserie Valerie continues to look tricky and WH Smith has mixed fortunes
4. In OTHER NEWS, I bring you a genius invention that we could do with over here. For more details, read on…

So Turkey/US relations might be about to get better and markets continue to plunge…

You may recall that Turkey has been having a rather rough time of things recently as the country’s economic woes have been exacerbated by Trump imposing sanctions in protest against an American pastor being held in the country on charges of espionage. Well Turkey is expected to release American pastor on Friday (Wall Street Journal, Alan Cullison, Peter Nicholas and David Gauthier-Villars) shows that this deadlock may be about to end as a release looks likely today after a court hearing. North Carolina pastor Andrew Brunson has been held since 2016, but now it looks like he may be freed – although deals have fallen through at the last minute in the past. * SO WHAT? * Basically, Turkey could do with some allies right now as it doesn’t have that much support in the region and releasing Brunson could bring Trump back onside. It would also be a nice little PR boost for Trump in the run-up to the midterm elections to say that he had managed to solve the Brunson dispute. In addition to this I would have thought that, if this goes ahead and sanctions are lifted, Turkey will see a relief rally and recovery in its currency. This would in turn reduce pressure to make any further interest rate increases, which is something that President Erdogan is keen to avoid. Some may argue that the resulting relief could lift other emerging markets as well but I’m inclined to think this is a Turkey-specific thing rather than a wider emerging markets thing. The problems remain for the latter regarding their dollar-denominated debt getting more expensive because of rising US interest rates, but I guess that a Brunson release isn’t going to do any harm!

FTSE 100 ends 10% off peak as global sell-off continues (The Guardian, Larry Elliott) highlights the continued market sell-off as investors continued to show concerns

over ongoing trade tensions, higher inflation and Donald Trump’s attempt to rein in the US central bank’s intentions to continue to raise interest rates. He told reporters yesterday that “we have interest rate going up at a clip that’s much faster than certainly a lot of people, including myself, would have anticipated. I think the Fed is out of control”. The Federal Reserve (aka “the Fed”) is expected to put rates up again in December and then put through up to four more increases in 2019. * SO WHAT? * The US economy is chugging along nicely, unemployment levels are super-low and wages are trending higher. This makes Trump look good. HOWEVER, the Federal Reserve is independent and it has the power to take some of the heat out of the economy by hiking rates, which will slow everything down – making Trump look not-so-good. Basically, I think it all boils down to this: if the central bank is more concerned about rising inflation than stock markets, interest rates WILL continue to rise at a decent pace, but if it has any concerns about the effects of its actions on the stock markets then perhaps the rises will be more gradual – at the moment, the base case is one rise this year and four more next. Anything less/slower than that will bolster current sentiment and the weakness we are seeing now could be viewed as a buying opportunity.

In the meantime, Tencent Music pauses IPO amid market turmoil (Wall Street Journal, Julie Steinberg and Maureen Farrell) shows how the current market sell-off is affecting sentiment in the IPO market. According to people close to the offering, it will be postponed until at least the middle of November in what would be one of the biggest IPOs in the US this year. It was due to start off its investor roadshow next week and start trading on October 22nd. * SO WHAT? * This is definitely the right course of action for the company right now – especially given the carnage not just in the US but in its own home market. For instance, Tencent Music’s parent company – Tencent Holdings – fell by 6.8% in Hong Kong yesterday alone – its tenth consecutive day of decline. The share price is now 34% down so far this year.

Car sales in China slow down and BMW increases its hold of its Chinese joint venture…

In Global car makers rattled by stalling China market (Financial Times, Tom Hancock) we see that Chinese car sales have fallen in both July and August versus the previous year and it looks likely that they will continue to fall in September. * SO WHAT? * Given that China is the largest and most profitable car market in the world, this is clearly a concern for car manufacturers who see the country as key to their profitability. Bernstein analyst Robin Zhu says that “the auto sector has been under huge pressure in recent weeks and months, with existing cyclical and structural concerns being joined by worries about tariffs and China. Few of these concerns are going away”.

Meanwhile, BMW to raise stake in China joint venture to 75% in €3.6bn deal (Financial Times, Tom Hancock and Alice Woodhouse) shows a concrete reaction to Beijing’s recent relaxation of its restrictions of foreign ownership in the automotive sector. The previous arrangement put in place a ceiling of 50% ownership by a foreign firm of a joint venture with a Chinese manufacturer, but the government said in April that it will lift this restriction by the end of this year for electric vehicles and by 2022 for other types of vehicle. * SO WHAT? * This will give BMW greater control over its JV with Brilliance Auto Group and boost margins. However, BMW/China: Brill seeker (Lex, Financial Times) believes that this is a costly investment in a market that has its own risks. On the positive side, China represents a great testing ground where car companies can sell low-emission vehicles to see what works and what doesn’t but on the other side, such an investment increases exposure to the whims of the Chinese government who still have a great deal of control over the supply chain and the actual sale of the cars.

In retailer news, Amazon ups its pay again for some workers, an online bags and trainers “market” comes to the UK, Coast gets rescued, Patisserie Valerie continues to look shaky and WH Smith has a bit of a mixed bag…

Further to recent criticism that its recently much-trumpeted wage rises for US and UK workers actually made them worse off because the reduction in benefits actually negated the increase, Amazon adds to pay rise of longtime workers to address backlash (Financial Times, Shannon Bond) shows that Amazon has decided to give an extra boost to workers who have been there the longest. Analysts don’t believe this wage increase is going to have too much impact on the overall financials of Amazon, though, as an increase in net incremental costs of between $400m and $1.9bn represents less than 1% of the company’s $235bn in revenues it is forecasted to achieve this year.

Online marketplace to resell trainers and handbags hits Europe (Financial Times, Andrew Edgecliffe-Johnson) heralds the arrival in Europe of Stock X, an online marketplace that sells things like Yeezy sneakers, Supreme streetwear and Louis Vuitton handbags, as it opens a west London facility that will authenticate products sold in the UK and 30 other European countries. StockX differs from sites like eBay because it offers “bid” and “ask” prices like a stock exchange with ticker symbols. When a transaction is

agreed, the seller sends the product to the StockX warehouse for viewing by authenticators, which has meant that the rate of fake goods it detects has dropped from 15% to 2%. The company touts itself as being an alternative retail model for brands and has expanded the product categories in which it trades. Sounds exciting, no?

Elsewhere, things continue to be tricky on the UK high street in Karen Millen snaps up Coast assets as it faces administration (Daily Telegraph, Ben Woods) as women’s clothing retailer Coast went into administration, with parts of the business being bought out by sister company Karen Millen. It’ll save some jobs and department store concessions, but 24 of its high street shops are still set to close. Mike Denny, from the administrator PwC, said that “this sale puts the ongoing business on a firmer financial footing. Karen Millen will be working with the existing management team to continue to grow and develop the new business”.

Patisserie Valerie faces closure without immediate cash injection (Daily Telegraph, Oliver Gill) shows that things aren’t getting any better for the bakery chain, keeping the future of its 2,500 staff and 206 shops in limbo. The saga continues as various advisers are called in…

Costs take gloss off profit rise at WH Smith (The Times, Deirdre Hipwell) shows that although underlying profits and the dividend rose at WH Smith, higher restructuring costs for its high street retail business sent the company’s share price down by over 11.5% in trading yesterday. Its travel division (shops in stations, airports etc) continues to power the company and accounts for over half of group sales and two thirds of profits.

And finally, in other news, I bring you an interesting new invention…

I thought that this might be particularly appropriate as it’s a Friday, but how about this as an invention of something you never knew you needed: Clever pizza box turns into a food tray so you can scoff slices in bed (The Mirror, Robyn Darbyshire https://tinyurl.com/ybfjhbd5). I wonder what great mind came up with that??

1. In MACROECONOMIC AND MARKETS NEWS, UK GDP rises and US markets fall
2. In RETAIL NEWS, Sears gets closer to bankruptcy, Ikea changes its stores, Wilko stutters and Patisserie Valerie has a nightmare
3. In INDIVIDUAL COMPANY NEWS, Snapchat announces new shows, Fever Tree slows and James Murdoch emerges as a front-runner for the Tesla chairman role
4. In OTHER NEWS, I bring you two life hacks. For more details, read on…

So UK GDP rises whilst US markets get nervy…

GDP grows 0.7% but slows in August, spending cools (Daily Telegraph, Anna Isaac) cites the latest data from the Office for National Statistics (ONS) which show that sales of food, booze and cars boosted GDP growth over the summer but a sluggish August posed questions about the underlying strength of the economy. The all-important service industry, which accounts for almost 80% of GDP, got a helping hand from sales of accommodation and food services in July, but these activities shrank by 1.6% in August. * SO WHAT? * This “cooling off” trend appears to be echoed in other data sets like the most recent Purchasing Managers’ Survey which also saw growth, but at a slower rate. Rob Kent-Smith, of the ONS, observed that “the economy continued to rebound strongly after a weak spring, with retail, food and drink production and housebuilding all performing particularly well during the hot summer months” although long-term growth “continues to lag behind its historical trend”.

Meanwhile, Wall Street plunges amid sell-off in technology giants (Daily Telegraph, James Titcomb) highlights Wall Street’s biggest fall since February as a

mass sell-off in tech stocks and interest rate concerns combined to power a 3.2% fall in the Dow Jones and a 3.3% fall in the S&P500. Shares in all the FAANG stocks fell, taking the Nasdaq down by 4% – its worst trading day since 2016. Neflix was down by 8% and Amazon, Apple, Alphabet and Facebook all fell by between 4.6% and 6.5%. Snap, parent company of Snapchat, fell by 5.9% to new lows. * SO WHAT? * Yes, tech stock valuations have become rather toppy – but then we live in a tech world and, for the most part, these companies actually produce real stuff that people need. Netflix continues to be at the forefront of streaming with everyone else trying to play catch-up, Google, Facebook and Amazon have all been facing privacy issues of late and Apple is getting hit by the US-China trade shenanigans. Although these companies clearly aren’t cheap, I think that there is still plenty of scope for development and that any weakness will create chances for the braver investor. If the US-China thing gets sorted I think these stocks could potentially roof it because any deal between the two sides is bound to have a watertight tech element to it. On the other hand, the longer negotiations drag on, the more the tech hardware companies are likely to suffer IMHO. The other major cloud on the horizon, of course, is if onerous legislation is put in place for data protection given recent newsflow. But even then, most of these companies will have gone through a modicum of reform as they have to comply with the European GDPR. There will be an initial financial hit, but then I would expect things to calm down thereafter.

Sears faces bankruptcy, Ikea changes the model, Wilko suffers and Patisserie Valerie’s future looks to be in doubt…

Lampert won’t give Sears another lifeline (Wall Street Journal, Suzanne Kapner) spells the beginning of the end for what was once America’s biggest retailer as Edward Lampert, who is Sears’ chairman, chief exec, biggest shareholder and biggest creditor (via his hedge fund ESL Investments Inc) has refused to lend the company money to repay $134m in debt due Monday as the restructuring plan he proposed recently failed to gain any traction. A bankruptcy filing could come within days and the shares fell 17% in trading yesterday. * SO WHAT? * Lampert has disposed of assets and attempted to cut costs at the retailer which has the Sears and Kmart brands, but it doesn’t look like it’ll be enough to save the venerable retailer as things stand. The company is facing a cash crunch at the moment as, on the one hand, it needs to restock its stores ahead of the holidays but on the other, vendors are increasingly asking for the company to pay cash up front. There will have to be one heck of a deal to drag this one out of the dirt. Given that the American consumer is spending, wages are going up and confidence in the economy is strong Sears’ continued underperformance looks particularly underwhelming, but I guess it is a company that has a lot of baggage (and I don’t just mean in their luggage department).

Ikea eyes transformation of stores in response to consumer shift (Financial Times, Richard Milne) shows the company’s continued efforts to future-proof itself as Torbjorn Loof, Ikea’s chief exec, said that changing consumer behaviour means that there is an increased need for city-centre shops and that its huge out-of-town outlets could become distribution centres. The basic idea is that the city-centre outlets gives them the shop window and then customers can get their goods delivered, changing the decades-old model where customers drive to their massive outlets, buy stuff and put it together when they get home.

It’s already happening – home delivery accounts for about 80% of orders in Hong Kong and in other major cities such as London, home delivery accounts for between 40% and 60% of orders.* SO WHAT? * The company is testing all sorts of formats at the moment to see what works and it’s really good to see a company taking on the challenges of changing consumer tastes directly and with a clear sense of urgency. I think that the company is doing the right things at the moment in order to position itself for the future, but we’ll have to wait before the retail experiments consolidate into a coherent strategy.

Store openings and ‘high level’ of lost stock push Wilko to loss (Daily Telegraph, Ben Woods) shows that it’s not all sunshine and unicorns at discounter chains as it announced a £65m loss due to big investment in store openings and high levels of lost stock. The good news is that turnover grew by 7% due to a 47% hike in online sales and 20 new stores, but this all came at a cost. * SO WHAT? * Wilko needs to make this investment in order to compete with the likes of B&M and Home Bargains and has already cut management jobs to streamline the business model. The underlying business looks pretty good, though, and the company has been taking steps to get to the bottom of the lost stock problems.

Hot on the heels of Greggs’ quarterly results, Patisserie Valerie fights for life (The Times, Dominic Walsh and Alex Ralph) highlights the troubles facing the pastry-maker-and-purveyor after news of a £20m black hole in the accounts prompted a suspension in the trading of its shares – and its CFO – yesterday. The company is conducting an investigation to determine the cause and scope of the damage. The news then got even worse as the company issued a statement saying that its main trading subsidiary Stonebeach Limited was facing a winding up petition from HMRC for an unpaid tax bill of £1.14m. Funnily enough, the petition was advertised last Friday in the London Gazette but was only noticed yesterday afternoon! Patisserie Holdings’ chairman, Luke Johnson, said of the investigation that “We are determined to understand the full details of what has happened and will communicate these to investors and stakeholders as soon as possible”.

In individual company news, Snapchat tries to enhance its offering, Fever Tree cools off and there’s speculation on Tesla’s new chairman…

In interesting individual company news bits, Snapchat unveils new shows aimed at monetising users (Daily Telegraph, Matthew Field) shows the company releasing more original TV-like shows (a mix of teen dramas and documentaries) in a mobile-friendly vertical format that will help the company to consolidate its grip on its user base and give it an edge over Facebook and Instagram. Episodes will be five minutes long and advertisers will be able to buy commercial slots.

It seems like the party’s over – at least at the moment – in Sliced return leaves investors in low spirits (The Times, Simon Duke) which shows that the company lost 10% of its value yesterday as fears increased that its popularity

was going off the boil. Yesterday’s fall means that the company’s share price has now cratered by a third in only four weeks. It had been one of the success stories of the stock market in recent years as it floated at £1.34 in 2015 to reach a peak of £39.56 four weeks ago.

Then I thought I’d mention James Murdoch is frontrunner to take Tesla chairmanship from Elon Musk (The Guardian, Patrick Greenfield) because it’s all over the press today. Musk had to step down from being chairman of Tesla (although he’s still its chief exec) as part of his deal with the SEC and apparently Murdoch is currently the frontrunner to take up the role. Murdoch is currently chief exec of 21st Century Fox but will depart once it completes the sale of the majority of its assets to Disney. Having said that, Musk tweeted yesterday that “This is incorrect”. * SO WHAT? * FWIW, I think Murdoch is a bit lightweight for the role and surely someone like Musk will find it difficult to respect someone who got where he is because his daddy gave him a plum job in the family media business. I would have thought Tesla needs someone with more gravitas and flair to cope with Elon Musk’s big personality.

And finally, in other news, I bring you two life hacks…

We’re entering that time where everyone gets the sniffles, so I thought you might be interested in How far should you stay away from someone with a cold or flu? (Metro, Adam Smith https://tinyurl.com/y6wowalu).

And then I thought I’d leave you with a neat trick to lessen your ironing burden in Clever ice cube trick that means you will never have to iron again (The Mirror, Robyn Darbyshire https://tinyurl.com/y7hpgypw). A bold claim but worth a try, no?

1. In FINANCIALS NEWS, the Bank of England threatens the EU and Wirecard looks moonbound
2. In HIGH STREET NEWS, Greggs gets an unhealthy boost and TK Maxx benefits from bargain-seekers
3. In TECH HARDWARE NEWS, Google unveils some shiny new gadgetry
4. In INDIVIDUAL COMPANY NEWS, SoftBank talks about a majority stake in WeWork and Brewdog considers an IPO
5. In OTHER NEWS, I bring you  an idea for a new hobby. For more details, read on…

So the Bank of England points something out to the EU and newbie Wildcard makes some punchy claims…

Lack of EU preparation puts £69tn of financial contracts at risk (The Guardian, Richard Partington) is a story doing the rounds of the broadsheets today as the Bank of England has warned that contracts governing financial derivatives – which are sold by banks and used by companies to mitigate interest rate and market volatility – could be rendered illegal in the event of a no-deal Brexit. It said in a statement that “In the limited time remaining, it is not possible for companies on their own to mitigate fully the risks of disruption to cross-border financial services”. As much as £41tn-worth of derivatives contracts are due to mature after Britain leaves the EU and London is central to the process that settles these trades – called “clearing”. Ironically, it is the EU that forced banks to increase trade via London’s clearing houses following the financial crisis to make their risk more transparent and this has led to the UK being responsible for clearing 90% of EU firms’ interest rate swaps – one of the most common financial instruments traded by corporates. * SO WHAT? * The article goes into more detail than I’m doing here, but the 

main thrust of it is that although the EU might see this as a brilliant opportunity to take our clearing business, there are major doubts that the EU could cope with the sheer volume of derivatives transactions. Some bankers have likened the relocation of derivatives as handling nuclear waste and some British officials believe that there isn’t enough time left to sort this out. So actually, this might prove to be a key bargaining chip for the UK side in Brexit negotiations.

