Category: Uncategorized

1. In CORONAVIRUS NEWS, markets continue to fall, Italy and UK warn on effect on budgets, China’s data is questioned as the race for a vaccine continues and spice prices go up
2. In RETAIL NEWS, Amazon opens a supermarket, Home Depot does OK, UK retailers show lower sales but higher optimism and Tesco cuts in-store bakery jobs
3. In INDIVIDUAL COMPANY NEWS, Expedia cuts 12% of its workforce and Disney’s boss resigns suddenly
4. In OTHER NEWS, I bring you the lasagne-in-a-pizza and nuts that aren’t…

So markets weaken, Italy and UK warn on budget impact, China’s data is questioned, the race for a vaccine continues and spice prices rise…

Virus fears send stocks down again (The Times, Callum Jones, James Dean and Tom Howard) highlights further weakness in world stock markets as the coronavirus has now spread (officially) to 34 countries. According to the World Health Organisation, 80,000 people have been infected and 2,700 have died so far. Italy warns EU on budget targets as coronavirus cases rise (Financial Times, Miles Johnson, Myles McCormick and Daniel Dombey) shows that Italy is managing down expectations as its industrialised northern regions are suffering from coronavirus impact whilst the economy is already on the verge of recession and Weak economy and coronavirus threaten UK spending pledges (Financial Times, Chris Giles and George Parker) shows that new Chancellor Rishi Sunak may have to rein in some of the government’s biggest Budget decisions until the autumn given the likely negative impact of the coronavirus on the economy. The Budget will go ahead as planned on March 11th, but officials are talking about a “trilogy” of statements this year.

Meanwhile, China fall in coronavirus cases undermined by questionable data (Financial Times, Yuan Yang, Nian Liu and Tom Mitchell) highlights scepticism surrounding the recent apparent fall in the number of new coronavirus cases outside of Hubei, the province from which the virus originated. The problem is that the numbers have fluctuated wildly depending on how individuals are diagnosed and the authorities seemed to have flipped between different methods, causing a mix of confusion, panic and now scepticism. Still, the hunt for a vaccine continues. Drug firms rush to find vaccine but don’t expect to profit by it (The Times, Alex Ralph) highlights the ongoing efforts by big pharmaceuticals companies to find a vaccine but also that they aren’t expecting to make tons of money from it. Although short term investors are pushing up share prices of biotech companies and mask/glove-makers, they maintain that they are NOT going

to make any money from finding a cure. Still, I guess that the companies will win brownie points that they may well use further down the line…

Why coronavirus is driving up the price of spice (Financial Times, Emiko Terazono) is a really interesting article which highlights that wholesale prices of garlic, ginger and chilli have gone up by 17% since the start of December because of labour shortages in farms and distribution. * SO WHAT? * China accounts for about 80% of the global garlic export market, 47% of the ginger market and 20% of the chilli market, according to figures published by research firm Mintec. Even where production is returning to normal, there have been container ship shortages and higher freight costs. Bad news for stir fry fans (and I include myself in this)!

*** RANT ALERT *** Just thought I’d warn you that I’m about to have a mini-rant. I don’t know how many of you pay attention to this, but do you look at the table at the bottom of Watson’s Daily? It’s got all the market levels, currencies etc. Anyway, three things – firstly, the oil price is getting mullered at the moment. SURELY Opec are going to have to cut production levels to stop a downward spiral in price. Secondly, have you noticed how suspiciously well the Shanghai stock market has been performing while other markets have been all over the place during this coronavirus outbreak? The Chinese must be throwing LOADS of cash at the market to prop it up. When/if they stop buying, the market level is going to get a massive dose of reality. OK, so China has loads of money to be able to do this, but the market must feel like a money pit at the moment…and THIRDLY, what’s going on with Bitcoin?? It has supposedly turned into a “safe haven” asset like gold (yes, weird I know given it has no intrinsic value) and yet, gold continues to strengthen while Bitcoin shows more volatility. I’ve said it before and I’ll say it again, I have NEVER seen a convincing explanation as to why Bitcoin moves. All that cr*p about “oh, big buyers in China” or some such rubbish that traders use by way of “explanation” is just hot air. I’ve worked with these people and I know the sort of answers they give when they haven’t got a clue/can’t be ars3d 😂. You can explain other currency moves on political/economic impact but Bitcoin is just bizarre! Rant over 😁. I feel better now…

Amazon opens a supermarket, Home Depot does OK, there’s good and bad for UK retailers and Tesco announces job cuts…

Amazon opens cashierless supermarket in latest push to sell food (Wall Street Journal, Sebastian Herrera and Aaron Tilley) heralds a new chapter for cashierless shops as Amazon.com just used the technology from its “Go” stores in a new larger format of a supermarket! Amazon Go Grocery opened in Seattle yesterday and uses a combination of cameras, shelf sensors and software to ensure shoppers pay for what they take away! Accounts are normally charged via a smartphone app when you leave the store. Amazon has opened a number of “Go” convenience stores since 2018, but this latest store is five times bigger than the format in its existing 25 stores. The company will be using this a a way to showcase the technology to potential partners. * SO WHAT? * Sounds pretty amazing, right? It’s interesting to see that they are apparently open to other traditional retailer rivals using their tech (for a fee, obviously), but then there will be some who will be scared of working with a massive rival – plus there are bound to be loads of issues about data privacy etc. I do wonder with this sort of thing whether it really is viable long term when you pitch installation/ongoing maintenance costs (and surely at least some losses from shoplifters!) versus just doing things the old-fashioned way.

Home Depot’s quarterly profit rises (Wall Street Journal, Dave Sebastian) shows that the US home improvement

chain did well in the latest quarter but may suffer coronavirus impact as it sources 30% of its products from overseas, mainly from China. * SO WHAT? * Given that it is a large home improvement store, Home Depot is often seen as an indicator of economic confidence. Either people are moving house more often or they are spending money anyway on upgrading their existing homes. Either way they are spending money – and that’s what the economy needs!

In the UK, there’s a mixed picture for retailers as Mixed bag for high street sales (The Times, Gurpreet Narwan) says that retail sales growth in February fell short of expectations according to the latest figures from the CBI but then Retailers to unleash investment spending spree (Daily Telegraph, Tim Wallace) concentrates on a different aspect of the same report that says that more retailers are planning to invest than cut back. The swing in investment in investment intentions was the biggest since records began in 1983 and would suggest that a feelgood factor may be returning.

Unfortunately, the feelgood factor is likely to be in short supply in Tesco puts 1,800 jobs at risk as it scales down in-store bakeries (The Guardian, Joanna Partridge) as the supermarket says that it is having to make the cuts because of changing consumer tastes. They are buying more wraps, bagels and flatbreads in preference to the humble traditional loaf and Tesco wants to adapt. This comes only a year after the supermarket said it would close fresh food counters in about 90 of its stores and cut head office roles. * SO WHAT? * Although Tesco blames the move on changing consumer tastes, it’s probably more likely that the company just wants to cut costs and protect margins in the face of the German discounters who are constantly snapping at their heels!

Expedia cuts 12% of its workforce and Disney loses its CEO suddenly…

Expedia cuts 3,000 jobs in major restructuring (Financial Times, Alice Hancock) highlights major changes at the online travel agency following the departures of its chief exec and CFO in December. 500 of the jobs being cut will be at its Seattle HQ. Chairman Barry Diller said that “We are stopping doing dumb things and starting doing what we think are good things”. * SO WHAT? * Expedia compares unfavourably to rival Booking.com and is also suffering from the recent entry of Google into the online travel sector. Tough times. 

In Disney CEO Bob Iger steps aside; Bob Chapek named new head (Wall Street Journal, R.T Wilson, Joe Flint and Ben Fritz) we see that longtime CEO Bob Iger announced the surprise decision to step away from being Disney’s CEO and promote its head of parks and resorts to the top job. Iger will stay on as deputy chairman until the end of next year. Iger presided over a transformative period in Disney’s history and has been highly regarded. Under his tenure, Disney’s share price has increased six-fold, its annual net income has more than quadrupled and its annual revenue has more than doubled. Not bad!

And finally, in other news…

Many of you will know by now that I am intrigued by unusual food. Well how about this beauty: Hungry Horse pubs are selling a lasagne inside a pizza – and it looks epic (The Mirror, Courtney Pochin https://tinyurl.com/rtpf7pe). WHAT???????????? It sounds pretty tragic to me. Apparently, they are catering to that massive cohort of diners who can’t quite decide on whether they want pizza or lasagne 😂. We’ve all been there (not). Staying on the food theme, I thought this was interesting: 10 ‘Nuts’ That Aren’t Actually Nuts (Mental Floss, Mark Mancini https://tinyurl.com/vqabh5a). Well I never!

1. In CORONAVIRUS & MACRO NEWS, global markets fall on coronavirus fears, South Korea, Iran and Italy all suffer – as do airlines, carmakers and drugmakers but a vaccine may be in sight. Meanwhile, Trump visits India…
2. In FINANCIALS NEWS, a US hedge fund pushes for a Prudential break-up, Barclays’ CEO sets a departure date and Revolut raises $500m
3. In INDIVIDUAL COMPANY NEWS, Cargill aims for meatless, Primark falters and Tesco tries cashless
4. In OTHER NEWS, I bring you an example of Rubikscubism…

So markets, countries and industries continue to suffer from the coronavirus but a vaccine could be on the way. Meanwhile Trump visits India…

Contagion hits markets in $1trillion rout (Daily Telegraph, Louis Ashworth and Alan Tovey) highlights a tough day for global stock markets as investors feared a coronavirus-led economic slowdown. European shares had the biggest drop since the Brexit vote, the FTSE100 had its worst fall in 4.5 years, the Dow Jones had its worst one-day performance since early 2018 and oil prices fell by around 5%. Conversely, gold shot up to its highest level in seven years as investors flocked to safety.

South Korea places more than 7,000 soldiers in quarantine (Financial Times, Song Jung-a) displays dramatic attempts to stop the spread of the virus as the country became the worst affected outside China. The Bank of Korea looks likely to cut interest rates from the current level of 1.25% this Thursday to support the economy. Iran faces further isolation after jump in coronavirus deaths (Financial Times, Najmeh Bozorgmehr) highlights developments in Iran (it now has the highest number of coronavirus-related fatalities outside China) and that neighbouring countries including Turkey, Iraq, Afghanistan, Armenia and Pakistan are closing/restricting their borders. Coronavirus deals fresh blow to Italy’s struggling economy (Financial Times, Miles Johnson and Valentina Romei) looks at how the outbreak is hitting Italy’s already-fragile economy as contraction in GDP growth at the end of last year looks highly likely to continue in the first quarter of this year, potentially pushing Italy into recession. Major travel restrictions are in place and the disruption to manufacturing, supply chains and tourism will add up.

On a “per industry” basis, Airline stocks plunge as coronavirus hits Italy (Financial Times, Alice Hancock) shows that airlines such as EasyJet and Ryanair saw their share prices crater, as did major European hotelier Accor on fears of reduced travel on a global basis. Coronavirus: Chinese carmakers struggle with disruption (Financial Times, Christian Shepherd) says that although car factories are resuming operations following a nationwide

shutdown, it’ll take months to get back to normal. China’s automotive industry association had predicted that sales would stabilise this year, but now it is saying that sales will fall by 10% in the first half of this year but recover to falling 5% for the full year. Coronavirus outbreak causes supply problem for India’s drugmakers (Financial Times, Stephanie Findlay and Sun Yu) highlights the problems being caused by Chinese raw materials shortages as well as panic buying of antibiotics pushing prices sky high. India is one of the world’s biggest drug exporters and relies on China for a whopping 70% of its raw pharmaceutical ingredients. A February 16th report from the Confederation of Indian Industry (CII) said that Indian pharmaceutical companies are “running close to exhausting their supply of raw material”.

In a bit of potentially positive news amidst all this, Drugmaker Moderna delivers first experimental Coronavirus vaccine for human testing (Wall Street Journal, Peter Loftus) shows that the drugmaker has just sent the first batch of its coronavirus vaccine to US government researchers who are expected to commence a clinical trial on 20-25 healthy human volunteers by the end of April with initial results expected to be available in July or August. * SO WHAT? * Although a treatment can’t come quickly enough, this represents an incredibly rapid turnaround (this might even be a record). If all goes according to plan, it will only take three months to get to human testing versus a treatment for SARS taking 20 months to reach the same stage. Advantages in technology and public-private sector partnerships are helping to shorten the timelines when outbreaks occur. Clearly there are no guarantees here, but at least it seems that we are moving in the right direction. Although the vaccine is unlikely to be ready this time around, it may prevent a repeat of such an outbreak this time next year.

In non-coronavirus news, Trump presses Modi to bolster US ties amid trade frictions (Financial Times, Benjamin Parkin and Amy Kazmin) highlights Trump’s visit to India. Trump wants India to strengthen its ties with America, arguably to counterbalance China’s unpredictability, but there are many niggles between the two sides on trade. * SO WHAT? * As well as potentially diversifying reliance away from China, Trump may well be courting Indian relations in order to boost his vote back home in the presidential election as the affluent Indian-American community, who are thought to number about 4 million, have the tendency to vote Democrat.

Prudential faces pressure to break up, Barclays’ Staley sets a leaving date and Revolut raises a ton of cash…

US hedge fund calls for Prudential breakup as it takes near-$2bn stake (The Guardian, Joanna Partridge) highlights a rather vocal US hedge fund called Third Point calling for Prudential to split its Asian and US businesses. The activist investor has built up a stake of almost 5% in the London-based insurer and is using this as a platform to argue that Prudential Corporation Asia and Jackson National Life need to separate to maximise the value of both businesses. * SO WHAT? * Prudential only just separated out its fund management and European divisions into the London-traded M&G, but Third Point thinks it needs to go even further. The activist hedge fund is well known for building up stakes in big international companies and then calling for changes in strategy. There was no comment from Prudential.

Elsewhere, Barclays chief executive Staley ‘set to depart

by end of next year’ (Daily Telegraph, Michael O’Dwyer) heralds the latest development in the controversy surrounding Jes Staley as questions continue to dog the chief exec around his links to the notorious Jeffrey Epstein. * SO WHAT? * He has apparently told colleagues that he expects to leave by the end of next year, possibly at the bank’s annual meeting in May 2021. However, I think that he needs to go ASAP. His lingering will be bad for morale and questions are bound to continue about the judgement of the boss of a major bank who didn’t see anything wrong with visiting Epstein, a friend of 15 years, while he was under house arrest for soliciting prostitution from a minor. IMO Barclays needs to get rid and get another experienced operator on board asap. Markets are tricky, so the last thing you need is a zombie for a boss.

In Revolut valued at $5.5bn in long-awaited funding round (Financial Times, Nicholas Megaw) we see the upstart bank has managed to raise $500m in a much-anticipated funding round making it one of the most valuable fintechs in Europe. Revolut is continuing to roll out banking operations in Europe and broaden its product range in order to persuade people to use it as their main bank account (average deposit sizes for the second half of last year were between £350 to £260 per customer).

Cargill turns its sights on meatless, Primark falters and Tesco tries cashless…

Cargill gets teeth into non-meat production (The Times, James Dean) highlights moves by the world’s biggest agribusiness group to enter the growing market for meat alternatives. It said yesterday that it was planning an April launch for meatless patties and ground products to take on the likes of Impossible Foods and Beyond Meat. They will be sold to retailers, who will rebrand them to their own labels. Interestingly, Cargill has invested $100m in Puris, one of Beyond Meat’s pea protein suppliers. * SO WHAT? * Given the popularity of the trend for eating less meat, this kind of thing is bound to happen – and Cargill is now

throwing its considerable resources into this arena. I expect more to come! Impossible Foods and Beyond Meat need to make use of their early successes to avoid being gobbled up by sleeping giants.

On the UK high street, Primark warns of clothing shortages (The Times, Alex Ralph) shows that the coronavirus may result in shortages of some of the fashion retailer’s products given Chinese production delays and Alarm as Tesco opens first mainstream cashless store (The Times, Ben Martin) heralds the opening of a cashless Tesco on High Holborn in London as many consumers continue to move away from the use of notes and coins. There will be an array of paying options available, but obviously no cash. At the moment, there are no plans for any further cashless stores. * SO WHAT? * Some will argue that going cashless will be bad news for vulnerable groups, but it certainly seems to me that things are certainly heading in the cashless direction.

And finally, in other news…

As you will know by now, I’m all about learning and tasteful culture. It should therefore come as no surprise that I introduce you to a new style of art in Rubik’s Cube Mona Lisa fetches 480,000 euros at Paris auction (Relaxnews, AFP https://tinyurl.com/tpztz5z). Nice 😁

1. In CORONAVIRUS NEWS, the IMF warns of global economic vulnerability, Italy and Iran have issues and we look at ongoing effects on private jet demand and toys
2. In CAR NEWS, we see China’s designs on India and how Tesla’s electronics are ahead of the rest
3. In INDIVIDUAL COMPANY NEWS, UK estate agents Countrywide and LSL talk about merging, retail parks are about to lose more restaurants and Warren Buffett’s Berkshire Hathaway has a ‘mare
4. In OTHER NEWS, I bring you an analogue solution to a digital problem plus world record planking…

So the IMF warns, Italy and Iran have problems and we see private jet demand rise and potential disappointment over toys…

‘Fragile’ global recovery put at risk by virus, says IMF chief (Daily Telegraph, Tom Rees) highlights remarks from the IMF’s managing director, Kristalina Georgieva, who said that the coronavirus has “disrupted economic activity in China and could put the recovery at risk”. She added that the IMF would give money for debt relief to the poorest countries via a special trust that covers public health and natural disasters as the effects continued to spread. Even Chinese president Xi Jinping admitted that that the virus would have a “relatively big impact on the economy”. The IMF estimates that China’s growth will slow right down from its original January prediction of 6% to 5.6% and that global growth will be 0.1% slower than it had originally predicted.

Meanwhile, Italy quarantines northern towns in coronavirus outbreak (Financial Times, Miles Johnson) shows that infection is spreading in the country, resulting in the cancellation of the last two days of the Venice carnival and a number of Italian football fixtures while fashion designer Armani held an empty show in Milan yesterday. MIDO, the world’s biggest eyewear trade fair that was due to take place this month has been moved to June. Iran tries to combat public distrust on coronavirus (Financial Times, Namjeh Bozorgmehr) shows that the country’s authorities are shutting down schools, universities and some religious seminaries in order to calm rising levels of public distrust over the containment of the coronavirus as

the death toll increases. Iranians have been panic buying food and other supplies and prices of sterilisers, masks and some food items have quintupled in the last few days alone.

In terms of effects on specific areas and industries, Private jet demand surges in wake of coronavirus outbreak (Financial Times, Tanya Powley) highlights the sharp increase in demand for private jets as companies and individuals look for ways to fly out of Hong Kong (the number of business jet flights between Hong Kong and Australia and North America shot up by 214% last month versus the previous year, according to one company). This comes as airlines have dramatically cut the number of flights in and out of China. Then in MGA boss warns coronavirus could lead to toy shortage (Financial Times, Alistair Gray) we see that MGA Entertainment – which makes LOL Surprise! miniature collectibles (last year’s biggest selling toy, apparently!), Bratz fashion dolls and Little Tikes – thinks that the outbreak will result in a global shortage of popular toys. The toy sector is thought to source around 80% of its products from China and Toy retailers see cold Christmas ahead (The Times, Ashley Armstrong and Callum Jones) provides further evidence of how retailers are bracing themselves for a tough time ahead. Gary Grant, chief exec of The Entertainer, the UK’s biggest independent toy retailer, says that if the outbreak continues for the next few weeks, there could be major issues with Christmas stocks because new ranges are usually marketed in August and September for sale at Christmas. If production issues persist, this will push new toy launches back by a year. * SO WHAT? * The nightmare continues as no-one knows when the spread is going to stop. The momentum of SARS in 2002/3 was said to have slowed down as Spring weather approached and many will be hoping that this will help slow the current coronavirus’ momentum.

Chinese carmakers target India for growth and Tesla’s electronics are years ahead of the competition…

In Chinese carmakers accelerate drive into India (Financial Times, Benjamin Parkin) we see that manufacturers such as Great Wall Motor and FAW Haima are trying to counter sluggish growth in their domestic market with their first forays into India. SAIC Motor started selling MG cars there last year and BYD, which makes electric buses in India, has plans to launch electric vans there. Chinese manufacturers were present in force at this month’s New Delhi auto expo unveiling 10 new models. * SO WHAT? * Vehicle sales fell by 8% in China last year and although sales in India actually fell by 13% in the same time period, the expectation is that they will recover more quickly and then overtake China’s domestic sales in terms of growth rate. IHS Markit reckons that India will overtake Japan as the world’s #3 car market after China and the US by 2025 – so clearly the expectation is there. At the moment, Maruti Suzuki (a subsidiary of Japan’s Suzuki) has a massive 50% market share in the country, with South Korea’s Hyundai also doing well there. Clearly there is room for others.

