Friday 14/10/22

1. In MACRO & CRYPTO NEWS, US inflation keeps going, Kwarteng wavers, NFTs tank and a crypto broker makes deep cuts
2. In CONSUMER, LEISURE & RETAIL NEWS, we look at what consumers are and are not spending their money on, the latest on the jobs market, Ikea’s success, Boots’ sales, Kroger buying a rival and the potential for UK supermarket consolidation
3. In TECH HARDWARE NEWS, chip equipment providers swerve China, VW announces a €2.4bn venture, TSMC pulls back and telecom companies are given extra time to de-Huawei themselves
4. In MISCELLANEOUS NEWS, Apple announces a savings account, Netflix offers an ad-supported option and Goldman Sachs is down on UK commercial property
5. AND FINALLY, I bring you a controversial Santa…

So US inflation keeps going, it looks like more U-turns are coming and there’s more negative newsflow on crypto…

Blow to Biden as inflation and mortgage rates surge (Daily Telegraph, Tom Rees) highlights a surprise jump in US inflation in September and a chunky rise in mortgage rates. The average mortgage rate for a 30-year fixed loan rose to 6.92% last week. The Core inflation number, which takes out volatile food and energy prices – rose from 6.3% to 6.6%, the highest since 1982. The average mortgage rate for a 30-year fixed rate mortgage rose to 6.92% last week, its highest level since 2002! * SO WHAT? * This is yet another blow for Biden as he faces tricky mid-term elections having already had egg on his face following the Saudis siding with Russia in the recent OPEC+ meeting (although they continue to strenuously deny this is not the case).

Things aren’t exactly peachy in the UK either as Kwasi Kwarteng leaves IMF meetings early as UK government re-examines tax cuts (Financial Times, George Parker, Tommy Stubbington and Chris Giles) shows that speculation that the chancellor will roll back at least some of the elements of the recent mini-Budget is gaining momentum to a degree that sterling and gilts rallied. Some are saying that up to £24bn of the £43bn of unfunded tax cuts could be on for the chop – and the planned cancellation of the rise in corporation tax looks particularly vulnerable. The drama continues…

The negative newsflow on crypto continues today with NFTs: regulators go ape amid market downturn (Financial Times, Lex), which shows that trading volumes in NFTs have cratered – the average price of Bored Ape Yacht Club NFT has plummeted by around 20% in the last 30 days alone. * SO WHAT? * Maybe it is just as well that investors are getting out – the fact that criminal activity in crytocurrencies (which are often used to buy NFTs) reached a new high this month, according to blockchain analysis specialist Chainanalysis. The US SEC is currently investigating whether NFTs sold by Yuga Labs, the creator of Bored Ape Yacht Club, should be classed as securities. I guess this is all very new and there’s always a risk in such things, particularly if investors aren’t wholly convinced what they are and what they are for once all the hype dies down.

Then in Crypto broker NYDIG lays off one-third of staff to narrow focus (Wall Street Journal, Vicky Ge Huang and Justin Beer) we see that the US company which offers bitcoin trading, brokerage, custody and asset management services to institutional clients decided on the dramatic headcount reduction in order to cut costs. It then got rid of its CEO and President! What an absolute joke. Crypto is clearly not without risk…

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!

Consumers face tricky hurdles while retail activity is looking interesting…

In news on what consumers are spending their money on, Royal Mint reports record profit as investors turn to gold (Daily Telegraph, Simon Foy and Gareth Corfield) shows that Britain’s oldest company managed to reveal record profits thanks to the demand for gold coins and precious metals shooting up as investors sought something tangible against a difficult economic backdrop. It seems that consumers are willing to gamble in Entain bets on strong finish to the year (The Times, Tom Saunders), which highlights a strong Q3 performance from the parent company of Ladbrokes and Coral with higher gaming revenues from a “record level of active customers”. Its US betting business saw a 90% year-on-year revenue jump on the back of a decent start to the NFL season. Entain is also expected a strong end to the year as it looks forward to a boost from the World Cup in Qatar. It also seems that consumers are still willing to travel, according to IAG and easyJet offer hope as travel demand remains solid (Financial Times, Philip Georgiadis and Sarah Provan) where the parent of British Airways and the British budget airline posted robust trading updates, saying that demand for the winter was solid and that the summer had been profitable. It is interesting to note that no major European airline has seen a fall in bookings despite the massive rises in inflation. Over the Pond, Delta expects travel rebound to continue as summer demand lifts revenue (Wall Street Journal, Alison Slider) shows that Delta Air Lines also saw robust demand and that it was able to raise prices to fund higher fuel and labour costs. * SO WHAT? * I have to say that I reckon next year is going to be a different story as inflation continues to chip away at consumer spending power. Do you holiday or keep the lights on? Call me old-fashioned, but I’d prefer to keep the lights on. Also, buying gold and gambling sounds pretty desperate as well. Consumer sentiment continues to be pretty ropey…

Meanwhile, Soaring bills put brakes on switch to electric cars (The Guardian, Mark Sweney) cites an RAC survey which says that a record number of drivers want their next car to be electric, but that the cost-of-living crisis is holding them back. * SO WHAT? * I think this is unsurprising given the cost of buying EVs – and the rising price of electricity meaning that the cost of using public fast chargers is currently not that different to filling a car with petrol. Winners from the current situation, IMO, are companies that do car maintenance because aging vehicles will need more TLC. Halfords could be a winner here, for instance…

Ofgem calls on consumers to cut gas and electricity use (The Guardian, Kalyeena Makortoff and Alex Lawson) tries to appeal to us all to pull together this winter and Recruitment slows after summer boom (The Times, Tom Howard) cites Hays’ results which confirm what rival agencies Robert Walters and PageGroup have said over recent days – that the summer has seen a decent performance but that there are now signs of a slowdown. That said, job movers are still able to get a 20% pay lift when they go elsewhere.

