Thursday 03/10/19

  1. In MACRO & MARKETS NEWS, BoJo’s Brexit journey continues, US gets the go-ahead to slap the EU with big taxes and markets take a tumble
  2. In TECH NEWS, Facebook remains defiant about Libra, Microsoft gets back into mobile phones with Google while Google faces a UK lawsuit for collecting iPhone data
  3. In INDIVIDUAL COMPANY NEWS, Paddy Power’s owner creates a giant, Tesla falls short, Deliveroo’s losses mount while the heads of Metro Bank and Tesco announce their departures
  4. In OTHER NEWS, I bring you some interesting items…



So BoJo launches a “final” Brexit deal bid, the EU is about to get “tariffed” by the US and markets dive…

Boris Johnson sends in contentious plan to break Brexit deadlock (Financial Times, George Parker, Laura Hughes and Sam Fleming) signals BoJo’s latest/final bid for a Brexit deal as he closed his Conservative party conference by dispatching “fair and reasonable” proposals to Brussels. You can see the actual letter he sent in Read Brexit letter from Johnson to Juncker (Financial Times) which addresses the contentious backstop – and it seems to have satisfied the eurosceptics from our side. Apparently, if this plan is rejected by the Europeans, he will break off talks and start preparing for a no-deal Brexit. He could also be a no-show for the forthcoming EU summit and contest any future election on a platform blaming Brussels, opposition parties and Remainers for stopping the country acting according to the wishes of the electorate in the Referendum. We’ll just have to see what Jean-Claude, Michel and friends think of this – the response to this latest proposal has been cautious so far.

US to impose tariffs on EU goods after WTO’s Airbus ruling (Wall Street Journal, Emre Peker and Josh Zumbrun) piles on the pressure for the EU as the US plans to slap 10% tariffs on jetliners and 25% tariffs from October 18th on food products including Irish and Scottish whiskies, cheeses and olives following a ruling by the World Trade Organization (WTO) yesterday. The WTO found in the US’s favour regarding its objections to the EU’s subsidies to Airbus and authorised it to impose tariffs of up

to 100% on $7.5bn worth of goods. This is the biggest trade action against the EU since the US imposed steel and aluminium tariffs last year. US trade representative Robert Lighthizer said in a statement that “For years, Europe has been providing massive subsidies to Airbus that have seriously injured the US aerospace industry and our workers. Finally, after 15 years of litigation, the WTO has confirmed that the United States is entitled to impose countermeasures in response to the EU’s illegal subsidies”. * SO WHAT? * It is important to note that BOTH sides have been found by the WTO to have received illegal government subsidies and that Airbus is just the first one to get through the system. The WTO is due to rule on Boeing subsidies early next year, so you would have thought that the US won’t get too trigger happy on taxes. In the meantime, Airbus argues that tariffs will hit both sides by suddenly raising costs for US carriers with Airbus fleets and European officials said that getting into a tariff war now, while China and Russia are subsidising their own aircraft makers, will be counterproductive. Given that both sides gave subsidies to their own, I think that many of the accusations are just noise and bluster – and part of a broader effort to get the EU and US to the negotiation table to update current trading guidelines. The other possible consequence of this action is that it might take the edge off Airbus nicking Boeing orders after the latter has seen orders crater following the whole Boeing 737 Max disaster.

Global markets fall on poor economic data (Financial Times, Richard Henderson ,Colby Smith, Joe Rennison and Alice Woodhouse) highlights weakness in markets around the world as they reacted to weaker-than-expected US job data yesterday. Employment market sluggishness stoked ongoing concerns about the global economic slowdown as well as potentially putting downward pressure on consumer spending, hence the sell-off.



Facebook remains defiant against Libra naysayers and Microsoft moves into mobile phones with Google while Google faces a lawsuit over iPhone data…

Facebook hits back at Libra criticism and vows to press ahead (Financial Times, Hannah Murphy) follows on from what I was saying yesterday about some Libra backers getting cold feet about the project. So far, the 28 members of the so-called Libra Association (which include Visa, Mastercard, Uber, Spotify and Facebook subsidiary Calibra, among others) have promised to invest at least $10m a piece in the Libra project – but no money has changed hands yet. David Marcus, co-creator of Libra, vehemently denied knowledge that any members were having second thoughts and the Libra Association refused to confirm or deny any meetings were taking place between members. * SO WHAT? * Politicians, law makers and central bankers around the world have been sticking the boot in to Libra citing concerns about privacy, competition, money laundering, tax evasion and potential effects on financial stability, so it is unsurprising that some members could be having second thoughts in the belief that Libra will be more trouble than it’s worth. It is also unsurprising that Marcus is

defending his corner so vigorously because I think if some of the wobblier association members smell fear, they will abandon. If this leads to an exodus, Libra will be dead in the water and The Establishment will have got what it wanted.