I’ve been talking recently about disruptors in the banking world and Wirecard predicts sixfold profit rise by 2025 on cashless trend (Financial Times, Dan McCrum and Sarah Provan) is another example of the trend towards digital banking. So far this year, the share price of Wildcard has doubled and it has replaced venerable bank Commerzbank in the Dax index of top companies as its market cap has hit €21bn. Yesterday, it said that it was targeting a sixfold increase in profits by 2025 as transactions volumes rise from €91bn last year to €710bn in the same period due to societies becoming increasingly cashless. Wirecard says that it authorises and processes payments for roughly 250,000 merchants, issues credit and prepaid cards and provides tech for contactless smartphone payments. * SO WHAT? * The share price has been volatile of late, but this bad boy has big ambitions.

In UK high street news, Greggs bakes up a storm and TK Maxx benefits from bargain-hunters…

Greggs third-quarter sales bolstered by drinks and pizza (Financial Times, Chris Tighe and Sarah Provan) highlights a solid performance by the high street baker as it was bolstered by an increase in the take-up of its gift cards (which it’s pushing in the corporate market as a cheap-and-cheerful reward for staff), a broadening of its product range (with healthier options) and strong trading generally. Despite everything going on around them, the company expects to have around 100 net openings in 2018. * SO WHAT? * The company certainly seems to be doing a lot of the right things – it’s even jumping on the vegan trend (!) – and could see new areas of growth as a result. At the moment, for instance, it is trialling deliveries with UberEats 

and Deliveroo and it will be opening an outlet at the recently-refurbished London Bridge, with a view to rolling it out to other sites in the UK capital. This is a far cry from when the company lost almost 20% of its market value when it announced a profits warning in May following bad weather hitting sales.

TK Maxx sales near £3bn as shoppers seek value (Daily Telegraph, Ben Woods) shows how the discount retailer is bucking the downbeat trend as it revealed sales of almost £3bn in the UK. Although turnover jumped up to 11% for the year to February 3rd, its profits fell as it invested in IT and staff recruitment. Hannah Thomson, GlobalData’s senior retail analyst, pointed out that “While high street powerhouses Marks & Spencer and Arcadia have seen their clothing market shares drop by 1.9 percentage points each over the past five years, TK Maxx has grown its share from 2.6pc to 3.2pc”. TK Maxx is owned by US group TJX Companies, which is listed in New York. * SO WHAT? * It’s always good to see some sunshine in an otherwise gloomy high street. 

In tech hardware news, Google unveils various bits of gadgetry…

Google launches new smart speaker with screen (Financial Times, Tim Bradshaw and Richard Waters) makes it feel like Groundhog Day as Google unveiled its smart-speaker-with-screen one day after Facebook unveiled its own device. The main difference with its rivals is that Google’s new Home Hub comes without a camera, which could help it swerve the privacy concerns raised over its competitors’ offerings.

It is designed to show YouTube videos, control smart home devices and have digital picture frame functionality. It also comes with both Amazon’s Alexa and Google’s Assistant. Google also unveiled a new Pixel 3 smartphone and a Slate laptop-tablet hybrid. * SO WHAT? * It’ll be interesting to see what sort of demand there’s going to be for the Home Hub, but I for one would consider it over similar devices WITH a camera as I don’t like the idea of a device sitting there, watching your every move! Still, its popularity will very much depend on price I would have thought. Do you really want to be paying top dollar for something that lets you watch stuff you can already watch on any other device and switches the kettle on?

In individual company news, SoftBank eyes WeWork and Brewdog considers an IPO…

In SoftBank discusses taking majority stake in WeWork (Wall Street Journal, Eliot Brown, Dana Mattioli and Maureen Farrell) we see that Japan’s SoftBank is in negotiation with the eight-year-old, New York-based provider of shared office space to take a majority stake with an investment that could amount to somewhere between $15bn and $20bn. It is thought that this money would come from SoftBank’s $92bn Vision Fund which already owns almost 20% of WeWork after sinking $4.4bn in it last year. * SO WHAT? * If this deal goes ahead, it could be one of the biggest deals of the last ten years. Whether they will be getting value for money is another question, however – especially when SoftBank’s chairman 

Masayoshi Son says things like “Feeling is more important than just looking at the numbers. You have to feel the force, like Star Wars”. He said this at a shareholder meeting in June.

Brewdog ready to move from IPA to IPO (The Times, Greig Cameron) looks at some potential future developments for the craft beer brewer and bar owner as it explores its options with its financial advisors whilst simultaneously strengthening its internal systems in anticipation of an Initial Public Offering. The company’s founders are aiming for a float by 2020 and are currently deciding between a London or New York listing. * SO WHAT? * A listing would help to fund expansion and give current investors an exit opportunity. TSG Consumer Partners, a US private equity group paid £213m for a 23% stake in the business last year and Brewdog already has thousands of smaller investors who bought into the company via crowdfunding initiatives. This could get quite exciting!

…And finally, in other news…

I thought I’d leave you with an idea for a new hobby that could help to relieve stress: Axe throwing takes aim at sunny Los Angeles (Reuters, Rory Carrol https://tinyurl.com/y7eou2we). It sounds rather therapeutic, although I’m sure that it could awaken an inner-beast in some…

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

1. In MARKETS AND OIL NEWS, investors get spooked by Italy’s EU spat and we look at high oil price knock-on effects
2. In TECH HARDWARE NEWS, Sony looks towards a PS5 and Facebook announces its new Portal
3. In UK RETAIL NEWS, there’s more evidence of a slowdown and French Connection has a hike
4. In INDIVIDUAL COMPANY NEWS, Google admits a big data breach
5. In OTHER NEWS, I bring you a fusion of art and music. For more details, read on…

So markets get hammered on Italy/EU shenanigans and the higher oil price is leading to uncertainty in Nigeria and consolidation between rivals…

Italy’s budget battle with EU spooks global stock markets (The Guardian, Richard Partington) highlights a global market sell-off yesterday as investors got nervous about Italy’s spat with the EU over its budget, the prospect of weaker Chinese growth and increasing tensions between negotiators in the US-China trade talks. Brussels is concerned that Italy’s plans will increase its budget deficit (the difference between income from taxes and the amount of government spending). Meanwhile, investors are worried that the budget put forward by Italy’s newly-installed government will increase the cost of borrowing as well as its overall debt – which is already the second highest in the Eurozone as a percentage of GDP, behind only Greece. * SO WHAT? * The Euro weakened against the dollar and most European markets posted losses yesterday. Basically, something has to give between the two sides. As things stand, it looks to me like the EU is going to look bad whatever the outcome. If it blocks Italy’s proposed budget it will be accused of meddling and effectively ignoring the will of the people, whereas if it treats it more leniently it faces a potential backlash from other members who will maybe feel that their efforts to comply with EU guidelines will effectively be ignored by giving Italy a “free pass”. It’s not going to be easy, though – especially when you have the Italian deputy PM saying in a news conference (with French far-right leader Marine Le Pen) that “We are against the enemies of Europe – Juncker and Moscovici – shut away in the Brussels bunker”. Juncker in the bunker.

Given that oil prices have remained stubbornly high of late, it is unsurprising that there have been some repercussions. In Nigeria’s fuel subsidies bill set to soar on rising oil price (Financial Times, Neil Munshi) we see that the high prices have led to a massive increase in the cost for fuel subsidies in Nigeria, Africa’s largest oil producer. Weirdly enough, although it produces 1.7m barrels of crude oil per day, it has next to no refining capacity which means that it has to import 90% of its fuel.

Nigeria has only just started to recover from oil prices dropping to about $30 a barrel in 2016 but it isn’t really benefitting from recent price strength. As Tunde Ajileye, a partner at SBM Intel, put it “We sit on a double-edged sword: when oil prices go down, government revenues go down and it becomes difficult to get foreign exchange. When oil prices go up, while there is usually an increase in government revenues…the big issue is that for refined products like fuel and diesel, the prices go up and [then]…the subsidy bill goes up”. * SO WHAT? * Proceeds from crude oil account for a massive 56% of government revenues, but its annual fuel import bill is over $7bn – so you can see why this is a big issue, and it comes just as Nigeria heads towards elections early next year. This means that the current situation is making a tough scenario even more difficult as uncertainty is bound to breed even more instability. It is a shame because the country could potentially produce 2.5m barrels per day but poor infrastructure, pipeline sabotage and massive corruption all mean it is performing well short of what it could do. The situation doesn’t look like improving any time soon as Opec seems pretty keen to keep prices at current levels.

Other than that, Offshore driller Ensco to buy Rowan in all-stock deal (Financial Times, David Sheppard and Mamta Badka) highlights the creation of a combined entity that will create an offshore specialist with 83 rigs and major drilling contracts that have operations covering six continents. It will have an enterprise value of £12bn and is the latest example of industry consolidation as players bet on scale as being the answer in an industry upswing. Other examples of recent industry consolidation include Baker Hughes paying $550m for a 5% stake in the drilling division of Abu Dhabi’s state oil company yesterday and Transocean buying Ocean Rig last month in a cash-and-shares transaction valued at around $2.7bn. * SO WHAT? * Given that oil prices have risen by almost 50% in the last twelve months, it is unsurprising that the deal-making that dried up following the 2014 downturn has returned with a vengeance. As JPMorgan analyst Sean Meakim put it, “significant consolidation in the offshore drilling sector was practically inevitable given the backdrop of a half-decade’s worth of declining utilisation and rates globally. The company will be by far the largest shallow-water driller globally”. I suspect that there will be more to consolidation to come!

In tech hardware news, Sony eyes a “PS5” and Facebook unveils its new Portal…

There’s often chat every now and again as to whether there really is a need for games consoles any more, so Sony commits to successor for PlayStation 4 (Financial Times, Kana Inagaki, Leo Lewis and Lionel Barber) puts that debate to bed as the company’s president confirmed plans for the next generation of console. Some believe that Sony has not done enough in mobile gaming, given the explosion in its popularity, and is behind the curve on esports where estimated global audiences of 167m watch pros playing each other online. * SO WHAT? * It’s too early yet to speculate about what the new console could look like, but it seems that Sony is undergoing a mindset shift at the moment which could help it to embrace change – as per upping its game in esports – rather than trying to control it. After all, the company recently opened up Fortnite Battle Royale so that gamers could play each other across different consoles – something it never would have considered in the past.

Facebook launches video-calling device Portal (Financial Times, Hannah Kuchler) looks at a new gadget

launched by Facebook, in partnership with Amazon, intended to help its users keep in touch with friends and family. It will enable users video call as they walk around the house using AI to zoom in and out and change focus. The Portal can operate like a smart speaker and users will be able to ask Alexa questions by saying “Hey, Portal” and it will compete with Amazon’s Echo Show, which also has a video screen. The device is now available for pre-order in the US in two sizes – the 10-inch screen costing $199 and the 15.6inch device costing $349. * SO WHAT? * Maybe I’m just old-fashioned, but I HATE this idea. It’s bad enough with Smart TVs watching your every move (that’s not paranoia – it has actually happened with the cameras monitoring people without their knowledge) but having a device so you can call your FB mates? What’s wrong with meeting them in person, calling them on a phone or Skyping/Facetiming them? I think it sounds mega-creepy and although the company says “Facebook doesn’t listen to, view or keep the contents of your Portal video calls. Your Portal conversations stay between you and the people you’re calling. In addition, video calls on Portal are encrypted, so your calls are always secure”, I’m not inclined to trust them. I can see why they are doing it, but I just don’t like where it’s going. Also, my house is always untidy (lego everywhere – not me, it’s my kids honest), dishes next to the sink etc. so the last thing I need is a friend calling me when I’m wandering around in a t-shirt and trackie bottoms loading the dishwasher!

In UK retail news, figures show that growth is slowing right down and French Connection sees a big uplift on news of the founder selling out…

Retail growth slowest in five months (The Times, Emma Yeomans) cites the latest figures from the British Retail Consortium which show that retail sales in September slowed right down, although online retail and clothing sales showed some signs of life. Barclaycard will also release data today that confirms this trend and it noted that around 62% lacked confidence in the economy, with around the same proportion expressing worries about

rising fuel prices. Also, almost half of consumers are planning on spending less this Christmas versus last year. * SO WHAT? * This could be just a bit of a slow patch, but with Brexit coming up I doubt consumers will be loading up with abandon.

Following on from what I said yesterday, On your Marks…race on as French Connection boss says au revoir (Daily Telegraph, Ben Woods) shows how excited investors got about the prospect of the co-founder of FCUK selling out. The shares roofed it by 45% in morning trading before settling down to a 28% gain by the close. This article does a great job of giving you the history of the company – so well worth a read if you have the time. What I said yesterday still stands – whoever buys this stake (and probably the company) really has their work cut out.

In individual company news, Google has a data nightmare…

I’m not going to spend too much time on Google exposed user data, feared repercussions of disclosing to the public (Wall Street Journal, Douglas MacMillan and Robert McMillan) because I suspect this is going to be a story that will continue to develop. The nub of it is that Google exposed the data of hundreds of thousands of users of the Google+ social network in spring and didn’t disclose the breach because they thought it “would draw regulatory scrutiny and cause reputational damage” (no sh!t, Sherlock!!!).

Parent company Alphabet responded yesterday by introducing new data privacy measures and shutting down all consumer functionality of Google+. * SO WHAT? * I bet Facebook is secretly pleased that Google will be taking the heat now but this really does highlight the downsides of online convenience. I also wonder whether it will mean that the US will be more inclined to either adopt European GDPR or perhaps make a US version. Surely, it would be easier to adopt the European guidelines as they are already there so it would be much quicker – but then again nothing is logical in this world! I suspect that this will be great news for some service providers such as lawyers and management consultants who will advise on the inevitable rise in demand from companies looking to check their current standards.

…And finally, in other news…

I thought I’d leave you today with something quite clever: Katrina McHugh: Pop charts…as you’ve never seen them before (BBC, Lucy Todd https://tinyurl.com/y9o9y754).

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

1. In UK REAL ESTATE NEWS, we look at contrasting fortunes in the office, retail and residential markets
2. In RETAILER NEWS, US retailers scramble to fill the hole left by Toys R Us and FCUK is up for sale
3. In INDIVIDUAL COMPANY NEWS, Ford wields the axe, Apple has talks with BT and Jollibee takes on KFC
4. In OTHER NEWS, I bring you some amazing raffles and Thomas Cook’s rebranding fail

So the UK real estate market is a bit of a mixed bag at the moment…

London’s office boom bearing up in face of Brexit (Daily Telegraph, Jack Torrance) does a good job of giving a quick overview of what happened in London’s property market in the immediate aftermath of the referendum and what the current situation is. Initially, nothing happened but then “by Christmas everybody had realised whatever is going to happen is going to take many years to unravel and our business can’t sit still”, according to Will Colthorpe, a partner at property developer Argent. Big employers continued to rent properties and over 5m sq ft of central London office space has been let in the first half of this year – the highest level since 2015 and 13% above the long-term average! Google, for instance, currently occupies an 11-storey building in between King’s Cross and St Pancras stations and last year signed to take over an even bigger building across the road. Facebook will be moving into the area in 2021 at an even larger site and Apple signed an agreement to lease six floors in the redeveloped Battersea Power Station. There has been continued interest from other major international companies such as advertising major Dentsu Aegis and Sony Pictures as well as a mushrooming in demand from the likes of flexible office space providers WeWork – but supply hasn’t been able to keep up. Interestingly, this has led to increased levels of pre-letting, where tenants sign leasing agreements sometimes years in advance of actually moving in. Almost 3m sq ft of pre-lets have been signed this year according to Savills’ research – the highest level since 2013. * SO WHAT? * A lot of this runs contrary to what you would have expected given all the uncertainty engendered by all the Brexit chat, and although Tim Roberts of British Land is probably biased in his projections, he does suggest an interesting theory that “disorderly Brexit could be an opportunity. There does appear to be quite a lot of money lining up that if they can get another 20pc on the currency they will pile in to London to capitalise on that”.

On the other hand, Landlords struggle to offload billions in UK retail property (Financial Times, Judith Evans) looks at the rather more downbeat assessment of what’s going on in our shopping and retail parks at the moment. One unnamed retail estate agent remarked that “Everything is for sale. Nobody wants to own this stuff. The bid-offer

spread between holders’ expectations and the prices that buyers are willing to pay is just a chasm” and a stream of high-profile retail sector collapses has exacerbated the situation. Retailers such as House of Fraser, Maplin, Poundworld and Toys R Us have all been hit by a combination of consumers buying more online and increased overheads (higher minimum wage and higher taxes) while the landlords themselves are getting pummelled by markets. For instance, Hammerson – which specialises in shopping centres – is currently trading at a discount of 40% versus its assets and there are even rumours of rival Intu going private  – but this only looks likely to go ahead at a sizeable discount to net asset value. Others are looking to offload their retail assets, putting further pressure on prices. * SO WHAT? * It is a buyers’ market at the moment as it seems that companies can’t cut their retail portfolios fast enough. Although local councils appear to be buying shopping centres, you do wonder whether they are just throwing taxpayers’ cash into a money pit given the way that the retail landscape is changing. You could argue that having the council as a landlord is probably quite good from a lessee point of view (perhaps they will be more understanding?) but a dying market is a dying market and if everyone is heading for the exit, you have to be a very brave (and deep-pocketed) contrarian to go against the tide. IMHO, these big buildings need to be re-purposed to provide attractive experiences for your average punter – whether that is retail or otherwise. If they don’t do that, these places will just continue to die a slow death.

