Watson’s Weekly 18-10-2019

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE DAY IN BRACKETS REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

• Market excitement continued on US/China trade hopes (Tuesday) but the Chinese economy appears to be losing momentum (Friday)
• In the Eurozone, we saw inflation at three-year lows (Thursday) and an amended Brexit deal was negotiated (Friday) but Parliament is due to vote on it tomorrow. UK inflation stayed low (Thursday) meaning that there won’t be any real pressure on the Bank of England to raise interest rates to encourage consumers to rein in spending
• Things continued to go from bad to worse as Facebook’s Libra lost Booking.com as a backer (Tuesday), which means that it has joined the likes of PayPal, Mastercard, Visa, e-Bay, Stripe and Mercado Pago who all abandoned over the last week as the Libra Association confirmed its founding members. The only payment firm left is Dutch firm PayU! The prospects for Libra aren’t looking good right at the moment…

• Car sales are suffering pretty much the world over, but weakening sales of New Energy Vehicles in China (Tuesday) is particularly worrying – if it continues – as China is the world’s biggest car market and the government is putting a lot of effort into putting it at the forefront of car technology. It just goes to show that whatever else is going on, car sales go down when you take away the subsidies!
• Marijuana stocks continued their weakness (Monday) as previous projections proved to be overly ambitious but then Canopy Growth’s pharmaceutical division, Spectrum Therapeutics, was granted a licence from the Home Office to import medical cannabis in bulk to the UK. The beginning of something big, perhaps?
• American companies still have designs on making a splash in China despite all the trade shenanigans going on at the moment as Citi plans to take 100% control of its China operations (Wednesday) and PayPal got permission to buy a majority stake in Chinese payments group Gopay (Thursday). This has been made possible by Chinese restrictions on foreign ownership easing up
• Elsewhere, Netflix’s share price continues to weaken on increased short-selling activity (Monday) and subscriber numbers falling short of expectations (Thursday). The nightmare continues for players in the world of vaping as Juul announced the withdrawal of most of its most popular flavours from online sale (Friday) as the crackdown continues from the FDA, FTC and Federal prosecutors

• US retail sales were weaker (Thursday) as the latest US Commerce Department data shows that retailers reported an unexpected fall in headline sales. This could imply that consumer spending, which accounts for two thirds of the US economy, may be weakening. Given recent sluggishness in the US manufacturing sector it will put pressure on the Federal Reserve to cut interest rates at its December meeting. Meanwhile Barneys New York has finalised a deal (Thursday) to sell its name and brands to Authentic Brands Group and investment firm B.Riley Financial and close all of its stores, depending on how rent talks go with the landlords. Rival bidders will have until October 22nd to come forward or the deal will go through as is – and if they do, an auction process will be triggered on October 24th
• The number of UK shoppers fell (Monday) as Brexit concerns made them think twice about spending. Sports Direct’s Mike Ashley wanted to make his complaint about Nike and Adidas official (Tuesday) by calling for a Europe-wide investigation into the sportswear industry. He argues that such brands have oversize power in supply and product prices, but I have to say that I think Nike and Adidas should surely have the final say as to where their goods are sold (or not). He’s just annoyed they prefer JD Sports to Sports Direct 😜! Then in online retailing, Asos looks like it is turning a corner (Thursday) and will be able to grow profit margins from here after bolstering its management team and resolving its warehouse issues that dented its profits

• Sophos, the UK cybersecurity software specialist, was bought by private equity fund Thoma Bravo for $3.8bn (Tuesday). The acquisition is expected to complete sometime in the first quarter of next year
• WH Smith bought Marshall Retail Group in the US for $400m (Friday), effectively doubling the size of WHSmith’s international travel business. This follows its $198m acquisition of US business InMotion in October last year and shows its commitment to America and the belief in their profitable travel business

This week, my favourite “alternative” story was Kim Jong-un channels hardman hero Vladimir Putin as he rides on horseback in bizarre snaps (The Sun, Neal Baker https://tinyurl.com/yxbas43d). Nothing like seeing your leader enjoying a bit of fresh air to inspire you to greater things. Having said that, I really hope that Boris Johnson doesn’t try it. You just wouldn’t be able to unsee it!

I hope you have an enjoyable weekend!