Then in retail sector news, Ikea sales rise as customers wrap up warm for winter (Daily Telegraph, Hannah Boland) shows that households are swapping blinds with heavy curtains this winter as customers have been buying products that help keep heat in. It is also seeing stronger sales of taps that use less water and food storage containers as we all try to cut down on waste. * SO WHAT? * Amazingly, Ikea saw a 5.6% sales increase and it actually managed to CUT prices thanks to improved supply chains. I am sure this will make them even more popular with their customers!

Boots’ own-brand rival to Viagra raises over-the-counter sales (Daily Telegraph, Hannah Boland) shows that Boots is seeing an increase in sales thanks to this “uplifting” product (called “Sildenafil”) as part of its general campaign to offer own-brand alternatives to branded products. Sales were particularly brisk in travel stores and deodorant sale were up by 46% on last year as workers returned to city centres. Total retail sales are now above pre-pandemic levels. * SO WHAT? * All of this should be music to the ears of owner Walgreens Boots Alliance, which is trying to sell Boots. However, you do wonder whether they can find a buyer under current economic circumstances.

There was some interesting supermarket newsflow in Biggest US grocery chain Kroger in talks to buy rival Albertsons (Financial Times, James Fontanella-Khan, Ortenca Aliaj and Arash Massoudi) where a combination of America’s two biggest supermarkets could test the resolve of the competition regulators. To give you an idea of scale, Kroger’s market cap is about $33bn and Albertson’s reached about $13.7bn on news of the proposed acquisition. Big Four supermarket merger may be more palatable for regulator (Financial Times, Jonathan Eley) shows that, in the UK, a merger could be possible only three years after the proposed merger of Sainsbury’s and Asda was blocked because Aldi and Lidl continue to provide more competition and now both Morrisons and Asda have private equity owners who may be more willing to sell to each other. * SO WHAT? * These deals would be subject to a LOT of scrutiny by competition regulators but I think it’s interesting that the landscape has changed enough for these things to even be on the radar…

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!

We see semiconductor drama and an extension for cutting out Huawei…

World’s top chip equipment suppliers halt business with China (Financial Times, Qianer Liu, Kathrin Hille and Yuan Yang) shows that Lam Research, Applied Materials and KLA Corporation – US companies who are specialists in specific parts of the semiconductor manufacturing process – and ASML (the global leader in chipmaking equipment) are suspending sales and/or services to Chinese customers to comply with new US rules announced last week. The new rules, which were anounced last Friday, ban the export to China of US semiconductor equipment that can’t be provided by any foreign rival, among other things. Clearly, the Chinese weren’t enamoured as the China Semiconductor Industry Association said that it hoped “the US government can adjust its wrong course of action”. * SO WHAT? * This is just the latest move by the Americans to try to restrict China’s progress in the fight for tech supremacy. That said, Samsung, TSMC win exemption from new US chip restrictions on China (Wall Street Journal, Jiyoung Sohn and Asa Fitch) shows that two chip giants managed to wangle an exemption but this loophole will close in one year’s time, so the restrictions won’t actually bite TOO hard. It seems more symbolic at this stage…

Although the Americans are trying to put clear water between themselves and the Chinese, VW unveils €2.4bn venture with Chinese AI chip specialist (Financial Times, Patricia Nilsson and Edward White) shows that the opposite is the case with VW as it looks to pour a major sum of money into a joint venture with China’s Horizon Robotics, one of its leading designers of AI chips. * SO WHAT? * This looks like VW is trying to retain its access to advanced chips in China whilst simultaneously sucking up to the Chinese government. Given that VW makes around half of its net profits in China, you can’t blame it…

Then in Phone firms given extra year to hang up on Huawei (The Times, Katie Prescott) we see that BT and other telecoms companies have been given one additional year to strip Huawei equipment out of their respective 5G networks to avoid service disruptions. BT had appealed for an extension originally because it said that Covid had delayed progress. * SO WHAT? * It seems ages ago now, but the process of taking out Huawei equipment began in 2020 after security concerns were raised (particularly by Trump) regarding a powerful Chinese company at the heart of next-gen communication networks.

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!

Apple does banking, Netflix offers ad-supported subscriptions and Goldman Sachs gets downbeat on UK commercial property…

In a quick scoot around other interesting stories today, Apple team up with Goldman Sachs on high-yield savings accounts (Financial Times, Patrick McGee and Joshua Franklin) highlights a new no-fee, high-yield savings account for Apple’s credit card customers as it aims to offer more financial products to its customers. This deepens ties with Goldman, who is already working with Apple on its as-yet-unlaunched Apple Pay Later BNPL service.

Then in Netflix launches £4.99 package with adverts to lure cost-conscious streamers (The Guardian, Mark Sweney) shows that Netflix will launch its new much-anticipated ad-supported membership from November 3rd in a bid to attract/hang-on to new/existing subscribers and Goldman Sachs sounds alarm on UK commercial property (Financial Times, George Hammond) shows that the investment bank reckons that skyrocketing borrowing costs will scare buyers off participating in the market, leading to property price falls of 15-20% by the end of 2024. Hammerson and British Land were among the companies that it said could suffer most. Ouch.

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!

…in other news…

Yes, I know it’s still October but this is quite amusing: Shoppers at The Range do double take over ‘dodgy’ Santa decoration they can’t unsee (The Mirror, Marsha O’Mahoney and Caroline Abbott). Oh dear!