- In MACROECONOMIC & OIL NEWS, the ECB keeps rates unchanged and BP buys into wind
- In INDIVIDUAL COMPANY NEWS, Oracle benefits from cloud-computing, LVMH takes the fight to Tiffany, Nikola faces friction, AstraZeneca “stays on track” and British Airways launches a rights issue
- In RETAIL NEWS, retailers fear a poor Christmas and Morrisons’ profits are hit by pandemic costs
- In LEISURE NEWS, Peloton unveils its first ever quarterly profit and Pure Gym shores up its finances
- AND FINALLY, I bring you a haunted toilet…
MACROECONOMIC & OIL NEWS
So the ECB holds firm and BP invests in wind power…
ECB to monitor rise of euro after keeping rates on hold (Financial Times, Martin Arnold) shows that the ECB’s governing council left interest rates unchanged but said that it would be keeping a close eye on the Euro, which has strengthened by 10% against the dollar since March. The worry here is that if the Euro gets too strong, it could harm exports by effectively making them more expensive.
New world of wind power for BP as it takes the plunge in America (The Times, Emily Gosden) shows that BP has just spent $1.1bn on a 50% interest in two US wind farm
projects with Norway’s Equinor (which used to be known as Statoil and is 67% owned by the Norwegian government). The two companies will also form a strategic partnership to work together on other projects in the fast-growing American offshore wind market, with a view to potentially rolling it out to other countries. * SO WHAT? * This is all part of BP’s new strategic direction to invest more in green energy, aiming for a net zero carbon footprint by 2050. BP/Equinor: spinning windmills (Financial Times, Lex) says that BP has paid quite a high price for getting involved as it is late to the party and will therefore find it more challenging to get returns than early movers such as Equinor. Still, it’s a move in the right direction and shows that BP’s CEO is putting his money where his mouth is (for the moment, at least!).
INDIVIDUAL COMPANY NEWS
I found today’s news to be particularly “bitty” today, so apologies for the randomness in this section – but they are important stories!
Oracle results bolstered by cloud-computing growth (Wall Street Journal, Aaron Tilley) is an interesting story that highlights would-be-TikTok-buyer (!) Oracle as being one of the many companies that have benefited from the increase in demand for cloud-computing products and services during lockdown. Companies are generally accelerating their shift to cloud-computing and Oracle has managed to pick up new clients for its cloud products, including Zoom which needed more capacity to service its massive upsurge in users. * SO WHAT? * Oracle has enjoyed some of the benefits of this boom in demand for cloud-computing but it still has baggage in the form of a legacy in database products. It seems to me that Oracle is very keen to accelerate moves towards cloud-based products and services and that it hopes that its supposed interest in TikTok will give it some kind of jolt. FWIW, I think it would be bizarre as it has no experience in this area at all – it would be a massive vanity purchase as far as I can see.
Following on from yesterday’s news, LVMH retaliates against Tiffany by preparing lawsuit (Financial Times, Leila Abboud) shows that LVMH is now filing a lawsuit against Tiffany, alleging that it mismanaged the business during Covid-19, “forcing” it to reconsider the $16.6bn takeover bid. Interestingly, a report on Bloomberg said yesterday that LVMH’s CEO Bernard Arnault “asked for help” from the French government to extract him from the deal, although the company strenuously denied this on a media call yesterday. * SO WHAT? * The drama continues, but I suspect that this is all a charade in an effort to force the price down. Who else is going to want to buy Tiffany now if LVMH walks away?? Tiffany has everything to lose here – and it will be made worse by having to pay for a drawn-out lawsuit.
