Category: Uncategorized

1. In CORONATRENDS NEWS, propane demand explodes in the US but in the UK, office projects stall, moves towards railway nationalisation continue, covid prompts reshoring, motor insurers await a nice bump, there’s an elephant in the room regarding house prices and Regeneron gets the green light
2. In ALTERNATIVE FUEL NEWS, Ineos signs a hydrogen deal with Hyundai as the UK EV charging network proves to be very skewed
3. In RETAIL NEWS, Black Friday is going to be even more crucial than usual and Sainsbury’s quits financial services
4. In CHINA TECH NEWS, regulator crackdown prompts an investor rethink on tech
5. AND FINALLY, I bring you a novel way of flirting for baristas…

So the coronavirus continues to change our behaviour…

Are YOU a SILVER subscriber? If so, there’s something new coming for you very soon! I’ll tell you more later this week 👍…

Propane supplies feel heat as Covid drives dining outdoors (Financial Times, Gregory Meyer) shows that propane supplies are running down in the US as demand has risen by a whopping 75% over the year as the coronavirus has forced everyone to socialise outside under patio heaters! Hardware stores, petrol stations and large retailers have no stocks of portable steel containers. UGI, one of America’s biggest propane retailers, said that its AmeriGas cylinder exchange service hit record highs in the fiscal year to December. * SO WHAT? * This is just one example of how the coronavirus is affecting our behaviour. Clearly environmentalists will be concerned about how this sudden spike in demand for heaters that just, basically, heat the sky but proponents of propane say that it’s more efficient than electric heaters (which are powered by fossil fuels ultimately) and therefore greener. Yeah right – but then again the economic benefits to businesses who are allowed to stay open, for instance, are probably more immediately pressing.

In the UK, Covid is shaping behaviours in all sorts of ways. ‘Seismic’ shift to work from home shakes office projects (The Times, Louisa Clarence-Smith) shows that the construction of new offices in London has halved in six months, according to a survey by Deloitte Real Estate. This drop is particularly acute given that the volume of new office space under construction was at record levels at the beginning of the year. Developers are getting increasingly concerned about longer term weak demand for office space as more people work from home, especially in the City, and funding for projects is getting increasingly expensive. Having said that, though, Deloitte Real Estate director Mike Cracknell added that the construction pipeline for the next three years was still solid and the current rate of decline isn’t yet as bad as the levels experienced in 2008 and 2009. * SO WHAT? * Although office attendance is clearly going to be hit for the short-to-medium term, I still believe that people are gradually going to be returning. We’ll just have to wait and see how fast that return will be – but in the meantime, it’ll create a headache for the construction industry as it HAS to make key decisions years in advance. There is a danger here that this won’t be a short-term blip (for instance, I would argue that the financial crisis which resulted in the last dip was more “contained” in terms of sector than the universal effect of the coronavirus this time around), but it is going to take some time before we see what the real situation is going to be. In the meantime, tenants seem to be busy subletting their space…

The effect of working from home has been disastrous for our transport industry as a whole as far fewer people are now commuting to work and so Rail nationalisation goes full steam ahead, strategy reveals (Daily Telegraph, Oliver Gill) is a very interesting article which reflects the new reality that momentum towards railway nationalisation is continuing to build. Ministers have asked Network Rail to put together a 30-year strategy for the railway called “The Whole Industry Strategic Plan” (WISP) which makes it look very much like the private sector will have very little/no say in railway reform. An update on the situation on railways is expected in the Spending Review, which is due to be announced later on this week. * SO WHAT? * This is going

to be really bad for the likes of FirstGroup, Arriva and Go-Ahead Group because they are now too weak to fight an encroachment on their turf by the government. It will be interesting to see how this turns out because nationalisation really goes against the Conservative mindset – but then again if the government doesn’t do anything drastic now there may be no railway industry left. Long-time critics of the railways will no doubt see this as a golden opportunity to put things right (or at least on the right footing).

Covid and Brexit could see UK manufacturers bringing it all back home (The Guardian, Sarah Butler) cites a report by Alvarez & Marsal and research group Retail Economics which suggests that UK factories could be making up to £4.8bn-worth of more goods for British retailers (equivalent to the UK’s entire clothing manufacturing output at the moment) as supply chain worries due to covid and Brexit push British businesses to keep things domestic. Consumers are also getting more interested in sustainability, meaning there is more pressure to source product closer to home. * SO WHAT? * This trend of reshoring is pretty interesting and, given that it’s not easy to do, it would suggest that if demand was not out there it would not be happening. I don’t think this is necessarily just a case of businesses having to pivot – it’s a sign that they are taking a longer term view.

In news on other covid-related trends, UK motor insurers on the road to pandemic profit boost (Financial Times, Oliver Ralph) shows that reduced traffic levels and accidents have meant that motor insurers are like to benefit from the coronavirus. Having said that, they will probably lose out in other areas of their business such as travel, meaning that premiums won’t necessarily come down. They will also be wary of giving away too much because they may have to continue to pay out more on whiplash claims due to the delayed introduction of a new system to cut the cost of such claims and they will also have to stop charging existing customers higher rates than new ones for the same products.

House prices soar but beware the slide of March (Daily Telegraph, Russell Lynch) highlights increasing concern from the real estate industry that the end of the stamp duty holiday on purchases up to £500,000 in March next year will result in a massive dive in activity. As things stand right now, the end of March is going to bring three things: the end of the stamp duty holiday, the end of the current Help To Buy Scheme to be replaced by a much less generous plan, and the end of the furlough scheme. * SO WHAT? * This is a very painful-sounding triple whammy – and I would imagine that Sunak will have to do something about that confluence of three major schemes – vaccine, or no vaccine.

Meanwhile, in vaccine-related news, FDA authorises Regeneron’s Covid-19 antibody cocktail drug (Wall Street Journal, Joseph Walker) shows that a treatment that president Trump recently hailed as “unbelieveable” and made him feel good “immediately” was authorised this weekend by the FDA for emergency use for those with mild to moderate Covid over the age of 12. AstraZeneca, Oxford Covid-19 vaccine up to 90% effective in late-stage trials (Wall Street Journal, Jenny Strasburg) highlights more good news on vaccine development BUT that the average efficacy rate was about 70% depending on the dosage given. * SO WHAT? * It’s great that a third potential vaccine – in addition to Pfizer/BioNTech’s and Moderna’s candidates – is on the scene. It is also notable in that it is likely to be distributed more widely as both AstraZeneca and Oxford University have committed to selling it at cost during the pandemic.

Ineos and Hyundai sign a hydrogen deal while the UK’s EV charging network continues to look inadequate…

Ineos and Hyundai strike hydrogen deal (Financial Times, Peter Campbell) highlights a deal where Ineos will be buying Hyundai’s fuel cell technology for its own entry to the car industry while Ineos will supply Hyundai with hydrogen. Ineos has developed its version of the Land Rover Defender, the Grenadier. * SO WHAT? * It’s interesting to see that the shift from internal combustion engines to EV and hydrogen power has led to carmakers to rejig their own supply chains, especially to get lithium directly for their own batteries. Car makers such as Hyundai, Toyota and GM are all bringing out their own hydrogen models and need to make sure they get enough supply. Like most things, hydrogen is not perfect. Charging stations are more expensive to install than battery charging points because the fuel has to be kept at the right conditions and the production process that goes into it is not particularly environmentally friendly.

Then in Regional disparities in electric car-charging points revealed (The Guardian, Jasper Jolly) we see that London and the south-east have taken the lion’s share of newly-installed car charging points over the last year, according to analysis by The Guardian. Those regions received 45% of new charger capacity in the year to October compared to the area representing 27% of the population. * SO WHAT? * This is clearly unfair at first glance, although I would say it would be interesting to see these statistics compared to a national heat map of EV owners to see whether this all coincides. In terms of EV demand I would say that if you are in the market for such a vehicle a big consideration will be how easily you will be able to charge it under normal circumstances. If this is true, charging stations need to be built and the customers will come, but I also suspect that pay levels will also need to be considered because EVs are still pretty expensive. If wage levels and unemployment outside London and the south east are markedly different then it doesn’t matter how many charging stations you install – EV sales aren’t going to go up by the same amount. 

All eyes are on Black Friday and Sainsbury’s quits financial services…

We all know that this run-up to Christmas is crucial for many a retailer’s survival but It’s make-or-break on the blackest of Fridays (The Times, Ashley Armstrong) highlights the logistical difficulties that are going to become more problematic over the next few weeks and there are concerns that revenues from online shopping will not be enough to replace usual Christmas takings. * SO WHAT? * Clearly, the whole lockdown situation has taken its toll on bricks-and-mortar retailers on the one hand and played massively into the hands of online specialists such as Amazon on the other. France has actually gone as far as postponing Black Friday due to pressure brought by small shopkeepers who say that Amazon was stealing their business, so now the giant has agreed to postpone it until shops are allowed to reopen. Interestingly, some retailers such as M&S and Next are avoiding Black Friday – the

former will be extending opening hours to absorb hoped-for pent-up demand and the latter says that its logistics capabilities are already stretched and that it wants to prioritise full-price sales.

Then in Sainsbury’s quits financial services after supermarket banks challenge fails (Daily Telegraph, Lucy Burton) we see that the supermarket giant has decided to call it a day on financial services since buying out its joint venture partner, Lloyds Bank, back in 2013. The business has been put up for sale and NatWest is one of many bidders looking at buying it. * SO WHAT? * Supermarkets thought that their trusted status would rake in the customers in the aftermath of the financial crisis, but it seems that things proved to be rather harder in the execution as the Co-op Bank, for instance, cut ties with the Co-operative Group back in 2017 and is itself also up for sale. Tesco sold its mortgage business to Lloyds last year. It seems that supermarkets failed in their endeavours because costs of running a bank have risen considerably – but they have also suffered because it is still very difficult to change banks.

The Chinese regulator’s crackdown is starting to affect investor perceptions…

I have been talking about this subject since the whole Ant Group IPO cancellation debacle but China regulations spur investors to reassess tech sector (Financial Times, Primrose Riordan and Mercedes Ruehl) shows that initial actions are starting to trickle through to Chinese investors’ outlook on tech as a whole given that new regulations are

likely to clip the wings of the sector rather dramatically. Companies such as Tencent, Alibaba and Meituan-Dianping have all benefited from investor interest under lockdown but that appears to be wavering due to last week’s introduction of draft rules designed to limit their power. * SO WHAT? * This is definitely going to put the brakes on Big Tech’s progress for now but I think that these companies are smart enough to evolve past this particular setback. I also believe that the Chinese government will not want to REALLY hobble a sector that is powering its economy. A good example of when a regulator got involved and

…in other news…

I thought I’d leave you today with an enterprising/creepy (depending on which way you look at it) way of flirting in Starbucks customer finds cheeky secret message ‘written on coffee cup by barista’ (The Mirror, Luke Matthews). Whoever this is needs to work on their spelling for next time…

1. In CONSUMER/GOODS/RETAIL NEWS, UK consumer confidence weakens, the PS5 launch crashes sites, Frasers increases its stake in Mulberry, Peacocks and Jaeger go under and Naked Wines toasts more subscriptions
2. In CORONAVIRUS DRUG NEWS, the WHO dismisses Remdesivir but an arthritis drug looks promising
3. In CORONATRENDS NEWS, Royal Mail delivers more parcels and Cineworld seeks out a CVA
4. In INDIVIDUAL COMPANY NEWS, GM pledges more money for EVs and Roblox heads for an IPO
5. AND FINALLY, I bring you a very clever dog…

So UK consumer confidence wanes, the PS5 launch causes chaos, Frasers takes a bite of Mulberry, Peacocks and Jaeger fail and Naked Wines racks up the subscribers…

UK consumer confidence at six-month low as restrictions tighten (Financial Times, Valentina Romei) cites the GfK consumer index which shows that coronavirus restrictions have taken their toll on consumer psyche as concerns increase about jobs and business survival. Consumer spending powered the rebound in Q3 but cracks are showing at a time when shops are bustling. The results were based on interviews carried out between November 2nd and 13th which encompasses lockdown but, crucially, does not include the recent good news on the vaccines. Separately, Fable Data (a company that monitors credit card transactions) reported that UK consumer spending contracted by 8.8% in the week ending November 15th versus the same period last year. Although spending was weak across the board, the main drag was from spending in bars and restaurants. * SO WHAT? * This is not great – but it will be interesting to follow the same data points in the coming weeks as vaccine news filters through and shops open up once more in the run-up to Christmas.

Playstation 5 launch overwhelms retailers (The Times, Ashley Armstrong) shows that Tesco, John Lewis, Currys and Game websites all crashed yesterday as they were unable to cope with the deluge of interest for Sony’s latest console. Some eBay users were selling their consoles for £800 versus the actual price of £449! * SO WHAT? * This always happens with a console launch – but the difference this time is that high street retailers aren’t able to get involved, putting even more strain on online retailers. This is going to be a massive hit under lockdown!

Elsewhere, Frasers Group increases stake in Mulberry (The Guardian, Zoe Wood) shows that the-company-formerly-known-as-Sports-Direct is pondering a potential takeover of Mulberry after it increased its stake in the brand to 37%. Interestingly, companies normally have to make a bid for the whole company (“put up or shut up”) when they own 29.9% of the shares, but the Takeover Panel made an exception this time because Mulberry’s biggest shareholder owns a 56% stake. Under the current rules, Frasers has

until 17th December to make a full offer. * SO WHAT? * Mulberry has really been through the wars due to Covid. It has not only been hit by the closure of its own stores – the closure of department stores has also been devastating. You do wonder whether any of the brand’s cachet will be tainted by being associated with Mike Ashley, but then again he is good at sniffing out a bargain and he does seem to be carving a path towards taking his retail empire upmarket – he is also building up his stake in Hugo Boss, for instance. One thing you can count on – if Ashley buys it, it will be for a very reasonable price!

Peacocks and Jaeger businesses collapse into administration (The Guardian, Sarah Butler) shows that Peacocks, Jaeger, Austin Reed and Jacques Vert have all fallen into administration as they come under the umbrella of entrepreneur Philip Day’s Edinburgh Woollen Mill, which had recently warned of imminent collapse. Administrators said that the businesses would continue to trade whilst considering options for the future. Day is thought to want to rescue Peacocks and Jaeger, but has been looking for a buyer for Austin Reed and Jacques Vert. Funnily enough, Mike Ashley’s Frasers Group is among those in the mix for buying them. * SO WHAT? * Although it looks like there are brands here that will be available for fire-sale prices I would have thought that buyers will need to be very wary because there are reasons why those brands are not firing on all cylinders and the retail landscape looks unlikely to recover any time soon. Whoever ends up owning them will at least have to sort out their poor online presence to at least get that base covered.

Talking of online, Naked Wines toasts surging mail-order subscriptions (Daily Telegraph, Hannah Uttley) shows that the company unveiled 80% growth in half-year sales which prompted it to lift its full year sales growth forecasts to between 55% and 65%. Naked Wines parted company with Majestic Wines last year to concentrate on growing its US business. It seems that it has been pretty successful in this endeavour as the US now accounts for about 50% of sales with the UK coming in at 35% and Australia 5%. The share price has almost doubled since the start of the year. * SO WHAT? * It’ll be interesting to see how the company fares going forward, but if the trend for home drinking continues after lockdown is lifted, I don’t see there being any reason why the party can’t continue. They are arguably in a better position than Majestic because they don’t have a massive tail of stores to worry about.

The WHO sticks the boot into remdesivir and an arthritis drug offer hope…

WHO advises against prescribing remdesivir to Covid patients (Financial Times, Donato Paolo Mancini and Hannah Kuchler) deals a blow to Gilead, who produces the treatment that is currently the only antiviral approved to treat Covid – and was one of the treatments given to Trump when he recently fell ill with the virus. This recommendation is based on four randomised trials comprising over 7,000 patients. The WHO said “Remdesivir has no meaningful effect on mortality or on other important outcomes for patients” but in WHO recommends

against use of Gilead Covid-19 drug remdesivir (Wall Street Journal, Joseph Walker) we see Gilead hitting back by saying that the WHO’s study was not as good as the others which showed that there was a benefit. * SO WHAT? * This is clearly a blow for Gilead and I expect that it will increase efforts to show its efficacy. In the meantime, this is bound to hit sales.

Conversely, Arthritis drug offers hope for severely ill Covid patients (Financial Times, Anna Gross) shows that the administering of a drug used to fight rheumatoid arthritis, Tocilizumab, results in much-improved outcomes for severely ill Covid-19 patients. It is the first immunosuppressant drug to have an effect on hospitalised Covid patients. Many will hope that this could add to the growing array of coronavirus treatments that are becoming available.

Royal Mail benefits from more parcels and Cineworld seeks a CVA…

As the prevalence of online shopping continues to grow thanks to the coronavirus outbreak, Big losses show Royal Mail’s delivery duty ‘must change’ (The Times, Robert Lea) highlights the importance of increased parcel traffic as the Royal Mail announced losses of £180m over the spring and summer due to having to meet its obligation to deliver nationwide six days a week for one price. The company said that the “universal service obligation” it made as part of its privatisation seven years ago now has to change. It reported a 33% drop in letter volumes but a 31% rise in parcel volumes. * SO WHAT? * Overall, parcels helped Royal Mail to post a 5% increase in revenues, but it is clear

that it is operating with one hand tied behind its back compared to the likes of Amazon, DPD, UPS and DHL. It now deals with more parcels than letters for the first time ever! I would have thought it will be tricky to back out of this universal agreement though because who else is going to offer to do it?

Cineworld eyes CVA amid shortage of blockbusters (Daily Telegraph, Hannah Uttley) shows that Cineworld, the world’s second biggest cinema chain, is thinking about pursuing a CVA in order to stop the continued outflow of money. It hired AlixPartners last month to negotiate with lenders about its $8.1bn debt, much of which was due to the company’s reverse takeover of Regal in 2017. Cineworld is also in negotiations with individual landlords about rent cuts. * SO WHAT? * This is a tricky turn of events for a major operator, but maybe it should think about signing deals with movie studios to at least get some money coming in. Surely some money is better than none, no?

GM pledges more for EVs and Roblox gets closer to an IPO…

GM ups bet on EVs as investors swoon for electric cars (Wall Street Journal, Mike Colias) shows that GM announced plans to increase its spend on developing electric and driverless vehicles by $27bn up to 2025 ($7bn more than it pledge back in March). * SO WHAT? * Electric vehicles still only make up 2% of global car sales but pressure continues to increase on car makers to make their fleets more environmentally friendly. This sounds like a big spend on stuff that may or not pay off in the end. I have to say that surely driverless is an even bigger money pit than EVs because the regulatory/insurance/moral hurdles involved will continue for years IMO whereas at least EVs are on most people’s radars currently.

Then in Roblox files to go public amid surge in videogaming spending (Wall Street Journal, Sarah E. Needleman) we see that videogame company Roblox has filed to go public in documents submitted yesterday. * SO WHAT? * Sales and revenues have been stellar under lockdown, so I think it is highly understandable that the company would want to take advantage of its currently strong position and float with a nice fat valuation. Although it is still loss-making, it’s not like other game developers or publishers because Roblox is more of a platform which players use to develop their own games and the company makes its money by getting users to make in-game purchases with virtual currency called Robux. It has been incredibly popular under lockdown as a way to connect with friends and have a bit of fun at the same time. I would have thought its IPO would be very well received under current circumstances!

…in other news…

I thought I’d leave you today with a video clip that I think I could watch all day in ‘Genius’ dog figures out how to steal treats without its owner ever knowing (The Mirror, Luke Matthews). Superb!

