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…

So AMD buys Xilinx, LVMH and Tiffany try to resolve differences and Airbnb goes for a listing…

AMD agrees to buy rival chip maker Xilinx for $35bn (Wall Street Journal, Asa Fitch) highlights further consolidation in the chip industry as Advanced Micro Devices announced plans to buy rival Xilinx in an all-paper deal that will broaden their product range significantly. The deal will need to get regulator approval but comes only weeks after Nvidia announced plans to purchase Arm Holdings for $40bn. AMD/Xilinx: stock take (Financial Times, Lex) shows that this is quite an opportune move by AMD as Xilinx has suffered for quite some time due to the US/China trade wars and Huawei-bashing (Huawei is a Xilinx client). In making this move, AMD will become a bigger producers of FPGAs (Field-Programmable Gate Arrays) than Intel and will help it grow its cloud computing business. * SO WHAT? * The fact that AMD’s share price has shot up by about 80% this year has given it currency to make such a move. In this business it is important to have scale to make further ground to keep up with customer demand for specialist chips and an enlarged entity with different client bases should provide new opportunities. The industry consolidation continues…

Given what’s going on at the moment, LVMH and Tiffany in talks to cut price of $16.6bn deal (Financial Times, James Fontanella-Khan, Leila Abboud and Arash Massoudi) is hardly surprising. Basically, the deal was originally agreed at a very high price shortly before coronavirus hit, it was (probably) a watertight contract and LVMH’s chief exec, Bernard Arnault, tried to back out completely (using the French government to put pressure on – although they obviously denied any involvement). The original deal was for LVMH to pay $135-a-share in cash for Tiffany, but it seems that Tiffany’s stance has softened to the point where it now says it is willing to look at offers above $130-a-share whilst LVMH could be happy with something under $133. Every $1 reduction would equate to a saving of around $120m. * SO WHAT? * All I can say is that contract must have been tight as to tie LVMH to this deal as I am sure that it would have explored every possible avenue to make a swift exit! Surely a compromise will happen, no?

Then in Airbnb announces plans for Nasdaq listing (Daily Telegraph) we see that Airbnb has announced that it aims to list on the Nasdaq and raise $3bn in an IPO, which would give it an implied valuation of over $30bn. This came after there was speculation that it would list before the end of this year. If it did, it would be the index’s third-biggest IPO after Facebook and Mondelez International.

Microsoft soars on cloud computing and TikTok turns to Shopify…

Microsoft’s earnings continue to ride pandemic-fueled demand for cloud, videogaming (Wall Street Journal, Aaron Tilley) shows that the tech giant believes that catalysts that have driven its current strength – demand for cloud computing services, videogaming and PCs – will continue at least until the end of the year. It said that sales rose by 12% during the first quarter of its fiscal year, which was above market expectations on revenue and profit. Sales from Azure, its cloud computing division, increased by 48% from the previous year while its gaming content business saw a sales rise of 30% versus the same period last year. With the new XBox Series X gaming console hitting the shops in a few weeks’ time, you would expect a further spike. * SO WHAT? * Overall, the results fell slightly short of the market’s expectations, but I would have thought that Microsoft is right in assuming recent catalysts will continue. Companies will shift to the cloud, students and white-collar workers alike will continue to power PC

demand as they work from home and gaming revenues should improve with a new console and winter on the horizon (people wanting to snuggle up indoors playing console games rather than go outside!). Longer term, maybe its search engine Bing may get a lift if the US Justice Department decides to come down hard on Google in its just-started antitrust case.

TikTok moves into social ecommerce with Shopify deal (Financial Times, Tim Bradshaw and Hannah Murphy) heralds a move by the app towards ecommerce as it has announced an alliance with the Canada-based Shopify that will enable users to shop while they scroll through videos, bringing it line with others such as Facebook, Instagram and Pinterest. * SO WHAT? * This form of shopping has been around for a while now in China and it seems that we are all just playing catchup! Apps such as WeChat, Kuaishou and Pinduoduo in China have powered sales in the country worth about $253bn this year versus just under $20bn in the US last year – so you can see that there is MASSIVE growth potential here. Shopify has made huge gains under lockdown as retailers rushed to give themselves online capability and I don’t see this ending any time soon! Its growth rate may, however, slow down following lockdown frenzy.

Waymo does a deal with Daimler Trucks, Aston Martin gets a boost and Jaguar Land Rover becomes profitable…

In a look at what’s going on in the automotive sector at the moment, Waymo strikes self-driving lorry deal with Daimler Trucks (Financial Times, Patrick McGee) highlights the autonomous driving specialist’s partnership with commercial vehicle group Daimler Trucks to power big lorries. This will be Alphabet-owned Waymo’s first partnership in the trucking sector and the two companies will work together on building a self-driving version of Daimler’s Freightliner Cascadia, with a view to making it available to US customers “in the coming years”. This sounds interesting, but I still think that we will be waiting for years to see driverless trucks on our roads in any numbers.

Elsewhere, Mercedes takes 20pc stake in Aston Martin (Daily Telegraph, Alan Tovey) shows that the German carmaker is going to take a 20% stake in the troubled Aston Martin. It will also supply Aston with engines and

powertrains as part of the deal – and some are even saying that this could pave the way eventually for a full takeover. * SO WHAT? * Aston Martin has had a nightmare since it floated two years ago at a valuation of £4bn. It is now worth £1bn, chief exec Andy Palmer was booted in May and a consortium led by Lawrence Stroll took over subsequently. Former Mercedes exec Tobias Moers was then installed as chief exec. No doubt this would make a Mercedes takeover much smoother if it did happen!

Then there’s some more good news in Jaguar Land Rover steers back into profit as sales rise (Daily Telegraph, Alan Tovey) which shows that JLR has actually returned to profit following coronavirus carnage which led to production shutdowns and cost-cutting. Car sales were up by 53.3% versus the preceding quarter but down by 12% (which I don’t think sounds that bad, considering!) versus the same quarter last year. Sales in China are picking up and demand for its new Defender have been pretty good. * SO WHAT? * This sounds OK, but there is still a lot of work to be done here. Its legacy of too-much-diesel-and-not-enough-electric will take time to overcome, for instance, but let’s hope that the new boss, Thierry Bolloré, will be able to work some magic. He’s got his work cut out in this market, though!

BP profits but then cautions, UK banks look at charging and Big Hit Entertainment gets the blues…

BP warns of volatile future for oil market as it returns to profit (The Guardian, Jillian Ambrose) shows that the oil giant has returned to a modest underlying profit for the third quarter but tempered this with a warning that the oil market as a whole will face a volatile future under the pandemic. * SO WHAT? * Yes, things aren’t great at the moment, but they have been a lot worse. I think that chief exec Bernard Looney is just piling on the misery at a time when the company is cutting 10,000 jobs and shoring up its finances. It seems to me that global trade is rising slowly from the ashes and that a higher oil price can’t be that far behind, especially as China appears to be recovering at a decent rate. When that builds momentum, I would expect BP’s prospects to improve further.

Banks look at charging for current accounts (Daily Telegraph, Lucy Barton) shows that banks are considering charging for current accounts as the historically low interest rate is killing their ability to earn money. If one

starts, it is highly likely that others will follow – and it looks likely that HSBC will be the first or at least one of the first.

Then in South Korean boy bands give investors a case of buyers’ remorse (Financial Times, June Yoon) we see that post-IPO blues are setting in among investors who saw the IPO of BTS’ management company Big Hit Entertainment shoot up and subsequently explode, like dynamite, leaving them with a cold dose of reality. Retail investors have been badly burned already after the share price rose from Won135,000 to Won270,000 and beyond before currently settling at Won156,000. As I have said before, BHE is far too reliant on one band, BTS. Two of the seven members are due to go off on compulsory military service for two years in the near future and then there’s the problem that most K-pop groups tend to peak after five years – BTS has been around for seven. * SO WHAT? * BHE doesn’t really have anything in the pipeline either song-wise or artist-wise other than BTS, so if it can’t grow organically, it may have to take the more expensive route of buying in talent. Having said that, lockdown has presented new possibilities – two online concerts held by the band were highly lucrative, bringing in more money than “real” concerts and merchandise sales were more than double what they would be normally. Will this be the way to go in the future?

…in other news…

I thought I would leave you today with something that some will class as an abomination in Gordon Ramsay’s £48 ‘pizza beef Wellington’ blasted by fuming Italians (The Mirror, Rosaleen Fenton). I actually happen to think this sounds quite nice 😋

1. In MARKETS & CORONAVIRUS TRENDS, US and European markets weaken and we see how Lockdown 2.0 could highlight different winners
2. In FINTECH & TECH NEWS, Ant Group aims to raise $34bn, Facebook moves into cloud-based gaming and SAP takes short term pain for long term gain
3. In INDIVIDUAL COMPANY NEWS, Dunkin’ talks to an acquiror, DHL hires more staff and The Hut Group ups its sales forecasts
4. AND FINALLY, I bring you some sleep guidance…

So markets weaken and Lockdown 2.0 winners may be different…

US and European markets dip as Covid containment efforts founder (The Guardian, Jasper Jolly) highlights US and European stock market weakness as new restrictions are rolled out across Europe to combat the rising number of cases whilst uncertainty over a potential US stimulus package and the impending US presidential election took their toll. It seems that summer optimism, powered by the reopening of economies, has been replaced by concern once more as the potential reality of a second wave hits. This seems to me like volatility going into the final straights of a US election rather than anything else.

The big winners of Lockdown 2.0 will be very different (Daily Telegraph, Matthew Lynn) is a really interesting article which breezes through the winners of Lockdown 1.0 (Apple, Google, Zoom and Netflix among others) but then suggests that the winners of the next lockdown will be different because tech is losing momentum (Netflix subscriber numbers have been slowing down and stellar gains by tech more generally are arguably unsustainable), consumers are embracing familiarity, comfort and more cleanliness(just look at strong results from the likes of

comfort-brand stalwarts like Nestlé, Unilever, Procter & Gamble and Reckitt Benckiser) and because businesses are adapting to the changing environment. Most recently, investment banks have been posting very strong figures (mainly down to trading and investment banking revenues) and publicly-traded restaurant stocks like Domino’s and Chipotle have hit record highs because they have switched their respective business models to doing more take-outs and slimming down their menus. * SO WHAT? * The main argument here is that Big Tech won’t be the only winners in Lockdown 2.0. I think that this is true to an extent but that a lot of future success will depend on the length and depth of Lockdown 2.0. I am not convinced that restaurants, for instance, can continue to survive on take-outs. If unemployment increases, I would have thought that take-outs should decline because they are a luxury IMO. Do you, for instance, spend £30 on a Domino’s pizza for two plus a few sides or do you put that towards your food bill and buy one for £4 from your supermarket and make do? Also, if everyone is doing take-out, the competition is just increasing – which potentially dilutes any gains that are there to be had. I think that companies are doing all they can to survive and although some of this pivoting is working right now, it is not always going to be sustainable. I think that Big Tech will continue to be the dominant force under lockdown by far, but growth rates will be slower.

