Category: Uncategorized

1. In MACROECONOMIC NEWS, we see reactions to Sunak’s announcement and Indian companies look to Chinese alternatives
2. In RETAIL & CONSUMER NEWS, Boohoo’s woes persist, Brooks Brothers files for Chapter 11 and Klarna warns of overspend
3. In NEWS ON “WINNERS” & LOSERS, Deutsche Post rewards its workers, United Airlines and AirAsia face tough times and FirstGroup might cease trading
4. In TECH NEWS, Big Tech thinks about leaving Hong Kong and Twitter mulls a subscription option
5. AND FINALLY, I bring you some current music trends (who’d have thought!)…

So Sunak targets youth and spending and India looks to wean itself off China…

Sunak’s plan welcomed but fears remain (The Times, Alex Ralph and Simon Duke) looks at the emergency package announced yesterday by the UK chancellor Rishi Sunak. His overarching aim was to “protect, support and create jobs” and announced a temporary VAT cut for the hospitality sector from 20% to 5% until January, an “eat out to help out” discount scheme to encourage people to go to restaurants. On the jobs front, he unveiled a £2bn fund to create jobs for young people, a £1bn boost to fund job centres and an incentive scheme to reward employers for keeping on staff into January. He also raised the stamp duty threshold on homes up to £500,000 until March next year as well as a £2bn fund to decarbonise buildings. Champagne stays on ice in markets (The Times, Tom Howard) showed an underwhelming reaction from markets as shares in pubs, restaurant and hotel groups rose initially on news of the VAT cut but then finished trading in negative territory as scepticism crept in over whether the measures will really work. Investors had been buying into housebuilder stocks in the hope of a cut in stamp duty – so when it was announced, they sold off to take profits. This is a perfect example of the market saying “buy the mystery, sell the history”. Hospitality firms toast VAT cut and discounts for diners (Daily Telegraph, Oliver Gill) shows that the industry celebrated Sunak’s announcement (if you want more detail, you should read this – there are some

good charts in here) but then, on the other hand, Retailers complain over VAT cut exclusion (Daily Telegraph, Michael O’Dwyer and Laura Onita) reflects the disappointment of those who weren’t sprinkled with Sunak’s fairy dust. I guess that you can’t please everyone, but you can’t blame those who were left out for continuing to push for support. It remains to be seen whether these moves will be enough to keep the economy going.

Following on from India’s recent banning of Chinese apps, Border clash prompts Indian industry to seek China alternatives (Financial Times, Benjamin Parkin) shows that Indian companies are looking for alternatives to the Chinese suppliers on which they’ve become increasingly reliant over the years, given the risk that increasing geopolitical tensions could result in more sanctions. China’s share of total imports into India was less than 3% in 2000, but is now 14%. The country’s pharmaceutical sector gets about 70% of its starting ingredients from China and Chinese mobile phones from makers such as Xiaomi are ubiquitous. India’s automakers also source about 25% of their components from China. * SO WHAT? * Clearly tensions are running high at the moment following the recent death of the Indian soldiers in a clash with Chinese soldiers on the Himalayan border. However, given China’s importance to Indian industry I would have thought switching supply chains will take quite some time – and I suspect that many companies and industries in other countries around the world will be trying to do the same thing at the same time! I’d say that one of the many things that the coronavirus outbreak has taught us is how reliant so many key supply chains are on China. Weaning off China suppliers will be a tall order, I suspect.

Boohoo’s woes continue, Brooks Brothers files for Chapter 11 and Klarna warns consumers…

Review of sweatshops no relief as Boohoo shares tumble again (The Times, Ashley Armstrong and Gurpreet Narwan) shows that shares in online retailer Boohoo fell yet again yesterday following allegations of modern slavery at a factory in Leicester. Since the allegations surfaced, the company has hired Alison Levitt, QC from Mischon de Reya to investigate its suppliers’ adherence to minimum wage rules and Multiple Boohoo inspections find no modern slavery offences (Financial Times, Patricia Nilsson, Alex Barker, Laura Hughes and Jonathan Eley) shows that nothing dodgy has been uncovered so far despite inspections of Leicester factories by the GLAA, Leicestershire Police, Leicester City Council, the National Crime Agency, Health and Safety Executive, Leicestershire Fire and Rescue and Immigration enforcement. * SO WHAT? * This is very bad PR for Boohoo, but then again it seems that the clothing that caused the furore in the first place was not actually made there – it was just being repackaged there. Other inspections have failed to turn anything up as yet but then again it may take some time given that Leicester’s textile industry is incredibly fragmented – 1,000 manufacturers employ less than 10 staff, for instance. This has definitely taken a lot of the recent sheen off Boohoo’s recent purple patch, but unless investigators can find anything nothing has really changed. In the meantime, Boohoo’s share price has fallen by a third – but it will be under a cloud until there is some kind of conclusion forthcoming from the investigation. 

Brooks Brothers, hurt by casual Fridays and coronavirus, files for bankruptcy (Wall Street Journal, Suzanne Kapner and Soma Biswas) shows the latest US retailer to bite the dust as it filed for bankruptcy protection yesterday. It follows the likes of Neiman Marcus, J.Crew and J.C.Penney as it seems that coronavirus lockdown proved to be the final straw in a business that was already suffering from changing consumer tastes (more casual, less smart) and behaviour (buying more online). It is now seeking a buyer. What a shame for a company that has been around for over 200 years and managed to survive two world wars. Fun fact: did you know that Marks & Spencer owned Brooks Brothers between 1988 until 2001? I did. That’s why I’m such an incredibly exciting bloke 👍.

Then in ‘Buy now, pay later’ firm warns of impulse buying (The Times, Patrick Hosking) we see that the market leader in “buy now, pay later” financing, Klarna, is going to launch a campaign to warn shoppers against buying stuff they don’t want (but I bet they mean “don’t buy stuff you can’t afford” but can’t quite bring themselves to say it 😜)! Klarna is Europe’s join-largest fintech company (the other one is Revolut) and it said it will be rolling out this campaign across TV and social media. They want would-be consumers to ask “Do I love it? Will I use it? Is it worth it?” (they missed out Queen of Tidying, Marie Kondo’s question “Will it bring me joy?” 😂). * SO WHAT? * Surely this is like Diageo launching a campaign to get everyone to be teetotal or for British American Tobacco to push the benefits of not smoking!!! Thus far, Klarna has emphasised the benefits of offering a “pay later” service because they say that it boosts sales by up to 20%, but this campaign heralds a real back-track. Call me paranoid, but it looks to me like the company is hugely concerned that many customers will “default” and that they are desperately trying to pre-empt a potentially huge problem.

Deutsche Post DHL employees get bonuses, United and AirAsia face problems – as does FirstGroup (when was the last time you were on a train or bus??)…

There’s good news for employees in Deutsche Post DHL will award bonus to 500,000 workers (Financial Times, Joe Miller) as the company, one of the world’s largest in logistics, said it will give over 500,000 of its employees a €300 bonus and pay a dividend. It can do this because it has been a major beneficiary of the boom in online shopping and increased demand for freight capacity during lockdown. Deutsche Post: stamp of approval (Financial Times, Lex) applauded the company’s performance and compares it to the struggling Royal Mail. Deutsche Post’s profitability is helped by a supportive domestic mail regulator and the lucrative business from its B2B DHL parcels delivery service.

The nightmare for airlines continues in AirAsia shares fall 18% as auditor raises ‘going concern’ doubts (Financial Times, Stefania Palma) which highlights an uncertain future for the Malaysian airline and United Airlines warns it may furlough 36,000 staff (Wall Street Journal, Doug Cameron and Alison Sider) shows that, despite getting government handouts, it’s still going to hunker down for a tricky time. * SO WHAT? * The whole industry is just in a tailspin and survival is far from certain for many airlines. We just won’t know who the survivors will be and it will absolutely depend on how quickly any travel restrictions can be lifted.

It’s not much better in FirstGroup could cease trading as coronavirus hits passenger levels (The Guardian, Gwyn Topham) as the UK’s biggest bus company and railway operator says that it may have to stop trading because of the massive drop in passenger numbers. * SO WHAT? * The company is getting absolutely mullered by coronavirus and passengers not commuting – and the timing of it trying to sell off its US bus operations couldn’t be worse! It has some cash buffer but I guess the company is really saying this to prompt more reassurance from the government.

Big Tech gets nervous about Hong Kong and Twitter looks at subscription…

Silicon Valley weighs whether to leave Hong Kong (Financial Times) shows that the latest legal reforms from China are causing concern for Silicon Valley’s finest. At the moment, Facebook, Twitter, Google, Zoom and LinkedIn (owned by Microsoft) said they will “pause” any data requests from law enforcement while Apple and Amazon are “assessing” and “reviewing” their positions respectively. * SO WHAT? * The implications of the new security law are far-reaching and will be very concerning for users. It’s early

days yet and Hong Kong is not a major part of the companies’ overall business – but they will be having a long hard think about their next move and how they will respond to authorities.

Twitter signals interest in developing subscription service (Wall Street Journal, Robert McMillan) highlights what could be a real departure for Twitter as the company said it was developing a subscription service (presumably to diversify its revenue streams away from a reliance on advertising, which is a bit dodgy at the moment). * SO WHAT? * Twitter has been under pressure to seek out more revenue sources and the recent social media ad boycott is shining a harsh spotlight onto a sensitive subject for the company. Will it work? I’m not so sure. I don’t think Twitter is “sticky” enough for users to feel compelled to stay with it under a subscription model, but I guess we’d have to see what the offering is before deciding.

…in other news…

I thought I’d leave you today with the latest in music trends – check me out!!!

1. In MACROECONOMIC & MARKETS NEWS, Brussels cuts EU growth forecasts, Sunak is to unveil a £2bn scheme and the Hong Kong market benefits from home-comings
2. In RETAIL NEWS, Boohoo gets the cold shoulder, JD Sports grumbles and Halfords is a mixed bag
3. In NEWS ON “WINNERS” & LOSERS, Under Armour and Uniqlo vie for face mask supremacy, Travelodge sees bookings recover, Plus500 benefits from lockdown boredom and chain restaurants look vulnerable
4. In INDIVIDUAL COMPANY NEWS, P&O sells Oceana and BG electrifies its fleet
5. AND FINALLY, I bring you LED facemasks and a heart-warming moment…

So Brussels downgrades, Sunak offers up a new plan and America’s loss is Hong Kong’s gain…

Europe faces deep recession and UK will shrink by 10%, says EC (The Guardian, Jennifer Rankin) shows that the European Commission has downgraded its growth forecasts for European GDP versus the forecasts it made in May. This comes ten days before EU leaders meet in Brussels to discuss the €750bn bailout plan for the bloc and bring the “frugal four” (Austria, Denmark, the Netherlands and Sweden) into line. Everyone apart from the EU wants to issue more grants, whereas the “frugal four” want the fund to issue more loans.

In Sunak unveils £2bn scheme to avoid youth jobless disaster (Financial Times, George Parker and Chris Giles) we see that chancellor Rishi Sunak will today announce a

£2bn job creation scheme aimed at helping young people. The Treasury plans to pay the minimum wage for up to 300,000 people aged 16-24 for six months starting from next month. Young people are said to be suffering more than older people because a higher proportion work in sectors most affected by the coronavirus. The chancellor is also expected to announce a temporary VAT cut and a stamp duty “holiday” for house purchases at the lower end of the market.

Hong Kong’s bourse reaps benefits of China homecomings (Financial Times, Primrose Riordan) highlights how the territory’s stock exchange is benefiting from increased tension between the US and China as a number of major Chinese companies, including giants Netease and JD.com, have migrated from Wall Street to Hong Kong for their secondary listings. Many are expecting more Hong Kong listings in the short term but some are saying that there may be longer term concerns for the exchange as a whole regarding China’s increasing legal encroachment.

Boohoo gets the silent treatment, JD Sports could do better and Halfords does well on bikes, not so much on cars…

Next, Asos and Zalando drop Boohoo from websites (Financial Times, Patricia Nelson) shows fallout from the recent discovery of Boohoo’s clothes in a factory in Leicester paying illegally low wages as the fashion retailers have temporarily blocked Boohoo products from their websites. Boohoo faces boycott from social media influencers (Daily Telegraph, Laura Onita) shows that influencers could be sticking the boot in as well. * SO WHAT? * Boohoo needs to come up with something Pretty Darn Quick because this is taking the shine off what has so far been an example of an epic performance by a retailer thriving through lockdown. Big retailer partners are looking for reassurances and Boohoo says it has launched an investigation that will result in unethical suppliers being cut off. If this problem is widespread, it could ultimately prove to be costly if it impacts margins due to having to pay their suppliers more – but it’s too early to tell yet.

Meanwhile, on the high street, Abrupt halt to JD Sports’ run lays bare rocky road ahead (Daily Telegraph, Ben Marlow) takes a closer look at JD Sports and how its strong past performance is not necessarily the indicator of future performance. Turnover and profits had been very solid and there has been strong trading in the US, but current footfall is not great and there are no obvious catalysts for outperformance on the horizon. * SO WHAT? * The company’s previous success is to be applauded, but I guess that putting a brave face on things is all that JD Sports can do at the moment as it prays that more consumers emerge from lockdown and spend.

Bicycle boom predicted to continue for 2020 (The Guardian, Sarah Butler) shows that Halfords reported a 57% rise in cycling-related sales during the pandemic as people wanted to do a bit more exercise and avoid public transport but Bike sales boom fails to offset car business slide at Halfords (Financial Times, Antonia Cundy) points out that this has not been enough to make up for the poor performance in its more profitable car business. Having said that, the company believes that motoring revenues will rise as more people venture out onto the roads and get back in their cars to avoid public transport. * SO WHAT? * It’s only a personal opinion, but I think that the cycling boom really kicked into gear around the time of the London Olympics in 2012 with the popularity of Bradley Wiggins & co and the Brownlee brothers in triathlon. Expensive bikes for these sports flew off the shelves for types who bought more than one bike – perhaps a “winter bike” for doing the bad weather rides, a lighter racing bike and maybe even a time-trial specific bike for shaving off a few more seconds in races (not to mention all the carbon fibre disk wheels etc.etc). However, it seems that the popularity of this has calmed down in the last few years but new demand has suddenly come from nowhere in the form of coronavirus as people have wanted to ride their bikes for their “daily hour” under lockdown and use them/dust off old ones to commute to work in order to avoid crowded trains and buses. IMO, the current demand is not really sustainable in the longer term because I think that people who buy bikes for “leisure” as opposed to sporting purposes will tend to buy one bike and that’s it! Those who buy for sporting purposes are probably more likely to buy more expensive bikes, more accessories and more bikes more frequently. HOWEVER, I would expect demand to continue to be strong for now – which could tide things over nicely for Halfords until the more profitable car business kicks in once more.

Facemasks get competitive, Travelodge sees more bookings, Plus500 profits from boredom and chain restaurants face an uncertain future…

Under Armour faces off with Uniqlo in activewear masks (Financial Times, Rurika Imahashi) highlights the current trend for reusable face masks as Uniqlo’s offering (pack of three AIRism masks for about $9) just completely sold out! Under Armour launched its reusable UA Sportsmasks on the same day and its stock of 30,000 retailing for $28 each ran out within one hour! Demand is likely to increase further as some countries are making the wearing of masks mandatory in public spaces. * SO WHAT? * Although masks for many aren’t all that profitable (although maybe the UA ones are at that price!), they are very good for brand visibility AND they will attract more people to the shops that sell them. I suspect that they will continue to sell well for the foreseeable future as people seek out reusable options!

UK hotel bookings returning after slump, says Premier Inn owner (The Guardian, Joanna Partridge) shows that hotel

bookings for UK destinations are rising as more people are booking summer trips to the beach and other traditional tourist spots, which is welcome news for Premier Inn owner Whitbread – and Plus500 wins big as bored gamblers lose on the markets (The Times, Ben Martin) shows that the amateur trading website is benefiting from punters trying to make money on volatile stock markets.

On the other hand, Covid threatens to break the chain restaurant (Daily Telegraph, Hannah Uttley) provides an interesting discussion on the survival prospects of chain restaurants following the difficulties that have faced owners such as the Casual Dining Group and The Restaurant Group etc. * SO WHAT? * FWIW, I think that many chains will fail and that the previous wisdom of private equity companies getting involved and rolling out huge numbers of outlets at a rapid pace will have to change. Some chains will no doubt survive – and perhaps strengthen as more locations become available due to the demise of rivals – but I really think that the make-up of our high streets could change with more independents taking their place because I would expect the government to give loans to people starting businesses. Who knows – perhaps landlords will be more reasonable to their new tenants?! Or maybe this is just a pipe dream! If things continue as they are, though, the hollowing out of our town centres is likely to continue…

P&O sells a boat  and BG tries to go electric…

Given the nightmare that the cruise ship industry has had to endure this year, Oceana makes way for much bigger sister at P&O Cruises (The Times, Dominic Walsh) shows that the cruise ship, Oceana, owned by P&O Cruises (owned by Carnival Corporation) has been sold for an undisclosed sum after 18 years of service as the company decides to concentrate on larger more efficient ships. Carnival’s chief exec has said that the company plans

to retire six ships within the next three months and that some of them would be scrapped rather than sold. Ouch 😱! Unsurprising, though, given the horrendous PR they had at the beginning of the coronavirus. It’s going to take some time and a LOT of discounting to recover from that IMO.

Then in Electric vans lined up by British Gas (The Times, Emily Gosden) we see what may be a vision of the future as the energy supplier has just ordered a thousand electric vans from Vauxhall as it moves forward on its plans to electrify its entire fleet by 2030! This sounds like good news and I would imagine that other companies (and public bodies like councils!) will do the same thing.

…in other news…

I’ve referred to face masks already in today’s Watson’s Daily, but maybe this could be a glimpse of the Next Big Thing: White is so 2019, LED light-up face masks a hit on Japanese crowdfunding site (SoraNews24, Master Blaster https://tinyurl.com/ybt3qn9r). This could be the hot new trend for Christmas 2020, no?!? But I really wanted to finish on this rather heart-warming story that will start your day on a positive  note: Three-year-old besties reunite after months apart in lockdown and it’s adorable (The Mirror, Paige Holland https://tinyurl.com/y6vv55hy). Ahhhh! This is sooo cute!

1. In MARKETS & MACROECONOMIC NEWS, bullish China chat lifts markets and the ONS makes a massive mistake
2. In ENERGY-RELATED NEWS, oil refiners suffer, Iberdrola outlines a clean energy push and Tesla supplies a Dorset plant
3. In RETAIL-RELATED NEWS, high street footfall rises sharply, Pret cuts jobs and stores and Boohoo takes flak
4. In INDIVIDUAL COMPANY NEWS, Uber buys Postmates, Cineworld countersues and the Big 4 accountants are told to split
5. AND FINALLY, I bring you a breakfast sandwich and a very impressive omelette…

So China boosts markets and the ONS gets it massively wrong…

Bullish talk from China lifts markets (The Times, James Dean) highlights Chinese state media encouraging investors over the weekend to create a “healthy bull market” as being taken as a sign that the state will support domestic stocks. This explains the 5.7% rise in the Shanghai Composite in trading yesterday – its biggest one-day rise in five years. This had a knock-on effect in the region and continued, albeit to a lesser extent, elsewhere.

UK’s growth rate could be revised after large revisions to official data (Financial Times, Chris Giles) shows that the Office for National Statistics (ONS) has been making mistakes over the last twenty years in measuring prices and output in the telecoms industry and will be correcting them! Whaaaa?!? Making these corrections will increase the growth rate of the economy over the last two decades, cast doubt over the whole productivity crisis and force a rethink over how inflation is measured. * SO WHAT? * This will have a massive effect on the performance of the telecoms sector but it is not known at this stage how much of a ripple-effect it will have elsewhere. The ONS says that it will have more of a handle on this in October. How embarrassing!

Oil refiners continue to suffer, Iberdrola invests big in clean energy and Tesla comes to the UK…

Oil crash piles pressure on bloated refining sector (Financial Times, Derek Brower and David Sheppard) highlights the plight of oil refineries as the impact of lower oil prices, weak demand and high inventories is taking its toll. Falling supplies are making the crude refiners’ processes more expensive, which is eating into their margins. Given this fall in supply, it is thought that refining capacity will need to be cut and European facilities appear to be most at risk because they are generally older and there are initiatives to move away from the use of some fossil fuels. * SO WHAT? * There was probably too much oil refining capacity before Covid-19 hit anyway as the whole industry has been facing pressure from various governments’ plans to phase out fossil fuels and increased competition from newer plants in Asia. The UK, for instance, is planning on banning the sale of new petrol or diesel cars sometime in the 2030s – so the incentive to invest in making new plants or improve efficiency is dwindling.

Iberdrola plans €10bn-a-year clean energy push (Financial Times, Daniel Dombey) shows that Spanish utility giant

Iberdrola is going to invest €10bn a year in renewables and networks as it sees the aftermath of the coronavirus as being a unique opportunity for the energy sector to reinvent itself. The idea would be for this to create “green” jobs as well as benefiting the planet. Fun fact: Iberdrola owns Scottish Power, which is now a 100% wind energy company. * SO WHAT? * It’s great to see such a high-profile company committing to a cleaner future because it may have a halo effect and persuade others to do the same. This does not sound like empty words either – €10bn a year is a lot of money!

