Category: Uncategorized

1. In TECH-RELATED NEWS, the UK and France take different stances on digital tax, Facebook creates UK jobs but loses Vodafone as a Libra backer
2. In RETAIL NEWS, Sainsbury’s says it’ll axe managers, Aldi is to become the #1 payer, Dixons doubles back and Joules has a tricky time
3. In INDIVIDUAL COMPANY NEWS, Uber sells its Indian food delivery business, IBM sees signs of a turnaround, Boeing has more problems and EasyJet benefits from Thomas Cook’s collapse
4. In OTHER NEWS, I bring you an unusual cocker spaniel…

So the UK and France seem to go in opposite directions regarding digital tax, Facebook creates 1,000 new tech jobs but Vodafone abandons Libra…

UK to push on with digital tax in face of US anger (Financial Times, Chris Giles and Jim Pickard) shows that the UK is apparently playing a dangerous game with the US as it appeared to dig its heels in on the imposition of a digital tax that will hit big (predominantly US) companies. Washington has threatened retaliatory tariffs if the British government doesn’t pull back on its stance. In contrast, France poised to drop plan to tax tech giants amid signs of US deal (The Guardian, Larry Elliott) shows that France is about to back down on its own plans to impose a digital tax, as long as the US engages with the OECD to find a multilateral solution. * SO WHAT? * The OECD has been pretty useless thus far in getting the Americans to engage in discussions about setting rules on how to tax global tech companies and corralling a unified opinion of what to do from its members. It seems to me that the companies themselves (and the American government) have been understandably dragging their feet on this because it will affect them the most, but maybe – just maybe – we’ve reached a point where something actually might get done about it. Having individual countries impose their own taxes just won’t work because all this will do is make tech companies (who provide a lot of jobs) uproot operations and go somewhere where the regimes aren’t so strict – Ireland, for instance, has benefited from this for years. FWIW, I think that the British government will use this digital tax “threat” as a bargaining chip in trade negotiations scheduled with the US for next month. I think that the countries that will lose out the most from a

general OECD agreement will be tax-friendly countries that rely on their “light touch” to attract some of the world’s biggest companies. The tech giants will obviously bleat and scream injustice, but surely even they will realise that they’ve had a tremendous run of getting-away-with-it and will have to pay their way.

Facebook backs British tech sector with 1,000 new jobs (The Times, Simon Duke) highlights a major boost for the British tech sector going into Brexit as Facebook aims to swell its UK employee ranks to over 4,000, with half of the 1,000 new positions being in tech areas such as software engineering, product design and development and data science. Insiders say that the company is looking to expand further in the UK – its new offices at King’s Cross has capacity for over 6,000. Fun fact: the UK is now Facebook’s biggest engineering hub outside the US.

However, in Vodafone latest Libra backer to call time on Facebook’s currency (Daily Telegraph, James Titcomb) we see that Vodafone is the latest early backer of Libra to abandon ship as it decides to focus on its own mobile payment system M-Pesa. Visa, Mastercard, Stripe, PayPal, eBay, Booking Holdings and Mercado Pago all pulled out of the cryptocurrency project last year. * SO WHAT? * It will definitely be harder for Facebook to “sell” Libra as an independently overseen project with fewer members, but it will no doubt continue in its efforts to get Libra to work in some shape or form (see what I say about this in Watson’s Yearly if you are a paying subscriber). Interestingly, though, the Bank of England has formed a group of central banks comprising of The Bank of Canada, Bank of Japan, the ECB, the Swiss National Bank and Sweden’s Riksbank “to assess the potential cases for central bank digital currency”. The Bank for International Settlements (BIS), which is a body that represents central banks, is also set to join the group. If THEY could come up with a proper Libra-beater, things could get quite exciting.

Sainsbury’s announces job losses, Aldi looks set to be the biggest payer, Dixons has a wobble and Joules joins the gloom…

Sainsbury’s to cut hundreds of managers’ jobs to reduce costs (Daily Telegraph, Laura Onita) heralds some bad news for the supermarket’s employees as it continues to try to cut costs. * SO WHAT? * Sainsbury’s is clearly suffering since its bid to buy Asda collapsed last year. I think that the problems were always there and that, had the bid actually been successful, there would have been a ton of job cuts anyway that would have been blamed on “overlap”. The failure of the bid just meant that the underlying problems have less of a buffer, hence the job losses being announced now – but it will be painful for those involved. It is rumoured that chief exec Mike Coupe will be stepping down this summer. What an idiot – did you see this? Priceless 😂

Still, maybe those affected can go down the road and get another job with a rival – and maybe even come out on top. Aldi to become UK’s ‘best-paying supermarket’ with wage rise (The Guardian, Joanna Partridge) highlights Aldi’s next move where it will award UK staff a payrise of 3%, making it the best payer among supermarkets and nudging previous top dog Lidl into second place. Long service will also be rewarded. Both Aldi and Lidl are continuing to expand aggressively in the UK this year. * SO WHAT? * This really is amazing, don’t you think? I do wonder what could

possibly stop the German discounters’ continued expansion – nothing at the moment!

If you ever feel bad when you’ve made a mistake, About-turn for Dixons Carphone as it restates festive period sales (Daily Telegraph, Laura Onita) should make you feel a bit better! The company announced results yesterday which initially said that overall sales grew by 2% in the latest quarter – but then corrected this comment a few hours later when it said that sales actually fell by 2%, blaming it on a typo! On the plus side, it saw strong sales of items including big TVs, Apple Airpods and expensive hairdryers but weak sales of mobile phones as users hang onto their phones for longer or go for SIM-only deals). * SO WHAT? * Dixons is trying to fashion a turnaround by introducing new ideas (like “gaming arenas” where customers compete against each other on in-store consoles), focusing on boosting its finance arm that offers credit, merging its electrical and mobile divisions to cut costs and shutting down 92 of its 1,000 UK shops. It sounds like a bit of a mess to me, but let’s hope that these efforts bear fruit.

Then in Black Friday leaves Joules feeling blue (The Times, Robert Miller) we see that fallen-darling-of-the-high-street Joules reported a whopping 82% fall in half-year pre-tax profits. The company blamed a late Black Friday, costs incurred in shutting down underperforming stores and the relocation of its HQ. * SO WHAT? * Interestingly, the share price jumped by 10.4% on the news. Joules very recently shocked investors with a profit warning, saying that it had made an accounting error. I guess that investors are giving it the benefit of the doubt and see these costs as a one-off blip on an otherwise upward trajectory.

Uber sells a food delivery business, IBM shows a potential turnaround, Boeing has more troubles and EasyJet profits from Thomas Cook’s downfall…

Uber sells Indian food delivery business to local rival Zomato (Financial Times, Patrick McGee, Mercedes Ruehl, Stephanie Findlay and Dave Lee) heralds a scaling back of Uber’s global ambitions as it has agreed to sell its Indian food delivery service to Alibaba-backed Zomato in exchange for a 9.99% stake in the business (which is estimated to be worth around $350m on the company’s most recent valuation) and a $35m cash payment for tax and services reimbursed. * SO WHAT? * The Indian business was just haemorrhaging cash at a ridiculous rate. It only contributed 3% of Uber Eats’ worldwide revenues but accounted for 25% of the losses in the first nine months of 2019, so this latest move sounds like a reasonable exit in that it will still be able to benefit in any upside. Zomato, on the other hand, will get a boost from this deal against arch rival Swiggy, which is backed by South African investment group Naspers. This comes only days after Zomato got another $150m in funding from Ant Financial, a Chinese payments giant affiliated with Alibaba. Zomato remains unprofitable for the moment, but the company claims that its cash burn is slowing and that it is targeting profitability by the end of this year. I think it’s good to see that Uber cuts its losses – something that will benefit the company as it matures and reaches profitability.

IBM earnings hint at signs of turnaround (Wall Street Journal, Asa Fitch) highlights the tech giant’s slight increase in quarterly revenues, ending a losing streak and potentially showing signs of recovery following the company’s $33bn acquisition of open-source software giant Red Hat. IBM has been slow to the party regarding cloud computing, but the Red Hat acquisition is helping it to catch up to rivals. It also announced an upbeat outlook for the current year, which helped to lift the share price by 3.5% in after market trading.

Boeing suspends trading in its shares after Max delays (Daily Telegraph, LaToya Harding) shows that Boeing had to suspend trading in its shares yesterday after it warned that there would be further delays for the reinstatement of its currently-grounded 737 Max fleet. The expectation of the reinstatement from the Federal Aviation Administration (FAA) has now been pushed out by a number of months to at least mid-2020 as Bpeing continues to wrestle with technical issues since the grounding of its 737 Max planes. The company is scheduled to announced fourth quarter figures next week.

Meanwhile, EasyJet reports strong first quarter boosted by Thomas Cook collapse (The Guardian, Gwyn Topham) highlights a strong performance from the discount airline as its revenues shot up in the final quarter of 2019 due to Thomas Cook’s collapse. Revenue per seat was also up and it says that losses will show an improvement on last year despite higher fuel costs. It’ll be interesting to see whether the package holiday business it launched shortly after Thomas Cook’s collapse, EasyJet Holidays, will prove to be a winner!

And finally, in other news…

I thought I’d leave you today with Adorable ‘Disney’ dog has people questioning if she’s real – because of her eyes (The Mirror, Courtney Pochin, https://tinyurl.com/qu9pg22). OK, so I’m biased because I’ve got a cocker spaniel and she’s lovely – but this dog really is quite something!

1. In RETAIL-RELATED NEWS, US retail landlords suffer from retail closures, Intu asks for cash, Beales falls into administration, Matalan profits fall whilst options for the future of Reiss and Itsu are considered
2. In UK CONSUMER NEWS, confidence in household finances improves while the London housing market lights up
3. In INDIVIDUAL COMPANY NEWS, BAE Systems buys United Technologies’ GPS business for $1.93bn and Fevertree’s sales fall through the floor
4. In OTHER NEWS, I bring you a really inspirational teacher…

So US retail landlords are suffering as well, Intu seeks finance, Beales collapses and Matalan’s profits fall while Reiss and Itsu’s respective successes give owners cause for thought…

US landlords grapple with thousands of store closures (Financial Times, Alistair Gray and Judith Evans) shows that it’s not just UK retailer landlords who are suffering from the current shake-out of the high street. Landlords face difficult choices. Given that rents tend to make up about 10% of any given retailer’s costs, landlords argue that they could bring rents down to zero and the tenants would still not make money and taking reduced rents would hit the value and/or image of the property. However, the downfall of companies like Forever 21, Payless and Barneys New York have forced landlords to change their approach by offering things like more flexible lease terms and a sliding scale of payments pegged to sales. Figures from Cushman & Wakefield show that rents in some prestigious Manhattan addresses have fallen by about 17% year-on-year but they say that the real situation on the ground may be more severe than this figure suggests. * SO WHAT? * It sounds like the UK is not alone in the current decimation of its retail landscape. The main difference, I would say, is that the US is suffering while the economy is booming – which would imply that if the wheels start to fall off, there could be some serious problems in the future. At least in the UK, there is more excuse for retailers doing badly given the overall cloud of gloom that has been hanging over us particularly since the Brexit referendum in 2016. However, it is imperative for landlords and retailers on both sides of the Atlantic to adapt to the changing tastes of modern consumers.

Talking of retail landlords, and following on from yesterday’s speculation, Shopping centre owner Intu’s shares fall as it aims to raise up to £1bn (The Guardian, Kalyeena Makortoff) shows that the company did announce the fact that it wanted to ask investors for money, but declined to say how much. The share price fell by 7% on the news (in addition to the 80% drop it has experienced in the last 12 months) as this latest move just highlights the company’s massive £5bn debt pile. * SO WHAT? * This sounds pretty bad, but some analysts think that the company could well ask for more than the £1bn figure being bandied around as retail property prices are expected to fall further.

Beales collapse leaves 1,000 jobs at risk as bosses fail to find buyer (Daily Telegraph, Laura Onita) highlights the ailing department store’s fall into administration following on from recent speculation. KPMG was brought in to find suitors but none were fielded and efforts to raise money or cut rents all failed. The website has been taken down but the stores themselves will stay open while the administrators continue to seek out buyers for the business. * SO WHAT? * Everyone, including Beales’ boss Tony Brown, likes to blame rates but the fact is that many department stores sell products that aren’t exclusive and can be bought more cheaply elsewhere. I also get the feeling that they are less of a “destination” than they used to be and tired formats just drag out a terminal decline towards irrelevance. As places like Selfridges and Fortnum & Mason have shown, there IS a place in shoppers’ hearts for department stores with a bit of flair – and the mid-market operators need to learn from them. In the meantime, department stores will continue to die…

The gloom continues with Profits fall as Matalan feels chill (The Times), as the company’s revenues fell in the latest quarter by 1.2% versus the previous year – although the good news is that its online business showed growth of 25%.

On the other hand, relative success has led to Owner set to test taste for Reiss (The Times, Tom Howard) where Reiss’ owner, US private equity firm Warburg Pincus, is considering cashing in on one of the high street’s rare successes by potentially selling the majority stake in the business it acquired in 2016. There was no official comment on this story that was first reported on Sky News. Then in Pret founder plans float for sushi chain (Daily Telegraph, Hannah Uttley) we see that Julian Metcalfe is thinking about floating sushi chain Itsu on the stock market in order to raise funds to make a major US expansion. He wants to grow it to 1,000 stores in the next few years. Metcalfe started Itsu in 1997 and is the majority owner with a 54% stake. * SO WHAT? * It’s good to see successes on the high street, but you do wonder whether the owners are thinking of getting out while the going’s good! Fair enough for someone like Warburg Pincus where the objective was no doubt to make a profitable exit at some point not too distant in the future, but maybe Pret’s founder is taking a look at the longer term. I’m sceptical about whether Itsu can be a success in America given that there’s more competition there for sushi, but you never know.

Confidence in household finances improves and the London housing market heats up…

OK, so it’s only a survey, but Election lifts mood about finances (The Times, Gurpreet Narwan) cites the findings from the latest IHS Markit survey which show that pessimism on household finances has lessened since the general election – but that it is still in pessimistic rather than optimistic territory. This improvement in sentiment was mainly driven by expectations of house price growth, although weaker inflation has also helped to put a lid on some costs. * SO WHAT? * It’s a mild positive to see something like this, but concern remains about the

economic backdrop – and until we see more clarity on that, we aren’t going to see any major changes. It does show, however, how important house prices are to feelings of prosperity.

Talking about house prices, in London house market leaps to life (Daily Telegraph, Sebastian McCarthy) we see that the number of new buyers registered with estate agent Knight Frank hit its highest level for mid-January for over 15 years! It also said that the number of viewings and deals had also risen. * SO WHAT? * This sounds positive and, as I’ve said before, it is particularly notable at the higher end of the market. London, in particular, was suffering going into the end of last year, so the relief at BoJo’s majority was pretty apparent. As I said in the earlier article, house prices really are key to individuals’ feelings of wealth – so although this sort of chat can be pretty boring, it is actually quite important to track!

BAE Systems buys into military GPS, Subaru complains about American ambivalence on EVs and Fevertree has a ‘mare…

BAE Systems to buy military GPS business from United Technologies for $1.93billion (Wall Street Journal, Doug Cameron) shows that BAE Systems has decided to consolidate its position in the US defence market by agreeing to buy the Military Global Positioning Systems business from United Technologies for $1.93bn. This will be its biggest acquisition in over ten years – but BAE Systems added that it was also going to buy Raytheon’s Airborne Tactical Radios business for $275m. * SO WHAT? * United and Raytheon are trying to get approval for their own merger that they announced last year, which will

create the world’s #2 military supplier by sales, so I guess the sales of these two very strong businesses to BAE Systems is in anticipation of that. I would imagine that more disposals are likely in order to appease the regulator.

Fevertree shares fall 25% as UK sales shrink (Financial Times, Myles McCormick) highlights trouble for high-end tonic maker Fevertree as it admitted yesterday that profits had contracted in 2019, sending its share price down by 25%. Christmas trading was sluggish in the UK and the company cut its revenue guidance for the second time in quick succession. * SO WHAT? * It seems to me that we may have reached “peak gin” in the UK in 2018/19 (the UK is Fevertree’s biggest market) and that it will be more important than ever for the company to make a success of its overseas ventures. Sales were up by 33% last year in the US but Fevertree is trying to position its brand as being “premium” rather than “super-premium” to get better volumes. Tough times for a company that has pretty much only known success and massive growth rates.

And finally, in other news…

I thought I’d leave you today with the really inspirational teacher in This teacher raised money for 1,000 books so her students would learn to love reading (The Washington Post, Hannah Natanson https://tinyurl.com/ukzqsg4). Things like this really do give you faith in humanity! What a great teacher!

1. In RETAIL NEWS, Intu’s finances are in trouble, Beales looks vulnerable and Amazon examines hand gestures
2. In CAR-RELATED NEWS, we see that owners are hanging on for longer, that electric car demand pushes GKN and Delta together and that pubs might help you refuel
3. In MISCELLANEOUS NEWS, house prices see a “Boris boost” and the Netflix/Sky tie-up continues
4. In OTHER NEWS, I bring you a stylish flying rabbit and Morrisons’ cure for snoring…

So retail landlord Intu has problems, Beales looks shaky and Amazon looks at gesture payment…

Shopping centre chain seeks up to £1bn to shore up finances (The Guardian, Zoe Wood) highlights the ongoing travails behind Intu Properties, the landlord which owns shopping centres including Manchester’s Trafford Centre and Essex’s Lakeside. The group has about £5bn in debt and has seen its share price fall by 80% in the last 12 months due to the impact that ongoing poor performance of its retail tenants has had on the value of its properties. It is thought that it may try to raise up to £1bn in order to bolster its financial position. * SO WHAT? * It’s debatable as to how investors might greet a cash call, but even if they do get it, everyone knows that Intu still has a ton of debt. Yes, the company will also be making asset disposals, but then again it is a crowded market as everyone and their dog is trying to sell off retail properties at the moment. This means that buyers in the market can get some real bargains currently and Intu will probably be selling at low prices, meaning it will have to sell more properties, which will bring prices down further etc.etc. in a downward spiral. The tough times continue.

It’s probably fair to say that this has been well-flagged, but Department store Beales on brink (Daily Telegraph,

Matthew Field) shows that the Bournemouth-based department store chain’s future is hanging in the balance as a board meeting will be held today to decide on whether to bring in the administrators. The chain, which was founded in 1881 and now employs around 1,600 staff, has been looking since December for a buyer of its 22 stores, but doesn’t appear to have been successful. The department store gloom continues…

Elsewhere, in Cash, plastic or hand? Amazon envisions paying with a wave (Wall Street Journal, AnnaMaria Andriotis) we see that the e-tailing giant is looking at making your hand your credit card! It is experimenting with putting scanners into stores that will allow card information to be linked with customers’ hand prints. Amazon is said to be pitching the idea to shops that do a lot of repeat business with customers like coffee shops and fast food outlets. Plans for these terminals are in the early stages currently, but Amazon has apparently been working on them most recently with Visa and Mastercard are expected to get involved as well soon. Other card issuers including JP Morgan Chase, Wells Fargo and Synchrony Financial have also expressed interest in the idea. * SO WHAT? * I think this sounds great from a convenience point of view, but there will be obvious security concerns here as to the safety of the data. It sounds like there’s more work to do here, but it does sound quite interesting, no?

Car owners hang on to their vehicles, GKN links-up with Delta and, in future, pubs could refuel your car…

Cars getting older as drivers delay buying new vehicles (Daily Telegraph, Alan Tovey) cites data from Auto Trader which shows that drivers change their cars every 3.4 years on average in 2018, in an upward trend that began in 2016 and one that brings it closer to the peak of 3.5 years in the midst of the financial crisis. The period between 2011 and 2016 saw the time period between changing cars shorten due to strong consumer confidence and cheap deals but since then Brexit concerns and weaker sterling hitting manufacturers’ margins have made deals harder to come by. * SO WHAT? * Unsurprising really, given the economic backdrop. I would also suggest that what’s happening in cars now is similar to what’s happening with mobile phones in that owners are hanging on because they are waiting on the next technology before making purchasing decisions. In mobile phones, it’s about potentially upgrading to a 5G handset, but with cars its about whether or not to go electric. Unfortunately, car dealerships and manufacturers are caught in the middle.

Electric car boom drives GKN-Delta link-up (Financial Times, Peggy Hollinger) highlights a new “strategic collaboration” between GKN Automotive (the world’s #1 supplier of drivetrain tech) and Taiwan’s Delta Electronics that is intended to speed up the development of power systems for electric vehicles (EVs). The partnership will mean that GKN will be able to offer a single package consisting of the electric motor, gearbox and power electronics which will reduce cost, weight and packaging

for car manufacturers. * SO WHAT? * The push towards EVs continues as under EU rules, car makers must reduce average CO2 emissions across their WHOLE fleet to 95g/km or face huge fines that could run into the hundreds of millions, if not billions of euros. I would expect more deals like this to be done as companies manoeuvre themselves to make efficiencies in the face of the rising R&D costs involved in rolling out new technologies.

