Friday 21/09/18

  1. In MACROECONOMIC AND MARKETS NEWS, China plans on softening tariffs for non-US companies, Japan’s PM wins the party leadership election and US markets reach new highs
  2. In RETAILER NEWS, Amazon looks at some interesting new areas, French Connection’s nightmare continues and Evans Cycles puts itself up for sale
  3. In VEHICLE-RELATED NEWS, Hyundai announces a new truck innovation and Aston goes for a top end IPO valuation
  4. In INDIVIDUAL COMPANY NEWS, Sky ownership is about to be decided by blind auction and Uber looks at buying Deliveroo
  5. In OTHER NEWS, I bring you an unusually large spiders’ web. For more details, read on…



So China shifts its stance on non-US countries, Japan’s PM wins the leadership election and US markets power to new heights…

In China to cut tariffs for other countries as US row deepens (The Times, Callum Jones) we see that China is on the verge of reducing trade tariffs for certain consumer products from non-US countries as officials look to mitigate the impact of Trump’s tariffs. Specifics as to which countries or products will be targeted are, as yet, unclear but the new regime could come into force as early as next month. * SO WHAT? * This’ll no doubt be great for those countries and industries that get the China boost, but you just don’t know whether this will be something that only happens for the duration of the US-China trade spat or whether it will be more of a long term thing. The Devil will most definitely be in the detail. It may even broaden the trade disputes as the US will no doubt put in measures themselves to stop other countries/industries from benefitting too much.

Japan’s Shinzo Abe triumphs in LDP leadership election (Financial Times, Robin Harding) heralds an important moment for the Japanese PM whose party leadership win means that he could potentially be the country’s longest-serving PM as lower house elections aren’t due until 2021. * SO WHAT? * He easily beat opponent Shigeru Ishiba, which will give him the confidence to continue his economic stimulus programme, aka Abenomics. The prime ministership of Japan has long been known as a revolving door – so this is no mean feat. He will, however, need to hang on until November 20th 2019 in order to become Japan’s longest-serving Japanese PM ever – but it’s looking good at the moment.

US stocks close at records (Wall Street Journal, Michael Wursthorn) highlights new highs for the Dow Jones and the S&P 500 as they ended up 7.8% and 9.6% on the year, with more to come as the US economy continues to go from strength to strength. The Dow also put in a strong performance with 28 of its 30 constituents ending up on the day. * SO WHAT? * It just shows what low unemployment, big tax cuts and burgeoning profits can do for a country. The current trade war may yet take the shine off an economy that is, in many areas, cooking with gas but momentum is currently positive.



In retailer news, Amazon continues to look into new areas while French Connection and Evans Cycles have a ‘mare…

There seem to be a number of interesting developments going on at Amazon at the moment. Amazon plans 3,000 cashless stores (The Times, James Dean) shows us rumours about the company’s plan for its Amazon Go stores that could simultaneously transform our shopping experience and spark the demise of an entire profession, Amazon investment in India ties into retail chain (Wall Street Journal, Corinne Abrams) highlights a joint venture in India with private equity firm Samara Capital which could give it access to over 500 stores and an important foothold in a market with huge potential and then Amazon’s new microwave: ‘Alexa, please defrost my chicken’ (Wall Street Journal, Laura Stevens) highlights a new Alexa-enabled chip that can be put into everyday household devices to make them “intelligent”. * SO WHAT? * This all goes to show that you don’t have to be small and quirky to be a disruptor! The Amazon Go store plans haven’t been officially confirmed, but they could transform our day-to-day shopping experience, the India move would appear to be a smart option in a market with huge potential upside and if the new chips are adopted by manufacturers, it could help to broaden Amazon’s presence in our normal lives. I happen to think that the latter is especially creepy, but you 

can’t blame the company for wanting to deepen the customer relationship.

