Thursday 02/07/20

  1. In MACROECONOMIC NEWS, Hong Kongers seek the exit and Putin gets closer to his goal
  2. In MAIN STREET/HIGH STREET NEWS, Macy’s reopens while Apple, McDonald’s and Pizza Hut close. In the UK, there’s more jobs carnage on the high street, John Lewis looks tricky, Sainsbury’s has a cautious outlook, B&M prospers and Germans start spending
  3. In PROPERTY NEWS, there’s a gulf between retail and office fortunes while UK house prices fall
  4. In INDIVIDUAL COMPANY NEWS, we see how Facebook and Twitter will fare in the ad boycott, Google looks at glasses again and Tesla overtakes Toyota
  5. AND FINALLY, I bring you onion-flavoured breakfast cereal and an amazing taekwondo dance!…



So we see the immediate impact of the new security law in Hong Kong and Putin gets closer to “immortality”…

The newly-imposed security law from China starts to have repercussions in Hong Kongers look to the exits as China imposes security law (Financial Times, Alice Woodhouse, Nicolle Liu and Primrose Riordan) shows that an increasing number of residents are currently making plans to emigrate and are making moves to get their money out of Hong Kong . Andrew Lo, founder of the immigration consultancy Anlex, talked about previous spikes in interest in emigration and observed that “In 1989 [the year of the Tiananmen massacre], it was only people with money who were planning to go as they were worried about their wealth not being protected” but then added that “Last year [when all the protests were going on], it was mostly the working class wanting to leave. This year, everyone wants to leave”. Some are wanting to get their money out of Hong Kong in case the US punishes China with sanctions – a YouTube video on how to get capital out of Hong Kong has had over 384,000 views and talks about how to open overseas accounts using platforms like Monzo and N26 etc. Meanwhile, Johnson condemns HK law as breach of handover pact (Financial Times, Laura Hughes and Alice Woodhouse) shows that BoJo is leaving the door open to

citizenship for almost 3m Hong Kong residents, sticking to his original pledge. * SO WHAT? * Clearly it is early days as the law has only just been implemented and tempers are bound to run high. It’s too soon to tell whether this is going lead to some sort of mass-exodus, but you do wonder where everyone is going to go as all countries are likely to be sensitive about letting in new citizens at this time as they will have their own problems to deal with in terms of unemployment, housing etc. My point is that although Hong Kongers may WANT to leave, the number of places that they could go to may be limited. On the other hand, I would imagine that a lot of ex-pats and foreign businesses are likely to be thinking about their long term future there. I would also add that with this latest action, Taiwan will be wondering whether they are going to be next for the Beijing treatment.

Elsewhere, Russians set to back Putin’s move to extend his rule (Financial Times, Max Seddon) shows that Putin is on the verge of getting his wish after all as the vote to make constitutional changes to extend his 20-year rule until 2036 is likely to go his way. Other amendments included a ban on gay marriage and making Russian the “language of the state-forming ethnic group”. * SO WHAT? * This was all part of the overhaul Putin made earlier this year of his cabinet and it seems that he has managed to push this through successfully despite falling approval ratings and his rather inconsistent handling of the coronavirus. From a markets perspective, this is unlikely to change anything as Russia looks like it’s about to embark on more of the same until 2036!



Main Street reopenings are mixed while High Street carnage continues…

Over in the States, Macy’s says most stores have reopened as US coronavirus infections rise (Wall Street Journal, Dave Sebastian) sounds great in a way, but the struggling department store chain is cautious about the future given that additional outbreaks could mean a return to tighter restrictions as per Apple to shut dozens of stores as coronavirus flares in parts of the US (Wall Street Journal, Allison Prang) and McDonald’s halts reopening plans as US coronavirus cases grow (Wall Street Journal, Heather Haddon). Elsewhere in the world of fast food, Largest Pizza Hut franchisee bankruptcy signals Yum Brands tensions (Financial Times, Alistair Gray) shows that NPC International, America’s biggest operator of Pizza Hut restaurants, has just filed for bankruptcy after it failed to squeeze any money out of parent company Yum Brands to help it through. NPC, which is owned by private investment firm Eldridge, had been struggling before the pandemic hit because of tougher competition, rising minimum wages and higher beef prices so the outbreak just pushed it over the edge. Tough times.

In the UK, Jobs shock after 10,000 workers axed in two days (The Times, Dominic Walsh) highlights ongoing job carnage on the high street as SSP, which owns Upper Crust and Caffé Ritazza, yesterday announced 5,000

redundancies while Arcadia (owner of Topshop, Miss Selfridge etc.), Harrods and John Lewis announced at least 1,200 job cuts. Talking of which, No sacred cows as John Lewis forms store closure plan (The Times, Ashley Armstrong) shows that the management is getting ruthless with shutting down stores as it is even considering the closure of its £35m Birmingham store that it opened in 2015.

