Friday 03/09/21

  1. In TECH NEWS, Alibaba tries to suck up, Apple relents and WhatsApp gets whacked
  2. In CONSUMER/HIGH STREET NEWS, gas prices look likely to rise, UK wages increase but “buy now, pay later” customers get pursued while retail footfall increases and The Gym Group has designs on the high street
  3. In SUPPLY CHAIN NEWS, the US seeks foreign truck drivers while Ford and GM shut down factories and Tesla delays its Roadster launch due to chip shortages
  4. In MISCELLANEOUS NEWS, Baxter aims to buy Hollrom for $12.5bn, Advent/GIC go for Sobi and CMC Markets plunges on thin trading
  5. AND FINALLY, I bring you a very communicative dog…

1

TECH NEWS

Alibaba tries to play nice, Apple relents on the App Store and WhatsApp gets fined…

Alibaba vows to give Rmb100bn towards China’s ‘common prosperity’ (Financial Times, Edward White) shows that the e-tailing giant has said that it will give away $15.5bn – about two-thirds of its net income in 2020 – to projects that support President Xi Jinping’s initiatives to bring “common prosperity”. This is the same amount that Tencent recently pledged. Pinduoduo, a growing online retailer – also said that it would give Rmb10bn to farmers from its Q2 profits and subsequent profits. * SO WHAT? * Presumably these moves have been “encouraged” behind the scenes as a way for the formerly freewheeling online giants to make their way into Xi Jinping’s good books as recent crackdowns on different industries have all fed into this “common prosperity” theme one way or another. Talking of which, regulators announced yesterday that they were giving ride-hailing companies like Didi and Meituan four months to “rectify” their treatment of customers and workers. Didi continues to await what authorities have in store for it as an investigation into its data security comes to its conclusion and Meituan is also waiting to see the results of an antitrust probe.

Apple to ease App Store rules on charges (The Times, Callum Jones) shows that Apple has relented on its App Store rules and is going to allow the developers of some apps (“reader apps” – and not gaming apps) to include direct links to their websites, meaning that companies will be able to avoid having to pay Apple fees when signing up subscribers. The changes are due to come into force from next year and this comes after a settlement with the Japanese Fair Trade Commission, which has been investigating it for five years. Apple decided to roll the changes out worldwide. However, Apple cedes ground as larger fights over App Store brew in court, Congress (Wall Street Journal, Tim Higgins) shows that the company is still not out of the woods on the investigation front as it still faces scrutiny by the EU and Congress over anticompetitive behaviour.

Then in Ireland watchdog fines WhatsApp record sum for EU data rule breach (The Guardian, Rory Carroll) we see that the Data Protection Commission announced its decision yesterday to fine WhatsApp with a record €225m fine for violating GDPR rules after a three-year investigation. It also ordered WhatsApp to amend its policies to protect personal data. Funnily enough, WhatsApp said that it will appeal. * SO WHAT? * Sounds great, but let’s face it, WhatsApp has a LOT of firepower at its disposal and regulators haven’t exactly covered themselves in glory with success at taking on Big Tech so far. Big words need to be backed up and I’m sure WhatsApp will drag this out for as long as possible.

2

CONSUMER/HIGH STREET NEWS

Gas prices look likely to rise, UK wages also edge higher but BNPL customers get chased while retail footfall increases and The Gym Group casts its eye over the UK high street…

Gas crunch threatens industry in UK and Europe (Financial Times, David Sheppard and Jim Pickard) shows that consumers are likely to see rising household bills as a global supply crunch, which has already powered natural gas prices to record levels for this time of year, as countries have failed to fill storage ahead of the winter season. This could not only result in higher bills for individuals – it could also force factories to temper production or shut down altogether at a time when the number of coronavirus cases looks set to increase. Asian countries such as Japan, South Korea and China have all increased their imports of LNG, and demand has remained high over the summer due to increased use of aircon. Consumers need to hope that we don’t have a long, cold winter and they should also shop around for cheaper tariffs. * SO WHAT? * At the moment, we are under a “price cap” system where Ofgem can prevent gas suppliers from charging more than a pre-determined price but the next review is due in February and that price cap is likely to skyrocket if demand is strong. This will be yet another cost to consider for households and is bound to filter through to more high inflation!

Meanwhile, UK wages are rising at last, but for how long? (Financial Times, Delphine Strauss) points out that wages are rising overall, but that we are seeing pockets of particularly big increases in areas where there is an acute shortage e.g. truck drivers being offered pay of £60,000+ a year, care providers offering signing-on bonuses and

higher wages for bricklayers and carpenters. Interestingly, it seems that pay growth for white collar jobs in financial services and marketing, for instance, is much more sedate in comparison. * SO WHAT? * This sounds quite positive, but if wage growth continues there will be a knock-on effect on inflation as consumers spend more as they earn more (and pay higher prices due to manufacturers passing on higher costs of materials prices while the going is good).

