Category: Uncategorized

1. In RETAILER NEWS TODAY, Walmart looks at selling off its Japanese supermarket chain, Asos warns on full year sales growth, DFS and Dunelm announce poor sofa sales and B&M does a roaring trade in paddling pools.

2. In UK CONSUMER SPENDING NEWS, credit card defaults are on the rise, as is home lending to first-time buyers.

3. In M&A NEWS, Broadcom gets a pasting after yesterday’s deal announcement.

4. In OTHER NEWS, I bring you a new Instagram pose. For more details, read on…

So Walmart eyes potential exit from Japan, ASOS reins in expectations, DFS and Dunlem get the sofa blues and B&M gets big boost from paddling pools…

In Walmart explores sale of Japanese supermarket chain (Financial Times, Kana Inagaki and Leo Lewis) we see that there is speculation that Walmart is about to continue to reshuffle its international business focus by exiting from the Japan market after 16 years via the sale of its struggling Seiyu supermarket chain, which it bought for $60bn in 2002. This is still in the early stages, but some believe it could be snapped up by a private equity buyer as there

is increased interest in Japan as a source of deals from these types of firms. Having said that, Seiyu might prove to be tricky, as an anonymous PE punter observed that “When you look at the list of failures by foreign retailers in Japan, it is quite tough to imagine bringing in someone to manage a great turnaround story for Seiyu. If Walmart cannot do it, you know it is tough”. * SO WHAT? * Walmart, for its part, has denied that it is in discussions with potential buyers, but it would be fair to say that it has had a bumpy ride since it made the purchase. Japan has been the graveyard of many a retailer in the past – Tesco pulled out in 2011 after 8 years and French retailer Carrefour pulled out after only five in 2005 (and I also remember how Boots tried and failed in the late 90s/early 2000s because I was involved in the launch!) – and Walmart has made some headline-grabbing moves of late in terms of shifting around its international business interests. It sold off a majority stake in its Brazilian business last month, merged Asda with J Sainsbury in April and recently announced its purchase of a $16bn stake in Flipkart in India. Selling off Seiyu sounds like it would make good strategic sense, but the buyer is going to be in for a rough ride methinks.

Asos investors take fright over sales (The Times, Deirdre Hipwell) highlights the 10% drop in Asos’ share price as investors panicked despite

the firm announcing a very healthy 22% increase in sales. The thing that spooked investors was the company’s announcement that full-year figures would be at the lower end of its previously announced range of 25-35% sales increase, citing slower overseas growth. The company even maintained the profit outlook for the year, but this couldn’t stop the rout. * SO WHAT? * Asos was founded in 2000 and has surfed the wave of online retailing ever since with a few blips here and there, notably overtaking M&S in terms of market value back in November last year (although it has fallen back since then). I would be inclined to agree with the conclusions in Asos: friction fiction (Financial Times, Lex), that this is a short term aberration and that the company is well placed to take full advantage of the continued growth of online retailing. It has been a victim of its own success as it keeps overachieving (hence the punchy valuation), so any disappointment tends to get magnified.

Elsewhere in the world of UK retailers, DFS and Dunelm blame the heat for bad sofa sales (The Guardian, Julia Kollewe) gives the companies’ respective excuses/explanations for their poor performance with DFS announcing its second profit warning in just over a year and Dunelm cutting its profit forecasts after issuing a profit warning in May. DFS, which also owns Sofology, Dwell and Sofa Workshop said in a statement that “in the fourth quarter to date, exceptionally hot weather, including over key trading weekends, has led to significantly lower-than- expected order intake”. * SO WHAT? * Some analysts are saying that this is all weather-related and not much to get concerned about, but it’s worth saying that these companies can also be seen as a sort of proxy on confidence in the economy as they sell big- ticket items. Sales generally correlate to the housing market as buying a sofa generally tends to happen when people move house. If that is the case, I would argue that sales could stagnate for even longer given our current political and economic turmoil, along with Brexit being around the corner.

Meanwhile, the weather has been GOOD for others, as per Paddling pools make a summer turnover splash for B&M (Daily Telegraph, Rhiannon Curry), where the discount retailer has sold an impressive 250,000 paddling pools, 200,000 water pistols and 50,000 patio sets this summer! The company had its best summer season yet and its overall revenues were up by 21.3%. Sales at its German brand Jawoll were up by 6.9% and revenues from Heron Foods, the convenience store it bought last August, were also solid. The chain is continuing to expand and intends to make a push in southern England.

In news on UK consumer spending, credit card defaults are on the rise and first-time buyers power mortgages…

Rise in credit card defaults stokes fears of a UK downturn (Daily Telegraph, Iain Withers) cites the latest findings of the Bank of England’s credit conditions survey that there was “a significant increase in default rates on credit card loans” between April and June this year, which would imply that consumer budgets continue to be tight. * SO WHAT? * Credit card spending is something that that the BoE has been keen to crack down on, and an increase in defaults is worthy of note because it can often be a leading indicator of an economic downturn.

Lenders have continued to cut the amount of unsecured credit they make available to customers for the sixth quarter in a row although overall demand for unsecured credit has remained unchanged.

Sharp rise in first-time buyers boosts home lending (The Guardian, Angela Monaghan) cites the latest data from UK Finance, a lobby group for the financial services industry, which showed that the number of first-time buyers increased in May whilst the number taking on new buy-to-let mortgages fell. Interestingly, the average first-time buyer in the UK is 30, has a gross household income of £42,000 and takes on a loan of £142,452 at a loan-to- value of 85%. Jackie Bennett, director of mortgages at UK Finance observed that “the mortgage market is seeing a pre- summer boost, driven by a rise in the number of first- time buyers and strong remortgaging activity. Meanwhile, purchases in the buy-to-let market continue to be constrained by regulatory and tax changes, the full impact of which have yet to be fully felt”.

In merger and acquisition news, Broadcom’s big deal goes down like a lead balloon…

Following on from the story in yesterday’s WIFI about Broadcom buying CA 

Technologies, Broadcom shares sink as latest deal puzzles Wall Street (Wall Street Journal, Ted Greenwald and Miriam Gottfried) shows that Broadcom’s shares tanked by 14% in trading yesterday as investors collectively thought “WTF did they go and do that for?”. Chief exec Hock Tan has a rep for doing deals as part of building the company into a chip powerhouse, but it seems that investors weren’t up for his latest wheeze as everyone thought it was a bit random. He’s really going to have to make this work otherwise this could be his downfall!

…And finally, in other news…

Fed up of the duckface, fish gape or squinch?? Well there’s a new selfie pose in

town that’s causing a kerfuffle: ‘Migraine pose’ is the new Instagram trend celebs love – but it’s making people very angry (The Mirror, Courtney Pochin https://tinyurl.com/y7zoy93l). Oh dear. Something tells me that people who dream these things up have FAR too much time on their hands!

As always, thank you for reading the WIFI!

1. In MACROECONOMIC NEWS TODAY, we take a look at the current Brexit/May chaos and the EU’s initial reaction.

2. In TECH-RELATED NEWS, Apple takes on Spotify, Microsoft takes on Apple whilst Twitter and Xiaomi take a bath.

3. In UK RETAIL NEWS, the World Cup provides a welcome boost and Mothercare takes action.

4. In OTHER NEWS, I bring you an unusual tattoo from an England football fan. For more details, read on…

So our PM loses ministers and the EU expresses dismay…

So it seems that things are hotting up Brexit-wise after Gove and BoJo quit yesterday, leaving our PM in a bit of a pickle in Theresa May vows to fight removal attempt after Boris Johnson quits (Financial Times, Henry Mance and Laura Hughes) as the “agreement” reached on Friday at Chequers was not quite as water-tight as she had thought. Jezza reacted with glee as he pointed out that the Brexit deal reached on Friday had taken “two years to reach and just two days to unravel” whilst one anonymous MP, remarking on the warm response Theresa May got from addressing the Tory backbench 1922 Committee when she spoke last night, observed that “The fact MPs stood up and applauded her for five minutes means she’s screwed”. Having said that, it looks doubtful that the Eurosceptics led by Jacob Rees-Mogg will be able to muster the 48 signatures needed to force a vote of no-confidence under Tory party rules as there’s no immediately obvious candidate (but you never know!). Which just means that no one knows what’s going to happen. 

Donald Tusk, president of the EU Council even cheekily suggested that we could even stay in the EU when he said “I can only regret that the idea of Brexit has not left with Davis and Johnson. But…who knows?”. EU reacts with dismay to British Brexit chaos (Financial Times, Mehreen Khan and Tobias Buck) shows that this kerfuffle is a cause of concern for the

Europeans and Christian Linder, leader of Germany’s liberal Free Democrats, tweeted that Europe should not feel “schadenfreude” at our plight as “Brexit threatens to become a fiasco that will also weaken the EU and Germany” although European Commission president Jean-Claude Juncker was more dismissive of the departures, saying that “What matters for us is the negotiating framework that our 27 member states have set for us”.

At this moment in time, the whole thing is in a right mess and Thorny questions on Brexit that Chequers summit failed to answer (Daily Telegraph, Anna Isaac and Tim Wallace) does a good job of identifying key areas of uncertainty such as borders, VAT, data flows, what will happen to financial services etc.etc. whilst Turmoil among Tories makes a sovereign Brexit possible again (Daily Telegraph, Ambrose Evans-Pritchard) makes some very interesting observations on possible outcomes. Evans- Pritchard says that anything is possible now from a “global” Britain trading with the EU on WTO terms via a snap election on the one extreme to a Corbyn government on the other. He basically argues that the agreement reached on Friday was far from ideal anyway and that, although much as been said about how much WE are going to suffer from Brexit, Europe is not going to get off it lightly either. He expounds the view that if the EU puts trade barriers in place in March 2019, it will suffer a lot itself and that “large parts of European industry would be paralysed”, that a resulting recession would stoke up an EMU banking crisis, which would in turn be followed by political and economic turmoil between EU member states. * SO WHAT? * The whole thing is a complete mess and there are so many moving parts to this it is impossible to predict what is going to happen. The UK (and the EU, for that matter) needs stability as it heads towards Brexit – and having major Cabinet ministers resign in the run-up, thus putting Theresa May’s leadership in question in the process, is not ideal for anyone (apart from Corbyn, obviously). Mind you, although Mario Draghi, president of the ECB, is talking a good game about the Eurozone’s economic prospects, I think that Europe is precarious at the moment and is being held together by zero- interest rate gaffer tape whilst many of its top economies – Germany, Italy and Spain – are facing some serious domestic problems that could cause aftershocks. The UK and EU are facing difficulties within whilst the US is tightening the screws on trade. Time for everyone to grow a pair and get back to the negotiating table before we all shoot ourselves in both feet, no?

In tech news, Apple takes Spotify share, Microsoft announces a new tablet, Twitter gives investors the jitters and Xiaomi has a disappointing market debut…

Apple slices into Spotify’s lead in US music market (Financial Times, Anna Nicolaou) takes a look at the current state of play in music streaming and shows that the gap between Spotify and Apple Music is narrowing in the US, the world’s #1 music market. One sign of this was Drake’s recent release of Scorpion – expected to be the biggest album of the year – which was streamed on Apple Music 170m times versus being streamed on Spotify “only” 130m times in the first 24 hours of its release. As of last week, Apple has between 21 and 21.5m subscribers in the US versus Spotify on between 22 and 22.5m and music executives expect Apple to go level with Spotify in the US by next month, overtaking them by the end of this year. * SO WHAT? * This is an impressive performance by Apple and I think that there is a lot more upside potential as its user base is much broader with more potential than Spotify, which has done well from soaking up many of the “early adopters”. Spotify’s still top dog on a global basis, but I don’t think that Apple’s growth is going to cause too much concern for Daniel Ek and his chums as I think that the market is big enough to accommodate at least a few streamers. It does go to show, however, the bright prospects for Apple’s “services” division revenues. Good news for cash- strapped tablet fans in Microsoft to sell low-cost surface to compete with Apple’s iPad (Wall Street Journal, Jay Greene) as Microsoft announced that it was going to cut prices on its Surface devices and introduce a $399 tablet that will take on Apple’s cheapest iPads. Microsoft’s 10-inch Surface Go, which ships on August 2nd in the US and 24 other markets, is the cheapest Surface model and is aimed squarely at the same customers as Apple’s 9.7 inch iPad. * SO WHAT? * Great news for

seekers of reasonably-priced tablets, but it seems to me that there is an air of desperation as tablet shipments continue to fall as the market matures. Worldwide shipments fell by 11.7% in the first quarter of this year versus last year, according to International Data Corp, although shipments of tablets with detachable keyboards grew by 2.9%. The fact is that this market is pretty sluggish now and with the trend for narrowing prices between laptops and tablets, there is less motivation for consumers to buy the latter. After all, if you are just using a tablet to do a bit of web surfing and streaming TV/films, you will probably hold on to your existing tablet for longer – and if you need something “proper” to use, you will probably be inclined to buy a laptop. I would expect tablet prices to continue to trend down over the coming years unless they find some exciting new tech.

