Category: Uncategorized

1. In MACRO & OIL NEWS, the US looks at trade agreements with neighbours and the Chinese, China’s inflation rises on pork prices and UK GDP flatlines while Saudi Aramco pumps up the valuation and Chevron cuts estimates
2. In RETAIL NEWS, Ted Baker’s top management resigns and M&S makes a new clothing hire
3. In INDIVIDUAL COMPANY NEWS, M&C Saatchi loses the M and property funds see MASSIVE outflows
4. In OTHER NEWS, I bring you unusual Christmas traditions and Die Hard On Ice…

So US trade agreements see developments, Chinese inflation rises partly because of pork, UK GDP slows, Saudi Aramco chases a $2tn valuation and Chevron has a reality check…

Revised trade pact set for likely approval by Congress in 2020 (Wall Street Journal, Natalie Andrews, William Mauldin and Anthony Harrup) shows that a new US trade deal with Mexico and Canada is getting closer. Trump campaigned in 2016 to remake or abandon the existing North American Free Trade Agreement (aka NAFTA). The new NAFTA replacement, the US-Mexico-Canada Agreeement (USMCA) was signed by all the top trading bods of the three countries and will replace NAFTA when ratified next year. The agreement covers changes in labour rules, the relaxation of restrictions related to generic drug production and the movement of data across borders, among other things. * SO WHAT? * OK, so the agreement has not yet been ratified, but it looks likely to get the go-ahead and will bring some certainty/clarity to all concerned.

Then in US and Chinese trade negotiators planning for delay of December tariffs (Wall Street Journal, Lingling Wei and Bob Davies) we see that a delay in the implementation of $165bn of new tariffs on Chinese goods on December 15th is looking increasingly likely. * SO WHAT? * Both sides are continuing their efforts to hammer out details for a phased trade agreement, so it really isn’t worth getting too excited about things at this stage. This is just the latest status!

In China pork price rise adds to inflation (Daily Telegraph, Russell Lynch) we see that higher pork prices, brought on by the massive cull of pigs following an African swine fever outbreak, have led to inflation reaching a seven-year high of 4.5%. Prices rose by 110% over the last year, but some are saying that this has now peaked out with prices up by only 3.8% in November versus a rise of 20% in October. * SO WHAT? * Pork is a major staple for the Chinese so rising prices will have an effect on household spending. Companies like Beyond Meat and Impossible Foods are among those trying to use the opportunity to make inroads in the China market for their pork alternatives – so the clock is ticking for them to make an impression before pork prices start to normalise. In the meantime, demand for other types of meat have risen and China has been importing more pork to make up for its sudden domestic shortfall, pushing up prices everywhere else.

Given the uncertain economic backdrop at the moment, UK economic growth slows to 2009 levels (Daily Telegraph, Russell Lynch) isn’t all that surprising as the latest figures from the Office for National Statistics (ONS) showed that

the economy flatlined in the three months leading into the October 31st Brexit deadline. Construction and manufacturing were particularly weak, but the overall performance was “saved” from contraction by a comparatively strong performance from the UK’s dominant services sector. * SO WHAT? * The services sector accounts for about 80% of the UK’s GDP, so ONS warnings that it is currently losing momentum will spark some concern as manufacturing is not going to take up any slack.  What happens next will hinge on the outcome of tomorrow’s general election.

In the world of oil, Saudi Arabia renews push for $2tn Aramco valuation (Financial Times, Simeon Kerr, Anjli Raval and Arash Massoudi) shows that the push to get institutions and rich families to buy into the Saudi Aramco IPO continued in the run-up to its float today with a focus on getting a $2tn valuation by hyping up the aftermarket (in other words, although the indicative price of the flotation suggests a company valuation of $1.7tn, those in the deal are trying to talk up the prospects of the company so investors will try to buy more after it floats on the market, which will send the price up, which will then get the company closer to the $2tn valuation that Crown Prince Mohammed bin Salman so craves). * SO WHAT? * In short, I think that hyping the shares up for the aftermarket is eminently possible for a company that is only floating 1.5% of its shares. If you assume that a third of that 1.5% is going to be locked up with retail investors via incentives that they will get more shares if they don’t sell for 180 days and that institutional investors will have been strongly encouraged not to sell either, there’s only a miniscule free float left over that people can actually trade. This still doesn’t disguise the fact that many do not believe it is worth anywhere near the $2bn mark apart from the Crown Prince, but HE will say that the float is a success because it priced at the top of the range and the aftermarket price will be squeezed upwards (at least for the near term) due to shortage of shares being traded. It just goes to show what you can achieve if you have tons of money and can threaten people effectively into doing what you want 😬

Then in Chevron, facing fossil fuels glut, takes $10billion charge (Wall Street Journal, Christopher M. Matthews and Rebecca Elliott) we see that America’s #2 oil company is making its largest asset write-down in years due to an abundance of oil and gas. The company also said that it would restructure to focus on fewer prospects as natural gas prices stay stubbornly low and lowered its commodity price forecasts. * SO WHAT? * Given Chevron’s size, it is likely that other oil companies will be prompted to look at their own portfolios with a view to trimming here and there.  Shale gas producers will be particularly adversely affected as oversupply has led to consistently low prices. This writedown follows other recent writedowns from the UK’s BP in October and Spain’s Repsol last month as the economics of many projects have become less compelling. OPEC’s decision to make production cuts last week would seem to confirm the overall sentiment.

Ted Baker bosses resign and M&S gets a new supply chain chief…

Ted Baker bosses quit as it warns of profits plunge (The Guardian, Sarah Butler and Julia Kollewe) highlights more bad news from the fashion retailer as it announced its fourth profits warning in a year along with the departure of its chief exec and chairman. The news prompted a share price drop of 35% initially, but ended the day down by 13%. The share price has fallen by 90% in less than two years. * SO WHAT? * Given that founder Ray Kelvin still has a 35% slice of the company he resigned from, due to allegations of inappropriate workplace conduct, you can see why there is increasing speculation that he will buy the company and take it private to sort out its problems away from investor gaze. It’s not clear whether he can do this alone (even taking into account the current weak share price), but the price just seems to keep getting cheaper by the day. If you want to catch up on the story so far, How fashion brand lost its way after the ‘hugs’ furore (The Times, Ashley

Armstrong) does a good job but, in a nutshell, eccentric founder Ray Kelvin resigned amid allegations of inappropriate conduct with his staff and since then the company has collapsed. His longtime lieutenants failed to arrest the slide which came to a head last week when the company’s new CFO, Rachel Osborne, discovered a £25m hole in the accounts that is now being investigated by third parties – and the CEO and chairman have now been made to pay with their jobs. The drama continues, but without a leader to steer the company through choppy waters…

Marks seeks new spark to light up clothing arm (The Times, Ashley Armstrong) heralds a new hire from Adidas, Paul Babbs, to head up its supply chain as part of efforts by M&S to sort out its clothing division. This comes three months after it sacked its previous supply chain chief, Gordon Mowat, and chief exec of clothing, Jill McDonald for a massive error that resulted in embarrassing shortages of a key jeans line that was popularised by a Holly Willoughby ad campaign. Hopes are high, given Babbs’ reputation at Adidas, but there is still work to be done here. At least it seems to be a step in the right direction.

M&C Saatchi loses Maurice and property funds see huge outflows following the M&G debacle…

Maurice Saatchi quits M&C as accounts scandal takes fresh twist (Financial Times, Alex Barker) heralds more bad news for the ad agency following the recent accounting scandal at M&C Saatchi as Maurice, the M of M&C, and three independent directors resigned over disagreements over how to reform governance at the company. The drama continues…

Investors pull £138m out of property after M&G block (Daily Telegraph, Michael O’Dwyer) highlights the knee-jerk reaction to M&G’s recent decision to suspend trading on its property funds. Apparently, investors pulled a whopping £140m out of property funds in the three days following the news as M&G’s move highlighted increasing concerns over anything related to retail property. Since last week’s announcement, sell orders have made up 80% of trading in property funds 😱

And finally, in other news…

Given that we are now firmly in the approach to Christmas, I thought that you’d find 11 Unusual Christmas Traditions Around the World (Mental_Floss, Erika Wolf https://tinyurl.com/rdy3wgq) quite interesting and when I saw Die Hard On Ice parody video released and it’s nothing if not Christmassy (Metro, Jamie Tabberer https://tinyurl.com/sjep2zc) I thought I just had to include it! If only it were true…

1. In MACRO & OIL NEWS, Japan’s economy grows and Tullow Oil has a shocker
2. In CONSUMER/RETAIL NEWS, UK employers pause, Prosus ups its offer for Just Eat and we take another look at Tesco’s potential disposal
3. In INDIVIDUAL COMPANY NEWS, Valeo’s chief thinks China’s car market has bottomed out and Amigo’s founder returns
4. In OTHER NEWS, I bring you a cat hotel and a disco for toddlers…

So Japan’s economy grows and Tullow Oil has a nightmare…

Japan economy grows faster but fears of a slowdown intensify (Financial Times, Robin Harding) cites the latest official figures from Japan’s cabinet office which show that it raised its projected annualised GDP growth rate from 0.2% to 1.8% due to stronger business investment. This would suggest that there was some decent growth momentum going on as the country approached a rise in its consumption tax rate (Japan’s equivalent of VAT) from 8% to 10% on October 1st. This tax hike is expected to hit consumer spending. * SO WHAT? * This all sounds positive, but there is a risk here that consumer spending could fall off a cliff in the fourth quarter as consumers may have brought forward their spending to beat the tax rise. This is certainly a short term concern, but given the cumulative negative impact of the consumption tax rise, the ongoing US trade war and potential slowdown after next year’s Tokyo Olympics, many will probably be hoping

that PM Abe’s recent bumper package of stimulus measures will start to kick in from the middle of next year.

Tullow shares plummet 70% after group cuts production outlook (Financial Times, David Sheppard and Myles McCormick) highlights a massive share price fall for the FTSE250 oil and gas explorer as it cut its production outlook drastically (by a third!) and announced the departure of its chief exec and head of exploration. The share price is now at its lowest level since 2000 as the former stock market darling has suffered from a prolonged period of oil price weakness. * SO WHAT? * The company will have to find a way to reduce its medium-term debt and there are rumblings among investors that Tullow Oil will have to ask investors for more money or sell off at least part of the business. Tullow Oil: downhole (Financial Times, Lex) suggests that the company’s troubles started long ago and that the production outlook downgrade is just the latest disappointment in a long line of disappointments. It says that although the company’s cash position is actually not too bad at the moment, the best shareholders can hope for is a bid as there are still risks to the downside.

UK employers slow hiring, Prosus increases its offer for Just Eat and we look at the pro’s and con’s of Tesco selling off its Asian business…

Hiring confidence among employers at seven-year low (The Times, Ben Martin) cites a quarterly study by Manpower which shows that hiring intentions for the first quarter of next year have fallen to their weakest rate since 2012, when the UK was still recovering from the financial crisis. London was the worst as the report showed that more companies were expecting to cut employee numbers rather than bolster them. * SO WHAT? * This is notable because it is the first time London has been in negative territory since 2010 and Chris Gray, director of Manpower UK, said that in the past “where London leads, the country often follows”. The usual suspects of a slowing global economy, general election-related jitters and Brexit uncertainties were the unsurprising reasons behind employers’ increasing reticence to hire. This latest report echoes similar conclusions to those found in recent releases from the Recruitment and Employment Confederation and the Office for National Statistics. The general election uncertainty thing will clearly be resolved soon enough – although things could get worse if there is a hung Parliament as no-one will be able to implement their policies.

In Just Eat: Prosus ups offer to £5.1bn in Takeaway.com battle (The Guardian, Julia Kollewe) we see that Naspers’ tech group offshoot Prosus is still keen on breaking up the agreed merger between Just Eat and Dutch rival

Takeaway.com as it raised its offer to £5.1bn (Takeaway.com’s offer is £4.8bn – all in shares, whereas Prosus’ offer is all cash). Just Eat’s board is considering the new bid, but is currently advising shareholders to take no action. On the other side, Prosus has until 1pm on December 27th to get a majority of shareholders to support its bid in order for it to win control. * SO WHAT? * There has been a lot of consolidation going on in the last few years in the food delivery segment as individual operators pursue scale in order to survive and grow amid an increasingly competitive field. Now this is a bit of a generalisation, but investors tend to prefer cash bids to share bids because it’s clean, puts a tangible value on the shares and usually gives them an exit option at a premium to the market price. I guess short term investors will be tempted by taking the money from the cash bid whereas longer term investors will be betting on future growth of the food delivery business. I expect this to drag on for a while longer!

OK, so it’s yesterday’s news, but Why would Tesco sell off its golden goose in Asia? (Daily Telegraph, Ben Marlow) takes a look as to why Britain’s #1 supermarket might be tempted to sell its lucrative Thai and Malaysian business, news of which sent Tesco’s shares up by 5% in trading yesterday. * SO WHAT? * Margins in Thailand are around 6% versus less than 3% in UK and Ireland and Tesco only recently talked about rolling out another 750 stores to take advantage of the increasing urbanisation of the population. Lotus is Thailand’s #2 supermarket with a 28% market share and its profits now count for 13% of Tesco’s total. As I said yesterday, it is an attractive asset – and could earn a high selling price, the proceeds of which could be very useful in strengthening its business back home. This could be too tempting to ignore, despite the obvious attractions of this rare overseas success for a UK supermarket.

Car parts maker Valeo thinks that the Chinese car market has bottomed out and Amigo Loans’ founder returns with an axe…

Valeo chief says China’s car market slump has bottomed out (Financial Times, Michael Pooler) heralds what could be an important development as the French car parts supplier – one of the biggest in the world – believes that China’s car market has bottomed out after a prolonged slump. The company had two profit warnings last year and said that there would be more redundancies to come in Europe but it saw an uptick in this third quarter with a 5% rise in like-for-like equipment sales in China. * SO WHAT? * This could obviously be a one-off, but if it becomes a trend it would be a very welcome one from an industry that has become accustomed to bad news! I still think that there are underlying problems in Europe in terms of demand and consumer confidence but if China is actually making a turnaround then it may serve to mitigate sluggishness elsewhere.

Chief executive bids adios to Amigo as founder stages boardroom coup (The Times, Ben Martin) is a story that’s doing the rounds in many of this morning’s broadsheets. It highlights the return of the founder of Amigo, Britain’s #1 guarantor lender, after he ousted its chairman and chief exec, with the chair of the board’s remuneration committee also heading for the exit “at the first suitable opportunity”. The business that James Benamor founded gives out unsecured personal loans of up to £10,000 with interest rates of 49.9% to people with poor credit ratings who have a friend of family member acting as guarantor. * SO WHAT? * Benamor owns almost 61% of Amigo via his Richmond Group investment vehicle and he is clearly not happy with the share price as it has fallen to just 66.75p versus the £2.75 it traded at in June last year. After suffering from rising bad debts, slower loan growth and a crackdown by the Financial Conduct Authority on the guarantor industry as a whole it’s not surprising that he wanted to step in. The share price actually rose yesterday on speculation that Benamor would take the company private given how cheap it has become.

And finally, in other news…

Given all the stuff that’s going on at the moment, I thought I’d leave you with New cat hotel in Japan lets you watch kitties right outside your window for entire stay (SoraNews24, Casey Baseel https://tinyurl.com/ulrdqlc) and the decidedly feel-good Sunday Morning Fever? California toddlers hit the dance floor at Baby Rave (Reuters, Jane Ross https://tinyurl.com/tfuj3ac). Superb!

1. In MACRO NEWS, China exports falter and Greece cracks down on tax evasion
2. In TECH NEWS, China orders a clear-out of foreign PCs and software while Amazon and Facebook expand in New York
3. In RETAIL NEWS, UK shopper numbers fall and Tesco considers the sale of its Asia business
4. In OTHER NEWS, I show you how to improve your karaoke skills…

So China exports weaken and Greece tries to address rife tax evasion…

Sliding exports increase pressure on China (The Times, Callum Jones) cites the latest official state figures which show that Chinese exports have fallen for the fourth month in a row as the ongoing US-China trade war continues to bite. Shipments overall fell by 1.1% in November, but dropped by 23% to the US over the same time period. Although Trump disappointed investors by saying last week that it was possible that a trade deal wouldn’t be hammered out until after next year’s presidential election, he went on to say that current talks were going “very well”. As things stand, Trump has threatened to impose tariffs of 15% on an additional $160bn-worth of Chinese products – with a particular focus mobile phones, laptops, games consoles and toys. * SO WHAT? * Although Trump said in the past that trade wars are “good, and easy to win”, they have been damaging for both sides. I would have thought that Trump will be trying to find a way to get some kind of deal done in a reasonable time frame because if he doesn’t, tariffs will have time to filter down to prices to the consumer in the run-up to the presidential election next

year – and that’s not going to be universally popular with voters. The negotiations continue…

Greece goes digital in crackdown on rampant tax evasion (Daily Telegraph, Tom Rees) heralds a bold move by the new regime which says that Greeks will be hit by a big fine if they don’t spend at least 30% of their income electronically. If they don’t, they will be hit by a 22% fine on the difference. The government has projected that it will be able to raise over €500m per annum via this initiative in the world’s biggest shadow economy. * SO WHAT? * Tax evasion is (and has been for a very long time) rife in Greece. Many workers are paid in cash and the country also has one of the lowest rates of internet usage in the EU at 72%, meaning that some will find it difficult to meet the 30% threshold, even though they will be able to use debit cards, credit cards and ecommerce for their transactions. Tax evasion was estimated in 2016 to cost Greece up to €16bn every year via VAT or income tax fraud – so it will be interesting to see what happens. Surely, everyone will just under-report their earnings, no? It’ll be interesting to see how this goes – but if the government can get its people to actually pay the taxes that they are supposed to, then that would be a start. New PM Kyriakos Mitsotakis is simultaneously trying to cut taxes to workers and businesses, so I guess what he is taking with one hand he is trying to give with the other.

China orders an IT crackdown and Amazon and Facebook sign up to New York office space…

In Beijing orders state offices to replace foreign PCs and software (Financial Times, Yuan Yang and Nian Liu) we see that Beijing has sent a directive to all government offices and public institutions to take out all non-Chinese computer equipment and software within three years, echoing similar moves by the US and others. The directive specified that the tech swaps to domestic equivalents should take place to the following timetable: 30% in 2020, 50% in 2021 and 20% in 2022, hence the policy’s nickname of “3-5-2” (perhaps snappier than 30-50-20??). This is all part of a plan for government agencies and critical infrastructure to use “secure and controllable” tech, as per the Cyber Security Law of 2017. * SO WHAT? * This will be a big blow to the likes of HP, Dell and Microsoft who generate, according to Jefferies analysts, around $150bn of revenues per year from China – although it has to be said that the lion’s share of this is from private companies, not state entities. Having said that, many say that it will be difficult for local alternatives to replace what’s currently on offer but I guess that the incentive to change that has just got one hell of a lot bigger. Local operating systems like Kylin OS, are pretty limited and it’s also trickier than you’d

think to define “domestically made” as Lenovo, for instance, is Chinese-0wned and assembles a lot of its products in China, but its processing chips are made by Intel and its hard drives by Samsung. You do wonder what the longer-term implications will be, however, and whether the directive will spread to the private sector. Can you imagine the nightmare of transferring over all those excel spreadsheets en masse?? There must be a business opportunity there…

Amazon leases new Manhattan office space, less than a year after HQ2 pullout (Wall Street Journal, Keiko Morris) heralds a big move by tech giants Amazon and Facebook, who have signed up for new office space in New York City less than a year after Amazon abandoned much-hyped plans to build its second major HQ there (a project known as “HQ2”). Amazon has signed a new lease for 335,000 square feet and Facebook is in talks to lease almost double that nearby. * SO WHAT? * This is a particularly interesting move by Amazon considering that there are no special tax credits or inducements involved. The company was offered up to $3bn in tax incentives to create up to 25,000 new jobs in the “HQ2” project, which it subsequently abandoned. Tech, advertising and media companies have taken a big share of Manhattan office leasing space this year, according to real estate services firm Newmark Group. Given that the average annual tech sector professionals earn way over $100,000 a year, their influx is expected to boost jobs in real estate, restaurant and personal services (e.g. dog walkers, fitness trainers etc.) sectors.

UK shoppers numbers weaken and Tesco considers selling its Asian business…

Rainy November adds to high street gloom as shopper numbers fall (The Guardian, Jasper Jolly) cites the latest figures from data company Springboard which says that the number of high street visitors fell by 4.3% last month versus November 2018. This is twice as big a fall as that experienced at retail parks, who are trying to stem the decline by doing things like adding more restaurants to their spaces. Traditional retailers with actual shops continue to suffer, although the British Retail Consortium published figures last week that showed a small uptick in sales. Fun fact: online retail sales made up 19.2% of all retail sales in October 2019, according to the Office for National statistics – and it continues to rise.

