Friday 05/11/21

  1. In MACRO, CLIMATE & CRYPTO NEWS, the Bank of England leaves interest rates (but furlough and wage numbers keep the pressure on), climate pledges have a wobble and BTS NFTs are going to be a thing
  2. In POSTCORONATRENDS NEWS, airlines hit turbulence, Wizz Air cuts fares, Airbnb recovers and Peloton loses momentum
  3. In BANKS & REAL ESTATE NEWS, SocGen’s investment bank comes up trumps, Metro Bank fields an approach, Purplebricks has a ‘mare but foreign buyers return to London
  4. In INDIVIDUAL COMPANY NEWS, IBM cuts 25% of its business, Uber makes its first ever profit and Novartis sells down its Roche stake
  5. AND FINALLY, I bring you some snakey accommodation and a very weird hobby…



So the Bank of England stays put, climate pledges have a wobble and BTS NFTs are incoming…

Bank of England has failed a test of political independence (Daily Telegraph, Ben Wright) highlights the Bank of England’s decision to leave interest rates unchanged at 0.1% at yesterday’s MPC meeting but says that the communication leading up to the decision was particularly poor. There was a contrast between US Fed chief Jerome Powell’s transparent strategy and the Bank of England’s Andrew Bailey, who seemed to stoke chat about a rate rise ahead of yesterday’s meeting. This prompted comparisons with his predecessor Mark Carney who had been described as an “unreliable boyfriend” for telling markets one thing and then doing another. Markets and business hate uncertainty, and if Bailey pulls another stunt like that then I think his reputation will go even further down the toilet. Markets are now pricing in an interest rate rise in the December meeting. Only 6% of furloughed staff left jobs (The Times, Robert Miller), which cites the latest data from the Office for National Statistics that shows only 6% of furloughed staff left jobs either through choice or being laid off, puts more pressure on the Bank of England to raise rates sooner rather than later because it would imply that feared unemployment rises may not actually come to fruition. Wages rise as firms struggle to recruit (The Times) cites a survey from the Recruitment and Employment Confederation (REC) and KPMG which shows that a shortage of candidates is leading to the steepest increase in starting pay since the survey began in 1997 – which will also keep the pressure on the Bank of England.

Meanwhile, in climate news, COP26 forests pact frays as Indonesia calls it ‘unfair’ days after signing up (Financial Times, William Langley) shows that the good intentions are starting to unravel already as Indonesia is having second thoughts about the agreement it signed up to. A global agreement was signed this week by over 100 world leaders to stop cutting down forests by 2030. Either environmental and forestry minister Siti Nurbaya Bakar,

who signed the agreement, is monumentally stupid or this is just a way for Indonesia to squeeze out concessions because it knows it has one of the largest areas of rainforest in the world. * SO WHAT? * Such niggling so soon after an agreement was signed just highlights the gulf between countries who can afford to be more environment-conscious and those who find it difficult. This is interesting, however, given how Indonesia exports thermal coal, oil and other commodities sending its currency and equities markets higher as it benefits from the current global energy crunch.

The IEA warns Paris climate target at risk as US and China shun coal pact (Financial Times) also shows how full of 💩 the US and China are about the environment as both countries swerved the UK’s flagship coal pact, rendering the goals of the Paris accord on global warming potentially unattainable. The UK wanted to consign “coal to history”, but had to weaken terms of the pact in order to get more countries to sign an agreement that committed them to shut coal plants and stop the issuance of new licences for new plants. Rather hilariously, the world’s top three coal consumers China, India and the US – who make up 72% of global emissions from coal-fired power – did not sign up and neither did Australia (which exports tons of the stuff!). Indonesia, which is the world’s biggest exporter of coal, sort of signed up but not to the part which covered new plants and projects. What an absolute mess!

Then in BTS’s music label partners with crypto exchange on K-pop non-fungibles (Financial Times, Song Jung-a) we see that Hybe, BTS’s music label, said it has agreed to buy a 2.5% stake in Dunamu, which operates South Korea’s biggest crypto exchange Upbit, to sell NFTs related to the band and give them another revenue stream. It will issue photo cards of BTS members as NFTs on Upbit. * SO WHAT? * I think that this is a brilliant idea by the music label and is one way for the industry to protect copyright while giving artists another way to earn income while they are hot. NFTs are still in relative infancy IMO, so the future is unclear. However, developments like this will bring them into the mainstream which will, hopefully result in appropriate regulation that will protect investors.



Airlines face turbulence, Airbnb booms and Peloton pedals more slowly…

Airlines are still struggling for take-off (Financial Times) is a really interesting article which highlights a historic milestone this week of both Ryanair and Wizz Air announcing their first profitable quarter since the Coronavirus outbreak. Having said that, Ryanair cut its earnings forecasts and Wizz Air to cut off-peak fares in attempt to fill its flights (Daily Telegraph, Oliver Gill) shows that the budget airline is resorting to drastic measures to attract passengers over what is traditionally a quiet period. * SO WHAT? * Airlines that have survived the pandemic thanks to government help are now facing further turbulence in the form of higher jet fuel prices and worker shortages, not to mention the weather-related problems being suffered recently by US carriers. The glacial pace of business travel recovery isn’t helping either, so the whole industry needs to stay strapped in for a bumpy ride…

On the other hand, Airbnb boosted by travel rebound and corporate belt-tightening (Financial Times, Dave Lee) shows that the accommodation booking platform benefited from both the recovery in the global travel

industry as well as a focus on its own cost-cutting, helping it to almost quadruple its profits compared to the July-September period last year. Results came in way above market expectations on revenue and income and the company gave upbeat guidance for the rest of the year. * SO WHAT? * Other companies in this space have also benefited from the rebound in demand for travel as the likes of Priceline, Kayak and Expedia also posting solid performances. I would have thought that continued lifting of travelling restrictions will keep the party going for some time yet!