Then, looking at another area of the property market, Councils paying price as one in three tenants in rent arrears (Daily Telegraph, Helen Chandler-Wilde) shows that one in three council houses was in rent arrears last year. Universal Credit, a subsidy payment that includes all allowances in one payment, is thought to be a major factor because money is paid directly to the tenant, who then has to pay the landlord. Previously, rent was paid directly to the landlord, but senior policy analyst at the Resolution Foundation observed that the “Citizens Advice Bureau and the like have said that people will naturally dip into that money if it’s in their pocket. The temptation is understandable when they’re on very low incomes.” * SO WHAT? * This just adds to the pressure that councils are currently under. It is also something that private landlords who rent to people on benefits will need to keep in mind as this will add to their own uncertainty as well.

US retailers ready themselves for a Christmas without Toys R Us and FCUK effectively goes up for sale…

Retailers rush to fill holiday hole left by Toys ‘R’ Us (Wall Street Journal, Paul Ziobro and Bryan Anselm) we see that, in the aftermath of Toys R Us’ (“TRU”) demise US retailers such as Walmart and Target are allocating more floor space to toys in a bid to chase the dollars that previously went to the now-defunct toy retailer. Even Amazon is rumoured to be looking at handing out toy catalogues to shoppers at its Whole Foods stores! Kohl’s is selling Lego sets and JC Penney is going to distribute a toy catalogue. TRU had the ability to stock up late in the season because it could afford to carry new inventory into the next year, unlike everyone else who faced more pressure to sell so they weren’t wearing extra stock. This meant that they could sell more (at higher prices) than anyone else because they could afford to hold back until the final week of the holiday season when everyone else was running out. TRU’s absence could mean that punters doing last minute shopping are therefore going to be more likely to come up empty handed when the time comes. * SO WHAT? * It’ll be interesting to see how these new tactics play out without the presence of TRU at retailers who aren’t really all that used to selling toys. Personally 

speaking, I don’t think that this sounds good for the embattled toy manufacturers who need their distributors now more than ever to sell their toys in the best way possible. No doubt sales will continue to migrate online.

French Connection hoists for sale sign (The Times, Deirdre Hipwell) heralds a sad day for the apparel retailer as a notice that will be issued to the London Stock Exchange today says that “The board confirms it is currently reviewing all strategic options in order to deliver maximum value for its shareholders, which includes the potential sale of the company”. Numis, the company’s corporate broker, has been tasked with approaching potential buyers who might be interested in buying founder Stephen Marks’ 42% stake in the company that will probably lead to a bid for the whole company. French Connection floated in 1984, reached a peak of 484.5p in March 2004 and is now worth 43p a share. * SO WHAT? * Wow – how time flies! FCUK popularity went through the roof with its famous campaign emphasising the similarity of its logo to a naughty word and I recall the days when it was whupping Next’s ass in clothing sales. Now the company has a “tiny” market cap (compared to what it used to have) of £41m. This is a chain in SERIOUS need of a revamp – and who knows, maybe Sports Direct’s Mike Ashley will ride to the rescue as, funnily enough, he (via his company) owns a 27% stake as part of “Mike Ashley’s Bag of Retail Cr@p”. I call it that because he seems to like owning retailer no-hopers. Good luck to whoever buys this.

In individual company news, Ford cuts jobs, Apple talks distribution with BT and Jollibee takes on the mighty KFC…

There’s bad news for workers in Ford to cut jobs as it reorganises salaried workforce (Wall Street Journal, Mike Colias) as the company announced job losses as part of a broader plans to cut costs in an effort to revive its flagging fortunes. There are no further details as yet re the numbers of job losses but a spokeswoman said that this latest move reflected chief exec Jim Hackett’s desire “to have an organisation that is moving faster, and part of that comes from having a flatter management structure”. * SO WHAT? * Hackett is under a lot of pressure to reveal more details of how he will revitalise the company’s fortunes (and share price) as rivals have continued to perform better. Announcing job cuts is a quick fix IMHO, but it has to be part of something bigger and more wide ranging otherwise he’ll be following the people he sacks out of the door himself.

Apple and BT in talks over new pay-TV partnership (Daily Telegraph, Christopher Williams) highlights talks between the two companies over a combined push into pay-TV as they appear to be in early discussions to make

BT’s mobile brand EE a major distributor of Apple TV set-top boxes. BT would offer the boxes to EE broadband customers pre-loaded with BT Sport and other content. Apple has a similar distribution deal in Switzerland with pay-TV provider Salt. * SO WHAT? * Sounds like a nice idea. It is at the early stages though, so it’ll be interesting to see how this develops. If it does go ahead, I wonder whether this will result in other similar deals as the pay-TV customer base continues to fragment.

Philippines’ Jollibee Foods plans expansion to rival KFC (Financial Times, John Reed and Grace Ramos) heralds some punchy chat from the Philippine fast-food company with a $5bn market cap (which could possibly put it into the FTSE100 if it was quoted on the LSE) as it announced ambitions to become a “global” brand. The company wants to open 25 outlets in the UK over the next five years and plans to expand further in the US and China as it adds to its majority interest in US chain Smashburger, Vietnam’s Highlands Coffee, Pho 24, Dunkin’ Donuts in some parts of China and the Burger King franchise in the Philippines. The company is popular in the Philippines for its Chickenjoy fried chicken, sweet spaghetti and pineapply Aloha Yumburgers. Funnily enough, it held talks back in 2017 about buying Pret A Manger – but I bet it’s glad it didn’t do that given recent newsflow. * SO WHAT? * This sounds like a very interesting company in a very competitive space. Still, here’s hoping they do well in a tough market! The first London store in Earls Court is due to open on October 20th.

And finally, in other news, I bring you some potentially very exciting raffles and a Thomas Cook branding fail…

If you feel like bagging yourself a bargain, how about having a look at this: Five incredible homes which could be yours for less than £25 – and one is just around the corner from Zayn Malik (The Mirror, Zoe Forsey https://tinyurl.com/yay4uxsz). Wow!

But then finally, I’m sorry to bring the tone down a tad but this did make me laugh: Thomas Cook plane turns X-rated when the door is open thanks to awkward design flaw (The Mirror, Nicola Oakley https://tinyurl.com/yb93ycz5). Photos taken at the door of this plane on disembarkation would be priceless…

1. In MACROECONOMIC AND OIL NEWS, Trump has a new trade template and high oil prices pile on pressure
2. In CONSUMER ELECTRONICS NEWS, Samsung expects and Nintendo aims for a Switch revamp
3. In RETAILER NEWS, Ted Baker takes a hit and BHS eyes a limited comeback
4. In INDIVIDUAL COMPANY NEWS, Elon Musk does it again and UNILAD goes under
5. In OTHER NEWS, I bring you the new Vladimir Putin calendar. You’re welcome. For more details, read on…

So Trump wants to use “Nafta 2.0” as a template and high oil prices pile on the pressure for Asian economies…

Trump aims to model new trade deals on revised Nafta (Wall Street Journal, Jacob Schlesinger and Josh Zumbrun) highlights the potential way forward for trade negotiations as the Trump administration wrestles with how to apply principles of the new US-Mexico-Canada Agreement to other trade partners. Next up on the negotiation agenda are Japan and the European Union who have already started talks. This will then be followed by talks with the UK and the Philippines. * SO WHAT? * It’ll be interesting to see whether the principles in the USMCA will translate over to other countries with which is has no existing trading agreements, but at least it gives potential trading partners some idea of what to expect.

In Oil price rise puts Asian economies under pressure (Financial Times, Emma Dunkley) we see that the recent oil price hike to a four-year high is having a major knock-on effect to Asia’s biggest oil importers. India is having a

particularly tricky time of it because it is suffering from the triple whammy of a massive current account deficit, a falling rupee (it fell to its lowest ever level to the dollar yesterday) and the fact that it is the world’s fourth largest importer of oil. As ING economist Prakash Sakpal put it, “The Indian rupee is getting more battered. But they are pretty much sailing in the same boat and the problem is the oil pushing cost of imports higher and dragging the current account to even larger deficits”. Retail petrol and diesel prices have been cut to ease the burden on consumers and businesses but this has just made India’s budget deficit even worse. The Indian central bank is expected to raise interest rates shortly in order to help prop up the rupee. * SO WHAT? * These are tough times indeed for emerging economies who are facing growing costs due to dollar-denominated debt becoming increasingly expensive as US interest rates continue to rise. Indonesia is another Asian economy which is taking a pasting at the moment – its rupiah is now at its lowest level versus the dollar since the Asian financial crisis hit twenty years ago. Although panic over the Turkish lira and Argentinian peso has subsided for the moment, investors continue to feel rather nervous about ongoing risks faced by emerging economies with big current account deficits.

In consumer electronics news, Samsung expects strong numbers and Nintendo considers a console revamp…

Samsung Electronics expects third-quarter operating profit to be its highest ever (Wall Street Journal, Timothy W. Martin) shows high expectations from the world’s largest smartphone and semiconductor maker for third quarter operating profits at results due to be unveiled later this month. On the other hand, some analysts have concerns over the sustainability of its particularly strong performance in memory chips and recently weaker smartphone sales as it battles with Apple for customers at the top end of the food chain and a number of Chinese rivals at the cheap-and-cheerful end. * SO WHAT? * Prices for NAND flash memory (used to store content on devices) 

and DRAM (the chip that gives devices multi-tasking speed) are both expected to drop next year and, given that Samsung is the world’s biggest maker of both, you can see why there are concerns.

Nintendo aims to stay in the game with console revamp (Daily Telegraph, Tom Hoggins) shows that the gaming giant is planning on releasing a new version of the Switch console next year. The release is slated for the second half of 2019 but some sources say it could be released in the summer. It’s not currently clear what features and upgrades are going to be implemented but it will no doubt aim to make a better console whilst also keeping costs down. * SO WHAT? * The Switch has been a massive hit for Nintendo but sales are losing steam as fewer new games releases in 2018 have resulted in a slowdown in console sales, which the company will want to pep up by bringing out a new version. As always, the key thing for the success of ANY console sales is the strength of the game lineup and future pipeline.

In retailer news, Ted Baker feels weather effects and BHS looks like making a return of sorts…

Ted Baker takes a hit as weather challenges high street trading (Daily Telegraph, Ben Woods) shows that even the strong falter every now and then as it reported a fall in profits yesterday and said that the rest of the year would “remain challenging”. The shares fell by 13% on the news initially but recovered to finish the day 8% down as the company took a hit from House of Fraser-related charges, the winter snows and the unusually hot summer. * SO WHAT? * Ted Baker has certainly been seen to be one of the stronger players on the UK high street, but it just goes to show that even the best suffer. Mind you, online sales were up by a very healthy 24% – so it wasn’t all bad! IMHO, success in apparel retail depends not only on appealing design – it really depends on how fast your turnaround is 

from design-to-being-in-the-shops so you can adapt more quickly to customer tastes (and possibly weather). Will investors use this opportunity to buy on weakness given that the company has, until now, been a company that can do no wrong?

BHS brand set for limited return to UK high street (Financial Times, Jonathan Eley) heralds the potential return of the brand as its Qatari owners reached a concessionaire agreement with Beales, a privately-owned department store group. A trial has started this week in nine stores and Beales’ chief exec (and former retail director for BHS, funnily enough) Toby Brown said that “It’s an ideal marriage. Different concessions – menswear, womenswear, homewares and lighting – will be trialled in different locations. It’s to understand if the brands can still resonate with the customer”. * SO WHAT? * This sounds like Beales is flogging a dead horse. After the high profile scandals and subsequent pension disasters I would have thought that the BHS “brand” counts for b*gger all. Still, no doubt Brown got a good deal to peddle this stuff, so maybe someone will do well out of it.

In individual company news, Elon Musk does it again on Twitter and UNILAD goes from hero to zero…

Musk mocks watchdog that fined him (The Times, James Dean) shows that Tesla is in dire need of someone who can rein in Musk’s urge to be a kn0b on Twitter as he tweeted “Just want to [say] that the Shortseller Enrichment Commission is doing incredible work. And the name change is so on point”. This is the SEC that just fined him and his company $40m for sending that August tweet and forced him to step down as chairman. Tesla shares fell by 4% yesterday, he then made this tweet and then the shares fell again by 3% in after-hours trading. * SO WHAT? * WTF was he thinking?? Just as his company hit production targets that it’s been striving to achieve for ages he goes 

and does this! Tesla needs a chairman – and it needs one RIGHT NOW before Musk ends up making more gaffes that could needlessly cost them money. Company execs must be tearing their hair out right now.

I thought that Debts force Facebook video firm to the wall (The Times, Simon Duke) was quite interesting as it shows how Unilad, maker of some of the most popular videos on Facebook, has gone into administration with debts of over £6m. The company has been one of the world’s biggest producers of videos for Facebook, earning a cut of revenues generated by ads that sit next to its (often) viral content. * SO WHAT? * Given its huge popularity (it has 60million followers on its social media channels and its videos are viewed four billion times per month) you do wonder how things came to this. I would have thought that someone would want to scoop this up for a song – not everyone can make viral videos and now its financial problems are out in the open I would have thought there should be a number of potential buyers. 

…And finally, in other news…

Yes, folks – it’s that time of year again. The leaves are starting to change colour, the falling temperatures are making people up and down the country change their duvets – and the latest Vladimir Putin calendar has been published in Putin’s 2019 calendar has him hugging a puppy and the obligatory shirtless shot (Metro, Martine Berg Olsen https://tinyurl.com/y8djr978). If only our very own PM had something like this. I’m not sure whether a calendar would work but I’m sure that one of those wobbly dashboard dancing figures would go down a storm. Just imagine this…

…but with Theresa May on top of a glitterball! I’d buy one…

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

1. In MACROECONOMIC AND COMMODITIES NEWS, Macron gets another resignation, Turkey’s inflation rises to almost 25%, UK services sector growth slows and copper trading looks set to rise
2. In FINANCE NEWS, Greek banks have a right wobble, N26 arrives in the UK and Funding Circle underwhelms
3. In CARS NEWS, Honda joins the driverless party but Aston Martin’s market debut disappoints
4. In RETAILER NEWS, Tesco announces overseas woes
5. In OTHER NEWS, I bring you the latest in junk food. Oh yes. For more details, read on…

So Macron’s troubles continue, Turkey’s inflation reaches nightmare proportions, UK services sector growth slows and copper demand looks set to surge…

Emmanuel Macron suffers blow as third minister resigns (Financial Times, Harriet Agnew) shows that the wheels are falling off a bit for France’s Emmanuel Macron at the moment as his interior minister and once-loyal supporter, Gerard Collomb, has become the third senior minister to quit in three months. Macron doesn’t have a replacement right now so his PM Edouard Philippe will be taking charge of the interior ministry for the time being. * SO WHAT? * Collomb’s resignation follows that of Nicolas Hulot, the environment minister and sports minister Laura Flessel. The basic problem is that Macron is increasingly being perceived as a bit of a dictator, which is p!ssing off the coalition partners he worked so hard to unite. In a lunch with journalists at the end of last month, Collomb said that “if everyone bows down to him, he will eventually isolate himself”. The resignations come at a delicate time for the President as he is continuing to push through difficult economic and labour reforms. IMHO, France is long-overdue these reforms and given the unusually strong support for the President when he came to power I have to say that if Macron can’t do it then no-one can. Mind you, as I have said before Macron’s not been in power for long and he has covered quite a lot of ground in that time.

Turkey’s inflation rate surges to almost 25% (Financial Times, Laura Pitel) highlights continued tricky times for Turkey as its inflation rate hit 24.5%. It has continued to rise following the August currency crisis sparked by Erdogan’s spat with Trump over an American pastor/spy (depending on who you believe). Although the currency has strengthened against the dollar since its August lows, it is still 37% down since the start of the year and has been the main cause of price increases for fuel and other imports.

* SO WHAT? * It would seem that the market reaction is not quite as bad as you’d expect right now, but it would seem that everyone is waiting for the outcome of the hearing of Andrew Brunson (the pastor/spy) which due on October 12th. If he is not released, then the lira is likely to be sold off big time and inflation will get even worse. This could lead to the central bank raising interest rates yet again (they were only recently hiked to 24% in an effort to calm inflation).

UK services sector activity slows in September (Financial Times, Chris Giles) cites the latest IHS Markit’s Purchasing Managers’ Index which showed a slowing rate of growth in September. Chris Williamson, chief business economist at IHS Markit observed that “Brexit worries continue to dominate the outlook, however, keeping business optimism firmly anchored at levels which would normally be indicative of an imminent slowdown. Clarity on Brexit arrangements is therefore needed as soon as possible to help sustain growth”. * SO WHAT? * Given that the services sector accounts for something like 80% of UK GDP you can see why everyone’s watching it so closely. August’s GDP figures are due out next week

Copper trade to surge as China’s global lending fuels demand (Daily Telegraph, Jon Yeomans) highlights projections by the world’s biggest miner, BHP Billiton, that copper demand is going to shoot up over the next five years due to the country’s massive “belt and road initiative” which could generate spending of around $1.3tn on infrastructure projects by 2023. They believe this will require an additional 1.6m tons of copper demand, which equates to adding another 7% to existing global demand. * SO WHAT? * The “belt and road” initiative was announced by President Xi Jinping in 2013 to increase China’s influence by lending money to developing nations to help them build power lines, railways, roads and pipelines. While a great deal of this extra copper demand will be used in power projects, it may lead to more demand from construction and consumer devices as countries develop. BHP’s data says that belt-and-road countries use only 1.35kg of copper per capita versus the global average of 4kg, so there is clearly growth potential (according to their figures).

