Friday 23/07/21

  1. In TECH NEWS, Intel says the chip shortage could stretch into 2023 and a start-up has made a breakthrough in long-duration batteries
  2. In TRAVEL-RELATED NEWS, US airlines see a recovery in demand while the UK and France try to cobble a travel app together
  3. In FINANCIALS NEWS, the government announces plans to sell down its stake in NatWest and Starling aims for a flotation
  4. In MISCELLANEOUS NEWS, consumer confidence reaches pre-Covid levels, Unilever faces big cost rises, HBO Max eats Netflix’s lunch and Mercedes buys a British start-up
  5. AND FINALLY, I bring you an interesting idea for cooling down…

1

TECH NEWS

So US airlines recover while the UK and France try to get their app together…

In Intel CEO says chip shortage could stretch into 2023 (Wall Street Journal, Asa Fitch) we see that Intel’s chief exec reckons that the current global semiconductor shortage could potentially run into 2023. However, he did say that supply shortages should start to ease later on this year, backing TSMC’s recent assertion that we had gone through the worst of it. Both TSMC and Intel are adding more chip production plants, but they won’t be operational for another two years or so. * SO WHAT? * It’s good to hear another chip giant making positive noises on the semiconductor shortage but some car makers, such as VW, continue to be quite downbeat about the whole thing (VW thinks that the shortage could actually get worse over the next six months).

Bearing in mind what I said at the beginning of this week about how to store electricity, Startup claims breakthrough in long-duration batteries (Wall Street Journal, Russell Gold) highlights the discovery by a four-year-old startup called Form Energy of an inexpensive battery that can discharge power for days using one of the Earth’s most common elements – iron. Although these batteries are too heavy for use in cars, they could potentially be ideal for storing large amounts of electricity that then feed into power grids on grey and/or still days. * SO WHAT? * This has been the holy grail for the power industry and if everything goes to plan, the company will be able to provide cheap, long term power storage by 2025! Its early backers include Breakthrough Energy Ventures, a climate investment fund that counts investors such as Bill Gates and Jeff Bezos among its ranks. I think that this really could be exciting and an elegant solution to something that has been troubling power generators for quite some time.

2

TRAVEL-RELATED NEWS

US airlines see a recovery in demand while the UK and France try to agree on something…

American Airlines, Southwest lifted by recovering demand and government aid (Wall Street Journal, Alison Snider) is further evidence that the airline business is recovering in the US. Both airlines have benefited from government aid and an influx of vacation travellers. Delta Air Lines also joined its rivals in reporting a pandemic-era profit. * SO WHAT? * It’s interesting to see airlines making such a strong recovery. In fact, they are now saying that demand for leisure travel is actually greater than it was before the pandemic struck, to the extent that they are now struggling to hire enough workers to keep up! As I have said before, I expect both leisure and business travel to recover strongly in the US because a) it is relatively self-contained and b) the vaccine rollout is going well. I don’t think that we’ll see

the same recovery in Europe because of the relatively patchy rollout and confusing guidance of where you can/can’t go and what the quarantining restrictions are.

Talking of Europe, UK and France discuss travel app to avoid holiday chaos (Daily Telegraph, Oliver Gill) shows that Britain and France are discussing plans to launch a “wallet” travel app that will help to make sure holidaymakers have all the relevant Covid documents before they go to the airport. The app will contain things like Covid test results, proof of vaccination and passport details. * SO WHAT? * Interestingly, this is actually a more sophisticated system than the one that is currently being used by airlines. It has evolved from a previous version aimed at hauliers post-Brexit to make sure they had all the right paperwork in place to travel cross-border. I think that anything that smooths travel between the two countries will be a real boon and the sooner it is introduced, the better!

3

FINANCIALS NEWS

The government announces its intentions to reduce its stake in NatWest and Starling aims for an IPO…

UK government to cut size of £12bn stake in NatWest (Financial Times, Nicholas Megaw and Sarah Provan) shows that the UK government is going to speed up the disposal of the 55% stake it has in the bank to return it to private majority ownership. UK Government Investments oversees the stake and it has appointed Morgan Stanley to manage the sale. It didn’t say how much would be sold, but it will be less than the full amount and it is hoped that doing it this way will mean that it will get better prices. * SO WHAT? * The Treasury spent £46bn rescuing NatWest after it got caught up in the US subprime mortgage crisis and although NatWest’s share price has risen by 25% since the start of this year, it is still 60% lower than the average price the government bought it at. There will always be a glass ceiling on the stock when everyone knows how much the state owns, so selling down is good in theory although in this case the taxpayer will unfortunately have lost a lot of money in the process.

