Thursday 06/08/20

  1. In TECH NEWS, Twitter cuts Trump, TikTok rivals lure creators and the Microsoft deal gets closer
  2. In HIGH STREET & CONSUMER NEWS, WH Smith, River Island and William Hill announce cuts while consumers spend on cars and Sunak’s meal deal
  3. In FINANCIALS NEWS, we look at some bank trends, Metro Bank’s loss and a £1.7bn deal for Hastings
  4. In NEWS ON CORONATRENDS, cinemas clash with streaming, Segro becomes the UK’s biggest landlord and gold keeps shining
  5. AND FINALLY, I bring you a zombie Ferris wheel and Ross Kemp’s shocking trout pout…



So Twitter cuts Trump and TikTok-related dramas continue…

*** It’s THURSDAY today, which means that it’s ZOOM TIME! I will be going through the week’s key business and financial markets news and will then open up for questions to you! Click HERE to join ***

Twitter freezes account of Trump presidential campaign (Financial Times, Hannah Murphy and Demetri Sevastopulo) shows that Twitter froze the account yesterday for breaking rules on misinformation after it posted a video where Donald Trump, President of the United States and self-styled leader of the free world said that children were “almost immune” to coronavirus. O.M.G. That’s like saying that someone is just “a bit” pregnant or that these curtains are “a bit flammable”. It was such a ridiculous statement that even Facebook removed it (in fact, they removed it before Twitter did!). * SO WHAT? * Although this is comically bad, the serious point here is that people seem to be able to post all kinds of rubbish on social media without much real backlash. I just wonder whether, as we get closer to the presidential election, American voters will be bombarded with even more of this kind of stuff to drown out real news in order to cause panic and control the narrative.

In Rivals take advantage of TikTok’s troubles to poach talent (Financial Times, Hannah Murphy) we see that rivals to TikTok are lining up to capitalise on the uncertainty surrounding the video app. Triller has just taken on Josh Richards, up to now a TikTok creator with 20m followers who earns hundreds of thousands of dollars promoting music and merch. Byte, launched by the former founder of Vine, has already seen a “huge influx” of creators “in the last few weeks” and Facebook’s Instagram yesterday launched Reels in 50 countries. Some of the major influencers are already starting to build up a presence on other platforms by directing existing fans to them. Meanwhile, Video app’s takeover deal ticks ever closer (The Times, Simon Duke) shows that a potential deal between Microsoft and TikTok’s parent ByteDance is ongoing and could be finalised within three weeks, according to CNBC reports yesterday. * SO WHAT? * It’ll be interesting to see how many people sign up with the TikTok alternatives and whether they are made up of people who haven’t been on TikTok before or whether they will just migrate onto the new platforms. It’s too early to tell whether these platforms can co-exist or whether one will emerge victorious. Although Reels is backed by Facebook, it’s not guaranteed to work as its previous TikTok me-too Lasso was a flop. 



UK High Street blues continue but consumers are spending on some things…

WH Smith puts 1,500 jobs at risk as commutes slow (Daily Telegraph, Laura Onita) shows that the high street stalwart is going to cut up to 10% of its staff. This will be part of wider cost cutting efforts to mitigate against the damage caused by coronavirus on its commuter-focused business in railway stations and airports. Island is no safe haven in the retail storm (The Times, Robert Miller) highlights problems for River Island as the company is the latest one to consider a Company Voluntary Arrangement (CVA). The fashion retailer is currently looking at closing some stores and cutting rents on others. Elsewhere on the high street, in William Hill shuts another 119 stores as more punters shift online (Financial Times, Alice Hancock) we see that the UK bookmaker is making more cuts and store closures and will be merging its retail and online operations as the migration to online gambling has increased under lockdown. * SO WHAT? * The effects of coronavirus have been devastating on so many high street retailers and it’s likely that there will be more suffering to come. There may be some light at the end of the tunnel for William Hill, though, as its US business looks like it could be a real growth area as. It is looking to take advantage of its

knowledge in sports betting that was only fairly recently legalised in America so now the company earns 61% of its profits in the UK as opposed to 85% a couple of years ago. Mind you, for that to properly kick in, there have got to be more sporting events!

It’s not all bad, though! Meal discounts offer diners taste of normality (Daily Telegraph, Hannah Uttley) shows that restaurants and pubs have seen a real uplift in the early days of the “Eat Out To Help Out” campaign where the government subsidises your food up to £10 a head. Also July car sales drive recovery hopes higher in hard-pressed motor trade (The Times, Robert Lea) shows that there has been a big bounce (from an extremely low base) in car sales according to the latest figures from the Society of Motor Manufacturers and Traders, with new car registrations in July being 11% higher than the same month last year. Sales so far this year are around 58% of 2019 levels, so it’s not time to crack open the Bolly just yet. * SO WHAT? * I think that the restaurant thing is good because it gives people a reason to go out after spending months in lockdown. It may break some of the reticence of the more cautious among us enough to tempt them to venture out more and spend. The car thing sounds a bit spurious, though, as figures were pumped up by the fact that car show rooms were only opened in June after lockdown and because July and August sales figures tend to be weak because the usual trend is a slowdown before the new registration plate in September. Still, these are not negative developments – we just have to wait and see whether they are just a blip or morph into a trend!



