Friday 30/08/19

  1. In MACRO & ECONOMIC INDICATOR NEWS, US growth wobbles on the trade war, Boris Johnson tries to head off opposition and Ukraine gets a new young PM while UK consumer spending looks vulnerable and Hays rejigs its business
  2. In TECH NEWS, Dell sees record PC revenues and Micro Focus falls through the floor
  3. In INDIVIDUAL COMPANY NEWS, YouTube reconsiders its paywall, Juul faces more scrutiny, Amigo has a shocker and Lewis Hamilton invests in a new meat-free burger chain
  4. In OTHER NEWS, I bring you an amazing Airbnb



So US growth wobbles, BoJo speeds momentum, Ukraine gets a new PM, UK consumer spending looks increasingly vulnerable and Hays shuffles its business…

Trade war hits US growth as Trump renews attack on Fed (Wall Street Journal, James Dean) cites an estimate downgrade from the commerce department of Q2 GDP growth from 2.1% to 2% due to exports and business investment being weaker than it had originally thought. Trump is currently trying to find a balance between re-setting the trading relationship with China and ensuring that his own economy continues on a growth track, but some observers think his efforts are starting to slow things down on the domestic front. Trump resorted to his tried-and-tested strategy of blaming anything negative on someone else and tweeted yesterday that “The economy is doing great, with tremendous upside potential! If the Fed would do what they should, we are a rocket upward!”. The market is expecting a 0.25% cut in interest rates at the Federal Reserve’s next policy meeting to avert potential recession in the US.

Meanwhile, Boris Johnson seeks to avert defeat by accelerating Brexit talks (Financial Times, George Parker and Jim Brundsen) shows that BoJo is trying to up the tempo in talks with Brussels to hammer out a revised Brexit deal in order to avoid defeat at the hands of his opponents next week. His chief Brexit negotiator, David Frost, is to meet his EU counterparts twice a week throughout September to get a new deal before the summit set for October 17th-18th. * SO WHAT? * Basically, BoJo wants to keep the soft border in Ireland and Europe has thus far refused any such overtures. He is said to be hoping to ensure this ahead of the EU October summit. MPs who are opposed to a no-deal are trying to get together to stop him from using the threat of no-deal to get a better deal and things are likely to come to a head when they return from their summer recess next Tuesday.

Elsewhere, Oleksiy Honcharuk named as Ukrainian prime minister (Financial Times, Roman Olearchyk) heralds the approval of 35-year-old lawyer Oleksiy Honcharuk as the country’s next prime minister under President Volodymyr Zelensky’s administration. He’ll be Ukraine’s youngest PM and will aim to increase economic growth and investment by accelerating privatisation plans, lifting restrictions on selling agricultural land, speeding up deregulation and strengthening the rule of law. The new parliament is also expected to implement more legislation to crack down on corruption.

In terms of economic indicators, Brakes could go on consumer spending as confidence falls (Daily Telegraph, Tim Wallace) cites the latest GFK survey that shows confidence in consumer spending, which makes up a significant chunk of the UK’s economy, is falling. The last time the reading has been this low is in the eurozone crisis in 2013 and concerns of recession are increasing. GFK’s Joe Staton siad that “Unless there is major good news impacting the hearts and minds of consumers, my concern is this [indicator] will fall, and if it falls people will stop spending and the brakes will come on the economy, as we saw at the beginning of the last downturn”. On the plus side, wage growth is continuing and employment is tight – so things could be worse.

Talking of employment, Recruiter’s profits hit by slowdown in Europe (The Times, Ben Martin) shows that the UK’s biggest recruiter, Hays, struck a cautious note in its results yesterday as it spoke of a weakening German market and tougher conditions in the UK. It has had to cut managers in the Netherlands, Belgium and France as part of a European restructuring due to an increasingly inhospitable business landscape. * SO WHAT? * The company, which recruits people into white-collar industries, is often seen as an economic bellwether considering its size and breadth of exposure to the job market. Although things haven’t been great of late, chief exec Alistair Cox maintained high hopes for the German business – which he wants to double over the next few years – but said that, for the moment, weakness in manufacturing and automotive companies as well as the possibility that Germany could tip into recession is proving to be a dampener.



Dell posts solid PC revenues while Micro Focus tanks…

Dell reports record revenue in PC division (Wall Street Journal, Maria Armental) heralds a solid performance by the company which saw its quarterly profits boosted by a big tax benefit and record revenues from sales of PCs, notebooks and workstations to commercial clients. Dell’s vice chairman Jeff Clarke observed that “We are in the early stages of a technology-led investment cycle”. If that is indeed the case, then the next year or two could bring more joy for the company that returned to public markets in December after a five-year absence.

