Friday 20/09/19

  1. In MACRO NEWS, the European Commission raises hopes of a Brexit deal and UK interest rates remain unchanged
  2. In RETAIL NEWS, UK retail sales fall in August, Debenhams brushes Ashley aside and Next’s sales slow
  3. In INDIVIDUAL COMPANY NEWS, E-cigarettes get banned in Asia, Amazon commits to electric delivery vans, Airbnb aims for a 2020 flotation and Stripe’s worth continues to climb
  4. In OTHER NEWS, I bring you a hilarious misunderstanding…



So it appears that the EC might be throwing us a bone and the Bank of England leaves interest rates untouched…

In European Commission raises hopes of a Brexit deal (Financial Times, Sam Fleming, Jim Brunsden and George Parker) we see that Jean-Claude Juncker, president of the European Commission, appeared to soften his stance by saying he might scrap the Irish “backstop” if BoJo comes up with a workable alternative. On the surface, it would appear that this is a turnaround as J-C said only last month that “We have made clear that we are not prepared to hold new negotiations on the withdrawal agreement”. I would caution against reading too much into this latest development and I think that Irish PM Leo Varadkar put it best when he said “I think the rhetoric has tempered, the mood music is good, there is a lot of energy and positivity.

But when it comes to the substance of the issues that need to be resolved the gaps are still very wide and we’ve no time to lose”. The drama rolls on…

Bank of England holds interest rates but cuts GDP forecasts (Daily Telegraph, Russell Lynch and Tom Rees) is not exactly the most inspiring headline you’ll ever see, but it was interesting to see that ALL members of the Bank of England’s Monetary Policy Committee (MPC) voted to leave interest rates unchanged at the current 0.75% level. * SO WHAT? * Given that we currently have a backdrop of the ECB announcing big stimulus measures to get the eurozone out of a rut, the US cutting its interest rates for the second time in a row after ten years of either staying the same or going in the other direction and, of course, Brexit it is unsurprising that the Bank of England will want to keep its powder dry by keeping things as they are. If we cut now, we will have less ammo to use in the Brexit aftermath and TBH, there appears to be no desperate need to do so given that the current rate of inflation of 1.7% is below the target rate of 2%.



UK retail sales have a disappointing August, Debenhams ploughs on with its restructuring and Next’s sales growth slows…

Sudden fall in online sales deepens gloom enveloping retailers (The Times, Elizabeth Burden) cites the latest figures from the Office for National Statistics (ONS) which show that retail sales fell unexpectedly last month, with particular weakness in online sales which showed their sharpest drop in four years. Rhian Murphy, head of retail sales at the ONS, observed that “Retail sales grew moderately in the three months to August with online sales still providing the biggest driver, despite falling back in the latest month”. * SO WHAT? * The fall in online sales is quite surprising, but it may just be a blip. However, those of a nervous disposition will say that it is a sign of the fickle nature of consumer confidence. Either way, we’re heading into the busiest quarter of the year in the run-up to Christmas, so retailers will be hoping this is just a one-off rather than a trend.

Debenhams pushes on with shop closures after legal challenge fails (The Guardian, Sarah Butler) shows that

the troubled department store has successfully shrugged off a Sports Direct-funded legal challenge to its recently-agreed CVA, which means that it can continue with its store closure programme. At least 22 of Debenhams’ 166 stores are set to close by January 2020 and rents on many others are to be reduced as part of the CVA. * SO WHAT? * This looks like Mike Ashley’s bid to put a spanner in the works has failed for now. Still, if he bides his time, Debenhams may well collapse further down the line and he can wade in at fire sale prices (although he might not have as much money then given how Sports Direct and his other businesses are performing). I know that sounds a bit harsh, but I think trimming stores here and there and doing a bit of a cosmetic upgrade is like rearranging the deckchairs on the Titanic. Department stores are going DOWN. Unless the management team comes up with something special (and they haven’t so far), I believe that Debenhams will die the death of a thousand cuts.

Next blames warm weather for slow sales as shares plummet (The Guardian, Zoe Wood and Julia Kollewe) highlights investor disappointment with the apparel and homeware retailer as it blamed disappointing sales of its new autumn clothing ranges on recent warm weather. Next’s shares were the biggest faller on the FTSE100 yesterday (they fell by 5%) as its chief exec Lord Wolfson was pretty downbeat on current trading.



E-cigarettes get more bad news, Amazon commits to electric delivery vans, Airbnb aims for flotation and Stripe’s value continues to rise…

Asian countries move to ban e-cigarettes as global backlash grows (Financial Times, Stephanie Findlay) heralds even more bad news for e-cigarettes as India’s cabinet announced, in a meeting on Wednesday, a ban and jail time for up to three years for those who make, import or sell vaping products in response to a massive rise in its popularity among young people. This drastic move came in the same week that China, which is the world’s biggest producer and consumer of tobacco, stopped sales of Juul products and shortly after a recommendation earlier this month from the US Centers for Disease Control and Prevention that consumers should avoid the products due to an increase in unexplained lung illnesses among users. China seems to be moving towards tightening e-cigarette legislation while Cambodia and Thailand banned the use and import of e-cigarettes in 2014. * SO WHAT? * When you consider the potential market size of China (over 300m 

smokers) and India (over 266m) and the slowing down of sales of “traditional” smokes, you can understand why big tobacco companies are trying to throw their weight behind the tobacco alternatives. Still, as the negative news stories pile up, the industry will have a big PR battle on its hands to protect this nascent business. Mind you, although this is bad, the fact is that this will (somewhat ironically) probably benefit traditional cigarette sales – so the tobacco companies win either way because this is what makes them the most money anyway! It just might mean that they might have to rein in the rhetoric on a “tobacco-free future”…

Elsewhere, Amazon to add 100,000 electric vehicles as part of climate pledge (Wall Street Journal, Patrick Thomas) highlights progress for the e-tailing giant on reducing its carbon emissions as it committed to buying electric vehicles from Detroit-based start-up Rivian Automotive with a view to using them for deliveries in 2021. Then Tech unicorn Airbnb shares its plan to go public in 2020 (The Times, James Dean) heralds the plan of yet another unicorn to float on the stock market (but at least this one makes money!) while Fintech firm Stripe joins Silicon Valley elite with $35billion valuation (Wall Street Journal, Peter Rudegeair) shows the latest sky-high valuation for a US start-up after its latest fund-raising round.



And finally, in other news…

I thought I’d leave you today with something that almost made me fall off my chair this morning: Man fuming as wife’s sandwich has ‘b!tch’ written on it – then discovers meaning (The Mirror, Courtney Pochin This works so well because you just won’t see what’s coming 😜

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Some of today’s market, commodity & currency moves (as at hrs 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 **
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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