Ant Group aims high, Facebook moves into cloud-based gaming and SAP has to play the long game…

China’s Ant Group to raise more than $34bn in record IPO (Financial Times, Hudson Lockett) shows that the fintech giant is aiming to raise over $34bn in its upcoming dual listing in Shanghai and Hong Kong in what will be the largest amount of money ever raised in an IPO, eclipsing even that of Saudi Aramco last year. It is expected to list on November 5th. * SO WHAT? * The pricing values Ant Group at around $313bn, which makes it roughly equal in size to JP Morgan Chase. Ant IPO: earth-shaking arthropod (Financial Times, Lex) says that although these numbers are impressive, the valuation is not excessive because there are risks in future over more regulation stifling some of the innovations that have brought the company to this point. Also, an increased crackdown on Chinese tech companies around the world (especially in the US and India) could stifle its progress. In the short term, however, things like the Singles Day shopping festival will continue to power its revenues.

Meanwhile, Facebook moves into cloud gaming (Wall Street Journal, Sarah E. Needleman) shows that the social media giant is the latest Big Tech company to signal its move into the future of gaming. It will be adding streaming to its Facebook Gaming platform for free – in contrast to the subscription-based model preferred by rivals such as Google (Stadia) and Microsoft (xCloud). The six games will be available for players to stream in some parts of the US initially but Facebook added that there will be more games accessible in more regions as time goes on. * SO WHAT? * More established “players” in this genre include Sony’s Playstation Now (with 2.2m paid subscribers) and Nvidia’s GeForce Now (4m registered users, which includes free and

paid subscribers) show that there is appetite for this kind of thing even though the tech is arguably not quite up to it at the moment. I think that once 5G properly kicks in, however, this will really take off as it will mean that you will get a good quality gaming experience on any device. I think that cloud-based gaming is an important development for Facebook as it will be another way of getting more people to spend longer on its website – something that is, and will continue to be, key to growing its advertising revenues.

Staying with Facebook but moving on from one type of gaming to another (politics!), Campaigns rush to submit Facebook ads ahead of limits (Wall Street Journal, Emily Glazer, Patience Haggin and Alexandra) shows that both Republican and Democratic political advertisers raced to submit their ads to Facebook before the end of Monday after Facebook decided not to allow any new political ads in the week leading up to Election Day – a move designed to limit misinformation that could lead to rioting. This won’t stop advertisers from moving onto other platforms and influencers, however! The bun-fight always intensifies in the closing stages as political campaigns raise and spend a lot of money during this time.

Meanwhile, SAP shares drop as software maker cuts forecasts (Financial Times, Joe Miller) shows that Europe’s largest software company slashed its revenue and profits forecasts for the year due to Covid prompting companies to rein in their spending. The company’s share price fell by a chunky 22% yesterday as a result but SAP: cloud busting (Financial Times, Lex) suggests that the SAP’s transformation from a licensing-based model to a cloud-based model will take time and money to execute properly, so it must take some short term pain to make long term gains.

Dunkin’ talks excite, DHL commits to more staff and The Hut Group ups its forecasts…

In other news doing the rounds today, Dunkin’ Brands in talks to be acquired by Arby’s parent (Wall Street Journal, Dave Sebastian) shows that Dunkin’ Brands Group, the parent company of Dunkin’ Donuts and Baskin-Robbins, is in early talks to be taken private by Inspire Brands, which owns brands such as Arby’s, Buffalo Wild Wings and Jimmy John’s. * SO WHAT? * Shares in Dunkin’ rose by 15% on the news although nothing’s been finalised – but this latest development does provide a ray of hope for a Dunkin’, which has had a tough time under lockdown and recently announced the closure of about 800 locations in the US.

Elsewhere, there’s good news in DHL hires 10,000 workers as it prepares for record Christmas season (Financial Times, Joe Miller) as the German delivery company said it hired more additional workers in the run-up to Christmas in anticipation of the continued boom in online shopping. The company expects this period, which encompasses Black

Monday and Cyber Monday, to see deliveries boosted by over 50% versus last year and has invested €1bn in extra capacity. Growth in delivery companies continues!

Then in Hut Group is hot property after rapid rise in sales forecasts (The Times, Alex Ralph and Tom Ball) we see that THG raised its forecast for annual sales yesterday after only floating on the stock market last month! The company announced this upgrade due to Q3 revenues rising by 38.6% year-on-year. * SO WHAT? * Despite the company’s share price rising from £5 at its flotation last month to over £6.94 yesterday, it has come under criticism for shortfalls in corporate governance best practices – including having the founder Matthew Moulding in both the chief exec and exec chairman roles. This actually held it back from listing on the FTSE100 even though its valuation would have guaranteed it entry. However, it sounds like these concerns are being addressed by announcing the appointment of independent special advisers to its board committee as well as the future appointment of non-executive directors. If this goes ahead and Matthew Moulding agrees to release his grip slightly, an entry into the FTSE100 would make the company’s share price shoot up again as more funds would have to buy it.

…in other news…

I thought I’d leave you today with a guide about something that is very dear to me in Exact time you need to go to bed to not feel tired – based on when you have to get up (The Mirror, Zoe Forsey). Unfortunately, it does not tell me when I need to go to bed given I get up at 4am every day to write Watson’s Daily!

1. In CORONATRENDS NEWS, private jets get popular, home workers seek refuge elsewhere, Lloyds tells staff to go home until spring and copper prices rise
2. In RETAIL NEWS, Debenhams’ suitors face a deadline while Cath Kidston returns online
3. In INDIVIDUAL COMPANY  NEWS, Apple faces Google fallout and the Oxford Covid trials go well
4. AND FINALLY, I bring you a dancer’s save and some dodgy handwriting…

So private jets soar, home workers escape, Lloyds staff go home and copper demand rises…

Hello there! Just wanted to remind you that I’m doing an Instagram Live tonight at 5pm with April Parker – aka According To A Law Student – for the launch of our e-book on Commercial Awareness. Just follow us on Instagram and see us tonight!

Private jets take off as wealthy flyers seek to avoid virus (Financial Times, Philip Georgiadis and Alice Hancock) shows that increasing numbers of wealthy flyers are snapping up places on private jets to avoid breathing the same air as us dirty plebs 😁, according to a number of private jet operators and brokers. Passengers can often drive straight to the plane without mingling with anyone else – and they are willing to pay up in rising numbers. * SO WHAT? * Interestingly enough, while commercial flight numbers were down by around 50%, private flight numbers only fell by about 10% between September 1st and October 15th versus the same time period last year. Although companies like Colibri Aircraft, LunaJets and Flexjet have benefited from strong demand, they are feeling nervous going into the end of the year due to tightening restrictions around Europe designed to avert a second wave. There is a fear that falls in the number of business trips will actually have a knock-on effect on leisure travel as many business travellers use their loyalty points on holidays.

Desperate UK home workers renting solace from nimble-footed firms (The Guardian, Joanna Partridge) shows that some businesses are pivoting to supply out-of-home working alternatives as increasing numbers of home workers are going stir-crazy. They provide a workspace, decent wifi and refreshments and Fraser Campbell, who is ambassador for Dewar’s whisky, has set up a “work from bars” initiative designed to showcase venues that are now offering this service. Hilton has started to offer day rentals across most of its 160 UK hotels, European group Accor (which owns brands such as Novotel and Ibis) is doing something similar across its 220 UK locations and David Lloyd fitness club has reported a 40% rise in online inquiries for corporate membership as companies appear to want to offer their employees gym access and an alternative workspace. * SO WHAT? * Businesses are being forced to be creative in order to survive and any efforts to

do so are to be applauded. I do not know how long this is sustainable, but if it buys time then that has to be a good thing. I also wonder whether in some cases, this could continue post-Covid. If it did, this would be very bad news for the likes of WeWork as it would provide yet another alternative for solo workers.

In Lloyds orders staff home until spring (The Times, Louisa Clarence-Smith) we see that Lloyds Bank has told the majority of its employees not to come back to the office until at least springtime in a memo circulated last week to its 65,000 staff. It had originally asked most of its staff to work from home if they can until the end of the year. Rivals Barclays and Nat West have also given staff similar guidance for various periods. * SO WHAT? * This is another blow to London especially as fewer office workers = lower footfall at retailers. Data from retail researcher Springboard says that weekly visits to central London have fallen by the sharpest margin versus anywhere else in the country – down almost 60% versus the previous year. This compares to a 48% decline in regional cities and 26% in market towns. Having said that, this may actually be good news for high streets in suburban areas that have seen an uptick in customer traffic as people working from home try to support their local area.

Then in Copper price soars on back of China’s Covid-19 recovery (The Times, Tom Howard) we see that copper prices broke through the $7,000 a ton level last week – its highest level since June 2018 – in a 12% rise so far this year. This has been due to three things. Firstly, increasing demand from China, the world’s biggest consumer of raw materials, as it cranks up the number of new infrastructure projects to stimulate the economy; secondly, the yuan is at its highest level against the dollar since summer 2018, meaning that it is cheaper for China to buy copper; and thirdly, there have been supply disruptions as mines have had to close due to coronavirus-related restrictions, especially in Chile, which produces about 30% of global supply. * SO WHAT? * Given that copper is used in so many things, including electric vehicles, their batteries and chargers and water pipes, it makes sense that demand is rising as economies try to encourage building and infrastructure projects. There may be another boost to come in the form of Joe Biden winning the US presidential race as he is expected to spend big on green energy and infrastructure. Companies like Anglo American and Antofagsta are among those who could benefit from a Biden victory as they have exposure to a higher copper price.

Debenhams suitors face pressure and Cath Kidston emphasises online…

Suitors get three days to bid for Debenhams (The Times, Ashley Armstrong) highlights the fact that we are now entering, as Sir Alex Ferguson would put it, “squeaky bum time” as prospective buyers for the stricken department store have been told by advisers to put in a proper offer by the close of business this Wednesday or walk away. Mike Ashley’s Frasers Group has been dithering (although, TBF, he did try to buy it ages ago but was rebuffed) and if it continues to do so, the whole chain could be liquidated or broken up and sold off in bits to a group of hedge funds including Silver Point Capital. * SO WHAT? * It’ll be interesting to see whether Frasers Group is successful. I would have thought it makes strategic sense if nothing else, given all the other assets that Mike Ashley owns, but I

would have thought loads of stores and jobs would be in line for the chop if he took the reins. Mind you, I think that would happen whoever “wins”. The company itself is obviously talking a good game – saying that trading had been better than expected – but of course they are going to say that! We’ll just have to wait for the outcome…

Cath Kidston set to put on the chintz but its future is online (Daily Telegraph, Laura Onita) highlights a new dawn for the purveyor of “timeless” flowery bits and pieces as it moves forward with online sales, having ditched all 60 stores in the UK in April as footfall evaporated overnight. It has continued operation throughout lockdown and will actually reopen its Piccadilly store in November as its flagship and sole physical branch. * SO WHAT? * Covid no doubt accelerated the physical stores’ demise but the company seems to have had a turbulent time of it over the last few years. At the end of the day, although its designs are said to be “timeless”, many said the same about Laura Ashley years ago and look where that’s gone. Trends ebb and flow, so let’s hope for the company’s sake that it manages to track the trends rather than lag them.

Apple could face Google fallout and the latest on the Oxford Covid trials sounds positive…

Apple’s booming services business could be hit in Google antitrust battle (Wall Street Journal, Tim Higgins) shows that the lawsuit brought last week against Google by the US Department of Justice could actually take a major toll on Apple. This is because the massive deal that Google has with Apple to be its default browser – which it has had for 15 years – could be a major target of any punishment. * SO WHAT? * Given that Google pays Apple the equivalent of

20% of Apple’s overall profits under this deal, the danger is clear. However, investors seemed to be pretty calm about this last week – presumably because they think that this case will drag on for years and that Apple will make more money elsewhere in the meantime. Still, this is a case that is definitely worth following!