1. In CONSUMER/RETAIL-RELATED NEWS, Inflation rises, wages freeze, Halford peddles well and British Land offloads retail while in the US, Target hits the spot and TK Maxx’s parent makes an online push
2. In ELECTRIC VEHICLE NEWS, Arrival aims for NY and Panasonic has European battery plans
3. In TECH NEWS, Nvidia sees higher demand and Apple relents
4. In INDIVIDUAL COMPANY NEWS, the Pfizer/BioNTech solution looks even more promising, Norwegian Air files for bankruptcy protection and RSA accepts the takeover bid
5. AND FINALLY, I bring you an unusually specialised estate agent and a life lesson…

So inflation rises, wages go sideways, Halfords benefits and British Land disposes of retail assets while Target and TK Maxx make progress Stateside…

*** It’s THURSDAY today, which means that it’s ZOOM time! This is a Zoom call where I talk about the week’s key business and financial markets news and open it up to questions from YOU where you can ask anything you like. The call for PAYING SUBSCRIBERS starts at 6.30pm and finishes at 7.30pm [NB THIS IS ONE HOUR LATER THAN THE USUAL TIME AND IS A ONE-OFF THIS WEEK]. In this call, I do the weekly roundup, Q&A and interactive group discussion. Joining details for this call are HERE. If you want to upgrade to be a paying subscriber, please click HERE. Hopefully I will see you later! Don’t be shy – say hello! IF you have any issues accessing this call, please e-mail to tell me on peter@seihaconsulting.com and I will set something else up ***

Prior to this call I will be doing an Instagram Live starting at 5pm on the Watson’s Daily Instagram channel where I will be picking out a few of this week’s big stories, talking about how and why I pick the articles I do in Watson’s Daily (it’s a mixture of science AND art!) and answering your questions ***

Inflation rises on back of increase in clothing and secondhand car prices (The Guardian, Richard Partington) cites the latest figures from the Office for National Statistics (ONS) which says that inflation rose above expectations in October. The cost of food also increased a bit last month and analysts expect this trend to continue into November as the forced closure of restaurants is likely to fuel demand for goods sold in supermarkets. Despite the unexpected rise, the rate of inflation is still way below the Bank of England’s 2% target.

Then in Fifth of firms freeze wages despite resurgence of GDP (Daily Telegraph, Tim Wallace) we see that data from XpertHR shows that 20% of companies imposed pay freezes in the three months to October – which is way more than the 5% that would do so in a “normal” year. Average pay rises came in at 2%, which is smaller than the 2.5% average offered in 2018 and 2019. * SO WHAT? * As things stand right now, this does not bode well for the consumer as their collective spending power has been chipped away during this year. I do wonder whether we are going to be seeing sharp rises in household debt going into Christmas and New Year as consumers concentrate on pushing the boat out, but then again this could be blunted by others who have been quietly paying down their debts over lockdown (because they are not going on holidays, going to restaurants etc.).

Hardcore cyclists put Halfords on right track (The Times, Ashley Armstrong) shows that worsening weather is not slowing down customers’ appetite for cycling and that people are actually buying more expensive bikes, which would suggest that they are going to continue cycling longer term. At the moment, online orders account for over half of its sales and it posted pre-tax profits for the half year that were 116% higher than the same time period last year. Sales rose by 184% over the period as the company struggled to keep up with demand for adult bikes, electric bikes and scooters. Demand is such that the company said that it would be increasing the number of in-store bike and scooter technicians from 400 to 1,800 to keep up! It’s also training more electric car mechanics. * SO WHAT? * This is a quite incredible performance and I must say that my pre-covid prediction of peak gin and peak cycling (and questioning of the logic of Peloton!) were woefully misguided! I stand by this prediction in a pre-covid world, but the disease has given all of them a catalyst that no-one expected. Well done to Halfords for surfing the wave! If the momentum continues through the winter months, I would expect things to get even stronger again in the summer.

British Land ditches retail properties as pandemic inflicts £1bn hit (Financial Times, George Hammond) reflects further gloom in the retail sector as it said yesterday that it has sold over £400m of retail properties since the beginning of the pandemic. It said that the value of its retail portfolio had fallen by 15% over the period. On the plus side, its office properties fared better as British Land said that office tenants had paid 97% of the rent they owed versus retail tenants who only paid 62% of rent owed. * SO WHAT? * It seems to me that British Land and Landsec are going in the same direction as they are concentrating more on their office properties in the hope that revenues from segment will be more robust over the long term. They may well be, but it will also depend on how long the working from home trend continues IMO.

Meanwhile, over in the US, Target grabs sales from rivals amid pandemic (Wall Street Journal, Sarah Nassauer) shows that Target had a great quarter with sales rising on demand for household goods and home office supplies. Online sales were also strong. I guess the question is whether this momentum can continue, as Walmart said yesterday that it was slowing down. Then in TJ Maxx parent launches online platform as coronavirus persists (Wall Street Journal, Renata Geraldo) we see that the owner of TK Maxx (TJX) has announced that it would be launching an e-commerce platform in the second half of 2021. * SO WHAT? * It’s interesting to see that TJX is rather belatedly catching up with the times but then again, in the past, discounters like TJX, Burlington Stores and Ross Stores have avoided too much emphasis on e-commerce as they have argued that their customers want to go to physical stores. I guess that covid has given TJX an almighty kick up the backside, hence the announcement…

Arrival heads to the States and Panasonic reveals battery plans…

UK electric vehicle group Arrival to list in US through Spac deal (Financial Times, Peter Campbell) shows that UK electric bus and van maker Arrival, which is backed by Hyundai, said yesterday that it will list on the NASDAQ via a reverse takeover with CIIG Merger Corp, a special purpose acquisition company (SPAC). This will pit it against Ford with its soon-to-be-revealed electric Transit van and other start-ups like Rivian. The company wants to produces electric buses and vans from “microfactories” and will raise $660m from the listing which will help it to increase factory openings in the US and Europe. Arrival/Spacs: coming to America (Financial Times, Lex) points out that at least five American electric or autonomous vehicle companies have listed their shares via Spac mergers and although this is clearly a hot area, the fate of electric truck maker Nikola will be something to keep in mind. Expectations are high – and so are the valuations – so Arrival will have a lot to prove. A £4bn ‘mini Tesla’ choosing to list stock in US is worrying (The Guardian, Nils Pratley) takes an interesting

spin on the story as it acknowledges Arrival’s logic of going stateside to surf the EV wave that investors love at the moment, but points out that this is a slap in the face for the London Stock Exchange, given that Arrival is a British company. It makes the point that SPACs can move quickly because there is not so much oversight to contend with for the companies involved versus a traditional listing, but I guess the implication here is that American Spacs are hoovering up exciting (but risky) companies while we just look on. If we don’t act quickly to change the laws on listing, we may well miss out on more such developments.

Then in Tesla supplier Panasonic to make big battery bet in Europe (Financial Times, Kana Inagaki and Richard Milne) we see that Panasonic has announced plans to expand in Europe, with initial plans to make a battery factory in Norway. It is engaging with state-controlled oil and gas major Equinor and aluminium company Norsk Hydro in a feasibility study that will take six months. As things stand currently, Panasonic runs the world’s largest battery factory with Tesla in Nevada, but has noticeably little presence in Europe. * SO WHAT? * When you consider that battery demand is likely to increase considerably over the next few years AND the expertise that Panasonic has picked up by working with Tesla, this rollout in Europe sounds like a great idea. It’ll be a while before we see actual factories, but we are moving in the right direction.

Nvidia see higher demand and Apple relents…

Nvidia benefits from sustained pandemic-era remote work, videogaming demand (Wall Street Journal, Asa Fitch) shows that graphics chip maker Nvidia doesn’t expect any slowing of momentum as it expects continued demand for its chips in home computers, videogames and big data centres will power even better results. * SO WHAT? * It posted strong sales in Q3 but there are a few potential flies in the ointment. One is the continued Huawei-bashing, which will put downward pressure on orders – and the other is the discomfort that its offer to buy Arm Holdings is causing as the chip industry appears

to be sceptical of Arm’s continued neutrality under Nvidia. There is a danger that this discomfort may lead to many digging their heels in and scuppering the deal. If Nvidia can get the deal through, though, growth potential could be huge.

There’s good news for little guys like me in Apple gives up a slice of sales charge (The Times, James Dean) as the company announced that it will halve fees to 15% for small software developers for using its App Store. It will cut sales commissions next year from 30% to 15% for developers who get less than $1m of annual revenues via the platform. * SO WHAT? * Critics say that this is just window dressing and that it is a cynical move designed to take the wind out of the sales of the growing campaign against “Apple Tax” that is being fronted by the likes of Spotify, Netflix and Epic Games. I guess time will tell. It will be interesting to see if Google does something similar.

There’s good news for Pfizer/BioNTech, bad news for Norwegian Air and and acceptance by RSA…

In other news doing the rounds today, Pfizer-BioNTech trial data show vaccine to be even more effective (Financial Times, Hannah Kuchler, Joe Miller and Donato Paolo Mancini) shows the latest development in coronavirus vaccines as the companies announced they would submit their vaccine for US and EU emergency approval “within days” and that it has proved to be even more effective than originally thought. Superb news!

Elsewhere, Norwegian Air files for bankruptcy protection in Ireland (The Guardian, Joanna Partridge) shows that low-cost airline Norwegian Air is on the rack – not surprising considering its own government recently rejected appeals for another bailout. Then in Insurer RSA accepts £7.2bn bid from Intact and Tryg (Financial Times, Oliver Ralph) we see that the proposed acquisition of RSA by Canadian insurance group Intact and Danish insurer Tryg has been accepted by the company.

…in other news…

I thought I’d leave you today with a highly unusual collaboration between a fast-food outlet and a real estate company serving an incredibly niche customer base in Burger King opens a rental site to help fast food lovers find an apartment in Japan (SoraNews24, Oona McGee). This is just plain weird 🤷‍♂️. Then there is a very pertinent life lesson to be had in Man instantly rejected from job interview after failing trick test at reception (The Mirror, Rosaleen Fenton). This is something that I 100% agree with!

1. In BITCOIN & FINANCIALS NEWS, Bitcoin reaches new highs, Santander buys Wirecard’s European business and Co-Op Bank gets an approach
2. In CONSUMER/RETAIL NEWS, we look at US and UK sales trends and Walmart’s slowing rise
3. In INDIVIDUAL COMPANY NEWS, Amazon takes on pharmacies, Airbnb marches towards its IPO and Nio sales shoot up
4. AND FINALLY, I bring you taekwondo vs judo…

So Bitcoin continues its rise, Santander gets opportune with Wirecard and the Co-Op Bank gets an approach…

*** 📣 JUST A HEADS-UP FOR TOMORROW’S ZOOM CALL. THE TIME WILL CHANGE – FOR TOMORROW ONLY – FROM THE USUAL 5.30-6.30pm TIMESLOT TO 6.30-7.30pm. SEE YOU THERE! ***

Bitcoin closes in on record price after topping $17,000 (Daily Telegraph, Sam Benstead) highlights the fact that Bitcoin has now reached a three-year high (and I’m getting a sense of déjà-vu here as we approach Christmas!). Its value versus the dollar has skyrocketed by a whopping 70% since September and it is only now 10% off the historic $20,000 high it reached in December 2017. Apparently, investors have increasingly been betting that it will overcome a “credibility hump” and become more mainstream and that they are using it as a hedge against higher inflation and continued government stimulus. * SO WHAT? * I personally think that it really IS moving towards the mainstream, whereas back in 2017 people were just saying it. The fact that Paypal recently started to accept Bitcoin payments goes to show that it really seem to be knocking on the door of acceptability. That said, I think that it may well be increasingly on the radar of governments and central banks as a result of this and you saw how quickly they torpedoed Facebook’s Libra. If they see it as a threat (because it could effectively take away one tool that governments and banks use to control/calm economies – trading currencies), things could happen quite quickly I would imagine.

Meanwhile, Santander buys Wirecard’s core European business for €100m (Financial Times, Olaf Storbeck and Daniel Dombey) heralds an important step in the dismantling of the hero-to-zero German payments provider. Around 500 Wirecard employees will join Spain’s biggest bank, which is buying the company’s European tech platform that processes all the electronic payments.

Britain’s Lycamobile was the only other company in the running to buy, but it obviously lost out in the end. Santander was very clear that the acquisition did not include Wirecard companies or any legal liabilities related to Wirecard AG and Wirecard Bank. * SO WHAT? * This sounds like a decent enough acquisition for Santander on a strategic front, as it will help to expand its payment solutions in Europe and broaden their product development capacity. It sounds like they’ve got the good stuff without all the baggage.

Then in Co-op Bank reveals takeover talks with US private equity buyer (The Guardian, Kalyeena Makortoff) we see the beginnings of what could be a wave of M&A within the UK banking sector as the Co-op Bank said it had received an approach – and it turns out that this was from Cerberus Capital Management. The Co-op Bank is currently 85% owned by Invesco and a group of US hedge funds including Silver Point Capital, GoldenTree, Anchorage Capital, Blue Mountain and Cyrus Capital. * SO WHAT? * The Co-op Bank sounds like an absolute basket case as it has lurched from disaster to scandal (remember former chairman Paul Flowers, nicknamed “The crystal Methodist”?!?), has had six chief execs in nine years and hasn’t been profitable in at least six years. It sounds like it is ripe for a major shake-up and maybe Cerberus is the one to do it (although you wonder why the others have been so spectacularly unsuccessful). Maybe it’s just a coincidence, but the fact that this follows closely on the heels of another approach (Sainsbury’s Bank was approached by NatWest last week) could suggest that there is an imminent wave of M&A about to hit our shores. TSB, for instance, could be another target as merger talks between BBVA and Sabadell could result in non-core assets being put on the chopping block. Bank valuations have been weakened as investors shun them for fear of a potential tsunami of loan defaults that will undoubtedly result in the wake of the coronavirus. If you combine this with the fact that the larger lenders came into the outbreak as profitable and well-capitalised (even better capitalised at the moment as they have been banned by regulators from paying out dividends), you can see that there are buyers out there.

We look at sales trends in the US and UK, Walmart’s momentum and the immediate prospects for UK retailers…

US retail sales climbed at a slower pace in October (Wall Street Journal, Harriet Tory) cites the latest figures from the US Commerce Department which showed that retail sales rose by a seasonally adjusted 0.3% in October versus the previous month – way below the 1.6% growth seen in September and the smallest monthly rise since May. This slowdown in growth was echoed in Walmart’s sales gains slow as pandemic drags on (Wall Street Journal, Sarah Nassauer) as Walmart said that its quarterly sales are still rising but at a slower pace. Interestingly, footfall dropped by 14.2% but the value of the basket rose by 24% as online spend increased.

Talking about online, Lockdown and Black Friday set up ‘record-breaking month’ for UK online sales (The Guardian, Zoe Wood and Sarah Butler) cites a report by the internet

industry body IMRG (so it’s probably going to be a bit biased 😁) which predicts that a combination of Black Friday discounts and coronavirus movement restrictions will result in a bumper month for online spending in the UK just as online sales for the first week of November went up by a chunky 61%. Shoppers stock up early on Covid Christmas essentials (The Times, Ashley Armstrong) highlights strong sales at Asda of frozen turkeys, Christmas trees, Christmas puddings and mince pies as people prepare for a lockdown Christmas but Retailers ‘losing £2bn a week’ in lockdown (Daily Telegraph, Tim Wallace and Russell Lynch) paints an altogether gloomier picture as the Helen Dickinson, head of the British Retail Consortium, puts a figure on the losses retailers are currently suffering. Pressure is increasing on the Chancellor to review business rates relief and grants to mothballed companies. * SO WHAT? * I maintain my belief that we will see a final hurrah from the British consumer when the pre-Christmas lockdown eventually lifts because people will just want to get out and support shops if they can. If the lockdown is extended, I think that spending will still go up (but maybe not by quite as much) as consumers will just want to do what they can to have an enjoyable Christmas.

Amazon takes on pharmacies, Airbnb heads towards IPO and Nio sales rise…

It’s bad news for pharmacies in the US as Amazon prescription drugs launch is a bitter pill for pharmacists (The Times, James Dean) shows that the e-tailing giant announced yesterday that it will be launching Amazon Pharmacy, which will offer Americans swift delivery of prescription drugs and major discounts on generic and branded medicines. Pharmacists elsewhere will no doubt be praying that Amazon will stay firmly in its own backyard…

For those of you following the whole Airbnb thing, Five takeaways from Airbnb’s IPO filing (Financial Times, Dave Lee and Miles Kruppa) takes a look at Airbnb’s IPO filing and what it means. The IPO prospectus showed that revenue growth had been slowing down before the pandemic, that it had to make drastic cost cuts after years of spending money on staff and marketing, that its new

businesses (e.g. “Experiences”, that paired tourists up with local guides) may not be doing that well, that the number of hosts may decrease and that there is regulation risk (i.e. some big cities and hotel groups have been resisting Airbnb – and this resistance could well increase). Airbnb: room with a view (Financial Times, Lex) says that now may be a good time for Airbnb to have an IPO to surf a wave of optimism that things will return to “normal” but that there is a danger that a slowdown in revenues may be a reflection that the best years of Airbnb growth are behind it.

Then in Tesla rival Nio posts sharply higher sales (Wall Street Journal, Kimberly Chin) we see that the Chinese purveyor of super-cool electric cars has reported that sales have increased by 146% in the latest quarter. It seems that Nio’s brand is catching on in China and investors are increasingly hopeful that it will meet aggressive sales targets. * SO WHAT? * EV sales continue to account for just 2% of total car sales globally, but they are rising. Eco-friendly policies around the world are likely to increase the momentum, but ubiquity is going to take a lot of time as they are starting from a very low base.

…in other news…

I thought I’d leave you today with some impressive martial art videos. On the one hand, you have a feelgood taekwondo/dance mash-up (some of the moves are incredible!) but then on the other, I thought I’d show you some really impressive moves in judo. Some of you may know that I am a black belt in judo but you might not know that I got it at a prison in Tokyo 😁. Although I would like to say that I was dropped in and had to fight my way out (what a great story that would be), it just so happens that a lot of prisons have dojos and my grading just happened to be at Fuchuu prison!

1. In VACCINE-RELATED NEWS, Moderna’s news boosts markets
2. In CORONATRENDS NEWS, Home Depot splashes out, the birth rate falls, Cinemark signs a historic deal and UK Lockdown 2.0 has less impact
3. In ELECTRIC VEHICLE-RELATED NEWS, Tesla is to join the S&P while EVs in the UK lag
4. In MISCELLANEOUS NEWS, Walmart pulls out of Japan, Airbnb looks good ahead of its IPO, BBVA targets a smaller rival and UK house prices fall
5. AND FINALLY, I bring you a dodgy birthday cake and a busy Christmas tree…

So Moderna’s vaccine hopeful gets everyone excited…

Moderna’s Covid jab shows 94.5% efficacy in clinical trials (Financial Times, Donato Paolo Mancini, Sarah Neville and Hannah Kuchler) highlights another promising-looking candidate to fight the coronavirus and the company said that it is aiming to submit the vaccine for approval by the FDA “in the coming weeks”. The European Medicines Agency said that it had begun an accelerated review of the vaccine. Easier distribution may make Moderna’s vaccine much more valuable (The Guardian, Nils Pratley) emphasises the fact that this vaccine could be more valuable than the one announced by Pfizer/BioNTech last week because it can be transported and stored for up to six months at -20ºC and then remain stable for 30 days in conventional fridges. Pfizer/BioNTech’s vaccine has to be stored at around -75ºC and can only last for five days at fridge temperature. On a side note, AstraZeneca invested in Moderna back in 2013 and then again in 2016 – a total of about $380m – and Moderna’s share price has quintupled since floating in 2018! Moderna/vaccines: getting warmer (Financial Times, Lex) points out that this development

could bring Moderna the vindication that it has long sought out and that its belief in messenger RNA is now paying off. * SO WHAT? * It could be many months before we see a jab from either Pfizer or Moderna and it is not yet clear how long any protection lasts BUT each successful vaccine will not only make mass immunisation possible, it will also reduce the risks of relying on a single solution. The fact that Moderna’s solution is easier to transport and store certainly makes it very compelling as things stand at the moment because it doesn’t matter how great a vaccine is – if you can’t get it to the people who need it then it is of limited use.

Funnily enough, Markets get shot in the arm from vaccine trial (The Times, James Dean and Alex Ralph) shows that global markets once again got a “shot in the arm” (hoho) from positive news on Moderna’s vaccine. Once more, bombed-out sectors like travel, transport and leisure shares were the best performers. * SO WHAT? * I suspect that we are going to see a lot of this sort of movement on news of new vaccine candidates. Even if they don’t all work, I would imagine that every instance is going to give investors increasing confidence in the face of rising coronavirus cases that an end is in sight. Fingers crossed 🤞🤞!

Home Depot goes shopping, slowing birth rates could be problematic, Cinemark makes a historic deal and the UK’s Lockdown 2.0 doesn’t look as bad…

Home Depot pays $9.1bn for building materials wholesaler HD Supply (Financial Times, Alistair Gray) shows that the world’s biggest DIY chain announced a deal to buy its former subsidiary HD Supply (which supplies building materials to maintenance and repair contractors) for a 25% premium to Friday’s closing price. This is very much an example of a company that has done well in lockdown splashing the cash. HD Supply was sold to private equity investors in 2007, just before the US housing market meltdown. * SO WHAT? * This deal broadens Home Depot’s offering and the apparent underinvestment in HD Supply gives it an opportunity to add some value and get some growth. It’ll be interesting to see whether we get anything similar going on in the UK.