Tesco mulls sale of Asian empire for up to $9bn (The Times, Callum Jones, Ashley Armstrong) highlights the possibility of Tesco offloading its Thai and Malaysian

businesses “following inbound interest” although the company reiterated it was only in the early stages. To give you an idea of the scale of a potential sale, J Sainsbury and Wm Morrison are valued at about £4.9bn each. * SO WHAT? * If a sale did go ahead, it would signal the latest retreat from its international business as it has withdrawn from the US, South Korea and Japan in the last ten years. Having said that, it has been operating for about twenty years in Thailand via its ownership of the Lotus chain of hypermarkets and convenience stores and Tesco execs recently expressed hopes for expansion. Having said that, there is always a price for everything so this may yet prove to be outgoing (as in, he is leaving – not that he’s a fun guy 😁) chief exec Dave Lewis’ most lucrative disposal yet. FWIW, I tend to think that overseas businesses of UK supermarkets tend to over-promise and under-deliver and get disposed of at some point down the line as supermarkets are always a competitive area pretty much wherever you go. If Tesco DID sell up, though, what would it do with the money? I think it should invest in making its domestic business more compelling as $9bn is a decent chunk of change but I’m sure investors will whinge on and appeal for share buybacks. Maybe a bit of both, perhaps, to keep everyone happy?

And finally, in other news…

We are well and truly in the midst of office Christmas party season at the moment, so I thought I’d try to help you by giving you the official low-down in How to improve your singing at karaoke with a deceivingly simple trick (SoraNews24, Eli Pang https://tinyurl.com/v5qrfvf). This is advice from NHK (Japan’s equivalent of the BBC) so you know it’s going to be good 😜

1. In MACRO & OIL NEWS, Japan gets a chunky stimulus, Germany’s SPD decides not to rock the boat after all, Europe weighs in on the digital services tax and Saudi Aramco aims for a top price
2. In CAR-RELATED NEWS, GM and LG work together on a battery venture, UK new car sales weaken and Aston Martin gets a boost from bid speculation
3. In INDIVIDUAL COMPANY NEWS, Alphabet’s new chief suggests a reining in of “moonshots”, Glencore faces bribery allegations and Metro Bank suffers backer abandonment
4. In OTHER NEWS, I bring you some amazing snow and ice hotels and some Christmas puzzles…

So Japan gets a big stimulus, Germany’s SPD calms its threats on the coalition, digital tax get European backing and Saudi Aramco aims for the top end…

Shinzo Abe launches $121bn stimulus package for Japan (Financial Times, Robin Harding) highlights Japan’s first fiscal stimulus since 2016 (and one of the biggest since the 2008-2009 crisis) with a bigger-than-expected package to repair damage from recent typhoons, improve infrastructure and invest in new technologies. This is an effort by Japan’s PM to get Japan on the growth track amid the global economic slowdown, recent consumption tax rise and potential slowdown after next year’s Olympics. * SO WHAT? * This is a significant amount and signals a return to the spending that characterised Abe’s early years in his current term (he was prime minister briefly in 2006 as well!). It’s interesting to see that some sources suggest that $2bn of this package will be allocated to R&D in 6G tech and “moonshot” projects particularly in biomedical research.

Germany’s SPD rows back from threat to quit Merkel coalition (Financial Times, Tobias Buck) shows a major softening in stance from the party’s new leaders following concerns that they would walk away from the fragile coalition with Angela Merkel’s CDU. This is a major departure from the anti-coalition chat that powered the recent leadership campaign of Norbert Walter-Borjans and Saskia Esken where they had said they would give Merkel & co an ultimatum to renegotiate the coalition agreement or they would walk. * SO WHAT? * This just goes to show the BS politicians will talk in order to win an election 😂.

Anyway, this is probably good for Germany in that the prospect of more leadership instability in Europe’s most important economy has now receded – at least for the time being.

Following on from Trump’s recent threats to retaliate over the proposed imposition of a digital services tax, Brussels steps up pressure on US over global digital tax deal (Financial Times, Sam Fleming, Jim Brunsden and Chris Giles) shows that the EU said it would take up the baton on the digital services tax if the OECD’s efforts failed to produce anything (they have already failed before, so they may well do again). * SO WHAT? * The OECD has the rather unenviable task of trying to corral 135 countries in ongoing tax discussions, but this latest commitment to see the thing through by the new EU economy commissioner Paulo Gentiloni will irk the Americans who were probably hoping that the OECD would fail. Whether the EU can do any better than the OECD is a moot point, but at least it means that there is slightly more of a chance of getting something done.

Saudi Aramco raises $25.6bn in world’s biggest IPO (Financial Times, Anjli Raval, Simeon Kerr and Phil Stafford) shows that state-owned oil company Saudi Aramco has priced its IPO at the top end of the price range, valuing the company at $1.7tn, which would make it the biggest publicly quoted company in the world. Apparently, advisers were thought to have urged a pricing in the middle of the range rather than the top end to encourage more activity in the immediate aftermath of the flotation, but that advice was obviously ignored. The money raised by this flotation of only 1.5% of the company ($25.6bn) will be more than all the companies that have had IPOs this year on the Nasdaq alone! Separately, OPEC started a two-day meeting yesterday and the expectation is that oil production will be cut to support the oil price – and prices moved up in anticipation.

GM & LG work together on new batteries, UK new car sales continue to worsen and Aston Martin perks up on bid rumours…

GM, LG to spend $2.3billion on venture to make electric car batteries (Wall Street Journal, Mike Colias) heralds a joint venture between General Motors and South Korea’s LG Chem to build one of the world’s biggest battery plants in Ohio, with construction scheduled to begin in the middle of next year. The two companies will co-develop and assemble battery cells to be used in GM’s vehicles. * SO WHAT? * The EV battery-producing factory will rival Tesla’s Nevada gigafactory in terms of size and its construction will represent the latest move by a car manufacturer to improve its technology for electric vehicles. VW is investing in a joint venture with a Swedish start-up on battery production and Toyota Motor signed a battery production joint venture with Panasonic at the beginning of this year. No doubt these sorts of deals will continue as the need to sort out battery supplies becomes increasingly urgent.

New car sales crash but demand for greener vehicles increase (The Guardian, Julia Kollewe) cites the latest

figures from the Society of Motor Manufacturers and Traders, which show (yet again) that the sale of new cars in the UK fell last month while the share of hybrid and electric vehicles sold reached new highs. It’s all due to the same old reasons: weaker confidence stopping the purchase of big ticket items like cars, economic uncertainty and the ongoing downfall of diesel. As usual, the SMMT’s chief exec Mike Hawes stated the bleedin’ obvious when he said “there is still a long way to go for [electric vehicles] to become mainstream and, to grow uptake further, we need fiscal incentives, investment in charging infrastructure and a more confident customer”. The man is clearly a genius.

Billionaire F1 fan eyes up stake in struggling Aston Martin (Daily Telegraph, Alan Tovey) heralds a bit of excitement for a change for the embattled sports car maker as Canadian billionaire Lawrence Stroll (that guy who bought the Force India F1 team and made his son the driver 😂) is thought to be preparing to make a big investment in Aston Martin, which sent the share price up by 18% yesterday. * SO WHAT? * It’s all rumours at the moment, but everyone loves a good rumour. Aston Martin floated last year at £19 a share – and even with the prospect of a bid from Stroll, the shares were trading just shy of £6. If this rumour turns out not to be true, expect Aston’s share price to fall through the floor again.

Alphabet will probably indulge in fewer “moonshots”, Glencore flirts with trouble and Metro Bank loses support…

Google management shuffle points to retreat from Alphabet experiment (Wall Street Journal, Rob Copeland) considers the future of Alphabet under Sundar Pichai after co-founders Larry Page and Sergey Brin take a backseat. Basically, it would suggest that there will be more focus on making money and less on vanity/fantasy projects. * SO WHAT? * My overall takeaway from this is that by making Pichai head honcho of Alphabet, it is almost an admission of the company growing more mature as it will no doubt shed some of the more expensive non-core businesses to focus on cloud computing and healthcare.

In Glencore faces Serious Fraud Office enquiry over suspected bribery (The Times, Alex Ralph) we see that the SFO has started an investigation into the company over “suspicions of bribery”.  Shares in the mining and commodities giant fell by 9% on the news and focus is likely to centre on the firm’s dealings with Dan Gertler, an Israeli diamond tycoon and former partner in the

Democratic Republic of Congo who is himself under investigation related to bribery and money laundering in Congo, Nigeria and Venezuela. Glencore is also being investigated for corruption by the US Commodity Futures Trading Commission as well as fellow trading giants Vitol and Trafigura. * SO WHAT? * This is serious but it’s not the first time that a commodities giant has been involved in bribery – and it certainly won’t be the last! The fact is that these companies operate in some very poor and corrupt countries which would be impossible to do business in without bribing officials/regimes etc. No doubt there will be a big fine involved ultimately, but Glencore will still carry on.

Following on from the CEO’s recent departure, Metro Bank investors cut losses (Daily Telegraph, Lucy Barton) shows that hedge fund investor Steve Cohen has cut back even further on his holding in the challenger bank. He owned a 9.8% stake until recently, which he has sold down to 5.8% in the last two weeks. Other American investors have also sold down their stakes: Wasatch Advisors went from 4.4% to 2.8% and Spruce House Partnership cut from 6.7% to 5.9%. Ouch. * SO WHAT? * It’s never great to see long term share holders sell down their stakes when the share price has already cratered as it suggests a lack of confidence from the backbone of the shareholders. Whoever comes in to fill the roles of chairman and chief exec will clearly have a lot of convincing to do…

And finally, in other news…

I thought I’d leave you today with a bit of inspiration in The world’s coolest ice and snow hotels (Stars Insider, https://tinyurl.com/tux9kbj) and something Christmassy in Can you find the Queen’s corgi? Challenge to find Her Majesty’s canine in the festive scene will leave puzzlers scratching their heads! (Mailonline, Bridie Pearson-Jones https://tinyurl.com/yxynpxw4). I hope you have a great weekend!

1. In TECH NEWS, digital services taxes set to go ahead despite Trump’s threats and Slack raises its forecasts
2. In TROUBLED COMPANY NEWS, Expedia loses its CEO and CFO, Metro Bank’s CEO departs, M&C Saatchi’s share price halves on an accounting scandal and M&G suspends its £2.5bn property fund
3. In RETAIL NEWS, Boohoo.com’s founders look to cash in, Clintons gets rescued and Quiz is looking questionable
4. In OTHER NEWS, I bring you an annoying puzzle…

So digital taxes are set to go ahead despite Trump’s threats and Slack lifts forecasts…

Countries vow to press ahead with digital taxes despite US threat (Financial Times, Tim Bradshaw) shows that countries including the UK, Canada, Austria and Indonesia are among those pressing ahead with plans to impose taxes on US tech companies despite threats of retaliation from Trump. There are two really good charts in this article that gives you a per country breakdown of existing and proposed digital services taxes from around the world as momentum on this seems to be building. * SO WHAT? * It’s imperative for something like this to be adopted as widely as possible IMO because only having a few countries do it just results in threats by the powerful digital giants to take their business (and jobs) elsewhere. There was an attempt in the EU to impose a Europe-wide 3% tax on US internet groups, but it failed last year because Sweden, Denmark and Ireland just didn’t have the balls to go through with it. Admittedly, this is easy for me to say – there are obviously a lot of jobs on the line on something like this and the companies concerned would argue that the jobs they create enrich the government via income taxes. Discussions on a broader digital services tax are ongoing currently at the OECD and there are hopes of a breakthrough that will negate the need for a piecemeal

approach by individual countries – and the fact that Trump has threatened to impose 100% taxes on French goods for doing this should give the talks more urgency. In the meantime, I expect more threats to come from the US, which is arguing that its companies are being targeted unfairly.

Slack raises outlook after winning new corporate customers (Wall Street Journal, Sarah E. Needleman and Kimberly Chin) shows that the workplace-software maker has raised its full year forecasts as it added more big corporate clients over the latest quarter. It has a major competitor in the form of Microsoft, which supplies its competing product – Teams – to its massive Microsoft 365 customers for free. Slack now has over 50 customers who generate at least $1m in annual revenues, which is a sizeable increase from the 30 or so it had this time last year. * SO WHAT? * It’s great that Slack is making progress, but when Microsoft’s Teams currently boasts over 20 million active users – up from over 13 million in July – versus Slack with 12 million daily users in July and 10 million in January you can see what it is up against. I would venture that many bigger, more established companies will be more tempted to stay with what they’ve always known and that Slack will find more success with smaller, younger companies that don’t have so much IT baggage. Also, with Microsoft being able to plug into a massive installed user base with a FREE product, I would imagine that Slack will hit a ceiling. Still, it seems that there will be growth enough for now!

Expedia and Metro Bank lose bosses, M&C Saatchi is the latest to succumb to an accounting scandal and M&G shuts the exit doors…

Expedia CEO, CFO ousted in clash with Barry Diller, Board (Wall Street Journal, Patrick Thomas) highlights problems at the travel company as senior bosses were the casualties after arguing with Chairman Barry Diller over where to take the company. Expedia’s brands include Hotels.com, Orbitz, Travelocity, Hotwire and CarRentals.com and the company’s share price has taken a battering recently – down 12% so far this year until Tuesday, but they dropped by 27% in one day last month after reporting poor third quarter results. * SO WHAT? * It’s unusual for such senior management to leave at the same time, but it seems that online travel companies are generally finding life tough after Google redesigned its hotel-search function which meant that they aren’t getting as many free links on Google search pages. Whoever takes up the senior roles will certainly have a lot of work to do in order to stay on top of an evolving industry.

Metro Bank in chaos after boss follows founder Hill out door (Daily Telegraph, Lucy Barton) heralds the departure of Metro Bank’s CEO shortly after founder and chairman Vernon Hill stepped down. They are both casualties of a disastrous year for the company that kicked off with an admission that it had misclassified its loan book. The share price has fallen by almost 96% since its 2018 peak. * SO WHAT? * Craig Donaldson’s departure reflects a U-turn by the board who didn’t accept his resignation in the immediate aftermath of the scandal. Still, given its scale, it is hardly surprising that senior management had to take ultimate responsibility. The company really needs to move forward now, so a race to get some top management who like a challenge is well and truly on!

Accounting crisis cuts value of M&C Saatchi shares in half (Daily Telegraph, Christopher Williams) shows an advertising agency in crisis as it issued a profit warning

and the damning results of a forensic review of its accounts which revealed that it had been overstating its performance for up to five years 😱. The share price fell by a whopping 46% as investors digested the news. * SO WHAT? * The company is now worth less than £74m – quite a lot less than the £320m it was worth before the dodgy accounting was brought to light in August. In what is probably one of the finest ever examples of acting once the horse has bolted M&C Saatchi’s chief exec David Kershaw said that “We have started implementing processes…to prevent such issues arising again”. This is serious stuff and I wonder whether the company will now be vulnerable to lawsuits from angry shareholders who will allege that they bought the shares under false pretences. For anyone in the market to buy a well-known ad agency, this one’s price is looking more and more like a bargain (but clearly there will be baggage involved). Will someone like WPP snap it up to at least get access to its client base??

M&G suspends £2.5bn property fund on Brexit and retail woes (Financial Times, Judith Evans and Siobhan Riding) shows that the fund manager has decided to stop trading in its property fund as Brexit concerns and crisis in the retail sector has prompted investors to pull their money out in increasing numbers. It has decided to take this drastic action because withdrawals are now reaching such a level that they can’t sell properties fast enough to return the money. The dealing suspension is temporary, but there was no time limit put on it. * SO WHAT? * I think that this could well result in an avalanche of investor requests to pull their money out from other property funds on fears that they will potentially take the same action as M&G. Mind you, M&G’s fund is particularly exposed to the ailing retail sector (about 40% of its portfolio is in retail property according to recent figures), so it might not be wise to sell off ALL property funds. There will be investors out there who will just want to get out of property generally, so there may be some opportunities to be had in buying funds that DON’T have as much retail property exposure. Brave/optimistic investors will either hang on and/or invest in other property funds if they are of the opinion that next week’s election result will bring some “certainty” back to the market. The current suspension will be monitored on a daily basis and then reviewed every 28 days.

Boohoo founders look to cash in, Clintons gets rescued and Quiz is in trouble…

In a quick scoot around the retail sector news today, Boohoo founders to sell shares (The Times, Ben Martin) highlights founders Mahmud Kamani and Carol Kane’s intent to sell off shares worth up to £150m in the company they founded in 2006 as its shares hit record highs. This will leave them with a stake of at least 13.1% and 2.7% respectively. * SO WHAT? * Good on ’em. Usually, mass sell-offs like this set off alarm bells for investors (is there something wrong with the company that we don’t know about??) but it seems like things are going in the right direction for the company and why not cash in on something that you built up into a behemoth worth £3.5bn?! 

Clintons seals rescue deal that saves 2,500 jobs (The Guardian, Sarah Butler) will give cause for sighs of relief for employees as the card retailer has been bought out of

administration. This means that all jobs will be safe, stores will continue to trade and debts owed to suppliers will be wiped out. It also resets leases, meaning that the company will be able to renegotiate rents or pull out of stores going into next year. * SO WHAT? * Sighs of relief all around, but the company is still not out of the woods just yet. With its more successful rival Card Factory constantly breathing down its neck and a continued tight market, the pressure will continue. However, it has survived in the meantime, which is a victory of sorts…

Then in Quiz warns of store closures after first-half loss (The Guardian, Mark Sweney) we see that fashion brand Quiz announced disappointing sales figures for the year that sent its share price down by 16% initially. It blamed weakness on ongoing tricky conditions on the high street and it is reviewing its current UK estate of 246 UK stores and concessions. * SO WHAT? * Falls in revenue at the company’s high street stores were widely expected, but investors were not impressed with their sluggish online revenues. Christmas trading really will be of utmost importance. I suspect that a serious cull of their shops will be in the offing in the not-too-distant future…

And finally, in other news…

I thought I’d leave you today with the annoying Can you spot the clock that’s telling a different time than the others? (mailonline, Chloe Morgan https://tinyurl.com/vwlgjt2). Apparently the record for doing this is 9 seconds. Can you beat it??

1. In MACRO NEWS, Trump pours cold water on an imminent China trade deal, insults President Macron and promises not to touch the NHS. Boris sticks with his digital tax, Labour’s nationalisation plans come under fire and Brazil’s economy surprises on the upside.
2. In TECH NEWS, Alphabet’s top dogs step down and Epic looks to the future
3. In INDIVIDUAL COMPANY NEWS, UniCredit announces job cuts
4. In OTHER NEWS, I bring you a fascinating fact…

So Trump vents his opinions on all sorts on his London trip, Labour’s plans are criticised and Brazil’s economy surprises on the upside…

Trump says China-US trade deal may not happen until 2021 (The Guardian, Phillip Inman) shows Trump pouring cold water on the idea that a trade deal with China is about to happen any time soon. He said at the Nato summit in London yesterday that “in some ways, it’s better to wait until after the election for the China deal. Bit they want to make a deal now”. * SO WHAT? * Stock markets around the world fell on the back of these comments, but I just think that remarks like this are all part of the negotiation process. Chinese officials have been saying recently that a first phase deal was imminent, but no-one, apart from the negotiators themselves, really knows what the actual situation is. Neither side wants to be blamed for the breakdown of any talks – so they will always say things like this to make the opposition look bad or to put pressure on them.

In other news about what Trump has been saying on his current UK trip, Trump and Macron clash as Nato leaders gather (Financial Times, Michael Peel and Laura Pitel) shows that the two leaders clashed over Syria, Turkey and the future of Nato and Donald Trump says he wants ‘nothing to do with’ NHS (Financial Times, Jim Pickard) addresses concerns about the NHS being targeted in some way as part of a post-Brexit US-UK trade deal. The fear is that US drug companies may demand higher prices for their drugs in the UK and greater access to the NHS.

Meanwhile, Johnson risks Trump ire with digital tax pledge (Financial Times, George Parker, Chris Giles and James Politi) shows the PM sticking to his promise to impose a digital sales tax, which could annoy Trump, as it will target big US companies like Google, Amazon etc. in trying to make tech companies pay tax in the countries where they operate rather than shuffle money around between tax havens.