We look at some of the current bank trends, Metro Bank’s loss and Hastings going private…

Four trends from the bank earnings season (Financial Times, Owen Walker, Stephen Morris, Nicholas Megaw and Laura Noonan) sounds like an extremely 🥱🥱🥱 headline, but actually it’s quite interesting! Having just emerged from the latest banking results season, this article does a good roundup of what’s emerged. Firstly bad loan provisions continue to rise on both sides of the Atlantic as everyone is bracing themselves for a rush of defaults, but provisions were bigger in the US than in Europe. Secondly, banks with more exposure to trading operations did well because of the increased amount of trading activity in very volatile markets. Morgan Stanley, Goldman Sachs and JP Morgan did particularly well in this regard and BNP Paribas benefited the most from this in Europe, although Barclays was not-too-shabby either. America’s top six banks manged to grow their capital despite putting aside massive loan loss provisions and cost-cutting has also featured highly. Credit Suisse and Société Générale are among those embarking on big cost-cutting plans while the likes of HSBC and Deutsche Bank are re-visiting previous plans for big lay-offs.

Elsewhere, Metro Bank falls to £241m loss after sharp rise in loan provisions (Financial Times, Nicholas Megaw) shows that the UK challenger bank still has a lot to do to get back on track after last years scandals and upheaval. The rise in expected credit losses was actually more of a consequence of new economic forecasts rather than actual customers defaults – which have been kept relatively low so far by loan repayment holidays and government rescue schemes. * SO WHAT? * I think that Metro Bank is in the very early stages of a four year restructuring and given that things are really bad for all high street lenders it is up to them to just hunker down and survive as best they can.

Then in UK insurer Hastings to be taken private in £1.7bn deal (Financial Times, Oliver Ralph) we see that the insurer is to go private following the receipt of a £1.7bn cash offer – a 47% premium to the share price before the news came out – from South Africa’s Rand Merchant International and Finnish insurer Sampo. There has been a lot of interest in the UK general insurance market from foreign companies with the likes of Allianz, Axa and Zurich having or increasing presence – and Munich Re is now the largest holder in Admiral. * SO WHAT? * This gives Hastings a bigger balance sheet from a “sugar daddy” to play with, Rand Merchant clearly likes what it sees as it has owned a 30% shareholding in the company since 2016 and Sampo gets to expand its geographical footprint.



Cinemas and streaming clash, Segro becomes the UK’s biggest landlord and gold keeps going…

Cinemas forced into duel with streaming giants (Daily Telegraph, Michael Cogley) shows that cinemas will be clashing with studios as Disney is the latest to announce the release of Mulan to video-on-demand on its Disney Plus service – a film that was supposed to be released this month. It’ll cost $29.99 in the ‘States to stream from September 4th although Disney will release it in cinemas that can allow it. * SO WHAT? * OK so Disney says this is a one-off, but the successful release of Trolls World Tour under lockdown has shown studios that video on demand is a viable option to generate revenues under current circumstances. Mind you, I have to say that I am sceptical about this because how many people are going to be willing to pay $30 for ONE film? Going to the cinema is a bit of an event and costs around $12 per person in the US. And if you are streaming other films and TV as well, $30 a pop sounds like a big ask (especially for a film like Mulan). This all follows the recent agreement reached between Universal Pictures and AMC Entertainment (the #1 cinema owner in the US) for the former to be allowed to release films for viewing at home only 17 days after release.

Segro’s crown as Britain’s largest landlord comes at a princely price (Financial Times, Cat Rutter Pooley) is a really interesting article which highlights the fact that the

decidedly un-sexy sounding landlord of warehouses is now the UK’s biggest landlord – with a valuation a full 45% higher than the combined market cap of British Land and Land Securities! The latter two have been absolutely killed by retail tenants’ suffering and it is likely that their exposure to offices will be the next painful problem they will have to deal with. Not so for Segro, with its bet on warehouses serving burgeoning demand from online businesses proving to be particularly astute! * SO WHAT? * This stellar demand can’t go on for ever – and as high streets start to open up again, online shopping may calm down a bit versus the initial frenzy of lockdown. Still, Segro still has exposure to data centres – which should also continue to see hot demand. An interesting company!

Then in After Covid-19, just how high will prices go in the 2020 gold rush? (The Guardian, Rupert Neate) we see that the gold price continued to power through the $2,000 level in trading yesterday. The price of the precious metal has risen by 34% since the start of the year and it has continued its climb over continued concerns over the effects of the coronavirus and rising geopolitical tensions around the world. * SO WHAT? * Clearly, gold’s performance so far this year has been impressive but it could yet go further in theory. The World Gold Council says that if you take into account inflation, it could go to $2,800 if it were to match the price in January 1980! Bank of America Merrill Lynch analysts reckon it could hit $3,000 an ounce by early 2022 and US financial pundit and speculator Jim Rickards reckons it could hit $15,000 by 2025! 😱 This guy is clearly talking his own book 😂. Still, it does make you think!



…in other news…

I thought I’d leave you today the rather weird No escape from the terror with Japan’s new haunted Ferris wheel (SoraNews24, Casey Baseel) and then the cautionary tale in Ross Kemp learns hard way not to disturb wasps (SkyNews). This is a bit of a shocker!

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Some of today’s market, commodity & currency moves (as at 0758hrs 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 **
6,105 (+1.14%)27,202 (+1.39%)3,328 (+0.64%)10,998 (+0.52%)12,660 (+0.47%)4,933 (+0.90%)22,399 (-0.52%)3,386 (+0.26%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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