In Tesla plugs first energy plant into UK grid (Daily Telegraph, Ed Clowes) we see that Tesla has supplied its Megapack high-capacity batteries and Autobidder control software to Harmony Energy and Spanish company FRV’S energy storage site in Poole. This represents Tesla’s first ever dabble in the UK power sector and its lithium ion batteries will provide 15 megawatts of wind-generated electricity to Dorset and its surrounding areas. Harmony plans to build more energy storage plants in the UK. * SO WHAT? * This sounds like an interesting initiative. Power generation is one thing – but storing it is another. Power storage is key to the realistic and more widespread use of renewable energy IMO because it smooths out all the peaks and troughs, providing a more consistent power source. Storage has often been the major difficulty given the UK’s variable and unreliable weather, so this sounds like progress is being made.

High street footfall shoots up, Pret cuts jobs and outlets and Boohoo faces criticism..

Footfall on high street surges by up to half (Daily Telegraph, Laura Onita and Lizzy Burden) shows that – surprise, surprise – the opening of pubs, bars and restaurants over the weekend after three months of lockdown has boosted high street visits by over a third on Saturday and 50% on Sunday, according to data from Springboard. London saw the biggest rise in footfall. * SO WHAT? * IMO footfall means nothing if it’s not accompanied by punters actually BUYING stuff! Visits to shopping centres and retail parks, where the food and drink provision is less, saw limited uptick and a fall in footfall respectively. There is a long way to go yet and, unfortunately, survival for many outlets is not a certainty – especially given that they can be closed at short notice if more cases are reported.

Following on from what I said yesterday, Pret a Manger to close 30 stores and could cut more than 1,000 jobs (The

Guardian, Rebecca Smithers) shows that the company will make cuts amid “significant operating losses” due to the lockdown. There will be a general staff restructuring, a review of the current business model (which focuses on supplying office staff) and a sale process will be initiated for the lease of its main support office in London Victoria. Unsurprising given the ubiquity of its offering.

Boohoo shares shredded by claims factory workers are exploited (The Times, James Hu) highlights the massive 23% fall in Boohoo’s share price yesterday as it admitted poor conditions in its Leicester factory after a Sunday Times reporter did an undercover exposé. Low wages and poor social distancing adherence were brought to light in a town that has been told to extend its lockdown due to more coronavirus cases. * SO WHAT? * This was clearly embarrassing for the company that has been benefiting so much from rising levels of online shopping during lockdown, but it sounds like this is something to do with dodgy subcontractors rather than Boohoo itself. I wonder whether Boohoo will just take a one-off financial hit to do some deeper due diligence on its suppliers and carry on as before. The danger, though, is that this one incident exposes bigger weaknesses in a business model that has so far been extremely successful.

Uber buys Postmates, Cineworld fights back and the Big 4 are given a deadline…

In other news making the broadsheets today, Uber to buy Postmates for $2.65billion in stock (Wall Street Journal, Heather Haddon) highlights Uber’s latest move to consolidate its position in the restaurant and grocery delivery market. This all-paper (i.e. all stock changing hands, no cash) deal will make Uber the #2 delivery service in the US by market share, with DoorDash being in #1 and Grubhub in #3 position. * SO WHAT? * Scale is important in a business like this where margins are thin and competition is fierce. Rivals may well be forced into offering discounts in order to remain attractive to customers and restaurants. Great for the consumers!

Elsewhere, Cineworld will fight rival Cineplex over lawsuit row (Daily Telegraph, Hannah Uttley) shows that Cineworld is countersuing Canadian rival Cineplex after the latter initiated its own lawsuit to force the former to stick with its previous commitment to buy Cineplex. Cineworld pulled

out of its takeover of Cineplex last month saying that Cineplex had breached a number of agreements on which the deal was resting. * SO WHAT? * We’ll just have to see how this plays out. Presumably, Cineworld would want to walk away completely, but it looks at the moment like the most likely outcome will be that the two parties will be forced together but on different terms.

UK’s biggest accountancy firms told to split off audit arms by 2024 (The Guardian, Rob Davies) is big news, but perhaps not entirely unexpected given that rumblings on this have been rife for the last few years as more high profile bankruptcies have been blamed on dodgy accounting. The Financial Reporting Council (FRC), the industry body, has told EY, Deloitte, KPMG and PwC to separate out their auditing divisions by June 2024. * SO WHAT? * The Big Four have made some feeble attempts to separate out their audit and consultancy businesses since the failures of companies such as Carillion and BHS, but it seems like the FRC has lost its patience. The whole problem has stemmed from the age-old cosy practice of auditors signing off a clean bill of health on dodgy accounts in return for them getting more lucrative consultancy business. This has been going on for ages and any moves to end the practice have proved to be very slow.

…in other news…

I thought I’d leave you today with some breakfast-making projects. Egg sandwich breakfast hack goes viral and people can’t wait to try it (The Mirror, Luke Matthews https://tinyurl.com/yaxgjl6o) looks entirely doable whereas this version of an omelette looks like it requires some serious practice!

1. In “BIG PICTURE” NEWS, central banks have a savings problem, US Big Tech faces EU scrutiny and the UK plans a Huawei phase-out
2. In NEWS ON “WINNERS” & LOSERS, online car dealership Cazoo grows and the outbreak electrifies possibilities while the retail sector and management consultants suffer
3. In INDIVIDUAL COMPANY NEWS, India’s Zomato feels the pinch and Hitachi unveils diesel train electrification plans
4. AND FINALLY, I bring you an attack of the mutant potatoes…

So central banks face a delicate conundrum, Big Tech faces EU focus and the UK plans to phase out Huawei from 5G…

You will be aware that I referred, last week, to high levels of savings in UK households (and the latest European data showed the same thing). Well Soaring savings rates pose policy dilemma for world’s central bankers (Financial Times, Chris Giles and Martin Arnold) highlights a delicate balancing act that central banks will want to get right. Lockdown has forced households to save (a phenomenon also referred to as “involuntary saving”) and the bankers have to decide whether this money represents pent-up spending potential or whether households are putting money away for a “rainy day” (aka “precautionary saving”). * SO WHAT? * If it is the former, too much central bank stimulus will result in over-spending and rising inflation – but if it is the latter, sluggish expenditure could slow recovery and lead to rising unemployment. In reality, it’s probably a bit of both at the moment, but central bankers will be debating which of these forces is more dominant so they can implement the appropriate level of stimulatory measures. The need to get this right will become ever more pressing as lockdowns continue to lift.

We all knew that this was going to happen anyway, but Tech giants to face EU legal push on content, competition, taxes (Wall Street Journal, Valentina Pop and Sam Schechner) shows that Margrethe Vestager, chief of the EU’s digital policy and antitrust body, is putting flesh on the bones of the plan to restrict Big Tech’s anticompetitive behaviour, make them pay more taxes and force them to do more to filter out illegal content. It sounds like there’s going to be a shed-load of legislation to cover these areas and the tech companies themselves say that they are keen to work with her (yeah, right!). It’ll be interesting to see how effective the legislation is and whether it will be taken as a sort of template for other countries/regions, which is what happened with General Data Protection Regulation (GDPR) following its introduction in 2018.

Then in UK expected to phase Huawei out of 5G networks (Financial Times, George Parker, Helen Warrell and Nic Fildes) we see that BoJo is due to unveil plans later on this month on how he will be phasing Huawei out of the UK’s 5G phone networks following the conclusions of the most recent official security inquiry (and the American threats of sanctions 😜). * SO WHAT? * If there is a ban and all Huawei equipment is stripped out of 5G networks, the likes of Nokia, Eriksson, NEC and Samsung are likely to benefit greatly as more trusted partners, but Britain’s 5G efforts to reach “gigabit speeds” by 2025 will be delayed as a result.

Cazoo and electrification benefit from lockdown while retailers and management consultants face hurdles…

Online car dealer enters the start-up fast lane (Daily Telegraph, Hannah Boland) shows that Alex Chesterman, founder of both LoveFilm and Zoopla, has seen his online-only used car site Cazoo achieve an implied valuation of £1bn after attracting additional funding whilst under lockdown. Chesterman says that eight million used cars are sold per year versus two million new cars. Cazoo specialises in selling used cars online and then delivers them to people’s houses. * SO WHAT? * It seems to me that the only way Cazoo is different to sites like, say, Autotrader, is that you get your car delivered to you at the end of the process. Most people do tons of research online and then go to dealerships to buy secondhand cars but the coronavirus outbreak has meant that more people have had to go through the process in a completely “hands-off” manner. Although this will probably mean that more people will be happier to go through the whole process online than would have been the case before, I don’t see Cazoo being different enough to displace others. Also, although they may argue that the secondhand car market generally benefits from an economic downturn (people are less willing to splash out on new cars), I have said previously that the rise of PCP financing for cars means that a LOT of new cars are going to be hitting the secondhand market if people just hand them back and so although demand MAY go up, I think supply will go up as well. Still, Chesterton has a lot of money behind him and managed to grow Zoopla into the second largest property site in the UK after launching just after the financial crisis – so he has form in operating successfully in less-than-ideal economic

circumstances! Mind you, as they say, past performance does not guarantee future results…

How lockdown is driving an electric future (The Guardian, Jillian Ambrose) is an interesting article that shows how lockdown is benefiting businesses like bike/bike repair shops (more people want to avoid public transport and are buying new/repairing old bikes), e-mobility firms like Lime (electric scooters) and making more people consider buying electric vehicles. Vehicle-charging firm Engenie says that there is a big uptick in retail parks installing charging points. The company installs rapid-chargers for no cost but asks for 50-50 split in charge-point revenues. * SO WHAT? * If businesses are being forced to change because of coronavirus, it makes sense for them to take long-term sustainability into account, but whether this ambition translates into actual change remains to be seen.

Meanwhile, the tough times continue for retail in 24,000 retail job losses are ‘tip of the iceberg’ (Daily Telegraph, Matthew Field) which sums up what’s happened thus far and says that there’s more misery to come when the furlough scheme ends next month and One in ten Pret stores may not survive (The Times, Dominic Walsh) shows that the company’s staff will this week get to know if they keep their jobs or not as management decides which stores to close. The situation for Pret is already dire and they have already said they can only pay 30% of rent, so this is unfortunately inevitable.

Elsewhere, Management consultants fear revenue fall of 10pc (Daily Telegraph, Michael O’Dwyer) shows that although management consultants have actually benefited from increased focus on public sector work and advising clients on crisis management, supply chain enhancements and digitisation, they think that growth in the next 12 months is going to be tough. Digital and tech consultants have brought in 19% of income and government contracts represent about 25% of the work for the sector.

Zomato feels the pinch and Hitachi talks electrification…

Zomato cut off from Chinese funding by India-China tensions (Financial Times, Mercedes Ruehl and Stephanie Findlay) shows that the $3bn Indian food delivery start-up has been cut off from $100m in funding from Ant Financial, the Chinese digital payment giant as it goes through the government’s approval process. * SO WHAT? * The Indian government is currently increasing efforts to block “opportunistic takeovers” and the process of approving foreign investment is part of this. The problem is that over 60% of India’s 30 unicorns (private companies that have a valuation of over $1bn) are funded either by big Chinese tech groups (like Tencent and Alibaba) or venture capital funds and the two countries have become so intertwined that

unravelling them could prove to be very tricky. OK, so sentiment is pretty hostile between India and China at the moment, but I suspect it will pass eventually as IMO India needs China’s cash and China needs India’s growth.

Hitachi flicks the switch for battery to replace diesel (The Times, Robert Lea) shows that Hitachi Rail UK, is currently seeking government go-ahead for the manufacture of hundreds of battery-powered electric trains to replace the UK’s diesel fleet. The company will be in partnership with Hyperdrive, the UK’s biggest independent battery maker. This sounds like great news for the environment, but the even-better news is that it can be retro-fitted onto some existing trains. * SO WHAT? * Some other manufacturers are looking at making hydrogen-powered trains, but Hitachi UK argues that battery-electric tech is ready-to-use right now and that it could immediately make a start on helping the government reach its target of having no diesel trains by 2040.

…in other news…

I thought I’d leave you today with one woman’s experience of lockdown in ‘Terrified’ woman returns home to find mutant potatoes have taken over flat (The Mirror, Luke Matthews https://tinyurl.com/y9kdk9h8). This really is quite impressive 😱! Talking of which, I am reminded of this classic where comedian Rhod Gilbert recounts his potato-related experience HERE . He is brilliant! Just in case you are a bit squeamish about these things, he does use a few naughty words…

1. In MACROECONOMIC NEWS, we look at the state of US, European and UK jobs, quarantine dismantling and Sunak managing expectations
2. In HIGH STREET NEWS & CONSUMER TRENDS, the Casual Dining Group goes into administration, Pret a Manger has a new idea, Primark sticks to offline and gun sales rise
3. In INDIVIDUAL COMPANY NEWS, Tesla delights and Facebook reckons the ad storm will blow over
4. AND FINALLY, I bring you a home-made swimming pool and a DIY fail…

So we look at US, European and UK jobs while the UK dismantles quarantine and Sunak manages tax cut expectations…

Trump celebrates record jobs rise despite new threat (The Times, Simon Duke) shows that American companies hired at a record rate last month as employers added 4.8m staff as bars and restaurants were among the businesses coming back to life. This was significantly above the 3m that were expected and the breakdown was quite interesting: leisure and hospitality added 2.1m, retailers added 740,000 and manufacturers added 356,000 people. This job data was gathered in the second week of June and does not include falls in employment in states that reimposed lockdown. * SO WHAT? * This is a positive sign but these sorts of numbers will be vulnerable in the event of more lockdowns. Fingers crossed that there isn’t too much of that.

Slowdown in EU job losses defies economists’ predictions (Financial Times, Martin Arnold) cites the latest data from Eurostat which shows that the rise in unemployment slowed down in May – it was up by 6.7% across the EU, which is an eight month high but it’s lower than economists were expecting (so that’s a good thing). * SO WHAT? * Big consumer spending rises in Germany and France show that a willingness to spend is there and IF most people on furlough schemes can return to work, albeit potentially on

reduced hours, the economic impact may not be so bad. However, you could also argue that Europe has just been putting off the inevitable by putting over 40m workers on furlough schemes and that there will be a wall of major job losses if/when these furlough schemes come to an end.

In the UK, Three-quarters of UK manufacturers set to cut jobs this year (Financial Times, Valentina Romei and Daniel Thomas) cites the results of a survey by Make UK, a trade body that represents manufacturers. The industry is warning that there will be big-scale redundancies when the government’s furlough scheme winds down, putting more pressure on the government as it prepares to announce a package of economic stimulus measures next week. Sunak damps hopes of big tax cuts (Financial Times, George Parker) shows that next week’s announcement will disappoint those hoping for a tax cut-powered economic boost. The announcement will mark a change from a “support” phase that we’ve seen so far to the “stimulus” phase where the government will encourage households and companies to return to normal spending patterns. Meanwhile, UK to begin dismantling its quarantine policy (Financial Times, Jim Pickard and Mure Dickie) signals imminent announcements on 70 destinations where people can travel to without having to self-isolate for 14 days upon return. Boris Johnson is expected to announce a new “traffic light system” for countries, allowing free travel to countries designated as green or amber. A list of “safe” countries was to have been published on Wednesday, but there has been a delay. * SO WHAT? * The balancing act between minimising risk and getting the economy going again continues…

Restaurant carnage continues, Pret has a new idea, Primark sticks to its guns and US gun sales increase…

Café Rouge owner falls into administration, with loss of 1,900 jobs (The Guardian, Zoe Wood) shows that Casual Dining Group (CDG), owner of chains including Bella Italia, Café Rouge and Las Iguanas has fallen into administration resulting in the instant loss of 1,900 jobs. Advisory firm Alix Partners is now handling the administration which will no doubt involve the break up of the group. Although there are many interested buyers, none of them want to take on all the existing sites and 91 of its 250 outlets will not reopen. Bella Italia and Café Rouge will see the most cuts, but Belgo will close three out of four of its venues and airport brands Huxleys and Oriel will also be shut down. * SO WHAT? * CDG said in May that administration was a possibility – and, unfortunately, this proved to be correct. This follows on from 5,000 job losses announced on Wednesday as SSP, the owner of Upper Crust and Caffé Ritazza, and the 3,000 job losses announced by The Restaurant Group, owner of Frankie & Benny’s and Garfunkel’s in June. Tough times for casual dining, but over-expansion in the last few years prompted by over-eager private equity owners has well and truly come home to roost.

Meanwhile, Pret a Manger serves up new dinner menu for home time (Daily Telegraph, Laura Onita and Hannah Uttley) highlights a new initiative where it will start to offer things like salad bowls, lasagne and fish pie for dinner from next week. It will start trialling deliveries from some of its shops in Bristol, Cambridge, Nottingham and London. The new menu items will be available from 5pm and is aimed at people working from home all the time. * SO WHAT? * This is just another example of a company fighting to adapt to the challenges presented by the coronavirus. It sounds like a decent enough stab, but I’m not sure whether targeting people who are working from home is that much of a great idea – especially as they will have so many other options open to them as well. I think that the reason why Pret is

successful is that it has been in the right places (near offices) until the coronavirus hit, but they are now the wrong places. I hope that this initiative can help Pret to survive long enough to see the return of office workers, but surely it is going to have to shut down at least some outlets over the next few months.

Although Pret might be looking at new initiatives, Online still not the right fit, insists Primark (The Times, Ashley Armstrong) shows that the retailer wants to stick with its existing strategy of being offline-only despite losing over £1.5bn in sales while its shops were shut under lockdown. Primark’s owner, Associated British Foods, said yesterday that like-for-like sales fell only 12% year-on-year in the last seven weeks and that it was seeing an encouraging rebound since the reopening of its shops. * SO WHAT? * FWIW, and I’m sure I will be criticised for this, I actually think that, in Primark’s case, staying offline is actually a reasonable policy. Now I like a bit of online retailing as much as the next person, but there are many downsides to providing this convenience. Returns from people ordering online are surprisingly chunky and making your own delivery capability can cost a lot of money. I don’t think that Primark can continue to be offline forever, but for the moment, it can save itself some money and benefit from shoppers being overjoyed at the prospect of browsing around real shops once more.

There’s an interesting trend going on in the US at the moment – Data point to soaring US gun sales in June (Financial Times, Lauren Fedor and Christine Zhang) cites the latest FBI figures which show that a record 3.9m firearm background checks were carried out in June as gun sales have skyrocketed through lockdown and a spike in civil unrest following the George Floyd killing. The number of checks conducted was a whopping 71% higher than the number carried out in the same month last year. * SO WHAT? * This is only a guide because these figures don’t tell you how many guns were sold, not all American gun buyers need to submit to background checks and regulations governing their purchase vary from state to state. I guess that some people were using the $1,200 checks they received from the government to buy their dream gun.

Tesla confounds the sceptics and Facebook remains calm about the ad boycott…

Tesla quarterly deliveries fell less than expected amid Covid shutdown (Wall Street Journal, Tim Higgins) shows that the electric car company’s second quarter deliveries global deliveries fell by only 4.9% versus the previous year – a figure that is way better than the market was expecting. This performance will no doubt fuel investor speculation that 2020 will be the year that Tesla turns a full-year profit. The share price rose again in trading yesterday by 8% after recent strength made the company the biggest car manufacturer in the world in terms of

valuation. There is SO much expectation for Tesla at the moment.

Despite all the recent furore surrounding the movement to encourage an online ad ban Advertisers will be back soon, says Zuckerberg (Daily Telegraph, Laurence Dodds) shows that Mark Zuckerberg remains defiant and says that the company will not be changing its policy in the face of “a threat to a small per cent of our revenue”. * SO WHAT? * FWIW, I think that although the motivations of the movement are admirable, they are likely to come up short because as long as Facebook has a massive user base, companies are going to want to advertise to them. The company has a massive goldmine of user information that is very hard to get and so ultimately, unless you can get rid of Facebook users in vast numbers – and quickly – it will be impossible for advertisers to boycott Facebook for long.

…in other news…

I thought I’d leave you today with a home project idea in ‘Genius’ hack sees family transform trampoline into swimming pool for under £40 (The Mirror, Paige Holland https://tinyurl.com/ydz5lyy5) – although I must say it looks potentially problematic to me! Then there are the rather unfortunate consequences of not thinking through a spruce-up properly in Woman’s DIY fail leaves others in stitches after she tried to revamp old wardrobe (The Mirror, Luke Matthews https://tinyurl.com/y7tg9dd9). Oh dear.

