Friday 29/05/20

  1. In MACRO NEWS, we look at the latest reactions to the China/HK thing, hurdles to the EU bailout package and the coronavirus latest in France, Spain and the UK
  2. In TECH NEWS, Big Tech gets bigger but Trump is about to clip its wings
  3. In RETAIL/HIGH STREET-RELATED NEWS, Amazon converts part-time jobs, Boohoo flips the Dark Destroyer the bird, Monsoon is in deep trouble and Cineworld calms nerves
  4. In INDIVIDUAL COMPANY NEWS, Nissan choses the UK and EasyJet gets the axe out
  5. AND FINALLY, I bring you one family’s lockdown…



So we get the latest on the China/Hong Kong situation, the obstacles for the EU bailout package and a coronavirus update from France, Spain and the UK…

In the midst of all the uproar being caused by China imposing a National Security Law on Hong Kong, UK opens door to citizenship for 300,000 HK residents (Financial Times, Laura Hughes) highlights the UK’s pledge to extend visa rights for British National (Overseas) passport holders and speed up the path to citizenship in response to China’s recent action. About 315,000 Hong Kong residents born before the 1997 UK handover hold BNO passports which have previously given them only a limited amount of extra rights and although they have now been extended, Raab has stopped short of granting them automatic British citizenship. The US, UK, Australia and Canada released a joint statement yesterday condemning China’s move but, on the ground, Businesses swallow ‘bitter medicine’ of Hong Kong security law (Financial Times, Don Weinland, James Kynge and Nicolle Liu) shows that businesses generally seem to want to fall in line in order to avoid further protests and bring calm back. Many companies just want to bring an end to the turbulence of last year when the protests reached fever pitch and others are reconsidering their presence in the territory. Will they all go over to Singapore, I wonder?

Meanwhile, EU recovery fund faces prodigious hurdles to reach consensus (Financial Times, Sam Fleming, Jim Brunsden and Michael Peel) shows that the EU’s proposed coronavirus bailout bill is going to have to get through a tricky few weeks in order to get approval from all its

member states. Potential sticking points include the size of the recovery fund itself, how it’ll be divvied up, what the split of grants and loans will be, what strings will be attached and how the EU is ultimately going to pay it all back. This is going to get difficult – especially with the “frugal four” (Austria, Denmark, the Netherlands and Sweden) being reluctant as things stand currently.

Meanwhile, France further eases coronavirus lockdown (Financial Times, Victor Mallet) highlights the easing of travel restrictions within the country and the reopening next week of schools, cafés and restaurants although French jobless numbers surge as Europe limps out of lockdown (Financial Times, Martin Arnold and Valentina Romei) shows that the number of French unemployed in April hit a record 23%. The path out of the pandemic won’t be a smooth ride for anyone.

Elsewhere, Spain to push through minimum income guarantee to fight poverty (Financial Times, Daniel Dombey and Martin Sandbu) looks at another way of getting money to the people as the Spanish government is set to use emergency powers today to force through a minimum income guarantee that will help the poorest 2.3m in society as soon as next month. This guarantee will top up incomes to a guaranteed level of €461-1,015, depending on individual households, versus the current €310 per month.

Back in the UK, PM Eases lockdown for friends and family (The Times, Steven Swinford) highlights further lockdown easing as now friends and family will be able to meet outdoors in groups of six from Monday – but they must maintain social distancing. I bet that garden centres and grocery stores are going to see a massive uplift in sales of BBQs, BBQ food and garden furniture over the next few days as a result!



Big Tech gets bigger but Trump is about to give it a slap…

In Big Tech goes on pandemic M&A spree despite political backlash (Financial Times, Miles Kruppa and James Fontanella-Khan) we see that big tech companies are snapping up deals at their fastest pace since 2015 – Alphabet, Amazon, Apple, Facebook and Microsoft have already announced 19 deals so far according to data from Refinitiv. This is different to what happened in the 2001 recession and 2008 financial crisis because tech companies now have so much more cash (public filings say they have a combined $560bn in cash and marketable securities), plus they have come out of this current crisis smelling of roses. A combination of cash-rich tech giants and cash-hungry start-ups has resulted in an M&A frenzy in certain areas. * SO WHAT? * I think that this feeding frenzy is likely to continue as Big Tech’s coffers continue to swell and more businesses that previously wouldn’t consider selling may well start showing up on their radar as targets. The problem is that it just means that the barriers to entry are going to be ridiculously high and the big players will just get harder to beat.

