Friday 06/12/19

  1. In MACRO & OIL NEWS, Japan gets a chunky stimulus, Germany’s SPD decides not to rock the boat after all, Europe weighs in on the digital services tax and Saudi Aramco aims for a top price
  2. In CAR-RELATED NEWS, GM and LG work together on a battery venture, UK new car sales weaken and Aston Martin gets a boost from bid speculation
  3. In INDIVIDUAL COMPANY NEWS, Alphabet’s new chief suggests a reining in of “moonshots”, Glencore faces bribery allegations and Metro Bank suffers backer abandonment
  4. In OTHER NEWS, I bring you some amazing snow and ice hotels and some Christmas puzzles…



So Japan gets a big stimulus, Germany’s SPD calms its threats on the coalition, digital tax get European backing and Saudi Aramco aims for the top end…

Shinzo Abe launches $121bn stimulus package for Japan (Financial Times, Robin Harding) highlights Japan’s first fiscal stimulus since 2016 (and one of the biggest since the 2008-2009 crisis) with a bigger-than-expected package to repair damage from recent typhoons, improve infrastructure and invest in new technologies. This is an effort by Japan’s PM to get Japan on the growth track amid the global economic slowdown, recent consumption tax rise and potential slowdown after next year’s Olympics. * SO WHAT? * This is a significant amount and signals a return to the spending that characterised Abe’s early years in his current term (he was prime minister briefly in 2006 as well!). It’s interesting to see that some sources suggest that $2bn of this package will be allocated to R&D in 6G tech and “moonshot” projects particularly in biomedical research.

Germany’s SPD rows back from threat to quit Merkel coalition (Financial Times, Tobias Buck) shows a major softening in stance from the party’s new leaders following concerns that they would walk away from the fragile coalition with Angela Merkel’s CDU. This is a major departure from the anti-coalition chat that powered the recent leadership campaign of Norbert Walter-Borjans and Saskia Esken where they had said they would give Merkel & co an ultimatum to renegotiate the coalition agreement or they would walk. * SO WHAT? * This just goes to show the BS politicians will talk in order to win an election 😂.

Anyway, this is probably good for Germany in that the prospect of more leadership instability in Europe’s most important economy has now receded – at least for the time being.

Following on from Trump’s recent threats to retaliate over the proposed imposition of a digital services tax, Brussels steps up pressure on US over global digital tax deal (Financial Times, Sam Fleming, Jim Brunsden and Chris Giles) shows that the EU said it would take up the baton on the digital services tax if the OECD’s efforts failed to produce anything (they have already failed before, so they may well do again). * SO WHAT? * The OECD has the rather unenviable task of trying to corral 135 countries in ongoing tax discussions, but this latest commitment to see the thing through by the new EU economy commissioner Paulo Gentiloni will irk the Americans who were probably hoping that the OECD would fail. Whether the EU can do any better than the OECD is a moot point, but at least it means that there is slightly more of a chance of getting something done.

Saudi Aramco raises $25.6bn in world’s biggest IPO (Financial Times, Anjli Raval, Simeon Kerr and Phil Stafford) shows that state-owned oil company Saudi Aramco has priced its IPO at the top end of the price range, valuing the company at $1.7tn, which would make it the biggest publicly quoted company in the world. Apparently, advisers were thought to have urged a pricing in the middle of the range rather than the top end to encourage more activity in the immediate aftermath of the flotation, but that advice was obviously ignored. The money raised by this flotation of only 1.5% of the company ($25.6bn) will be more than all the companies that have had IPOs this year on the Nasdaq alone! Separately, OPEC started a two-day meeting yesterday and the expectation is that oil production will be cut to support the oil price – and prices moved up in anticipation.



GM & LG work together on new batteries, UK new car sales continue to worsen and Aston Martin perks up on bid rumours…

GM, LG to spend $2.3billion on venture to make electric car batteries (Wall Street Journal, Mike Colias) heralds a joint venture between General Motors and South Korea’s LG Chem to build one of the world’s biggest battery plants in Ohio, with construction scheduled to begin in the middle of next year. The two companies will co-develop and assemble battery cells to be used in GM’s vehicles. * SO WHAT? * The EV battery-producing factory will rival Tesla’s Nevada gigafactory in terms of size and its construction will represent the latest move by a car manufacturer to improve its technology for electric vehicles. VW is investing in a joint venture with a Swedish start-up on battery production and Toyota Motor signed a battery production joint venture with Panasonic at the beginning of this year. No doubt these sorts of deals will continue as the need to sort out battery supplies becomes increasingly urgent.