Why the pub could become the new refuelling point for drivers (The Times, James Hurley) shows us a rather interesting view of the future as Marston’s, the publicly listed brewer and pub chain, has become the first in its industry to announce the installation of rapid chargers across its outlets (rapid chargers deliver 80miles worth of charge to vehicles in 20-30 minutes). Private company Engenie is to install 400 chargers at 200 Marston’s sites in the kind of tie-up that could attract others. * SO WHAT? * This sounds like an interesting solution – especially for the moment – as you would think that pubs and restaurants could benefit from drivers pulling up and buying refreshments while waiting for their cars to charge. IMO, though, while that might sound like a good idea when it takes 20-30 minutes to charge a car at the moment, they will be totally scuppered longer term when technology improves and car charging (and power storage) gets more efficient. I think that the onus will be on car manufacturers and battery makers to reduce charging time to make purchasing EVs a more attractive proposition and so they will have absolutely zero reason to keep charging times as long as they are now. The other thing is that our power infrastructure can’t take the extra demands of loads of fast chargers as there can, practically speaking, only be a certain number in a given area. In conclusion then, for me, I’d say nice idea – but I think it’ll end up costing more money than they will generate in the long run.

House prices experience a “Boris boost” and Netflix continues its relationship with Sky…

Housing market enjoys “Boris boost” as prices rise at record rate (The Times, Miles Costello) cites the latest data from Rightmove, which shows that house prices have risen by 2.3% since the general election – the biggest monthly price rise for this time of the year since such data started in 2002. Data from other sources including Halifax and Nationwide also confirm the trend as buyers close deals before an anticipated rush. * SO WHAT? * FWIW, I can see why house prices at the top end of the market would have risen sharply as I bet that there were a load of rich people who were nervous about Corbyn getting into power and taxing them heavily – so a Conservative

majority was a good outcome as far as they were concerned. However, lower down the market, I do wonder whether this was a bit of a flurry for those who were really desperate to move whereas others may want to wait until the dust has settled on the economy. After all, we are still in the situation whereby no-one knows what’s going to happen with Brexit – and this was one of the main factors holding purchases back!

Netflix’s shows still in demand at Sky (The Times, Dominic Walsh) highlights a new multi-year deal between the two to ensure that Netflix content will be made available to subscribers after initially teaming up two years ago. This is the latest in a line of deals for Sky which has recently signed agreements with the BBC, Channel 4, Channel 5 and Warner Media. * SO WHAT? * A strategically smart move for Sky, I think, and perhaps increasing competition for Netflix in the form of Disney+, Apple TV etc. might have taken the edge off Netflix’s negotiating power.

And finally, in other news…

I thought I’d leave you today with the incredibly cute Bunny in a bow tie is living her best life as she flies first class with owner (The Mirror, Courtney Pochin https://tinyurl.com/rkkcgsj). I’m not a rabbit person per se, but she really is beautiful! Then there is good news for those who sleep with snorers in the form of Morrisons is selling a plant Nasa says can stop your partner’s snoring – and it’s only £10 (The Mirror, Paige Holland https://tinyurl.com/yx898xe6). Wow!

1. In MACRO & “ECONOMIC BELLWETHER” NEWS, China’s GDP slows down, Turkey announces its fifth interest rate cut in a row, European car sales rise and UK recruiters suffer
2. In RETAIL NEWS, Gap goes back on its plan to split itself, Arcadia announces store closures, Primark looks overseas and Halfords has a good Christmas
3. In TECH NEWS, Facebook cancels plans to sell ads in WhatsApp and Alphabet hits $1tn
4. In OTHER NEWS, I bring you the Super Nintendo World song and some snow art…

So China slows, Turkey cuts interest rates yet again, European car sales rise and UK recruiters suffer fallout…

Pretty much everyone’s been expecting it anyway but China’s economic growth slows to 6.1% as trade and business confidence suffer (Wall Street Journal, James T. Areddy) cites the latest data from China’s National Bureau of Statistics, reflecting a general economic slowdown that was made worse by the ongoing US-China trade war. This is China’s slowest rate of growth for almost thirty years but still falls within the government’s 2019 target range of between 6% and 6.5%. Headwinds included the continued clampdown on debt, slower income growth and rising food price inflation stemming from the African swine fever outbreak denting purchasing power. The government expects a turnaround in consumer confidence and consumption this year and has outlined some punchy goals for 2020 including boosts for GDP and income and a pledge to end absolute poverty.

Turkey delivers fifth rate cut in a row in effort to boost growth (Financial Times, Ayla Jean Yackley) highlights yet another interest rate cut, bringing the one-week repo rate down by 0.75% to 11.25% to boost the economy despite inflation rising to 11.9% (I say “despite” because, normally, central banks raise interest rates to take the heat out of rising inflation as it encourages people to save more and spend less). President Erdogan believes that lower interest rates will calm inflation, which goes against conventional economic theory, and has been putting constant pressure

on his Central Bank to cut interest rates from the high of 24% which was implemented in 2018 to protect the lira.

European auto sales motor on despite trade headwinds (Daily Telegraph, Alan Tovey) cites official data from the European Automobile Manufacturers’ Association (ACEA), which shows that demand for new cars rose across Europe for the sixth consecutive year despite consumers getting increasingly jittery about spending on big ticket items. Germany was by far the strongest market with sales up by 5%, France saw a 1.9% increase and Italy saw a more modest 0.3% increase. Spain saw sales drop by 4.8%, which was twice as much as the UK. * SO WHAT? * I thought this was quite surprising given the hugely negative sentiment we get from the manufacturers themselves but they are more focused on the rising costs involved in making cars that comply with ever-tightening regulation. Still, it’s interesting to see that consumers are still buying (on the Continent).

Then in Recuitment groups hit by global turmoil (Financial Times, Archie Hall) we see that FTSE250 recruiters Hays and PageGroup have seen their business dented by French strikes, Brexit uncertainty and, most recently, Australian wildfires. Smaller rival Robert Walters also suffered with falling profits but the companies were divided on the outlook. Hays’ FD sounded pretty bullish, saying that one-off factors were to blame for the fall in profits but PageGroup’s chief exec painted a more downbeat picture. * SO WHAT? * Recruiters are often seen as an economic bellwether, with the argument being that companies hire when the good times roll, but then cut recruitment budgets when they are feeling the pinch. The divided opinion would suggest that they just don’t know how 2020 will pan out. FWIW, I think that their performance will be less like a bellwether over time as recruitment becomes increasingly automated. That will be a slow burn, however.

Gap does a U-turn, Arcadia announces closures, Primark aims for overseas growth and Halfords has a decent Christmas…

Gap backs away from Old Navy split (Wall Street Journal, Suzanne Kapner and Micah Maidenburg) heralds the rather dramatic news that Gap will not spin off its better-performing brand Old Navy after all. The original plan to split the two into separately quoted companies was announced about a year ago and when CEO Art Peck stepped down at the end of last year, the company reiterated that the plan remain unchanged. Clearly, that has now changed. * SO WHAT? * When you consider that Old Navy’s performance has stuttered a bit recently and that sales at Gap and Banana Republic continue to fall, it seems sensible for the management (which has been very unstable recently with tons of senior departures) to focus on getting things on a more even footing before doing anything drastic. Separating out Old Navy would have caused some big upheavals at a tricky time. Investors won’t be that pleased, though, because I think that they had been looking forward to being able to put money into the more successful part of the business rather than Gap as a whole. Still, this is something that new top management will have to deal with and at least keeping the whole lot together (for now, at least) will give them more potential options.

Philip Green’s Arcadia closes more stores after tough Christmas (The Guardian, Sarah Butler) shows that the parent company behind Topshop, Topman, Dorothy Perkins, Evans, Burton, Miss Selfridge and Wallis has announced the closure of at least 12 outlets in the last few

weeks, including one at the high-profile Westfield Stratford, due to poor performance over Christmas. This is despite landlords agreeing to massive rent cuts last year as part of a rescue bid. More store closures are likely and a second round of restructuring is rumoured to be on the cards. * SO WHAT? * This gives us further evidence that entering into a CVA does NOT guarantee survival and that clothing retailers have suffered from heavy discounting in the lead-up to Christmas. Arcadia’s nightmare continues…

Primark leans on new shops to buck high street gloom (Daily Telegraph, Simon Foy) shows that sales were up by 4.5% in the 16 weeks to Jan 4th versus the same period last year as its European business did quite well. The UK business saw a small decline in like-for-like sales (i.e. sales in shops that are not new). Sales were up overall due to new store openings and existing store expansions. * SO WHAT? * This is an OK performance in a tricky environment and it’s interesting to see that, according to Primark looks overseas as UK fashion sales slip (The Guardian, Zoe Wood and Sarah Butler), Primark will only open ONE new store in the UK this year (its lowest number in decades) and concentrate on openings in the US, France, Italy, Spain, Poland and the Czech Republic. Let’s hope that works out as overseas expansion can often be a nightmare. Primark has done well so far, though, so let’s hope that continues.

There’s also good news in Halfords’ festive period bicycle sales step up a gear (Daily Telegraph, Laura Onita) as the company benefited from its cycling business as its motoring business went slower. Electric scooters and custom bikes proved to be particularly popular. * SO WHAT? * This is good news, but I still wonder whether we’ve hit “peak cycling” in the UK after the boom which followed the 2012 Olympics. It’ll be interesting to see how Evans Cycles did in comparison.

Facebook reconsiders WhatsApp plans and Alphabet hits the $1tn mark…

Facebook backs off controversial plan to sell ads in WhatsApp (Wall Street Journal, Jeff Horwitz and Kirsten Grind) heralds an interesting development from Facebook as it has decided to cool its efforts to put ads on WhatsApp. * SO WHAT? * This is a major change of

direction as Facebook, which owns WhatsApp, has spent a lot of time looking at options for monetising the popular messaging service. In fact, the acrimony caused by Facebook wanting to put ads into the app led to the WhatsApp founders leaving. Facebook will now look at other ways of monetising.

A red-letter day for $1trn Alphabet (The Times, James Dean) highlights the day when Google’s owner, Alphabet, became the fifth publicly quoted company to gain a market value of over $1tn. The other four are Apple, Microsoft, Amazon and Saudi Aramco. Ultimately, this is nice, but doesn’t really mean all that much 😜

And finally, in other news…

I thought I’d leave you today with the annoyingly catchy song in Universal Studios Japan’s Super Nintendo World preview shows fans busting moves, mystery block (SoraNews24, Katy Kelly https://tinyurl.com/vx9ap2y) and the altogether more calming Artist uses snow as canvas for massive geometrical designs (Associated Press, Thomas Peipert https://tinyurl.com/txtfe4j). Nice.

1. In MACRO NEWS, a US/China trade deal is announced, Vlad Putin has a reshuffle, China’s GDP looks shaky, Germany’s is the worst for six years, UK inflation falls but the number of house sellers rises
2. In RETAIL NEWS, Bezos announces a big investment in India, Target is off target, Greggs announces Just Eat delivery, Booths has a merry Christmas and Revolution Bars toasts a decent performance
3. In INDIVIDUAL NEWS, Goldman Sachs takes a hit, Juul pulls back on overseas expansion and Arrival gets money
4. In OTHER NEWS, I bring you Valentine’s trees and Spotify’s doggy playlist…

So a phase one US/China trade deal is announced, Vladimir Putin has a reshuffle, China’s GDP faces further headwinds, Germany’s GDP hits new lows, UK inflation softens further but UK housing sales rise…

Trump signs China trade pact and boasts of ‘the biggest deal ever seen’ (The Guardian, Dominic Rushe) heralds a long-awaited initial accord between the two superpowers after two years of constant wrangling and tariff increases. The first phase of the deal will leave $360bn-worth of tariffs in place on Chinese goods, with the threat of more to come if China reneagues in any way, BUT it includes a commitment from China to buy about $200bn-worth of American goods and services. It also cancels planned US taxes on China-made mobile phones, laptops and toys and halves the current 15% tariff for about $120bn-worth of some other Chinese electrical goods. * SO WHAT? * If this agreement holds together, it will be a major boon to Trump’s chances of re-election and will give businesses that have been in limbo something to work with. Having said that, there are still many thorny issues yet to be addressed like China’s massive subsidies to big industries (including steel and solar panels) which have helped Chinese companies dominate by flooding markets with their cheap exports. Still, financial markets climbed on the news.

Vladimir Putin outlines leadership revamp and picks new PM (Financial Times, Max Seddon) highlights Vlad’s clearout of the current government and launch of a massive constitutional overhaul that will allow him to continue to pull the strings of power when his presidential term ends in 2024. Once Putin had announced plans for this major revamp to the political system in a state-of-the-nation address, Prime Minister Dmitry Medvedev and the whole cabinet resigned to clear the way for potentially sweeping changes 😱. Mikhail Mishustin, the head of Russia’s tax service, was then installed as the next Prime Minister (as you do). * SO WHAT? * Putin’s approval ratings have been falling and have now reached record lows against the backdrop of a sluggish economy where real incomes have fallen for the last five years. The announcement of this revamp along with a number of “national projects” aimed at boosting the economy and an increase in social spending is obviously part of the attempt to get Russians onside, but it’ll take more than words to counter the scepticism.

In State Grid warns that China GDP at risk of slipping to 4% (Financial Times, Sun Yu) we see that China’s largest utility company and state-monopoly, State Grid, is preparing for the country’s GDP to fall to 4% in the next five years. At least 10 of its 27 regional operations reported a loss last year, leading the company to make major cuts in its infrastructure spending. * SO WHAT? * This is particularly notable because the company is known to be very bullish in its forecasts and is seen by many as a bellwether of China’s economy. The National Bureau of Statistics is expected to report official GDP figures tomorrow.

Talking about disappointing GDP, Germany posts worst annual GDP growth for six years (Daily Telegraph, Tim Wallace) cites data from the official agency Destatis which shows that German GDP growth was just 0.6% in 2019, less than half the rate of 2018 and way lower than the 2.5% of 2017. * SO WHAT? * Germany has been hit particularly hard by the fallout from the US-China trade war that has made its industrial machinery and car exports way more expensive. The manufacturing sector accounts for over 20% of Germany’s economy.

Meanwhile, back in the UK, Inflation falls to three-year low on back of high street discounting (The Guardian, Richard Partington) highlights continued inflation sluggishness that will put pressure on the Bank of England to cut interest rates (the idea of this being that lower interest rates = less incentive to save and more incentive to spend. When lots of people spend, prices go up – which means inflation is going up. There’s more to it than this, but this is one aspect). These figures from the Office for National Statistics show that high street discounting and lower hotel prices had put a particular dent in prices.

Then in Housing market boosted by election win (The Times, Louisa Clarence-Smith) we see that the monthly survey of estate agents carried out by the Royal Institute of Chartered Surveyors (RICS) showed that the number of reported home sales in December rose – the first time it has risen since May 2019. Estate agents are now expecting to sell more homes at higher prices following a decisive election result. * SO WHAT? * This all sounds great, but now the expectations are higher after a very tough 2019 there is always the risk that hopes will be overblown. Having said that, wages continue to trend upwards. If house prices turn a corner and rise as well, people will feel “richer” and sustained strength in the housing market is likely to result. We’ll just have to see.

Bezos invests in India, Target misses, Greggs delivers with Just Eat, Booths experiences Christmas cheer and Revolution Bars show revellers’ thirst for “experiences”…

Jeff Bezos promises $1bn Amazon investment in India (Financial Times, Stephanie Findlay) highlights Bezos’ ambitions in India just days after the Competition Commission of India (CCI) announced its decision to investigate Amazon and Walmart-owned Flipkart in relation to potential violations of the competition law. Bezos said that Amazon will invest $1bn to digitise small and medium businesses across India – perhaps a warning shot to Mukesh Ambani, head of Reliance Industries, who will be flying the domestic flag via his new venture JioMart. It’s going to be rough, but the potential in India is just vast.

Target says holiday sales missed its forecasts (Wall Street Journal, Sarah Nassauer) shows that all is not well at Target as it reported poor sales over the festive period and warned that growth for the fourth quarter (which includes January) will fall short of its previous forecasts. This was put down to slow sales of toys and electronics, which are usually big sellers at this time of year. * SO WHAT? * A government report on December retail sales is due out today and will probably give clues, along with Walmart’s forthcoming results announcement, as to whether current

sluggishness is a Target thing or industry-wide. The current state of affairs is disappointing for Target which had seen its shares nearly double last year following a store revamp, the addition of more in-house brands and investment in its digital business.

In the UK, Greggs rolls out delivery with takeaway company Just Eat (Daily Telegraph, Louis Ashworth) highlights a new deal between the baker and the food delivery supremo that will roll out food deliveries across the UK, city-by-city. Customers will be able to order Greggs’ products via the Just Eat app and early trials proved to be very popular – especially at breakfast!

Elsewhere, Supermarket group Booths reports strong Christmas sales growth (Financial Times, Jonathan Eley) heralds a strong Christmas ahead of its more mainstream rivals. This marks an impressive turnaround for the supermarket that is often dubbed “the Waitrose of the North” in a reference to its regional focus as it came within a whisker of breaching its bank lending covenants in 2017. Since then losses have narrowed but the company is remaining coy as to whether it will be profitable this year. Still, it’s all moving in the right direction!

I thought I’d also mention Revolutions Bars raises glass to record Christmas (Daily Telegraph) because the cocktail bar chain reported stellar festive results in its seventh consecutive record Christmas! This is another bit of evidence that goes to show how consumers seem to be spending more on “experiences”, which was echoed by Mitchells & Butlers’ recent results…

Goldman Sachs suffers, Juul rethinks overseas and Arrival attracts foreign investment…

Goldman Sachs suffers $1.2bn hit over Malaysian IMDB scandal (Daily Telegraph, Lucy Burton) highlights a rare hiccup for the company as it announced quarterly profits that were down 24% versus the previous year as it put aside a hefty $1.2bn to finance legal costs. * SO WHAT? * Goldman’s trading revenues were actually pretty good, but the headline figure was obviously disappointing given the impressive results announcements from rivals JP Morgan and Citigroup.

Juul scales back overseas expansion (Wall Street Journal, Jennifer Maloney) heralds more bad news for the king of vaping as the company told staff that it may exit South Korea and will put off its entry into New Zealand. The new

CEO, K.C.Crossthwaite, is adopting a more cautious approach versus the previous strategy of expand first, deal with the regulations later. * SO WHAT? * Vaping is in dire trouble at the moment as it has become a victim of its own success and suffered from massive crackdowns around the world following concerns over the health impact. The thing is, Juul is ONLY exposed to vaping, so will suffer exponentially in a crackdown whereas the vaping business is still only a very small part of the business for big tobacco companies. 

UK electric van maker Arrival secures £85m from Kia and Hyundai (The Guardian, Jasper Jolly) highlights an encouraging development for the electric van start-up and will be a welcome boost in its bid to scale up production of its (sort of) cheap and cheerful electric van. The Korean companies will help Arrival to develop new zero-emissions commercial vehicles. * SO WHAT? * This latest funding gives Arrival a £3bn implied valuation, making it a “unicorn” which is particularly rare for a UK manufacturing company. The British automotive industry could do with some good news at the moment – so best of luck to Arrival! 

And finally, in other news…

Most of you, by now, will have taken down your Christmas trees and packed away those baubles. However, some people just can’t let it go and want to keep the party going as per People are redecorating Christmas trees for Valentine’s Day so they can keep them up (The Mirror, Courtney Pochin https://tinyurl.com/vl9m3xo) which focuses in on a new Instagram trend. Weird. And then there’s a nice development for all you dog-lovers out there in Spotify launches playlists for dogs left home alone (Reuters, https://tinyurl.com/tgwb8vf). Ahhhh!

1. In MACRO NEWS, Europe ups the pressure on Iran, Germany invests big in rail and the Irish PM calls for a general election
2. In RETAIL NEWS, Boohoo overtakes M&S in value and Games Workshop sees rising sales
3. In INDIVIDUAL COMPANY NEWS, US banks announce big profits, Tesla’s valuation nears a landmark, Boeing gets more cancellations, MGM Resorts sells off property and the UK’s Flybe gets rescued
4. In OTHER NEWS, I bring you a cheese hotel…

So Europe increases pressure on Iran, Germany invests in rail infrastructure and Ireland is to get a general election…

European powers step up pressure on Iran over nuclear deal (Financial Times, Michael Peel, Andrew England and Jim Pickard) shows that the “E3” (UK, France and Germany) has triggered a dispute clause in the 2015 nuclear agreement with Iran that could bring back UN sanctions on the republic. Following the recent assassination, Iran has threatened to end limits on uranium enrichment, triggering the European response. Signatories to the deal, who include China and Russia, are to meet within the next two weeks to discuss concerns. * SO WHAT? * Iran agreed in 2015 to restrict its atomic activity in return for the lifting of sanctions but America’s U-turn on the deal under Trump has put the country under enormous pressure as it now faces huge difficulties selling its oil, plunging it into its worst recession for decades. Iran says that it is still committed to the agreement and even allows the International Atomic Energy Agency access to its nuclear activity. We’ll just have to see whether this gets Iran to the negotiation table or drives them further away. At the moment, it says that the recent ramping up of its stockpile

of enriched uranium and nuclear R&D are still reversible if a compromise can be reached.