1. In MACROECONOMIC NEWS, Hong Kongers seek the exit and Putin gets closer to his goal
2. In MAIN STREET/HIGH STREET NEWS, Macy’s reopens while Apple, McDonald’s and Pizza Hut close. In the UK, there’s more jobs carnage on the high street, John Lewis looks tricky, Sainsbury’s has a cautious outlook, B&M prospers and Germans start spending
3. In PROPERTY NEWS, there’s a gulf between retail and office fortunes while UK house prices fall
4. In INDIVIDUAL COMPANY NEWS, we see how Facebook and Twitter will fare in the ad boycott, Google looks at glasses again and Tesla overtakes Toyota
5. AND FINALLY, I bring you onion-flavoured breakfast cereal and an amazing taekwondo dance!…

So we see the immediate impact of the new security law in Hong Kong and Putin gets closer to “immortality”…

The newly-imposed security law from China starts to have repercussions in Hong Kongers look to the exits as China imposes security law (Financial Times, Alice Woodhouse, Nicolle Liu and Primrose Riordan) shows that an increasing number of residents are currently making plans to emigrate and are making moves to get their money out of Hong Kong . Andrew Lo, founder of the immigration consultancy Anlex, talked about previous spikes in interest in emigration and observed that “In 1989 [the year of the Tiananmen massacre], it was only people with money who were planning to go as they were worried about their wealth not being protected” but then added that “Last year [when all the protests were going on], it was mostly the working class wanting to leave. This year, everyone wants to leave”. Some are wanting to get their money out of Hong Kong in case the US punishes China with sanctions – a YouTube video on how to get capital out of Hong Kong has had over 384,000 views and talks about how to open overseas accounts using platforms like Monzo and N26 etc. Meanwhile, Johnson condemns HK law as breach of handover pact (Financial Times, Laura Hughes and Alice Woodhouse) shows that BoJo is leaving the door open to

citizenship for almost 3m Hong Kong residents, sticking to his original pledge. * SO WHAT? * Clearly it is early days as the law has only just been implemented and tempers are bound to run high. It’s too soon to tell whether this is going lead to some sort of mass-exodus, but you do wonder where everyone is going to go as all countries are likely to be sensitive about letting in new citizens at this time as they will have their own problems to deal with in terms of unemployment, housing etc. My point is that although Hong Kongers may WANT to leave, the number of places that they could go to may be limited. On the other hand, I would imagine that a lot of ex-pats and foreign businesses are likely to be thinking about their long term future there. I would also add that with this latest action, Taiwan will be wondering whether they are going to be next for the Beijing treatment.

Elsewhere, Russians set to back Putin’s move to extend his rule (Financial Times, Max Seddon) shows that Putin is on the verge of getting his wish after all as the vote to make constitutional changes to extend his 20-year rule until 2036 is likely to go his way. Other amendments included a ban on gay marriage and making Russian the “language of the state-forming ethnic group”. * SO WHAT? * This was all part of the overhaul Putin made earlier this year of his cabinet and it seems that he has managed to push this through successfully despite falling approval ratings and his rather inconsistent handling of the coronavirus. From a markets perspective, this is unlikely to change anything as Russia looks like it’s about to embark on more of the same until 2036!

Main Street reopenings are mixed while High Street carnage continues…

Over in the States, Macy’s says most stores have reopened as US coronavirus infections rise (Wall Street Journal, Dave Sebastian) sounds great in a way, but the struggling department store chain is cautious about the future given that additional outbreaks could mean a return to tighter restrictions as per Apple to shut dozens of stores as coronavirus flares in parts of the US (Wall Street Journal, Allison Prang) and McDonald’s halts reopening plans as US coronavirus cases grow (Wall Street Journal, Heather Haddon). Elsewhere in the world of fast food, Largest Pizza Hut franchisee bankruptcy signals Yum Brands tensions (Financial Times, Alistair Gray) shows that NPC International, America’s biggest operator of Pizza Hut restaurants, has just filed for bankruptcy after it failed to squeeze any money out of parent company Yum Brands to help it through. NPC, which is owned by private investment firm Eldridge, had been struggling before the pandemic hit because of tougher competition, rising minimum wages and higher beef prices so the outbreak just pushed it over the edge. Tough times.

In the UK, Jobs shock after 10,000 workers axed in two days (The Times, Dominic Walsh) highlights ongoing job carnage on the high street as SSP, which owns Upper Crust and Caffé Ritazza, yesterday announced 5,000

redundancies while Arcadia (owner of Topshop, Miss Selfridge etc.), Harrods and John Lewis announced at least 1,200 job cuts. Talking of which, No sacred cows as John Lewis forms store closure plan (The Times, Ashley Armstrong) shows that the management is getting ruthless with shutting down stores as it is even considering the closure of its £35m Birmingham store that it opened in 2015.

On a slightly more positive note, Sainsbury’s cautious despite web sales boom (Daily Telegraph, Laura Onita) shows that Sainsbury’s is staying cautious on the outlook despite online sales more than doubling during lockdown, B&M increases its cut of the retailing pie (The Times, Ashley Armstrong) shows that the discount chain continues to see very healthy sales. Apparently, around 20% of sales came from new customers – which must be very encouraging. It’s difficult to tell whether this strength will persist, but for now it’s doing pretty well! It plans to open a number of new stores this year – and I bet it can get them at bargain prices/rents given the amount of space that is becoming available!

There’s good news on the continent, though, in Germans rushed to reopen wallets after lockdown eased (Financial Times, Martin Arnold) which cites data from the Federal Statistical Agency which shows that retail sales shot up by a record 13.9% in May versus the previous month. This was the biggest monthly rise since data started in 1994 – but obviously this was from a very low base. Hopefully this will be sustained and may be a reflection of what could happen over here!

The fortunes of retail, office and residential property continue to differ..

UK retail landlords squeezed as stores hit by Covid-19 crisis (The Guardian, Sarah Butler) shows how retail landlords Hammerson and British Land are having a nightmare in terms of collecting rents from their tenants as the retail sector continues to struggle, but British Land/Hammerson: the way we’ll live now (Financial Times, Lex) highlights the fact that British Land’s exposure to offices, where it has collected 90% of rents due, will help it do better than Hammerson (mainly shopping centres)

which has only managed to collect 16%. * SO WHAT? * It’s early days, but I would have thought that offices may start to get worse as we approach the end of furlough (unless it is extended) and maybe retail may get slightly better as they start to open. The ending of furlough may well put terminal pressure on a number of businesses.

Meanwhile, House prices fall for the first time since 2012, survey shows (Daily Telegraph, Melissa Lawford) highlights the latest stats from building society Nationwide. * SO WHAT? * I don’t think this is particularly surprising and it’s possible that after an initial mini-boom as pent-up demand from lockdown washes through the system things will just continue to drift until households can feel confident about the economy and their finances once more.

Twitter may suffer from Facebook flak, Google tries glasses on and Tesla is now bigger than Toyota…

Facebook is too big to suffer from a boycott. But its rival Twitter is not (Daily Telegraph, Robin Pagnamenta) makes the very interesting and valid point that although advertisers are making a lot of noise about abandoning Facebook for its lax stance on moderating hate speech, its much smaller rival Twitter is also suffering because advertisers are banning all social media advertising this month – starting yesterday. * SO WHAT? * The irony of this situation is that Twitter has taken the high road on this matter (although it has problems of its own with bots, trolls etc.) but it is way less profitable and is smaller than big, bad Facebook. Given the commercial damage that Twitter could suffer, will it use this opportunity to move to a subscriber model?? An interesting suggestion but I just

can’t see it. The ad ban is only for a month and TBH, companies are still going to want to advertise on social media IMO. 

In other news, Google sets sights on smart glasses start-up (Daily Telegraph, Margi Murphy) shows that the company is having another go at glasses by announcing the acquisition of “pioneering” smart glasses company, North. This signals a return for Google to smart glasses after Google Glass failed to gain sufficient traction (remember that wearers of the tech were nicknamed “Glassholes” 😂 Good times).

Then in Tesla becomes world’s most valuable carmaker without making a profit (The Guardian, Rob Davies) just goes to show how much investors are buying in on future hopes as its valuation is now greater than that of Toyota. OK so its cars are technologically impressive and there is an argument to say that the coronavirus could lead to the greater adoption of alternatively-powered cars, but it does all seem rather ridiculous. Still, well done Elon!

…in other news…

I’ve got some real goodies for you today! First of all there’s the quite frankly horrendous-sounding Kellogg’s launches onion-flavoured breakfast cereal – but do you dare try it (The Mirror, Ruki Sayid https://tinyurl.com/ya2pxv9j) 🤢 which certainly makes for a “unique” breakfast and then there’s the INCREDIBLY impressive group of taekwondo experts in this video who do a mixture of dance and high kicks! This is one of the most impressive and mesmerising videos I have ever seen! The athleticism, skill and co-ordination – and EDITING – is A-MA-ZING. I’m a black belt at judo and sadly we never did anything like that 😥. Maybe that could be a new thing…

ONE LAST THING. For those of you who are keen on improving your knowledge and want to spice things up a bit, you should really think about trying this competition I saw in the Daily Telegraph. It will really change the way you look at business and financial news because you will feel invested in it (but it’s all free). And if you like that, you should definitely join me on my Zoom call tonight HERE at 5pm. If that link doesn’t work, just look at this morning’s e-mail – it will have the details.

1. In MACRO & OIL NEWS, Hong Kong takes its Chinese medicine, the UK’s GDP craters but there’s talk of a V-shaped recovery while BoJo talks relaunch and Shell cuts asset valuations
2. In TRAVEL INDUSTRY NEWS, Airbus and Easyjet announce cuts while On The Beach looks on the bright side
3. In NEWS ON “WINNERS” & LOSERS, FedEx exceeds expectations and rental e-scooters get the go-ahead while US bankruptcies increase, a Chinese electric car manufacturer suspends operations and TM Lewin, Harveys and Bensons For Beds fall into administration
4. AND FINALLY, I bring you a mask solution for better haircuts…

So Hong Kong gets its medicine, UK GDP is a disaster but better things are promised and Shell downgrades valuations…

China draws condemnation for new Hong Kong security law (Financial Times, Nicolle Liu, Yuan Yang, Demetri Sevastopulo, Jamie Smyth and Michael Peel) shows the immediate reaction to China imposing the new security law which bypassed Hong Kong’s own legislature. Acts of terrorism, subversion, secession and “collusion with foreign elements” will now be punishable by up to life imprisonment and Chinese state security agencies will be able to operate openly in Hong Kong for the first time. The new law applies not only to those within the territory – it also applies to those outside it, meaning that vocal sympathisers can be prosecuted upon entry to Hong Kong or mainland China. Following this, Hong Kong pre-democracy groups disband after security law is passed (Financial Times, Nicolle Liu and Yuan Yang) highlights the disbanding of pro-democracy opposition party Demosisto and US bars arms exports to Hong Kong as it revokes special status (Financial Times, Katrina Manson and Demetri Sevastopulo) shows that the Americans were serious about their threat to revoke Hong Kong’s special status and have now banned the export of arms and sensitive tech there. * SO WHAT? * This all sounds rather scary to me – but it must be VERY scary for people who live there. This is also likely to spook any foreign businesses in Hong Kong (although I suspect no-one will be willing to say this publicly) and make it a lot harder to recruit staff to go there IMO. The reality of the law may well prompt new (or hasten existing) plans to leave and go to Singapore or Tokyo if a presence is required in the region.

Meanwhile, in the UK, Worst GDP fall since winter of discontent (The Times, Gurpreet Narwan) cites the latest

data from the Office for National Statistics which shows that GDP fell by 2.2% in the first quarter – more than it had initially expected and the biggest drop since 1979 when there were loads of strikes. Not to worry, though as Haldane: V-shaped recovery is on the cards (Daily Telegraph, Tim Wallace) shows that the chief economist of the Bank of England, Andy Haldane, reckons that the UK is in for a sharp recovery as consumer spending data, consumer confidence and business activity point to better things to come sooner than expected but The future may be V-shaped, but it would be rash to count on it (The Guardian, Nils Pratley) points out that he went on to say that things could go one of two ways in the second half of this year: higher spending and falling unemployment (which would support the V-shaped recovery) or higher unemployment (because of the end of furlough and lack of business activity) and lower spending (consumers being cautious). Let’s hope that his plan to invest in the public services, housing, transport and science he mentioned in Boris Johnson announces state-led post-coronavirus relaunch (Financial Times, George Parker, Jim Pickard and Chris Giles) comes good! * SO WHAT? * In short, there are some positive signs out there, but there are still some massive risks!

There’s more gloom in oil in Shell to cut £18bn from value of assets amid coronavirus crisis (The Guardian, Jillian Ambrose and Kalyeena Makortoff) as the oil major warned that it would be cutting valuations in the wake of current circumstances and expects poor oil demand for the next three years at least. It also outlined its oil price expectations for the next few years – $35 a barrel on average for the rest of 2020, $40 a barrel in 2021 and $50 by 2022. * SO WHAT? * When you hear oil majors like Shell and BP being so downbeat about oil, it does make you think that the current level of $40 a barrel is being supported by an awful lot of talk from Trump and the Saudis! On the other hand, you could say that they are being overly gloomy to deflect criticism of their cuts.

Airbus and Easyjet announce cuts while On The Beach is of a sunnier disposition…

The carnage continues in the air travel industry in Airbus to cut 15,000 in industry’s ‘gravest crisis’ (Daily Telegraph, Alan Tovey) which highlights the cuts that the company is planning on making – which include 1,700 jobs in the UK – as demand for air travel has just evaporated. Chief exec Guillaume Faury said “Airbus is facing the gravest crisis this industry has ever experienced”. Easyjet to close bases and cut staff (The Times, Robert Lea) deepens the gloom even further as the company makes moves to shut bases at Stansted, Southend and Newcastle airports with the loss of 2,000 employees. * SO WHAT? * This really is doomsday stuff and I expect it to continue. I just hope these businesses can last long enough to benefit from the uptick that WILL come eventually. Until then it’s all about

battening down the hatches and surviving. It’s not just the plane manufacturers and Easyjet staff who will lose out, though – many more will suffer in other companies that support and supply them.

On the beach? Families skip this year’s holiday and book ahead (The Times, Dominic Walsh) shows that On The Beach Group, which accounts for 20% of online sales in the short-haul beach holiday market, is sounding quite an upbeat tone as it announced that booking volumes are almost back to normal levels after a very sparse March and April. Chief exec Simon Cooper estimates that some holidays will be 10-15% cheaper than they were last year and that customers were basically writing this year off and booking for next year. Interestingly, On the Beach looks to lap up travel businesses caught in tide of pandemic problems (Daily Telegraph, Hannah Uttley) highlights the company’s £50m war chest that it is willing to use to buy up struggling rivals at bargain prices. It has been particularly keen to get a presence in Germany. We’ll just have to see what happens…

FedEx and e-scooters win, while US companies, a Chinese electric car manufacturer and some UK high street names all suffer…

And in the “winners” corner today, FedEx reports better-than-expected revenue as residential deliveries surge (Wall Street Journal, Paul Ziobro and Allison Prang) shows that the company benefited from a massive upsurge in online shopping during lockdown (no surprises there). However, what is interesting is that it says it is seeing a strong rise in international cargo, which would imply that there are early signs of recovery for the global economy.

There’s good news for those who like a bit of adrenaline with their commute in Rental e-scooters given go-ahead in green drive (Financial Times, Tanya Powley and Tim Bradshaw) as RENTAL electric scooters will be allowed on British roads from Saturday after parliament passed legislation yesterday to fast-track trials. This is all part of

the government’s efforts to encourage people to use ways of commuting that are greener and less coronavirus-prone than current modes of public transport. The scooters will be limited to 15.5miles per hour and won’t be allowed on pavements. Until now, they have been illegal in the UK. E-scooter operators include Lime, Bird, Spin, Tier, Voi and Dott will all be interested in a British launch!

And in the “losers” corner, US companies file for bankruptcy at fastest pace since 2013 (Financial Times, Joe Rennison and James Fontanella-Khan) highlights the frightening pace of business failure in the US at the moment, Chinese elecrtric car maker Byton suspends operations (Financial Times, Christian Shepherd and Emma Zhou) shows another Chinese electric car start-up in trouble and TM Lewin, Harveys and Bensons for Beds enter administration (Financial Times, Jonathan Eley) highlights ongoing problems for high street players. TM Lewin was only bought by private equity firm SCP last month, but having now bought it out of a pre-pack administration, it is going to close all of its 66 stores and let it live on online.

…in other news…

Words cannot do justice to the elation I will feel when I get my haircut next week. I’m pretty impatient when it comes to this sort of thing and my hair is now longer at the back and sides than it has been since I was 12! If only we had bits of kit like this in the UK: You can now get stick-on salon masks for haircuts in the coronavirus age in Japan (SoraNews24, Casey Baseel https://tinyurl.com/y9by7ck4). I might just have to improvise with a few bits of gaffer tape with a breathing hole in the middle. Taking it off may be a tad painful, but I think I can bear it. People pay a lot of money for exfoliation…

1. In MACRO & OIL NEWS, Beijing imposes a new security law on Hong Kong, India blocks Chinese apps, Merkel appeals to the “frugal four”, Ireland gets a new PM and BP sells its petrochemicals to Ineos
2. In CONSUMER/RETAIL-RELATED NEWS, we look at household finances and then what’s going on with Byron, Pizza Express and Frasers Group buying more Hugo Boss, Coty buying more Kardashian and Lululemon buying Mirror
3. In INDIVIDUAL COMPANY NEWS, Gilead charges for remdesivir, Wirecard repercussions continue and Lookers addresses shortfall
4. AND FINALLY, I bring you a steak-bake rug and a dog with its owner’s false teeth…

So Beijing gets tough, India gets tough, Merkel appeals to the “frugal four”, Ireland gets a new PM and BP backs out of petrochemicals…

China passes Hong Kong security law aimed at crushing protests (Wall Street Journal, Chun Han Wong and Wenxin Fan) highlights the approval today by China’s legislature of a major new law aimed at stamping out threats to national security in Hong Kong. The legislation was put together and approved incredibly quickly and is focused on preventing and punishing disruptive activities. The full text is expected to be released today – the contents have thus far been kept away from the public eye to avoid sparking further protests. The official line from China is that it will only affect a very small number of people and will bring more order and harmony to Hong Kong. Why Beijing is rushing to push through Hong Kong security law (Financial Times, Tom Mitchell) gives more detail about how and why Beijing has been so keen to get this legislation through and concludes that it is being brought out in time for the July 1st holiday, which is officially a day to celebrate Hong Kong’s return to China but has actually become a day associated with pro-democracy protests. Things are likely to get very tetchy tomorrow.

Talking about tetchy, India bans TikTok, dozens of other Chinese apps after border clash (Wall Street Journal, Rajesh Roy and Shan Li) highlights India’s response to the recent border clash between the two countries which resulted in 20 Indian soldiers losing their lives. Bans included apps such as TikTok and WeChat and the government says that the ban has been imposed due to security concerns. This could give other countries an excuse to do the same thing – the US is currently considering whether TikTok poses a national security risk. This is particularly bad news for ByteDance, which owns the app, as India ranked #1 for new users (making up 20% of downloads globally) and the US was #2 (9.3% of global downloads). * SO WHAT? * Six of the top ten downloaded apps in India come from Chinese tech companies so this ban is going to hurt their growth prospects if it continues. There are two forces at work here. On the one hand, you’ve got the Chinese companies who are keen to expand out of

their domestic market and see India as a country with huge potential and then on the other, it seems you have India being keen not to get overrun by Chinese tech to the extent that they will become over-reliant on it. I would say that, at the moment, India may bow to populist sentiment but you never know what will happen to the economy further down the road – India may have to swallow its pride and let China in.

Elsewhere, Merkel offers olive branch to ‘frugal four’ over EU crisis fund (Financial Times, Guy Chazan) shows that Germany’s chancellor is trying to appeal to the “frugal four” nations (Sweden, the Netherlands, Denmark and Austria) who are opposed to the European Commission’s plans for a €750bn coronavirus bailout fund by asking for EU countries to reform their economies. * SO WHAT? * That all sounds nice but the fact is that there are major divisions over how much of the €750bn should be in grants and how much in loans, how long it should go on for and when repayments should start, among other things. The ‘frugal four’ want a smaller fund and a higher percentage of loans WITH conditions attached. This debate will continue – but the parties will have to reach agreement soon. Europe’s unity is certainly being tested at the moment.

In Micheál Martin takes helm in historic Irish coalition deal (Financial Times, Arthur Beesley) we see that Ireland now has a new PM until December 2022 when he will have to relinquish his position to put Leo Varadkar back in office (he’ll be the deputy premier in the interim). This is all due to coalition politics 🥱 and seems a bit messy to me! Would YOU fancy his job at a time like this?? He plans to announce a new economic stimulus next month.

In oil, BP sells petrochemical business to Ineos for $5bn (The Guardian, Jasper Jolly) shows BP’s ongoing commitment to a lower carbon future (and to improving its balance sheet) as it has sold the business that includes the aromatics (produces chemicals for polyester used in clothing and packaging etc.) and acetyls (used in food flavourings, paint and glue) businesses. Once this completes, the company will have met its target of selling off $15bn-worth of assets that will go some way to paying down debt that stood at over $60bn at the end of the first quarter. BP/Ineos: good chemistry (Financial Times, Lex) says that this will cut about 10% of the company’s net debt and that a simplified structure will be applauded by investors.

