- In MACROECONOMIC & OIL NEWS, the US economy bounces back, oil hits a low and Exxon makes deep cuts
- In FAANG NEWS, Facebook’s revenues rise, Amazon aims to keep up with demand, Netflix ups its prices and Google’s ad sales return
- In CORONATRENDS NEWS, Moderna collects deposits, Lloyds Bank benefits from the housing market frenzy, Kraft Heinz and Kellogg benefit from comfort eating, Hornby benefits from lockdown demand but Anheuser-Busch suffers from home drinking
- In INDIVIDUAL COMPANY NEWS, VW gets back to profit, Starbucks sees customers return, Walmart stops gun sales and Juul settles for a more modest valuation
- AND FINALLY, I bring you a method for making crispy roast potatoes…
MACROECONOMIC & OIL NEWS
So the US economy rebounds, oil hits a new low and Exxon axes employees…
Economy bounces back but deeper trends hint at enduring woe (The Guardian, Dominic Rushe and Michael Sainato) cites Bureau of Economic Analysis figures which show that GDP rose at an annualised rate of 33.1% between July and September and increased 7.4% versus the previous quarter. The previous record for a quarterly figure was a 3.9% increase in 1950 and Trump was obviously keen to claim the credit, tweeting that these figures were the “Biggest and Best in the History of our Country…Sleepy Joe Biden and his proposed record setting tax increase, would kill it all”. * SO WHAT? * This is an impressive jump and Trump is obviously going to be making the most of this given we are less than a week away from the presidential election. In order to win, he needs to steer the narrative away from coronavirus (it’s not going well) and towards the economy (it looks like it is going well, although it’s far from being out of the woods!). The thing is, this sudden hike comes from a very low base as the second quarter showed a historic slump and these wild swings make accurate predictions more difficult. Trump can take credit for this boost, though, because of his
decision to reopen most the economy – but the downside has been more coronavirus cases. I imagine that this GDP figure is something he is going to make most mileage out of in the final stages of the presidential election in order to drown out any coronavirus criticisms.
Oil sinks to lowest since May on fears new Covid rules will hit demand (Financial Times, David Sheppard) highlights the fact that oil prices fell to their lowest level since May as rising infection rates in Europe have prompted fears of a return to March and April lows when demand dropped through the floor. The Brent crude price has fallen by 10% this week in its worst performance for over six months. Brent went below $20 a barrel in April and then stayed in the $40-45 range for a lot of the summer as the Opec+ group cut production, but increased lockdown restrictions are expected to hit demand once again. Exxon to slash up to 15% of global workforce, including 1,900 jobs in US (Wall Street Journal, Christopher M Matthews) shows ongoing fallout in the industry as the low oil price persists. The announcement follows job cuts by rivals such as Royal Dutch Shell, BP and Chevron who are all trying to survive the downturn. * SO WHAT? * Although more lockdowns are bound to affect demand, I wouldn’t have thought it would be as severe as March and April given that everyone’s demand disappeared overnight at the same time. If you add China’s apparent recovery into the mix, at least you have somewhere that could take up the slack – unlike the situation back in the Spring.
Facebook revenues up more than 20% despite ad boycotts (Financial Times, Hannah Murphy) shows that Facebook has beaten market expectations with a massive revenue rise in the third quarter and an even better fourth quarter in prospect as ad revenue demand continues to strengthen. On the downside, the number of active users in the US and Canada fell versus heightened levels experienced in the second quarter. * SO WHAT? * It just goes to show how little effect the Facebook boycott had in the summer where over 1,000 brands – including the likes of For and Coca-Cola – pulled their ads from the platform for at least a month. This boycott went ahead in protest at Facebook’s alleged failure to tackle hate speech. The Facebook juggernaut trundles on…
Amazon says keeping up with holiday shopping demand will be tight (Financial Times, Dave Lee) shows that the e-tailing giant believes that sales in the fourth quarter will easily smash the $100bn level for the first time ever and that demand will be so strong that shoppers are being advised to buy in early. Just to give you an idea about how well things are going, when the company published its third quarter earnings yesterday, it posted a net income between July and September that beat Wall Street expectations by 71%! * SO WHAT? * Amazon’s share price is up by 66% since the start of the year but it came off by 2% yesterday because some investors baulked at the prospect of rising shipping costs and Covid-related spending (plus presumably some of them were just taking some profit off
the table). Mind you, the company’s cloud computing business, AWS, continues to power ahead as revenues grew 29% in the third quarter – so that should help to mitigate costs to some extent. The company now employs over 1m people globally – up 50% this year, excluding contractors. This company just keeps getting bigger and better! I really do think that Big Tech needs to get regulated before it gets too big.
