Friday 26/03/21

1. In MACROECONOMIC & VACCINE NEWS, US jobless numbers fall, the Suez thing drags on, India blocks vaccine exports and there’s back-pedalling on pub passports
2. In ELECTRIC VEHICLE-RELATED NEWS, Arrival arrives, Ford ditches the Mondeo for EVs and the UK charging network has a way to go
3. In RETAIL-RELATED NEWS, H&M and Nike face Chinese wrath, the GameStop frenzy starts again and Boohoo cuts suppliers
4. In INDIVIDUAL COMPANY NEWS, Microsoft moves to buy Discord, Cineworld paints a gloomy picture, Deliveroo gets the cold shoulder from investors and Tui reins it in
5. AND FINALLY, I thought I’d leave you with a pasta prank and a “sushi” kit…

So US job numbers fall, the Suez remains blocked, India stops vaccine exports and the passports for pubs thing takes flak…

Jobless claims in America tumble to lowest level since start of pandemic (Daily Telegraph, Tim Wallace) highlights positive signs for the US economy as the number of Americans claiming unemployment benefits fell to its lowest level since the start of the pandemic, according to the latest stats from the Department of Labor. It is thought that the vaccine rollout and stimulus payments played a major part in this turnaround and economists are already raising GDP forecasts as a result.

Suez Canal clearance could take ‘weeks’, says salvage company (Financial Times, David Sheppard and Heba Saleh) shows that the Suez Canal blockage is not going away for a while yet as efforts continue to refloat the 220,000-tonne Ever Given container vessel come to nothing. This thing is 400m long, is one of the world’s biggest container ships and is fully laden with cargo and fuel and dredgers are trying to move enough sand and soil to enable higher tides to free it. * SO WHAT? * Although this is going to affect supply chains and cause delays I think that this will be a blip as there doesn’t appear to be anything sinister behind it. IMO it will increase container rates and fuel costs, but they will surely normalise once this gets solved.

India blocks vaccine exports in blow to dozens of nations (Financial Times, Stephanie Findlay, Michael Peel and Donato Paolo Mancini) highlights the country’s ban on vaccine exports for up to two to three months due to an accelerating second wave of coronavirus infections. The Serum Institute of India, which is the biggest vaccine manufacturer in the world and the main supplier to the international Covax programme, has be told to stop exports. * SO WHAT? * Given the sharp recent rise of cases at the moment in India this sounds like a prudent course of action but it will be yet another blow for vaccine rollout and will be particularly acutely felt in places like Africa, which rely heavily on the WHO’s Covax programme.

Then in Johnson backtracks on vaccine ‘passports for pubs’ after backlash (Financial Times, Sebastian Payne, Alice Hancock and George Steer) we see that vaccine certification may only start when all British adults have been offered the jab, following massive resistance from the hospitality sector over his previous suggestions of a plan to introduce a “passport for pubs”. An official review into what’s possible re certification is due to be  completed on April 5th or 12th. * SO WHAT? * I think that there is a lot of noise on this. IMO, one of the real reasons behind the objections is not really about the whole human rights thing (although it’s probably partly about that), it’s about who wants to carry the can for making decisions on who should or should not be allowed into places like pubs. The government wants landlords to make the decision because then they don’t look like the killjoys (you can imagine that pubs – and possibly those who work in them – who enforce such rules will be attacked. Just look at what happens to hardworking supermarket workers who get abused for enforcing the social-distancing/mask rule) and the landlords want the government to make the decision so that they don’t get the blame. The other thing, of course, is that you could argue that the prospect of having to produce proof of being vaccinated or having some kind of immunity will result in lower custom, but I think that if everyone has to do this it will just become part of people’s daily lives. FWIW, I think that there needs to be some kind of central database and a mobile app which gives you a QR code. You could then put someone on the door of the pub with a QR reader (much like what you get when you go to a concert) who then lets people in. Apparently, in Israel (which has the most advanced vaccination rollout on the planet) people who want to enter a restaurant or bar have to show a “green pass” which shows whether they’ve had the jab or have immunity. We’ll just have to see what the review says but if I was being very cynical, I could say that the government making landlords make the decision would be a back-door way of effectively forcing people to take the vaccine. The implication here would be that people will be given the “choice” of not taking the vaccine – but if they don’t, they won’t be able to go to the pub, book a holiday, go to a rock concert etc.