Tesla electronics ‘years ahead’ of Toyota and VW (Financial Times, Hideyoshi Kume) is a VERY interesting article which talks about Tesla’s electronics technology. Basically, Nikkei Business Publications (a sister publication of the FT) took a Model 3 apart and got people to have a close look at it. The car’s integrated central control unit, aka Hardware 3, includes two custom-made AI chips with bespoke software that powers the car’s self-driving capabilities and infotainment system. One engineer from a major Japanese car manufacturer took a look and said “we cannot do it” and other industry insiders believe that similar tech won’t become mainstream until around 2025 at the earliest. * SO WHAT? * Systems like Hardware 3 drastically reduces the number of electric control units (ECUs) in cars, potentially decimating suppliers who make these components – and it is thought that car manufacturers are caught between remaining loyal to their suppliers and moving innovation forward at a more natural (faster) pace. This hardware enables “over the air” software updates and is one of Tesla’s key features. Sorry, but I think loyalty is going to have to go out of the window. If carmakers can develop their own Hardware 3 equivalent systems, they will – after all, they have to survive as well. Although this tech is indeed very impressive, the fact is Tesla is still some distance away from being mainstream and the more established manufacturers have the firepower to make big improvements in this area, should they be so minded. Interesting though, no?

UK estate agents talks about getting together, more restaurants look vulnerable and Berkshire Hathaway has a year to forget…

Estate agents Countrywide and LSL ‘in £460m merger talks’ (The Times, Tom Howard) heralds a potentially big merger between the two as Countrywide (which owns Hamptons International and Bairstow Eves among many others) and LSL Property Services (which owns Your Move and Marsh & Parsons) are in early stage discussions. * SO WHAT? * I would have thought that a deal would make strategic sense given that transaction volumes have fallen and the housing market has been weak going into the end of last year. Presumably, logic would suggest that a getting together will result in cost savings (i.e. branch closures and job losses) at the same time as the market is going into an upswing initiated by the general election result. Not nice for those involved, however.

Retail park restaurants facing axe this week (The Times, Louisa Clarence-Smith) shows that the owner of Frankie & Benny’s and Chiquito, The Restaurant Group, is expected to be announcing closures this week of underperforming sites, many of which are in out-of-town retail parks. Some of them will be turned into Wagamama restaurants, but the company did warn last September that at least 50% of its 352 sites could be shut down over the coming years. The Restaurant Group is due to report full-year results on Wednesday. * SO WHAT? * This will just add to the headache that retail park landlords are feeling these days.

Warren Buffett’s Berkshire Hathaway stock underperforms the most since 2009 (Wall Street Journal, Nicole Friedman) highlights a tricky year for uber-investor Warren Buffett’s investment company as its share price only rose by 11% in 2019 versus a rise of 31.5% in the S&P500. He just said that everyone should concentrate on the long term and sung the praises of Ajit Jain and Greg Abel, who are to replace the 89 year-old Warren Buffett and 96-year old business partner Charlie Munger. Bit of a cop-out, but I guess you can just do whatever you want when you are Warren Buffett!

And finally, in other news…

I thought I’d leave you today with the very amusing Woman’s ‘game-changing’ online shopping trick means she always buys right shoes (The Mirror, Courtney Pochin https://tinyurl.com/vpgj6nm) and the very impressive Former Marine planks for over 8 hours, setting Guinness record (USA Today, Joel Shannon https://tinyurl.com/ufj3pe4). This guy is 62!!!

1. In CORONAVIRUS NEWS, Chinese banks cut lending rate to help the economy, Airlines and Maersk count the cost and app downloads soar
2. In FINANCIALS NEWS, Morgan Stanley buys ETrade, Swiss Re suffers from storms and wildfires and Lloyds Bank sees profits fall
3. In UK CONSUMER NEWS, retail spending jumps and calls increase for Sunak to reform stamp duty
4. In INDIVIDUAL COMPANY NEWS, Sprint/T-Mobile merger terms change, we looks at what’s in store for Victoria’s Secret and TikTok aims to evolve
5. In OTHER NEWS, I bring you tightrope-walking over a volcano and how to dry a wet dog…

So Chinese banks try to cushion the blow, airlines and Maersk count the cost of the coronavirus and isolated Chinese buy into app downloads…

Chinese banks cut lending rate to prop up coronavirus-hit economy (Financial Times, Hudson Lockett and Adam Samson) highlights the lowering of the one-year loan prime rate by Chinese banks – a key lending rate used across China’s financial system – in order to ease lending conditions. The decision came as ratings agency S&P warned that banks face a sharp increase in bad loans due to the chaos caused by the coronavirus.

Meanwhile, Airlines warn of $29bn earnings hit as coronavirus saps demand (Daily Telegraph, Tom Rees) cites forecasts from the International Air Transport Association (Iata) which say that airlines in Asia will take a $29bn sales hit in 2020 due to the outbreak. Air France-KLM and Qantus have already warned on earnings and Iata says that it expects airline traffic to fall this year for the first time since 2003. Maersk warns of coronavirus blow to earnings this year (Financial Times, Richard Milne) shows that things aren’t any better at sea as the world’s biggest shipping container company warned of a “very, very

weak February and weak March”. Having said that, chief exec Soren Skou said that he expects a significant bounce-back in April, May and June as factories get back to normal production. * SO WHAT? * Maersk in particular is seen as a bellwether for global trade as its containers account for one in every six transported by sea. The current quarter comes after a tricky year last year marred by the ongoing US-China trade war. Skou believes that factories in China are operating at about 50-60% capacity and that this will go up to 90% by the beginning of March.

Given how many people remain isolated as a result of the coronavirus outbreak, China app downloads surge due to coronavirus outbreak (Financial Times, Leo Lewis and Hudson Lockett) is not really surprising! Smartphone users downloaded record numbers of games and other apps, boosting the $150bn global games industry. According to analytics provider AppAnnie, average weekly downloads for the first two weeks of February, shot up by 40% versus the average taken across the whole of 2019. Share prices of listed game-makers have shot up accordingly – Tencent’s share price is now at a 20-month high. Education apps have also done well as schools remain closed and shares in New Oriental Education, which provides online education in China, have shot up by 17% this year. * SO WHAT? * This follows on from what I was saying about companies that make software and/or apps that enable remote working. It seems that homebound Chinese are spending longer on apps, which also increases the chance of monetisation. 

Morgan Stanley buys ETrade, Swiss Re counts the cost of wildfires and storms and Lloyds Bank sees a fall in profits…

Morgan Stanley agrees $13bn deal to buy ETrade (Financial Times, Laura Noonan) heralds the biggest purchase by a Wall Street bank since the financial crisis as Morgan Stanley becomes the latest investment bank to invest in a retail banking business to boost its future growth. The all-stock purchase, which is subject to regulatory approval, comes at a time when the US wealth management industry is consolidating and rivals such as Goldman Sachs are also going down the same road. It also comes only months after November’s $26bn merger between ETrade rivals Charles Schwab and TD Ameritrade which occurred against the backdrop of falling trading fees. * SO WHAT? * If the deal goes through, it will mean that 57% of Morgan Stanley’s pre-tax profits will come via wealth management and investment management as opposed to the more volatile area of investment banking. The deal appears to make strategic sense in terms of diversifying income streams into less risky areas but the downside is that the company thinks it will take until 2022 to break even.

Swiss Re profits hurt by storms and wildfires (Financial Times, Oliver Ralph) highlights tough times for reinsurance group as growing payouts in the US and a succession of natural disasters have dented profits (reinsurance

companies sell insurance to insurance companies). US payouts are rising because there is a trend for juries to award higher compensation payments for things such as motor accidents and medical malpractice. Natural disaster payouts have also been on the rise due to Australian bushfires and storms in the US, Japan and Bahamas. * SO WHAT? * When natural disasters happen, after all the human and environmental cost, people tend to think about insurers – so I thought I’d mention reinsurers for a change, as they suffer too! You would have thought that things are going to get worse given the coronavirus, but then again it depends on how much of its consequences were actually covered by insurance. For instance, cruise companies appear not to be covered because the premiums were too expensive…

Lloyds bank boss takes 28% pay cut after annual profits fall (The Guardian, Kalyeena Makortoff) shows that chief exec Antonio Horta-Osorio has taken a pay cut (don’t feel too sorry for him – he will still earn £4.7m – phew!) as the bank’s profits fell sharply last year. The bonus pool also shrunk as the company said that its results were “heavily impacted by the additional PPI provision and other conduct-related issues”. * SO WHAT? * Lloyds is seen by some as a bellwether for the UK economy as it is domestically focused and is a major mortgage provider and business lender. I would be inclined to think that a lot of the bad news is already in the share price and there is an end in sight for PPI payouts. It remains to be seen how successful the bank will be in changing its offering to suit the evolving tastes of its customer base and the increasing competition with innovative digital rivals. Or maybe it’ll just buy one??

Retail spending climbs and calls increase to reform stamp duty…

Shoppers banish Brexit blues with jump in retail spending (The Times, Philip Aldrick) cites the latest figures from the Office for National Statistics which show that customers headed back to the shops in January, lifting retail sales by 0.9% (biggest lift since March 2019) – or by 1.6% if you exclude fuel (the biggest hike since May 2018) and came in above consensus forecasts. * SO WHAT? * The “Boris bounce” seems to be leaking through to the high street at the moment but obviously time will tell if this is a blip or a trend. As long as wage growth continues and the labour

market stays tight I would have thought that this should continue. It will also be helped by people feeling “richer” as the paper value of their abodes go up as per recent figures.

Chancellor urged to pull the plug on stamp duty to boost market (Daily Telegraph, Rachel Millard) shows that the new chancellor, Rishi Sunak, is coming under increasing pressure to reform the UK’s stamp duty system in his first Budget to be unveiled next month. Reformists say that punitive levels of tax on property sales is causing a logjam as they make families wanting to move up stay put, meaning that there’s less room for first-timers to get on the housing ladder. People are calling for a higher threshold for paying stamp duty (it’s currently slapped on all properties costing over £125,000) and excluding downsizers from having to pay. It all sounds good, but we’ll just have to wait until March 11th to see whether anything actually happens!

The Sprint/T-Mobile terms are revised, Victoria’s Secret faces an uncertain future and TikTok wants to expand…

Further to the recent court judgement for the Sprint/T-Mobile merger to go ahead and subsequent moves by T-Mobile’s parent company Deutsche Telekom to retrospectively change the terms of the deal (because Sprint’s performance has been cr*p since the deal was originally announced), Sprint, T-Mobile revise merger terms (Wall Street Journal, Cara Lombardo, Dana Cimilluca and Drew FitzGerald) shows that the two companies have agreed on new terms by improving the share exchange ratio. Originally, 9.75 Sprint shares were to be exchanged for 1 T-Mobile share, but now 11 Sprint shares will be exchanged for 1 T-Mobile share. The new company will be called T-Mobile. It is expected that the merger will be closed on or by April 1st.

Following L Brands’ disposal of Victoria’s Secret yesterday, Victoria’s Secret must rely on angels anew if it is not to be undone (Daily Telegraph, Laura Onita) looks at the difficult way ahead for the company that will now be taken private by its new majority owner, Sycamore Partners. Although it was hot property for the 90s and noughties, the company has since lost its way and customers have complained that

it is not keeping up with the times. Things will have to change. * SO WHAT? * Industry data suggests that the online underwear market will grow by over 40% over the next five years – implying that there is a decent market to chase. The Victoria’s Secret offering has fallen behind up-and-coming brands such as Les Girls Les Boys so it will be interesting to see how much it will change away from the pressures of the stock market.

Then in TikTok owner’s plan: be more than just TikTok (Wall Street Journal, Shan Li) we see that TikTok’s owner ByteDance is looking beyond its popular entertaining videos and into new apps, games and e-commerce to take advantage of its current momentum and not end up as a one-hit wonder. It has launched a financial services app, is testing a music streaming app and has bought some game developers in China. There is now speculation that ByteDance will be introducing a subscription service that will give users access to additional content from preferred creators – but the company has not confirmed this. * SO WHAT? * Diversification while TikTok is “hot” is an excellent idea and would diversify its income streams and give it access to more user data which would help advertising revenues. It’s too early to tell whether this will all work BUT at least they are giving it a go! Still, it won’t be easy because the company will be dipping its toes into waters dominated by the likes of Tencent’s WeChat Pay and Ant Financial’s Alipay in addition to Western companies such as Spotify.

And finally, in other news…

I thought I’d leave you today with a couple of ideas to ponder for the weekend. Namely, Man to walk tightrope over active volcano (Independent, Harry Cockburn https://tinyurl.com/qq6ghg3) which looks just RIDICULOUS and then the rather more sedate Woman fed up of wet dog making a mess after bath time solves problem for £3.50 (The Mirror, Courtney Pochin https://tinyurl.com/wn9nd28). My dog Poppy, who some of you may have seen in a pre-Christmas post, definitely needs something like this. At the moment, after fighting to shampoo her in the bath and then getting her “towel-dry”, she insists on rubbing herself along any carpet in the house – which is quite amusing to watch, but not ideal. Have a great weekend!

1. In MACROECONOMIC NEWS, UK inflation hits a 6-month high, UK house prices rise across the UK and we look at the winners and losers from the new immigration laws
2. In INDUSTRY-WIDE NEWS, Big Tech faces data changes, cord-cutting increases and the cruise industry faces big problems
3. In RETAIL NEWS, Victoria’s Secret goes private and Laura Ashley gets a lifeline
4. In INDIVIDUAL COMPANY NEWS, Qatar buys into IAG, Adidas and Puma warn over coronavirus fallout and Metro Bank gets a chief
5. In OTHER NEWS, I introduce you to a talented 6-year old…

So UK inflation and house prices rise while winners and losers emerge from the new immigration rules…

UK inflation hits six-month high as petrol and energy prices rise (The Guardian, Phillip Inman) cites the latest figures from the Office for National Statistics which showed a rise in inflation to 1.8% in January thanks to higher petrol prices and cumulative increases in the cost of gas and electricity over the last year. The rise of 1.8% was above consensus forecasts of 1.6%, bringing it closer to the Bank of England target of 2%. * SO WHAT? * Inflation fell in December to 1.3% – its lowest rate for three years – prompting speculation of a possible interest rate cut to encourage spending. However, given this latest figure and an apparent pick-up in business confidence since the election, you would have thought a cut would be unlikely at the next meeting of the Bank of England’s Monetary Policy Committee (MPC) in March.

House prices rise in every region of UK for first time in two years (The Guardian, Phillip Inman) cites house price data from the Land Registry which shows that average annual house prices increased by 2.2% in December, versus an increase of 1.7% in November. It was also the first month since February 2016 that prices went up in all regions. Separately, the Office for National Statistics observed that slowing house price growth since the 2016 referendum started to reverse last summer in the north and east of England. Recent sales data from Nationwide and Halifax also seem to back this up while the latest Bank of England stats showed that mortgage approvals for house purchases shot up in December to their highest monthly level since July 2017. * SO WHAT? * This is all good news for sellers, but it’s also not too bad for buyers either as there will be more choice in the market and mortgages are still pretty cheap (although they are getting more difficult to get). Still, I think that this initial euphoria following the

election will calm down as the complexities of Brexit negotiations hit. It will be interesting to see whether the upcoming Budget does anything to encourage property buying activity.

Picking winners and losers under new UK points-based immigration system (Financial Times, Robert Wright) looks at the new immigration rules announced yesterday and identifies some of the winners and losers from this new system which gives potential immigrants points based on language ability, job offer (the job has to pay above £25,600 per annum – which is less than the current limit of £30,000) and academic qualifications. So who are the winners? The tech industry, for starters, which brings in highly paid staff from India, the US and others from outside the EEA. Makers of equipment that can automate certain jobs (thus reducing staff overheads) may also benefit – so there may be more tablet computers taking restaurant orders and dealing with customers at check-in desks, but the scope for this is limited at the moment. On the other hand, losers include the social care sector where many employers are restrained in terms of what they can pay by funding they get from the central and local government – so this will make attracting staff trickier. The meat processing industry also looks like it will have difficulties as 70% of its employees are currently from EEA countries and don’t have the academics that meet the new standards for the most part. The agricultural sector is also likely to suffer as it tends to employ low-paid staff without much in the way of qualifications. * SO WHAT? * Given that the rules have only just been introduced, I suspect that more winners and losers will emerge. Overall, I think that this will mean that existing employees may well see their wages rise because employers will surely want to hang on to them but the problem is that, especially in an environment of super-low unemployment, many potential UK employees will avoid poorly paid jobs in unattractive environments/sectors because there are just more jobs elsewhere. I think that huge problems will emerge from this and the government will have no choice but to increase the number of categories in the “shortage occupation list”, where applicants will receive preferential treatment, further down the line.

Big Tech faces data backlash, cord-cutting is on the rise and the cruise industry looks very difficult…

Big Tech will have to share data under EU proposals (Financial Times, Javier Espinoza, Madhumita Murgia and Richard Waters) highlights proposals from the European Commission which will force big tech companies to make their data available to smaller rivals. The document, entitled European Strategy for data, pushes for more pooling of data and suggests that previous EU directives could be revised to reclassify what constitutes a trade secret. The EC argued that tech companies have built enormous advantages over competitors by guarding their data – and so want to move towards what happens in the banking and car industries where everyone has to share customer information. * SO WHAT? * At the end of the day, everyone knows that big tech harvests enormous amounts of data from customers and the advantage that it gives them effectively stifles any meaningful competition. Trump may well whinge that Europe is targeting US companies unfairly and that they are being punished just for being good at what they do – but if Europe does nothing to stop Big Tech’s onward march on the data front, everyone may as well just pack up and go home. IMO, Big Tech will try and stretch things out as long as possible to enable it to continue to collect as much data as possible but eventually something will have to be done. If Europe stands firm on this matter, the companies will have to change – but at the moment the details are unclear. I think that this is the warning shot, to be followed up with more salvos later. The EC’s Margrethe Vestager has form in taking on the big companies, so if anyone can, Margrethe can!

Cord-cutting accelerated in 2019, raising pressure on cable providers (Wall Street Journal, Lillian Rizzo and Drew Fitzgerald) shows that the pace of customers abandoning traditional pay-TV packages accelerated by over 70% last year in the US. Prices for satellite and cable contracts continued to rise while the number of cheaper streaming services continued to proliferate. Cable TV providers such as Comcast, Charter Communications and Altice lost around 1m pay-TV customers in 2019 while satellite providers did even worse as AT&T’s DirecTV lost

3.4m customers and Rival Dish Network lost 500,000. * SO WHAT? * “Traditional” providers are having to increase prices because of the rising costs of content. Matters are made even worse for them because more streaming services are coming online with deep-pocketed backers who don’t mind losing a ton of money in order to build a big customer base quickly. Netflix was bad enough – and then came Amazon, Hulu and now Disney+ and Apple TV+, soon to be followed by Comcast’s Peacock and AT&T’s HBO Max later this year. I think this is a golden age for customers – but reality will certainly hit a few years from now when these ventures have to start making money. As I keep saying, I believe that consumers will hit “peak subscription” at some point (probably when economies start to go downhill and people start reining in their extraneous spending) at which time I would expect the streamers to consolidate. However, I think it will be a few years before that starts to happen!

Coronavirus: cruise industry caught in the eye of the storm (Financial Times, Alice Hancock) highlights the difficulties facing a sector worth $45bn as two cruise ships, the Diamond Princess and Westerdam (both owned by Carnival Corporation), are in the news on a daily basis with trapped holidaymakers and staff, chipping away at consumer confidence. So far, over 50 cruises have been cancelled, seven ports have been shut down and thousands of holidaymakers have faced disruption. Share prices of the major players in the industry – Carnival, Royal Caribbean and Norweigian Cruise Line – have fallen between 10% and 16% since the beginning of the year and they have all admitted to weaker bookings since the outbreak began. * SO WHAT? * Asia is a small market with big growth potential – especially in China – so this will certainly hit hard at least in the short term. Compensation costs are likely to be painful, but the other thing is that most major cruise lines do not have commercial insurance to cover the latest outbreak because premiums that cover such things are extremely expensive. I am stating the bleedin’ obvious here but the longer it takes to contain the coronavirus, the worse it will be for the industry and the more they will have to spend to get back on an even keel. This will have to come in the form of advertising, increased measures to reassure passengers that their health is not at risk and cheaper prices. I would have thought that there will be lots of incredibly cheap deals for cruise holidays coming up this year – especially for rooms that have no windows.

Victoria’s secret is to go private and Laura Ashley gets a lifeline…

Victoria’s Secret to go private at $1.1billion valuation (Wall Street Journal, Khadeeja Safdar and Cara Lombardo) heralds a major development for the lingerie retailer as its owner, L Brands, is close to selling 55% of the company to private equity firm Sycamore Partners – who is expected to then take the company private. * SO WHAT? * L Brands has been selling off a number of its brands in the last few years to raise cash and Sycamore Partners has been hoovering up a number of poorly

performing apparel brands including The Limited, Hot Topic, Nine West and Staples in an effort to make a huge profit after staging a turnaround. Victoria’s Secret has seen falling sales over the last few years, so maybe a new owner is just what it needs right now.

Laura Ashley agrees emergency funding deal with Wells Fargo (The Guardian) heralds a stay of execution for the clothing and furnishing retailer as it now has enough funds to meet its immediate funding needs via its bank and not from Malaysian firm MUI Asia, with which it had been holding talks. * SO WHAT? * Stay of execution or are Wells Fargo just rearranging the deckchairs on the Titanic?? Sorry to be harsh, but I think Laura Ashley is way past its heyday and that the only way out would be for someone else to buy it. But who would do that now?? 