Elsewhere, Twitter shares take a nosedive (Daily Telegraph, James Titcomb) highlights the 8% fall in the company’s share price yesterday after it announced a deeper-than- expected cull of fake accounts that will dent its recent growth in the number of users. The company will reveal its second-quarter results lar this month. * SO WHAT? * Yes, this is a kick in the teeth for the short term, but I think that the company is doing the right thing in culling fake accounts – and it may even benefit from higher ad revenues further down the road as it will be able to keep a straight face when it touts the quality of its user base to advertisers. The shares have almost doubled in the last six months, so I suppose some investors used this to lock in some profit. I would personally see it as a short term blip, but I would be interested to see the figures later this month.

Talking of disappointing news, Chinese smartphone maker Xiaomi falls in Hong Kong trading debut (Wall Street Journal, Dan Strumpf and Joanne Chiu) details the disappointing performance of a company that had put its shares on the market valuing itself at the lower end of its touted range at $54bn versus chat earlier this year that it would be going for $100bn. The company, founded only eight years ago to become the world’s #4 smartphone maker after Samsung, Apple and Huawei, decided to float in order to fund international expansion plans. * SO WHAT? * Generally speaking, you want an Initial Public Offering (IPO) to fly out of the door with chunky first-day gains that will get investors flooding back for more on subsequent flotations and create FOMO (Fear Of Missing Out) in the current offering. That didn’t happen yesterday, and if the sluggishness continues, it won’t bode well for subsequent listings such as China Tower Corp (which does mobile infrastructure) and Maituan Dianping (which specialises in local services). If it really continues like this, it is possible that these candidates could postpone their respective listings and wait for better market conditions.

In UK retail news, the world cup boost the high street and Mothercare makes some tough decisions…

There’s some good news in World Cup fever and heatwave aid retailers (The Guardian, Richard Partington) as warm weather and England’s unexpected run in the world cup are powering sales in beer, barbecue and big- screen TV sales despite underlying difficulties in the high street (not to mention the recent shortage of CO2!), according to the latest figures from the British Retail Consortium (BRC). Total retail sales rose by 2.3% last month – which is above average – and is better than the 2% rise experienced in June 2017, with particular strength in food and grocery sales. Mind you, the BRCs chief exec Helen

Dickinson, warned against getting too carried away when she said “The reality is that sales don’t grow on feelgood factor alone. Once the euphoria of sporting success subsides, without a deal on Brexit shoppers face the prospect of significant price increases and shortages of everyday goods”.

Reality bites in Mothercare takes baby steps to recovery after raising £32m (The Times, Deirdre Hipwell) as it launched a big £32.5m capital raising via a deeply discounted rights issue whilst simultaneously increasing the number of store closures to 60. The chief exec, Mark Newton-Jones believes that the current company restructure will allow the company to do “three years of work in one year” by improving its product range, investing in staff training and online sales whilst also keeping a lid on costs. It will also focus on international expansion as non-UK business now accounts for over 2/3rds of turnover and 100% of its profits! * SO WHAT? * Mothercare has been a complete basket case for a few years now, culminating in the rather ridiculous sacking and then rehiring (within one month!) of its chief exec. However, unlike some of its fellow high street players, it still has properly identifiable niche and DOES have upside – especially abroad. If it gets the domestic offering right, it will calm things down a bit and help it to focus on making all that overseas profit! Having said that, Newton-Jones has his work cut out – Mothercare’s share price closed at 27.5- a share yesterday versus the 164.25p level it was at when Newton-Jones took over a few years ago. 

…And finally, in other news…

I had an emotional couple of nights last week watching Japan vs Belgium and then England vs Colombia (I’m half-Japanese)

1. In MACROECONOMIC AND OIL NEWS TODAY, the EU threatens, Obrador looks like winning in Mexico and Trump gets his Saudi mates to pump more oil.
2. In UK HIGH STREET NEWS, Wagamama attracts suitors, Café Rouge gets a lifeline and Estate agents face serious downsizing.
3. In INDIVIDUAL COMPANY NEWS, Tesla hits its Model 3 production target at last, Travelodge unveils a new format and Monzo faces a long road ahead.
4. In OTHER NEWS, I leave you with a heart-warming chimpanzee moment. For more details, read on…

MACROECONMIC AND OIL NEWS

So the EU fights back, Mexico’s on the verge of getting a populist president and Trump gets Saudi Arabia to pump more oil…

EU warns of $300bn hit to US over car import tariffs (Financial Times, Jim Brunsden) highlights a written warning submitted by the European Commission to the US Department of Commerce which states that Trump’s threats to hit car imports with big tariffs could result in global backlash of retaliatory taxes that could affect as much as $300bn of US products. The document said that “As markets would become fragmented, US costs would rise, US automobile exports would

suffer, US consumers would pay higher prices, and jobs would be lost…this development harms trade, growth and jobs in the US and abroad, weakens the bonds with friends and allies, and shifts the attention away from the shared strategic challenges that genuinely threaten the market-based western economic model”. Trump said yesterday that the EU was “as bad” as China when it came to trading with the US “just smaller”, but added that he was seeking collaboration with the EU against the Chinese. * SO WHAT? * At the moment, it sounds to me like a load of hot air. The EU is threatening, but hasn’t actually imposed any MAJOR measures (I think that the ones they’ve imposed so far are largely 

symbolic) and God knows where they got that $300bn figure from (I’ll bet my mortgage on the fact that that figure will be wrong!). I guess that Trump is trying to use the EU’s current disarray to his advantage and press his superior bargaining power.

Mexican leftist projected to win presidential election (Wall Street Journal, Juan Montes and Robbie Whelan) heralds what could be a new dawn for Mexico as populist presidential candidate Andres Manuel Lopez Obrador (aka “AMLO”) looks set to win yesterday’s presidential election by a landslide, which would result in a major shift to the left in Mexico’s politics as the electorate sticks two fingers up to the established parties. * SO WHAT? *

by way of observation it would seem that the investment restrictions will have less impact than you’d think because there’s already been a huge drop-off of inward investment from China – but industry is probably more concerned about taking a dent in exports.

In Trump’s trade war ‘could trigger fresh downturn’ (The Guardian, Angela Monaghan) we see that the Bank for International Settlements (BIS) is getting in on the Trump-bashing as Agustin Carstens, the BIS general manager, says in the organisation’s annual report on the global economy that “One possible trigger of an economic slowdown or downturn could be an escalation of protectionist measures. Its impact could be very significant, if such escalation was seen as threatening the open multilateral trading system. Indeed, there are signs that the rise in uncertainty associated with the first protectionist steps and the ratcheting up of rhetoric have already been inhibiting

If he gets a majority in Congress, he would be the first Mexican president since 1997 to have a legislative majority, which would make it much easier for him to push through his policies. Although Trump tweeted “I look very much forward to working with him”, Obrador’s administration is likely to have a more distant relationship with his noisy neighbour and Mexico’s free market model is likely to change as he puts more emphasis on helping the poor. He came close to winning in presidential elections in 2006 and 2012 but it seems that the Mexican electorate has tired of late of the growing number of corruption scandals during the presidency of Enrique Pena Nieto and given AMLO the top job this time around. Obrador is proposing to increase social spending and public investment by saving $25bn from ending corruption (!), with another $20bn a year from an austerity plan which will cut the salaries and perks for top public officials. Sceptics say that his figures are unrealistic and that he will eventually have to choose between watering down his promises or take on more debt, which could damage the country’s new-found financial stability. Leftists in the region – who have had a bit of a pasting of late – will take heart from Obrador’s victory.

Saudis ‘agree to US request to increase oil production’ (The Guardian) shows Saudi Arabia may have agreed to increase oil production by almost 20% (equivalent to 2m barrels of oil per day) in order to mitigate the supply squeeze that resulted from the US reimposing sanctions on Iran. So far we’ve only got Trump’s word for it that he managed to convince the Saudis to act in a telephone call he had with King Salman. * SO WHAT? * This is a big ask from Trump as Saudi Arabia currently produces about 10m barrels a day, with its all-time production record standing at 10.72m barrels a day – so asking for another 2m is rather punchy IMHO. Handily, Trump didn’t mention a time frame for the extra barrels. You can imagine this will go down like a lead balloon with other OPEC members who have just agreed to a relatively small increase to keep prices high-but-not-too-high (in their opinion, although I’d beg to differ given how much it cost to fill my car with diesel this weekend!).

UK HIGH STREET

In Wagamama attracts interest of private equity groups (Financial Times, Javier Espinoza) we see that the sale of the noodle restaurant chain is getting closer as groups such as Bridgepoint, CVC, KKR and L Catterton have all expressed interest in the group which could mean that the current owners could sell it for as much as £750m. The chain has 130 restaurants in the UK, five in the US and about 60 franchises around the world. Formal bids haven’t yet been submitted, but there is clearly interest. * SO WHAT? * The resilience of Wagamama in generally difficult times for restaurant chains is notable and a new US private equity owner might be just the thing the company needs to expand in America whilst also generating a very healthy return for the current owners, Duke Street. The intrigue continues…

Talking about restaurant chains, Café Rouge owner rescued by lenders (Daily Telegraph, Alan Tovey) looks at the rescue of the Casual Dining Group by US private equity giant KKR and Pemberton Asset Management over the weekend, which will be good news for the 7,500 employees who work at its 280 mid-market restaurants, which include brands such as Café Rouge, Bella Italia, La Tasca and Las Iguanas.

A chunk of the debts will be written off and £30m will be injected into the business as part of the deal. * SO WHAT? * No doubt KKR will have hammered out a very good deal in exchange for become a white knight, but clearly it sees some potential as high street restaurants have been having a right old ‘mare what with the likes of Carluccio’s and Jamie’s Italian (amongst others) having problems with higher overheads and lower footfall. Surely there will be closures and “right-sizing” of the business given what’s going on with the competition?

And it’s not just restaurants that are suffering as Thousands of estate agents at risk from weak market, online rivals and fee cuts (The Guardian, Patrick Collinson) cites a study by accountants Moore Stephens which shows that 153 firms went insolvent last year as they suffered from increasing online competition, a sluggish property market and a reduction in letting fees. * SO WHAT? * The 25% share price fall last week of Britain’s biggest estate agent, Countrywide Properties, is just symptomatic of the problems that are being faced by all estate agents at the moment. As Chris Marsden, restructuring partner at Moore Stephens, put it: “Insolvencies of high street estate agents are increasing as online competitors continue to chip away at their sales. With the ban on letting fees stated to come into force in 2019, estate agents will struggle to pass those fees on to landlords”.

INDIVIDUAL COMPANY

In individual company news, Tesla hits its target, Travelodge unveils a new brand and Monzo faces an uphill task…

Tesla reaches production goal for making 5,000 Model 3s (Wall Street Journal, Tim Higgins) marks a historic moment for the company as workers celebrated yesterday reaching their goal of producing 5,000 Model 3 sedans in one week – a target that has eluded them for some time. * SO WHAT? * This is fantastic news for the company (and its hard- working employees!) because the 5,000 vehicles a week mark represents the level at which Tesla will be able to be profitable. The next question is, will this be sustainable and then how soon will they be able to increase this level to make some serious money??

Travelodge upgrades with budget chic format (The Times, Louisa Clarence- Smith) brings our attention to a new “budget chic” format – called Travelodge Plus – that will be rolled out across the country, starting with sites in Brighton, York, Edinburgh, Gatwick Airport, London Waterloo and the City. The new brand will be funkier than their usual offering

with things like a distinctive choice of rooms and a bar café which will help customers work and relax outside their rooms. Travelodge currently owns 564 hotels in the UK, Spain and Ireland and is owned by Goldentree Asset Management, Goldman Sachs and Avenue Capital. * SO WHAT? * Interesting timing, I guess, given the fragile state of the UK economy, but I would imagine that it will depend largely on the price point and who it is targeting. If it is more of a business-traveller type offering then I believe it will be an attractive option as companies look to save costs on their mobile employees, but then surely it could have gone the whole hog and called it something else and got rid of the Travelodge reference. The initial locations would be reasonable for the business traveller and the leisure traveller alike, but again it all depends on how much it is going to charge.

