Friday 15/02/19

  1. In MACROECONOMIC NEWS, Trump calls an emergency, May loses another vote and Germany avoids recession
  2. In RETAIL NEWS, US retail sales weaken, Amazon abandons HQ2 in New York and looks at London store openings, Patisserie Valerie gets a lifeline and the Restaurant Group loses its chief exec
  3. In FINANCIALS NEWS, Ant Financial buys WorldFirst and JP Morgan dabbles in crypto
  4. In INDIVIDUAL COMPANY NEWS, Airbus abandons the A380
  5. In OTHER NEWS, I bring you a double-strike trick shot. For more details, read on…



So Trump ploughs on, May gets defeated yet again and Germany just scrapes through…

Trump to sign spending deal, declare national emergency (Wall Street Journal, Rebecca Ballhaus, Kristina Peterson and Natalie Andrews) is good news for government employees on the one hand – as Trump’s plans to sign a new spending bill will avoid a second government shutdown – but will annoy people on the other as it looks like he’s planning to shift either military construction or US Army Corps of Engineers funding to build more border barriers. He is scheduled to talk about border security at 10am today. In the meantime, opponents to his border wall are gathering together and questioning the legality of his calling for a national emergency when actually there isn’t one. The Trump show continues.

Theresa May suffers Commons defeat on Brexit plan B (Financial Times, Henry Mance) means that she’s officially

got just over 40 days to reach an exit agreement with the EU, get MPs onside and then get all the legislation through by March 29th! Clearly, this will be a tall order and expectations are increasing about a delay in the Brexit date.

Meanwhile, UK grows faster than Germany as eurozone shows weakness (Daily Telegraph, Anna Isaac and Tim Wallace) cites the latest figures from Eurostat which show that Britain was the third fastest growing economy among Europe’s “big five” with 0.2% growth (the same as the eurozone as a whole) versus Spain at 0.7% and France at 0.3%. Germany managed to escape recession (two successive quarters of contraction) by posting zero growth after the previous quarter contracted by 0.2%, but Italy’s economy shrank by 0.1% taking it into its third recession this decade. * SO WHAT? * All is not well in Europe at the moment – and it’s not just Britain that’s suffering. Spain did well – but is coming from a very low base – France did OK considering the whole gilets jaunes malarkey, Germany’s contraction looks like it’s due to more than merely automobile industry woes and Italy just continues to be a disaster.



US retail sales weaken, Amazon abandons its NY HQ2 and looks at opening London outlets, Patisserie Valerie gets a lifeline and Restaurant Group loses its chief exec…

US retail sales fall at fastest rate since 2009 (Daily Telegraph, Helen Chandler-White) shows a possible loss in momentum for the world’s largest economy as retail sales fell by 1.2% over the Christmas trading period – the worst drop since 2009 and way worse than market expectations. * SO WHAT? * On some measures, retail sales fell at a rate not seen since the immediate aftermath of the 9/11 attacks in 2001 and particular areas of weakness included department stores, furniture and clothing. These figures could mean that fourth quarter GDP growth may be weaker than originally thought.

In Amazon news today, there’s a lot of comment about Amazon cancels HQ2 plans in New York City (Wall Street Journal, Laura Stevens, Jimmy Vielkind and Katie Honan) as the e-tailer cancelled much-trumpeted plans to build a $2.5bn New York HQ following growing political opposition to the amount of subsidies (like $3 billion in tax incentives) being given to one of the world’s richest companies. * SO WHAT? * This will cost New York 25,000 potential jobs and will be very embarrassing for New York Governor Andrew Cuomo and New York City Mayor Bill de Blasio, given their very high profile backing of the project. Plans to open another HQ in northern Virginia are still going ahead and jobs that would have gone to New York will be spread across other offices. I would imagine that quite a few high end realtors (and property developers) will be crying into their wheatgrass smoothies on the back of this news as well.

Staying with Amazon for a moment, Amazon looks to London for new stores (The Times, Deirdre Hipwell) shows that the company is close to trialling its first checkout-free

food stores in London as it is believed to have secured sites for its first Amazon Go stores according to The Grocer trade magazine. The first Amazon Go opened in Seattle in 2016 and there are now ten sites in Seattle, Chicago and San Francisco, with another being planned for New York. * SO WHAT? * Sounds great but it’s all going to be in the execution. Let’s hope that Amazon Go doesn’t go the same way as Ofo and fall foul of Londoners with light fingers! No doubt others will be watching with interest, but I don’t think anyone else has really got the tech to do this at the moment.