Qatar buys a chunk of IAG, Adidas and Puma warn on coronavirus and Metro Bank gets a full-time chief…

In a quick scoot around other news that hit the headlines today, Qatar spends £450m to bag 25pc stake in BA’s owner IAG (Daily Telegraph, Oliver Gill and Simon Foy) shows that state-owned Qatar Airways now owns 25% of IAG, the airlines group that owns British Airways, Iberia and Vueling. This comes as chief exec Willie Walsh is retiring and follows on from the stepping down over the weekend of BA’s COO and head of HR. IAG’s share price rose by 1.6% yesterday, but it has shot up by over 50% in the last six months! * SO WHAT? * It seems that Qatar is just adding to its interests in foreign airlines as it has already built up stakes in China Southern and Cathay Pacific. It is currently in talks to buy 49% of RwandAir and to take its current stake in Latam Airlines from 10% to 20%.

Adidas and Puma warn of coronavirus sales drag (Financial Times, Philip Georgiadis) shows that both

German sportswear makers (founded by two brothers – but that’s another story) have issued profit warnings, saying that their businesses in China have taken a major beating due to store closures and slower sales. * SO WHAT? * Puma only has 2% market share in China versus Adidas’ share, which is in the high teens, but both companies should recover strongly once the coronavirus calms down. However, no-one knows how long the current slump will last.

Metro banks on restructuring expert for turnaround (The Times, Ben Martin) shows that Dan Frumkin, who has been Metro Bank’s active chief exec since the beginning of the year, has now been appointed to the role on a permanent basis. * SO WHAT? * Metro Bank has had a very rough ride since it admitted to mis-classifying its loan book last year and there has been a senior management vacuum after the subsequent departures of  its previous chief exec and its colourful chairman Vernon Hill. Let’s hope this steadies the ship. I expect there will be pain to come, however, as new management generally like to make some dramatic moves to put their stamp on the business.

And finally, in other news…

There’s been a lot in the news recently about the girl who is about to be our youngest Olympian, Sky Brown, but this Russian girl also looks like she’ll be taking the world by storm: At six, Russian snowboarding prodigy is flying high (AFP, https://tinyurl.com/vw5yrgu). Incredible!!! What do these kids eat for breakfast??? I need to get some for my own two boys (and myself)!

1. In CORONAVIRUS & MACRO NEWS, companies see consequences and opportunity, Germany’s wobble continues, the UK Budget will be delivered on time and UK wage growth slows
2. In RETAIL NEWS, it’s a mixed bag for Walmart, Beales faces extinction and WH Smith stops selling The Telegraph
3. In INDIVIDUAL COMPANY NEWS, some say HSBC’s cuts don’t go deep enough and Nissan announces changes
4. In OTHER NEWS, I bring you a floating, self-solving Rubik’s Cube…

So we see more consequences and an opportunity related to the coronavirus, Germany’s ‘mare continues, the UK Budget sticks to the schedule and UK wage growth slows…

Jaguar Land Rover rushes parts out of China in suitcases (Financial Times, Nikou Asgari) highlights the impact of the coronavirus on car makers as ongoing production disruption in China means that JLR will be facing serious problems in the next few weeks if things don’t start getting back to normal. Transporting parts by air rather than by sea is far quicker, but it’s more expensive and you can’t get the same volumes so JLR is clearly resorting to desperate measures at the moment. Coronavirus hits return to work at Apple’s biggest iPhone plant (Financial Times, Ryan McMorrow, Nian Lui and Kathrin Hille) highlights difficulties at Apple’s biggest iPhone plant, run by Foxconn in Zhengzhou, as workers are returning from the Lunar New Year holiday – just not in sufficient numbers to get up to full production capacity due to travel restrictions and quarantine issues. Fun fact: a mind-boggling 200,000 employees work at Foxconn’s Zhengzhou plant when it’s at full capacity! Virus deals blow to hotel group reeling from Hong Kong unrest (The Times, Robert Lea) shows that Intercontinental Hotels Group is another company that is feeling coronavirus fallout, compounding its suffering from the Hong Kong protests, as it unveiled annual results which showed that revenue per available room (a key industry metric, also referred to as “revpar”) fell by a massive 64% in the Christmas trading quarter. On the other hand, Remote working is on trial in both China and Silicon Valley (Financial Times, Tim Bradshaw and Ryan McMorrow) shows that providers of tech that facilitates working from home – such as messaging app Slack and videoconferencing provider Zoom in the US and Alibaba’s DingTalk and ByteDance’s Lark in China – could actually benefit in the long run from the outbreak. There are two trends at work currently – one being the “enforced” working from home due to the coronavirus and the other being increased demand from workers as a way of improving work-life balance. Ecommerce got a big boost from the SARS outbreak in 2002/3 because people started to shop more online and it seems that the current outbreak is resulting in “explosive growth” for DingTalk, Alibaba’s chat, videoconferencing and task management platform. According to App Annie, a mobile data and analytics provider, DingTalk went from being outside China’s top 250 iPhone apps on January 25th to the #1 position for most of February! In addition to this, share prices of Slack and Zoom have risen 20-30% since the Chinese New Year holiday. * SO WHAT? * Many companies are having a tough

time with the coronavirus at the moment, but it does go to show that even in these difficult circumstances there are still opportunities. I think that remote working is much more do-able in more lines of work than people think and it has positive consequences for the environment (less travelling), work-life balance (being able to do the boring “home” stuff whilst still working) and individual finances (saves on commuting costs, etc.). The coronavirus could well be to remote working what SARS was to e-commerce.

Meanwhile, Germany’s woes continue in Angela Merkel pressed to step down early to ease CDU crisis (Financial Times, Guy Chazan) which follows on from the recent shock news that her preferred successor wanted to step back from it all. At the moment, Merkel’s term is due to end in the autumn of 2021 but there seems to be a lot of grumbling going on in the background which could turn into pressure for her to make an earlier exit. The Christian Democratic Union is just about to start the process for finding a new leader and it is likely that whoever it is will have to work with Merkel, which could prove to be problematic as it will hamper their ability to lead. * SO WHAT? * If an “anti” Merkel candidate wins in the election for the leadership, things could get nasty – but it is actually quite difficult to get rid of a Chancellor under the German constitution. This comes at a difficult time as Germany’s economy continues to struggle – but it’s also going to be holding the rotating presidency of the EU in the second half of this year. Profit warnings hit record in Germany (Financial Times, Joe Miller) shows just how difficult things are at the moment for the country as profit and sales warnings hit new records in 2019 – up by 25% from 2018, according to figures from accountancy firm EY.

Back in the UK, Chancellor confirms Budget will go ahead on March 11 (Financial Times, Laura Hughes, Sebastian Payne and Eva Szalay) shows that the new Chancellor, Rishi Sunak, will be keeping to the original timetable despite being appointed only last week following Sajid Javid’s resignation. There had been speculation that it would be delayed given Sunak’s appointment’s proximity to this key announcement, but clearly that has now been shut down.

Wage growth slows despite robust labour market (Financial Times, Valentina Romei) cites the latest data from the Office for National Statistics which shows that wage growth fell to its slowest rate in over a year at the end of 2019, but employment hit its highest level since records began in 1971. The unemployment rate now stands at 3.8%. * SO WHAT? * I would have thought that the wage growth thing was a blip in that we were facing a lot of uncertainty going into the end of 2019. Given that confidence seems to be bouncing back in many areas and that we continue to have a tight labour market, I think that wage growth should recover once more.

Walmart has a mixed bag, Beales faces extinction and WH Smith bans the Daily Telegraph…

In Walmart posts mixed holiday sales (Wall Street Journal, Sarah Nassauer) we see that the US retailer (which is also the world’s biggest retailer) unveiled uninspiring holiday sales on the one hand and solid online sales on the other while its UK problem child – Asda – continued to disappoint. Asda’s Christmas sales slide as shoppers rein in spending (The Guardian, Mark Sweney) shows that its customers cut back on spending in the run-up to Christmas and its clothing line, George, took a big hit. * SO WHAT? * Given that Walmart failed in its bid to sell the Asda business to Sainsbury’s last year and that it’s not doing particularly well at the moment in a highly competitive UK market, you would have thought that Walmart would be very open to offers for the business. Whether there’s anyone out there who actually wants to buy it is another question!

On the UK high street, Bell tolls for Beales’ department stores (Daily Telegraph, LaToya Harding) heralds the potential final demise of one of the UK’s oldest department stores. It closed 12 of its 23 stores this month after falling into administration last month – the remainder are expected to trade for the next eight weeks while closing down sales take place. The search for a buyer continues.

WH Smith excludes Daily Telegraph from shops at railway stations (Financial Times, Alex Barker and Mark Di Stefano) shows that the high street retailer has stopped selling the Daily Telegraph at its railway outlets (for maximum pain!) in protest at shrinking margins. The Telegraph has hiked the cover price of its newspapers by almost 25% this month but it did not increase the amount paid to retailers by the same amount. * SO WHAT? * Newspapers are sold at around 54,000 outlets in the UK and WH Smith and supermarkets are the main sellers. The banning of a national publication is extremely rare and just goes to show the extent of WH Smith’s frustration at the trend for newspapers hiking their prices while paying less to the sellers. I would have thought it would be very much in the interest of the Daily Telegraph to pony up the money otherwise its hard copy sales will really suffer – and, given falling circulation trends these days, it needs to make sure it is not biting the hand that feeds it.

Critics say that HSBC’s cuts don’t go deep enough and Nissan makes promises…

You will recall that I mentioned the dramatic cuts being undertaken by HSBC yesterday – well HSBC plan to cut 35,000 jobs leaves investors disappointed (Daily Telegraph, Lucy Burton) says that HSBC’s share price fall in trading yesterday implies that investors don’t think it’s going far enough. Analysts are predicting that 15,000 of the 35,000 roles will be in the UK, with many of them being at

its Canary Wharf HQ. The bank also reported a $3.9bn fourth quarter loss as annual pre-tax profits fell by one third. Tough times.

New Nissan boss signals pay cuts and deeper restructuring (Financial Times, Kana Inagaki) tells of a two-and-a-half hour grilling yesterday by disgruntled Nissan shareholders of the newly appointed chief exec Makoto Uchida, over the company’s poor performance. Uchida said he would step down if he fails to turn the company around. He announced cuts to executive pay and deeper restructuring measures. * SO WHAT? * Big deal. Japanese bosses say this kind of thing all the time. The proof of the pudding will be in the eating, so Nissan needs to take swift and drastic action as global car sales continue to suffer.

And finally, in other news…

I thought I’d leave you with something pretty amazing today in Cool automated Rubik’s cube found at Maker’s Faire floats, solves itself, blows our minds (SoraNews24, Dale Roll https://tinyurl.com/u8ls4ro). You really should watch this – it is highly entertaining!

1. In CORONAVIRUS & MACRO NEWS, China faces a major growth slowdown, restrictions in foreign internet and now a chicken cull as Cathay Pacific and Apple warn on repercussions. Germany and Japan’s economies look vulnerable
2. In CAR NEWS, GM exits Oz and NZ and Tesla faces problems for its German gigafactory
3. In INDIVIDUAL COMPANY NEWS, Pier 1 Imports files for Chapter 11, Laura Ashley looks very dodgy, BT changes its subscription model and HSBC is on the verge of announcing a big overhaul
4. In OTHER NEWS, I bring you a consequence of over-zealous spray-tanning…

So China’s economy faces a major slowdown, restrictions on foreign internet and a chicken cull while Cathay Pacific and Apple warn of fallout. Germany and Japan also look vulnerable…

China slowdown ‘biggest in 30 years’ (The Times, Callum Jones) cites Nomura’s assessment of the effect of Covid-19 (the official name for the current coronavirus) on China’s economy, predicting that the country could see its steepest fall in quarterly GDP growth since the Tiananmen Square protests in 1989. China stifles foreign internet to control coronavirus coverage (Financial Times, Yuan Yang) shows that Beijing is trying to keep a lid on panic as it has restricted access to the uncensored global internet in order to help the state frame the narrative. Meanwhile, Coronavirus fears force China into mass chicken cull (Financial Times, Sun Yu) highlights another effect of the outbreak – that that country has started to cull millions of young birds (at least 100m so far) because travel restrictions have meant animal feed has not been able to get to them, resulting in 30,000 chickens per day starving to death. This has been exacerbated by a major shortage of the main ingredients of feed – corn and soyabeans. In terms of the birds themselves, long distance domestic shipment of live birds has been restricted over concerns that this would spread the virus, leading to poultry farms having too many live chickens which has had the terrible consequence of baby chicks being buried alive. A restriction on the import of live US chickens (that has been in place since 2015) has been lifted in order to alleviate the problem but meat supply in China looks like it will be getting worse and prices are likely to stay high. * SO WHAT? * Given that China is still reeling from culling 40% of its pig population in the wake of the African swine fever outbreak, the prospect of a major chicken cull is going to

be hitting meat-lovers hard. Surely firms that make meat alternatives will be wanting to accelerate their plans for China expansion because they have a captive audience at the moment. Awful though the whole situation is, this is an absolutely golden opportunity for the likes of Impossible Foods, Beyond Meat and Omnipork to make some valuable inroads.

Cathay Pacific issues profit warning after coronavirus hits service (The Guardian, Jasper Jolly) highlights another consequence of the coronavirus as Hong Kong’s flag carrier announced a profit warning as it has had to cancel 40% of its flights in February and March. It had already faced difficulties from last year’s street protests. Apple to fall short of projected revenue due to coronavirus (Wall Street Journal, Tripp Mickle) shows yet another consequence as it became the first American company to say that it won’t reach quarterly revenue targets due to the outbreak, but will give more detail at its official earnings announcement in April. * SO WHAT? * The fallout continues and companies around the world will be continuing their attempts to quantify the damage. I do wonder whether we will see a spate of M&A when things die down as I suspect some smaller companies will be less well-equipped to weather a downturn perhaps leading to larger companies with cash swooping in and buying good businesses on the cheap.

In Japan’s economy heading for recession, and Germany wobbles (The Guardian, Phillip Inman) we see that Japan is heading towards a technical recession this year (two consecutive quarters of GDP contraction) as official figures revealed that its GDP growth rate slowed in the final quarter of 2019. Germany’s Bundesbank (the country’s central bank) said yesterday that the country’s major industrial sectors were continuing to see weaker orders. * SO WHAT? * Japan and Germany are two of the world’s biggest exporters and so their weakness is a big deal. At least Japan has the Olympics to look forward to – unless that gets affected as well.

GM leaves Australia and New Zealand and Tesla hits a hurdle on its German gigafactory…

GM to exit Australia and New Zealand as part of global overhaul (Financial Times, Jamie Smyth and Christian Shepherd) shows that General Motors is continuing with its restructuring as it continues to withdraw from markets where it has been struggling. It has also withdrawn from Russia, India and Europe (where it sold Opel and Vauxhall to PSA Group) and will be focusing its attention on the US, China, South Korea, South America and the Middle East. * SO WHAT? * And so the global car manufacturer reshuffle continues. This is a great opportunity, however, for the likes of China’s Great Wall Motors, who bought into GM’s Thailand business. Great Wall is one of the non state-owned car companies and with car sales stagnating in its

domestic market it looks like the time might be right for some overseas action.

Court’s axe hovers over Tesla factory (The Times, Oliver Moody) heralds some potentially tricky news for Tesla as a German court has ordered the company to stop cutting down trees without planning permission during its gigafactory build. Elon Musk had been hoping that Tesla’s first major factory in Europe could be built within 18 months but this could well be delayed should conservationists get their way. If Tesla doesn’t manage to finish cutting the trees down by mid-March, the company will be forced to cease activities in order to comply with laws that protect the breeding sites of wild birds during the spring and summer. * SO WHAT? * Given Germany’s rather precarious economy and the fact that this is a £3bn investment with 10,000 jobs at stake in a relatively poor region you would have thought some kind of arrangement could be reached. Still, it is a pain for Musk and could cause production delays down the road – but investors will be rather used to that 😂

Pier 1 Imports files for bankruptcy, Laura Ashley has problems, BT makes changes to its subscription model and HSBC is about to announce a big restructure…

Pier 1 imports files for Chapter 11 bankruptcy (Wall Street Journal, Aisha Al-Muslim) highlights the demise of the home furnishings giant with over 1,000 stores only two months after it said that it would be closing up to 450 outlets and cutting costs. Although the company doesn’t have massive debts, it is suffering acutely from competition with the likes of Wayfair, HomeGoods, Cost Plus World Market and Amazon. * SO WHAT? * It seems that Pier 1 didn’t do itself any favours by being late to the online retail party and had its costs jacked up from building infrastructure to cope whilst at the same time seeing its margins being squeezed.

Laura Ashley owner in crisis talks to secure emergency funding (The Guardian, Jasper Jolly) shows the latest UK retailer in crisis as its Malaysian owner (MUI Asia) is currently holding crucial talks with its bank (Wells Fargo) over getting access to extra funding in the short-to-

medium term. The retailer has seen a sharp drop-off in sales and now 2,700 jobs hang in the balance. Things aren’t looking great.

In BT ready to break with tradition to chase Netflix generation (The Guardian, Mark Sweney) we see that BT is planning to scrap its traditional pay-TV packages and let customers pay for prime content (e.g. Premier League football) on a monthly subscription – something more akin to the likes of Netflix and Disney+. Until now, BT has been pursuing the “traditional” model of tying customers into long term contracts but it will now offer more flexible packages. * SO WHAT? * I think that BT just had to do this. Everyone is doing it and they will just get left behind if they just leave things as they are. Yes, there’s a risk that their revenues could get more volatile as a result, but I think on balance that it’s better for them to keep customers happy with more options (and probably attract a few more customers) than die a slow death by clinging onto an old business model.

HSBC to cut 35,000 jobs and $100billion of assets (Wall Street Journal, Simon Clark and Margot Patrick) heralds bad news for the bank’s employees as it announced the cuts that are to happen over the next three years. This major restructuring of the business will include a scaling-down of US and European operations and a scaling-up in Asia and the Middle East. Tough times.

And finally, in other news…

I have to say that the following headline sounds somewhat naughtier than it actually is – but this story is very amusing: Breastfeeding mum regrets fake-tanning every part of her body (Metro, Richard Hartley-Parkinson https://tinyurl.com/ro9mtdz). This is hilarious!

1. In CORONAVIRUS NEWS, China relaxes taxes to help out
2. In CONSUMER/SERVICES-RELATED NEWS, UK house prices rise, Strava aims to go the distance and fashion renting looks on trend
3. In INDIVIDUAL COMPANY NEWS, Alstom offers $7bn for Bombardier and Arm announces strong profits
4. In OTHER NEWS, I bring you a belated-Valentine’s service and a brilliant Chinese man…

So Chinese authorities relax taxes to help businesses beyond the coronavirus…

In Chinese developers hit by coronavirus sales ban (Financial Times, Don Weinland) we see that local governments are trying to mitigate the effects of the coronavirus outbreak on property developers who have been forced to cease home sales (but still face $100bn of maturing bonds this year) by allowing them to delay payments on land and taxes. The ban was put in place to stop the spread of the disease so this move by authorities is designed to help developers’ cash flow. Just to give you an idea of the scale of the problem, a report from E-House showed that, in the first week of February, fewer than four homes were sold in Beijing – a city that has a population of over 20m people. * SO WHAT? * The longer this drags on,

the tighter things are going to become for developers who traditionally have high debt levels.

China plans to cut taxes to fight virus slump after trade war (Daily Telegraph, Russell Lynch) cites the Finance minister Liu Kun in the Communist Party’s magazine as saying that the government would use “targeted and phased” measures to cut taxes like VAT for firms supplying essentials while putting further funding into containing the disease. * SO WHAT? * The coronavirus is going to end up costing the Chinese government an absolutely enormous amount of money. Not only is it propping up the stock market (it’s suspiciously stable, don’t you think?) but it is also going to have to help out its people and businesses with some kind of compensation for lost earnings/inconvenience either in the form of handouts and/or tax breaks. I would also imagine that it will have to strike a delicate balance between being foreign-company friendly (to stop them from leaving China) whilst also championing domestic companies who will have suffered greatly.

UK house prices strengthen, Strava moves ahead and fashion renting continues to develop…

UK housing boom leads to £2,500 jump in asking prices (The Guardian, Patrick Collinson) cites findings from Rightmove which show that average asking prices have jumped up by over £2,500 in the last month alone to £309,399. Both buyers and sellers appear to have been part of the “Boris bounce” and agreed sales have gone up by 12% versus January last year. Interestingly, Rightmove’s report hasn’t been this positive since 2014-15 and urges hesitant buyers to “jump in”. * SO WHAT? * It’s worth pointing out that Rightmove’s figures are based on ASKING prices, so if you want ACTUAL selling prices you will have to look at data from the Land Registry. However, recent reports from Halifax and Nationwide (who publish mortgage data) seem to bear out Rightmove’s findings. FWIW, I just get the feeling that we are in a bit of a purple patch at the moment and the estate agents are just trying to stoke things up. There will be more uncertainty to come this year as Brexit negotiations continue and like I have said before, I just wonder whether the market average is being dragged up at the moment by people buying in at the high end of the property market because Corbyn didn’t win the election.