Labour’s election promises came under fire in UK utility investors prepare to fight with nationalisation in prospect (Financial Times, Jonathan Ford and Gill Plimmer) as lawyers predict that investors in UK utilities and telecoms will fight against them and Labour nationalisation risks years of disruption, IFS says (The Guardian, Larry Elliott) highlights the criticisms of Labour’s plans from the Institute for Fiscal Studies (IFS) think tank. The IFS warned that Labour’s proposed plans for mass-nationalisation would be too expensive and too complicated and recommended instead to tighten regulation. Unsurprisingly, shadow chancellor John McDonnell rejected this saying that “Labour’s proposals for nationalisation will enable us to meet our decarbonisation targets all the sooner”.

Elsewhere, Brazil’s economy grows faster than expected in third quarter (Financial Times, Bryan Harris and Andres Schipani) shows that the country’s economy actually grew by 0.6% in the third quarter, coming in above analyst expectations and giving some hope of economic recovery, * SO WHAT? * This will be good news for Brazil’s policy makers as they try to revitalise what has been an ailing economy by embarking on a major programme of deregulation and privatisations. They will take this to heart for now, but focus will probably ow turn to interest rates, which hit record lows last week.

Alphabet’s top dogs step down and Epic Games aims for a future after Fortnite…

In Google’s co-founders Page, Brin give up management roles (Wall Street Journal, Rob Copeland) we see that co-founders Larry Page and Sergey Brin are to step down from the day-to-day management of the company they founded in a garage in 1998 and hand over control to current Google CEO Sundar Pichai. * SO WHAT? * The two have been toning down their involvement over the years, but the move is a surprise. They will remain on Alphabet’s board and will still control a majority of the voting power, so I wouldn’t expect much to change. It’s just a historic moment for the company!

Epic funnels ‘Fortnite’ cash into boosting games platform (Financial Times, Tim Bradshaw) looks at Epic Games’ novel manoevering in anticipation of life after Fortnite – it is to make its proprietary gaming platform, Unreal Engine, available to other developers in return for a cut of the next hit game. Fortnite is still generating massive amounts of cash but it is expected that earnings will tail off eventually. Unreal Engine is free to use at first but will take a 5% royalty fee for any games that are built using its toolkit. * SO WHAT? * I think this is really exciting because Unreal Engine and rivals such as Unity Technologies bring the capabilities of big Hollywood studios and major games publishers to a wider base of creatives. I often find that many games developers tend to dwindle into obscurity once their massive hit becomes yesterday’s news, so Epic Games’ strategy to use Fortnite’s cash to buy up companies to beef-up its toolkit is a very sensible idea.

UniCredit makes some bold announcements…

In UniCredit plans 8,000 job cuts and first share buyback in a decade (Financial Times, Stephen Morris and Alice Woodhouse) we see that Italy’s biggest lender is taking drastic measures as part of a four-year strategic plan unveiled by its chief exec yesterday. They will also involve 500 branch closures in an effort to save €1bn of costs in

Western Europe. * SO WHAT? * I think the company is to be applauded for announcing some important moves to get it back on track. There had been speculation of the bank merging with other European banks such as Commerzbank or Societe Generale, but it seems that the CEO is now rejecting that course of action in favour of share buybacks. If the share buyback gets approval from the regulator, it may prompt other banks to follow suit.

And finally, in other news…

As you know, Watson’s Daily is all about learning. So that’s why I was intrigued by The Ingenious Reason Medieval Castle Staircases Were Built Clockwise (Mental Floss, Ellen Gutoskey https://tinyurl.com/voahawq). Well I never!

1. In MACRO NEWS, Trump talks tariffs on Argentina, Brazil and France, Chinese manufacturing gets a surprise uplift and UK manufacturing cuts jobs
2. In RETAIL NEWS, the UK high street has an uptick while Ted Baker has a shocker
3. In INDIVIDUAL COMPANY NEWS, UK motorists demand compensation from VW and Nomura’s new chief has his work cut out
4. In OTHER NEWS, I bring you Disney’s most streamed song…

So Trump rattles more cages, Chinese manufacturing shows surprise growth and UK manufacturing cuts jobs…

Trump to levy tariffs on Brazil, Argentina (Wall Street Journal, Josh Zumbrun, Paulo Trevisani and Amrith Ramkumar) shows the US president in typically aggressive mode as he announced that he would be raising tariffs on steel and aluminium imports from the two countries. He accused them, on Twitter of course 😜, of “presiding over a massive devaluation of their currencies, which is not good for our farmers” and put tariffs up with immediate effect. He also ramped up the rhetoric with France in Trump administration proposes tariffs against $2.4bn of French goods (Wall Street Journal, Josh Zumbrun and Noemie Bisserbe) as he threatened to slap French imports with 100% tariffs in retaliation for them imposing a new digital services tax, which he says unfairly targets US tech companies. The 3% tax applies to revenues that tech companies earn in France from such things as targeted advertising or running a digital marketplace. The Americans argue that this focuses on areas where US companies are particularly strong and won’t affect French ones in the same way. * SO WHAT? * Everyone was taken by surprise by Trump’s moves on Argentina and Brazil, especially considering that they are not seen to be countries who have been manipulating their currencies, as the president suggests. When the US started imposing tariffs globally of 25% on steel and 10% on aluminium in 2018, Argentina and Brazil managed to get exemptions. Many observers say that the currency weakness has not been manufactured – it has been due to slow economic growth and political upheaval and now both countries are scrambling to try to get Trump to change his mind. As for France, Finance Minister Bruno Le Maire remained defiant about Trump’s threats saying that “We will never, never, never abandon our will to tax fairly tech giants” on what has been nicknamed the “GAFA” tax (Google, Apple,

Facebook, Amazon). The American side says that, in addition to GAFA, Groupon, eBay, Match Group (owner of Tinder) and Expedia would also be affected. It’ll be interesting to see what happens here as France is one of the first countries to impose a digital services tax in Europe due to American giants paying a pittance versus what they earn. More will follow, but the Americans are urging other countries considering taking the same action to do it within an OECD framework (presumably because this will take absolutely ages and will give US companies time to shift strategy/operations). I think the only way of imposing a digital services tax effectively is to charge the same rate across the board in as many countries as possible. The risk of each country doing it themselves is that it will leave them open to tech companies moving their operations (or threatening to move their operations) away to a more receptive country – and taking their jobs with them. I suspect this will be a theme for quite some time to come.

China shows surprise growth spurt (The Times, Callum Jones) highlights unexpectedly strong factory activity as manufacturing output rose in November to its highest level since December 2016, according to the Caixin/Markit purchasing managers’ index (PMI) for manufacturing. Some observers saw this as a one-off and not a trend (but the cynical side of me says that they were the ones who were predicting weakness and so are talking their own book 😜). * SO WHAT? * I think it’s advisable not to use PMI figures on their own because they are a survey. It’s better to use them as a general guide as to direction, but they should be backed up by hard figures in other data points. Still, I’m sure that the government will welcome such news coming into the end of a difficult year.

On the other hand, UK factories are laying off workers at fastest rate for seven years (The Guardian, Julia Kollewe) cites the latest IHS Markit/Cips figures which show that workers are being laid off at their fastest rate since September 2012 due to ongoing cuts to factory output. New orders fell for the seventh month in a row on tougher trading conditions and inventories that had been built up in anticipation of Brexit being run down. The gloom goes on.

There’s a glimmer of hope on the UK high street but Ted Baker’s shares fall in the latest scandal…

High street surges in Black Friday run-up (The Times, Philip Aldrick) cites the latest monthly release from the British Retail Consortium which shows that November’s adjusted year-on-year sales actually rose by 0.9% going into Black Friday. Electronics and clothing sales got a boost from discounts and recent cold weather but the latest figures from Barclaycard were less flattering as they showed consumer spending rising in November only at about half the rate of inflation. On the plus side, spending in bars, pubs and clubs was pretty solid. * SO WHAT? * This sounds a bit like last year when people seemed to spend more on “experiences” rather than things – and pubs/bars/restaurant chains like Mitchells & Butlers et al. did quite well as a result. Mind you, Barclaycard’s consumer confidence survey warned that “a third of Britons are planning to spend less than usual for Christmas this year”. I would suggest that the likes of Aldi and Lidl will continue to do well as consumers tighten up their spending over Christmas while bars, clubs, restaurants and cinemas will benefit from consumers wanting to cheer themselves up!

Ted Baker investigates £25m error in accounts as shares plunge (Daily Telegraph, Laura Onita and Simon Foy) heralds a very embarrassing accounting blunder which sent the retailer’s share price down to its lowest level for a decade as bosses said it had overstated the value of the stock on its books. The problem was highlighted by new CFO Rachel Osborne, who only joined within the last couple of months, and the company swiftly brought in another auditor and law firm to investigate further. KPMG, the previous CFO (who had been in the job for 17 years) and the chairman will no doubt be building up a sweat as a result of this extra scrutiny. The share price fell by 8% to £3.36 – which is a drop in the ocean when you consider that Ted Baker’s share price was £21 at the beginning of this year…* SO WHAT? * Ted Baker has had an absolute shocker of a year what with the departure of its founder Ray Kelvin (amid allegations of his unwelcome “hands-on” style of management) and two profit warnings – and this really would be the crowning glory of what the Queen would call an annus horribilis. Rumours continue to swirl about a group led by Ray Kelvin buying the company back and taking it private. This would help Kelvin to turn the company around without having to deal with the spotlight of nervous investors – and this latest scandal just went and made a potential buyout a whole lot cheaper! A trading update from the company is due out next week.

VW faces more irate drivers and Nomura’s new boss has a lot on his plate…

UK ‘dieselgate’ victims demand compensation from Volkswagen (Daily Telegraph, Michael O’Dwyer) highlights the latest developments in the whole emissions scandal following the High Court hearing in London yesterday. Customers claim that they were misled by the firm who fitted devices to their cars to cheat emissions tests, but VW says that they are not entitled to compensation because their vehicles didn’t contain the device and therefore did not suffer any loss. * SO WHAT? * VW settled similar claims by US consumers, businesses and regulators to the tune of $25bn, but has managed to avoid something similar in Europe thus far. It’ll be interesting to see who wins this particular game of chicken. The hearing is expected to last about two weeks.

In Incoming Nomura boss warns of ‘sense of crisis’ (Financial Times, Leo Lewis) we see that incoming chief exec, Kentaro Okuda, is taking up the chief exec hot seat and replacing predecessor Koji Nagai who lost shareholder support in a vote in the June AGM (don’t feel too sorry for him – he’s going to become chairman). Nomura has built its reputation on its rock-solid domestic brokerage business and Okuda’s appointment is unusual in that he comes from the investment banking division – not the broking one, which is usually the case. He inherits a brokerage that has had to deal with a number of scandals and a decimation of morale following three $1bn cost-cutting programmes. * SO WHAT? * Okuda has his work cut out as online brokerage competitors like SBI continue to threaten Nomura’s supremacy. He will need to cuts costs, digitise the company and restore morale quickly in order to turn things around.

And finally, in other news…

You are going to hate me today. It’s because once you read Disney’s most streamed song on Spotify – and amount artist has cashed in from it (The Mirror, Courtney Pochin https://tinyurl.com/rg6u9vv) you aren’t going to get the song(s) out of your head 😁 Obviously, you may well choose not to read it, but don’t you want to know what it is?? Or what the artist earns from it??

1. In MACRO & OIL NEWS, Germany’s coalition government gets a shock and Saudis are likely to pump up the oil price ahead of Saudi Aramco’s IPO
2. In TECH NEWS, Huawei makes phones without US parts, big tech companies take big chunk of ad spend, Chinese tech companies target growth in India and Ocado signs up Japan’s Aeon
3. In INDIVIDUAL COMPANY NEWS, there are big expectations for Cyber Monday and Las Iguanas bucks the casual dining gloom
4. In OTHER NEWS, I bring you the chair challenge and the magic hands trick…

So Germany gets a jolt and it looks like there will be upward pressure on the oil price…

Germany’s ruling coalition shaken by new SPD election (Financial Times, Tobias Buck and Guy Chazan) highlights potential upheaval in Europe’s biggest economy as the Social Democatic party (aka SPD) elected two new left wing leaders, Norbert Walter-Borjans and Saskia Esken, on the weekend. They are expected to continue their efforts to renegotiate the fragile coalition arrangement with Angela Merkel’s Christian Democrats (aka CDU) and call for more spending on infrastructure, more action on climate change and a stimulus spending package to drag Germany out of its current rut. The Christian Democrats reiterated their support of the current coalition agreement. * SO WHAT? * The SPD hasn’t said categorically that it will leave the coalition, but if it did there would be a few options. One is that there could be a minority government where the CDU go it alone without the SPD (which some in the CDU would quite like as they won’t have to appease their partners any more). A second option could be that the CDU could try to form a coalition with the Greens and liberal Free Democrats. Alternatively, chancellor Merkel could call another election, but I’m presuming that this would be the

least preferred option as it could leave the country in a precarious position at a difficult time. Still, a changing of the guard in the SPD is likely to jangle the nerves of many who are desperate to see the engine of Europe back firing on all cylinders.

Saudi Arabia aims to buoy oil price before Aramco stock market debut (The Guardian, Jillian Ambrose) highlights the likelihood of Saudi Arabia using its position as the head of the Opec oil cartel to encourage others at this week’s OPEC meeting to support a stronger oil price by sticking to tight production limits. It may even cut its own production in order to keep the price above $65 a barrel to bolster support for the upcoming flotation of Saudi Aramco. * SO WHAT? * This IPO is just looking more like a joke by the day. Valuations have been shredded, Saudi Arabia is using all of its might to put pressure on companies and rich individuals to buy the shares – so virtually 90% of bids from institutional investors are from Saudia Arabia! Yes, a higher oil price will justify a higher valuation for Saudi Aramco on its stock market debut on the Tadawul but if it takes this much pressure to get the thing off the ground you do wonder how successful it will be in the after-market and further down the road. Given how many favours the kingdom has been calling in to get this thing off the ground, you would have thought that it will cost Saudi Aramco (and the state) a lot to keep the party going – and it will need to if it ever wants to try this sort of thing again.

Huawei makes phones without US bits, ad spend is dominated by big tech, Chinese companies aim for Indian growth and Japan’s Aeon signs up with Ocado…

Huawei manages to make smartphones without American chips (Wall Street Journal, Asa Fitch and Dan Strumpf) sounds quite ominous for American tech companies as Huawei’s latest flagship phone, the Mate 30, contained zero American parts according to recent analysis where the phone was taken apart. Trump banned chip shipments from US-based companies to Huawei in May amid security concerns and general tetchiness in the US-China trade talks, but it seems that the Chinese tech giant has used the time to up its game. Although Huawei hasn’t stopped using US chips completely (the ban affects chips made in the US but a lot of companies make them outside the US these days) it has been cutting down on US suppliers and substituting US chips with others in their latest phones (e.g. Cirrus Logic chips were swapped for those from NXP, the Dutch chip maker, and Huawei’s in-house HiSilicon’s power amplifiers were used instead of those from Qorvo or Skyworks). * SO WHAT? * Although Huawei’s preference is to use US suppliers, it had been gearing up for a ban for quite some time in the lead-up to when it actually happened. The speed with which Huawei has been able to react will probably be quite surprising to some and should hurt US suppliers’ future bargaining power. There was always a risk that Huawei would use the ban to accelerate its plans for “US independence” – and here is the evidence that it is indeed doing so.

Eight tech giants swallow 5pc of world’s advertising spending (Daily Telegraph, Matthew Field) just highlights how Facebook, Amazon, Netflix, Alphabet (Google’s parent), eBay, Liberty Media, Uber and Booking.com have continued to grow their domination of global advertising spend to the extent that they now account for 5% of all ad spending on a global basis. According to media analyst firm GroupM, pure internet ad spend is expected to grow healthily at the expense of advertising in TV and magazines.

Chinese tech start-ups pursue growth in Indian market (Financial Times, Ryan McMorrow and Henny Sender) takes a look at Chinese start-ups such as Club Factory (a fashion and lifestyle marketplace that undercuts domestic rivals on price), Newsdog (an AI-powered news aggregator) and Mayfair (a fast fashion start-up which goes under the band name Urbanic) who have all set up in India, as well as their rather larger cousins ByteDance, Tencent and Alibaba. All these companies are taking home-grown ideas and spreading them into a sizeable new market powered by the explosion in popularity of cheap smartphones. This massive inflow of Chinese goods and companies has resulted in a backlash of sorts as the Indian government has stopped some imports following allegations of tax-dodging and an influx of counterfeit goods, but this has not dented their desire to expand in the country. As Aaron Li, co-founder of Club Factory, put it, “It’s an early market. A lot of [Indian] infrastructure is not as good as in China or the US. But they are at a tipping point…If there is another Alibaba or Amazon, it should be in India”. * SO WHAT? * Given their maturing domestic market and ongoing problems in developed ones, I think it makes perfect sense for Chinese companies to look to India for their next phase of growth. I do suspect, though, that every effort will be made by Indian authorities to ensure that LOCAL companies take leading positions and don’t get swamped by the Chinese influx, attractive though their cash, jobs and expertise may be.

It’s kind of last week’s news really but Ocado to build robot-powered warehouses in Japan (Financial Times, Jonathan Eley, Adam Samson and Kana Inagaki) heralds the latest deal signed with Ocado by a foreign supermarket operator to licence its smart platform system of automated warehouses and software. Japan’s Aeon has signed a deal that follows similar ones with America’s Kroger and France’s Casino. Financial details of the partnership were not revealed. * SO WHAT? * Given that the usual arrangement involves the client (in this case, Aeon) buying the warehouse shell and delivery vehicles and Ocado financing the robotics and software rollout, you would have thought that this latest deal will delay the day when Ocado becomes profitable – but the nature of such deals would suggest that there are real benefits that will be worth waiting for in terms of future profits.

Cyber Monday expectations increase and Las Iguanas seems to be a casual dining success story…

In Cyber Monday tipped to break US ecommerce sales record (Financial Times, Alistair Gray) we see that projections would suggest that Cyber Monday is set to be the most successful day ever for US e-commerce sales as footfall at traditional shops fell on Black Friday and Thanksgiving, according to the latest data from ShopperTrak and RetailNext. On the other hand, Adobe Analytics’ findings suggest new online sales records with $7.4bn spent on Black Friday and $9.4bn expected on Cyber Monday – but they still fall way short of Alibaba’s $38bn in sales on Singles’ Day! Another worrying feature for physical stores is that shoppers are showing an increasing trend of buying more expensive items online – the average online order value on Black Friday rose by almost 6% versus last year. * SO WHAT? * Again, this

probably just provides evidence that backs up what we already suspected. I think that the need for shops to provide a better in-store experience is still growing – although there are exceptions to the rule, like Primark, who avoid online sales and are doing so well that they are continuing with their international expansion plans!

Talking of exceptions to the rule, Las Iguanas hungry for more expansion (The Times, Dominic Walsh) highlights the success of Las Iguanas, the Latin American-themed restaurant chain owned by Casual Dining Group (CDG), to the extent that it announced plans to open five new sites per year. CDG is one of Britain’s biggest mid-market restaurant chain operators with other brands in its stable such as Bella Italia and Cafe Rouge. * SO WHAT? * It’s good to see that there are some successes in this battered industry! It sounds like Las Iguanas is to CDG what Wagamama is to rival The Restaurant Group in that their respective performances are making up for shortfalls elsewhere in their restaurant portfolios. It’s always nice to see that there is still some life left in mid-market restaurants!

And finally, in other news…

I thought I’d leave you today with two things: Everyone’s trying the chair challenge – which women can do but men can’t (The Mirror, Luke Matthews https://tinyurl.com/s3gf8zu) and then the quite frankly freaky Woman’s ‘trippy’ optical illusion video leaves people completely bemused (The Mirror, Courtney Pochin https://tinyurl.com/trtcttr). Wha-??? How did she do that??

1. In TRADE & OIL NEWS, China continues to make positive noises about trade while the EU continues to suffer and the Saudi Aramco IPO looks like it’ll shift
2. In CONSUMER & RETAIL NEWS, UK house prices rise on a monthly basis while household net worth falls, Fortnum & Mason has a solid year, Gymshark seeks funding and the FTC has the urge to purge fake five-star reviews
3. In INDIVIDUAL COMPANY NEWS, global drugmakers make big price cuts to access China and Amigo’s profits take a hit
4. In OTHER NEWS, I bring you a very weird photo…

So China is still talking a good game re US trade negotiations, the EU continues to suffer from slow trade fallout and the Saudi Aramco deal looks like it’ll be OK…

China protests US law supporting Hong Kong but signals hope for trade deal (Wall Street Journal, Lingling Wei, Philip Wen and Chao Deng) shows that China is at least sounding like it won’t let Trump’s signing of a bill supporting Hong Kong’s pro-democracy protesters derail current trade talks between the two countries as officials stressed that everything was still on track for a “phase one” agreement. * SO WHAT? * Trump has form in having selective hearing (remember when he almost destroyed Chinese telco equipment giant ZTE with sanctions before saving it, despite numerous objections from his advisers?), signed the measure the evening before Thanksgiving (meaning it would largely go under the radar) and gave himself room for manoeuvre in the document he signed with a clause in the statement emphasising “constitutional authorities with respect to foreign relations”. There is still apparent hope that a partial trading deal can be done!