There’s some good news in Oxford Covid vaccine trials offer hope for elderly (Financial Times, Sarah Neville, Clive Cookson and Anna Gross) as one of the vaccine frontrunners – the one that is being developed between the University of Oxford and AstraZeneca – looks like it has produced a “robust immune response in elderly people” – the group most at risk from the coronavirus. * SO WHAT? * This is great, but we should only really be getting excited when/if the vaccine gets through phase three trials.

…in other news…

I thought I’d leave you today with a spectacular save in Dancer praised for incredible reaction after bottomless brunch goes wrong (The Mirror, Rosaleen Fenton) and the occasional hilarity of parenthood in Dad left cracking up after seeing daughter’s accidentally rude ‘handwriting practice’ (The Mirror, Courtney Pochin). I have a number of these examples myself from my own kids! If I can find them I shall dig them out for you…

1. In CONSUMER NEWS, Sunak gets more generous, consumer confidence takes a dent and take a bit wealth hit
2. In RETAIL/CONSUMER GOODS NEWS, Gap considers European closures, Hermès and Kering show a recovery in luxury, Barbie sales take off, Coca-Cola fizzes and Guinness announces a zero alcohol version
3. In TECH NEWS, Intel weakens and we see that Microsoft might benefit from Google’s woes
4. In INDIVIDUAL COMPANY NEWS, Gilead gets remdesivir approval and BA’s owner cuts capacity
5. AND FINALLY, I bring you a challenge – real house or dolls’ house? You decide…

So Sunak caves, consumer confidence is hit – as it personal wealth…

Sunak announces more generous UK jobs support scheme (Financial Times, Jim Pickard, George Parker and Robert Wright) shows that the Chancellor has promised an additional £11bn of support for jobs and businesses over the next six months in order to avoid mass unemployment going into winter. He said that his original winter plan, which was announced a month ago, was made with a re-opening economy in mind, but given that things have gone the opposite way, he has had to revisit. The winners (and losers) as Sunak splashes more cash (Daily Telegraph, Marianna Hunt) highlights winners – businesses will now benefit from the government paying 61.67% of unworked hours (it was going to be 33%), those in hospitality, accommodation and leisure under Tier 2 restrictions will be able to claim cash grants of up to £2,100 per month according to the rateable value of their property (this was only going to be available to those under Tier 3 restrictions) and the self-employed will be able to claim a new grant until February that will cover 40% of a freelancer’s average

monthly profits (it was going to be 20%), with a ceiling raised from £1,875 to £3,750. Losers will include company directors and the newly self-employed who still fall outside these criteria and freelancers will still have to pay tax on the grant. * SO WHAT? * This sounds like it’s better than what was on the table before, but it’s not perfect. Hopefully this will help to ease the inevitable rise in unemployment at least to some extent.

Meanwhile, Drop in UK consumer confidence fuels double-dip recession fears (Financial Times, Valentina Romei) cites data from research company GfK which shows that UK consumer confidence, spending and mobility has fallen in October to its lowest level since May as consumers have become more pessimistic and in Britons suffer world’s biggest hit to wealth in pandemic (The Times, Ben Martin) we see another study by Credit Suisse which shows that total household wealth in Britain has taken the biggest hit of any of the world’s leading economies in 2020. This study looks at financial and real assets (including property) net of debts. * SO WHAT? * Given what’s going on, I don’t think the findings of any of these studies is going to surprise anyone – apart from the Bank of England’s chief economist Andy Haldane, perhaps, as he kept on banging on about a V-shaped recovery. My @rse.

Gap considers drastic measures, Hermès and Kering prove luxury’s resilience, Mattel benefits, Coca-Cola fizzes and Guinness goes zero-alcohol…

Meanwhile, US retailer considering closure of all Europe stores and UK warehouse (The Guardian, Sarah Butler) shows that Gap is thinking about closing all of its 129 company-owned stores in Europe as well as a distribution centre in Rugby next year, putting hundreds of jobs on the line. The company is looking to move to a franchise model (they already have 158 across Europe) as presumably this is cheaper and lessens their exposure to risk. * SO WHAT? * Gap really has lost its way over the years and it is funny to think how popular it once was. Still, it has been slow to capture trends and the “main” brand has been overtaken by the better-performing Athleta and Old Navy brands in the US. I think that the company needs to get its house in order – especially in its domestic market – before getting on the front foot once more. The upside of a franchise model is that you are exposed to less risk, but the downside is that you have less control.

Hermès and Kering add to signs of luxury goods recovery (Financial Times, Leila Abboud) highlights positive signs for the French luxury groups as both companies reported third quarter sales that were above market expectations. Hermès returned to quarterly growth thanks to strong sales of its leather goods and Kering (which owns Gucci, among others) was boosted by strong demand in the China and US. * SO WHAT? * OK, so sales have been hit by travel restrictions cutting the effect of free-spending tourists, but it seems that luxury is bouncing back – rival LVMH last week reported strong sales growth at Louis Vuitton and Dior, for instance. Despite improvement from Hermès and Kering, neither company wanted to give guidance for the

full year, presumably because they have no idea what’s going to happen! FWIW, I wonder whether this is a short term blip in terms of uptick because I really think that in order to truly recover, the industry needs more tourists – and I don’t see that happening for quite some time.

Elsewhere, Barbie sales take off as parents try to cut down on screen time (Wall Street Journal, Paul Ziobro) shows that Mattel’s flagship doll put in an impressive 29% sales increase over the third quarter – the largest quarterly increase for at least two decades – due to parents wanting their children to do something other than stare at a screen and to efforts to widen the variety of dolls it sales with new hair colours, skin tones and career paths (!). There is even a four-pack of election-themed Barbies that includes a candidate and a campaign manager! * SO WHAT? * This is great for now, but I think the real test is going to be the upcoming Christmas season where it will be crucial to get the product mix and distribution spot on.

In beverage news, Coca-Cola rediscovers its fizz after sales slump (The Times, Dominic Walsh) shows that the company bounced back from a second-quarter slump in sales to exceed forecasts in the third quarter. The second quarter was a disaster because about half of its revenues come from “away-from-home” sales – so it was adversely affected by restaurant, bar and cinema closures. Since then, the company has cut jobs, streamlined its product portfolio and concentrated more on its top selling beverages. It remains uncertain about its outlook, however, given economic uncertainty.

Then in My goodness it’s Guinness for new era (The Times, Dominic Walsh) we see that there will be a new non-alcohol Guinness (called Guinness 0.0) launched on Monday that is “100 per cent Guinness but 0 per cent alcohol”. It’s brewed in the same way as the “conventional” black stuff but alcohol is removed by cold filtration. * SO WHAT? * This sounds like a good idea as it taps into the trend for low or no-alcohol beverages. Mind you, with everyone getting drunk at home under lockdown, I wouldn’t have thought this is a product that will do well under Covid. Interesting innovation, though!

Intel weakens and Microsoft could benefit from Google…

In Intel hit as consumers flock to lower-cost laptops, datacentre chips (Wall Street Journal, Asa Fitch) we see that the WFH boost may be fading as revenues fell after seeing strong sales in the first half. It seems that consumers are buying cheaper laptops and datacentre sales are also coming off the boil. The company’s share price fell by over 10% in after-hours trading.

Google’s antitrust woes seen helping Microsoft’s Bing (Wall Street Journal, Aaron Tilley) argues that Microsoft could potentially benefit from any antitrust actions that target Google as its Bing search engine is its only real competitor (but it only has less than 7% market share!). This is quite ironic really because when the US government came down on Microsoft twenty years ago, it was Google that benefited and grew into what it is now. Now it seems that it’s time for Google to return the favour! Nothing’s been decided yet, but it would seem logical that Microsoft will be the one to benefit.

Gilead gets approval and IAG cuts capacity…

In other news doing the rounds today, Gilead secures FDA approval for remdesivir (Financial Times, Hannah Kuchler and Donato Paolo Mancini) heralds approval for Gilead’s Covid-19 drug (called “Veklury”) that is supposed to speed up recovery – and is one of the drugs that Trump received recently. * SO WHAT? * This sounds great, but it’s not a cure or a vaccine – so is unlikely to get everyone too excited. Also, some trials are sceptical as to its efficacy (it was originally developed to treat Ebola).

Then in British Airways owner cuts capacity as losses rise (Daily Telegraph, Simon Foy and Oliver Gill) we see that the owner of British Airways, IAG, has decided to fly no more than 30% of usual flights between October and December due to Covid-related uncertainty (previous plans had targeted 40%). Unsurprising – and another kick in the teeth for the industry. When I see figures like this, I do wonder – who is actually flying at the moment??

…in other news…

I thought I would leave you today with something that will prey on your mind. Is it real or is it a dolls’ house? Decide for yourself in People confused by video of woman’s home which looks like a doll house (The Mirror, Rosaleen Fenton). I think dolls’ house.

1. In FAANG NEWS, Facebook launches its dating site in the UK and we look at why Netflix ain’t dead yet and what’s going on with Google
2. In ELECTRIC VEHICLE NEWS, Tesla’s profits rises as it talks about mining and we see how EV development costs will fall
3. In CORONATRENDS NEWS, Ad demand falls, UK home sales rise and more people eat in with Nestlé
4. In INDIVIDUAL COMPANY NEWS, Ericsson gets Huawei crumbs, PayPal accepts Bitcoin and Quibi shuts down
5. AND FINALLY, I show you how to make your own cola…

So Facebook launches its dating service in the UK and we see how Netflix is still relevant and what’s in store for Google…

*** 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 ***

Labour of love: Facebook’s UK dating service is here (Daily Telegraph, Michael Cogley) highlights Facebook’s rollout of its dating service in the UK and rest of Europe yesterday. Facebook Dating is an opt-in service within Facebook’s main app and lets users match up and go on virtual dates using Facebook’s video call service. The company will be competing in the same arena as the likes of Tinder and Bumble. * SO WHAT? * The service launched in the US over a year ago, is available in 19 other countries and was supposed to launch in Europe on February 13th this year but the Irish Data Protection Commissioner raised concerns, hence the delay. Facebook is keen to get a chunk of the £3.8bn global online dating industry and it differentiates itself from the competition by saying that it gives users “a more authentic look at who someone is”. I think this is a genius idea by Facebook and is a really interesting way of using the data that it’s already got on users. I also wonder whether this will have a side benefit of attracting a younger demographic. If you want to know more about the dating industry, have a look at a report I did on it earlier this year HERE.

I mentioned Neflix’s slowing subscriber growth in yesterday’s Watson’s Daily but Don’t write off Netflix just yet, it’s still mainstream (Daily Telegraph, Ben Marlow) is a good article which argues that although 2.2m subscribers

in the July to September quarter was weak compared to the first and second quarters which saw 16m and 10m new subs respectively – and less than the 3.4m expected by analysts – it wasn’t bad in the scheme of things. * SO WHAT? * Investors obsess over the new subscribers metric but the company continues to see meaningful rises in revenues. It is still the biggest streamer out there with almost 200m subscribers versus 150m at Amazon Prime and Disney’s 60m and has good original content (I would also argue that Amazon Prime member numbers may be puffed up as not all of them use the service – they get Prime for other reasons). Given that people continue to abandon terrestrial TV, it would seem that there is more growth potential to be had – but I still think that at some point over the next few years there will be subscription fatigue and the sector will consolidate.

