Friday 17/08/18

  1. In MACROECONOMIC AND COMMODITY NEWS TODAY, the US and China prepare to talk, Trump continues to turn the screw on Turkey and the gold price reaches new lows
  2. In RETAIL-RELATED NEWS, American department store JCPenney has a shocker, Walmart unveils strong numbers, Amazon considers price comparison and UK retail sales show the contrast between online and offline
  3. In OTHER NEWS, I bring you a bit of nostalgia. For more details, read on…



So there’s talk about talks between the US and China, Trump ups the stakes on Turkey and gold hits new lows…

US, China to resume trade talks as tariffs bite (Wall Street Journal, Chao Deng and Bob Davis) shows a mini-breakthrough in the current trade dispute as both sides have agreed to low-level talks later this month amid the ongoing tit-for-tat trade tariff war. If they go ahead, the talks would be the first that both sides have had for two months! * SO WHAT? * Talks about talks! Nothing to get too excited about here, although it’s a start. Will they be enough to stop/delay US plans to slap tariffs on $200bn-worth of goods in the next few weeks? My money’s on there being a delay (because surely this is a blunt tactic designed to get them to the negotiation table).

Far be it from me to say “I told you so” but Threat of new US sanctions hits fragile lira (The Times, Robert Miller) heralds renewed pressure on the Turkish lira after the US said that it would impose additional sanctions if it continued to refuse to release the American pastor at the centre of this, Andrew Brunson (and by the way, if you want to know more about him, you should really read this: The evangelical pastor at heart of Turkey’s dispute with US (Financial Times, Ayla Jean Yackley and Laura Pitel)). The lira had a bit of a respite in recent days following Qatar weighing in with $15bn-worth of assistance, but it fell back

again versus the dollar. The newly-appointed finance minister, Berat Albayrak (who is also President Erdogan’s son-in-law), talked a good game on a massive conference call yesterday, saying that Turkey was well aware of the challenges facing it but that his banks were healthy and the country could ride this out. * SO WHAT? * Horse-sh!t! Turkey is standing on the precipice of one almighty testosterone-induced **ck-up. The problem is that Erdogan continues to back himself into a corner and will  potentially do things like strike some kind of economic deal with Russia and stop accepting immigrants, creating headaches for both the US and Europe alike. My feeling is that this is something that is just getting blown up into something that it needn’t have become and neither side can back down without some kind of major shift. In this game of chicken (or should I say “turkey”) no-one is looking like blinking at the moment.

Given that global growth is said to be slowing down and that trade wars between the US, China and Europe are ongoing Gold hits 19-month low as dollar strengthens (Financial Times, Henry Sanderson) seems to be rather counter-intuitive in some ways given that investors tend to reach for the shiny stuff when they think things are going down the pan. Total gold demand for the first half of this year was at its lowest level since 2009, according to the World Gold Council, and it seems that there could be more weakness to come as central banks in emerging markets who are seeing their currency getting mullered become distressed sellers of gold to stem the slide. * SO WHAT? * The prospect of further weakness – coupled with the fact that the US economy continues to be going from strength to strength – will probably mean that the contrast in fortunes of the dollar and gold price will get even more pronounced as punters just plough their money into buying the dollar.



In retail-related news, JC Penney has a ‘mare, Walmart knocks it out of the park, Amazon scares the bejeezus out of price comparison sites and UK retail figures reflect a mixed bag…

Some readers will really think that I’ve got it in for department stores – and they’d be right ;0). Although some of the American ones are doing OK (Macy’s and Nordstrom, for instance) JC Penney shares plunge to record low as it cuts full-year outlook (Financial Times, Mamta Badkar and Eric Platt) is one that isn’t – and it lowered its full-year outlook after posting sluggish quarterly sales and deeper losses sending its shares down by a whopping 27.4% to a record low of $1.75 before recovering slightly to being down by “only” 25% on the day. The company has been without a chief exec since May. * SO WHAT? * Although JC Penney has tried various initiatives to turn things around – like introducing private labels, opening more Sephora beauty stores and broadening its range of home appliances –  it is still suffering from the wider malaise of consumers continuing to migrate to online shopping as well as paying the price for store over-expansion. To take an analogy I mentioned earlier this week (“you can’t polish a “t*rd, but you CAN roll it in glitter”), whilst Nordstrom and Macy’s may well be polishing t*rds, JCPenney is at the stage where it is trying to roll itself in glitter (but not much is sticking). They all need to wake up and shake up otherwise they’ll be gone in ten years IMHO. More on that in a soon-to-be published report!

In contrast, there’s good news in Walmart logs on for best sales leap in decade (The Times, James Dean) as Walmart’s online shopping business helped to power its

best sales performance in ten years! Store sales in the US – its home market – were almost double the level of market expectations – and even Asda (which is owned by Walmart) did well, posting its fifth quarter of growth in a row. The shares were up by 9.3% in New York trading.

Britain’s biggest insurance comparison websites were running for cover yesterday in Comparison sites left reeling by Amazon plan to launch rival (Daily Telegraph, Natasha Bernal) after reports suggested that Amazon was in talks to launch a rival offering. The UK market is dominated by GoCompare (whose shares fell by 10.2%), Moneysupermarket,com (down by 5.2%) and (whose owner, Admiral, saw its shares drop by 2.4%) and the prospect of an entry by a deep-pocketed rival with a good track record is clearly unsettling for them. The top four insurance comparison websites in the UK (all of the ones above,plus have 85% of the market stitched up but have rested on their laurels somewhat. Amazon is about to give them an almighty kick up the jacksy. * SO WHAT? * It certainly sounds like this market is ripe for a disruptor and Amazon’s massive customer base, cutting edge tech and very deep pockets will prove to be tough competition. However, it’s not a certainty that Amazon will smash it as Google launched Google Compare in 2015 to provide car insurance but it folded after a year as it failed to generate enough revenue.

Online retail sales soar but high street suffers (Daily Telegraph, Tim Wallace) cites the latest data from the Office for National Statistics which show that retail sales were up by 0.7% versus the previous month and by 3.5% versus July last year but internet sales saw an annual growth rate of 16.9% – the fastest increase recorded so far this year! Laith Khalaf, of Hargreaves Lansdown, observed that “Even if more traditional stores are switching to the online channel, that means they need less physical space to sell stuff from. That spells more store closures, which clearly does nothing to attract people to the high street and is likely to contribute to declining footfall”.



…And finally, in other news…

I thought I’d leave you with a bit of nostalgia today (or a look into a history that you never knew, depending on your age!) with 19 things everyone who grew up in the ‘90s will instantly recognise (Metro,

As always, thank you for reading Watson’s Daily!