Global trade slowdown hits EU the hardest, new figures show (Financial Times, Valentina Roma) cites the latest figures from the OECD which show that the current global trade slowdown is hitting the EU the hardest whilst also being exacerbated by Brexit and Germany’s current turmoil.

* SO WHAT? * Both exports and imports fell in the third quarter for all major EU economies by more than any of the other G20 countries. This is because the EU is particularly exposed to trade and has relatively open borders. Central banks have been trying to counter the slowdown by easing monetary policy, but the effects take time to filter through, so there will still be tough times ahead.

For those of you who are interested, Saudi Aramco share orders fail to break any records (Daily Telegraph, Ed Clowes) shows that the order book for the Saudi Aramco IPO appears to be more than covered, but won’t be shooting the lights out. Fun facts: almost 25% of orders from retail investors came from cash machines (?) and another 38% from online banking. * SO WHAT? * Usually, with a high profile IPO like this, you want to create a buzz and FOMO to keep the order booking ticking over. In an ideal world, you want to get the book covered many times over (e.g. if you had 100 shares on offer, you want to create a buzz that would lead to demand equivalent to 200, 300 or more shares) because this is a positive sign for what will happen in the after-market. In other words, if you have pent-up demand leading up to the offering, investors are more likely to buy in when the stock starts trading which will give the floating company a great start (i.e. share price rises strongly) and eventually lead to other similar companies to want to float in order to get themselves a piece of the action. In this case, it seems to me that underlying investor demand isn’t that strong but I think that the Saudi regime needs this thing to fly so will no doubt be putting plenty of effort and resources into making sure it doesn’t tank.

UK house prices turn up slightly but household net worth goes down, Fortum & Mason has a good year, Gymshark looks to raise money and the FTC wants retailers to purge false five-star reviews…

So how are UK consumers feeling right now? House prices increase at their fastest in 7 months (The Times, Gurpreet Narwan and Callum Jones) would suggest that, on paper, they will be feeling slightly better as the latest figures from the Nationwide Building Society show that the monthly rise in house prices for November was the highest its been since April. On the other hand, Households suffer weakest growth in net worth for decade (The Times, Philip Aldrick) paints a rather more downbeat picture as the latest data published by the Office for National Statistics shows that household wealth accumulation was badly dented by a sluggish housing market and lacklustre FTSE100 performance. * SO WHAT? * The monthly house price uptick is a mild positive (if it blossoms into a trend) but there’s no getting away from the fact that weak house price performance is hitting how “rich” people feel. I know I’m stating the obvious, but the richer people feel, the more they are likely to spend. Spending creates more wealth which creates jobs which creates more wealth etc.etc. If, on the other hand, they are in negative equity and the value of their pensions are falling because of weaker stock markets then caution is more likely to prevail, leading to economic stagnation. I don’t personally think this is a massive disaster as things stand, but if the situation persists (or gets worse) then there’s a risk of a downward spiral that will be difficult to arrest.

On a happier note, Fortnum & Mason reports bumper year despite Hong Kong protests (The Guardian, Zoe Wood) shows that the high-end department store had another good year in terms of sales and profits despite its new Hong Kong store (its first standalone store outside the UK) suffering from the effects of the ongoing protests. Sales have been boosted by the trend for upmarket tea with flavours such as chocolate violet and pistachio and clotted cream (!) as well as demand for its sparkling tea (billed as an alternative to alcohol). * SO WHAT? * I think that Fortnum’s is an example of what other department stores should be aspiring to.

It knows its customers, has a proper niche and sells to it in an environment that you just can’t replicate online. It’s an experience that people want to be part of – so if Mike Ashley can make his new “Frasers” anything like this, it would be a good thing 😜. I joke, but then he does have the brands to make it work. I guess it’s whether he can make it work fast enough and throw enough cash at it before he gets cold feet.

Gymshark sportswear brand looks to raise investment (Financial Times, Daniel Thomas) highlights exciting times for the fast-growing British clothing brand as it has appointed advisers to raise money to help it expand in the US. Gymshark, which started in 2012, is an online-only sportswear retailer that targets younger customers and has doubled annual sales for the last two years running. It now employs over 400 people and sells to 180 countries vying for position with the likes of Under Armour and Nike. * SO WHAT? * It’s great to see such a good British success story. Again, it knows its customer, focuses on what they like and sells its products in an engaging way. The fact that it doesn’t rely on physical shops keeps the costs down and it has managed to create a niche for itself by using influencers rather than traditional marketing. Good luck to them!

Talking of online shopping, Black Friday shoppers: beware of fake five-star reviews (Wall Street Journal, Suzanne Kapner) highlights a very real phenomenon with online retailing: fake reviews. According to Fakespot, over a third of online reviews on websites such as Amazon, Walmart and Sephora are fakes from robots or those who get paid to write them. The problem has become so prevalent that the Federal Trade Commission (FTC) has started to seek out perpetrators and lawmakers are appealing for companies such as Amazon to do a better job of overseeing their reviews. * SO WHAT? * This is a big deal as we head into the all-important Christmas season where online sales, which account for about 23% of total sales in the US, are expected to climb by as much as 14% this month and next, according to the National Retail Federation. The companies themselves say that they are doing as much as they can to filter out this nonsense, but I certainly get the feeling that more people are losing trust in the reviews. Although it’s great that the FTC is getting involved, I think that they need to get a big scalp before retailers ACTUALLY take notice. It is a problem that we all know about but that is very hard to police. Even influencers are getting it in the neck at the moment.

Global drugmakers cut prices to get into China and Amigo’s profits get dented…

Global drugmakers strike deal to slash prices in China (Financial Times, Tom Hancock and Wang Xueuqiao) highlights the slashing of drugs prices by Western pharmaceutical companies in China as a way of getting access to the world’s second largest drug market. AstraZeneca, Gilead, Sanofi and Roche are among those who have agreed with Beijing to give average discounts of 60% (!) on 70 drugs in order to be included on the state-run insurance scheme. * SO WHAT? * Clearly the Chinese authorities could smell the desperation of the drugs giants eager to access a growth market and the prices charged for these drugs will be the lowest in any market in the world. Call me cynical, but I expect a) Chinese copies and b) a massive black market for buying the drugs in China and selling them elsewhere. I guess it’s the price these companies are willing to pay to get some growth.

Amigo profits dive as customers struggle with loan repayments (Daily Telegraph, Michael O’Dwyer) is another story doing the rounds of the broadsheets today as high-interest lender Amigo announced a hit on profits as the number of customers struggling to make repayments trended higher than the previous year. The company has been under pressure by the regulators to do more to explain its products and has seen its shares crater by 80% this year, but when you charge an average rate of 49.9% for a loan (!) what do you expect?!? Profits were also dented by higher overheads involved in hiring more customer service staff. Still, the share price climbed by 8.3% as investors saw progress in the company’s restructuring and dealings with regulators.

And finally, in other news…

I thought I’d leave you today with the rather confusing photo in Picture of girl in park with popcorn is ‘messing people up’ and leaving them baffled (The Mirror, Chris Kitching https://tinyurl.com/rdhra2m). And on that note, I hope you have a fun weekend!

1. In MACRO NEWS, Hong Kong continues to suffer protest impact while Trump endorses the movement, Seoul makes conciliatory noises to Japan and UK wages growth falters
2. In SMOKING-RELATED NEWS, British American Tobacco is hit by vaping while cannabis is on a major downer
3. In LEISURE-RELATED NEWS, South African Airways nears collapse and Thomas Cook’s failure impacts On The Beach
4. In INDIVIDUAL COMPANY NEWS, Uber’s Kalanick offloads shares and RBS launches digital bank Bo
5. In OTHER NEWS, I bring you another weirdly-flavoured KitKat and a picture of Trump that Putin would be proud of…

So Trump supports Hong Kong’s protesters, Seoul makes moves towards bridging the gap with Japan and UK wage growth loses momentum…

Trump signs bill supporting Hong Kong pro-democracy protesters (Wall Street Journal, Vivian Salama) heralds an interesting development, especially given that the US-China trade talks are at a very sensitive stage at the moment, as Trump signed the Hong Kong Human Rights and Democracy Act of 2019 which confirms and amends the US-Hong Kong policy act of 1992. It details US policy towards Hong Kong and outlines things like how to assess whether it is independent enough from Beijing for the US to continue trading with the territory (among other things) and has already annoyed the Chinese, who threatened to retaliate if the US signed it. Meanwhile, How Hong Kong’s economy is reeling from the protests – in 7 charts (Financial Times, Valentina Romei) is a good article to read as a roundup of what the impact has been thus far. Basically, tourism has dropped off, the territory fell into recession for the first time in ten years in the third quarter and retail sales have fallen sharply. * SO WHAT? * I don’t think that this is going to be taken lightly by the Chinese and makes a “phase one” agreement between the two sides less likely this side of Christmas. As for Hong Kong, economic conditions don’t look like improving anytime soon – especially if US-China trade talks continue to drag.

Seoul lobbies wartime forced labour victims to drop Japan claims (Financial Times, Edward White, Kang Buseong and Robin Harding) highlights a potentially key development that could start a thaw in the currently icy relationship between South Korea and Japan as victims of wartime forced labour are now being urged to drop lawsuits against Japanese companies for compensation. This is a departure from the rather more defiant stance

that prompted Japan to implement major export restrictions on South Korean electronics manufacturers a few months ago. There are suggestions that victims drop their claims in return for receiving payments from a central fund that would be financed by public and private sources from South Korea and Japan. * SO WHAT? * I suspect that the bad feeling between the two countries will continue for the foreseeable future. You have militant South Korean activists on the one hand who are fighting the mistreatment of their citizens by the Japanese in WWII – and emboldened by a victory in their Supreme Court last year – and then you have Japan on the other, saying that all claims resulting from that period in their history were covered by a 1965 treaty and a more recent agreement in 2015 to compensate South Korean women who were forced into prostitution by the Japanese. I have seen this issue flare up time and time again over the years, and a cynical part of me says that it tends to happen when South Korea needs a distraction from poor economic performance and/or a rallying point for its people. In my experience, Japanese people tend to be in quite surprising denial about what they did to their Asian neighbours during the War and want to forget it whereas South Koreans are taught from a young age what Japan did to them. As a result, you get a problem that is unlikely to go away any time soon but ultimately, I think that the two countries need each other and this latest development could signal one way forward. 

In the UK, Wage growth hit as workers struggle to get extra hours (The Guardian, Phillip Inman) highlights a study by The Guardian which shows that wage growth faltered last month on slowing trade and Brexit concerns. Employment fell at its fastest rate for four years and inactivity rates rose as workers stepped away from the job market rather than seek out new work. You would normally expect wage growth to be strong given the current super-low unemployment rates but it is thought that one reason why wages aren’t growing as fast as they should is the rising “underemployment rate”, which is the proportion of workers who say that they are part-time but want full-time jobs. The gloom continues…

BAT’s revenues suffer from the vaping backlash and cannabis looks like it’s on a downer…

In US vaping backlash dents British American Tobacco revenues (The Guardian, Jasper Jolly) we see that the massive backlash in the ‘States against vaping has dramatically reduced revenues for the tobacco major in its “new category” division. This is not really surprising given that the overall vaping market itself has shrunk by about 25% since health concerns related to vaping have increasingly been coming to light. However, investors were reassured by BAT’s strong sales of its traditional cigarettes, which account for the majority of its revenues. * SO WHAT? * BAT announced last month that it was going to cut 2,300 jobs by 2020 as it shifts away from traditional cigarettes and vaping has been seen, up till now anyway, as the way forward. However, when you have newsflow like last week’s identification by the US Centers for Disease Control and Prevention which said it had identified

2,290 cases of vaping-related lung injuries in the US and its territories, the future of vaping doesn’t look all that rosy. 

Cannabis euphoria dims as legal market falters (Daily Telegraph, Charlie Mitchell) is a really good summary of the current state of the effects of cannabis legalisation. It charts developments from the initial “highs” of Canada becoming the second nation in the world, after Uraguay, to legalise cannabis last year to the resounding feeling of “meh” that the market is feeling right now. The whole industry has suffered due to lack of sales outlets, challenges of reaching scale and the lack of “conversion” from black market smokers to using the newly-legitimised products. Canopy Growth (backed by Constellation Brands) sales and Aurora Cannabis’s revenues have both taken a battering and suppliers are starting to rein in growth ambitions and sack workers. * SO WHAT? * So it seems that reality is now biting in the cannabis industry after an initial frenzy. However, I think that the trend of legalisation will continue and that cannabis and its related products will be here to stay.

South African Airways hits turbulence and Thomas Cook’s demise hits On The Beach…

South African Airways close to collapse (Financial Times, Joseph Cotterill and David Pilling) highlights troubled times for the airline as it was revealed that it only paid half of staff salaries this month and is currently scrabbling around to secure finance to ensure its survival. Its situation was made worse by recent grounded flights and now the government is working with the company “to urgently formulate immediate actions that will be required to provide support to enable SAA to carry on its business”. If it can’t sort finances in the next few days, it may have to file for liquidation. * SO WHAT? * These troubles haven’t appeared overnight – the company hasn’t produced accounts for the last two years as there are doubts about it being a going concern – and it has already soaked up billions of dollars in state aid in the last twenty years to keep it going. President Ramaphosa is now in a tricky

position because he has committed to save state-owned companies on the one hand, but now faces the potentially unpopular option, on the other, of pouring even more money into something that is seen as a middle-class subsidy. Mind you, if SAA goes into liquidation, there will be huge costs to Ramaphosa’s government who would have to pay out guarantees that were agreed with lenders in the even of a default. Tough times, but a tough decision is going to have to be made pronto.

Thomas Cook collapse hits profits at On the Beach (Financial Times, Alice Hancock) highlights the ongoing fallout from Thomas Cook’s failure as related costs mounted on rival On the Beach. This all came about because On the Beach booked about 15% of its customers on Thomas Cook flights and so it had to pay out refunds as well as having to fork out more for flights that suddenly got more expensive as the number of available airline seats fell. * SO WHAT? * This sounds to me like a one-off and clears the decks for the company to increase its market share. On the Beach’s CFO Paul Meehan said that he was unconcerned by the launch of EasyJet’s package holiday business. 

Uber’s founder sells and RBS launches a new digital bank…

Uber’s founder Kalanick offloads $1.7bn of his shares (Daily Telegraph, Margi Murphy) highlights an important development in Uber’s history as it turns out that controversial founder Travis Kalanick has sold a big slug of stock since a lock-up expired on November 6th. Co-founder Garrett Camp sold about $20m worth, but still has over $2bn in the firm. * SO WHAT? * I think that this is a big deal because it takes out a major seller, which may actually help the share price. However, following on from its failure to

get a renewal on its London licence, Uber’s ‘dirty little secret’: shared driver accounts (Wall Street Journal, Parmy Olson and Sarah E. Needleman) goes into more detail as to how drivers managed to skirt the driver approval process. It doesn’t make for uplifting reading!

Then Bo peeps out into the brave new world of British digital banking (The Times, Ben Martin) heralds the official launch of RBS’s new digital bank called Bo. This is expected to be a rival to the likes of Monzo, Revolut and Starling, but it seems like it will have a job on its hands considering Fraudsters target RBS’s digital bank (The Times, Ben Martin). The challenge is big and yes, RBS is late to the party, but at least it has thrown its hat into the ring.

And finally, in other news…

I thought I’d bring you more on the whacky Japanese penchant for weirdly-flavoured KitKats in Japanese KitKats now come in edamame milkshake flavour (SoraNews24, Oona McGee https://tinyurl.com/ryvoyhh). WHAAAAAAAT??? And then there’s the rather odd photo that you just can’t unsee in Trump tweets picture of his head on Rocky’s body – but no one is sure why (Sky News, https://tinyurl.com/yx72hfsg).

1. In MACRO NEWS, China makes positive trade noises but in the UK, mortgage approvals fall and employers lose confidence
2. In CAR-RELATED NEWS, Audi cuts jobs to pay for EV investment while Ola and Bolt try to take advantage of Uber’s misfortune
3. In RETAIL-RELATED NEWS, a West End landlord suffers retail blues and Pets At Home shares jump
4. In INDIVIDUAL NEWS, Saudi Aramco gets a cornerstone investor, Alibaba does its Hong Kong float, American Outdoor splits off its gun business, drug companies face criminal charges in the opioid crisis and De La Rue has issues
5. In OTHER NEWS, I bring you a very skilled “balancer”…

So China sounds positive, but the UK is in limbo…

China raises hopes for US trade deal (Wall Street Journal, Chao Deng and Bob Davis) cites China’s Commerce Ministry as saying that both the US and China sides had “reached a consensus on properly resolving related issues”, following a call between China’s chief negotiator Liu He and US counterparts Robert Lighthizer and Steven Mnuchin. This follows weekend moves on the China side to tighten up guidelines to protect intellectual property rights, a core area of concern for the Americans and would suggest that they were edging closer to some kind of agreement. * SO WHAT? * This all sounds great, but we’ve had loads of false dawns before. We’ll just have to wait and see whether anything concrete actually gets signed. When/if it does (even if it’s just a tentative “first stage” of a broader agreement) markets will no doubt stage some kind of relief rally.

Meanwhile, things are looking a tad tricky in the UK as

House buyers vote with their feet as mortgages decline (The Times, Philip Aldrick) cites the latest figures from trade body UK Finance which show that mortgage approvals hit a seven-month low in October on election and Brexit concerns. In Uncertainty takes toll on employers’ confidence in economy (The Times, Gurpreet Narwan) we see that the latest stats from the Recruitment and Employment Confederation (REC) show slowing momentum in hiring as pessimism increases over Brexit. REC chief executive Neil Carberry said that “There is a great deal of potential in Britain’s businesses just waiting to be unleashed. With so many firms at or close to fullcapacity, it’s no surprise that employers want to invest in their workforces. Uncertainty is holding firms back”. * SO WHAT? * Mortgage approvals are seen as a bellwether of the health of the property market but I don’t think it’s any coincidence that we are now hitting lows not seen since we had the original deadline for Brexit! It’s also not going to be any surprise that employers are getting a bit nervy about increasing staff numbers when we are heading into political and economic uncertainty at the moment. These stats just give us more evidence to back up what we already know!

Audi plans cuts and Uber rivals up their game…

Audi plans 9,500 job cuts to save £5bn for electric car investment (The Guardian, Rupert Neate) heralds more bad news for workers in the automotive sector as the VW-owned marque said that this was part of an initiative to save €6bn to invest in electric cars and digital technology. On the other hand, it said that it would also hire 2,000 staff in “new expert positions in areas such as electric mobility and digitalisation”. The cuts, however, equate to about 10% of Audi’s workforce and come less than two weeks after Mercedes-Benz said it would cut over 1,000 jobs by the close of 2022 in order to hit tighter new emissions targets. * SO WHAT? * 10% of the workforce is pretty chunky, but actually these cuts are to be made over the next 5 years or so (until 2025) so actually, when you take natural attrition

and early-retirements into account as well, it may not actually be as bad as it seems. Having said that, it does show the continued pressure that automakers are currently under and it won’t do much for morale at Audi itself or the wider industry.

Given that Uber has just lost its London licence, it’s hardly surprising to see Rivals gear up to fill Uber gap (Daily Telegraph, Matthew Field) as Ola, which was founded in India and had a limited launch in the UK last year, is readying itself for a London launch in January 2020 and Bolt, which originated in Estonia and is big in Eastern Europe, will also be upping the ante following its own London launch in June. Bolt, which is backed by China’s ride-hailing giant DiDi, apparently raised almost $70m over the summer and is looking to raise another $100m to fund its expansion. * SO WHAT? * Uber is currently appealing against TfL’s decision but it makes perfect sense for rivals to up their game while the giant is down. If Uber loses its appeal, they will be able to make even more gains!