In Germany signs off on landmark €86bn investment in rail network (Financial Times, Guy Chazan) we see that the German government has just announced a ten-year, $86bn investment programme for the German rail network – its biggest ever investment. This represents a 54% uplift in spending versus the previous round of funding and will go towards upgrading its tracks, stations, energy supply systems, switches and bridges. * SO WHAT? * €86bn is clearly a lot of money but the main railway trade union, EVG, says that it’s not enough, considering that the network has been neglected for decades leading to a massive investment backlog. Still, it does show that the German government has caved under pressure not to stick so tightly to its “schwarze Null” policy of committing to a balanced budget and to increase government spending. This will be great for German jobs and manufacturing, I would have thought.

Then Ireland’s Varadkar calls February 8 general election (Financial Times, Arthur Beesley) shows that Leo Varadkar is in a confident mood as he called a snap general election to strengthen his mandate ahead of the next phase of Brexit negotiations. His campaign will focus on Ireland’s rebound from the 2008 financial crisis.

Boohoo overtakes M&S and Games Workshop continues to succeed…

Boohoo worth more than M&S as fast-fashion retailer’s sales soar (Daily Telegraph, Laura Onita) shows just how far Boohoo has come (and/or how far M&S has fallen) as its valuation hit new highs on strong sales, making it more valuable than M&S! Revenues at the online fashion retailer were boosted by a whopping 44% in the 10 months to the end of December, sending the share price up by almost 5%. * SO WHAT? * Boohoo’s performance contrasts sharply with that of many other fashion retailers at the moment, so let’s hope that they don’t fall foul of that rather worrying

recent trend – accounting error in the retailing sector! Just ask Joules and Ted Baker…

Chaos brings victory for Games Workshop (The Times, Ashley Armstrong) shows that the retailer, famed for developing the Warhammer board game brand, reported record sales and profits yesterday, justifying the doubling of its share price over the last year! Group revenues rose by 18.5% in the six months to December and pre-tax profits have grown by 44%. It is now developing a TV series based on a character from its Warhammer 40,000 game. * SO WHAT? * Here is another example of a retailer that is getting the balance right between in-store experience and online capability. The company is keen to build on the sense of community of its online fans.

US banks see bumper profits, Tesla’s valuation nears a bonus milestone, Boeing’s nightmare continues, MGM sells some property and Flybe gets rescued…

Big banks post big profits thanks to strong US economy (Wall Street Journal, David Benoit) shows that the robust US economy played a major part in boosting profits at America’s biggest banks despite a backdrop of falling interest rates (which make lending less profitable because they can’t charge as much to borrowers). JP Morgan Chase and Citigroup enjoyed double digit earnings growth in the last quarter of 2019 thanks to increased consumer borrowing and a revival in investment banking revenues. In fact, JP Morgan said it had the most profitable year in its history! Both banks benefited from consumers as their credit card businesses experienced a rise in spending. Retail customers seem to be OK on the credit front and continue to spend while corporate clients appear to be more positive given the recent apparent thawing of trade relations between the US and China. * SO WHAT? * If you just listen to what these guys have to say, things are looking pretty good for 2020. Wages are up, the labour market is tight and house values are also rising – which makes people feel “richer” and more inclined to spend. The story was rather different at rival bank Wells Fargo & Co, which saw a massive 53% fall in fourth quarter profits – but this is largely due to it having to put aside more money ($1.5bn) to cover costs associated with its 2016 fake account scandal. It seems that Wells Fargo’s reputation took a bit of a battering and it is continuing to play catch-up.

In Tesla valuation nears Elon Musk’s bonus trigger of $100bn (Financial Times, Peter Campbell) we see that Tesla’s share price is approaching the $100bn valuation mark (it’s now at $97bn). If it stays there for six months, it will unlock a treasure trove of share-based payments for chief exec Elon Musk worth just under $350m that were implemented back in 2018 as an incentive to keep him in

the top job. Its strong share price performance has been thanks to more deliveries, actual profitability and the rising surge in EV sales. Musk has various targets to hit over the years that could net him $50bn! Now that is what I call a bonus!

First negative orders for Boeing in 30 years in wake of 737 Max crisis (Daily Telegraph, Alan Tovey) highlights the difficult truth that Boeing actually lost more orders than it received last year for the first time in three decades due to customers’ crisis of confidence in the wake of two fatal crashes involving its planes. In contrast, European rival Airbus signed deals to sell 768 planes during the year. Boeing has called a temporary halt to 737 Max production to ease pressure on its finances.

Elsewhere, MGM Resorts sells casino property in $2.5bn deal (Financial Times, James Fontanella-Khan and Eric Platt) signals the latest real estate deal for private equity firm Blackstone as it partnered up with an affiliate of MGM Resorts to buy the MGM Grand. This comes only months after it bought the Bellagio (also owned by MGM Resorts) but is a result of investors putting pressure on MGM Resorts to cut its casino assets. Although it has sold the casinos, it will continue to operate them – it will just be paying Blackstone rent. * SO WHAT? * This is a reasonably chunky deal and is one that MGM Resorts needed to boost its cashflow.

Then in Relief for airline Flybe as £106m tax bill delayed after deal (Daily Telegraph, Oliver Gill and Gordon Rayner) we see that Flybe has won a stay of execution after ministers agreed to a controversial deal to stop Britain’s biggest regional airline going under by delaying a £106m tax bill. There was a lot of pressure brought to bear here because its survival was seen to be key to maintaining a vital link between regional cities. * SO WHAT? * According to Flybe/state aid: from bad to Wurzel (Financial Times, Lex), Flybe has been consistently unprofitable due to costly aircraft leases, overexpansion and rising overheads over time. Even a change in ownership last year hasn’t done much to turn things around, so it is questionable as to whether it really deserves such special treatment to exist as is. It argues that selling off profitable routes to other operators and subsidising lossmaking-but-publicly-desirable ones would be fairer.

And finally, in other news…

Today, I thought I’d leave you with something special for the cheese-lover in your life: A Cheese-Themed Hotel Room Is Popping Up in London (mental_floss, Michele Debczak https://tinyurl.com/rcluauc). 👍

1. In MACRO NEWS, UK GDP drops but housing sales rise
2. In CAR-RELATED NEWS, China car sales fall again, Russia’s Yandex aims at European car-sharing, Germany warns about EV-related job losses and we look at how EVs could change car model line-ups, petrol stations and power generation
3. In INDIVIDUAL COMPANY NEWS, Visa buys fintech Plaid for $5.3bn and William Hill benefits from surprises
4. In OTHER NEWS, I bring you a very cute baby…

So UK GDP falls but housing sales rise…

Rate cut pressure grows as GDP falls (Daily Telegraph, Tim Wallace) cites the latest figures from the Office for National Statistics which show that GDP fell by 0.3% in November versus the previous month and that it grew at its weakest pace over the quarter since mid-2012. Pressure to cut the interest rate to stimulate growth will increase as a result of this and financial markets are currently indicating that there’s more than a 50% possibility that the Bank of England will cut rates from the current 0.75% to 0.5%.

In UK house sales rising after Boris Johnson’s election win, says Savills (The Guardian, Rupert Neate) we see that estate agent Savills is benefiting from a “Boris Bounce” since the election, saying in a stock market update that “the

clear outcome of the general election prompted a strong close to the year as confidence to transact returned to the market”. It was cautiously bullish about the prospects for 2020, with the caveat that a proper increase in demand would depend on getting more clarity on Brexit. * SO WHAT? * I don’t think it’s too surprising that the election result provided a late boon to house sales at the top end of the market (I think this is more about Jeremy Corbyn NOT getting in than Boris Johnson’s majority, given his “tax the rich” mentality – although that majority won’t have hurt!), but detail on the whole Brexit thing is very sketchy at the moment. Economic confidence is a huge factor in house buying and, at the moment, I believe that underlying confidence is backed by rising wages and a tight labour market. This should imply that there is at least pent-up demand for home-buying, but it won’t be unleased fully unless people feel that it’s safe to go ahead and make those purchases. Clarity is what everyone is after here – and it’s not going to come overnight.

China car sales fall again, Yandex moves in on car-sharing, Germany warns about the negative impact of EVs and we take a look at how EVs could change model line-ups, petrol stations and power generation…

China car sales tumble for second year in row (Financial Times, Sun Yu) cites the latest stats from the China Association of Automobile manufacturers which show that the country’s car sales fell for the second consecutive year due to a slowing economy and ongoing impact from trade disputes with America hitting consumer sentiment. It’s also possible that rising secondhand car sales put a dent in new car sales as well. Another area for concern was the falling sales of electric vehicles (EVs) following the government cut in subsidies, which were slashed by over 50%. This prompted a cut in production by the manufacturers. * SO WHAT? * China is the world’s largest car market, so this is a big deal. The fact that EV sales were also affected by government cuts in the subsidy is also worrying, although you could argue that you can’t subsidise EVs forever. Mind you, although the OVERALL figure is disappointing for the year, there was only a 0.1% fall in car sales in December, so some are arguing that the worst could be over and that the imminent trade deal with the US could help consumer sentiment to bounce back.

Yandex to offer car-sharing in Europe as rivals pull out (Financial Times, Max Seddon) shows that Russian tech giant Yandex has designs on expanding its car-sharing service (Yandex.Drive) in Europe just as other car-sharing operations such as ShareNow (a joint venture between BMW and Mercedes-Benz owner Daimler) are pulling out (ShareNow announced last month it was pulling out of the UK and US). Yandex.Drive has only been around for two years but touts itself as being the world’s biggest car-sharing service, with over 21,000 vehicles in operation in Russia. Yandex is looking at cities with decent electric car facilities including Madrid and Copenhagen, among others, and plans to launch a test service of up to 1,000 electric cars in a European city sometime this year. * SO WHAT? * Car-share markets are dominated in Europe by auto makers, but in Russia, it’s the tech companies who run the show. Mail.ru bought a start-up called YouDrive last year and aims to grow its fleet to 10,000 cars and Delimobil plans to raise up to $300m in a New York IPO by next year. European manufacturers seem to be increasingly doubtful of the profitability of such ventures but Yandex is banking on building on the expertise it has gained in the search engine market and Yandex.Taxi, its ride sharing app. It’s difficult to see how successful this could be although you can understand Yandex’s optimism given the success it has enjoyed in its domestic market. User growth is through the roof in Moscow, according to marketing agency Autostat, but it remains to be seen whether this can be transferred elsewhere.

There were quite a lot of articles in today’s newspapers about the impact that electric vehicles (EVs) would have in various areas. For instance, Germany’s shift to electric cars puts 400,000 jobs at risk in next decade (Financial Times, Joe Miller) highlights concerns outlined in a government-sanctioned report by the National Platform on Future Mobility (NPM) that over 400,000 jobs could be in the balance over the next ten years as the car industry gravitates towards electric vehicles. This is based on projections that Germany may have to rely on imports to meet EV sales targets as most vehicle batteries – the most valuable part of electric cars – are made in Asia. A huge number of emissions-free vehicles will have to be

manufactured over the next 24 months if Germany is to avoid billions of Euros in fines from Brussels. Another reason for the potential sharp decline in jobs is that EVs contain far fewer components, meaning that vehicle assembly will be able to be increasingly automated with jobs in engineering, technical development and design and metal production being particularly vulnerable. * SO WHAT? * Germany is an export-led economy and the car industry is a major part of that. The sector currently employs 800,000 workers, so you can see how 400,000 being identified as “at risk” is a major issue. Manufacturers can potentially soften the blow by reskilling staff to move with the changes, but this will obviously take time and money.

Polluting cars could be pulled from UK sale, say carmakers (The Guardian, Jasper Jolly) shows that the chief exec of the Society of Motor Manufacturers and Traders (SMMT), Mike Hawes, thinks that carmakers may have to cut models in the UK to comply with post-Brexit carbon dioxide limits because the UK loves 4x4s! Under the new EU rules, average CO2 emissions for virtually all cars sold this year and next will have to come in under 95g/km. Huge fines (€95 for every gram they are over their limit multiplied by the number of cars sold that year) await those who breach this limit. Currently, the UK average is 127.9g/km. What a headache for the carmakers!

Then in Old-style petrol stations will be replaced…but by what? (The Times, Robert Lea) discusses the future of charging in an increasingly EV-friendly Britain. Everyone knows that the current charging network is extremely patchy and all sorts of figures are bandied about regarding how many chargers we’ll need to install in order to meet rising demand. It is assumed that most people will charge at home, but it also thought that they will also charge at “destinations” (like supermarkets, hotels, cinemas and gyms) and “en route” (i.e. filling/service stations) but the government could also encourage more charger installation by forcing all filling stations, railway stations and hotels to become part of the public recharging infrastructure. BP Chargemaster is currently looking at installing 150kW chargers which cost £75,000 but charge up an EV in less than 20 minutes and Pod Point is involved in Tesco’s plans to install 2,400 charging points at 600 of its stores. Start-up Instavolt believes that there will be demand for chargers at places where people go for 30-45 minutes, e.g. at coffee shops, fast food outlets and convenience stores. * SO WHAT? * This all sounds great, but I have to say that I think charging will get progressively quicker and so business models that rely on motorists hanging around for 30-45 minutes will be very vulnerable. In the meantime, though, we need to get the charger infrastructure sorted first and it will be important for everyone to put resource into this otherwise EV adoption will be very slow. Yes, sales have been very strong in percentage terms, but they are miniscule in absolute terms. To my mind, I think that we are getting to the stage now where many people feel that they are up for having an electric “runaround” car, but that they will still need to have a “normal” car for the longer journeys. We need to get to the next stage where you have an electric car as your ONLY car – and improving the charging network (along with battery tech and power storage) will be key.

More electricity demand means bigger challenge for power firms (The Times, Emily Gosden) then takes a look at how an increase in EV charging points will affect our entire power generation and distribution infrastructure. National Grid published a frightening report in 2017 outlining the worst-case scenario for a massive hike in electricity needs, but since then it has retreated somewhat, saying that “smart charging” will smooth out supply and demand. Still, more electricity will definitely be needed – but I don’t think anyone has an idea as to how much!

Visa makes a chunky fintech acquisition and William Hill benefits from sporting surprises…

Visa to pay $5.3 billion for fintech startup (Wall Street Journal, Cara Lombardo and AnnaMaria Andriotis) highlights Visa’s purchase of Plaid Inc, which makes software that gives financial services apps access to financial accounts, as part of efforts to access consumers’ growing use of fintech apps and non-card payments. Visa’s chief exec said that the acquisition would

help broaden its access to fintech firms and its reach outside cards. * SO WHAT? * This is part of a move by Visa to diversify its reliance on cards as customers continue to evolve away from their use. I would expect more of this kind of thing from Visa and other players, such as Mastercard, as they try not to get left behind by changing customer behaviour.

Sporting shocks bolster William Hill profit estimates (Daily Telegraph, Hannah Uttley) shows that betting supremo William Hill’s annual profits will benefit from the number of surprise sporting triumphs in 2019. * SO WHAT? * This trading update will calm the nerves of investors who are still smarting from the impact of the major crackdown on Fixed Odds Betting Terminals (FOBTs). Hopes for the future will now rest on the growth prospects of its US business.

And finally, in other news…

You’re going to think I’ve gone all mushy, but you’d have to have a heart of stone not to say “aahhhh” when you see this: Mom dresses up baby as influential women in history (USA Today, Morgan Hines https://tinyurl.com/snwzrmo).

1. In MANUFACTURING/CAR NEWS, US manufacturers offer incentives to attract workers, Nissan looks at a Renault split and we look at whether 2020 is the year for electric cars
2. In RETAIL NEWS, shopper numbers fall and Beales looks tricky
3. In INDIVIDUAL COMPANY NEWS, TikTok tries to appeal to advertisers, Lloyds Bank staff face a bonus cut and one small company aims to be the vegan Willy Wonka
4. In OTHER NEWS, I bring you the flex challenge

So US manufacturers have to sweeten the deal, Nissan looks at Renault separation and we look at whether 2020 is the year for electric cars…

Manufacturers increase perks to get new hires to move (Wall Street Journal, Austen Hufford) shows just how tight the labour market is in the US at the moment as manufacturers are now offering to pay relocation costs and signing bonuses in addition to paying higher wages to attract new workers! There are currently around 500,000 factory job vacancies – the biggest number for almost twenty years – and when unemployment rates are at their lowest for nigh on 50 years, attracting new workers is getting difficult. These perks aren’t just part of job offers – they are using them in job ads to attract those from further afield. Welders, engineers and machine programmers are in particular demand and the likes of Caterpillar, Lockheed Martin and Raytheon are among those who are offering generous relocation benefits – the latter of which is currently offering up to $5,000 in moving costs for a $17-an-hour position, for instance! * SO WHAT? * This just goes to show how tight things are getting in the US labour market – and I would have thought things could get tighter still if the US-China trade negotiations get sorted out as I would expect a resulting increase in manufacturing activity.

Nissan executives step up planning for potential split from Renault (Financial Times, Peter Campbell, Leo Lewis and Kana Inagaki) shows how senior Nissan execs have accelerated plans to potentially split from Renault as the partnership becomes increasingly fraught. * SO WHAT? * If Nissan really does want to split from its longtime partner (and let’s not forget – if Renault hadn’t come along when it did twenty years ago with the now-disgraced former chief Carlos Ghosn, Nissan would have gone down the toilet) I think it is absolute madness. When EVERYONE else is

forging alliances around them (e.g. Fiat Chrysler and PSA’s full merger and countless other joint ventures or closer alliances), Nissan is looking to load up the shotgun and shoot itself in the foot. Unpicking Nissan and Renault’s closely intertwined purchasing and engineering functions will be extremely difficult and when you’ve got everyone else in the industry huddling together to cut costs and focus on specific areas against a backdrop of tightening regulation and technological change, Nissan’s arrogance just beggars belief. No doubt it will seek out alliances with other car manufacturers, but I would have thought its bargaining position would be shot to pieces as surely no-one will want to partner up with a company that will have to spend a LOT of time and money on unpicking its operations.

Will 2020 be year electric cars spark into life? (The Times, Robert Lea) highlights the fact that 2020 will see more than double the number of pure electric cars in the British showrooms. 2019 saw 19 electric plug-in car models on sale in the UK from the under-£20,000 Smart car with a range of under 70 miles to the £80,000+ Tesla Model X with a claimed range of over 300 miles. 2020 will see up to 22 new fully-electric models becoming available, four of which will be under £20,000. Until now, the mid-market has been dominated for most of the last decade by the Nissan Leaf, Renault Zoe and BMW i3, but the £20-30,000 segment is expected to hot up with cars like VW’s ID.3, electric mini, Vauxhall Corsa and Honda e waiting in the wings. * SO WHAT? * Range anxiety and charging network concerns remain the main reasons for overall sales of electric vehicles representing only 1.6% of car purchases and the Society of Motor Manufacturers and Traders thinks that they will still make up for less than 3% of new car purchases by the end of this year. The main prospective spanner in the works for potential sales growth, however, is the possibility of the government reducing (or abandoning altogether) the £3,500 subsidy for new electric cars. As we have seen in every market in the world, once subsidies fall, new electric vehicle sales crater dramatically. It’ll be interesting to see how things pan out this year, though!

High street shopper numbers fall and Beales is teetering on the edge…

No Christmas cheer for high street again (Daily Telegraph, Michael O’Dwyer) cites the latest figures from Springboard which show that December footfall was down by 3.5% versus the same month in 2018 – for the eighth consecutive December. * SO WHAT? * This is just more evidence of what a combination of higher business rates, increasingly thrifty customers, heavy discounting on Black Friday/Cyber Monday cannibalising Christmas sales and

relentless online competition is doing to high street retailers. Tough times. Something surely has to give in order for retailers to survive long term. Sure, I keep banging on about how they should improve the customer experience to give them what they can’t get online, but they could also do with an “outside” helping hand otherwise our high streets will disappear.

Beales on brink of administration (Daily Telegraph, Hasan Chowdhury) shows that one of the UK’s oldest department stores, Beales, is on the verge of going into administration. It is currently in talks with landlords about cutting rents whilst trying to find a buyer. * SO WHAT? * The terminal (in my opinion!) decline of department stores continues…

TikTok appeals to advertisers, Lloyds Bank bonuses look vulnerable and a vegan start-up attracts more funding…

In TikTok explores starting curated content feed to lure advertisers (Financial Times, Hannah Murphy and Tim Bradshaw) we see that viral video sensation TikTok is looking at launching a curated feed of content that will be guaranteed safe for brands to advertise in. This would enable the Chinese-owned company to charge higher rates to advertisers and mirrors a similar successful move by Snap, when it launched its “Discover” tab in 2015. TikTok is also looking at ways of letting users shop directly from brands. * SO WHAT? * This is a great idea and works well for Snap – the company said that it now has over 100 Discover channels with a monthly audience of 10m and average watch time rising by 40% year-on-year – so this idea definitely works. Given the amount of criticism that TikTok has faced over its dodgier content, I have no doubt that the prospect of a “clean” area will be very attractive to advertisers who want access to TikTok’s audience without the potential for damaging their brands.