UK consumers save, Byron and Pizza Express have issues while Monsoon surprises and Frasers buys more of Hugo Boss. Over in the US, Coty buys into the Kardashian brand and Lululemon buys Mirror…

Household deposits soar by record amount as lockdown hits spending (Financial Times, Valentina Romei) cites Bank of England data as showing that household savings have gone up by the largest amount since records began in 1997 while consumer credit borrowing was lower than usual. The same report was mentioned in UK home loans fall 90% since start of Covid-19 crisis (the Guardian, Larry Elliott) which showed that the number of approved new home loans fell to their lowest level since 1993. * SO WHAT? * Given that the housing market has been shut for months and that consumers haven’t been ABLE to spend their money in ways that they normally would, these figures are not surprising. They do paint a picture of a cautious consumer – however, if/when a vaccine/cure is found, it shows that there could be big upside if consumers start once more to use some of the money they’ve saved!

The UK high street is still a stage full of high drama in Job losses feared as burger chain prepares to be swallowed up (The Times, Dominic Walsh), which shows that Byron Burger is going to bring in the administrators. It is highly likely that loss-making outlets will be jettisoned and there will be resulting job losses – another nail in the coffin for casual dining. We cannot pay the rent, warns Pizza Express (Daily Telegraph, Rachel Millard) highlights another fellow sufferer on the high street who wrote to landlords to say that it was going to withhold rent payments until there was more visibility regarding future customer behaviour and Monsoon saves 57 more stores than planned after landlord truce on rents (Daily Telegraph, Laura Onita) shows that Monsoon Accessorize will keep 157 stores – 57 more than had originally been thought – due to agreements being reached with landlords over rent. Most landlords have agreed to switch from a flat

rate to turnover-based rent. In other developments, Frasers Group ups stake in Hugo Boss (Daily Telegraph) shows that The Company Formerly Known As Sports Direct has taken its 5.1% stake in the German fashion house to 10.1%. This goes to show that CEO Mike Ashley is serious about taking his company upmarket. * SO WHAT? * The Great High Street Shake-Up continues. Some retailers are now getting what they’ve asked for for ages – rent based on turnover. Previous pleas to do so have fallen on deaf ears as landlords have preferred to charge flat rates, but things are getting desperate out there right now. The balance of power seems to have shifted from landlord to tenant at the moment as some rent is always better than no rent in the current environment. The Frasers Group thing is interesting isn’t it? Mike Ashley is an ambitious and canny fella – Hugo Boss is a proper brand, so it’ll be interesting to see whether this investment results in more of a relationship with Frasers or whether this is just an investment thing.

Meanwhile, Coty to buy 20% stake in Kim Kardashian West’s beauty line (Financial Times, Leila Abboud and Arash Massoudi) highlights Coty’s purchase of a 20% stake in KKW for $200m – not long after it bought a 51% stake in younger sister Kylie Jenner’s beauty business. * SO WHAT? * Times are tougher now, so “only” buying a 20% stake signals a more cautious approach by Coty – although it does have the option to buy a majority stake further down the road. It’s all part of an attempt to use the Kardashian magic dust to makeover more tired brands that are currently in the Coty stable. Coty is owned by investment firm JAB Holdings, which also has stakes of varying sizes in Pret A Manger, Panera Bread, Keirig Dr Pepper and JDE Peet’s.

Lululemon buys Mirror, an at-home fitness start-up, for $500million (Wall Street Journal, Sharon Terlep) highlights Lululemon Athletica’s purchase of the company that sells a $1,500 tech-enabled mirror with speakers that enables customers to participate in live fitness classes at their own home. It only launched back in September 2018 – not bad, eh! * SO WHAT? * This sounds like a good idea from a strategic standpoint for Lululemon as it will give it another way of boosting revenue in addition to another avenue to market for its core products. Mirror is expected to become profitable by next year.

Gilead names its price, Wirecard has more problems and Lookers takes its medicine…

In other news doing the rounds today, Gilead to charge governments $2,340 for remdesivir (Financial Times, Donato Paolo Mancini and Mamta Badkar) shows that Gilead will be charging a chunky price for 5-day course of remdesivir, which is said to short coronavirus recovery times. That includes $390 a pop per vial and six vials over five days. The drug was originally used to treat Ebola.

Wirecard nightmares continue in Wirecard fallout spreads in UK and Singapore (Financial Times, Nicholas Megaw, Stefania Palma and Silvia Sciorilli Borrelli) and UK consumers dragged into Wirecard’s collapse (Financial Times, Nicholas Megaw) while EY prepares for backlash over Wirecard scandal (Financial Times, Tabby Kinder and Olaf Storbeck) shows that the accounting giant is readying itself for tough conversations with clients.

Talking of accounting holes, Lookers confirms £19m charge to correct books after fraud inquiry (The Guardian) shows that the embattled car dealership chain is going to book a £19m charge to plug the hole that a recent investigation uncovered in its accounts. What is it with accountants these days?? Are they worse than they used to be or just less adept at brushing things under the carpet?!?

…in other news…

During these coronavirus times, I think we all get our spirits lifted by a little retail therapy – either online or offline. Some people like to share the joy with others on social media. One woman’s purchase got a rather different reaction from the online community than she was expecting in Woman shows off new yellow rug but people say it looks like a Greggs steak bake (The Mirror, Paige Holland https://tinyurl.com/y92uuuz9). What do you see? I guess it depends how hungry you are when you look at it and/or whether you are vegetarian 😂. Then there’s something that’s sure to make you smile in Dog shows off hilarious toothy grin after stealing false teeth from drawer (The Mirror, Luke Matthews https://tinyurl.com/yd8n6q9b). I think that I might have included something similar in a previous Watson’s Daily, but you know I don’t think you can ever have too many videos of dogs running around wearing their owners’ false teeth 👍

1. In MACROECONOMIC & OIL NEWS, UK inflation may be higher than originally thought and shale producer Chesapeake Energy files for bankruptcy
2. In FINANCIALS NEWS, Wirecard continues to have repercussions and Lloyds Bank searches for new areas
3. In RETAIL-RELATED NEWS, Intu falls into administration, M&S and Next eye up Victoria’s Secret, retailers brace themselves for returns and bike sales rocket up
4. In INDIVIDUAL COMPANY NEWS, Facebook faces more flak
5. AND FINALLY, I bring you a classic moment…

So UK inflation could actually be higher and Chesapeake Energy falls…

Prices are rising faster than official figures suggest (Financial Times, Chris Giles) cites research from the National Institute of Economic and Social Research (NIESR) which claims that price measures used by the Office for National Statistics (ONS) are low-balling the real inflation rate. It says that the ONS puts too much weight on goods and services that were simply unavailable during the outbreak. 16% of the normal “basket” includes things like haircuts and restaurant meals. The Bank of England’s CPI rate fell to 0.5% in May. * SO WHAT? * I don’t think it takes a genius to come to this conclusion. The fact is, NO figures are going to be accurate during this crisis because everyone’s just doing the best they can having never experienced anything like this before. I think it’s ridiculous to start chopping and changing the contents of the basket all the time because, as far as I can see, the whole point of having it is that you can make reasonable like-for-like comparisons over time. By all means change a few items

here and there to reflect the real world on an ongoing basis, but changing them for a few months sounds a bit silly to me. If you change the basket, when are you going to change it back again? I think it’s better for people to take the next few months’ readings with a massive pinch of salt but keep everything the same.

In Fracking trailblazer Chesapeake Energy files for bankruptcy (Wall Street Journal, Rebecca Elliott) we see that a pioneer in US shale production joined some of its rivals when it filed for bankruptcy protection yesterday. The company was once America’s second-largest gas producer, but in its race for growth it accumulated huge debts which meant it was particularly exposed when oil prices took a huge dive. * SO WHAT? * It is interesting to note that with an oil price of around $35 a barrel, consultants at Deloitte reckon that about 30% of large public US shale producers are insolvent (i.e. their net liabilities are greater than their discounted future value). It ain’t pretty at the moment, but I suspect that there will be consolidation going on in the industry driven by companies that have strong balance sheets being able to cherry-pick companies and/or assets at bargain prices over the coming months. Oil prices do seem to be stabilising at the moment around the $40 a barrel mark, so I guess things could be worse.

Wirecard repercussions continue and Lloyds Bank thinks about its business mix…

Following on from Wirecard filing for insolvency last week, Germany to overhaul accounting regulation after Wirecard collapse (Financial Times, Olaf Storbeck and Guy Chazan) shows that the government is stepping in to tighten oversight of accountancy firms. It’s all kicking off now! EY accused of failing to act on Wirecard worries (The Times, James Hurley) shows that although EY had concerns about Wirecard as far back as 2016, it just signed off on the accounts anyway! When you consider that EY were also the auditors of NMC Health and Thomas Cook, you can see that their reputation is going to be taking a battering – and so it should. Interestingly, over 1,000 Wirecard shareholders are now joining together in a legal action in Germany regarding £910m for its audit “work”. It really does sound like the 💩 is going to hit the fan. To make things worse, Wirecard UK ordered to freeze customer funds by finance regulator (The Guardian, Mark Sweney) shows that the UK’s Financial Conduct Authority (FCA) has

now ordered Wirecard’s UK arm “to cease all regulated activity and freeze all its assets and funds”. The disaster continues…

Lloyds’ to push further into wealth management and insurance (Financial Times, Nicholas Megaw and Stephen Morris) shows that the UK’s biggest high street bank is considering a broadening of its offering in order to reduce reliance on interest-rate dependent business. There have been internal concerns that its business is too exposed to consumer banking in one country and when you consider that each 0.25% cut in interest rates slices £150m from Lloyds’ annual net interest income, you can see that it needs to look elsewhere to make some proper money. As a result, it is going to try to deepen its efforts in wealth management and insurance. * SO WHAT? * It’s about time!!! UK interest rates were hardly stellar before, but given that they are now at a historical lows it makes sense to make more effort elsewhere in the business. It’ll no doubt take a while to see any benefits coming through but I would have thought that wealth management and insurance are very hot areas right now. The problem is, I would imagine that they won’t be the only ones to consider expansion so I would expect them to come up against quite a lot of competition for talent. 

Intu gives up, M&S and Next vie for Victoria’s Secret, apparel retailers face concerns over returns and UK bike sales get a huge boost..

Shopping centre owner Intu collapses into administration (The Guardian, Zoe Wood) is just further evidence of carnage on the high street as the company was unable to convince lenders to give them any further slack and had to appoint KPMG on Friday afternoon to handle its administration. Fun fact: Intu’s shopping centres are individually owned by Special Purpose Vehicles (SPVs) which stand outside of the insolvency process, so they can continue to trade as normal. Creditors have also agreed to release £12m to keep the malls going during the administration process. * SO WHAT? * Current thinking suggests that the group will be broken up. Although it owns nine of the UK’s top 20 shopping centres, it is unclear what buyer demand is going to be like for anything other than their best venues.

Meanwhile, M&S and Next compete for UK arm of Victoria’s Secret (The Guardian, Sarah Butler) shows that the two high street stalwarts are slugging it out to take control of the UK arm of lingerie brand Victoria’s Secret. Although buying the brand would probably help to attract a younger audience, M&S might come up against competition concerns (it already controls almost one third of the UK lingerie market, with 36% of the market in bras!) so Next might be more successful. Having said that, it already has a number of brands and previously bought Lipsy to broaden its portfolio. * SO WHAT? * It’s good to see that these companies are considering ways of

broadening their product line-up and appeal, but they’ve got to make sure they make the right choice otherwise things could very rapidly go from bad to worse as the costs involved in a not-very-good acquisition could exacerbate a current lack of sales.

Talking of potential wobbles, Returns may come back to bite fashion retailers (The Times, Ashley Armstrong) cites some retail consultant concerns regarding the potential effect of a lengthening of return deadlines from the usual 28 days up to 100 days in some cases. It is possible that retailers could be deluged with unwanted stuff as a result of this, with fears that the 30% average return rate will increase. * SO WHAT? * Given that retailers are already sitting on mountains of unsold stuff due to lockdown, the prospect of rising costs due to increased returns (plus more expensive delivery charges) will make many apparel retailers very nervous. It’s certainly something they will want to keep a close eye on.

UK bike sales up 60% in April as lifestyles change (The Guardian, Sarah Butler) shows another interesting trend as consumers bought bikes in their droves during lockdown! Bike sales had been trending down at the beginning of the year but their sales shot up by 60% in April, although sales of bikes worth over £3,000 fell. Electric bikes saw sales up by 50% during that month and repairs are in strong demand as commuters try to resuscitate their ageing steeds. * SO WHAT? * I must say that I thought we’d reached peak cycling, but coronavirus has provided an unexpected boost in demand. I’m not sure how long this uptick will last  because I think it will depend on where the demand really is – if it’s commuters buying bikes then I would argue they will only buy one bike and keep it until the thing falls apart, but if there’s a renewed interest in cycling as a leisure activity then higher sales could be sustainable IMO. 

Facebook continues to get flak…

Drinks giants join Facebook advertising boycott (Daily Telegraph, Matthew Field) shows that Starbucks and now Diageo have joined some of the world’s biggest advertisers (who include Unilever, Coca Cola and PepsiCo) in an ad boycott against Facebook for not doing enough to stamp out hate speech. Still, according to Facebook’s in a fix but the ad boycott won’t break it (Daily Telegraph, James Titcomb) it’s not ideal for Facebook, but as Mark

Zuckerberg is CEO, chairman and biggest shareholder, he can do what he likes. His advertising customer base is incredibly broad, limiting the impact of any boycott, and past boycotts have shown that advertisers come crawling back soon enough. This happened with YouTube in 2017 when ads appeared next to not-very-savoury content and in the aftermath of the Cambridge Analytica scandal in 2018. Advertisers just can’t ignore Facebook – especially in current times as I would have thought more people are spending more time on their networks than they normally do and so if they want more sales they are going to have to go where all their customers are eventually!

…in other news…

Today has been yet another quiet day regarding amusing/interesting “alternative” stories, so I’ll just leave you with this absolutely brilliant sketch of two Scottish guys in a lift: “Eleven”. Love it. It’s a classic!

1. In MACROECONOMIC NEWS, the US puts pressure on the UK on Huawei and there’s back-pedalling on the digital tax
2. In FINANCIALS NEWS, Wirecard files for insolvency, WhatsApp Pay has a Brazil shocker
3. In RETAIL-RELATED NEWS, the Albertson’s IPO dents confidence, Macy’s cuts jobs, Nike falls short overall and UK rent disasters continue
4. In INDIVIDUAL COMPANY NEWS, Royal Mail announces management job losses and BA’s cabin crew get a 20% pay cut
5. AND FINALLY, I bring you a fascinating woman…

So America puts pressure on us over Huawei – and it seems to have worked on the digital tax…

US warns UK over Huawei plan to spend £1bn on chip facility (Financial Times, Nic Fildes, George Parker and Katrina Manson) shows that the Americans aren’t letting it lie as they again issued a warning about the security risks of using Huawei after the company was cleared to build a new £1bn chip facility just outside Cambridge. Huawei has committed to spend £1bn over the next five years to

establish the new facility – an investment that is much higher than had originally been forecast.

UK back-pedals on global digital tax after US threats (Daily Telegraph, Hannah Boland) shows that the UK is one of the countries offering to relax its intentions to impose a digital tax after the US threatened to slap tariffs on countries that went ahead with such plans. US Treasury Secretary Steven Mnuchin sent finance ministers of the UK, France, Italy and Spain a letter saying that a broader agreement was made more likely within the year following the climbdown. * SO WHAT? * This is all posturing and noise IMO. I would have thought that nothing will get concluded on this until at LEAST after the US presidential election as all energies go into Trump staying in office.

Wirecard goes under, WhatsApp Pay has a tough time in Brazil…

Wirecard collapses into insolvency (Financial Times, Dan McCrum, Olaf Storbeck, Stefania Palma and John Reed) shows how a company can go from hero to zero in double-quick time when it reports a $1.9bn hole in its balance sheet! It’s the first failure of a company on Germany’s Dax index and is bound to heap enormous pressure on the regulator, BaFin and the company’s auditors, EY. It is worth noting that the insolvency filing only applies (at the moment) to the holding company, which employs 200 of the overall 5,700 headcount. Hedge funds reap €1bn in a week from Wirecard collapse (Financial Times, Laurence Fletcher) shows that UK and US hedge funds like TCI and Marshall Wace have benefitted handsomely from Wirecard’s demise by shorting it. * SO WHAT? * The collapse of such a high profile company is a big deal and, as well as obviously being disastrous for Wirecard, it is also particularly bad for the auditors EY (the scale of their incompetence here is impressive) and the regulators, BaFin (who not only banned shorting of the stock last year, citing the company’s “importance for the economy”, it also filed a

criminal complaint against two FT journalists and a group of short-sellers, alleging potential market manipulation). What a mess!

In Brazil’s banks face pincer threat from big tech and fintech (Financial Times, Bryan Harris) we see that Facebook’s WhatsApp Pay has had an absolute shocker in Brazil only one week after launch! A rollout in Latin America’s biggest economy made a lot of sense as WhatsApp already has 120m users and loads of small retailers who could potentially benefit from the convenience of the payment system. However, what Facebook didn’t bank on was the banks – they complained and, only days later, the central bank surprised everyone by suspending the rollout saying that it could adversely affect “competition, efficiency and data privacy”. * SO WHAT? * When you consider that Brazil’s Itaú, Bradesco and Santander banks have a very cosy market enjoying rising profits, you can understand why they don’t want fintechs to crash the party and chip away at their margins. They are particularly nervous about fintech systems and amount of data they have on customers. At the moment, this is a temporary suspension but it has surprised everyone because the central bank has generally been supportive of “open banking” and encouraging fintechs. Frustrating for Facebook, but I don’t think it’s insurmountable.

The Albertson’s IPO disappoints, Macy’s announces cuts, Nike falls short and UK retailers fail to pay landlords..

Albertsons prices IPO below expectations in downsized deal (Wall Street Journal, Corrie Driesbusch and Jaewon Kang) marks a stumble in the feel-good US IPO market as America’s #2 grocery store (Kroger is #1) in terms of store numbers failed to ignite investor passion. This meant that it priced its IPO below expectations, so it’ll be interesting to see how it behaves when it floats on the New York Stock Exchange later today. The pressure will be on as, since the beginning of April, shares of newly-listed companies have gone up by 25% on average on their first day of trading, according to Dealogic.

The tough times continue in Macy’s to cut 3,900 corporate jobs (Wall Street Journal, Suzanne Kapner) as the struggling department store chain announced cuts of 3% of the workforce. This is in addition to the 2,000 cuts announced in February. It did say, however, that it would hire people back depending on how sales fare on the lifting of lockdown. Nike sales dragged down by store closures (Wall Street Journal, Khadeeja Safdar and Kimberly Chin) shows that Nike experienced a sales drop of 38% in the most recent quarter. Although online demand surged it

wasn’t enough to make up for sales lost by the closure of physical stores. As things stand, Nike says that about 85% of its stores were open in the US, 90% in the EMEA region and 65% in the Asia-Pac and LatAm regions – so you would have thought that things stand a decent chance of recovering over the next quarter.

Following on from recent threats by many high street retailers, Pret A Manger slashes rent payments to landlords (Financial Times, Alice Hancock) shows one outlet’s unattractive proposal to only pay 30% of its next rent bill, but the picture’s worse overall as UK retailers pay only 14% of £2.5bn rent due this week (The Guardian, Zoe Wood) shows that UK retailers as a whole are piling the pressure on their landlords by not paying rent. This appears to have been the last straw for one particularly indebted landlord in Shopping centre owner Intu on verge of collapse (Financial Times, George Hammond) which says that the company, which runs the Trafford Centre in Manchester and Lakeside in Essex, is set to enter administration as it failed to reach an agreement with lenders. * SO WHAT? * I suspect that the problem is going to get worse before it gets better. The problem is, it looks likely that landlords are going to have to sell off properties – but who is going to buy them? Physical shops were already doing badly before the coronavirus hit – and consumption isn’t exactly red-hot at the moment. A fire sale of retail property assets will abound for the cash-rich and very brave/ambitious IMO. One for the sovereign wealth funds, perhaps?

Royal Mail cuts jobs and BA’s cabin crew see a fall in wages…

It’s difficult to keep things light, given the news today and Royal Mail to cut 2,000 management roles (The Guardian, Kalyeena Makortoff) is unlikely to improve the mood. The company announced that 20% of its management roles will go between now and March 2021 in IT, finance, marketing and sales. Postal workers, however, will not be affected by the cuts. * SO WHAT? * The latest cuts follow years of falling profits and an overall failure to make up the fall in letter volumes with rising parcel sales as more people shop online. The coronavirus has accelerated those trends and the company will be making more cost cuts in order to

survive for the long term. One interesting thing to come out of this was that although frontline workers won’t be affected this time around, it is thought that increased future automation of parcel and letter processing will gradually reduce numbers in future. Tough times ahead.

BA staff have really been through the mill over the last few months and it seems that the prospects for those who have managed to hang onto their jobs isn’t great as BA cabin crew face losing fifth of pay (The Times, Graeme Paton) shows that the company told its 14,000 cabin crew that pay could be cut by up to 20%. Interestingly, about 40% of them on post-2010 contracts will actually get a pay rise, but others will see cuts. * SO WHAT? * Final numbers of job cuts are still being discussed but the future is not looking good. This is all just another example of how pretty much everyone and everything involved with the air travel industry is suffering because of the coronavirus.