I thought I’d mention A Covid baby bust is bad news for these businesses (Wall Street Journal, Saabira Chaudhuri) because it refers to a potential problem a few years from now – that birth rates are likely to fall dramatically because people put off having families during the pandemic (although you could argue that there will be a “relief boom” when the vaccines start coming). The birth rate had already been weakening for a few years prior, but a dramatic fall is likely to hit companies that make related products like baby formula and nappies, such as Reckitt Benckiser, Nestle and Danone. Stats from the Brookings Institution think tank expect there to be 300,000 to 500,000 fewer births (talk about hedging your bets – that’s a massive margin 😂!) in 2020 versus 44,172 fewer in 2019, although official government figures won’t be released until summer next year. It is basing its forecast on what happened in the 2007-2009 recession and uses the hypothesis that weaker job prospects equate to fewer births. * SO WHAT? * Interestingly, although birth rates are weakening, it seems that parents are spending more on their children so efforts are being made by companies to introduce more expensive baby food.

Cinemark, Universal usher in more change to movie-theater distribution (Wall Street Journal, R.T.Watson) heralds what could be a historic moment for movies as Comcast’s Universal Pictures has just signed a deal with America’s 3rd largest cinema chain, Cinemark Holdings, which will allow Universal titles to go to streaming after just three weekends – or 17 days – in theatres. AMC Entertainment, the world’s biggest cinema chain, already agreed a similar deal with Universal in July. * SO WHAT? * This is potentially AMAZING as, currently, moviegoers have to wait about 2½ months from a film’s cinema debut before being able to watch it at home. This move is definitely a sign of the times as movie theatres have been trying to make money under lockdown and a multi-year deal will give it some much-needed cash flow certainty, albeit at a cost to its theatre revenues. Mind you, given that most films and cinemas earn the bulk of their box-office revenues in the first few weeks of release, theatres have been jealously guarding their 2½ month window. However, now that the power has swung back very much in the studios’ favour, cinemas are having to be a bit more humble otherwise they may not survive. Under the Cinemark-Universal deal, films that gross over $50m in their first weekend can continue to have theatre-exclusivity for five weekends – or 31 days. Once that is reached, they can still screen the film but it will also be available for streaming (and the cinemas can get a share of the digital-rental revenue). I think that this is an excellent idea for all concerned and it will be interesting to see how much of an impact this will have on box office receipts.

New restrictions less damaging to UK economy than spring lockdown, data show (Financial Times, Valentina Romei) cites a number of unofficial data sources which show that Lockdown 2.0 isn’t proving to be as damaging to the economy as the first one. Stats on the volumes of people travelling to work and HGV traffic levels remain largely unchanged (which implies that factories and building sites are still mostly open) although consumer confidence took a recent hit, according to the latest data from PwC. * SO WHAT? * Clearly, the first lockdown was a major shock to the system but it seems that households and businesses have had time to adapt. Given that this is also a lockdown with a deadline (we hope!), plus growing optimism about a vaccine, I would expect there to be a smaller hit on the economy than last time although I would concede that there will be more businesses shutting down for good the longer restrictions are in place.

Tesla aims for the S&P but EVs still lag in the UK…

Tesla to be added to S&P 500 Index (Wall Street Journal, Heather Somerville) heralds the imminent promotion of Tesla to the “big boys’ club” as S&P Global announced yesterday that Tesla would join the S&P 500 Index on December 21st. The company did not make the cut in September despite having now had five consecutive quarters of net profit (you need four to get into the index) and brings with it official recognition. * SO WHAT? * This is great news for the company – and the share price has already shot up on the back of this news. Tracker funds will have to buy into it now and so I would expect more upside

from here. This will give investors a feeling of vindication but it still doesn’t alter the fact that the company’s car sales are still miniscule versus the whole.

Meanwhile, Is Britain’s electric vehicle journey moving too fast? (Daily Telegraph, James Cook) shows that we are still way behind in terms of charging network in the UK for electric vehicles despite the government is to bring forward the ban on the sale of new petrol or diesel cars from 2035 to 2030. Currently, 73.6% of new car sales so far this year are petrol and diesel, 5.5% are put electric and the rest are hybrids. Mind you, it’s not just the network that’s the problem – Johnson plays catch-up amid world’s gigafactory charge (Daily Telegraph, Michael Cogley) shows that we will need massive battery production capacity as well and that we are currently falling way short! The move to EVs sounds great, but success will all be in the execution.

Walmart exits Japan, Aibnb has good news, BBVA eyes a smaller rival and UK house prices fall…

In a quick scoot around some of today’s other key stories, Why Walmart’s might couldn’t crack Japan (Financial Times, Kana Inagaki and Leo Lewis) shows that Walmart has finally decided to call it a day in Japan after 18 years as it sold its majority stake in Seiyu. * SO WHAT? * Japan has been the graveyard of many a western retail hopeful – just ask Boots, Carrefour, Tesco and Ikea – mainly because suppliers are so strong and a foreign interloper just can’t seem to break it no matter how big they are. This means that they are unable to leverage any buying power. The new owners of the Seiyu stake, Rakuten and KKR may well be able to do more to grow the online business than Walmart ever could. Walmart will still retain a 15% stake in Seiyu, so still has skin in the game – which might be a good thing given that Seiyu is likely to have an IPO next year.

Elsewhere, Airbnb IPO filing shows profitable quarter after deep cuts (Wall Street Journal, Preetika Rana and Maureen Farrell) highlights the company’s profit in Q3, which will be very useful as it heads towards an IPO. Deep cost cuts and rising revenues since the lowest point of the

pandemic have combined to boost profits in time for a (probably) successful flotation. Nice timing – although it did warn that further movement restrictions in the fourth quarter may dampen things a bit.

Elsewhere, Spanish bank BBVA in merger talks with smaller rival Sabadell (Financial Times, Daniel Dombey) shows that Spain’s second largest bank, BBVA (with a market cap of €24.5bn) is in merger talks with TSB owner Sabadell (which has a market cap of €2.3bn). * SO WHAT? * There’s a spate of M&A going on in the Italian and Spanish banking sector at the moment as banks try to get scale in  difficult markets. Spain’s CaixaBank announced its purchase of Bankia in September, making the enlarged entity the biggest lender in the country, for instance. Sabadell’s shares rose by 25% on the news (but they were down by over 50% over the past year) and BBVA’s rose by 15%. I suspect that investors are looking at this as a potential cost savings story where both banks cut overlapping branches and reduce costs.

Then in Prices fall as sellers seek deals before duty cut-off (Daily Telegraph, Melissa Lawford) we sees that house prices weakened last month, according to Rightmove, as sellers continue to rush to make the stamp duty holiday cut-off. I suspect that the frenzy will continue with renewed vigour in the new year as the deadline gets closer!

…in other news…

I thought I’d leave you today with an unintentionally amusing birthday cake in Woman orders surprise birthday cake for friend – but baker makes embarrassing blunder (The Mirror, Courtney Pochin) and a very busy-looking Christmas tree in Pixar fans are going wild over family’s incredible Toy Story Christmas tree (The Mirror, Courtney Pochin). Wow!

1. In MACROECONOMIC NEWS, a historic Asian trade deal is signed, Japan’s economy rebounds and BoJo self-isolates
2. In CORONATRENDS NEWS, Simon Property and Taubman agree on a lower price, the Supreme Court readies itself for an insurance battle and Johnson & Johnson launches a UK trial
3. In CONSUMER & UK HIGH STREET NEWS, US consumers pay down debt, Arcadia wobbles, Mitchells & Butlers cuts venues, the Post Office distances itself from Royal Mail and Nando’s rescues Wahaca
4. AND FINALLY, I bring you an idea for super-quick roasties and a blue dog…

So Asia strengthens trading ties, Japan’s economy grows and BoJo has to self-isolate…

China and 14 Asia-Pacific countries agree historic deal (The Guardian, Jasper Jolly) shows that one of the biggest free trade deals in history was signed over the weekend. The Regional Comprehensive Economic Partnership (RCEP) was signed yesterday via video link after eight years of negotiation and covers China, Japan, South Korea, Australia, New Zealand, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam – who are collectively responsible for 30% of the world’s GDP. The deal outlines terms of trade, cross-border investment and new rules for e-commerce and intellectual property. India is a notable absentee from the agreement as it pulled out last year, saying that it thought that the agreement would not provide adequate protection from its domestic industry and agriculture but it will still be possible for other countries to sign up. Huge Asian trade pact increases Beijing’s influence (Daily Telegraph) reflects opinion that the agreement favours Chinese interests and could help it to draft the rules of trade in the region and Huge Asia-Pacific trade agreement is challenge for Biden (The Times, James Hurley, Richard Lloyd Parry, Bernard Lagan) suggests that it may make things a bit harder for the Americans, who pulled out of their own trade deal with the region (the Trans Pacific Partnership) a few years back under Trump. * SO WHAT? * This deal cuts out 90% of tariffs but it does not include anything on environmental protections or labour rights. It is, however, a good start to getting some coherence in the region.

Meanwhile, Japan’s economy rebounds 5% in the third quarter (Financial Times, Robin Harding) highlights Q3 GDP growth that came in above market expectations. Taking everything into account, Japan’s economy grew by 21.4% on an annualised basis, which is in the ballpark of other advanced economies as they bounced back strongly from the lows of the outbreak. Yoshihide Suga, Japan’s PM, is about to unveil a new spending package that could be worth around $95.5bn. * SO WHAT? * Japan’s economy was already struggling before the coronavirus as a hike in consumption tax last autumn tipped it into recession. Any hopes of an Olympic-fuelled boost were clearly snuffed out by the outbreak, but who knows – maybe a combination of stimulus, a desire for people to travel and a renewed opportunity to see live sports at a postponed Olympics could give the economy a decent boost in 2021…

Then in Blow to Johnson plans for reboot as PM forced to self-isolate (Financial Times, George Parker, Sebastian Payne and Sarah Neville) we see that Boris’s plans for a “re-set”, after some high-profile departures over the last few days, have had a set-back as he has been told by NHS Test and Trace to self-isolate after meeting a Conservative MP who later developed symptoms of  Covid-19. He does not have any symptoms at the moment and will continue to work from Downing Street.

Simon Property and Taubman renegotiate, the insurance battle goes to the Supreme Court and Johnson & Johnson launches a UK trial…

Simon Property, Taubman agree to revise merger deal (Wall Street Journal, Cara Lombardo) shows that high-end mall developer Taubman has agreed to accept a lower takeover price from Simon Property ($43 a share versus the original $52.50) in order to avoid a costly legal battle. The deal was first announced in February just before the pandemic really started to kick in and its original structure will be unchanged. The deal is expected to close either later this year or the beginning of next. * SO WHAT? * This has shades of LVMH/Tiffany about it as both sides got together to come to a compromise in that case too. You only want to bring the lawyers in if you absolutely, positively have to 😜

Talking of court cases, Supreme court case looms as insurers battle firms over Covid cover (The Guardian, Julia Kollewe) reminds us that the latest stage of the test case brought by the Financial Conduct Authority on behalf of business owners who had business interruption insurance will be heard over the next four days. According to the Association of British Insurers, about £900m-worth of claims is at stake. The FCA won the last round against the insurers, but the insurers refused to pay out and appealed the decision, which brings us here. Timing of any ruling is currently unknown.

Then, in the week after Pfizer announces its vaccine news, J&J to launch UK trial of its Covid-19 vaccine (Financial Times, Donato Paolo Mancini) shows that US pharmaceutical giant Johnson & Johnson is to launch its UK Phase 3 trial this week via its Janssen subsidiary. It will be the third experimental vaccine to go into late-stage trials in the UK after one developed by Novavax and the other one being developed by AstraZeneca and Oxford University. According to government forecasts, if the J&J trials go well, 30m doses could be ready for use here by mid-next year.

US consumers pay down debt and we take a look at the UK high street in tricky times…

Bank credit card profits in question as US consumers pay down debt (Financial Times, Robert Armstrong) shows that American consumers are paying down their credit cards as a lack of opportunity to spend elsewhere affects consumer behaviour. According to stats from the Federal Reserve, there were $755bn-worth of card loans held by US banks as at the last week of October. This was $100bn lower than at the start of the pandemic and it is continuing to trend lower in the last three out of four weeks. TransUnion stats also showed that the number of new card accounts fell by 50% in Q3 versus the same time last year – and all of this combined will hit banks as high interest cards are a key profit driver. * SO WHAT? * On the one hand, it’s good that households are paying down debt, but if they don’t spend on anything other than essentials this will be bad for the economy in the long run. It could also be a double-whammy for banks as they could end up getting hit by more loans going bad AND a lack of profit from their lucrative cards business.

Back in the UK, Arcadia in talks over possible £30m loan after Covid sales loss (The Guardian, Jasper Jolly) shows that the Arcadia fashion group – which owns brands including Topshop, Burton and Dorothy Perkins – is currently in talks with lenders about loans in order to help out with the damage done from lost sales under lockdown. Arcadia currently operates about 500 sites in the UK employing about 15,000 staff. All of the staff in England have been furloughed. * SO WHAT? * Arcadia was already having problems before the coronavirus and the outbreak has just compounded them. As things stand, Arcadia could be put into administration to protect company assets while

directors try to sell individual brands but this is still risky at the current time. The company denies that it is even considering administration at this point. For now I guess they just have to cross their fingers and hope for online sales success!

The gloom continues in All Bar One owner axes up to 20 venues as Covid bites (Daily Telegraph, Ben Woods and Hannah Uttley) as Mitchells & Butlers, owner of brands such as All Bar One and Harvester, has decided to cut up to 20 pubs and restaurants out of its estate of around 1,700 establishments – but it is currently unclear as to how many of its 44,000 staff will be affected by this decision. * SO WHAT? * Rivals including Marston’s, Fuller’s, Young’s and Greene King have all had to cut thousands of roles following the impact of the 10pm curfew and Lockdown 2.0. It is hardly surprising that M&B has had to do the same thing given what’s going on at the moment.

End for Post Office tie to Royal Mail (The Times, Robert Lea) shows that the historic link between the Royal Mail and the Post Office is about to end, resulting in the state-owned Post Office handling the packages of rivals such as Amazon. * SO WHAT? * Many believe that once this tie is broken, outlets could have a freer hand to do other activities like click-and-collect or pick-up/drop-off of parcels, which could be particularly useful in the run-up to Christmas. The two were formally separated ten years ago, but they signed an agreement at the time whereby the Post Office agreed to exclusively handle Royal Mail post, parcels and packages. This has now come to an end and future arrangements are currently being discussed. Clearly the Post Office is keen to free itself to work with rivals.

Then in Nando’s serves up rescue for Wahaca (The Times, Ben Martin), we see that the South African businessman behind Nando’s has just rescued Wahaca by buying a majority stake in Wahaca’s parent company, Oaxaca and given it a loan to help it through the pandemic. At least that’s one less restaurant chain biting the dust (for now, at least!).

…in other news…

I thought I’d leave you today with a tip on how to do speedy roast potatoes in Chef shares trick to make ‘perfectly crispy’ roast potatoes in just 20 minutes (The Mirror, Luke Matthews) and a hilarious and very cute dog in Freshly-groomed dog left ‘looking like Smurf’ after biting into ink cartridge (The Mirror, Luke Matthews). Nice!

1. In CORONATRENDS NEWS, WeWork burns even more cash, Emirates announces its first loss in over 30 years and Tui faces criticism
2. In RETAIL NEWS, WH Smith announces cuts and closures, Burberry wants tax-free to continue and B&M announces big profits
3. In MEDIA-RELATED NEWS, Disney is a mixed bag, ITV says ads are turning a corner, TikTok gets a reprieve and Roblox considers an IPO
4. AND FINALLY, I bring you a highly controversial cheesecake…

So WeWork keeps burning the cash, Emirates hits major turbulence and Tui annoys with late payments…

WeWork burns through another $500m in third quarter (Financial Times, Eric Platt) highlights the fact that the office space provider managed to burn $517m in the latest quarter as demand for office space in central locations continued to fall. This means that it “only” has $3.6bn left in the kitty, having now burnt through a staggering $1.7bn since the start of the year! Chief exec Sandeep Mathrani sticking to his target of being cash flow positive next year is looking increasingly like he is living in fantasyland as sales continue to fall. OK, so the company has cut thousands of jobs, closed poorly-performing buildings and rid itself of its narcissist (yet highly successful!) founder Adam Neumann but sales dropped by 13% in the latest quarter. * SO WHAT? * WeWork has been an absolute disaster and investors who even considered taking part in the abandoned IPO last year must be thankful that they dodged the mother of all bullets. Being an office space provider in a world where more people are working from home and who are therefore not commuting and doing more videoconferencing, not to mention the fact that commercial property prices in central locations are falling – means that WeWork is facing massive headwinds. Cashflow positive next year? My @rse. And there was me thinking the last CEO was full of 💩!

Emirates swings to first half-year loss in more than 30 years (Financial Times, Simeon Kerr) shows that the airline has hit a serious air pocket as it announced revenues fell

by about 75% due to coronavirus travel restrictions. Headcount has been cut by 24% as of September 30th and the company has been raiding its cash reserves and using a $2bn injection from the Dubai government to keep going. On the positive side, Emirates managed to switch to cargo operations as passenger traffic declined but in overall terms passenger numbers were down by 95% on the previous year and cargo volume fell by 35%. * SO WHAT? * This is unsurprising given what’s going on elsewhere in the world – and in the aviation industry – at the moment but I really think that those who can hang on and weather this extreme turbulence will see major upswings when vaccines become widely adopted. I believe that many people will be desperate to travel abroad after being locked down for so long!

Then in Tui under fire as delayed payments put businesses at risk (Financial Times, Alice Hancock and Kerin Hope) we see that Europe’s biggest tour operator is being targeted by Greek hoteliers for not paying its bills on time, which is putting hundreds of businesses at risk. Tui has issued a number of contract amendments in the last week or two which require hotel owners to wait until March 2021 to get 75% of the money owed to them for stays made this year. Usually, these payments are made 60 days after departure dates, so you can imagine the frustration and anger this is causing. * SO WHAT? * Everyone is doing their best to survive and Tui clearly does not want to become the next Thomas Cook. However, doing this by putting hoteliers in the lurch is not a good look and if this continues you wonder whether there will be some significant reputational damage that could prompt would-be holidaymakers to shop elsewhere.

WH Smith cuts, Burberry fights for tax-free and B&M puts in a strong performance…

WH Smith to shut 25 high street stores after it reports £280m loss (The Guardian, Sarah Butler) shows that the high street stalwart is going to make cuts, including about 200 jobs, after coronavirus has pushed it into loss. Sales in its high street outlets dropped by 19% but its previously successful outlets at stations, airports and hospitals suffered even more as they saw a 43% fall in sales to the year to 31st August. Interestingly, sales via its main website shot up by over 240%! The 200 job cuts here are in addition to the 1,500 announced in August. * SO WHAT? * I’ve probably said this before but WH Smith has seen an absolutely massive upheaval. Until the pandemic hit, its strategy of being in places with captive consumers was widely praised and was its major cash cow. That has completely changed with the advent of the coronavirus as the “boring” high street business kept it limping through while its outlets at airports and railway stations had to shut down. I think that it is high time for yet another overhaul at the retailer (it’s had its fair share of these over the years) to sort out its stodgy high street business and maybe this virus is going to give it a bit of negotiating power as it is in the throes of renegotiating the terms of leases on 120 stores this year and another 300 over the next three years. Lower rents would be a start, but I think WH Smith needs to reinvigorate its high street business while the former “cash cow” business regroups.

Burberry warning over end to tax-free shopping (Daily Telegraph, Hannah Uttley and Simon Foy) shows that the luxury retailer is trying to hang on to any advantages it can

get as it announced a 62% fall in half-year pre-tax profits. It warned that ending tax-free shopping for overseas tourists would make it more expensive versus the rest of Europe and therefore end up turning visitors away. Ministers have suggested a “shop-and-ship” alternative where international visitors would be allowed to send goods overseas to take advantage of VAT relief but industry has said that this is unworkable. In Burberry’s case, two-thirds of their customers in the UK are tourists, so you can understand why they are fighting tooth-and-nail to keep the VAT relief. * SO WHAT? * At first glance, Burberry’s objections sound a lot like whingeing but when you consider the importance of tourists to their business you can understand. The thing is that there just aren’t any tourists at the moment and there are unlikely to be for the foreseeable future, so I think that the argument is somewhat academic at the moment. You would have thought that the government should throw Burberry a bone in this regard and keep the current duty-free thing in place. Mind you, Chinese consumers are starting to spend more and luxury goods groups have reported strong sales – so maybe Burberry can fight to get more of a slice of that action.

