Friday 08/12/23

  1. In MACRO & OIL NEWS, China dismisses EU trade concerns, Canada imposes an oil and gas emissions cap and there are talks of an Aussie LNG mega-merger
  2. In REAL ESTATE NEWS, UK house prices rise and commercial property negotiates a tricky patch while luxury brands snap up buildings
  3. In CAR NEWS, Tesla loses in Sweden, the Danes sell out and Vertu’s valuation drops
  4. In MISCELLANEOUS NEWS, online luxury falters, Frasers sees better sales and Games Workshop doles out a proper Christmas bonus, redundancies rise and Spotify’s CFO departs while AJ Bell profits and mobile firms face a class action
  5. AND FINALLY, I bring you the definitive way to pronounce “Nike”…

1

MACRO & OIL NEWS

So China rejects EU concerns, Canada imposes limits and an Aussie mega-merger is on the cards…

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China dismisses EU trade deficit concerns as leaders meet (Financial Times, Joe Leahy) shows that nothing’s really getting done at a EU-China summit in Beijing involving President Xi Jinping, the European Council president Charles Michel and European Commission president Ursula von der Leyen. Basically, the Europeans are complaining that trade is very much skewed in China’s favour (the trade deficit has doubled in the last two years!), something that China denies responsibility for whilst also pointing out that the deficit is already falling. Europe says that there is a lack of market access for European companies and that Beijing gives preferential treatment to domestic companies. China also denied that there was overcapacity in its EV sector, particularly because the need for them continues to grow. The impasse continues…

Meanwhile, Canada Imposes Emissions Cap on Oil-and-Gas Industry (Wall Street Journal, Vipal Monga) shows that the

Canadian government just committed to imposing greenhouse gas emission limits on its oil and gas industry in a move that will make it one of the first major global oil producers to do so. This “draft framework” will be finalised in 2025 but will cap emissions at somewhere between 35% and 38% below 2019 starting in 2030. Emissions limits will continue to fall in stages until the industry hits net zero by 2050. * SO WHAT? * The oil and gas industry is responsible for about 28% of total greenhouse gas emissions in Canada, which is higher than the transportation sector that makes up 22%. The emissions plan is a key plank of PM Trudeau’s 2050 net zero ambitions but was obviously met by opposition from the industry. Environmental groups obviously say that the measures don’t go far enough. Will this work? Governments can come and go during this time so TBH I think this just creates uncertainty.

Then in Woodside and Santos open talks over $52bn oil and gas merger (Financial Times, Nic Fildes) we see that Australia’s two biggest oil and gas companies are looking at a potential merger that could create a national champion in LNG production. * SO WHAT? * Talks are currently “incomplete” and it sounds like there’s a lot of thrashing out still to do but it seems that this is just the latest development in a sector that is consolidating. ExxonMobil has agreed to buy Pioneer for $64bn including debt and Chevron is buying Hess for $60bn including debt. This is interesting timing as it follows the failure of Brookfield’s $13bn proposed takeover bid for Origin Energy earlier this week. LNG is very much a hot area at the moment, particularly as countries scramble for energy independence in the wake of Russia’s invasion of Ukraine and all the implications that has had!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

2

REAL ESTATE NEWS

UK house prices weaken, commercial property is in a tough spot but luxury brands buy their bricks-and-mortar…

UK house prices rise 0.5% in November (The Times, Tom Howard) cites the latest stats from Halifax which show that house prices increased in November – making it the second consecutive monthly rise as a shortage of properties on the market offsets the impact of higher mortgage rates. It looks like many expect the shortage of properties on the market to continue into next year. * SO WHAT? * This echoes stats published by rival Nationwide which showed THREE consecutive months of house price rises. While transaction volumes have fallen sharply (by 20% in October versus the same month last  year) prices have continued to hold up because of the relative lack of properties on the market.

Meanwhile, Commercial property confronts the ‘comedown’ from easy money (Financial Times, Joshua Oliver) provides an interesting discussion on what’s going on in commercial property at the moment, particularly in light of the recent scandal involving the Signa Group, which ended up having to hand over majority ownership of Selfridges to Central Group as Signa Holding, the parent company, filed for administration last week. * SO WHAT? * The main problem was that Signa – along with other property firms – borrowed LOADS of money when interest rates were cheap and then got hugely caught out when they shot up. European property groups including SBB and Adler have been facing funding difficulties and bondholder ire respectively while

many property owners are looking at unrealised losses as commercial property valuations have fallen. It is interesting to note that although it feels like we are seeing a change here of “higher for longer” interest rates, if you look over time, the near-zero interest rate period that we’ve been experiencing over the last decade is actually the anomaly and not the norm! Maybe the market just needs to get used to “higher for longer” once again…

I thought that Champs-Élysées is a luxury address LVMH cannot do without (The Times, Tom Howard) highlights a very interesting phenomenon – that luxury goods firms seem to be consolidating their positions on the world’s most famous streets. LVMH just bought 150 Avenue de Champs-Élysées for a whopping €950m, a record price for a building on the glizty street, but actually LVMH, Kering and Hermès have spent €3.5bn collectively on property in the past year or so, including LVMH’s purchase of 101 Avenue de Champs-Élysées earlier this summer for €775m. In the UK, a third of the buildings on New Bond Street are now owned by luxury retailers – which is more than double the 15% in 2009! LVMH paid £165m last year for a building there that houses Dior and Rolex bought Bond Street House at roughly the same time for £160m (and this now houses Patek Philippe). Just prior to that, Chanel bought its boutique on the street for £310m. * SO WHAT? * It seems that the retailers are looking to protect their prestigious addresses – and given how well they’ve done until relatively recently, you can understand that! These things go in waves so maybe in years to come the tide will turn and such trophy assets will get sold…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

