Friday 07/08/20

  1. In BIG PICTURE NEWS, Donald Trump makes some big announcements, Chinese firms face de-listing in the US and the BoE is surprisingly chirpy
  2. In TECH NEWS, Microsoft broadens its TikTok ambitions and Nintendo sees a massive rise in profits
  3. In HIGH STREET NEWS, Hammerson shakes up rents, Franco Manca man eyes opportunity and Travelex makes cuts
  4. In INDIVIDUAL COMPANY NEWS, Uber has a ‘mare and ITV has its worst ever ad decline
  5. AND FINALLY, I bring you an intriguing invention…



So Donald Trump makes a splash, Chinese firms face de-listing and the BoE sounds quite upbeat…

Donald Trump to order government to buy medicines from US companies (Financial Times, Demetri Sevastopulo and Aime Williams) highlights the President’s signing of an executive order that will force the federal government to buy specific essential medicines from US manufacturers in a bid to break reliance on foreign supply chains. With one eye clearly on the voters, he said “Over the course of the next four years, we will bring out pharmaceutical and medical supply chains home and we will end reliance on China and other foreign nations”. Donald Trump threatens executive action to spur stimulus talks (Financial Times, Demetri Sevastopulo, Lauren Fedor and Claire Bushey) shows Trump trying to take the initiative in the current stimulus negotiation impasse between the White House and Democrats and threatening to take executive action to force Democrats to bend to his way of thinking. Issues up for debate include the renewal or not of $600-a-week emergency unemployment benefits (they ended last week) as well as aid to help cities. In White House seeks crackdown on US-listed Chinese firms (Wall Street Journal, Dave Michaels) we see that the Trump administration recommended a plan yesterday that will force Chinese companies with shares traded on the US stock exchanges to de-list unless they comply with US audit requirements. Such companies have faced criticism in the past for their lack of transparency but under this new plan, Chinese firms that already have a listing on the NYSE or Nasdaq will have to comply by 2022 or give up their listing. Those that do not already have a listing will have to comply before getting one. And if that wasn’t enough, Trump executive orders target TikTok, WeChat apps (Wall

Street Journal, Andrew Restuccia and Jing Yang) shows that Trump issued two executive orders yesterday that will ban people in the US, or those subject to US jurisdiction, from transactions with the China-based owners of the apps starting in 45 days’ time. When it comes in, it could prevent Americans from downloading the affected apps from the Apple or Google app stores. * SO WHAT? * Whoooah! Trump has been BUSY! I think that making all these announcements at the same time makes a statement to his fellow Americans. He clearly wants to portray himself as the key guy fighting America’s corner against the Chinese. He is in full presidential re-election mode and will no doubt relish skirmishes with China’s Xi Jinping as further evidence of his patriotism (having said that, if he pushes it too far it could backfire spectacularly). Although I can’t comment on whether Chinese apps are really a threat or not to national security, I do think that the US (and others) have been willing to turn a blind eye to more opaque accounting practices of Chinese companies for many years because no-one wanted to be the party-pooper and potentially cut themselves off from one of the biggest growth drivers in town. This was bound to happen sooner or later IMO.

Back in the UK, BoE surprises City with its chirpy outlook (Daily Telegraph, Tim Wallace) shows that the Bank of England is getting slightly more upbeat about the prospects for the UK economy although yesterday its monetary policy committee (MPC) voted unanimously to keep interest rates at the record low of 0.1%. In May, the BoE said that it would not be able to announce any official forecasts but yesterday it resumed making its predictions. It observed that the housing market had “returned to close to normal levels”, most furloughed staff are now working, the GDP fall was not as sharp as they’d envisaged in May. The focus now is firmly on encouraging banks to keep lending to encourage growth.



Microsoft broadens its TikTok ambitions and Nintendo triumphs…

Microsoft expands TikTok takeover ambitions to entire global business (Financial Times, Miles Kruppa, Arash Massoudi, Stephanie Findlay and Primrose Riordan) shows that US software giant is now broadening its ambitions to buy all of TikTok’s global business including its operations in India and Europe. We already knew that they were looking at buying the US, Canada, Australia and New Zealand businesses but this is way bigger. TikTok does not operate in China. * SO WHAT? * If this deal actually came off it would be MASSIVE as India is TikTok’s biggest market and the US is its second biggest. TikTok has been banned in India since June when the government there banned 59 Chinese mobile apps, but if

Microsoft bought it, I would presume that the stigma would be removed and TikTok could be restored. The negotiations continue…

Nintendo profits soar 541% as consumers retreat to living rooms (Financial Times, Leo Lewis and Kana Inagaki) shows that the Japanese gaming company has benefited big time from lockdown despite a worldwide shortage of Switch consoles and a not-very-impressive pipeline of in-house games. The year-on-year hike in sales and profits over the April/June quarter was way more than analysts had been expecting and saw a particular boost from sales of fantasy game Animal Crossing: New Horizons. * SO WHAT? * It is interesting to see that lockdown hastened a shift from buying physical copies of the games to more downloads (digital versions have higher margins). Something similar happened with Sony in their latest quarterly results and they observed that increasing familiarity with downloading meant more sales as gamers worked their way through older titles.



