Monday 18/10/21

  1. In MACRO & SUPPLY CHAIN NEWS, China’s GDP growth slows, the Bank of England hints at an interest rate rise, China’s energy crisis shows no signs of easing and Sunak mulls cutting VAT on energy bills
  2. In JOBS & CONSUMER NEWS, the lack of workers is causing headaches for nightclubs and restaurants while Klarna girds itself for a crackdown and Alibaba adapts
  3. In IPO AND M&A NEWS, City deal-making soars, Britishvolt and an Aussie battery maker aim for London IPOs – but there are cautionary tales
  4. In MISCELLANEOUS NEWS, we see Apple’s ads taking off, China’s beef with Brazil and Impossible’s plans for Britain
  5. AND FINALLY, I bring you an aesthetically pleasing restaurant option…

1

MACRO & SUPPLY CHAIN NEWS

So China’s growth rate slows, the Bank of England moves towards an interest rate increase, China’s energy crisis continues and Sunak considers a VAT cut on energy bills…

China economy grows 4.9% in third quarter as momentum slows (Financial Times, Thomas Hale, Ryan McMorrow and Tom Mitchell) cites the latest data from the National Bureau of Statistics which shows a slowdown in China’s economic growth in Q3 thanks to a cooldown in the white-hot property market and ongoing energy shortages. On that front, China’s energy crisis threatens lengthy disruption to global supply chain (Financial Times, Primrose Riordan, Edward White and Harry Dempsey) shows that factory owners in China and their global customers have been warned to expect continued power supply disruptions as President Xi Jinping continues in his attempts to wean his country off its current reliance on coal. He is forcing power users to use more renewable sources of energy at a time when demand for China’s products are increasing, which is causing a big commotion and contributing to the worldwide supply chain logjam. * SO WHAT? * It seems that China’s president is laser-focused on sticking to his guns in forcing companies to use more sustainable power – but this is causing all sorts of headaches down the line and is likely to increase lead times for all manner of products for some time to come…

Meanwhile, Bank of England governor hints at November rate rise (Daily Telegraph, Lucy Burton) shows that the governor of the Bank of England, Andrew Bailey, suggested yesterday in an online panel that the central bank is preparing to increase interest rates from the current 0.1% – and speculation is increasing that it could raise rates as soon as next month, when it meets on November 4th. Markets are also increasingly expected an increase of 0.25%. * SO WHAT? * It has been interesting to see how the Bank of England has really changed its tune in the last few months – but an increase hasn’t happened just yet! It will be REALLY interesting to see whether a rate rise in the Bank of England will break the seal and prompt other major central banks follow suit.

It’s also interesting to see Sunak considers cutting VAT on household energy bills (Financial Times, George Parker) given skyrocketing energy prices at the moment and although this will no doubt be a crowd-pleaser to some extent, this is a cut to household energy bills we are talking about here. Corporate energy bills may not get the same treatment – and so those costs will still be passed on to the end consumer. * SO WHAT? * The 5% minimum VAT rate was a Brussels thing so Boris Johnson could potentially cut this and say that he was doing this to help out his fellow citizens through a cold winter AND say he is delivering on his Brexit promises at the same time. The only thing is that this could cost about £1.5bn per annum to implement. No final decisions have been made as yet, however…

2

JOBS & CONSUMER NEWS

The lack of workers is causing difficulties, Klarna makes changes and Alibaba is forced to adapt…

Missing workers fuel Britain’s inflation fears (Daily Telegraph, Tim Wallace and Tom Rees) is a really interesting illustration of the current situation for some of Britain’s employers as they just can’t get enough staff – and are either losing them to retirement (Covid has made them rethink their priorities) or to other companies (they are getting tempted by higher wages). According to recent findings by the British Chambers of Commerce, over 75% of businesses who are recruiting at the moment are having difficulties in doing so. Stories like Clubs face bouncer shortage as UK staffing squeeze hits nightlife (The Guardian, Joanna Partridge) and Lack of staff hits restaurant recovery (The Times, Dominic Walsh) are further evidence of the labour shortages we are seeing at the moment as bouncers are getting paid up to 25% more to ply their trade and the company behind Quaglino’s and Coq d’Argent – D&D London – says that staff shortages are costing it 10% of its revenues.

Klarna pre-empts crackdown with buy now, pay now option (The Times, Patrick Hosking) shows that the biggest Buy Now Pay Later (BNPL) operator in Britain has decided to change the rules in anticipation of a crackdown meaning that all customers will be offered the option of paying in full and not taking out any credit. It will also be making its language clearer at the checkout, making

affordability checks tighter, improving its complaints procedures and ditching some of its “late fees”. * SO WHAT? * The Treasury is launching a (long overdue, IMO) consultation on the Swedish fintech following a growing chorus of voices calling for it to be regulated by the Financial Conduct Authority. BNPL is becoming a very crowded field, what with new operators lining up (for instance Apple and Goldman Sachs with their Apple Pay Later venture) and old ones stepping in (like Mastercard). I think that Klarna needs, at the very least, to be regulated by the FCA – but the field in which it operates is going to get increasingly competitive. It faces tough times ahead!