Google antitrust case backed by rare Washington consensus (Financial Times, Kiran Stacey, Kadhim Shubber and Richard Waters) highlights the gathering momentum against Google and draws comparisons with what happened over twenty years ago when the US Department of Justice filed a competition case against Microsoft and the current case it is now filing against Google. Interestingly, the current case will not examine its online advertising dominance and does not deal with allegations that its commentary is liberal-biased and will concentrate on the anti-competitive element. Funnily enough, Google says that the lawsuit is “deeply flawed” and would “do nothing to help consumers” but when you look at what it says in The rivals who have learnt to live shoulder to shoulder (Daily Telegraph, Margi Murphy and James Titcomb), which draws attention to the close relationship between Google and Apple on search (did you know that Google’s payments to Apple to be its default browser are thought to account for up to 20% of Apple’s annual profits??) and The businesses where Google is biggest (and the ones where it isn’t) (Wall Street Journal, Katherine Riley) which highlights its supreme strength in digital ads, smartphone search, maps (did you know that Google bought Waze back in 2013?), browsers and video (via YouTube), you can see where the anti-competitive allegations come from! OK, so it’s still got work to do in smart speakers, cloud computing and smartwatches but it is no slouch. Google/antitrust: unparanoid Android (Financial Times, Lex) shows that the markets are taking this quite calmly at the moment, but given that fines, divestments and impositions on the way Google does things are all possibilities it would seem that these risks are not fully priced in as yet.

Tesla does well and considers mining its own lithium while UBS speculates about how soon EV production costs will come down…

In Tesla sticks to target as profit rises (The Times, James Dean) we see that Tesla said yesterday that it will stick with its ambitious target to deliver 500,000 cars this year whilst announcing its fifth quarter of profits in a row. It did say that the delivery goal was made more difficult because of the enforced shutdown of its California factory. * SO WHAT? * Interestingly, Tesla would have lost money in the last four quarters had it not been for the hundreds of millions of dollars that other car manufacturers have paid it for “green” credits! Tesla’s move into mining aimed at energising battery supply chain (Financial Times, Henry Sanderson) highlights another aspect of Tesla’s strategy – mining its own lithium. Sceptics say that it will take years for him to be able to do so and that it is more a kick up the backside for the likes of two big US lithium miners, Livent

and Albemarle in order to give them a sense of urgency (“If you don’t do it, we will”). This is all part of an overall strategy of reducing battery production costs.

Talking of reducing costs, Electric cars ‘as cheap to manufacture’ as regular models by 2024 (The Guardian, Jasper Jolly) sounds like a rather ballsy call from the analysts at UBS who based their research on analysis of batteries from seven of the biggest manufacturers. At the moment, it costs a lot more to make an electric vehicle than it does to make the Internal Combustion Engine (ICE) equivalent – base price for a conventional VW Golf is about £20,280 vs the ID-3 starting at £29,990. * SO WHAT? * Reaching parity will be a huge moment because they will at last become viable alternatives for the masses (assuming the charging infrastructure is up to it). UBS analysts reckon that manufacturers who hang on to making ICE vehicles at the expense of EVs will fall behind the likes of VW and Tesla. It added that parity will eliminate the need for hybrid EVs. This all sounds great, but I have to say I don’t see it happening as quickly as the analysts think it will mainly because there still isn’t massive take-up and because of the poor charging infrastructure.

Ad demand weakens, UK home sales strengthen and Nestlé benefits from lockdown…

Pandemic triggers big cuts in advertising (The Times, Simon Duke) cites the closely-watched IPA Bellwether Report which shows that 41% of companies cut expenditure on adverts and marketing in the third quarter in order to save cash in the downturn. The cuts are the second deepest in the 20 years the survey has been going. * SO WHAT? * When things go badly in the economy, one of the first things to get cut is the advertising budget – it is a pretty reliable economic indicator. Although things have improved since the worst of lockdown, they are still not great. The gloom continues.

In Stamp duty move boosts house sales (The Times, Gurpreet Narwan) we see further evidence, this time from HM Revenue and Customs data, that house buying activity is strong – purchases rose by over 20% last month and are nearing their pre-pandemic levels. Thus far, economic concerns have been superceded by the strong desire for people to move. * SO WHAT? * I am expecting this boost to die down going into Christmas as people hunker down for lockdown celebration but then pick back up again in the New Year as people reassess and try to beat the March stamp duty holiday deadline.

Talking of stuffing our faces under lockdown, Nestle sales top forecasts thanks to pet food boom and ‘trusted’ brands (Financial Times, Judith Evans) shows that the world’s biggest food group announced a positive outlook for the full year due to strong household demand for pet food, convenience foods and purchases of “trusted” brands as we all want to feel warm and fuzzy with the things we know best. Chief exec Mark Schneider observed that “By and large the trend to in-home consumption, I think, is here to stay and that bodes well for next year”.

Ericsson benefits from Huawei’s woes, PayPal accepts Bitcoin and Quibi closes down…

In a quick scoot around other stories today, Ericsson shines against backdrop of Sino-Swedish tension (Financial Times, Nic Fildes) shows that Swedish company reported its best quarterly margins for 14 years as it managed to profit from strong Chinese demand for 5G equipment. * SO WHAT? * This sounds great, but the problem is that there’s a bit of a to-do going on at the moment between the Swedish government and China as it has just become the latest country to ban Huawei from getting involved in its 5G networks. It remains to be seen whether any wavering in demand from China (perhaps in retaliation for its treatment of Huawei) will be mitigated by rising demand elsewhere as more countries shun the Chinese telecoms equipment maker. China is the world’s biggest telecoms market, so retaliation could be quite painful.

Then in Bitcoin gets nod of approval from Paypal (The Times, James Dean) we see that the payment provider is going to allow Bitcoin payments for the first time, sending the price of Bitcoin up by 6% to reach its highest level since July 2019. * SO WHAT? * The euphoria is warranted given that PayPal is one of the world’s biggest online payments groups, meaning that there will be more Bitcoin action via

PayPal but also the increased prospect that others will adopt it as well. Customers will be able to trade and hold Bitcoin, Bitcoin cash, Ether and Litecoin in digital wallets on PayPal. This is a major development as it brings Bitcoin closer to the mainstream.

Quibi is shutting down barely six months after going live (Wall Street Journal, Benjamin Mullin, Joe Flint and Maureen Farrell) highlights a dramatic fall from grace for the much-hyped streaming service. The service, which put out shows in 5-10 minute chapters designed for the commute (!) is now shutting down in order to return as much capital to investors as possible. Employees will be laid off and paid off while the company will try to sell the rights of some of its content to other media and tech companies. * SO WHAT? * This just goes to show that an interesting idea, high profile leaders and the backing of Hollywood just wasn’t enough to overcome the unstoppable force of the coronavirus. Conceived at a time when employment was at all-time highs and people were cash-rich and time-poor, it never had a chance against the coronavirus and the effects it had on jobs and lifestyles. While the Disney+ launch was timed to perfection as families hunkered down, I do not think that Quibi’s launch could have been timed worse as people had much more time to enjoy long-form content. I personally thought that shows like “Most Dangerous Game” and “#FreeRayshawn” were really good, but ultimately it was just too expensive. It’s probably quite good news for other streamers, though, because they might be able to buy content at a time when their own stocks are looking increasingly bare due to production lockdowns.

…in other news…

After yesterday’s dodgy photo, I thought I’d bring things back to an even keel today with something altogether more wholesome in How to make craft cola with all natural ingredients (SoraNews24, Oona McGee). You will be quite surprised at the process!

1. In TRANSPORT-RELATED NEWS, Cathay Pacific takes drastic action, airports lose £83m a week, the Trainline boss quits and TfL gets threatened by government
2. In TECH-RELATED NEWS, Google gets sued by the Justice Department, Snapchat adds more users and Sweden is the latest country to ban Huawei
3. In CORONATRENDS NEWS, testing goes to the next level for some, Odeon’s owner AMC Entertainment raises cash, Netflix subscriber growth loses momentum and Reckitt Benckiser cleans up
4. In INDIVIDUAL COMPANY NEWS, Pioneer buys Parsley Energy in another shale deal, Waitrose readies for a price war and Next has wage issues
5. AND FINALLY, I bring you a very unfortunate photo…

So Cathay Pacific makes big cuts, airports continue to bleed cash, the Trainline boss quits and TfL gets heavily leaned on…

Cathay Pacific to slash 8,500 jobs and shut regional airline (Financial Times, Alice Woodhouse and Primrose Riordan) shows that the Hong Kong airline plans to cut almost 25% of its staff and shut down its regional airline Cathay Dragon in attempts to survive the coronavirus-induced decimation of the airline industry. Cathay Pacific said that the latest moves would reduce its monthly cash burn of HK$1.5bn-HK$2bn by HK$500m. * SO WHAT? * Given that passenger traffic has fallen by 98% year-on-year for December and that the airline only expects to run at about 10% capacity for the rest of the year and below 50% for 2021, these aggressive moves are not surprising. Airports lose £83m a week due to Covid, say operators (Daily Telegraph, Charles Hymas) cites figures from the Airport Operators Association which just put a figure on the current carnage afflicting the industry in the UK. Everywhere is suffering.

Meanwhile, on land, Trainline boss quits after cashing in shares (The Times, Ashley Armstrong) shows that the boss of Trainline, Clare Gilmartin, announced she will be leaving in order to spend time with her young family, after selling shares worth £15.8m over the last few months. Her

seven-year tenure culminated in a very successful stock market listing last year and the company’s share price fell by 12.9% on the announcement. She will stay on as a senior advisor after handing over the CEO job to Jody Ford who joined last month from Photobox. * SO WHAT? * This was an unexpected move and it will undoubtedly prompt concerns among investors that something is amiss at the top of Trainline at a crucial time, but at least Gilmartin is staying on in some capacity to provide continuity.

Government threatens to take direct control of Transport for London (Financial Times, Jim Pickard) shows that ministers have threatened to take over Transport for London if Sadiq Khan doesn’t accept a package of measures to unlock rescue funding that include higher council tax, an enlarged congestion charge zone and higher fares for buses and tubes. Khan wants £4.9bn for the next 18 months and a decision was due last Friday but the deadline has been pushed back for two weeks. * SO WHAT? * The government has Khan by the balls and ultimately, I think that he has very little room for manoeuvre. The fact is that bailing out London is going to cost a fortune and Khan will obviously keep arguing for more money (that’s kind of part of his job and you’d expect that) while the government will obviously play the bad guy in this negotiation charade saying that there isn’t an endless supply of money. Any solution is going to have to be a major compromise although I suspect that Khan will have to make more concessions than the government.

Google faces more scrutiny, Snapchat adds users and Sweden bans Huawei…

US challenge to Google’s ‘illegal’ search monopoly (The Times, James Dean) shows that the US Department of Justice and 11 state attorney-generals yesterday filed a competition case against Google saying that it has illegally shut out competitors via a number of exclusive business contracts. This is thought to be the most aggressive action against a tech company since that taken against Microsoft in the ’90s. One such contract is the agreement with Apple – for billions of dollars a year – to make sure Google is the default search engine on iPhones. Critics also cite how Android, Google’s mobile operating system, stops competitors’ search apps from being pre-loaded on mobile phones. * SO WHAT? * Momentum is building against Big Tech at the moment as competition cases are being considered against Amazon, Facebook and Apple. This case against Google could result in various sanctions, including forcing it to sell parts of its business and/or pay hefty fines. Given that Google has a 90% market share for online searches and has the #1 position in online advertising, it has a big target on its back. Let the fireworks begin!