Lloyds warns staff to expect first bonus cut in four years (The Guardian, Kayleena Makortoff) highlights a memo

warning its 60,000 staff about a potential bonus cut following a number of problems, including higher-than-expected PPI claims going into the final deadline. Obviously, the unions are up in arms (of course they are) about this, but the company says that it has not been finalised yet. Clearly this is an exercise in expectation management…

OK, so it’s a really small company but ‘Willy Wonka of vegan food’ stages successful funding round (Daily Telegraph, Hasan Chowdhury) shows that food-tech business THIS has raised £4.7m in its latest funding round to boost production of its vegan “meat” after only being launched in June 2019! The company currently produces vegan chicken and bacon rashers and supplies the likes of Waitrose, Ocado and Honest Burger. * SO WHAT? * At the risk of sounding like a miserable git, I do wonder whether things like this show that there’s too much froth in the market for plant-based meat substitutes. The company has not been around for long, was started up by a couple of fast food operators (not scientists!) and has already attracted £5.6m in total. Given that food giants including Nestlé and Tyson Foods are trying to play catch-up with the likes of Beyond Meat and Impossible Foods, the market is going to get really crowded and I’m not confident such a start-up can weather the competition. Despite that, though, I DO hope that it works as I will always want the little guy to win! I just think it is going to be an uphill battle.

And finally, in other news…

I thought I’d leave you today with Gymnast’s viral challenge sounds easy – but no one understands how it’s possible (The Mirror, Luke Matthews https://tinyurl.com/wh7q7c9). This is very impressive! Mind you, I think it would still be pretty hard to do this from a “back down” position as well!

1. In RETAIL NEWS, JC Penney and Kohl’s announce weaker sales, India’s Reliance takes on Amazon, Ikea buys a shopping centre (!), John Lewis has a shocker, Selfridges thrives on vegan hampers, M&S suffers, Tesco’s Christmas is a bit meh and Mitchells & Butlers does it again
2. In INDUSTRY NEWS, we look at how African swine fever is reshaping the meat industry and how CBD feet-dragging might help smaller players
3. In INDIVIDUAL COMPANY NEWS, British Airways’ Willie Walsh announces his retirement
4. In OTHER NEWS, I bring you some great gritter names

So US department stores underwhelm, India’s Reliance takes on Amazon, Ikea buys a shopping centre, John Lewis has a nightmare, Selfridges benefits from vegan hampers, M&S and Tesco are a bit meh and All Bar One owners toasts record sales growth …

JC Penney, Kohl’s post lower holiday sales (Wall Street Journal, Suzanne Kapner) shows that a solid US economy and consumer spending just aren’t feeding through to these department store chains as they reported weaker sales during the critical months of November and December. JC Penney, Kohl’s and Victoria’s Secret parent L Brands were all in the same boat as they lost out to the likes of Amazon, TJ Maxx and Target. This was announced just a day after Macy’s and Bed Bath & Beyond unveiled underwhelming performances. * SO WHAT? * This doesn’t really inspire confidence for the immediate future of US department stores and reflects the pressure that many retailers are still under. Having said that, it’s not all bad as Walmart, Target and Costco all did pretty well.

Reliance takes on Amazon and Walmart in India with JioMart (Financial Times, Benjamin Parkin) is a really interesting article that highlights India’s mighty Reliance conglomerate wading into online shopping to take on the likes of Amazon and Walmart-owned local rival Flipkart. Small local shops (known as kiranas) have been suffering from the proliferation of online operators but Reliance looking to change all that. It is experimenting with its new platform JioMart where customers buy their goods which are then delivered from their nearby shops. These shopkeepers then use a handheld Jio terminal to input what goods they have in stock and order new stock from Reliance’s wholesalers. Reliance will try to entice customers by giving early adopters chunky discounts and offering free delivery and returns while the local shopkeepers will benefit from more customers and access to cheaper wholesale goods. The conglomerate will also look to use the data they field from this to offer other digital services. * SO WHAT? * Online grocery delivery is a huge growth area in India’s $60bn e-commerce market and, shortly after Reliance started to sign up customers, Amazon announced a tie-up with local retail group Future to offer grocery shopping and delivery within two hours in major cities. Reliance, though, has an advantage over Amazon and Flipkart (which, as I said, is Indian BUT is majority-0wned by Walmart) because new legislation came in last year restricting foreign-owned companies selling their own inventory to shoppers – but because Reliance is local, it won’t face such restrictions. This will be a very interesting area to watch develop IMO.

Meanwhile, in the UK, Ikea buys UK shopping centre in plan to open more ‘mini’ stores (The Guardian, Sarah Butler) highlights Ikea’s £170m purchase of a shopping centre in West London (the King’s Mall in Hammersmith) which opened in 1980 and contains 40 shops. This is Ikea’s first shopping centre in the UK but it will probably hoover up more as it looks to take advantage of being in a buyers’ market. The company announced that it had beefed up its property team in the UK back in October to take advantage of current market conditions with a view to getting smaller stores in central locations, in a departure from its traditional big box out-of-town format. The new Hammersmith store will stock over 2,000 home furnishing accessories and, yes, their meatballs will also be available 👍. * SO WHAT? * I really do like Ikea’s thinking. They have used their massive resources to experiment with formats and try new initiatives in order to manoeuvre themselves

into a position to take on the future whilst actually listening to what their customers want. They are one of the few players with the resources (and willingness!) to play in retail real estate arena and will no doubt have the pick of the properties available given the number of landlords trying to reduce their exposure to retail property. I still think that they could be major buyers of department stores given their size in central locations. Are they just waiting in the wings for when Debenhams collapses?? BTW, just to be clear, this is PURELY speculation on my part.

And now back to some gloom for UK retail. John Lewis boss in bombshell exit as sales nosedive (Daily Telegraph, Laura Onita and Simon Foy) heralds shocking news for the retailer as it announced a profit warning, the departure of top exec Paula Nickolds and the potential cancellation of its staff bonus – the first time in 67 years. Christmas was poor and annual profits were “significantly lower” than the previous year. John Lewis left reeling by shock exit of ‘golden girl’ (The Times, Ashley Armstrong) highlights the City’s surprise at Nickolds’ departure as she was highly rated by colleagues and commentators but the fact is there is now a management vacuum at the top of the company at a tricky time in the market. Waitrose boss Rob Collins got chopped in the reshuffle and John Lewis boss Nickolds will leave next month along with chairman Sir Charlie Mayfield. The new incoming chairman, Dame Sharon White, is highly regarded but has zero retail experience. * SO WHAT? * I would be willing to bet money that the newbie will jettison the partnership status and make it a publicly listed company within the next year or two – or just sell it. The fact that the new chairman has no retail experience would suggest that the company is looking for a new direction and being a partnership restricts the avenues available to finance a radical overhaul. The company will obviously deny this, but the pressure to do something drastic will only increase as it continues to fail to capitalise from the weakness of rivals in department stores and supermarkets. Yes, staff will say that it will change the identity of the company, but if the senior bods are offered the chance to sell their shares and run when retail generally looks like it’s going to go down the toilet – I think they’ll take it and think about their consciences later.

Elsewhere, Vegan hampers helped Selfridges’ sales grow by 5pc (Daily Telegraph, Hannah Uttley) shows that the department store saw sales increased by 5%, boosted by the popularity of vegan sweets and chocolates whose sales were up by 96% versus the previous year, beauty products, toys and menswear. The department store has been investing in experiences for customers and it appears to have paid off! Fortum & Mason also announced a 15% hike in sales in the five weeks to December 29th as it benefited from sales of its hand-carved smoked salmon, champagne and non-alcoholic sparkling tea. * SO WHAT? * It just goes to show that it’s still possible to do well as a department store – and it seems to me that investing in customer experience is absolutely key.

In a quick scoot around some of the other retailer highlights, Glut of food and skinny jeans squeezes M&S (Daily Telegraph, Laura Onita) shows a shaky performance in clothing and home sales and stronger food sales over the festive period, but there was overstocking in some areas hitting profit margins and its share price fell by 10% on the news. Tesco boasts ‘busiest day ever’ but festive revenues still fall flat (Daily Telegraph, Laura Onita) sounded reasonably good news for the supermarket, which benefited from the performance of its wholesaler Booker and Pubs group raises glass to record sales growth (The Times, Dominic Walsh) showed that strong demand for pub meals and drinks helped power a strong performance at Mitchells & Butlers (owner of brands including All Bar One), confirming the trend of people spending on “experiences” over “things”.

We look at how African swine fever is reshaping the whole industry and how CBD hurdles could give smaller operators an opportunity…

How swine fever is reshaping the global meat trade (Financial Times, Emiko Terazono, Andres Schipani and Jamie Smyth) takes a look at how African swine fever in China has drastially reshaped the meat market globally in the 18 months since it was first acknowledged. So far it has reduced the number of pigs in China by about 40% (around 100 million 😱), which led to pork prices shooting up to record highs and prices of beef and chicken going higher as consumers ate them instead. The situation has become so bad that meat imports to China have not only not been affected by the trade shenanigans going on between the US and China, they have actually increased. The country’s meat imports were up by 63% in the first 11 months of 2019 versus the previous year and suppliers have struggled to keep up with demand. Brazilian, European and Australian producers have been diverting a lot of their product to China meaning that other markets such as Japan, Indonesia, Canada and the Philippines have lost out. Swine fever has now spread to Vietnam, the

Philippines, South Korea and Mongolia with recent outbreaks in Serbia and Slovakia. In the UK, pork producer prices have risen by 12% but suppliers and retailers haven’t yet passed this on to customers. * SO WHAT? * The effects of African swine fever have been shocking but it looks like we are not in the clear yet so expect higher prices for longer for all animal proteins. Good news for the likes of Beyond Meat and Impossible foods if they can take advantage, no?

Adding CBD to food, drink was a hot trend, until FDA chimed in (Wall Street Journal, Annie Gasparro) shows that major food and beverage companies are slowing down work on products containing CBD after the FDA, the US regulator, told consumers in November that there wasn’t enough scientific evidence to prove its stated benefits. PepsiCo, Starbucks, Kellogg, Monster Beverage and Red Bull have been among those looking at putting CBD in their products, but it all appears to have been sidelined as FDA approval could take months or years. * SO WHAT? * This is a major spanner in the works but could prove useful to smaller companies who could take advantage of making products containing CBD as sales of such products continue to rise even without FDA approval. Industry publication (so of course, it’s not biased 😜) Hemp Industry Daily forecasts that hemp-derived CBD product sales were over $1bn in 2019 and could rise to $10billion by 2024.

British Airways’ boss decides to retire…

Willie Walsh to stand down as boss of British Airways owner (The Guardian, Julia Kollewe and Gwyn Topham) signals the end of an era as Willie Walsh, chief exec of

British Airways and Iberia owner International Airlines Group (IAG) will be stepping down in March to be succeeded by Luis Gallego, the Iberian chief exec. Walsh had indicated he would step down within two years at the end of last October, so I guess the pull of the golf course was just too much to resist.

And finally, in other news…

I thought I’d leave you today with Snowel Gallagher and Gritter Thunberg among names chosen for new fleet of salt spreaders (Sky News, Tania Snuggs https://tinyurl.com/wab9736). Gotta love this!

1. In MACRO & COMMODITIES NEWS, Trump tries to calm the US/Iran situation, India slashes its own growth forecasts, von der Leyen manages Brexit expectations, Spain’s Sanchez digs in and a lithium producer cuts guidance
2. In RETAIL/CONSUMER GOODS NEWS, Macy’s outlines store closures, UK retailers have a shocker, Sainsbury’s gets an Argos drag, Boots and Ted Baker consider their futures, Greggs offers staff a £7m bonus, Beyond Meat sees a McOpportunity and Constellation downplays cannabis
3. In INDIVIDUAL COMPANY NEWS, Uber tries fudging the rules and TikTok tightens them
4. In OTHER NEWS, I bring you some camouflaged animals

So the US/Iran situation calms (for now), India cuts growth forecasts, von der Layen manages Brexit expectations, Spain’s Sanchez tries to dig in and a lithium producer cuts guidance…

I must say that I could do a whole other Watson’s Daily just on macro news these days, but I’ll try and keep it quick!

Donald Trump backs away from military action against Iran (Financial Times, Katrina Manson and James Politi) shows Trump’s efforts to de-escalate tension between the two countries as he said that the US would not respond via military action to the most recent attack on US forces by the Iranians. He added that there had been no Iraqi or American casualties after the missile attack on Tuesday night. This represents a climbdown from his recent rhetoric where he said that he would inflict “disproportionate” military action if Iran retaliated. This was met by relief all around, but you never know with Trump (or Iran, for that matter!), so it’s not worth getting too comfortable…

Then India cuts growth forecast to slowest pace in 11 years (Financial Times, Stephanie Findlay) heralds the latest official growth forecasts from India’s ministry of statistics which say that India’s GDP will grow at 5% in the current financial year – its slowest pace for over a decade. This is down to weakening private consumption, industrial activity and investment and although the government is trying to counter this with corporate tax cuts and more infrastructure projects, this will take some time to feed through. * SO WHAT? * This is disappointing news and comes at a time where the country faces concerns (from some of its own people) over the credibility of its official data. Given Narendra Modi’s enhanced powers and keenness to push through his Hindu nationalist agenda,

maybe the administration is just buying itself a bit of time by making the downgrades.

In Ursula von der Leyen: three takeaways from her Brexit speech (Financial Times, Jim Brunsden) we see the FT’s take on what the new EC president had to say about Brexit when she was in town yesterday. The FT looks at three takeaways, but I would summarise them further by her saying that negotiations will be difficult, take longer than BoJo thinks and that relations will forever change. No surprises there then.

Pedro Sánchez prepares to dig in as Spain’s prime minister (Financial Times, Daniel Dombey) gives us the latest on Spain’s “new” PM and what he needs to do if he is going to achieve anything at all. He was sworn in yesterday and will probably kick off proceedings by making it difficult to remove him now that he has got his grubby paws on the top job. He has got all sorts of legislation up his sleeve, but whether he will be able to get anything done because of his paper-thin majority is another question. Negotiations over Catalonia and a new budget are bound to be particularly tricky. Good luck Pedro…will we be heading for a fifth general election in five years?? 😜

In the world of commodities, Lithium producer Livent falls 12% after guidance cut (Financial Times, Henry Sanderson) shows a worrying trend for some as the company slashed its earnings guidance and warned that the market for the raw material used in batteries is “challenging”. It is also revisiting its plans to increase capacity given the continued weakness in lithium prices. * SO WHAT? * This is a real downer for many as there had been expectations of an uptick in lithium prices as they had fallen by over 50% in the last year due to more supply coming online from new mines in Australia as well as from big producers SQM and Albemarle. Having said that, this is good for battery MAKERS as one of their input costs will be cheap.

Macy’s announces store cuts, UK retailers continue to suffer, Sainsbury’s cheer is dulled by Argos, both Boots and Ted Baker consider their futures, Greggs is on a roll, Beyond Meat sees a McOpportunity and Constellation downplays its cannabis connection…

In the US, Macy’s plans store closures, posts encouraging holiday sales (Wall Street Journal, Suzanne Kapner) shows that the troubled department store chain is looking to shut down 28 Macy’s stores and one Bloomingdale’s, but on the other hand says it saw “a strong trend improvement from the third quarter” as the sales decline in the fourth quarter wasn’t as bad as everyone had been expecting. The company has around 680 department stores and 190 specialty stores and said that the closures were just a normal part of an annual review of its store portfolio. * SO WHAT? * Macy’s is just another department store struggling to keep up with changing consumer behaviour. Under chief exec Jeff Gennette, it has executed a number of initiatives such as sprucing up the best performing stores and trying out new concepts such as Backstage (which sells deeply discounted items) and Story (which sells themed merchandise). Unfortunately, these efforts have not had a huge impact thus far, but I guess at least the company is trying! It remains too early to tell whether they will bear fruit or whether Gennette is just rearranging the deckchairs on the Titanic…

Back in the UK, Exodus from high street hits retailers in worst year on record (The Guardian, Sarah Butler) cites the latest figures from the British Retail Consortium (BRC) and KPMG which show that sales fell for the first time in 24 years, making it the worst year on record for British retail as a whole. Sales were tipped over the edge as the crucial final two months of the year proved to be weak. On the other hand, Black Friday lifts sales on high street out of the red (The Times, Gurpreet Narwan) interprets the same figures in a more upbeat way, saying that sales grew by 1.9% in the five weeks to December 28th versus the same time last year BUT if you make adjustments for Black Friday, total sales actually fell by 0.9% in the period. The BRC observed that the week going into Black Friday had usurped Christmas this year as the biggest shopping week of the year for non-food. * SO WHAT? * Although many retailers are clearly having a rough time of it at the moment, it seems that consumers haven’t closed their wallets completely. December data from Barclaycard shows a continuation of the trend for consumers to spend less on “stuff” and more on “experiences” as spending increased on cinema tickets (+19%), pubs (+11.7%) and takeaway orders (+12.5%) versus a drop in spending on clothing, toys and computer games. I think that the quieter December for retailers must surely have been adversely affected by having a general election that got nerves jangling and people spent their money instead on experiences to lift their spirits. As I have said before, wage growth has been strong and we still have a very tight labour market, so I think that things could be a lot worse. Retailers need to upgrade their in-store experience for customers – and if they do this effectively, they will see the benefits as consumers have the money.

Low toy demand at Argos weighs on Sainsbury’s Christmas trade (Daily Telegraph, Simon Foy) shows that, on the one hand, the supermarket’s food business did pretty well in a competitive market, but then Argos found the going tougher over the festive period. Chief exec Mike “We’re-in-the-money” Coupe put a positive spin on things by saying that “The colder weather helped to deliver strong clothing sales in the quarter and our Christmas, party and gifting ranges were all popular with customers”. Although not stellar, things could have been worse!

Then in Boots owner stays mum over taking ailing chemist private (Daily Telegraph, Laura Onita) we see that Walgreens Boots Alliance (WBA), Boots’ American parent company, is staying tight-lipped over speculation that it may take the retailer private with help from investor KKR. UK sales have continued to weaken. * SO WHAT? * There has been speculation about a $70bn take-private deal since November and as the retailer’s poor performance persists, so do the rumours. Boots is to shut 200 shops and has also axed 350 jobs at its Nottingham HQ as part of efforts to jolt the business back to life, but I would argue that a turnaround needs to go much deeper. Sometimes it can be much easier to perform root-and-branch surgery on a company without having to deal with the constant glare of shareholders, so I am sure this buyout option is at least being considered.

Another company is also considering its options in Ted Baker’s bankers call in experts to weigh prospects (The Guardian, Sarah Butler) as advisory firm FTI Consulting has been brought in to do a business review and come up with possible ways forward for the troubled fashion retailer. The consultation is expected to take a few weeks. * SO WHAT? * Given the company’s absolutely shocking performance (it recently announced its fourth profit warning in a year) you can see why they got in some help. Ted Baker is currently reaching its £180m debt limit and is looking at all sorts of ways to bring in much-needed cash (including selling its HQ and leasing it back, that will apparently raise £60m). The slowdown in trading has been compounded by the recent discovery of an accounting error by the recently appointed CFO and speculation abounds that founder Ray Kelvin could return and take the company private (although apparently he’s not that keen – but who knows?!? Surely even if he was keen he wouldn’t say it because the selling price would then go up!). Whatever happens, Kelvin will certainly have a part to play as the shares are very tightly held – he has 35% and over a quarter of the remaining shares are held by investment firm Toscafund (which recently built up a sizeable stake), Schroders and Threadneedle.

In consumer goods news, Supplying McDonald’s is just not possible (The Times, James Dean) heralds a potentially massive opportunity for Beyond Meat as its rival Impossible Foods has pulled out of the bidding to supply meat-free burgers to McDonald’s because it can’t produce enough. McDonald’s is the world’s #1 fast-food restaurant chain and is yet to launch a meatless burger worldwide despite competitors such as Burger King doing so (Impossible Foods supplies it with the patties for the Impossible Whopper). Impossible Foods’ chief exec Pat Brown said that “Having more big customers right now doesn’t do us any good until we scale up production. I wish we had vastly more capacity than we do right now because the demand is high”. * SO WHAT? * This must be gutting for Impossible Foods, but I suspect that the way things are right now there’s room for everyone in the alternative meat arena. Beyond Meat will have to step up big time as others will be waiting in the wings for them to fail. If they do step up, this could be the making of the company IMO.

Following on from one of my themes in this years Watson’s Yearly, High hopes suffer new blow at Constellation (The Times, James Dean) shows that beer giant Constellation Brands announced that it was writing down its 38% stake in Canopy Growth, Canada’s #1 marijuana grower, by $534m. The stake originally cost Constellation $4bn and is in addition to the previous writedown of $839m it made after its second quarter results in October. The writedown made a sizeable dent in its third quarter profits but it still beat market forecasts due to strong beer sales. * SO WHAT? * I would have thought that the Canopy investment would have been hanging over investors for a while given that the Canadian company’s share price has cratered by almost two thirds from its high at the end of April last year, so at least this writedown addresses that. I still think that there’s time for the cannabis boom, but we will clearly have to wait a while yet!

Uber fiddles about and TikTok outlines etiquette…

Uber retools California fares in response to gig economy law (Wall Street Journal, Preetika Rana) highlights some more Uber shenanigans as the company tries to see if it can get around the California Assembly Bill 5 (aka “AB5”) by altering the way it calculates some fares. Basically, AB5 went into force on January 1st and reclassifies drivers as “employees” rather than “contractors”. This is a big deal because being an employee means that Uber has to provide benefits such as holidays, minimum wage and sick pay – thus hiking up their costs considerably. Yesterday, Uber put a new cap on its commission and let drivers know how much they could make on certain trips. * SO WHAT? * There wasn’t too much detail on this in the article but I am guessing that the reason Uber is doing this is because it can argue that this new feature will allow drivers to PICK the jobs they go on, hence giving them more autonomy and therefore allowing them to act more like independent contractors (which is what they want). This sounds like

lawyers manufacturing a loophole as this interpretation would be very literal, but I think that the spirit of the law would still define drivers as employees. We’ll just have to see how this unfolds because the implications could be massive if they are taken as a precedent for the rest of the world.