Meanwhile, Patisserie Valerie saved in buyout backed by Irish private equity firm (The Guardian, Sarah Butler) heralds some good news for the embattled pastry emporium as Irish private equity firm Causeway Capital has backed a management buyout that will save around 100 cafes and 2,000 jobs. Causeway specialises in investing in small and medium-sized companies and already owns BB Bakers + Baristas, which has just over 60 outlets in the UK and Ireland. It said that it wanted to “refresh and renew” the brand. * SO WHAT? * This brings a temporary close to a very turbulent time in Patisserie’s history. The dramatic turn of events following the discovery of a £40m black hole in its accounts last year will now hopefully calm down so that the new owners can implement their strategy.

Talking of turbulence, Restaurant Group chief leaves the table (The Times, Dominic Walsh) highlights the unexpected departure of its chief exec Andy McCue only two months after he pushed through the controversial (because it was expensive) acquisition of Wagamama “due to extenuating personal circumstances”. He will remain in the role until a successor is found but already weakened shares fell by another 11% on the back of this news. The Restaurant Group owns brands including Frankie & Benny’s and Chiquito and caused a right old stir when it agreed to pay £559m for Wagamama. * SO WHAT? * McCue’s departure timing is not great as he was the main driver behind the controversial deal that only just squeaked past disgruntled shareholders. This will put a cloud of uncertainty over the whole thing until a new leader emerges.



Ant Financial goes shopping and JP Morgan tries crypto…

In China’s Ant Financial agrees to buy WorldFirst in $700m deal (Financial Times, Nicholas Megaw) we see Jack Ma’s biggest push yet into western markets as Alibaba’s fintech affiliate buys British payments group WorldFirst for around $700m. * SO WHAT? * This is Ant Financial’s first major deal in the UK and follows the company’s failed attempt to buy US cross border payments group MoneyGram – which was blocked due to security concerns. Ant Financial is the world’s most valuable tech start-up, being valued at $150bn in its latest funding round last year and is best known for its Alipay mobile payments platform, although it also has credit rating and cloud computing businesses. WorldFirst provides international money transfers and currency exchange for businesses and individuals.

JP Morgan creates own digital currency (The Times, James Dean) highlights JP Morgan’s creation of its own – non publicly-tradeable – digital coin called JPM coins, which have been given a fixed value of $1 each. They will be used to send and receive money within the bank’s wholesale payments business which move around $6tn every day for banks, broker-dealers and other corporate clients. Chairman and chief exec Jamie Dimon has been a long-time vocal critic of bitcoin but has always been supportive of the blockchain technology behind it. Other banks such as HSBC and Santander are also experimenting with their own digital coins. * SO WHAT? * It’s early days, but it seems to me that this could be the start of banks attempting to make a proper and more widely accepted “legit” cryptocurrency. Umar Farooq, head of digital treasury services and blockchain at JP Morgan pointed pointed out that “Ultimately, we believe that JPM coin can yield significant benefits for blockchain applications by reducing clients’ counterparty and settlement risk, decreasing capital requirements and enabling instant value transfer”. It’ll be interesting to see the long term effects this has on bitcoin.



Airbus announces the end of the A380…

The superjumbo falls off the radar (Daily Telegraph, Tim Wallace) spells the end of the world’s biggest aircraft, the A380, as production will wind down and end in 2021. The biggest customer for the superjumbo, Emirates, has reduced its order book and production will be shut down as

there are no other orders in sight. * SO WHAT? * This could put 3,500 jobs at risk although at least some staff can be redeployed to the production of other aircraft. Basically, it all went wrong for Boeing because of a combination of regulation changes, poor ticket sales as the plane came into service just before the financial crisis hit and because anticipated demand for two-part flights – with passengers going to big hubs to then take smaller planes to their final destination – proved to be completely wrong.



And finally, in other news…

I thought I’d leave you with an impressive ten-pin bowling trick I saw on my Twitter feed today here. Enjoy!

Some of today’s market, commodity & currency moves (as at 0833hrs 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 **
7,197 (+0.09%)25,439 (-0.41%)2,746 (-0.27%)7,42711,090 (-0.69%)5,063 (-0.23%)20,901 (-1.13%)2,682 (-1.37%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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