With its 50m users, Strava can stay ahead of its rivals (Daily Telegraph, Michael Cogley) highlights the success of the world’s most popular fitness app, Strava. The company avoided hardware in the early days in favour of focusing on

apps and it has branched out from cycling and then to running and swimming as well as hiking, canoeing, ice skating and kitesurfing. The two guys who founded the company, Michael Horvath and Mark Gainey, returned to the company they founded after some time out and now they want it to become the world’s leading subscription business for athletes. * SO WHAT? * When you consider the ongoing trend of the gamification of fitness (Peloton being a recent example of this), it makes a lot of sense for a company like Strava to continue to expand. Given its big user base and its breadth of sports, you would imagine that they have a decent chance of reaching their ambition – especially if they can convert free users to paying subscribers.

Renting has become the latest fashion statement (The Times, Ashley Armstrong) takes an interesting look at the growing area of fashion rental in the UK. My Wardrobe HQ does designer fashion retail rental in the UK which helps women buy or rent top end brands like Gucci, Prada and Chanel for way less than it costs to own – around £100 to rent for a dress for a week that would usually cost thousands. Global Data reckons that the British fashion rental market is expected to rise from £400m last year to £2.3bn by 2029. * SO WHAT? * I think that this is a useful service that pushes back at the “throwaway” fashion that has become so popular over the last few years. Having said that, I do think that it is pretty niche in nature at the moment as it tends to focus on occasionwear BUT I definitely think it has a place. Rentable fashion is something that some American retailers are dabbling with (where you pay a monthly fee to “rent” a certain number of items of clothing) and I definitely think that this feeds nicely into the theme of sustainability. I wonder if more “normal” fashion retailers did this whether it would help them to reduce the problem of expensive returns.

Alstom offers $7bn for Bombardier and Arm puts in a decent performance…

Alstom reaches preliminary deal to buy Bombardier train unit (Wall Street Journal, Jacquie NcNish and Ben Dummett) highlights the French train giant’s offer for Bombardier’s train business as the former tries to boost its scale to take on increased competition from China’s state-owned CRRC, the world’s biggest railway supplier. Conversely, Bombardier has been trying to reduce its business following a number of production issues and order delays. The deal is expected to be in a mix of cash and stock but will have to get past a number of antitrust regulators before going ahead. Alstom was on the wrong

end of this back in 2017 when it tried to merge with the train-making business of Siemens, but the European Commission (the EU’s antitrust group) blocked it, saying that it would lead to higher prices. * SO WHAT? * This sounds like a reasonable deal and would really help Bombardier as it would halve its debt at a stroke and allow it to concentrate on business jets which include brands like Challenger, Learjet and Global. Still, it has hurdles to clear before that.

Strong profit in Arm’s reach (Daily Telegraph, James Titcomb) shows that Britain’s biggest microchip company unveiled its best profit for three years, giving its Japanese owners (Softbank, who bought it for £24bn in 2016) a rare bit of good news. Arm’s designs are used in virtually all of the world’s smartphones and tablets. Its revenues come from licencing its designs to tech companies and then raking in the royalties. The company had fallen into the red in the previous quarter due to its high R&D spend.

And finally, in other news…

I thought I’d leave you today with the very enterprising florist in Florists add note taking blame for late Valentine’s flowers for those who forgot (The Mirror, Luke Matthews https://tinyurl.com/vylb5zn) and then the altogether uplifting Man runs marathon in apartment as China fights virus with exercise (AFP, https://tinyurl.com/snuuyvv). Good on him 👍

1. In CORONAVIRUS & POLITICS NEWS, we see data problems, the effect on businesses, tourism and why this could benefit Trump. The UK replaces its Chancellor of the Exchequer
2. In CAR NEWS, Tesla asks for more money just as it faces an investigation and Nissan has its first quarterly loss in a decade
3. In INDIVIDUAL COMPANY NEWS, Microsoft’s Pentagon contract hits a hurdle, Deutsche Telekom tries to renegotiate terms of the Sprint deal and betting firms suffer another blow
4. In OTHER NEWS, I bring  you some potential lunch ideas…

So the coronavirus brings up data questions, the impact on businesses including tourism and an unexpected boon for Trump while the UK switches its Chancellor…

Data experts battle to map path of coronavirus outbreak (Financial Times, Sarah Neville) highlights the difficulty of tracking the progress of the coronavirus as Wednesday saw a major spike in the number of reported cases, which spooked a lot of people. It came as a particular surprise because it came only a day after the World Health Organisation (WHO) had suggested that we might have hit the “peak” of infections and deaths. * SO WHAT? * The sudden increase in cases was due to the way China changed its reporting criteria. Associate professor at the University of Warwick, Mike Tildesley, said that cases had previously only been confirmed “only after positive laboratory tests” whereas Chinese authorities are now reporting confirmed cases “based on clinical diagnosis of symptoms”. People could have concluded that the disease had started to lose momentum because the labs were inundated, leading to a bottleneck and NOT a slowdown of the coronavirus. The outbreak continues…

Businesses worldwide count cost of outbreak (The Guardian, Jasper Jolly) does a really good job of rounding up the impact on a number of businesses so far. British digger maker JCB has decided to reduce working hours and suspend overtime due to a shortage of parts from China, 24 airlines so far have cancelled flights to and from China, Pernod Ricard will take a hit on profit growth as Chinese bars are closed or empty and Ralph Lauren says its sales will take a $55-70m dive as two-thirds of its Chinese mainland outlets have been closed for the last week. Geneva motor show organisers brace for disruption (The Guardian, Jasper Jolly and Julia Kollewe) highlights the fragility of another major trade show shortly after the cancellation of Barcelona’s Mobile World Congress and Alibaba warns of severe impact as coronavirus brings China to halt (Financial Times, Ryan McMorrow) shows how China’s bellwether is now expecting a tough outlook as sales of some big brands on its platform have fallen 40-80% versus January/February last year. Given that Alibaba’s platforms account for a massive two-thirds of everything bought online in China, you would have thought that it would be in a good position to benefit from people increasing their online shopping (e-commerce transactions

have apparently tripled over the last few weeks). However, merchants on the platform are getting low on inventory, the suppliers are patchy on the restart of production and there’s a lack of couriers to deliver the merchandise. Coronavirus hits global tourism industry as Chinese stay at home (Financial Times, Alice Hancock) says that the dramatic drop of Chinese tourist numbers will hit hoteliers, restaurants, tour operators and retailers as one of the top spending customer groups stays away. Countries in the Asian region who rely heavily on Chinese tourists (they account for 25% of tourists in Thailand, for example) are finding that their businesses and currencies are taking a major bashing and Macao has shut its casinos for at least two weeks. Big winner from coronavirus will be Donald Trump (Daily Telegraph, Garry White) has a very interesting angle as it suggests that the coronavirus will end up being a real boon for Trump in his re-election campaign. Basically, there was a lot of scepticism surrounding the ability of China to actually live up to the “phase one” trade agreement because it called for Chinese purchases of US farm goods to increase by around $16bn per year – something that was unlikely to happen because the decimation of China’s pig herd due to swine fever meant that demand for soya beans for feed fell off a cliff. The resulting failure of his much-touted negotiation victory would have been difficult to explain away on the campaign trail but now the coronavirus has hit Trump can say to the farmers that the reason why they aren’t seeing the shipments he promised is due to him protecting his citizens (not because of lack of China demand). He can also use this as an excuse to “de-globalise” and bring jobs and production back to the US as it has further exposed an over-reliance on China. This all means that the coronavirus has done what his trade negotiations would have failed to do – break the supply chains.

There was a dramatic development yesterday in British politics in Sajid Javid resigns as UK chancellor of the exchequer (Financial Times, Sebastian Payne and George Parker) as Boris Johnson’s cabinet reshuffle proved to be more dramatic than had been expected. It apparently happened because BoJo wanted Javid to sack his advisers and Javid refused. He’s been replaced by young up-and-comer Rishi Sunak, who you can find more about in Rishi Sunak, the fast-rising Brexiter rewarded by Johnson (Financial Times, Jim Pickard) but the main thing that everyone will be concerned about is the Budget, which was due to be unveiled on March 11th. There was initial market speculation that the new guy may be more generous than Javid, but obviously that is completely unfounded at the moment! There’s no word yet on whether the Budget will be delayed.

Tesla asks for more money and Nissan is the latest carmaker to announce big losses…

Tesla faces fresh inquiry as it launches surprise $2bn offering (Daily Telegraph, Olivia Rudgard) highlights yet another investigation into Tesla by the Securities and Exchange Commission, which has only just concluded the last investigation over Elon Musk’s tweets in 2018 saying that he planned to take the company private and his projections for Model 3 production rates in 2017. This time, it has issued a subpoena for “information concerning certain financial data and contracts including Tesla’s regular financing arrangements”. This came on the day that the company unleashed a surprise $2bn stock offering that took advantage of Tesla’s recent share price performance, the proceeds of which will be used to “further strengthen its balance sheet, as well as for general corporate

purposes”. Musk had said only two weeks ago that raising more capital “doesn’t make sense” for the company, yet here we are 😂. * SO WHAT? * OK so the investigation’s probably going to be a bit of a pain, but there were grumblings in the background about yet another refinancing hanging over the company. If you are going to do something like this, it’s always better to do it when you are on a winning streak – and Tesla’s share price has been doing particularly well in the last six weeks.

In Nissan suffers first loss in a decade (The Times, Robert Lea) we see that Nissan not only made its first quarterly loss since the financial crisis, but it made things worse by painting a very downbeat outlook for the year. It may even get worse still as the company said that the impact of the coronavirus was not included in its latest forecasts. China is the company’s biggest market. Ouch. * SO WHAT? * All the major carmakers are having a tough time on the sales front (Daimler announced a similarly poor performance earlier this week), but it seems that Nissan is suffering more than most – plus it’s still got this whole Carlos Ghosn thing going on.

Microsoft gets a slap, Deutsche Telecom tries it on and betting firms take another blow…

Federal judge halts Pentagon cloud contract (Wall Street Journal, John McKinnon) heralds a major spanner in the works as a federal judge ordered a halt to work on the huge JEDI (Joint Enterprise Defence Infrastructure) cloud-computing contract awarded to Microsoft. * SO WHAT? * Amazon is contending that Microsoft’s award of the contract was due to improper influence from Donald Trump, but whatever happens ultimately, this will definitely slow things down. Amazon’s cloud unit, AWS, had long been considered the frontrunner for the project. This sounds like it could drag on for quite some time, but when you consider that the contract is thought to be worth about $10bn over the next ten years, you can see why.

Following the court’s recent decision to give the go-ahead to the T-Mobile/Sprint takeover, Deutsche Telekom seeks changes to Sprint takeover terms (Financial Times, James Fontanella-Khan, Nic Fildes and Miles Kruppa) shows that

T-Mobile’s parent company, Deutsche Telekom is going to try it on and attempt to negotiate the price down because the share price and performance of its target has fallen since the original terms were offered. * SO WHAT? * You can’t blame it for trying, but it’ll only work if Deutsche Telekom is willing to walk away from the deal. In theory, this is possible because the delay was so long (over two years), that it formally expired towards the end of last year.

As UK betting firms continue to lick their wounds from the regulatory assault on FOBTs (Fixed Odds Betting Terminals), Shares in betting firms plunge over suggested £2 cap in online casinos (The Guardian, Rob Davies) shows that the Gambling Commission, the industry’s regulator, is considering the implementation of a ceiling on the stakes for online casino games. Separately, the government has said in the recent past that it will be reviewing the 2005 Gambling Act due to growing concerns about gambling addiction and misconduct within the industry. * SO WHAT? * This sounds like an absolute nightmare for the likes of William Hill, GVC (owner of Ladbrokes), Playtech (which makes gambling software), Flutter and 888. It just confirms the need for ongoing efforts to expand in other markets as their domestic one is coming under sustained attack.

And finally, in other news…

I thought I’d give you some inspiration for lunchtime with 42 more foods you need to eat before you die (Insider, Giulia Hjort https://tinyurl.com/wjf4cyr). TBH, many of them look like they could, in fact, be the last thing you actually eat before you die! If you wondered what inspired that list, then have a look at 42 foods you need to eat before you die (Insider, Lisa Nho and Laura Bilash https://tinyurl.com/wxmwbhs). Amazing, but your arteries may fur up just watching this…

1. In MACRO & CORONAVIRUS NEWS, the Eurozone’s economic outlook takes a blow, Macron’s popularity continues to dive and Italy’s Salvini goes to trial while the coronavirus rages on
2. In RETAIL NEWS, the landlords’ rescue of Forever 21 poses questions and in the UK retailers push for rates reform while Dunelm puts in a good performance and Greggs does a deal with Asda
3. In INDIVIDUAL COMPANY NEWS, Cisco’s sales fall, SoftBank’s ambitions soften and BP makes climate promises
4. In OTHER NEWS, I bring you a maths problem that’s harder that my Big Weekly Quiz 😁..

So the Eurozone’s outlook takes a hit, Macron’s popularity slides, Salvini loses immunity and the coronavirus rolls on…

Eurozone economic outlook dented by industrial output drop (Financial Times, Martin Arnold and Laura Noonan) cites the latest data from Eurostat which showed a steeper-than-expected fall in industrial production going into the end of last year. Output from Germany, France and Italy was particularly weak and economists continue to revise down their estimates for Eurozone GDP growth. * SO WHAT? * Recent surveys showing improving sentiment suggested that Eurozone manufacturing had turned a corner but now the disruption from the coronavirus is pulling the rug from underneath it. The SARS experience of 2002/3 suggests that growth takes a hefty dent in the short term but then bounces back very strongly.

Problems for Macron as defecting MPs believe the party is over (Financial Times, Victor Mallet) highlights increasing French dissatisfaction with President Macron as MPs continue to quit La République en Marche (LREM) ahead of local elections next month. Macron’s party now has 300 members of the National Assembly, down from 314 at the beginning of his presidency and heading towards the 289 level where he will still have an absolute majority. Macron now has around a 30% approval rating and voters are expected to vote for Marine Le Pen’s extreme right Rassemblement National and the greens on the left. * SO WHAT? * It seems to me that Macron is suffering a severe case of mid-term blues after an incredible honeymoon at the beginning of his term. Since then he has brought in some painful reforms and his popularity was always bound to take a hit. I don’t think there’s any need for him to panic just yet as he still has a comfortable majority, but it is something he should be keeping an eye on.

Then in Salvini loses immunity and faces trial for blocking migrant boat (Financial Times, Miles Johnson) we see that the controversial leader of the right wing League party, Matteo Salvini, has now lost his legal immunity and will face prosecution for blocking a ship full of migrants from entering Italy last year. Prosecutors argue that his actions whilst he was interior minister amounted to abuse of power. * SO WHAT? * Salvini is relishing the chance of using the trial as a political platform to stir things up regarding illegal immigration (he has actually been pushing

for a trial himself). Italy’s legal system is highly convoluted and a trial plus appeals could stretch over many years. Speaking of years, if he loses, Salvini could spend 15 years behind bars and be barred from public office. Polls indicate that his anti-immigration League party is Italy’s most popular political party – but his continued attempts to become prime minister himself have so far fallen flat. If he times it right, he may yet get his wish as being on trial will no doubt guarantee him a platform from which to express his views.

In news on the coronavirus, China accused of under-reporting coronavirus outbreak (Financial Times, Yuan Yang and Nian Liu) highlights criticisms from health workers on the front line, academics and patients while China ousts top official in coronavirus outbreak’s epicenter (Wall Street Journal, Stu Woo) shows some early finger-pointing, ‘It’s like a war’: panic buying as virus convulses city (The Guardian, Verna Yu) gives you an idea of what’s going on in Hong Kong at the moment while Coronavirus sends ripples through a global economy (Financial Times, Valentina Romei) shines a light on how the virus is adversely affecting important supply chains, which will also dent global GDP growth. As I said earlier, SARS hit growth initially, but when things calmed down activity increased sharply. Clearly, we have not got to that stage yet. Markets revive as virus spread slows (The Times, Gurpreet Narwan and Philip Aldrick) shows a rally in world markets as investors tried to second-guess everyone and Coronavirus-drug development becomes a top focus at Gilead (Wall Street Journal, Joseph Walker) gives us an insight into how one company is racing to come up with the world’s first drug to treat the disease, with early signs of its treatment looking positive. The drug in question is remdesivir and the company has been trying to ramp up production in case the early test results continue to be borne out. Fun fact: remdesivir was originally developed several years ago to treat Ebola. In the meantime, US travel industry set for multibillion-dollar hit from coronavirus (Wall Street Journal, Keiko Morris and Austen Hufford) shows how airlines, hotels and retailers are bracing themselves for a hit and things have now got so bad that Mobile World Congress axed after firms quit over coronavirus fears (The Guardian, Mark Sweeney), which is a shocker considering that this is a major annual industry conference. However, exhibitors and speakers continued to cancel due to health concerns so it was probably unsurprising in the end. It was supposed to be held on 24th February and would have had over 100,000 delegates from around 200 countries over the four days of the conference.

Forever 21’s rescue by landlords poses questions while UK retailers push for rates reform, Dunelm furnishes the market with good news and Greggs goes to Asda…

Landlords’ rescue of Forever 21 sounds warning bell (Financial Times, Alistair Gray) suggests that things aren’t right when gnarly old retailers won’t touch the fashion retailer with a barge pole while its landlords have just embraced Forever 21 with open arms (and maybe gritted teeth). Simon Property Group and Brookfield Property Partners have teamed up with BlackRock-controlled Authentic Brands to buy it out of bankruptcy for $80m. If this hadn’t happened, the business would have to have been liquidated. * SO WHAT? * Things really are getting bad for retailers and their landlords stateside – by the end of last year, mall vacancies hit their highest level in at least 20 years, according to Reis Moody’s Analytics. In this case, the two landlords were owed $13.4 m in unpaid rent, but the disappearance of Forever 21 would have left a big hole in a lot of malls and adversely affected other tenants (although it would be bad for landlords as well as tenants would demand lower rents or leave altogether). Do the landlords have hitherto undisclosed retail chops to turn things around at Forever 21? I think it would be fair to say that levels of scepticism are high…

Retailers call for reform of rates to save high street (The Times, Louisa Clarence-Smith) shows that 52 high street chains have written collectively, with the help of the British Retail Consortium, to Chancellor of the Exchequer Sajid Javid to appeal for urgent business rates reform before the Budget is published next month. Specifically, they want a reform of transitional relief, which stops business rates from falling in line with rents. * SO WHAT? * This push has been going on for a while now as the high street continues to disintegrate and I would have thought that the timing is right for this latest move to be successful. We’ll just have to see how it goes…

On a more positive note, Dunelm profit surge allows it to think smaller (Daily Telegraph, Laura Onita and Simon Foy) shows that the furniture chain surprised the market yesterday by announcing a big boost in profits for the second half of 2019 – and its share price rose by 8.7% as the company also announced an increase in the dividend. It added that it aims to open more smaller stores on the high street – something that it has experimented with and has found to be popular.

Then for all you pastry fans out there, Greggs targets supermarket shoppers in tie-up with Asda (Daily Telegraph, Laura Onita) shows that Greggs will be bringing its hot food into Asda’s supermarkets, starting with five sites in the north of England. If this proves to be successful, there will be a wider (sausage)rollout. * SO WHAT? * This is Asda’s latest tie-up – as it already works with Just Eat to deliver items to customers quickly and KellyDeli, which makes sushi. I guess that it is trying to tart itself up after the failed merger with Sainsbury’s so that other buyers may be attracted by Asda’s charms. Good ideas, though!

Cisco’s sales drop, SoftBank’s ambitions are reined in and BP makes some promises…

Cisco sales fall in latest quarter (Wall Street Journal, Aaron Tilley) shows that global economic jitters are leading to a slowdown in tech investment, crimping sales growth at the network equipment giant. * SO WHAT? * The router maker is often seen to be a bellwether for corporate demand – so the signs aren’t great. Unfortunately, the already bleak outlook does not yet take into account effects from the coronavirus.

SoftBank’s billionaire founder scales back fund’s ambitions (Financial Times, Kana Inagaki) highlights problems at SoftBank’s massive Vision Fund which has

made a number of duff investments – most notably in WeWork. Activist investor Elliott Management has built up a $2.5bn stake in SoftBank and is calling for the company to plough back billions in share buy backs, give more transparency on its Vision Fund investments and sort out its governance. * SO WHAT? * Many fear the approach of Elliott Advisors, but I would say that chief exec Masayoshi Son is a VERY tough cookie, so it’ll be interesting to see who wins the battle.