On a slightly more positive note, Sainsbury’s cautious despite web sales boom (Daily Telegraph, Laura Onita) shows that Sainsbury’s is staying cautious on the outlook despite online sales more than doubling during lockdown, B&M increases its cut of the retailing pie (The Times, Ashley Armstrong) shows that the discount chain continues to see very healthy sales. Apparently, around 20% of sales came from new customers – which must be very encouraging. It’s difficult to tell whether this strength will persist, but for now it’s doing pretty well! It plans to open a number of new stores this year – and I bet it can get them at bargain prices/rents given the amount of space that is becoming available!

There’s good news on the continent, though, in Germans rushed to reopen wallets after lockdown eased (Financial Times, Martin Arnold) which cites data from the Federal Statistical Agency which shows that retail sales shot up by a record 13.9% in May versus the previous month. This was the biggest monthly rise since data started in 1994 – but obviously this was from a very low base. Hopefully this will be sustained and may be a reflection of what could happen over here!



The fortunes of retail, office and residential property continue to differ..

UK retail landlords squeezed as stores hit by Covid-19 crisis (The Guardian, Sarah Butler) shows how retail landlords Hammerson and British Land are having a nightmare in terms of collecting rents from their tenants as the retail sector continues to struggle, but British Land/Hammerson: the way we’ll live now (Financial Times, Lex) highlights the fact that British Land’s exposure to offices, where it has collected 90% of rents due, will help it do better than Hammerson (mainly shopping centres)

which has only managed to collect 16%. * SO WHAT? * It’s early days, but I would have thought that offices may start to get worse as we approach the end of furlough (unless it is extended) and maybe retail may get slightly better as they start to open. The ending of furlough may well put terminal pressure on a number of businesses.

Meanwhile, House prices fall for the first time since 2012, survey shows (Daily Telegraph, Melissa Lawford) highlights the latest stats from building society Nationwide. * SO WHAT? * I don’t think this is particularly surprising and it’s possible that after an initial mini-boom as pent-up demand from lockdown washes through the system things will just continue to drift until households can feel confident about the economy and their finances once more.



Twitter may suffer from Facebook flak, Google tries glasses on and Tesla is now bigger than Toyota…

Facebook is too big to suffer from a boycott. But its rival Twitter is not (Daily Telegraph, Robin Pagnamenta) makes the very interesting and valid point that although advertisers are making a lot of noise about abandoning Facebook for its lax stance on moderating hate speech, its much smaller rival Twitter is also suffering because advertisers are banning all social media advertising this month – starting yesterday. * SO WHAT? * The irony of this situation is that Twitter has taken the high road on this matter (although it has problems of its own with bots, trolls etc.) but it is way less profitable and is smaller than big, bad Facebook. Given the commercial damage that Twitter could suffer, will it use this opportunity to move to a subscriber model?? An interesting suggestion but I just

can’t see it. The ad ban is only for a month and TBH, companies are still going to want to advertise on social media IMO. 

In other news, Google sets sights on smart glasses start-up (Daily Telegraph, Margi Murphy) shows that the company is having another go at glasses by announcing the acquisition of “pioneering” smart glasses company, North. This signals a return for Google to smart glasses after Google Glass failed to gain sufficient traction (remember that wearers of the tech were nicknamed “Glassholes” 😂 Good times).

Then in Tesla becomes world’s most valuable carmaker without making a profit (The Guardian, Rob Davies) just goes to show how much investors are buying in on future hopes as its valuation is now greater than that of Toyota. OK so its cars are technologically impressive and there is an argument to say that the coronavirus could lead to the greater adoption of alternatively-powered cars, but it does all seem rather ridiculous. Still, well done Elon!



…in other news…

I’ve got some real goodies for you today! First of all there’s the quite frankly horrendous-sounding Kellogg’s launches onion-flavoured breakfast cereal – but do you dare try it (The Mirror, Ruki Sayid 🤢 which certainly makes for a “unique” breakfast and then there’s the INCREDIBLY impressive group of taekwondo experts in this video who do a mixture of dance and high kicks! This is one of the most impressive and mesmerising videos I have ever seen! The athleticism, skill and co-ordination – and EDITING – is A-MA-ZING. I’m a black belt at judo and sadly we never did anything like that 😥. Maybe that could be a new thing…

ONE LAST THING. For those of you who are keen on improving your knowledge and want to spice things up a bit, you should really think about trying this competition I saw in the Daily Telegraph. It will really change the way you look at business and financial news because you will feel invested in it (but it’s all free). And if you like that, you should definitely join me on my Zoom call tonight HERE at 5pm. If that link doesn’t work, just look at this morning’s e-mail – it will have the details.

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Some of today’s market, commodity & currency moves (as at 0742hrs 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 **
6,159 (+0.20%)12,089 (-0.73%)4,910 (-0.18%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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