Elsewhere, Snapchat nears 250million daily users as advertisers lift spending on platform (Wall Street Journal, Kimberly Chin) shows that Snap’s revenues shot up by 52% in the latest quarter thanks to increasing user numbers and more advertisers wanting to reach people spending more time on their devices under lockdown. User growth was greater than market expectations and demonstrated decent performance against competition from TikTok and Facebook. The share price rose by over 20% in after-hours trading, which means it is now up by 74% so far this year. * SO WHAT? * This is a decent performance – and as it is one of the first online-ad reliant companies to announce results recently it could indicate similar success for rivals. The final quarter of the year is usually Snap’s strongest and if current momentum was to continue into the Christmas season its revenues could see a serious uptick versus last year.

Meanwhile, Sweden bans Huawei and ZTE from 5G telecoms networks (Financial Times, Richard Milne) shows that Sweden has become the latest country to blacklist Huawei and ZTE regarding involvement in its 5G networks, citing Beijing’s spying and “theft of technology”. This follows Germany’s latest move to cut Huawei out of its 5G plans. * SO WHAT? * Bad news for Huawei and ZTE, more good news for Nokia, Ericsson and Samsung who will no doubt be picking up the business.

Tests get serious, AMC Entertainment asks for cash, Netflix loses momentum and Reckitt Benckiser continues to benefit…

I thought that it would be interesting to bring your attention to Volunteers to be infected with coronavirus in world’s first ‘human challenge’ trials (Financial Times, Clive Cookson) because it sounds like a significant step towards finding a vaccine. The world’s first “human challenge trials” announced officially yesterday will speed up vaccine development by infecting healthy volunteers aged 18 to 30 at a secure clinic in London. Normally, they have to wait to be exposed to the virus while they go about their lives – which could take ages. This initiative will fast-track the process considerably and the company running the project, hVivo, will be looking for willing participants. They are looking for the “fittest of the fit” and could pay about £4,000 if people spend two to three weeks in quarantine during the study.

Under lockdown, we have been avoiding cinemas which has led to Odeon cinema owner AMC to raise cash (Daily Telegraph) by issuing up to 15m of its class A shares but warned even this might not be enough to restructure its debt. If it can’t do the latter the company said that it would go for bankruptcy protection.

We have, on the other hand, been gleefully streaming content under lockdown but Netflix subscriber growth slows amid heightened competition (Wall Street Journal, Joe Flint and Micah Maidenburg) shows a slowing of Netflix’s momentum. It seems that a relaxation of lockdown has resulted in some more energetic liaisons as per Durex sales surge after end of lockdown (The Guardian, Zoe Wood) shows that sales of Reckitt Benckisers’ Durex brand have risen by over 10% in the summer months. In addition to getting down and dirty it seems that consumers have also been getting up and cleaning if strong sales of the company’s Dettol and Lysol brands are anything to go by!

There’s more consolidation in the shale oil industry, Waitrose gears up for a Christmas price war and Next faces pay allegations…

Pioneer strikes $7.6bn deal for Texas shale rival Parsley Energy (Financial Times, Myles McCormick) highlights the second shale oil deal in two days (the other one was yesterday’s ConocoPhillips purchase of Concho Resources for $9.7bn) which will make Pioneer the biggest independent oil and gas producer in the Permian Basin. * SO WHAT? * Industry consolidation continues. Who will be next??

Waitrose and Co-op to cut prices of essential goods by an average of 15% (The Guardian, Sarah Butler) shows that the two supermarkets have laid down a marker this week by cutting prices of a range of basics ahead of the cut-throat Christmas season. This follows a spate of price

cutting from Tesco, Sainsbury’s, Asda and Morrisons. * SO WHAT? * OK, so many of us will not be earning huge sums going into the end of the year but at least our grocery shopping may cost a bit less! Supermarkets will no doubt be hoping to benefit from volume rather than margins.

Then in Next denies destroying records in pay fight (Daily Telegraph, Laura Onita) we see that the company is facing some potentially serious allegations over equal pay. It is alleged that the company disposed of records that would prove that they were paid unfairly. * SO WHAT? * This is an absolute shocker if it is true. However, in the scheme of things, I wouldn’t have thought this would affect the company very much. Just look at the moral outrage that was aimed at Boohoo over its Leicester factory failings – consumers just didn’t bat an eyelid. This is a serious issue – but I just don’t see it affecting the company that much in the short term. It is worth following, however, in case things do blow up…

…in other news…

Now I must admit that the following is a bit naughty. I ummed and arred about including it in today’s edition, but it was so funny that I thought I would! Once you see this, you can’t unsee it: Woman’s photo goes viral after friends spot unfortunate reflection in mirror (The Mirror, Luke Matthews). Oh dear 😱😱😱!

1. In M&A AND IPO NEWS, Conoco Phillips buys Concho, Alibaba takes control of Sun Art, Intel sells NAND business to SK Hynix and Ant’s $30bn gets the go-ahead
2. In CORONATRENDS NEWS, Landsec decides to sell a massive chunk of its properties and Heathrow offers rapid checks
3. In INDIVIDUAL COMPANY NEWS, Universal offers up movies, EVs face fire risk and Boohoo loses its auditor
4. AND FINALLY, I bring you an astrologer’s predictions…

So oil Conoco buys Concho, Alibaba takes control of Sun Art, Intel sells off its NAND business and Ant gets the go-ahead for a massive IPO…

Watson’s Daily will be changing its membership structure after midnight on Bonfire Night (November 5th). If you are an existing paying member (or if you take up a paid membership before November 5th), you will automatically be upgraded to SILVER membership in the new structure AT NO EXTRA COST. In other words, it will only cost you £2.99pm to get £4.99pm of value. Why not upgrade now? Subscribing to Watson’s Daily will really help me to give YOU more!

ConocoPhillips to buy rival Concho in $9.7bn deal (Financial Times, Derek Brower and Myles McCormick) shows that ConocoPhillips is willing to gamble on shale ahead of a hoped-for post-coronavirus oil recovery. It will make one of the world’s biggest independent oil producers a major player in US shale and will catapult its status in the Permian, the world’s richest oilfield, to being a serious rival to ExxonMobil. No cash will change hands, as this is an all-paper deal, and the price represents a 15% premium to what Concho Resources was trading at at the October 13th close. This follows two other recent major acquisitions in shale – Chevron agreed to buy Noble Energy in July for $13bn and Devon Energy agreed to buy rival WPX for $12bn in September. * SO WHAT? * Given the M&A activity in this area, it would seem that big oil companies are now confident enough to use the recent decimation of the shale oil industry as an opportunity to get involved. Conoco/Concho: surfing the wave (Financial Times, Lex) highlights this deal as making ConocoPhillips the third biggest US shale producer and that Concho Resources’ wells are not on government land – so if Biden gets in, the company will be unaffected by his promise that there will be a ban on fracking permits on government property. All they need now is for oil prices to go up…

Alibaba to pay $3.6bn to take control of Chinese supermarket chain Sun Art (Financial Times, Ryan McMorrow) shows that the ecommerce giant has

increased its stake in supermarket operator Sun Art Retail Group from 36.2% to 72% and it is currently offering cash to its other shareholders. * SO WHAT? * Funnily enough, the supermarket chain’s share price shot up by 19% on the news as it bought the shares from France’s Auchan Retail International. Sun Art is China’s #2 grocery chain and it has worked with Alibaba on grocery delivery. Alibaba/Sun Art: fresh meat (Financial Times, Lex) highlights the fact that Auchan’s retreat follows the likes of Amazon, Tesco, Carrefour and Metro as yet another foreigner who failed to crack the Chinese market and that this is a good strategic move by Alibaba as part of its plans to combine online and offline capability using big data.

In Intel enters deal to sell NAND memory unit to SK Hynix (Wall Street Journal, Cara Lombardo and Dana Cimilluca) we see that Intel will be selling its NAND flash memory manufacturing business to South Korea’s SK Hynix for about $9bn that will mark a major move in strategic direction for Intel and make the SK Hynix one of the world’s biggest NAND memory makers. Their combined market share was over 20% in Q2 – a level only bettered by Samsung, which has a market share of over 30%. Intel stated its intentions of investing the cash in fast-growing areas like AI and 5G. * SO WHAT? * This is the latest example of consolidation in the semiconductor industry as players go for scale and broaden their product portfolios. For instance, Analog Devices agreed to pay over $20bn for Maxim Integrated Products in July, Nvidia has offered $40bn for Arm Holdings last month and AMD is in talks to buy Xilinx.

Meanwhile, Beijing gives green light for Hong Kong leg of Ant’s $30bn IPO (Financial Times, Primrose Riordan, Hudson Lockett, Mercedes Ruehl and Ryan McMorrow) shows that Chinese regulators have approved the Hong Kong IPO of Chinese payments company Ant Group. At $30bn, this will be the world’s biggest stock market debut (the company itself is thought to be worth up to $318bn). It will raise even more money than the Saudi Aramco float which raised $25bn last year. Ant Group is planning a dual listing in Shanghai and Hong Kong. It is currently awaiting approval from Hong Kong Exchanges and Clearing.

Landsec decides to sell a ton of properties and Heathrow offers rapid testing…

Coronavirus has made a huge dent in the prospects for UK real estate and Landsec to sell almost a third of its £12.8bn property portfolio (The Guardian, Joanna Partridge) shows that one of Britain’s biggest property companies has decided to sell off a load of its properties over the next few years in order to focus more on growth opportunities in cities. Landsec owns the Trinity Leeds shopping centre and Bluewater in Kent, among others, and wants to spend the proceeds on new developments. * SO WHAT? * It’s interesting to see that the company wants to offload some of its hotel and leisure properties as well as

retail parks in order to invest in offices, retail stores and homes. This all sounds great in a way, but the company did not provide much detail in the announcement so it’s difficult to judge the impact. It’ll be interesting to see who actually buys these properties because I would imagine that many rivals will be doing the same, leading to a crowded market and not great selling prices IMO.

Then in Heathrow to offer £80 rapid coronavirus test for departures (Financial Times, George Steer) we see that passengers flying from Heathrow will be able to pay £80 to get tested for Covid-19 and get the results in less than an hour in a purpose-built facility run by private firms Collinson and Swissport. Airlines including British Airways, Virgin Atlantic and Cathay Pacific will be offering this service to passengers in Terminals 2 and 5. * SO WHAT? * This certainly signals a step forward for international travel, but I don’t expect it’ll have much of an effect on its own. Nothing to get too excited about at this stage IMO.

Universal offers movies, EVs face fire risk and Boohoo has a set-back…

In a quick scoot around some of the other news headlines today, Universal tosses cinemas a lifeline while testing new distribution model (Wall Street Journal, R.T. Watson) shows that Comcast Corp’s Universal Pictures is to release an increased number of films going into the end of the year in order that should boost footfall at cinemas. Most studios have been going in the opposite direction and booting releases into next year. * SO WHAT? * Universal will be testing a new strategy of making films available for online rental sooner than ever by releasing low budget films and experimenting with a new distribution model. These are ideal conditions in which to test this sort of thing IMO as in normal circumstances I would have thought that there would be huge push-back from the cinemas. They are now in no position to bargain and so movie studios can experiment to their hearts’ content.