3

CAR NEWS

Tesla gets in more hot water and Vertu suffers from the EV slump…

Tesla loses legal action in Sweden as dispute with Nordic unions escalates (The Guardian) shows that unions are gaining the upper hand in the fight against Tesla as a Swedish court decided that Sweden’s postal service, PostNord, did not need to deliver licence plates to Tesla after all (Tesla sued it for not delivering the plates as postal workers went on strike in sympathy with their Tesla comrades). Last year, Norway and Sweden were Tesla’s fourth and fifth biggest markets in terms of sales and its Model Y has been Sweden’s top selling car this year! Danish pension fund dumps stake in Tesla as Musk’s row with Nordic unions escalates (Daily Telegraph, Alex Singleton) shows that PensionDanmark, one of Denmark’s biggest pension funds, has now sold its £46m stake in Tesla, ostensibly because of Tesla’s anti-union stance. I say “ostensibly” because I wonder whether the pension fund is making

a gain or a loss on this. This does seem quite hypocritical to me given that the fund manager holds stakes in other anti-union companies such as Amazon and Starbucks as well. If you’re going to adopt a moral stance, you should be consistent IMO – and if not, you should just shut up!

Then in Value of Vertu car dealership plunges as EV demand wanes (Daily Telegraph, Howard Mustoe) we see that Vertu – which operates under Bristol Street Motors, Vertu and Macklin Motors brands – saw its value shrink by up to a quarter as it warned of falling demand for EVs. Although car demand generally has been slower, this is particularly true of EVs. Stats published earlier this week by the SMMT show that sales of EVs fell by a chunky 17% last month while sales of all cars to households fell by 6% last month. Car dealers enjoyed a post-pandemic boom, but now it seems that the reality of the higher cost-of-living is kicking in…

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

4

MISCELLANEOUS NEWS

We look at the latest developments in retail, the jobs market, AJ Bell’s strong performance and the lawsuit facing mobile phone networks…

In a quick scoot around some of today’s other interesting stories, there were some interesting retail articles in Shopping for Luxury Online Has Fallen Out of Fashion (Wall Street Journal, Carol Ryan), which looked at the travails of the likes of Farfetch and MyTheresa, both of whom have lost around 90% of their value since they floated in 2018 and 2021 respectively. Matches, which is owned by private equity firm Apax Partners, is also doing badly and is currently seeking a cash injection to help it turn the business around. It seems that sales of luxury goods have been slowing down across the board, but online sales have fallen by more than the average. Meanwhile, Frasers sales improve despite ‘softening’ luxury market (The Times, Isabella Fish) shows that although recent profits came in above expectations, the company remains cautious about its “premium lifestyle” division. which includes Flannels, House of Fraser and Frasers department stores. The CEO did say, however, that weakness in the luxury market could present opportunities (maybe it’ll build up an even bigger stake in Hugo Boss, for example?). Elsewhere, Games Workshop hands staff £2,500 bonus as half-year profits rise 12% (The Guardian, Sarah Butler) shows that the fantasy figurine retailers is giving its employees a very nice Christmas bonus, which comes in at £1,000 more than it did a year ago! It said that it was increasing the bonus because it expected half-year profits and core gaming sales to rise. Nice! That said, it seems that the results were “only” in line with market expectations.

In employment news, Wave of redundancies triggers biggest jump in jobless since lockdown (Daily Telegraph, Melissa Lawford) shows that a surge in redundancies has resulted in the biggest jump in job seeker numbers since lockdown, according to the latest report by KPMG and REC. Hiring of permanent staff fell for the 14th month in a row and at its second fastest rate since

June 2020 while Tech lay-offs: expect revenue per employee to climb next year (Financial Times, Lex) suggested that the number of job cuts in the tech sector was likely to continue next year as headcounts are still higher than they were pre-pandemic.

It was interesting to see Spotify CFO cashes in £7.2m in shares after value surges on news of job cuts (The Guardian, Mark Sweney) as the company’s CFO took full advantage of a share price surge – prompted by the company announcing that it would be cutting almost a fifth of its workforce – to cash in more than $9m worth of shares 😱! Usually, this would raise red flags (“is there something going wrong at the company we don’t know about??” etc.) but Spotify Technology Finance Chief Paul Vogel to Depart (Wall Street Journal, Ben Glickman) would suggest that this is the CFO’s last hurrah as he is leaving the company.

In other news, AJ Bell profits up after boost from interest earned on customer cash (Financial Times, Arjun Neil Alim) shows that UK investment platform AJ Bell saw a massive 50% rise in pre-tax profits and stellar revenues in its latest financial year – mainly thanks to the interest earned on customer accounts! * SO WHAT? * This is something that is benefiting its rivals who are also basking in the glory of high interest rates that enable them to earn money by doing nothing! This won’t last forever, though, as interest rates appear to be peaking out.

Then in Phone networks face £3bn class action over bills (Daily Telegraph, James Warrington) we see that the UK’s mobile networks are now facing a big class action as they are being accused of overcharging millions of customers on their phone contracts. The class action lawsuit involves Vodafone, EE, Three and O2 who are alleged to have been abusing their market positions to charge a so-called “loyalty penalty” as they consistently fail to cut the amount charged to customers’ bills once the minimum term of their contracts expire. This could get messy!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

5

...AND FINALLY...

…in other news…

I know that I pronounced “Nike” incorrectly for years but have corrected myself over time. If you are not quite sure how to do it, this will give you the definitive answer: Boss ends debate on how to correctly pronounce Nike – but fans refuse to believe it (The Mirror, Paige Freshwater). So now you know!

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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 **
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