West End landlord Shaftsbury is unable to escape the retail malaise unscathed but Pets at Home gets investors purring…

Retail’s woes play out on West End stage (The Times, Arthi Nachiappan) shows that retail difficulties are hitting West End landlord Shaftsbury – which owns vast tracts (about 15 acres, in fact!) of properties in Covent Garden, China Town and Carnaby Street – as it reported a massive 85% drop in annual pre-tax profits after a revaluation of its Covent Garden properties. Chief exec Brian Bickell said that his company is going to have to downsize the retail spaces to take into account current demand, reversing a trend for larger shops that were in demand 15 years ago. * SO WHAT? * Although Shaftsbury is suffering in the same way as rivals such as Intu, Land Securities and British Land, I think that the LOCATION of its properties mean that they are easier to repurpose and re-let as I would argue that there will always be demand to be there.

Pets at Home shares jump after upgrade to profit forecast (Financial Times, Siddharth Venkataramakrishnan) shows investor delight as the retailer increased its profit expectations for the second time in three months, sending its share price up by 15% in trading yesterday. The company has concentrated on providing services for pet owners, keeping prices competitive and restructuring its vet practices. Grooming, retail and vet revenues have all done well and it looks like the company could get even more of a boost by renegotiating about 200 leases over the next five years with significant scope for lower rents. * SO WHAT? * Clearly, there was a lot to cheer about here, but the company added that Brexit could adversely affect its vet business and distribution centres given that it employs “a significant number” of EU nationals. Although the company’s share price has doubled over the last year, it is only the first time in three years that it has gone through the 245p level it floated at back in 2014.

Saudi Aramco gets a cornerstone investor, Alibaba makes a splash in Hong Kong and there are some dramatic developments in the worlds of guns, drugs and cash…

In IPO news, Saudi Aramco turns to Gulf funds to prop up IPO (Financial Times, Anjli Raval, Simeon Kerr and Andrew England) shows that Abu Dhabi is potentially stepping up to support its regional ally by investing around $1.5bn in the up-coming Saudi Aramco listing, which would pretty much cover the 1% allocated to institutions. The remaining 0.5% is intended for retail investors – and it seems that a number of wealthy families have been pushed to invest in it. * SO WHAT? * I’ve said it before, but this IPO stinks. If foreign investors don’t want to touch it with a barge pole and retail investors have to be co-erced to buy the shares, it doesn’t look good, does it! Still, as I’ve said before, I’m sure the Saudis will pull out all the stops to ensure the deal is a success.

Alibaba conjures up $11bn with Hong Kong float (The Times, Simon Duke) highlights the success of Alibaba’s flotation on Hong Kong’s stock market as it provided a rare moment of cheer against a stormy political backdrop. The shares climbed by 6.7% by the end of the day and the company said that it would use the extra cash to invest in its online food delivery business Ele.me, internet travel platform Figgy and video site Youku. * SO WHAT? * This is a secondary listing for Alibaba, which listed in New York five years ago raising $25bn from American investors. The Hong Kong listing will give Chinese investors more access to the company’s shares, which holders will be able to sell on either exchange.

American Outdoor’s split highlights risks for gunmakers (Financial Times, Archie Hall) is an interesting article that highlights changing pressures for gunmakers as they split up their operations due to fewer investors wanting to be associated with them. American Outdoor Brands (#2 gunmaker in the US) announced plans a few weeks ago to split itself into Smith & Wesson (guns) and the outdoor

products business (which sells things like knives and fishing equipment), saying that the list of banks and insurance companies willing to deal with them is getting shorter and shorter. Rival Vista Outdoors sold its gun business in July, Walmart announced plans to restrict gun sales in September after a mass shooting at one of its stores and Dick’s Sporting Goods stopped selling assault weapons (!?!?) and then all guns in about 20% of its stores. Sturm Ruger is also under increasing pressure by shareholders to adopt all sorts of new policies and resolutions and the pressure is likely to increase further as Remington is facing a lawsuit alleging that its hairy-chested marketing is at least partly to blame for the 2012 Sandy Hook shooting where 26 people were killed, including 20 kids. * SO WHAT? * I think it’s hilarious that big investors like BlackRock and Vanguard get all holier-than-thou about gun companies, but the fact is they buy the shares and stuff them in their funds! Having said that, they do sell gun-free ESG index funds, but hardly anyone buys them! I think it’s a bit like McDonald’s selling salad. Most people go to McDonald’s when they feel like having a dirty burger – they do NOT immediately think “Ah yes, I feel like having a salad today and so I’ll try to find a McDonalds”, but they HAVE to show that they are trying to do something healthy as a bit of a token gesture. Similarly, with funds supposedly putting pressure on gunmakers they are appealing to some of their “woke” investors (the “salad eaters” in my analogy) whilst really just buying more shares in them. Conventional wisdom says that the fortunes of gunmakers waxes and wanes according to the fortunes of the Democrats, but it seems that pressure is continuing to build.

Then in Federal prosecutors launch criminal probe of opioid makers, distributors (Wall Street Journal, Corine Ramey) we see that a criminal investigation is being launched in order to ascertain whether pharmaceuticals companies intentionally allowed opioid painkillers to flood communities. If criminal charges follow the investigation it could be the biggest ever prosecution of pharmaceutical companies and, so far, at least six companies – including Teva Pharmaceutical, Mallinckrodt, Johnson & Johnson, Amneal Phamaceuticals as well as distributors AmerisourceBergen and McKesson – have received subpoenas related to the Brooklyn federal investigation.

And finally, in other news…

I thought I’d leave you today with the amazing man in Gaza man masters rare skill of balancing art (AP, Hatem Mossa https://tinyurl.com/wh67wow). Wow!

1. In POLITICAL & DEAL-MAKING NEWS, Hong Kong gets behind pro-democracy, Saudi Arabians arrest more dissidents, the LibDems face difficulties and the M&A boom is back with a…boom
2. In RETAILING/HIGH STREET NEWS, US trad retailers continue to face challenges but the UK high street gets a boost while Wagamama’s owner stumbles, Sports Direct announces a rebrand and TSB announces branch cuts
3. In INDIVIDUAL COMPANY NEWS, Uber loses its London licence and battery maker Northvolt scales up
4. In OTHER NEWS, I bring you an idea for what we could do with our phone boxes…

So Hong Kong gets behind the protesters, Saudi Arabia is up to its old tricks, the LibDems face challenges and the M&A boom is back…

Hong Kong voters propel pro-democracy candidates to landslide win (Financial Times, Sue-Lin Wong and Nicolle Liu) heralds a massive victory for pro-democracy parties who won a majority in 17 out of the 18 district councils – a feat that is particularly impressive given that it didn’t win control of any council seat at the last local election four years ago. The voter turnout was also pretty high with over 70% of registered voters standing up to be counted. Out of 452 seats, pro-democracy won 385, pro-Beijing candidates won 59 and independents won 8. Carrie Lam, Hong Kong’s chief exec said the result would be respected and there appeared to be little reaction from Beijing in the immediate aftermath. * SO WHAT? * You do wonder what Carrie Lam would have done differently with the benefit of hindsight when she tried to pass a bill (which has since been withdrawn) that would have sent criminal suspects to mainland China. This sparked the massive protests we have seen over the past five months, with some of the most violent clashes occurring in the last fortnight. Having said all that, these local elections won’t actually change things that much because although the pro-democracy candidates will now have a greater say on the committee that elects the chief exec, that committee is still stuffed with pro-Beijing members. This is definitely a step in the right direction for the pro-democracy cause, but it will need to continue momentum if it is to actually achieve anything more substantial when it comes to elections for the Legislative Council, which is basically the city’s parliament.

Judging from Saudi Arabia arrests writers in fresh crackdown, says rights group (Financial Times, Andrew England) its seems that the regime is up to its old tricks again as human rights group ALQST alleges that at least eight dissident writers, bloggers and journalists have been arrested. * SO WHAT? * They weren’t apparently that high level, but Saudi Arabia’s treatment of critics was highlighted most recently when Jamal Khashoggi was murdered last year in Saudi Arabia’s consulate in Istambul. Investors who decided to avoid Saudi Aramco’s ongoing IPO may well be feeling even more justified in their decision not to get involved when you have a regime that is as unpredictable as this.

Lib Dems fear promise to reverse Brexit has backfired (Financial Times, Laura Hughes) suggests that the Lib Dems’ clear line that they will just stop Brexit dead if elected (and not hold another referendum) is not going down that well with voters according to polls and it also seems that voters just don’t seem to be getting behind Jo Swinson at the moment. * SO WHAT? * This is just one example of the noise you are going to be hearing up until the election itself! Now that all the manifestos are out for the main parties, I’m going through all of them individually and will be publishing a guide that will give you an idea of where each party stands on the main issues plus a quick word on what their impact may be so you can more easily compare and contrast. I’m hoping to have this out by the end of the week for you – so watch this space! I’ve decided to concentrate on the manifestos because these are the documents that have been debated over at length by the parties and represent more clearly, to my mind, what they are aiming to do. I tend not to take too much notice of TV debates etc. because all that shows IMHO is how good the participants are at debating! Being good on camera doesn’t necessarily mean you can do the job any better…

Boomtime back as dealmaking hits $70bn in a day (Financial Times, Eric Platt and Arash Massoudi) highlights the latest rush of global takeovers yesterday as over $70bn-worth of deals were announced. They included Charles Schwab’s acquisition of TD Ameritrade for $26bn, LVMH’s purchase of Tiffany for $16.6bn, Novartis buying biotech company The Medicinces Company for $9.7bn, a Mitsubishi-led consortium takeover of Dutch Utility company Eneco for €4.1bn and eBay selling its online ticketing business StubHub for $4.1bn to Viagogo. * SO WHAT? * Schwab/Ameritrade: imperilling Merrill says that the deal will still have to get past the regulators, but if it goes ahead should help it take on the likes of Morgan Stanley and Bank of America Merrill Lynch; LVMH/Tiffany: diamond geezer (Financial Times, Lex) suggests that Tiffany should flourish under LVMH’s umbrella; and New fear of rip-off prices after Viagogo buys StubHub from eBay in $4bn deal (The Guardian, Dominic Rushe and Rob Davies) shows that there’s resistance to the potential power of a mega-ticket tout. OK, so there are still hoops to jump through for some of these deals to complete, but the fact that these things just happened at all shows that there is an underlying thirst for them which shows confidence. Many will take heart at this given how we keep hearing about a global economic slowdown, US-China trade tensions and difficulties in Europe. It would imply to me that there is still belief under the surface of tension and that solutions to any of these economic logjams will result in a massive frenzy of activity.

US retailers face tough competition, the UK high street gets a boost, Wagamama’s owner sees a slowdown, Sports Direct wants to rebrand and TSB announces closures…

Why traditional US retailers don’t expect happy holidays (Financial Times, Richard Henderson) highlights a potentially tough period for shops in the US as they continue to face pressure from online-based rivals. IHS Markit forecasts suggest that online shopping sales for the holiday season will rise by 18.4% versus, say, US department stores which are expected to see a 6% fall. Interestingly, a group of 48 traditional retail stocks have underperformed an equivalent group of online retailers by 20% so far this year alone! * SO WHAT? * I think it’d be fair to say this isn’t particularly surprising, but there are some interesting charts in this article to illustrate the point. More evidence of what we have all come to suspect anyway!

Christmas boost comes early for retailers (The Times, Gurpreet Narwan) cites the latest figures from the CBI which show that retail sales remained unchanged in November – a significant development given months of continuous gloom. * SO WHAT? *  Some will see this as an early sign that Christmas on the high street might actually turn out to be OK, although the CBI’s deputy chief economist Anna Leach sounded a note of caution as well when she said “Actual sales have also stabilised and have nudged above average for the time of year. Employment has stopped falling after three years of decline. But Brexit uncertainty continues to weigh on investment plans for the year ahead, which remain weak”. It’s too early to tell yet, but at least this gives high street retailers some hope.

Slowdown in sales growth hits Wagamama’s parent company (Daily Telegraph, Simon Foy) highlights a slowdown in momentum at Wagamama’s, the company that The Restaurant Group (TRG) bought last November to add to existing brands Frankie & Benny’s and Chiquito. * SO WHAT? * The halving of Wagamama’s sales growth will be a particularly sensitive subject for the company given that it paid a whopping £559m for it at the end of last year amid shareholder outcry over the price. TRG sought to justify the cost by emphasising Wagamama’s growth momentum, especially in the US. Plans for its American business are currently under review and are expected to be unveiled at TRG’s full-year results in late February or early March.

Ashley changes name of Sports Direct (Daily Telegraph, LaToya Harding) shows that Sports Direct’s founder Mike Ashley is intending to rebrand his company as Frasers Group in an attempt to ditch its discount image and go up-market. If shareholders approve of the name change, the rebranding will take place on December 16th. * SO WHAT? * Although Ashley’s critics will say that putting lipstick on a pig won’t make it a supermodel, I think that this is a much-needed evolution for the company. When you consider that Nike and Adidas have decided that they don’t want to sell their latest stuff there because Sports Direct doesn’t fit well with their respective images, you can see why this move is needed. Whether or not it works, of course, will depend on whether it’s a proper format change or whether it’ll just be a case of swapping the sign over the door.

Meanwhile, TSB to close 86 branches with loss of up to 400 jobs (The Guardian, Jasper Jolly) piles on the gloom with plans by the high street bank to cut costs over the next year as its new chief exec, Debbie Crosbie, puts her mark on the company. She didn’t rule out further closures or job cuts either…

Uber lost its London licence and Northvolt scales up…

Uber loses licence to operate in London (Financial Times, Tim Bradshaw) heralds tough times for the ride-hailer as it has lost its licence for the second time as London’s transport regulator, Transport for London, found that it was not a “fit and proper” company to operate in the capital. This conclusion was reached due to a number of findings of questionable drivers using loopholes in the system that continued to allow them to work. Uber now has 21 days to lodge an appeal, but will be able to continue to operate in the meantime. * SO WHAT? * Competitors will be loving this, but this will just add to Uber’s headache. We’ll just

have to see how quickly it can act! Its food delivery business, Uber Eats, and its electric bike rentals service Jump will be unaffected by this decision.

In Battery maker Northvolt scales up ambitions with factory push (Financial Times, Richard Milne) we see that Europe’s leading battery start-up has announced big ambitions to almost triple the number of large factories it currently has in the pipeline. The Swedish group makes batteries for electric cars, storage and other uses and has thus far attracted €1bn of investment from the likes of BMW, Goldman Sachs and Ikea. * SO WHAT? * Its new ambitions will launch it into the same orbit of companies like Panasonic and Tesla and it said that it is open to working with other leading European industry players. I suspect that this will get a lot of support on the continent as many will want a European champion to rally behind.

And finally, in other news…

I have a confession to make. I love karaoke. There – I said it. So when I saw HacoKara Karaoke Box: The best way to de-stress at the cinema in Japan (SoraNews24, Oona McGee https://tinyurl.com/wlj7k9a) I thought this is something we need over here – and we could perhaps use our old telephone boxes! How great would this be?? A Dragon’s Den idea perhaps?!? I’m not sure whether everyone would share my enthusiasm, though…

1. In TECH/MEDIA NEWS, Chinese videogame makers make inroads into Japan while Uefa considers Champions League streaming
2. In RETAIL & CONSUMER GOODS NEWS, LVMH buys Tiffany and we look at the problems caused by Black Friday returns and fake sellers on Amazon as well as Argos ditching AO World and shops going cashless
3. In INDIVIDUAL COMPANY NEWS, Aramco can’t find a cornerstone investor and Uber’s days look numbered in London
4. In OTHER NEWS, I bring you a talented dog driver…

So Chinese gamemakers up the ante in Japan while Uefa considers more streaming…

In Chinese videogame makers hunt for new market in Japan (Wall Street Journal, Takashi Mochizuki) we see that Japanese smartphone game makers are suffering from the successful onslaught of their edgier, deep-pocketed and faster-moving Chinese counterparts. Japanese firm DeNA makes smartphone games for Nintendo and blamed the halving of its most recent quarterly profits on increased Chinese competition. * SO WHAT? * China is currently the world’s biggest smartphone game market in terms of revenue but makers there are now looking outside their maturing domestic market for expansion. Tencent is already looking to expand in the second biggest smartphone game market, the US, via its partnership with Nintendo, but China’s #2 game provider, NetEase, is already seeing big success with games like “Knives Out”, which grossed $465m in 2018 – 80% from Japan – which compares to Epic Games’ Fortnite at $455m. Although concerns have increased over the proliferation of Chinese games/apps (especially ByteDance’s TikTok) and how gamer data might be misappropriated, Japanese gamers appear to be oblivious because they don’t realise they are playing a Chinese game and the whole data security thing hasn’t really been flagged

thus far in the country. In the meantime, Japanese developers are rightly fearful about Chinese rivals eating their lunch – in their own backyard.

Uefa explores move into Champions League streaming (Financial Times, Murad Ahmed) shows that European football’s governing body is looking at creating its own internet streaming service to show Champions League matches as traditional broadcasters balk at the ever-rising costs of buying the rights to show matches. Uefa is currently conducting an auction for TV deals to show its major competitions between 2021 and 2024, but it is considering streaming as an alternative option in some territories outside Europe where such auctions only tend to muster up €5-10m a year. * SO WHAT? * I think that this is definitely the right way to go and it could eventually lead to a different business model such as that of Major League Baseball in the US where its internet channel has a subscription service that generates annual revenues of around $620m. It won’t happen overnight, but it is definitely something worthy of note. You do wonder whether other sports which perhaps don’t have the clout to win big at auction would benefit from such a move if marketed in the right way. What about things like sumo wrestling outside Japan, for instance (just an example – just insert the name of a sport that has, say, big domestic audiences but not so much of an international footprint)? Aussie Rules? Kabbadi? Something like this could spark huge interest in previously unknown sports and bring new audiences (and revenues).

LVMH ups its offer for Tiffany, Black Friday looms with the cost of returns and fake sellers and Argos splits with AO World while shops go cashless…

LVMH bets it can restore Tiffany’s shine with $16billion deal (Wall Street Journal, Ben Dummett, Suzanne Kapner and Matthew Dalton) shows that LVMH has managed to reach an agreement to acquire Tiffany for just over $16bn. Naysayers believe that LVMH will be paying for a brand that’s past its best and that has been hit most recently by lower tourist spending and a strong dollar. Supporters of the deal say that this will strengthen its position in jewellery, one of the fastest growing segments in personal luxury goods. At least now, from Tiffany’s point of view, it will not have to answer to investors every quarter (LVMH will take over this duty), which will give the brand time to develop and will benefit from the LVMH “sugar daddy” using some of its $50bn in annual revenues to invest in the future.

Given that we are now heading towards the all-important Christmas trading period, I thought it was worth talking about some of the challenges facing already-challenged retailers and makers of consumer goods. Festive period sales returns land retailers with £2.6bn bill (Daily Telegraph, Laura Onita) shows that with higher consumer spending comes higher product returns as figures from ReBound say that fashion retailers will probably see their costs rising by £606m this coming Black Friday weekend as 25% of items bought online are expected to be returned! Some retailers are better set up than others to cope with this, but then Fake sellers make Black Friday bleak for authentic firms (Daily Telegraph, Hannah Boland and Laurence Dodds) shows that there’s another challenge facing them – the proliferation of sales of counterfeit

goods. Amazon is particularly guilty of selling such fakes despite having their own “brand registry” that is supposed to protect products and it gets worse at times where the market is awash with bargain deals. * SO WHAT? * Given that many retailers are experiencing difficult trading conditions at the moment, having to deal with returns and fake sellers won’t make the job any easier. They will just have to hope that volume will more than make up for these drags on sales and profitability.

Following on from last week’s news that AO is quitting the Netherlands, Argos delivers order blow to AO World (Daily Telegraph, Laura Onita) shows that Argos will be bringing TV and white goods deliveries in-house, meaning that it will no longer be using AO World to do so. The revenue for AO’s logistics division will suffer from this but it does have new deals in place with The Cotswold Company, Aldi and Simba.

Then in Cafe society makes leap into cashless society (The Times, Arthi Nachiappan) we see that there are a growing number of retailers who are going cashless for security reasons (nothing to rob) and because of the falling number of bank branches into which they can deposit their notes and coins at the end of the day. A survey of 1,000 small businesses in the UK found that about 40% of respondents in Bristol didn’t accept cash in 2018 with 30% of businesses in Manchester, Cardiff, Birmingham and Glasgow – and 25% of businesses in Brighton – also not accepting cash. Interestingly, the UK Finance trade body said that cash made up only 28% of all payments in 2018 versus 60% in 2008. * SO WHAT? * Overall, the cost of accepting cash is increasing while the cost of digital payments decreasing and it seems that we are going down the road of becoming a cashless society. Although it is argued that society’s most vulnerable will be affected most adversely by the disappearance of cash, there are many retailers out there who see it as a boon. I wonder whether charities and people begging in the streets will suffer particularly badly as people don’t mind so much giving cash to strangers but will probably mind quite a lot about giving them their card/bank details.

