Friday 03/08/18

1. In MACROECONOMIC AND GOLD NEWS TODAY, Trump takes aim at China (again), UK interest rates rise to a level not seen since 2009 and gold demand falls to new lows
2. In TECH-RELATED NEWS, Apple reaches $1tn and Google faces significant hurdles to China re-entry 
3. In UK REAL ESTATE NEWS, Countrywide has a complete shocker and house building sees strong growth
4. In OTHER NEWS, I bring you a great job opportunity and an inadvisable item of clothing. For more details, read on…

So Trump takes aim at China, the Bank of England raises interest rates and gold demand falls…

Here we go again in Trump zeroes in on China after trade truce with Europe (Financial Times, Demetri Sevastopulo and Shawn Donnan) which says that after his kinda-truce with Europe last week, Trump has donned his subtlest negotiating trousers and threatened to raise duties on $200bn of Chinese goods from 10% to 25%! * SO WHAT? * China describes this as “blackmail” but Trump has clearly got his sights on the mid-term elections in November. A little China-baiting will probably not do him any harm in the polls – and if he manages to negotiate something major with them before the actual vote then he is going to be sorted. Dennis Wilder, a former top China adviser to George W Bush, observed that “What was unpopular was a tariff war against the world. The administration realised that and shifted gears. What is popular going into the midterms on both sides of the aisle is China bashing”. He also made a very interesting point on Trump’s broader negotiation behaviour when he said “From the Chinese point of view, [negotiations] have to be between Xi and Trump. If they have learnt one thing [looking at] Juncker dealing with Trump and Kim Jong Un dealing with Trump, it is when you get a deal with Trump it sticks. When you get a deal with the others like Mnuchin and Ross, suddenly it’s gone”. Clearly, we will just have to observe from the sidelines to see how this plays out…

Bank of England raises interest rates to highest level since 2009 (Financial Times, Gavin Jackson and Delphine Strauss) highlights the outcome of a unanimous

verdict by members of the Bank of England’s Monetary Policy Committee (MPC) to raise the UK interest rate from 0.5% to 0.75%, the highest rate since 2009. Governor Mark Carney said that the strategy of cutting rates and keeping them low following Brexit had worked and that “Employment is at a record high, there is very limited spare capacity, real wages are picking up and external price pressures are declining” and that now was the time to focus on inflation rather than employment growth. * SO WHAT? * The rate rise had been widely expected by the market, but many businesses were still p!ssed off about it because they believe that it will damage confidence and investment prospects. Suren Thiru, head of economics at the British Chambers of Commerce said that “The decision to raise interest rates, while expected, looks ill-judged against a backdrop of a sluggish economy…it risks undermining confidence at a time of significant political and economic uncertainty” and that the Bank was “overly focused on reinforcing an idealised direction for rates rather than on economic reality”, according to Business hits out at ‘ill-judged’ rate rise (The Times, Tom Knowles).

Losing its lustre: demand for gold falls to nine-year low (The Guardian, Julia Kollewe) cites figures from the World Gold Council which show that global gold demand fell to its lowest level since 2009 in the first half of this year as investors felt emboldened enough to buy riskier assets against the backdrop of a booming US economy, with both consumers and central banks buying less of the shiny stuff. Investment was weakest in America due to an upwardly-mobile economy and stronger in Europe because of political uncertainty. * SO WHAT? * The general rule of thumb is that gold prices soar when economic sentiment goes down the toilet because it is seen to be a physical asset that has intrinsic value, but then conversely the gold price falls when sentiment is buoyant and other asset classes look like they will get higher returns.