Microsoft phone tie-up with Google with dual-screen handset (Daily Telegraph, James Titcomb) heralds Microsoft’s return to the smartphone market via a dual-screen handset (called the Surface Duo) running Android software. It’s due out next year, will be Microsoft’s first handset for four years and its first one to run on Android (not some version of Windows). It sounds a bit like a poor man’s Galaxy Fold (see more about that in The $2,000 phone of the future is here – please don’t break it (Wall Street Journal, Joanna Stern)) but Google faces UK class action lawsuit over collecting iPhone data (Financial Times, Jane Croft) highlights Google’s less than squeaky-clean rep in this area as it is facing a lawsuit in the Court of Appeal for allegedly tracking the personal data of 4m iPhone users in the UK between August 2011 and February 2012. * SO WHAT? * Richard Lloyd, a former director of consumer rights group Which? and the one bringing the case, previously estimated that if he wins the trial damages could be in the region of £750 per iPhone user, at a total potential cost of £3.3bn to Google. This is particularly notable because it will be the first time such a collective action – similar to a US-style class action – has been brought in Britain against a big tech company for misuse of data. Lots of parties will be watching this closely.



Paddy Power’s owner creates a betting powerhouse, Tesla disappoints and Deliveroo sees revenues rise and losses widen while senior departures from Metro Bank and Tesco get different reactions…

World’s largest online betting firm created by Paddy Power owner (The Guardian, Rob Davies) highlights the £10bn all-paper takeover of The Stars Group (aka TSG, which owns Sky Bet) by Flutter Entertainment, the company that owns Paddy Power and Betfair. This will give Flutter shareholders 55% of the enlarged group that will hope to use its scale and presence to get a slice of the newly-opened world of sports betting in the US. * SO WHAT? * This move will help Flutter to take advantage of the relaxation of US sports betting laws and help it expand beyond the restrictive/mature British and Australian markets. Sports betting is now legal in 11 states, with more to follow. There will no doubt be more consolidation in the industry as others fight to get a slice of a potentially lucrative growth market.

Tesla misses target for car deliveries (Daily Telegraph, Olivia Rudgard) shows that Tesla did well on the one hand – it reported its best ever delivery numbers for the quarter at 97,000 units – but disappointed on the other, as it had predicted that it would shift 100,000 units. * SO WHAT? * Logistics continue to be problematic as the company has been scrambling to increase the availability of its most affordable car, the Model 3, in Europe and Asia. Tesla’s

share price has fallen by almost a third this year – and its competition is getting stronger all the time.

There are two high profile senior exec departures that are grabbing headlines in today’s newspapers. Tesco chief Dave Lewis to step down next year (Financial Times, Jonathan Eley) heralds the surprise news that Tesco’s turnaround man is resigning without a job to go to after  five years in the hot seat. * SO WHAT? * I think that he’s actually done a pretty impressive job at a very difficult time in Tesco’s history and lived up to his nickname “Drastic Dave” by making some drastic changes to a supermarket retailer that was in all sorts of problems when he turned up. He axed the HQ, sold off non-core businesses and even had a dabble in taking on Aldi and Lidl with Tesco discounter Jack’s – but maybe it’s time to let someone else have a go. In a way you would have thought that he could have resigned after Christmas, but putting my cynical hat on for a moment, it may be that if this key trading period proves to be a disaster they can blame him and if it goes well, they can call it his swansong.

It’s a bit of a different story in Metro Bank seals £350m bond sale as founder is shown the door (Daily Telegraph, Lucy Burton) as the UK challenger bank managed, at last, to get a bond deal away after the company’s controversial chairman Vernon Hill resigned. The company had to cancel the bond deal only a few days ago due to lack of investor interest – so Hill’s removal seems to have appeased doubting investors. Clearly, the company could not wait to get rid of him! * SO WHAT? * This is a positive step but problems still remain at the bank which spooked everyone earlier this year when it admitted that it had mis-classified its loan book. Having said that, Hill’s departure and subsequent bond sale will buy it time to turn things around – and with “Vernon the Barbarian” out of the way, it will probably make it easier to appoint a successor.



And finally, in other news…

I thought I’d leave you with a few potential purchasing ideas today. Halloumi wrapped in bacon is coming to Aldi this Christmas (The Mirror, Luke Matthews is definitely something I want to get involved in (and my two young sons are particularly enamoured by the two metre long pig-in-blanket!) but I’m not so sure about ASOS baffles people with faux wireless headphones sold as ‘fashion accessories’ (The Mirror, Courtney Pochin Hmm.

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Some of today’s market, commodity & currency moves (as at 0911hrs 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 **
7,123 (-3.23%)26,079 (-1.86%)2,888 (-1.79%)7,78911,925 (-2.76%)5,423 (-3.12%)21,342 (-2.01%)Holiday
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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