Friday 18/10/19

  1. In MACRO NEWS, China’s economy slows, Turkey pauses Syria operations, BoJo presents his Brexit deal and UK manufacturers assume the brace position
  2. In RETAIL & CONSUMER GOODS NEWS, WH Smith buys American, Domino’s pulls out of European markets, Unilever feels the heat while Nestle turns a corner and Juul withdraws some flavoured pods from sale
  3. In PLANES, TRAINS & AUTOMOBILES NEWS, we see that flight shaming could hit airlines – although trains should benefit – and Renault paints a downbeat picture
  4. In OTHER NEWS, I bring you some dad jokes…



So China’s economy slows, Turkey pauses in Syria, BoJo has a Brexit deal to sell and UK manufacturing braces itself…

China economic growth slows even more in the third quarter (Wall Street Journal, James T. Areddy) cites the latest figures from the National Bureau for Statistics which show that Chinese GDP grew by 6% in the third quarter – right at the bottom end of its target range and the slowest growth since the first quarter of 1992. * SO WHAT? * This confirms the trend of slowing growth in China as it grew by 6.2% in the second quarter and by 6.6% overall last year. Clearly this will get everyone worried about whether the full year target can be met, although a US-China trade agreement would certainly help the Chinese economy going into the end of the year.

Turkey agrees to halt Syria assault as US pledges to ease sanctions (Financial Times, Demetri Sevastopulo and Laura Pitel) heralds a pause in its military operations as US vice-president Mike Pence tried to broker some kind of truce using the promise of no more sanctions (for the moment). * SO WHAT? * At the moment, this looks like a victory for Turkish president Erdogan but more trouble could be in the offing because both sides appear to have a different interpretation of where the “safe zone” is. We’ll just have to see how this unfolds.

After much drama and hype, BoJo has managed to hammer out some kind of Brexit deal with the EU and now faces the uphill task of selling it to the UK parliament. Boris Johnson gambit hangs in balance (Financial Times, George Parker, Sam Fleming, Jim Brunsden, Michael Peel and Laura Hughes) shows that the odds are stacked against BoJo as the Democratic Unionist Party said it would be opposed, which means that he will have to rely more on his political opponents to support it in a vote scheduled for tomorrow. Jean-Claude Juncker, European Commission president, said there would be NO extension

to the Brexit process, but Donald Tusk, president of the European Council didn’t rule it out. Brexit deal drama cues wild highs and lows in sterling (Daily Telegraph, Louis Ashcroft) highlighted sterling trading at extremes on Brexit hopes and fears and it is now 7% above the 34-year low of $1.17 in early September. Sector guide to Johnson’s deal (Daily Telegraph, Tom Rees, Tim Wallace, Michael O’Dwyer, Lucy Burton and Adam Williams) is a useful overview of how the current deal might affect different industries and Will parliament approve Boris Johnson’s Brexit deal? (Financial Times, Sebastian Payne, John-Burn Murdoch, Jim Pickard and Laura Hughes) is quite an interesting look at whether it’ll get through. Conclusion: the FT thinks that 321 MPs will be against BoJo’s deal and 318 will support it. However, I’m not going to go into any detail here because it may well all change after tomorrow! I just thought I’d let you know where to look in case you are interested in following all the ins and outs.

Meanwhile, UK manufacturers braced for financial hit as US tariffs bite (The Guardian, Jasper Jolly) shows that British manufacturers are having to grit their teeth somewhat as 25% tariffs imposed by the US as part of its retaliation for subsidies given to aerospace manufacturer Airbus are coming into force today. A load of products are being hit by this new tax including French wine, Italian Parmesan and Spanish olives, among many other things. The US announced these tariffs on October 3rd after the World Trade Organisation concluded that EU nations gave state aid illegally to help Airbus develop its A380 superjumbo and the smaller A350. The Scottish Whisky association (SWA) says that its whisky products will be hit by over 60% of the UK’s total tariff bill. Apparently our government argued with the Americans to get an exception, but this clearly fell on deaf ears. * SO WHAT? * Given that this is a fight between two massive aircraft manufacturers, it seems somewhat overzealous to put the screws on other completely unrelated industries that will get badly hit by this. Still, this seems to be Trump’s negotiating style and so everyone’s just got to sit it out. The timing for some will be particularly painful given there’s the whole Brexit thing to contend with as well.