Now I’m mentioning BP pledging to cut emissions to ‘net zero’ by 2050 (Daily Telegraph, Ed Clowes) because this story is all over the papers today. This is being touted as being BP’s biggest-ever strategic overhaul, but TBH I think it’s all BS. 2050 is miles away and restructuring takes years. Nice words, but I really don’t think this is anything but noise at this stage. It’s just a line in the sand and the detail will supposedly follow. BP going net zero? That would be like a lion saying it has decided to go vegan…😜

And finally, in other news…

I thought I’d leave you with a right old brain-teaser today if you have any spare time and you enjoy intellectual torture. Here it is: Can you solve this crazy difficult, super satisfying math puzzle from a Japanese middle schooler? (SoraNews24, Casey Baseel https://tinyurl.com/wvsgu23). 😱

1. In CARS’N TAXI NEWS, Daimler announces its worst profits in a decade, Uber fails in its California challenge and Lyft announces losses as it focuses on profitable growth
2. In TELEPHONE-RELATED NEWS, the T-Mobile/Sprint deal gets the green light and Samsung unveils new phones
3. In RETAIL NEWS, Ocado announces a big loss, JD Sports encounters Footasylum problems and Intu hits a major hurdle
4. In INDIVIDUAL COMPANY NEWS, Mastercard wins approval for China, N26 exits the UK, Airbnb announces losses and Tui gets a bookings boost
5. In OTHER NEWS, I bring you a “David vs Goliath” sumo match…

So Daimler has a shocker, Uber fails in its legal challenge and Lyft has losses in its bid to concentrate on profitable expansion…

Profits at Mercedes-Benz owner Daimler fall by €5bn (The Guardian, Jasper Jolly) highlights a shocking performance by the German automaker. Its profits fell by nigh on two-thirds in 2019 to their lowest level for a decade as “dieselgate” legal costs and big investment in EVs caught up with it. Daimler’s van division suffered particularly acutely due to legal costs. * SO WHAT? * The company has already announced big job cuts (at least 10,000 employees, mainly in management) in November as part of a bid to slash over €1bn in costs, but it continues to face the same problems as all of its rivals: sluggish car sales globally, higher overheads in meeting tighter emissions regulations and new technology targets – and now the coronavirus hitting its supply chain. The chief exec, Ola Kallenius, has already announced over four profit warnings since he took over last year and things don’t look like getting better any time soon. 

Then in the world of ride-hailers, Uber fails to block California gig economy law (Financial Times, Dave Lee) heralds the latest blow for Uber as a Los Angeles judge (called Dolly Gee – what a great name!) upheld the newly-introduced Assembly Bill 5 (aka “AB5” – I know, sounds like a new South Korean boy band 😂), which gives gig economy workers more robust employment rights. Uber had sought, with co-plaintiff Postmates, to get a preliminary injunction to stop the enforcement of AB5 while the challenge went through the courts. * SO WHAT? * You

will probably recall that Uber is trying to classify its employees as “contractors”, meaning that it would NOT have to provide benefits normally associated with “employees” (e.g. sick pay, holidays etc.). Uber and Postmates said that reclassification of their employees could add 20% to their labour costs, so you can see why they are trying to fight this. Gig economy companies around the world will be watching developments here very closely because it could have massive implications for their cost bases.

Meanwhile, Lyft’s net loss widens as it focuses on profitable growth (Wall Street Journal, Preetika Rana) heralds bigger losses for the latest quarter but the company maintains that it will hit profitability by the end of this year. Although net losses were larger, revenues actually came in above market expectations due to more corporate partnerships that drove repeat custom and better revenues per ride. Lyft aims to achieve profitability by cutting out discounts and it is also making significant reductions in the proportion of revenues it spends on sales and marketing. * SO WHAT? * Uber recently brought forward its timetable to profitability from the end of 2021 to the end of this year, bringing it in line with Lyft. I think this is probably good news for Lyft because at least Uber is less likely to undercut it by continuing to subsidise rides. I actually quite like Lyft as a ride-hailer because it doesn’t try to be all things to all people and it is concentrating its efforts geographically rather than casting its net too wide (“just” the USA and Canada, unlike Uber). Overall, there is one major thing that could derail its plans to reach profitability – and that’s further developments in the fight against the aforementioned AB5 legislation, that would increase overheads and potentially push profitability into next year.

T-Mobile and Sprint deal gets the go-ahead and Samsung unveils new phones…

T-Mobile, Sprint deal wins approval, reshaping industry (Wall Street Journal, Drew Fitzgerald and Sarah Krouse) highlights the approval of T-Mobile’s takeover of Sprint, worth $26bn when it was initially announced two years ago, after 13 states and the District of Columbia got together to stop the deal arguing that it was anti-competitive. The judge disagreed and waved the deal through, leaving wireless customers with a choice of three network operators: Verizon, AT&T and now T-Mobile. Sprint shares shot up by a whopping 78% on the news. * SO WHAT? * T-Mobile and Sprint have been trying to merge in some way or other for the last seven years. Now they are together, T-Mobile is hoping to benefit from Sprint’s

wireless radio licences, which will enable it to serve more customers with fast mobile broadband as everyone upgrades to 5G.

I mentioned this in Monday’s Watson’s Daily pre the launch but Samsung unveils new lineup of smartphones (Wall Street Journal, Elizabeth Koh) comes after the event and describes all the features and gizmos on the new handsets. It unveiled three models of its Galaxy S (different screen sizes) and the foldable Galaxy Z Flip. The S models are 5G compatible, but the Z-Flip isn’t. * SO  WHAT? * The world’s #1 smartphone maker is clearly trying, with its latest line-up, to tempt customers with its new gadgetry (whilst also bumping up handset prices!), but this is all against a backdrop of buyer apathy as global smartphone sales slipped by 1% last year, according to Counterpoint Research. As I keep saying, I think that people will be buying their next phones with 5G in mind and so I expect handset sales to increase from here as more people upgrade.

Ocado posts a hefty loss, JD Sports gets fired up and Intu hits a problem…

Ocado posts £214m loss as it ramps up spending on logistics (Financial Times, Jonathan Eley) highlights a quadrupling in losses last year as it had to take a hit on its warehouse fire as well as an increase in investment. On the other hand, its incredible share price performance (due largely to it being re-rated in investors’ eyes as a tech stock rather than a retail stock) unlocked an £87m pay bonanza for its senior directors. The company said that losses could deepen this year as it continues to fit out new distribution centres for itself and its clients. * SO WHAT? * It sounds to me like the company is doing the right things and will be seeing a nice inflow of money once their facilities come online. OK, so it’s not going to be immediate, but they’ve signed some big deals and will hopefully sign more as well to keep the momentum going. There are tough barriers to entry in this business and Ocado’s tech is clearly highly rated by retailers. I would expect more to sign up in order to compete with the likes of Amazon etc.

Meanwhile, JD Sports may be forced to sell Footasylum after competition probe (Financial Times, Myles McCormick and Kate Beioley) is a story that’s been doing the rounds this morning as the UK competition regulator,

the Competition and Markets Authority (CMA) announced that the £90m acquisition “substantially lessens competition” in sports-inspired clothing and footwear. JD Sports may be forced to sell Footasylum as a result. JD Sports has a March 3rd deadline to meet in order to give its views and the CMA will give its final decision on May 11th. * SO WHAT? * JD Sports is obviously kicking up a fuss because it says that the CMA isn’t taking into account increased online competition, but we’ll just have to see what happens.

There’s more bad news for the retailer landlord in Intu future in question after investor backs out (The Times, Louisa Clarence-Smith) as Hong Kong-listed investor Link Real Estate Investment Trust has pulled out of talks to become a cornerstone shareholder in an emergency £1bn fundraising due at the end of this month. Intu owns 20 shopping centres in Britain and Spain is trying to raise money to reduce its hefty £4.7bn debt pile as the value of its properties continue to plummet due to ongoing retailer failures. Intu’s share price fell by 30% on the news as it said that it “remains engaged with shareholders and potential new investors”. As the saying goes, this stock looks like a dog – with fleas. * SO WHAT? * Options are running out for Intu and pressure is building to take it private so that it can do the required dramatic restructuring behind closed doors. This is a major blow not just for Intu – it signals a warning to its rivals that if they don’t get themselves sorted, they could go down the same road.

Mastercard gets a China go-ahead, N26 makes an escape, Airbnb suffers loss and Tui takes advantage…

In a quick scoot around some of the other major stories in today’s business news, Mastercard wins approval to enter Chinese payments market (Financial Times, Tom Mitchell) heralds an important development for the company as its application to launch a joint venture with a local company has finally been approved. This could be the start of similar moves by Visa and American Express in future.

On the other hand German digital bank N26 leaves UK market, blaming Brexit (The Guardian, Kalyeena Makortoff) highlights an exit from a market – the UK one – as the digital bank has blamed Brexit. It has over 200,000

UK accounts and will be giving customers until 15th April to close them only 18 months after entering the market! It was hoping to use its passporting rights from its German licence to operate in the UK, but that has now gone out of the window.

In the world of holidays, Airbnb swings to a loss as costs climb ahead of IPO (Wall Street Journal, Jean Eaglesham, Maureen Farrell and Kirsten Grind) highlights a $322m loss for the nine months to September due to sharp rises in costs. This isn’t going to be particularly helpful for its widely-expected IPO sometime this year. Maybe it’s just getting this bad news out of the way first, but you’d think that there’s more to come as the effects of the coronavirus on bookings may yet dent the company’s fortunes…

Then in Tui booking bosst after Thomas Cook crisis (Daily Telegraph, Simon Foy) we see that the company saw record demand for holiday bookings in the wake of Thomas Cook’s collapse last year. Its share price rose by 13% to be the FTSE100’s biggest riser yesterday.

And finally, in other news…

I love it when the little guy teaches the big guy a lesson – so The bigger they are… Smallest top sumo wrestler takes on yokozuna with amazing result (SoraNews24, Casey Baseel https://tinyurl.com/vrer2bu) definitely caught my eye! If you can’t see the video in the story, click on this to see it. Impressive!

1. In MACRO & CORONAVIRUS NEWS, Trump promises spending cuts, China’s inflation reaches new highs and Germany’s leadership plunges into further turmoil while the coronavirus hits global growth, oil prices and mobile phone production
2. In RETAIL NEWS, US mall operators Simon Property and Taubman pair up, UK shoppers ship in the bargains and John Lewis tastes success with makeup for men
3. In MERGER & ACQUISITION NEWS, the Harry’s/Edgewell deal falls apart, William Hill and CBS sign an agreement while Geely and Volvo Cars head towards a merger
4. In OTHER NEWS, I bring you one of my all-time favourite movie scenes (it’s not classy)…

So Trump talks spending cuts, China’s inflation shoots up and Germany’s leadership problems just got worse while the coronavirus continues to affect global growth, oil and mobile phone production…

Trump proposes big spending cuts in $4.8tn budget (Financial Times, James Politi and Katrina Manson) shows that the President announced his final annual budget before the November elections, calling for increased spending on defence and infrastructure and decreased social spending. His plans contrast sharply with those of the Democrats, who accuse him of pandering to the rich at the expense of the poor.

In China’s inflation hits eight-year high (Daily Telegraph, Tim Wallace) we see that inflation has shot up to 5.4% in January – up from 4.5% in December. Food prices alone have climbed by over 20% in the last 12 months as China has been hit not only by the coronavirus – it is still suffering from the culling of about half of its pig population after the African swine fever outbreak (this was about 100m pigs).

In Europe, Race to succeed Merkel thrown open as heir apparent steps aside (Financial Times, Guy Chazan) highlights a shocking development for the ailing country as the person who was thought most likely to succeed Angela Merkel as Chancellor, Annegret Kramp-Karrenbauer (aka

“AKK”), said she wouldn’t run for the job at the next election and will stand down as the leader of the Christian Democratic Union. This follows a series of gaffes which caused people to question whether she had the right stuff to be leader of Europe’s biggest economy. Potential replacements include Armin Laschet (PM of North Rhine-Westphalia), Jens Spahn (the current health minister) and Friedrich Merz (a former CDU group leader and old rival of Merkel). If either of the last two win, it is likely that the CDU will change direction and become more conservative. It is also likely to mean early elections. * SO WHAT? * What an absolute mess! The coalition is already fragile enough as it is without all this. What a time for Europe. On the other hand, maybe this could jolt Germany out of its current rut – but the risk here is that it could over-compensate in its lurch to the right in order to capture the AfD vote.

In the meantime, the impact of the coronavirus continues to be felt in Investors fear outbreak is set to halt global growth (The Times, Callum Jones), which highlights falling markets and fears that global growth on a quarter-on-quarter basis could stall for the first time since 2009. Oil down to a one-year low as the virus takes its toll (The Times, Emily Gosden) shows the effect of a sudden drop in demand from the world’s biggest oil importer as some observe that the increasing surplus of oil will further depress prices unless OPEC decides to cut production and Smartphone output to slide as coronavirus shuts Chinese factories (The Guardian, Rob Davies and Graeme Wearden) cites research from TrendForce which forecasts that smartphone production will fall by 12% in the first quarter versus last year due to factory shutdowns and lack of workers. The nightmare continues.

US mall operators get together, UK shoppers buy the bargains and John Lewis benefits from makeup for men…

Mall operators Simon and Taubman pair up (Wall Street Journal, Esther Fung and Micah Maidenburg) shows that Simon Property Group, America’s biggest mall owner, has agreed to buy rival Taubman Centers Inc for $3.6bn. Fun fact: Simon Property tried to buy Taubman in 2002 for $18, but it is now offering $52.50 a share. * SO WHAT? * This is an example of the larger company using its strong cash flow and balance sheet to go shopping and buy out weaker players – and comes only a week after Simon Property and a couple of partners agreed to buy clothing retailer Forever 21 out of bankruptcy for $81m. It would seem that Taubman is a good fit as it owns upmarket malls that tend to attract more affluent shoppers – and is therefore arguably more insulated against an economic downturn.

Bargain-hunters keep tills ringing after Christmas (The Times, Ben Martin) cites the latest monthly survey from the British Retail Consortium and KPMG which shows that retail sales avoided a decline last month due to discounting, although they were flat versus January last year. * SO WHAT? * Although this isn’t exactly a historic

moment for retailers, it could be a lot worse. Optimists will say that consumer confidence is returning after the election and continued tight markets and rising wages should filter through eventually. The latest Barclaycard survey would seem to back this up as 74% of its 2,004 respondents said that they were confident about their household finances and 42% were feeling positive about the prospects for the economy – the highest proportion since September 2016. That sounds positive, but I do wonder how imminent changes in overdraft charges are going to affect this.

John Lewis slaps on its war paint in London (The Times, Ben Martin) heralds an interesting trend as a trial of male beauty products – including bronzer, concealer, foundation, powder among other items under the “War Paint for Men” brand at its Oxford Street store – has been so successful that the range will be made available online. This is clearly a growth area as John Lewis said that men’s personal styling sales have shot up by over 150% over the last year. * SO WHAT? * Wow! There has been a lot of talk about this trend in recent years, but the fact that this experiment beat the retailer’s expectations by 50% shows that it could be a great growth area. It’s good to see that John Lewis is trying new things – but it’ll need a lot more of this sort of thing to really turn things around. I do not doubt that there are low barriers to entry here, so I would expect many others to jump on the bandwagon.

Harry’s/Edgewell falls apart and William Hill and CBS sign an agreement while Geely and Volvo Cars get closer…

Harry’s threatens legal action after Edgewell scraps $1.4bn deal (Financial Times, Alistair Gray) highlights the breakdown of the proposed deal between two of America’s biggest shaving companies as Edgewell, maker of Schick and Wilkinson Sword razors, said that the overzealousness of the Federal Trade Commission (FTC) towards the acquisition put them off the whole thing. Harry’s isn’t taking this lying down and is threatening legal action. Edgewell enjoyed an effective duopoly with Gilette owner Proctor & Gamble for years, but then Harry’s then tried to disrupt this when it started in 2013 by selling shaving products via an online subscription service. Edgewell and Harry’s considered merging to take advantage of Edgewell’s IP and global distribution power and Harry’s experience in brand building and direct-to-consumer marketing. * SO WHAT? * This is a big win for the FTC who argued that such a combo would damage the competitive landscape. I would imagine that Harry’s is the biggest loser out of this – shares in Edgewell jumped by 25% on the news!

In William Hill, CBS strike sports-betting media deal (Wall Street Journal, Katherine Sayre and Benjamin Mullin) we see that William Hill has agree to pay CBS Sports an

undisclosed sum for access to its audience and sponsorships across the latter’s content. The aim is to get CBS Sports users to download the William Hill betting app and put money into betting accounts. * SO WHAT? * This sounds like a great idea on a strategic basis, although you would have thought this will not have come cheaply for William Hill. It’s the latest in a string of deals between sports bookies and media companies following the legalisation in 2018 of sports betting across the US. Given the stagnant nature of its UK business, it is clearly imperative that William Hill gets an early foothold into a market with absolutely massive potential. 

Volvo could return to stock market in merger with Geely (Daily Telegraph, Vinjeru Mkandawire) shows that the billionaire behind Chinese car manufacturer Geely Automotive is looking at potentially merging it with Volvo Cars with a view to a dual listing in Stockholm and Hong Kong. Li Shifu said that a merger would help to pool resources. * SO WHAT? * Volvo has flourished since Zhejiang Geely Holding Group took up ownership in 2009 and with greater access to China, the world’s biggest car market, and consolidated resources you would have thought that it would be a formidable combination. Car manufacturers continue to consolidate in the face of tightening regulation and rising costs involved in complying with it: last year VW and Ford partnered up on autonomous and electric vehicles and Fiat Chrysler is currently in the midst of a £35bn merger with PSA Group. Consolidation is bound to continue.

And finally, in other news…

I scour a number of sources in order to bring you something unusual and/or interesting for this section – but today is one of those rare occasions when I have come up with NOTHING! 😱😱😱 So instead, I thought I’d put a link here of something I watch from time to time when I need to cheer up a bit – it’s Stifler’s dance-off from American Pie: The Wedding. Whoever did the choreography for this is a genius! Just to warn you, Stifler does say one naughty word in this short clip…

1. In CORONAVIRUS & POLITICAL NEWS, China tries to restart, factories struggle, the “Boris Bounce” could get knocked off course and the Irish election yields a major upset
2. In TELECOMS NEWS, Huawei stripping comes at a cost and Samsung is to unveil an impressive phone
3. In MISCELLANEOUS NEWS, Mattel revamps, Waitrose aims to charm and some argue “peak gin” calls are premature
4. In OTHER NEWS, I bring you Marmite peanut butter and exactly how you should reheat pizza…

So China hits the restart button, factories continue to suffer, the Boris bounce may get less bouncy and the Irish election surprises…

China seeks to restart economy despite coronavirus outbreak (Financial Times, Tom Mitchell, Ryan McMorrow and Sun Yu) heralds an attempt to get back to normality as China’s State Council has urged critical industries to start normal operations as soon as possible and most provinces have appealed to local businesses to do the same. Some are encouraging people to work from home, but some such as Alibaba and Meituan have extended the already-extended break to February 16th or later. Schools will not, however, be opening. China’s factories struggle to resume operations after virus shutdown (Wall Street Journal, Chuin-Wei Yap) shows that although things are bad enough for big companies having to shut down operations, it’s even worse for smaller companies. There aren’t enough staff to run the factories, there’s a lack of quality controllers to certify them, shifting product around is difficult by road (loads of checkpoints where drivers are screened for the disease) and flights and shipping have been severely restricted. * SO WHAT? * As everyone keeps saying, the longer this continues, the longer its repercussions are likely to last. As things stand, China’s much-anticipated GDP growth target of 6% looks tricky and there’s even talk that the National People’s Congress in March (which is where this target is announced) could be delayed. In the meantime, the fatalities continue.

There have been a number of stories recently referring to the “Boris bounce” (an uptick in activity since the increased “certainty” following December’s general election) in house prices and manufacturing, but ‘Boris bounce’ in growth set to be battered by coronavirus (Daily Telegraph, Tom Rees and Russell Lynch) shows that many City economists are

cutting forecasts to take into account the effect of the coronavirus on first quarter GDP growth prospects. * SO WHAT? * I wouldn’t get too caught up in this as predicting the impact right now is a mug’s game. OK, so these economists are paid to have an opinion and come up with some BS backing up their workings 😜, but at the end of the day these things are only an indication and are not always right (plus they always change the figures anyway)! I think that a lot of the ‘Boris bounce thing is just hype. Yes, there was some amount of relief in certain quarters (I would argue rich people, who held off major purchases like houses because they were concerned about a Labour government) but there are still tough negotiations to be done with Europe. At least jobs and wages are holding up reasonably well for the moment.

Well it looks like Irish PM “did a Cameron” (my own terminology – will it catch on??) and massively misjudged the electorate in Sinn Féin demands government role after Irish poll breakthrough (Financial Times, Arthur Beesley) as the centre-left party made huge strides in the Irish election. It took 24.5% of the vote while Varadkar’s centre-right Fine Gael limped in in third place with 20.9%. However, centrist opposition Fianna Fáel looks likely to be the biggest party in parliament even though it came in second with 22.2% of the vote because Sinn Féin didn’t run enough candidates. * SO WHAT? * This is an especially notable victory as it only had 9.5% of the vote in local elections last year and will smash the decades-long dominance of Fine Gael and Fianna Fáel who have always tried to exclude Sinn Féin from government because of its links to the IRA. Although Sinn Féin will hold the balance of power, neither of the other parties wants to work with them although Fianna Fáel’s leader Micheál Martin, has been slightly more open to it than Varadkar. The electorate clearly didn’t give a 💩 about Brexit (an exit poll for RTÉ and others suggested that it was the priority for just 1% of voters!), but DID care a lot about housing and healthcare. It’ll be interesting to see what sort of impact this might have on the Brexit debate going forward.

Companies count the cost of Huawei stripping and Samsung is about to unveil a very cool phone…

Full Huawei ban ‘could cost phone firms £1.5bn’ (The Times, Alex Ralph) cites findings from research company Enders Analysis which says that a complete ban on Huawei equipment on Britain’s 5G network could delay its rollout by up to two years and cost the likes of BT, Vodafone and Three around £1.5bn. BoJo recently suggested a 35% cap on Huawei usage in 5G infrastructure and Vodafone has already estimated the cost of stripping out Huawei equipment but the US continues to put pressure on the UK for a 100% ban, as are some MPs. The debate rages on as China objects to this “witch hunt”.