Elsewhere, Auto makers grapple with battery-fire risks in electric vehicles (Wall Street Journal, Ben Foldy) shows that US safety regulators are this month opening an investigation into over 77,000 Chevy Bolts made by General Motors after complaints of battery-related fires. This isn’t great at a time when car sales are making a nervous recovery and EVs are being touted as the way forward. Not disastrous, but not great either!

Boohoo takes a tumble as auditor stands down (The Times, Ben Martin) highlights a 20% hit to Boohoo’s share price yesterday on news that its auditor, PwC, was stepping down. Investors get spooked by this because it suggests that something dodgy is going on, but I would also add that the company had a bit of a run following its Leicester-related problems over the summer. I would say that this is not a drama yet, but it is worth monitoring. Accountants are getting super-sensitive after a spate of dodgy accounts-related disasters.

…in other news…

I thought I’d leave you with food for thought today in Brit astrologer who ‘predicted’ coronavirus says what’ll happen in next 6 months (The Mirror, Zoe Forsey). Hmm.

1. In MACROECONOMIC NEWS, China GDP grows, Europe faces a double-dip and fund managers back Biden to win
2. In TECH NEWS, it looks like Big Tech will suffer whoever wins the election and Facebook could get a big fine
3. In RETAIL NEWS, UK shops close at a record rate and Hamleys cuts jobs
4. In MISCELLANEOUS NEWS, the US appeals to developing nations to supply networks, increasing electric car adoption is leading to a tussle for charging control while Europe is set to decide on vegan “burgers” or discs
5. AND FINALLY, I bring you the latest trend in handbags…

So China’s GDP grows, Europe faces tricky times and fund managers back Biden…

China economy grows 4.9% as rest of world struggles with coronavirus (Wall Street Journal, Jonathan Cheng) highlights the contrast between China’s improving fortunes and the sluggish performance of the rest of the world. Official figures show that GDP growth hit 4.9% in the third quarter versus the previous year. This actually fell short of analyst expectations but the country is nevertheless back on track to be there or thereabouts with growth forecasts made at the beginning of the year of between 5.5% and 6%. The International Monetary Fund (IMF) believes it will be the only major world economy to grow this year. Other official figures showed that unemployment was down and that retail sales are rising.

On the other hand, Europe’s second wave raises threat of double-dip recession (Financial Times, Martin Arnold) shows that Europe’s economy looks increasingly likely to

contract again as Germany, France, Italy, Spain and the UK have all put measures in place recently to control the second wave of Covid-19 infections following a recent rise in cases. Interestingly, Q3 GDP figures are to be published at the end of this month and are expected to reflect record growth in the eurozone – but now economists are starting to cut their Q4 figures. * SO WHAT? * This latest setback is likely to dent ECB hopes that the eurozone economy will bounce back to pre-coronavirus levels by 2022. Most do not expect across-the-board lockdowns given the extent of economic damage that wrought the first time around, but partial lockdowns will certainly slow any progress.

Then in Fund managers overhaul portfolios on ‘blue wave’ bet (Financial Times, Attracta Mooney and Siobhan Riding) we see that portfolio managers including Janus Henderson, Schroders, Invesco and Candrian have said that their portfolios now reflect a loss for Trump in the upcoming presidential election. * SO WHAT? * If this turns out to be the case, monetary easing is expected, Biden is expected to spend big and to invest in green energy. Investors are ditching tech stocks and buying into housebuilders and regional banks as a result.

Big Tech looks like facing resistance whoever wins and Facebook may get a big fine…

Talking about elections, Political rage boils over for US Big Tech amid election (Daily Telegraph, James Titcomb) shows that the likes of Facebook, Google and Twitter in particular are likely to be in the crosshairs of whoever makes it to the White House following the presidential elections – but for different reasons. Republicans complain that the liberals of Silicon Valley are restricting free speech – especially that of ardent right-wingers – and Democrats are more concerned about the sheer economic power of Google, Facebook and Amazon, privacy issues and how they suck oxygen from their competition. * SO WHAT? * So far, the only big fine against Big Tech has been the $5bn

fine from the Federal Trade Commission (FTC) against Facebook for breaching users’ privacy last year. However, the fact that both sides of the political spectrum want to “do something” about Big Tech – albeit for different reasons – would suggest that the next four years is going to be more difficult than the last four as an enforced break up and revision of business models looks entirely possible.

Talking about Facebook, Facebook facing EU fine over child privacy breach (Daily Telegraph, James Titcomb) shows that Facebook may be in line to pay a massive privacy fine in the billions of dollars. Ireland’s Data Protection Commissioner (DPC) has commenced two separate inquiries into allegations that Instagram made the email addresses and phone numbers of users under 18 public. Instagram has a minimum age of 13 but over 20% of British kids aged between 8 and 12 use it. * SO WHAT? * If Facebook is deemed to have breached European data protection laws, Facebook may have to pay a fine of up to 4% of its annual revenue. Ouch!

UK shops close at a record rate and Hamleys cuts jobs…

Carnage on the high street continues in Stores close at record rate as shoppers change their habits (The Times, Gurpreet Narwan) as a study by PwC showed that shops closed down at a record rate during the first half due to the outbreak. Although things have improved over the summer, tightening restrictions on socialising and movement are likely to continue to weigh heavily on the UK high street.

Interestingly, over 5,000 shops actually opened during the first half of this year, which would imply that there is still some demand in there for physical shops.

Hamleys to cut more than a quarter of London staff (The Guardian, Zoe Wood) is another sad reflection of what is going on in retail at the moment as the toy specialist announced it would be cutting over 25% of its staff – something particularly noteworthy given that we are approaching the peak Christmas trading season. Fewer tourists and a lack of office workers continue to hit sales and a planned refurbishment has also been put on hold. On a positive note, web sales at Hamleys have been strong and it is going to be opening up 11 pop up shops between now and Christmas.

The US turns to developed nations for networks, US operators scramble over EV charging supremacy and Europe is set to decided on burger terminology…

Having done a massive hatchet-job on Huawei getting involved in the rollout of 5G networks around the world over the last year or so, US to offer loans to lure developing countries away from Chinese telecom gear (Wall Street Journal, Stu Woo) shows that the Americans are now making a push into developing countries to use alternative telecoms gear rather than that of the Chinese. They are offering financial assistance to use their services that they say are safer and have fewer conditions (Chinese finance agencies offer finance that can trap them). The US Agency for International Development is leading the push and will send out politicians and regulators who will slag off Huawei and ZTE and big up makers like Nokia, Ericsson and Samung instead. * SO WHAT? * This sounds pretty outrageous, don’t you think? Whether you believe what they say or not, a concerted campaign by the Americans to decimate Chinese business whilst recommending alternatives is pretty brazen. Mind you, given the success the huge negative-PR campaign against Huawei this is the next logical step as China continues to be strong in Africa and the Middle East.

Meanwhile, Spread of electric cars sparks fight for control over charging (Wall Street Journal, Rebecca Elliott) shows that the increasing uptake of electric cars is prompting a scramble for who controls the charging networks to power them in the US. Utilities companies such as Exelon Corp and Southern California Edison are looking to invest

millions in upgrading their infrastructure to accommodate charging but want to get some control. They argue that there will be quicker EV adoption if utilities get involved because they already have an infrastructure to build, something that other private companies lack. Their opponents say that they should not be allowed a monopoly on car charging but acknowledge they’ll have to play a prominent role. * SO WHAT? * I suspect that progress here will be monitored closely as other countries think about the spread of electric vehicles.

Debate over vegan ‘sausages’ and ‘burgers’ heats up ahead of EU vote (Financial Times, Emiko Terazono and Mehreen Khan) shows that MEPs are scheduled to vote this Wednesday on whether words like “steak”, “sausage”, “escalope” and “burger” will be allowed to be used with products that don’t contain meat. If they decide against letting them use such terminology we will be subject to such foodstuffs to be called “discs” and “fingers” (really??). Funnily enough, the move has been backed by Europe’s meat and livestock industry and the European Parliament’s agricultural committee. * SO WHAT? * Farmers are understandably fearful of the continued rise of meat-alternatives and forcing them to call their products by different names is obviously designed to make them less appealing. Their argument that referring to meat alternatives with names associated with meat would be confusing is patently ridiculous! The vote hangs in the balance and there has been form in this kind of thing before as the European Court of Justice in 2017 banned the use of the words “milk”, “butter” and “yoghurt” for marketing non-animal products. The agricultural lobby is very powerful, so it’ll be interesting to see what happens here. All this talk of food makes me want to eat a vegan cylinder 😋. Yum.

…in other news…

There’s nothing I like more here at Watson’s Daily than to identify important trends. Today is no different – and to that end I bring you Rubber chicken handbag everyone is obsessing over and where to buy it (The Mirror, Paige Holland). You heard it here first!

1. In CONSUMER/RETAIL-RELATED NEWS, credit card borrowing costs are expected to rise and we’re spending money on Domino’s and AO World but not at Boots. Marston’s faces reality, the EG Group brothers face scrutiny and LVMH offers hope
2. In FINANCIALS NEWS, Stripe buys into Africa, Morgan Stanley sees profits jump and more fund raising looks likely
3. In TECH NEWS, Google Chrome comes under the spotlight and Twitter goes down
4. In INDIVIDUAL COMPANY NEWS, Ford leans on rivals, Ryanair makes tough choices and Big Hit Entertainment looks vulnerable
5. AND FINALLY I bring you a VERY weird tattoo and some expensive underpants…

So credit card borrowing costs look like rising, Domino’s gets a slice of the action, AO World triumphs, Boots doesn’t, Marston’s makes tough choices, the EG Group brothers face scrutiny and LVMH offers hope…

*** If you got through the FIRST ROUND of the Watson’s Daily x More From Law x LittleLaw competition, please find the questions for Round Two HERE. You should be getting an e-mail on this if you achieved the pass mark, but I thought I’d put it up here as well! ***

Credit card borrowing costs to rise by Christmas (The Guardian, Phillip Inman) cites findings by the Bank of England which show that banks raised the cost of credit cards in Q3 and look to continue to do the same in Q4. The majority of lenders are also likely to restrict loan products during the final quarter. * SO WHAT? * This will increase fears that the UK’s poorest households will have much more restricted access to credit as the furlough scheme ends and unemployment starts to rise. On the other hand, lenders are keen to limit their downside and potential exposure to customers defaulting. Tough times.

Meanwhile, consumers are spending on pizza – as per Domino’s sales figures served cold (The Times, Dominic Walsh), which highlights like-for-like sales growth of 17.5% in Q3 although orders are now falling due to more rivals opening up and some students delaying a return to university – and on electrical goods in Sales boom at AO World puts rivals in shade (The Times, Ashley Armstrong) where the online retailer announced a hike in sales in the six months to September of a whopping 57%. Chief exec John Roberts said that “The last six months of trading have been like no other during my two decades in the business” and the company’s share price shot up by 30.1% following this bullish update, pushing its valuation above that of Dixons Carphone. This is an incredible performance when you consider that AO’s share price has gone from 85p at the beginning of this year to 302.5p!