At the other end of the scale, B&M bosses set for £44m as lockdown profits soar (The Times, Ashley Armstrong) shows that the billionaire brothers behind B&M are about to get a £44m payout as the discount retailer unveiled profit numbers that more than doubled under lockdown! Bobby and Robin Arora have a 14.9% stake in B&M via their offshore vehicle SSA Investments and will get the money due to the company paying a £250m special dividend. * SO WHAT? * Although this is clearly rather nice for the brothers, they are facing criticism from those who object to massive payouts from companies who have benefited from taxpayer support during lockdown and just paid them away to shareholders. I suspect that this is a subject that will drag on for quite some time.

Disney’s story is mixed, ITV is positive about ads, TikTok gets a reprieve and Roblox eyes an IPO…

The pandemic has been “a whole new world” for Disney, which has largely suffered badly from a case of the coronavirus. At Disney, streaming soars as other businesses struggle (Wall Street Journal, Erich Schwartzel) shows that the company’s Disney+ streaming service is the only thing that’s going well for Disney at the moment as the company announced its second consecutive quarterly loss yesterday. Subscriptions to Disney+ hit 73.7m as at October 3rd versus over 60m in August. * SO WHAT? * The streaming business is where it’s at at the moment for Disney and some are arguing that it needs to be rated like a tech stock because of this, but the fact is that it is still highly exposed to tourism and moveigoing which are both in the doldrums at the moment. I think that sunny days will return for Disney but in the meantime I think it’s sensible to put more resource towards Disney+ to build it up while it is particularly relevant to all of our lives.

Elsewhere, Advertisers’ clamour for Christmas TV airtime boosts ITV recovery (The Guardian, Mark Sweney) highlights a bit of a turnaround as advertising revenues have bounced back strongly after a disastrous first half going into Christmas (nice, but I have to say I think this is a bit of a one-off as I would expect ad budgets to continue to be squeezed going into next year), US backs down on TikTok (Wall Street Journal, John D. McKinnon and Georgia Wells) shows that the US Commerce Department has decided to delay the implementation of an order that would have banned companies from providing internet-hosting or content-deliery services that would have made it impossible to operate in the US (great for TikTok/ByteDance as it buys them time to see how Biden will treat them) and Roblox/games: multiverse nurse (Financial Times, Lex) shows that Roblox is thinking about an IPO via the direct listing route which could give it an implied valuation of $8bn. Although this sounds expensive, Roblox’s advantage is that it’s more of a game engine rather than a developer. I say that because developers tend to be characterised by being one or two-hit wonders (e.g. Rovio Entertainment with Angry Birds etc.). As it is a hub for users to share games it acts more like YouTube and given that apparently 2/3 of all US children between nine and twelve use the platform it looks like a decent prospect IMO.

…in other news…

I thought I’d leave you today with the highly controversial Pigs in blankets cheesecake is driving people wild as it’s ‘so wrong it’s right’ (The Mirror, Courtney Pochin). Wait, whaaaaattt??? 😱😱😱 Having said that, I’m erring on the side of “I think I would try that”…

1. In CONSUMER/RETAIL NEWS, we see rising household debts, a hot residential property market into the end of the year and worries about retailers coping with extra demand
2. In TECH NEWS, China tech suffers, Alibaba has a stellar Singles Day and TikTok tries another delay
3. In PHARMACEUTICAL NEWS, we look at potential vaccine hurdles and Pfizer’s chief exec makes a handy bonus
4. In MISCELLANEOUS NEWS, we look at the effects of BoJo’s takeover rules and Flutter’s US success
5. AND FINALLY, I bring you one of my favourite ever music videos…

So household debts rise, residential property is hot but retailers worry about meeting demand…

*** It’s THURSDAY today, which means that it’s ZOOM time! This is a Zoom call where I talk about the week’s key business and financial markets news and open it up to questions from YOU where you can ask anything you like. The call for PAYING SUBSCRIBERS starts at 5.30pm and finishes at 6.30pm. In this call, I do the weekly roundup, Q&A and interactive group discussion. Joining details for this call are HERE. If you want to upgrade to be a paying subscriber, please click HERE. Hopefully I will see you later! Don’t be shy – say hello! I had a problem with the call last week, so IF you have any issues please e-mail to tell me on peter@seihaconsulting.com and I will set something else up. I think I’ve fixed it, but I just thought I would have a back-up plan just in case!

Prior to this call I will be doing an Instagram Live starting at 5pm on the Watson’s Daily Instagram channel where I will be interviewing Emily, who has been a subscriber to Watson’s Daily for the past three years. She’ll be answering questions about how she has used Watson’s Daily and the benefits it has brought her. If there is time, I will also open things up to a Q&A as usual! ***

Debt crisis warning as UK reports steep rise in emergency borrowing (The Guardian, Phillip Inman) cites research by debt charity Stepchange which shows that household borrowing and arrears have shot up by 66% since May and the number of people who are in severe debt has risen to 1.2m. It warns that inaction by the government could result

in these numbers continuing to rise – something that it should be taking into consideration particularly as unemployment numbers increase.

Having said that, Property market booming but will slow after support ends in new year (The Times, Gurpreet Narwan) cites the Royal Institution of Chartered Surveyors (RICS) as saying that although the number of buyer inquiries, agreed sales and instructions to sell are still on the rise, this rate of growth was unsustainable given that Rishi Sunak’s stamp duty holiday will end in March next year. RICS members said in a survey that they expected that the end of this relief – as well as an uncertain economic backdrop – would herald a cooling off. * SO WHAT? * No 💩, Sherlock. The current residential property boom is being largely powered by Sunak’s stamp duty measure and if he sticks to a hard deadline, I would have thought that the housing market will fall off a cliff. Buying property isn’t a swift process – especially at the moment – and so there is a danger that some buyers will miss the benefits if there are delays in the housing chain. I think that the government needs to come up with more guidance about how it will address this problem and tell people whether it’ll be a hard deadline or whether stamp duty will come back in staggered phases so people can plan now.

Then in Christmas gift warning as retailers face supply chaos (Daily Telegraph, Laura Onita) we see that retailers are expecting chaos in December due to a combination of supply chain issues, movement restrictions, staff absences and nervous customers. Stores are seeing a huge uptick in online demand and are moving stock from shops back to warehouses in order to keep up. The Entertainer’s CEO, Gary Grant, warned that delivery capacity would fall short if the current lockdown period is extended. Tough times. Great if you are a delivery driver, though!

China tech gets the blues, Alibaba has a great Singles Day and TikTok tries to delay…

Fear of Beijing curbs wipes billions from value of tech firms (The Guardian, Rupert Neate) follows on from what I was saying yesterday about Chinese authorities cracking down on tech companies as their share prices continued to fall for a second day. Alibaba saw its share price fall by 9.8%, but many others also had a bad day as Tencent fell by 7.4%, JD.com by 9.2%, Xiaomi by 8.2% and Meituan Dianping by 9.7%. This was despite Alibaba sets ‘Singles Day’ sales record (Wall Street Journal, Liza Lin and Xie Yu) being a cause for celebration as the world’s biggest online shopping event went even crazier than usual – it saw $75.1bn in sale in one day but Alibaba: trust issues (Financial Times, Lex) hightlights the fact that Alibaba has a lot to lose under the new rules as it has a whopping 60% market share of Chinese e-commerce market. If you then add in JD.com’s share, then you have almost 75% of the market dominated by two players! * SO  WHAT? * The danger here will be what the authorities decide to do about restrictions of the use of customer data from online search

and what they buy. Such data helps to power Alibaba’s ad revenues as it know who to target for the most effective return. If tighter controls are brought in for data usage, Alibaba’s supremacy could dent its lead over rivals. As always, the devil will be in the detail of any regulations, so everyone will be watching with interest when they see the final draft. Are the regulators just trying to scare tech, or will they really clamp down on it??

TikTok challenges Trump order ahead of US divestment deadline (Financial Times, Miles Kruppa and James Fontanella-Khan) shows that ByteDance, TikTok’s parent company, has filed a legal challenge against the White House order that will force a sale of TikTok’s US operations. The company is saying that Trump’s divestment order is a violation of the company’s constitutional rights and it is also applying for a 30-day extension for the deadline with the Committee on Foreign Investment in the US (Cfius). * SO WHAT? * ByteDance has got an agreement with Oracle and Walmart to control its US business but there are disagreements over who is actually going to be top dog in the deal. I would imagine that it is in ByteDance’s interest to keep dragging this thing out as long as possible in the hope that Trump will just get bored and that Biden may be less aggressive towards it.

We look at potential vaccine problems and the Pfizer chief sells into strength…

I am as hopeful as the next person that the Pfizer/BioNTech vaccine works wonders BUT I also believe in the saying “Hope for the best but prepare for the worst”. Seven factors that could pop bubble of elation over Pfizer (Daily Telegraph, Hannah Uttley) is an excellent summary of some of the issues that could get in the way of a vaccine and its swift distribution. It says that safety data will have to be of a decent standard to get emergency use authorisation from the FDA (although it could release this data as soon as next week, apparently), that the level of efficacy can fall even in the latter stages of a trial, that manufacturing it fast enough could be problematic, that

logistics could prove to be a sticking point (Pfizer’s vaccine has to be stored at -70ºC and there’s not enough dry ice knocking around to keep it at that temperature) and that the public may not trust something that has been developed so quickly. What is particularly interesting, though, is that the challenges faced by the Pfizer/BioNTech solution (cold transportation) may hand rivals such as AstraZeneca/Oxford University an advantage if their vaccine is as effective but less problematic to transport. Still, that said, fingers crossed for a successful vaccine candidate!

Meanwhile, a lot of newspapers have picked up on Pfizer chief sold $5.6m of shares as promising vaccine was revealed (The Times, Alex Ralph) given that it obviously looks a bit dodgy at first glance. However, he did apply to sell about two-thirds of his shareholding on August 19th at a certain price before he knew the news – and managed to make a tidy $5.6m on it. Not bad!

We see who BoJo’s new rules are aimed at and how Flutter’s American bet is going well so far…

I did talk about these new takeover rules yesterday and who they were really aimed at but UK takes aim at China with revamp of takeover rules (Financial Times, Jim Pickard, Daniel Thomas, Arash Massoudi and Tom Mitchell) goes into more detail about why it is aimed at China and says that yesterday’s move brings the UK into line with other Western allies such as the US, Australia, Canada and New Zealand. * SO WHAT? * When you consider that Jingye owns British Steel and that China Investment Corporation owns stakes in Heathrow, National Grid and Thames Water while other Chinese entities own a stake in Hinkley Point C, you can see why there is an increasing need to at least keep a closer eye on the situation. UK M&A: intervening before elevenses (Financial Times, Lex) suggests that a fine line will have to be trodden

by politicians between protectionism, nurturing home-grown expertise and attracting inward investment. The new rules could also mean that less venture capital funds will be available for UK start-ups who won’t have the prospect of a Chinese buyer to fall back on. 

Flutter’s US bet wins as it aims for $1bn in revenues (Daily Telegraph, Oliver Gill) shows that the company behind Sky Bet, Paddy Power and Betfair is close to smashing through the $1bn revenues barrier in the US as firms slug it out to win in gambling as sports betting is legalised across the US. There will continue to be a lot of M&A activity across online gambling as companies seek out scale and expertise but Flutter Entertainment: betting on America (Financial Times, Lex) heralds a note of caution as the UK still accounts for about 40% of revenues and says that it is unclear as to how online gambling growth will continue when lockdown is lifted and how sustainable the current uptick in the US will be. Still, all’s good in the ‘hood for now…

…in other news…

I didn’t find anything particularly exciting in the newspapers today regarding “alternative” stories, so I thought I’d leave you with what I think is probably my favourite ever music video! It’s a few years old now but it is just astounding. There is no CGI and it’s a one-shot video. Just keep watching to the end – it is mind-blowing! Anyway, HERE is “I won’t let you down” by OK Go. If you like this, have a look at their first viral video which is lower tech but just superbly simple. Maybe this is something you could recreate when gyms come out of lockdown 😁…

1. In REGULATION NEWS, China draws up antitrust rules, the EU accuses Amazon and UK takeover rules tighten
2. In VACCINE NEWS, we look at who’s in the race as well as Pfizer and potential logistical challenges
3. In TECH NEWS, the sector gets sold but it can still win and Apple announces a new chip
4. In INDIVIDUAL COMPANY NEWS, Spotify continues to invest in podcasts and Premier Foods benefits from more home-cooking
5. AND FINALLY, I bring you an apologetic tooth fairy and Bake-Off outrage…

So China, the EU and the UK get feisty…

China draws up first antitrust rules to curb power of tech companies (Financial Times, Ryan McMorrow, Nian Liu and Mercedes Ruehl) shows that China’s market regulator, fresh from taking Jack Ma down a peg or two, is now moving towards putting together antitrust rules that have sent shares in China’s Big Tech companies – including Alibaba, Tencent and food delivery specialist Meituan – down between 4% and 11% in trading yesterday. The State Administration for Market Regulation will define, for the first time, what antitrust behaviour is. This constitutes a considerable departure from its previous light-touch approach but will address issues concerning function portability (e.g. users can’t use WeChat Pay to shop in Alibaba’s Taobao store). * SO WHAT? * The new rules are likely to hit exclusivity clauses and the bundling of products, which will presumably hit margins and potential revenues. To give you an idea of scale, Alibaba sells almost 20% of all Chinese consumer goods versus 5% market share of Amazon in the US. Draft regulations targeted the likes of Tencent, Alibaba, Meituan and JD.com specifically. The regulator is currently awaiting public feedback before the deadline of November 30th. It is going to be fascinating to see how far it is willing to go to get its own Big Tech under control.

Amazon charged with abusing EU competition rules (The Guardian, Daniel Boffey) shows that Margrethe Vestager is at it again as Amazon has now been formally charged by the European Commission with using sales data from third party sellers on its website to gain advantage in the European marketplace. EC vice-president Vestager says that Amazon used “big data” to skew competition in France and Germany. There will also be a second investigation looking into Amazon’s alleged prioritisation of its own

offers and independent retailers who use its logistics and delivery services. * SO WHAT? * I really hope that Vestager manages to win this time around. Her bruising encounter with Apple – which she lost – was a major blow to the credibility of the EC and she needs to win this otherwise, in my opinion, she might as well resign and not bother because no-one will take her, or the EC, seriously.

No 10 toughens takeover laws to lock out ‘back door’ security risks (Financial Times, Jim Pickard, Helen Warrell and Daniel Thomas) shows that Boris Johnson will today announce the biggest overhaul of British takeover law in twenty years in order to prevent foreign companies taking over key assets in the form of the National Security and Investment Bill. Potential foreign buyers of UK companies, large shareholdings or intellectual property in 17 specific industries will have to alert a new government body or face personal fines of up to £10m or corporate fines of up to 5% of annual turnover. The screening process should be completed within 30 working days. Sectors covered by the new bill include defence, transport, energy, AI, computing hardware etc. The powers will be active from when the Bill is introduced today in order to head-off a deluge of deal-making before a deadline. * SO WHAT? * The proposals had been drawn up three years ago under Theresa May but implementation had been on the backburner in the meantime. This will bring the UK in line with similar practices adopted in other Five Eyes partners including the US and Australia and reflects growing concerns about takeovers via the backdoor from China and sovereign wealth funds eager to take advantage of covid-induced vulnerability. While this sounds reasonable in theory, in of itself it won’t really help companies that need the funding. By cutting out potential partners, unless other measures are introduced to help these sectors, I would expect a number of companies to fall by the wayside in the name of “national security”.

We look at what’s going on elsewhere in vaccines and some of the challenges…

Leaders in race to develop jab (The Times) is an excellent infographic which shows you where other players are in the race to bring out a vaccine. Specifically, it shows you where the likes of Moderna, AstraZeneca/Oxford University and Sanofi/GSK are in relation to BioNTech and Pfizer. It’s certainly good to have options! Vaccines/Pfizer: calling the shots (Financial Times, Lex) shows that Pfizer and BioNTech will be benefitting from a vaccine because they have used their own money (not government) for

development. Some estimate potential sales of $13bn next year – way more than their current bestseller, a pneumonia vaccine that made $5.8bn last year. There are some potential logistical problems with Pfizer/BioNTech’s vaccine as it has to be kept at -70ºC – and Fears dry-ice shortage could delay Pfizer vaccine rollout (Daily Telegraph, Lizzy Burden) shows that dry-ice weight restrictions on aeroplanes are prompting fears that distribution may be restricted – but then Moderna’s candidate only needs to be stored at -20ºC.  * SO WHAT? * While it’s clearly brilliant to hear about Pfizer/BioNTech, it’s also fantastic to see that others are not far behind. Hopefully, sufferers – and those exposed to the virus regularly – will have options.

Tech gets sold, but it can still win and Apple announces a new chip…

Tech sell-off continues after Covid vaccine breakthrough (Financial Times) highlights the fact that the sell-off of tech stocks continued yesterday as investors crystallised their gains after a prolonged rally but then Tech stocks: tails they win, too (Financial Times, Lex) shows that this is not likely to be permanent given that we are still going to be working from home for some time yet. What lockdown has done is to accelerate Big Tech’s profitability and an uptick in memberships tying users to services is unlikely to drop off a cliff. * SO WHAT? * Of course the likes of Zoom and Peloton have experienced massive gains during the pandemic, but given that that some form of lockdown has

been prolonged, people have become accustomed to new services and new ways of doing things. OK, so the growth rate is probably going to slow down but there will still be growth to be had IMO. It is also way too early to get excited about aviation and travel agents, for instance.

Meanwhile, Apple Mac line, once dubbed ‘dinosaur’, gets new life in pandemic, in-house chips (Wall Street Journal, Tim Higgins) shows that Apple has unveiled a new in-house designed chip called that M1 that will make its Macs faster and more energy efficient (and possibly more profitable). The MacBook Air, MacBook Pro and Mac Mini will be the first to get the chip. * SO WHAT? * This development brings its Mac line-up more in-line with its other products and also heralds the end of a 15-year relationship with Intel. This is all part of CEO Tim Cook’s efforts to manufacture more of its own components.

Spotify continues to invest in podcasts and Premier Foods benefits from home cooking…

Spotify continues podcast push with Megaphone deal (Financial Times, Anna Nicolaou) shows that the music-streaming giant is continuing to beef-up its podcast capabilities by buying Megaphone for about $235m. This is the latest acquisition following those of Gimlet Media, Anchor, The Ringer, Parcast and individual deals with stars such as Joe Rogan and Michelle Obama. Megaphone does ad technology for podcasting, which will be useful to podcasters and perhaps attract more of them to the Spotify platform as they continue to aim to monetise

content. * SO WHAT? * There seems to be a lot of action in the podcast world at the moment – Amazon added podcasts to its music services in September, Apple recently bought Scout FM, which curates podcasts and SiriusXM agreed to buy the Stitcher platform this year. It certainly seems like podcasts are the way to go content-wise at the moment!

Then in Home cooking boom is all gravy for Premier Foods (Daily Telegraph, Hannah Uttley) shows a continuation of the theme for consumers buying familiar brands as the owner of Bisto Gravy and Mr Kipling, among others, announced rising profits and sales as more people are eating at home under lockdown. No doubt this will continue for at least the next quarter as we all have a homely Christmas!