TikTok tightens rules on video content and users (Wall Street Journal, Sarah E.Needleman) shows that TikTok is trying to address criticisms of the rather freewheeling nature of its highly popular content as it released new rules covering ten categories yesterday. Most of its users are under 30 and its new rules of etiquette forbid things like the promotion of behaviour leading to eating disorders, threats against users based on immigration status, gender and caste. * SO WHAT? * TikTok said that it introduced these guidelines because it felt it need to provide users with more clarity, but I think this is BS. I think it’s all about TikTok’s desire to clean up its image and address some of the criticisms that could hold back future growth. The company faced a lot of criticism over its content in India (a key market for the company) and continues to face potential regulatory problems in the US where there are worries that it breaches national security given that it is owned by Chinese conglomerate ByteDance.

And finally, in other news…

In today’s “…and finally,” sections I thought I’d bring this to your attention: Can you spot the camouflaged animals in these photos? (Insider, Talia Lakritz https://tinyurl.com/v7lj3wt). There are some absolutely incredible animals on show here!

1. In MACRO NEWS, Iran retaliates, the Venezuela drama continues, Sanchez becomes Spain’s PM and European inflation rises
2. In CAR NEWS, Tesla talks China expansion, GM has its worst China sales decline, Rolls-Royce benefits from its SUV and Aston Martin announces a profit warning
3. In RETAIL NEWS, high street job losses increase, supermarkets have a tricky Christmas but Majestic toasts a good one
4. In TECH NEWS, Sonos sues Google and Samsung pins hopes on 5G
5. In OTHER NEWS, I introduce to you TGI Friday’s vegan “steak”

So Iran retaliates, Venezuelan chaos continues, Sanchez becomes PM and European inflation rises on higher energy bills…

In Iran fires missiles at US forces in Iraq (Wall Street Journal, Gordon Lubold, Nancy A.Youssef and Isabel Coles) we see that Iran fired missiles at two US bases in Iraq, which Iran’s Islamic Revolutionary Guard said were in retaliation for the assassination of Major General Qassem Soleimani. An admin official says that there weren’t any casualties, but conceded that it was “early”. Iran’s Foreign Minister Javad Zarif tweeted, “We do not seek escalation or war, but will defend ourselves against any aggression”. * SO WHAT? * It was bound to happen, but this attack was unusual in that the missiles were not only fired into Iraq from Iranian territory, Iran openly acknowledged that it had happened as well (whereas in the past, they would generally try to deny it and blame others). The US has upped its military presence in the region and now the total number of soldiers, sailors and airmen in the Middle East stands at around 80,000. There will be more to come…

Following on from some stories earlier this week, Venezuela: What happens next? (Financial Times, Gideon Long) shows continuing chaos in the country as Juan Guaidó claims to be its legitimate president and president of the National Assembly while Nicolas Maduro and his mate Luis Eduardo Parra are actually in the respective hot seats. * SO WHAT? * Confusion continues to reign as the US, EU, Organization of American States and the Group of Lima (a group comprising of Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Honduras, Mexico,

Panama, Paraguay, and Peru. Guyana, Saint Lucia and Bolivia) support Guaido and condemn the Maduro administration, although Russia supported Parra’s highly contentious election. The drama continues…

Then in Spain’s parliament confirms Pedro Sánchez as Prime Minister in tight vote (Financial Times, Daniel Dombey) we see that parliament confirmed him as Prime Minister (he has been the “caretaker” prime minister until now) by 167 votes to 165! What a ringing endorsement 😂! Spain will now have its first coalition government in modern times. The new administration will have its first Communist ministers in government since the 1936-39 civil war and plans to impose major tax hikes on big corporations, reduce carbon emissions and fight gender-based violence. * SO WHAT? * This is a ridiculous state of affairs. Pedro Sánchez came to power 18 months ago only by winning a vote of no-confidence in the previous administration and since then has failed miserably in putting together a proper government! Even though he “won”, this sounds like the recipe for an absolute disaster. Ironically, Spain’s economy has actually been doing OK in the meantime, but having a horrendous hodge-podge of politicians at the top who are idealogically opposed to each other will surely have consequences.

Energy bills push eurozone inflation to eight-month high (Daily Telegraph, Tom Rees) cites the latest figures from Eurostat that show a rise in inflation from 1% to 1.3% in December, equaling the biggest jump for 19 months, as higher energy prices (which could still climb higher following US-Iran tensions) started to bite. * SO WHAT? * Eurozone inflation has stuck below the ECB’s 2% targets, with ultra-low interest rates failing to kick-start sluggish European economies. The ECB will be conducting a policy review this year to see what it can do to jolt the ‘zone back to life.

Tesla outlines intentions for China, GM disappoints, Rolls-Royce benefits from SUV sales and Aston Martin has a profit warning…

Tesla set to expand China assembly with company SUV (Wall Street Journal, Yin Yijun, Yoko Kubota and Tim Higgins) shows that Tesla has begun to tool up its new Shanghai factory to churn out its next model – the Model Y, a compact SUV – just as it started delivery of Model 3s to its Chinese customers. Tesla’s Chinese website said that Model Y SUVs could potentially roll off production lines in 2021. * SO WHAT? * This is an impressive achievement given that the Shanghai site was just a sea of mud only a year ago! Mind you, it is obviously keen to devote resources to boost production facilities in the world’s biggest car market. Tesla plans on starting production of the Model Y at its California site this year and has announced plans for its upcoming German gigafactory to make both the Model 3 and the Model Y (although it will be starting with the Model Y). Of the new model, Elon Musk said “Ultimately, Model Y will have more demand than probably all of the other cars of Tesla combined”.

Staying with China for the moment, GM posts its biggest China sales decline (Wall Street Journal, Mike Colias and Yuko Kubota) makes for grim reading for General Motors as it compounded the misery by saying that 2020 was also going to be difficult. * SO WHAT? * China has been a beacon of rare growth in recent years for car manufacturers as sales elsewhere have proved to be sluggish, but in the last couple of years China sales have weakened due to a combination of slower economic growth and shrinking subsidies from the government that

make their products more affordable. GM is China’s #2 car maker by sales (second only to VW) and is more focused than many on China, so a slowdown in sales for them is particularly painful. Given that there don’t appear to be any other growth options, I would expect GM to just try and stick it out. Chief exec Mary Barra said that the company would be bringing out a few new models this year, but we’ll just have to see whether the introduction of the Chevrolet Trailblazer (a small SUV) and Cadillac XT6 (a large SUV) tempt Chinese customers!

Going to the more “luxury” end of the market, Rolls-Royce enjoys record sales thanks to £264,000+ SUV (The Guardian, Rupert Neate) shows that the company achieved its best ever sales last year – up by 25% since 2018 as people with way more money than sense bought the Cullinan SUV (have you seen this thing? It is a monstrosity that you just can’t unsee 🤮!). Rolls-Royce Motor Cars (remember, it is separate from the Rolls-Royce that makes jet engines) said that sales in the US were strongest (I would imagine that rappers and drug dealers would like this car 😂) at about a third of shipments, with China coming into the #2 spot with about 25% of shipments.

Then in Profit warning for Aston Martin as sales slide (The Guardian, Julia Kollewe) we see Aston Martin issuing its second profit warning in 12 months after a tricky year with rising costs. The only hope for the company now is that the forthcoming DBX SUV is a roaring success, otherwise the company will be in a lot of trouble. The £158,000 SUV looks way better than that Cullinan thing, so let’s hope the company benefits. * SO WHAT? * Aston Martin’s troubles show just how dangerous it is to get swept up in the hype as its IPO has proved to be disastrous for many investors. The more it fails, the more likely it is to get taken private and some say that Canadian F1 team billionaire Lance Stroll is leading a consortium to build a stake in the business.

High street job losses increase, supermarkets talk Christmas and Majestic is full of cheer…

In a quick scoot around UK retail, High street crisis deepens as 3,150 staff lose jobs in a week (The Guardian, Sarah Butler and Zoe Wood) highlights the number of job losses this week as Mothercare and Links of London will quit the high street for good by Sunday night after both companies fell into administration before Christmas. Next up for the potential chop are fashion retailer Bonmarché, department store Beales and camera shop Jessops as all seeking advice on how to survive. Debenhams will shut the first six stores of the 19 earmarked for closure this year and rival House of Fraser is also set to close outlets as part of owner Mike Ashley’s turnaround plan.

The gloom continues in Supermarkets report poor Christmas amid Brexit worries (The Guardian, Sarah Butler) as analysts say that supermarkets had their slowest Christmas sales growth in four-to-five years.

Morrisons reported an “unusually challenging period for sales” and Kantar research analyst Fraser McKevitt, said that there had been little sign of a “Boris bounce” following the election. The Big Four – Tesco, Sainsbury’s, Asda and Morrisons – all had particularly disappointing trading periods as shoppers visited them less often, with Morrisons being the worst performer. Lidl and Aldi continue to grow sales, but it was interesting to see that Ocado did particularly well with sales up by 12.5% with a market share of 1.3%.

On the other hand, Majestic on sparkling form over Christmas (The Times, Dominic Walsh) highlights a strong Christmas performance for Majestic Wine, the company acquired by Fortress Investment Group for £95m. Champagne was a best seller while rum and brandy sales were also strong. * SO WHAT? * Although many retailers are experiencing tough times at the moment, it goes to show that there are still SOME winners out there! A strong Christmas season would have been particularly welcome given all the upheaval that Majestic Wine went through last year. The company is due to come up with a new business plan later on in the year.

Sonos sues Google and Samsung has 5G hopes…

Sonos sues Google over its wireless speaker technology (Daily Telegraph, Margi Murphy) heralds a dramatic development as Sonos is accusing Google of stealing its wireless speaker technology and undercutting its prices in a bid to take market share. It filed a lawsuit against Google in two US federal court systems yesterday, requesting unspecified damages and a nationwide ban on the sale of Google’s laptops, smartphones and home speakers from from the US International Trade Commission. The patent infringements allegedly took place when the two companies began working together in 2013 when they

were integrating Google’s voice assistant with Sonos’ speakers. I get the feeling this will take a while!

Samsung expects operating profit to plunge, pins hope on 5G (Wall Street Journal, Eun-Young Jeong) shows just how dire things are getting for the South Korean consumer electronics giant as it announced that it was expecting a 34% fall in its fourth quarter operating profit for 2019 as the global slump in semiconductor sales continue to hit home. The world’s #1 smarphone and memory-chip maker is due to report full earnings later on this month. * SO WHAT? * This is obviously a nightmare for the company, but then again it could well get a boost from the continued roll-out of 5G this year as people become more inclined to upgrade their phones (chip demand is also expected to rise as well). So far, reports of 5G have not exactly been glowing, but I am sure this will change as networks expand and usage increases.

And finally, in other news…

It’s been a bit sparse on the “alternative story” front today, but I thought I’d bring you TGI Fridays launches vegan steak for £12.99 – made from watermelon (The Mirror, Naimah Archibald, https://tinyurl.com/yexbbvbv) as an example of how ridiculous things can get when companies are so desperate to jump on a bandwagon they come out with something completely ridiculous! This “steak” is a couple of slices of melon with a spicy sauce, or if you read the official description, it is “fresh watermelon carefully cut into steak slices then chargrilled to create its unique steak-like texture”, for £12.99! What a pile of 💩. I’ve got nothing against veggie/vegan food (actually, I’m all for it), but I am against this kind of massive rip-off! Remember this story about M&S selling “cauliflower steaks”???

1. In MACRO & COMMODITIES NEWS, we look at more Iran/US fallout, Venezuela’s Guaidó getting ousted, buoyant services sectors in France and the UK and a “decade of renewal” budget
2. In RETAIL NEWS, boozers help Aldi, Mountain Warehouse looks for more shops and a retail park transforms itself into warehouses
3. In CAR NEWS, German car orders spike and Tesla’s depend on subsidies
4. In OTHER NEWS, I bring you Nike’s super-shoes!

So the US/Iran conflict fallout continues, Venezuela’s Guaidó gets ousted, services sectors in France and the UK give reason for cheer and Javid talks up a budget…

Qassem Soleimani’s successor vows to expel US from Middle East (Financial Times, Najmeh Bozorgmehr, David Sheppard, Katrina Manson and James Politi) highlights the latest reaction to Soleimani’s assassination as his successor, Brigadier General Esmail Ghaani, talked of revenge on state TV. US adds troops to mideast as Iranians call for revenge at General’s funeral (Wall Street Journal, Aresu Eqbali, Sune Engel Rasmussen and Nancy A. Youssef) is the response on the US side as oil prices rose further and Gold nears 7-year high as Iran fears hit markets (The Times, James Dean). * SO WHAT? * This is not surprising really considering that gold is one of those assets that investors buy in times of uncertainty (it’s often referred to as a “safe haven” asset for this reason). Weirdly, Bitcoin has also increasingly been acting like a safe haven asset and it strengthens in times of strife but I’m not really sure why given that it doesn’t have the intrinsic value like gold does! There will be more sabre rattling on the Iran and US sides, especially until the conclusion of Soleimani’s funeral.

Juan Guaidó ousted in chaotic Venezuelan parliamentary vote (Financial Times, Gideon Long and Katrina Manson) heralds a major development in Venezuela as the opposition leader and self-declared interim president has been ousted as the head of the National Assembly. He has been able to claim to be the legitimate leader (rather than

the incumbent president Nicolás Maduro who has been in office since 2013) by virtue of the fact that he was head of the National Assembly, but amid chaotic scenes at the parliamentary vote where he and his supporters were denied entry, Maduro’s mate Luis Eduardo Parra became the new head of the National Assembly. * SO WHAT? * Washington said it would still recognise Guaidó as the legitimate leader of the Assembly and Maduro’s actions have been roundly criticised. Venezuela continues to be in crisis.

Meanwhile, Relief for Macron as French service industry grows despite strikes (Daily Telegraph, Lizzy Burden) cites the latest IHS Markit Purchasing Managers’ Index (PMI) which shows that the services sector of the economy expanded while manufacturing growth fell slightly – not too bad considering all the strikes going on at the moment over his pension reforms. * SO  WHAT? * This will be a relief for the embattled President and is arguably a solid performance given that manufacturing across Europe has been hit hard by tariffs and a global slowdown in trade over the last year.

In the UK, Services sector rebounds as Brexit uncertainty recedes (The Guardian, Richard Partington) cites the same survey which also shows that the UK services sector actually rebounded in December as optimism increased in the wake of the new majority government. Separately, a poll of members of the Institute of Directors the day after the election showed that optimism shot up to its highest level for over three years. So it is against this backdrop that we see Budget will launch ‘decade of renewal’, says Javid (The Guardian, Larry Elliott) where chancellor Sajid Javid has announced that he will be unveiling a new budget on 11th March. Everyone will be trying to second-guess at the detail, but I think it’s better to wait until we hear from the horse’s mouth.

Alcohol sales boost Aldi, Mountain Warehouse looks to expand and a retail park changes into a warehouse park in a sign of the times…

Festive drinkers help Aldi break £1bn sales bar (Daily Telegraph, Laura Onita) highlights a historic moment for Aldi as it breached the £1bn festive sales mark for the first time ever. Sales for the four weeks going into Christmas Eve were up by 7.9% versus 10% in the same period last year and 15% the year before, so momentum appears to be slowing. * SO WHAT? * The company doesn’t release “like-for-like” figures (this is where new stores are excluded so you can compare like with like, which means it’s easier to see trends) so it’s tricky to say whether this was a good or a disappointing Christmas given that it added 47 shops over the year. The company said in September that it would be upping expansion in London and the South East, with plans to open up to 250 stores in the region over the next five years.

Mountain Warehouse climbs to new highs (The Times, Miles Costello) highlights a rare high street winner as Mountain Warehouse announced record trading over Christmas, with socks, winter jackets and hats being its most popular products. The company started off with a

single outlet in 1997 but now has 400 stores in nine countries, including Germany, Poland, the US, Canada and New Zealand! The company plans on opening another five stores this year and Mark Neale, the founder chief exec was obviously very bullish about its prospects. Fun fact: the company had its busiest trading day in history on Black Friday. * SO WHAT? * It’s as the chief exec said – if you have the right product in the right places at the right price, people will spend. I think they sell quality gear very cheaply – and, anecdotally, I see how successful they are by the number of kids who wear their stuff at school! 

I thought I’d mention Retail park converted to online warehouses in landmark deal (Daily Telegraph, Rachel Millard) because, given the general malaise in the retail sector, it could be a sign of things to come. Prologis, the world’s biggest warehouse company, just bought the 128,000 sq ft Ravenside Park in Edmonton, North London for £51.4m from investment manager M&G. This is thought to be the first retail park brought specifically to be turned into warehouse space in the UK. * SO WHAT? * I think that this is a big deal and is potentially a sign of the future as warehouse property values climb (because of increasing demand from online retail operators) and retail property values fall (because of lower customer footfall). When you couple that with property funds who are trying desperately to reduce their retail property exposure, I suspect that other warehouse operators will be able to pick up some decent bargains (although if they start to fight over properties, this would be good news for the sellers who want to achieve higher prices).

German sales rise and Tesla’s depend on subsidies in China…

German car orders surge to beat tighter EU emissions rules (Financial Times, Joe Miller) highlights a sudden surprise influx of new car sales in the last weeks of 2019 which boosted the number of annual orders in Germany to their highest level in ten years! Basically, manufacturers offered loads of incentives to cut their stock of gas guzzlers before new EU emissions regulations came into effect on January 1st. Sales of SUVs rose by 20% in 2019, but overall forecasts for German car sales remain downbeat for 2020.

Tesla/regional suppliers: part mart (Financial Times, Lex) is an interesting piece that emphasises how important subsidies are when you are selling electric cars in China. Basically, Tesla is on the approved list even though it uses foreign-made batteries and this will help enormously in its quest for sales of the Model 3, which went on sale this week. The company also cut the sale price to close the gap with local rivals so it is about 10% cheaper than it is elsewhere. * SO WHAT? * This is great for Tesla, but also its suppliers who include solar glass supplier Changzhou Almaden (whose share price has shot up by 86% over the past month) and parts maker Ningbo Tuopu. Let’s hope that Tesla remains on the approved list – because sales fall through the floor when government subsidies dry up…

And finally, in other news…

Some of you may well have New Year’s resolutions that involve doing a bit of running. Well if you want ideas on what shoes to wear, have a look at Asics Runs Into Trouble as Athletes Opt for Nike’s Super-Shoe (Bloomberg.com, Shoko Oda https://tinyurl.com/yeurnt4e). Apparently, over 84% of runners did the race in Nike’s Vaporfly Next%! That is incredible!

1. In MACRO & COMMODITIES NEWS, the US/Iran situation heats up, Spain closes in on actually forming a government, BoJo hopes for swift EU trade talks and the battery industry talks about weaning itself off cobalt
2. In CONSUMER NEWS, restaurant chains get a boost from supermarket sales, retailers battle with too many returns and gyms face a new threat
3. In CAR NEWS, Daimler announces a big US recall and new car sales in the UK remain weak
4. In OTHER NEWS, I bring you the world’s one and only asaparamancer…

So US/Iran relations get much worse, Spain looks like it could have a government, BoJo pushes for quick negotiations and battery makers aim to reduce cobalt consumption…

In Iran pulls back from nuclear deal as Middle Eastern tensions rise (Financial Times, Najmeh Bozorgmehr, Chloe Cornish and Katrina Manson) we see that Tehran has threatened to tear up its commitments to the nuclear accord it signed with governments around the world in 2015 in the wake of the US killing of revered Iranian commander Qassem Soleimani. This came in response to Donald Trump’s threat to attack 52 targets if Tehran retaliates. This latest statement falls short of a total withdrawal as it said that it would continue to co-operate with the International Atomic Energy Agency, but supporters of the US action say that this is evidence vindicates its theory that Iran was never going to stick to the accord anyway. Trump pushes Iraq, threatens sanctions after vote to expel US troops (Wall Street Journal, Isabel Coles, Catherine Lucey) shows a bullish Trump who responded to the Iraqi parliament vote to kick out American forces following the Soleimani assassination by saying that “We have a very extraordinarily expensive air base that’s there. It cost billions of dollars to build. We’re not leaving unless they pay us back for it”. Saudi Aramco shares plunge as a result of Soleimani killing (Daily Telegraph, Louis Ashworth) highlights other consequences of the current situation as the Saudi Arabian oil giant’s share price fell by over 10% from their post-float highs yesterday as markets across the whole region weakened on fears of increased conflict. * SO WHAT? * We are at a very early stage of this latest development, so there is a lot of noise. I would expect this to continue at least until Soleimani’s extended funeral comes to a close as mass hysteria spreads around the region. Clearly this is a big deal and the current situation is very fluid, but if you take a step back, it seems to me that Trump is getting quite a lot of benefit from this. He’s eliminated a major enemy, made it even more difficult for Iran to sell its oil and could even bring his troops back from the Middle East (one of his election pledges) with compensation from the Iraqi government seeking to turf them out AND he’s managed to take the focus off his impeachment. It’ll be interesting to see what concrete actions Russia and China take, but in the meantime both sides (and allies) will be on high alert.