Saudi Aramco fails to find cornerstone investors and Uber faces losing London…

Aramco wants states to take a stake in oil float (The Times, Miles Costello) gives us the latest on the Saudi Aramco deal which is now trying to get neighbouring states to buy into the deal after international investors gave it a wide berth. Malaysia’s Petronas and Russia’s Lukoil are among those who said that they will not be investing. The state-owned oil company has seen the likes of the Kuwaiti Investment Authority, the Abu Dhabi Investment Authority and Singapore’s GIC recently and presented yesterday to investors including the state-owned Investment Corporation of Dubai. However, the flotation itself remains popular with retail investors. * SO WHAT? * Usually, in deals like this, the company likes to get in place a few big institutional investors to take a decent stake because they tend to buy shares and hold for longer. In theory, this means that these “cornerstone investors” become a stabilising influence on the stock (because they don’t sell it

after holding onto it for five minutes). Being popular with retail investors is all well and good but can lead to more volatile share prices because their movements tend to accentuate upswings and downswings as greed or panic take hold. Mind you, Saudi Aramco is only floating a rather weeny 1.5% of itself so I guess that, at the end of the day, it doesn’t really give a toss. It probably won’t matter in the grander scheme of things, but the fact that so many big names are not keen to touch it would suggest that it really is a bit of a stinker despite all the incentives. As the saying goes, you can’t polish a turd (although the company is desperately trying to roll it in glitter 😜).

Things are getting rather serious in Uber in last-ditch talks to extend London licence (Financial Times, Tim Bradshaw) as the ride hailer faces the real possibility of Transport for London letting its licence lapse. This is not good for Uber because London is one of five cities (along with New York, Los Angeles, San Francisco and Sao Paolo) that accounted for almost 25% of the company’s gross bookings last year. Rivals such as Ola, Kapten and Bolt have benefited from Uber getting caught up in a crackdown on passenger protection and driver vetting. Uber’s licence is set to expire just before midnight tonight! Neither side has made an official announcement as yet.

And finally, in other news…

I thought I’d leave you today with the clever/adventurous dog in Dog puts car in reverse and drives around in circles for an hour (Skynews https://tinyurl.com/uc5c2xp). Impressive!

1. In MACRO & OIL NEWS, US-China trade talks take a more positive turn, Labour’s manifesto launch ruffles feathers and Saudi Aramco sidelines foreign banks
2. In BID NEWS, Charles Schwab closes in on TD Ameritrade, Google’s acquisition of Fitbit faces resistance, LVMH increases its bid for Tiffany and Xerox threatens HP with a hostile bid if it doesn’t play ball
3. In RETAIL NEWS, both Macy’s and Kroger disappoint
4. In INDIVIDUAL COMPANY NEWS, Francaise des Jeux’s IPO nets the government €2bn, WeWork cuts 17% of the workforce and Royal Mail has a bad day
5. In OTHER NEWS, I bring you a knife made of fungus and a Jesus/Phil Collins statue…

So China makes positive noises, Labour’s manifesto creates a splash and Saudi Aramco snubs foreign banks…

China invites Lighthizer and Mnuchin to Beijing (The Times, James Dean) heralds a potentially positive move as Liu He, China’s chief trade negotiator, said that he was “cautiously optimistic” about reaching the first stage of a multi-phase deal. He has invited his opposite number, Robert Lighthizer, and treasury secretary Steve Mnuchin to Beijing to continue high level talks. * SO WHAT? * TBH, this sounds ever-so-slightly positive but is nothing to get excited about. One side saying that they are “optimistic” about talks means b*gger all as it could either be taken at face value or it could just be a negotiation tactic so when nothing gets done, the other side can be blamed for being the one to scupper the talks. Rhetoric elsewhere from both Washington and Beijing continues to be quite prickly and voicing support for the Hong Kong protesters is not going to make things any easier either.

The Labour Party unveiled its election manifesto yesterday – and it caused quite the commotion! Headlines this morning say things like Jeremy Corbyn tax plans trigger fears of return to 1970s (Financial Times, Jim Pickard), Labour declares war on the City (Daily Telegraph, Ed Clowes and Lucy Burton) and Corbyn hails £83bn dream spending plan (The Times, Francis Elliott, Steven Swinford and James Coney) which shouts “Highest tax burden since Second World War” and “Labour offer ‘not credible’ –

independent expert’. Wow! I’m going to read the LibDem, Labour and Conservative manifestos in their entirety when they come out and then summarise policies in terms of how they affect specific groups. Obviously I’ll get cracking on the first two as they are now out, but I will release a report when I get a chance to look at all of them and review them side-by-side. I bet you can’t wait!

Then in Saudi Arabia sidelines foreign banks on Aramco IPO (Financial Times, Arash Massoudi, Anjli Raval and Simeon Kerr) we see that the global banks, including JP Morgan Chase and Morgan Stanley who have been advising on the Saudi Aramco IPO, are being snubbed in favour of locals NCP Capital and Samba Capital – as well as HSBC – to co-ordinate the deal. * SO WHAT? * This is obviously the Saudi regime giving the likes of Bank of America, Citigroup, Credit Suisse, JP Morgan, Morgan Stanley and Goldman Sachs a slap in the face. I have to say that I think that this whole IPO stinks. From the puffed-up valuations to the way companies and governments have kow-towed to a highly questionable regime that dissolves dissenting journalists in acid and the desperate attempt at making shares more attractive by providing strangely-generous incentives – and now the sidelining of the foreigners – this is a dodgy deal of the highest order. Unsophisticated retail investors may buy it, believing that the Saudis will underwrite it no matter what and institutions may be leaned on by the regime to buy shares with forced smiles on their faces – but making this a success post-flotation may prove to be very expensive ultimately if the government has to support it all in the background. I suspect it could be a success when it trades – but I don’t think it will be able to perform well without help. Having said that, Saudia Arabia probably has enough money to keep the party going for a quite some time.

Charles Schwab closes in on TD Ameritrade, LVMH ups its Tiffany bid and Xerox gives HP and ultimatum…

Charles Schwab nears $25bn deal for rival TD Ameritrade (Financial Times, James Fontanella-Khan, Eric Platt and Phillip Stafford) shows how the ongoing major price wars between online brokers are forcing them to consolidate. Many have had to cut their trading fees to zero with the advent of new players like Robinhood increasingly trying to eat their lunch and the growth of passive investing has also hit their trading volumes. If the two got together, the combined entity would have a whopping $5tn in assets. * SO WHAT? * Given the downward trend in fees and constant threat of passive investing, it is unsurprising that firms are looking to consolidate. There has already been some consolidation in wealth management circles and I don’t think it is going to stop now as the threats facing them don’t look like receding any time soon…

LVMH ups bid for Tiffany close to $16bn (Financial Times, James Fontanella-Khan and Eric Platt) highlights the latest development as talks between the two companies have been going on for the last few weeks. Tiffany is now letting LVMH take a closer look at its books – which would suggest that a deal is becoming increasingly likely, although obviously nothing’s finalised at this moment. * SO WHAT? * If the takeover went ahead, it would be LVMH’s biggest-ever acquisition and it would help the European luxury goods giant to broaden its footprint in America. Given that Tiffany has been struggling of late with lower tourist spending, a strong dollar making their goods more expensive overseas and the ongoing US-China trade war, it would seem that the time is ripe for a deal like this! The original offer of an all-cash $120 per share has now been

upped to $130 and represents a 30% premium to where Tiffany’s share price was before LVMH started to sniff around.

In Google runs into data fears over $2.1bn Fitbit deal (Financial Times, Hannah Kuchler) we see that Google’s proposed $2.1bn acquisition of Fitbit is facing calls by politicians and privacy campaigners to be blocked. * SO WHAT? * On the one hand, you could say that an acquisition of Fitbit by Google is just an attempt by the latter to catch up with Apple and its Watch. However, the problem is that there are increasing concerns over Google’s potential access to the data of 27m people who use Fitbit’s trackers! It would gain access to heart rate, activity and sleep data and now there are calls for the FTC to block the deal. Google is currently being sued by a patient at the University of Chicago who alleges that Google appropriated data from the university’s medical school and cross-checked it with Google Maps and WiFi connections to put names to patients – and then there’s the US government investigation into whether Google breached privacy laws in its “Project Nightingale” agreement with Ascension, where it gained access to the medical records of over 50m Americans. So the objectors have clearly got a point! It’s interesting, isn’t it, that Apple has decided to approach the harvesting of data in a different way – they’ve got the users via their Watch and now they are asking them to give them data via their new Research App.

Xerox threatens to go hostile in HP takeover bid (Financial Times, Matthew Rocco and James Fontanella-Khan) shows that Xerox has had enough of playing Mr Nice Guy and has now told the much bigger HP that its friendly bid will turn into a hostile one if it doesn’t agree to combine and play nice by Monday next week. HP has turned down the $22bn offer that Xerox tabled on Sunday saying it “significantly undervalues” the company (mind you, they pretty much all say that to get a better price) but left the door open for a higher bid. The drama continues…

After a few highlights in US retailing, both Macy’s and Kroger disappoint…

Macy’s posts lower sales; cuts forecast (Wall Street Journal, Suzanne Kapner and Allison Prang) highlights falling sales for the third quarter and it cut its full year forecast as well. The company put this down to weaker demand for autumn goods on later cold weather, weaker spending by international tourists and sales declines at smaller malls – but critics say it’s down to an offering that just isn’t working currently and that it has too many outlets

in lower-tier locations. Nordstrom and Gap also posted disappointing numbers after the market close.

Kroger dials back overhaul as sales splutter (Wall Street Journal, Jaewon Kang) shows that America’s biggest supermarket chain has decided to concentrate more on selling groceries and de-emphasise the rollout of too many new products and store revamps. It said that it will be slowing down the pace of store refurbishment to minimise disruption and will now focus on increasing sales of groceries that account for around 75% of sales. * SO WHAT? * Kroger is trying to improve both its offline and online capabilities in a very competitive market but it seems that plans that were put in place 2017 haven’t worked particularly well so it has now decided to return to basics.

The French government gets a handy €2bn, WeWork axes staff and Royal Mail doesn’t deliver…

French government raises €2bn with Francaise des Jeux IPO (Financial Times, David Keohane) heralds a successful stock market debut for state gaming monopoly Francaise des Jeux, raising a useful €2bn for a government that is trying to sell off national assets. Francaise des Jeux, which started off originally in 1933 as a national lottery to help soldiers injured in WWI, shot up by over 17% by lunchtime. The government reduced its stake from 72% to 20% in the process. * SO WHAT? * This was obviously a welcome development for a government that is trying to sell off stakes in various assets like Engie and Aeroports de Paris to raise money that it will invest elsewhere. As Finance Minister Bruno Le Maire said about the Francaise des Jeux sell-off, “I clearly think that the role for the French state is not to be part of the French lottery…our role is to invest in the future of young people in innovation and in new technologies”.

WeWork to cut around 17% of workforce (Wall Street Journal, Sarah E Needleman and Eliot Brown) highlights the job cuts that everyone had been expecting as the company tries to slow burgeoning losses. 2,400 jobs will go, excluding 1,000 cleaning and facilities staff who will be transferred to another company and the 1,000 employees who work in companies that WeWork acquired. WeWork had around 14,500 employees before it all started to fall apart.

Royal Mail share price tumbles over delay in shake-up plan (The Guardian, Mark Sweney) had a bad day yesterday as its share price fell by 14% on news that strike action could put the company into loss next year. That aside, it had its best revenues for five years and saw a big jump in profits for the half year but is falling behind schedule on its bid to transform its business in the wake of falling letter volumes. * SO WHAT? * Talk about turkeys voting for Christmas – workers voting to strike are risking cutting their noses off to spite their face as customers now have viable alternatives to the Post Office and can switch their business elsewhere quite easily – especially in the growing area of parcel delivery. The UK business remains challenging and will continue to be so for a while yet as the company tries to change with the times.

And finally, in other news…

I thought I’d bring you a couple of quite bizarre stories today with Japan’s YouTube knife-maker is back at it again–this time with a knife made entirely of fungus (SoraNews24, Dale Roll https://tinyurl.com/rxa8rrj) – which is amazing – and the rather freaky Jesus He Knows Me: Huge church statue in Mexico is Phil Collins lookalike (Sky News https://tinyurl.com/rxa8rrj), which you will find hilarious if you actually know who Phil Collins is…

1. In MACRO & ENERGY NEWS, Europe warns France and Italy on debt and China continues to finance coal
2. In RETAIL/HIGH STREET NEWS, Target unveils solid results, B&Q owner’s new chief plays the blame game, Crew Clothing benefits from LTA “love” and All-Bar-One/Harvester’s parent company bucks the gloom
3. In INDIVIDUAL COMPANY NEWS, PayPal buys Honey Science, Emirates orders $9bn of aircraft from Boeing and Fevertree fizzes despite revenue warning
4. In OTHER NEWS, I bring you an unfortunate stained glass window…

So Europe warns France, Italy and Spain on debt while China continues to invest in coal…

France and Italy warned by Brussels over high debt levels (Financial Times, Daniel Dombey) cites a report from the European Commission, published yesterday, which outlines its opinions on all the eurozone member states. France, Italy and Spain came under particular criticism for failing to reduce their debt burdens. * SO WHAT? * Valdis Dombrovkis, the EC’s vice-president in charge of the euro said that current apparent inaction “is worrying because very high debt levels limit the capacity to respond to economic shocks and market pressures” and warned that failing to do something about it now could pile the pressure on other highly-indebted states in the future, risking contagion in the bloc. Italy has forecast a 136% debt to GDP ratio, France looks likely to breach the EU’s deficit ceiling of 3% of GDP this year (the only country in the eurozone to do so) while Spain and Belgium have been asked to hand in fresh budgets as soon as their new governments get their feet under the table! Spain could find this particularly tough going as the ruling Socialist Party campaigned in this month’s general election to increase spending and has just formed a coalition government with

radical left party Podemos, who want to spend even more than they do! Good luck with that.

China’s appetite for coal returns despite climate pledge (The Guardian, Jillian Ambrose) shows that the country’s ongoing penchant for building new coal-fired power stations has actually outweighed coal-fired power station closures in the rest of the world since the start of last year, according to the latest data. Although China continues to invest in clean energy sources, Global Energy Monitor said that this trend looks likely to continue with Beijing planning to build more coal-fired plants than the rest of the world put together. The country is behind the financing of 25% of all the new coal projects in the rest of the world, including places like South Africa, Pakistan and Bangladesh – but if you include its domestic projects, China is backing over 50% of all global coal power capacity currently under development! * SO WHAT? * This is quite interesting in that you have China the defender of the planet with a huge lead in things like electric cars (it sold more last year than the rest of the world put together) and solar and wind power on the one hand, and then being the driving force behind “dirty” coal-powered generation on the other. Given China’s ongoing massive thirst for energy, I suspect that this mix of clean and dirty will continue for quite some time to come – and no-one can realistically do anything about it. I don’t see Greta Thunberg getting a warm reception in China any time soon (well not from the authorities anyway)…

US retailer Target hits the spot, B&Q parent company’s new CEO blames his predecessor, Crew Clothing does well from its LTA tie-up and All-Bar-One owner bucks the trend…

Target extends its sales streak (Wall Street Journal, Sarah Naussauer) highlights another good quarter from the US retailer as both its offline and online sales increased, extending its winning sales streak to over two years. American retailers have had mixed fortunes thus far in the earnings season but despite its consistency, Target still managed to outperform market expectations and the company raised its full year forecasts as well – prompting investors to boost the share price by 14% in trading yesterday. Separately, DIY chain Lowe’s reported weaker quarterly sales but raised its profits forecast for the year. * SO WHAT? * Target’s performance has been powered by market share gains in apparel and home and beauty categories, which have in turn been helped by new in-house brands, store refreshes and customer service improvements. This is impressive stuff and goes to show that successful retailing CAN be done in this environment! Retail strugglers should take note…

Boss of B&Q owner hammers predecessor (Daily Telegraph, Laura Onita) shows that Thierry Garnier, the new boss of Screwfix and B&Q parent Kingfisher, has followed the time-honoured tradition of new guy blaming the predecessor for all the problems (this is also known as “kitchen sinking”). Tel “Because I’m Worth It” Garnier got the top job two months ago and, surprise surprise, is now talking about bringing more focus to the company (=”I’m probably going to sack loads of staff and close down/sell-off outlets/brands that don’t work”) as predecessor Veronique Laury’s attempts at bringing together its rag-bag of overseas businesses clearly hasn’t worked. Garnier is expected to unveil a new strategy in March. * SO WHAT? * This is classic new-CEO behaviour. We’ll never know whether Laury was a victim of macroeconomic circumstance (i.e. that Kingfisher’s business fell away because of cooling real estate markets which are a big driver of sales) rather than poor execution of strategy but

Garnier has got a lot to sort out. Like I said before I would be willing to bet my mortgage on him coming out with a plan in March to cut tons of jobs and sell off underperforming businesses. I’m not sure who would buy them though – maybe another one for private equity?

Crew Clothing discovers its perfect match with LTA (The Times, Ashley Armstrong) shows that the chain which sells clothes you can go to meet your in-laws in has benefited from a collaboration with the Lawn Tennis Association (LTA) as it announced an increase in both sales and profits. The company now has 81 shops in the UK and about 740 staff and attributes its success to doubling its range to appeal to more customers and redesigning its website to increase online sales. The company said that a decision to sponsor the LTA will enhance its appeal to its core customer base of “people in their forties, in commuter belts”. * SO WHAT? * Although their clothes aren’t exactly cutting edge, I think that Crew Clothing’s success is down to successfully identifying their customer avatar and making stuff that appeals to them. I know that this sounds so basic, but companies like Crew Clothing and Joules have seen continued success by using this strategy whereas companies like M&S suffer from seemingly adopting a rather scattergun approach. I really believe that for retailers to survive for the long term they need to get a decent balance of online versus offline and identify exactly who they are selling to (easy to say, hard to do!). I’m personally not that convinced by Superdry as it stands because it just sells the same old stuff and surely there are only so many hoodies and polo shirts you can sell to people before they get bored.

Pub chain Mitchells & Butlers defies casual dining downturn (Financial Times, Alice Hancock) is another example of a high street operator bucking the general trend of gloom as the parent of All Bar One and Harvester continues to grow its estate and revenues while others in the casual dining market continue to suffer. * SO WHAT? * I think that M&B has been quite canny as it has paid particular attention to the trend for customers eating out less but spending more when they do. It has responded by transferring some of its “cheap-and-cheerful” Harvester sites to higher-end steakhouse brand Miller & Carter. Food sales have edged up and net debt and food waste have gone down. The outlook is still for a tricky market, but M&B is doing all the right things at the moment.

PayPal buys Honey Science, Emirates puts in a Boeing order and Fever Tree maintains its fizz…

PayPal to buy Honey Science for $4bn (Wall Street Journal, Maria Armental) heralds the online payment company’s chunkiest acquisition yet of the shopping and rewards platform Honey Science. Honey helps to find discount codes and personalised online offers and is profitable. It works with the likes of AliExpress (retail arm of Alibaba), Walmart, Adidas and Sephora and PayPal execs believe it will help promote deeper engagement with its 300m customers and access to new markets. The deal is expected to close in the first quarter. * SO WHAT? * Not sure about the price, but this sounds like a good deal on a strategic basis and gives PayPal something new and relevant. I wonder whether this will prompt a flurry of such tie-ups as other payments companies try to provide more services.

Elsewhere, Emirates orders $9bn aircraft from Boeing in wake of Airbus deal (Financial Times, Simeon Kerr) shows that the Middle East’s largest airline just ordered 30 Boeing 787-9 aircraft while cutting its purchases for the delayed B777x from 150 down to 126 following the Dubai air show. This is some rare good news for Boeing since the whole 737Max debacle.

Then in Fevertree fizzes despite alert on profit (The Times, Dominic Walsh) we see that, after five consecutive years of knocking it out of the park, the purveyor of high-end tonic water announced a profit downgrade yesterday – but its shares still went up! The City has become accustomed to nothing but success from this company but there was probably an element of relief here as a profit warning had been rumoured for some time. It seems to me that the UK is maturing and that future growth will come from overseas.