New car sales crash but demand for greener vehicles increase (The Guardian, Julia Kollewe) cites the latest

figures from the Society of Motor Manufacturers and Traders, which show (yet again) that the sale of new cars in the UK fell last month while the share of hybrid and electric vehicles sold reached new highs. It’s all due to the same old reasons: weaker confidence stopping the purchase of big ticket items like cars, economic uncertainty and the ongoing downfall of diesel. As usual, the SMMT’s chief exec Mike Hawes stated the bleedin’ obvious when he said “there is still a long way to go for [electric vehicles] to become mainstream and, to grow uptake further, we need fiscal incentives, investment in charging infrastructure and a more confident customer”. The man is clearly a genius.

Billionaire F1 fan eyes up stake in struggling Aston Martin (Daily Telegraph, Alan Tovey) heralds a bit of excitement for a change for the embattled sports car maker as Canadian billionaire Lawrence Stroll (that guy who bought the Force India F1 team and made his son the driver 😂) is thought to be preparing to make a big investment in Aston Martin, which sent the share price up by 18% yesterday. * SO WHAT? * It’s all rumours at the moment, but everyone loves a good rumour. Aston Martin floated last year at £19 a share – and even with the prospect of a bid from Stroll, the shares were trading just shy of £6. If this rumour turns out not to be true, expect Aston’s share price to fall through the floor again.



Alphabet will probably indulge in fewer “moonshots”, Glencore flirts with trouble and Metro Bank loses support…

Google management shuffle points to retreat from Alphabet experiment (Wall Street Journal, Rob Copeland) considers the future of Alphabet under Sundar Pichai after co-founders Larry Page and Sergey Brin take a backseat. Basically, it would suggest that there will be more focus on making money and less on vanity/fantasy projects. * SO WHAT? * My overall takeaway from this is that by making Pichai head honcho of Alphabet, it is almost an admission of the company growing more mature as it will no doubt shed some of the more expensive non-core businesses to focus on cloud computing and healthcare.

In Glencore faces Serious Fraud Office enquiry over suspected bribery (The Times, Alex Ralph) we see that the SFO has started an investigation into the company over “suspicions of bribery”.  Shares in the mining and commodities giant fell by 9% on the news and focus is likely to centre on the firm’s dealings with Dan Gertler, an Israeli diamond tycoon and former partner in the

Democratic Republic of Congo who is himself under investigation related to bribery and money laundering in Congo, Nigeria and Venezuela. Glencore is also being investigated for corruption by the US Commodity Futures Trading Commission as well as fellow trading giants Vitol and Trafigura. * SO WHAT? * This is serious but it’s not the first time that a commodities giant has been involved in bribery – and it certainly won’t be the last! The fact is that these companies operate in some very poor and corrupt countries which would be impossible to do business in without bribing officials/regimes etc. No doubt there will be a big fine involved ultimately, but Glencore will still carry on.

Following on from the CEO’s recent departure, Metro Bank investors cut losses (Daily Telegraph, Lucy Barton) shows that hedge fund investor Steve Cohen has cut back even further on his holding in the challenger bank. He owned a 9.8% stake until recently, which he has sold down to 5.8% in the last two weeks. Other American investors have also sold down their stakes: Wasatch Advisors went from 4.4% to 2.8% and Spruce House Partnership cut from 6.7% to 5.9%. Ouch. * SO WHAT? * It’s never great to see long term share holders sell down their stakes when the share price has already cratered as it suggests a lack of confidence from the backbone of the shareholders. Whoever comes in to fill the roles of chairman and chief exec will clearly have a lot of convincing to do…



And finally, in other news…

I thought I’d leave you today with a bit of inspiration in The world’s coolest ice and snow hotels (Stars Insider, and something Christmassy in Can you find the Queen’s corgi? Challenge to find Her Majesty’s canine in the festive scene will leave puzzlers scratching their heads! (Mailonline, Bridie Pearson-Jones I hope you have a great weekend!

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Some of today’s market, commodity & currency moves (as at 0901hrs 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 **
7,135 (-0.75%)27,665 (+0.05%)3,116 (+0.11%)8,57113,076 (-0.49%)5,808 (+0.14%)23,354 (+0.23%)2,912 (+0.43%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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