Monday 14/09/20

1. In MACROECONOMIC & OIL NEWS, we see what’s next following the UK-Japan trade deal and BP’s “alternatives” future
2. In TECH NEWS, Trump boosts Triller, TikTok hits 100m European users and Oracle beats Microsoft. Apple aims to unveil and Nvidia aims at Arm
3. In PHARMACEUTICALS NEWS, Gilead makes a $21bn purchase and AstraZeneca resumes trials
4. In INDIVIDUAL COMPANY NEWS, Netflix splashes the cash and New Look gets closer to the edge
5. AND FINALLY, I bring you an unusual way to eat pancakes…

So the UK talks trade deals while BP aims for an alternative future…

Japan trade deal commits UK to stricter state aid curbs than in EU talks (Financial Times, Alan Beattie, Jim Pickard and Peter Foster) highlights controversial aspects to the UK-Japan agreement reached in principle on Friday in that the new agreement contains more stringent restrictions on state aid than ones currently being offered to the EU in Brexit talks. As things currently stand, the UK has told the EU that it should have total freedom on granting state aid subject to WTO rules whereas the new Japan deal restricts open-ended government bailouts that don’t have a clear restructuring plan in place. Having said that, some lawyers believe that the concessions made by the UK on this are less onerous than the ones that they would have to make with the EU on state aid. After Japan trade deal, the next challenge is Canada (Daily Telegraph, Lizzy Burden) shows that Canada appears to be next up on the trade front. Ottawa is thought to be favouring a “phase one” agreement – a bit like the one between the US and China – to tide things over in the short term, with a few to firming up and expanding later. However, the Canadians are highly skilled at negotiation, so this is likely to be tough. * SO WHAT? * The devil is always in the detail with these things and all parties are negotiating in highly unusual times. I would have thought that all sides will want as much wiggle room as possible in order to adapt to changing behaviour as we all try to cope with coronavirus.

Autumn redundancies could exceed 700,000 (The Guardian, Rupert Jones) cites analysis from the Institute

for Employment Studies (IES) which says that almost 500,000 redundancies may be announced this autumn with numbers potentially breaching 700,000 – and this is in addition to the 240,000 redundancies recorded by the government up until June. The report concludes by appealing for more help to those affected, for more measures to boost employment growth and for the provision of focused help on viable companies. * SO WHAT? * Tough times, but let’s face it – no-one knows what the real figure will be until the redundancies actually happen. An estimate of between 500,000 and 700,000 is a ridiculously wide range (you might as well just use a dartboard) and, I would argue, pretty useless. I find it hilarious when so-called experts spend a lot of time producing dross like this. Unfortunately, the subject matter is most definitely NOT hilarious. Still, if you must have an estimate, this is it.

Then BP’s Looney stakes future on producing less oil (Financial Times, Roula Khalaf, Anjli Raval and David Sheppard) reminds us that the chief exec of BP, Bernard Looney, will be unveiling the future of BP this week – and he will be emphasising a future with less oil and gas in it. He wants BP to be a diversified energy producer and targets net zero emissions by 2050 and production cuts of 40% over the next ten years. * SO WHAT? * This is great – but the real test will be if the oil price rises quite a lot from here. It’s one thing to do this kind of thing in a low oil price environment and quite another to stick to your morals if the oil price goes up to $80 a barrel, for instance. Reducing exposure to oil and gas won’t then look so clever and the risk then is that Looney takes the fall and someone less environmentally friendly takes the helm.

It’s all going on with TikTok, Apple is due for an unusual reveal and Nvidia goes for Arm…

It was interesting to see Trump talk up Triller as US answer to TikTok (Daily Telegraph, Laurence Dodds) as he endorsed the American TikTok alternative whose user numbers jumped from 13m active users in October last year to 65m last month – 35m joined in a few days after Trump threatened to ban TikTok in the US. TikTok tots up 100m in Europe (The Times, Alex Ralph) highlights the breach of a new user number landmark, but the really interesting news is that Oracle wins bid for TikTok in US; Microsoft proposal is rejected (Wall Street Journal, Georgia Wells and Aaron Tilley) – which shows that Oracle beat the previous favourite Microsoft in the bidding for the social media app. It will be TikTok’s “trusted tech partner” in the US and it seems that the deal is not a sale – it’s more of a “partnership”. Details are sketchy and it’s not known whether there will be a transfer of algorithms – something that was made problematic by China imposing a ban on exports of AI technology. TikTok’s algorithms that are responsible for recommending videos to users based on their preferences are seen to be a key ingredient of its success, so if those aren’t transferred over you’ve got to wonder what Oracle is getting itself into. * SO WHAT? * Trump threatened TikTok shutdown in the US if a sale was not agreed by a mooted September 15th deadline, so I guess this solves that problem. It is also interesting to note that retail giant Walmart had joined Microsoft’s bid – but it is now considering joining the Oracle bid. Oracle is making this move to boost its cloud computing business that is currently way behind Amazon and Microsoft’s capabilities. It’ll be interesting to see the specifics of this deal, but I have to say that my initial opinion is that Microsoft dodged a very expensive bullet.

