Thursday 19/12/19

  1. In MACRO NEWS, Trump gets impeached and UK inflation stays low
  2. In CAR NEWS, Fiat Chrysler and Peugeot agree to merge, Tesla considers lowering the Model 3 price in China and Volvo sells its Japanese truck unit to Isuzu
  3. In TECH NEWS, Apple, Amazon and Google unify for smart home devices while the UK watchdog threatens Google
  4. In INDIVIDUAL COMPANY NEWS, JP Morgan gets approval for Chinese business and Hays Travel has to close 10 shops that it saved from Thomas Cook
  5. In OTHER NEWS, I bust some hangover myths and bring you an inspirational non-profit…



So Trump is impeached and UK inflation remains low…

House votes to impeach President Trump (Wall Street Journal, Siobhan Hughes and Natalie Andrews) heralds Trump’s impeachment for abuse of power and obstruction of Congress regarding allegations of him forcing the Ukraine to investigate former Vice President Joe Biden and his son in return for military aid. He will be only the third president after Andrew Johnson (in 1868) and Bill Clinton (in 1998) to face the next stage, a Senate trial. On both those occasions, the presidents were acquitted. * SO WHAT? * It’s highly unlikely that Trump will get kicked out of office because to do so would require a two-thirds majority in a Senate that is stuffed with Republicans

(Trump’s party). It’s probably a bit too early to tell what impact this will have on Trump’s chances of re-election in the presidential elections next year, but given that he was backed strongly by his own party, it is possible that all these accusations will actually galvanise his support base. As I said, no-one really expects his removal from office at this stage, but it is still a story worth following!

Inflation remains at three-year low (The Times, Gurpreet Narwan) cites the latest figures from the Office for National Statistics which show that inflation grew at its slowest level since November 2016 at 1.5%. * SO WHAT? * Expectations are that inflation will remain well below the Bank of England’s 2% target next year due to caps on energy and water prices and a stronger pound. This will give the Bank a bit of room to potentially lower interest rates further if the economy gets weaker. The Bank of England’s Monetary Policy Committee (MPC) is expected to keep rates on hold at 0.75% when they meet later today.



Fiat Chrysler and Peugeot confirm the merger, Tesla considers cutting Model 3 prices in China and Volvo sells a Japanese unit to Isuzu…

Fiat Chrysler and Peugeot agree to merge in giant auto deal (Financial Times, Michael Pooler and Joe Miller) heralds a deal to create the world’s fourth biggest carmaker with shareholders on both sides getting 50% of the new entity and will bring together marques such as PSA’s Citroën, Opel, Vauxhall and FCA’s Jeep, Dodge, Maserati and Alfa Romeo. PSA’s Carlos Tavares will be the group’s CEO for the first five years and John Elkann of FCA will be chairman and both parties expect the deal to complete within 12 to 15 months, pending shareholder and regulatory approval. Unite union seeks jobs assurances after PSA-Fiat Chrysler merger (The Guardian, Jasper Jolly) shows that unions are rightly worried about job losses which usually follow in deals like this although the companies said that there would be no plant closures. * SO WHAT? * This deal has been well-flagged since talks emerged around October only months after a merger failed between Fiat Chrysler and Renault due to French government opposition. The enlarged group will be bigger than General Motors and Hyundai-Kia and will be able to pool resources to invest in electric vehicles and compliance with tighter emissions regulations. No doubt other deals will be done in the industry for the same reasons! There are already loads of joint ventures in

specific geographic and/or product areas, so this just takes it a step further.

Elsewhere, Tesla may cut Model 3 price to keep China buyers keen (The Times, James Dean) shows that Tesla is thinking about lowering prices by 20% or more on Chinese-made Model 3s sold in China in order to stay competitive and play a part in the country’s EV future. * SO WHAT? * Given China’s big plan to take all fossil-fuel powered vehicles from its roads, you can understand Tesla’s eagerness to stay involved. It invested $2bn in a gigafactory near Shanghai that Elon Musk hopes will produce 250,000 vehicles a year and is due to deliver its first China-built Model 3s to customers in about a month’s time. Tesla’s put a lot of effort into China, so really I don’t think the company can do anything other than cut prices to remain competitive in an increasingly tight market where new competitors are emerging all the time.