Monzo losses surge amid ‘real progress’ with users (Daily Telegraph, Iain Withers) is a common story running in today’s broadsheets as Monzo, the UK’s fastest-growing digital bank, has trebled its user numbers to 750,000 in one year, but admits that profitability is its “next challenge” after its losses quadrupled to £33.1m due to expansion costs. The company only got its banking licence in April last year and is currently offering pre-paid debit cards, current accounts and overdrafts. * SO WHAT? * This sounds like the company is going in the right direction although it will obviously want to see profitability sooner rather than later if it is to achieve its goal of floating on the London Stock Exchange in as little as two to seven years.

OTHER NEWS

… And finally, in other news…

I thought I’d leave you with a something that will give you a bit of

a lift today if you can spare the 30 seconds it takes to watch: Chimpanzee can’t hide delight at being reunited with human foster family who raised him (The Mirror, Zosia Eyres http://tinyurl.com/y8r6wqyf). Ahh!!!

As always, thank you for reading the WIFI!

1. In UK HIGH STREET NEWS TODAY, John Lewis gets drastic, Costa looks lacklustre and the latest research suggests huge closures of bank branches.

2. In INDIVIDUAL COMPANY NEWS, the Disney/Fox deal gets closer, Twitter says it will validate new accounts and office space supremo IWG issues a profit warning.

3. In OTHER NEWS, I bring you a cure for sunburn and an amazing gesture that will warm your heart. For more details, read on…

So John Lewis is feeling the heat, Costa cools and bank branches could be an endangered species…

John Lewis looks to play to its strengths (Financial Times, Jonathan Eley) signals the venerable UK retailer’s acknowledgment of its current situation versus the competition and changing consumer behaviour and its willingness to take drastic action as it said that it will accelerate the “It’s your business 2028” strategy announced three years ago. The group warned that profits before exceptional items will be almost zero for the first half of the year and that it will fall short of 2017 by year end. Basically, it wants to differentiate itself

from the competition by emphasising its strengths – so it will concentrate more on service at its department stores and quality at its supermarkets. More specifically, in Profit close to zero, John Lewis chief warns (The Times, Deirdre Hipwell) we see that the company will pretty much stop any new store openings (barring exceptional circumstances) and will plough money into existing outlets, products and services. It will reduce some store sizes and utilise its freehold property space more effectively by looking into other uses for it. As Chairman Charlie Mayfield put it, “For us the relentless pursuit of greater scale is not the right course. Our plans put differentiation, innovation and partner-led service at the heart of our offer. The measures we have outlined today are an important next step in our strategy that will ensure we emerge stronger from this period of profound change”. * SO WHAT? * I would strongly agree with the chairman on this one. I think it is more realistic for his company to stick to what it does best and not sacrifice what makes it different to be everything to everybody, because in doing so it will blend into being like everyone else. Once that happens, consumers view you differently and they start to take more notice of price. And once they start doing that, you lose business to the discounters and the likes of Amazon – and then you will ultimately disappear. IMHO, given what’s happening in retail land these days, it is more important than ever for retailers to 

find their why and cherish their identity because that is one big reason why consumers will continue to set foot over the threshold of their stores. They need to focus their efforts on what Amazon and the discounters CAN’T (or will find very difficult to) provide – quality of experience being a big one, for instance – and build on that. I think there’s still space to co-exist with competitors, but retailers really need to listen to their customers and not get lazy. John Lewis is often seen as an important bellwether of the high street as it has been around for a long time and is a retailer that sells both food and non-food, so can give a broad picture of how consumers are feeling – especially the more affluent ones. It sounds like they have grasped the gravity of the current situation and are taking steps in the right direction.

The high street gloom continues in Vending machines prove profitable, but Costa feels pressure on the high street (The Guardian, Issy James) as parent company Whitbread blamed falling sales at Costa on lower footfall on the high street. Currently, it has 3,800 coffee shops (2,400 of which are in the UK) and over 8,000 highly profitable coffee vending machines. * SO WHAT? * Whitbread announced in April that it would be splitting the company into two separate businesses: Costa and the

Premier Inn hotel and restaurant chains (which would include brands like Brewers Fayre and Beefeater). The intention is for Costa to float on the stock market as a stand- alone by 2020. Again, I think this is a good idea as it will make each business more transparent. I’m not so sure about the coffee business overall, though, as it feels to me like we are reaching “peak coffee”. My worry for Costa is that consumers tire of big brands such as Costa and Starbucks and go to independents or small chains such as Joe & The Juice and Taylor St. Baristas etc. for a more interesting and less bland experience (it’s not just retailers that need to enhance the experience for their customers!). And if the vending machines are doing well, I would have thought that there isn’t much to stop its competitors from doing the same thing – and if they do, margins will shrink.

2,400 bank branches at risk (Daily Telegraph, Iain Withers) cites a report published by DJB Research on behalf of the mighty Nottingham Building Society which concludes that Britain’s top five banks could cut up to 2,400 branches (which would result in the loss of 12,000 jobs) in addition to the swathes they’ve already cut as it asserts that banks could give “effective nationwide customer coverage” with only 600 branches apiece. * SO WHAT? * More carnage in store for the banks. I imagine the unions will have something to say about this report! Mind you, it is more evidence of changing consumer behaviour. It’s all very well moaning about bank closures but if we don’t use them it’s bound to happen!

In individual company news, the Disney/Fox deal takes another step forward, Twitter gets more responsible and UK office space specialist IWG announces a profit warning…

In US approves Disney’s purchase of Fox’s entertainment assets (Wall Street Journal, Erich Schwartzel and Keach Hagey) we see that the US Justice Department gave its seal of approval for Walt Disney’s proposed $71bn acquisition of 21st Century Fox assets, as long as it sells off Fox’s regional sports networks, effectively helping Disney nose ahead in its battle with Comcast for control of Rupert Murdoch’s media empire. It would have 90 days following the completion of the Fox deal to sell off the sports networks. Comcast is currently tapping up potential partners that could help it scrape more cash together for another bid. * SO WHAT? * Comcast isn’t just going to let this go, so I expect to see continued fireworks. It just goes to show how important content is getting in a world that is long on networks. Building those networks takes time and a lot of money, but the best network in the work is nothing without content to pipe through just as great content won’t reach its potential without effective distribution channels.

Twitter users to submit email addresses in battle with bots (Daily Telegraph, Hannah Boland) shows that Twitter is making at least some 

effort to address long- standing criticism that it does b*gger all to stop trolling and spamming by saying that an update to be rolled out by the end of this year will require NEW USERS to confirm either e- mail addresses of phone numbers when signing up to “make it harder to register spam account”. Twitter founder Jack Dorsey said earlier this year that “We have witnessed abuse, harassment, troll armies, manipulation through bots and human coordination, misinformation campaigns, and increasingly divisive echo chambers…we aren’t proud of how people have taken advantage of our service, or our inability to address it fast enough”. * SO WHAT? * It sounds to me like Twitter is just p!ssing in the wind. The company needs to review its EXISTING user base to weed out the undesirables who remain anonymous, spreading their venom to often vulnerable targets. Maybe I’m just being cynical, but it seems that the roll-out of crowd-pleasing updates is occurring at the exact moment that subscriber growth is dropping off. When things were going gangbusters for them, the company didn’t give a sh!t! Let’s hope that Twitter continues to make moves in the right direction regarding sorting out its moral compass. If it makes meaningful advances in that arena, maybe subscriber number growth will start to accelerate again. 

WG issues profit warning following buying spree (Financial Times, Aime Williams) heralds the second profit warning in just over eight months for the world’s biggest serviced office group as the UK-listed company spent money on more leases to increase its office floorspace footprint. IWG runs offices in roughly 3,000 locations in 100 countries but is facing increasing competition from newcomers such as WeWork who compete with it in co-working spaces. * SO WHAT? * IWG, best known for its Regis brand, is obviously talking a good game but it sounds like the company is going to have to come up with something good soon otherwise the company’s credibility will be shot to pieces. Thus far it’s used profit warning explanation clichés such as Brexit and global disruption as well as the current “we invested a bit more than we had intended so bear with us”-kind of deal. IWG will have to do something sharpish otherwise the vultures will start circling and pick off its portfolio.

…And finally, in other news… 

It is quite hot at the moment, isn’t it! So just in case you get caught out, I thought you might be interested in this: Mum reveals miracle cure for getting rid of sunburn in just 30 minutes – and it

involves shaving cream (The Mirror, Amber Hick https://tinyurl.com/ycxpgs8q) This sounds a bit messy and I haven’t tried it – but next time I get sunburn I think I’ll give it a go!

AND FINALLY, I thought I’d end with a really positive story that will restore your faith in human nature: Cleaner overcome with emotion after students raise money to send him on holiday (Metro, Jane Wharton https://tinyurl.com/y83vjucc). How great is this??

As always, thank you for reading the WIFI!

1. In MACRO & MARKETS NEWS TODAY, Trump fights back against Harley-Davidson and Iranian oil buyers, Merkel continues to be in a tight spot and some economists reckon the US market has peaked.

2. In UK CONSUMER NEWS, spending power has increased, our love of wonky veg and gin has powered retailers but then serial returners are skewing sales figures and mortgage approvals are down.

3. In INDIVIDUAL COMPANY NEWS, GE continues to cut its limbs off and Uber gets the licence it craved.

4. In OTHER NEWS, I bring you a spot-the-difference and suggestions for the naming of some bin lorries. For more details, read on…

So Trump makes more threats, Merkel’s in a corner and US markets have hit their peak apparently…

Following on from Harley- Davidson saying that it would shift some of its production overseas due to EU tariffs, Trump issues tax threat to Harley- Davidson if it moves output (Daily Telegraph, Hannah Boland) shows that the President continues to be in combative mood as he warned the company that he will tax it “like never before” if it goes ahead with these plans whilst adding that its bikes “should never be built in another country”.

Trump’s also getting more punchy on Iran in US toughens stance on future Iran oil exports (Wall Street Journal, Ian Talley) as a senior US State Department official said that the US will go through with a threat to impose sanctions on countries that don’t cut oil imports from Iran to “zero” by November 4th. * SO WHAT? * Many buyers thought they’d get more time to reduce the imports – but no. Trump continues to flip his allies and China alike the bird.

Meanwhile, in Europe, Besieged Merkel seeks escape as rebellion mounts (Financial Times, Guy Chazan and Alex Barker) shows that the German chancellor is in a very tricky spot at the moment as she is surrounded by rebellious coalition “partners” and facing attack from outside her country from populists (Italy in particular) as she enters her 75th gathering of EU heads of government in Brussels tomorrow. Merkel has been the most powerful leader in the zone for the past 13 years, but her position has become so fragile that many are predicting that this meeting will be her last before she is ousted or resigns. * SO WHAT? * If countries see her as a dead-woman- walking, it is unlikely that she is going to get much in the way of support as other European leaders will deem any negotiations a waste of time as they will bring little or no benefit. If Merkel gets ousted, I think that it is highly likely that her replacement will be far less expansive on the immigration issue, which will really stir things up

with other EU members and perhaps prove to be a boon for all populists, resulting in more instability. Having said that, Merkel has been extraordinarily resilient in the face of impossible odds in the past, so she should never be underestimated – even when she is down. Europe could do without instability at its core given the current trade wars and imminent Brexit.

US markets at peak with bull run at tipping point, warn economists (Daily Telegraph, Tim Wallace) sounds rather dramatic as headlines go as it highlights that Bank of America Merrill Lynch analysts are predicting that the nine-year bull run in financial markets could come to a juddering halt due to a perfect storm of higher interest rates, trade war, falling profits, eurozone imbalances and a potential US recession. 