Samsung eyes new halo with game-changing flip-phone (Daily Telegraph, Harry de Quetteville and Matthew Field) highlights the imminent launch of Samsung’s Z-Flip (yes, OK, so it will also launch the latest updated Galaxy with better cameras, battery and 5G connectivity 🥱) which is the company’s second foldable phone that will give users a big screen via a new/old clamshell design. Although last year’s Fold generated some embarrassing moments, Samsung actually ended up selling up to half a million units – way more than analysts were expecting. * SO WHAT? * This looks like one amazing phone and I’m sure that Samsung will do very well from it. However, the company always seems to produce the technically superior handsets while Apple, forever late to the party, makes even greater strides due to its better usability. This is another game-changer and I really think that the combination of foldable phones and 5G will drag the whole industry out of its current rut. Exciting times!

Mattel tries to change, Waitrose makes moves ahead of the Ocado farewell and it seems that there could be life in gin after all…

Mattel closes factories as it revamps supply chain (Wall Street Journal, Paul Ziobro) is a really interesting article that looks at the company’s struggles as the whole toy manufacturing industry wages war for childrens’ attention against the dreaded tablets. Mattel said that it had closed factories in China and Indonesia last year, with another one in Montreal scheduled to be closed down sometime this year as it struggles with its long-honoured tradition of making its own toys (unlike rival Hasbro, which outsources manufacture). * SO WHAT? * This is all part of a restructuring plan and investors will be watching with interest as both Mattel and Hasbro are due to announce their earnings this week that will cover the festive period.

Elsewhere, Waitrose to launch charm offensive as Ocado switches to M&S (The Guardian, Zoe Wood) shows that the supermarket, which is to part company with its long-time online partner Ocado in August this year, is going to launch a number of new and overhauled products in almost a third of its own-label products in a bid to keep existing/tempt new customers. * SO WHAT? * This comes just ahead of Ocado announcing its full year results tomorrow, which are expected to give an idea of how the new partnership with M&S is progressing. Ocado’s share price has shot up by over 40% in the last 12 months as it continues to sign deals all over the place! Interestingly, Ocado owns all the customer data (not Waitrose) so this will no doubt be used to pull Waitrose customers away when Ocado switches.

Then in Distillers raise a glass as our love affair with G&T continues (The Times, Tom Howard) we see that data compiled by IWSR, which tracks trends in alcoholic drinks, shows that gin sales are still strong and are predicted to rise by over 50% during the next four years. It said that flavoured gin has done particularly well in recent years. * SO WHAT? * This is interesting because mixer darling Fevertree had a profit warning recently and said that it is looking overseas for growth, implying that the UK may have hit “peak gin”. I am verging towards thinking this way and find it hard to believe the incredibly bullish predictions of IWSR, but hey. The gin market has become so fragmented in recent years with loads of tiny distillers popping up. Even if gin continues to gain in popularity, surely there will be some consolidation in the industry – there are loads of businesses to choose from right now for the drinks giants. Distillers shouldn’t get too snooty either about being bought out as I just can’t see the gin thing lasting forever.

And finally, in other news…

I thought I’d leave you today with a couple of food stories. Maybe I’m a bit late to the party but Marmite smooth peanut butter hits UK supermarkets in controversial new launch (The Mirror, Paige Holland https://tinyurl.com/umf5kku) just sounds plain wrong (for the record, I LOVE Marmite as well as peanut butter – but not at the same time!) and then we learn an important life hack in The best way to reheat pizza (Popular Science, Sandra Gutierrez https://tinyurl.com/u8g26sk). You heard it here, people!

1. In CORONAVIRUS & MACRO NEWS, we see more developments and impact as the virus continues to spread, Steve Mnuchin warns of a slowing momentum in the US economy and UK hiring picks up
2. In RETAIL NEWS, Tesco attracts bidders for its Asian business, John Lewis warns of more job losses but we also see evidence of a “Boris bounce” in retail
3. In INDIVIDUAL COMPANY NEWS, Twitter’s revenues hit a new high, Apple’s Watch eclipses the Swiss, there are calls for the US to invest in Eriksson and Nokia while ICE abandons its eBay bid
4. In OTHER NEWS, I bring you a trick involving an avocado…

So the coronavirus continues to impact many areas, US growth loses momentum but UK hiring picks up…

Coronavirus whistleblower doctor dies in Wuhan hospital (Financial Times, James Kynge and Nian Liu) highlights the death of the Chinese doctor, Li Wenliang, who raised the alarm over the coronavirus epidemic. He had initially been accused by Chinese authorities of “rumour-mongering” and they forced him to retract his statement. The outpouring of sympathy following his death became particularly poignant following local media reports that he leaves behind a pregnant wife who has also contracted the disease. The death toll continues to climb.

As far as economic impact goes, Coronavirus threatens to tip China property into downturn (Financial Times, Don Weinland and George Hammond) signals problems for the country’s $43tn property market as sales centres close and potential homebuyers stay away. According to some estimates, China’s property market contributes 25% of the country’s GDP – and so could have a meaningful effect on GDP for the first quarter. Toyota and Nintendo warn of hit from coronavirus outbreak (Financial Times, Kana Inagaki and Leo Lewis) shows both companies are warning that Nintendo Switch consoles shipments and Toyota car sales will suffer, Fiat Chrysler warns coronavirus may force European plant to close (Financial Times, Peter Campbell) highlights the first time a global car company has warned of a European plant closing as it faces shortages of key parts from China and Coronavirus outbreak strains global medical mask market (Wall Street Journal, Austen Hufford and Melanie Evans) shows how the supply of medical masks is tightening as rising demand is being exacerbated by the fall in the number of staff at the factories producing the masks. In the meantime, China to cut US tariffs as coronavirus risks deepen (The Guardian, Larry Elliott) shows the latest efforts of the Chinese government to stimulate its economy by halving tariffs on a variety of US products.

Steven Mnuchin warns US growth may not hit 3% in 2020 (Financial Times, James Politi) shows further repercussions as the US Treasury Secretary said that the US GDP growth may fall short of its 3% target this year because of the ongoing Boeing 737 Max problems and coronavirus outbreak (although there might be some light at the end of the tunnel for Boeing as per Boeing 737 Max: regulators to agree on design fixes for troubled airliner (The Guardian, Dominic Rushe) which says that international air safety regulators are getting close to agreeing design fixes for the planes that had two fatal crashes).

* SO WHAT? * The coronavirus continues to spread and the repercussions on global growth, commodity prices and individual companies alike will continue to grow as scientists and doctors around the world race to find a cure. Any attempts at trying to quantify the impact of something like this can be pretty futile when you are in the middle of it – as we are – so the best that anyone can do is damage limitation.

On a non-coronavirus note, Surge in hiring as employers recover their confidence (Daily Telegraph, Tom Rees) cites the findings of a monthly report from REC (Recruitment & Employment Confederation) and consultant KPMG, which show that companies went on their biggest hiring spree in over a year during January as vacancies shot up (although temp work fell for the first time in almost seven years). * SO WHAT? * This certainly looks like good news on the face of it. Confidence among employers appears to be rising although new rules on IR35, which cover how contractors are taxed, is said to be putting a dampener on the temp market. Interestingly, there was a bit of an anomaly in this report as it found that salary growth for new permanent staff was at its lowest level since July 2016 – which runs counter to official data which suggests that wages are getting close to their fastest growth rate for the last ten years. I wonder whether this may be due to employers not being quite so ready to fork out for higher wages in the uncertain run-up to the December general election. If that’s the case, then I would have thought wage rises would get back on track.

Tesco lines up the Asian suitors, John Lewis warns of more cuts but retail actually experiences a “Boris bounce”…

Thai conglomerates enter bids for Tesco’s south-east Asia stores (Financial Times, John Reed and Stefania Palma) brings us up to date with what’s going on with Tesco’s Asian business at the moment. Charoen Pokphand (the conglomerate which owns Thailand’s 7-Eleven stores), Central Group (Thailand’s biggest department store group) and TCC Group (controlled by a brewing billionaire) all put in bids to buy Tesco Lotus a couple of weeks ago but the final bid deadline is expected to be either towards the end of this month or the beginning of next. Tesco currently has 1,967 stores in Thailand – and some shopping centres – and 74 stores in Malaysia and this overseas business is a rare success for a UK retailer. * SO WHAT? * This all sounds great, but given the size of these bidders, there is definitely a chance that Thailand’s antitrust regulator, the Office of Trade Competition Commission, could put a spanner in the works. Still, there is strong interest in this business and I would expect Tesco to extract a very decent price (with the caveat that the bidders aren’t swatted away due to their outsize market share). This will no doubt come in handy to help Tesco in its domestic market.

John Lewis boss warns of store closures and job losses (The Times, Ashley Armstrong) heralds more gloom for the ailing retailer as its new chairwoman, Dame Sharon White, warned that further cuts would be made in an effort to turn its fortunes around. The group currently has over 80,000 employees, 50 John Lewis shops and 338 Waitrose supermarkets and convenience stores. The new

chairwoman took over on Tuesday and made the warning in her first address to staff. * SO WHAT? * I don’t revel in being negative, but it seems like madness to me to select a chairwoman who has zero experience in retail to run a big retailer like this in a time of crisis. All I can think is that she has been brought in to make the tough decisions (e.g. on staff bonuses and more cuts). If it works, she can be praised for bringing a breath of fresh air to the proceedings, but if it doesn’t she will be blamed as an outsider who didn’t know what she was doing and they get someone else in who DOES have the relevant experience. Either way, the company wins because they get a patsy who they can dump the blame on (but who gets their dirty work done) or someone who actually manages to help them through a difficult transition. I certainly hope that she succeeds – John Lewis really needs her to.

‘Boris bounce’ drives High Street sales to highest level in six years (The Times, Ashley Armstrong) sounds a rather rare positive note as it cites the findings of a BDO report which show that high street retailers saw their biggest increase in sales since January 2014 as they also benefited from the “Boris bounce” post the general election. The data showed that the fashion sector ended a two-month downward spiral with a 5.8% rise in sales and sales of homeware, including furniture and sofas, rose even more strongly – up by 8.9% in the segment’s biggest rise since 2011. Online sales rose by an impressive 18.8%. * SO WHAT? * This is great news, although the shine is somewhat dimmed by the fact that sales were boosted by heavy discounting which isn’t great for margins. The retail sector needs to continue to invest in improving efficiency and customer experience – but it also needs to tackle the tricky problem of the huge cost of returns because between 20 and 40% of all fashion sales are returned (remember I mentioned a little while ago the practices of “wardrobing” and “bracketing”?).

Twitter’s revenues breach $1bn, Apple’s Watch eclipses the Swiss, Barr calls for US investment in Eriksson and Nokia and ICE backs away from eBay…

In a quick scoot around some of the other news, Twitter revenue tops $1bn a quarter for first time (The Guardian, Mark Sweney) shows that the company performed hugely above expectations following a difficult third quarter. “Monetisable” daily user numbers (users to whom Twitter shows ads) were also up 21% year-on-year, which was above market expectations. Ad revenues were also up strongly – a 20% increase year-on-year.

Apple clocks the Swiss watch sector (Daily Telegraph, Michael Cogley) highlights a rather alarming phenomenon (if you are a Swiss watch maker, that is) as the Apple Watch last year sold more than all the watches of all the Swiss brands combined. Strategy Analytics believes that Apple sold 31m units last year versus the Swiss watch

makers who sold 21m. Apple Watch sales were up by 36% on the year versus a 13% decline for the Swiss. The level of disruption is thought to be less dramatic in the high end makes, but it’s certainly a worrying trend for the entire industry. Will this be the death of the traditional wrist watch?

You will recall how the US gleefully went around the world last year doing a hatchet job on Huawei’s reputation. BoJo even annoyed the Americans recently with not slapping Huawei with a total ban on the UK 5G network and Donald Trump ‘apoplectic’ in call with Boris Johnson over Huawei (Financial Times, Sebastian Payne and Katrina Manson) is indeed indicative of that. However, US signals move for Ericsson or Nokia to take on Huawei’s 5G (Daily Telegraph) shows that the Americans are willing to go even further as the US Attorney General, Bill Barr, called on the US and its allies to buy controlling stakes in Eriksson and Nokia! Wow.

Then in Intercontinental Exchange chief defends eBay approach (Financial Times, Philip Stafford) we see that ICE has quickly abandoned its bid to buy eBay as investors reacted angrily to the proposal. Back to square one for both, then.

And finally, in other news…

I thought I’d end this week with something avocado fans out there might like: Mum’s ‘awesome’ trick will keep your avocados fresh and stop them going brown (The Mirror, Luke Matthews https://tinyurl.com/u96mebz). Keeping it real here at Watson’s Daily…

1. In CORONAVIRUS NEWS, markets rise on the prospects of a virus cure
2. In CAR NEWS, Tesla takes a tumble, GM and Ford take stock, more Brits ask about electric cars and the Nissan Leaf breaks a self-driving distance record
3. In CONSUMER/CONSUMER GOODS NEWS, contactless payment may get troublesome, Imperial Brands has a profit warning and Nike’s Alphafly sneakers survive
4. In INDIVIDUAL COMPANY NEWS, Spotify gets further into podcasts, GSK announces a profit warning and Vodafone counts the cost of stripping out Huawei
5. In OTHER NEWS, I bring you some massive waves…

So it looks like there could be a coronavirus cure…

Virus cure hopes revive the markets (The Times, Callum Jones and Tom Howard) highlights reports that Chinese academics may have found a drug to treat the coronavirus. British scientists also announced a breakthrough for a vaccine. The World Health Organisation’s official stance

remains: that there are “no known effective therapeutics” for the virus. * SO WHAT? *Markets recovered, as did the oil price, while further precautions were coming in thick and fast. LG pulled out of the upcoming Mobile World Congress techfest in Barcelona (incidentally, the organisers are now encouraging a ban on hand-shaking!), Adidas said it was closing down a “considerable” number of its 12,000 outlets across China and now every hospital in England is to create “priority assessment pods” for patients with suspected coronavirus.

Tesla stumbles, GM and Ford face slowing demand, UK electric car interest rises and the Nissan Leaf breaks a self-driving distance record…

Suspicions of investor bubble and China virus ravage Tesla shares (Daily Telegraph, Olivia Rudgard) shows that the Tesla share price fell by up to 20% yesterday. The investor buying frenzy turned into a sell-off as analysts speculated over the potential negative impact of the coronavirus on the company’s Shanghai gigafactory as factories across China have been shut down as part of efforts to contain the virus. * SO WHAT? * Yes, this could well impact first quarter production numbers, but I don’t think this is a long-term concern. I just think that investors were taking some money off the table after a massive rise in the share price. Cynics might even say that the coronavirus could actually be quite useful for Elon Musk (although I’m sure he’d never say this publicly) because if there were any production problems he could just blame any shortfalls on the virus – it’s like his first quarters “get-out-of-jail-free” card.

I touched on this yesterday, but GM and Ford face slowing demand as Tesla revs up (Wall Street Journal, Mike Colias) shows that both traditional car makers are predicting a downbeat 2020 after posting lacklustre results due to slower demand and rising costs. GM reported yesterday that earnings were hit by a 40-day strike that affected dozens of its US factories last year and it isn’t expecting this year to be great either because of a continued slowdown in demand in the US and Chinese car markets. * SO WHAT? * I guess the risk here is on the upside because everyone is expecting demand to slow down. Although I continue to believe that Tesla’s valuation is ridiculous in relative terms, the upcoming Model Y and

Cybertruck will generate a lot of excitement in the meantime – especially if the company delivers on time and addresses quality issues. More hype to come!

Back in the UK, Electric car queries soar over UK plan to ban polluting vehicles (Financial Times, Peter Campbell) shows the immediate reaction to news of the government bringing forward plans to ban the sale of petrol and diesel-powered cars from 2040 to 2035. Online searches for electric cars shot up by 162% versus normal levels while those for hybrids (which could also be banned) rose by an impressive, but more modest, 42%, according to figures from Auto Trader. * SO WHAT? * Data from the Society of Motor Manufacturers and Traders shows that sales of EVs tripled in January and they now make up 2.7% of the new car market – but let’s face it, overall car sales have been weakening for quite some time because of political and economic uncertainty and this tripling is from a laughably low base. Hybrid-powered cars also sold well – but there is now a bit of uncertainty surrounding them as the new targets INCLUDE them in the ban whereas the previous guidelines ALLOWED them if they could drive a reasonable distance using battery-only.

Nissan Leaf breaks UK record for longest self-driving car journey (The Guardian, Joanna Partridge) shows that a self-navigating car drove itself for 230 miles from Nissan’s technical centre in Bedfordshire to its manufacturing plant in Sunderland. The car traveled with traffic and along country lanes and the M1 and had two engineers in the car throughout the journey. It drove itself for 99% of the time, but human drivers stepped in when pulling into four service stations along the way for checks and charging. * SO WHAT? * Interesting, but overall meh IMO. The legal, insurance and ethical problems are just so vast and complicated that I think this is a pipe dream that we are not going to see adopted en masse for YEARS. Don’t get me wrong, I love the concept (it will give independence to those who may not have access) but it’s just so complicated at the moment. Clearly the tech is heading in the right direction but adoption is another matter.

Contactless payment may get troublesome, Imperial Brands warns on profits and Nike’s Alphafly get the OK…

A Brussels contactless crackdown could cost retailers dear (Daily Telegraph, James Cook) highlights the new Strong Customer Authentication (SCA) rules that force banks to verify a customer’s identity every time their payments go over €100. This means that if customers continue to push through this limit via contactless payments, they will have to input their PIN. * SO WHAT? * Sounds good from a consumer point of view, no? However, retailers are getting rather concerned about this because they think that consumers will just abandon their purchases as a report published by 451 Research commissioned by Stripe suggested that €57bn of payments across the European Union will be abandoned due to the extra checks. The new rules are obviously designed to make life more difficult for fraudsters to rack up massive bills on stolen cards – and these rules are likely

to stay in place even after the Brexit transition phase ends in December.

In Imperial brands warns on profit (Daily Telegraph, Simon Foy) we see that the tobacco giant issued a profits warning which it blamed on the US crackdown on vaping and a slowdown in customer demand. * SO WHAT? * All the tobacco companies are blaming poor performance on the vaping crackdown, but I think it is just a convenient excuse for them because they still generate a vast portion of their profits from “traditional” cigarettes. Vaping, up until fairly recently, gave them a potential way forward and an air of aspiration and virtue (they would say that they want a future without cigarettes – chuh, right 🤔) but that avenue appears to be closing down due to a rising number of unexplained deaths. They will, no doubt, be searching for The Next Big Thing in case vaping gets shut down IMO.

Nike Alphafly sneakers will also avoid Olympic ban (Wall Street Journal, Khadeeja Safdar and Rachel Bachman) continues the Nike sneaker controversy as track and field’s world governing body, World Athletics, not only gave the recent Vaporfly wonder-shoe the thumbs up, it gave its approval to the Air Zoom Alphafly – a prototype for which was used by Eliud Kipchoge to beat the 2-hour marathon mark). Rivals will have to rush to provide their athletes with similar shoes in the Tokyo Olympics. Wow!

Spotify buys more into podcasts, GSK has a profit warning and Vodafone counts the cost of Huawei-stripping…

Spotify to buy The Ringer as it steps up podcast push (Financial Times, Anna Nicolaou) shows the music streamer adding to its podcast capability by reaching an agreement to buy the sports-focused digital media group for an undisclosed sum. You may recall that Spotify purchased two other podcast specialists last year as the company continues in its efforts to broaden its content offering and differentiate itself from the likes of Apple and Amazon. Spotify says that it is prioritising a push into podcasts as profitability slows despite a continued growth in user numbers and likens this purchase as being aking to buying the podcast version of ESPN. * SO WHAT? * Spotify is doing the right thing by broadening its content base as it currently has to hand out most of its revenues in royalties to the music industry. Podcasts offer the company cheaper content that users value and so having the ability to offer exclusive quality content is a good thing.

GSK warns profits to fall as it steps up R&D spending (Financial Times, Sarah Neville and Sarah Provan) highlights tough times for UK drugmaker GSK as it said yesterday that profits would take a hit as they invest in research and new product launches. CEO Emma Walmsley also unveiled a two-year plan to split the company into two separate entities (pharmaceuticals/vaccines being one – and consumer health being the other). The company also indicated that it could make further asset sales to mitigate the costs of a break-up. On the plus side, its shingles vaccine, Shingrix, put in a solid performance. * SO WHAT? * Tough times, but this may ultimately be better for investors as they can focus more on specific areas of the business.

Following on from the recent UK government decision on the Chinese telecoms equipment giant, Huawei switch set to cost Vodafone €200m (The Times, Alex Ralph) shows that Vodafone has done its sums on how much it will cost to cut Huawei out from the most sensitive parts of its network. * SO WHAT? * For the moment, Vodafone’s CEO says that this would only necessitate minor changes BUT the problem is that if other European telcos have their own “market share” quotas imposed like the the UK, delays and big prices could ensue.