Volvo sells struggling Japan unit UD Trucks to Isuzu Motors (Financial Times, Richard Milne) highlights another new partnership in the consolidating automotive industry as the Swedish truck maker has decided to sell its underperforming Japanese business to Isuzu Motors on terms to be finalised around the middle of next year. Both Isuzu and Volvo Group will also start working together on tech and heavy-duty trucks with a view to widening the scope further down the line. Fun fact: Volvo Group is separate from Volvo Cars, which is owned by China’s Geely. * SO WHAT? * It’s not just car makers that need to consolidate – the same pressures apply to truck makers! As I said before, there will be more alliances and mergers as time goes on…



Big Tech gets together to ease smart homes and Google faces resistance from the CMA…

Apple, Amazon and Google form alliance for smart home devices (Financial Times, Patrick McGee) heralds a really interesting development as the tech giants have agreed to collaborate with each other and members of the Zigbee Alliance (comprising of members including Samsung, Ikea and Comcast) to build a common standard so that devices could be operated by any voice assistant. * SO WHAT? * I would have thought that ‘Project Connected Home’ will be a MAJOR boost to the prospects for smart homes and the so-called Internet of Things. On current projections, the market for smart devices is expected to grow by about 14.4% per year, according to the International Data Corporation, but I wonder whether this really will open the

floodgates. Time will tell, but I think that this is an eminently sensible idea. You do wonder why they didn’t do this before!

Competition watchdog hits Google with threat of break-up (Daily Telegraph, Matthew Field) is a rather dramatic headline as headlines go but the UK’s Competition and Markets Authority (CMA) expressed concerns over its advertising division’s dominance in a report that was published yesterday. It found that Google accounted for almost 90% of all search advertising revenues in Britain last year worth about £6bn, while Facebook had a 50% share of all display adverts worth £2bn. * SO WHAT? * The CMA is thinking about opening up Google’s digital advertising business and even unwinding parts of Google’s 2007 merger with DoubleClick. The watchdog is not going to launch into a full investigation for now, but its proposal to break up Google’s business reflects increasing resistance to its power. It is also thinking about how to make Facebook share its tech with other players. The final version of the report will be published in July.



JP Morgan gets the China go-ahead and Hays Travel has to cut stores…

JP Morgan wins approval for majority-owned Chinese securities business (Financial Times, George Hammond and Don Weinland) highlights an important strategic win for the US bank in its aim to expand its reach in China. It will now open a new unit in the country offering a wide variety of services having been approved by the China Securities Regulatory Commission. * SO WHAT? * This will make JP Morgan the first US bank to get approval for a majority-owned securities joint venture in China (in the past, the Chinese partner had to be the majority owner).

Nomura got official approval in November and Goldman Sachs applied for permission in August. The current backdrop is a bit tricky at the moment what with the whole US-China trade war, but companies will be hoping that this marks a trend of loosening regulation, making it easier to do business in the country.

Hays shuts 10 of the Thomas Cook travel shops it tried to save (Daily Telegraph) shows the latest developments in the months following the Thomas Cook collapse as the company that rescued its shops, Hays Travel, had to close 10 of the 461 outlets it reopened from the 553 it snapped up when it bought the chain. Chairman of Hays Travel, Irene Hays, said that this was down to not being able to get enough staff. Hays is planning on rolling out an advertising campaign from January to promote its enlarged high street presence.



And finally, in other news…

Today, I thought I’d bring you Hangover myths to avoid when dealing with the morning after the Christmas party (The Mirror, Poppy Danby which, to be honest, is a bit disheartening. On the other hand, I thought I’d also bring your attention to this rather heartwarming story: This nonprofit is transforming the lives of seniors, one bike ride at a time (USA Today, Grace Hauck Amazing!

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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 **
7,555 (+0.42%)28,283 (-0.04%)3,194 (+0.01%)8,82813,231 (-0.46%)5,969 (unch)23,865 (-0.29%)3,017 (unch)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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