Thursday 07/03/19

  1. In TRADE-RELATED NEWS, Trump’s tariff tampering leads to deficit as Volvo and Jack Daniel’s talk about tariff impact
  2. In INDIVIDUAL COMPANY NEWS, US regulators approve the first drug to treat depression since Prozac, Grab grabs $1.5bn to expand in Indonesia, Paddy Power has a flutter and Amazon closes its pop-up shops
  3. In OTHER NEWS, I bring you the future of broadcasting. For more details, read on…



So Trump’s trade war comes home to roost while Volvo and Jack Daniel’s talk tariff troubles…

Trump’s tariff war pushes US trade deficit to 10-year high (The Guardian, Phillip Inman) highlights the gap between the the amount of goods US companies sell to China and the amount of Chinese imports to the US as being the largest in ten years and occurred despite a surplus in services trade. Trump’s $1tn of tax cuts and higher government spending had boosted domestic consumption, but had also increased imports as customers continued to buy imported goods. On the other side, the strong dollar made American goods more expensive, meaning that consumers outside the US looked for more competitive goods. The US imported from 60 countries in 2018, with most imports coming from China, Mexico and Germany. * SO WHAT? * If you just look at this data, it would seem that Trump’s efforts to reduce the gap have failed spectacularly. These disappointing figures may even make him less likely to sign off on a deal with China later this month but it will also intensify subsequent negotiations with Europe.

In Volvo’s Polestar electric car brand warns of US tariff impact (Financial Times, Peter Campbell) we see that Volvo Cars is already assuming the worst as it said that it will cut sales targets for its all-electric model in the US if Trump imposes higher tariffs on exports from China. The Polestar 2, a new potential competitor for the Tesla Model 3, was shown at the Geneva Motor Show this week and will

go on sale next year as one of the first mid-market all-electric cars from a volume car manufacturer (it’ll be priced at $63,000, which includes a 27.5% tariff on Chinese auto imports). * SO WHAT? * Trump has obviously instigated the whole tariff war in an effort to protect/nurture the US automotive industry, but his actions have resulted in some manufacturing leaving the US already (BMW and Daimler have moved some production out of the US to avoid sanctions) and a reduction in the number of models available (e.g. Ford cancelled plans to sell the Focus, which is made in China, in the US). Although Volvo’s new factory in South Carolina could be tooled up to produce the Polestar 2, it is deemed to be too risky if it doesn’t build brand recognition in the US first. This just goes to show that it is too simplistic to assume that slapping tariffs on imported vehicles will automatically help the US automotive industry. Globalisation has made this much less clear-cut than it would have been in the past.

Whiskey tariffs drag on sales for Jack Daniel’s maker (Financial Times, Matthew Rocco) highlights the effects of the trade war on Jack Daniel’s maker Brown-Forman as tariffs on American Whiskey took a sizeable chunk out of its sales growth in the last quarter. Investors took fright, sending the stock price down by 6.9%, but the company said that it expected to limit tariff impacts in 2019. * SO WHAT? * It seems that the spirits industry has been an easy target as Trump’s tariffs have prompted China, Canada, Mexico and Europe to impose their own. Clearly, the longer this drags on, the more painful things are going to become. 



A new anti-depressant gets approval, Grab grabs a chunk of dosh to expand, Paddy Power rebrands and Amazon shuts its pop-ups…

US approves first depression drug in decades (Financial Times, Hannah Kuchler) heralds a huge moment as the US Federal Drug Administration (FDA) has approved a new antidepressant, called esketamine and branded Spravato, to treat patients who have already tried at least two other antidepressant treatments. Johnson & Johnson make the drug and it will be sold as a nasal spray. The drug was given a “Breakthrough therapy” classification, which meant that it was fast-tracked through the approval process. * SO WHAT? * This is huge news because it is the first new antidepressant to get approval since Prozac was released 30 years ago. Although tests have shown that it can work fast (sometimes in as little as two days), there are risks of serious side-effects (particularly sedation and dissociation), which mean that it must be administered at a doctor’s office or clinic with patients having to be monitored for two hours after getting a dose. Despite this breakthrough, and the fact that it could be a life-saver for a third of people with major depressive disorders who have not yet responded to existing therapies, Johnson & Johnson’s share price stayed pretty flat after the approval was announced. Allergan, a Dublin-based pharmaceuticals company, is developing another antidepressant based on similar principles and will announce the results of its phase III clinical trials on Rapastinel soon.

Grab pockets $1.5bn from SoftBank to expand in Indonesia (Daily Telegraph, James Cook) heralds a nice little boost for South East Asian ride-hailing service Grab as it just got $1.5bn in new funding from SoftBank’s Vision Fund and will use most of it to expand its operations in Indonesia. * SO WHAT? * Including this latest injection, Grab has managed to raise more than $4.5bn over the past year and the company has grown rapidly since it bought

Uber’s regional ride-hailing and food business in March last year. The company will continue to grow its existing services and add additional ones like on-demand video, digital healthcare, insurance and hotel bookings. It certainly sounds like it is “crushing it” in the region.

Paddy Power has flutter on value of new name (The Times, Dominic Walsh) is a story cropping up in a few of the broadsheets today as it turns out that the company is intending to rebrand itself as Flutter Entertainment to reflect the “increased diversity of our brands and operations”. A vote on the change will be held at the company’s AGM in May. * SO WHAT? * I guess that this is an effort to simplify things after a period of consolidation in the industry as Flutter Entertainment is much less of a mouthful than Paddy Power Betfair (which came from the merger of the Irish bookmaker Paddy Power and Betfair back in 2016). It is aiming to buy more brands in the US and other emerging gambling markets as it searches for new growth.

I thought that Amazon to shut all US pop-up stores as it rethinks physical retail strategy (Wall Street Journal, Esther Fung) was worth mentioning because it seems that it has been expanding its footprint of physical stores of late. However, it’s now shutting down all of its 87 US pop-up stores, which were small and showcased devices like its voice assistant speakers, Kindles and other new products. On the other hand, Amazon is expanding its number of bookstores and its so-called 4-star stores (which sell products rated four stars or more by Amazon customers) which provide a broader product range – as well as rolling out a new line of grocery stores and more Amazon Go cashierless outlets. * SO WHAT? * Amazon really is trying to find its feet in the physical retail space and I think that initiatives like the pop-up shops have probably provided valuable insight into the real world by giving the company exposure to the end customer. It’s rare for a retailer to have deep enough pockets to finance this kind of experimentation, but having pretty much conquered online retailing, Amazon is now coming for the high street. Competitors should be very scared.



And finally, in other news…

You know that I’m always trying to bring you new trends – well, this could be the future of newsreaders: Chinese news agency unveils world’s first AI news presenters in jaw-dropping videos (SoraNews24, Koh Ruide Although this is impressive, you won’t get TV gold like this with a robot: (BBC newsreader Simon McCoy was clearly having a bad day!).

Some of today’s market, commodity & currency moves (as at 0814hrs 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 **
7,196 (+0.18%)25,673 (-0.52%)2,771 (-0.65%)7,50611,588 (-0.28%)5,289 (-0.16%)21,456 (-0.65%)3,106 (+0.14%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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