- In MACRO NEWS, BoJo pushes for an election and Germany’s economy slows
- In TECH-RELATED NEWS, Intel sounds optimistic, Nokia has a profit warning and Twitter disappoints
- In RETAIL-RELATED NEWS, Amazon’s profits get dented, Next signs a deal with O2 and Supercuts goes into administration
- In OTHER NEWS, nothing says ‘I love you’ more than toenail clippings…
So BoJo changes tack and Germany looks tricky…
Boris Johnson in new push for UK general election (Financial Times, Laura Hughes and Jim Pickard) shows that BoJo has admitted defeat in his efforts to get Brexit done on October 31st and is now calling for a general election on December 12th, saying that a “broken parliament” was to blame for the current situation. The PM needs to get at least 434 of the 650 MPs to go ahead with an election, but Corbyn continues to drag his feet over making a decision to support this or not, saying that he wants the prospect of no-deal taken off the table first. The LibDems are unlikely to support an election unless they know whether the EU has granted an extension (which we may get more on today). The drama goes on…and on…and on…
Warning signs for eurozone as Germany’s growth stalls (The Guardian, Phillip Inman) highlights concerns from
Mario Draghi, the outgoing (as in leaving, not extrovert 😜) president of the European Central Bank (ECB) about slowing global growth and Germany teetering on the brink of recession. He painted a gloomy picture when he said that “The incoming data since the last governing council meeting in early September confirm our previous assessment of protracted weakness in the euro area growth dynamics, the persistence of prominent downside risk and muted inflation pressures”. German companies have been feeling the heat in particular due to their exposure to exports and manufacturing and recent figures show that the country’s employment numbers fell for the first time in six years. * SO WHAT? * Germany is the bloc’s main engine – and so when it splutters, everyone else suffers (some would argue that Germany’s performance papers over the cracks elsewhere in the eurozone, so when Germany does badly, everyone else’s shortcomings become more obvious). Draghi is leaving the eurozone in a right state what with sluggish GDP, worsening jobs growth and not much to look forward to. Incoming new president Christine Lagarde has a lot to do if she’s going to turn this around!
Intel is optimistic, Nokia has a shocker and Twitter underwhelms…
Intel raises outlook, sending shares higher (Wall Street Journal, Sarah E. Needleman) highlights Intel’s solid third quarter earnings and optimism for the future as it raised its full-year outlook. Intel is the largest chip maker in the US by revenues and is seeing an uptick in demand for its chips that are used in the data centres that power cloud-computing. The other thing is that its memory business (I’d forgotten about that 😂) is showing signs of turning around but PC-related revenues were hit as they couldn’t keep up with strong demand for PCs. * SO WHAT? * Great news for Intel, but I would also have thought that this will be good for the whole industry. It’s interesting to see the strong demand for PCs, but I’m not sure how long that will last if we get into a protracted global economic slowdown as sales of big ticket items tend to suffer.
Nokia shares plunge on 5G outlook in US and China (Financial Times, Richard Milne) shows that shares in the Finnish telecoms equipment maker fell by 24% yesterday after it announced a cancellation of its dividend and a reduction in its earnings forecasts for this year and next due to tough competition and costs of rolling out 5G networks. Interestingly, the US is trying to divert spending away from Huawei (which it doesn’t trust) and towards Ericsson and Nokia (which it does) for 5G but complicated trade rules are making things difficult. A proposed merger
in the US between Sprint and T-Mobile could take out a big customer in the American market and the Chinese government’s eagerness to support Huawei in its own market is making things even more tricky. * SO WHAT? * It sounds to me like Nokia is having problems that are entirely out of its hands – so making these cuts sounds like the sensible thing to do as it’s probably best to hunker down until the dust settles. The third quarter results weren’t all bad given the circumstances – net sales were up by 4% versus a year earlier and it made an operating profit of €264m versus a €54m loss a year ago. The chief exec believes that Nokia will have a “strong” fourth quarter.
In Twitter shares plunge as ad-business troubles weigh on growth (Wall Street Journal, Sarah E. Needleman) we see that revelations of glitches in its ad-targeting software (which made it less targeted than usual) and underwhelming ad revenues in July and August shocked the market, which sent the share price down by over 20% in trading yesterday. This is the biggest one-day percentage drop since the company floated on the stock market in 13. * SO WHAT? * The good news is that the problems with the software were fixed but the company’s credibility got dinged in the meantime. Given that advertising represents 85% of overall revenue, it is hardly surprising that any bad news in this area is going to have exponential consequences. Still, the market doesn’t like surprises and expressed that in yesterday’s sell-off. Even though you would have thought that Twitter should be taking advantage of arch-rival Facebook’s current problems in terms of attracting advertising, it doesn’t seem to be doing so.
Amazon’s profit hurt by push to speed up shipping (Wall Street Journal, Dana Mattioli) shows a rare hiccup in Amazon’s relentless money making as Q3 profit fell by 26% versus a year ago thanks to its investment in reducing delivery times. This is its first profit decline since 2017. * SO WHAT? * Amazon’s Q3 tends to be the quarter when spending increases in the run-up to the holiday season – and it’s expected to be even higher this year as Amazon aims to offer one-day free shipping to Prime members. Revenues were up by about 24% this quarter, but they were eclipsed by the 46% jump in shipping costs. Still, CFO Brian Olsavsky points out that faster deliveries lead Prime members to shop more, so it looks like more expenditure now will underpin higher future sales – although this obviously costs in the short term. What is slightly more worrying to my mind is the slowdown in growth for Amazon Web Services (AWS) but some would argue that a rise in shopping traffic elsewhere will boost demand for Amazon’s cloud services. It may also be that the business is just maturing.
Next stores to host O2 phone shop pop-ups (The Guardian, Laura Onita) heralds another deal for Next as it has just opened two O2 concessions in its 500 stores, with more to come, which will allow shoppers to buy a new mobile phone or renew their existing O2 contracts while clothes shopping! * SO WHAT? * This looks like another canny move from chief exec Lord Wolfson as retailers look to maximise what they can earn from the retail space they have. Next has already announced similar deals with Costa, Caffe Nero, Paperchase, Virgin Holidays, Tui and others who pay them a fee to park in their stores and flog their wares. Next also recently signed a deal that enabled customers to pick up their Amazon orders in store. All this is great to maximise revenues from their existing space, but it should also help with sales as higher footfall should translate into shoppers buying more of their stuff. Other retailers should take note!
Supercuts hair salon owner, Regis UK, enters administration (The Guardian, Zoe Wood) highlights the latest high street failure as Regis UK’s efforts to survive via CVA last year didn’t work and now 1,200 jobs are put at risk at 220 salons across the country. The shops are expected to trade as normal for the moment while Deloitte, the administrator, looks at options for the business. The nightmare on high street continues…
And finally, in other news…
You know when you give a gift, it often means so much more when you’ve put some of yourself in it? Well this guy took it to extremes in Man saves his nail clippings for a year and turns them into engagement ring (The Mirror, Courtney Pochin https://tinyurl.com/y57ojwcz). How romantic 🤢 Diamonds are just so yesterday, daaaahlings
Some of today’s market, commodity & currency moves (as at 0908hrs 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 **|
|7,328 (+0.93%)||26,806 (-0.11%)||3,010 (+0.19%)||8,186||12,872 (+0.58%)||5,684 (+0.55%)||22,800 (+0.22%)||2,955 (+0.48%)|
|Oil (WTI) p/b||Oil (Brent) p/b||Gold Per t/oz||£/$||€/$||$/¥||£/€||$/₿|
(markets with an * are at yesterday’s close, ** are at today’s close)