…in other news…

I thought I’d leave you this week with the quick-thinking mum in Mum forgets tooth fairy visit but saves the day with clever note (The Mirror, Paige Holland) and something that I also noticed last night when I watched TV in Bake Off fans outraged by Paul Hollywood’s snub to Hermine after ‘stunning’ jelly cake (The Mirror, Rose Hill). It was an INCREDIBLE cake if you haven’t seen it…

1. In CORONAVIRUS NEWS, Pfizer’s revelation sparks a rally, optimism is tinged with caution and Eli Lilly gets approval
2. In MACRO & TREND NEWS, the EU starts to impose tariffs on the US and the Turkish lira jumps while
3. In M&A NEWS, VF buys Supreme and Countrywide gets an approach
4. In INDIVIDUAL COMPANY NEWS, Ant Group faces hurdles, Norwegian Air is refused a bailout and Nikola’s losses deepen
5. AND FINALLY, I bring you a tough coffee exam question…

So Pfizer sparks joy and Eli Lilly gets approval…

Covid vaccine breakthrough fuels broad global equity rally (Financial Times) highlights yesterday’s market euphoria in the wake of the announcement by Pfizer and BioNTech that their vaccine had been found to be over 90% effective in a late-stage trial. This added to the Biden win rally and Winners and losers on day of sudden reversals (The Times) identified a reversal of fortunes for sectors that had been in the doldrums due to Covid. The breakthrough sparked optimism that the aviation industry may be saved – so Rolls Royce (maker of jet engines and servicer of aircraft) and IAG (owner of British Airways) share prices shot up by 43.8% and 26% respectively. It also prompted the hope that people may be able to congregate in numbers once again – so Informa (the world’s biggest events company) was up by 22.2% – and that office life may return – meaning British Land was up by 21.9% and Compass Group was boosted by 21.7%.  Losers included recent strong performers such as Ocado – whose share price fell by 11.% – and Reckitt Benckiser, which saw its share price fall by a more modest 5.5%. The market frenzy had consequences as per Millions miss out as trading sites collapse (The Times, Ali Hussain), which shows that investors using firms such as Hargreaves Lansdown, AJ Bell and Fidelity were unable to trade as their respective websites crashed due to the sudden spike in activity. Trading 212 also crashed.

The whole vaccine thing is undoubtedly a great and uplifting story. HOWEVER, Market must show a healthy dose of realism, say experts (Daily Telegraph, Julia Bradshaw) highlights the fact that we are not home and dry yet given that drugs that reach stage three (like this one) have an 80% success rate and the trial is still only half way through, with safety data yet to be released. Other

candidates with drugs at the same stage include AstraZeneca, Moderna and Janssen. A first glimmer of hope for a Covid vaccine (Financial Times) points out that the end of the fight against the disease – even if these vaccines are successful – will take many months yet despite the US, UK, EU, Japan and other countries pre-ordering huge numbers of doses of the Pfizer vaccine. In this particular case, there are problems with logistics and distribution as Pfizer’s vaccine has to be stored below 80°C. Pfizer/BioNTech vaccine: a new hope (Financial Times, Lex) echoed a note of caution as there are other challenges as well – let’s not forget that Denmark is culling its mink population at the moment due to a new strain, which may scupper vaccine effectiveness and that scepticism abounds as per the findings of a Pew Research Center survey which showed that almost 50% of American respondents said they may not get a Covid vaccination if it were available right now. Staying on the subject of Covid-related things, Eli Lilly receives authorisation for Covid-19 antibody treatment (Financial Times, Hannah Kuchler) shows that the FDA has just given Eli Lilly an emergency use authorisation for its antibody treatment, called bamlanivimab, that is designed to boost patients’ immune systems with artificially-engineered antibodies. * SO WHAT? * There are some really encouraging developments here, but I think that markets got overheated with buying into bombed-out sectors like airlines (even if there is a vaccine, I don’t think there’s going to be any mass move to travelling abroad for some time yet) and selling off companies and sectors that are doing well now and will continue to do so for the foreseeable, like Zoom and Reckitt Benckiser, for instance. People aren’t just going to stop videoconferencing and washing their hands on the back of this news. This indicative, however, of what COULD happen when a vaccine really does get approved for mass usage. BTW, isn’t it interesting that all this news came out the day AFTER Biden won!

The EU doles out the tariffs, Turkey gets dramatic and we see the rush before the calm on UK retailing…

In EU hits US goods with tariffs in Airbus-Boeing dispute (Financial Times, Jim Brunsden) we see that Brussels is slapping punitive tariffs on American imports following the recent granting of the right to do so by the World Trading Organization. Tariffs will apply to around $4bn worth of US goods in the long-running (16 years!) transatlantic spat regarding the US government giving too much state aid to Boeing. Your move next, Mr Biden…

Elsewhere, Turkish lira jumps as Erdogan looks for a way out of crisis (Daily Telegraph, Tom Rees) shows that the Turkish lira shot up from historic lows yesterday as President Erdogan sacked the country’s central bank

governor (the fourth one in five years!) and the finance minister (Erdogan’s son-in-law, no less!) for not doing enough to save the lira. * SO WHAT? * Interest rate rises are usually expected in such cases in order to rein in high inflation, but Erdogan hates such moves, so it’s not a given. It seems that the markets are currently reflecting the hope that radical steps will be taken to address economic concerns.

Meanwhile, back in the UK, Stockpiling and Christmas shopping boost UK retail sales in October (Financial Times, Valentina Romei) shows that there was a major boost in retail sales before Lockdown 2.0 hit, according to the latest figures from KPMG and the British Retail Consortium but Footfall down 75% as England’s lockdown takes toll on shops (The Guardian, Larry Elliott) shows that there is a quiet few weeks in prospect, according to data from the British Retail Consortium and ShopperTrak. Unsurprising, given that most places are now on shutdown!

VF buys Supreme and Countrywide attracts interest…

Supreme streetwear brand sold to VF in $2.1billion deal (Wall Street Journal, Dave Sebastian) heralds the purchase of the cultish brand by VF Corp, the parent company of Vans and Timberland. Founder James Jebbia and a load of private equity firms will be getting a nice payday as a result! Fans are hoping that Supreme’s exclusivity won’t be sacrificed to sales under a more conventional owner.

Back home, Rival takes aim at Countrywide with £82m offer (The Times, Katherine Griffiths) shows that the troubled real estate agent which owns Hamptons and Bairstow Eves, among others, has received an £82m takeover bid from Connells, a smaller rival. Shares in Countrywide shot up by 41.4% on the news. Connells has 600 branches to Countrywide’s 850. It will be interesting to see how this goes and whether they can benefit as one in the event of continued strength in the housing market.

Ant Group faces hurdles for its return, Norwegian Air gets disappointing news and Nikola’s losses worsen…

In a quick look at some of today’s other key stories, Ant faces tortuous path back to market as Beijing tightens rules (Financial Times, Hudson Lockett, Primrose Riordan and Yuan Yang) shows that things could get even worse for Ant Group as the banking regulator suggested it would treat fintech like banks in a move that could have a dramatic effect on valuations. * SO WHAT? * As things stand currently, Ant takes on minimal risk for maximum profit but new regulations could force it to put more loans on its own books rather than shift the risk to someone else. At the moment it only has to fund 2% of its consumer loans book, but under new regulation it may have to hold up to 20%, which could potentially halve the company’s valuation. Ant’s near term fate hinges on being able to convince authorities that it is just an intermediary and not a bank. I would have thought that the authorities and fintechs will have to come to some kind of compromise because if Ant is going to suffer I would have thought it would be far worse for rivals – and does China really want to have to kill off something that it’s been doing rather well in at a time when they could do with more lending?

Elsewhere, Norwegian in a battle for survival after Oslo rejects second bailout (Daily Telegraph, Oliver Gill) shows that not all governments are willing to bail out failing state airlines as Norway’s transport ministry turned down an appeal for assistance. To give you an idea of the scale of the demise of the airline that was Gatwick’s third biggest airline pre-pandemic, the 10,000 staff working for the airline have now been cut to just 600 over the next few months. Brutal. Nationalisation was on the cards, but things are looking pretty shaky at the moment…

Then in Nikola’s losses widen as executives try to regain momentum, develop first truck (Wall Street Journal, Ben Foldy) shows that things continue to get worse for the embattled and controversial electric truck start-up as it reported bigger losses in Q3. This is largely due to the costs involved in developing its first semi-truck model and growing its workforce. * SO WHAT? * Will this thing survive?? At least when Tesla went through its “dodgy” phase, it could rely on Elon Musk wowing investors and blinding them with fairy dust to extract more money from them. I’m not sure whether Nikola will be given as much of a free rein. GM announced a JV with the company just days before a damning report came out about the latter and terms are still being negotiated at the present time. It may be a bit punchy to say this but I think that if GM walks away, Nikola will go down the toilet.

…in other news…

I thought I’d leave you this week with the tricky question in Coffee exam question bemuses students – and even baristas can’t agree on answer (The Mirror, Courtney Pochin). Hmm 🤔

1. In TRUMP/BIDEN NEWS, Trump kicks and screams his way out of the White House and we see what Biden has in store
2. In FINANCIAL NEWS, Buffett benefits, fund raising is about to increase, Scottish Widows gets a conscience and there’s a rush on UK bank loans
3. In MISCELLANEOUS NEWS, China drives demand for European luxury goods and private equity targets Reebok
4. AND FINALLY, I bring you a must-have Aldi product…

So we take a look at the White House loser and winner and what’s in store for America and the rest of us…

I don’t want to dwell on the result of the American election too much because we are all going to be bored to death with this by the media in the coming weeks and months but I’ll try to bring you some of the key bits and pieces 😁. Reality TV presidency cancelled after 4-year run (Financial Times, Demetri Sevastopulo) actually does quite a good job of summarising the main bits of Trump’s presidency starting from his tumultuous entry to office until the current time where “Adiós Trump” T-shirts were being promoted by Democrats. He’s not going without a fight, though. Election 2020: What are the Trump legal claims (Wall Street Journal, Deanna Paul, Brent Kendall and Corinne Ramey) looks at what Trump meant when he said that he would contest the result through the courts. Lawsuits have been filed in various states and Rudy Giuliani, one of Trump’s lawyers, said that they would be focusing on three areas: allegations regarding restrictions on observing the mail-in ballot count, allegations over votes being cast by dead people and allegations over backdated ballots. No evidence backing any of those claims has been provided as yet, however. It is likely to be an uphill battle. The last time when the election was contested like this was in 2000 when it was George W Bush versus Al Gore in 2000 when they were fighting over a few hundred votes in one state. This time around, the fight is going to be over tens of thousands of votes in at least four states.

On the other hand, Biden set to unwind Trump agenda after winning US election (Financial Times, Courtney Weaver) has a stab at guessing what Biden is going to do in office: re-enter the Paris climate accord, reverse back into the World Health Organization, reinstate the “Dreamer” path to US citizenship and announcing a new coronavirus task force. What does a Biden presidency mean for the world (Financial Times, Katrina Manson, Aime Williams and Michael Peel) suggests a more conciliatory and less

confrontational relationship with countries outside America (especially with its allies), which will probably mean it will rebuild bridges that were being burnt by Trump, a harder line on Russia, more support for Nato, potentially letting Iran back into the fold and a less confrontational approach with China. Europe and the UK will want to talk about things like aircraft subsidies, digital taxation and ending tariffs on products including wine and cheese. Interestingly, For business, Biden bodes a less hospitable but more predictable presidency (Wall Street Journal, Greg Ip) shows that the election result could be a dream scenario for business as it will get a more moderate Democratic president whose more “extreme” plans won’t be able to pass the Senate – and it won’t have the unpredictability that Trump’s presidency had. That said, What can Silicon Valley expect from Joe Biden (Financial Times, Kiran Stacey and Richard Waters) suggests that although a Democrat will be back in office, it will not enjoy the same cosy relationship it had with Obama as Big Tech companies have evolved and grown considerably in the intervening years. In the past, Biden has talked about the possibility of splitting them up, but hasn’t followed up any of this chat up with detail. Some say that he could take a less aggressive approach and start by changing some rules rather than reaching for the sledgehammer from the off. He is also expected to raise corporate taxes – and it is thought that a higher tax on profits generated by intangible overseas assets could be more acutely painful for Big Tech, but then again, without a majority in the Senate it is likely that this will fail to see the light of day. * SO WHAT? * Overall, once all the dust has eventually settled, I think that America will be left with a president who is more conciliatory, less unpredictable and less Twitter-friendly than Trump. It doesn’t sound like he is going to hit reverse on everything that Trump has done – for instance, he is unlikely to be particularly friendly with China – but he I would expect him not to be able to do anything too radical policy-wise given his lack of majority in the Senate. I would have thought that may not necessarily be a bad thing, though, as it could mean that the US economy’s rise could be steady as opposed to the potentially very volatile ride that Trump seems to prefer.

Buffett wins, a fund-raising spree is expected, Scottish Widows gets all moral and bank loan applications rise…

Stock market surge hands a $30bn boost to Buffett (The Times, Tom Howard) shows that Warren Buffett’s Berkshire Hathaway made a whopping $30bn profit in Q3 due to the value of its investments rising in the summer rally. His 5.8% stake in Apple alone shot up in value by $20bn since the end of June! If you were thinking of buying into the thoughts of the “Sage of Omaha”, you will have to scrape together a rather hefty $313,885 to buy just ONE of its shares! * SO WHAT? * OK, so paper gains like this don’t really mean that much because a gain ain’t a gain until you’ve sold it BUT it is interesting to see this as a reflection of what markets have done since their lows as Buffett invests in big companies.

Talking about investment, Scottish Widows dons green cloak with move to drop risky business (The Times, Tom Howard) shows that Scottish Widows, one of Britain’s biggest pension providers, has started to sell off £440m of its holdings in businesses that it reckons pose “the most severe investment risk”. It has said that this could grow if company boards don’t improve the way they do business. Portfolio managers now have six months to re-jig their portfolios according to the new rules or face fines or termination! * SO WHAT? * It’s interesting to see a serious investor taking proper measures to make its funds more ethical. The problem for the fund managers on the ground, though, is that everyone now knows the rules and can therefore work out which stocks they are going to sell – which could be great news for hedge funds looking for a “shorts” shopping list. Doing things like excluding commodities companies or those with questionable

practices (e.g. Aberdeen Standard Investments selling off most of its stake in Boohoo after the summer scandal in Leicester) sounds great, but is often much more difficult to execute in practice because most companies are not 100% “evil”. When, for instance, commodity prices are weak it is easy to take the moral high ground and sell off anything to do with fossil fuels. However, if prices suddenly rise on a world economy going crazy for trade in the event of mass Covid-vaccination, ethical funds risk getting left behind. Fund managers get paid on performance and if they continually underperform because of ESG restrictions, the temptation to increase exposure to “unethical” winners will only rise. Interestingly – and perhaps unsurprisingly – managers can still invest in such companies if they can show that they can influence the companies they hold to improve their business practices.

City braced for rush of last-minute fundraising (The Times, Miles Costello and Ben Martin) highlights a potential rush of fundraisings as companies look to shore up their balance sheets before a November 30th deadline. Listed businesses in the UK have been raising money from the stock markets since April under more relaxed rules that enable them to raise money from specific institutions rather than all investors at the same time. This will stop at the end of this month and if companies want to raise money after that date, they will have to engage in a more expensive and laborious process of doing things like rights issues. * SO WHAT? * It is likely that companies in retail and hospitality will be most likely to want to raise cash given the current lockdown. Companies aren’t just coming to markets to raise money though – Banks creak under pressure of new loan applications (Daily Telegraph, Lucy Burton and Michael O’Dwyer) shows that banks are already seeing a run on loan applications under the government’s coronavirus loan schemes. Although banks are being encouraged to lend, you would have thought that the longer all this goes on, the higher the likely incidence of loans going bad. Still, everyone is doing what they can to survive…

China rides to the rescue and Reebok is targeted…

We’ve all seen the latest figures which show that China’s economy is recovering and that spending is trending upwards on things like cars, and China demand for Europe’s luxury goods lifts virus-hit economy (Financial Times, Valentina Romei and Thomas Hale) shows that this phenomenon is now powering a recovery in the European luxury sector. According to data published over the weekend, Chinese imports from Germany rose by an annualised 24% and by 21% for Italy and companies like Kering and Salvatore Ferragamo have been seeing stronger sales from China. This upswing will definitely be welcome in countries and companies who are still wrestling with the coronavirus.

Private equity firms circle Reebok (Financial Times, Sara Germano and Kaye Wiggins) shows that private equity companies Permira and Triton are among those looking to make a move for Reebok as its current parent, Adidas, is looking to sever ties. Adidas bought Reebok over ten years ago but Reebok has not really made much ground in this time. * SO WHAT? * No-one has officially commented on this, but given Reebok’s anaemic performance over the years you would have thought that it needs a bit of a revamp. Permira has more form in footwear with investments in Dr Martens and Golden Goose – whereas Triton appears to be less plugged in to this area. Adidas has been considering a sale off and on for years, so no reason to get too excited just yet.

…in other news…

I thought I’d leave you today with another Christmas gift idea in Shoppers stockpile Aldi’s fur throw after it returns to stores for first time in a year (The Mirror, Paige Holland). I just had a look and it appears to have sold out online already! Get yourself into those stores!

1. In MACROECONOMIC NEWS, uncertainty continues over the US election while Sunak and the Bank of England give support
2. In FINANCIALS NEWS, Ant Group looks at a long delay, SocGen profits on trading and RSA announces a takeover bid
3. In CORONATRENDS NEWS, AstraZeneca nears an announcement and Nintendo hikes up its profit targets while a Chinese escooter-maker, Peloton and pizza trend up and fast food breakfasts crash
4. In INDIVIDUAL COMPANY NEWS, Uber and Lyft could set the example, Sainsbury’s cuts down on Argos and storm clouds gather over Ocado
5. AND FINALLY, I bring you Santa’s Yumnut and some tips on how to win Monopoly under lockdown…

So uncertainty in the US continues while Sunak and the Bank of England join forces…

Did you know that today is Watson’s Daily’s SIXTH birthday?? I started writing what was then known as Watson’s WIFI in my cramped (I can’t stand up in it – and I’m a short-@rse 😁) basement. I had to wear three layers of clothes and take an electric heater down there in order to be able to write it and it took me so long that I could only send it out at lunchtime! Things have changed since then as I moved my boys into a room they share with a bunkbed and I moved “operations” into the small box room where there is, crucially, some heating! Please help Watson’s Daily help more people by subscribing and recommending it to others! In the meantime, 🎂 🍾🎈 woo hoo!

Things just drag on and on in the wake of the presidential election and US cities brace for protests with election result still unclear (Financial Times, Katrina Manson, Hannah Murphy and Claire Bushey) reflects widespread disquiet across America as Trump continued to stir things up by calling a halt to vote counting in some swing states while US stocks build on rally as election shakes up market calculus (Financial Times, Richard Henderson, Eric Platt, Colby Smith, Naomi Rovnick and Tommy

Stubbington) shows that the Nasdaq and S&P500 were on track for their best week since April as a tech driven rally broadened to include industrials and banks. * SO WHAT? * With the prospect of a president winning by a slender margin and a divided Congress, investors were manoeuvring out of positions reflecting a clear Biden victory (big stimulus, investment in green infrastructure etc.) into positions that reflect expectations of lower growth and less rocking of the boat regarding business regulation and taxation because whoever wins will be unlikely to have the clout to push anything radical through on the legislation front.

Meanwhile, in the UK, BoE and Sunak join forces to support UK’s Covid economy (Financial Times, Chris Giles) shows that the Bank of England announced a £150bn stimulus package while chancellor Rishi Sunak also announced an extension to the government’s furlough scheme paying up to 80% of wages until the end of March next year. * SO WHAT? * Both of these measures should ease the potential economic pain and be a source of relief for many in the run-up to Christmas. In effect, this just kicks the can down the road – so in the meantime, let’s hope for a vaccine. Extreme disaster has been averted for the moment although critics will argue that this is a sticking plaster measure to a gaping economic wound and is just delaying the inevitable job losses and company failures.

Ant Group faces a long delay, SocGen is the latest to profit from trading and RSA announces a takeover bid…

Ant Group IPO faces at least 6-month delay after Beijing intervention (Financial Times, Hudson Lockett and Primrose Riordan) shows that Ant’s IPO could be delayed for quite some time – with a reduced valuation – after Chinese authorities intervened earlier this week to stop an IPO that would have gone ahead yesterday. The company will have to submit a new prospectus in Hong Kong, which could take at least six months. * SO WHAT? * Ant Group will be forced to adhere to the new regulations regarding lending, which makes up 40% of the company’s sales. The rules require internet platforms to finance at least 30% of their loans themselves – a big increase from the current 2%. Ant says that it is possible that there could be changes to these requirements on funding, but this is unclear at the moment. As things stand currently, Ant Group 0 – Chinese authorities 1.

SocGen swings back to profit as equity trading rebounds (Financial Times, David Keohane and Owen Walker) shows that the French bank bounced back into the black in Q3 thanks to a rebound in performance from its equity derivatives business and equity trading. * SO WHAT? * It seems that banks with trading capabilities are all benefiting – as per BNP earlier this week and then Goldman Sachs and Morgan Stanley a couple of weeks back. Trading revenues can be volatile and they rebounded from lower levels in the initial stages of the outbreak, but they are riding high for the moment! 