And finally, in other news…

I thought I’d leave you today with Woman spots very x-rated detail in church’s window featuring Jesus and Mary (The Mirror, Courtney Pochin https://tinyurl.com/ud3p6re). I don’t know what the fuss is all about. She’s clearly holding some kind of ancient baguette 😇…

1. In TECH NEWS, American tech is on course for a decade-best performance, Tesla is set to make the world’s biggest lithium ion battery and Samsung plans to emulate Apple in services
2. In RETAIL NEWS, US retailers paint a mixed picture, Home Depot has a downbeat outlook and AO World quits the Netherlands
3. In INDIVIDUAL COMPANY NEWS, the Cobham takeover nears approval and US meatless companies target China
4. In OTHER NEWS, I bring you a McSmile…

So US tech is on for a notable performance, Tesla tries to outdo itself and Samsung wants some services action…

Technology stocks head toward best year since 2009 (Wall Street Journal, Akane Otani and Karen Langley) shows that tech stocks are leading the market, with the S&P500 tech sector’s 41% rise for the year versus the wider S&P500 index’s climb of 24%. This is made all the more remarkable considering the ongoing concerns and investigations regarding data usage and antitrust issues. Particularly impressive performances have come from chip-related companies like Applied Materials (+86%), Tokyo Electron (+83%), ASML Holding (+79%) and Lam Research (+100%) as well as electronic payments-related stocks like Visa (+39%) and Mastercard (+51%) but it seems that earnings in the sector have shown sharp declines in the third quarter, according to FactSet. Amazon announced its first earnings fall for two years and Netflix missed its subscriber growth target for the second quarter in a row, for instance. * SO WHAT? * I just wonder whether this performance has been flattered by the fact that the tech sector was pretty weak in the final quarter of last year. Valuations for many are now looking pretty healthy, but there could be more catalysts for growth coming up next year as 5G continues to roll out, bringing with it new business opportunities and even stronger demand. Data usage and antitrust issues continue to hang over the sector and they will need to be resolved for tech to reach the next level. In the meantime, I would have thought that investors will be looking to lock in some gains in the absence of any obvious short-term catalysts.

Tesla to expand world’s largest lithium battery facility by 50pc (Daily Telegraph, Ed Clowes) highlights a new challenge for Tesla – to make the world’s biggest battery (which it built in less than three months in 2017) – even bigger! The battery stores energy from the Hornsdale wind farm in South Australia and has the capacity to power 30,000 homes for one hour. The South Australian state

government and the Australian Renewable Energy Agency has set aside £12m for the project that will increase capacity from 100 to 150 megawatts at the site owned by French renewables company Neoen. The expansion is due to be completed by July next year (the original one was built particularly quickly because Elon Musk said if he couldn’t build it within 100 days, he wouldn’t charge for it #nopunintendedhonest) and will enhance the state’s power supply. * SO WHAT? * This is impressive stuff and is actually one of a number of large-scale battery projects in Australia. The country now generates 20% of its electricity from renewables, necessitating the need for batteries to store it all. French company Total Eren is planning to build a 270 megawatt storage facility for its Kiamal solar farm in Victoria and EPS energy is looking to build a 280 megawatt solar farm and 140megawatt battery in Robertstown. There is also a massive Goyder South project which will include up to 1,200 megawatts of wind generation, 600megawatts of solar and 900megawatts of battery storage. Wow!

Then in Samsung chases Apple’s $50bn-a-year lead in services (Financial Times, Edward White) we see that the world’s largest smartphone maker has seen Apple’s growing revenues from its services business and decided it wants a piece of the action. The company has decided to move into services for the first time after a four-year period of making big investments in software and a maturing of the smartphone market. However, it’s not clear at the moment what services they are going to start charging for, but it wants to somehow monetise its existing 1bn customer accounts and increase the use of SmartThings, an Internet-of-Things platform which lets people control electronics devices remotely by smartphone. * SO WHAT? * This all sounds lovely, but the fact that Samsung has consistently failed to make money out of music, video and virtual reality services would suggest that the latest statement of intent won’t be setting analyst and investor hearts a-flutter. Interestingly, by working with Microsoft on Windows, Google on Android and Qualcomm on chips, Samsung has put itself right in the middle of every major tech component – but whether it can properly monetise these developments is another matter!

US retailers have mixed fortunes, Home Depot paints an uninspiring picture and AO World ditches the Netherlands…

Retailer results send mixed signals on consumer spending (Wall Street Journal, Suzanne Kapner and Allison Prang) shows that, even with a strong US economy, some retailers continue to struggle as we head into the Christmas season. Jefferies analyst Randal Konik observed that “the winners keep winning and the losers keep losing” as Home Depot (DIY stores) announced disappointing sales in the latest quarter due to investments taking longer-than-expected to bear fruit while department stores Kohl’s, JC Penney and Sears continue to suffer from downward-trending sales. On the other hand, TJX (parent of TJ Maxx, HomeGoods and our own TK Maxx) manged to put in a solid sales performance for the quarter and even raised its profit forecast for the full year due to strong footfall and the availability of plenty of discounted merchandise for it to sell. * SO WHAT? * In theory, you would have thought that a growing economy, rising wages and a tight labour market would all contribute to strong retailer performance across the board – but I think that these results are just more evidence of a sea-change in consumer tastes and behaviour. I continue to be pessimistic on the long-term survival of department stores unless they can do something spectacular to enhance the customer experience and their ongoing disappointing performances just serve to reinforce this opinion.

Following on from that, Home Depot lowers sales outlook, shares fall (Wall Street Journal, Patrick Thomas) highlights lower-than-expected third quarter sales and a cut in its full-year forecast as investments in tech to

improve its online business proved to take longer than planned to feed through. The share price fell by 5% on the news after rallying by 30% so far this year. * SO WHAT? * It’s always worth monitoring what’s going on at DIY retailers as they can be an interesting reflection of consumer confidence and of the state of the property market. They tend to benefit when property prices are booming as customers flock in when they move into new homes and prospective sellers spend on DIY when sprucing up their homes to get higher prices. DIY retailers continue to do well when real estate hits the top of the market as customers decide to improve their existing homes because they can’t afford to climb further up the ladder due to higher prices – but then things get tricky when the economy is in a downward trend as activity stalls and spending on DIY takes a back seat. Judging from what Home Depot’s CFO Richard McPhail had to say, the latest weakness was purely a result of IT benefits not filtering through as overall consumer spending was actually pretty robust.

AO World cuts its losses and pulls plug on the Netherlands (The Times, Ashley Armstrong) heralds a major revision in one of Britain’s biggest online retailer’s overseas ambitions as AO World has decided to shut down its Netherlands operation after just four years. The business loses €6m annually and AO World will have to take a €3m hit from closing the business. Although chief exec John Roberts is currently talking a good game about the German business, he has given himself a deadline of next summer to sort it out otherwise it too will get shut down. * SO WHAT? * Investors seemed to warm to Roberts’ candour as the share price rose by 15.8% on this news as well as a solid performance in its British market. Roberts founded the business 20 years ago, left two years ago and then returned in January this year. This closure is all part of his strategy to grow AO’s profitability and cash generation.

The Cobham takeover nears approval and US companies take meatless to China…

UK poised to approve £4bn US takeover of defence firm Cobham (The Guardian, Jasper Jolly) shows that the government is on the verge of approving the £4bn takeover of British defence company Cobham by the US private equity group Advent International on condition that the latter takes concrete steps to address national security concerns. * SO WHAT? * The all-cash deal was actually announced in July but the government stepped in with objections from the MoD on 17th September. Interestingly, although the company employs around 10,000 people globally, it only earns about 8% of its revenues in the UK. Cobham specialises in air-to-air refuelling tech used by US and UK military jets.

US food groups take plant-based burger to China (Financial Times, Emiko Terazono and Tom Hancock) shows that vegan heroes Impossible Foods and Beyond Meat are looking to expand into China. Impossible Foods is currently considering potential partnerships while Beyond Meat is looking to start production in the country next year. * SO WHAT? * Given that China consumes almost a third of the world’s meat there is either a massive opportunity here or an insurmountable mountain to climb, depending on your point of view! Mind you, they won’t be the first to try to supply alternative protein as Omnipork (pork subsitutes) and Just (US-based plant-based egg substitute) have already generated a lot of interest. I think that such companies should put everything they can into China right now as meat prices have risen a great deal due to the after effects of the African swine fever outbreak.

And finally, in other news…

I thought I’d leave you today with the heart-warming story in Dad comes up with adorable way to keep his kids happy when they want McDonald’s (The Mirror, Luke Matthews https://tinyurl.com/vnnj2so). Nice one, dad!

1. In DEAL NEWS, Saudi Aramco cancels its international roadshow, Airbnb becomes an Olympic sponsor and Kylie Jenner signs a massive deal with Coty
2. In NEWS ON COMPANY EVOLUTION, TikTok aims to distance itself from its roots, Ford announces an electric Mustang, Walmart tries to narrow the gap with Amazon and Jamie Oliver’s at it again
3. In INDIVIDUAL COMPANY NEWS, Tata Steel and WeWork announce job losses
4. In OTHER NEWS, I bring you banana KitKats and a real Little Drummer Boy…

So Saudi Aramco pulls back even more, Airbnb sponsors the Olympics and Kylie Jenner signs a humungous deal…

Following on from yesterday’s news that Saudi Aramco had cancelled its US and Japan roadshow due to lack of demand, Saudi Aramco abandons international roadshow for IPO (Financial Times, Arash Massoudi, Anjli Raval and Simeon Kerr) shows that originally ambitious plans have been scaled right back to just selling shares in the company domestically and to its neighbours as the European investor roadshow was also cancelled. 0.5% of the company’s shares will be sold to local retail investors and 1% will be allocated to big Saudi institutions and local regional funds. * SO WHAT? * Roadshows are a key part of the Initial Public Offering (IPO) process as the company that is listing goes on a big tour with their advisers to see as many of their prospective investors as possible to get them to buy shares in the offering. In my previous life as a stockbroker, I have arranged a number of these meetings myself! Sometimes, it’s dead easy to arrange – you call the clients and they say yes before you’ve even got a full sentence out and others really have to be persuaded into taking such a meeting. Then the bosses get on your back and it all gets competitive with colleagues as to who can get the most meetings! Sad, I know…but anyway, in this case, it seems that no-one was interested. Major investors have been telling Saudi Aramco that the deal just won’t fly at the valuation that Crown Prince Mohammed bin Salman is looking for – even though he eventually lowered his expectations – but the company is just going ahead anyway. The order book will be open until December 4th, pricing will be decided on December 5th and then trading will start on Riyadh’s Tadawul exchange a week later. There are various lock-ins and incentives in place to hold the shares, which should limit immediate selling (we used to call it a “stag” – where investors get allocated shares after the pricing is announced and then sell as soon as they can to lock in any gains as IPOs generally tend to go higher on the first day, especially if the deal is oversubscribed) and general volatility but it’ll be interesting to see how things go

as I am sure that the State will want to manufacture a successful IPO so it can flip overseas investors the bird and say how wrong they all were. I bet they will just put pressure on funds to buy to ensure that the thing at least goes up at launch, but once they’ve done all their squeezing and local investors can buy no more, overseas investors will be even less attracted to the shares. If it’s possible to short the shares I’m sure it will be a popular trade!

Airbnb seals $500m Olympics sponsorship deal ahead of listing (Financial Times, Murad Ahmed and Alice Hancock) heralds a major deal for the accommodation booking platform as it has decided to sponsor both the summer and winter Games until 2028, joining the likes of Coca-Cola, Alibaba and Toyota. * SO WHAT? * This is the first time that Airbnb has signed a big sponsorship deal and it sounds like this one will help to broaden its international footprint considerably. This is a nice bit of PR ahead of the company’s expected listing next year although $500m is a hefty sum. Good news for the International Olympic Committee, though, which has been under pressure to mitigate the massive cost of hosting the Games – and Airbnb sponsorship means that cities won’t have to build so many new hotels. The company is now thought to be worth around $42bn, made over $1bn in revenues in the second quarter of this year and is profitable. Onwards and upwards!

Kylie Jenner sells stake in cosmetics firm to Coty (The Times, James Dean) is a common story in today’s newspapers which shows that personality-turned-entrepreneur Kylie Jenner has just offloaded 51% of her four-year-old Kylie Cosmetics to Coty, the company behind brands including Max Factor and Cover Girl, for a cool $600m. Jenner will still be the face of the brand and will “continue to lead all creative efforts in terms of product and communications initiatives”. * SO WHAT? * This is an interesting development and will no doubt embolden other start-ups as there seems to be a trend of cosmetic giants buying them up. It’s great for the minnows who then get access to the resources of a big company and the giants get a quick injection of something fresh. Whether or not they last within a massive stable of other brands is a moot point, however…

TikTok tries to change, Ford unveils an electric Mustang, Walmart tries to be more Amazon and Jamie Oliver announces more restaurants …

TikTok looking at ways to shake off its ties to China (Wall Street Journal, Georgia Wells, Yoko Kubota and Kate O’Keeffe) shows that the company is now apparently looking at ways to be “less Chinese” as it faces continued scrutiny from US lawmakers and regulators. It’s talking about expanding operations in South East Asia and is reducing the amount of content from China on the app itself (fun fact: TikTok isn’t TikTok in China, it’s Douyin). * SO WHAT? * It seems to me that TikTok has been a victim of its own (rapid) success as its expansion has been so fast that naysayers have become increasingly concerned that the Chinese government could demand information about the app’s users at any time, constituting a security risk that brings up all sorts of data issues. Everyone else has seen this success and wants a piece of the action! Instagram unveiled its version of TikTok last week called “Reels” following Facebook’s attempt to do something similar last year with “Lasso” but the latter is just nowhere in terms of popularity while the former is too new to know whether it’ll be a creditable threat. Also, Tencent recently said it was allocating an unlimited budget to its own short-video app Weishi in a specific attempt to take on Douyin – so ByteDance will be facing increasing competition in its domestic market as well as its overseas one! Things could get tricky but they definitely have first-mover advantage for the time being!

Then we see more companies attempting to change direction in Ford saddles up electric Mustang to take on Tesla (Daily Telegraph, Alan Tovey) which highlights Ford’s attempt to take on Tesla’s Model Y with its brand new Mach-E SUV in its first big push into electric cars.

* SO WHAT? * The company is investing $11bn in electric motoring by 2022 and has thus far lagged many of its competitors in this area. This should be a compelling offering in theory as the entry price for this model is $44,000 versus $70,000-plus for its main rivals that include the Audi e-tron, Jaguar’s I-Pace and Mercedes’ EQC. Ford’s chief exec Jim Hackett says that every Mach-E will be profitable straight away despite its relatively low price. Wow!

Jamie Oliver pins hopes on new format for restaurants (The Guardian, Simon Goodley) is a another story that’s doing the rounds today – not surprising considering that Jamie Oliver’s UK operation came crashing down just six months ago. Basically, he’s trying to build a mid-market restaurant chain starting with two of his Jamie’s Italian restaurants in Bali and Thailand with the format being all-day dining with local dishes. Another 19 are planned going into the end of next year. Good luck to him – let’s hope he’s learned some lessons from his UK experience.

Walmart plays catch-up in Amazon ecommerce battle (Financial Times, Alistair Gray) highlights the fact that Walmart is actually coping quite well in the face of the constant threat of Amazon – but it is conscious that it has a lot more work to do in order to narrow the gap with the giant e-tailer. * SO WHAT? * Walmart is currently losing money in online sales, although they have gone up by 41% versus a year ago. This has been due to the company pumping more money into this part of the business but its investment has divided opinion. Doubters say that online grocery delivery will never be profitable for Walmart given the size of the country meaning delivery distances are longer and that costs for employees packing a load of low-value items (which is what shoppers obviously do themselves when they are physically shopping at stores) are too high. Supporters say that Walmart is the only retailer that has the scale to be able to take Amazon on in online grocery sales and is at least making a decent stab at it currently. I say that Walmart needs to give this a decent go now and maybe revisit in a year or two to review, otherwise it will just get left behind.

There’s bad news for employees at Tata Steel and WeWork…

Tata Steel cuts 3,000 European staff (Daily Telegraph, LaToya Harding) shows that the company is planning to cut 3,000 jobs across Europe in order to reduce costs. Two-thirds of the cuts will be to office-based workers and over half of them will be in the Netherlands. * SO WHAT? * The company said that this was part of a “transformation

programme to build a strong and more sustainable business in Europe” and it added that this will “lead the way towards a carbon-neutral future”. This is clearly complete cr*p. It’s all about company survival. Things have been bad for years and these measures are all about keeping the company alive IMO. 

It’s not much better in WeWork spending cuts threaten 4,000 jobs (Daily Telegraph, Hasan Chowdbury) as a third of the company’s workforce worldwide is expected to be laid off later this week following the company’s sudden downfall. This is part of a five-year plan to curtail spending, but things certainly aren’t looking good at the moment.

And finally, in other news…

Regular readers of Watson’s Daily may well be aware of Japan’s obsession with KitKats and the myriad of flavours you can get there. Well Japanese KitKats now come in Gold Caramel Tokyo Banana flavour (SoraNews24, Oona McGee https://tinyurl.com/vbv4gaf) shows the latest developments on that front! Banana!!! Anyway, given that we are getting closer to Christmas, I thought I’d bring you a heart-warming story about a real Little Drummer Boy in 5-year-old drumming prodigy lands full band scholarship 13 years before his high school graduation (USA Today, Wilton Jackson https://tinyurl.com/ua9lr4h). Amazing, don’t you think?? And for those who don’t know what I’m going on about when I refer to Little Drummer Boy, here’s a rendition of the song by the incredibly talented Pentatonix.

1. In MACRO & OIL NEWS, UK house prices fall and Saudi Aramco’s IPO ambitions get a reality check
2. In TECH NEWS, Google’s Stadia has big plans, ByteDance launches music streaming, Yahoo Japan confirms merger talks with Line and HP rejects Xerox’s offer but sounds open to a higher price
3. In CONSUMER GOODS NEWS, Johnson & Johnson rushes to prove its Baby Powder doesn’t contain asbestos 😱 while Nike’s snub of Amazon could prompt more to do the same
4. In OTHER NEWS, I bring you some ideas for nights out…

So UK house prices weaken ahead of the election and Saudi Aramco gets a reality check…

Fall in UK house prices as election keeps homes off the market (The Guardian, Zoe Wood) cites the latest findings from Rightmove which show that the number of new properties coming on the the UK housing market is falling at its steepest rate since August 2009 as potential sellers stay on the sidelines ahead of the forthcoming general election. Average prices fell by about 1% in November and new listings dropped by almost 15%. * SO WHAT? * The property market tends to slow down going into Christmas anyway, but the general election is providing additional reason for sellers not to do anything. It seems to me that there are a number of pent-up sellers out there that would be unleashed in the new year especially if the new government decides to reform stamp duty to reduce moving costs. Given what has been happening recently

with the property market, it would be an easy win for a new government to get it moving again by doing something like reducing stamp duty.

In Saudi Aramco pares back IPO on weak foreign demand (Financial Times, Simeon Kerr and Anjli Raval) we see that the state-owned oil giant has had to reel in its ambitions considerably for its Initial Public Offering (IPO) due to limited interest from foreign investors. It had once hoped to raise $100bn from the listing but is now aiming to raise $24-25.6bn for 1.5% of the shares, equating to a valuation of $1.6-1.7tn for the whole company. This would still comfortably make it the biggest listed company in the world, but doesn’t reach the $2tn valuation that Crown Prince Mohammed bin Salman wanted originally. He had initially planned to float 5% of the company as part of long-term plans to wean Saudi Arabia off oil revenues. * SO WHAT? * Plans for an IPO roadshow in the US and Japan have been canned and the company’s attention will instead turn on domestic retail investors, Saudi funds and other sovereign funds. It seems that foreign investors weren’t tempted by guaranteed chunky dividends after all!

Google has big plans for Stadia, ByteDance moves into music streaming, Yahoo Japan and Line confirm merger talks and HP rejects Xerox’s opening move…

Google’s Stadia takes aim at $130bn video game market (Financial Times, Tim Bradshaw and Richard Waters) highlights the upcoming launch tomorrow of Google’s game-streaming service that aims to give a console-quality gaming experience to gamers-on-the-go via powerful servers. Stadia will launch with 10 computer games across 14 countries, with at least 12 more to come by the end of the year. * SO WHAT? * This is indeed exciting news, but it is bound to be a very expensive venture for Google and not without risk given that it has b*gger all content compared to rivals such as Sony (which already has its own games streaming service, PlayStation Now) and Microsoft (which is due to launch its streaming service, xCloud, next year with over 50 titles). In the short term, wider availability of affordable 5G for the necessary streaming speeds is needed to make this an attractive proposition and games creators will need to be convinced that they will be able to monetise their efforts from streaming before going all in. Longer term, if game streaming takes off, the potential market is huge when you consider that, currently, there are estimated to be 200-250m console players globally across all the consoles versus 2.5bn people who play games across all platforms. Game streaming could reach markets that have been difficult thus far for console makers (e.g. India), but obviously these places are going to need the internet speeds required to make the experience an attractive one. Exciting times ahead, but it’s early days at the moment!