In finance news, Greek banks wobble, N26 comes to the UK and Funding Circle disappoints on its debut…

In Greek bank shares slide on bad debt worries (Financial Times, Martin Arnold and Kerin Hope) we see that some of Greece’s banks got mullered in trading yesterday as investors started to worry that they might not have enough capital to meet targets for reducing bad debts. Piraeus Bank, the country’s largest lender by assets (and seen to be Greece’s weakest bank due to its higher exposure to bad debt and low capital strength versus its peers) saw its shares fall by over 20%, Eurobank’s fell by 15%, National Bank of Greece’s fell by 5.5% and Alpha Bank’s were down by 3.3%. * SO WHAT? * I would say that these jitters occur from time to time, but the difference now is that Greece has restricted access to sovereign debt markets and so has less of a buffer if things go wrong. One senior banker called yesterday’s sell-off “an over-reaction by a weak and illiquid market dominated by short sellers” and said that banks were well-capitalised and on course to meet the current timetable agreed with the ECB for reducing bad debt.

Digital bank takes on high street’s big players (The Times, Harry Wilson) heralds the arrival of a new kid on the block in digital banking as Germany’s N26 starts a

phased roll-out in the UK, joining other digital-only banks such as Revolut and Monzo in taking on our traditional lenders. Interestingly, over 50,000 Britons have joined a waiting list to open an account with the bank that has some very high-profile backers. N26 only started up in 2015 but grew to 500,000 customers within nine months! It now has over 1.5m customers in 17 European countries. Over time, the aim for N26 is to replace traditional banks by providing overdrafts and savings products – although this is limited to German customers at the present time. * SO WHAT? * Although incumbent banks are still way bigger than these digital tiddlers in terms of customer base, such start-ups are rising quickly as they benefit from cutting edge tech and not being mired with problematic legacy IT systems. They continue to attract customers with innovative services, such as allowing customers to spend money overseas in foreign currencies at exchange rates that are very close to market rates. The incumbents need to get their act together or they will face a slow death!

Poor trading on first day takes shine off Funding Circle (The Guardian, Rupert Neate) shows that shares in peer-to-peer lender Funding Circle fell by 24% from its flotation price yesterday in the company’s first official day of trading. Some said that this was because it had been overpriced and there is some scepticism surrounding its claims to be a force in business lending. Since it started up in 2010, Funding Circle has attracted £5bn in funds from over 80,000 investors and lent to around 50,000 small businesses.

In car news, Honda jumps on the driverless bandwagon and Aston Martin misfires on its market debut…

Honda to invest $2.75billion in GM’s self-driving car unit (Wall Street Journal, Adrienne Roberts and Sean McLain) signals an initial $750m investment in General Motors’ self-driving car unit that will rise by another $2bn over the next 12 years as part of an initiative to develop a mass-produced fully autonomous car. The Japanese manufacturer will work with GM Cruise to develop a driverless car from scratch that can be churned out in high volumes on a global basis and will take a 5.7% slice of Cruise. Japan’s SoftBank Group bought a 19.6% stake in Cruise in June costing $2.2bn. * SO WHAT? * Driverless car development is an expensive business, so it makes 

sense for companies to pool their resources. This deal with Cruise isn’t exclusive – Honda has been in talks with Alphabet’s Waymo since December 2016, although they have yet to announce anything concrete as a result. Everyone else is at it as well, what with Fiat Chrysler teaming up with a BMW-led consortium that aims to produce fully-automated vehicles by 2021 and Toyota announcing in August an investment of $500m in Uber to jointly develop autonomous vehicles. I’m still sceptical that it will happen as soon as they say it will, but there is some serious money flying about here – so it could just be enough to make it happen.

Aston’s share price skids on first day of trading (The Guardian, Angela Monaghan) is a common story doing the rounds this morning as Aston Martin had a tough first day on the markets as its shares fell from £19 to £17.75 initially to recover and finish the day at £18.10. the flotation will allow the company to invest in increasing its production volumes and new products.

In retailer news, Tesco announces problems overseas…

Tesco shares tumble over Thai troubles (The Times, Deirdre Hipwell) highlights the impact of the company’s overseas travails as they had a negative impact on Tesco’s expected operating profit, sending shares down by 8.6% yesterday. The domestic business doesn’t sound like it’s doing too badly as it had 11 consecutive quarters of growth and, as chief exec Dave Lewis put it, “When you

look at the group – sales are up, profits are up, cash generation is up, we are paying down debt and paying more to shareholders in dividends”. However, Tesco has faced problems in Thailand as the government issued welfare cards for groceries that can’t be used in internationally-owned supermarkets and then sales in Poland were hit by a government-led change in Sunday trading laws. * SO WHAT? * I guess you’ve got to take the rough with the smooth and it is good news that the domestic business is putting in a pretty solid performance. There’s no word about disposing these businesses, but “Drastic” Dave is not shy about wielding the knife, so we’ll just have to see what happens!

…And finally, in other news…

If you like noodles and crisps, then I think you are going to love this: First ever Pringles instant cup ramen noodles are coming to Japan (SoraNews24, Oona McGee https://tinyurl.com/ybln78ba). Genuis!!!

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

1. In UK CONSUMER NEWS, London house prices fall but shop prices go up
2. In RETAILER NEWS, Amazon increases its minimum wage and a Belarus supermarket looks at a London listing
3. In IPO NEWS, Tencent considers the US and UK fintech floats could face a slowdown
4. In INDIVIDUAL COMPANY NEWS, Tesla hits production targets and the FDA held a surprise inspection at JUUL
5. In OTHER NEWS, I bring you a new way of cooking a trad full-English and an endorsement of jazz hands over clapping. For more details, read on…

So London house prices fall and prices in the shops go up…

House prices fall again in London amid uncertainty (The Guardian, Angela Monaghan) cites the latest data from Nationwide which shows that London house prices fell for the fifth consecutive quarter as higher prices, increased stamp duty on second homes and Brexit continue to bite. London prices fell by 0.7% in the third quarter but house prices across the UK increased by 0.3% last month following the worst drop for six years in August. * SO WHAT? * Yes it’s boring, but unfortunately it IS important 

to watch this kind of thing as house price rises generally make people feel richer and more likely to spend whilst the opposite is true when they start to wobble or fall. 

Era of discounting ends as shop prices tick up (Daily Telegraph, Tim Wallace) looks at figures published by the British Retail Consortium (BRC) which show overall shop prices increasing by 0.2% on the year, which signals the fastest rise in inflation since 2013. The BRC said that this was due to less discounting and an increase in food prices following “unusual weather patterns in the first half of the year”. * SO WHAT? * 0.2% doesn’t sound like much but I guess it signals a change in direction as it is the second consecutive rise in the BRC’s index. Let’s hope that wages rise faster otherwise we’ll all start feeling poorer!

In retailer news, Amazon ups its wages and a Belarus supermarket is eyeing London…

Amazon set to raise its minimum wage (The Times, Deirdre Hipwell and James Dean) heralds good news for all its British and American employees as they get a pretty chunky wage increase following the company’s to ongoing criticism. Anyone working in London would get an hourly rate of £10.50 versus £8.20 previously and those outside London would get £9.50 versus the £8 they get now. Founder Jeff Bezos said “We listened to our critics, thought hard about what we wanted to do, and decided we want to lead” * SO WHAT? * My @rse. The fact is that both markets have record low levels of unemployment, meaning that there’s more competition out there on the jobs market in terms of attracting workers in the first place and then retaining them. All he is doing is making Amazon a bit more competitive on that front and dressing it up as some 

do-gooder gesture. It will be interesting to see how other employers respond to this as it might make them feel like they have to pay more as well, which could eventually cause inflation to rise as costs are passed on to the end customer.

I thought I’d mention Supermarket chain plans Belarus’s first international IPO (Financial Times, James Shotter) because it is the first ever international listing by a company from Belarus. Eurotorg is the country’s biggest retailer and JPMorgan and Credit Suisse have been picked as global co-ordinators for the IPO, potentially valuing the company up to $1bn in a flotation that is slated for this month or next. It is Belarus’ biggest private sector employer with 33,000 staff – and has a market share f 19% that is five times as big as its nearest rival. * SO WHAT? * Belarus lies between Europe and Russia and the country is constantly trying to balance a wish to be closer to Europe whilst not offending Russian sensibilities. I guess this fits into broader moves by the country’s president Aleksander Lukashenko to modernise the economy and attract more outside interest.

In IPO news, Tencent Music eyes the US and Funding Circle’s IPO could delay the ambitions of other fintech companies…

In Tencent Music files for US IPO (Wall Street Journal, Maureen Farrell and Anne Steele) we see that Tencent Music Entertainment kicked off what could be one of the biggest tech IPOs ever as it filed to go public in the US yesterday. Tencent Music is China’s biggest music streaming company and is part of the internet behemoth that is Tencent Holdings. Revenues in 2017 were a whopping $1.6bn, with about 70% of its revenue coming from social entertainment services including online karaoke, live streaming and merchandise sales. It also reported recently that it had over 800 million total unique monthly active users and some are saying that the company could be valued at over $25bn. * SO WHAT? * If this all goes ahead, Tencent Music would be the second streaming giant to float this year after Spotify completed its direct listing in April. I guess that a New York listing would be good to raise the company’s profile internationally and it will no doubt try to blind investors 

with promises of stellar user growth. However, the fact remains that its paying user base is smaller than Spotify’s and that it is banking on investors not caring too much about a dual-class structure that will mean they will probably have b*gger all say in how the company is run. Still, a chunky advisory fee looks like it’s up for grabs!

Lender’s fall casts doubts over fintech (The Times, Harry Wilson and Simon Duke) gives us an interesting snapshot of Funding Circle’s current travails as one of London’s home-grown “unicorns” lost almost 20% of its value before its first official day of trading on the LSE today. Other potential fintech debutants such as TransferWise, the money transfer service and Monzo, the online bank, are likely to be underwhelmed by the news and any failure (or perceived failure) here could dent ambitions for the LSE to increase its exposure to fintech companies. One senior tech industry source said that “I’m not surprised by the fall. The valuation they sought was almost 20 times revenues when other financial services businesses are traditionally trading at around three to four times”. * SO WHAT? * It might be a bit early to read too much into this but this is something that the LSE doesn’t need right now as it may well make other fintech candidates think a bit harder about coming to market – or even worse, go and list somewhere else.

In individual company news, Tesla hits production targets and Juul gets inspected…

Tesla finally hits production target only for deliveries to disappoint (Financial Times, Richard Waters and Camilla Hodgson) highlights some good news for the company as it has finally managed to meet its quarterly production target for the model 3, but it is now facing delays in distribution with model 3s stacking up around the US waiting to be delivered. * SO WHAT? * This is “sort of” good news, but distribution delays are still delays as far as the end customer is concerned, so the company will need to get this sorted PDQ. It does sound like Tesla is edging 

towards its goal of being profitable in the third quarter, though!

You may recall recent news of the US Federal Drug Administration (FDA) potentially banning flavoured e-cigarettes – well FDA conducted surprise inspection of Juul’s headquarters (Wall Street Journal, Jennifer Maloney) shows it following through on its promise to focus on the industry and, in particular, why it appeals so much to youngsters. Juul represents 73% of the $2.5bn US e-cigarette market and one data source says that as many as 20% of high-school students have used e-cigarettes in the past 30 days. * SO WHAT? * If the FDA really decides to crack down on this, Juul – and any other pure plays in e-cigarettes, for that matter – is going to be toast given its massive exposure to this market. It’ll be interesting to see how this plays out

…And finally, in other news…

I thought I’d leave you today with a story that has just gone a bit mental on Twitter – Manchester Students’ Union bans clapping and says jazz hands should be used instead (Metro, Richard Hartley-Parkinson https://tinyurl.com/y7s68n3g) as well as a novel way to do the traditional British brekky in Mum reveals her unique way of cooking a full English breakfast – and it’s blowing people’s minds (The Mirror, Caitlin O’Sullivan and Courtney Pochin https://tinyurl.com/ycvoz2pb). Nice!

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

1. In MACROECONOMIC NEWS, Trump hails the new “Nafta”, with China next on the agenda
2. In CAR NEWS, Tesla jumps after the SEC decision and Aston Martin goes for a lower flotation price
3. In RETAILER NEWS, Aldi unveils solid numbers and Mike Ashley sacks House of Fraser senior execs
4. In INDIVIDUAL COMPANY NEWS, General Electric cuts its chief exec, Ryanair and Royal Mail have profit warnings and Deliveroo delivers a mixed bag

So Trump unveils the new “Nafta”, with China next on the agenda…

Wall Street nears a record high as Nafta deal is signed at last minute (Daily Telegraph, Tom Rees) heralds an important moment as Canada agreed to sign a revamped deal between itself, the US and Mexico just before the close of the deadline to replace the now defunct Nafta trade deal that was put in place 24 years ago. The new agreement, called the US-Mexico-Canada Agreement, gives US farmers more access to Canada’s dairy market (which is currently protected) and increases intellectual property protections in addition to updating worker and origin rules in the car manufacturing industry to make the US more attractive. * SO WHAT? * The new agreement will now have to pass through US Congress, but for now, the markets welcomed the latest development with the S&P 500 nearing all-time highs on this news. The US still has 

steel and aluminium tariffs in place for imports coming from Canada and Mexico, but many see this latest breakthrough as a step in the right direction.

US pivots to China, with Nafta deal in hand (Wall Street Journal, Bob Davis) takes the development identified above a step further by saying that now a US “home” market deal has been struck, it strengthens Trump’s hand in China trade negotiations which have, thus far, fallen short. * SO WHAT? * If an agreement had NOT been reached, it would have helped China negotiate its own deals with Canada and Mexico. The administration is hoping that “Nafta 2.0” and China tariffs will combine to make the US a more attractive place to invest relative to China and, in Trump’s words yesterday, “reclaim a supply chain that has been off-shored to the world”. Some big tech companies are already talking about pulling some production out of China in order to avoid punitive US tariffs.

In car news, Tesla jumps on the SEC decision and Aston Martin goes for a less-punchy price tag…

Tesla shares rally sharply on Musk settlement (Financial Times, Camilla Hodgson) shows that Tesla shares, which fell 14% on Friday jumped by 16% in the morning session on Wall Street yesterday. The shares fell on Friday following news that the Securities and Exchange Commission (SEC) filed a fraud complaint alleging Musk had made “false and misleading statements” about having the funding to take his company private, but they jumped after all parties came to an agreement over the weekend. * SO WHAT? * Despite this relief, the shares are still down almost 20% since Musk made that fateful tweet and none of this chat changes the fact that Tesla still has production issues. At least they still have their talismanic leader at the 

top – and as long as he’s there I am sure that (even more) investor money will continue to flow in once the dust has settled.

There’s been a lot of hype recently over the imminent Aston Martin flotation, but in Aston Martin cuts maximum share price for IPO (Financial Times, Peter Campbell) we see that it reduced the top of its price range from £22.50 per share to £20 and raised the bottom end of the range from £17.50 to £18.50. * SO WHAT? * If it floated at this value, it would miss out on a place in the FTSE100 – all things remaining equal – in the next December reshuffle. Mind you, I don’t think this would be such a bad thing as there would be slightly less scrutiny and given that its valuation is still pretty punchy – especially when you compare it to Ferrari – it is probably the sensible thing to do bearing in mind that this is a company which has gone bust seven times in its 100-year history. The shares are due to start trading tomorrow.

In retail news, Aldi puts in a strong performance and House of Fraser gets a senior management clearout…

In We’re alright Jack, says Aldi as sales jump (The Times, Deirdre Hipwell) we see that Aldi has put in another strong performance as its sales shot up by 16.4% in a record year of trading for the discounter. To put it in perspective, this is equivalent to an extra £100m of sales per month and is even higher than the 13.5% increase it had in 2016. Giles Hurley, chief exec of Aldi in UK and Ireland, is clearly not afraid of the competition as he pronounced that “We welcome competition and we are used to dealing with it. It will be a real struggle for any more complex supermarket to successfully imitate or replicate our model”. * SO WHAT? * I am inclined to agree 

with him. As I’ve said before, I don’t believe that merely copying Aldi’s model is going to work for the likes of Tesco’s new “Jack’s” brand – they will either have to go even cheaper (but surely this would be very difficult to do) or carve out their own identity. At the moment I’m not convinced. 

Ashley sacks top management at House of Fraser (The Guardian) heralds the latest development in House of Fraser’s “rehabilitation” under the new owner – Sports Direct’s Mike Ashley. In a statement to investors after market close yesterday, Sports Direct said “Following the collapse of House of Fraser on August 10 2018, and subsequent calls for an investigation into the circumstances of that collapse, the company today announces that we have dismissed the former directors and senior management of House of Fraser”. * SO WHAT? * This certainly sends a message of intent, but it’s an early step in the long road to what I hope will be recovery. No doubt there will be a lot more to follow over the coming months and years.