…in other news…

I thought I’d end today on with a fascinating story about a South Korean lady in She kept her scissors going in South Korea’s postwar years. The coronavirus hasn’t stopped her (Los Angeles Times, Victoria Kim https://tinyurl.com/y9xwxpyt). I must admit, I probably chose this story to end on because I really really need a haircut 😂. I am booked in for July 7th 😁 YESSSSS

1. In AIR TRAVEL NEWS, the Asia-Pacific region mulls international travel, Brussels clashes with US over Airbus, Qantas cuts jobs, Easyjet raises money and Swissport halves its UK workforce
2. In RETAILER/CONSUMER GOODS NEWS, UK shoppers return, pubs and restaurants push for VAT cut and retailers withhold rents while Naked Wines and Premier Foods benefit from lockdown drinking and home baking
3. In INDIVIDUAL COMPANY NEWS, Facebook faces an ad backlash, Amazon’s Deliveroo investment gets the OK and Olympus cuts out cameras
4. AND FINALLY, I bring you the world’s oldest golden retriever…

So Asia considers air travel, Brussels and the US clash over Airbus, Qantas cuts jobs, Easyjet raises money and Swissport cuts half of its UK staff…

Asia-Pacific makes a tentative return to international travel (Financial Times, Robin Harding, John Reed and Jamie Smyth) shows that the Asia-Pacific region is trying to restart the return to international travel as 440 Japanese business people are due to take “exceptional” flights to Vietnam over the next three days. Countries including Thailand, Vietnam, Japan, Australia and New Zealand are still in talks over how to allow travel whilst also protecting their respective populations. Plan for travel corridors with Europe to be given priority (Financial Times, Jim Pickard and Tanya Powley) shows that similar negotiations are going on in Europe as well. The main issues being faced by all these countries are that they don’t want to import new cases, testing capacity is variable and they have to have protocols in place to reimpose stricter controls if there is another spike in cases. Still, they are all having to make tricky decisions between risk and economic disaster.

Meanwhile, Brussels warns new US tariff threat over Airbus will harm both sides (Financial Times, Jim Brunsden and Aime Williams) shows that the Trump administration’s announcement on Tuesday that it would impose tariffs on $3.1bn of European products isn’t going down well at the European Commission. The EC said that this will just pile on even more uncertainty and put even more pressure on businesses at a time when they need more support. Last year, the World Trade Organisation gave the US the right to impose tariffs of up to 100% on $7.5bn of European goods because it deemed the support given to Airbus to be illegal. Thus far the US has not exercised the right fully, but it could just go ahead. Interestingly, the US is

at an advantage because a similar case going the other way (about the US “over-helping” Boeing) has yet to be concluded. The decision was meant to be made in July, but many believe that this won’t now happen until September. * SO WHAT? * This comes at a rather delicate time for both sides and it seems to me that this is just another example of Trump trying to burnish his tough negotiator image to appeal to his (potential) voter base in the lead-in to the presidential elections. A lot of this negotiation stuff is noise, but unfortunately, negotiator posturing is likely to result in a lot of needless business failure.

Elsewhere, Qantas slashes jobs and taps shareholders for survival plan (Financial Times, Jamie Smyth) highlights the dramatic actions announced by Australia’s flag-carrier that it will cut 6,000 jobs, ground 100 of its aircraft for at least one year and raise A$1.9bn in equity to get it through the pandemic and beyond as part of a three-year plan. Easyjet bolsters finances with £450m share issue (The Times, Robert Miller) gives yet another example of an airline trying to boost its coffers in order to survive as it surprised the market yesterday by publishing its (rather disastrous) half-year results. All of the nightmares that the airlines are experiencing at the moment continue to have knock-on effects as per Swissport halves UK workforce in face of pandemic turbulence (Daily Telegraph, Simon Foy) as the airport baggage handling company had to react to a 50% fall in revenues this year. The company said that it had to make big cuts in order to get access to emergency funding from lenders and investors. * SO WHAT? * Times are obviously tough for anyone involved in the air travel industry, whether it is the companies who make the planes, airlines who transport everyone between destinations or the people who sort out the luggage. Drastic measures are being taken but no-one really knows how long this lack of air travel is going to go on for. Once again, a cure/vaccine for the coronavirus can’t come quick enough – and as I have said before, if/when it does, I expect confidence to skyrocket almost overnight. It IS going to happen at some point – let’s hope it’s soon 👍

UK shoppers return – but all is not cosy on the high street – and it seems that lockdown has turned us all into drinkers and bakers…

In English shoppers return – but economy faces long road to recovery (The Guardian, Richard Partington) we see that the latest figures from Springboard say that footfall, in the week commencing 15th June, was up by 45% versus the previous week (don’t get too excited, though – the shops weren’t open last week 😂) but overall numbers were unsurprisingly way down on what the were in the same week last year. The next thing they’ll tell us is that bears 💩 in the woods 😂. Actually this article does a really good snapshot of lots of areas – I recommend that you read it.

Although this is mildly good news, Hospitality sector calls for VAT cut to ease burden of social distancing (Daily Telegraph, Hannah Uttley) shows that embattled hotels, pubs and restaurants are calling for a reduction in VAT to 5% to help them out and attract customers and Retailers withhold quarterly rent after landlords standoff worsens (The Times, Louisa Clarence-Smith and Ashley Armstrong) shows that landlords’ worst fears were realised yesterday when quarterly rent became due as William Hill, JD Sports, Primark, Boots and Stonegate Pubs were among the

companies to refuse to pay. * SO WHAT? * All this twiddling around the edges is fine, but the MAIN thing is NOT the numbers on the high street – it’s WHETHER THEY SPEND (a lot) that’s important. I suspect that some people may feel the need to “do their bit” and support local shops by spending, but when wallets get tightened over the next few months by rising unemployment and a tailing off of furlough, things really will get tricky.

Meanwhile, Naked Wines’ sales fizzing 81pc higher in lockdown (Daily Telegraph, Hannah Uttley) highlights something to toast for the online wine merchant as it experienced an 81% hike in sales in April and May as we all turned into a nation of drunkards (just kidding – a nation of “home tipplers”, maybe) and booze hoarders. Things got so crazy that it had to stop orders from new customers in the UK last month! Talking of crazy, Britain going crazy for baking, says Premier Foods (Daily Telegraph, Hannah Uttley) shows that Premier Foods, which owns brands like Angel Delight, Homepride sauces and Bisto gravy among others, saw “astronomical” demand for its flour brands McDougalls and Be-Ro during lockdown. The company said that there had been huge demand for flour and baking mixes. Premier Foods’ share price hit its highest level for six years as it shot up by 15% in trading yesterday. * SO WHAT? * As always, it’s great to see “winners” emerging from this terrible situation. It will be interesting to see, however, whether demand just falls off a cliff as people flee headlong into the high street, drunk with new-found freedom (and their latest order from Naked Wines) and whether their new “love” of baking continues beyond watching re-runs of The Great British Bake-Off. 

Facebook faces flak, Amazon’s investment in Deliveroo gets the green light and Olympus plans to ditch cameras…

Facebook to be hit by its largest ever advertising boycott over racism (The Guardian, Alex Hern) shows that the #StopHateforProfit campaign I mentioned this week has gathered further momentum as more companies have committed to pull advertising from the platform in protest over its policing of hate speech. Facebook just reiterated its ongoing efforts to remove hate speech but didn’t commit to anything more than that.

In other “well-I-never” developments, UK competition watchdog in U-turn on Deliveroo-Amazon deal (Financial Times, Tim Bradshaw, Kate Beioley and Javier Espinoza)

highlights the Competition and Markets Authority announcement yesterday that it would provisionally approve Amazon’s multi-million dollar purchase of 16% of Deliveroo, reversing its previous assessment that it would adversely affect customers. This signals the end of a year-long investigation. What a waste of time that was! The CMA did add, though, that if Amazon bought an even higher stake, it might lead into another investigation.

Then Olympus calls time on camera business after 84 years (Financial Times, Kana Inagaki) heralds the end of an era as the Japanese company said that it would sell the camera division to Japan Industrial Partners, a private equity group that also owns the Vaio brand – remember them?? The company has been associated with cameras for 84 years, but the fact of the matter is that these days the group makes about 80% of its sales from medical devices as smartphones have essentially killed off the camera business.

…in other news…

I thought I’d end today on a high with ‘World’s oldest’ golden retriever named Augie celebrates her 20th birthday (The Mirror, Luke Matthews https://tinyurl.com/y8h4pynz). What an amazing achievement!

1. In MARKETS & MACROECONOMIC NEWS, US indexes tell different stories, European and UK business activity downturn slows and BoJo announces an exit from hybernation
2. In REAL ESTATE NEWS, demand for high rise office space looks vulnerable, Intu’s woes continue and Boots has a showdown with landlords while residential property prices are expected to have a bit of a bump up
3. In INDIVIDUAL COMPANY NEWS, the Wirecard debacle just gets crazier and JD Sports buys Go Outdoors out of administration
4. AND FINALLY, I bring you an unusual home-growing kit…

So US indexes diverge, European and UK business activity improves and BoJo announces UK Independence Day…

The big US stock indexes are telling different stories (Wall Street Journal, Karen Langley) highlights the divergence in performance between the Nasdaq (up 13% in 2020), the Dow Jones Industrial Average (down 8.3%) and the S&P 500 (down 3.1%). The difference between the Nasdaq and the other two is the biggest it’s been since 1983 and the gap between the S&P500 and the Dow is the widest it’s been since 2002, when the Dow was on top. The huge outperformance of a small number of stocks has skewed performance of the Nasdaq and S&P. Given that Apple, Microsoft, Amazon, Google parent Alphabet and Facebook make up about 40% of the Nasdaq and 20% of the S&P, you can see why just looking at the headline numbers isn’t enough. Generally speaking, the S&P has been the index that is seen to be the broadest benchmark, the Dow is very narrow as it only has 30 stocks (it has been dragged down hugely by Boeing’s performance, for instance) and the Nasdaq is all about tech. * SO WHAT? * I just thought I would mention this because there is a lot of froth at the moment in many markets and this goes some way to explaining why that is. The thing is, I don’t see tech stocks getting particularly weaker which means that their continued outperformance could well continue to mask the underperformance of everything else. More than ever it is worth keeping an eye on what’s going on under the hood because just glancing at the surface of what markets are doing is likely to be misleading IMO.

There’s good news in Eurozone business downturn slows as virus restrictions ease (Financial Times, Valentina Romei and Martin Arnold) as the IHS Markit purchasing managers’ index (PMI) for Europe showed that the fall in business activity slowed down in June as lockdown restrictions continue to be lifted – something reflected in the UK in Survey shows record rise in UK business activity in June (The Guardian, Larry Elliott), which says the same thing for us. Interestingly for us, manufacturing started to return to growth in June and there was only a small contraction in activity in the larger services sector. Although activity appears to be picking up, demand is still weak and job losses are rising. Still, at least things are going in the right direction for the moment. This should be helped by Boris Johnson takes England out of ‘national hibernation’ (Financial Times, George Parker), which highlights the latest step in the freeing up of lockdown restrictions. It sounds like this will mean the hospitality sector will be able to open up, but restriction in the number of customers that can be accommodated is still likely to be well below economically viable standards. Gyms and swimming pools continue to face an agonising wait to get the green light. * SO WHAT? * Although this is a tentative step in the right direction economically, I don’t think it’s going to be enough to prevent businesses from going under IF other restrictions continue because they just won’t be able to operate at anywhere near full capacity. The thing is, unless a cure/vaccine is found over the summer, I think there is a risk not only of a second wave – there is the risk of more businesses shutting down for good because by then they will have to pay rent, pay staff etc.etc. On the other hand, I really think that if a cure/vaccine IS found quickly, sentiment, spending and overall activity will just sky-rocket overnight as relief and optimism replace despair and pessimism. Fingers-crossed, eh!

Office space demand is likely to change, Intu’s ‘mare continues, Boots has discussions with landlords and residential prices looks set for a short honeymoon…

There are some interesting things going on in real estate at the moment. London high-rise offices to suffer ‘dramatic’ dent in demand, say experts (The Guardian, Joanna Partridge) shows that experts are steeling themselves for a drop in demand for office space in big city sky-scrapers even when the coronavirus recedes. Many more workers are likely to be working from home and social distancing rules are also going to mean that far fewer employees will be able to use lifts to get to higher floors! * SO WHAT? * At the moment, banks are among those who say that working remotely is going to become a permanent fixture and that crowded commutes are going to be a thing of the past. I’m not so sure about this because I think that, fundamentally, humans are sociable and generally like being around others. I would imagine that a mix of office and remote working will become the norm which should be good for furniture companies and electrical retailers but bad for train and bus companies, for instance. It’s also not going to be great for companies like WH Smith who have built profitable businesses catering to those who travel and commute.

Malls at risk of closing as Intu chases deal with lenders (Daily Telegraph, Simon Foy) shows that mall landlord Intu, which runs 17 sites including Manchester’s Trafford Centre and Lakeside in Essex, is desperately trying to avoid administration as it negotiates with lenders about its £4.5bn debt pile. If it fails, these shopping centres may be forced to shut down and KPMG will oversee administration. Commercial landlords only expect to collect 10-20% of the quarterly rent they are due today – another sign of just how dire things are at the moment. * SO WHAT? * Intu has been creaking under a massive debt load for some time now. This is a huge fall from grace considering it was once in the FTSE100, but its share price has fallen by 95% over the last year and its demise will be a warning to rivals.

Talking of retail landlords, Boots and landlords in rent payments standoff (Daily Telegraph, Rachel Millard and Oliver Gill) highlights ongoing talks between Boots (which has stayed open throughout the outbreak, but seen sale tank because of lower footfall and other restrictions) and their landlords (who argue that Boots should pay rent because they have been able to stay open). * SO WHAT? * These conversations aren’t going to be easy and there are strong arguments for both sides. However, I would say

that Boots may be in the slightly stronger position here as current guidance seems to protect retailers more than landlords plus their ongoing threats to just close shops down are very real. If Intu goes into administration, I am sure that their rivals will do anything to avoid the same fate.

On the residential property side of things, Summer honeymoon predicted for house prices before redundancies bite (Daily Telegraph, Melissa Lawford) cites Zoopla’s latest market forecasts which suggest that house prices will rise for the next three months due to pent-up demand held-back by lockdown, but then they will drop over the rest of the year as unemployment starts to rise at the tail end of furlough. Sales in northern cities are strongest, powered by buy-to-let investors, while sales in Cambridge fared particularly badly – down by 61% versus the February rate. * SO WHAT? * I do think that the housing market is going to be patchy going into the end of this year because of the reasons that Zoopla suggested, but I do wonder whether we will see the market changing as people are increasingly given the option of working from home. I have said, in the past, that if I was Prime Minister (and that’s not likely to happen, BTW!) I would try to force companies to at least give their staff the option of working from home because I believe that it will help work-life balance (can see the family more, can pick up and drop the kids off etc.), cut the need for an environmentally-unfriendly commute AND mean that house prices stand a chance of evening out a bit across the country as employees feel less of a need to live close to work. If WFH becomes more of the default for the British workforce, it may mean that housing market activity picks up as people decide to ditch the city life and live in the ‘burbs in a bigger house (home office space much easier to come by) with bigger rooms!

Meanwhile, for the real estate agents themselves, Rightmove counts cost of estate agents in ‘financial shock’ (The Times, Simon Duke) shows that they are continuing to have a terrible time. Unsurprisingly, the number of agents listing on their website has dropped over the lockdown – by almost 4% – and online-only brokers have been the worst hit. Rightmove said it will offer a 60% discount for August and a 40% discount for September to its agency customers in England, with bigger discounts in Wales and Scotland. * SO WHAT? * Rightmove, which was started in 2000 by Countryside, Connells, Halifax and Royal & Sun Alliance, makes its money by charging estate agents a monthly fee for listing homes on its portal. Clearly things have been difficult, hence the willingness to offer discounts. No doubt all concerned will be praying for an uptick in the market otherwise things will just get even worse for all concerned. Rightmove certainly seems to be a good gauge of the overall health of the real estate market.

Wirecard gets worse and JD Sports buys back Go Outdoors…

Ex-Wirecard chief Markus Braun arrested (Financial Times, Olaf Storbeck, Dan McCrum and Stefania Palma) highlights the latest development in the whole Wirecard saga as the founder has just been arrested on suspicion of false accounting and market manipulation and Wirecard scandal leaves German regulators under fire (Financial Times, Olaf Storbeck and Guy Chazan) shows that the finger-pointing has already started in earnest. I get the feeling that this is just going to run and run as the scandal gets worse by the day.

Following on from what I said on Monday about Go Outdoors going into administration, JD Sports buys Go Outdoors back in £56.5m pre-pack deal (The Times, Robert Miller) shows that JD Sports bought it back. What this means is that it’s highly likely that there will be tons of job losses, although it said it would do its best and would also keep the majority of its 67 stores. * SO WHAT? * This pre-pack administration malarkey is a bit weird in that it is a process that allows companies to put businesses into adminstration and then buy them back again, whilst enabling it to write off some debt. In this case, it means that the new venture is free of some of the lease agreements which it said would never decrease and will thus give the company a bit more financial flexibility to move forward.

…in other news…

We’ve all come to make new discoveries during lockdown. Some people have learned languages, picked up new (or dusted off old) musical instruments and even taken up gardening. Here’s something that would be quite nice (and a bit random) to have over here: Oh shiitake! How to grow your own with Japan’s super-easy mushroom cultivation kit (SoraNews24, Casey Baseel https://tinyurl.com/y824y386). I’d definitely be up for that! BTW, for those of you who are new(ish) to Watson’s Daily, I am half-Japanese, speak Japanese, went to uni and worked in Tokyo for a few years – and I still have an affection for the place! This is why you may see more stories about it here than you might elsewhere! Just sayin’…

1. In MACROECONOMIC NEWS, the ECB/German court kerfuffle nears an end, BoJo presses on with lockdown easing, the Bank of England cautions and Japan pushes for a UK trade deal
2. In TECH-RELATED NEWS, Apple announces big changes and digital ads are about to overtake trad ad market share
3. In INDIVIDUAL COMPANY NEWS, Refinitiv is about to get the Brussels treatment and Wirecard’s problems get even worse while warehouses boom
4. AND FINALLY, I bring you Japanese zombies attacking your car and a mullet-free zone…

So the Berlin vs ECB thing looks like dying down, Johnson prepares for lockdown lifting, the Bank of England makes a sobering statement and Japan pushes for a trade agreement…

Further to the whole drama going on between Germany’s constitutional court and the ECB over its massive bond-buying programme, Berlin and ECB signal end to legal impasse over bond-buying (Financial Times, Martin Arnold) shows that the stand-off may be easing as Germany’s finance minister, Olaf Scholz, says that there will be a resolution “without drama” – potentially this week. In addition to this, a newly-appointed German constitutional court judge, Astrid Wallrabenstein, said over the weekend that she hoped “things will ultimately develop in the right direction and that in the end everyone will get over certain injuries”. * SO WHAT? * It seems that both sides are coming together now, but I think that the ECB got a big shock from the Germans. There was the potential for this to throw a massive spanner in the works for the ECB’s stimulus efforts and a resolution had to be sought in double-quick time to avoid serious problems. It’s not over yet, but it certainly seems like it’s going that way. 

Meanwhile, Johnson to overrule scientists and ease lockdown (Financial Times, George Parker, Jim Pickard, Laura Hughes and Sebastian Payne) shows that the PM will go ahead and reduce the 2m social-distancing rule meaning that cinemas, galleries, museums, pubs, restaurants, hotels and hairdressers will be allowed to reopen on July 4th. It also seems likely that the government will lift 14-day quarantine restrictions on travellers arriving from countries such as Belgium, France, Germany, Greece and Spain sometime in the next few days. There will also be new legislation introduced into Parliament this week that will allow cafés and pubs easier access to tables on pavements. A mooted relaxation of Sunday trading laws has been dropped, however, following objections from Conservative MPs. * SO WHAT? * There are going to be loads of naysayers out there. It seems to me that if 2m was the correct distance, we are being lied to now, but if 1m was the correct distance all along then we’ve been lied to for the last three months! Having said that,

there is obviously an uncomfortable balance that needs to be struck by the government that HAS to balance economic well-being and increased risks of coronavirus infection. I think it’s a bit like going to your GP after a sporting injury. You will probably be advised to stay in bed and not do anything because this is the risk-free way of sorting yourself out. If, however, you cannot/don’t want to do this for whatever reason, you go to another (sportier) GP who will give you ways of rehabilitation and perhaps recommend you to a physiotherapist. There is more risk of aggravating the injury in this case, but you are willing to take the risk in order to get back to your sporting endeavours. In the case of coronavirus, I suspect that the scientists may well be right to be more cautious – but if there is yet another need building and building every day to open up businesses and get the economy moving again, something has to give. In this case, it’s the 2m rule. I personally think that it will also be interesting to see whether there is a spike in coronavirus cases this week or next as it is now a couple weeks since we had many of the Black Lives Matter protests which involved large gatherings of people. If there is no appreciable spike, then I would have thought that people will become increasingly confident of venturing out.