Elsewhere in the land of tech, With no iPhone to launch, Apple turns to accessories and wearables (Financial Times, Patrick McGee and Tim Bradshaw) highlights the Apple reveal event tomorrow. This story was out over the weekend and observed that this will be the first time it has

not unveiled its new iPhone at the event in almost ten years! Instead, it will push the accessories business and new hardware such as the Apple Watch, a new iPad Air, new over-ear headphones called AirPods Studio and lost items tracker AirTags. It’s interesting to note that, over the last five years, sales attributed to the iPhone have fallen from 63% to 44% in the latest quarter. Over that time, its wearables and accessories sales have shot up by 144%, mainly thanks to the Apple Watch and AirPods. One interesting metric shows that for every 100 iPhones sold, Apple sells 49 pairs of AirPods and 14 Apple Watches. In contrast, for every 100 Galaxy S phones sold, Samsung sells 34 Galaxy Buds and 14 watches – and Apple also manages to sell at higher margins. * SO WHAT? * This will be subject to a great deal of scrutiny and will give Apple’s other products so much more airtime than they normally get. If this generates a lot of feelgood, then I am sure that the delayed iPhone launch won’t feel too long.

Ministers to step in as US tech titan buys Arm (Daily Telegraph, James Titcomb) highlights concerns by the UK government that the $40bn sale of Arm from Japan’s SoftBank to America’s Nvidia will result in a hollowing out of Arm’s Cambridge base. SoftBank promised in 2016, when it bought the UK tech company, that the UK workforce will double and that its HQ will remain in Cambridge and according to ARM: UK-based chip designer sold to US firm Nvidia (bbc.co.uk, Leo Kelion), the new acquirors will honour this (the deal has just been announced). Highflying Nvidia’s deal for Arm signals loftier chip ambition (Wall Street Journal, Cara Lombardo, Maureen Farrell and Asa Fitch) shows the wider implications of a successful deal between the two. * SO WHAT? * Given Nvidia’s expertise in graphics processors and Arm’s dominance in the microprocessors that are embedded in 90% of the world’s smartphones, this deal will make Nvidia a powerful force in smartphones and a major supplier to other devices including smart speakers and fitness trackers. This is one of the biggest deals ever done in semiconductors, but the road ahead may face bumps as China may not like its “neutral” supplier falling into American hands, among other things. SoftBank bought Arm for $32bn in 2016 but has struggled to boost growth in the business, so maybe the new owner is better placed to do so.

Gilead goes shopping and AstraZeneca resumes…

Gilead reaches deal to buy Immunomedics for $21bn (Wall Street Journal, Cara Lombardo and Jonathan D.Rockoff) highlights a chunky deal for Gilead as it buys Immunomedics and its highly-rated breast cancer drug for a tidy sum. Gilead is paying a whopping 108% premium to the price Immunomedics was trading at before the deal

was announced. Oncology is a hot area for the major drugmakers and Immunomedics’ breast-cancer treatment Trodelvy, is particularly attractive.

Elsewhere, AstraZeneca Covid-19 vaccine trials resume in UK (Wall Street Journal, Peter Loftus) shows that the drugmaker has resumed trials in the UK after pausing last week following a participant falling ill and the regulators said it was safe to do so. Trials in other countries remain suspended pending local permissions. * SO WHAT? * There will no doubt be relief that trials have resumed but it is a reminder of how difficult finding a vaccine really is.

Netflix spends and New Look teeters…

Netflix to take crown for spending on films and television (Financial Times, Alex Barker) highlights the streamer’s massive spend on entertainment content this year as a report by Ampere Analysis shows that its spend on films and programming will rise by $3bn to $13.6bn in 2020 – more than rivals ViacomCBS, Disney and NBCUniversal, excluding sporting rights. Spending on content is expected

to increase to new highs in 2020 despite crumbling economies and delays to content production.

The retail nightmare continues in New Look pleads with landlords to back rescue deal to save it from administration (Daily Telegraph, Laura Onita) as a vote with 300 landlords on whether or not to accept a CVA is due tomorrow. Apparently, Boohoo is hovering in the wings to buy it – and given that Boohoo has recently bought the name and websites (not the shops) of Karen Millen, Coast, Oasis and Warehouse since they collapsed, it will not bode well for the shops or indeed their employees. Their future hangs in the balance…

…in other news…

Today, I thought I’d leave you with the absolutely hilarious young lady in Woman labelled ‘genius’ for sharing ‘revolutionary’ way she eats duck pancakes (The Mirror, Courtney Pochin). Probably something best not to try at a restaurant unless you like attracting attention…