Friday 04/09/20

  1. In MACROECONOMIC & MARKETS NEWS, Macron pledges €100bn, UK business slashes investment and US stocks fall
  2. In RETAIL & HIGH STREET-RELATED NEWS, European retail sales drop and in the UK, vacant shop numbers rise, Costa makes cuts, Pret does dinner, Co-Op expands and Amazon announces more UK staff
  3. In PHARMACEUTICALS NEWS, Pfizer warns against being too hasty while GSK and Sanofi start human trials
  4. In INDIVIDUAL COMPANY NEWS, GM and Honda deepen ties and Virgin Atlantic heads for more job cuts
  5. AND FINALLY, I bring you burger-in-a-can…



So Macron pledges some wedge, UK businesses get nervy and US stocks weaken on tech…

Macron pledges €100bn recovery fund as France and UK diverge (Daily Telegraph, Tim Wallace) highlights the French government’s unveiling of a €100bn four-year stimulus package – called France Relance (“Relaunch France”) – designed to keep the economy in recovery mode post-coronavirus. The funds will finance green projects, tax cuts and employment support after the economy contracted by a chunky 13.8% in the second quarter. The spending will kick off with cuts to business taxes – France currently has the highest corporation taxes in the OECD at 32% (versus the UK’s 19%), meaning that there is ample scope to cut. * SO WHAT? * The aim here is to get France back to where it was pre-Covid within two years and have enough money left over to help it grow more. Interestingly, not all of this package will be financed by France itself – up to €40bn of this will come from the EU!

UK businesses slash investment as coronavirus crisis bites (Financial Times, Valentina Romei) cites a Bank of England survey which shows that UK businesses are cutting investment plans in the third quarter by 32% on average, with the food and accommodation sector seeing the steepest cuts of 60%. This confirms findings in a recent data release from the Office for National Statistics which showed that just under half of businesses reported turnover below what they usually expect in the two weeks to August 23rd.* SO WHAT? * Although there was a big uptake in government-back loans, businesses remain cautious about the uncertain outlook and prolonged unwillingness to invest could hobble UK industry’s longer term recovery potential. Investment needs at least a degree of certainty – but in the coronavirus era that we are

currently in, there just isn’t any. I think that the government will just have to monitor the situation and perhaps extend payment deadlines and/or offer more money. Like many things, it all depends on the timing of a vaccine!

Then in Tech stocks dive as rally hits reverse (The Times, Tom Howard) we see that American stocks suffered their biggest one-day fall since March 16th in trading yesterday as the tech-heavy Nasdaq dropped by a hefty 5%, which dragged down other indexes such as the S&P500 and Dow Jones. Tech stocks including Facebook, Apple, Amazon, Microsoft and Alphabet all fell between 4 and 8 per cent – and these stocks alone account for almost 25% of the S&P500’s total value. Even Tesla had a bad day yesterday, falling by 9%. Still, The economy is limping, but Wall Street is booming (Wall Street Journal, Liz Hoffman) shows that in all the chaos, investment banking and trading revenues hit eight year highs in the first half of 2020, according to figures compiled by industry research group Coalition. This has been largely due to market volatility (which encourages more trading, which stokes volatility, which encourages more trading etc.), heavy stimulus by the Federal Reserve to prop up the economy and the urgent need by companies to raise cash – fast. * SO WHAT? * FWIW, I think that investors were just taking some money off the table after the latest tech rally – but I don’t think underlying drivers have suddenly changed, so I would expect investors to pile back in again once the dust has had a bit of time to settle. Big Tech stocks now have such an outsize influence on ALL indexes these days that it is no surprise that a big move in the Nasdaq has major knock-on effects on other indexes. I thought it was also interesting to note that some banks are trying to downplay their strong trading performance by saying that it was a blip rather than a trend. On the financing front, I would expect companies to continue to use different ways to raise money – including using the markets in bond and/or equity issuance. However, I imagine that there will be more competition for funding sources from the likes of private equity that can offer different attractions and, if the reports are to be believed, a LOT of money.



European retail sales fall – and in the UK, vacant shop numbers rise while Costa cuts, Pret adapts, Co-Op expands and Amazon hires…

Eurozone retail sales run out of steam as north-south split emerges (Financial Times, Martin Arnold) cites Eurostat figures which show that eurozone retail sales fell by 1.3% in July versus the previous month, with the implication that the recent rebound in consumer spending in the bloc was temporary. The figures also showed that the north-south divide in European economic recovery is widening as German, French and Dutch retail sales stayed above last year’s levels while Spanish, Portuguese and Greek sales fell. * SO WHAT? * Economists were expecting better, so these figures were a blow to expectations. Given the uncertain outlook from here until we get a vaccine, further growth prospects are likely to be muted.