Markets on notice as Bailey warns Bank’s QE blitz can’t last (Daily Telegraph, Tom Rees) highlights the Bank of England governor as saying that it will reverse its quantitative easing programme before raising interest rates when the economy starts to recover from the coronavirus outbreak. Andrew Bailey said that the Bank needs to build up reserves as soon as it can to ensure that it can prepare itself for another potential downturn and that markets should not expect QE as the norm. So far this is all talk, but quantitative tightening (QT) has had mixed success when introduced elsewhere. Like many things at the moment, we’ll just have to wait and see what happens.

Following on from recent news of trade talks with Australia, Japan rushes UK to agree first post-Brexit trade deal (Financial Times, Robin Harding and Sebastian Payne) shows that Japan has only given the UK six weeks within which to put a post-Brexit trade deal together. * SO WHAT? * Although the speed with which this deal may be put together will give BoJo something to boast about going into Brexit, there is a risk that more sacrifices may have to be made as these things usually take years. It’ll be interesting to see what comes out of this.

Apple announce big changes and digital advertising continues to flourish…

Apple tightens control with launch of its own chips (Daily Telegraph, James Titcomb and Olivia Rudgard) announced yesterday that it would start making its own microchips for its Mac computers, marking the end of a 15-year relationship with Intel. It will start selling computers with proprietary chips later this year that will be made by Apple but designed by Cambridge-based-but-SoftBank-owned Arm and will bring the computers closer to other devices whose designs are already utilised in the company’s iPhones and iPads. The idea of all of this is to improve performance (because they will be specifically designed), cut loading times and give them more processing power. They are also likely to cost less, which will help margins. If you want to know more detail about the differences you’ll see with Apple chips, you should have a read of Apple’s new Macs: how they’ll work after ditching intel chips (Wall Street Journal, Nicole Nguyen). iOS 14, iPadOS, Watch OS 7, MacOS Big Sur: the changes coming to your Apple devices (Wall Street Journal, Joanna Stern) takes a look at what changes are heading our way in the next version of Apple’s iOS. AirPod Pros will get better sound, your Watch

will be able to know when you are washing your hands and make you do the full 20seconds (!) and laptops will get better battery life, among other things. iOS 14 will be available to all iPhones that go back to the iPhone 6s. * SO WHAT? * All of these things sound like decent improvements and will probably keep current Apple users happy. However, what I want to know is – WHEN IS THEIR 5G PHONE COMING OUT?!? It was supposed to be September/October time, but coronavirus delays will been the launch could be postponed. At least a delay will give me more time to think about which internal organ I will have to sell in order to raise the money to buy one 😂

Digital ad market set to eclipse traditional media for first time (Financial Times, Alex Barker) heralds a historic (yet inevitable?) moment for digital advertising as media buying agency GroupM (which is itself owned by advertising giant WPP) says that digital marketing is likely to account for over half of the $530bn global advertising industry in 2020. Recent forecasts by other companies, such as Magna, also expect this to be the case. The momentum had been gathering pace before the pandemic, but coronavirus has just accelerated the process. * SO WHAT? * Advertising spend is one of the first things to get cut when companies want to slash costs in an economic downturn. Digital advertising tends to be more targeted and more about purchases whereas traditional advertising tends to be more about enhancing the brands. This is going to be pretty disastrous for TV advertising revenues.

Refitinitiv is going to get the Brussels treatment, Wirecard’s woes get worse and warehouses are hot property…

Given the current climate I’d say Brussels refers LSE-Refinitiv deal for full antitrust investigation (Financial Times, Philip Stafford and Javier Espinoza) is somewhat unsurprising! LSE’s planned $27bn takeover of Refinitiv will face close scrutiny as regulators are concerned that the enlarged company could prioritise customers for critical data used on global markets, that there could be an overlap on European sovereign bond-trading and that there could be a potential concentration of derivatives trading. A final ruling will be expected by October 27th but could be extended if authorities force the parties to make concessions to satisfy any concerns.

Elsewhere, Wirecard fights for survival as it admits scale of fraud (Financial Times, Olaf Storbeck, Dan McCrum and Stefania Palma) shows that things are going from bad to

worse for the German payments processor following recent revelations as it said that the €1.9bn of cash on the balance sheet may not have existed at all! The company’s share price is now down by 80% since the scandal erupted last Thursday. Wirecard fall puts British fintech unit in jeopardy (The Times, James Hurley and Ben Martin) shows that the repercussions in Germany are likely to spread as its British subsidiary, which currently holds hundreds of millions of pounds of customers’ money, looks suddenly vulnerable. Presumably, there is going to be a stampede of customers trying to get their money out.

On a more positive note, Sale of warehouses to break records for booming sector (The Times, Louisa Clarence-Smith) shows that the biggest warehouse investment sales is about to start as Prologis is about to sell a portfolio of properties with a guide price of over £435m. Prologis is the world’s biggest owner of warehouses and distribution centres and is selling this portfolio because standalone warehouses no longer align with their overall strategy. * SO WHAT? * This will be the largest portfolio of warehouses ever put up for sale in Britain and, given the boom in online shopping during lockdown, demand is likely to be very high. What a contrast with the fortunes of retail property owners!

…in other news…

We are all fantasising about what we will do when we escape lockdown. We all want to have fun experiences again – and for some people that includes getting chased by zombies! Rather handily, there is an option available for Japanese who like a bit of a fright in Coronavirus leads to the creation of haunted drive-in in Tokyo this summer (SoraNews24, Casey Baseel https://tinyurl.com/y7k8xolg). Then there was the sad story of a lad who just wanted to celebrate a milestone birthday and was rejected because of his haircut in Man claims he was refused entry to pub on 18th birthday – because of his hairstyle (The Mirror, Courtney Pochin https://tinyurl.com/ycew3exl). Clearly the pub was mullet-ist…

1. In MARKETS & MACROECONOMIC NEWS, we see that US markets aren’t just rising on Big Tech, Sunak is on the cusp of cutting VAT and UK takeover rules look likely to change
2. In INSURANCE NEWS, Directors’ and Officers’ insurance prices rise, companies are delaying life cover and the industry goes on trial
3. In INDIVIDUAL COMPANY NEWS, North Face blocks Facebook, JD Sports’ Go Outdoors faces administration and Wirecard’s problems deepen
4. AND FINALLY, I bring you a Covid-ready rollercoaster…

So the market rally is broader than Big Tech, Sunak looks at the VAT route and UK takeover rules look like tightening…

More stocks are driving market rally, decreasing reliance on Big Tech (Wall Street Journal, Caitlin McCabe) shows that although Big Tech stocks have helped markets bounce strongly, it seems that other stocks are now taking the baton and contributing to ongoing momentum. Interestingly, over 97% of stocks in the S&P traded above their 50-day moving average (a measure used to track the breadth and momentum of market moves). This is the highest level since at least June 2010 and is about double the percentage in May. Another “technical” measure – the NYSE advance-decline line (which gives you the number of all securities rising minus the number falling every day) – has just hit its highest level for at least two years (i.e. the difference between risers and decliners continues to widen). * SO WHAT? * I think that this is interesting stuff to note – especially if you are trying to make an argument to support the opinion that market strength is broad-based. However, the big difficulty with all of this is that these measures have worked historically – but current circumstances are unique and global in nature. There is a risk, IMO, that many companies are being held together at the moment by a combination of government subsidies, whatever money the company has in the bank – and gaffer tape. Things could change quickly and violently depending on which schemes wind down first and how consumers behave. I am not a betting man, but I would stick with tech.

Sunak set to follow VAT stimulus with autumn tax rises (Financial Times, Chris Giles, Jim Pickard, Daniel Thomas and Sebastian Payne) shows that the chancellor is thinking about potentially cutting VAT to 15% for at least some industries (particularly those involved in leisure – such as pubs, restaurants and hotels) as early as next month, but this may be balanced out by other tax rises and cuts in public spending.

In UK to tighten takeover rules for groups vital to virus response (Financial Times, Sebastian Payne) we see that the UK government will, later on today, announce an immediate tightening of takeover laws in order to protect key businesses from foreign buyers. Companies involved in the manufacture of protective equipment and those in the food supply chain are seen to be vital in the pandemic response but are also having a tough time financially and could be vulnerable to takeover. The new measures are to be voted on today and, if all goes well, they will come into force tomorrow. Interestingly, this is an additional shorter-term measure to the upcoming National Security and Investment bill (NSI) that will give the government broader powers of blocking/intervening in takeovers – particularly from China. * SO WHAT? * This sounds like an OK-ish idea in theory, but it will depend on whether by implementing the measures the government is just going to restrict the number of potential buyers or whether it is going to somehow compensate target businesses with actual money. If it is the former, then such a move could contribute unwittingly to a slow death for these companies – but if it is the latter, it will be less bad. The devil will be in the detail.

D&O insurance premiums rise, life cover gets delayed and the industry goes to court in the UK…

Companies are paying a lot more to insure their directors and officers (Wall Street Journal, Alice Uribe and Leslie Schism) shows that many companies in the US and Australia are having to pay much higher rates to cover their top execs (this insurance is often referred to as “D&O insurance”, as in Directors and Officers). Demand for this type of insurance is rising due to increased incidence of shareholder litigation both in terms of frequency and size of settlements. Also, litigation finance firms are also getting more involved these days, meaning that complainants are getting better funded. US premiums have risen by 104% in the first quarter versus the same time period last year, according to AON and Marsh & McLennan while premiums in Australia have risen by a whopping 225% over this quarter! * SO WHAT? * D&O insurance is a key insurance product purchased by publicly traded companies and is there to cover claims filed against top execs and other employees if the company doesn’t pay the costs itself. Premiums in the US and Australia have risen particularly strongly because there is a history of more litigation against companies. Companies are just going to have to factor in this higher cost because future litigation risk is just so unpredictable – but this is obviously easier said than done.

Insurers are delaying life cover over Covid-19 concerns (Financial Times, Anna Gross) highlights an emerging pattern of behaviour where insurance companies including

Aviva, Royal London and Legal & General are keeping applications on hold for up to three months if applicants say they are at risk of contracting Covid-19. Applicants are being asked a) whether they are currently experiencing any symptoms, b) whether they have tested positive for the virus and c) whether they’ve been in contact with someone who could have the virus. * SO WHAT? * I guess you can’t blame the insurers for asking these extra questions to protect themselves (they aren’t charities, after all), but such moves make life very difficult for healthcare professionals. As the president of the hospital doctors’ union said, on the one hand they recommend getting tested, but on the other hand they have to warn them of the financial repercussions of taking a voluntary test. This is a tricky situation indeed.

Then I thought I would highlight Insurers vs small businesses: a high-stakes battle over lockdowns (Financial Times, Oliver Ralph and Robert Armstrong) because it flags the forthcoming reckoning between the insurance industry and small business at the High Court next month over who’s going to pay the bill for the coronavirus pandemic – all under the wing of the Financial Conduct Authority (FCA). This will centre on whether business interruption policies cover coronavirus lockdown-related losses. * SO WHAT? * The FCA has brought this test case to hasten a solution to the argument, which may help to save businesses who would otherwise have been unable to stay the course. The world will be watching as litigation on this is becoming more of an issue everywhere. One thing worth bearing in mind, though, is that even if complainants win they will still have to wait for the companies to decide the correct level of payout. As far as the insurers are concerned, though, a loss would mean a total claims bill of over the $100bn that Lloyds of London has forecast – so there is a huge amount at stake.

North Face boycotts Facebook, JD Sports’s Go Outdoors faces an uncertain future and the misery continues for Wirecard…

North Face joins Facebook advertising boycott (Daily Telegraph, Olivia Rudgard) shows that outdoors brand The North Face is joining a growing advertising boycott in protest against Facebook’s handling of misinformation. Momentum is gathering to pressure Facebook’s chief exec Mark Zuckerberg to combat racism and incitement of violence on his social network. The #StopHateforProfit campaign was launched last week and has asked members to pause advertising on Facebook and Instagram during the month of July. It’s too early to know whether or not this will actually result in anything, but it is worth monitoring.

Talking about outdoor brands, JD Sports’ Go Outdoors brand likely to enter administration in days (The Guardian, Kalyeena Makortoff) shows that JD Sports is on the verge of appointing administrators for its Go Outdoors brand within the next few days, putting the jobs of over 2,000 employees on the line. The brand specialises in fishing, cycling and camping gear and store sales are at its core and represents about 5% of JD Sports’ annual turnover. The sports retailer bought the outdoor brand in November 2016 for £112m. * SO WHAT? * It’s not the first retailer to go into administration during the pandemic (Oasis, Warehouse, Laura Ashley and Debenhams have come before them) – and it certainly won’t be the last. More gaps on the high street then 😢

I mentioned the Wirecard debacle last week, but Wirecard’s €1.9bn never entered Philippine financial system, bank governor says (Financial Times, Dan McCrum, John Reed, Olaf Storbeck and Stefania) adds more ridiculousness to the whole story. Wirecard’s chief exec resigned on Friday. What a complete mess. The whole shambles rolls on.

…in other news…

In this socially-distanced world in which we find ourselves, we are all looking for little ways to get back to normal. I have to say that I think that this is one of the more unusual measures I’ve heard of recently: No screaming allowed on Japanese roller coasters, and new video shows it can be done (SoraNews24, Casey Baseel https://tinyurl.com/y7g2x66r). This is so funny IMO – you have two senior execs of the theme park and parent company trying to look unperturbed whilst being thrown around in a rollercoaster! I personally find shouting loudly/hysterically helps to keep the contents of my stomach in, but maybe that’s just me…

1. In MACRO NEWS, US jobless figures aren’t great, the Europeans bounce back on the digital tax and the Bank of England powers up
2. In RETAIL NEWS, the US retail recovery catches short-sellers out, Kroger has stronger sales and Chanel gets gloomy while in the UK shoppers return, All Saints goes for a CVA, Superdry gets out of China, Tesco gets out of Poland and Westfield’s House of Fraser changes
3. In INDIVIDUAL COMPANY NEWS, Wirecard has a hole of epic proportions and Nintendo shares jump even higher than Super Mario
4. AND FINALLY, I bring you some muddy (but happy) dogs…

So US jobless numbers fall short, the Europeans vow to continue with the digital tax and the Bank of England fires up stimulus measures…

US unemployment claims edge lower but remain historically high (Wall Street Journal, Eric Morath) shows that the number of applicants and recipients of unemployment benefits has appeared to top out at historically high levels. New applicants for benefits fell, according to Labor Department data released yesterday, but the pace of layoffs doesn’t seem to be getting much better. The new level of weekly jobless claims is comfortably lower than it was at its peak but is still greater than the previous high reached in 1982.

In yesterday’s Watson’s Daily, I brought your attention to the US walking away from talks about the introduction of a digital services tax. Well Europe renews calls for global digital tax as US quits talks (The Guardian, Mark Sweney) shows that Europeans are undeterred by America’s petulence. Almost 140 countries are involved in talks put together by the Organisation for Economic Cooperation and Development (OECD) to reach a global solution to corporate taxation that will drag existing rules forward into the digital era. The original intention had been to hammer out some kind of deal by the end of the year, but given the recent action and timing of the US presidential election I

would be willing to wager a crisp £5 note (wild, I know) that it will not happen. US Treasury Secretary Steven Mnuchin said that no progress had been made and, of course, the Europeans (well, French finance minister Bruno Le Maire) disputed this saying that “we were centimetres away from a deal”. Yeah, right. * SO WHAT? * This could prove to become a very expensive game of chicken if individual countries like the UK, France, Italy and Spain follow through on the rhetoric and impose their own digital taxes anyway. The UK’s proposed digital services tax is aimed at online companies that make over £500m per annum globally at 2% whereas France wants to impose a 3% levy on online companies earning over €25m in France €750m globally. Digital taxes: transatlantic dust-up (Financial Times, Lex) says that there is still hope for the OECD’s initiative to work but that it will have to wait until after the US presidential election. It is in everybody’s interest right now NOT to have a digital tax-inspired trade war…

£100bn bid by Bank to avoid jobs bloodbath (The Times, Philip Aldrick) highlights the Bank of England’s intention to inject a further £100bn into the economy to get it going in order to avoid the much-feared-yet-expected prospect of mass-unemployment when the furlough scheme comes to an end. On the plus side, the Bank of England’s chief economist, Andy Haldane, reckons that the recession won’t be as bad as previously believed and that the recovery “was occurring sooner and materially faster than expected”. The Bank of England remains open-minded as to the measures it could implement to stimulate the economy – including the introduction of negative interest rates.

The US retail recovery catches some off-guard, Kroger does well and Chanel gets concerned while UK shoppers return and All Saints, Superdry Tesco and Westfield overcome various issues…

I said earlier this week that US sales turned up unexpectedly. Well, US retail recovery delivers $28bn blow to short sellers (Financial Times, Alistair Gray) cites data from S3 partners which shows that investors who shorted retail stocks in the belief that they would suffer in the downturn have lost a rather large amount of money. There have been massive shorts on Wayfair (online retailer), RH (furnishings), Bed Bath & Beyond (homewares), Williams-Sonoma (posh kitchenware), Home Dept and Lowe’s (both DIY stores), but their strength has confounded the doubters. Despite that, short positions in US retailers this week were about 50% above the levels they were at at the end of March, so investors are still pessimistic about the prospects.

Staying in the US, Kroger posts stronger sales, profit amid coronavirus pandemic (Wall Street Journal, Jaewon Kang) shows that America’s biggest supermarket is expecting sales to calm down as customers stockpile less although they are still spending a decent amount. The company also observed that customers were starting to make impulse purchases again. The supermarket said that sales were up by 30% in March and by over 20% in April and May. At the beginning of the pandemic they bought paper, cleaning and “long life” groceries (tins, dried food etc.) whereas now they are buying more produce, protein and own-brand products. * SO WHAT? * Sales are clearly still strong, but the retailer did not confirm its year-end guidance as it said there were still many unknowns. In Europe, Chanel forecasts ‘difficult’ two years for luxury amid Covid-19 (Financial Times, Leila Abboud) shows that the luxury goods company believes that the next two years are going to be tough but will plough on with its strategy of avoiding discounts and selling online. The private company published annual results yesterday that showed strong growth last year

– its first one for years without Karl Lagerfeld. * SO WHAT? * Some observers expect the luxury goods sector to be hit hard as travel restrictions cut off a major source of their custom – rich Chinese consumers who travel the world. It remains to be seen as to whether Chanel’s unwavering conviction to remain virtually entirely offline and not discount will prove to work.

Meanwhile, closer to home, English shoppers’ return points to gradual retail recovery (Financial Times, Valentina Romei and John Burn-Murdoch) cites FT analysis of unofficial data covering the first three days of this week when the “non-essential” shops were allowed to open. Spending and footfall are down and the pent-up demand predicted/prayed for has not materialised. * SO WHAT? * I know I keep banging on about the retail sector, but the fact is that it accounts for about 5% of UK output and 9% of jobs – so we NEED it to turn around. OK, so it’s still early days yet but everyone will be watching very closely to see any signs of a return of consumer confidence.

Retailers continue to ditch non-core areas as per Superdry absorbs £6m hit in China (The Times, Ashley Armstrong), which has decided to walk away from its Chinese joint venture with the fabulously-named Trendy International and Tesco rings up £181m with sale of Polish stores (The Times, Ashley Armstrong) as it continues its retreat from overseas interests (remember it sold its Thai and Malaysian business for an impressive £8bn in March this year) to concentrate on its domestic business. I would imagine that the cash will come in very handy!

Plans to turn House of Fraser in Westfield into co-working space (The Guardian, Sarah Butler) shows that there are plans afoot to turn Westfield’s House of Fraser into a WeWork-style office space and either getting someone in to operate it or just running it itself. * SO WHAT? * Councils and landlords up and down the land are wondering how to fill the gaping holes left by the likes of House of Fraser and Debenhams and they are having to get creative given that there may not be enough retailers to fill them. I have always thought that department stores need to be repurposed given the space they occupy and the locations they are in and think that potentially a mix of office space and residential would be a potentially viable direction. 

Wirecard has a ‘mare and Nintendo strengthens…

Wirecard says €1.9bn of cash is missing (Financial Times, Dan McCrum and Olaf Storbeck) highlights the massive over-60% share price crash in German payments-processor Wirecard which announced that €1.9bn was missing from its accounts. The company processes tens of billions of Euros each year but has faced scrutiny over its accounting practices over the last 18 months. The company had a market cap of €24bn when it debuted on the Dax two years ago, but it is now worth €5bn after yesterday’s debacle. Shareholders such as DWS and Deka Investment look like they are – or are about to – lawyer up. This is going to get VERY nasty. * SO WHAT? * A €1.9bn hole?!? Amazing. This hole is equivalent to ALL the profits the group has declared since 2012 😱😱😱

Nintendo shares surge in anticipation of continued Covid-19 gaming boom (Financial Times, Leo Lewis) highlights Nintendo’s share price strength as expectations increase for the number of Switch Console sales – and game sales – going into the end of the year. * SO WHAT? * The company’s share price has earned a “pandemic premium” and I guess the danger here is that that could cool as lockdown is lifted. What is notable, though, is that it is the first time the firm’s share price has breached ¥50,000 since 2008 – when it launched the Wii console. For now, though, demand continues to be strong.

