Friday 03/12/21

  1. In MACRO, OIL & CRYPTO NEWS, Turkey’s Erdogan tightens his grip, OPEC+ sticks with agreed oil supply increase, Shell walks away from Cambo and India considers banning crypto
  2. In M&A AND IPO NEWS, Nvidia/Arm looks shaky, Grab slips on its debut, Didi decides to delist and new UK listing rules come into force
  3. In CONSUMER TRENDS & RETAIL NEWS, infection rates hit Eurozone consumers, UK hospitality suffers but household wealth reaches new highs and America’s Kroger does brisk trade
  4. In INDIVIDUAL COMPANY NEWS, Apple’s iPhone sales could be disappointing and Musk’s sale of Tesla shares tops $10bn
  5. AND FINALLY, I bring you an American Greggs fan, dad dancing and a defiant baby…(well it is Friday, after all!)

1

MACRO, OIL & CRYPTO NEWS

So Erdogan tightens his grip on power, OPEC plays ball, Shell cools on Cambo and India considers banning crypto…

President Erdogan of Turkey really is a unique character. Last week he proudly went against all conventional wisdom in his stance on how to beat inflation, but Finance minister’s exit cements Erdogan’s grip on Turkish economy (Financial Times, Laura Pitel) highlights the resignation of Turkey’s latest finance minister, Lutfi Elvan, which had been expected as rumours had been circling around his imminent departure. Erdogan has gone through a number of finance ministers – including his son-in-law – over the years and replacing Elvan with a puppet replacement, Nureddin Nebati, will tighten his grip on the economy. Turkey’s future now rests on the whims of one man – Erdogan! His plan is to prioritise exports and investments by having lower interest rates over having a weak lira. It’ll be interesting to see how this turns out.

Meanwhile, in oil, Opec+ sticks with oil supply increase after US overture to Saudi Arabia (Financial Times, Derek Brower, Katrina Manson, Andrew England, Tom Wilson and Samer Al-Atrush) shows that Saudi Arabia and chums have, after all, decided to stick with pumping out an extra 400,000 barrels of oil per day from next year as per their original intention rather than going off in a huff and not playing ball in retaliation for a number of big countries clubbing together their oil reserves to dump on the market last week. * SO WHAT? * Given that oil prices have fallen over the last week because of concerns prompted by Omicron, some traders were expecting this increase in production to be postponed so that they could prop up the oil price. Oil still ain’t cheap though! At least this will put the lid on things for now…

It was also really interesting to see North Sea field under threat as Shell walks away (Daily Telegraph, Rachel Millard, Oliver Gill and Matt Oliver) because it turns out that Shell is walking away from a major North Sea oil project that has been causing a bit of a dilemma for the government. The Cambo oil field off the Shetland Islands could help to boost the UK’s oil and gas industry and create 1,000 jobs, but approval for drilling there has come under increasing pressure from activists who are keen to force the government to live up to its rhetoric on climate change. Shell has become frustrated with this and walked away. It has 30% of the licence along with private company Siccar Point Energy, who wants to continue the process. * SO WHAT? * This is a bit of a tricky situation as we are currently in an energy crisis and over 75% of the UK’s total energy needs are met by oil and gas. Cambo fans say that NOT approving the drilling will make us increasingly reliant on Russia but critics say that it will render BoJo’s fine words on climate change meaningless. I get the feeling that UK and Scottish governments secretly want to approve the deal because of the jobs and the self-reliance aspect but no-one wants to play the environmental bad guy and give the approval! I wonder whether they’ll wait awhile until the echoes of COP26 are but a distant memory and then quietly approve it via the back door…

Then in India at crypto crossroads as New Delhi considers ban (Financial Times, Chloe Cornish) we see that cryptocurrencies’ increasing profile in the country has prompted government concerns as millions have rushed to buy various digital currencies. It seems that there could well be a regulatory backlash and the Indian government appears to be considering the possibility of following China and banning them altogether. No-one really knows what form this backlash may take, but at least it may clarify the overall position. Companies such as CoinSwitch Kuber, WazirX and others will be watching nervously for what’s next.

2

M&A AND IPO NEWS

The Nvidia/Arm thing looks increasingly unlikely, Grab slips, Didi reverses and UK listing rules change…

$75bn takeover of chip designer Arm by rival Nvidia in jeopardy (The Guardian, Mark Sweney) shows that the takeover is looking increasingly unlikely as US regulators followed the UK and Europe in voicing their misgivings about what would be “the largest semiconductor chip merger in history”. The Federal Trade Commission is now suing to stop the takeover of Arm and now poses the biggest threat to the deal. * SO WHAT? * There is a huge amount of opposition to this deal as opponents argue that this will give Nvidia an unfair advantage. We’ll have to wait and see whether the deal is killed or whether it is allowed to go ahead with a whole boatload of conditions and enforced disposals.

Meanwhile, in IPOs, Grab shares fall sharply after world’s biggest Spac deal (Financial Times, Mercedes Ruehl and Miles Kruppa) highlights the fortunes of the Southeast Asian super app Grab as it made its market debut on the NASDAQ yesterday. It had closed a reverse merger with Altimeter Growth Corp worth $40bn in the world’s biggest ever SPAC deal but fell from $13.06 to $8.75. Its chief exec Anthony Tan continues to talk a good game regarding its “super-app” strategy, saying that being exposed to different geographies and areas of business smooths out volatile earnings. As is pretty much always the case with SPAC-backed companies, Grab has yet to be profitable… * SO WHAT? * It’s interesting to note that trading in Altimeter Growth has been pretty volatile since the Grab deal was announced. However, it’s also possible now that it is trading as Grab that it will trade less as a SPAC and more as a growth company that has big presence in a regional market with big potential. If the expected tech boom in South-east Asia blossoms, Grab will be a major player in this and initial scepticism may take a back seat.