Then in Insurer RSA reveals £7bn takeover bid (The Times, Ben Martin) we see that Britain’s oldest insurer could be broken up after receiving a joint takeover approach from Canada’s Intact Financial Corporation and Denmark’s Tryg. RSA’s share price shot up by almost 46% on the news yesterday. * SO WHAT? * If this deal went ahead, Intact would take control of the UK operations and Tryg would take on RSA’s Swedish and Norwegian business in addition to co-owning with Intact RSA’s Denmark business. A share price hike of 46% is particularly impressive and makes me wonder whether the market is expecting another potential bidder to come out of the woodwork and throw their hat in the ring. Zurich almost bought RSA in 2015 but had to pull out due to incurring big losses in an industrial accident in China, so who knows?!

AstraZeneca hints at an announcement, and we look at more coronavirus winners…

There’s some potentially heartening news in Astra vaccine results ‘within weeks’, says drug maker (Daily Telegraph, Simon Foy) as the pharmaceutical giant said that it expects to announce results of late-stage trials for its Covid vaccine by the end of the year. It posted strong results for Q3 but all eyes were on its Covid announcement because if things go well, it could start mass-injections in early 2021. Wouldn’t that be great! Its pre-tax profits more than doubled in Q3 and product sales came in above expectations. The outlook is also pretty good as two of its main drugs, cancer treatment Lynparza and diabetes drug Forxiga, have won approval for wider use in Europe.

In terms of interesting consumer trends, Nintendo raises profit target by 50% (Financial Times, Leo Lewis and Kana Inagaki) shows confidence by the Japanese games and console-maker, which is known for being overly conservative about its forecasts. * SO WHAT? * Although the Switch is three years old, it will no doubt see another boost under lockdown despite Sony and Microsoft’s respective consoles’ imminent launch.

China’s escooter maker’s stock accelerates 400% on Covid boom (Financial Times, Christian Shepherd) highlights the incredible success of Niu Technologies, a Chinese maker of electric scooters, as it outlined plans to broaden its presence in Europe and the US due to increased demand for socially distanced methods of transport under Covid. The company is the the fastest growing escooter brand in

China and its escooter sales were up by a whopping 68% year on year in Q3. Its share price has shot up by over 400% since March! * SO WHAT? * Doesn’t this sound interesting?? If regulations ease, I wonder whether e-scooters will replace bikes as a popular mode of commuter transport in major cities? Given that there is an impetus to give people alternative ways of getting to work, I would have thought that any regulatory developments will be faster than they would otherwise have been.

Peloton, pizza and videogames grow in stay-at-home world (Wall Street Journal, Kimberly China and Sarah E. Needleman) shows how some companies are set to benefit further under new lockdown restrictions as Peloton said that its revenues more than tripled over the September quarter, Papa John’s saw 17% sales growth and Take-Two Interactive (which publishes Grand Theft Auto) saw higher net bookings and better profits on new game releases.

On the other hand, it is interesting to see Fast food’s bet on breakfast goes bust during Covid-19 pandemic (Wall Street Journal, Julie Wernau) because working from home has decimated the demand for breakfast as people make their own at home. McDonald’s and Burger King say that sales of breakfast items are weak and breakfast-specialists such as IHOP and Dunkin’ are closing hundreds of restaurants as a result of less foot traffic. Conversely, those who make breakfast items that people will eat at home are doing rather well – Kraft Heinz makes Oscar Mayer bacon, Maxwell House coffee and Philadelphia cream cheese, for instance. * SO WHAT? * It’s interesting to see this happening and although there will inevitably be a bounce back once commuters return, if more people are working from home and getting used to having their own breakfasts again you do wonder whether there demand levels for breakfast items will be depressed for some time.

The Uber/Lyft thing could have longer term implications, Sainsbury’s ditches Argos stores and Ocado faces what could be a major headwind…

In a quick scoot around other news stories this morning, Uber and Lyft in driving seat to remake US labour laws (Financial Times, Dave Lee) shows that the vote to classify gig workers at these companies as contractors and not employees could have broader implications on other gig economy companies given that up to 17 states are currently debating how to regulate the industry. * SO WHAT? * If anything, this looks like a brief reprieve because the rapid growth of the gig economy in the last few years has increased the need for a proper framework regarding the proper definitions of an employee and a contractor. It will not go away and it is possible that some legislation, such as the Fair Labor Standards Act could actually take precedence over state law. This is most definitely not the end, but I am sure that companies dependent on gig workers will want to spend less time in court in future and so proper clarification is necessary.

In the UK, Sainsbury’s to cut 420 Argos stores and 3,500 jobs (Daily Telegraph, Laura Onita) sounds another ominous note for jobs as Sainsbury’s, Argos’s owner, announced that it will not be reopening the 120 Argos

outlets that have been closed since March and will instead be increasing efforts to shift the brand into Sainsbury’s stores. The 420 closures of stand-alone Argos stores are to happen over the next three-and-a-half years. J Sainsbury/Argos: super saver shares (Financial Times, Lex) points out that in a world that is increasingly dominated by Amazon, something needs to be done about Argos which is often criticised for running out of stock. Offering click-and-collect at every Sainsbury’s supermarket and building 30 new fulfilment centres should go some way to addressing this in a more efficient way.

Amid all the e-tailer high-fiving we are seeing at the moment, Ocado says robot patent case ‘could harm public health’ (Financial Times, Jonathan Eley) highlights something that could be a real problem for Ocado as the case being brought against it for alleged patent infringements from Norwegian warehouse automation company AutoStore could end up stopping the rollout of Ocado’s platform rollout at Kroger in the US, Ocado’s biggest customer. * SO WHAT? * Ocado is in the midst of fitting out 20 automated distribution centres across America so an enforced stoppage could be a complete nightmare not only for its deal with Kroger, but it could also make other potential customers think twice. Ocado seems to be downplaying this at the moment, but it looks to me like this could develop into something pretty major if it doesn’t get something sorted with AutoStore. Great timing by AutoStore to create maximum pressure on Ocado, though!

…in other news…

I thought I’d leave you this week with a new controversial food item in Marks & Spencer accused of “ruining Christmas” with suggestive festive doughnut (The Mirror, Rosaleen Fenton) and something to enhance important skills under lockdown in 6 tricks to always win Monopoly – which properties to buy and staying in jail (The Mirror, Zoe Forsey). Nice 👍

1. In US ELECTION & MACRO NEWS, it’s all looking a bit tricky in the US as the UK heads for a double-dip recession
2. In NEWS ABOUT THE UK HIGH STREET, shoppers make a last minute dash – but jobs are cut, Mike Ashley pulls out of Debenhams talks and Clarks finds a rescuer
3. In INDIVIDUAL COMPANY NEWS, Uber and Lyft get a major boost, BMW benefits from China, Qualcomm benefits from 5G smartphone sales and we look at Ant repercussions
4. AND FINALLY, I bring you some controversial shoes…

So we look at the repercussions of a tight election and the prospects of a double-dip UK recession…

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Phew 😅! With all that lot out of the way, Biden edges to victory as Trump threatens legal war (Daily Telegraph, Ben Riley-Smith) shows that the race to the White House is proving to be very close – so close, in fact, that President Trump is threatening legal action to discount postal votes in some key swing states. He even took the unprecedented step to declare victory while the vote was still being counted! Biden’s lead in the polls proved to be ephemeral and hopes that he would sweep to victory on Trump’s mishandling of the coronavirus pandemic turned out to be unfounded. Investors face bumpy ride as legal challenge threatens to delay results (Daily Telegraph, Sam Benstead) shows that Trump’s relative outperformance versus expectations means that a result will be less clear-cut and although the S&P500 was up yesterday, it’s likely that markets will go sideways until there is more clarity. US assets/election: blue wave goodbye (Financial Times, Lex) attests that the lack of a majority for the presidency and

Congress means that it is more likely that the next four years will be difficult as it will be hard to push through legislation. The resulting uncertainty could be damaging on a longer term basis as any efforts to make big changes are more likely to be scuppered by the opposition party pushing its own agenda. Agreement on any stimulus packages are likely to be particularly problematic, which is something that is picked up on in Election results dash business hopes for large-scale stimulus (Financial Times, James Politi, Andrew Edgecliffe-Johnson and Laura Noonan) where business leaders had expected a major stimulus in the event of a Biden win and are now wondering what’s next. Biden had talked about an immediate multi-billion dollar stimulus combined with a hike in taxes for big companies and the wealthy, but such ambitions could be hampered by his opposition.

So what movements have we seen in the stock markets as a result then? Well, Investors pile into tech stocks and Treasuries as ‘blue wave’ trade unravels (Financial Times, Eric Platt, Colby Smith, Katie Martin and Robin Wigglesworth) reflects relief that Big Tech looks less likely to become the whipping boy of the new regime and nervousness about the future is powering government bonds as they are seen as a safe haven. Also Oil and gas groups buoyed by fading fears of US ‘blue wave’ (Financial Times, Derek Brower) shows that old-school oil and gas stocks saw their share prices rise and those of renewable energy producers fell as hopes of a “green surge” under Biden faded away. * SO WHAT? * This is all rather tedious, but there’s not really that much of value to say until we get a final decision on the election result. For me, the main takeaway is that whoever wins won’t have done it by a clear margin. This will make it far more difficult to push through legislation at a very sensitive time for the economy, which is a shame for America but also for the rest of the world as America is a major driver of the world economy. I would suggest that this puts China in a great position in comparison and could even result in a thawing of the entrenched positions they currently have on trade. It may well be that the US has to “play nice” with China – or certainly engender less aggressive relations with it – because it could be one of the only major sources of growth for American companies in a world economy that is currently hanging by a thread.

Meanwhile, UK heading for double-dip recession as summer recovery stalls (The Guardian, Phillip Inman) cites the latest data from the IHS Markit/CIPS monthly survey on the services sector (the services sector contributes around 80% of the UK’s GDP) which shows that the British economy is heading towards a double-dip recession this winter (“double-dip” describes two consecutive downturns in quick succession). * SO WHAT? * I don’t think this is going to come as any surprise, so it will be interesting to see whether today’s meeting of the Bank of England’s monetary policy committee will result in a big stimulus.

Shoppers stock up and jobs cuts are announced…

In a quick scoot around news about the state of the UK high street, Shoppers make last-minute dash ahead of England’s lockdown (Financial Times, Patricia Nilsson and Alice Hancock) highlighted a final pre-lockdown hurrah as consumers flooded shops, restaurants and pubs as footfall shot up by a whopping 19% on Tuesday versus the same day last week, according to data from Springboard.

In a bad day for the high street, M&S swings to first loss in its history (Daily Telegraph, Laura Onita and Simon Foy) shows that the high street stalwart announced its first pre-tax loss in 94 years as a listed company and John Lewis cuts 1,500 jobs at its head office (The Times, Ashley Armstrong) highlights cuts to about a third of HQ jobs at the John Lewis Partnership. Ashley ruled out of Debenhams deal (The Times, Ashley Armstrong) shows that Debenhams future has just become that much more uncertain as Frasers Group’s Mike Ashley decided not to

match the £300m price tag the group’s advisors were asking for and pulled out of the bidding. Debenhams faces a stark future whichever way it looks as now the options are liquidation or selling it to a group of hedge funds – neither of which is going to end well.

Elsewhere on the high street, Lloyds to axe another 1,070 jobs as it cuts costs further (Daily Telegraph, Lucy Burton) shows that Britain’s biggest high street lender is cutting even more jobs as part of restructuring plans but, on a more positive note, Clark’s founding family loses control after £100m rescue (Daily Telegraph, Laura Onita) shows that Clarks has a rescuer, but at a cost. Hong Kong-based private equity giant LionRock Capital is supporting Clarks’ Company Voluntary Arrangement which will allow all 320 stores to stay open. 60 sites will pay no rent and the remainder will pay depending on turnover. If all goes ahead as planned with the CVA, LionRock will get a majority stake in Clarks, overtaking the Clarks’ family interest in the business. Sadly, though, this won’t be enough to help 4,000 jobs that will be at risk as part of a general restructuring, though. * SO WHAT? * I don’t know what it is about shoe shops, but they just seem to have been suffering for years. It seems like Clarks’ is getting a reprieve, though, but the future continues to look far from rosy.

Uber and Lyft get a boost, BMW does well in China, Qualcomm benefits from 5G and Ant faces repercussions…

California voters exempt Uber, Lyft, DoorDash from reclassifying drivers (Wall Street Journal, Preetika Rana) highlights a major win for gig-players as they will not have to classify their drivers as employees (which costs more because they will have to pay things like holidays and sick pay etc.), remaining at their current status as contractors (who don’t receive such benefits). * SO WHAT? * Given the current economic status, the companies involved will be relieved that they won’t have to pay out extra at a time when things are particularly tough. I would say, though, that it is unlikely this employee/contractor thing will end here. I’d say that it is a pause in hostilities!

In BMW’s profits jump as China recovery leads to record sales (Financial Times, Joe Miller) we see that BMW’s Q3 profits grew by almost 10% as demand increased, especially in Asia, to give the company its best ever sales figures! Sales in China were particularly strong – they increased by over 31% in Q3, which is great considering that China is BMW’s biggest and most profitable market. On the other hand, it warned that its automotive business

would not be profitable for the year as a whole due to significantly reduced demand. Europe is looking particularly sketchy at the moment. * SO WHAT? * It’s particularly interesting to see the success in China. This was echoed by rival Daimler’s results recently which showed that its net profits increased by almost 20% due to strong sales of Mercedes-Benz cars in China. More evidence of China’s current economic revival!

Qualcomm sees 5G smartphone sales taking off (Wall Street Journal, Asa Fitch) highlights the chipmaker’s forecasts that reflect a surge in smartphone sales next year as customers upgrade to 5G phones – at least double the expected level for this year. * SO WHAT? * I would have thought that a combination of Apple’s latest release of a suite of 5G phones and more lockdown will contribute to consumers deciding to upgrade their phones to the new standard (even though there is patchy coverage). It pays to be prepared, right??

I also thought it was worth adding some extra comment on yesterday’s news about the postponement of Ant Group’s IPO as per Beijing says it halted $37bn Ant IPO to protect market stability (Financial Times), which shows Chinese regulators’ tightening grip on the whole micro-lending sector and Ant’s eating of humble pie in Ant to hand back $167m after flotation blow (Daily Telegraph, Matthew Field and James Cook) as the company has been forced to repay over 1.5m investors who put money into the listing that then got postponed. Chastening times for the payments behemoth!

…in other news…

I thought I’d leave you today with a Christmas gift idea in ASOS mocked for selling studded Crocs that customers describe as ‘2020 in a shoe’ (The Mirror, Paige Holland). Hmmm.

1. In CORONATRENDS NEWS, we see why Lockdown 2.0 may not be so bad and consider more winners and losers
2. In FIN/TECH NEWS, Ant Group’s IPO gets a kick in the teeth and Nvidia/Arm is getting Chinese resistance
3. In INDIVIDUAL COMPANY NEWS, Ikea says it’s ready for lockdown, BNP benefits from trading revenues and Deloitte grows its legal arm
4. AND FINALLY, I show you why you need to put the lid down…

So we look at how Lockdown 2.0 may not be as bad and identify some winners and losers…

📣 IMPORTANT NOTICE: THIS IS A REMINDER THAT THE MEMBERSHIP STRUCTURE OF WATSON’S DAILY WILL CHANGE FROM MIDNIGHT ON BONFIRE NIGHT THIS WEEK. There are some very exciting upgrades coming which I will reveal over the next few days that no-one else offers. Paying subscribers are the lifeblood of Watson’s Daily and the more we get, the more we can help you because there is so much more to come! At the moment, it’s only £2.99 per month. If you subscribe before the deadline you will not pay more per month for as long as your membership lasts and I will upgrade you to a higher subscription category for no extra cost. Why not take the plunge and improve your knowledge for less than the cost of ONE cup of coffee per month?

Why the UK’s second wave is likely to cause less economic pain than the first (Financial Times, Chris Giles) contends that the level of Covid infections are likely to be lower than March as recent data suggests that “cases have not spiralled out of control”, death rates haven’t increased and there is some evidence to say that the growth rate of the virus is actually slowing. Economists believe that although the effects of a second lockdown will be bad, the consequences will be less damaging than they were the first time around as it’s not a complete shutdown and because restrictions are supposed to end in December, it is thought that consumers are more likely to postpone rather than cancel their spending plans. * SO WHAT? * You always have to take what economists say with a pinch of salt because they are always adjusting their forecasts. However, I would agree with the view that this lockdown won’t be as damaging as the first because a) we have the benefit of more experience of lockdown and how to cope with it, b) not everything has shutdown like last time and c) because there is a concrete spending catalyst on the horizon in the form of Christmas. I believe that IF this second lockdown does not extend, consumers will spend once more before Christmas because that is all many of us can look forward to at the moment! 

Meanwhile, Up to 18,000 high street premises could be vacant amid Covid crisis (The Guardian, Sarah Butler) cites Local Data Company (LDC) analysis which estimates that another 18,000 high street premises could be empty in 2020 as a result of the imminent month-long lockdown. This would mean that 14% of the high street would be vacant – the highest level since the LDC started the survey

in 2013. So far, a net 7,834 outlets closed in the first half of this year. Retailers in last-minute bid for sales (The Times, Alex Ralph) shows that the likes of John Lewis, Dixons (which owns PC World, Currys and Carphone Warehouse), Waterstones and The Entertainer are all opening late into tonight in order to get in as many sales as possible. Pubs are also cutting their beer prices to reduce the amount they are going to have to pour away. Primark boss eyes 24-hour trading push for Christmas (Daily Telegraph, Laura Onita and Simon Foy) shows that Primark, which does not do any online sales, is pushing for 24-hour trading in December to make up for lost sales under lockdown.

On the other hand, Iceland sales jump 22% during pandemic (Financial Times, Jonathan Eley) shows a potential winner under Lockdown 2.0 as it turns out that sales were up by almost a quarter in the six months to September as consumers rediscovered the joys of frozen food while The surprise success stories ready to ride second wave (Daily Telegraph, Marianna Hunt) highlights other winners including Match Group (benefited from introducing new features such as video dating), Pets At Home (consumers wanted pets and stuff to pamper them with under lockdown), Etsy (people were getting crafty under lockdown) and Pinterest (makes money from advertising and has attracted more eyeballs for its creative idea boards). HelloFresh doubles revenue as consumers snap up meal kits (Financial Times, Alice Hancock) shows that consumers are looking at alternatives to takeaways and Pandemic sets off a scramble to snap up outdoor heaters (Financial Times, Harry Dempsey and Alice Hancock) shows that some people (and businesses) are desperately trying to get hold of outdoor heaters in order to be able to socialise outside. The likes of AEI Corporation and Herschel Infrared Heaters are seeing demand go through the roof but distributors like Heat Outdoors are saying that the sudden nature of demand is resulting in long lead times as manufacturers catch up. Meanwhile, Prices surge as buyers retreat to the country (Daily Telegraph, Melissa Lawford) shows that country houses in the £3-4m price bracket are selling at their fastest rate since 2016, according to Knight Frank, as millionaires seek out agreeable escapes from the city (they spiked in 2016 because they were all trying to beat a stamp duty surcharge on second homes). * SO WHAT? * I have to say that I think that Primark’s push for 24-hour trading when this lockdown ends could be quite a good idea as I’m pretty sure workers would be on for it (to earn money) and it could result in less of a crush, which would be good from a social distancing point of view. Any beneficiaries from the first lockdown are likely to be better prepared this time around and could potentially do even better IMO.

Ant Group gets a bloody nose and Arm/Nvidia faces resistance…

In a rather shocking turn of events, Beijing squashes Ant Group’s mega-listing on the market (Daily Telegraph, Matthew Field and James Cook) shows that the world’s biggest IPO has been snuffed out (for the time being, anyway) by Chinese regulators following a meeting with Jack Ma to address concerns regarding risky lending practices. The Shanghai Stock Exchange suspended Ant just 48 hours before it was to go public. They have told Ma that the IPO cannot go ahead until Ant Group complies with new capital requirements that came into force for financial companies from November 1st. Alibaba, which originally spawned Ant Group and still owns 9% of it, saw

its share price fall by 9% in trading yesterday. Ant IPO/CCP: party pooper (Financial Times, Lex) says that a restructuring of the IPO now looks likely. * SO WHAT? * This just goes to show that Jack Ma overstepped the line once too often in his criticisms of regulation and that the ruling party is giving him a slap. Given all the prestige involved with what will be/would have been the world’s biggest IPO of a true Chinese winner, you would have thought that this is just an annoying bump in the road for an unstoppable juggernaut.