Having said that, Trump signs executive order targeting social media (Wall Street Journal, John D.McKinnon and Rebecca Ballhaus) shows that the US president signed an executive order yesterday to limit the legal protection currently enjoyed by social media and other platforms. The effect will be that it will make it easier for federal regulators to hold the likes of Twitter and Facebook liable if they are judged to be unfairly curbing users’ speech. This came just days after Twitter put a fact-checking sticker on Trump’s Tweet regarding voter fraud. * SO WHAT? * It sounds to me like the nutters and conspiracy theorists of the world will be cheering this order. It is likely that this will be challenged in court, with Big Tech arguing that the government is going too far and that it is violating First Amendment protections. Mark Zuckerberg has been taking a hands-off approach so far, saying in a CNBC interview yesterday that “I don’t think Facebook or internet platforms in general should be arbiters of truth” but I suspect that Trump will want to keep the pressure on as we lead into the final straight of the presidential election later this year. He is clearly keen to control the narrative…



Amazon does the decent thing, Boohoo kicks criticism into touch, Monsoon looks troubled and Cineworld gives investors cause for relief…

You will be aware that some retailers have been employing people at a vastly accelerated rate during the coronavirus pandemic, but Amazon gives full-time jobs to part-time workers (The Times, James Dean) shows that 125,000 of the 175,000 part-time employees it took on in America over this period will be offered full-time jobs, according to an announcement made yesterday. The rest of them will stay on seasonal contracts. * SO WHAT? * This move suggests that the e-tailing giant believes it can maintain the market share it has won over the period.

Boohoo sitting pretty after £330m deal for rest of fashion site (The Times, Ashley Armstrong) shows that Boohoo bought the stake in Pretty Little Thing that it didn’t already own for almost £338m. Shares in the online retailer shot up by 15% on the news as the PLT issue had been a cause of concern among investors for a while. The brand accounted for 54% of Boohoo’s profit last year and the company said that talks to make this move had been in the offing for a while but got more serious due to the coronavirus outbreak. It added that it had nothing to do with the disparaging note published a few days ago by short-seller Shadow Fall.

Staying with retailers, Monsoon close to collapsing (Daily Telegraph, Laura Onita) shows that 3,500 jobs hang in the balance as Monsoon Accessorize is about to appoint administrators in the next few days as the pandemic proved to be the final straw for an already-troubled high street retailer. They are not alone in their troubles as Debenhams is about to cut hundreds of head office jobs and Virgin Media will disappear from the high street as it has decided not to reopen its chain of 53 shops after the lockdown ends.

Then there’s some good news for cinema-goers in Cineworld intends to open cinemas worldwide in July (Financial Times, Simon Foy) as the company said it would open all of its cinemas in July. It has also secured $110m in extra cash from its lenders and gave investors cause for relief when it said that it now has enough cash to survive to the end of the year even if cinemas stay shut for the remainder of the year. The share price shot up by 21% on the news – but this is from a low base as the price has absolutely cratered since lockdown. It will bring in social distancing measures, an updated booking system that will allow family groups to sit together and staggered film times to reduce the number of people hanging around in lobbies. * SO WHAT? * So far so great, but the elephant in the room is Cineworld’s planned acquisition of Canada’s Cineplex for $2.1bn. Although consolidation and costs savings will be very welcome now, the price of the original deal may be too great for Cineworld given the increased likelihood of a poor outlook.



Nissan Sunderland breathes a sigh of relief and EasyJet threatens deep cuts…

Nissan’s Sunderland factory safe but plant in Barcelona will close (The Guardian, Jasper Jolly) shows that the Sunderland factory is going to continue while Barcelona’s won’t as part of a massive company-wide cost cutting effort. It did add, however, that it wanted to “improve efficiency” in its Sunderland facility. * SO WHAT? * This latest move means that Nissan will now have no car factories in the EU! Still, it sounds to me like Nissan will be cutting some jobs in Sunderland – although this is purely speculation on my part.

EasyJet to cull 4,500 staff as golden age of air travel ends (Daily Telegraph, Oliver Gill and Simon Foy) shows that EasyJet will be following other airlines in making deep cuts to staff numbers. Chief exec Johan Lundgren said that he believes that demand for air travel will not recover until 2023, which stands in contrast to rivals Ryanair and Wizz Air who believe that the recovery will be in 2021. EasyJet will also cut its fleet. * SO WHAT? * This is just the latest airline to hit massive turbulence. IMO, any return to normality will depend on a vaccine/cure and the reduction of social distancing measures. These are the main things that will boost confidence (and financial position) of potential passengers.



…in other news…

We’re all doing things in lockdown to chase away the boredom/increase the fun factor – and this family is no different: A dad turned his entire house into a giant ball pit for his kids who haven’t been able to visit their favorite playground (Insider, Samantha Grindell Looks like fun!

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Some of today’s market, commodity & currency moves (as at 0749hrs 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 **
6,219 (+1.21%)9,36911,781 (+1.06%)4,771 (+2.03%)21,878 (-0.18%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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