And finally, in other news…

I used to love surfing (one of a number of things I used to enjoy pre-kids!) and thought that this just looked incredible: Nazaré: the biggest waves in the world (Stars Insider, https://tinyurl.com/ubb9ekf). Just 😱😱😱

1. In CAR NEWS, EU/US fear parts shortages due to coronavirus, BoJo moves the goalposts for “dirty” cars and Tesla goes higher while Ford’s operating income falls
2. In RETAIL NEWS, Macy’s announces store closures, Ikea plans to shut a UK store and Kantar stats show supermarket winners and losers
3. In INDIVIDUAL COMPANY NEWS, Snap adds users (as does Disney+) and eBay gets an offer
4. In OTHER NEWS, I bring you the Sapporo ice festival…

So the coronavirus hits supply chains, BoJo cracks down further on “dirty” cars, Tesla continues to go bananas and Ford suffers…

EU and US carmakers warn ‘weeks away’ from China parts shortage (Financial Times, Edward White, Song Jung-a, Joe Miller and Peter Campbell) shows how the effects of the coronavirus are spreading to industry as senior execs at car manufacturers say that plants in the US and Europe may face imminent closure due to dwindling supplies of Chinese car parts. Hyundai said yesterday that it had to close all of its South Korean car factories for precisely this reason and it now looking for new sources. * SO WHAT? * Many analysts expect the effect of the virus on car sales and supply of Chinese-made parts will be worse than that of the SARS outbreak in 2003 because the country has become a much bigger manufacturing hub in the intervening years. Travel restrictions and factory closures in the country that have been imposed in order to stop the spread of the virus have led to a dwindling of supply. Given that no-one knows how long this will last, car makers and parts suppliers are being forced to think of contingency plans and potential closures. All of this is exposing supply chain weaknesses and when this outbreak eventually loses momentum, it will give everyone food for thought regarding their future diversification. Perhaps ultimately, this will be good news for smaller suppliers outside China if customers decide to broaden their supplier lists.

Carmakers face soaring costs as Johnson ‘moves the goalposts’ (Daily Telegraph, Alan Tovey) shows that the announcement Boris Johnson made yesterday that the deadline for the end of sales of new hybrid, petrol and diesels (basically, all cars with an internal combustion engine) will be brought forward from 2040 to 2035 has been criticised by automotive companies who would face huge costs and shortages of battery materials. * SO WHAT? * This is a massive storm in a teacup and the auto manufacturers are just complaining for the sake of it. 15 years is ages away and all sorts of tech advances can be made in that time. IMO, the manufacturers are bound to object because if they don’t, they risk looking like push-overs. No doubt green campaigners will say this isn’t soon enough, but I guess you can never please everybody.

I mentioned Tesla’s incredible share price yesterday, but it is still a major talking point today. Saudi Arabia wealth fund misses out on big Tesla spoils (Daily Telegraph, Olivia Rudgard) shows that the kingdom’s massive sovereign wealth fund has missed out on the most recent rally as an SEC filing shows that the Saudi Public Investment Fund sold almost all of its 8.2m shares in the company over the final quarter of last year. Investors have been going crazy for Tesla’s progress on its new China factory, two consecutive quarters of ACTUAL profitability and the prospect of two new models – the Model Y and the Cybertruck – going on sale in the near future (unless there are delays 😜). Short-sellers face wipeout as Tesla shares rocket up (The Times, Tom Howard) shows that sceptical hedge funds are another party to have lost out massively from Tesla’s rally because many of them bet a lot of money that the shares would go down in value. Shares in the company have more than doubled since the start of this year and they are up a whopping 400% since June. According to Data Group S3 Partners, short-sellers have already lost almost $8bn in 2020 alone! * SO WHAT? * I continue to think that Tesla’s valuation is absolutely ridiculous (it’s currently worth more than VW, Ford and General Motors combined!), but I guess you can’t argue with momentum. Although it is the most shorted stock in America, it continues to rise on hopes for the future and, as Tesla: death or glory (Financial Times, Lex) points out, momentum trading algorithms magnify share price moves in large-cap stocks. If more people continue to believe the hype, maybe Tesla’s belief will become self-perpetuating – but I still believe this is based on very shaky foundations.

In contrast to this, Ford’s operating income falls by two-thirds (Wall Street Journal, Mike Colias) highlights a poor fourth quarter performance and a downbeat outlook for 2020, sending the share price down by about 10% in after-hours trading. The company blamed problematic product launches of the Explorer and Escape SUVs and its Super Duty pickup truck as well as rising warranty costs and a $600m bonus payout to United Auto Workers. It has also suffered more than other overseas manufacturers in the Chinese market due to having a stale model line-up. * SO WHAT? * CEO Jim Hackett was brought into Ford in May 2017 in order to revitalise the company.  Ford has yet to return to earnings growth and profitability outside its domestic market despite cutting jobs and facilities all over the place. There is still a LOT of work to do although obviously, there will be increasing speculation as to whether this is a Ford problem or a Jim Hackett problem. What a contrast to Tesla’s current success!

It’s all going on with Macy’s, Ikea and UK supermarkets…

Macy’s to close 125 department stores, exit weakest malls (Wall Street Journal, Suzanne Kapner) shows that the troubled department store is having to cut about 20% of its outlets over the next five years as consumer tastes continue to evolve. It will also be cutting around 10% of its corporate and support staff (about 2,000 jobs) and shutting down a number of offices, including a dual HQ in Cincinatti. * SO WHAT? * This is a far cry from when the company operated over 800 department stores, including the Bloomingdale’s chain, but it just has to change – and QUICK – in order to survive. On the upside, the company has already refurbished 150 of its best performing locations, with another 100 to come this year, but it is obvious that the company is against the clock. Department stores everywhere are suffering, so it’s absolutely vital that management makes huge (and often painful) changes in order to ensure long term survival.

In Ikea to make first UK store closure as visitor numbers disappoint (Financial Times, Patricia Nilsson) we see that Ikea has decided to shut its multi-storey Coventry store, which has been continuously loss-making since it opened in 2007. 352 staff will be in consultation and the store will close in the summer. Ikea currently has another 21 stores in the UK. * SO WHAT? * This is no doubt a part of Ikea’s long-term plan to abandon/broaden its out-of-town “big

box” format to open smaller town-centre formats. It recently bought a shopping centre in Hammersmith and has already opened city centre stores in Paris and Moscow as part of the new initiative. It seems that Coventry’s seven storey behemoth proved to be just too big.

Dry January boosts low-alcohol sales for UK supermarkets (The Guardian, Zoe Wood) cites the latest data from Kantar which shows that sales of no-alcohol and low-alcohol beer surged by 37% in January, with demand for adult soft drinks rose by 3%. Euromonitor analysts have pointed out that UK sales of no-alcohol and low-alcohol beer have doubled over the last four years. Veganuary has also grown in popularity and helped sales of meat substitutes like soya mince and veggie burgers. * SO WHAT? * I think that people’s general desire to have healthier lifestyles with minimal discomfort have coincided with/driven vast improvements in alcohol and meat alternatives. I have personally found this to be true! For instance, I happen to like Brewdog’s Punk IPA (although I must say that Elvis Juice is my absolute fave), but when I went to a barbecue over the summer I had Brewdog’s Nanny State – which has NO alcohol. I was amazed at how beer-like it was – and I continue to experience the same amazement at the taste of Beyond Meat’s burgers. BTW, I have not been paid to say this – I am just telling you this as an average consumer. Also anecdotally, one of my alcohol-loving friends, who has a very senior role in the wine business, did dry January and “forced” himself to drink alcohol alternatives. His conclusion: no/low-alcohol beer – great, no/low-alcohol wine – rubbish! 😁

Snap and Disney+ add users and eBay fields an offer…

Snap adds users despite fierce competition, though guidance disappoints (Wall Street Journal, Georgia Wells) highlights a quarterly increase in users but the revenue increase and 2020 outlook fell short of analyst expectations, sending the share price down by over 10% in after-hours trading. * SO WHAT? * Snap has been doing well from selling ads, but is facing increasing competition from the likes of ByteDance’s TikTok. The company’s share price also suffered from having to pay $187.5m in legal costs related to its 2017 IPO. The company has yet to report a profit since flotation.

Subscribers boost for Walt Disney (The Times, Robert Miller) shows that, although not yet three months old, Disney+ managed to attract 26.5m subscribers by the end of December. This was above analyst expectations and

shows that it is on its way to catching up with Netflix and Amazon Prime Video. Disney itself announced a 36% increase in revenues with a superb performance from its film studios.

In NYSE owner Intercontinental Exchange makes takeover offer for eBay (Wall Street Journal, Cara Lombardo and Corrie Driesbusch) we see that ICE’s offer could value eBay at over $30bn, in its latest approach to buy the online auction site. There are no formal talks going on currently and ICE issued a statement late on yesterday confirming its interest. ICE is predominantly interested in eBay’s core marketplace business and not its classifieds business, which eBay has considered selling off for about $10bn. ICE’s shareholders expressed their displeasure with the potential purchase by selling ICE’s shares down by 7.5% while eBay’s rose by 8.8%. * SO WHAT? * eBay is particularly vulnerable to takeover approaches at the moment as it doesn’t have a permanent CEO (the last one left in September) and recently reported declining quarterly profits and a downbeat outlook for revenues. We’ll just have to see how this pans out.

And finally, in other news…

As some of you know, I did Law & Japanese at uni many years ago – and two years of that involved me studying at a university in Tokyo. Since then I also worked as a stockbroker for two-and-a-half years in Tokyo and over all that time, I really wanted to go to the world-famous Sapporo Ice Festival! Unfortunately, it was one of those things I never managed to get round to (that, and going to watch sumo wrestlers train), but it kicked off yesterday, as reported in Sapporo Snow Festival opens amid coronavirus fears and unusually warm winter (The Japan Times, https://tinyurl.com/re9vqob). It sounds like it will be a bit muted this year, though, given the coronavirus outbreak…

1. In CORONAVIRUS & MACRO NEWS, Hong Kong closes crossings to China as world growth, oil and supply chains look vulnerable while UK manufacturing output steadies
2. In FINANCIALS NEWS, Goldman teams up with Amazon and banks eye bitcoin again
3. In M&A NEWS, Worldline buys Ingenico while Just Eat and Takeaway.com goes ahead
4. In INDIVIDUAL COMPANY NEWS, Alphabet suffers overall but its YouTube and cloud businesses do well, Panasonic’s JV with Tesla hits profitability and Mike Ashley buys a chunk of Mulberry
5. In OTHER NEWS, I bring you customised cookie cutters and an unbelievable make-up artist…

So the Coronavirus effects continue while UK manufacturing stabilises…

Hong Kong closes most crossings to China as coronavirus spreads (Financial Times, Nicolle Liu, Alice Woodhouse and Naomi Rovnick) heralds the latest developments in Hong Kong regarding ongoing efforts to curtail the spread of the virus as its chief exec, Carrie Lam, announced that 10 crossings were to be suspended from midnight tonight. She added that the number of flights to the mainland would be further reduced, but stopped short of imposing what medical workers have been calling for – a complete block on entry from mainland China.

The ongoing outbreak continues to have a ripple effect in a number of areas. World growth to dip sharply as China goes into reverse (Daily Telegraph, Tim Wallace and Hannah Uttley) shows UBS analysts predicting a dramatic drop in world economic growth due to the fallout resulting from the shutdown of Chinese industry. They forecast the Chinese economy to contract by 1.5% versus the previous year – its first contraction since 1976, according to World Bank figures – and analysts at other houses are getting busy, cutting their own forecasts. Research group Scope Ratings made an interesting observation when they said that the “phase one” agreement recently reached between the US and China, which involved China buying an extra $200bn of US goods over the next two years, could look rather optimistic given current circumstances and may have to be revisited. Virus pushes oil into a bear market (The Times, Emily Gosden) highlights the effect the coronavirus is having on oil prices as Brent crude is now officially in bear market territory, having fallen by more than 20%. It was trading above $68 per barrel last month and is now hovering around $54-55. China is the world’s #1 oil importer but lockdowns have just decimated demand as the current death toll of 360 coronavirus deaths in China has overtaken that of the SARS epidemic of 2002-3. Coronavirus/China stocks: supply chain reaction (Financial Times, Lex) looks at another aspect of the effects of the outbreak as the automotive and tech sectors were hit badly in yesterday’s market sell-off. More specifically, Chinese carmaker Dongfeng has seen its share price drop by over 20% following news of the outbreak as most of its production is based in Wuhan – but Peugeot, Renault, Honda and Nissan also have production facilities there. In the tech space, companies including Apple, Xiaomi

and local electronic component maker BOE Technology also have major operations in Wuhan and Taiwan’s Hon Hai (aka Foxconn), famous for assembling the world’s iPhones, is also expected to be affected. * SO WHAT? * Clearly, world growth IS going to take a bashing due to the China-centric slowdown. However, I doubt that the US-China trade deal is going to have to be renegotiated – as it is, it’s only pretty limited in scope and it took so long to cobble together that you would have thought it should be OK. Oil price weakness is a problem for the oil producers – but presumably they will all decide to cut production at their emergency meeting in Vienna to counter it. One thing that I think IS more of a problem, though, is the whole supply chain thing. Every time there is a tsunami, natural disaster or a serious outbreak of disease, supply chains are exposed for being very concentrated geographically and/or in terms of heavy reliance on a very small number of companies. I guess that this is a characteristic of globalisation, but it seems that we never learn and history keeps repeating itself as a result – disaster, shock, supply chain weakness exposed, disaster recedes, everyone promises lessons will be learned and then the same thing happens all over again the next time around! Will we learn this time??

There’s good news for manufacturing in UK factory output begins to stabilise after eight-month slump (The Guardian, Richard Partington) as the IHS/CIPS monthly survey, which is closely monitored by the Treasury as a leading indicator of the economy, showed that factory output steadied in January after eight consecutive months of contraction – a losing run that was the weakest period in manufacturing activity since 2009! The decisive result of December’s general election helped to boost confidence as well as orders – and employment was flat on the month. * SO WHAT? * While this is not negative, it’s way too early to crack open the (non-European) bubbly as there are still a lot of issues to be sorted out with Europe (and the US, for that matter). Everyone keeps banging on about reduced levels of uncertainty following Boris’ election – but I think it’s a question of degree! Yes, at least he can count on Parliament to get things through on the UK side, but outside that is anyone’s guess. Still, at least manufacturing’s slide has been arrested for the moment. You also wonder whether the coronavirus is going to have an impact on UK manufacturing as maybe China will be keen to overcompensate for the virus’ effects by ramping up domestic production once its effects recede and encourage its citizens to “buy China”. It’s too early to tell – but there is a danger here IMO…

So Goldman works with Amazon and bitcoin attracts interest…

Amazon targets banking offer in hook-up with Goldman Sachs (Daily Telegraph, James Cook) highlights Amazon upping its attempts to get into banking as it announced a venture into small business lending with Goldman Sachs. The new facility will offer loans in the US via Amazon’s online lending platform as soon as next month, but Amazon has been offering business loans since 2011. * SO WHAT? * This will give Goldman access to more customers – with the added advantage that vendor sales data could be as useful as credit scores – and allow Amazon access to a broader range of banking services without having to go through all the audit/compliance hassles it would have had if it did it on its own. It is thought that Amazon loans, which are said to be anything from $1,000 to $750,ooo, are generally aimed at borrowers who may not be able to get a traditional business loan. Interestingly, Goldman/Amazon: Credit buddies (Financial Times, Lex) suggests that smaller banks shouldn’t be too concerned by Amazon’s

latest foray – but payment processors Square and PayPal SHOULD be, because they have been upping their efforts in business lending themselves. An interesting development, but on its own shouldn’t cause too much of a splash.

If you follow the table that I put at the bottom of Watson’s Daily, Banks and fund managers come back for another bite at Bitcoin (Financial Times, Eva Szalay and Laurence Fletcher) you will have noticed that Bitcoin has been doing rather well recently. Bitcoin’s price has surged by 31% in January, but looking further out, it has posted higher returns on a one, three and 10-year basis than any other asset class, according to Steve Kurz at Galaxy Digital, a specialist cryptocurrency firm. Banks have been burned before on Bitcoin when it crashed from its $20,000 highs in 2017, but this recent surge has put it back on the radar. * SO WHAT? * I’m NOT a cryto or currency specialist, but it just seems to me that money can be made out of Bitcoin IF investors watch it constantly and set themselves buy and sell limits because it’s just so darn volatile – it just isn’t a “buy and keep” asset. If I ever got involved in this (and I am NOT planning on doing so!), I would set a range and trade accordingly. Yes, I’d probably miss at least some outperformance but I think that over time you could do quite well from trading the volatility if you had the patience.

Worldline buys Ingenico while Just Eat and Takeaway.com push forth…

In Worldline to buy Ingenico for €7.8bn as sector dealmaking intensifies (Financial Times, Philip Georgiadis and Leila Abboud) we see that French payment services business Worldline has announced intentions to buy domestic rival Ingenico in a cash and shares deal that would create the world’s fourth biggest payment services provider. It sounds like a good match as Worldline has a good European client base and Ingenico is a leader in payments hardware and has a growing online commerce business. * SO WHAT? * There has been a tremendous amount of consolidation in the payments industry over the last year or so (e.g. Fiserv and Global Data, Global Payments and TYS,  FIS’s acquisition of WorldPay come to

mind). I think you need scale in this business – and when everyone’s consolidating around you, the pressure builds for you to do the same in order to keep pace with your rivals.

Takeaway merger goes ahead but final delivery may take 40 days (The Times, Dominic Walsh) brings us up-to-date with the £10bn merger that recently saw the Competition and Markets Authority (CMA) announce an investigation the day before the deal was to complete. Trading in Just Eat Takeaway.com started yesterday while the companies continue to be run separately under orders from the CMA while its investigation is ongoing. The company’s management are hopeful that the deal will get the final green light very soon. * SO WHAT? * I do think that the last-minute nature of the CMA’s involvement shows astounding levels of incompetence as it had plenty of time to get its act together to avoid this messy outcome. Hopefully they will get this sorted soon so everyone can just get on with things.

Alphabet has mixed news, Panasonic’s JV with Tesla becomes profitable and Mike Ashley buys a bit of Mulberry…

In a quick scoot around other news, Google parent debuts YouTube, cloud results, reports weak earnings (Wall Street Journal, Rob Copeland) shows that Alphabet surprised everyone by showing the individual performances of some of its businesses for the first time BUT operating income failed to meet market expectations for the ninth quarter in the last ten and revenues also fell. Although advertising revenue continues to pour in, the company’s growth is also increasingly dependent on newer areas such as YouTube and cloud storage.

Panasonic’s joint venture with Tesla turns first profit (Financial Times, Kana Inagaki) heralds some good news for Panasonic as it has at last managed to make money from its $1.6bn venture with Tesla as production volumes had cut the cost of raw materials. Talking of Tesla, Wall Street bulls drive Tesla’s valuation to new record (Daily Telegraph, Olivia Rudgard) shows its share price taking another massive jump taking its year-to-date rise to above 70%. It is now the world’s second biggest car manufacturer after Toyota and some analysts say it is well on track to become as big as Apple.

Mike Ashley snaps up stake in Mulberry (The Guardian, Rupert Neate) shows that Fraser Group’s Mike Ashley went shopping again – this time for a 12.5% stake in upmarket British handbag company Mulberry. This was said to be part of giving Fraser Group (formerly known as Sports Direct) a more premium feel.

And finally, in other news…

I thought I’d leave you today with a gift idea for that special someone in your life in You can get customised cookie cutters to make treats that look just like your pet (The Mirror, Luke Matthews https://tinyurl.com/uuqveay). However, I would absolutely urge you to take a look at Makeup artist blends into backgrounds by painting mind-bending optical illusions onto her FACE (Daily Mail, https://tinyurl.com/qp6aomt). This woman’s talent is just astounding!

1. In CORONAVIRUS NEWS, China acts to protect markets and insurers check cover
2. In CAR NEWS, Nissan has an interesting plan for Brexit while hybrid cars face a price war
3. In RETAIL-RELATED NEWS, sports brands compete with retailers and ghost kitchens replace retail space
4. In FINANCIALS NEWS, Revolut plans to move operations post-Brexit and Amigo finds no friends
5. In OTHER NEWS, I bring you a humane circus and a maths hack

So China acts to limit coronavirus damage to markets and insurers check their cover…

Coronavirus closes China to the World, straining global economy (Wall Street Journal, James T. Areddy) shows how more companies, airlines and governments are either closing down or severely curtailing their operations as the coronavirus continues to spread. Apple announced over the weekend that it would be closing all of its stores and its corporate offices until February 9th, highlighting the effects of the virus on the supply chain as companies like Tesla and Anheuser-Busch InBev also feel the repercussions as production facilities are shut down across the country. Demand for oil continues to fall (China is the world’s biggest oil importer and Wuhan is a key oil and gas hub), putting more downward pressure on the oil price to such an extent that Saudi Arabia is urging members of OPEC to set up an emerging meeting this Wednesday where they will presumably decide to cut production to stop the slide in price. American Airlines, Delta Air Lines and United Airlines put a temporary suspension on flights to China on Friday as tourists cancelled and flight crews got more nervy, Singapore said it would stop visitors coming in from China and Hong Kong is under pressure to close the border with the mainland. China has been irked by these actions and says that everyone is over-reacting. Chinese markets tumble on coronavirus uncertainty on first day after break (Wall Street Journal, Steven Russolillo and Xie Yu) highlights market weakness on the resumption of trading after the Lunar New Year break as 8% falls in the Shanghai

and Shenzhen Composites reflected a catch-up with world markets that had dropped last week. Meanwhile, China pumps in £130bn to calm markets (The Times, Ben Martin) shows what Chinese authorities are willing to do in order to avert market panic.