Battle at Arm China threatens $40bn Nvidia deal (Financial Times, Ryan McMorrow, Qianer Liu and Henny Sender) shows that Nvidia’s proposed purchase of Arm Holdings from SoftBank is facing holdups in China as it turns out that the disgruntled head of Arm Holdings’ Chinese venture controls almost 17% of its shares via an investment fund. * SO WHAT? * This could put a major spanner in the works for any deal and so negotiations are ongoing.

Ikea gets ready for lockdown, BNP benefits from trading and Deloitte grows its legal capability…

It’s interesting to see Ikea says second round of lockdowns will have less impact on its business (Financial Times, Richard Milne) as this shows that the flat-pack supremo is confident going into lockdown. It says that it has learned from its mis-steps in the original lockdown and tightened up its supply chain and production in order to keep going. Ikea, which is the world’s biggest funiture retailer, has asked suppliers to work extra shifts over the last few months to catch-up with pent-up demand under the first lockdown. As people have kitted out their home offices, average spend has jumped from €93 to between €118 and €120. It sounds like they are getting ready!

Then in Trading revenues surge at BNP Paribas (Financial Times, David Keohane and Owen Walker) we see that France’s biggest bank reported higher trading revenues and lower-than-expected bad loan provisions, which came together to boost profits above analysts’ expectations. * SO WHAT? * This goes to show that it pays to have diverse revenue streams as a bank. It also confirms the trend seen at other banks with significant trading divisions (e.g. Goldman Sachs, Morgan Stanley etc.) that market participants are benefiting from volatile markets under Covid.

I thought I’d mention Deloitte acquires Kemp Little in UK legal services push (Financial Times, Tabby Kinder and Kate Beioley) because the big four accountant has, at a stroke, doubled the size of its UK legal practice by buying tech-focused law firm Kemp Little. There has been a trend over the last few years for accountants to stray out of their accountancy playpen and dabble in law as they try to broaden their offering on the professional services front. It’ll be interesting to see whether more of this happens and/or whether law firms start to dabble in accountancy…

…in other news…

I thought I’d leave you today on a note of caution with Gross images show why you should always close the toilet lid when you flush (The Mirror, Luke Matthews). Yuck 🤢!

1. In CORONATRENDS NEWS, we take a look at what the forecasters are saying, long-term and short-term winners and losers and how coronavirus is changing behaviour
2. In RETAIL NEWS, Ocado lifts its forecasts while Alibaba makes a fashion investment
3. In INDIVIDUAL COMPANY NEWS, Nexi buys payments rival Nets for €7.2bn, China Evergrande raises $2.2bn and Serco loses a big contract
4. AND FINALLY, I bring you a scary train incident…

So we look at what more lockdown means in the long and short term and how it’s changing behaviour…

📣 IMPORTANT NOTICE: THIS IS A REMINDER THAT THE MEMBERSHIP STRUCTURE OF WATSON’S DAILY WILL CHANGE FROM MIDNIGHT ON BONFIRE NIGHT THIS WEEK. There are some very exciting upgrades coming which I will reveal over the next few days that no-one else offers. Paying subscribers are the lifeblood of Watson’s Daily and the more we get, the more we can help you because there is so much more to come! At the moment, it’s only £2.99 per month. If you subscribe before the deadline you will not pay more per month for as long as your membership lasts and I will upgrade you to a higher subscription category for no extra cost. Why not take the plunge and improve your knowledge for less than the cost of ONE cup of coffee per month?

Lockdown wipes out hopes of growth, warn forecasters (The Times, Philip Aldrick) shows that economists are, surprise surprise, cutting their growth forecasts as Lockdown 2.0 is about to kick in. The National Institute of Economic and Social Research is expecting a GDP contraction of 3.3% in Q4 – the sharpest quarterly drop since 1955 excluding the 19.8% drop in the April-June quarter. Goldman Sachs, Morgan Stanley and Credit Suisse are among the others who are also trimming their forecasts as well while the Bank of England is due to release its forecasts this Thursday. This latest development combined with the end of the Brexit transition period is likely to mean rocky conditions for the economy going into the end of this year and the beginning of next at the very least.

Ten ways coronavirus crisis will shape world in long term (Financial Times, Martin Wolf) is an excellent article which I suggest you read in full if you can because it takes a look at what we’ve already learned and extrapolates it forward. It suggests the possibility of a long wait for a vaccine, permanent economic damage, a change in the structure of economies as behaviours change, the increasing importance of tech (and increasing need to control it), possible increased centralisation of government, higher taxes on “winners”, a shift away from populism (Jair Bolsonaro, Boris Johnson and Donald Trump haven’t done well from this outbreak), increased protectionism, a shift in pace and emphasis of globalisation and a possible reset of global standards on things like the environment. Which sectors are likely to win or lose from the pandemic (Financial Times, Peggy Hollinger) is another article that I think you should read in full if you have the time because it takes a look at specific areas. Obvious winners will include Big Tech companies who help us work from home, deliver our shopping and entertain us while losers include the aviation, travel and leisure industries. However, other trends are likely to emerge. Any companies making non-essential products are likely to lose out (because people will just put off purchasing them). Those who rely on the corporate dollar will also suffer as companies chose to video-conference more and travel less (so hotels may have to pivot and convert rooms to temporary workspaces).

Behaviour is also changing as Goldman and Deutsche bank staff told to work from home in new City exodus (Daily Telegraph, Lucy Burton) shows that two major employers in London are encouraging working from home – soon to be followed by the likes of UBS and JP Morgan among others – as we go into lockdown on Thursday. Such changes could become more permanent as Schroders, for

instance, has told staff they will never have to come to the office for five days a week again. Tourism drain forces West End to consider possibility of life beyond pure retail (Daily Telegraph, Melissa Twigg) is another brilliant article which highlights thoughts about the future from the New West End Company – specifically, that Oxford Street and Regent Street will soon evolve from pure retail and become a mix of hospitality, art, health and beauty where people will also work and live. Areas with more diversification, such as King’s Road and Brompton Cross, are faring better than Oxford Street and Regent Street because they rely far less on tourism. I mentioned John Lewis last week as getting permission to use 45% of the floor space in its flagship store for offices and it is interesting to note that rents can change depending on the floor they are on. For instance, ground floor retail space on Oxford Street costs about £100 per square foot to rent versus £25 per square foot for space on the third or fourth floor. However, if you convert the space on the higher floors, you can get £75 per square foot.

In terms of specific winners and losers, though, Number on furlough in UK may double during England lockdown (The Guardian, Richard Partington) cites research from the Institute for Employment Studies (IES) thinktank and the consultancy Capital Economics which estimates that the number of workers on furlough could double this month to up to 5.5million, setting a rather gloomy scene. World’s largest cinema chain says sales down more than 90% (Financial Times, Anna Nicolaou) highlights a massive coronavirus hit to AMC Entertainment and cinemas in particular – which is likely to get worse – and Pubs and restaurants slash prices ahead of second lockdown (Financial Times, Alice Hancock) highlights the rush before shutdown as the leisure and hospitality industry readies itself for one more hurrah. Pub chains including JD Wetherspoon, Greene King and Mitchells & Butlers have now stopped deliveries and are now cutting prices to as low as 99p a pint in order to clear current stocks and having to pour it all away (because it’ll go off during lockdown).

On the other hand, some winners have emerged. Covid-19 slammed rental-car firms, then business turned around (Wall Street Journal, Nora Naughton) shows that although car rental firms suffered disaster initially as international travel evaporated, they have since benefited from more people looking to travel by car (and avoid public transport) and rising used-car prices (ditto). That whole theme about people retreating to their favourite brands (as recently evidenced by the likes of Unilever, Reckitt & Benckiser and Procter & Gamble) was also echoed in Mondelez’s sales in emerging markets bounce back (Wall Street Journal, Annie Gasparro) as sales of its snacks and chocolate (including things like Oreos and Trident gum) continued to improve while Clorox books record sales jump on disinfectant demand (Wall Street Journal, Sharon Terlep and Dave Sebastian) shows that an increasing general desire for better hygiene is benefitting companies that supply cleaning products. Clorox saw its sales rocket up by 27% – its fastest growth in at least twenty years!

* SO WHAT? * When you take all of this together, it just goes to show how society as a whole is having to adapt and that many temporary changes are likely to morph into permanent ones as our whole lives adopt a very different timetable. I think that we are all getting used to the idea of prolonged disruption – but I believe that when a vaccine is found, we will be in for another massive shift in behaviour as people joyfully return to previous pursuits – including going into the office to see colleagues! This will be the subject of a forthcoming Watson’s Monthly…

Ocado lifts its forecasts and Alibaba invests in fashion…

Ocado expects bigger profits as Covid fuels online grocery demand (The Guardian, Sarah Butler) shows that the online specialist has hiked up its full-year profits forecast yesterday by a massive 50%, sending its share price up by 8% in trading yesterday. Although there seems to be no stockpiling underway at the moment, volumes are still high. Ocado’s £200m robot deal should impress foreign markets (The Guardian, Nils Pratley) shows that things could get even better long term for Ocado as it announced that it was buying San Francisco-based Kindred Systems for $262m and the Las Vegas-based robotic arm designer Haddington Dynamics for $25m. These acquisitions are expected to enhance Ocado’s “robotic manipulation capabilities”. * SO WHAT? * Rising demand for online grocery sales is hardly surprising – but I would have thought that the acquisition of these two companies could have a positive impact on efficiency and costs over the longer term. I really believe that one of the things that

coronavirus will lead to is increased automation as companies seek to insulate themselves from a future pandemic by ensuring that they won’t have to have workers all operating in close proximity to each other. It will be a long road, but the pandemic has had the effect of stamping on the accelerator of change when it comes to automation.

Alibaba is sewing up stake in fashion site (The Times, Simon Duke) shows that the Chinese e-tailer giant – along with luxury specialist Richemont – is considering a $300m investment in online fashion marketplace Farfetch. News of this interest sent Farfetch’s share price up by 13.8% in trading yesterday (interestingly, the company is actually based in London but trades on the New York Stock Exchange). Farfetch connects luxury boutiques and brands with fashion followers. * SO WHAT? * This would be great for the currently loss-making Farfetch and contributes to the momentum that is building in the company. Farfetch is really trying to get a piece of the Chinese market and this could be a fabulous way in, especially given that consumer spending patterns have changed due to travel restrictions. It will no doubt be hoping for Alibaba’s assistance in helping it to access the well-off Chinese consumer. 

Nexi buys Nets, China Evergrande raises a ton of money and Serco loses a big contract…

Other stories doing the rounds today include Nexi in exclusive talks to buy Nordic payments rival Nets for €7.2bn (Financial Times, Arash Massoudi and Silvia Sciorilli Borrelli) which shows the Italian payments provider offering to buy Danish rival Nets in an all-paper deal. * SO WHAT? * This is the latest deal among payments providers, another recent one being Worldline’s takeover of Ingenico. Payment providers need scale as online shopping activity continues to increase, hence all the consolidation.

Elsewhere, China Evergrande shares jump after developer raises $2.2bn (Financial Times, Thomas Hale) highlights a 5.2% jump in the share price of China’s largest property group due to it announcing a big asset sale to Shenergy Group. This is an important development because concerns have been building about China Evergrande’s financial health.

Then in Serco hit by loss of nuclear submarine contract (Financial Times, Gill Plimmer) we see that outsourced services provider Serco lost a contract with the MoD to manage facilities that develop warheads for British nuclear submarines as the facilities will be renationalised. The shares fell by a chunky 12% as a result but Serco: fission trips (Financial Times, Lex) suggests that although this is a blow, Serco has managed to broaden its income base versus a few years ago, so the impact will be limited.

…in other news…

I thought I’d leave you today with the rather shocking incident in Train saved from disaster by giant whale after crashing through barrier at end of track (Metro, Jen Mills). Wow! What a save!

1. In MACRO & OIL NEWS, we look at the US election and beyond, downbeat Eurozone forecasts, UK lockdown implications and an agreement with TfL whilst oil prices fall
2. In RETAIL NEWS, footfall slides, toyshops close, Sainsbury’s looks like getting a Christmas boost while Sweaty Betty proves popular
3. In GAMING NEWS, Sony and Microsoft go head-to-head and videogame popularity surges in the US
4. AND FINALLY, I bring you the right way to eat Jaffa Cakes…

So the US election looms large, Eurozone and UK economies look tricky and oil prices weaken…

Will the US election pave the way for fresh stimulus? (Financial Times) highlights an important question as it is going to be a busy week in America. There’s the presidential election tomorrow, a two-day policy meeting of the Federal Reserve starting on Wednesday and the latest employment data release on Friday. Things have been slowing down of late as everyone waits to see who will get the keys to the White House and the state of limbo may continue if it takes a few days or a few weeks to count the votes given the record number of mail-in ballots due to the pandemic. A Biden win is expected to prompt a more generous stimulus package but nothing is certain, especially where Trump is concerned! Trump threatens legal action over swing state vote (Financial Times, Courtney Weaver and Peter Wells) shows that the President is threatening legal action against the result (unless he wins, presumably!) given that he is alleging that there is a potential for fraud in Pennsylvania and Nevada, two swing states. Some are saying that there could well be a delay in declaring the result because of huge numbers voting.

Meanwhile, Eurozone economic forecasts slashed as fresh lockdowns imposed (Financial Times, Martin Arnold) cites a survey by the Financial Times which shows that the eurozone economy is now expected to contract by 2.3% in the fourth quarter of this year (many economists surveyed

had expected growth previously) and Second England lockdown fuels fear of double-dip recession (The Guardian, Phillip Inman and Larry Elliott) shows that the Bank of England’s Monetary Policy Committee (MPC) is now expected to release more stimulus in the economy to cushion the blow of a second lockdown in an announcement due on Thursday.

Sticking with the UK for a moment, Sadiq Khan and Boris Johnson strike London transport rescue deal (Financial Times, Jim Pickard and Philip Georgiadis) shows that the two sides have reached an agreement for the moment with a rescue package of £1.8bn for TfL to keep bus and tube services going for the next six months. Further discussions will continue on another package for the following fiscal year, but at least this has addressed the immediate need. Talks have been testy, but some important concessions include keeping the size of the congestion zone as it is while fares will not have to increase by more than RPI inflation +1%, as agreed in early summer. On the other hand, TfL will have to come up with £160m in cost savings over the six months and pay any concessions for under-18s and pensioners by itself.

Then in Oil prices drop as new lockdowns hit economic outlook (Financial Times, Hudson Lockett) we see that the new European lockdowns have prompted fears that demand will fall. Brent crude fell to $35.74 in Asia, hitting its lowest level since May and West Texas Intermediate was down to $33.64. * SO WHAT? * Clearly there is going to be a slowdown in economic activity but I think that there is a risk here that the downside could be overestimated – after all, China is recovering strongly and economies aren’t COMPLETELY shutting down – so it could be far worse IMO.

Footfall is down and toyshops close while Sainsbury’s looks forward and Sweaty Betty proves to be popular…

Footfall to slide by two thirds as retailers face lockdown nightmare (The Times, Gurpreet Narwan) cites research by Springboard which shows that footfall is expected to drop by 62% year-on-year over the six weeks to Boxing Day – about double the drop it had been predicting before the announcement. Retailers rebounded sharply after the first lockdown was lifted but this is going to be a tough blow to take. The British Retail Consortium’s chief exec Helen Dickinson said that the new rules will do “untold damage” to retailers and the chief exec of the British Independent Retailers Association, Andrew Goodacre pointed out the rather sobering fact that the high street lost 25% of independent retailers in the last lockdown, with the implication that it could be worse this time around. * SO WHAT? * Clearly this is a very serious situation. However, I get the impression that retailers were steeling themselves for another lockdown anyway – and some have been putting more effort into much earlier pre-Christmas promotions. Although this will undoubtedly be catastrophic for many, I think that the true depth will be determined by how long the government keeps us under lockdown for. I would argue that if it keeps to its initial deadline there is still the possibility of consumers flocking to shops to buy in the run-up to Christmas whereas if it extends the deadline, it really could be terminal for far more high street operators.

In Toyshop lockdown may dampen Christmas joy for children (The Guardian, Zoe Wood) we see that many kids will be disappointed by Lockdown 2.0 in an industry that has been struggling for quite some time anyway. December accounts for 25% of the UK’s annual £3.6bn in toy sales but there may be another problem in prospect – if lockdown creates pent-up demand, some toy chains are concerned that they might not be able to make up for lost sales on reopening given social distancing rules. * SO WHAT? * Fortunately, under Lockdown 2.0, retailers will still be allowed to sell online and operate click-and-collect services, but many feel that it will not make up for lost sales. I wonder whether retailers could potentially offer a

timeslot system for shoppers where they have to book time. This would help the social distancing thing and, I would argue, may lead to more sales per customer because I think that people who book will have a higher propensity to spend – and spend more. Having said that, it could also put customers off, but given that most of us will not have seen the inside of a non-supermarket for a month by that time, we may just be keen enough to do the booking thing…

Elsewhere, Sainsbury’s set to ride sales boost into Christmas (Daily Telegraph, Laura Onita) shows that although Sainsbury’s is likely to be cautious about the end of the year, it is likely that all grocery retailers will do well going into the end of the year. The extra costs that they all incurred early on in the pandemic have stayed the same but sales are likely to go up and they are all better prepared this time than they were last time around. * SO WHAT? * I would expect grocers to be winners once again under lockdown because people will be focused on having a decent Christmas because that’s all than many of us can look forward to! After all, there will be no parties, no office parties, no other gatherings to go to – so all there is left is to enjoy Christmas at home! All of the grocers will get a lift IMO, but some will “win” more than others. I would say that a longer lockdown would favour the likes of Tesco, Sainsbury et al. (because they’ve got their own delivery capacity) whereas the budget operators – Aldi and Lidl – won’t do so well because they will have more limited delivery capacity.

I thought I’d mention Sweaty Betty in dash for new investor (The Times, Ashley Armstrong) because it is a British company that is currently surfing the “athleisure” wave alongside the likes of Canada’s Lululemon. Sweaty Betty is currently backed by L Catterton, an American private equity firm, and has over 60 outlets in the UK, US, Canada and Hong Kong. The founders have asked Goldman Sachs to seek out other private equity interest that could give the company a valuation of around £250m. Gymshark is another example of a British premium “athleisure” winner as it recently sold a 20% stake to General Atlantic which valued the brand at over £1bn. * SO WHAT? * This sounds quite interesting, but it is thought that Sweaty Betty is unlikely to achieve a rating as high as Gymshark’s due to it still being exposed to having traditional stores that will obviously be hit by lockdown.

Sony and Microsoft go head-to-head while videogames continue their rise in popularity in the US…

Sony and Microsoft look to match the hype with PS5 and Xbox launches (Financial Times, Leo Lewis, Kana Inagaki and Tim Bradshaw) highlights the fact that the imminent launch of new consoles from Sony and Microsoft will present a unique opportunity to prosper at a time when other entertainment like live events, sport and going to cinemas are nowhere to be seen. Interestingly, the CFO of Sony told investors that the real money is going to be made in software – not the consoles themselves. Some observers estimate that given the constraints of the current pandemic, production and distribution costs will mean that Sony could lose up to $170 per PS5 and may not hit the break-even point for three years – and Microsoft has also said that it could face a drag on gross margins as well. * SO WHAT? * Consoles are almost always a loss-leader (Nintendo is a notable exception to this), but the argument

goes that this is far outweighed by the earnings you get over a console’s lifetime. Production costs also go down as the years progress as more effective production techniques and cheaper components lead to eventual profitability on the hardware. This is going to be one hell of a launch, though!

Then in From ‘Fall Guys’ to ‘Among Us,’ how America turned to videogames under lockdown (Wall Street Journal, Sarah E.Needleman) we see that videogames are getting even more popular than they already were pre-lockdown. Existing players are playing more, former gamers are dusting off their old consoles and there are new gamers all the time as everyone tries to entertain themselves during lockdown. * SO WHAT? * Some of these games are the only way that gamers can communicate with friends and I think that a prolonged period of being shut indoors with limited entertainment options will cement and grow what is already a very popular pastime. I would imagine that this could have very interesting implication for the growth of e-sports as they will not be affected by social distancing and will plug successfully into the current upswing in gaming popularity.

…in other news…

I thought I’d leave you today with something shocking in Jaffa Cakes confirm ‘correct’ way to eat them – and it’s blowing people’s minds (The Mirror, Courtney Pochin). Well I never!