The report also says that the Faangs will be at risk, adding that “Peak asset prices in 2018 are consistent with peak investor positioning, peak corporate profit expectations, and peak policy stimulus in a late- cycle macro and market backdrop”. * SO WHAT? * It is notoriously difficult to call the top and bottom of the market and the analysts at BAML make some very salient points. However, for all the chunky valuations of the Faangs, I would suggest that actually they won’t do so badly in a downturn. Facebook and Google ad revenues would be relatively robust because although general ad spend is one of the first things to get cut in a downturn I would have thought that analogue ad spend (e.g. TV advertising, billboards etc.) will be slashed whereas digital ad spend will probably remain steady; Amazon continues to be the venue of choice for those seeking a bargain in an ever-broadening array of products; and a Netflix subscription is a perfect way to save money on going to the cinema or paying for cable/satellite. If the Faangs are OK, then I would argue that US market downside may be limited. I would also say that the current trade war and the trend for higher interest rates won’t last forever. I believe that the trade war issues will be solved within the next six months (because otherwise this thing is just going to spiral out of control) and that interest rates will be nudged up gradually (and they won’t go up forever either) so as to limit any dramatic loss. If the trade war issues, in particular, are resolved, I think that the market could go way higher as investor worries evaporate. Higher trending interest rates will limit upside, but I don’t think they will kill it.

In UK consumer news, spending power goes up, gin & wonky veg get popular but then serial returners are fudging sales figures and mortgage approvals are down…

Consumer spending power rises (The Times, Deirdre Hipwell) heralds a bit of good news for the British consumer as the latest Asda Income Tracker (!), which monitors what households have to spend after tax and basic living costs, shows that last month spending power experienced a MONUMENTAL rise in spending power of 2.1% – or £16.56 in monetary terms – versus a year ago. Wow. I might just go and buy myself an island. But hey, the good news is that this is the fifth month in a row of growth powered by rising wages and falling inflation despite stubbornly expensive fuel prices. Long may this continue!

Shoppers get a taste for gin and wonky veg (The Guardian, Sarah Butler) cites the latest research from Kantar which shows that the UK’s supermarkets have enjoyed a sales boost in recent weeks to the tune of £500m due to stellar gin sales (up a whopping 40% versus the same quarter last year!) and a tripling of wonky product sales at Morrisons. Kantar’s head of retail and insight Fraser McKevitt added that “The latest figures largely pre- date the soaring temperatures and newfound optimism for England’s World Cup chances but with the nation spending more than £500m in supermarkets this period compared to last year, it suggests that summer has already arrived for many”. Sales growth was positive Morrisons, Asda and Tesco – with Sainsbury’s being the only one to see contraction. Lidl continues to be the UK’s fastest-growing grocery chain. * SO WHAT? * It’s good to see that consumers are spending – and a lot of it has been powered by the weather. I know England have only played two games in the World Cup so far, but I would have thought that if they DO 

get much further, June could be a stellar month for sales as the feelgood factor filters through to the real economy (albeit briefly, I imagine!). This will be good for grocery retailers and probably electrical goods retailers as people decide to replace their old tellies with new ones to watch our ‘Arry winning the Golden Boot etc. Let’s just hope that the CO2 problem don’t persist for too long otherwise food and booze sales will not fully reach their potential over this period and it will prove to be a costly lost opportunity.

Rise of the serial returners adds to retail’s woes, says Barclaycard (Daily Telegraph, Sophie Christie) is something I mentioned a few weeks back as something that Amazon was clamping down on (the phenomenon of people who deliberately buy more items than they intend to keep and return them days later, aka “serial returners”), but it seems that this is creating problems for retailers as 25% of them have experienced an increase in returns in-store and online over the last two years, with fashion brands feeling the brunt of it. This has resulted in a “phantom economy” of lost revenues worth £7bn for retailers as a large chunk of their sales can’t be recognised. Barclaycard surveyed 2,000 people and found that of the £313 the average person spends on online clothes shopping per year, they end up sending back 47% of it. * SO WHAT? *  Fashion retailers may bleat about this, but TBH they only have themselves to blame because sizing is wildly different at every brand and customers don’t want the hassle of playing parcel tennis. It is perfectly logical to order a few sizes, see what fits best and then send the rest back. If retailers start charging for sending things back, I think consumers will stop spending – so I think that the retailers themselves have to come up with ways to minimise returns with tech like virtual changing rooms and customer avatars etc.

High prices push down mortgage approvals (The Times, Tom Knowles) cites the latest figures from UK Finance which show that high street banks approved more mortgages in May than they did in April but 4.3% less than a year earlier. Hansen Lu, an economist at Capital Economics, pointed out that “Much of the weakness in mortgage approvals is due to a stand-off between buyers and sellers. House prices are very high compared to incomes and that has priced out many would-be homebuyers, while discouraging others from accepting current asking prices. Yet, at the same time, sellers have also been reluctant to accept lower prices”.

In individual company news, GE slims down and Uber gets its London license…

GE break up intensifies with large-scale spin-offs (Financial Times, Eric Platt and Ed Crooks) shows how General Electric is continuing to slim down as it announced yesterday that it would be spinning off two of its biggest divisions as part of its overall strategy to be more focused, meaning revenues will be half the levels they were at ten years ago. The company will divest its healthcare division and its stake in Baker Hughes, the oil services company. * SO WHAT? * This is a big deal for a company that 

has been better known for its long list of acquisitions over the last two decades but this latest development just shows how difficult things have been for the company since the beginning of the financial crisis. The healthcare and oil services divisions accounted for 30% of group revenues and 25% of its industrial segment profit last year – so this is big. The company will now be left with three divisions: electricity industry equipment, renewable energy and aero engines & other aircraft parts.

Following on from yesterday, Uber wins 15-month London licence in court fight (Financial Times, Aliya Ram and Shannon Bond) will be cause for relief to the company that is gearing itself up for an Initial Public Offering next year. Although the judge ruled that TfL had been correct in refusing to renew its licence last September, she thought that the company had shown sufficient evidence that it had changed its ways.

…And finally, in other news…

We all love a spot-the- difference in a quiet moment, don’t we? Well have a go at this if you got a few spare minutes: Only a handful of people can spot the difference between these two photos – can you? (The Mirror, Zoe Forsey https://tinyurl.com/yarh4d48)

AND FINALLY, you’ve heard of the public being asked to name things like boats (resulting in suggestions such as the famously rejected Boaty McBoatface) – well Coventry City Council is asking Twitter users to name its new bin lorry fleet in Council asks for help naming its bin lorries – and some of the suggestions are absolutely hilarious (The Mirror, Courtney Pochin https://tinyurl.com/y9tfx8tp) Suggestions so far include Chitty Chitty Bin Bin, Dustbin Timberlake, Bin Diesel and Bin Kardashian. My own suggestion would be “I am Bin-Laden”, but then this might be a bit controversial…

As always, thank you for reading the WIFI!

1. In MACRO & MARKETS NEWS TODAY, the EU and China fight back on tariffs and equity markets continue to be powered by Faangs.

2. In UK HIGH STREET NEWS, suggestions are made regarding the future of city centres and estate agent Countrywide has a ‘mare.

3. In INDIVIDUAL COMPANY NEWS, Uber tries to save its London business.

4. In OTHER NEWS, I bring you a rather unfortunate magazine cover. For more details, read on…

So Trump’s tariffs have European and Chinese consequences and market performance continues to rely on FAANGS…

US trade war with Europe revs up as Harley- Davidson shifts production (Financial Times, Shawn Donnan, Jim Brunsden, Peter Campbell and Peter Wells) shows early consequences of Trump’s tariffs as Harley- Davidson said that it would move some manufacturing out of the US to avoid retaliatory EU tariffs. It said that it would increase production at its facilities in India, Brazil and Thailand to avoid paying taxes of up to $100m. Harley-Davidson is the first US manufacturer to cut domestic production in response to EU tariffs and Trump was obviously quite annoyed as he said in a tweet yesterday: “Surprised that Harley-Davidson, of all companies, would be the first to wave the White Flag. Taxes just a Harley excuse – be patient!”. Trump has been threatening 20% taxes on ALL imports of cars manufactured in the EU.

China’s Xi tells CEOs he’ll strike back at US (Wall Street Journal, Lingling Wei and Yoko Kubota) shows that China isn’t taking Trump’s actions lightly either and is likely to turn to measures other than tariffs to fight back as US exports to China only amounted to less than $200bn last year. It is likely that China’s retaliatory measures will include things like US companies having to undergo increased inspections, longer delays of regulatory approvals and a potential goal of getting Chinese consumers to avoid US products. Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics in Washington observed that “Apple’s $30billion market in China for iPhones, the largest in the world, could quickly collapse. Similarly, General Motors sells more cars in China than in the US, sales that could easily be disrupted by the Chinese government”. * SO WHAT? * How long is this p!ssing contest going to go on for?!? As I have said on previous occasions, I can see why Trump is trying to shake things up on the trade front because China does generally tend to take the mick in many ways (flouting patents, stealing valuable technology and copying it – all under the guise of local joint ventures – flooding markets with artificially cheap product because of its ridiculous overcapacity etc.etc.) and it has taken full advantage of being the world’s growth driver over some 

very lean years for everyone else. America’s economy is currently in a strong enough position to threaten in negotiation and you could argue that this is the time that Trump will be able to get the best deal – but still, the collateral damage could get increasingly painful. Conversely, WHEN this trade war comes to an end, I suspect that stock markets will skyrocket – but it does depend on how long this painful period lasts. If it goes on for too long, the skyrocketing could come too late for companies and industries that suffer terminal injuries as a result of Trump’s actions. FWIW, I think that Harley-Davidson’s actions are wholly understandable and, TBH, probably quite easy to do. It’ll be interesting to see how quickly other US manufacturers follow suit.

Equity investing in 2018 is all about momentum led by the Faangs (Financial Times, John Authers) is a really interesting article that highlights just how influential these “new” tech stocks are in dragging up the performance of the entire index. Generally speaking, stock selection is made on value (buying stocks that look cheap versus their

fundamentals) and momentum (buying stocks that are seeing upward movement and avoiding those that are on a continuous downer). Value has not been doing very well in the last few years versus momentum – and this momentum has been powered by the Faangs (which consists of Facebook, Amazon, Apple, Netflix and Google parent Alphabet). Their collective influence has in fact been so great that, without them, the US stock market would have fallen for the year so far! Expensive stocks keep getting more expensive and cheap stocks are getting cheaper as more and more investors jump on the momentum bandwagon. * SO WHAT? * When this kind of thing happens, people get twitchy and investors get severe bouts of FOMO (Fear Of Missing Out) despite being faced with very expensive fundamental valuations. A lot of people will probably draw comparisons with the dot-com boom of the beginning of this century, but I have to say that – expensive valuations aside – this is different. Back then, I remember having conversations with investor clients along the lines of “I know it’s expensive, but the fact is that everyone wants a piece”, which makes you feel uneasy because you know momentum can’t last forever, especially because these valuations were based on projections of what revenues these companies

would get in the future. Yes, I know that that’s how it works generally, but many of these companies were running at a big loss or weren’t even producing anything at all – whereas the Faangs of today are all producing very real revenues (although admittedly, many of them were in the red for years). I suspect that we are getting very close to the stage that some bright spark invents a “new” way of valuing tech companies based on some kind of whizz-bang maths, they’ll give it some fancy acronym-based name and everyone will adopt it to justify their buying of such expensive stocks. When that sort of things starts to happen it is usually time to head for the hills because valuation then becomes something based on complete BS…

In news about the UK high street, there are suggestions for new-look city centres and estate agent countrywide has a shocker…

More offices ‘can help to revive high street’ (The Guardian, Larry Elliott) is one of the conclusions reached in a report published by thinktank Centre for Cities which made the observation that evolving consumer behaviour that is negatively impacting our high street (resulting in increasing numbers of shop closures) needs to be addressed by changing the mix of retail, residential and office space in town centres. According to the report, successful city centres have a high proportion of their commercial spaces dedicated to offices (up to two-thirds in places like Bristol and Manchester), with retail outlets making up only 18% of this, with retail being helped by having large numbers of office workers to sell to (really? Maybe they will be telling us that bears sh!t in the woods as well). On the other hand, underperforming city centres have a lower proportion of offices making up their commercial space and are struggling as a result – for example, in Blackpool and Newport over 40% of commercial space is accounted for by retail versus less than 25% for offices. The thinktank recommended that cities with relatively high levels of shops should shift this 

mix towards having more office and residential. In places with weak demand for offices and homes, some demolition would be needed so that the land could be used to “improve the public realm”. * SO WHAT? * Unsurprising conclusions but the subject matter is very relevant given the current rate of shop closures. Action needs to be taken reasonably quickly as we could end up with empty high streets. I think this is particularly pressing given the continued demise of department stores in particular which occupy vast city centre locations where redevelopment is likely to be difficult and costly. Developers and councils might be reluctant to embark on anything major without the involvement of the government.