Arrival floats, Ford ditches the Mondeo and UK charging faces an uphill task…

Electric vehicle start-up sparks record valuation (The Times, James Dean) shows that the London-based electric van and bus start-up Arrival had its debut on the New York Stock Exchange yesterday (via the CIIG SPAC) with the biggest ever NYSE debut valuation for a British company of $13.6bn. The company has 1,800 employees worldwide, has facilities in Bicester, Reading and Banbury and has backers including Kia, Hyundai and BlackRock. Hopes are high, although it has never made a profit, as it aims to start public road testing for its vans this summer and its buses in the autumn. It aims to be profitable in 2023 and already has an order to supply up to 20,000 vans to UPS. * SO WHAT? * This all sounds great, but TBH we’ve seen this happen with Nikola before (they even had a similar-size order for a load of bin lorries) so any excitement should be tinged with caution. Let’s hope that Arrival has both style AND substance! One thing I find particularly attractive about this company is that it does not need to have “gigafactories” – it relies on highly automated smaller facilities that can be spread around the country, which will be great for a better dispersal of jobs.

Meanwhile, with cars, Ford axes the Mondeo to focus on electric and SUVs (Financial Times, Peter Campbell) shows that Ford is ditching an “icon” as it shifts its “focus” (hoho) to EVs and SUVs in Europe. It intends to go fully electric in the UK and Europe by 2030, but all options will have a hybrid or electric option by 2026. The business/family sedan was launched in 1993 but its sales

have dwindled of late, hence it is facing the axe. Almost 40% of the company’s European sales last year were SUVs or crossovers versus 31% the previous year, so this makes sense. This is another step forward on Ford’s journey to electrification!

Mind you, there are steep challenges identified in UK has to fit 700 charging points a day for EV switch (Daily Telegraph, Alan Tovey) cites new research by the Society for Motor Manufacturers and Traders shows that Britain will have to install 700 electric car charging points per day (the current rate is 42 per day) to hit the 2030 ban on sales of new cars with petrol or diesel engines – also remarking that 10% of public chargers are out of order. It also argues that as only one in three British households don’t have off-street parking, many will have to rely on public charging. * SO WHAT? * This is sobering, but let’s not forget that the SMMT represents PAYING members and is thus unlikely to come out with a conclusion that says any differently. OK, so they are right about the government’s recent cut in EV subsidies in that this is likely to have a detrimental effect to sales, but it sounds to me like the industry is just asking for freebies. Given that EVs are comparatively expensive in this country, I wonder whether this whole situation will force a rethink of car ownership sooner rather than later. Traditionally, people aimed to own their cars, but I think that if selling prices are really high one solution would be to RENT your car for a lower monthly fee. This may take a bit of time for people to get their head around, but if more people are working from home in the future, consumers continue to get more food deliveries etc. and cars continue to be expensive I really do see this as a viable option. Given trends over the years for people not to “own” something physically (when was the last time you bought a CD or a DVD??) but to pay a monthly fee, wouldn’t it make more sense to rent something like a car?

H&M and Nike face flak from China, the GameStop frenzy reignites and Boohoo cuts suppliers…

In a quick scoot around some of today’s retail stories, H&M and Nike face China backlash over Xinjiang stance (Financial Times, Christian Shepherd) shows that both companies are getting a right kicking in the Chinese state media and e-commerce platforms following their statements of concerns about forced labour in Xinjiang. Searches for H&M clothing from H&M came up blank on T-Mall and JD.com, China’s top two online retailers and searches for its shops on Baidu and Gaode, China’s top mapping apps, also came up empty-handed. China’s Communist Youth League were said to be responsible for calling for a boycott. In addition to this, one of Nike’s brand ambassadors cut ties in protest. * SO WHAT? * It seems that the dredging up of old statements by western companies on human rights issues in Xinjiang has coincided with a diplomatic row between Beijing and the West and sanctions being imposed by the latter on the former. I think this is a storm in a teacup from a corporate and economic standpoint because, generally speaking, these things tend to blow over relatively quickly. After all, companies like Dolce & Gabbana, Dior and Balenciaga have all faced boycotts for one reason or another and have managed to come through unscathed. 

