Friday 15/05/26

Lebanon and Israel to meet in Washington as ceasefire nears end (Financial Times, Raya Jalabi and Neri Zilber) shows that the two countries are readying for direct talks in Washington regarding the extension of a ceasefire that is supposed to end this week. Despite this truce, skirmishes have continued between Israel and Hizbollah. The drama continues…

Over in America, US Senate confirms Kevin Warsh as Federal Reserve chair, replacing Jerome Powell (The Guardian, Gaya Gupta) highlights the appointment of Trump’s guy for governor of the Fed. He’ll have the role for four years and comes in at a time when inflation is rising but the president wants him to cut interest rates. War, inflation and Trump’s tariffs have shaken the US. Why does the stock market keep going up? (The Guardian, Andrew Witherspoon) observes that despite all the turmoil and consumer nervousness, US markets continue to thrive. Essentially, it’s down to tech behemoths dragging up the indexes by themselves and Obscure Japanese stock measure widens on global hunt for AI winners (Financial Times, Leo Lewis) highlights another interesting phenomenon – the skyrocketing NT ratio, which tracks the divergence between the Nikkei 225 (the “N” in “NT” and the index that is tech-heavy and price-weighted) and Topix (the “T” in “NT”, which is market-cap weighted). This is down to investors seeking AI exposure outside the US markets. * SO WHAT? * I just thought that I’d point out why markets are up because Trump was on the telly the other day boasting that markets were strong. The implication he’s trying to make here is that what he’s doing is working – but the reality isn’t as simple as that. Right now, the AI bubble continues to grow and many US corporates have been knocking it out of the park according to the most recent quarterly numbers, which is resulting in a robust market. However, consumer confidence isn’t good, household spending power is shrinking and the fact that such a narrow group of stocks is having such an outsize influence on the wider markets is actually quite concerning because if you put all of that together, you have a recipe for what could be a nasty correction.

China’s fuel exports fail to rebound after Beijing signals easing of ban (Financial Times, Verity Ratcliffe and Edward White) shows that, despite China signalling that it would relax a ban on exports of jet fuel, gasoline and diesel, the level of those exports is still way below pre-war levels. Asian countries are crying out for oil and other refined products, so they will be feeling particularly disappointed that this recent relaxation is yet to have any effect. In the meantime, supplies continue to dwindle…

UK economy grew at the fastest pace in a year in the first quarter (The Times, Mehreen Khan) highlights the latest release from the ONS which shows that Q1 UK GDP growth hit 0.6% – its fastest growth rate in a year and a rebound from the 0.2% growth the economy eked out in Q4 last year. The services sector, which accounts for over three-quarters of economic output, was particularly strong and grew by 0.8% in Q1. Reeves seizes on surprise UK growth as evidence Labour leadership must stay (The Guardian, Tom Knowles) unsurprisingly latched onto this and said that it proved that the government had “the right economic plan”. She added that “Now is not the time to put our economic stability at risk”. Mind you, UK first-quarter growth ‘probably part illusion’, analysts warn (Financial Times, Delphine Strauss) shows that some economists are more circumspect about the figure, pointing out that Q1 has tended to start strong and then tail off as the year progresses.

Meanwhile, Starmer braces for leadership challenge by Burnham (Financial Times, George Parker, Rachel Rees, Chris Smyth and Jennifer Williams) shows that Starmer continues to face a leadership crisis as senior party members seem to be jockeying for position to topple him. I won’t go into too much detail here because a lot can change but suffice it to say, Starmer is in deep doo-doo.

LVMH to sell Marc Jacobs to WHP (Financial Times, Adrienne Klasa) shows that LVMH has now sold fashion brand Marc Jacobs to New York-based brand manager WHP as part of a plan by LVMH to streamline its portfolio of luxury labels. LVMH first bought a stake in Marc Jacobs in 1997 and the label was hot in the early 2000s. * SO WHAT? * LVMH has become what it is today thanks to four decades of acquisitions! However, over the last 18 months, it has pivoted from acquiror mode to seller mode disposing of Off-White as well as its stake in Stella McCartney and its travel retail business in Greater China. WHP currently owns Vera Wang, rag & bone and G-STAR.

Staying with luxury, Burberry tried to be Louis Vuitton; it should aim lower (Financial Times, Lex) shows that Burberry is now reverting back to more familiar territory in the mid-market after an attempted foray into higher-end luxury resulted in falling sales. Under the previous CEO, the company tried to make a push into the top tier (by November 2023, almost 30% of Burberry’s stock cost over £2,000!) but the problem was it didn’t sell and revenues just fell. The current chief exec, Joshua Schulman, has culled the more avant-garde products and returned to its classic trench coats, scarves and check patterns. Now only 3% of its stock costs more than £2,000 so it can do more volume and not have to discount. It is going in the right direction!