In individual company news, General Electric cuts its chief exec, Ryanair and Royal Mail announce profit warnings and Deliveroo serves up a mixed grill…

GE ditches chief executive and suffers shock $23bn hit (Daily Telegraph, Julia Bradshaw) signals an abrupt end to the tenure of John Flannery, who was only 14 months into the top job at General Electric, making him the shortest-serving chief exec GE has ever had (average tenure has been over a decade!). It also announced a massive $23bn goodwill impairment charge as well as a profit warning for this financial year. Funnily enough, the share price rebounded by 12% as investors welcomed this change in leadership, with Larry Culp (saviour of US medical behemoth Danaher) becoming the first ever outside to take the top job. * SO WHAT? * Flannery replaced long-serving chief Jeff Immelt as the company attempted to address its flagging share price. He cut a huge number of jobs and disposed of various businesses in an attempt to arrest the slide, but it just hasn’t been

enough. Let’s see how much slack Culp will get in turning this giant around!

Profit warnings came thick and fast yesterday, what with Ryanair share slump 12.5% on profit warning (The Guardian) as it said that recent strikes and higher oil prices would dent full-year profits and Shock profit warning hits Royal Mail (The Times, Katherine Griffiths) came due to the company missing key cost-saving and productivity targets and the ongoing decline in the volume of letters sent.

I thought I’d also mention Deliveroo sales double to £277m but losses grow (The Guardian, Sarah Butler) because of the ongoing discussions it is having with Uber about being taken over. On the one hand, its sales more than doubled, but on the other, losses at the takeaway delivery service shot up by 43% after investing in various projects such as a new HQ and some pop-up kitchens. Founder Will Shu continued to paint a bright picture for the future when he said “Our growth is matched only by our ambition. We want to become the world’s definitive food company and we have invested heavily in innovation, technology, people and restaurants”. * SO WHAT? * I believe that this kind of business needs scale to survive. It’s already doing quite well on that front, but a deal with Uber could take it to the next level. 

1. In TESLA NEWS, we look at the potential impact of the SEC’s decision over the weekend NOT to oust Elon Musk
2. In IPO NEWS, Gangfeng Lithium’s pioneering move could embolden others and Aston Martin nears a chunky valuation
3. In INDIVIDUAL COMPANY NEWS, Facebook faces the prospect of a rather large fine
4. In OTHER NEWS, I bring you an interesting idea for promoting public health. For more details, read on…

So it looks like everyone got what they wanted re Musk and Tesla apart from the short-sellers…

Musk move set to boost Tesla shares (The Times, James Hurley) suggests that Tesla shares will be rebounding in trade today as the SEC’s decision not to completely oust Elon Musk from his own company will provide huge relief for Tesla shareholders who have been having a rollercoaster ride of it recently. Basically, he’s going to stay on as chief exec but step down as chairman. Tesla is going to hire an independent chairman and two Non-Executive Directors as part of the deal struck with the regulator and some believe that Al “Inconvenient Truth” Gore, ex vice-president of the United States and a director of Apple, could be in the frame for the role.

Musk issued a rallying cry to staff in the wake of the SEC decision in Musk: Tesla near profitability (Daily Telegraph, Joseph Archer), where he sent an e-mail saying “We are very close to achieving profitability and proving the naysayers wrong, but, to be certain, we must execute really well”. However, if you want a more comprehensive analysis of what went on leading up to the SEC’s decision, Elon Musk to step down as Tesla chairman, CEO (Wall Street Journal, Tim Higgins and Dave Michaels) does an excellent job.

* SO WHAT? * You do wonder what the SEC would have done had it been anyone other than Elon Musk sending a Tweet that blatantly lied, with information that had direct impact on the share price! It turns out that Tesla and Musk each have to pay a fine of $20m, he’s barred from being chairman for three years and he got to neither admit nor deny wrongdoing as part of the settlement. Mind you, if you take a step back, I’d say that everyone got what they wanted. The SEC got a big scalp of sorts (although they didn’t force him to admit wrongdoing), a bit of pocket change in fines – but more than that, they have made Tesla split the roles of CEO and Chairman. This dual role is quite common in American companies, but is deemed by many to be undesirable as it concentrates too much power in one person. There had been previous attempts to do this at Tesla, but they failed. Given Musk’s mercurial and increasingly erratic behaviour (remember what he said about the British cave diver?), I think this is a good outcome for the regulator, Tesla itself (because it reins Musk in a bit) and Musk, for that matter. If he was kicked out, I think that there would have been a very real chance of the company collapsing given his huge influence. The only ones to suffer now will be the hedge funds who hold short positions in Tesla – but still, even they will have made a lot of money along the way. Short-sellers filed a lawsuit against Tesla/Musk alleging that his Tweet amounted to price manipulation a while back, but I’m not sure what influence this SEC decision will have or whether it will be treated completely independently. I’ll let you know when I find out!

In IPO news, everyone will be watching Ganfeng Lithium’s flotation as an indication of what is to come and Aston Martin hunkers down for a stellar valuation…

In Ganfeng Lithium listing to test appetite for key metal (Financial Times, Henry Sanderson) we see that the Hong Kong IPO this week of one of China’s biggest lithium ion producers will show not only current investor appetite for this wonder-metal, but also potential future appetite. Pricing will be fixed on Wednesday this week with trading commencing next week. * SO WHAT? * Demand for this white metal, that isn’t traded on any exchange, has been increasing over the last few years due to its use in rechargeable batteries and hopes for the future of electric cars. However, lithium prices have fallen by 17% so far this year as more investors express concerns that there is 

going to be oversupply, especially given that China is developing its own deposits in Qinghai. Gangfeng competitors Tianqi Lithium and Livent are due to list in October, so they will be monitoring investor demand particularly closely.

Excitement is revving up in Float places Aston Martin boss in driving seat (The Times, Robert Lea) as the maker of James Bond’s best cars (apart from that Lotus that goes underwater, obviously) eyes a top-of-the-range £5bn valuation when it floats on the London Stock Exchange this Wednesday. * SO WHAT? * CEO Andy Palmer has done a great job of turning the company around and seems to have the skills to further its development. The subsequent success will depend on the popularity of its new models – like the new SUV and Rapide E – but particularly on how many rich people want to buy its cars! It says that there are 17 million super-rich in the world that will rise to 25 million by 2025 and is targeting a decent share of the market for the 50,000 super-luxury vehicles out of the 85million cars sold each year! Still, £5bn is a very chunky valuation and Palmer will have to pull out all the stops to justify it.

In individual company news, Facebook could be facing a massive fine over last week’s data breach…

Facebook faces potential $1.63billion fine in Europe over data breach (Wall Street Journal, Sam Schechner) cites the potential consequences Facebook could face after the data breach announced on Friday where hackers accessed the accounts of over 50 million users if European regulators find it has breached the new General Data Protection Regulation. Ireland’s Data Protection Commission, which is the company’s main regulator in Europe has demanded more information about

the nature and scale of the breach. * SO WHAT? * This is going to be a major test of the new regulation which states that companies who don’t do enough to protect their users’ data risk a maximum fine of €20m or 4% of a company’s global annual revenue for the previous year, whichever is higher. GDPR also demands that companies notify regulators of breaches within 72 hours, or face a maximum fine of 2% of global revenue, so the overall effect of this legislation thus far is to force companies to disclose breaches more quickly and more publicly than they have done previously. This is the biggest potential breach of GDPR since it was introduced earlier this year and will be monitored very closely. Facebook says that it will respond to regulator requests, but it’s definitely bad PR for the social media giant that has been mired in various privacy and security issues of late. 

…And finally, in other news…

I thought I’d leave you with a story about a novel way of  getting  free rail ticket in Moscow in Do 30 sit-ups, get a metro ticket (NTV Telugu, https://tinyurl.com/y7g7sdhj). The English in this article isn’t perfect but I think you’ll get the idea!

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

1. In UK CONSUMER NEWS, confidence falls and UK housebuilding sees sales dip
2. In RETAIL-RELATED NEWS, Tui defies its rivals, H&M sees higher sales, Halfords has a profits warning and we see that an Asda-Sainsbury’s combo will have to lose a lot of stores
3. In INDIVIDUAL COMPANY NEWS, Musk gets sued by the SEC

So UK consumer confidence and housebuilding take a tumble…

Consumer confidence falls amid uncertainty (The Times, Tom Knowles) cites the latest findings of the GFK survey which shows that consumer confidence fell this month on increasing uncertainty over Brexit impact. As Joe Staton, strategy director at GFK put it, “There are fewer than 200 days until Brexit arrangements in some shape or fashion take effect. The clock is ticking down and in September the consumer mood dropped a couple of notches”. * SO WHAT? * Although households remain confident about personal finances, they are far more bearish on the overall economy – which could lead to a slowdown in consumer spending further down the road. 

Interestingly, this contrasts with the findings of a monthly survey of 1,200 businesses carried out by Lloyds Bank which showed an uptick in confidence in September. Having said that, it is important to note that the business survey was carried out before Brussels rejected Theresa May’s Chequers plan.

Housebuilding slows as sales dip (The Times, Tim Wallace) shows that the number of new houses being built slowed down in the three months to June as sales went off the boil. * SO WHAT? * If this trend continues, it will make the government’s target of building 300,000 homes per year even more impossible to hit. Sales volumes have slowed down because of high valuations, bigger tax burdens on landlords and tighter lending conditions on mortgages. FWIW, I would have thought that sales will continue to slow as consumers wait to see what Brexit will bring.

In retail-related news, Tui enjoys the sunshine, H&M has solid sales, Halfords has a profits warning and the Sainsbury’s/Asda combo is likely involve shedding a load of stores…

Tui’s strong earnings leave rivals in shade (The Times, Dominic Walsh) showed the contrast between its own performance and Thomas Cook’s as it reassured investors yesterday in a trading update that it was on course to deliver a fourth consecutive quarter of double-digit earnings growth. Unlike Thomas Cook, Tui owns its own hotels, resorts and cruise ships which mean that its business is less susceptible to seasonality. * SO WHAT? * I said that Thomas Cook’s weakness was probably due to consumers reining in their spending on big ticket items like holidays as well as ongoing sterling weakness, but clearly this hasn’t been the case with Tui. It seems that not owning your own assets means that you are more susceptible to discounting by rivals, hence Thomas Cook’s problems. Tui is also less exposed to late-bookings and more exposed to the higher growth and higher margin cruise ship business.

Online shopping shift helps drive H&M sales (Financial Times, Camilla Hodgson) highlights the success of efforts by the world’s second biggest clothing retailer to surf the online wave which are now bearing fruit as instore footfall has continued its decline. The company also said that the shift to online shopping meant that there were more opportunities to negotiate better lease terms for new and existing stores. * SO WHAT? * H&M had lagged some of its rivals in optimising the balance between its online and offline offerings but it seems to be catching up. It still 

has inventory issues (i.e. they are still high), but the situation is improving and the company said that it would not be increasing discounts in the fourth quarter. This really shows how important it is to get the balance right between online and offline and that it is possible to succeed in difficult times.

Halfords warns on profits as it hikes in-store services spending (Daily Telegraph, Ben Woods) heralds more bad news for bike retailers as the company cut its profits forecast at the same time as announcing an increase in investment to become a services “super specialist”. The shares fell by 7.6% on the news. * SO WHAT? * This isn’t great timing as the company also emerged earlier on this week as a potential buyer of Evans, itself a struggling bike retailer. It’ll be interesting to see how that one pans out as I would have thought there could be some gains to be had from a shake-up of a combined store portfolio, but I’m not sure where the next catalyst is going to come from in terms of the sport of cycling itself, which seems to be waning in popularity after the massive boom post London 2012. Sure, electric bikes seem to be the thing at the moment, but it’s not clear yet whether this is a fad or a long term trend.

Sainsbury’s-Asda marriage may mean loss of 460 shops (The Guardian, Sarah Butler) points to findings by the Competition and Markets Authority (CMA) which show that there is a “realistic prospect of a significant lessening of competition” in 463 places in the UK where the two overlapped. Store disposals are a given in the event of the deal going through, but this is a fluid situation. * SO WHAT? * Negotiations are obviously ongoing, but there is a very real danger that the merger won’t go through. In the meantime, Tesco’s forges ahead with its existing offering and, of course, Jack’s. TBH, I think that Sainsbury’s and Asda will be in big trouble if it all collapses because they appear to have put all their eggs in one basket re future growth without any obvious Plan B in place.

In individual company news, Musk gets sued by the SEC, putting Tesla under pressure…

SEC sues Elon Musk for fraud, seeks removal from Tesla (Wall Street Journal, Dave Michaels, Susan Pulliam, Tim Higgins, Michael Rapoport) shows that the chickens are coming home to roost re his fateful tweet about having the money in place to take Tesla private as the SEC is now seeking to remove Musk from the company he founded 15 years ago and ban him from serving as an officer or director of any US public company. Tesla shares fell by 9.9% in after-hours trading to $277 on the news. This will rank as one of the highest-profile civil fraud cases in recent years. * SO WHAT? * I really don’t know how Musk is going to wriggle out of this one – his tweet is pretty darn clear. 

Even if his defence argues that he made the tweet in a fragile state of mind (due to production-related stress etc.), he’ll have to leave for a decent amount of time to get treatment during which would put the company in limbo. Mind you, this could buy the company time to find a successor so it may be the least bad option of the options available. If Musk is kicked out, however, Tesla would surely crater as Musk IS the company. Companies and individuals who had lent Tesla money will suddenly call in debts and the company could go down the toilet. The irony of all this is, of course, that he surely sent that tweet to p!ss off the hedge fund managers who were shorting his stock – well look who’s laughing now. I would have thought another outcome could be that the stock craters, Musk goes to rehab, the Saudi Arabian sovereign wealth fund PIF buys Tesla for a song, takes it private and employs Musk as a “consultant”. Money would come back because everyone would know that the PIF would be a credible backstop and because Tesla might get a more chastened and less free-wheeling version of Musk back. Everyone’s a winner, no? Even Musk would ultimately win as he’d have money to play with and not have the constant shareholder pressure.

1. In MACROECONOMIC NEWS, the US raises interest rates, Argentina moves closer to an IMF deal and Macron loses steam in France
2. In RETAIL SECTOR NEWS, Sears slides further, Amazon opens a New York store, Boohoo profits climb and Halfords expresses an interest in Evans
3. In INDIVIDUAL COMPANY NEWS, Sky sees a changing of the guard
4. In OTHER NEWS, I bring you a punchy seal. For more details, read on…

So the US raises interest rates again, Argentina gets closer to a deal and Macron’s popularity continues to slide…

Fed raises rates and says pace will accelerate (The Times, Simon Duke) heralds the Federal Reserve’s latest decision to raise its benchmark lending rate by 0.25% to a range of 2% to 2.25%.  This is the third rate rise so far this year and it indicated that one more rise is on the cards later this year, to be followed by another three next year. * SO WHAT? * Fed Chairman Jerome Powell forecast GDP growth of 3.1% this year and gradual growth for at least three more years, powered by low unemployment and inflation. Although this rising interest rate trend shows confidence in the economy, not everyone is going to like this – the emerging markets with tons of dollar-denominated debt, for starters, because the cost of their debt will go up. Given the turmoil they are in currently, this could actually worsen their plight. Donald Trump wasn’t too chuffed either as he said that “I’m worried about the fact that they seem to like raising interest rates”. I guess it’s not in his interest to hike the rates too much because the Fed’s actions are akin to someone taking all the beer away a few hours after the party has started and replacing with soft drinks – and Trump likes to party.

Exit of central bank chief clears path to Argentina-IMF deal (Financial Times, Benedict Mander, Robin Wigglesworth and Colby Smith) explains why the resignation of Argentina’s central banker has effectively smoothed the way for an IMF bailout. Basically, Luis Caputo had a tendency to intervene on foreign exchange

markets whereas the IMF prefer freely-floating currencies, so they didn’t like that. His replacement, Guido Sandleris, used to be an adviser to the IMF and previously worked for economy minister Nicolas Dujovne, one of the people involved in the current IMF-Argentina bailout negotiations. * SO WHAT? * So it looks like the IMF got their inside man, which means that they will have far more control over the process and what happens afterwards. Argentina’s first deal with the IMF, one of the biggest the IMF has ever done, failed within three months and so this time around there is much more pressure to get it right – hence the desire for more control.

I thought it was worth pointing out Emmanuel Macron loses political capital as reform benefits stutter (Financial Times, Harriet Agnew) because it illustrates the French president’s dramatic fall in popularity, less than 12 months into his term. Since sweeping into office he has used his hefty legislative majority to push through a number of pro-business reforms aimed at revitalising the Eurozone’s second biggest economy and creating jobs. Right now, the benefits of these reforms have yet to filter through to show palpable economic growth or any meaningful dent in unemployment and so belief in his vision is taking a bit of a battering. * SO WHAT? * This will make his next moves on reforming the pension system and cutting thousands of civil service jobs trickier than it otherwise might have been. His popularity ratings have fallen to a record low of 29%, according to pollsters Ifop and he is increasingly seen to be aloof and out of touch with the electorate. Having said that, he’s only 12 months in and he’s managed to cover a lot of ground in that time. The French people may have to be more patient to see the benefits of reform come through, but the pressure is most definitely on.