1. In MACROECONOMIC & OIL NEWS, the US economy bounces back, oil hits a low and Exxon makes deep cuts
2. In FAANG NEWS, Facebook’s revenues rise, Amazon aims to keep up with demand, Netflix ups its prices and Google’s ad sales return
3. In CORONATRENDS NEWS, Moderna collects deposits, Lloyds Bank benefits from the housing market frenzy, Kraft Heinz and Kellogg benefit from comfort eating, Hornby benefits from lockdown demand but Anheuser-Busch suffers from home drinking
4. In INDIVIDUAL COMPANY NEWS, VW gets back to profit, Starbucks sees customers return, Walmart stops gun sales and Juul settles for a more modest valuation
5. AND FINALLY, I bring you a method for making crispy roast potatoes…

So the US economy rebounds, oil hits a new low and Exxon axes employees…

Economy bounces back but deeper trends hint at enduring woe (The Guardian, Dominic Rushe and Michael Sainato) cites Bureau of Economic Analysis figures which show that GDP rose at an annualised rate of 33.1% between July and September and increased 7.4% versus the previous quarter. The previous record for a quarterly figure was a 3.9% increase in 1950 and Trump was obviously keen to claim the credit, tweeting that these figures were the “Biggest and Best in the History of our Country…Sleepy Joe Biden and his proposed record setting tax increase, would kill it all”. * SO WHAT? * This is an impressive jump and Trump is obviously going to be making the most of this given we are less than a week away from the presidential election. In order to win, he needs to steer the narrative away from coronavirus (it’s not going well) and towards the economy (it looks like it is going well, although it’s far from being out of the woods!). The thing is, this sudden hike comes from a very low base as the second quarter showed a historic slump and these wild swings make accurate predictions more difficult. Trump can take credit for this boost, though, because of his

decision to reopen most the economy – but the downside has been more coronavirus cases. I imagine that this GDP figure is something he is going to make most mileage out of in the final stages of the presidential election in order to drown out any coronavirus criticisms.

Oil sinks to lowest since May on fears new Covid rules will hit demand (Financial Times, David Sheppard) highlights the fact that oil prices fell to their lowest level since May as rising infection rates in Europe have prompted fears of a return to March and April lows when demand dropped through the floor. The Brent crude price has fallen by 10% this week in its worst performance for over six months. Brent went below $20 a barrel in April and then stayed in the $40-45 range for a lot of the summer as the Opec+ group cut production, but increased lockdown restrictions are expected to hit demand once again. Exxon to slash up to 15% of global workforce, including 1,900 jobs in US (Wall Street Journal, Christopher M Matthews) shows ongoing fallout in the industry as the low oil price persists. The announcement follows job cuts by rivals such as Royal Dutch Shell, BP and Chevron who are all trying to survive the downturn. * SO WHAT? * Although more lockdowns are bound to affect demand, I wouldn’t have thought it would be as severe as March and April given that everyone’s demand disappeared overnight at the same time. If you add China’s apparent recovery into the mix, at least you have somewhere that could take up the slack – unlike the situation back in the Spring. 

Facebook and Amazon continue to do well, Netflix increases prices and Google’s ad sales return…

Facebook revenues up more than 20% despite ad boycotts (Financial Times, Hannah Murphy) shows that Facebook has beaten market expectations with a massive revenue rise in the third quarter and an even better fourth quarter in prospect as ad revenue demand continues to strengthen. On the downside, the number of active users in the US and Canada fell versus heightened levels experienced in the second quarter. * SO WHAT? * It just goes to show how little effect the Facebook boycott had in the summer where over 1,000 brands – including the likes of For and Coca-Cola – pulled their ads from the platform for at least a month. This boycott went ahead in protest at Facebook’s alleged failure to tackle hate speech. The Facebook juggernaut trundles on…

Amazon says keeping up with holiday shopping demand will be tight (Financial Times, Dave Lee) shows that the e-tailing giant believes that sales in the fourth quarter will easily smash the $100bn level for the first time ever and that demand will be so strong that shoppers are being advised to buy in early. Just to give you an idea about how well things are going, when the company published its third quarter earnings yesterday, it posted a net income between July and September that beat Wall Street expectations by 71%! * SO WHAT? * Amazon’s share price is up by 66% since the start of the year but it came off by 2% yesterday because some investors baulked at the prospect of rising shipping costs and Covid-related spending (plus presumably some of them were just taking some profit off

the table). Mind you, the company’s cloud computing business, AWS, continues to power ahead as revenues grew 29% in the third quarter – so that should help to mitigate costs to some extent. The company now employs over 1m people globally – up 50% this year, excluding contractors. This company just keeps getting bigger and better! I really do think that Big Tech needs to get regulated before it gets too big.

Netflix raises prices as competition increases (Wall Street Journal, Joe Flint) shows that the streaming giant has enough confidence to raise the price of its most popular subscription plan for the first time since January 2019 – from $12.99 to $13.99 for the standard plan and $15.99 to $17.99 for the premium service – in an increasingly competitive market. The announcement comes soon after the company’s third quarter subscriber projection miss. * SO WHAT? * The company says that the price increase is to cover rising costs of production but this move will surely benefit the likes of Walt Disney’s Disney+, AT&T’s HBO Max, Comcast’s Peacock and Amazon’s Prime Video as they will look cheaper in comparison and people may use this as an excuse to change.

Then in Google ad sales bounce back sharply from pandemic slump (Financial Times, Richard Waters) we see that Google’s advertising business showed a much bigger uptick from the lowest point of the outbreak powering earnings and revenues of parent company Alphabet way above market expectations. This announcement boosted the company’s share price by up to 9% in after-hours trading! * SO  WHAT? * Funnily enough, given that the company is now under investigation by the Department of Justice, chief exec Sundar Pichai tried to play down this outperformance, saying that it was more of an industry uplift rather than anything company-specific. Yeah right 😁. Ad momentum just keeps on building!

Moderna collects deposits, Lloyds benefits from real estate, comfort eaters power Kraft Heinz and Kellogg while Hornby and Anheuser-Busch benefit from more home time…

Moderna rakes in over $1bn in deposits for potential Covid vaccine (Financial Times, Hannah Kuchler) shows how things have turned around dramatically for the formally lossmaking US biotech as it has received over $1bn in deposits from governments around the world for its potential Covid-19 vaccine. Interestingly, Moderna has elected not to partner up with a pharmaceutical giant, instead deciding to keep its worldwide rights meaning that it would receive all the profits from a coronavirus vaccine. * SO WHAT? * Sounds like a bold move to go it alone – but let’s hope that Moderna pulls through as this could be the making of the company! The company’s share price has jumped up by a whopping 250% so far this year so everything is riding on this potential vaccine.

Lockdown property boom drives Lloyds back to profit (Daily Telegraph, Lucy Burton) shows that burgeoning

demand in the UK property sector since lockdown – and Sunak’s stamp duty holiday – has powered Britain’s biggest high street lender to making a £1bn pre-tax profit over the latest quarter. Mortgage levels have not been this high since 2008!  * SO WHAT? * This is great for Lloyds for the moment but the elephant in the room is what happens now that Sunak’s original furlough scheme comes to an end and unemployment inevitably rises.

It seems that we are all hunkering down at home during lockdown, which is great for a lot of companies. Kraft Heinz and Kellogg raise profit forecasts in wake of processed food boom (Financial Times, Alistair Gray) shows that the two household names have benefitted from consumers seeking out that warm fuzzy feeling of familiarity as they experienced huge demand for their respective products, Lockdown sales boom puts model railway-maker Hornby back on track (The Guardian, Joanna Partridge) shows that families’ efforts to peel kids away from their mobile devices have benefited sales of Scalextric and Hornby train sets, helping the company to return to profitability – but Brewer hit by drinkers’ home habit (The Times, Robert Miller) shows that quarterly profits were hit at Anheuser-Busch Inbev, the world’s biggest brewer, as the shift to home drinking led to rising costs because more packaging is involved.

VW returns to profit, Starbucks sees returning customers, Walmart stops gun sales and Juul settles for a lower valuation…

In a quick scoot around other news stories this morning, VW drives back to profit amid cost-cutting and new car sales (Daily Telegraph, Alan Tovey) shows that the car maker returned to profit in Q3 due to cost-cutting and stronger sales in China and Starbucks says customers are coming back to cafes (Wall Street Journal, Heather Haddon) shows that customers are returning more quickly than it had anticipated, giving it confidence to announce its prediction of sales growth next year.

Elsewhere, Walmart pulls guns, ammo displays in US stores, citing civil unrest (Wall Street Journal, Sarah Nassauer) shows that concerns about civil unrest going into the presidential election next week are such that the retailer has decided to removed all guns and ammo from sale! WTAF 😱😱😱?!? Fortunately for those people who really just want to buy a gun for some harmless fun, they can still buy guns and ammo by request at roughly half of Walmart’s 4,700 US stores 🤪.

Then in Juul cuts valuation to $10billion (Wall Street Journal, Jennifer Maloney) we see that the e-cigarette maker has cut its own valuation to about $10bn – in stark contrast to the $38bn it stood at two years ago when tobacco giant Altria bought a 35% stake. * SO WHAT? * It just goes to show how much protest and pressure has affected this company that was once one of America’s most valuable start-ups. It cut almost half of its workforce last month and is looking at pulling out of most overseas markets. How the mighty fall (especially if they encourage teens to vape)…

…in other news…

I thought I’d leave you this week with a how-to on a vital life skill in Chef says trick to perfectly crispy roast potatoes is ‘seven minute shuffle’ (The Mirror, Paige Holland). I have a different method that works consistently, but I might save that for a future Reel…

1. In MACRO & MARKETS NEWS, India/China relations get testier, Germany and France impose new measures and markets wobble
2. In CONSUMER/CONSUMER GOODS-RELATED NEWS, Visa and Mastercard point to a nervous US consumer (but US car sales are strengthening), UK estate agents push for a stamp duty holiday extension, LVMH/Tiffany is back on and Sony aims high for its PS5
3. In TECH-RELATED NEWS, Apple targets search but faces French privacy problems while Pinterest revenues climb
4. In INDIVIDUAL COMPANY NEWS, Heineken announces cuts, Glaxo wanes, Next delights and John Lewis goes for mixed use at its flagship
5. AND FINALLY, I bring you an exploding dessert…

So relations between India and China continue to be tense, Germany and France impose new measures to control the virus and markets weaken…

*** It’s THURSDAY today, which means that it’s ZOOM time! This is a Zoom call where I talk about the week’s key business and financial markets news and open it up to questions from YOU where you can ask anything you like. The call for PAYING SUBSCRIBERS starts at 5.30pm and finishes at 6.30pm. In this call, I do the weekly roundup, Q&A and interactive group discussion. Joining details for this call are HERE. If you want to upgrade to be a paying subscriber, please click HERE. Hopefully I will see you later! Don’t be shy – say hello!

Prior to this call I will be doing an Instagram Live starting at 5pm on the Watson’s Daily Instagram channel where I will talk about a few themes from this week, update you on what’s going on at Watson’s Daily (there’s a lot!) and answer any questions you may have ***

India takes its tussle with China to the high seas (Financial Times, Amy Kazmin) shows that relations between the two neighbours continues to be tense as India increased its presence in disputed waters in the South China Sea with a warship. Relations have been pretty tense over the summer after China soldiers killed 20 Indian soldiers on the Himalayan border and this latest move extends the testiness to the sea. China’s navy easily outmans and outguns India’s – and it is expanding more quickly as well. However, some say that India has a geographical advantage as most of China’s energy supplies

have to pass through it. * SO WHAT? * Until now, successive Indian governments have been reluctant to rattle China’s cage, but Beijing’s development of Indian Ocean ports in places like Sri Lanka, Pakistan and Djibouti have forced a rethink – with the drama in the Himalayas probably being the final straw. I think that this is pretty significant in that it shows a major shift from trying to appeal to China to being very wary of it. India has plans to reinforce its maritime infrastructure whilst also boosting its defence co-operation with Washington.

Then in Germany and France impose fresh curbs to slow Covid-19 spread (Financial Times, Michael Peel, Victor Mallet, Guy Chazan and Erika Solomon) we see that both countries are tightening restrictions on social contact in response to the rising number of infections. France has announced a new one-month national lockdown (although schools, factories and companies would remain open) and Germany’s new restrictions – which will come into force on Monday and last until the end of November – will shut down all restaurants, bars and virtually all public entertainment.

All of this had knock-on effects, as per Markets fall as prospect of winter lockdowns in Europe triggers sell-offs (The Guardian, Rob Davies) which shows that markets around the world took a tumble on investor concerns about a second wave in the northern hemisphere. * SO WHAT? * I would expect markets to be volatile for some time yet as they move upwards on falling case numbers and vaccine testing announcements and downwards on rising case numbers, faltering businesses and vaccine delays – not to mention what’s going to happen in the forthcoming US presidential election. It’s obviously going to be a bit more complicated than this, but you get the general gist.

The US consumer is getting more cautious (although car sales are rising), UK estate agents push for an extension of the stamp duty holiday, LVMH/Tiffany is back on and Sony has high hopes for the PS5…

In terms of the US consumer, Visa and Mastercard earnings highlight consumer spending woe (Financial Times, Robert Armstrong) shows that retail spending in the US has basically flatlined since July, which disappointed investors in Visa and Mastercard who were hoping for more. The companies were also hit by the fact that cross-border transactions, which have higher fees, have fallen sharply due to ongoing global travel restrictions. This is significant given that such transactions made up about 40% of Mastercard’s revenue pre-coronavirus. But then again, US car business vrooms back from pandemic nadir (Wall Street Journal, Mike Colias and Nora Naughton) shows that the pace of new-vehicle sales in the last few months has meant a return to pre-crisis levels. Luxury vehicles and high-end pick-up trucks are proving to be particularly popular, powering the likes of Fiat Chrysler and Ford to strong quarterly performances that beat market expectations. Having said that, there is a lurking danger in the form of a coronavirus second wave, so it would probably pay to remain at least a bit cautious at this stage regarding immediate prospects. * SO WHAT? * Super-low interest rates and government stimulus have helped consumers afford to buy cars and there is something to be said for the argument that household spending has been reprioritised. Money not being spent on going on holidays and going out more generally is being redirected towards “feathering the nest” (DIY projects etc.) and buying a new vehicle. I would have thought that the potential for this kind of growth to be sustainable will depend a lot on who wins the US presidency next week and what policies they put in place.

Back in the UK, Calls to extend stamp duty holiday by six months (Daily Telegraph, Melissa Lawford) shows that a group of industry bodies is, somewhat unsurprisingly, appealing to Chancellor Rishi Sunak to extend the stamp duty holiday by six months. They are arguing that the deluge of home sales in the pipeline may not beat the

current deadline, but let’s face it they are scared that a March deadline will kill sales after that date and the industry will see a massive drop-off. * SO WHAT? * The recent wave of transactions has been powered by the deadlines of both the Help to Buy scheme and stamp duty holiday ending on the same day (so everyone is trying to get things sorted before this) as well as the release of pent-up demand that was stoked by lockdown. The processing of all these transactions has been made more complicated by the shift to working from home which has led to the average for transaction processing to stretch from 12 to 20 weeks. It remains to be seen whether Sunak will bend on this. I would have thought that he’d want to avoid a hard deadline (i.e. stamp duty holiday and then suddenly back to normal) and perhaps do a staggered taper of the holiday otherwise things could get messy for buyers and sellers.

Meanwhile, Tiffany agrees to new deal terms with LVMH (Wall Street Journal, Cara Lombardo and Dana Cimilluca) shows that crisis (and massive legal fees) have been averted as Tiffany has agreed to accept a lower takeover price from LVMH to allow the deal to go forward. LVMH will now pay $131.50 per share for Tiffany versus the $135 per share it promised to pay back in November. * SO WHAT? * Thankfully, sense has prevailed and both sides have pretty much got something out of it all – which is what negotiation is all about! LVMH got a lower price and Tiffany got its sugar daddy. Now everyone can move on although the economic backdrop ain’t exactly rosy!

Sony sets 100m sales target for new PlayStation 5 console (Financial Times, Kana Inagaki) shows that the consumer electronics giant has set a sales target for the new console as it simultaneously raised its annual profit guidance by 13%. This will come as a welcome development at a time where sales of smartphone camera sensor sales are dropping off sharply (Huawei is its second biggest customers in this area. Apple is number one). Game sales and PlayStation Plus subscriptions have risen under lockdown and it is thought that this is likely to continue. Sony: angels and demons (Financial Times, Lex) points out that the company is currently on a valuation discount to its gaming rival Nintendo (but that this is because of the exposure to Huawei) and that console launches can be expensive initially. However, sales of high margin services like game downloads and online subscriptions are rising fast, so things should turn up.

Apple focuses on search and gets in hot water while Pinterest sees rising revenues…

Given all the fuss about Google, its search engine and exclusive contracts, Apple intensifies its efforts to replace Google search (Daily Telegraph, James Cook) is hardly surprising. Apparently, its new software iOS 14 includes a limited Apple search engine but its webcrawler, Applebot, which builds up a vast map of the internet has been increasing its activity. Apple clearly needs a plan B for if its current deal with Google gets compromised. However, Apple hit with antitrust complaint in France over privacy controls (Alex Barker, Patrick McGee and Leila Abboud) shows that Apple is now facing problems in France over its plans to restrict trackers used for mobile advertising. A coalition of trade groups in online advertising complained to France’s competition authority to ban Apple from

applying privacy controls early next year that would cripple their business. * SO WHAT? * Apple wants to ask users for permission to be tracked across apps and websites, which will no doubt result in a massive reduction in access to the info that powers mobile advertising. The coalition argues that Apple is saying on the surface that it is doing this for privacy reasons, but that the real reason is to stifle competition.

In Pinterest revenue soars as pandemic boosts engagement (Wall Street Journal, Sarah E. Needleman) we see that Pinterest announced strong user and revenue growth in the third quarter as engagement rose and advertising revenues rose during the Facebook advertising boycott. Whether or not that trend will last is questionable but it is a step in the right direction. These results powered the company’s share price up by 24% in after hours trading yesterday. Pinterest certainly seems to be on the up with monthly users rising by 37% in the third quarter, with particular strength outside the US.

Heineken announces cuts, Glaxo weakens, Next surprises on the upside and John Lewis goes for mixed-use…

In other news doing the rounds today, Heineken to cut head and regional office jobs by a fifth on profits hit (Financial Times, Judith Evans) highlights more deep cuts in the management of the world’s second-largest brewer as part of a restructuring process prompted by the coronavirus. It is the first company of the “Big Three” global brewers (the others being Anheuser-Busch InBev and Carlsberg) to announce major job cuts during the pandemic. Tough times. No doubt others will follow suit.

Then in Lower vaccine rates drag on Glaxo (The Times, Alex Ralph) we see that disruption to non-Coronavirus vaccinations have negatively impacted GSK’s quarterly

sales. A combination of lockdowns and patient reticence at visiting surgeries have meant fewer vaccinations overall. FWIW, I would have thought that these would come back sharply when there is a Coronavirus vaccine as patients may decide to get them all done at the same time or in quick succession.

In retail, Next warns new lockdown would wreck festive sales (Daily Telegraph, Laura Onita and Simon Foy) shows that although sales were strong in the third quarter, they could fall by 20% in the all-important fourth quarter in the event of a second lockdown. Then in Half of John Lewis flagship will turn to offices (Daily Telegraph, Louise Moon) we see that John Lewis has just been given the go-ahead to turn almost half of its flagship Oxford Street store to office space. * SO WHAT? * I think this could well be something that other department store operators get involved in as they try to turn things around. I really think that the days of big department stores in city centres are numbered. Mixed use makes so much more sense IMO and gives the stores an installed customer base.

…in other news…

I thought I would leave you today with the hilarious dessert-related incident in Woman suffers mortifying fail on camera while trying to enjoy a crème brûlée (The Mirror, Rosaleen Fenton). Brilliant 😂!

1. In M&A AND IPO NEWS, AMD buys Xilinx, LVMH and Tiffany renegotiate terms and Airbnb aims for a listing
2. In TECH NEWS, Microsoft rides the cloud and TikTok turns to Shopify
3. In AUTOMOTIVE NEWS, Waymo does a deal with Daimler Trucks, Daimler buys into Aston and Jaguar Land Rover hits profit
4. In INDIVIDUAL COMPANY NEWS, BP profits but warns about the future, UK banks consider charging and Big Hit Entertainment slides
5. AND FINALLY, I bring you some “offensive” fusion…