Then in UK landlord Landsec says occupancy levels at 20-year high (Financial Times, Euan Healy) we see that the FTSE 100 group has reported strong occupancy rates and announced

better-than-expected growth in real income in its latest results. Most of the company’s office space is in central London and have an occupancy rate of 98.6% while its overall occupancy rate is 98%. Landsec’s CEO added that “rents are growing at their fastest pace in nearly two decades”. * SO WHAT? * This is an impressive performance and comes after a rough few years in the wake of lockdown and the whole working from home trend. The question is whether it’s sustainable, though, as companies seem to be downsizing headcount at the moment.

In Currys’ turnaround king tasked with reviving tired Boots ahead of flotation (Daily Telegraph, Tom Haynes) we saw the announcement yesterday that Alex Baldock, formerly CEO of Currys, will take the top job at Boots. * SO WHAT? * Currys’ share price dipped when he announced his departure earlier this year because investors associated him with successfully turning the company around. I guess the idea here is that “the turnaround guy” can sprinkle some magic fairy dust onto the ailing high street stalwart and convince investors that it’s worth up to £7bn as it aims for a flotation at some point in the future. At Currys, he streamlined the store estate, cut costs, boosted online sales and pushed its “omnichannel” offering of services, repairs, credit and subscriptions. Can he do the same at Boots?? I think that Boots’ main revenue for future growth is going to be health and beauty, particularly because the demise of the department store means that there’s less competition. Medicines and prescriptions will keep footfall going but margins are going to be made on beauty.

In Ford shares surge after launch of power unit for data centres (Financial Times, Christian Davies) we see that Ford’s share price has boomed by over 20% in the last two days alone – its biggest hike since 2020 – on hopes that its new energy subsidiary, Ford Energy, will get the company a piece of the action in AI by providing battery storage capacity for Big Tech firms building AI data centres. It will use tech licensed from Chinese battery giant CATL. Sounds interesting, no?

Jaguar Land Rover annual profit falls 99% after US tariffs and cyber-attack take toll (The Guardian, Jasper Jolly) shows that JLR’s annual profits have all but evaporated thanks to the cost of US tariffs and a cyber-attack that hit operations at its factories for months. It also said that it took a bit of a beating in China where rivals are introducing new products. It wasn’t the only carmaker to suffer, though – Honda reported its first annual loss in 70 years as a listed company!

In a quick scoot around some of today’s other interesting stories, Klarna breaks even for first time since blockbuster New York IPO (Financial Times, Laith Al-Khalaf) highlights a potential turning point for the company as it announced the fact it broke even in Q1, helped by a surge in sign-ups for its debit card. The company’s primary business is offering interest-free consumer loans for retail purchases that let you pay in instalments but it’s been trying to move away from its BNPL origins and towards becoming a more traditional digital bank that offers products such as debit cards and interest-bearing loans. * SO WHAT? * I think that Klarna is becoming more interesting these days. I have slagged it off for quite some time now because I thought that it was a one-trick pony and that its business was kind of immoral in that it was encouraging people to spend outside their means in a cost-of-living crisis. However, the company appears to be growing up now (it’s been rumoured that it’s thinking about applying for an American banking licence, for instance) but I think that it’s lack of “baggage” means that its AI-forward strategy could actually work and differentiate it from its rivals. Its AI chatbot answers two-thirds of customer service inquiries. It has a decent client base – so all it needs to do now is deliver attractive products to them!

Then in Revolut prepares to launch private bank as it woos wealthy (Financial Times, Laith Al-Khalaf) we see that the newly-licenced Revolut is looking to launch a private bank in the UK and will provide complex financial instruments to clients to appeal to wealthy customers. The plan is to launch it later this year for customers who have at least £500,000 to deposit.

Hargreaves Lansdown to cut jobs in bid to fight off digital rivals (Financial Times, Emma Dunkley) highlights the investment platform’s plans to cut around 100 positions from its 2,400-strong workforce as part of a broader effort to streamline operations that will help it compete with intensifying competition including the likes of Interactive Investor and AJ Bell. * SO WHAT? * It’s been having a bit of a rough time of things in the last few years and change has been sorely needed. There’s still a lot of work to do.

Anthropic agrees terms of $30bn funding deal at $900bn valuation (Financial Times, George Hammond) heralds yet another massive fundraising for Anthropic – and this time it looks like it’s getting it at a level that implies a whopping $900bn valuation! This implies that it’s now bigger than OpenAI, which was most recently valued at $852bn.

It’s Friday – so what better day to learn a few important life hacks?! I think that the beer one looks like it could go badly wrong though…