ByteDance to take on rivals with music streaming launch (Financial Times, Anna Nicolaou) heralds in an interesting development for the Chinese company behind TikTok as it is in talks with the world’s biggest record companies – Universal Music, Sony Music and Warner Music – for licencing content on its new music streaming service. The new service could launch as early as next month in countries such as India, Indonesia and Brazil before rolling out in the US sometime thereafter. The company wants to differentiate itself from the likes of giant rivals including Spotify, Tencent and Apple by focusing on user-generated

content. * SO WHAT? * This is really interesting news and I think that music executives will be pleased at the arrival of a new player – along with the fact that ByteDance could give them access to over 1bn users that they want to tap into. Although nothing is finalised, it is thought that the new service will be priced below the $10 a month for Spotify and others in the US. It’s good that ByteDance is branching out IMO, but this is likely to be a very expensive move. At least it has a different angle on the music experience, but then again I think that content will be key and if it has way less music than the others, this venture won’t fly as the quality of rival offerings will be hard to follow. The other problem is that ByteDance’s domestic market in China is not used to paying a subscription for music. Tencent Music has 800m users in China, but fewer than 5% of customers actually pay for it! ByteDance will have to do something special to change the narrative!

Following on from last week’s rumours about Yahoo Japan and Line, Yahoo Japan and chat app Line agree to merge (Wall Street Journal, Takashi Mochizuki) shows that the two companies have agreed terms to merge in a 50-50 joint venture. They want to optimise each other’s user bases to expand their online businesses in shopping, payment services and advertising-supported content and are expected to finalise a deal next month. The companies said that they want the enlarged company to become “one of the world’s leading artificial intelligence technology companies” using AI to optimise marketing, e-commerce and digital payments online. * SO WHAT? * This is likely to be a boost for both companies in their domestic market, but is unlikely to move the needle that much for the major global players like Google and Amazon who already have very entrenched positions that will be hard to match outside Japan.

HP rejects Xerox offer but remains open to a deal (Wall Street Journal, Cara Lombardo) shows that HP has rejected a $33bn unsolicited takeover offer from Xerox as being too low but said that it would still be interested in pursuing a combination with its smaller rival. * SO WHAT? * Interestingly, the share prices of both companies have gone up since the rumours surfaced, which suggests that investors are open to the idea – and it certainly seems to make strategic sense in that the businesses are largely complementary. Xerox makes big printers and copy machines while HP specialises in smaller printers and printing supplies. It certainly sounds like a deal is there to be done – the two sides just have to hammer out details (unless someone else comes along, of course!).

Johnson & Johnson is quick to exonerate its Baby Powder and Nike’s rejection of Amazon could embolden others…

J&J rapidly tested its baby powder after asbestos finding – and the results were complicated (Wall Street Journal, Peter Loftus) highlights the quick action taken by J&J after the US Food and Drug Administration found asbestos in a bottle of Baby Powder last month, prompting a recall. The company said 11 days later that independent testing found no trace – but it wasn’t quite as simple as that as lab tests had mixed results. Fun fact: talc (the basis of talcum powder) is a naturally occurring mineral that can often be found near asbestos in the earth and the former can be contaminated with the latter if the mines aren’t chosen carefully or if the talc isn’t purified enough – hence the problem. * SO WHAT? * Although Baby Powder only makes up 1% of total sales, asbestos allegations could have big

repercussions for the company given how well-known it is. When you are also facing lawsuits with almost 100,000 plaintiffs over product safety and marketing, including 16,000 alleging that the powder caused ovarian cancer, clearly you want to address this issue as quickly as possible. This is going to drag on – so is definitely worth watching considering the implications it could have.

Nike has fired the starting gun in race away from Amazon (Daily Telegraph, James Titcomb) suggests that Nike’s recent decision to stop selling on Amazon could embolden other brands to follow suit as efforts by Amazon to stop fakes or copycats have fallen short by many companies’ standards. Birkenstock stopped selling on Amazon in 2016 for this reason and there have been others. * SO WHAT? * Nike is lucky in that it has a strong name of its own. Others may not be so fortunate and will continue to have to rely on the e-tailing giant despite the fact that some say that it promotes its own-brand goods above others and exploits the sales data itself to gain unfair advantage. If this is a one-off, then it is no real problem for Amazon – but if others abandon it as well and this becomes a trend, Amazon will have to do something to stem the outflow.

And finally, in other news…

We’re getting to that time of year when people start thinking about social activities in the run-up to Christmas – and I thought I’d leave you with a few ideas in Ball pit, anyone? The top 10 alternative nights out (Metro, https://tinyurl.com/rajrw5u). I think that an evening of axe-throwing sounds quite therapeutic but what do you think??

1. In MACRO NEWS, Germany avoids recession and Chinese manufacturing slows down
2. In RETAIL NEWS, Walmart continues its winning streak while UK retail sales fall
3. In DATA & SOCIAL MEDIA NEWS, Google plans to restrict data access, Apple launches a research app, Yahoo Japan and Line have merger talks and TikTok’s popularity in India continues
4. In INDIVIDUAL COMPANY NEWS, Disney+ makes a strong start but FirstGroup gets hit by Greyhound woes
5. In OTHER NEWS, I bring you the Japanese Elsa…

So Germany swerves recession and China manufacturing suffers…

Germany steers clear of recession…but only just (The Times, Gurpreet Narwan) shows that Germany managed to confound expectations yet again by showing a sliver of GDP growth (+0.1%) in the latest quarter. This means that it has avoided the fate of having two consecutive quarters of contraction which would have put it into technical recession. The country was once again rescued by strong consumer spending as its manufacturing capability continues to be buffeted by weaker global demand and ongoing trade tensions. * SO WHAT? * This is probably going to be greeted with relief rather than celebration and

eases the pressure slightly on the German government who would probably have had to unleash “emergency” fiscal stimulus measures if the economy had tipped into recession. They may well have to do so anyway, but this reprieve gives them a bit of leeway on the timing.

Chinese manufacturing slows as trade war with US dents confidence (The Guardian, Phillip Inman) cites the latest figures from the National Bureau of Statistics which show that the Chinese manufacturing sector slowed down for the sixth consecutive month in October. This was due to the ongoing US-China trade war and weakening consumer sentiment as retail sales fell to a 16-year low. * SO WHAT? * Continued weaker numbers would suggest that China’s economy is going to slow down even further going into the fourth quarter.

Walmart shows continued strength but UK retail sales take a dent…

Walmart’s sales growth streak hits five years (Wall Street Journal, Sarah Nassauer) heralds another strong performance from America’s biggest grocer as customers continue to stream through its doors – but interestingly, its e-commerce sales in the US rose by 41% versus the previous year. Walmart is the first major retailer to report its numbers this quarter and will be followed next week by Target, Best Buy and Macy’s. The company raised its guidance for the full year. * SO WHAT? * Although low unemployment and higher wages continue to support consumer confidence, the wider economy itself appears to be losing momentum. Still, the company is doing well but needs to continue its efforts to improve its walmart.com offering. Its international business faces challenges with Brexit in the UK and civil unrest in Chile but had some wins in China, Mexico and India. President Trump tried to quell

criticism that China tariffs would hit retailers like Walmart by touting its strong performance, but despite what he says I think that those worries will remain. 

UK sales hit by surprise downturn despite discounting (The Guardian, Phillip Inman) cites the latest figures from the Office for National Statistics which shows that sales fell by 0.1% in October, surprising analysts who had expected a 0.1% rise due to discounting. This is the weakest monthly sales figure since April last year and shows that consumers kept their hands in their pockets going into the October 31st Brexit “deadline”. Interestingly, department store sales volumes increased by 2% due to promotional events and the introduction of Christmas lines – but sales are still trending down overall. * SO WHAT? * Lots of observers will be saying that this is a portent of a difficult Christmas trading period but I think it’s too early to tell at this stage. We’ve still got retail events like Black Friday to come yet and it may well be that consumers have decided to wait until then to have a retail splurge. Every data release in the retail sector will be pored over in great detail as everyone tries to second-guess their Christmas fortunes.

Google plans changes, Apple launches a research app, Yahoo Japan mulls a merger with Line and TikTok’s Indian success continues…

Google plan to lock down user data draw fire from advertisers (Financial Times, Madhumita Murgia and Alex Barker) highlights the company’s plan to restrict advertisers’ access to personal data in response to privacy concerns. It says that it will stop advertisers from viewing information that breaks down web page content but advertisers and publishers say that will just give Google more power over user data. * SO WHAT? * I suspect this story is going to continue to run as this use of really quite sensitive data is rather eye-opening to say the least. Advertisers obviously want as much detail as possible on their targets to give them more chance to sell, but you can understand their frustration if Google just continues to collect the information anyway and not let anyone else access it. 

Talking of data collection, Apple launches research app in push to gather users’ health data (Financial Times, Patrick McGee and Hannah Kuchler) highlights a new research app (called “Research App”!) that will “advance science” by collating information from its iPhone users and Apple Watch wearers. Apple said it will use this data to build new products. * SO WHAT? * This is all part of a general push by tech companies to get into healthcare but it comes at a time when more people are questioning the use of increasingly sensitive user data. Apple will try to differentiate itself from others by emphasising its “privacy first” model which does not rely on advertising. Users will control whether they participate, which groups they can join and will be kept in the loop about results without any information being sold to third parties. If this gets

widespread adoption, it could lead to some major developments in the future as Apple will have access to “live” information. Will consumers trust Apple more than Google? It remains to be seen…

In SoftBank-backed Yahoo Japan in talks over merger with Line app (Financial Times, Kana Inagaki) we see that the two Japanese companies are looking at creating a broad-based internet player to take on the likes of America’s Facebook and China’s Tencent. Line is Japan’s rival to WhatsApp and is 73% owned by South Korean internet search group Naver. Talks have been confirmed but no final decision has been made as yet. * SO WHAT? * Line has 82m monthly active users in Japan and has expanded into payments, banking and fintech businesses and so a merger with Yahoo Japan, which operates PayPay, could strengthen both sides and give Line potential access to SoftBank’s Vision Fund. This sounds like a good idea from a strategic standpoint as it will help both companies compete domestically with Rakuten, but I don’t think Facebook or Tencent will be losing any sleep over this.

TikTok – target of US suspicion – is a smash hit in China (Wall Street Journal, Eric Bellman) shows that TikTok’s popularity in India is exploding as the ByteDance-owned video sharing app’s efforts to raise its profile by backing government initiatives and investing big money in the business appears to be paying off. Farmers and Lambo drivers alike are among the users and it now has quadruple the number of downloads that America has. * SO WHAT? * TikTok has been a huge hit in India but it faced a ban in April over fears it could be used for child exploitation. However, the ban was lifted after a massive outcry from users and moves by ByteDance to impose measures to prevent abuse. The company has said that it will invest $1bn in India over the next few years and it will be interesting to see how this develops because if TikTok is just a one-hit wonder, it could all end rather badly. For the immediate future, though, it’s a winner!

Disney+ has a decent start but FirstGroup hits a bump…

Force to be reckoned with (Daily Telegraph) shows that Disney’s new streaming service hit 10m subscribers in only one day following its launch on Tuesday in the US, Canada and Netherlands. Mind you, Netflix’s content chief says ‘nothing has changed’ with Disney+ launch (Wall Street Journal, Joe Flint) shows that Netflix is confident that its raft of original programming will help combat too many subscriber defections. * SO WHAT? * Netflix may well be saying this now but the competition’s only going to get more intense. I know this is probably just my opinion but I have yet to see a Netflix film that is any good – some of the original series are excellent, but I think their movie

offering is decidedly meh. Netflix will have to continue to spend to keep its subscribers plied with fresh content – but anything that they haven’t made themselves will probably cost more as there will be more players bidding for it!

FirstGroup goes off the rails with £124m hit from Greyhound sale (Daily Telegraph, Oliver Gill) highlights a tough time for transport firm FirstGroup as its first-half profits were wiped out after the company had to writedown the value of its US long-distance bus service, Greyhound, that it is trying to sell. The company’s share price fell by a fifth as investors expressed their disappointment with the writedown and news of increased costs for the North American business. * SO WHAT? * There isn’t much light at the end of the tunnel, at least in the short term, as the company also runs South Western Railway, which will no doubt suffer as 27 days of strikes are being called by the RMT in December. Tough times.

And finally, in other news…

Given that Frozen 2 is due to be released next week, I thought I’d show you Japanese version of Frozen 2’s “Into the Unknown” is a powerful return for Elsa’s singer in Japan (SoraNews24, Casey Baseel https://tinyurl.com/ubbo8oa) because I always find it fascinating to listen to Disney characters you know speaking other languages! I had a job when I was a student tutoring young kids English in Tokyo and I have fond memories of meeting the Japanese Donald Duck – it was mind-blowing! The voice of Donald Duck – just speaking in Japanese! Apparently, the song Into the Unknown could well outdo Let It Go as one of those songs you will never get out of your head 😜

1. In TECH NEWS, we see Google try banking, how our health data gets shared, Tencent’s weaker profits and the new Twitter/Facebook from Wikipedia
2. In ELECTRIC VEHICLE NEWS, Tesla’s Musk attacks Brexit and Chinese EV start-up raises $400m
3. In INDIVIDUAL COMPANY NEWS, British Land is the latest retailer landlord to see its property values slide while Mulberry reports losses
4. In OTHER NEWS, I bring you…Rod Stewart’s train set 🤔

So Google looks at banking and we look at how healthcare data is shared, Tencent’s weakening profits and Wikipedia’s new “Twitter”…

Next in Google’s quest for consumer dominance: banking (Wall Street Journal, Peter Rudegeair and Liz Hoffman) shines a light on Google’s Next Big Thing – offering checking accounts to consumers in a project code-named “Cache” (#cleverwordplay). The venture is due to launch next year with accounts being run by Citigroup and Stanford Federal Credit Union and marks the latest attempt by a tech company to move into banking and/or banking-related activities. Checking accounts aren’t that s3xy on the face of it, but if Google can convince people to take up this offer the company will have access to some very useful information like how much people get paid, what they buy and what bills they get. * SO WHAT? * Although it’ll be very much the banks’ branding on this product, I would have thought that the public is going to find it hard to trust anything with the Google name on it when it comes to personal data at the moment – especially as its secret Project Nightingale, where it has access to a huge amount of medical records, has just been revealed. Interestingly, a recent survey conducted by consultancy firm McKinsey showed that 58% of respondents would trust financial products from Google – which puts the company ahead of Apple and Facebook but behind Amazon. Having said that, I don’t know whether this was carried out before or after the Project Nightingale revelation. Overall, I think this is an interesting development as it adds extra functionality to the existing Google Pay (which is on course to having 100 million users globally in 2020) but it remains to be seen whether users want to trust it with a deeper level of personal financial information.

Talking about sensitive data, How top health websites are sharing sensitive data with advertisers (Financial Times, Madhumita Murgia and Max Harlow) shows just how much personal data is being shared between WebMD, Healthline, Babycentre and Bupa and ad-giants like Google, Amazon, Facebook and Oracle as the Financial Times carried out a very revealing investigation.  79% of the sites dropped cookies allowing third-party companies to track individuals on the internet without the user consent that is required in the UK. Google’s advertising division DoubleClick was the main destination for the data by far, (showing up on 78% of the sites tested) with Amazon in

second place (on 48%) followed by Facebook, Microsoft and AppNexus. The data shared drug names, symptoms, menstrual and ovulation cycle information and in some cases came with an identifier meaning that the information could be tracked to an individual 😱😱😱 * SO WHAT? * This is an absolute shocker – and should result in some serious investigation by the government and other relevant authorities. It looks like the things that Google is doing in Project Nightingale are just the tip of the iceberg! I really recommend you read this article in its entirety – and there is a shocking graphic on there which shows where all the data goes. Wow (but in a bad way). I would imagine that lawyers will do well out of this as surely there will be a deluge of nervous, sweaty clients seeking advice to make sure they are complying with regulations on this otherwise things could turn quite nasty IMO.

In Tencent profits fall as threat from Alibaba grows (Financial Times, Ryan McMorrow) we see that the Chinese tech behemoth suffered in the third quarter with sales falling short of market expectations due to a sluggish economy, intensive competition in advertising, more onerous government regulation and interference in its gaming and online businesses. * SO WHAT? * This was clearly not a great performance by Tencent, but the company’s chief strategy officer said that falling ad revenues will improve and revenues at its fintech business, which includes the WeChat Pay mobile payments division, were up by 36% from the previous year. Still, the company faces a number of potential bumps in the road with ongoing niggles with NBA streaming (a tweet from the team manager of the Houston Rockets supporting the Hong Kong protests went down very badly in China), continued interference in their gaming business (authorities imposing playing limits for minors etc.) and its arch-rival Alibaba potentially making a splash as it prepares for a secondary listing in Hong Kong.

Wikipedia co-founder Jimmy Wales launches Twitter and Facebook rival (Financial Times, Tim Bradshaw) highlights the advent of a new social media channel, called WT:Social, that was launched last month and lets users share links to articles and discuss them in a Facebook-like newsfeed. The idea is that this will be done without advertising and it will be supported by donations, as per the Wikipedia model. Wales said that he wanted to embark on this new venture because “The business model of social media companies, of pure advertising, is problematic. It turns out the huge winner is low-quality content”. * SO WHAT? * It’ll be interesting to see whether this works without advertising – but good luck to him. I just registered on it to have a look but it doesn’t look all that at this stage. Maybe worth revisiting to see how it develops.

Musk attacks Brexit and an Alibaba-backed EV start-up raises $400m…

Following on from the news that Tesla is opening a new gigafactory in Berlin, Brexit fears drove Tesla’s giant factory to Germany (The Times, James Dean) says that Brexit uncertainty pushed Elon Musk to choose Germany over the UK for its first European megafactory. * SO WHAT? * Really?? Surely we were never in consideration – but it just turns the knife in the back of British car manufacturing employees who are losing their jobs as companies abandon the UK. He said he chose Germany for his Gigafactory 4 (Gigafactory 1 is near Reno, Nevada and Gigafactory 2 is in Buffalo, New York and Gigafactory 3 is in Shanghai) because “everyone knows that German

engineering is outstanding”.

Alibaba-backed Chinese electric vehicle start-up Xpeng raises $400m (Financial Times, Mercedes Ruehl) shows that the Alibaba and Foxconn-backed Xpeng Motors managed to raise a chunky amount of money from investors despite EV minnows having a tough time of things at the moment. This is all in preparation for Xpeng’s launch next year of its second model, the P7 sedan. It is believed that this equates to an implied valuation of nigh on $4bn for the company. * SO WHAT? * This all sounds lovely, but the fact is that it doesn’t matter who your backers are – you can still get neck-deep in do-do when making electric cars. A backdrop of weakening car sales, a withdrawal of EV subsidies in June and a broader economic slowdown doesn’t exactly inspire confidence, but the company will just have to cross its fingers and hope that the money doesn’t run out before sales start to get to decent levels.

British Land is the latest landlord to quantify their retail-related suffering and Mulberry reports losses…

In a quick scoot around other news today, Value of British Land retail properties slides by over 10% (The Guardian, Julia Kollewe) highlights the latest retail landlord to see the value of its property portfolio slide due to retailer tenants going bust or asking to pay lower rents. Land Securities and Intu have also been in a similar nightmare – but I can’t see this getting better any time soon because even if they want to trim their portfolios, who are they going to sell to? Overseas investors may well step in here and bag a few bargains (especially with cheap sterling and low loan rates currently).

Then Mulberry reports £11m losses despite efforts to win younger customers (The Guardian, Sarah Butler) shows that losses at the luxury British brand have increased as more discounting dented sales in the UK, which account for 65% of the business. Chief exec Thierry Andretta sounded quite ominous when he said “The consumer is more and more waiting, in the market in general, for the promotional sales period. The UK is more and more similar to what’s been happening for a long time in the US”. This doesn’t sound good going into Christmas!

And finally, in other news…

Ever wondered what Rod Stewart does in his downtime? Me neither, but you have to admire his work in Sir Rod Stewart unveils model railway he worked on for 25 years (Sky News, https://tinyurl.com/vdhptap). This thing is AMAZING 😮