Meanwhile, things aren’t so rosy in UK retail at the moment what with Losses double as revenues drop at French Connection (Daily Telegraph, Ayesha Javed and Ben Woods), which the company blamed on tricky market conditions and Evans Cycles peddled to investors amid fears over trading (The Times, Tabby Kinder), which is being blamed on the waning of interest in cycling as punters appear to have reached peak Wiggo/Hoy/Froome et al. Advisers of Evans Cycles are currently approaching private equity firms, other retailers and investors with a view to selling the business as online retailers continue to eat its lunch. * SO WHAT? * Apparel retailing is notoriously difficult to do well and there once was a time when French Connection could do no wrong. However, the tables have now turned and it looks to me like it could be in the throes of a terminal slide into oblivion if something drastic doesn’t happen to turn it around. Yes, trading conditions are tricky at the moment, but there are fashion retailers who ARE doing well, so blaming it all on market conditions isn’t really a satisfactory excuse IMHO. As for Evans Cycles, I just think that this is going to be a difficult sell as the shops are purveyors of big ticket items in usually quite spacious premises, so there won’t be many wanting to take that on at “market rates”. Online retailers, such as Wiggle, don’t have these overheads and they do a great job of servicing the need of cyclists across the spectrum. The obvious thing here would be for Evans and Halfords to get together, but then would this be wise for Halfords to increase its exposure to an area that many believe is past its peak?



In vehicle-related news, Hyundai plans the launch of a hydrogen-powered truck and Aston Martin prices itself at the top end of the valuation range…

Hyundai Motor plans commercial launch of hydrogen-powered truck (Financial Times, Bryan Harris and Kana Inagaki) potentially heralds a new dawn for trucking as the Korean manufacturer announced plans to launch the world’s first commercially available hydrogen powered truck next year. It said it would begin the rollout of 1,000 fuel cell trucks in Switzerland as part of a five-year agreement with Swiss hydrogen company H2 energy. * SO WHAT? * This sounds great, no? The company believes that hydrogen technology is better suited to heavy vehicles travelling long distances versus 100% electric vehicles that face shorter ranges, long refuelling times and battery degradation. It also has the benefit of preserving the survival of component jobs. Tesla and Daimler plan to introduce battery-powered trucks in 2020 and 2021 

respectively, so the scene is set for a hydrogen vs electricity showdown at the beginning of the next decade!

A lot of the news today about Aston Martin seems to revolve around how much chief exec and Aston-saviour Andy Palmer will earn as a result of his company’s flotation, but Aston Martin’s valuation leaves Ferrari behind (The Times, Patrick Hosking) looks more at the announcement of the price range for the company’s upcoming Initial Public Offering (IPO) which would value the company at anything between £4.02bn and £5.07bn. In profits before tax terms, this would value Aston Martin more highly than Ferrari. Existing investors in Aston Martin hope to sell about 25% of the shares which will rake in around £1bn. The offer price range was decided on after brokers to the deal sounded out investors and the strike price will be announced on October 3rd. * SO WHAT? * Naysayers will point to the fact that the company has gone bust seven times in the last 105 years but optimists (including Aston Martin) say that there are over 16million people worldwide who can afford their cars without blinking. Retail investors will be able to get sniff of the action once the IPO has happened, but before that only investors, Aston Martin staff and customers will be able to participate.



In individual company news, Sky’s fate will be decided in an auction and Uber looks at buying Deliveroo…

Sky faces its date with destiny (Daily Telegraph, Christopher Williams) brings us nearer to closure for the protracted battle between Comcast, 21st Century Fox and Disney for the ownership of Sky as the three will enter into a bidding process over the weekend with the Takeover Panel acting as referee. * SO WHAT? * Thank God we’re 

going to get a resolution as this has just dragged on and on. The result is expected over the weekend or early Monday morning. At blimmin last!

In an interesting development in the cutthroat world of food delivery, Uber plots to swallow up Deliveroo (The Times, James Dean) says that Uber is in the early stages of making a bid of over $2bn to buy rival Deliveroo. Neither company commented, but it would be an interesting and powerful combination if it did happen. We’ll just have to wait and see. * SO WHAT? * I would have thought that this will put the whole area of food-delivery under the spotlight if the acquisition goes ahead. But even if it doesn’t, it may well prompt more M&A activity as existing operators try to beef up their existing offerings.



…And finally, in other news…

For all you spider lovers out there I thought I’d show you this impressive sight: Terrifying giant spiders’ web in Greece tourist resort is 1000ft long (Mirror, Dave Burke Nice!

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

Some of today’s market, commodity & currency moves (as at 0803hrs 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
7,367(+0.49%)26,657 (+0.95%)2,931 (+0.78%)8,02812,326 (+0.88%)5,452 (+1.07%)23,895 (+0.94%)2,792 (+2.28%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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