In Estate agent struggles to put house in order (The Times, Tom Knowles) we see that shares in the UK’s biggest estate agent, Countrywide, fell by a massive 30% after the company announced it would be asking for money to cut its debt. Countrywide owns 50 high street estate agency brands including Hamptons International, Bairstow Eves and Bridgfords and blamed a difficult housing market for its fourth profit warning in eight months. As Anthony Codling, an analyst at Jefferies put it, “The underlying second-hand housing market is dreadful and there is little to be done when homeowners stop moving. If times are hard for Countrywide, we can only imagine how the rest of the market may be struggling”. * SO WHAT? * Some have said that the company has suffered due to the rise of online competitors such as Purplebricks, but many others say that its troubles are actually self-inflicted and that its rising debt has been due to falling profitability, a lengthy period of buying up letting agents and the large amount of money that was thrown at its ultimately abandoned digital business. Given that the company is likely to want to raise about £125m (the debt currently stands at around £200m) and that market conditions aren’t the best, begging the market for cash is going to be a tough ask..

In individual company news, Uber makes a bid to keep going in London…

Uber seeking London private hire licence to keep it on the road (Daily Telegraph, James Cook) highlights the beginning of a hearing that started yesterday to get Uber its private hire operator licence to operate in London for the next 18 months following a September decision by TfL NOT to renew its licence. * SO WHAT? * If it wins, it will continue to operate as normal, but if it doesn’t, the service won’t disappear overnight as they will no doubt go through an appeals process.

…AND FINALLY, IN OTHER NEWS…

There are times when you wonder what goes on in people’s minds – especially when what they do can be very public: Arsenal’s new manager Unai Emery might want a word with the club’s magazine designer (Metro, Tanveer Mann https://tinyurl.com/yayklu4t). This is a classic. Maybe the designer was a Chelsea or Spurs supporter…

1. In MACRO & OIL NEWS TODAY, we see more trouble brewing on the US/China trade wars, Erdogan wins in Turkey and US shale oilers do well whatever OPEC decides.
2. In TECH NEWS, YouTube fights Facebook for creators, Amazon marches on in Japan and Commerzbank (yes, I know it’s a bank and not a tech company, but bear with me) has a dabble with AI to create research reports.
3. In INDIVIDUAL NEWS, there’s one restaurant chain that’s actually expanding on the UK high street.
4. In OTHER NEWS, I bring you some World Cup-themed interior design ideas and some shocking news about halloumi. For more details, read on…

MACRO & OIL NEWS

So Trump targets more areas to annoy China, Erdogan – surprise, surprise (NOT) – wins the election and shale oilers rub their hands…

Trump plans new curbs on Chinese investment, tech exports to China (Wall Street Journal, Bob Davis) shows Trump’s latest moves to p!ss China off as he is looking at banning many Chinese companies (specifically, firms with at least 25% ownership) from investing in US tech firms and blocking certain tech exports in a bid to slow down China’s progress in its “Made in China 2025” manifesto where it is aiming

to be a global leader in 10 areas of tech including IT, aerospace, electric vehicles and biotech. More details on Trump’s measures and their implementation are expected to be announced by the end of this week. *SO WHAT? * The final details are being hammered out, so the measures that are eventually announced could be different to those above. Just 

by way of observation it would seem that the investment restrictions will have less impact than you’d think because there’s already been a huge drop-off of inward investment from China – but industry is probably more concerned about taking a dent in exports.

In Trump’s trade war ‘could trigger fresh downturn’ (The Guardian, Angela Monaghan) we see that the Bank for International Settlements (BIS) is getting in on the Trump-bashing as Agustin Carstens, the BIS general manager, says in the organisation’s annual report on the global economy that “One possible trigger of an economic slowdown or downturn could be an escalation of protectionist measures. Its impact could be very significant, if such escalation was seen as threatening the open multilateral trading system. Indeed, there are signs that the rise in uncertainty associated with the first protectionist steps and the ratcheting up of rhetoric have already been inhibiting

investment”. No sh!t, Sherlock. The report went on to congratulate central banks for helping to lead their respective economies out of the depths of the financial crisis ten years ago, but that a normalisation of monetary policy (i.e. raising interest rates and unwinding quantitative easing) was essential “to rebuild policy space”. *SO WHAT? * Nothing earth- shattering here, but this is just the latest report to back up the consensus opinion that Trade Wars Are Bad and that Getting Back To Normal Is Good. And they probably pay a lot of people a lot of money to come up with this stuff…

Erdogan claims victory in Turkey elections (Financial Times, Laura Pitel, Funja Guler and Ayla Jean Yackley) heralds another five years of Recep Tayyip Erdogan as he won in yesterday’s presidential and parliamentary elections with 52.5% of the vote, with main challenger Muharrem Ince getting 30.8%. Erdogan’s ruling Justice and Development Party (AKP) will have a majority in parliament when combined with its allies in the ultranationalist party. Ince has grudgingly conceded defeat and will make a statement at midday local time today. * SO WHAT? * Although the AKP garnered a reduced vote (42.4% this time around versus the 49.5% it got in the November 2015 elections), the ultranationalist

Nationalist Movement Party (MHP), which has strong links with the AKP, performed particularly well by getting 11.2% of the vote which, combined with the AKP, gives the government a majority. Erdogan can rest easy after Ince’s fiery rhetoric and campaign promises to restore Turkey’s checks and balances eventually came to naught. It’ll be interesting to see how he interacts with the Eurozone, especially on immigration, given his own particular style and his backing from the MHP.

US shale companies motor ahead despite OPEC (Wall Street Journal, Rebecca Elliott and Christopher M Matthews) shows how US shalers will benefit from OPEC’s decision on Friday to boost oil production by 600,000 barrels of oil per day as the prices will continue to be strong, given that the output rise was relatively modest. US oil production has been growing at record levels this year, hitting 10.9million barrels a day this month, making it the world’s second biggest oil producer after Russia but ahead of Saudi Arabia. * SO WHAT? * Increasing production to take the edge off the oil price is no bad thing given that high prices – although great for the oil producers in the short term – have long term costs in that they dent economic growth which then leads to reduced demand. Although OPEC tried to put

US shalers out of business by driving down oil prices from $100 a barrel in 2014 to less than $30 a barrel in 2016, US shale production has actually proved to be pretty resilient and they have survived to play a major part in making America OPEC’s biggest competitor in oil production.

TECH NEWS

YouTube fights to keep curators happy as Facebook circles (Financial Times, Tim Bradshaw and Hannah Kuchler) highlights YouTube’s current efforts to help its content creators make money as ad revenue (the “traditional” way for creators to earn money from their legions of subscribers) has come under pressure following numerous instances of companies having their ads placed next to content that, shall we say, doesn’t exactly reflect what their brands stand for. YouTube is looking at helping creators sell merch to their fans and adding new kinds of paid subscriptions as competition is hotting up from Facebook with its newly-launched IGTV on Instagram and Watch that aim to attract content creators. * SO WHAT? * YouTube is humungous in this area with 1.9bn monthly logged-in users (up from 1.5bn a year ago) and Neal Mohan, YouTube’s head of product, points out that “We have creators with viewerships bigger than many or most cable channels, that have followings that are bigger than the populations of many countries”. However, Facebook also has a rather large audience and, with the introduction of its new services, you can see that it is trying to keep traffic that it previously lost to YouTube – for instance, lots of Instagram creators have been directing traffic to their YouTube channels until now. For now it would seem that creators won’t be abandoning one platform for another. As Lele Pons, who has over 25m followers on Instagram and who will be launching a new cooking show on IGTV, put it, “I will still be posting on YouTube as much as Instagram – you never know what works. On the internet, you never know what will happen”. Still, YouTube would do well to watch out for Facebook – look at what it did to Snapchat.

Amazon’s scale in Japan challenges rivals and regulators (Financial Times, Kana Inagaki) looks at how Japan has become Amazon’s second biggest overseas market by revenues after Germany and how its growth has now attracted the attentions of the Japan Fair Trade Commission which is now investigating allegations that the company has forced suppliers to absorb costs when it offers discounts in its online marketplace. Amazon overtook local rival Rakuten in 2016 and had a 23% market share in Japan’s internet retail market versus Rakuten’s 18.5% but the latter is trying to up its game by creating its own logistics and delivery network within the next two years (Amazon has its own proprietary network). There will be intensifying competition between the two as Amazon increases its efforts to push groceries via Whole Foods and Rakuten turns on the pressure via its tie-up with US group Walmart in online grocery delivery. * SO WHAT? * Clearly, I have no idea what the investigation is going to bring up, but it is interesting how Amazon has done so well in Japan considering the fact that the country has often been a graveyard for retailers originating from outside Japan. Its cutting- edge infrastructure will be tough (and very expensive) to beat for any of its rivals, but they have to keep fighting otherwise Amazon will just pulverise them.

Although Commerzbank sets AI to work writing analyst reports (Financial Times, Laura Noonan) doesn’t sound exactly tech because Commerzbank is, well, a bank – the fact that it has announced that it is experimenting with using AI to generate reports is very techie. It’s generating

reports on sports at the moment, but the intention is to see whether it can write analyst reports as MiFID II forces banks around the world to cut research costs. The bank is partnering up with Retresco, a content automation company, and the project is at an early stage. The idea of report automation has been bandied around by other bankers as well and is particularly relevant given that MiFID II is applying increasing pressure on research costs. * SO WHAT? * Earnings reports are a real ball-ache for researchers to write as it is often the case that they just plug numbers into their model and send them out to clients with some kind of bland overview like “numbers were in line. No surprises”. They sort of have to send this stuff out because everyone else will be doing the same and, although fund managers complain about this limited value-add research, they still need the raw numbers. This area is obviously ripe for automation, but I think it will be years (if ever) that they will replace research analysts as it is the INTERPRETATION of the raw data that contains the real value.

INDIVIDUAL NEWS

In individual company news, I bring your attention to a restaurant chain that’s actually in growth mode at the moment…

Lounge suits diners as big names struggle (The Times, Dominic Walsh) highlights a company called Loungers that runs 126 outlets with the Lounge and Cosy Club brands, which has opened 12 new sites this year and is on track to reach 140 by the end of 2018. Loungers’ chief exec, Nick Collins, said this would be the third consecutive year of at least 25 openings and it has a healthy future pipeline.

* SO WHAT? * The chief exec says that Loungers’ has succeeded where the likes of Byron, Prezzo and Jamie’s Italian have failed because of its choice of locations and its “third space” formula which pits it more against the likes of Costa Coffee, Caffe Nero and local sandwich shops rather than dining operators. So it’s not all bad on the high street!

OTHER NEWS

… And finally, in other news…

Given England’s surprisingly strong win in the World Cup yesterday, maybe you could be inspired to indulge in a little light interior design as per the bloke in Woman Comes Home To Find Her Fella Has Turned Living Room Into Football Pitch (Ladbible, Claire Reid https://tinyurl.com/yaj723u c). Nice.

And then I thought I’d end on a warning note – Britain Facing Halloumi Shortage As Farmers In Cyprus Struggle To Meet Demand (Ladbible, Rebecca Shepherd https://tinyurl.com/ybjhpfza). Oh no! I love this stuff!

As always, thank you for reading the WIFI!

1. In MACRO & COMMODITIES NEWS TODAY, we see that Daimler and BMW will lose from Trump’s tariffs whilst LNG may benefit, that oil price talks highlight rifts, that the CO2 shortage isn’t just affecting beer and that the odds on an August UK interest rate rise are getting shorter.

2. In TECH NEWS, Faangs are riding high whilst Xiaomi disappoints.

3. In RETAIL AND CONSUMER-RELATED NEWS, Kroger benefits from a different approach and Dixons sees a dive in profits.

4. In OTHER NEWS, I warn you about flying hotdogs. For more details, read on…

So Dailmer & BMW are losers from Trump tariffs and LNG is a big winner, OPEC’s members are split on oil price talks, the current CO2 shortage could have wider implications if it continues and a UK interest rate rise looks slightly more likely…

Daimler and BMW face hard road in trade wars (Financial Times, Patrick McGee and Patti Waldmeir) highlights more fallout from Trump’s tariffs as SUVs built by BMW in South Carolina and Daimler- owned Mercedes in Alabama will be subject to a whopping 40% tax as China

retaliates in the latest round of the trade war between the world’s two biggest economies. US car manufacturers won’t be affected very much, however, as the majority of Ford and General Motors’ vehicles sold in China are being manufactured locally in well-established JVs. * SO WHAT? * Interestingly enough, Porsche and Audi will only see minimal impact as their imports will be subject to a lower 15% tax. Philippe Houchois, autos analyst at Jefferies pointed out that “Ironically, China is the only large market with which the US enjoys an auto trade surplus. Import duties could lead German [carmakers] to localise more production in China putting US exports and jobs at risk”. An anonymous source at one of the German 

carmakers added that “You have examples where countries have [used] tariffs and protectionism to nurture a strong automotive industry – take Korea, Japan or China as examples- and they have only lowered the barriers once the industry is competitive at a global level. That works. But Trump is doing something different. He is taking a highly developed, established industry, and then he is slapping tariffs on it. There is no empirical evidence that that creates jobs”.