In retail sector news, Sears gets more grief, Amazon opens up a shop in New York, Boohoo sheds tears of joy and Halfords offers Evans a potential lifeline…

Trailblazing retailer Sears fights for its survival (Financial Times, Alistair Gray and Andrew Edgecliffe-Johnson) highlights the continued travails of what was once America’s biggest employer. As I said in the Tuesday edition of Watson’s Daily, Sears’ billionaire chairman Eddie Lampert – via his hedge fund ESL – has put forward a financial restructuring plan for board and investor approval that will reduce the company’s $5.6bn debt burden. Sears has suffered over the years from the success of “big-box” discounters such as Walmart and then the rise and rise of e-commerce. It has closed over 3,000 stores since 2011 and now only has less than 900 left. Lampert believes that the company could become an “ecosystem of services, products and retail touch points” but his strategy is facing a great deal of scepticism, not least because he also happens to be the company’s biggest shareholder (via ESL). * SO WHAT? * Lampert has sold off a lot of Sears’ assets over the years and there is a very real possibility that creditors will sue him for selling them off too cheaply (they’ll argue that he sold them to “himself” in what they would argue is a clear conflict of interest) in the event of a bankruptcy. It’s all very finely balanced, but is another example of the downfall of the once-mighty department store. It just goes to show how impressive the performances of Nordstrom and Macy’s are in comparison as they are all facing the same changes in consumer behaviour.

Elsewhere in retailer-land, Amazon is opening New York store to sell highly rated products (Wall Street Journal, Laura Stevens) shows the continued trend of e-tailers dabbling in re-tail as Amazon opens a store (called Amazon 4-star) today in the SoHo neighbourhood that will carry

goods that are curated in part by local consumers’ online shopping habits. This increases its physical store portfolio that already includes over a dozen bookstores, a few cashierless Go stores and, of course, the Whole Foods grocery stores. Consumers can check the online prices with a phone or scanner and Prime customers will be offered the same price as online whereas non-members will have to pay the list price. * SO WHAT? * I think that this sounds like a brilliant idea – and is something that other retailers will find pretty much impossible to replicate. It will also presumably have the side benefit of persuading more people to join Prime. I wonder what this will do to the ongoing independence of reviews and whether we will see a big increase in the number of “sponsored” reviewers.

Boohoo profits soar 22% in six months, helped by cycle shorts (The Guardian) highlights a strong performance by the online fashion retailer, whose sales were driven by success in cycling shorts, playsuits and 90s-inspired fashions as total sales rocketed by 50%. CFO Neil Catto said that the company continued to benefit from the ongoing shift to online shopping. Not bad for a company starting 12 years ago in Manchester! Fun fact – Boohoo’s valuation now stands at £2.44bn which is over 20 times more than 240-year-old Debenhams…

Halfords offers to ride to the rescue for Evans (Daily Telegraph, Oliver Gill) follows on from what I was saying last Friday as it turns out that Halfords is one of a number of parties to have made initial offers to the company’s advisers. Evans is trying to sort out a £10m rescue package to get it through the traditionally slow autumn and winter seasons as it continues to struggle with turning a profit – it announced a £17.4mloss before tax in the year to October 2017. * SO WHAT? * Although it’s good that there are a number of interested parties, it would be interesting to know how many of them actually want the bike business or if they really want access to the store estate for redevelopment or just selling off. I would have thought that Halfords would be a good strategic fit in theory, but is it wise at this point to double down your exposure to a declining sector?

In individual company news, it’s the end of one era for Sky and the beginning of another…

End of era as Murdoch sells £11.6bn Sky stake (The Times, James Dean) sounds a nostalgic note as Rupert Murdoch’s 21st Century Fox has agreed to sell its 39% stake in Sky to Comcast for £11.6bn and Comcast’s Sky roils European broadband (Financial Times, Nic Fildes) 

looks at what could have happened and what might happen now that Comcast has got its way. Comcast could try to invest in telecoms and build on its expertise in broadband (it is the largest broadband company in the US) by snapping up smaller operators such as TalkTalk. * SO WHAT? * North American telcos have had a tricky time of it in cracking Europe thus far, but Comcast’s acquisition of Sky has given the company a powerful base from which to expand. This move could also hasten further consolidation amongst competitors such as Vodafone and Virgin Media or Three and O2 in mobile. 

…And finally, in other news…

I thought I’d leave you with a violent seal in Seal jumps out of the sea and slaps innocent man in the face with an octopus (Metro, Rob Waugh https://tinyurl.com/yda7huq4). How very dare you!

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

1. In MACROECONOMIC NEWS, Argentina loses its central banker and the Swedish PM loses a confidence vote
2. In RETAILER NEWS, Next bucks the trend and Hotel Chocolat looks overseas
3. In CAR NEWS, BMW has a shocker but Toyota sees a Chinese opportunity
4. In PHARMACEUTICAL NEWS, AstraZeneca makes progress on a cancer drug and Novartis slims down
5. In OTHER NEWS, I bring you the world’s first ice-skating dog. For more details, read on…

So Argentina’s central banker leaves at a tricky time and Sweden faces a period of uncertainty…

Argentina central bank chief resigns (Financial Times, Benedict Mander, Pan Kwan Yuk and Colby Smith) heralds a tricky development for Argentina as its central bank chief resigned after only three months in the job. His timing was not exactly ideal as the government was facing down a 36-hour strike called in protest against his new austerity budget whilst simultaneously trying to negotiate a bailout with the IMF! The peso fell 5% on the news, after already falling by over 50% versus the dollar so far this year. * SO WHAT? * This is a nightmare for a country in turmoil. Argentina has turned to extreme measures to arrest the slide of its currency (its interest rates run at 60% currently) but it has not been well-received by the people. Luis Caputo will be replaced by Guido Sandleris, a respected economist. Good luck, son – that sounds like a

nightmare job (although if he manages to turn things around he’ll be a hero).

Swedish prime minister loses crucial confidence vote (Financial Times, Richard Milne) highlights the uncertain situation in Sweden at the moment as the failure of its centre-left PM to win a confidence vote will inevitably lead to a protracted period of negotiation in government. Stefan Lovfen now has the dubious honour of being the first Swedish PM to lose a vote of confidence as the forces of the left and right jockey for position. * SO WHAT? * The anti-immigration Sweden Democrats made a lot of ground in the recent elections and forming a government after that was always going to be a big ask given that two of the four centre-right parties have said that they will not entertain working with them in a coalition. It’s “squeaky bum time” for businesses as they believe that a weak government coalition just won’t be able to bring in any proper reforms. We will just have to sit on the sidelines and wait to see what comes out of this situation and whether a government can be formed. If it can’t be, then the Swedes will have to go to the polls again in quick succession.

In retailer news, Next puts in a solid performance and Hotel Chocolat aims at overseas expansion…

Next is ray of sunshine in high street gloom (The Times, Callum Jones) shows the clothing retailer bucking the trend of high street gloom as it increased its annual profit forecast and confounded expectations of weak summer sales. This positive surprise powered the shares up by 8% in trading yesterday. The company aims to more than double investment in digital marketing this year whilst halving expenditure on direct mail, print and TV advertising. It is also investing in warehouse capacity to service increasing online sales. * SO WHAT? * This is great news in a difficult time for the sector and it sounds like the company is doing the right things in order to survive for the long term. All it needs now is for punters to continue buying their clothes! I do think that whole Next Directory

thing is rather dated, though – so surely that’ll have to be on the chopping block at some point.

Hotel Chocolat expands abroad in bid to be a ‘global leader’ (Daily Telegraph, Jack Torrance) highlights the success of the chocolatier which has managed to increase its margins and profits despite ingredients prices going up (weak pound) and challenging market conditions. It is due to open its first shop in the US on New York’s Lexington Avenue and also has franchise partners in Japan and Scandinavia. Chief exec and founder Angus Thirlwell wants the company to become the “global leader in premium chocolate” and says that “we’re not going to do that by sticking to East Anglia, so we need to get out there and get our start-ups in those countries really working and growing”. * SO WHAT? * Good luck to them. All I would say is that over-hasty overseas expansion has led to the untimely death of many a company. As long as Hotel Choc expands sensibly, keeps an iron grip on supply and quality then I am sure it will do well – after all, the product’s great isn’t it!

In car news, it seems that there are contrasting reactions to Trump’s tariffs shown by BMW and Toyota…

In Profit warning adds to BMW’s problems (The Times, Robert Lea) we see that Trump’s tariffs are being blamed for BMW’s profit warning yesterday in an unscheduled trading statement. It said that “the continuing international trade conflicts are aggravating the market situation and feeding uncertainty. These circumstances are distorting demand more than anticipated and are leading to pricing pressure in several automotive markets”.

On the other hand, Toyota finds a silver lining in trade

war crisis (Financial Times, Kana Inagaki) shows that the Japanese car maker is preparing for a major push into China as the US market continues to look increasingly difficult. It is going to share technology and expertise in building hybrid vehicles with Chinese companies in response to a request from Beijing. Interestingly, Toyota has done well in the China market recently with Lexus sales up by 59% to a monthly record on China cutting tariffs and its “Toyota” sales were also up by 23%. * SO WHAT? * This is probably a good strategic move by Toyota as long as their Chinese partners don’t nick their tech like they have been known to do in the past. China wants to be the world leader in electric vehicles by 2025 but it also acknowledges the need for hybrid technology – which is where Toyota comes in. Relations between China and Japan are always up and down, so as long as they are “up” more than they are “down”, this could be a good move.

In pharmaceutical news, AstraZeneca makes some important headway in its cancer treatment and Novartis makes cost cuts…

AstraZeneca shares surge as cancer drug cuts deaths by a third (Daily Telegraph, Julia Bradshaw) heralds a really important development for its cancer drug Imfinzi, which was shown at the World Conference on Lung Cancer to cut the risk of death in patients with stage-three lung cancer by 32%. This drug is the only one of its type that is approved for stage-three lung cancer as others concentrate on later stages. * SO WHAT? * AstraZeneca needs this drug to succeed as a lot of its older oncology drugs are getting close to patent expiry. The company

hopes that by proving higher survival rates for earlier treatment that regular screening for lung cancer will be as commonplace as screening for breast cancer. The five-year survival rate for stage-four lung cancer is only 6%, whereas the survival rate for stage-three is 15%.

Elsewhere in the pharmaceutical sector, Hundreds of jobs to go as Swiss drugs firm pulls out of Grimsby (The Guardian) highlights the consequences of Novartis’ cost-cutting plans as it announced 1,700 job losses in both the UK and Switzerland in moving away from high volume pharmaceuticals to more specialised treatments. * SO WHAT? * This sort of thing is tough, but happens a lot in the pharma sector where companies change emphasis all the time. This is Novartis’ latest move in its bid to change focus as, earlier this year, it sold off its stake in a consumer healthcare business to GlaxoSmithKline for $13bn, which included a raft of brands such as Panadol, Sensodyne and Nicotinell.

…And finally, in other news…

I thought I’d leave you today with this great story about a rescue dog who’s gone on to develop some serious skills: ‘World’s first’ ice skating dog looks like he’s loving life after almost being put down (The Mirror, Ailbhe MacMahon & Neil Murphy https://tinyurl.com/ybeudx7x). Ahhhhhh!

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

1. In MACROECONOMIC AND MARKETS NEWS, Trump looks at deals with countries other than China, oil strengthens and Poland graduates from emerging market to developed
2. In MERGER & ACQUISITION NEWS, the Sky/Comcast deal suffers investor blowback, Sirius XM offers to buy Pandora, Kors eyes Versace, Casino rebuffs “approach” by Carrefour and it seems Amazon sniffed around Deliveroo
3. In INDIVIDUAL COMPANY NEWS, Sears’ troubles continue and Thomas Cook shares crater badly on a big profit warning
4. In OTHER NEWS, I bring you the limitations of an unfortunate surname. For more details, read on…

So Trump looks at negotiating with countries other than China, the oil price shoots up and Poland graduates to developed market status…

I know all this trade chat is getting a bit overdone at the moment, but please bear with me because it is important and does have far-reaching consequences! Trump pursues trade deals in Asia, Europe amid frostiness with China (Wall Street Journal, Jacob M.Schlesinger and Vivian Salama) shows that the President is looking outside his current trade negotiations with the Chinese. He signed a revised trade agreement with South Korea yesterday, is looking to open formal bilateral trade talks with Japan this week and his aides also have meetings lined up with their EU counterparts. * SO WHAT? * This is all good in theory, but it does not diminish the importance of getting the whole China thing sorted. Until that happens, I suspect that everything else – no matter how good or ground-breaking it may be – will pale into insignificance.

US reliance on obscure imports from China points to strategic vulnerability (Wall Street Journal, Chuin-Wei Yap) is a very interesting departure from all the usual comment you see on the US-China trade negotiations in that it looks at the detail of the exemptions to the list of goods affected by the most recent round of tariffs and extrapolates it. For instance, the fact that fluorine salts and carbonate esters (which are both used to make electrolytes for car batteries) got an exemption from the new tariffs shows a certain amount of US vulnerability. Barite imports are also exempted as this mineral is important in helping energy companies drill for oil and gas and ibuprofen – 90% of which comes from China – are also on the list of

exemptions. Basically, this whole exercise has revealed the uncomfortable fact that China has quietly become the world’s leading producer of obscure industrial commodities on which the US in particular has become increasingly reliant. * SO WHAT? * Although it isn’t the case at the moment, it does look like the exemptions on this list could be used as a stick to beat the US with in negotiations – and could be a more effective tool than mere tariff retaliation.

Oil soars as Opec rejects Trump’s demands (The Times, Emily Gosden) highlights oil strength as the Brent crude price rose by 3.3% to $81.39 New York yesterday as the market reacted to OPEC’s unwillingness to increase production. Trafigura and Mercuria, two leading commodities traders, said yesterday that they believe oil prices could hit $100 a barrel late this year or early next if things carry on like this. Trump tweeted that “We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices”. * SO WHAT? * The fact is, when you take Iran out of the equation because of reimposed US sanctions (plus a whole load of other supply problems that, together, add to the more restricted flow), the supply/demand balance is way tighter than it was – which means that oil prices will certainly be higher for longer.

Poland makes the leap from emerging to developed market (Daily Telegraph, Matthew Day) heralds an important moment as it has become the first country from Central and Eastern Europe to be recognised as a “developed” market on the FTSE Russell index and joins the likes of the US, UK and Japan in the list of 25 developed economies. * SO WHAT? * It is the first economy that has made the transition from “emerging” to “developed” for ten years. In order to make this transition, it has to display certain characteristics like a solid regulatory environment and reliable capital and derivatives markets.

In M&A news, there’s a boatload of it going on what with Sky/Comcast, Sirius XM/Pandora, Kors/Versace, Casino/Carrefour (although apparently that’s not real) and Amazon/Deliveroo (which has been discussed but nothing happened)…

North American dealmaking leaves M&A at record high (Financial Times, James Fontanella-Khan, Eric Platt and Arash Massoudi) highlights the huge amount of M&A going on at the moment despite the whole trade war backdrop. Boardroom confidence, super-cheap debt and surging stock prices – not to mention Trump’s tax benefit bonanza – have all helped to power this big movement.

Although Sky falls in on Comcast share price (The Times, Simon Duke) shows what investors can do when they are p!ssed off (Comcast shares fell by 6% because investors think it paid too much for Sky), deals like Pandora sold to the tune of $3.5bn (The Times, James Dean), where American satellite radio group Sirius XM has put in an offer to buy music streamer Pandora to help it challenge the likes of Apple and Spotify and Michael Kors to bag Versace for $2bn (The Times, James Dean) continue to be announced.

Elsewhere, though, French supermarkets at odds over claims of merger (Financial Times, Harriet Agnew) shows that approaches aren’t always welcome as it said that it rebuffed an approach from the larger Carrefour

(which the latter denied). Casino is probably feeling rather sensitive at the moment, given that its share price has fallen by 30% so far this year. Interestingly, the door has been left open for a potential combo. * SO WHAT? * Casino/Carrefour: No Dice (Financial Times, Lex) thinks a deal is unlikely because a combination of two of France’s biggest retailers (Carrefour is the world’s second biggest retailer by revenues) would require a prohibitively huge amount of disposals to get past the regulator, but it is theoretically possible as it has not been completely dismissed. However, they have big overlaps in France and Brazil and have three-quarters of France’s convenience store market sewn up between them, so the chances of a deal appear slim.

Following on from last week’s intriguing news that Uber was in the early stages of talks to acquire Deliveroo, Amazon pursued Deliveroo (Daily Telegraph, Matthew Field) makes the story even more exciting as it says that Amazon has, in fact, already made two preliminary approaches for food delivery company Deliveroo – the first one about two years ago and the second one last year. Neither party commented on this. * SO WHAT? * Sounds intriguing, no? Amazon is way smaller in the food delivery space than either Deliveroo or Uber Eats, but given that the market size of food delivery has grown to be around £100bn and that Amazon has “uber-deep” pockets, you can imagine that an acquisition of Deliveroo would make strategic sense. And who knows, it may even be able to use delivery drivers to not only deliver your takeaways, they might be able to deliver your food shopping! Deliveroo has postponed its proposed Initial Public Offering (IPO) from 2019 to 2020 and would probably look for a £4bn valuation for the purposes of any kind of acquisition. This is certainly one to watch!

In individual company news, US department store Sears continues to find life difficult and Thomas Cook has a shocker…

Sears CEO pushes a rescue plan to avoid bankruptcy (Wall Street Journal, Suzanne Kapner) shows that it’s not just UK retailers that are feeling the pinch at the moment as CEO Edward Lampert is pushing for creditors to restructure about $1.1bn of debt due in 2019 and 2020 and make a number of asset disposals in order to stave off bankruptcy ahead of a big debt payment due next month. If his proposals were accepted in their current form, the company’s debt would be cut from $5.5bn to about $1.24bn. * SO WHAT? * Lampert has done an admirable job keeping this retailer going, but Sears has lost over $11bn since 2011 and sales have fallen by almost 60% over this time. Naysayers say that he has merely been an asset stripper, selling off the company’s assets over time, but supporters say that he has had to do this in order to keep the company afloat. However, Sears continues to suffer the

problems other retailers are facing (namely changing consumer behaviour) and the current measures seem to be aimed at the fringes of re-jigging the financing rather than addressing the elephant in the room. Still, without money (or even a business that is a going concern), the right measures can’t be taken. I’m thinking that this company will go down the plughole – but I hope I am wrong.