Hammerson tries to adapt to the carnage, the top man at Franco Manca sees opportunities and Travelex makes cuts…

Hammerson to shake up rents after £1bn loss (Daily Telegraph, Rachel Millard) shows that shopping centre owner Hammerson is doing an overhaul on the way it charges rent as it tries to boost its longer term survival prospects after falling to a £1bn loss. It used to charged fixed quarterly costs but it is considering an expansion of a system for shops to pay rent based on their turnover. It is also looking at potentially linking payments to click-and-collect sales to get a slice of any internet revenues. * SO WHAT? * It’s about time the lazy old system was updated to give everyone a fair crack at the whip – but it’s telling that it’s taken such dire circumstances to make landlords take their fingers out of their ears and listen to retailers who’ve been after this for years. It will be interesting to see whether landlords revert to the old way when things eventually calm down a few years down the road…

On the actual high street itself, Franco Manca owner hungry to expand into cut-price empty sites (Daily Telegraph, Oliver Gill) shows that David Page, boss of Fulham Shore (which owns Franco Manca and the Real Greek) is hoping to use the current crisis to help him rapidly expand the chains – which is something he did in the early nineties with Pizza Express to great success. Landlords

have been queuing up to offer him sites abandoned by rivals – and it looks likely that he could expand quickly -and on the cheap – as it is currently very much a buyer’s market. For instance, it would only cost Fulham Shore £150,000 to repurpose a former Carluccio’s because everything is already there. Usually, it would cost about £650,000 to fully fit out a new Franco Manca. As far as current performance is concerned, Eat Out debut hailed as ‘astonishing’ (The Times, Dominic Walsh) highlights the huge success of Rishi Sunak’s meal subsidy offer as he has brought all staff back off furlough and incredibly strong sales. * SO WHAT? * Back in the nineties, Page grew Pizza Express from 80 to 200 restaurants in only five years by taking full advantage of cheap property prices. He is clearly hoping to do the same again but we’ll just have to wait to see whether he manages to repeat this success. It seems to me that Sunak’s plan has been pretty successful so far, but I think that restaurants will want to see what happens to trade on Thursdays, Fridays, Saturdays and Sundays – when the offer doesn’t apply – before they get too giddy. After all, there is a danger that the plan just shifts weekend business to early week.

Things are altogether gloomier in Travelex cuts 1,300 jobs after rescue deal agreed (Daily Telegraph, LaToya Harding) where embattled forex provider Travelex has now agreed a deal to survive, but at the cost of 1,300 jobs. A new Travelex is to emerge from pre-pack administration but its shops on the high street and some airport branches will not reopen as the UK business will be bearing most of the brunt of the cuts.



Uber and ITV voice their suffering under lockdown…

In other news, Uber ridership fails to recover as pandemic drives another big loss (Wall Street Journal, Preetika Rana) shows that Uber, rather unsurprisingly, announced its latest massive loss due to the heinous performance of its core ride-hailing business. Gross bookings were down by 75% year-on-year in the latest quarter but apparently the business in Asia was showing signs of bouncing back – especially in Hong Kong and New Zealand. Also, on the positive side, its food delivery service has done well over the pandemic.

Then in ITV suffers steepest fall ever due to Covid-19 lockdown (The Guardian, Mark Sweney) we see that ITV saw a 43% fall in ad revenues over the second quarter. It’s affected the broadcaster so badly that it could fall out of the FTSE100 next month. Chief exec Carolyn McCall said that she thought the worst was over but that future prospects remain unclear. Tough times, but hardly surprising for a firm that relies on production and advertising revenues to make its money!



…in other news…

I thought I’d leave you today with the intriguing invention in Japanese company develops “smart mask” that translates speech to eight languages (SoraNews24, Master Blaster). Could be something to take on holiday, perhaps??

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Some of today’s market, commodity & currency moves (as at 0745hrs 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 **
6,027 (-1.27%)27,387 (+0.68%)3,349 (+0.64%)11,108 (+1.00%)12,592 (-0.54%)4,885 (-0.98%)22,334 (-0.38%)3,354 (-0.96%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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