Insurers in the spotlight over coronavirus (Financial Times, Oliver Ralph) shows how companies and individuals are going through their insurance policies with a fine-tooth comb in order to see whether they are covered for costs relating to the outbreak. Although experts say that there will be some payouts, epidemics and pandemics are often excluded. Travel costs due to canceled flights etc. look like they could be covered but insurers are trying to shirk giving out payments too freely by saying that airlines should refund flight costs while credit card providers could cover some other losses. * SO WHAT? * Clearly, immediate costs are one thing, but companies will also be thinking about the impact that the spread of the coronavirus could have on future business. For instance, some hotels suffered a 40% fall in revenues in the wake of the SARS virus in 2003 as the outbreak affected people’s willingness to travel. No-one can really pin a figure on this at the moment, because we are still in the middle of it all, but it is certainly something that businesses will be talking about. I would have thought cruise ship companies will be hit pretty hard (nerves over the spread of disease is bound to make at least some travelers think twice about being in close proximity to thousands of others in a closed environment) while air travel and hotels will also suffer at least in the short term. The coronavirus outbreak also highlights supply chain exposure to China and will no doubt add to the debate for diversifying sourcing on a geographic basis.

So Nissan has a punchy Brexit plan and hybrid cars could be in a price war…

Nissan drafts plan to double down on UK under hard Brexit (Financial Times, Peter Campbell and Kana Inagaki) highlights a potentially punchy move by the Japanese car manufacturer in the event of Brexit leading to taxes on car exports from the the UK. While other manufacturers seem to be running down UK car production, this contingency plan suggests that the Sunderland plant (which makes the Qashqai, Juke and Leaf) would be maintained while facilities in Barcelona and France would be shut down. The plan, drawn up last year, implies that keeping production in the UK could help Nissan to grow from 4% to 20% market share! The company has, however, denied the existence of such a plan – but it does sound interesting!

EU emissions targets set to spark price war for hybrid cars (The Guardian, Jasper Jolly) suggests that there could be a price war over electric cars this year in manufacturers’ bid to sell more hybrids to avoid EU fines on carbon emissions. This will put pressure on them to reduce prices to shift more units, according to analysis by UBS. Those most at risk (and therefore the ones who are more likely to discount) include Mercedes-Benz, Renault, Fiat Chrysler and Jaguar Land Rover. * SO WHAT? * Funnily enough, plug-in hybrid electric vehicles (PHEVs) can actually be WORSE, emissions-wise, than the bog-standard internal combustion engine IF they are not charged because the smaller engine is hauling more weight and running less efficiently. Still, they attract various incentives for the manufacturers which means that there will be a lot of pressure to sell them. As the chief of the Society of Motor Manufacturers and Traders industry body, Mike Hawes, said “It’s a buyer’s market”.

Sports brands ditch retailers and ghost kitchens replace retail space…

Power play of sports brands puts retailers on back foot (The Times, Ashley Armstrong) is a really interesting article which shows that some of the big sports brands are tending to use their own websites and stores to get their product to the public in preference to traditional retailers. In the past, retailers held the power because brands didn’t have their own stores or digital capability but this has changed dramatically over the last few years. Nike recently said that it wants to cut the number of global retail partners to 40 from 30,000 and will cut retailers who don’t give it scale or the right vibe. Sports brands are trying to push “direct to customer” (DTC) sales – which include digital and own-store sales – because they engender more brand loyalty and are more profitable. * SO WHAT? * This is a really interesting development and is one that is definitely being felt by the retailers who need attractive product to sell in their stores. Last year, Sports Direct’s Mike Ashley complained that he wasn’t feeling the love from Nike in particular as the big sportswear companies get increasingly picky about having their brand damaged by being stocked in “pile-em-high-sell-em-cheap” outlets. IMO, it is the RETAILERS’ responsibility to step up in terms of branding, service and overall customer experience – if they can’t do this, they will get left behind.

Latest front in food delivery: kitchens in empty malls (Wall Street Journal, Heather Haddon) shows another interesting trend where the worlds of retailing and food delivery come together. Basically, property developers are building “ghost kitchens” (kitchens that specifically set up to prepare delivery-only meals) in empty mall units as the retail landscape evolves with consumer tastes. Retail developer Simon Property Group and hotels group Accor said yesterday that they were in talks with hospitality company SBE Entertainment Group to develop 200 such ghost kitchens that would supply nearby hotels and customers in the area. * SO WHAT? * I think that this is a very interesting development and shows how developers are having to be rather creative to ensure that obsolete retail space is put to good use. Uber founder Travis Kalanick is seeing growth in his ghost kitchens venture CloudKitchens (they are also known as “dark kitchens”) which makes kitchens and sublets them to restaurants, but there are others such as Kitchen United and various other VC-backed operations that are also in the market. VCs have invested almost $5bn in virtual kitchens since 2018 but critics say that it’s only going to be the big restaurants that can get high-order volumes for more than one mealtime who will ultimately benefit. FWIW, I think that this is great as long as people continue to order food online, but surely when wages fall and people realise that getting takeouts and not making the food themselves is a luxury rather than a necessity, the need for these kitchens will fall and the malls will be back to square one.

Revolut makes its own Brexit plans and Amigo remains friendless…

Brexit forces Revolut payments shift (Daily Telegraph, Michael Cogley) shows that fast-growing fintech unicorn Revolut will move European payments out of London and over to Ireland and Lithuania after Brexit, although the company’s global HQ will remain in London. Newly-appointed chief exec Richard Davies said that “We have already got the UK EMI licence. The strategy is to have our central and eastern European clients on our Lithuanian EMI and bank licence. We are in the process with the Central Bank of Ireland to have western European clients on our Irish licence”.

Then in Amigo finds itself without friends as rivals prove reluctant to bid (Daily Telegraph, Michael O’Dwyer and Lucy Burton) we see that potential suitors are not exactly fighting over themselves to buy the guarantor lender following last week’s announcement that it was for sale. Alternative options include taking it private or selling to private equity.

And finally, in other news…

I thought I’d leave you today with the impressive Circus swaps real animals for holograms- and they look stunning (The Mirror, Hannah Dodd https://tinyurl.com/sanjxn7) and the quite useful Simple method to work out complicated percentages is blowing people’s minds (The Mirror, Luke Matthews https://tinyurl.com/tkx53vm). Did you know that?

1. In MACRO & CORONAVIRUS NEWS, markets continue to fall, the coronavirus continues to spread, US growth slows, European unemployment hits a new low and the Bank of England leaves the interest rate unchanged
2. In TECH NEWS, the Huawei decision weighs on telcos and Amazon knocks it out of the park
3. In BEVERAGE NEWS, Diageo get hits by trade tensions, ULVR wants to shed tea and Coca-Cola gets a caffeine boost
4. In INDIVIDUAL COMPANY NEWS, Altria tries to distance itself from Juul
5. In OTHER NEWS, I bring you an amazing stop-motion Toy Story 3

So markets continue to weaken on coronavirus fears, the US economy slows, Europe’s jobless rate hits a new low and the Bank of England leaves interest rates unchanged…

Markets in turmoil after coronavirus stokes fears over growth (The Times, Alex Ralph) shows that investors are getting increasingly pessimistic on the effects of the coronavirus on economic growth, pushing stock markets and oil prices down. The World Health Organisation declared a global emergency and investors sold off travel, leisure and energy companies most heavily, with Carnival (the world’s #1 cruise operator) falling particularly sharply as news of potential cases of the coronavirus on one of its cruise ships came out. Coronavirus poses challenge for China’s centralised system (Financial Times, Christian Shepherd and Sue-Lin Wong) makes the very interesting point that China’s hierarchy could have made the outbreak worse as the mayor of Wuhan, Zhou Xianwang said in an interview this week that “I hope everyone can understand why there wasn’t timely disclosure. After I received information, I needed authorisation before making it public”. Coronavirus: closure of Russia-China border sparks trade fears (Financial Times, Henry Foy) shows further fallout as Russia made the decision to close its 4,000km-long land border with China, which probably won’t go down well with its biggest trade partner and Face mask shortage hits Europe and US as coronavirus spreads (Financial Times, Nikou Asgari and Peter Wells) shows another immediate impact of the virus as people stock up. US company 3M, which sells the popular N95 respirator, said it was upping production this week in order to meet huge demand. SP Services, a UK-based first aid equipment supplier, has had two years’ worth of demand over the last week alone and is searching for more suppliers and the Cambridge Mask Company, which makes military grade filtration masks, has actually sold out. Anecdotally, one of

my school friends who works in China said that the price of masks almost doubled in two days earlier this week and it seems that one of the trending topics on Weibo (a Twitter-like app which is extremely popular in China) is “cut up your masks before you throw them out”, which urges people to take action in order to stop unscrupulous operators reselling used masks. I can’t verify this myself, but if it’s true it’s pretty shocking.

Elsewhere, US economy grows at slowest annual pace since 2016 (Financial Times, Peter Wells and Brendan Greeley) cites the latest estimates from the US commerce department which show that economic growth slowed down in the final quarter of last year and could imply that growth for 2020 will fall short of Trump’s 3% annual growth target. Worryingly, it seems that consumer spending is one of the reasons behind this fall. This is not good because consumers have been key to America’s economic strength. This news came a day after the Federal Reserve left interests unchanged. * SO WHAT? * Trump could do without an economic slowdown going into the presidential election at the end of this year. He has been banging the drum on the economy for quite some time, so this isn’t likely to go down well. Slowing consumer activity is not going to be good for America’s retailers either.

Then Eurozone jobless rate slides to 12-year low as sentiment improves (Financial Times, Martin Arnold) shows potential signs of economic improvement in the bloc of 19 countries, with Greece, Bulgaria and Croatia all doing particularly well. * SO WHAT? * The ECB will probably be relieved about the direction as it wants tighter markets to increase wage growth that will, in turn, encourage spending and push up inflation.

Bank of England has kept rates unchanged but still fears Brexit (The Guardian, Larry Elliott) shows that the Bank decided to leave the interest rate unchanged yesterday. Although its Monetary Policy Committee (MPC) saw recent signs of improving confidence, it decided to err on the side of caution given the uncertain impact from Brexit.

So the Huawei restriction poses telcos problems and Amazon has a record festive period…

Following on from the UK government’s decision to only allow Huawei equipment to be used on the periphery of the UK rollout of 5G, Huawei curbs force UK telecoms groups to review 5G plans (Financial Times, Nic Fildes) shows that the likes of BT, Vodafone and Three will be forced to buy equipment from Huawei rivals such as Ericsson and Nokia. Some say that this means they could end up paying up to 20% more for the equipment they need. The government said that it will put a 35% market share limit on Huawei equipment in 5G networks and full-fibre fixed-line infrastructure, to take effect in 2023 – sooner than many in the industry were expecting. * SO WHAT? * Ruling will cost us £500m, says BT (The Guardian, Mark Sweney) shows

that this may well be a pain in terms of additional cost for the telcos, but it could have been way worse for them if the UK had ceded to US wishes to cut Huawei out completely.

Amazon revenue jumps on holiday sales as profit rises (Wall Street Journal, Dana Mattioli) highlights a great fourth quarter for Amazon as its sales beat previous records for the festive period. Profits from its cloud computing and advertising businesses mitigated increased costs associated with the expansion of its one-day Prime shipping programme – and investors clearly liked what they heard because the share price rose by over 10% in after hours trading. * SO WHAT? * It seems that the push to increase numbers of Prime customers is working – and although it cost Amazon money to “buy” them, they tend to spend more on the site. This in turn helps to boost its advertising business. Elsewhere, its AWS cloud services business continues to grow apace and now makes up about 20% of sales and two-thirds of operating income and expects a good 2020.

Diageo suffers, Unilever aims to shed tea and Coca-Cola gets a boost…

Global trade tensions weigh on Diageo (The Times, Greig Cameron) highlights tricky times for the drinks giant as it is currently fighting to stop 25% tariffs on Scotch whisky in the US amid difficult trading conditions. Diageo is the world’s biggest spirits producer and owns brands such as Johnnie Walker, Smirnoff and Tanqueray and, of course, Guinness. * SO WHAT? * Scotch sales account for about 26% Diageo’s overall business, so you can see why the company is keen to get something sorted.

Unilever goes cold on tea business as sales decline (Daily Telegraph, Hannah Uttley and Simon Foy) highlights the

company’s decision to have a strategic review of its tea business – which includes brands like Lipton and PG Tips – following steep profit falls in 2019. * SO WHAT? * Apparently, tea has an image problem with younger consumers but Unilever: reading the tea leaves (Financial Times, Lex) argues that the company should try to innovate with its current portfolio rather than get rid. It also points out that tea is actually one of the most popular drinks across large parts of the world and getting rid of it would be a lost opportunity as well as a bit of a cop-out.

Coffee and sports drinks give Coca-Cola a real lift (The Times, James Dean) shows that sports drinks and “enhanced” water powered the beverage giant’s fourth quarter results higher but the old favourites of Sprite, Fanta and Coke put in an even better performance. The company aims to be a “total beverage” group by expanding its drinks line-up with new drinks, which some believe could potentially include those infused with cannabis extracts in future.

Altria makes moves to distance itself from Juul…

Altria slashes value of Juul stake and loosens ties (Financial Times, Alistair Gray and Naomi Rovnick) heralds the latest development in the downfall of vaping as Altria decided to make a massive write-down on the stake it bought in vaping supremo Juul just over a year ago. This

was largely related to big legal costs for Juul as it faces an ongoing backlash from regulators and governments around the world. Altria also said it would cease to provide sales and distribution services to the company. * SO WHAT? * Given the massive flack that vaping has attracted over the last year, this seems to be a sensible course of action for Altria – but it really goes to show what a nightmare vaping has turned out to be. It already proved to be a deal-breaker to its previously proposed merger with Philip Morris International.

And finally, in other news…

I thought I’d leave you today with this incredibly impressive story: 2 Brothers Created a Stop-Motion Remake of Toy Story 3 Using Real Toys and People (Popsugar, Victoria Messina https://tinyurl.com/r9csxr7). Just. Wow.

1. In MODES-OF-TRANSPORT NEWS, Boeing has a shocker, Tesla delights, British car manufacturing hits new lows, Brit bike-maker Norton goes under and UPS gives electric van start-up a massive boost
2. In TECH NEWS, Microsoft benefits from the cloud, Samsung sees the light and Facebook’s revenue growth slows
3. In REAL ESTATE NEWS, landlords Intu and Land Securities hit hurdles while UK house price growth hits new highs
4. In OTHER NEWS, I bring you a cup you never knew you needed…

So Boeing suffers, Tesla delivers, the British car manufacturing slump continues, Norton hits the end of the road and Arrival gets a HUGE order from UPS…

Boeing hit by first loss in 22 years (The Times, James Dean) highlights the ongoing travails of Boeing as it reported a shock fourth-quarter loss and announced that it was setting aside almost $19bn to cover the 737 Max crisis (over double its previous forecasts). This figure does not take into account compensation for the families of the Lion Air and Ethiopian Airlines crashes. * SO WHAT? * Following the departure last month of former chief exec Dennis Muilenburg, the new guy (David Calhoun) hung out all the dirty laundry in the latest results. This actually led to the share price rising on the announcement, presumably as investors bet that much of the worst was already behind them. I think it’s way too early to feel relieved because the compensation claims are an unknown quantity PLUS we still don’t know when the grounded planes are going to be flying again. Clearly, the longer they are grounded, the worse the financial position will become – and the confidence in the quality of their product suffers every day. All the while, European rival Airbus sees its order books swell…

Tesla posts fourth-quarter profit on record deliveries (Wall Street Journal, Tim Higgins) highlights Tesla’s strong fourth-quarter results and it delighted investors by promising to boost sales by almost one third this year. It added that it was on track to start production of its next car – the Model Y – at its California plant, with first deliveries due in April. Tesla said that its business should be profitable from now on and the share price climbed by 11% in aftermarket trading. * SO WHAT? * These results are solid and I have to say that I think that the Model Y, unless things go really wrong, should be a great success given that it will probably have wide appeal as it is a compact electric SUV (all “hot” words right now 😎). HOWEVER, it is not the first time that Elon Musk has promised to be profitable only for the feelgood factor to crumble. Last year he said the business would be profitable, but then two consecutive quarters of contraction ensued leaving the company with a $862m loss at the

end of the year. Tesla has yet to be profitable on a full year basis – but then again, there is a first time for everything! Difficult times lay ahead as the first quarter is traditionally weak for car manufacturers, Tesla has also tended to struggle with new model launches in the past and then there is obviously the unknown potential impact of the coronavirus on both supply and demand.

Meanwhile, in the UK, British car manufacturing slumps to lowest level since 2010 (The Guardian, Jasper Jolly) cites the latest figures from the Society of Motor Manufacturers and Traders (SMMT) which show yet another fall in production (the third consecutive annual decline) at UK factories. * SO WHAT? * FWIW, I just don’t see any reason for this trend to stop. We’ve already seen Nissan’s Sunderland plant and Vauxhall’s Ellesmere Port factory lose out on making new models. Brexit has been blamed, but I just think that carmakers are just trying to distract attention away from the fact that car sales for everyone are weaker on a global basis and it’s a convenient excuse to use to disguise the fact they got too cocky with diesels even after the VW emissions scandal broke. Unless we can somehow reinvent the UK as an electric vehicle specialist, I think our car industry will be toast. Better to concentrate on batteries IMO, but even then I would have thought battery production could be largely automated.

The doom continues with End of the road for Norton (The Times, Robert Miller) as Norton Motorcycles, the British bike manufacturer founded in 1898, has gone into administration. It was struggling to pay a £300,000 tax bill and was then slapped with a winding up order from HMRC. BDO is acting as administrator.

On a rather brighter note, UPS orders 20,000 vehicles from electric-van maker Arrival (Financial Times, Peter Campbell) heralds some brilliant news for UK electric van maker, Arrival (which I brought to your attention recently following an investment from Kia and Hyndai), in the form of a huge order from UPS that is worth hundreds of millions of pounds. The vans are to be produced at Arrival’s Bicester and Banbury production sites as well as a new one in Reading, one in the US and another one on mainland Europe. Deliveries of the vehicle are due later this year. UPS and Arrival have been working together on the development of the new vehicle since 2016.

Microsoft benefits from cloud computing, Samsung’s profits weaken and Facebook’s revenue growth slides…

Microsoft posts record sales as cloud business continues to grow (Wall Street Journal, Aaron Tilley) highlights the company’s cloud business as being a key driver in its robust second quarter results, which came in above market expectations. Gross margins for its Azure cloud computing business and Office 365 apps grew to a healthy 67%. The company added that the margins were likely to rise even further from here. * SO WHAT? * This is a particularly impressive performance given that Microsoft has been spending big to boost cloud growth and catch up with rival Amazon. The signs are that Azure is on track to become the company’s biggest revenue generator in the next two to three years. Revenues from the videogames segment were weak, but were generally expected as consumers decided to keep their powder dry in the run-up to their next console launch later this year where they will once more go head-to-head with Sony. These days, I think it’s less about who is first to market – it’s more about what the game line-up is going to be like.

Samsung posts lower profit, anticipates end of chip slump (Wall Street Journal, Eun-Young Jeong) shows a mixed-bag from Samsung as, on the one hand, it announced a chunky 39% fall in fourth quarter net profit, but on the other, it predicted that this would be the year that the chip market recovered from its current slump. This latter prediction doesn’t sound like a pipe dream either

as rivals Intel and TSMC, the world’s biggest contract semiconductor maker, have announced strong revenues and forecasts. * SO WHAT? * Given that semiconductors accounted for 75% of Samsung’s operating profit in 2018, you can see why a turnaround in the chip market is so important. The company is also expected to benefit from sales of new 5G phones as the year progresses and more consumers upgrade to the new standard. Having said all that, it IS possible that the coronavirus will delay things as China is the world’s biggest market for smartphones and TVs and the second biggest market for PCs, so any delay in consumer spending will have repercussions.

Facebook shares slump in face of slowest revenue growth since 2011 (Daily Telegraph, James Titcomb) shows that the company’s share price took a sharp tumble of over 7% in after-hours trading last night as it unveiled its slowest ever revenue growth due to higher costs (in terms of hiring and covering fines). This was despite user numbers on Facebook, Instagram, WhatsApp and Facebook Messenger reaching all-time highs and revenues from advertising shooting up by 25%. * SO WHAT? * Given that Facebook’s share price has risen by about 50% in the last year, I think 7% is a drop in the ocean. User numbers are up and if Facebook can keep on top of its naughtiness (at least it seems to be trying by hiring tons of moderators to monitor content), I would have thought that the company will continue to make gains. It doesn’t seem to me like there’s anything new on the horizon that will make its share price pop – it’ll just be more of the same with (hopefully, for Facebook) fewer fines from regulators. The only caveat to that is if Facebook announces something Libra-related as I think this has fallen off most investors’ radar – but no-one’s really expecting anything on that front until next year.