Talking about things going down the plughole, Sunshine to blame as Thomas Cook share price tumbles by 28% (The Guardian, Sarah Butler) shows that the summer heatwave experienced in Europe wasn’t great for everyone as the travel company announced a profit warning yesterday, prompting a massive share price drop. The company said that there was a notable slowdown in bookings in June and July as more people opted to stay at home and not go abroad. Thomas Cook’s bookings are made up of 25% British, 30% German and 15% Scandinavian holiday makers and it makes all of its annual profit in the summer. The weaker pound and consequent higher prices for package holidays would also have been major factors in the bookings slowdown. * SO WHAT? * I just think this is another example of consumers reining in the spending ahead of Brexit and becoming more conscious of the weaker nature of sterling.

…And finally, in other news…

Unfortunate names can have unfortunate consequences, as this man from Belgium found out: Man named Anus changes Facebook profile after being butt of too many jokes (Metro, Zoe Drewett https://tinyurl.com/y9wfwlge). He’s standing as a council candidate – so at least voters will remember his name!

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

1. In MACROECONOMIC NEWS, China cancels US trade talks and OPEC’s latest meeting predicts rising oil demand
2. In NEWS ON CAR SALES, we see a contrast between the UK and US
3. In INDIVIDUAL COMPANY NEWS, Comcast wins in the auction for Sky, Royal Mail heralds a parcel-led future and River Island has a tough time
4. In OTHER NEWS, I bring you a weird new manicure “trend”. For more details, read on…

So China retaliates and OPEC predicts a bullish future for oil demand…

China cancels trade talks with US amid escalation in tariff threats (Wall Street Journal, Lingling Wei) is hardly surprising given Trump’s latest moves on the tariff front as his latest tranche of duties, affecting $200bn of Chinese imports, comes into force today. Having said that, China has left open the possibility for talks next month. * SO WHAT? * The two sides are just posturing at the moment. I think that Trump is trying to string this out for a little bit longer and that he’s more likely to come out with some kind of deal closer to the US midterm elections at the beginning of November to win votes. No doubt in his ideal world, talks with North Korea will warm up again by then as well – but obviously the opposite parties in both negotiations are fully aware of this and will probably be willing to do deals at that point to make everyone look good.

In Airlines’ demand for oil will offset impact of electric cars in next five years (The Guardian, Adam Vaughan) we see that OPEC’s latest report predicts that world oil production will rise to record levels within the next five years due to major expansion in demand from airlines outstripping a fall in demand from the increased take-up of electric cars. It also predicted that coal usage will also increase, with a steep drop in OECD country usage going into 2040 being offset by a huge increase in usage in developing countries. It also predicted that renewable energy production will only account for about 20% of global energy demand by 2040. * SO WHAT? * Clearly, this report needs to be taken with a pinch of salt. Whaaat? An oil cartel writing a report predicting a rosy future for its own product?? Nooooo – surely not!?! However, I suspect that the truth lies somewhere between what it is predicting and what the renewable energy industry is predicting. The thing is that renewable industry predictions are based on what might be or hopes for  future technological improvement. Oil industry predictions are based much more on past performance and fact. OK – so OPEC is obviously talking its own book, but I would be more inclined to believe their predictions more than the renewable industry’s.

In car sales news, there’s a stark contrast with markets in the UK and US…

Car sales set to crash after dealers flood market to beat green tests (Daily Telegraph, Alan Tovey) highlights a tricky situation for car makers and car dealers at the moment as car sales are expected to take a bath after what appeared to be a strong August. September is usually a big month for car sales (because of the registration plate changes) but carmakers have flooded the dealer network ahead of the rollout of a new emissions regime, known as WLTP (Worldwide harmonised Light Vehicle Test Procedure) to avoid having to test their vehicles to the new tighter standards brought in following the VW emissions scandal. Cars registered after August must be tested to WLTP standards, but some cars would fail – hence the manufacturers getting rid before the deadline and pumping up pre-registrations. Pre-registrations occur when dealers register cars themselves to inflate sales figures and then quietly sell the vehicles on as low-mileage used cars for a big discount. Auto Trader stats show a 22% increase in the number of cars for sale with less than 100 miles on the clock on their website in August, which would imply a lot of

pre-registering going on. * SO WHAT? * Although official new car registration data showed a 23.1% jump in August after a 1.2% rise in July, it seems that there is a lot of jiggery-pokery going on in the background meaning that any kind of sales figures for the next few months shouldn’t be taken at face value. I would have thought that the underlying trend for car sales will be in the downward direction as punters get more risk averse heading into Brexit.

Used-car sales boom as new cars get too pricey for many (Wall Street Journal, Adrienne Roberts) looks at the current state of affairs for car sales in the US where there appears to be a trend of punters increasingly going for second-hand cars due to the widening gap between new and used prices.  * SO WHAT? * New car sales have started to slow down this year after seven consecutive years of rises and a strengthening used market could well dent them further as buyers forego the “new car smell” for the “old car smell”. Although used car prices have been trending up of late, the gap between new and used prices is at its biggest for ten years according to car-shopping website Edmunds.com. Demand for used was particularly high this summer and it looks like this situation could continue as higher interest rates and rising prices for new cars combine to put increasing pressure on consumer wallets. 

In individual company news, Comcast wins the auction for Sky, Royal Mail stakes its future on parcels and River Island is the latest high street retailer to suffer lower profits…

So Comcast chief pledges to preserve Sky’s independence (Financial Times, Matthew Garrahan) heralds Comcast’s victory over rivals Walt Disney and 21st Century Fox for Rupert Murdoch’s pay TV group with an offer of £17.28 per share versus the Disney-Fox bid of £15.67 a share and effectively ends Murdoch’s involvement with Sky almost 30 years after he created the group. * SO WHAT? * This brings to a close a saga that kicked off in December 2016 and at least gives some clarity to the sector. We’ll just have to see now what Comcast has in store – although Comcast’s style tends to let the “locals” get on with it. As the chief exec of Comcast, Brian Roberts, put it, ” The consistent theme at Comcast has been letting leaders of our businesses make their own decisions, being decentralised and keeping an entrepreneurial spirit…we’ve said this to Jeremy and the rest of the Sky team…they will be able to act as an independent company but with the resources of a $150bn company behind them”. No doubt there will be more consolidation to come in the industry.

Royal Mail sends message to investors with focus on parcels (Financial Times, Michael Pooler) highlights the vision for the future, as delivered by the company’s new management. Basically, it wants to make sure it can surf the wave of increased parcel traffic as letter delivery

descends into terminal decline and chief exec Rico Back also outlined his desire to grow Royal Mail’s international parcels business, GLS. * SO WHAT? * Whatevs. The new team are making the right noises so far – with investors who need calming down after they objected to executive pay packages and unions who wanted assurance of no job losses – but the key problem the company needs to face RIGHT NOW is the decline in letter-traffic. The EU’s recently enacted GDPR legislation has already caused a massive drop in marketing mail and parcel delivery is becoming an increasingly competitive area. Royal Mail should not underestimate the challenges facing it, but it has the network to be able to fight back against newbies like Amazon. As long as it doesn’t dawdle, it SHOULD be able to benefit from increased parcel deliveries but it needs to be proactive IMHO.

I know I keep banging on about gloom on the UK high street – and today’s going to be no different as River Island profits down as retailer adapts to online world (Daily Telegraph, Ben Woods) highlights a massive 40% fall in profits at the apparel retailer as it invested in improving its online offering. As chief exec Ben Lewis put it, “Despite some of the challenges we have a strong belief in what we are doing, our brand and product proposition, and we are investing in the changes taking place in consumer behaviours to make sure that we stay at the forefront of customers’ minds”. Interestingly, despite the fall in profits, the company isn’t trimming its store footprint and actually added to its estate. * SO WHAT? * It sounds like this privately-owned business is in transition and wants to squeeze as much value out of its existing estate as possible. Clearly, investing in its online capabilities is a good thing, but if it can get the most out of its existing stores as well then everyone’s a winner!

…And finally, in other news…

I thought I’d bring you a very creepy “trend” to kick the week off with in Bizarre manicure is creeping people out – as it makes your nail look like a hand (The Mirror, Robyn Darbyshire https://tinyurl.com/yb73s8sm). Yuck!

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

1. In MACROECONOMIC AND MARKETS NEWS, China plans on softening tariffs for non-US companies, Japan’s PM wins the party leadership election and US markets reach new highs
2. In RETAILER NEWS, Amazon looks at some interesting new areas, French Connection’s nightmare continues and Evans Cycles puts itself up for sale
3. In VEHICLE-RELATED NEWS, Hyundai announces a new truck innovation and Aston goes for a top end IPO valuation
4. In INDIVIDUAL COMPANY NEWS, Sky ownership is about to be decided by blind auction and Uber looks at buying Deliveroo
5. In OTHER NEWS, I bring you an unusually large spiders’ web. For more details, read on…

So China shifts its stance on non-US countries, Japan’s PM wins the leadership election and US markets power to new heights…

In China to cut tariffs for other countries as US row deepens (The Times, Callum Jones) we see that China is on the verge of reducing trade tariffs for certain consumer products from non-US countries as officials look to mitigate the impact of Trump’s tariffs. Specifics as to which countries or products will be targeted are, as yet, unclear but the new regime could come into force as early as next month. * SO WHAT? * This’ll no doubt be great for those countries and industries that get the China boost, but you just don’t know whether this will be something that only happens for the duration of the US-China trade spat or whether it will be more of a long term thing. The Devil will most definitely be in the detail. It may even broaden the trade disputes as the US will no doubt put in measures themselves to stop other countries/industries from benefitting too much.

Japan’s Shinzo Abe triumphs in LDP leadership election (Financial Times, Robin Harding) heralds an important moment for the Japanese PM whose party leadership win means that he could potentially be the country’s longest-serving PM as lower house elections aren’t due until 2021. * SO WHAT? * He easily beat opponent Shigeru Ishiba, which will give him the confidence to continue his economic stimulus programme, aka Abenomics. The prime ministership of Japan has long been known as a revolving door – so this is no mean feat. He will, however, need to hang on until November 20th 2019 in order to become Japan’s longest-serving Japanese PM ever – but it’s looking good at the moment.

US stocks close at records (Wall Street Journal, Michael Wursthorn) highlights new highs for the Dow Jones and the S&P 500 as they ended up 7.8% and 9.6% on the year, with more to come as the US economy continues to go from strength to strength. The Dow also put in a strong performance with 28 of its 30 constituents ending up on the day. * SO WHAT? * It just shows what low unemployment, big tax cuts and burgeoning profits can do for a country. The current trade war may yet take the shine off an economy that is, in many areas, cooking with gas but momentum is currently positive.

In retailer news, Amazon continues to look into new areas while French Connection and Evans Cycles have a ‘mare…

There seem to be a number of interesting developments going on at Amazon at the moment. Amazon plans 3,000 cashless stores (The Times, James Dean) shows us rumours about the company’s plan for its Amazon Go stores that could simultaneously transform our shopping experience and spark the demise of an entire profession, Amazon investment in India ties into retail chain (Wall Street Journal, Corinne Abrams) highlights a joint venture in India with private equity firm Samara Capital which could give it access to over 500 stores and an important foothold in a market with huge potential and then Amazon’s new microwave: ‘Alexa, please defrost my chicken’ (Wall Street Journal, Laura Stevens) highlights a new Alexa-enabled chip that can be put into everyday household devices to make them “intelligent”. * SO WHAT? * This all goes to show that you don’t have to be small and quirky to be a disruptor! The Amazon Go store plans haven’t been officially confirmed, but they could transform our day-to-day shopping experience, the India move would appear to be a smart option in a market with huge potential upside and if the new chips are adopted by manufacturers, it could help to broaden Amazon’s presence in our normal lives. I happen to think that the latter is especially creepy, but you 

can’t blame the company for wanting to deepen the customer relationship.

Meanwhile, things aren’t so rosy in UK retail at the moment what with Losses double as revenues drop at French Connection (Daily Telegraph, Ayesha Javed and Ben Woods), which the company blamed on tricky market conditions and Evans Cycles peddled to investors amid fears over trading (The Times, Tabby Kinder), which is being blamed on the waning of interest in cycling as punters appear to have reached peak Wiggo/Hoy/Froome et al. Advisers of Evans Cycles are currently approaching private equity firms, other retailers and investors with a view to selling the business as online retailers continue to eat its lunch. * SO WHAT? * Apparel retailing is notoriously difficult to do well and there once was a time when French Connection could do no wrong. However, the tables have now turned and it looks to me like it could be in the throes of a terminal slide into oblivion if something drastic doesn’t happen to turn it around. Yes, trading conditions are tricky at the moment, but there are fashion retailers who ARE doing well, so blaming it all on market conditions isn’t really a satisfactory excuse IMHO. As for Evans Cycles, I just think that this is going to be a difficult sell as the shops are purveyors of big ticket items in usually quite spacious premises, so there won’t be many wanting to take that on at “market rates”. Online retailers, such as Wiggle, don’t have these overheads and they do a great job of servicing the need of cyclists across the spectrum. The obvious thing here would be for Evans and Halfords to get together, but then would this be wise for Halfords to increase its exposure to an area that many believe is past its peak?

In vehicle-related news, Hyundai plans the launch of a hydrogen-powered truck and Aston Martin prices itself at the top end of the valuation range…

Hyundai Motor plans commercial launch of hydrogen-powered truck (Financial Times, Bryan Harris and Kana Inagaki) potentially heralds a new dawn for trucking as the Korean manufacturer announced plans to launch the world’s first commercially available hydrogen powered truck next year. It said it would begin the rollout of 1,000 fuel cell trucks in Switzerland as part of a five-year agreement with Swiss hydrogen company H2 energy. * SO WHAT? * This sounds great, no? The company believes that hydrogen technology is better suited to heavy vehicles travelling long distances versus 100% electric vehicles that face shorter ranges, long refuelling times and battery degradation. It also has the benefit of preserving the survival of component jobs. Tesla and Daimler plan to introduce battery-powered trucks in 2020 and 2021 

respectively, so the scene is set for a hydrogen vs electricity showdown at the beginning of the next decade!

A lot of the news today about Aston Martin seems to revolve around how much chief exec and Aston-saviour Andy Palmer will earn as a result of his company’s flotation, but Aston Martin’s valuation leaves Ferrari behind (The Times, Patrick Hosking) looks more at the announcement of the price range for the company’s upcoming Initial Public Offering (IPO) which would value the company at anything between £4.02bn and £5.07bn. In profits before tax terms, this would value Aston Martin more highly than Ferrari. Existing investors in Aston Martin hope to sell about 25% of the shares which will rake in around £1bn. The offer price range was decided on after brokers to the deal sounded out investors and the strike price will be announced on October 3rd. * SO WHAT? * Naysayers will point to the fact that the company has gone bust seven times in the last 105 years but optimists (including Aston Martin) say that there are over 16million people worldwide who can afford their cars without blinking. Retail investors will be able to get sniff of the action once the IPO has happened, but before that only investors, Aston Martin staff and customers will be able to participate.

In individual company news, Sky’s fate will be decided in an auction and Uber looks at buying Deliveroo…

Sky faces its date with destiny (Daily Telegraph, Christopher Williams) brings us nearer to closure for the protracted battle between Comcast, 21st Century Fox and Disney for the ownership of Sky as the three will enter into a bidding process over the weekend with the Takeover Panel acting as referee. * SO WHAT? * Thank God we’re 

going to get a resolution as this has just dragged on and on. The result is expected over the weekend or early Monday morning. At blimmin last!

In an interesting development in the cutthroat world of food delivery, Uber plots to swallow up Deliveroo (The Times, James Dean) says that Uber is in the early stages of making a bid of over $2bn to buy rival Deliveroo. Neither company commented, but it would be an interesting and powerful combination if it did happen. We’ll just have to wait and see. * SO WHAT? * I would have thought that this will put the whole area of food-delivery under the spotlight if the acquisition goes ahead. But even if it doesn’t, it may well prompt more M&A activity as existing operators try to beef up their existing offerings.

…And finally, in other news…

For all you spider lovers out there I thought I’d show you this impressive sight: Terrifying giant spiders’ web in Greece tourist resort is 1000ft long (Mirror, Dave Burke https://tinyurl.com/ycj8bgpg). Nice!

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

1. In MACROECONOMIC NEWS, UK inflation hits new highs and house price growth hits new lows
2. In RETAILER NEWS, the EU gets on Amazon’s case, Alibaba pulls back from its US jobs promise and Jack’s launches
3. In INDIVIDUAL COMPANY NEWS, Google loses out on ad revenues and cannabis stock Tilray puffs up
4. In OTHER NEWS, I bring you the secret to growing giant vegetables. For more details, read on…

So UK inflation hits a six-month high while house price growth hits a five-year low…

Travel and theatre help push inflation to six-month peak (The Guardian, Richard Partington) cites the latest figures from the Office for National Statistics (ONS) which show that consumer prices increased by 2.7% last month, versus an increase of 2.5% in July and market expectations of 2.4%. The ONS said that the main driver behind the higher cost of living was the fastest rise in recreation and culture-related costs since January 2010. * SO WHAT? * This isn’t great news for many households as average wages have only just nosed ahead of inflation. Some of the more optimistic economists are saying that this inflation increase is just a blip given that it was driven by big rises 

from a relatively small amount of items and that the overall inflation trend is in the downward direction as the effect of a weaker sterling post the EU referendum continues to fade.