On the other hand, it’s interesting to see US prepares for next wave of LNG exports (Financial Times, Ed Crooks) because this is one area that China has not yet threatened with retaliatory tariffs because its usage is key to Chinese government efforts to wean itself off reliance on coal. China’s demand for Liquefied Natural Gas (LNG) is rising rapidly and consequent imports of it from the US have also been growing apace – from 17bn cubic feet in 2016 to 103bn cubic feet last year – to the extent that now, China is the #3 destination for US LNG exports behind Mexico and South Korea and is predicted to account for over 25% of ALL global consumption growth between 2015 and 2040 by the US Energy Information Administration. * SO WHAT? * New LNG plants take about four years to construct and there hasn’t been a new one built in the US since 2015 because everyone was expecting there to be an oversupply. However, the growth in demand from China has increased so rapidly that it became evident that these concerns were misplaced and now Venture Global LNG, Qatar Petroleum, LNG Ltd. and Tellurian are all looking to invest in US LNG export plants, with companies like Baker Hughes (the General Electric affiliate which 

supplies products and services for the oil and gas industry) also looking to benefit from this unexpected demand. Even though other countries, such as Russia, Qatar and Mozambique are looking to increase LNG production in the future, the US could still be at an advantage because its LNG is “the lowest cost of supply…in the world”, according to Brian Gilvary, BP’s CFO. Oil cartel split amid pressure to raise supplies (The Guardian, Adam Vaughan) does a good job of summarising the key areas for discussion in the Opec meeting that is taking place today in Vienna. Basically, Saudi Arabia (Opec’s biggest producer) and Russia (the biggest oil producer outside Opec) are in favour of increasing production whereas Iran, Iraq and Venezuela want to keep he current production restrictions in place. The oil price has shot up by 55% since Opec and non-Opec countries agreed to reduce production in 2016. This is an interesting article with some useful charts – but anyway, we’ll see soon enough what the outcome is. * SO WHAT? * FWIW, I think that if the two biggies decide to increase production everyone else is going to have to follow suit whether they like it or not because if they carry on as they are at the moment and the Saudis and Russians open the taps, they will just make their profits bigger whilst looking a bit stupid themselves.

I thought I’d better mention Threat from CO2 shortage spreads to food producers (Financial Times, Camilla Hodgson, Laura Hughes, Scheherazade Daneshkhu) because it is a problem that could have a rather disruptive effect on our food and drink supply chains in the UK with the British Poultry Council warning that a “severe lack” of CO2 – which is used by meat producers to stun birds and pigs during slaughter – will threaten meat production with eight or nine factories that account for 50- 60% of all poultry produced in the UK running low on CO2. The shortage is European-wide and could potentially have a detrimental effect on the meat and fizzy drinks industries. * SO WHAT? * CO2 supplies have been below average this year and the situation has been made worse by technical difficulties at a few gas supply companies. At the moment, it sounds like a short-term problem that will have minimal long-term effect, but we’ll just have to wait and see. Maybe this will result in panic buying of chicken and beer – so it may even turn out to be a good thing!

Recent newsflow has been conflicting in terms of the future direction of the UK interest rate and Odds shorten for August rate rise but don’t bank on it yet (Daily Telegraph, Tim Wallace) highlights the fact that the Bank of England’s chief economist, Andy Haldane, has indicated that he would be up for an interest rate rise, adding weight to the argument that the next meeting of the Bank of England’s Monetary Policy Committee (MPC) will yield an interest rate rise.

* SO WHAT? * It has proved to be a bit of a “dangerous” game double-guessing what the MPC might do (everyone expected a May rate rise, but that didn’t happen) but you would have thought that Andy Haldane would be best-placed to see what’s actually going on in the economy and that his support for an upward move would carry a lot of weight. Stefan Koopman at Rabobank observed that “The market has been caught on the wrong foot too many times to blindly believe the Bank’s MPC and go all-in. A more sceptical view would for instance be that the Bank’s hawkish message is aimed at lending support to the pound and to keep a lid on cost-push inflation, which is expected to rise over the summer”.

IN TECH NEWS, FAANGS SHOW THEY’VE GOT TEETH AND XIAOMI DISAPPOINTS ON ITS IPO PLANS…

Share price records topple as Faangs power ahead (Financial Times, Robin Wigglesworth) highlights the stellar performance of the group of stocks known as “Faangs” (Facebook, Apple, Amazon , Netflix and Google’s parent company Alphabet) as four of the five hit new intraday records in trading yesterday. Just to give you an idea of scale, the Faangs alone have a total market cap of $3.35tn, which makes them bigger than the entire FTSE100, Hong Kong’s Hang Seng Index or France’s CAC 40!

On the other hand, Xiaomi dents expectations with float price of $6.1bn (Daily Telegraph, Matthew Field) represents a bit of a damp squib in place of the expected fireworks from Chinese smartphone giant Xiaomi as it has set its flotation price at a significantly lower level than had previously been indicated. It is targeting a raise of $6.1bn in its Hong Kong Listing versus the $10bn it was originally aiming to achieve. That said it will still be one of the biggest flotations of the year and will value the company at somewhere between $54bn and $70bn market cap although it’ll fall way short of the $100bn it was touting earlier on this year.

The company has had to delay its offering in mainland China due to a dispute with the regulator, but it will start trading in Hong Kong on July 9th. * SO WHAT? * Maybe a combination of being overly bullish in the first place on the valuation and an atmosphere of uncertainty due to the China-US trade war is denting Xiaomi’s own confidence, but at least this is still going ahead. I suspect that they will await more favourable market conditions before making a return. I suppose that in this sense, the HK listing is quite a good way of testing the water as i am sure that this company will continue its upward momentum after a bit of a speedbump in 2016. 

In retail/consumer news, Kroger reports solid earnings, Dixons announced a dive in profits and cannabis gets legit…

In Kroger’s new approach to stocking shelves is boosting earnings (Wall Street Journal, Heather Haddon) we see that efforts by America’s #1 supermarket chain (by stores and sales) to overhaul its operations are bearing fruit as news of its stronger-than-expected earnings sent the share price 9.7% higher in trading yesterday. Like everyone else, it has been taking a good hard look at its business and decided to implement various measures to compete against the growing threat of Amazon and other retailers. For instance, Kroger announced last month that it was taking a roughly $250m stake in British online grocer 

Ocado Group to run its warehouses and process online orders and that it was also buying Home Chef, whose meal kits will shortly be sold in its stores. It hopes that moves like this couples with keeping supplier costs down and culling its product line-up will continue to strengthen the company overall. * SO WHAT? * It sounds like the company is making some good strategic moves, but it will have to keep momentum going as the competition isn’t standing still. Amazon continues to broaden its services, Walmart is also investing heavily in changing its business and European discounters Aldi and Lidl continue to expand in the US. It’s a jungle out there! 

In yet another bit of evidence that the UK high street is having a ‘mare, Dixons blames UK market for profits dive (The Times, Martin Strydom and Robin Pagnementa) highlights the company’s downbeat assessment of its

prospects as it announced a 24% fall in full-year profits due to a shrinking UK market, squeezed margins and higher costs. This assessment was broadly expected as it came close on the heels of last month’s profit warning, which wiped over 20% off the share price. New chief exec Alex Baldock also blamed an uncertain economic backdrop that was adversely affecting consumer confidence in addition to a slowing housing market that has been responsible for decreasing demand for fridges, cookers, washing machines and dishwashers.

…And finally, in other news…

If you ever find yourself at a Philadelphia Phillies baseball game, then you should maybe read this cautionary tale: Philadelphia Phillies baseball fan shot in face with hot dog as mascot fires sausages from oversize cannon (The Mirror, Chris Kitching). Fortunately, she’s OK and isn’t going to sue! I suspect she’s not going to eat hot dogs for a while, though…

As always, thank you for reading the WIFI!

ABOUT ME: I was a stockbroker for 13 years in four different investment banks in both London and Tokyo where I advised some of the world’s biggest financial institutions on investments in the European and Japanese stock markets. I’ve also worked in the recruitment world with spells in HR, investment banking recruiting and headhunting in addition to founding my own career consultancy, Seiha Consulting, in 2014 where I help people get the careers they really want using my experience as an interviewer and an interviewee over a 20+ year period. This has given me a unique insight not only into the way stock markets function, but also how it all relates to the employment landscape. If you want to know more about my background, please have a look at my LinkedIn profile here.

I’m a one-man band so I apologise in advance for any grammatical or spelling errors! I hate making mistakes, but I am only human so please keep that in mind.

Watson’s WIFI is intended to be a guide to the most important economic and commercial news of the day with added colour in the form of opinion. It does NOT constitute investment advice and the intention here is to help subscribers read news in a different way whilst being interesting and useful. My mission is to help people read news more efficiently!

This newsletter forms part of the resources available on www.seihaconsulting.com (for careers-related matters) but can also be accessed via www.watsonswifi.com (that’s for if you are reading a printed version of this, or if someone’s forwarded this to you – don’t be shy! Have your very own login!)

1. MACROECONOMIC NEWS US interest rates unchanged, Eurozone growth slows
2. RETAIL NEWS Amazon joins the fray for India’s Flipkart, Ocado signs a Swedish deal and House of Fraser announces store closures and job losses
3. TECH-RELATED NEWS Tesla does OK, Xiaomi announces a $10bn Hong Kong IPO, Spotify and Snap disappoints and Square continues to bleed cash
4. OTHER NEWS I bring a trinket for all you would-be Meghan Markles out there. For more details, read on…

US interest rates remain unchanged for now and eurozone growth still outpaces the uk…

Eurozone leaves UK in its wake (The Times, Philip Aldrick) cites the latest Eurostat data which shows on the one hand that Eurozone growth continued to kick our UK *sses by expanding 0.4% in the recent quarter versus our measly 0.1%, but on the other the figures did nothing to allay suspicions that the ‘zone is slowing down after a surprisingly good year last year. First quarter GDP was generally in line with expectations but was the weakest quarter since the summer of 2016. Separate data from IHSMarkit’s Purchasing Managers’ Index for manufacturing shows factory activity falling to a 13-month low.

The Fed holds US interest rates steady, but indicates increases will continue (Wall Street Journal, Nick Timiraos) gives us the boring yet important news that US interest rates are going to remain unchanged in the 1.5-1.75% range, although they kept alive the possibility of a rise at the next meeting in June. SO WHAT? There had been some speculation ahead of the release of the minutes of the two-day meeting that rates would go up – especially as inflation hit the central bank’s 2% target – but the vote was unanimous to leave them as they were.

SO WHAT? Although we can’t really gloat on this side of the Channel, it’s interesting to see such weakness on the continent. You wonder whether the growth has all been a charade, propped up by artificially low interest rates and a strong Germany papering over the cracks with the ECB’s president Mario Draghi and the European Commission’s president Jean-Claude Juncker talking a good game. Still, maybe this is a blip – so we’ll just have to wait and see. I suspect that May and her team will be praying for more Eurozone weakness as it could make the UK’s bargaining position slightly better as we go into the final straights of Brexit.

Amazon takes aim at Flipkart, Ocado signs another European deal and House of Fraser makes cuts…

In Amazon in battle for its biggest Indian rival (The Times, Robin Pagnamenta) we see that the e-commerce giant looks like it has decided to turn the heat up in India’s booming market as it has offered to buy a 60% stake in its biggest local rival, according to a report on Indian TV channel CNBC-TV18. Walmart is already in talks to buy a majority stake in the Indian etailer, so this could prove to be a bit of a spanner in the

works. Neither Amazon nor Walmart commented on the alleged deal. SO WHAT? Walmart must be pretty p!ssed off as it looks like Amazon is crashing the nice little party that it has had going on with Flipkart – with the added irony that it is Amazon’s ass-kicking of Walmart in the US and other markets that has forced it to look at other ways of expanding. Both Amazon and Walmart have Indian credentials, with Walmart having a presence in India via its partnership with Bharti Enterprises since 2007 and Amazon entering the market in 2013 with $5bn of commitment so far. If Walmart was to succeed in its bid, it would be its biggest ever purchase of an online retailer and mark a significant shift in strategy from its usual preference for organic growth. On the other hand, Amazon is not likely to give up easily as its failure to make a dent in the Chinese market (it only has 1% market share due to local rivals muscling it out) is no doubt uppermost in its mind – especially when some observers believe that the Indian e-commerce market is set to hit $200bn within the next ten years.