On the other hand, Boots is problem child for US parent as stores suffer (The Times, Ashley Armstrong) shows that

Boots posted a rather disappointing 29.2% fall in like-for-like sales in the three months to the end of August as footfall continues to drop. This poor performance will prompt action by the company’s American parent Walgreens Boots Alliance to turn things around. On the plus side, Boots’ online sales shot up by 155% over the quarter and it has managed to win back market share in the beauty sector. * SO WHAT? * This doesn’t sound particularly great and usually, when a parent says that it will be focusing on a turnaround, it usually means more closures and more job losses. The other thing I would mention is that Next is busy trying to put together a format that will be a new source of competition as per First look at the new Next Beauty and Home stores (Marie Claire, Fiona Embleton). I bet you never expected me to quote from Marie Claire, now did you!

Meanwhile, Pub and brewer Martson’s to cut 2,150 furloughed jobs (The Guardian, Rob Davies and Kalyeena Makortoff) highlights yet more misery in the hospitality sector as it reacts to the latest government covid restrictions. The company traded strongly over the summer but the 10pm curfew, requirement for full table service and now a three-tier system just all combined to push the company to make tough decisions. The British Beer and Pubs Association has warned that up to 300,000 jobs could disappear in the hospitality sector unless the government steps in. * SO WHAT? * Unfortunately, this was bound to happen given the circumstances. It is likely to continue.

I thought I’d mention Billionaire brothers need to account for themselves (Daily Telegraph, Ben Marlow) because it highlights a potential fly-in-the-ointment for the recently-announced Asda deal. Brothers Mohsin and Zuber Issa built up EG Group, which recently announced it was to buy a majority stake in Asda from current owner Walmart. However, it’s all gone a bit pear-shaped as the company’s auditors, Deloitte, resigned because of disputes on governance – just days after the brothers received their MBE’s from the Queen! * SO WHAT? * The article suggests that this is great publicity for Deloitte in a way, because many of the Big Four accountants have come under a lot of criticism over the last few years for signing off on dodgy accounts. It also suggests that the Competition and Markets Authority are now much more likely to investigate the pending deal much more closely as a result of Deloitte’s actions. Asda really seems to be a problem child!

Stripe buys into Africa, Morgan Stanley announces strong profits and more fund raising looks likely going into the end of the year…

Stripe moves into Africa with Paystack deal (Financial Times, Tim Bradshaw, Miles Kruppa and Neil Munshi) heralds an interesting move into Africa with its acquisition of Lagos-based payments company Paystack for an undisclosed amount. Paystack is among a group of companies that has made Lagos a hotbed of fintech on the continent. It now processes about half of all online payments in Nigeria. * SO WHAT? * It’s fascinating to see this move given that Jack Dorsey, founder of Twitter and Square, had planned to spend a number of months in Africa this year before coronavirus scuppered his plans. There is clearly massive potential upside in this market given that about 95% of transactions are still carried out in cash. On the other hand, there are big risks as the region has a long history of money laundering. Things could certainly get interesting!

Then in Morgan Stanley profits jump 25% on Wall Street trading bonanza (Financial Times, Laura Noonan) we see that Morgan Stanley has reflected the success of its peers JP Morgan and Goldman Sachs, who also benefited from higher trading volumes during lockdown. Its investment and loans portfolio also performed well as a result of strong market conditions. It’ll be interesting to see whether Morgan Stanley is able to keep the party going.

Winter nerves in boardrooms could trigger second round of fundraising (The Times, Tom Howard) shows that there is an expectation in the City that companies will try to tap markets for more money via equity placements (where the companies create new shares and sell them) going into the end of the year and many big institutions are ready to invest. * SO WHAT? * Companies who wanted quick money during lockdown turned to the markets. It seems that the underlying demand to raise money to shore up their balance sheets continues to bubble away and many would deem it prudent to raise money ahead of another lockdown “just in case”. Investment banking fees are likely to rise as a result, I would have thought…

Google warrants a closer look and Twitter has a hiccup…

Google’s Chrome now looks a little tarnished (Daily Telegraph, Margi Murphy) shows that members of the US Department of Justice who are investigating Google for alleged antitrust violations are considering whether Google should be forced to sell Chrome, the world’s most popular browser. * SO WHAT? * Given that this is the engine that drives its massive $162bn digital advertising revenues, such a separation could potentially be quite painful, depending on how it was structured. Pressure to force Chrome out of Google continues to build but DoJ bods are

considering other options such as separating it from Android, advertising tech or YouTube. This sort of talk is fine – but if they ACTUALLY decided to do something like this I think the execution would be a nightmare. Have a read of this article if you can, though – it is fascinating.

Then in Twitter suffered widespread service disruption, says there is no evidence of security breach or hack (Wall Street Journal, Sarah E. Needleman) we see that Twitter suffered a two-hour disruption of its services yesterday as some users were unable to send or receive tweets. * SO WHAT? * Twitter dismissed it as problems with internal systems. Mind you, given that earlier on this year it suffered its worst ever hack that allowed access to thousands of accounts to hackers this will be raising eyebrows, especially in the run-up to the presidential election where the spread of false information is a key area of concern.

Ford looks to rivals, Ryanair makes tough choices and Big Hit Entertainment looks vulnerable…

In a quick look at some of the other news stories doing the rounds today, Ford to pair with rivals to avoid EU fines over emissions (Financial Times, Peter Campbell and Joe Miller) signals a massive cop-out for the American car manufacturer as it has had to team up with rivals to meet its European emissions goals as a recall of its hybrid cars meant that it would fall foul of the new tighter restrictions (see what this is about HERE). It said that it had to buy carbon credits from rivals who have sold more electric or hybrid vehicles. * SO WHAT? * This is a short term fix to a longer term problem. Ford needs to pull its finger out on the EV front otherwise it will risk massive fines from Brussels.

Elsewhere, Ryanair cuts one in three winter flights and warns of more job losses (The Guardian, Kalyeena Makortoff and Gwyn Topham) highlights yet more misery for the airline industry as Ryanair makes even more cuts to flights, increasing the likelihood of yet more job losses.

Then in Big Hit/BTS: liable to pop (Financial Times, Lex) we see that although BTS’ management company Big Hit Entertainment is surfing a massive wave at the moment, there is a danger that its investors will be tempted to sell quickly in order to crystallise the massive gains since its flotation this week. I would say that this is a tricky company given its massive reliance on BTS and the fact that investors may be attracted to cheaper rival companies.

…in other news…

OMG. Just get a load of this: Man’s ‘insane optical illusion’ tattoo looks like giant hole in his head (The Mirror, Paige Holland). Incredible 😱! If you find that discombobulating (and it is!), why not check out the politician who thought he could stuff money down his pants in Politician stuffed £4,500 in the underpants he was wearing during raid by anti-corruption police (SkyNews). What??? Quick thinking or just plain stupid?!?

1. In BANKS NEWS, Goldman Sachs profits while falling interest rates take the shine off Bank of America and Wells Fargo
2. In PROPERTY NEWS, WeWork discounts rents, residential seems to be running out of steam but the top end is buzzing
3. In RETAIL/HIGH STREET NEWS, ASOS performs well but is cautious while Boparan buys GBK
4. In INDIVIDUAL COMPANY NEWS, BTS’s management company’s IPO proves to be “dynamite”, Zoom aims to cash in, Marshall Wace buys into IAG and Deloitte abandons EG Group
5. AND FINALLY, I bring you a Nigella pasta idea…

So Goldman profits while low interest rates drag on BoA and Wells Fargo…

*** If you got through the FIRST ROUND of the Watson’s Daily x More From Law x LittleLaw competition, please find the questions for Round Two HERE. You should be getting an e-mail on this if you achieved the pass mark, but I thought I’d put it up here as well! ***

*** 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 FREE subscribers (from 5pm-5.30pm) is HERE. I do another call for PAYING SUBSCRIBERS from 5.30pm-6.30pm where I do the weekly roundup, but there is also chance for more Q&A as well as 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! ***

Goldman Sachs profits soar 94pc amid trading frenzy (Daily Telegraph, Lucy Burton) highlights Goldman Sachs’ success at making profits during the pandemic thanks to its investment banking and trading businesses. Profits shot up due to a 29% rise in trading revenues and a 7% boost in investment banking revenues courtesy of clients trading volatiles markets and companies shoring up their balance sheets amid the pandemic and engaging in M&A.

On the other hand, Falling interest rates drag on Bank of America and Wells Fargo profits (Financial Times, Robert Armstrong) shows that things were not as rosy at rival banks as weakening interest rates squeezed margins. Both banks reported higher net profits than in Q2, but most of this was down to lower provisions for bad debts. On the plus side, Wells Fargo’s mortgage business had a strong quarter on the back of home refinancings, Bank of America saw an uplift in fees for its credit card business and both saw an increase in fee income from investment banking. * SO WHAT? * Falling interest rates really killed the party for these banks as net interest income (the difference between revenues from interest-bearing assets and interest paid for financing) fell sharply. Net interest income at both banks account for about half of the revenues – which is why Goldman swerved a similar fate given its higher exposure to other revenues streams.

WeWork offers discounted rents, the residential mini-boom seems to be losing momentum but the high end appears to be buzzing…

WeWork offers rent discounts to Covid-hit tenants (Financial Times, George Hammond, Andrew EdgeCliffe-Johnson and Stephen Morris) shows that WeWork is cutting prices around the world in order to stop an exodus of existing customers. In some cases, it is halving the rent they owe for the next few months. * SO WHAT? * This whole flexible office space thing is proving to be very difficult currently because companies like WeWork and IWG – who don’t OWN their buildings, they have them on long leases and then sublet to tenants on much shorter leases – have tenants reconsidering their space requirements on the one hand, whilst on the other, they are themselves also trying to talk down what they have to pay to their own landlords. Both companies are trying to remain positive and point out that they tend to do well in recessions as companies are less willing to commit to long leases. Still, I think the problem has three major elements: firstly, that the number of tenants is likely to decline as increasing

numbers go out of business or just retreat to their home offices/bedrooms; secondly, that there is likely to be a major uptick in the supply of office space; and thirdly, that there will be landlords out there who just want tenants at any price, meaning that they will charge peanuts, thus bringing down rents across the board.

Meanwhile, in residential property, Mini-boom loses steam as the search for new horizons falters (Daily Telegraph, Melissa Lawford) suggests that the mini-boom we saw over summer could be losing steam. Little things like Rightmove searches falling and mortgage brokers seeing a levelling-off in demand could constitute early signs of a loss in momentum. Zoopla reported that house buying activity, whilst still strong, could suffer further from first-timers not being able to get a deposit together due to lenders’ tighter lending conditions. On the other hand, Top London property in big demand (The Times, Philip Aldrick) shows that London’s super-prime property market (>£10m) has actually seen an uptick in activity, according to Knight Frank. Interestingly, 40% of buyers were British – the highest percentage in a decade – which is probably a function of travel restrictions. Kensington accounted for 14.3% of super-prime deals but demand for more outdoor space powered interest in properties in Notting Hill, St John’s Wood, Hampstead and Belgravia. Nice if you can get it!

ASOS does well but is cautious and Boparan buys GBK…

Asos profits quadruple as demand soars in lockdown (The Guardian, Sarah Butler) highlights a stellar performance by online apparel retailer Asos, powered by sales of casual wear and skincare products during lockdown. Having said that, the company’s share price fell by 10% as the company outlined a cautious outlook due to the outsize impact of the pandemic on its key customer demographic – 20somethings. * SO WHAT? * I guess that there is a limit on how many hoodies and sweatpants everyone wants/needs and although Asos has been able to cut costs and make efficiency gains at its European warehouse, the fact that its demographic is taking the brunt of coronavirus impact is likely to be a cloud over its impact for some time.

