Friday 16/11/18

  1. In MACROECONOMIC AND MARKETS NEWS, Brexit divides and markets react
  2. In RETAIL NEWS, Black Friday kicks off early, Walmart posts solid sales but UK retail sales fall
  3. In MISCELLANEOUS NEWS, the FDA seeks a ban on menthol-flavoured cigarettes and Aston Martin sees rising sales
  4. In OTHER NEWS, I bring you some unusual dating websites. For more details, read on…



So the Brexit “deal” stirs things up and UK markets slide whilst US markets rebound…

Theresa May vows to fight for her Brexit deal (Financial Times, George Parker, Jim Packard and Laura Hughes) heralds the beginning of a massive bun fight following the PM’s hammering out of a divorce deal with Europe. A number of high profile resignations followed (Dominic Raab, Brexit secretary; Esther McVey, work and pensions secretary plus two other junior ministers) and some are expecting Michael Gove, environmental secretary, to resign given he fronted the 2016 Leave campaign with Boris Johnson. Eurosceptics led by Jacob Rees-Mogg called for a vote of no-confidence in Theresa May as soon as possible – in “not months, but weeks”. * SO WHAT? * Despite all the hoo-ha, the PM’s critics at the pro-Brexit European Research Group did not manage to gather the 48 signatures needed to kick-off a confidence vote. Still, the pound had its biggest drop versus the pound for two years and companies with exposure to the UK saw their share prices weaken in trading yesterday. May is saying that if MPs reject the deal, there would be a “no-deal” Brexit or no Brexit at all and some are talking up the prospect of a “People’s Vote”, which would open up the possibility of Brexit being reversed. This glimpse of market panic might scare politicians away from the abyss of a no-deal exit (The Guardian, Nils Pratley) poses the theory

that market reaction to MPs voting down the deal would be so violent that the real possibility of a “no-deal” would temper Brexiteer frustration enough to actually let it go through with some minor adjustments.

Meanwhile, Brexit turmoil hands UK markets a chastening day (Financial Times, Laurence Fletcher) shows the effects of the Brexit drama, with the pound losing 2% against the dollar and 1.9% vs the Euro with some analysts believing that the pound has further to fall. Stocks have also suffered from Brexit fallout and this week’s BofA Merrill Lynch fund manager survey showed that the proportion of UK stocks in global fund manager portfolios is near its lowest in 20 years. As Newton Investment Management global equities portfolio manager Paul Markham put it, “While the economy has been OK, there are big questions over the outlook” and Richard Buxton, head of UK equities at Merian Global Investors pointed out that “People have sold out in spades. There’s tremendous value in some UK domestic and financial stocks. They’re extremely undervalued on any longer-term view”. But then again, as head of UK equities, he would say that, wouldn’t he ;0)

Meanwhile, on the other side of the Pond, US stocks close higher following tech rebound (Wall Street Journal, Riva Gold and Jessica Menton) highlights the reaction to reports that US Trade Representative Robert Lighthizer has put the next round of Chinese import tariffs on hold, with the implication being that the US-China trade discussions could be making some headway. I personally wouldn’t get too excited by this as there are bound to be a few more false dawns.



In retail news, Black Friday swings around, Walmart puts in a decent performance but UK retail sales trend weaker…

Black Friday comes early as retailers aim to stay out of red (The Guardian, Zoe Wood) heralds the beginning of the run-in to Christmas as Black Friday comes early as retailers fight over consumers. Black Friday is actually supposed to be on November 23rd, but Amazon has tried to steal a march on everyone else by starting early along with the likes of Argos and PC World. Zoe Mills, a retail analyst at the GlobalData consultancy, commented that “we have seen more clothing retailers participating in the event each year and while a number of big names such as Marks & Spencer are not participating, online stores such as Asos, and Gymshark are encouraging customers to move online to get a discount”. * SO WHAT? * When Black Friday first hit UK shores five years ago, we were treated to frenzied scenes on instore camera footage of customers fighting over the latest deals, but this ungainliness has calmed down somewhat since then as more shoppers have sought deals online. Some retailers have decided not to participate in Black Friday as they feel that it forces them to discount at the most crucial time of the year and consumer behaviour has adapted such that they have started to hold off on purchases in October to see what deals they can get when Black Friday rolls around. Will consumers spend??