On a more concerning note, 1 in 10 ‘pay later’ shoppers chased by debt collectors (The Times, Patrick Hosking) shows that 10% of shoppers who indulge in a bit of buy-now-pay-later-powered retail therapy are getting chased by debt collectors, according to a Citizens Advice report. It calls for regulators to take more of a hand in restricting offerings from the likes of Klarna and others to help people protect them from themselves. * SO WHAT? * This was always going to happen given the massive growth in the BNPL segment which is also populated by the likes of PayPal, Clearpay, Laybuy and Openpay. This is clearly great business for debt collectors, but could be disastrous for consumers who have difficulty in restraining themselves. I think that as long as the economy is expanding and unemployment remains manageable, this won’t be too much of a problem. However, if unemployment spikes and companies fail, things could get very ugly very quickly.

Gym Group limbers up for rapid expansion (The Times, Dominic Walsh) shows that The Gym Group is getting increasingly ambitious as its chief exec reckons that the chain will double in size as it eyes vacant high street sites. Richard Darwin reckons that the current market is the most favourable it’s been since the company started 12 years ago and wants to focus expansion on the UK, unlike rival PureGym that has international ambitions. * SO WHAT? * I think this sounds great, but wonder whether the company needs to be cautious about expanding too quickly as another shutdown could be very painful with more outlets.

3

SUPPLY CHAIN NEWS

The US tries to address its shortage of truck drivers while Ford, GM and Tesla all have chip problems and the UK government continues to face more pressure…

Just to show that it’s not us that has a shortage of truck drivers, US fleet managers seek out foreign truck drivers to solve labour shortage (Financial Times, Steff Chavez) highlights the problem in America as shortages have been caused by the closure of training schools, drivers leaving the profession and stricter drug and alcohol testing leading to around 60,000 sackings 😱. They are also worried about the damaging effect of “the worst ever” shortage of drivers on increasingly fragile supply chains.

Talking of which, Ford and GM scale back production amid chip shortage (Wall Street Journal, Allison Prang) shows that the chip shortage continues to bite as both companies announced factory closures and Elon Musk blames supply chain crisis for delaying Tesla Roadster (Daily Telegraph, James Titcomb) blamed the delay of a new model launch on the same thing, although I think that sounds like a bit of a convenient excuse because the launch has been pushed back until 2023. The original plan was for a 2020 launch. Musk is not known for his reputation of sticking to launch timetables!

Meanwhile, Government urged to ‘get a handle’ on supply chain crisis (The Guardian, Joanna Partridge) highlights ongoing and intensifying pressure on the UK government to take action on labour shortages and skills shortages. Surely the government can’t hold out that much longer regarding the issuance of temporary visas to EU nationals?!?

4

MISCELLANEOUS NEWS

M&A action continues and CMC Markets suffers from the trading slowdown…

In a quick scoot around some of today’s other big stories, Baxter to acquire US medical equipment group Hillrom for $12.4bn (Financial Times, James Fontanella-Khan) highlights a potentially whopping acquisition by the medical tech group which is the latest deal in a rapidly consolidating sector but Baxter/Hillrom: healthcare acquirer pays steeply for blanket solution (Financial Times, Lex) reckons the price is a pretty steep price to pay to pep up a boring company.

Advent and GIC offer $8bn to take Swedish biotech private (Financial Times, Richard Milne) shows that the US private equity firm and Singapore’s sovereign wealth fund have got together to bid for biotech company Swedish Orphan Biovitrum (aka “Sobi”) in what could be the biggest ever leveraged buyout in Sweden. Many observers reckon that counterbids are likely as they think that the offer lowballs the company’s real value and Biopharmaceuticals: Sobi deal could reignite Pfizer and Biogen interest (Financial Times, Lex) suggests that previously interested parties could be tempted into putting in their own offers.

Then in CMC Markets shares plunge after trading lull prompts profit warning (Financial Times, Joshua Oliver and Oliver Ralph) we see that the spread betting and online trading company announced a profits warning following low trading activity from its customer base over the summer. The company’s share price tanked by over 25% on the news and this seems to confirm recent similar statements from the likes of Hargreaves Lansdown. Maybe traders really did heed the old adage of “sell in May and go away”!

*** NEWS JUST OUT *** Japan’s PM Yoshihide Suga to resign after failing to control Covid outbreak (Financial Times, Kana Inagaki, Robin Harding and Leo Lewis) shows that Japan has plunged back into an era of spineless politicians who give up when the going gets tough. Over the years, being a PM of Japan was a revolving door and it’s only the likes of Junichiro Koizumi and most recently Shinzo Abe who have managed to put in a decent stint in office. It seems that Japan seems to like putting doddery old men in charge who can’t take the heat and then resign when they **ck up. What a complete 🍆. God knows who Japan will get in next but my bet’s on someone who’s at least 80 years old 🤣. What about putting in a younger woman, eh???

5

...AND FINALLY...

…in other news…

I thought that I’d leave you today with the brilliant dog in Curious dog asks owner ‘where are you going?’ in hilarious viral video (The Mirror, Bethan Shufflebotham). It’s good that he’s taking an interest!

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Some of today’s market, commodity & currency moves (as at 0747hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq*DAX *CAC-40 *Nikkei **Shanghai **
7,146 (-0.05%)35,443.82 (+0.37%)4,536.95 (+0.28%)15,331.18 (+0.14%)15,810 (-0.09%)6,752 (-0.10%)29,110 (+1.98%)3,580 (-0.47%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$69.92$73.09$1,813.011.382881.18754110.011.1644149,372.54

(markets with an * are at yesterday’s close, ** are at today’s close)