Ranjit Singh Boparan buys Gourmet Burger Kitchen in rescue deal (The Guardian, Sarah Butler) reflects further consolidation in the casual dining sector as Boparan, which snapped up Carluccio’s in May, has bought GBK out of administration. This will save 660 jobs, but 362 will be lost as 26 sites are to close. GBK was owned by South African company Famous Brands, which also owns Wimpy in the UK. However, it had to put GBK up for sale as it struggled during the pandemic. * SO WHAT? * Boparan, dubbed the “chicken king” on account of him being the co-owner and founder of 2 Sisters Food Group which supplies about a third of the chicken on UK supermarket shelves, is using current circumstances to pick up bargains in the restaurant sector. How long can he hang on, I wonder? I hope he does, for the sake of the employees – plus the fact I really like their onion rings 😁

Bit Hit Entertainment’s IPO proves to be a big hit, Zoom aims to keep the momentum going, Marshall Wace has a nibble of IAG while Deloitte abandons EG Group…

BTS frenzy drives hit K-pop IPO (Wall Street Journal, Frances Yoon) shows that Big Hit Entertainment, the management group behind the world’s biggest boyband BTS, had a stellar performance on its market debut yesterday as it doubled from its offer price. To give you an idea of scale, its value is now about $8.5bn versus Warner Music Group Corp (one of the world’s biggest record labels) at almost $15bn and Live Nation Entertainment at about $12bn. * SO WHAT? * Investor demand was huge (retail investor demand was 600 times oversubscribed and the institutional portion was 1,100 times oversubscribed!), but the fact is that BTS made up almost 88% of its entire revenues in the first half of this year. It would seem pretty risky to me on a long term basis because of this massive skewing – but I guess investors want to surf the BTS wave while it lasts!

Talking about surfing waves, Zoom to cash in on pandemic success with apps and events (Financial Times, Richard Waters) Zoom is going to be introducing apps and paid-for events to its existing offering in order to keep the party going. Zoom’s huge upswing in popularity during the pandemic is something that the management does not want to lose and yesterday it launched a US test of a marketplace called OnZoom where anyone can promote and sell virtual events with a full rollout scheduled for next

year. It also announced a plan to become a platform for other apps – called “Zapp” – which will bring extra features to enhance video meetings. * SO WHAT? * I personally think this could be absolutely massive and potentially catapult it, in time, to reach the heights of other Big Tech companies. Zoom has undoubtedly been a “winner” from lockdown and these ideas sound like a great way to keep engagement going.

Marshall Wace takes major stake in BA owner IAG (Daily Telegraph, Oliver Gill) shows that Marshall Wace, a major hedge fund, has built up a 3% stake in IAG – interesting considering that it had been known for building up short positions in Air France-KLM and Lufthansa earlier this year. * SO WHAT? * This sounds like a brave move to me given the ongoing prospects for the airline industry. I guess that it is banking on BA not going under as a flag carrier. At the moment, state-owned Qatar Airways is IAG’s biggest shareholder with a 25% stake.

Elsewhere, Deloitte quits as auditor of EG Group (The Times, Robert Miller) highlights a very interesting development as the accountancy firm has decided to resign as auditor to the company that’s just agreed to buy Asda from Walmart for £6.8m due to concerns about its governance and internal controls. EG Group, which is jointly owned by TDR Capital and the two Issa brothers, has grown rapidly and Deloitte asserted that its governance had not kept pace with its growth. EG Group owns almost 6,000 petrol stations and posted over €20bn of revenues last year. * SO WHAT? * This is pretty interesting – and I wonder what impact (if any) that this could have on the Asda deal. Given the increasing twitchiness that auditors have these days about dodgy accounts, I wonder whether the Asda deal will face further scrutiny.

…in other news…

Today, I thought I’d leave you with Nigella Lawson’s stale bread hack is the secret to ‘flavoursome’ pasta (The Mirror, Paige Holland). Looks quiet nice 👍

1. In MACRO/TRADE-RELATED NEWS, China grows, EU/US Boeing/Airbus tensions rise and Boeing’s orders hit a covid pocket
2. In CORONATRENDS NEWS, trials are halted for Lilly and J&J, UK unemployment rises and we spend on booze but not at cinemas
3. In INDIVIDUAL COMPANY NEWS, Apple does its reveal, Amazon pushes on, JPMorgan surprises on the upside and Cornish Lithium continues to garner interest
4. AND FINALLY, I bring you an unusual depiction of Peppa Pig…

So China shows growth in a troubled world, EU/US tension on Airbus/Boeing increases while Boeing’s orders continue to suffer…

*** If you got through the FIRST ROUND of the Watson’s Daily x More From Law x LittleLaw competition, please find the questions for Round Two HERE. You should be getting an e-mail on this if you achieved the pass mark, but thought I’d put it up here as well! ***

China ‘to be only major economy to grow in 2020’ (Daily Telegraph, Lizzy Burden) cites the latest figures from the China Association of Automobile Manufacturers which show that car sales rose by 12.8% last month – in the sixth consecutive month of growing sales. Official customs data released yesterday shows that Chinese goods exports rose by 9.9% in September versus September 2019. Imports also grew by 13.2% last month to their highest levels so far this year with particularly strong demand for things like soya beans, grains and semiconductors as well as for copper and steel products. * SO WHAT? * There is a marked contrast between China’s fortunes and those of the rest of the world and it is benefitting from everyone still being in some form of lockdown with heightened demand for things like PPE and laptops. I think this is a GOOD thing, however, as it means that when things get worse covid-wise in countries outside China at least we stand some chance of getting supplies. In the first lockdown, China’s factories were closed and production was dead but now

that China is open at least there is some production going on! However, it would be interesting to see how much price-gouging or supply of sub-standard product occurs given what happened the first time around.

WTO rules against Boeing in 16-year fight with Airbus (Daily Telegraph, Alan Tovey) shows that US imports to Europe could get hit by billions of dollars worth of taxes after the World Trade Organisation supported claims by Airbus that Boeing received illegal subsidies. The WTO said that illegal support via subsidies and tax breaks received by Boeing caused Airbus damages of $4bn a year in lost sales and market share. The body gave the European Commission permission to now impose levies on US goods equal to that value. * SO WHAT? * This battle has been dragging on for 16 years and the latest decision is thought to be getting towards the home straight of reaching a FINAL decision. It’s not all one-way, though – the WTO gave the US the right to impose taxes on $7.5bn of EU goods last year. This spat is bound to fuel Trump’s campaign and make him look all combative but Airbus is trying to push for a settlement to end the row once and for all. IMO this is all childish one-upmanship – and I have no doubt that both companies received state subsidies, but then why not? It is an incredibly expensive industry and there is a lot of prestige at stake. They should just admit it and move on. The main winners out of all this are undoubtedly the lawyers who will have earned some fat fees! You can understand Boeing’s whinging, though, given Boeing delivered 11 aircraft in September and won no new orders (Wall Street Journal, Doug Cameron) shows that it needs all the money it can get given the continued grounding of the controversial 737 MAX planes.

A couple of vaccine trials hit pause, UK unemployment rises and we stock up on booze rather than go to the cinema…

Two Covid-19 drug trials halted on safety concerns (Financial Times, Donato Paolo Mancini and Kiran Stacey) highlights a pause on enrolment for Eli Lilly’s antibody treatment (similar to the one Trump was waxing lyrical about recently) and a suspension of all trials of Johnson & Johnson’s experimental Covid-19 vaccine after one participant developed an “adverse reaction”. J&J hopes Covid-19 vaccine trial will restart shortly (Wall Street Journal, Peter Loftus) shows that the company is hopeful that it can resume testing in the next few days, but let’s face it, these things are highly complex and there is a lot of pressure to get it right. After all, AstraZeneca’s trials were halted in September after at least one participant displayed unexplained neurological symptoms – but these have now resumed everywhere but the US. We are bound to see more of this as time goes on.

Meanwhile, UK job losses rise at record rate in 3 months to August (Financial Times, Delphine Strauss) cites the latest figures from the Office for National Statistics which show the biggest jump in redundancy numbers since records began in 1995 as the gloom continues. Maybe

people are trying to drink their worries away in UK shoppers spend £261m more on alcohol amid pub curfew (The Guardian, Sarah Butler) which shows that the latest figures from Kantar show a big hike in booze consumption since the end of Eat Out To Help Out. Sales of toilet paper and flour rose by 64% and 73% respectively but there are few others signs of the panic buying we saw at the beginning of the outbreak. Interestingly, Morrisons has been seeing the fastest sales growth of the “big four” supermarkets as it benefited from new delivery services and its deepening partnership with Amazon. Unfortunately, Cineworld and Odeon ‘running out of cash’ (Daily Telegraph, Oliver Gill) shows that the world’s biggest two cinema operators could run out of cash by the end of this year. Cineworld is thought to be weeks from collapse whereas AMC Entertainment (which owns Odeon) could potentially last slightly longer, according to some analysts. Given that the list of films being booted into next year gets longer by the day I don’t see this improving any time soon. * SO WHAT? * It seems that everyone is making preparations to stock up under lockdown and hide away. This is terrible news for companies who rely on a constant flow of people and although movie studios can still use the “streaming” lifeline, cinemas have nothing in the locker as far as I’m concerned. The only way they will be able to survive is to accept outside money. I suspect hedge funds and private equity firms are licking their lips at the prospect of picking up such assets at potential fire sale prices.

Apple reveals, Amazon advances, JP Morgan surprises and Cornish Lithium attracts interest…

Apple bets on 5G to power ahead of rivals (Daily Telegraph, James Titcomb) highlights Apple’s reveal yesterday of four new phones priced between £699 to £1,399 featuring 5G tech as well as a £99 mini home speaker that will take the fight to Amazon and Google’s devices. The iPhone 12 series will be released between next Friday and November 13th. The phones will not come with earphones or charging plugs. Apple sows seeds of 5G future with ‘a new era’ for iPhone (Daily Telegraph, James Cook and James Titcomb) highlights the company’s hopes for a 5G future and I would say that if anyone can get people to buy into 5G, it’s Apple. * SO WHAT? * I think that the fact that the whole line-up has 5G capability with arguably more reasonable price points than in the past will give people reason to upgrade. Apple has also included AR features that will probably be of limited use now but will come into their own as time passes. I am expecting a huge uptick in iPhone sales.

Elsewhere, Amazon braces for winter demand surge with relentless expansion (Financial Times, Dave Lee) highlights the continuation of Amazon’s ambitious expansion plans, but also some of the issues it faces as it remains steadfast in its commitment to deliver in time for Christmas. In order to do that it has, so far grown its workforce by over 25% so far this year and continued its efforts to rely less on third parties to deliver on their behalf – with the expansion of its own airline Amazon Air being a

“prime” (sorry) example of this. All the while the company will continue efforts to expand the number of Prime members. In the US, Prime members will spend about $1,400 on the site versus non-Prime members spending $600 on average. * SO WHAT? * Amazon’s expansion into so many areas is incredible to behold, but the problem is that everyone else is going to get squeezed out if it is left to its own devices. I really think that it needs to be split up or restricted in some way before it gets too big and too powerful to stop – but will lawmakers and politicians have the stomach to take Amazon on?