Walmart posts strong sales gains ahead of holidays (Wall Street Journal, Sarah Nassuaer and Suzanne Kapner) highlights some good news for America’s largest retailer as the outlook for the forthcoming holiday season is looking pretty good with lean inventories and more products online to attract younger and wealthier customers. The company reported a 3.4% rise in sales in the latest quarter at stores open for at least a year, including an impressive 43% jump in e-commerce sales. Fortunes at other retailers remain mixed with Macy’s and Nordstrom seeing higher sales, but JC Penney continued to suffer with lower sales and a quarterly loss. * SO WHAT? * This is good news in itself, but retailers have been sold off a bit recently as investors have become increasingly concerned that profits losing pace with sales because companies are having to hike up wages to keep staff in a tight market and cutting prices to stay competitive with the e-tailers. I don’t see this going away any time soon, but I would have thought that any downside will be limited as long as sales continue to rack up. 

Retail sales down despite falling prices and pay rises (Daily Telegraph, Tim Wallace) cites the latest data from the Office for National Statistics which showed that sales volumes fell 0.5% on the month versus an expected 0.2% rise, making it the second monthly drop in a row and the biggest decline since March’s 0.8% fall when the cold weather scared shoppers away from the high street. That said, HSBC economist Elizabeth Martins observed that “with wage growth pushing higher and inflation dropping fast – particularly for retail goods – UK shoppers should be feeling a bit more bullish, despite the weather…yet the summer strength seems to have faded out and consumer confidence surveys also suggest a subdued mood”. I must say that, on balance, I would have thought there is room for upside here given recent wage data, but we’ll just have to wait and see.



The FDA cracks down on menthol ciggies and Aston Martin unveils strong sales…

Further to the stuff I’ve been saying about Juul Labs this week, FDA seeks ban on menthol-flavoured cigarettes (Financial Times, Alistair Gray and Andrew Edgecliffe-Johnson) heralds the FDA’s official announcement yesterday that it will follow through on its threats to choke off sales of menthol-flavoured cigarettes and new e-cigarettes that are deemed to be responsible for getting a new generation addicted to nicotine. Figures from the National Youth Tobacco Survey said that 3.6m middle and high school students in the US were currently using e-cigarettes – a massive rise of 71% in just one year – and that over half of child smokers between the ages of 12 and 17 used menthol cigarettes versus less than one-third of smokers aged over 35. The FDA proposes to severely restrict the sale of most flavours of e-cigarettes and completely ban menthol in cigarettes and cigars. * SO WHAT? * Funnily enough, Altria, which generates about

20% of its profits from menthol cigarettes said that “a total ban on menthol cigarettes or flavoured cigars would be an extreme measure not supported by science and evidence” and analysts believe that the FDA will have trouble on pushing the menthol ban through. If these proposals go through, though, they could represent the biggest restrictions on Big Tobacco since the 1990s. 

Aston Martin sales soar as sports carmaker doubles revenue (Daily Telegraph, Alan Tovey) signals the company’s first set of numbers as a quoted company and it trumpeted a near-doubling of revenue and car sales. Chief exec Andy Palmer boasted that “these results give us confidence that we will meet our full-year targets with sales at the top end of the range. This will pave the way for future growth as we prepare to begin production of the breakthrough DBX model at our new plant at St Athan, and as we receive further orders for new models including the DBS Superleggera and special editions”. * SO WHAT? * Very nice, but the fact remains that the shares are now 20% below their flotation price and they still have a lot of convincing to do to approach the valuation of rival Ferrari.



And finally, in other news…

As regular readers know, I’ve always got your best interests at heart here at Watson’s Daily. And it is with that in mind that I thought you might be interested in some unusual dating websites.  If you are a fan of clowns, what about Those who like hairy should perhaps peruse or if you trust your nose more than your eyes, how about And finally, for those who like a bit of soft rock, could be the answer to your dreams, although this website bears a striking resemblance to, which bills itself as “100% free dating & social networking for singles sportin a mullet”. Coincidence? I think not! Happy Friday!

Some of today’s market, commodity & currency moves (as at 0759hrs 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 **
7,038 (+0.06%)25,223 (+0.57%)2,724 (+0.82%)7,13611,354 (-0.52%)5,034 (-0.70%)21,680 (-0.57%)2,681 (+1.36%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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