Meanwhile, on the UK high street, Costa to cut 1,650 staff in slump on high street (The Times, Dominic Walsh) shows further evidence of coffee shop carnage as Britain’s biggest operator – owned by Coca-Cola – has made some tough decisions following last week’s announcement by Pret A Manger to cut almost 2,900 jobs. Talking of which, Pret A Manger shifts to dinner deliveries and out-of-town shops (Financial Times, Alice Hancock and Judith Evans)

shows that the London-centric sandwich chain is having to pivot and adapt its offering to survive the lack of office workers in central locations. * SO  WHAT? * Pret has suffered more than other rivals because of its heavy reliance on London and is now having to evolve its offering to provide more hot dinners in the evening and cheaper meal deals. It is also looking at international expansion and providing some of its products to supermarkets. 

On the plus side, Co-Op creates 1,000 jobs and opens 50 new stores in UK (The Guardian, Jasper Jolly) highlights the latest supermarket to announce expansion plans as it responds to the continued trend of consumers shopping closer to home. * SO WHAT? * I think that this is interesting to see given the current backdrop and it also makes me wonder what will happen to independent convenience store owners who could potentially get squeezed out by bigger players such as the Co-Op snapping up properties (presumably on the cheap given current high street decimation). The danger is that they will not get bought out themselves because there are arguably plenty of sites to choose from.

Another retail story doing the rounds today is Amazon creates 7,000 more UK jobs to meet online boom (The Times, Simon Duke) which shows that the e-tailing giant has announced plans to respond to increasing demand for online shopping by hiring more employees and increasing its UK headcount to over 7,000. ONS figures show that online spending rose by 50.4% between February and July and now represents 28.9% of total retail sales. Amazon’s stellar growth continues!



Pfizer warns against hasty vaccine approval while GSK/Sanofi starts human trials…

In Pfizer boss warns on risk of fast-tracking vaccines (Financial Times, Hannah Kuchler) we see that Pfizer’s chief exec, Albert Bourla, is warning about the risks of fast-tracking a Covid-19 vaccine approval as pressure mounts on pharma companies to come up with the goods. He said that his company would never submit a vaccine for authorisation before it was fully ready and his comments play against a backdrop where the US government seems to be preparing to distribute a vaccine just before the presidential election in November. * SO WHAT? * I think that you should, from now, expect mass @rse-covering PR

from pharma execs who want to make sure that they won’t be blamed for pumping out vaccines that don’t work or have bad side effects. This is completely understandable especially given that search, production and distribution has become highly politicised in the run-up to a presidential election. Tough times.

Meanwhile, Glaxo and Sanofi start human trials in the US of coronavirus vaccine (The Times, Alex Ralph) shows that both companies are starting human trials of their vaccine with results expected in December. If this goes OK, there will be more widespread testing and if that goes OK, companies could seek regulatory approval in the first half of next year. Fingers crossed 🤞! * SO WHAT? * There are currently over 200 vaccines in development around the world but the drop-off rate is high, so it’s wise not to put too much hope in individual candidates – which is why governments and investors alike are spreading their money around in an attempt to find the “winners”.



GM and Honda deepen ties while Virgin Atlantic heads for more job cuts…

In other news, GM, Honda deepen ties, plan joint vehicle development (Wall Street Journal, Mike Colias) highlights the latest joint venture between car makers as they all bid to lower costs by sharing things. They announced an alliance that will involved increased co-operation on

engineering, components and parts purchasing among other things. Honda said it wanted to drive through big cost savings in North America while maintaining its own offerings there.

Then in 1,000 face the axe at Virgin Atlantic in rescue deal (Daily Telegraph, Oliver Gill and LaToya Harding) we see the latest job cuts in a decimated and increasingly decimating sector as part of its £1.2bn rescue deal. This will mean that the company’s pre-covid 10,000 employees will have been cut in half 😱. Short term pain for long term survival or death of a thousand cuts??



…in other news…

Today, I thought I’d leave you with something that’s rather bizarre in Gourmet Japanese hamburger steak in three-year-shelf-life can: Genius or madness? Let’s find out! (SoraNews24, Casey Baseel). Burger-in-a-can, anyone??

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Some of today’s market, commodity & currency moves (as at hrs 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 **
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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