In tech news, Apple hits the trillion dollar mark and Google faces China hurdles…

Unless you spent all day yesterday in a cave with no WiFi signal, listening to white noise (which, let’s face it, we all do from time to time) news that Apple become first US trillion dollar firm (The Times, Robert Miller) will come as no surprise. Its market capitalisation has been flirting with this psychological level since it announced its third quarter results on Tuesday night and marks a 50,000% rise since it floated in 1980, with a 21% rise this year alone! For an excellent timeline of Apple’s journey, have a look at Apple wins race to be first trillion dollar company (Financial Times, Tim Bradshaw). Just to give you an idea just how big Apple is right now, there are only 16 countries with a GDP as big or bigger than Apple’s current market cap. Mad, eh? It isn’t the first company to reach this mark, however. Apple’s market cap hits $1trillion (Wall Street Journal, Tripp Mickle and Amrith Ramkumar) says that PetroChina Co’s market cap rose above $1tn back in 2007 and it is said that the state-owned oil company Saudi Arabian Oil Company (aka Saudi Aramco) was valued at

$2tn at the height of flotation speculation. * SO WHAT? * It doesn’t really mean anything to hit the $1tn mark in itself but is an interesting psychological level to reach. It may also give other FAANGS something to go for. Apart from that, well done and move on…

Talking about FAANGS, I meant to mention talk the other day about Google’s re-entry to the Chinese market via a censorship-friendly product after abandoning it in 2010. Google’s road back to China littered with obstacles (Wall Street Journal, Liza Lin and Shan Li) highlights some of the potential pitfalls of its mooted return. Namely, it could become a negotiating pawn in the increasingly tetchy trade war raging between China and the US as it would threaten local champion Baidu (whose share price fell 7.7% when the news came out on Wednesday) and it could also face resistance from regulators given that it left China in a huff criticising state censorship. * SO WHAT? * Google has been running a charm offensive in China for years (it opened an artificial intelligence lab in Beijing last December, for instance) and still currently runs offices in Beijing, Shanghai and Schenzhen employing about 700 people. It is currently aiming to increase its efforts on AI-related projects in the country and reintroduce its Google Play app store onto the Chinese market. There will definitely be misgivings amongst employees about effectively embracing censorship, but they might just have to swallow their beliefs if they want to make the REALLY big bucks in a MAHUSIVE potential market.

In UK real estate news, Countrywide has a massive shocker but housebuilding goes on strong…

In Countrywide shares fall 63% as it seeks emergency cash (Daily Telegraph, Rob Davies) we see that shares in the UK’s largest property services company – which operates under 50 different brand names including the likes of Hamptons International and Bairstow Eves and employs almost 10,700 staff – fell by an eye-watering 60% yesterday after it asked investors for £140m of emergency funds to stop it from collapsing. This would be via an offering of deeply discounted new shares (at an 80% discount to their previous value!) and echoes woes at rivals such as Foxtons, which announced a £2.5m half-year loss earlier this week. The company aims to use the funds to reduce its £212m debt that was racked up in an acquisition

frenzy in 2014 and 2015. * SO WHAT? * It does sound like Countrywide’s nightmare has largely been of its own making (and therefore company-specific) as it pursued a rather radical strategy under its previous chief exec – but it is also being affected by the wider malaise being experienced currently by estate agents. Nasty.

On the other hand, House building drives fastest construction growth in a year (Daily Telegraph, Helen Chandler-Wilde) cites the latest figures from the IHSMarket Purchasing Managers’ Index (PMI) which show that house building has risen at the fastest rate since December 2015 and that overall construction has experienced its fastest growth rate in over a year. Tim Moore, associate director at IHSMarkit, observed that “July data reveals an impressive turnaround in the performance of the UK construction sector, with output growth the strongest for just over one year…While the recent rebound in construction work has been flattered by its recovery from a low base earlier in 2018, there are also signs that underlying demand conditions have picked up this summer”. * SO WHAT? * This is good news for the sector as a whole but, as we know, things can change pretty darn quickly – especially with Brexit coming up.

…And finally, in other news…

Do you yearn for a different job? Always wanted to do the job you feel you were born for? Well how about Nutella is hiring taste testers – and the job sounds just as incredible as you would expect (The Mirror, Robyn Darbyshire and Nisha Mal https://tinyurl.com/ycxwywas). Nice!

AND FINALLY, it’s always best to do a final reality check before designs turn into product as per Awkward design issue with woman’s edgy ‘wildheart’ vest top has everyone laughing – can you spot why? (The Mirror, Robyn Darbyshire https://tinyurl.com/ybn8nex4). Surely someone would have pointed this out?

As always, thank you for reading Watson’s Daily!