Then in Alibaba faces new threat: an evolving Chinese shopper (Wall Street Journal, Stephanie Young) we see that the giant Chinese e-tailer Alibaba is playing catch-up with the Chinese consumer as the latter has started to favour browsing and interaction over the focused product searches for which is has become famous. Although it is still the #1 player in the online shopping space, its market share will have fallen from 78% in 2015 to “just” 51% in 2021, according to the latest predictions from research firm eMarketer. The likes of Tencent, Pinduoduo and Douyin (TikTok’s sister app in China) have all been chipping away with their increased interaction and gamification of shopping and Alibaba is now trying to do more content creation to up its offering. * SO WHAT? * It’s interesting to see how relative newcomers have been so successful over the last few years. Still, although Alibaba is way ahead of the rest in terms of revenues, it is important for it to remain on the ball otherwise others could well overtake it.

3

IPO AND M&A NEWS

Deal-making continues, but it’s not always sunshine and rainbows…

In a quick scoot around M&A and IPO news today, City dealmaking boom hits post-financial crisis high (Daily Telegraph, Simon Foy) cites the latest data from Dealogic which shows that London’s investment banks have made revenues of over £4.1bn so far this year from advising on flotations, M&A and capital raisings, which means that there will be a lot of bankers being paid fat bonuses this year! This is the highest amount recorded since the January-September period in 2007 when they raked in £4.2bn of revenues. Stories like Firm aiming to build £4bn UK ‘gigafactory’ poised for London IPO (The Guardian, Rob Davies) and Revolutionary Australian battery company plans £100m London float (Daily Telegraph, Rachel Millard) show that the appetite is still there – from Britishvolt and Gelion Technologies respectively – despite

Life is not so easy after all for stock market darlings (The Times, Emma Powell and Ben Martin) highlighting the fickleness of investor sentiment as former stock market darlings like Boohoo and AO World are experiencing a bit of a rough patch.

The Hut Group is suffering from that a lot at the moment and Hut Group founder to give up ‘golden share’ to calm investor fears (The Times, Louisa Clarence-Smith) shows just how big a concession that founder Matthew Moulding is willing to make to get back into investors’ good books – he is expected to give up his “golden share” which gives him the right to veto a takeover bid for three years. * SO WHAT? * Investors (well, UK ones at least) really hate dual class share structures which basically give their founders the ability to have their cake AND eat it in that they can get a massive windfall whilst at the time retaining control of their company. I think that this would definitely be a move in the right direction, but I would have thought that he might have to make some strategic changes as well to get investors back onside.

4

MISCELLANEOUS NEWS

Apple booms, China has beef problems and Impossible wants to come to Britain…

In other interesting stories today, Apple’s privacy changes create windfall for its own advertising business (Financial Times, Patrick McGee) highlights the fact that Apple’s advertising business, called Search Ads, has seen a massive uptick since it introduced privacy changes to iPhones that hobbled rivals like Facebook. It market share has more than tripled since it introduced the privacy changes six months ago. * SO WHAT? * This is an impressive development! It’s gone from pretty much nowhere to somewhere in the marketing space but I always think that Apple seems to get away with things that its biggest and supposedly-nastier rivals don’t! Don’t get me wrong, I LOVE Apple stuff, but are they really THAT much better than others regarding privacy and data usage? This is good news, however, for Apple as it continues in its efforts to diversify its revenue stream away from hardware (and particularly its phones).

Where’s the beef? China meat ban leaves Brazilian officials baffled (Financial Times, Bryan Harris, Emiko Terazono and Edward White) is a story that appeared over

the weekend which shows that Brazil is getting increasingly concerned about a Chinese ban on Brazilian beef which has now lasted for over one month and could prove to be fatal to exports worth about $4bn per year. Brazil had voluntarily suspended beef exports to China following the discovery of two cases of “atypical” mad cow disease in early September and although China was expected to resume imports shortly thereafter, it hasn’t. Brazil is the world’s biggest exporter of beef, so this is a very big deal. Ireland had something similar happen to it last year and China has yet to lift its ban on Irish beef imports.

On the other hand, Impossible on a mission to sell meatless burger in Britain soon (The Times, Callum Jones) shows that the US alt-meat maker Impossible Foods is hoping to launch in the UK after applying for regulatory approval for its use of soy leghemoglobin, aka “heme”, which gives burgers the “bleed” that you associate with real burgers. Europe has yet to authorise this, but once the UK left the EU the company tried to apply separately and it’s looking quite positive. Impossible Foods currently sells its products (which include meat-free burgers, sausages and nuggets) in the US, Canada, Hong Kong, Macau and Singapore. The alt-meat movement marches on!

5

...AND FINALLY...

…in other news…

I thought I’d leave you today with an aesthetically pleasing way of catering to those who are particularly concerned about the spread of Covid in Tokyo restaurant’s bright idea: Lantern pods for you to sit in while you eat (SoraNews24, Casey Baseel). How cool are these?? Also, the food in this place looks absolutely stunning 👌

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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 *Nasdaq*DAX *CAC-40 *Nikkei **Shanghai **
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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