Nikola shares fall after short seller claims business is an ‘intricate fraud’ (Financial Times, Claire Bushey and Peter Campbell) shows that shares in the much-hyped electric truckmaker Nikola fell by almost 10% in trading yesterday as a short seller, Hindenburg Research, claimed to have “extensive evidence” to prove that the company’s proprietary tech was actually bought from another company. * SO WHAT? * This claim could put a cloud over any business that has been run by founder Trevor Milton in the past. Nikola’s share price has more than quadrupled since listing in June as investors hope its fortunes will follow those of Tesla and this claim comes only days after GM announced a $2bn deal with it. The Hindenburg report makes a number of incredibly serious accusations including that it lied about making in-house electrical inverters (it bought them in, allegedly) and faked a product video in 2018 by ROLLING a Nikola One truck along a downhill stretch of highway to cover for the fact that it had no working engine 😱 and edited it to make the road look flat! Nikola’s stock shot up by 40% on the GM announcement, but then it took a hit following the Hindenburg revelations. Funnily enough, Trevor Milton sounds rather p!ssed off and vows to address the allegations. It’s difficult to tell whether Hindenburg or Trevor Milton is telling lies, but you should get popcorn, a drink and settle in – this looks like it is going to be one humdinger! GM must be feeling VERY worried right now (and probably a bit stupid). If it turns out that Hindenburg is right, I think it will be the end of Nikola. If the allegations are disproved, its share price could have an enormous rebound IMO!
Following on from the recent disappointing AstraZeneca news, AstraZeneca ‘still on track’ to submit Covid vaccine data before end of year (Financial Times, Sarah Neville) sounds like the company is trying to scrabble around to keep the feelgood going after a pause in its trials took the shine off its vaccine hopes. Let’s hope for the best – but at least our expectation levels may be more realistic now!
Then in BA owner IAG launches steeply discounted €2.75bn rights issue (Financial Times, Philip Georgiadis) we see that British Airways’ owner is trying to shore up its finances in the aftermath of coronavirus-related decimation of its business. IAG warned of falling passenger numbers for this year as travel restrictions and quarantine measures hit hard. The tough times for the airline industry continue…
Retailers fear a poor Christmas and Morrisons’ profits get hit by pandemic costs…
It feels weird talking about Christmas in September, but after recent comments about US retailers bringing Christmas forward in order to get consumers spending now, Lack of festive cheer to leave embattled retailers out in cold (Daily Telegraph, Laura Onita) shows that fears are increasing among retailers that a tough Christmas is looming in the aftermath of the end of furlough, the prospect of Brexit and consumers generally tightening their
belts. On average, UK households spend over £2,500 each month but in the run-up to Christmas they spend an additional £800, according to Bank of England estimates. Expectations for this year remain muted to say the least…
In Morrisons counts the costs of pandemic as sales surge (The Times, Ashley Armstrong) we see a bit of a mixed bag as the supermarket did well on the one hand with higher sales during lockdown, but on the other hand profits fell by over 25% due to increased costs of hiring, paying sick leave, bonuses and putting in safety measures. This was mitigated to some extent by four months of business rates relief but it’s not ideal. Digital business is booming (it has quintupled since the start of the year) but it is readying itself for a tricky Christmas.
Peloton turns its first profit and Pure Gym shores up its finances…
Peloton posts first-ever profit as pandemic speeds sales (Wall Street Journal, Kimberly Chin) shows that Peloton is one of the coronavirus “winners” as more people elect to sweat in the privacy of their own homes as revenues almost tripled. Demand is such that it is now increasing production of its stationary bikes and treadmills in order to improve wait times for its equipment. It is now expanding its offering and cutting the base price of its stationary bike by around $350 to $1,895. * SO WHAT?* This is a great performance but it also faces more competition as gyms open up and other fitness start-ups (e.g. Mirror, which was bought by Lululemon Athletica for $500m recently) try to soak up demand.
Talking about gyms, Pure Gym builds up £100m in financial muscle (Daily Telegraph, Hannah Uttley) shows that the gym chain has received a £100m cash injection from its US private equity shareholder Leonard Green to help get it through the lean times of coronavirus. The company has made positive noises about its reopenings, but times are still tough so the extra cash will come in handy.
…in other news…
Today, I thought I’d leave you with the rather bizarre Coronavirus leads to creation of haunted toilet at Japanese theme park (SoraNews24, Casey Baseel). At least if you scare easily you are sitting in the right place 😂.
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 *
|Oil (WTI) p/b
|Oil (Brent) p/b
|Gold Per t/oz
(markets with an * are at yesterday’s close, ** are at today’s close)