Netflix raises prices as competition increases (Wall Street Journal, Joe Flint) shows that the streaming giant has enough confidence to raise the price of its most popular subscription plan for the first time since January 2019 – from $12.99 to $13.99 for the standard plan and $15.99 to $17.99 for the premium service – in an increasingly competitive market. The announcement comes soon after the company’s third quarter subscriber projection miss. * SO WHAT? * The company says that the price increase is to cover rising costs of production but this move will surely benefit the likes of Walt Disney’s Disney+, AT&T’s HBO Max, Comcast’s Peacock and Amazon’s Prime Video as they will look cheaper in comparison and people may use this as an excuse to change.
Then in Google ad sales bounce back sharply from pandemic slump (Financial Times, Richard Waters) we see that Google’s advertising business showed a much bigger uptick from the lowest point of the outbreak powering earnings and revenues of parent company Alphabet way above market expectations. This announcement boosted the company’s share price by up to 9% in after-hours trading! * SO WHAT? * Funnily enough, given that the company is now under investigation by the Department of Justice, chief exec Sundar Pichai tried to play down this outperformance, saying that it was more of an industry uplift rather than anything company-specific. Yeah right 😁. Ad momentum just keeps on building!
Moderna rakes in over $1bn in deposits for potential Covid vaccine (Financial Times, Hannah Kuchler) shows how things have turned around dramatically for the formally lossmaking US biotech as it has received over $1bn in deposits from governments around the world for its potential Covid-19 vaccine. Interestingly, Moderna has elected not to partner up with a pharmaceutical giant, instead deciding to keep its worldwide rights meaning that it would receive all the profits from a coronavirus vaccine. * SO WHAT? * Sounds like a bold move to go it alone – but let’s hope that Moderna pulls through as this could be the making of the company! The company’s share price has jumped up by a whopping 250% so far this year so everything is riding on this potential vaccine.
Lockdown property boom drives Lloyds back to profit (Daily Telegraph, Lucy Burton) shows that burgeoning
demand in the UK property sector since lockdown – and Sunak’s stamp duty holiday – has powered Britain’s biggest high street lender to making a £1bn pre-tax profit over the latest quarter. Mortgage levels have not been this high since 2008! * SO WHAT? * This is great for Lloyds for the moment but the elephant in the room is what happens now that Sunak’s original furlough scheme comes to an end and unemployment inevitably rises.
It seems that we are all hunkering down at home during lockdown, which is great for a lot of companies. Kraft Heinz and Kellogg raise profit forecasts in wake of processed food boom (Financial Times, Alistair Gray) shows that the two household names have benefitted from consumers seeking out that warm fuzzy feeling of familiarity as they experienced huge demand for their respective products, Lockdown sales boom puts model railway-maker Hornby back on track (The Guardian, Joanna Partridge) shows that families’ efforts to peel kids away from their mobile devices have benefited sales of Scalextric and Hornby train sets, helping the company to return to profitability – but Brewer hit by drinkers’ home habit (The Times, Robert Miller) shows that quarterly profits were hit at Anheuser-Busch Inbev, the world’s biggest brewer, as the shift to home drinking led to rising costs because more packaging is involved.
INDIVIDUAL COMPANY NEWS
In a quick scoot around other news stories this morning, VW drives back to profit amid cost-cutting and new car sales (Daily Telegraph, Alan Tovey) shows that the car maker returned to profit in Q3 due to cost-cutting and stronger sales in China and Starbucks says customers are coming back to cafes (Wall Street Journal, Heather Haddon) shows that customers are returning more quickly than it had anticipated, giving it confidence to announce its prediction of sales growth next year.
Elsewhere, Walmart pulls guns, ammo displays in US stores, citing civil unrest (Wall Street Journal, Sarah Nassauer) shows that concerns about civil unrest going into the presidential election next week are such that the retailer has decided to removed all guns and ammo from sale! WTAF 😱😱😱?!? Fortunately for those people who really just want to buy a gun for some harmless fun, they can still buy guns and ammo by request at roughly half of Walmart’s 4,700 US stores 🤪.
Then in Juul cuts valuation to $10billion (Wall Street Journal, Jennifer Maloney) we see that the e-cigarette maker has cut its own valuation to about $10bn – in stark contrast to the $38bn it stood at two years ago when tobacco giant Altria bought a 35% stake. * SO WHAT? * It just goes to show how much protest and pressure has affected this company that was once one of America’s most valuable start-ups. It cut almost half of its workforce last month and is looking at pulling out of most overseas markets. How the mighty fall (especially if they encourage teens to vape)…
…in other news…
I thought I’d leave you this week with a how-to on a vital life skill in Chef says trick to perfectly crispy roast potatoes is ‘seven minute shuffle’ (The Mirror, Paige Holland). I have a different method that works consistently, but I might save that for a future Reel…
Some of today’s market, commodity & currency moves (as at hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!
|FTSE 100 *
|Dow Jones *
|S&P 500 *
|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)