Peloton’s sales lose speed as fewer people work out at home (Wall Street Journal, Sharon Terlep) highlights the waning of one lockdown winner as Peloton Interactive announced its smallest quarterly gain in subscribers since it floated two years ago. The company also cut its full year forecasts, saying that its annual revenues could actually be 20% below what they had originally expected – the news of which sent its share price down by a whopping 25% in after-hours trading. * SO WHAT? * The company has been hit by a combination of more competitive rivals and people going back to gyms. Even though sales of its equipment were helped by a 20% price reduction for its stationary bike introduced over the summer, will it ever be able to recover its lockdown mojo?? I’ve always thought that the bikes look very nice and the classes sound great, but if I was in the market for something like this, I’d go for a Wattbike (and no, I’m not sponsored by them!). It’s just a better product IMO.



SocGen benefits from deals and Metro garners interest while Purplebricks gets a mauling and foreign buyers return to the London property market…

SocGen’s investment bank recovery boosts profits (Financial Times, Sarah White) shows that the French bank has profited from a surge in deals over Q3, helping it to make ground on trading losses it incurred early on in the pandemic. It announced record revenues from its financing and advisory operations and sounds pretty positive for the future as well. * SO WHAT? * SocGen, France’s third biggest listed bank, is just the latest bank to report strong performance in its advisory business. Other banks have said that dealflow is not going to be drying up anytime soon, so I would expect this to continue.

Then in Metro Bank soars amid Carlyle bid approach (The Times, Katherine Griffiths) we see that the bank saw its shares shoot up by 29% yesterday on news that US private equity firm Carlyle had put in a bid for it, not long after a consortium of hedge funds made a bid for TSB. Carlyle must now make a formal bid for the challenger bank by

December 2nd or walk away. * SO WHAT? * It seems like banks are an area of focus for private equity firms at the moment, but you do wonder how much they can really squeeze from them given the competitive landscape and encroachment of tech upstarts on the sector’s traditional business.

In real estate, Purplebricks shares down 37% after it warns of big losses (The Times, Tom Howard) shows that the online real estate agent’s share price was decimated yesterday after it said that its profits would fall way below investors’ expectations. The company said that this was due to a shortage of properties to sell and a change in its business model, offering a money-back guarantee where it said it would return fees to vendors in full if properties did not get an offer within 10% of their valuation. * SO WHAT? * Purplebricks is operating in a highly competitive area and is suffering like all of its rivals from a lack of properties to sell. At least it doesn’t have physical offices to pay for, I guess!

Then in Foreign buyers return to give London’s high-end property prices ‘overdue’ boost (Daily Telegraph, Ben Gartside) we see that house prices in central London have increased at their steepest rate in over six years as foreign buyers have returned to the market, according to the latest figures published by Knight Frank. This has been helped by the relaxation of travel restrictions. The bounceback continues…



IBM makes dramatic cuts, Uber has its first ever profit and Novartis sells a massive stake in Roche…

In a quick scoot around some of the other interesting news today, IBM sheds 25% of its business in battle against decade of decline (Financial Times, Richard Waters) shows that the company has managed to complete the spin-off of its IT services business, called Kyndryl, which generated over 25% of its revenues last year. * SO WHAT? * The business has lost momentum in the last few years as customers have made the shift to cloud computing and its spin-off is hoped to make IBM attractive as more streamlined business.

Then in Lifting of lockdowns drives Uber to its first-ever profit (Daily Telegraph, Matt Oliver) we see that Uber managed to report its first ever quarterly profit yesterday as the easing of coronavirus restrictions has led to an increase in travel activity. The company is also seeing drivers return to its platform after many left during the pandemic. Interestingly, the company’s food delivery business was still larger than its taxi operations over Q3.

I thought I’d include Novartis to sell its Roche stake worth $21bn (Financial Times, Donato Paolo Mancini) because this disposal is just so darn huge! Novartis built up a stake of about a third of its rival over the last twenty years or so and has decided to offload it for the princely sum of $21bn and will use the proceeds to “continue to reimagine medicine”. This will simplify the structure of both companies but other than that I don’t think it’s going to make much difference to the day-to-day.



…in other news…

I thought I’d leave you today with the amazing accommodation in Stay in a psychedelic snake-shaped Airbnb with rooms connected by a maze of tunnels (The Mirror, Paige Holland) and the man-with-the-completely-pointless-hobby in Man ‘on mission to collect chip from every Wetherspoon in UK’ (Metro, Emma Brazell). If this isn’t a wind-up, he needs to take a serious look at his life choices…

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Some of today’s market, commodity & currency moves (as at 0759hrs 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 **
7,280 (+0.43%)36,124.23 (-0.09%)4,680.06 (+0.42%)15,940.31 (+0.81%)16,030 (+0.44%)6,988 (+0.53%)29,590 (-0.69%)3,492 (-1.00%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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