Meanwhile, in Europe, Spain on track for a coalition government after vote (Financial Times, Daniel Dombey) shows that the country is nearing its first coalition government in over 40 years as Pedro Sanchez, Spain’s

caretaker Socialist prime minister won a parliamentary vote on a new administration 166 to 165! There will be another vote tomorrow which now looks likely to return him to the office of PM in a controversial coalition with the radical left Podemos party. * SO WHAT? * Spanish politics have been an absolute nightmare for quite some time now and Sanchez’s gamble to call for a fourth general election in four years failed to break the deadlock, with a number of areas (including policy on Catalonia and the partial removal of labour reforms, among other things) continuing to prove to be incredibly divisive. Even if he succeeds in tomorrow’s vote, I suspect that the government will continue to be held back in achieving much given the huge divisions.

Boris Johnson to seek fast-track EU trade talks (Financial Times, George Parker) highlights BoJo’s hopes to persuade Ursula von der Leyen, European Commission president, to start intensive trade negotiations within weeks to “get Brexit done” by his self-imposed December 2020 deadline. She’ll be meeting him on Wednesday and will be doing a speech at the London School of Economics. * SO WHAT? * Cue loads of time-wasting on the European side as von der Layen has already said that the timetable is too tight. We’ll just have to see how this develops, but I do think things could get quite interesting if America, having appeared to make some progress in its trade talks with China, starts to turn the screws on Europe. In that scenario, it may be that Europe will be more minded to give the UK a better deal more quickly – although I suppose it could also be used as an excuse to delay things with the UK as it focuses its efforts on US talks. Could BoJo ask his American BFF to help chivvy things along??

Then in Cutting battery industry’s reliance on cobalt will be an uphill task (The Guardian, Jasper Jolly) we see that there are moves afoot to reduce and/or eliminate the use of cobalt in batteries. Elon Musk already pledged, back in 2018, to remove the mineral that is predominantly mined under controversial conditions in the Democratic Republic of Congo (DRC) from the next generation of Tesla cars – and companies like the UK’s Johnson Matthey, America’s Platinum Group Metals and smaller companies like Oxis Energy are also trying to make batteries with less or no cobalt. * SO WHAT? * Some progress has been made in recent years as the 11kg of cobalt in a 2012 Model S has been cut to around 4.5kg of the mineral in the current Model S, but the material has been key for lithium ion batteries in cathodes. The DRC supplies almost 75% of the world’s cobalt but has a terrible record in terms of human rights abuses and the use of child labour, hence the urge by many to look at alternatives. In the meantime, demand is expected to soar as sales of electric vehicles continue to increase.

Restaurant chains are getting a boost from supermarket sales, returns continue to be the bugbear of apparel retailers and gym memberships face a new threat…

We are probably all more than aware of the problems that are being experienced by both restaurants and supermarkets these days but Restaurant chains find sustenance in supermarket ranges (Financial Times, Alice Hancock) shows that supermarkets seem to be helping some restaurants out by selling their product! So in PizzaExpress’s case, it is struggling under £1.1bn of debt and poor performance in its restaurants, but – fun fact alert – it actually sells most of its pizzas in supermarkets! Gourmet Burger Kitchen, Strada, Prezzo and Giraffe are among the casual dinging chains who are experiencing tough trading conditions, so finding new distribution channels has proved to be one way of at least taking the edge off whilst simultaneously acting as additional marketing. Supermarkets also benefit from providing a “premium product” that the likes of Aldi and Lidl can’t replicate and now Nando’s (whose peri-peri sauce is the UK’s #1 selling chilli sauce!), Leon (sales of its aioli sauce in Sainsbury’s have exceeded forecasts by 60%!) Yo! (with its sushi) and Gourmet Burger Kitchen (with patties and relishes) are among those selling product in store. * SO WHAT? * This sounds like a lifeline for some ailing chains, but the risk is that supermarkets will eventually start to copy the product and ubiquity may end up devaluing the outlets themselves. Still, for the moment, supermarkets are proving to be a welcome revenue stream and provide some breathing room and revenues that can hopefully be redeployed for longer term survival.

Meanwhile, in apparel retailing, US retail: many unhappy returns (Financial Times, Lex) identifies an annoying and very expensive problem – product returns, or as they say in the industry, “bracketing” (the practice of ordering clothing in three sizes a returning the ones that don’t fit). Although online spending is continuing to increase, the huge amount of returns are decimating sales figures and profit margins. Americans returned 11% of purchases in 2018, according to the National Retail Federation, and many believe this

could be on the rise. A particularly stark example of this is with online fashion group Resolve, which said in its IPO prospectus in May last year that it made $400m in net sales in 2017 – but it turns out that the value of its returned goods was $385m! Funnily enough, its share price has virtually halved since it listed in June. Amazon is now banning customers who return goods too often, but middle and lower tier retailers like Gap and Macy’s are finding life much harder as they are less able to absorb the costs. Many happy returns? Retailers begin year with online headache (The Times, Ashley Armstrong) identifies another related phenomenon, “wardrobing” (where shoppers buy way more than they need/can afford and then return the items for a full refund), which has become so rife that Asos is now looking through its customers’ Facebook and Instagram feeds for abuse and then putting offenders on a blacklist. Returns are now 40% of Asos’ sales 😱 so you can see why they are taking this so seriously. * SO WHAT? * Retailers are having a real nightmare at the moment and these two damaging phenomena are making projections much harder to make as sales figures can be shredded by the amount of returns. Making shoppers return unwanted items to stores is one solution that gives retailers with a high street presence one way out, but it will be harder for online retailers to combat this. Another solutions is to increase the use of customer avatars (Zalando does this) or more accurate sizing tools (as per Uniqlo and Zara) to ensure a more accurate fit. The struggle continues…

Elsewhere, New Year, new gym – but now the customer is choosing where to go (Daily Telegraph, Rachel Millard) looks at a new threat to gym memberships – services that offer access to a range of gyms via middlemen which also allow cancellation with little or no notice. Companies such as ClassPass (which offers uses a flat fee starting for £15 a month to access a ton of gyms via an app) and MoveGB (which offers the same from £1 per week) are benefiting from a trend of gym-goers having less loyalty! Having said that, higher end gyms, such as GymBox and Barry’s Bootcamp are doing brisk trade as well. * SO WHAT? * This is clearly worrying for the likes of Pure Gym and Easy Gym who have seen massive rates of growth in recent years, so they will either have to offer more flexibility on membership or offer services that users value! Like high street retailers, it sounds like gyms now need to concentrate more on providing better experience.

Daimler announces a recall, Tesla excitement builds and UK new car sales continue their weakness…

In a quick scoot around car news, Daimler to recall 745,000 Mercedes-Benz vehicles in the US (Financial Times, Camilla Hodgson) highlights problems with unsafe sunroofs on C-Class, CLK-Class, CLS-Class and E-Class models and a resulting recall that is to begin on February

14th and Sales of new cars stuck in slow lane for a third year (The Times, Robert Lea) cites figures to be published today by the Society for Motor Manufacturers and Traders that will show further falls in new car sales in addition to weaker forecasts for this year.

And finally, in other news…

I thought I’d kick off the year with Woman uses asparagus to predict Trump will win election but will be impeached (Metro, James Hockaday https://tinyurl.com/yjoeynry). What a talent! Mind you, I don’t want to brag or anything, but I was interviewed on TV a few years ago and managed to predict the outcome of the referendum with a cucumber I bought from M&S (I might have to dig that out from YouTube 😜)…

1. In MACRO & ENERGY NEWS, BoJo gives a broad outline of policies, the Bank of England leaves interest rates unchanged and gets a new governor while renewables make up more of the UK’s energy mix
2. In CONSUMER NEWS, UK house price growth may be more modest than expectations, UK retail sales hit new lows but consumer confidence may have turned a corner
3. In INDIVIDUAL COMPANY NEWS, Airbnb gets an important judgement and Just Eat’s takeover nears
4. In OTHER NEWS, I bring you a one-woman Bohemian Rhapsody…

So BoJo outlines new policies, the Bank of England leaves interest rates untouched (and gets a new governor) while renewables increase as a proportion of the energy mix…

The Queen’s Speech: a guide to the main measures (Financial Times) takes a look at BoJo’s new policies as set out in yesterday’s Queen’s Speech, billed (by him) as the most radical in a generation. It covered the seven bills to implement Brexit, an NHS funding bill and social care reform bill, promises to publish its National Infrastructure Strategy which will outline a £100bn investment in transport etc., new legislation on law and order (to include tougher sentencing for terrorists), the repeal of the Fixed-Term Parliaments Act (which will restore the PM’s right to call a general election whenever they want to) and the creation of a Constitution, Democracy and Rights Commission that will look at the relationship between government, parliament and the courts. Two cheers from business for Queen’s Speech low on detail (The Times, Louisa Clarence-Smith and Callum Jones) looks at the 29 bills announced in the Queen’s Speech from a business point of view on things like superfast broadband (nice, but there was a lack of deadline), regional growth and skills funding (including the promise to increase tax credits for R&D), pension reform (including tougher powers for the Pensions Regulator), audit and corporate reporting (including the enhancement of regulator powers to enforce reform) and insolvency and restructuring (to ensure we

don’t get a repeat of Thomas Cook’s collapse, for instance). * SO WHAT? * OK, so it’s not super-detailed, but I guess it is at least a framework! The Devil, as they say, is always in the detail!

Meanwhile, Bank of England keeps interest rates on hold despite weak economy (The Guardian, Richard Partington) shows that the Bank’s Monetary Policy Committee (MPC) voted 7-2 in favour of keeping the official interest rate on hold at 0.75%. The two that didn’t thought that the weakness of the economy justified a reduction of 0.25% to 0.5%, but were outvoted by the others, including the governor of the Bank of England, Mark Carney. This was widely expected.

Talking of governors, Andrew Bailey selected to be the next Bank of England governor (Financial Times, Chris Giles and George Parker) shows that the current head of the Financial Conduct Authority has been selected to replace Mark Carney. He was former deputy governor, so has form. Although he has suffered a series of scandals this year that put into question the effectiveness of the FCA, he is expected to take over at the start of February.

And now for something else. In energy. Fossil fuels fall to record low proportion of UK energy mix (The Guardian, Jillian Ambrose) cites the latest government figures which show that renewables, such as wind and solar, made up 38.9% of the UK’s electricity in the third quarter of this year, up from around 33% in the same quarter last year. This moved it slightly ahead of gas-fired power, which made up 38.8%, making it the UK’s biggest source of power! How amazing is that?! If you combine renewables with nuclear-generated power, fossil fuels now make up their lowest share of the UK’s energy mix on record!

UK house price growth may be below expectations, UK retail sales fall but consumer confidence may have turned around…

UK house price growth to remain low despite talk of ‘Boris Bounce’ (The Guardian, Patrick Collinson) sounds a more cautious note than some recent excited commentary which talks of a revival of the UK housing market. Halifax is predicting that house price growth will be in the 1-3% range next year and Rightmove is forecasting a 2% rise. The main reason for this is that young buyers are continuing to struggle to scrape together deposits. Additionally, the Royal Institution of Chartered Surveyors (Rics) expects that rents will rise more steeply than house prices because the supply of rental properties has fallen over the last few years. * SO WHAT? * Are estate agents hedging their bets and calming expectations whilst secretly thinking that the house market is going to leap out of the rut it is currently in? Maybe. But it seems like the sensible course of action. I’m not so sure about a big “Boris Bounce” in residential property because of potential affordability concerns, but I do wonder whether commercial property prices will rise more strongly due to the perception of less uncertainty with a majority government. It’s early days yet, though.

Sales at 19-month low as Christmas shoppers leave it late (The Guardian, Richard Partington) cites the latest figures

from the Office for National Statistics which show that high street sales in November fell to their lowest level for over a year. Analysts blamed the weather (retail always does!), Brexit uncertainty and consumers waiting until the last minute to shop in order to bag bigger discounts. Having said that, Confident households prepare to spend again (The Times, Gurpreet Narwan) cites a GfK confidence index which shows that households were getting more confident about their finances leading into the election and are more positive about the prospects for the economy due to rising wages and record employment levels. Interestingly, GfK client strategy director Joe Staton commented that “We haven’t seen such a robust increase in confidence about our economic future since the summer of 2016”. In other interesting data releases, the Lloyds Bank Commercial Banking Business Barometer, which surveyed 1,200 in the fortnight leading into the general election, showed rising confidence among employers who expected hiring to increase next year by more than they had done previously. However, what is perhaps most surprising is that the manufacturing sector saw a big jump in optimism to the extent that it is now the most confident sector of the economy! * SO WHAT? * This seems to run contrary to most other stats that we’re seeing at the moment! It must be said that this is a SURVEY and, as such, there can be a bit of a gap between what people say and what they actually do! Still, this does sound like an interesting potential turn in sentiment – especially in manufacturing! Let’s hope that this is a portent of things to come!

Airbnb gets an important win and Just Eat nears the end of its takeover saga…

EU court rules Airbnb does not require estate agent licence (The Guardian, Daniel Boffey) highlights an important victory for the company as the European Court of Justice ruled that it acted as an “information society service” rather than a real estate agency, which is what France’s Association for Professional Tourism and Accommodation (AHTOP) was trying to argue. Airbnb was described by the court as “a tool to facilitate the conclusion of contracts”. * SO WHAT? * This is an important win for the company as it is currently fighting all sorts of claims from city authorities in places like Barcelona and

Amsterdam (in addition to Paris) who are saying that they are changing the faces of neighbourhoods and putting pressure on hotels who are losing out because they have higher costs related to a heavier regulatory burden. Airbnb is looking to float on the stock market next year, so this is a positive development in that the judgement takes away some of the threat of extra costs.

Just Eat set to go Dutch (Daily Telegraph, Oliver Gill) shows that Just Eat looks highly likely to proceed as planned with its takeover by Dutch delivery company Takeaway.com despite an increased offer yesterday afternoon from Prosus. Takeaway also upped its original offer to tip the balance in their favour – and it looks like this will work. Shareholders will now have until January 10th to decide which one to go for, but it looks like Prosus will have an uphill battle to convince shareholders to vote for its rival bid.

And finally, in other news…

And so we come to the final “…and finally” of 2019! What better way to mark it than with the song in Woman perfectly covers every part of Bohemian Rhapsody using folding mirror (The Mirror, Luke Matthews https://tinyurl.com/weddnl2). Thunderbolt and lightening, very very frightening…

1. In MACRO NEWS, Trump gets impeached and UK inflation stays low
2. In CAR NEWS, Fiat Chrysler and Peugeot agree to merge, Tesla considers lowering the Model 3 price in China and Volvo sells its Japanese truck unit to Isuzu
3. In TECH NEWS, Apple, Amazon and Google unify for smart home devices while the UK watchdog threatens Google
4. In INDIVIDUAL COMPANY NEWS, JP Morgan gets approval for Chinese business and Hays Travel has to close 10 shops that it saved from Thomas Cook
5. In OTHER NEWS, I bust some hangover myths and bring you an inspirational non-profit…

So Trump is impeached and UK inflation remains low…

House votes to impeach President Trump (Wall Street Journal, Siobhan Hughes and Natalie Andrews) heralds Trump’s impeachment for abuse of power and obstruction of Congress regarding allegations of him forcing the Ukraine to investigate former Vice President Joe Biden and his son in return for military aid. He will be only the third president after Andrew Johnson (in 1868) and Bill Clinton (in 1998) to face the next stage, a Senate trial. On both those occasions, the presidents were acquitted. * SO WHAT? * It’s highly unlikely that Trump will get kicked out of office because to do so would require a two-thirds majority in a Senate that is stuffed with Republicans

(Trump’s party). It’s probably a bit too early to tell what impact this will have on Trump’s chances of re-election in the presidential elections next year, but given that he was backed strongly by his own party, it is possible that all these accusations will actually galvanise his support base. As I said, no-one really expects his removal from office at this stage, but it is still a story worth following!

Inflation remains at three-year low (The Times, Gurpreet Narwan) cites the latest figures from the Office for National Statistics which show that inflation grew at its slowest level since November 2016 at 1.5%. * SO WHAT? * Expectations are that inflation will remain well below the Bank of England’s 2% target next year due to caps on energy and water prices and a stronger pound. This will give the Bank a bit of room to potentially lower interest rates further if the economy gets weaker. The Bank of England’s Monetary Policy Committee (MPC) is expected to keep rates on hold at 0.75% when they meet later today.

Fiat Chrysler and Peugeot confirm the merger, Tesla considers cutting Model 3 prices in China and Volvo sells a Japanese unit to Isuzu…

Fiat Chrysler and Peugeot agree to merge in giant auto deal (Financial Times, Michael Pooler and Joe Miller) heralds a deal to create the world’s fourth biggest carmaker with shareholders on both sides getting 50% of the new entity and will bring together marques such as PSA’s Citroën, Opel, Vauxhall and FCA’s Jeep, Dodge, Maserati and Alfa Romeo. PSA’s Carlos Tavares will be the group’s CEO for the first five years and John Elkann of FCA will be chairman and both parties expect the deal to complete within 12 to 15 months, pending shareholder and regulatory approval. Unite union seeks jobs assurances after PSA-Fiat Chrysler merger (The Guardian, Jasper Jolly) shows that unions are rightly worried about job losses which usually follow in deals like this although the companies said that there would be no plant closures. * SO WHAT? * This deal has been well-flagged since talks emerged around October only months after a merger failed between Fiat Chrysler and Renault due to French government opposition. The enlarged group will be bigger than General Motors and Hyundai-Kia and will be able to pool resources to invest in electric vehicles and compliance with tighter emissions regulations. No doubt other deals will be done in the industry for the same reasons! There are already loads of joint ventures in

specific geographic and/or product areas, so this just takes it a step further.

Elsewhere, Tesla may cut Model 3 price to keep China buyers keen (The Times, James Dean) shows that Tesla is thinking about lowering prices by 20% or more on Chinese-made Model 3s sold in China in order to stay competitive and play a part in the country’s EV future. * SO WHAT? * Given China’s big plan to take all fossil-fuel powered vehicles from its roads, you can understand Tesla’s eagerness to stay involved. It invested $2bn in a gigafactory near Shanghai that Elon Musk hopes will produce 250,000 vehicles a year and is due to deliver its first China-built Model 3s to customers in about a month’s time. Tesla’s put a lot of effort into China, so really I don’t think the company can do anything other than cut prices to remain competitive in an increasingly tight market where new competitors are emerging all the time.

Volvo sells struggling Japan unit UD Trucks to Isuzu Motors (Financial Times, Richard Milne) highlights another new partnership in the consolidating automotive industry as the Swedish truck maker has decided to sell its underperforming Japanese business to Isuzu Motors on terms to be finalised around the middle of next year. Both Isuzu and Volvo Group will also start working together on tech and heavy-duty trucks with a view to widening the scope further down the line. Fun fact: Volvo Group is separate from Volvo Cars, which is owned by China’s Geely. * SO WHAT? * It’s not just car makers that need to consolidate – the same pressures apply to truck makers! As I said before, there will be more alliances and mergers as time goes on…

Big Tech gets together to ease smart homes and Google faces resistance from the CMA…

Apple, Amazon and Google form alliance for smart home devices (Financial Times, Patrick McGee) heralds a really interesting development as the tech giants have agreed to collaborate with each other and members of the Zigbee Alliance (comprising of members including Samsung, Ikea and Comcast) to build a common standard so that devices could be operated by any voice assistant. * SO WHAT? * I would have thought that ‘Project Connected Home’ will be a MAJOR boost to the prospects for smart homes and the so-called Internet of Things. On current projections, the market for smart devices is expected to grow by about 14.4% per year, according to the International Data Corporation, but I wonder whether this really will open the

floodgates. Time will tell, but I think that this is an eminently sensible idea. You do wonder why they didn’t do this before!

Competition watchdog hits Google with threat of break-up (Daily Telegraph, Matthew Field) is a rather dramatic headline as headlines go but the UK’s Competition and Markets Authority (CMA) expressed concerns over its advertising division’s dominance in a report that was published yesterday. It found that Google accounted for almost 90% of all search advertising revenues in Britain last year worth about £6bn, while Facebook had a 50% share of all display adverts worth £2bn. * SO WHAT? * The CMA is thinking about opening up Google’s digital advertising business and even unwinding parts of Google’s 2007 merger with DoubleClick. The watchdog is not going to launch into a full investigation for now, but its proposal to break up Google’s business reflects increasing resistance to its power. It is also thinking about how to make Facebook share its tech with other players. The final version of the report will be published in July.

JP Morgan gets the China go-ahead and Hays Travel has to cut stores…

JP Morgan wins approval for majority-owned Chinese securities business (Financial Times, George Hammond and Don Weinland) highlights an important strategic win for the US bank in its aim to expand its reach in China. It will now open a new unit in the country offering a wide variety of services having been approved by the China Securities Regulatory Commission. * SO WHAT? * This will make JP Morgan the first US bank to get approval for a majority-owned securities joint venture in China (in the past, the Chinese partner had to be the majority owner).