Turning profitable sends Starling towards flotation (The Times, Katherine Griffiths) shows that challenger bank Starling is getting more confident after unveiling a rise in revenues and profitability for ten months at its results yesterday. Chief exec Anne Boden, who set up the bank in 2014 and launched it in 2017, said that its performance put it on track for an IPO either at the back end of 2022 or in 2023. * SO WHAT? * I think that the most difficult hurdle for these challenger banks to overcome is getting customers to trust them enough to make them their main/only bank. I remember hearing some years ago that people were statistically more likely to get divorced than they were to change their bank (!) and so customers are taking quite a leap of trust to use such challenger banks. Some have found that customers use them as a “secondary” bank to their main one where they get their wages paid in, and this is always going to make it harder for them to build up an accurate picture of their customers which, again, will make it harder for them to lend well (which is where they will make more money). Still, I guess trust takes some time to build. 

4

MISCELLANEOUS NEWS

Consumer confidence continues to rise, Unilever faces higher costs, HBO Max eats into Netflix and Mercedes buys a British start-up…

Echoing separate recent surveys by Deloitte and PwC (Monday), Confidence is higher than it was before Covid (The Times) cites another survey, this time from GfK, which shows how households feel about their own finances and the wider economy. Interestingly for retailers, attitudes towards making big purchases also improved. * SO WHAT? * I think that we are still in the rosy post-restriction-lifting glow but the spectre of higher inflation and end of furlough could put the brakes on things. For now, though, it’s looking pretty good.

Mind you, talking of potential inflationary pressures, Unilever faces biggest cost rises in a decade, warns chief executive (Financial Times, Judith Evans) shows that the chief exec is saying that rising costs of raw materials, packaging and transport is squeezing operating margins. At the moment, it’s absorbing these costs, but it sounds like it will be increasing prices. * SO WHAT? * When you consider that things like palm oil (used in loads of Unilever’s personal care products), soybean oil, crude oil and ocean freight prices have increased over the year by 70%, 80%, 60% and 40-50% respectively, hiking up prices sounds inevitable – and this will, of course, impact inflation.

Elsewhere, HBO Max gains US subscribers as Netflix slips (Financial Times, Anna Nicolaou) shows that the streaming service managed to sign up 2.4m subscribers in the June quarter in the US, implying that at least some Netflix subscribers are jumping ship. HBO Max has 12.1m retail subscribers (excluding those who have access to it via cable subscription) versus Netflix’s 74m in the US and Canada (209m worldwide). No doubt content agreements like the one referred to in Warner Bros. to make 10 movies exclusively for HBO Max streaming service (Wall Street Journal, Joe Flint) play a part in the move to different streaming platforms. All the more reason for Netflix to buy a studio to get quick access to good quality content!

Then in New driver for electric motors firm (The Times) we see that Mercedes has bought British electric motor start-up Yasa for an undisclosed sum, in its ongoing effort to boost its technological expertise. Mercedes has already been working with Yasa for two years and Yasa now counts Ferrari among its customers. Vehicles can drive further on a single charge using Yasa’s axial flux motors, which are smaller and more efficient than other designs. The company will now supply its motors across a range of new electric models in Mercedes’ AMG range.

5

...AND FINALLY...

…in other news…

For those of you who have been overheating recently, here’s something that might be worth a try: Woman shares fan and bedsheet heatwave hack and people say it’s a game changer (The Mirror, Andrea Oldereide). It looks a bit tricky to me and potentially prone to collapse but worth attempting if you’re being driven to distraction by summer heat!

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Some of today’s market, commodity & currency moves (as at 0759hrs 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 **
6,968 (-0.44%)34,823.35 (+0.07%)4,367.48 (+0.20%)14,684.6 (+0.36%)15,526 (+0.67%)6,493 (+0.44%)HOLIDAY3,552 (-0.65%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$71.71$73.58$1,807.851.374861.17721110.291.1680532,598.03

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