Ocado strikes partnership with Swedish grocery chain (Financial Times, Jonathan Eley and Adam Samson) we see that the heralds Ocado’s third deal in six months (even the bullish analysts at Peel Hunt projected only three deals every two years!) to build an online grocery business – this time for Sweden’s biggest supermarket ICA. It is the first time that Ocado has nabbed a contract with a national market leader and the agreement is along the same lines as the deal it struck with Canadian grocer Sobeys and France’s Groupe Casino. Ocado’s shares have gone up by 40% so far this year as scepticism regarding its plans to get such licencing deals has done a 180.

SO WHAT? Although this is clearly great news, cash from the tech solutions division will take a few years to materialise and the UK online retail business still accounts for 90% of revenues. The company’s strategy of becoming a third-party supplier of systems to other grocers who want to up their game in online ordering, warehousing and delivery is all well and good, but it sucks up a lot of capital in the initial build phase. My impression would be that profits from its core UK retail business will continue to be under pressure given the competitive environment and that the company will become increasingly reliant on outside funding to finance the building of the “fulfilment centres” needed for its tech solutions business. Although deals like this are good in theory, I do wonder whether there will be such a thing as having too many deals from a financial perspective and whether there’s a danger of Ocado over-stretching itself.

House of Fraser to close stores and cut jobs in deal with Chinese firm (The Guardian, Sarah Butler) signals some bad news for employees of House of Fraser as a restructuring following transfer of ownership to Chinese retailer C.banner of a 51% stake could result in the potential loss of at least 20 out of its 59 sites, according to industry experts. House of Fraser employs 5,000 staff directly and has an additional 12,500 employees working at concessions including brands such as French Connection, Phase Eight and Ted Baker.

SO WHAT? Although House of Fraser has said that it has been making progress in a difficult environment, a new pair of eyes (in the form of Hamleys owner C.banner) and some more cash could help it step back from the brink and avoid the fate of other retailers. Like I keep saying, though, I think that department stores are an anachronism and have thus far failed to keep up with trends in consumer behaviour. Unless the cash is used to revamp the offering from the ground up, this is just going to be one massive money pit IMHO.

1. MACROECONOMIC NEWS US interest rates unchanged, Eurozone growth slows
2. RETAIL NEWS Amazon joins the fray for India’s Flipkart, Ocado signs a Swedish deal and House of Fraser announces store closures and job losses
3. TECH-RELATED NEWS Tesla does OK, Xiaomi announces a $10bn Hong Kong IPO, Spotify and Snap disappoints and Square continues to bleed cash
4. OTHER NEWS I bring a trinket for all you would-be Meghan Markles out there. For more details, read on…

US interest rates remain unchanged for now and eurozone growth still outpaces the uk…

Eurozone leaves UK in its wake (The Times, Philip Aldrick) cites the latest Eurostat data which shows on the one hand that Eurozone growth continued to kick our UK *sses by expanding 0.4% in the recent quarter versus our measly 0.1%, but on the other the figures did nothing to allay suspicions that the ‘zone is slowing down after a surprisingly good year last year. First quarter GDP was generally in line with expectations but was the weakest quarter since the summer of 2016. Separate data from IHSMarkit’s Purchasing Managers’ Index for manufacturing shows factory activity falling to a 13-month low.

The Fed holds US interest rates steady, but indicates increases will continue (Wall Street Journal, Nick Timiraos) gives us the boring yet important news that US interest rates are going to remain unchanged in the 1.5-1.75% range, although they kept alive the possibility of a rise at the next meeting in June. SO WHAT? There had been some speculation ahead of the release of the minutes of the two-day meeting that rates would go up – especially as inflation hit the central bank’s 2% target – but the vote was unanimous to leave them as they were.

SO WHAT? Although we can’t really gloat on this side of the Channel, it’s interesting to see such weakness on the continent. You wonder whether the growth has all been a charade, propped up by artificially low interest rates and a strong Germany papering over the cracks with the ECB’s president Mario Draghi and the European Commission’s president Jean-Claude Juncker talking a good game. Still, maybe this is a blip – so we’ll just have to wait and see. I suspect that May and her team will be praying for more Eurozone weakness as it could make the UK’s bargaining position slightly better as we go into the final straights of Brexit.

Amazon takes aim at Flipkart, Ocado signs another European deal and House of Fraser makes cuts…

In Amazon in battle for its biggest Indian rival (The Times, Robin Pagnamenta) we see that the e-commerce giant looks like it has decided to turn the heat up in India’s booming market as it has offered to buy a 60% stake in its biggest local rival, according to a report on Indian TV channel CNBC-TV18. Walmart is already in talks to buy a majority stake in the Indian etailer, so this could prove to be a bit of a spanner in the

works. Neither Amazon nor Walmart commented on the alleged deal. SO WHAT? Walmart must be pretty p!ssed off as it looks like Amazon is crashing the nice little party that it has had going on with Flipkart – with the added irony that it is Amazon’s ass-kicking of Walmart in the US and other markets that has forced it to look at other ways of expanding. Both Amazon and Walmart have Indian credentials, with Walmart having a presence in India via its partnership with Bharti Enterprises since 2007 and Amazon entering the market in 2013 with $5bn of commitment so far. If Walmart was to succeed in its bid, it would be its biggest ever purchase of an online retailer and mark a significant shift in strategy from its usual preference for organic growth. On the other hand, Amazon is not likely to give up easily as its failure to make a dent in the Chinese market (it only has 1% market share due to local rivals muscling it out) is no doubt uppermost in its mind – especially when some observers believe that the Indian e-commerce market is set to hit $200bn within the next ten years.

Ocado strikes partnership with Swedish grocery chain (Financial Times, Jonathan Eley and Adam Samson) we see that the heralds Ocado’s third deal in six months (even the bullish analysts at Peel Hunt projected only three deals every two years!) to build an online grocery business – this time for Sweden’s biggest supermarket ICA. It is the first time that Ocado has nabbed a contract with a national market leader and the agreement is along the same lines as the deal it struck with Canadian grocer Sobeys and France’s Groupe Casino. Ocado’s shares have gone up by 40% so far this year as scepticism regarding its plans to get such licencing deals has done a 180.

SO WHAT? Although this is clearly great news, cash from the tech solutions division will take a few years to materialise and the UK online retail business still accounts for 90% of revenues. The company’s strategy of becoming a third-party supplier of systems to other grocers who want to up their game in online ordering, warehousing and delivery is all well and good, but it sucks up a lot of capital in the initial build phase. My impression would be that profits from its core UK retail business will continue to be under pressure given the competitive environment and that the company will become increasingly reliant on outside funding to finance the building of the “fulfilment centres” needed for its tech solutions business. Although deals like this are good in theory, I do wonder whether there will be such a thing as having too many deals from a financial perspective and whether there’s a danger of Ocado over-stretching itself.

House of Fraser to close stores and cut jobs in deal with Chinese firm (The Guardian, Sarah Butler) signals some bad news for employees of House of Fraser as a restructuring following transfer of ownership to Chinese retailer C.banner of a 51% stake could result in the potential loss of at least 20 out of its 59 sites, according to industry experts. House of Fraser employs 5,000 staff directly and has an additional 12,500 employees working at concessions including brands such as French Connection, Phase Eight and Ted Baker.

SO WHAT? Although House of Fraser has said that it has been making progress in a difficult environment, a new pair of eyes (in the form of Hamleys owner C.banner) and some more cash could help it step back from the brink and avoid the fate of other retailers. Like I keep saying, though, I think that department stores are an anachronism and have thus far failed to keep up with trends in consumer behaviour. Unless the cash is used to revamp the offering from the ground up, this is just going to be one massive money pit IMHO.

1. MACROECONOMIC NEWS US interest rates unchanged, Eurozone growth slows
2. RETAIL NEWS Amazon joins the fray for India’s Flipkart, Ocado signs a Swedish deal and House of Fraser announces store closures and job losses
3. TECH-RELATED NEWS Tesla does OK, Xiaomi announces a $10bn Hong Kong IPO, Spotify and Snap disappoints and Square continues to bleed cash
4. OTHER NEWS I bring a trinket for all you would-be Meghan Markles out there. For more details, read on…

US interest rates remain unchanged for now and eurozone growth still outpaces the uk…

Eurozone leaves UK in its wake (The Times, Philip Aldrick) cites the latest Eurostat data which shows on the one hand that Eurozone growth continued to kick our UK *sses by expanding 0.4% in the recent quarter versus our measly 0.1%, but on the other the figures did nothing to allay suspicions that the ‘zone is slowing down after a surprisingly good year last year. First quarter GDP was generally in line with expectations but was the weakest quarter since the summer of 2016. Separate data from IHSMarkit’s Purchasing Managers’ Index for manufacturing shows factory activity falling to a 13-month low.

The Fed holds US interest rates steady, but indicates increases will continue (Wall Street Journal, Nick Timiraos) gives us the boring yet important news that US interest rates are going to remain unchanged in the 1.5-1.75% range, although they kept alive the possibility of a rise at the next meeting in June. SO WHAT? There had been some speculation ahead of the release of the minutes of the two-day meeting that rates would go up – especially as inflation hit the central bank’s 2% target – but the vote was unanimous to leave them as they were.

SO WHAT? Although we can’t really gloat on this side of the Channel, it’s interesting to see such weakness on the continent. You wonder whether the growth has all been a charade, propped up by artificially low interest rates and a strong Germany papering over the cracks with the ECB’s president Mario Draghi and the European Commission’s president Jean-Claude Juncker talking a good game. Still, maybe this is a blip – so we’ll just have to wait and see. I suspect that May and her team will be praying for more Eurozone weakness as it could make the UK’s bargaining position slightly better as we go into the final straights of Brexit.

Amazon takes aim at Flipkart, Ocado signs another European deal and House of Fraser makes cuts…

In Amazon in battle for its biggest Indian rival (The Times, Robin Pagnamenta) we see that the e-commerce giant looks like it has decided to turn the heat up in India’s booming market as it has offered to buy a 60% stake in its biggest local rival, according to a report on Indian TV channel CNBC-TV18. Walmart is already in talks to buy a majority stake in the Indian etailer, so this could prove to be a bit of a spanner in the

works. Neither Amazon nor Walmart commented on the alleged deal. SO WHAT? Walmart must be pretty p!ssed off as it looks like Amazon is crashing the nice little party that it has had going on with Flipkart – with the added irony that it is Amazon’s ass-kicking of Walmart in the US and other markets that has forced it to look at other ways of expanding. Both Amazon and Walmart have Indian credentials, with Walmart having a presence in India via its partnership with Bharti Enterprises since 2007 and Amazon entering the market in 2013 with $5bn of commitment so far. If Walmart was to succeed in its bid, it would be its biggest ever purchase of an online retailer and mark a significant shift in strategy from its usual preference for organic growth. On the other hand, Amazon is not likely to give up easily as its failure to make a dent in the Chinese market (it only has 1% market share due to local rivals muscling it out) is no doubt uppermost in its mind – especially when some observers believe that the Indian e-commerce market is set to hit $200bn within the next ten years.

Ocado strikes partnership with Swedish grocery chain (Financial Times, Jonathan Eley and Adam Samson) we see that the heralds Ocado’s third deal in six months (even the bullish analysts at Peel Hunt projected only three deals every two years!) to build an online grocery business – this time for Sweden’s biggest supermarket ICA. It is the first time that Ocado has nabbed a contract with a national market leader and the agreement is along the same lines as the deal it struck with Canadian grocer Sobeys and France’s Groupe Casino. Ocado’s shares have gone up by 40% so far this year as scepticism regarding its plans to get such licencing deals has done a 180.

SO WHAT? Although this is clearly great news, cash from the tech solutions division will take a few years to materialise and the UK online retail business still accounts for 90% of revenues. The company’s strategy of becoming a third-party supplier of systems to other grocers who want to up their game in online ordering, warehousing and delivery is all well and good, but it sucks up a lot of capital in the initial build phase. My impression would be that profits from its core UK retail business will continue to be under pressure given the competitive environment and that the company will become increasingly reliant on outside funding to finance the building of the “fulfilment centres” needed for its tech solutions business. Although deals like this are good in theory, I do wonder whether there will be such a thing as having too many deals from a financial perspective and whether there’s a danger of Ocado over-stretching itself.