Nomura got official approval in November and Goldman Sachs applied for permission in August. The current backdrop is a bit tricky at the moment what with the whole US-China trade war, but companies will be hoping that this marks a trend of loosening regulation, making it easier to do business in the country.

Hays shuts 10 of the Thomas Cook travel shops it tried to save (Daily Telegraph) shows the latest developments in the months following the Thomas Cook collapse as the company that rescued its shops, Hays Travel, had to close 10 of the 461 outlets it reopened from the 553 it snapped up when it bought the chain. Chairman of Hays Travel, Irene Hays, said that this was down to not being able to get enough staff. Hays is planning on rolling out an advertising campaign from January to promote its enlarged high street presence.

And finally, in other news…

Today, I thought I’d bring you Hangover myths to avoid when dealing with the morning after the Christmas party (The Mirror, Poppy Danby https://tinyurl.com/rx9yuxj) which, to be honest, is a bit disheartening. On the other hand, I thought I’d also bring your attention to this rather heartwarming story: This nonprofit is transforming the lives of seniors, one bike ride at a time (USA Today, Grace Hauck https://tinyurl.com/qrrzoee). Amazing!

1. In MACRO NEWS, Trump targets Europe, BoJo gets feisty with Brexit and Davos while UK employment hits a record high
2. In MANUFACTURING-RELATED NEWS, suppliers suffer Boeing fallout and Tesla confounds the short-sellers
3. In INDIVIDUAL COMPANY NEWS, JAB lines up a big coffee IPO, Unilever faces challenges and e-cigarette promotion is banned on Instagram
4. In OTHER NEWS, I bring you a tilted toilet and a Christmas song puzzle…

So Trump turns his attentions to Europe, BoJo targets a Brexit deadline and no Davos frivolities while UK employment hits new highs…

Robert Lighthizer says Trump ‘focused’ on EU trade (Financial Times, James Politi) heralds an imminent Trump-shaped headache for the EU. US trade representative Robert Lighthizer hinted that the President, fresh from trade negotiation breakthroughs with the NAFTA replacement and “phase one” agreement with China, will be turning his attention to Europeans. In an interview with Fox Business Network yesterday, Lighthizer said that “We’ve put tariffs in place on a variety of products, and we’re going to continue to focus on that. It’s something the president cares about. You can’t get the global trade deficit down without getting the trade deficit down with Europe”. He added that there is currently a $180bn bilateral deficit this year, which is unsustainable for Washington. On a separate note, he said that the US was looking forward to negotiating “a really big deal” with the UK following last week’s election result, but that it wouldn’t necessarily happen quickly. * SO WHAT? * This comes at a tricky time for the EU given Germany’s ongoing economic and political paralysis (Germany is the real driver of the bloc) and its particular exposure to exports. I presume that Trump’s team will be feeling pretty good about themselves given recent developments in trade negotiations elsewhere so it will be interesting to see how much pressure the Americans exert on their European counterparts.

Boris Johnson throws down gauntlet to Brussels as trade talks loom (Financial Times, Sam Fleming, Alan Beattie, Jim Brunsden and George Parker) shows that Boris Johnson’s push to exclude the option of another Brexit deadline extension by enshrining it in law will put huge pressure on negotiations next year. The EU has warned that a deal by December 2020 would be very tricky, but Johnson is keen to turn the screws. * SO WHAT? * Some say that this short timetable may necessitate a partial deal

that will involve prioritising aspects of what both sides want to achieve, but others say that even this will be difficult. The law that BoJo wants to bring in can be overturned, so the move is largely symbolic, but he is making his intentions very clear. The EU wants to begin talks in March. 

In Johnson bans ministers from attending Davos summit (Financial Times, Jim Pickard) we see that the PM is trying to start his new government on the right foot by saying that it would be inappropriate for ministers to attend because “Our focus is on delivering for the people, not champagne with billionaires”. Donald Trump did something similar in Davos 2017 shortly after he became president as he surfed his way to the oval office on a wave of populism. * SO WHAT? * This is all noise, of course, but I guess this is an easy PR win for BoJo, who described previous Davos visits when he was London’s mayor as “a great big constellation of egos involved in massive mutual orgies of adulation”. It’ll take more than this, though, to convince people that his new regime is a “people’s parliament”. It’s still early, so we’ll soon see what he has up his sleeve.

UK wage growth slows again but employment hits record high (The Guardian, Richard Partington) cites the latest figures from the Office for National Statistics which show that although average weekly wage growth weakened to 3.2% in the three months leading into the October 31st deadline, unemployment stayed at 3.8% – its lowest level since the mid-1970s. In terms of interesting trends, the ONS said that this increase was down to a larger number of men entering the workforce, but the number of women in employment fell. John Philpott, of the Jobs Economist consultancy, pointed out that public sector employment was rising while private sector employment had fallen slightly over the quarter. * SO WHAT? * Interesting stuff, but my take on things is that a majority government is likely to lead to more job creation as pent-up investment that has been sidelined by political and economic uncertainty will be released. I don’t think it’ll be a sudden flood because there are still a large number of knotty issues to be addressed, but I would have thought that a parliament with a big majority (a novelty in recent years) will ease recent concerns to some extent.

Boeing problems spread down the supply chain and Tesla frustrates the short-sellers…

Boeing suppliers reel from 737 Max production halt (Financial Times, Andrew Edgecliffe-Johnson, Peggy Hollinger, Sarah Provan, Archie Hall and Michael Pooler) highlights the fact that Boeing’s 737 Max woes are spreading panic down the global supply chain following its decision, announced on Monday, to suspend production of its controversial aircraft. Two fatal crashes led to its 737 Max planes being grounded in March. The share prices of Safran, (a French company which makes the Leap engine for the Max in a joint venture with General Electric), Senior (a UK supplier that makes airframes an high-tech components for the Max), Meggitt (another UK supplier) and Spirit AeroSystems (which makes fuselages for the Max) all suffered a sell-off, but the uncertain nature of when (or even, if) production might restart will test some suppliers’ ability to survive given the unprecedented magnitude of the problem. * SO WHAT? * It’s unclear currently as to how much Boeing will be supporting suppliers as those further down the chain will not want to leave their machinery idle. If they go off to engage in other

projects due to lack of support, Boeing will suffer when 737 Max production restarts. The scale of this problem is such that this production halt could actually start impacting America’s GDP in the next few months.

Tesla making short work of the sceptics (The Times, Tom Knowles) highlights the $575m in paper losses that hedge funds have suffered in shorting the stock as hopes for Tesla’s new gigafactory in Shanghai are rising, as has its share price – by 14% this year. Tesla is the third most shorted stock in the US and the most shorted car manufacturer in the world (short selling is when traders pay to borrow stock from a big institution and sell it in the expectation that the share price will fall, which will allow them to buy it back at a lower price). * SO WHAT? * This does not mean that it’s all going to be a bed of roses for Tesla from now on! In fact, the refusal of the Trump administration to extend a tax credit for electric vehicle buyers will come as a blow to the company. As I keep saying, Tesla’s tech is great, but its longstanding production issues, poor record of customer service when things go wrong and the increasing capability of its competition will make things very difficult in the coming years. No doubt Musk is hoping that his gigafactories will keep him ahead of the game, but I really think that incumbent makers’ superior experience, supply chains and distribution networks will severely reduce (or even negate) Tesla’s first-mover advantage.

JAB eyes a big coffee IPO, Unilever disappoints and e-cigarette promotion on Insta is a big no-no…

JAB to list Peet’s and Douwe Egberts in €3bn coffee IPO (Financial Times, Leila Abboud and Arash Massoudi) heralds the imminent combination of two of the world’s best-known coffee brands to take the fight to the likes of Nestlé and Starbucks in a European listing next year. Parent company JAB Holdings is hoping to raise up to €3bn from the IPO of a combined Jacobs Douwe Egberts Group (JDEG, the world’s #2 coffee roaster by volume after Nestlé) and Peet’s Coffee (a premium retail coffee brand that has brand names such as Tassimo, Senseo and L’Or under its umbrella). * SO WHAT? * If this all goes ahead, it would create the biggest publicly traded coffee company in the world and would be the biggest IPO scheduled so far for 2020. The flotation would give early investors an opportunity to crystallise gains. 

Elsewhere, Pressure builds on Unilever as Asian slowdown weighs on sales (Daily Telegraph, Hannah Uttley and Simon Foy) shows the company facing criticism as it blamed the fact that it would not hit its sales targets this year due to tricky market conditions. South Asia and west Africa markets were cited as being particularly problematic. * SO WHAT? * There is an understandable amount of scepticism here among investors who have seen a weak performance from the company, but they have been promised that the good times will return in the second half of next year as its efforts to attract younder customers and offer more exclusive products kick in.

Vaping suffers its latest blow in Advertising watchdog bans e-cigarette promotion on Instagram (The Guardian, Mark Sweney) as the UK’s Advertising Standards Authority (ASA) ruled that British American Tobacco (BAT), Ama Vape Lab, Attitude Vapes and Mylo Vapes should not be allowed to promote their products on Instagram. * SO WHAT? * The pressure on vaping – and particularly its promotion to younger people – continues…

And finally, in other news…

Productivity is said to be a serious problem for the UK economy at the moment, so it seems that a toilet company is trying to address this single-handedly in Say goodbye to comfort breaks! New downward-tilting toilets are designed to become unbearable to sit on after five minutes (Mailonline, Ryan Morrison https://tinyurl.com/wltawrv). All I can say is 😱. Maybe they will use this song in the marketing 😜. If you want something to consider if you are at a loose end for a few minutes, you might want to have a go at How many Christmas songs can you find hidden in this holiday brainteaser? (Insider, Frank Olito https://tinyurl.com/svbmw6k). Good luck!

1. In MACRO & MARKETS NEWS, UK stocks continue to rise but UK and European manfacturing stay gloomy
2. In CONSUMER & RETAIL NEWS, high end property starts shifting, water bills are set to fall, UK shopper numbers weaken while Sports Direct and Franco Manca press for business rate cuts
3. In INDIVIDUAL NEWS, IFF buys DuPont’s nutrition business for $26bn, Uber exits Indian venture, FirstGroup looks for buyers of its US business, Cineworld announces a big acquisition and Netflix emphasises overseas growth
4. In OTHER NEWS, I bust a myth about beer cans…

So UK stocks show big gains while both UK and European manufacturing continue to suffer…

UK stocks jump as election result eases uncertainty (Financial Times, Adam Samson and Myles McCormick) shows continued euphoria following Friday’s general election result as the FTSE100 made its biggest one-day gain in trading since December 2018, contributing to a 3.4% gain in the last two trading days. The FTSE250, which is made up of more domestically-focused companies, also posted strong gains, although they were more modest in comparison. * SO WHAT? * Trump’s partial trade deal with China will have been another driver behind the FTSE100’s strong performance – and proved to be a boost to indexes around the world. However, the magnitude of BoJo’s victory will have done a great deal to embolden investors who had been reluctant to put money into the UK for fear of prolonged uncertainty over a number of things including Brexit. There’s still more detail to be worked out – and it’s going to be a bumpy road – so I would expect the euphoria to wear off in the fairly near future.

Manufacturers glum as business activity slows sharply (Financial Times, Delphine Strauss) cites the latest IHS Markit survey showing a UK manufacturing industry at its lowest ebb since the aftermath of the 2016 EU referendum. Service sector businesses were less gloomy but the majority of participants in both sectors said they were cutting staff. Eurozone manufacturing activity shrinks for 11th straight month (Financial Times, Valentina Romei) shows that things aren’t much better on the Continent as manufacturing activity contracted for the 11th consecutive month in December. * SO WHAT? * Although things aren’t looking great at the moment for manufacturing, I would have thought that the “phase one” US-China trade deal should calm things at least a little bit (as long as it holds!) but the benefits will take a few months to filter through. With regard to UK manufacturing, I think that BoJo’s victory could stop the cycle that we’ve seen going into the past two Brexit deadlines-that-weren’t where orders ramped up ahead of a deadline (to beat uncertainty) only to fall off a cliff for a few months as the inventory gets run down, which then repeated going into the second deadline. This should hopefully mean less of a “boom-bust” order pattern and a smoothing out of demand.

High end property activity picks up, water bills are about to fall, UK shopper numbers weaken while Sports Direct and Franco Manca call for business rate cuts…

Sales bounce for UK high-end property after Tory victory (Financial Times, Judith Evans) highlights another area that has been impacted by BoJo’s win as estate agents for “super prime” homes reported an immediate boost in sales. Overseas buyers are also keen to get involved to beat a new 3% stamp duty surcharge that BoJo will be bringing in to target them when they buy homes here, plus there’s an increased chance now of sellers becoming emboldened and asking for higher prices.

There’s good news for those of us in the real world in Household water bills to fall by 26pc as Ofwat gets tough (Daily Telegraph, Ed Clowes) as regulator Ofwat has told water firms to cut the average bill by 12% before inflation, although the actual amount will vary depending on where you are. It is calling for improved efficiency in the industry and a reduction in pollution and leaks, as well as household bills. Utilities companies will also be forced to put aside £1bn to prevent flooding as part of efforts to improve services. * SO WHAT? * The companies affected are allowed to appeal – and will have eight weeks to do so – but it would be a gamble as an appeal to the Competition and Markets Authority could actually result in a conclusion that Ofwat had been too soft. Anglian, Northumbrian, Thames and Yorkshire are the ones most likely to appeal, so they will no doubt be weighing things up.

Shoppers fail to keep pace after Black Friday surge in footfall (Daily Telegraph, Michael O’Dwyer) cites the latest data from Springboard which shows that the number of

shoppers fell in the second week of December versus the same time last year as conditions remain tough. Sky reported last night that department store chain Beales had called in KPMG to launch a strategic review of their business. Retailers will be hoping that this Saturday, dubbed “Super Saturday” in the industry (because it is traditionally the busiest day of the year for shoppers), will give them a decent boost.

Mike Ashley: more House of Fraser stores likely to close (The Guardian, Sarah Butler) continues the gloom with threats that more stores could go unless the government does a major overhaul of the business rates system. On the plus side, he announced that he expected higher profits this year due to reduced losses at House of Fraser, sending shares in Sports Direct (whose name-change to “Frasers” was approved by shareholders yesterday) up by 27%. Employees were also due to benefit from the introduction of a new staff bonus scheme of about £100m, as Ashley said that he wanted to make about 50 people millionaires. Tackle business rates now, pizza chain boss urges PM (Daily Telegraph, Oliver Gill) shows the boss of the successful Franco Manca pizza chain, David Page, joining in the retailer chorus for a business rates overhaul to avert the death of the high street. Business rates are predicted to bring in £31.8bn for the Exchequer this year and are based on the estimated rental value of a company’s property. Retailers complain that they have to pay huge sums that do not take into account falling shopper numbers. * SO WHAT? * It’s amazing that the government hasn’t done anything about this sooner given the number of retailer failures over the last couple of years (but then again, I suppose that business rates are a nice little earner for them). However, the Conservatives did say that they would cut business rates in their election manifesto so hopefully, retailers won’t have too long to wait to see some action on this, but it may prove to be too little too late for some.

IFF buys DuPont’s nutrition business, Uber and FirstGroup look to exit some overseas ventures, Cineworld eyes a big acquisition and Netflix points to its overseas growth …

IFF-DuPont $26bn deal bets on meatless future (Financial Times, Gregory Meyer, Matthew Rocco and Arthur Beesley) highlights a major acquisition by International Flavors & Fragrances of DuPont’s nutrition and biosciences business with a view to targeting the fast-growing meatless market. DuPont shareholders will own 55.4% and IFF shareholders 44.6% of the enlarged company which represents the biggest ever tie-up in the industry. * SO WHAT? * IFF investors weren’t too happy with the deal given their doubts over the success of the previous acquisition of Frutarom Industries, but the sector has been consolidating over the last year or so and this deal creates a major player with a broad range of expertise. Although IFF shareholders may be sceptical about the high acquisition price and the company’s ability to digest another big acquisition so soon after the previous one, projected cost savings of $300m per annum and $400m of revenue benefits should help to soften the blow.

There was also news today of two companies itching to get out of some of their overseas businesses in Taxi for Uber as it offloads Indian delivery arm to rival (Daily Telegraph, James Cook) where Uber is on the verge of selling its Indian food delivery business to Zomato as part of efforts to reduce exposure to poorly performing parts of the business and FirstGroup in move to sell US arm as it bows to pressure (Daily Telegraph, Oliver Gill) shows that the transport group has eventually buckled to investors who want it to offload its troubled North American

businesses and has hired investment bank Rothschild to give it some options. Businesses that are likely to be affected include  the famous long-distance US coach arm Greyhound as well as its school bus and city operations.

Then in Cineworld sees big picture in Canada deal (The Times, Dominic Walsh) we see that the UK cinema chain is aiming to increase its exposure to the North American market by buying Canada’s biggest cinema operator Cineplex for £1.6bn. This comes not long after the company’s $5.8bn acquisition of American cinema operation Regal Entertainment in February last year. * SO WHAT? * I think that this is a very ballsy move given the expense, the expected poor slate of films coming out next year and the ongoing pressure from the TV streamers. Cineworld’s chief exec, Mooky Greidinger, said that “I don’t think you’ll find anyone who’ll tell you they’re on Netflix because of the great movies. Netflix is not an enemy and it’s not a threat”. Hmmm. Still, pretty impressive.

Talking of which, Netflix reveals new data on overseas growth amid stiffer US competition (Wall Street Journal, Joe Flint) shows that the streaming giant has now started to release geographic data breakdowns in an effort to get investors focusing more on overseas growth rather than tightening domestic competition. The EMEA region has seen more than double the number of subscribers since 2017 and is the biggest non-US region for them. Latin America was also strong and Asia is showing positive signs but from a low base. * SO WHAT? * You know when things aren’t going well when a company decides to change the metrics on which it is measured! However, in this case, it may well be forgivable given the mature nature of Netflix’s domestic market. Now that growth in its own backyard is no longer stellar, it will now hope for chunky growth rates elsewhere. It’s great that it is making inroads in other regions, but the competition is increasing (which may put a cap on subscription price upside) and Netflix will continue to have to pay high prices to buy (and develop) content to keep ahead of its rivals.

And finally, in other news…

Given that many of us will be drinking a bit more than usual at the moment, I thought I’d bring this to your attention: Something you always thought you knew about beer isn’t actually true (BGR, Mike Wehner https://tinyurl.com/wcrztvy). Well I never!!! You’ll be telling me that Father Christmas isn’t real next!

1. In MACRO NEWS, we look at the US trade deal impact and post-UK election expectations
2. In RETAIL/HIGH STREET NEWS, US retail suffers a tricky year, Toscafund buys a decent wedge of Ted Baker and UK cinemas want to feel The Force
3. In MISCELLANEOUS NEWS, UK water companies survive nationalisation but face tough challenges and Ola tries to make a splash while Uber is side-lined
4. In OTHER NEWS, I show you how how to win the Christmas cracker pull…

So markets cheer the partial US/China trade deal and more certainty in Westminster…

US hails trade deal with China as threatened tariffs are suspended (The Guardian, Patrick Collinson) heralds a sense of relief and euphoria as China suspended additional tariffs on an array of imports from the US as part of the “Phase One” deal. The US trade representative, Robert Lighthizer, said that the deal will almost double US exports to China over the next two years. Easing worries push investors out of havens, drive stocks to new highs (Wall Street Journal, Ira Iosebashvilli) shows that this recent development is starting to result in a shift from “safe haven” assets like gold, the Yen and stocks that pay dividends (which investors tend to buy when things aren’t going so well because they are less risky/offer more stability) back into the wider stock market. The majority Conservative win on Friday will also have a positive effect on the markets (at least for the short term) such as those identified in Boris bounce ‘may reverse Brexit blow to sterling’ (Daily Telegraph, Tim Wallace) which suggests

that BoJo’s victory will open the floodgates to foreign investors buying sterling after a long period of reticence due to the uncertain economic/political climate; and Election to boost house prices (The Times, Louisa Clarence-Smith) cites Rightmove as saying that the average house price will go up by 2% over the next year, with housing market activity picking up in spring on pent-up demand. * SO WHAT? * Trade talks and Brexit are certainly two big clouds that have been hanging over markets of late and so positive developments (albeit on a limited capacity on the US/China trade front) were bound to have a positive impact. US markets have seen many false dawns over the last two years as trade agreement prospects have risen only to be dashed and investors in the UK have become increasingly fretful about Brexit and Westminster’s indecision. Neither of these latest developments claims to be the finished article – as there are still many hurdles to be faced – but in the meantime share prices hit new highs in the US and those of UK builders and estate agents shot up by 10% in the immediate aftermath of both bits of news. Detractors will say that Trump sold out to make himself look good going into election year and that Boris has still got some very tricky negotiation ahead of him with the Europeans.