Micro Focus suffers £1.7bn wipeout over sales shock (Daily Telegraph, Matthew Field and Michael O’Dwyer) is a

story doing the rounds of the broadsheets today as Britain’s second biggest tech group saw its share price crater by 32% yesterday after issuing a profit warning in an unscheduled trading update. Micro Focus, which specialises in prolonging the life of legacy computer systems, has continued to struggle with the integration of the acquisition of HP’s software business in 2017. Chief exec Stephen Murdoch, said it would now undertake a strategic overhaul of the business, leaving all options open. * SO WHAT? * This is serious stuff – and if there’s any more share price weakness, the company will have to face the prospect of being ejected from the FTSE100 next week, when there is a rebalancing. This news has really thrown the cat among the pigeons, leaving investors wondering whether there will be more M&A, whether the company will go private or whether there will be some disposals.



YouTube reconsiders its paywall, Juul faces more accusations, Amigo has a nightmare and Lewis Hamilton invests in a meatless burger joint…

YouTube drops paywall for new shows as streaming war heats up (Financial Times, Anna Nicolaou) signals an interesting development in streaming as YouTube announced that it is going to make its original programming – including cult hit Cobra Kai – free to watch, moving away from the subscription model and back into its ad-supported model just as the likes of Apple and Disney wait in the wings to launch their subscription channels. The Google-owned platform has decided not to mix it with the likes of Netflix et al in what will be a crowded market and said that all future original shows will be available for fixed time periods with ads, but for free. Cobra Kai, for instance, saw its first season moved in front of the pay wall on Thursday and season 2, which will be broadcast next month, will also be available for free. All other shows in its existing library will stay behind the paywall because of contracts YouTube has with producers. * SO WHAT? * I think that this is a good move because people have become accustomed to seeing ads on YouTube over the years – and it means that it will be able to mitigate the high costs of creating content in a tried-and-tested way. As I keep saying, I think that people will reach subscription fatigue when all these other channels throw their hats into the ring, but YouTube will continue to attract users who don’t mind ads in return for free access to content.

Following on from all the Philip Morris International/Altria merger chat that’s going on at the moment, Juul’s marketing practices under investigation by FTC (Wall Street Journal, Jennifer Maloney) says that the Federal Trading Commission (FTC) is conducting an investigation into whether vaping start-up Juul Labs has used influencers and other marketing to target minors. The FTC sent Juul a letter requesting more information about its marketing last September and it has been deepening its investigation ever since. The Food and Drug Administration (FDA) is also investigating Juul’s marketing practices. * SO WHAT? * Juul’s slick campaigns have been seen to be

instrumental in the skyrocketing popularity of vaping as the practice among teens shot up by 78% from 2017 to 2018, according to federal data. The FDA has been just one party looking to kill its use among youngsters and news of the FTC’s investigation just ratchets up the pressure – something that Altria, the owner of a 35% stake in Juul, and Philip Morris International will have to take into account in their merger talks.

Talking of regulatory crackdowns, Amigo shares plummet as regulatory crackdown looms (The Guardian, Kalyeena Makortoff) shows that the share price of the loans group Amigo dropped by over 50% yesterday after it warned that growth would evaporate due to increased scrutiny by regulators and a Brexit-led economic downturn. Amigo specialises in guarantor loans where the borrower uses friends and family to guarantee payments on loans to those with trickier credit histories. The company said that “While past recessions have demonstrated the resilience of our business, we believe it is prudent to factor a deteriorating economic outlook into our impairments model. We will continue to monitor the potential impact and will review our position again at the half year”. * SO WHAT? * The Financial Conduct Authority is concerned about the practice of re-lending to existing borrowers, so Amigo is having to find new customers which is, presumably, more expensive to do. They are also going to be more cautious in their lending conditions, which may also dent growth prospects…

And finally, I thought you might be interested to see Lewis Hamilton invests in meat-free burger chain (The Guardian, Sarah Butler) as the F1 driver is teaming up with a few other investors to back a meat-free burger chain called Neat Burger. The first one will open just off London’s Regent Street on Monday, to be followed by others in Covent Garden and Kings Cross. There are plans to open in the US next year and 14 outlets across Europe over the next two years. Fellow investor Ryan Bishti said that “We are not aiming for vegans or a plant-based niche, we are aiming to convert meat eaters. We are part of a movement happening when you look at the world today in the Amazon with deforestation for crops and agri-farming. This is a perfect way to make a change”. Neat Burger’s chefs have spent 10 months working with Beyond Meat to develop their own patty. * SO WHAT? * The vegan revolution rolls on! For more on meatless, see my more detailed write-up HERE.



And finally, in other news…

I thought I’d bring you an amazing Airbnb today in You can rent a snow igloo in Finland on Airbnb for $122 a night (Insider, Alison Millington Wow!

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Some of today’s market, commodity & currency moves (as at 0901hrs 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 **
7,184 (+0.98%)26,362 (+1.25%)2,925 (+1.27%)7,97311,839 (+1.18%)5,450 (+1.15%)20,704 (+1.19%)2,886 (-0.16%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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