House of Fraser to close stores and cut jobs in deal with Chinese firm (The Guardian, Sarah Butler) signals some bad news for employees of House of Fraser as a restructuring following transfer of ownership to Chinese retailer C.banner of a 51% stake could result in the potential loss of at least 20 out of its 59 sites, according to industry experts. House of Fraser employs 5,000 staff directly and has an additional 12,500 employees working at concessions including brands such as French Connection, Phase Eight and Ted Baker.

SO WHAT? Although House of Fraser has said that it has been making progress in a difficult environment, a new pair of eyes (in the form of Hamleys owner C.banner) and some more cash could help it step back from the brink and avoid the fate of other retailers. Like I keep saying, though, I think that department stores are an anachronism and have thus far failed to keep up with trends in consumer behaviour. Unless the cash is used to revamp the offering from the ground up, this is just going to be one massive money pit IMHO.

1. MACROECONOMIC NEWS US interest rates unchanged, Eurozone growth slows
2. RETAIL NEWS Amazon joins the fray for India’s Flipkart, Ocado signs a Swedish deal and House of Fraser announces store closures and job losses
3. TECH-RELATED NEWS Tesla does OK, Xiaomi announces a $10bn Hong Kong IPO, Spotify and Snap disappoints and Square continues to bleed cash
4. OTHER NEWS I bring a trinket for all you would-be Meghan Markles out there. For more details, read on…

US interest rates remain unchanged for now and eurozone growth still outpaces the uk…

Eurozone leaves UK in its wake (The Times, Philip Aldrick) cites the latest Eurostat data which shows on the one hand that Eurozone growth continued to kick our UK *sses by expanding 0.4% in the recent quarter versus our measly 0.1%, but on the other the figures did nothing to allay suspicions that the ‘zone is slowing down after a surprisingly good year last year. First quarter GDP was generally in line with expectations but was the weakest quarter since the summer of 2016. Separate data from IHSMarkit’s Purchasing Managers’ Index for manufacturing shows factory activity falling to a 13-month low.

The Fed holds US interest rates steady, but indicates increases will continue (Wall Street Journal, Nick Timiraos) gives us the boring yet important news that US interest rates are going to remain unchanged in the 1.5-1.75% range, although they kept alive the possibility of a rise at the next meeting in June. SO WHAT? There had been some speculation ahead of the release of the minutes of the two-day meeting that rates would go up – especially as inflation hit the central bank’s 2% target – but the vote was unanimous to leave them as they were.

SO WHAT? Although we can’t really gloat on this side of the Channel, it’s interesting to see such weakness on the continent. You wonder whether the growth has all been a charade, propped up by artificially low interest rates and a strong Germany papering over the cracks with the ECB’s president Mario Draghi and the European Commission’s president Jean-Claude Juncker talking a good game. Still, maybe this is a blip – so we’ll just have to wait and see. I suspect that May and her team will be praying for more Eurozone weakness as it could make the UK’s bargaining position slightly better as we go into the final straights of Brexit.

Amazon takes aim at Flipkart, Ocado signs another European deal and House of Fraser makes cuts…

In Amazon in battle for its biggest Indian rival (The Times, Robin Pagnamenta) we see that the e-commerce giant looks like it has decided to turn the heat up in India’s booming market as it has offered to buy a 60% stake in its biggest local rival, according to a report on Indian TV channel CNBC-TV18. Walmart is already in talks to buy a majority stake in the Indian etailer, so this could prove to be a bit of a spanner in the

works. Neither Amazon nor Walmart commented on the alleged deal. SO WHAT? Walmart must be pretty p!ssed off as it looks like Amazon is crashing the nice little party that it has had going on with Flipkart – with the added irony that it is Amazon’s ass-kicking of Walmart in the US and other markets that has forced it to look at other ways of expanding. Both Amazon and Walmart have Indian credentials, with Walmart having a presence in India via its partnership with Bharti Enterprises since 2007 and Amazon entering the market in 2013 with $5bn of commitment so far. If Walmart was to succeed in its bid, it would be its biggest ever purchase of an online retailer and mark a significant shift in strategy from its usual preference for organic growth. On the other hand, Amazon is not likely to give up easily as its failure to make a dent in the Chinese market (it only has 1% market share due to local rivals muscling it out) is no doubt uppermost in its mind – especially when some observers believe that the Indian e-commerce market is set to hit $200bn within the next ten years.

Ocado strikes partnership with Swedish grocery chain (Financial Times, Jonathan Eley and Adam Samson) we see that the heralds Ocado’s third deal in six months (even the bullish analysts at Peel Hunt projected only three deals every two years!) to build an online grocery business – this time for Sweden’s biggest supermarket ICA. It is the first time that Ocado has nabbed a contract with a national market leader and the agreement is along the same lines as the deal it struck with Canadian grocer Sobeys and France’s Groupe Casino. Ocado’s shares have gone up by 40% so far this year as scepticism regarding its plans to get such licencing deals has done a 180.

SO WHAT? Although this is clearly great news, cash from the tech solutions division will take a few years to materialise and the UK online retail business still accounts for 90% of revenues. The company’s strategy of becoming a third-party supplier of systems to other grocers who want to up their game in online ordering, warehousing and delivery is all well and good, but it sucks up a lot of capital in the initial build phase. My impression would be that profits from its core UK retail business will continue to be under pressure given the competitive environment and that the company will become increasingly reliant on outside funding to finance the building of the “fulfilment centres” needed for its tech solutions business. Although deals like this are good in theory, I do wonder whether there will be such a thing as having too many deals from a financial perspective and whether there’s a danger of Ocado over-stretching itself.

House of Fraser to close stores and cut jobs in deal with Chinese firm (The Guardian, Sarah Butler) signals some bad news for employees of House of Fraser as a restructuring following transfer of ownership to Chinese retailer C.banner of a 51% stake could result in the potential loss of at least 20 out of its 59 sites, according to industry experts. House of Fraser employs 5,000 staff directly and has an additional 12,500 employees working at concessions including brands such as French Connection, Phase Eight and Ted Baker.

SO WHAT? Although House of Fraser has said that it has been making progress in a difficult environment, a new pair of eyes (in the form of Hamleys owner C.banner) and some more cash could help it step back from the brink and avoid the fate of other retailers. Like I keep saying, though, I think that department stores are an anachronism and have thus far failed to keep up with trends in consumer behaviour. Unless the cash is used to revamp the offering from the ground up, this is just going to be one massive money pit IMHO.

1. MACROECONOMIC NEWS US interest rates unchanged, Eurozone growth slows
2. RETAIL NEWS Amazon joins the fray for India’s Flipkart, Ocado signs a Swedish deal and House of Fraser announces store closures and job losses
3. TECH-RELATED NEWS Tesla does OK, Xiaomi announces a $10bn Hong Kong IPO, Spotify and Snap disappoints and Square continues to bleed cash
4. OTHER NEWS I bring a trinket for all you would-be Meghan Markles out there. For more details, read on…

MACROECONOMICS

US interest rates remain unchanged for now and eurozone growth still outpaces the uk…

Eurozone leaves UK in its wake (The Times, Philip Aldrick) cites the latest Eurostat data which shows on the one hand that Eurozone growth continued to kick our UK *sses by expanding 0.4% in the recent quarter versus our measly 0.1%, but on the other the figures did nothing to allay suspicions that the ‘zone is slowing down after a surprisingly good year last year. First quarter GDP was generally in line with expectations but was the weakest quarter since the summer of 2016. Separate data from IHSMarkit’s Purchasing Managers’ Index for manufacturing shows factory activity falling to a 13-month low.

The Fed holds US interest rates steady, but indicates increases will continue (Wall Street Journal, Nick Timiraos) gives us the boring yet important news that US interest rates are going to remain unchanged in the 1.5-1.75% range, although they kept alive the possibility of a rise at the next meeting in June. SO WHAT? There had been some speculation ahead of the release of the minutes of the two-day meeting that rates would go up – especially as inflation hit the central bank’s 2% target – but the vote was unanimous to leave them as they were.

SO WHAT? Although we can’t really gloat on this side of the Channel, it’s interesting to see such weakness on the continent. You wonder whether the growth has all been a charade, propped up by artificially low interest rates and a strong Germany papering over the cracks with the ECB’s president Mario Draghi and the European Commission’s president Jean-Claude Juncker talking a good game. Still, maybe this is a blip – so we’ll just have to wait and see. I suspect that May and her team will be praying for more Eurozone weakness as it could make the UK’s bargaining position slightly better as we go into the final straights of Brexit.

Amazon takes aim at Flipkart, Ocado signs another European deal and House of Fraser makes cuts…

In Amazon in battle for its biggest Indian rival (The Times, Robin Pagnamenta) we see that the e-commerce giant looks like it has decided to turn the heat up in India’s booming market as it has offered to buy a 60% stake in its biggest local rival, according to a report on Indian TV channel CNBC-TV18. Walmart is already in talks to buy a majority stake in the Indian etailer, so this could prove to be a bit of a spanner in the

works. Neither Amazon nor Walmart commented on the alleged deal. SO WHAT? Walmart must be pretty p!ssed off as it looks like Amazon is crashing the nice little party that it has had going on with Flipkart – with the added irony that it is Amazon’s ass-kicking of Walmart in the US and other markets that has forced it to look at other ways of expanding. Both Amazon and Walmart have Indian credentials, with Walmart having a presence in India via its partnership with Bharti Enterprises since 2007 and Amazon entering the market in 2013 with $5bn of commitment so far. If Walmart was to succeed in its bid, it would be its biggest ever purchase of an online retailer and mark a significant shift in strategy from its usual preference for organic growth. On the other hand, Amazon is not likely to give up easily as its failure to make a dent in the Chinese market (it only has 1% market share due to local rivals muscling it out) is no doubt uppermost in its mind – especially when some observers believe that the Indian e-commerce market is set to hit $200bn within the next ten years.

Ocado strikes partnership with Swedish grocery chain (Financial Times, Jonathan Eley and Adam Samson) we see that the heralds Ocado’s third deal in six months (even the bullish analysts at Peel Hunt projected only three deals every two years!) to build an online grocery business – this time for Sweden’s biggest supermarket ICA. It is the first time that Ocado has nabbed a contract with a national market leader and the agreement is along the same lines as the deal it struck with Canadian grocer Sobeys and France’s Groupe Casino. Ocado’s shares have gone up by 40% so far this year as scepticism regarding its plans to get such licencing deals has done a 180.

SO WHAT? Although this is clearly great news, cash from the tech solutions division will take a few years to materialise and the UK online retail business still accounts for 90% of revenues. The company’s strategy of becoming a third-party supplier of systems to other grocers who want to up their game in online ordering, warehousing and delivery is all well and good, but it sucks up a lot of capital in the initial build phase. My impression would be that profits from its core UK retail business will continue to be under pressure given the competitive environment and that the company will become increasingly reliant on outside funding to finance the building of the “fulfilment centres” needed for its tech solutions business. Although deals like this are good in theory, I do wonder whether there will be such a thing as having too many deals from a financial perspective and whether there’s a danger of Ocado over-stretching itself.

House of Fraser to close stores and cut jobs in deal with Chinese firm (The Guardian, Sarah Butler) signals some bad news for employees of House of Fraser as a restructuring following transfer of ownership to Chinese retailer C.banner of a 51% stake could result in the potential loss of at least 20 out of its 59 sites, according to industry experts. House of Fraser employs 5,000 staff directly and has an additional 12,500 employees working at concessions including brands such as French Connection, Phase Eight and Ted Baker.

SO WHAT? Although House of Fraser has said that it has been making progress in a difficult environment, a new pair of eyes (in the form of Hamleys owner C.banner) and some more cash could help it step back from the brink and avoid the fate of other retailers. Like I keep saying, though, I think that department stores are an anachronism and have thus far failed to keep up with trends in consumer behaviour. Unless the cash is used to revamp the offering from the ground up, this is just going to be one massive money pit IMHO.

Watson's Daily is a hard-working start-up striving to help people get a better understanding of the business world. I would really appreciate your involvement in spreading the word and recommending it to your friends, colleagues, relatives etc. by clicking and sharing on the links below. Please help me to help you and I will throw in a small thank-you!