House price growth falls to a five-year low, figures show (Daily Telegraph, Charlie Taylor-Kroll) cites the latest ONS House Price figures which show the lowest house price growth since August 2013. The north-west had the fastest price growth over the last year with 5.6% versus the national average of 3.1% as falling prices in the south and east of England dragged everywhere else down. * SO WHAT? * This is hardly surprising given the uncertainty we are facing with Brexit. House price chat, although intensely boring, is important because a buoyant housing market makes everyone feel richer (even though you’re only really richer on paper) which makes them more likely to spend more and keep the economy ticking over. Weaker house prices tend to have the opposite effect.

In retailer news, the EU opens an investigation into Amazon’s use of data, Alibaba pulls back on its US jobs promise and Tesco launches its discount chain…

EU opens probe into Amazon use of data about merchants (Financial Times, Rochelle Toplensky and Shannon Bond) highlights a new investigation by the European Commission which will look at how the company uses data about merchants as it is currently not only their host, but also their major competitor. EU officials were keen to stress that this is NOT a formal probe at this stage and that they are currently just gathering information from merchants. * SO WHAT? * There’s nothing to see here – yet. I guess the reason it’s making the headlines is because it’s a shift of focus for Margrethe Vestager, who is coming to the end of a five-year term and was the one responsible for fining Google €4.3bn in July for allegedly abusing its position of power in mobile operating systems.

Alibaba’s Jack Ma pulls plug on ‘million jobs’ pledge (Daily Telegraph, Margi Murphy) shows that the founder of the Chinese e-tailer behemoth has reacted to the current US-China trade spat by pulling back from his January 2017 promise of creating one million jobs in America. He said that “The promise was made on the premise of friendly US-China partnership and rational trade relations…That premise no longer exists today, so our promise

cannot be fulfilled”. * SO WHAT? * TBH, it’s all words but I think that the important thing here is that someone as high-profile as Jack Ma saying something like this could embolden other Chinese employers in the US to do the same. Mind you, Ma is on a different planet to everyone else and so they might need more of a Chinese uprising before jumping on his no-job bandwagon.

Tesco’s Drastic Dave brings back Slasher Jack (The Times, Deirdre Hipwell) highlights Tesco’s move to dislodge the supremacy of Aldi and Lidl in the discount supermarket space as it launches its first two “Jacks’s” branded stores. Cutting to heart of it, the stores are made more cheaply with lower overheads, a limited product range and they even have a When It’s Gone It’s Gone aisle. Tesco plans to open between 10 and 15 stores this year and chief exec Dave Lewis sounded quite airy about cannibalising Tesco sales when he said “I’d rather cannibalise myself than have somebody else cannibalise me”. * SO WHAT? * It may be a bit premature to assume this venture will end in failure, but the odds are stacked against it – both Asda and Sainsbury’s have tried and failed with discount formats in the past. I’m a sceptic on Jack’s because, at this stage, I don’t see that they’re doing anything new – they’re just copying other (admittedly, successful) existing formats. I believe that, in order for Tesco to truly succeed, it has to build its own identity and come up with new, original ideas – maybe even harness that pioneering spirit of the Tesco founder Sir Jack Cohen. Just chucking a bit of money at a tarted-up copy of the competition surely isn’t enough to get the German discounters quaking in their boots.

In individual company news, Google’s ad share gets a little dent and cannabis company Tilray gets high…

Google’s grip on advertising is weakening (Daily Telegraph, Hannah Boland) highlights the latest forecasts from research group eMarketer, which say that Amazon will have a 4.15% share of the US digital ad market this year. This is a significant increase from their previous forecasts and would make Amazon the US’s #3 digital ad platform, taking it ahead of Oath and Microsoft for the first time. * SO WHAT? * Google and Facebook won’t be too concerned just yet (they have 37.14% and 20.57% market share respectively), but they will need to keep Amazon on the radar.

Reefer madness as pot stock Tilray hits $20bn valuation (Financial Times, Nicole Bullock, Peter Wells and

Andrew Edgecliffe-Johnson) shows what hype does when the lossmaking Canadian cannabis producer with less than $10m of sales in its latest quarter hit a market cap of $20bn in trading yesterday. It floated at $17 per share on Nasdaq only two months ago, but it was up to $300 in mid-afternoon trading in New York yesterday on the back of news that it had received approval from the US Drug Enforcement Administration to import one of its products in capsule form to use in a clinical trial to treat a neurological disorder called essential tremor. When the hype calmed down, it went back to $214.06, which still meant the stock had risen by a chunky 38% on the day. * SO WHAT? * Tilray is a proper company and has several brands that it markets in Canada, where recreational use will be legalised next month. However, one of the reasons why Tilray was up so strongly yesterday was because only 20% of its shares are available to trade in the market – and this can skew price movements hugely. Current valuations are looking toppy at these levels but the growth potential of the pot market looks pretty attractive from here – especially if legalisation becomes a global trend.

…And finally, in other news…

Ever dreamed of growing giant veg? Me neither. However, I’ve got you covered if you ever get the urge: Giant vegetable whisperer strokes his leeks to help them grow (Metro, Zoe Drewett https://tinyurl.com/ybho7jfe).

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

1. In MACROECONOMIC NEWS, China retaliates to Trump’s tariffs and economists warn of the potential damage
2. In EV/HYBRID VEHICLE-RELATED NEWS, Tesla faces a criminal investigation, rival Lucid plays catch-up, Ferrari announces ambitious plans and retro-fitted hybrid trains are on their way
3. In ONLINE RETAILER-RELATED NEWS, we see why Amazon should be split up, Zalando has a nightmare but Ocado predicts growth
4. In INDIVIDUAL COMPANY NEWS, Sky decides to include Netflix and there’s consolidation in the insurance broker industry
5. In OTHER NEWS, I bring you Britain’s best lawn. For more details, read on…

So China fights back and economists tell us trade wars can be “bad” and that bears sh!t in the woods…

No-one will be surprised by China hits back at Trump with further $60bn of tariffs (The Guardian, Richard Partington) given that Donny T just slapped them with $200bn-worth. It seems that Trump is likely to turn the screws even further in a bid to boost his approval ratings ahead of the US midterm elections in November. * SO WHAT? * If you just looked at the headline amounts, you’d think that China’s response is rather muted – but the fact is that China’s imports from America only amount to $130bn versus exports TO America amount to around $500bn. However, there are other ways for China to respond that 

could be equally or more damaging – via tightening of regulations, meddling more deeply in day-to-day operations and, on a higher level, any kind of M&A.

Meanwhile, we must all thank our lucky stars for the tremendous insight of economists in Economists warn US and China will both suffer in tariff trade war (Daily Telegraph, Anna Isaac) as many of them make downward adjustments to growth forecasts and say things like Lazard Asset Management’s Ronald Temple did when he said “With each escalation, the outlook for markets and economic growth in 2019 deteriorates…our concerns over trade friction and monetary policy tightening are increasing”. Amazing insight. Almost as good as credit agencies ;0) BTW, if I find anything on who actually benefits from these trade tariffs, I’ll let you know – because commentary is all rather one-sided currently.

In EV/hybrid vehicle-related news, Tesla gets into more hot water, Lucid plays catch-up, Ferrari evolves and hybrid trains become a reality…

DOJ opened probe of Tesla after Musk’s going-private tweet (Wall Street Journal, Tim Higgins and Dave Michaels) highlights Tesla’s revelation yesterday that the Department of Justice had commenced an investigation into the company in the aftermath of Elon Musk’s August tweet that he’d secured funding to take the company private. Bloomberg News reported yesterday that this was a criminal investigation against Tesla (although there has been no official confirmation of that) but it is also facing an investigation from the Securities and Exchange Commission which could potential bring a civil case. Tesla’s share price fell by 3.2% in trading yesterday but has fallen by about 25% since THAT tweet. * SO WHAT? * There’s a lot of hoo-ha surrounding this, but what with some observers questioning Musk’s state of mind and his bizarrely aggressive tweets regarding the British rescue diver, I just wonder whether this is all a Jose Mourinho-like theatrical attempt to focus the attention on him rather than his company’s production problems. The drama continues…

Following on from Monday’s announcement that it had secured $1bn in funding from Saudi Arabia’s sovereign wealth fund, Lucid plays catch-up in electric vehicles race (Financial Times, Richard Waters) shows just how much the Tesla rival has to do to produce its first luxury sedan in 2020. The company currently only has 200 employees, but it will need to expand exponentially in order to meet the deadline to release the Lucid Air. * SO WHAT? * Even with $1bn in your back pocket, this is going to be a monumentally difficult nut to crack given that all the big boys have been given a bloody nose by the Tesla upstart and are now well into the electrification of their product line-up. The longer a tiddler like Lucid has to wait until it 

can make production a reality the harder it’s going to become to make a dent in anyone’s consciousness. It says that it’s not going to build its own network of charging stations and that it will buy in batteries from Samsung and LG – which should make things easier – but then the competitive landscape is going to advance so much by the time Lucid comes out with a car that they are going to have a nightmarish time of it IMHO.

In Ferrari unveils “ambitious” plan to secure future of brand (Financial Times, Peter Campbell) we see that the sports car manufacturer has announced plans to double profits, adopt hybrid technology and expand its product range by 2022 to secure its future. It said that 60% of its models will contain hybrid technology by 2022 and that it is targeting a margin increase from the current 30.3% to over 38%. Although it said that all of its current range will be hybrid by 2021, it has stopped short of announcing a purely electric car. * SO WHAT? * Quite dramatic stuff, but it’s all in the execution. The company has done well since being spun-off from Fiat in 2015 and this announcement would suggest that its plans on future-proofing itself are going in the right direction.

Hybrid battery trains set to shorten commuter journey times (Financial Times, Andy Bounds) sounds brilliant, don’t you think? Chiltern Railways announced plans to run hybrid diesel and battery-powered trains from next year but said that it won’t go for full electrification because of the high costs involved. The company is working with Angel Trains on tech that will convert diesel trains into the UK’s first retrofitted electric hybrids. Chiltern currently relies entirely on diesel trains on its London-Birmingham and Oxford-Aylesbury networks and Angel said that it expects the first Class 165 HyDrive train to be ready by the end of 2019. * SO WHAT? * This sounds like a great idea – especially because its something that can use existing rolling stock and will cost far less than going the whole hog into electrification. The fact that it will also make a meaningful impact in terms of efficiency is great news and offers train operators who are often locked into long leasing contracts a realistic upgrade option. Angel Trains is working with Magtec, a Sheffield-based EV specialist which produces electric drive trains for military vehicles, small trucks and buses.

In online retailer-related news, we look at reasons why Amazon could be broken up, Zalando goes south and Ocado predicts a sunny outlook…

Amazon ‘should be split up before it is broken up’ (The Times, Simon Duke) is an interesting little article which focuses on the opinion of a Citigroup analyst, Mark Hay, who thinks that Amazon should split itself into a retail division and a cloud computing division in order to head off potential regulatory focus. * SO WHAT? * This is quite an interesting theory – and investors would probably love the separation as it would potentially make closer scrutiny of each part of the business easier – but I’m not sure how much the top brass will want to do that. After all, the two divisions complement each other quite well at the moment and there may yet be further synergies to be had. Mind you, given how much Trump seems to dislike Amazon and Jeff Bezos, it might be a smart move to go for the pre-emptive move to at least give the impression of a lower profile. For all his bluster, and however much he may want to stick it to a high profile critic, “punishing” Amazon for being successful may not go down well in corporate America and, if he DID look at punishing Amazon somehow, investors would start to play a game of “who’s next” which could play unwelcome havoc with some company stock prices.

Zalando shares tumble 20% on second profit warning (Financial Times, Tobias Buck) heralds a calamitous day

for the German online fashion retailer as it announced that full-year sales and earnings would be lower than current forecasts. As is often the case with retailers, it blamed the weather on its poor performance citing the “long hot summer” as having a delaying effect on autumn/winter sales of higher-value items such as jackets and coats. * SO WHAT? * This news is rather disconcerting and no doubt investors will be wondering if the same pressures will affect competitors such as Asos, for instance. Zalando has 24.6m active customers in 17 markets and has been widely seen as a success story in the online retail space. However, its stock price has fallen by almost 30% since August – when it announced its first profit warning – so you do wonder how the company will get back on track. If it really is just the weather that’s behind this, then there should be some kind of rebound – but if there is something more fundamental going on it could have further to fall.

Ocado predicts growth surge after increase in retail sales (Daily Telegraph, LaToya Harding) shows that online grocery retailer Ocado is predicting a strong surge into the end of the year after solid sales in the latest quarter and the company’s CFO, Duncan Tatton-Brown, said that “We are investing in a number of areas, primarily in our new platforms” whilst also recruiting more engineers. * SO WHAT? * This is great news and shows that it’s not only the overseas business that’s doing well (although, let’s be honest, the overseas business is what investors are most interested in). As Laith Khalaf of Hargreaves Lansdown put it, “Ocado recently achieved promotion to the FTSE100 and its equity market value is now greater than the likes of Morrisons, Royal Mail and M&S. It still needs to turn overseas partnerships into profits, and details of its commercial relationships with US retailer Kroger are still being hammered out”.

In individual company news, Sky decides to include Netflix and two insurance giants consolidate…

Sky includes Netflix in TV deals in attempt to retain subscribers (Daily Telegraph, Christopher Williams) is a very interesting article (not least because I myself have recently attempted to ditch Sky for Netflix!) which shows that mass desertion has forced Sky to make nice with a major nemesis by including Netflix in its pay-tv packages for the first time ever from November. Although the £10 additional charge on an existing subscription is more than going direct to Netflix for £7.99 per month, the deal will include 350 extra boxsets from Sky that would normally cost an extra £5 per month and Netflix programming will be integrated into the Sky Q interface itself. * SO WHAT? * It just goes to show how powerful Netflix has become because, in the past, something like this would never have happened.

‘Fabulous’ bid means £100m for broker bosses (The Times, Harry Wilson) highlights US insurance giant Marsh & McLennan’s £4.3bn bid to acquire Jardine Lloyd Thomson – an all-cash bid at a fat 40% premium to JLT’s average share price before the announcement. M&M is a professional services behemoth employing 65,000 people generating revenues of over $14bn last year and said that buying up JLT would edge it closer to its aims of becoming the “pre-eminent global firm offering clients advice and solutions”. The bid apparently came out of the blue and a rival knock-out bid looks unlikely at this stage. Funnily enough, shares in JLT shot up by 30% yesterday and the deal is expected to be completed in the next six months. * SO WHAT? * There’s been a recent trend of consolidation in the insurance sector as regulations have continued to tighten around the world and competition has intensified. Earlier this year, for instance, French insurer Axa offered $15.3bn for XL group and AIG offered $5.6bn for reinsurer Validus. There are bound to be more deals to come.

…And finally, in other news…

I thought I’d bring you something exciting today – so here it is: This is officially Britain’s best lawn (and it took 273 hours to mow) (Metro, Jen Mills https://tinyurl.com/y7dal969). Oh yeah! Boom! You know where the party’s at – WATSON’S DAILY, BABY!!!

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

1. In TRADE WAR-RELATED NEWS, Trump’s proposed China tariffs get more detailed and Apple gets exclusions
2. In BEVERAGE-RELATED NEWS, Coca-Cola looks at cannabis drinks and Innocent advances
3. In RETAIL-RELATED NEWS, Sweden’s H&M unveils a solid performance and the new Boohoo chief could earn a hefty £50m bonus
4. In CAR-RELATED NEWS, Indonesia’s Go-Jek aims for $2bn in funding, Jaguar slims down to a three-day week and a Saudi fund backs Tesla rival Lucid Motors
5. In OTHER NEWS, I bring you an invisible car. For more details, read on…

So there’s more detail on Trump’s new China tariffs and Apple manages to get special treatment…

Trump raises stakes with new China tariffs (The Times, Callum Jones) follows on from what I was saying yesterday about Trump slapping $200bn-worth of tariffs on China, just with a few more details. Namely, the 10% tariffs will kick in from September 24th but the rate will then increase to 25% by the end of the year – a move intended to give US companies time to re-jig their supply chains. Trump says he’s got another $267bn of tariffs lined up for if China decides to retaliate and boast-tweeted that “Tariffs have put the US in a very strong bargaining position…” whilst China’s Global Times said that “we are looking

forward to a more beautiful counterattack and will keep increasing the pain felt by the US”. The Great P!ssing Contest continues…

Meanwhile, Apple avoids US tariffs on smartwatches, earbuds (Wall Street Journal, Tripp Mickle) shows that Apple managed to get an important exemption from Trump as the company manufactures almost all of its gadgets in China. * SO WHAT? * This all comes at a rather delicate time for Apple as it’s just unveiled a ton of gadget-p0rn and wants to sell boatloads of it to power future growth. It is thought that Apple will have enough inventory for now but if China decides to retaliate against Trump’s latest moves, Apple looks like a great target for China to use as an “example”. Even if it does tighten the screws, Apple’s fat profit margins could stand a bit of a squeeze for the short term – but I am sure it is hoping for a reasonably swift resolution to all this drama.