US retailers suffer from discounts, Ted Baker gets a new big shareholder and UK cinemas want The Force to be with them…

US retailers hit by ‘worst year since 2008’ for discounting (Financial Times, Alistair Gray) highlights a worrying trend among US retailers as they resort to cutting prices to combat the threat of online rivals. The latest industry data shows that special offers have gone way beyond Black Friday and are also bigger than they have been in previous years. Retail consultant Jan Rogers Kniffen observed that “This is the worst year for discounting since 2008. Outside of a recession, it’s the deepest I’ve seen”. This has been exacerbated by the US-China trade war which has led to many clothing retailers ordering more than they would normally to potentially beat the tariffs – but this has led to higher inventory, which will probably lead to even more discounting. Retailers such as American Eagle, Tailored Brands and Children’s Place have all expressed concerns going into Christmas. * SO WHAT? * This is indeed concerning to hear at a key period of the year. The latest developments in the US-China trade stand-off will no doubt be welcomed by retailers, but I would expect them to take some time to feed through. In the meantime, the US consumer stands a good chance of bagging a decent number of bargains over the holiday season.

In Toscafund scoops up 12% of troubled retailer Ted Baker (Financial Times, Jonathan Eley) we see that hedge fund Toscafund Asset Management has now built up a stake of almost 12% in Ted Baker, making it the second biggest

shareholder after founder Ray Kelvin. Investors such as Invesco and Baillie Gifford have been reducing their stakes in the company which has had four profit warnings in the last year. * SO WHAT? * Neither Toscafund nor Ray Kelvin have made any comment re the stake, but the interesting thing here is that although more conservative investors will be reluctant to put money into the company because of allegations of Kelvin’s inappropriate behaviour to staff (which led to his abrupt departure), it is likely that a hedge fund may have no such qualms. The fund has a history of investing in companies who have founders with big stakes and buying assets that nobody wants. The drama continues…

Then in UK cinema industry hoping to feel full force of Star Wars (The Guardian, Mark Sweney) we see that the industry is crossing its fingers/toes/praying that the new Star Wars film will result in sales that will take them into a galaxy far, far away. The British box office has had a pretty good few years and the industry is hoping that a strong December roster of Jumanji: The Next Level and Cats will be complemented by a successful final installment of the venerable franchise. * SO WHAT? * This is all impressive stuff – and Disney’s success over this year has been staggering when you consider their ownership of hugely popular films as part of franchises including Star Wars, Toy Story, The Incredibles, Marvel, Frozen and Lion King. However, many are saying that this is unlikely to be replicated and that next year’s movie schedule is not nearly as strong and will look lacklustre in comparison. In the meantime, cinema chains such as Vue have continued to invest in a better experience which they hope will keep punters going to their theatres rather than just staying at home and watching Netflix.

Water companies survive nationalisation but face hurdles while Ola tries to take advantage of Uber’s misfortune…

Water Industry faces battle against watchdog’s tough new regime (Daily Telegraph, Tim Wallace) highlights challenges facing the big water companies shortly after they breathed a sigh of relied that they won’t be nationalised under a Labour government. Industry regulator Ofwat will today be announcing a new regime that will force companies to be more efficient and take less profits as part of a five-year plan to shake-up the industry. It said that “These are seriously stretching goals for the sector, but we know they can be achieved”. Water companies

could challenge the new rules, so we’ll just have to see how things develop from here.

Upstart Indian taxi rival hails cut-price route into London (The Times, Simon Duke) heralds a push by Softbank-backed Indian start-up Ola in London as it announced its official launch in the capital next month. Uber, which is also backed by Softbank, is to lose its London licence due to the discovery of lapses in its driver approval process so Ola is looking to take advantage while the giant is down. It will be opening with lower prices to attract new users and waive commissions, attracting drivers who are used to having to pay Uber 25%. * SO WHAT? * It looks like drivers and customers will certainly benefit from the arrival of this new kid on the block and, given that it already operates in 250 cities worldwide in India, Australia and New Zealand, it is no slouch. Rivals Kapten and Bolt will also be vying for customer and driver attention while Uber sits powerless on the sidelines.

And finally, in other news…

If you are feeling particularly competitive this Christmas then you might like to read How to win the Christmas cracker pull every time – and what we all do wrong (The Mirror, Luke Matthews https://tinyurl.com/tl7p6ux). Just think of all those cheap gifts that you will be winning!

1. In MACRO & OIL NEWS, the Conservatives win the UK election, Trump agrees to a limited China trade deal and Saudi Aramco hits $2tn
2. In RETAIL-RELATED NEWS, Dixons Carphone says it’s back on track, Superdry raises margins – but also an accounting error (what is it with accountants these days??), Fuller’s chief wants business rates changed and UK property fund withdrawals hit highs
3. In INDIVIDUAL COMPANY NEWS, China car sale projections look anaemic and Waymo buys an Oxford AI firm
4. In OTHER NEWS, I bring you an unusual Christmas tree…

So the Conservatives win the UK general election, the US and China agree to a limited trade deal, and Saudi Aramco manages to get the $2bn valuation it craved…

UK election results: Boris Johnson lauds ‘day many of us dreamed of’ after Tory win (Financial Times, Philip Georgiadis, Myles McCormick, Sarah Provan, Charlotte Middlehurst and Adam Samson) heralds a big win for Boris Johnson and the Conservative party. In a speech this morning at Conservative HQ, BoJo said “The people of this country have given us tonight a huge great stonking mandate” and president Trump said that the victory leaves the US and UK “free to strike a massive new trade deal” after Brexit. Cue loads and loads and loads of comment/post mortems about the high profile losers. * SO WHAT? * This will at least give BoJo a freer hand to implement his policies but there are still massive macroeconomic challenges ahead and huge scepticism that he will be able to execute Brexit by his own deadline of December 2020. I do, however, think that this slight movement towards a bit less uncertainty will unlock a lot of pent-up investment, which should be a positive for jobs and the property market among other areas.

Trump agrees to limited trade deal with China (Wall Street Journal, Lingling Wei, Bob Davis, William Maudlin and Josh Zumbrun) heralds a breakthrough on the trade front as the US said it would reduce current tariff rates on Chinese goods and kick the threatened new tariffs into the

long grass in return for Beijing committing to buy $50bn-worth of agricultural, energy and other goods in 2020. If Beijing doesn’t follow through on its promise, the original tariffs would come back into force. This “phase one” deal is likely to lead to a “phase two” deal that would tackle trickier issues like forced-tech transfer, subsidies and the conduct of Chinese state-owned firms. * SO WHAT? * This is a positive development and it just goes to show that you can’t believe what Trump says until something is actually signed (and Tweeted??) given what he said recently about the prospect of an agreement! Still, I think that American farmers will be particularly relieved as this deal is likely to boost their exports to China. Markets rose on the news and will probably bask in a bit of a rosy glow for now.

Saudi Aramco reaches $2trillion threshold but doubts persist (The Times, Emily Gosden) highlights more share price gains for the newly-floated state-controlled oil company as it briefly broke through the $2tn valuation barrier. To put this in perspective, Apple is the next biggest listed company with a valuation of around $1.2tn. * SO WHAT? * It seems that pretty much everyone outside the region thinks that the world’s largest oil company is way overvalued. However, that does not mean to say that the share price will crater. If there is enough feelgood factor (and strong incentives NOT to sell), the “success” could continue for a while yet. The danger is that this could blow up in everyone’s faces at any moment if doubts start to creep into investors’ minds. As I have said before, there’s a LOT riding on the success of Saudi Aramco and the regime appears to have enough money and will to keep the party going. If they can keep it going long enough, they may well make another tranche of shares available – and I think that foreign investors could potentially be inclined to buy into this as a momentum investment if nothing else.

Dixons Carphone says it’s heading in the  right direction, Superdry is the latest to announce an accounting error, Fullers wants a change in business rates and UK property fund withdrawals go crazy…

Dixons Carphone ‘on track’ despite profits drop (The Times, Ashley Armstrong) highlights the electrical goods retailer’s belief that its recovery is still going to plan despite a massive 60% fall in profits. The owner of Currys, PC World and Carphone Warehouse blamed it on weaker mobile phone sales but maintained its guidance for the full year (i.e. they don’t expect things to get too much worse from here). * SO WHAT? * Chief exec Alex Baldock is trying to boost the appeal of the company’s offering by building credit capability and having more interactive gaming areas in its stores but I don’t think that things are going to start REALLY picking up again until 5G gets better coverage and 5G phones start coming out. I suspect that many are holding fire on upgrading their phones until that happens – and I wouldn’t expect that to kick in in a meaningful way until maybe the second half of next year.

In Superdry rings up £4.2m loss – and reveals accounts error (Daily Telegraph, Laura Onita and Simon Foy) we see that Superdry fell into loss, partly because of an “isolated” accounting error linked to the costs of importing stock and moving items between its warehouses last year. It also expressed concerns about its Christmas sales if high street rivals decided to discount prices heavily to shift product. Its share price fell by 3.5%. * SO WHAT? * What’s going on with accountants at the moment?? Clearly Ted Baker’s problem is more serious, but you do wonder why this is happening. If there aren’t any more incidents like this then it’ll all disappear no doubt, but you do wonder if this is the start of a worrying trend. It’s one thing to have badly-performing companies reveal something like this – but it would arguably be even more damaging if a more successful retailer had similar issues.

Fuller’s chief calls for shake-up of business rates (Financial Times, Alice Hancock) shows chief exec Simon Emeny of UK pub group Fuller, Smith & Turner has called for the incoming government to cut business rates and sort out the immigration system. The industry’s trade body, UK Hospitality, has also been pushing for changes to business rates saying that the industry as a whole overpays by over £2bn per annum versus its combined turnover. * SO WHAT? * Join the queue, buddy! Everyone and their dog is begging for business rates to change – with retailers being the main ones to voice their complaints. The Conservatives said in their election manifesto that they will be cutting business rates – so they may be in luck.

Now UK property funds suffer worst week since Brexit referendum (The Guardian, Patrick Collinson) doesn’t look like a retail story at first glance but the fact is that the poorly performing retail sector is giving retail property valuations a real kicking, which has had a hugely damaging effect on UK property funds. The recent move by M&G, one of the UK’s biggest asset managers, to block withdrawals from the fund to give them time to sell assets to raise money, caused a massive spike in demand for redemptions for property funds in general. Data from Calastone, a global fund transaction network, showed that in the week since M&G’s “gating”, investors have taken out an additional £193m out of UK property funds – £60m of which was withdrawn within the first 24 hours! Aberdeen Standard’s £1.3bn property fund is thought to be one of the worst affected by the redemptions as it has the most exposure to retail property assets, such as shopping centres and malls. * SO WHAT? * Although M&G’s move was clearly a shocker, I do wonder whether there will be some investment opportunities here as there will no doubt be funds that aren’t quite so exposed to retail property but got sold off nevertheless. Also, in Aberdeen’s case, it was already in the throes of selling off its Moor shopping centre in Sheffield (which could go for £89.4m) that could give them a useful cash buffer to help cover redemptions. In addition to this, retailers could get a boost if Boris Johnson follows through on business rate cuts – but I don’t think that will kick in immediately. Still, there may be value here for those who are prepared to do their homework and find out where the assets of these funds actually are.

China car sales are projected to weaken and Waymo buys into Oxford…

In direct contrast to the slightly optimistic tone of what French car parts maker Valeo said the other day, Further drop in Chinese car sales alarms makers worldwide (Daily Telegraph) cites the latest forecasts from the China Association of Automobile Manufacturers which show that sales in the world’s biggest car market could fall by 2% in 2020 after an 8% fall this year and a 3% fall in 2018. * SO WHAT? * Clearly, this is bad news for auto makers who are craving any good news about car sales as global activity 

continues to be sluggish. OK, so maybe Valeo is sort of on the right track in that the rate of decline may be falling – but it’s still falling nonetheless!

Waymo buys Oxford AI firm in drive for research hub (Daily Telegraph, Matthew Field) highlights the acquisition of Latent Logic, an AI firm that was set up by Oxford academics, which builds extremely realistic road and car simulations that can be used to train AI software for driverless vehicles. There were no details about how much was paid, but the company had been valued at £8m at a fund raising round earlier this year. * SO WHAT? * Nice for the academics and early investors and is obviously a big endorsement by a major player in the filed. I think this is quite tiny in the scheme of things but shows that there is continued appetite in improving tech capabilities in driverless cars.

And finally, in other news…

Not many sleeps now till Christmas! Given that, I thought you might find this rather unusual Christmas tree quite interesting: Airport builds Christmas tree out of confiscated items (UPI, Ben Hooper https://tinyurl.com/r7d2pvd). This would be quite the conversation piece I think…

1. In MACRO & OIL NEWS, US interest rates stay unchanged, UK polls cast doubt on a Conservative majority and Saudi Aramco has a solid market debut
2. In RETAIL NEWS, Home Depot announces a downbeat outlook, Amazon/Deliveroo faces potential competition hurdles, Lululemon chases guys, Inditex gets even better and Majestic eyes more outlets
3. In INDIVIDUAL COMPANY NEWS, Nestlé wants to offload Häagen-Dazs, VW invests in a self-driving start-up and Stagecoach’s founder steps down
4. In OTHER NEWS, I explain why we hang mistletoe at Christmas…

So US interest rates stay the same, the Conservatives don’t look like winning a majority and Saudi Aramco’s debut is a good one…

Federal Reserve keeps interest rates steady, sees long pause (Wall Street Journal, Nick Timiraos) shows that the Fed has kept interest rates unchanged after cutting them for the last three meetings. It voted 10-0 to leave them unchanged in the first unanimous vote since May and indicated that they will remain there for the next year. They remain in the 1.5% and 1.75% range. Fed chief Jerome Powell hinted, however, that they would be prepared to intervene again if the need arose. * SO WHAT? * The Fed put interest rates up four times last year in the belief that strong economic momentum and low unemployment would cause things to overheat and push inflation higher. However, it had to hit reverse this year when it realised that wasn’t going to happen because of the global economic slowdown and ongoing US-China trade tensions. I suspect that President Trump will continue to intensify the pressure on “Jay” Powell to cut rates in order to make him look good in the presidential election run-up because, as a general rule, when rates are cut, markets go up – and when markets go up, people feel richer and if they feel richer, they spend and if they spend companies grow, and if they grow they employ more people which leads to a tighter labour market, which leads to higher wages, which leads to more spending…etc.

Then in Tory hopes of decisive majority in doubt as voters head to polls (Financial Times, George Parker) we see that the momentum of the Conservatives is slowing down as we head into the general election today (I’ve written a report on which parties tout which policies which you can access HERE. The idea of this is to make it easier for you to compare policies side-by-side). Boris Johnson’s lead had been convincing but has narrowed over the last week or so, lessening the likelihood of the majority that he craves to push through his policies. Polling stations open at 7am this morning and close at 10pm tonight for Britain’s third general election in four years. A hung parliament would be a nightmare for all concerned as no-one would be able to achieve what they want as they all pursue their individual agendas.

Aramco ends its debut trading day as world’s biggest business (Daily Telegraph, Ed Clowes) highlights a strong first day of trading as the oil giant’s share price shot up by 10% yesterday on the Tadawul stock exchange. Some observers believe that strong pressure by the Saudi Royal family on domestic investors was the reason for this sharp rise and caution that the market itself is often open to manipulation and insider trading. * SO WHAT? * Supporters of the IPO will say that this debut has proved the doubters wrong and that their bleating is just sour grapes. However, we will see what the true value of the company is once this initial froth has calmed down. Having said that, the Crown Prince will be doing all he can to make this work, so I am sure that there will be a lot of support for Saudi Aramco in the background. For the moment, though, it has been a success!

Home Depot paints a downbeat picture, Amazon’s investment in Deliveroo comes under scrutiny, Lululemon targets menswear, Inditex gets even better and Majestic eyes more outlets…

Home Depot gives cautious outlook for 2020 (Wall Street Journal, Sarah Nassauer and Allison Prang) highlights a cooling in the American DIY store’s forecasts for next year as it expects a slowing economy and believes that its own “home improvements” will take time to turn into sales gains. Home Depot has enjoyed strong growth over the years as a strong housing market and low unemployment have powered sales growth but the company now says that momentum is slowing down. The company is currently investing $1.2bn over five years on its supply chain and distribution centres to automate a number of processes but it says that the benefits of this will take some time to filter through. * SO WHAT? * Given that the company has missed same store sales targets for the last four quarters, it’s probably just as well that it brings down expectations. After all, it has outperformed rivals like Lowe’s and its share price has risen by about 18% over the past year. Interestingly, it turns out that Americans are staying in their homes longer, which makes them more willing to invest in improvements – so there is still some growth to be had!

In Competition warning over Amazon and Deliveroo (The Guardian, Sarah Butler) we see that Amazon’s investment in a 16% stake in Deliveroo in May is attracting interest from the Competition and Markets Authority (CMA) which could ultimately result in Amazon being forced to sell or reduce its stake in the food delivery company. The two companies have been given five days in order to address concerns from the CMA or a full investigation will be triggered that could take up to six months. The main worries centre around the move stifling competition in food delivery as well as grocery delivery given how strong they both are in their respective areas. * SO WHAT? * The CMA has form in getting its hands dirty in these things before – BSkyB was forced to sell over half of its 17.9% stake in ITV and Ryanair was told to cut its near-30% stake in rival Aer Lingus, for instance – so its threats aren’t empty. We’ll just

have to wait and see if the CMA will be satisfied by the answers they get.

Lululemon leans into men’s apparel as segment expands (Wall Street Journal, Charity L.Scott) shows that, having become a master at selling premium yoga gear to women, the company is now turning its focus to men. Chief exec Calvin McDonald said yesterday that total revenue for menswear grew by 38% in the third quarter and reiterated the company’s goal to double the size of the men’s business by the end of 2023. * SO WHAT? * Sounds like a plan! Men like stretchy stuff as well! OK so you do pay through the nose for some of their stuff, but the company continues to go from strength to strength – its share price has doubled over the past year alone! The company wants to broaden its “athleisure” reputation and move into other categories like personal care products. Clearly, you never know whether this broadening will actually work, but I think that Lululemon has the potential to make a decent go of it. It is a premium brand that doesn’t really do much in the way of discounts (which helps to keep the exclusivity factor) and it appeals to an active customer who is after a quality product. Let’s hope it doesn’t overstretch itself…

Profits surge turns Inditex into cashflow ‘juggernaut’ (The Times, Ashley Armstrong) highlights the continued success of the world’s biggest clothing retailer after investment in radio-frequency identification technology that tracks clothing stocks in shops very accurately has helped to make the company even more efficient. The owner of Zara, Massimo Dutti and Pull & Bear reported a strong performance with net profits, net cash and sales all up. * SO WHAT? * This company just continues to impress. Being able to design and stock items in super-quick time versus many of their rivals is now enhanced by technology that keeps a very tight rein on inventories, making the whole process even more streamlined. This company always innovates and tries to stay ahead of the trends – and its efforts are bearing fruit, as these results show.

There’s positive news in New outlets plan after Majestic sale (The Times, Dominic Walsh) as the wine retailer is set to open more stores after the £95m acquisition of the chain by Fortress Investment Group completed yesterday. Returning exec chairman John Colley mentioned St Andrews, Marlow and Henley as potential sites and added that early signs of Christmas trading have been promising.

Nestlé wants to sell its Häagen-Dazs brand, VW invests in a self-driving start-up and one of Stagecoach’s founders steps down…

Nestlé to sell Haagen-Dazs ice cream business for $4bn (Financial Times, Leila Abboud and Arash Massoudi) heralds a sale of the well-known US ice cream business for $4bn in cash to Froneri, which is backed by private equity group PAI Partners. * SO WHAT? * This is just the latest divestment from Nestlé as it continues the process of streamlining its brand line-up. It’s also interesting to note that private equity firms seem to be benefiting from the current trend of consumer goods giants selling off underperforming assets (e.g. KKR bought Unilever’s spreads business for €6.8bn in 2017).

Volkswagen invests in Aeva self-driving vision start-up (Financial Times, Patrick McGee) highlights an interesting development for VW as it made an unspecified investment into Aeva, a start-up founded by two Apple engineers which claims to have invented a new lidar (a light detection and ranging sensor) that is cheaper and more efficient than current options. Lidars help the car to know the distance and depth of objects by creating 3D maps. Current versions

are big and unweildy (and can cost thousands of dollars) while Aeva’s is on a single chip with no moving parts and can be fitted next to a car’s lights – for the price of $500. * SO WHAT? * Many believe that lidar tech is key for autonomous driving but Elon Musk has scoffed at the tech, preferring instead to use cameras and radar on his autonomous vehicles – but VW Autonomy chief Alex Hitzinger said that Musk’s conclusion “is based on the extremely high cost of lidar, but if the cost isn’t high any more then the argument falls away”. Nice move by VW by the sounds of it…

Stagecoach founder Sir Brian Souter to step down (The Guardian, Gwyn Topham) marks a historic development for the bus company after its billionaire founder, Sir Brian Souter, said he’d step down at the end of the year but remain on the board as a non-exec director (NED). His sister and co-founder Ann Gloag, will also retire from an NED position at the end of the year. * SO WHAT? * This spells the end of an era, although the brother-and-sister combo will still be shareholders in the company. Given the potential upheaval in transport that the next government may make and the loss of some of its train and overseas interests – not to mention that they are both getting on a bit – it seems like a good enough time to leave things to the existing management team. Mind you, if they muck things up, they may well make a return 😉 like Julian Dunkerton did to Superdry and possibly Ray Kelvin to Ted Baker.

And finally, in other news…

Given our approach to Christmas, I thought you might be interested in This Is Why We Hang a Mistletoe at Christmas (BestLife, Owen Duff https://tinyurl.com/wn4owkf). Well I never knew that!

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…