WHSmith heads stateside, Domino’s withdraws from Europe, Unilever and Nestle report and Juul withdraws some products…

WHSmith expansion gets wings with US deal (The Times, Ashley Armstrong) highlights the company’s $400m acquisition of Marshall Retail Group in the US which will effectively double the size of WHSmith’s international travel business. This follows on from its $198m acquisition of US business InMotion in October last year. The travel business now accounts for two thirds of profits at WHSmith and incoming CEO Carl Cowling said that this deal will “significantly enhance our scale and growth opportunities in the US, a large and fast-growing travel retail market”. * SO WHAT? * This latest acquisition seems to chime in well with WHSmith’s overseas and travel ambitions and should certainly give it more clout in the US market. I believe that although WHSmith’s high street business is pretty mature, its travel retail business (shops at train stations, airports etc.) still has a way to go as it continues to take advantage of a captive audience. Having said that, American dream often turns into a nightmare (The Times, Ashley Armstrong) makes the very valid point that America has been the graveyard of many a UK retailer – just ask Topshop, Tesco, Dixons and Tesco who all tried making a splash stateside and left with their collective tails between their legs. Let’s hope it’s learned from the mistakes of its predecessors!

It’s all been going wrong with pizza recently, hasn’t it! Well Domino’s pulls out of overseas markets to add to UK troubles (Daily Telegraph, Oliver Gill) continues that trend as the pizza company announced it would be pulling out of Switzerland, Iceland, Norway and Sweden after piling up

multi-million pound losses in the last few years. * SO WHAT? * Domino’s Pizza Group is having a ‘mare at the moment as it is still on the lookout for a new chief exec and chairman following heated rows with UK franchisees who want a bigger slice (sorry) of the parent group’s profits to compensate for higher labour costs. It sounds like this could be an attractive proposition for incoming senior management given it is a decent brand that people know but that also needs a bit of direction. I would imagine the shares could be up strongly on new appointments given that any newcomer is bound to do something drastic to make their mark on the company.

In consumer goods, Unilever feels the heat as ice cream sales melt and trade war hits China (The Times, Ashley Armstrong) shows that the company just missed market expectations in its quarterly results due to poor ice cream sales and a slowdown in China (due to the ongoing trade war), India (due to monsoons hitting rural spending) and Argentina (due to hyperinflation curtailing consumer spending). Having said that, the Magnum ice cream maker has kept its guidance for the full year unchanged. Meanwhile, Nestle to return $20bn to shareholders as turnaround gathers pace (Financial Times, Leila Abboud) saw the company get back on the right track with results that were largely in line with market expectations and a three year share buyback target. Nestle has been selling non-core businesses in order to improve sales growth and profit margins whilst trying to keep up with changing consumer tastes.

Then in Juul halts online sales of some flavoured e-cigarettes (Wall Street Journal, Jennifer Maloney) we see the latest development in the ongoing downfall of vaping as Juul announced that it is halting online sales of its sweet and fruity e-cigarette refill pods. It had already stopped sales of such flavours in physical shops, but has now extended this online as pressure continues on the whole industry from the FTC, the FDA and federal prosecutors.



Plane-shaming hits air travel, boosts trains and Renault has a gloomy outlook…

‘Flight-shaming’ could slow growth of airline industry, says Iata (The Guardian, Gwyn Topham) shows that the International Air Transport Association believes that the rising trend of “flight-shaming” will push airlines to take environmental concerns more seriously and Eurostar enjoys busiest August as passengers seek alternative to

flying (The Guardian, Gwyn Topham) would appear to substantiate this theory as Eurostar reported its busiest August on record due to increasing demand for alternatives to flying.

Renault warns on gloomy outlook as demand falters (Financial Times, David Keohane) continues the gloomy mood in the automotive sector as it announced that it was cutting its sales and profits guidance for 2019 as it continues to battle against weakening global demand and its leadership problems. The company said that sales would drop by 3-4% this year due to “an economic environment less favourable than expected and in a regulatory context requiring ever-increasing costs”. Tough times.



And finally, in other news…

Normally in this section, I bring you either amusing or “interesting” stories from different sources – but I just can’t find any today that hit the spot! So instead, I thought I’d bring you some dad jokes:

What did one pirate say to the other when he beat him at chess? Checkmatey

Did you hear about the famous Italian chef that recently died? He pasta way

and finally,

Sometimes I just tuck my knees into my chest and lean forward for the hell of it. That’s just how I roll.

You would never guess that I used to write and perform a little bit of stand-up comedy, would you 😜

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Some of today’s market, commodity & currency moves (as at 0906hrs 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 **
7,182 (+0.20%)27,026 (+0.09%)2,998 (+0.28%)8,15712,655 (-0.12%)5,673 (-0.42%)22,493 (+0.18%)2,938 (-1.32%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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