Then in GameStop share frenzy starts again (The Times, Callum Jones) we got a case of déja vu on GameStop as its share price shot up by 53% despite posting disappointing results earlier this week. GameStop has 5,000 shops in ten countries and its share price has risen by a whopping 865% since the start of this year when retail investors piled in to stick it to the hedge funds! Interestingly enough, the share price of another stock that got caught up in the Reddit-fuelled frenzy earlier this year, AMC Entertainment, saw a chunky 21.35% rise in trading yesterday despite news of the release of Black Widow being pushed back to July.

Then in Boohoo severs ties with hundreds of UK manufacturers after critical review (The Guardian, Sarah Butler) we see that the embattled online apparel retailer has cut ties with hundreds of companies following a review of its supply chain. * SO WHAT? * This is all part of the current soul-searching being undertaken by the company following the scandal last summer about dodgy practices in a supplier’s Leicester factory. It is part of an ongoing rehabilitation of the reputation of the brand, but I still think this is largely cosmetic as sales continue to be strong despite the dent to its image.

Microsoft courts Discord, Cineworld paints a gloomy picture, Deliveroo faces resistance and Tui cuts back…

In other big stories today, Microsoft is in exclusive talks to acquire Discord (Wall Street Journal, Cara Lombardo and Maureen Farrell) shows that the software giant is in advanced talks to buy the messaging platform Discord for at least $10bn as it tries to broaden its offering. The two companies are in exclusive talks regarding a deal that could complete as early as next month. Discord offers voice, text and video-chatting and it has been a lockdown winner as people have been keen to connect with others online. * SO WHAT? * The purchase of Discord could enhance Microsoft’s videogame business and boost its social networking offering. It would be the software giant’s biggest acquisition since it bought LinkedIn for $26.6bn in 2016. Discord only started in 2015 and now has around 140 million monthly users.

Elsewhere, Cineworld warns Covid-19 could threaten its survival (The Times, James Dean) highlights difficulties being faced by the world’s #2 cinema chain as it announced a gloomy set of annual results yesterday. It had a pre-tax loss of $3bn for 2020 versus a pre-tax profit of $212m in 2019. * SO WHAT? * Although this was a dire performance, I wouldn’t have expected anything else! I am firmly of the belief that cinemas will see a huge resurgence (actually, in markets that have opened up already in China and Japan, this is already going on) when lockdown lifts as people will really value going to the cinema AND there is going to be an incredible array of postponed blockbuster-after-blockbuster on offer!

Legal and General joins investors shunning Deliveroo IPO (Financial Times, Attracta Mooney and Tim Bradshaw) shows that the UK’s biggest fund manager has joined a growing throng of big investors to say it will not partake in Deliveroo’s IPO next week. The main sticking points are its dual-share structure and the way it treats its workers. M&G, Aberdeen Standard Investments and Aviva Investors have also indicated that they will not be participating in what should be the UK’s biggest IPO for ten years. * SO WHAT? * If the IPO actually goes ahead as planned, Will Shu, co-founder and chief exec, will have a stake worth £500m, but he will retain 57% of the voting rights. I have to say that I think there’s an air of desperation surrounding this IPO given the recent Supreme Court judgment on Uber and Europe also taking a closer look at how their couriers are classified (as contractors or workers) in addition to a potential dropping off of business levels as lockdown restrictions lift and people decide to ditch takeaways and go to restaurants in person. I wonder whether they would rather cut the flotation price and get the deal away quickly rather than risk a snowballing of negative comment that could kick an IPO into the long grass.

Then in Tui cuts summer capacity despite ‘optimism’ for holidays in 2021 (The Guardian, Gwyn Topham) we see that Europe’s biggest travel company has decided to cut summer capacity following warnings from politicians that foreign holidays could be off the cards. Uncertainty is clearly the enemy here – and it stands in stark contrast with the approach that Ryanair is taking.

…in other news…

I thought I’d leave you today with an amusing mother-daughter moment in Woman’s pasta prank on Italian mum works a charm as she ends up absolutely fuming (The Mirror, Courtney Pochin) and then a very clever “sushi” set in These beautiful pieces of sushi aren’t actually sushi (SoraNews24, Casey Baseel). Nice!