…in other news…

Many regular readers of Watson’s Daily will know that I am a dog person. I like cats, but I am a dog owner! Which is why I unashamedly thought I’d leave you with the brilliant photos in Dog owners share hilarious photos of unrecognisable pets after they find mud (The Mirror, Luke Matthews https://tinyurl.com/y8xwnrv7). Superb! Just what we need on a lockdown Friday!

1. In MACRO/POLITICAL NEWS, the Americans go off in a huff over digital tax and UK inflation falls off a cliff
2. In FINANCIALS NEWS, Mastercard and Visa run up a painful bill, Nationwide triples the minimum deposit and HSBC gets the axe out
3. In RETAIL/CONSUMER NEWS, Boohoo buys Oasis and Warehouse, DPD and Kingfisher hire and Dominos counts the cost
4. In INDIVIDUAL COMPANY NEWS, Lufthansa’s bailout hits turbulence and Tesla’s California registrations disappoint
5. AND FINALLY, I bring you a domestic protest and a novel way to shield…

So the US throws its toys out of the pram and UK inflation craters…

In US upends global digital tax plans after pulling out of talks with Europe (Financial Times, Sam Fleming, Jim Brunsden, Chris Giles and James Politi) we see that the Americans have thrown their toys out over the pram regarding a new global tax framework for tech companies and abandoned talks with Europe. US Treasury secretary Steven Mnuchin sent a letter to European finance ministers in the UK, France, Italy and Spain saying that he could not agree on any changes to global taxation law that would affect US companies – and threatened retaliatory tariffs if they went ahead with anything. * SO WHAT? * This is all a charade IMO. Basically, the US is using Covid-19 as a convenient excuse to drag talks out. Its tech sector is hugely important to the country – especially at the moment – and has been one of the reasons why its financial markets have bounced back so well. You can’t blame American politicians for wanting to protect it as much as possible. On the other hand, you have rather poorer European countries who could do with a bit of extra cash right now but I really think that you will only get strength in numbers in this scenario and smaller countries especially will not want to bite the hand that feeds them (i.e. tech jobs in their respective countries), hence the fragmentation of support for a co-ordinated approach to taxing the tech giants. As far as I can see, I think there are a number of forces at work here. Firstly, Trump is desperate to get re-elected – so he’s got to look “strong”, hence the hard line;

secondly, the administration is moving towards putting more pressure on Big Tech – and could use the threat of giving the Europeans free rein on imposing taxes as a negotiation stick to beat them with; and thirdly, the taxation thing will be a useful negotiating tool in all the trade talks that are going on at the moment i.e. don’t slap taxes on Big Tech and we won’t send you our chlorinated chickens etc. It’s all a game and I feel that the coronavirus outbreak will make Europe’s threats even more toothless than they were before because everyone is that much financially weaker right now. The only way they can push this through is, ironically, if they stay together – but that doesn’t look likely to happen any time soon.

UK inflation falls to 0.5% on back of cheaper petrol and toys (The Guardian, Larry Elliott) cites the latest figures from the Office for National Statistics which show that the annual rate of inflation (as measured by the Consumer Price Index) is now at is lowest level for almost four years as it drifts even further away from the government’s 2% target. The main causes of the drop was lower prices for oil, clothing and footwear. It doesn’t look like things will turn around any time soon either as producer prices were also trending lower – and producer prices are often seen as a lead indicator of cost pressures. * SO WHAT? * A fall in inflation was obviously expected, but the job of predicting where it will go next has been made even harder because 74 of the products in the “basket” that it normally keeps tabs on were not actually available to customers during lockdown and researchers could not verify prices in person. That will clearly change as time goes on, but making these sorts of forecasts is tricky at the best of times.

Mastercard and Visa run up a bill, Nationwide “does us a favour” and HSBC gets the axe out…

Mastercard and Visa face billion-pound payouts after UK court ruling (Financial Times, Jane Croft) highlights a real pain for the big credit card companies as the UK’s highest court, the Supreme Court, ruled that the transaction fees they charge breach competition laws. The court rejected three separate appeal cases involving Asda, J Sainsbury, Argos and Wm Morrison over interchange fees (the levy for every time a payment card is used). Incredibly, the appeals have been going on since 1992! Damages payable to the retailers could run into the billions, although the exact levels will be decided in further trials. * SO WHAT? * Wow! Let’s hope for the retailers’ sake that decision on damages won’t be going on for another 28 years 😂 – they could probably do with the cash at the moment. Mind you, if the credit card companies are forced to pay out, I would imagine that the consumer will be the one to suffer ultimately because those costs will no doubt be passed on to us!

Nationwide triples minimum deposit for UK first-time buyers (The Guardian, Patrick Collinson) shows that Nationwide, one of the UK’s main mortgage lenders, will ask for three times the amount of deposit it was asking for

before as it prepares itself for falling house prices and negative equity. This means it will be asking for a 15% minimum deposit applying to all new house purchases, remortgages and first-time buyer applications. Anyone still offering 95% loan-to-value mortgages will no doubt have to close applications soon because they will be inundated. * SO WHAT? * Nationwide itself said that it was doing it to protect customers, but let’s be honest, they are doing it to protect themselves! You can’t blame them, though. This is surely going to pull the rug from under the feet of the already-vulnerable real estate market. It’s a bit like estate agents have just been rolling around on the floor after a fight (with election uncertainty, Brexit worries and now coronavirus) slowly getting up only to be punched in the face by market conditions and now kicked in the testicles by the building societies. It will take a while to recover IMO.

Talking of pain, Fury as HSBC revives plan to dump 35,000 staff (Daily Telegraph, Lucy Burton and Simon Foy) highlights a revival of job cut plans by HSBC after delaying the redundancy programme while the coronavirus was going on. Obviously, union officials were up in arms about this, but the bank faces tough times ahead. * SO WHAT? * The bank has plans to slash $4.5bn in costs and had already put the job cut plans on hold. However, profits for the first quarter fell by 48% versus the previous year so the writing has been on the wall. This move comes one month after Deutsche Bank announced it was going to go ahead with 18,000 job cuts. It is going to be carnage in the banking sector for some time, I think.

Boohoo buys Oasis and Warehouse, DPD and Kingfisher have jobs to fill and Dominos sees higher costs…

I mentioned that Boohoo was on the verge of this yesterday but Boohoo snaps up high street’s big fashion victims (The Times, Ashley Armstrong) not only highlights its impressive 45% jump in first quarter sales, it shows that the company has just paid £5.25m for Oasis and Warehouse but will not be taking on any of their stores or shopworkers. * SO WHAT? * Boohoo’s market cap is now almost as big as that of M&S and Asos COMBINED! Not bad for a company that was founded in 2006! The company said that trading in March and April had been mixed but got stronger going into May and that it remained on track to deliver strong above-market-expectation growth for the year. Boohoo reiterated its commitment to remaining an online-only retailer.

Elsewhere, DPD and Kingfisher to hire 7,500 staff as demand soars (The Guardian, Sarah Butler) highlights

plans by both companies to hire more employees to cope with the rising demand for home deliveries. DPD wants to hire 6,000 HGV drivers, warehouse staff, managers and support staff as part of a £200m new investment for expansion. Kingfisher (which owns B&Q and Screwfix) wants to take on 3-4,000 staff, around half of whom will be in the UK. These roles will be mainly summer temp roles as the company is unsure as to whether the surge in demand under lockdown will continue. * SO WHAT? * It’s nice to hear about more jobs for a change rather than job cuts! Still, this does reflect the extremes between industries and businesses that have done well and those that have not.

Lockdown costs eat into profits at Domino’s Pizza (The Times, Callum Jones) shows that although UK sales have risen by 5% under lockdown, additional costs to cope with operating through the coronavirus dented earnings in the first half. * SO WHAT? * Hopefully, now those changes have been made and people start going back to work, earnings will improve. Still, it’s very difficult to predict which way it will go. This is another example of a business that would potentially benefit from a reduction in the 2m social distancing guidelines.

Lufthansa’s bailout hits problems and Tesla suffers from poorer orders…

You will probably recall that Germany’s Lufthansa is one of many airlines to take a government bailout recently but Lufthansa bailout in jeopardy as top shareholder seeks other options (Financial Times, Joe Miller) shows that the €9bn bailout is at risk because the company’s biggest shareholder (a rich bloke who owns over 15%) indicated that he might reject the deal because he thinks that other options should be considered first. * SO WHAT? * The

company said in a statement that if he did not vote the package through, there was a danger that it would not get the two-thirds majority it needed to continue – and if THAT happened, Lufthansa would probably have to initiate bankruptcy proceedings. Ouch. The drama continues…

Elsewhere, Tesla registrations plunge in California, data tracker says (Wall Street Journal, Tim Higgins) shows that new registrations for its cars have fallen by 37% over April and May in California, according to the latest data from Dominion Enterprises. On the plus side, though, the company did report a surprise uptick in first-quarter profits and encouraging sales data from China where it delivered a record number of Model 3 cars last month. It’ll be interesting to see how things go as lockdown restrictions continue to ease…

…in other news…

Today, I thought I would leave you with the epic riposte in Mum takes ‘epic’ revenge after husband complains she didn’t cut up his sandwiches (The Mirror, Luke Matthews https://tinyurl.com/y7ds7r59) and the rather creative thought process of one lady in Cuban dons full-body cardboard shield against coronavirus (Reuters https://tinyurl.com/y9yrsrpb). Nice 👍

1. In MACRO, MARKETS & OIL NEWS, a global rally fades, Jay Powell urges caution, Trump pushes infrastructure, UK and Oz talk trade and true oil price recovery looks a way off
2. In CONSUMER/RETAIL/LEISURE NEWS, we see strong US sales and developments on the UK high street
3. In PHARMACEUTICAL NEWS, the UK has a corona-breakthrough and Royalty Pharma’s IPO rockets
4. In TECH NEWS, Apple faces antitrust investigation and China’s biggest chipmaker lists in Shanghai
5. AND FINALLY I bring you an old favourite…

So markets rally and then calm, Jay stays cautious, Trump announces infrastructure, the UK and Oz talk trade and we get an official spin on the oil price…

Global stock rally loses steam as geopolitical tensions rise (Financial Times, Hudson Lockett) highlights the rise then fall of global markets as unexpectedly strong US retail sales figures initially boosted markets that were then tempered by gloom surrounding heightened tensions between North and South Korea and a skirmish between Indian and Chinese troops in the Himalayas that resulted in the death of 20 Indian soldiers. News of a new outbreak of coronavirus cases in Beijing also didn’t help sentiment. Trump readies $1tn infrastructure bill to aid recovery (Financial Times, Demetri Sevastopulo and Lauren Fedor) had also helped to boost sentiment as the President announced plans to spend more on roads and bridges over the next ten years but Powell warns of ‘significant uncertainty’ over US recovery (Financial Times, James Politi and Colby Smith) reiterated the US central bank chief’s caution over the “timing and strength” of any US economic recovery.

Elsewhere, Australia looks for UK trade deal ‘by end of 2020’ (Financial Times, Jamie Smyth and Sebastian Payne) shows that Australia is seeking to sign a comprehensive free trade deal with the UK that will cut out tariffs and quotas in “record” time. Australia’s trade minister, Simon Birmingham, will be launching negotiations with his UK counterpart Liz Truss today via videolink and concedes that concluding a deal by the end of this year would be challenging (but presumably also doable). * SO WHAT? * Sounds nice, but trade with Australia just is a tiny drop in the ocean compared with the trade we do with the EU. In fact, it’s so tiny that even if the UK was to have free trade agreements with ALL of the 11 nations in the Trans-Pacific Partnership (TPP), it would only increase our GDP by 0.1 to 0.4%.

Following on from what BP said about its oil price expectations, Oil will not take flight ‘for at least two years’ (The Times, Emily Gosden) shows that the Paris-based International Energy Agency believes that oil demand will experience a record drop this year and will not recover until at least 2022. Having said that, it added that the drop may not be as bad as had initially been feared because China’s demand for oil was bouncing back strongly.

US retail sales surprise on the upside while many changes are afoot on the UK high street…

As I said above, Record rise in US retail sales beats forecasts (Daily Telegraph, Lizzy Burden) shows that US retail sales had a record 17.7% rise in May as lockdowns relaxed around the world – the sharpest rise since records began in 1992! Before you reach for the Bolly to celebrate the good times, this is a rise from a very low base and levels are still short of what they were pre-outbreak.

Meanwhile, the UK is gradually opening up and Al-fresco dining to come to London in relaxation of the rules (Financial Times, Jim Pickard, Alice Hancock and Andy Bounds) shows that regulations could be relaxed to let restaurants put tables outside on pavements, Thai restaurant operator Giggling Squid rescued by emergency loan (Daily Telegraph, Oliver Gill) shows that one restaurant chain has managed to get a stay of execution after agreeing an emergency loan, Greggs to reopen 800 stores on Thursday but warns of lower sales (The Guardian, Kalyeena Makortoff) highlights opening plans that will delight cheap pastry fans and McDonald’s US sales bounce back (Wall Street Journal, Heather Haddon) show what could be in store for such outlets as it has managed to make up for the ground it lost in April in terms of sales as hungry customers craving their fix returned in their socially-distanced droves. * SO WHAT? * It’s great that these outlets can open once more, but I don’t think that current arrangements are sustainable for the long term because they just won’t get enough customers to pay for their existence. At least they can get the wheels in motion again, but until social distancing at least reduces I can’t see this going on for much longer than a few months. The high

streets will already be decimated by businesses who have already gone under and continued 2m distancing will make the situation even worse from an economic point of view. What that means in terms of public health is another issue.

Elsewhere on the UK high street, Boohoo set for purchase of Oasis and Warehouse (Daily Telegraph, LaToya Harding) shows that Boohoo is on the verge of snapping up a couple more retailers two months after they fell into administration. If it all goes ahead, it will bring the total number of brands under Boohoo’s umbrella to nine (remember they bought Coast and Karen Millen last August?). Fun fact: Boohoo’s market cap is now more than double Marks & Spencer’s. That just goes to show you how well Boohoo has done and how much 💩 M&S is in at the moment.

Talking about retailers in the 💩 currently, Poundstretcher could close 250 UK stores (The Guardian, Sarah Butler) shows that the discounter is on the verge of closing over half of its stores as part of restructuring designed to save the company. It is currently asking creditors to support a CVA which will involve rent cuts of over 30%. * SO WHAT? * The tough times continue, but even if the company manages to push through this CVA there is no guarantee of long term survival. Mind you, if we do hit deep recession, stores like Poundstretcher tend to benefit as consumers tighten their belts but the company may be too far gone by then to keep going. If it can weather this storm, there may be upside – but it is touch and go IMO.

Then there’s good news for people who are tired of watching their TV and want something a bit bigger in Cineworld is ready to fight back (The Times, Dominic Walsh) as the cinema chain is preparing to open all of its 787 venues, starting with those in the US and UK on July 10th. A welcome bit of positive news after the strain of its attempted abandonment of the proposed acquisition of Canada’s Cineplex.

The UK makes a breakthrough and the good times roll for Royalty Pharma’s IPO…

Cheap generic steroid significantly cuts Covid-19 mortality rates (Financial Times, Anna Gross) highlights a major breakthrough made by British scientists that dexamethasone, which is a cheap and widely available generic steroid, significantly reduces the risk of dying from coronavirus. It cuts the death rate of severely ill patients on ventilators by one third and by those on oxygen by one fifth. Superb news! Mind you, some remain sceptical about this given the number of false dawns we’ve seen so far on coronavirus treatments.

I mentioned the company yesterday but Royalty Pharma shares surge 59% after IPO (Financial Times, Richard Henderson) shows that the biggest US IPO of the year so

far felt some serious love from investors who powered up the share price in its stock market debut yesterday. The company earns royalties paid by pharmaceuticals companies including Merck, Gilead and Johnson & Johnson for producing drugs and the pharmaceutical sector is pretty hot right now. * SO WHAT? * Deal advisers will be delighted by this performance and they will hope that this will persuade others to come out and enjoy the IPO party (and pay them fat fees to help them do it). OK, so seeing a company’s share price shoot up by 60% on its debut may make you think that you could have achieved a much better initial offer price, but psychology of deals is also important because if companies see wobbly flotations they get nervous very quickly. I do wonder whether current market conditions will make companies return to “traditional” flotations because they will want more hand-holding rather than strike out and do direct listings (which cut out the investment banks to a large extent – thus saving on fees), which is the road that Spotify and Slack Technologies took in their respective flotations…

Apple faces investigation and China’s biggest chipmaker lists in Shanghai…

Apple Pay and App Store face investigation over competition rules (The Guardian, Alex Hern) highlights the beginning of what will undoubtedly be a long and drawn-out process as the EU competition commission announced that it has breached competition rules after years of niggle from Spotify and other regulators. The allegations concern Apple forcing apps to pay them a 15-30% cut as well as a ban on telling users other ways of paying for the digital content. If it is found to be in breach, Apple could be fined up to 10% of its global turnover. The EU’s bite at Apple could prove to be a game changer (The Guardian, Nils Pratley) argues that there’s a real chance that Margrethe Vestager, the EU’s competition chief, could not only slap a big fine on them – it could change the way Apple does business in the EU. * SO WHAT? * I’m going to be watching this with interest because I have found this frustrating myself. When I developed the Watson’s Daily app in the first few months of this year, I was wondering how to price it. I

was advised that I should potentially charge £3.99 per month on the App Store (to take into account the 30% cut Apple was going to take), which I did initially, but then I relented to charging £2.99 across the board because I thought I would be forever explaining myself as to why the app was £1 more on the App Store than anywhere else – so I decided to take the hit for simplicity. When I found this out initially it was a bit disappointing I must say – but hey it’s Apple, so what can you do?? I love their stuff – just a pity about how much they take!

Then in China’s biggest chipmaker bets on Shanghai listing (Financial Times, Yuan Yang and Nian Liu) we see that Semiconductor Manufacturing International Corporation (SMIC) decided that it would delist from the New York Stock Exchange in June and list on Shanghai’s new Star market instead. * SO WHAT? * This is particularly interesting because there has been momentum building for Chinese tech companies to wean themselves off reliance on foreign tech given Huawei’s experience over the last 12-18 months – and SMIC looks like one of China’s best bets to narrow the expertise gap. Currently, some say that SMIC’s gap with Taiwan’s TSMC is about five years, but if SMIC has a successful flotation it will raise money that the company can use to throw at this in order to narrow the difference.

…in other news…

Every day, when I write Watson’s Daily, I try to seek out amusing and/or informative stories to end with. I use a variety of sources and 99% of the time I can come up with something – but today I just can’t find anything that fits the bill 😥. In cases like this, I either tell you really bad dad jokes (I am a father and yes, I have actually written and performed a bit of stand-up comedy in the past) or just return to something that I have found to be particularly memorable. Today, I’ve gone for the latter and bring you what is quite likely the most bizarre video you will ever see. It is the Japanese man yodelling about chickens. Yes, strange – but also strangely compelling I think. If only Japan could enter the Eurovision Song Contest purely to showcase his work…

1. In MACRO & OIL NEWS, Chinese manufacturing gathers pace but consumer spending doesn’t, BP announces a massive coronavirus writedown and banks cut funding to shale producers
2. In RETAIL & LEISURE NEWS, UK shops see queuing as they open, H&M shines and Cineworld faces legal action
3. In PHARMACEUTICAL-RELATED NEWS, Royalty Pharma lines up the biggest US listing this year, the German government buys a slice of CureVac and the FDA withdraws approval for Trump-endorsed malaria treatment for Covid-19
4. In INDIVIDUAL NEWS, Facebook launches WhatsApp Pay in Brazil, insurer LV= goes up for sale, jobs are shed at JLR and Travis Perkins and Bunzl pays back
5. AND FINALLY, I show you what you could look like if you spend too much time on Netflix 😱 and what you can do about it…

So Chinese manufacturing gathers momentum but consumer spending doesn’t, BP announces a big writedown and banks cut funding to shalers…

China’s factories race ahead but consumer spending lags behind (The Times, Gurpreet Narwan) cites the latest official figures from China which show that industrial production increased by 4.4% in May – better than April’s +3.9% but not quite as good as market expectations of +5% – as the manufacturing sector benefited from state-sponsored infrastructure projects. On the other hand, household consumption disappointed as retail sales fell by 2.8% in the year to May – more than the market was expecting. Although sales fell for the fourth consecutive month, the rate of collapse has slowed down (which is some comfort) but it seems that Chinese consumers remain cautious despite strict anti-virus measures being relaxed. * SO WHAT? * This is a bit of a mixed bag and the road to recovery is not going to be smooth as exporters are suffering from sluggish global trade levels, meaning that domestic consumption is even more important than usual. Everyone remains nervous about the prospect of a second wave – something that is going to put a lid on any upside for the time being.