Didi Global plans to delist from New York Stock Exchange (Wall Street Journal, Jing Yang) is at once shocking – because it only listed in New York on June 30th this year – and yet expected, because the Chinese authorities have been clamping down on it ever since it listed. There had been rumours that Didi was considering taking itself private in the wave of a massive backlash by Chinese authorities, but I guess that a Hong Kong listing is a reasonable compromise (although exact details are a bit thin on the ground at this stage). When it listed in New York, the company had a $68bn market cap, but this has since fallen to about $38bn. What a fall from grace! * SO WHAT? * China has been making concerted efforts to clamp down on companies that it deems to fall outside its core values and making their lives more difficult. This is a pretty serious capitulation by Didi, but then what else could it do? It remains to be seen as to whether this will satisfy authorities enough to get them off Didi’s back…

Then in Sweeping overhaul of UK listing rules comes into force (Financial Times, Philip Stafford and Laura Noonan) we see that Britain’s chief financial regulator, the Financial Conduct Authority (FCA), has finalised a major overhaul of the UK’s listing rules making it easier for fast-growing companies to float on the stock exchange. Some highlights of the changes include allowing as little as 10% of a company’s shares to be offered in a listing (this used to be 25%) and allowing a dual-class share structure that will enable founders to have outsized voting rights compared to their actual shareholdings (this didn’t used to be allowed and put a lot of tech entrepreneurs off). There are more changes to come, but it’ll be interesting to see how much difference these changes actually make – or whether the reforms have actually come too late to benefit from the listing boom…

3

CONSUMER TRENDS & RETAIL NEWS

Consumer behaviour evolves and Kroger does well…

Jump in Covid infections pounds eurozone consumer activity (Financial Times, Valentina Romei) cites high frequency data – including things like numbers on restaurant bookings, cinema ticket sales and other spending behaviour – which shows that rising Covid infection rate, a new variant and more movement restrictions are dampening the mojo of European consumers. Back home, UK hotels hit by wave of cancellations as Omicron concerns grow (The Guardian, Julia Kollewe) highlights a recent uptick in Christmas party cancellations and Dining out in UK at lowest level since May amid Omicron fears (The Guardian, Richard Partington) cites the latest figures from OpenTable which paint another gloomy picture. All the while, Household wealth rises to record high (The Times, Simon Duke) shows that Britons’ net worth actually rose by 8.4% versus 2019, the highest rate of growth since the financial crisis of 2008. Higher property prices were the main driver behind

this, but it was also helped by white-collar workers saving money by WFH. * SO WHAT? * I think that it’s a bit early to tell whether Christmas has been cancelled from a leisure industry point of view because if, let’s say, scientists come out in force and say that the Omicron variant isn’t as serious as others, for instance, bookings will shoot right back up again IMO. However, the timing of this latest development isn’t great given how so many businesses are just staggering to their feet after taking a serious kicking under lockdown.

Meanwhile, across The Pond, Kroger sales rise as grocer benefits from consumers eating at home (Wall Street Journal, Jaewon Kang) shows that the American supermarket posted strong sales for the latest quarter as consumers continued to eat more at home, but at the same time its profits were being squeezed by higher costs thanks to supply chain issues. It has paid up to ensure its shelves are full, but it is finding that consumers are starting to get more price sensitive according to a poll carried out by the company. * SO WHAT? * I don’t think that this is just an American thing. Although consumers are willing to buy going into Christmas I really think that they are going to be much more likely to tighten their belts when the New Year comes as inflation continues to bite on both sides of the consumer/retailer divide.

4

INDIVIDUAL COMPANY NEWS

Apple’s momentum slows and Musk’s sell-off breaks $10bn…

In other interesting news stories today, Apple hit by warning on iPhone sales (The Times, Callum Jones) shows that a report on Bloomberg News highlighting a slowdown in iPhone 13 manufacturing plans due to supply chain disruptions has hit sentiment in the company. Apple is thought to have cut its annual production target of the phone by up to ten million units – and the share price fell

as a result. Given that the iPhone generates about 50% of the company’s sales and this latest news comes in Apple’s most crucial quarter, this isn’t great news.

Then in Elon Musk’s Tesla share-selling spree tops $10billion (Wall Street Journal, Robert Wall) we see that founder Elon Musk has now sold over $10bn-worth of Tesla shares after commencing the sell-off “prompted” by a Twitter poll. TBH, I don’t think this is of massive importance as a story, but it is interesting to note that he’s reached the target of $10bn, implying that the “big seller” in the market (Musk) is now out of the picture. Will this mean that the share price will resume its journey to the stars, I wonder?!?

5

...AND FINALLY...

…in other news…

There were a number of great options today for this section – so I had to cut them down to these three! There was the clearly-staged-but-still-amusing American woman mocked by passerby for baffling pronunciation of Greggs (The Mirror, Florence Freeman), the inspirational ‘Iconic’ dad becomes internet celebrity after going clubbing with his daughter (The Mirror, John Bett and Sophie Jackson) and the hilarious Defiant baby pays no attention to mum as she insists on sharing highchair snack with dog (The Mirror, Catherine Swan). The baby’s facial expression is just brilliant 🤣!

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Some of today’s market, commodity & currency moves (as at 0755hrs 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 **
7,129 (-0.55%)34,639.79 (+1.82%)4,577.10 (+1.42%)15,381.32 (+0.83%)15,263 (-1.35%)6,796 (-1.25%)28,030 (+1.00%)3,607 (+0.94%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$67.93$71.06$1,770.621.327221.12893113.381.1755856,757

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