In oil, BP expects to take $17.5bn hit due to coronavirus writedown (The Guardian, Jillian Ambrose and Julia Kollewe) shows that the British oil major is making some negative assumptions about the future as it has decided to cut its oil price forecasts to around $55 a barrel on average between 2020 and 2050. This would mean that it will not be economically viable for the company to develop some fossil fuel discoveries. This glum forecast follows on from last week’s news about BP cutting 14% of its global workforce by the end of the year due to the global collapse

in demand for oil. * SO WHAT? * The company has suggested that the global pandemic will “accelerate the pace of transition to a lower carbon economy and energy system”. CEO Bernard Looney will soon announce detailed plans of how BP will be able to cut its carbon emissions to net zero. Call me old-fashioned/cynical, but I just don’t believe this. BP is a MASSIVE oil company. It seems to me that Looney is saying all the right things to please the environmentalists and saying that the job cuts are due to the coronavirus changing our long term behaviour (i.e. we are going to cut our use of fossil fuels). The fact is, green and well-intentioned or not, Looney will get the chop if he doesn’t turn the company’s fortunes around. By then the oil price might be higher and the temptation to go back to what BP is good at may be too attractive to turn down. I think his words are noble but I’ll need more convincing before I actually believe them. Also – a target of $55 a barrel between now and 2050?? He must be having a laugh. Who cares?? He might as well take a dart and throw it at a dart board to get a target like that 😂.

Banks cut shale drillers’ lifelines as losses mount (Wall Street Journal, Christopher M.Matthews and Andrew Scurria) shows that lower oil prices continue to have repercussions as banks are cutting credit lines to shale oil producers, who have been borrowing money over the last few years to expand. * SO WHAT? * Centennial Resource Development, Oasis Petroleum and Antero Resources are among those to have credit lines cut and it seems that the small-to-medium sized operators who make up 25% of US oil production are most at risk of bankruptcy. According to Rystad Energy estimates, if US oil prices stay around $30 a barrel this year, 73 oil and gas producers may have to file for bankruptcy protection followed by another 170 in 2021. Fortunately for them, the oil price seems to be turning up and some shalers are already restarting production as the oil price has hovered around $40. We’ll just have to wait and see whether a combination of Saudi Arabia and Trump talking up oil prices will continue to work.

UK shops experience queuing, H&M is a bright spot and Cineworld faces legal pain…

Long queues mask rocky outlook for retailers (Daily Telegraph, Hannah Uttley and Laura Onita) says that although media coverage yesterday showed massive queues outside shops, visitor numbers were down overall. Away from the scrums outside NikeTown and Primark, 90% of the retailers in London’s West End were open but the New West End Company estimated a 75% drop in footfall versus pre-outbreak levels. * SO WHAT? * Until the 2m social-distancing rule is cut/reduced and/or a vaccine is found, I don’t see how retailers are going to survive longer term. At least a 1m distance will give them a fighting chance – but at what cost ?? It seems that there is some pent-up demand out there, but consumers’ confidence and wallets have been hit badly overall, which will keep a buying frenzy in check IMO.

On a positive note, H&M offers its own ray of sunshine for the high street (The Times, Louisa Clarence-Smith) highlights a better-than-expected performance for the first two weeks of June, providing some cheer for an embattled retail sector. The world’s second largest fashion retailer (#1 is Inditex, owner of Zara) has been opening its 5,000 stores

in 62 countries gradually, in accordance with local guidelines, with the majority of its UK outlets opening yesterday. * SO WHAT? * The company’s going in the right direction but, as with other apparel retailers, it’s going to be a long road to normality. I would expect companies like this to see a bit of a blip in demand once people start to trickle back to the office in greater numbers – but whether or not that is sustainable will depend hugely on what is going on with consumer confidence.

In Cineworld faces legal action for pulling out of Cineplex deal (Financial Times, Alice Hancock) we see the latest example of a company trying to pull out of a deal it negotiated pre-coronavirus. Cineworld, the world’s second biggest cinema chain, faces potentially expensive legal procedings as Canada’s Cineplex launched an action against it for pulling out of a $2.3bn deal that was supposed to complete this month. The acquisition by Cineworld was originally announced in December and was due to complete at the end of June. * SO WHAT? * Given what’s happened in the world economy – and especially cinemas in this case – this is an unsurprising turn of events. Many deals that were negotiated pre-coronavirus have unravelled or are in the midst of unravelling. Sycamore Partners’ proposed acquisition of L Brands’ Victoria’s Secret was abandoned and LVMH appears to be thinking about its agreed purchase of Tiffany & Co – and there are others. There will be more to come as companies try to save money where they can.

Royalty Pharma’s IPO, Berlin buys into CureVac and Trump’s malaria drug is withdrawn…

There have been some very interesting developments in the pharmaceuticals sector today! Royalty Pharma poised for biggest US listing of this year (Financial Times, Richard Henderson) heralds a $2.2bn IPO that will knock Warner Music off the top spot for the biggest IPO of the year as the company tries to simultaneously surf the current IPO feelgood wave and take advantage of pharmaceutical sector buoyancy. There are going to be five IPOs this week in the US – and they are all of pharmaceuticals companies!

Then in Berlin takes €300m stake in biotech firm CureVac (Daily Telegraph, Vinjeru Mkandawire) we see that the German government is taking heed of recent advice for European nations to take stakes in key companies to avoid foreign takeovers. It is paying a slug of money to buy 23% of private biotech company CureVac, which is on the verge of clinical trials of its vaccine for the coronavirus. Apparently, the Trump administration had been sniffing around in a bid to secure supplies of any future vaccine.

Talking of Trump, FDA pulls emergency Covid-19 use approval for hydroxychloroquine, taken by Trump (Wall Street Journal, Thomas M. Burton) shows that the FDA has revoked its emergency-use approval for chloroquine and hydroxychloroquine because they have now been deemed to be ineffective for treating Covid-19. Back to the drawing board then!

WhatsApp Pay is launched in Brazil, LV= puts itself up for sale, JLR and Travis Perkins announce job losses and Bunzl pays back…

In a quick scoot around some of the other stories in the news today, Facebook launches WhatsApp-based digital payments service in Brazil (Financial Times, Hannah Murphy) shows that Facebook is continuing with plans to expand in emerging markets and introduce e-commerce on its platforms by launching its WhatsApp-based digital payments service. This will enable Brazil’s WhatsApp users to transfer money to each other for free and make purchases from small businesses all within the app itself. This will be the app’s first nationwide rollout as chief exec Zuckerberg outlined plans earlier this year to introduce it in Brazil, Mexico, Indonesia and India. * SO WHAT? * This will be useful for Facebook as it will allow it to gather even more detail about consumers and their spending habits (which will be very useful for advertising, for instance). This latest service comes hot on the heels of the introduction of

Facebook Shops which allows sellers to create digital storefronts in the app. The company has already been rolling out a similar service called Facebook Pay over Facebook and Messenger.

Elsewhere, Life insurer LV= signals potential £1bn sale (Daily Telegraph) shows that Liverpool Victoria, one of the UK’s last mutuals (i.e. owned by its customers), is considering selling itself off to “maximise its value”, Jaguar Land Rover to cut more than 1,000 agency staff in UK (The Guardian, Rob Davies) shows further evidence of misery in the automotive sector and Travis Perkins to cut 2,500 jobs and shut 165 in UK (The Guardian, Julia Kollewe) shows that the owner of Wickes and Toolstation is hunkering down in the expectation of a lean few years following the coronavirus outbreak.

On the other hand, Bunzl to repay furlough funds after trading boost from Covid-19 (Financial Times, Naomi Rovnick) shows that another company is aiming to “do the decent thing” and pay back furlough money to the government (Ikea is doing this as well) but Furlough funds: payback time (Financial Times, Lex) says that this will continue to be the exception rather than the rule because most will not be able to afford it.

…in other news…

OK, so this article is from last week, but I think its message still holds true: ‘Netflix addict’ models show what binge-watching Brits could look like in 20 years (Daily Star, Sophie Bateman https://tinyurl.com/y79za8eu) gives us a visual representation of what could happen to us if we spend too much time in front of the telly during lockdown. Yuck! I’ve been doing a fitness challenge for the last five weeks because I felt I was turning into one of these models and wanted to break out of the rut by doing a variety of things. If you want any inspiration for what the human body is capable of, maybe have a watch of this insane workout! Some (well, let’s face it – almost all) of these exercises are just incredible 😱

1. In MARKETS & MACRO NEWS, global stocks have a wobble, Macron lifts restrictions and economists paint a bleak picture of the UK
2. In LEISURE & RETAIL NEWS, tourism suffers while hotels do their best, shoppers and retailers prepare to re-engage and we look at winners and losers, TM Lewin’s next move and Ikea paying back furlough money
3. In OTHER NEWS, the owner of Timberland and Vans wants to go shopping and car insurers get nervous about returning drivers
4. AND FINALLY, I bring you Air Pod cleaning and some amusing dog photos…

So global stocks reflect second wave worries, Macron lifts restrictions and things aren’t looking good for the UK economy…

Global stocks fall after jump in China and US coronavirus cases (Financial Times, Hudson Lockett) shows that news of a mini-spike in new coronavirus infections thought to originate in a seafood and veg market in Beijing over the weekend, as well as a jump in the number of cases in the US, spooked markets. Until this weekend, Beijing had gone for over 50 days without a new case and now there are fears of a second wave and potential new lockdowns. In the US, the number of new cases increased by over 25,000. * SO WHAT? * Markets are highly sensitive to any news in this regard and so we are likely to see them oscillate between falls due to new cases and rises due to new drug test developments. At some point, we are going to see a successful drug – and when THAT happens, markets will go bananas.

Emmanuel Macron lifts most coronavirus restrictions (Financial Times, Victor Mallet) highlights the latest developments in France as its president has now lifted

almost all of the lockdown restrictions. Most will end from today and all French schools will open fully for compulsory attendance from June 22nd. Bars and restaurants will now be fully open (they have been restricted recently to serving customers outside) and travel within Europe will return to normal today while international travel gets the green light from July 1st. There will still be limits on large gatherings. In his televised speech to the nation yesterday, Macron said he would outline more detailed plans in July for the rest of his presidency. * SO WHAT? * Macron said he would “reinvent” himself following his experiences during the coronavirus crisis, so it will be interesting to see what he comes up with.

As if we didn’t already know things aren’t going to be great economy-wise going forward, Economy to shrink by 8% this year (The Times, Gurpreet Narwan and Callum Jones) cites the forecasts of the EY Item Club which say that Britain’s economy will contract by 8% this year. On the plus side, they also said that they expect things to start recovering from the third quarter, assuming gradual lifting of restrictions by the government continues. * SO WHAT? * Obviously this is just best-guess stuff because there’s not really much to work with and so much depends on what the government decides to do and when. We’ll just have to wait and see what happens.

The tourism industry does its best, shoppers and retailers await a return, TM Lewin’s new owner gets aggressive and Ikea does the decent thing…

Tourism deals lingering blow to global economy (Financial Times, Valentina Romei) takes a look at the devastation wrought by the coronavirus on the industry by the coronavirus outbreak, the resultant impact on the global economy and the challenges it faces. Tourism has seen positive momentum over the years as middle classes have expanded in emerging economies, meaning that more people have money to spare to spend on leisure. According to stats from the World Travel and Tourism Council (so no bias there then 😜), tourism accounts for 25% of all new jobs created over the last five years and about 10% of economic output on a global basis. Tourism is more important to some countries than others, with it accounting for 30% of the economies in some countries in South Asia, southern Europe and Central America. * SO WHAT? * This article cites tons of rather depressing stats – the IMF has warned that some Caribbean countries will face their deepest recession for over 50 years – but it seems that some places are trying to adapt by pushing domestic tourism as international travel still faces a number of restrictions. The next step will be to encourage regional tourism, which Asia is already starting to do by negotiating “bubbles” where visitors won’t have to undergo quarantine. Europe is also keen to do something similar as 85% of European arrivals are from within Europe. Numbers will definitely be down versus normal circumstances, but at least this gives the industry some hope for survival.

Hotels are reopening. Will guests have any reservations? (Wall Street Journal, Craig Karmin and Steven Russolillo) shows how hotels are having to adapt to include coronavirus protocols in order to reopen – loads of extra signage asking guests to stay 6ft apart, every other treadmill being off limits, extreme cleaning and housekeeping on request only (so no free choccy?!) are among the measures. * SO WHAT? * You should read this article if you can – it’s really interesting. However, for all the innovations and extra precautions, it seems to me like this is all going to be a bit of a pain as a customer. After all, for many, the little things that you get as a hotel guest tend to add to your holiday and all these extra bits of protocol will chip away at the feelgood factor IMO. As I have said before, I think that people will be more inclined to sort out an Airbnb for less hassle, less stress and possibly more freedom until restrictions lift completely.

Meanwhile, although Retailers ready to open doors into a socially-distanced world (Daily Telegraph, Hannah Uttley) shows how preparations have been going in the lead-up to today’s opening of “non-essential” shops, it’s only half of the equation as Retailer woe as half of shoppers may stay at home (Daily Telegraph, Russell Lynch) cites a Daily Telegraph YouGov poll which suggests that 40% of consumers will spend less than they did pre-lockdown as they fear for the economy and the prospect of rising unemployment. 50% of shoppers are “uncomfortable” about returning to clothing stores versus 40% who are happy to return and 20% of respondents say that they will

be “very uncomfortable”. As far as pubs, restaurants and hairdressers are concerned, 54% said they’d be uncomfortable going to pubs, 53% said the same about restaurants and 41% would feel iffy about going to the hairdressers. Good time for home comforts and a bad one for travel (Daily Telegraph, Laura Onita) highlights some of the retail winners and losers so far. Winners include supermarkets (panic buying, eating at home etc.), meal kit start-ups (Mindful Chef saw a 452% increase in its new recipe box), DIY/home improvement specialists (in addition to people doing a bit of DIY, Made.com and Cox & Cox have seen orders related to people creating work spaces in their homes), bike shops (e.g. Halfords and Evans as fewer people want to run the gauntlet of public transport) and sellers of loungewear (no need to buy a suit if you can hang around in your jim-jams all day 😂). Losers include “tired brands” that were already in trouble and/or got the offline/online balance wrong (e.g. Cath Kidston, Debenhams, Monsoon Accessorize), builders merchants (e.g. Travis Perkins, due to projects being postponed etc.), Ocado (yes, they are online specialists but weren’t able to scale up quickly enough and are still having issues) and WH Smith (who has suffered because most of its profit have been made from outlets at travel hubs like train stations and airports). * SO WHAT? * It’s going to be a bumpy ride for retailers and consumers alike and I think that a lot of how this unfolds will depend on how consumer nerves can be calmed. Some of that will be down to the shopping experience, but a lot of it will be due to how confident consumers will be feeling about their household finances.

Shirtmaker rolls up its sleeves for rent battle (The Times, Ashley Armstrong) highlights a bit of drama on the high street as the new owners of TM Lewin, SCP Private Equity (run by James Cox, founder of Simba sleep – which isn’t really much to boast about considering the company’s been quite a disaster until recently!) is getting a bit feisty with its landlords. SCP has created a new vehicle called Torque Brands, a stable of British brands with global potential, and has told landlords via its advisers at commercial property specialist Cedar Dean that it will put TM Lewin into pre-pack administration unless landlords lower the rents. * SO WHAT? * Landlords are having a nightmare because their previously cosy arrangement of getting paid fat (and rising) rents on a quarterly basis is being challenged by the carnage on the high street and stricken retailers asking for things like monthly payments based on turnover and service charges to be waived while shops have been shut. I suspect that many retailers will be using the coronavirus and high rent demands from landlords as an “excuse” for mass store closures (things were already looking pretty tricky before the pandemic hit anyway). Landlords are being forced on a daily basis to chose between reduced rents and no rents. The tough times continue…

I thought I’d also mention Ikea in talks with governments over returning furlough money (Financial Times, Richard Milne) because it is something you might have to frame and hang on your toilet wall considering how rare this action is likely to be! Basically, Ikea used furlough money to pay its staff, but actually found that the business had done better than expected and so is trying to do the decent thing and pay back the money to governments in Belgium, Croatia, the Czech Republic, Ireland, Portugal, Romania, Serbia, Spain and the US! Wow!

Timberland’s owner wants to go shopping and insurers brace themselves for rusty drivers…

Although many retailers are suffering at the moment, Timberland and Vans owner eyes acquisitions despite uncertainty (Financial Times, Alistair Gray) highlights that the company behind Timberland, Vans and The North Face, VF Corp is looking for further acquisitions and sees current circumstances as an opportunity to pick up some more assets. Although Canada Goose, Gap’s Athleta and Columbia Sportswear have been mooted by some commentators as potential targets, VF Corp itself has not commented on the speculation. * SO WHAT? * VF sounds

like a canny operator and has recently disposed of Wrangler and Lee jeans although, notably, it hasn’t made any acquisitions since it bought Icebreaker (merino brand) and Altra (running shoes) in 2018. Apparently, it has a $5bn fund it can dip into for acquisitions – so things could get interesting.

Insurers watch and wait as rusty drivers return to the roads (Financial Times, Oliver Ralph) heralds a nervous waiting game for insurers as drivers who have only been driving to and from the supermarket return to the roads today! Companies including Direct Line, Hastings and Admiral have all been benefiting from a fall in claims as people have kept off the road. Some, such as Admiral, have offered a rebate to their customers to take this into account, but it will be interesting to see how claims go now things are slowly edging towards normality.

…in other news…

I’m all about trying to improve the quality of your life, here at Watson’s Daily, so how’s about this: Hack shows how to properly clean headphones – and the results are gross (The Mirror, Luke Matthews https://tinyurl.com/ya55hgxb). Also, I thought I’d leave you with some amusing photos in Owner shares photo of her dog sitting like a ‘weirdo’ and it’s adorable (The Mirror, Luke Matthews https://tinyurl.com/y8ol4jd7). I think “weirdo” is rather harsh for the poor dog – he looks very cute! Unusual, yes – but weirdo, no 😂

1. In MARKETS & MACRO NEWS, global markets wobble on US second wave fears, the UK announces a major Brexit U-turn and we see the effect lockdown has had on spending
2. In CONSUMER GOODS AND RETAIL NEWS, Unilever puts its eggs in the UK basket, Beyond Meat expands European capability, B&M goes for growth and Amazon faces EU charges
3. In INDIVIDUAL COMPANY NEWS, Centrica, Johnson Matthey, Heathrow and Lufthansa announce job losses while Snap opens up to developers and DoorDash raises money
4. AND FINALLY, I bring you a brilliant father-son moment…

So markets wobble, US jobless numbers fall, the UK makes a Brexit U-turn and we look at how lockdown has affected spending…

Fears of second wave trigger sell-off on global markets (Daily Telegraph, Tim Wallace) highlights the fragility of world markets as US and European indexes weakened significantly as news outlined in headlines such as US coronavirus outbreak continues to spread south and west (Financial Times, Peter Wells) prompted fears that a second wave is around the corner. The latest figures suggest that the number of new coronavirus cases were highest in states that moved early to lift lockdown restrictions. The concerning thing here is that most of the seven states that are in the south and west showed increases that were at or near record highs. On a more positive note, US new jobless claims at 1.5m as hiring slowly returns (Financial Times, Matthew Rocco) shows that companies are starting to hire once more as the US reopens its economy. The number of people claiming first-time unemployment benefits came to 1.5m last week, down from the peak of 6.9m, the tenth consecutive week of decline. Continuing claims (claims from people who are actively receiving benefits) were also down. This all sounds like incremental good news, but obviously the rise in coronavirus cases is a cause for concern.

Meanwhile, in UK in U-turn on full post-Brexit border controls (Financial Times, Peter Foster and George Parker) we see that the British government has decided to

abandon plans to have full border checks with the EU on January 1st so as not to overburden businesses that are already facing coronavirus pressures. Instead, the government will allow a “light touch” regime at UK ports for incoming UK goods under either a deal or “no-deal” scenario (and no, Noel Edmonds is not involved). On the other hand, it looks likely that goods going the other way to France are likely to face full checks, although the UK is probably hoping that the Europeans will relent. * SO WHAT? * This will at least give logistics and trade groups something to work with as they have been complaining for the last few months about a lack of information making it difficult to plan.

Then Lockdown law blocks fifth of spending (The Times, Gurpreet Narwan) cites the latest figures from the Office for National Statistics which show that British households spent £182 a week less, on average, than they did pre-lockdown because they’ve not been able to spend on restaurants, travel and holidays among many other things. This fall in spending has coincided with a rise in unemployment and a fall in incomes. * SO WHAT? * I would say that, at the moment, it is very difficult to predict how spending will change after lockdown because people are being artificially supported by spending restrictions and furlough money (for those lucky enough to keep their jobs). They will no doubt be encouraged to spend and support local businesses etc. but consumers will need to feel a degree of economic confidence to let that happen. I do think, however, that when a vaccine/cure is found spending will see a massive boost because this would signal a return to normality and I think that the sense of relief will power a major upsurge.

Unilever tries to sort its structure again, Beyond Meat expands in Europe, B&M continues on the growth path and Amazon faces EU charges…