Thursday 10/01/19

  1. In MACRO NEWS, US-China talks make progress, the Eurozone jobless rate hits a new low and France vows to continue reforms
  2. In RETAIL NEWS, we look at the festive season’s winners and losers
  3. In CAR NEWS, China sales hit new lows, Rolls-Royce does nicely and scepticism increases on driverless
  4. In TECH NEWS, Apple announces a cut in iPhone production and we look at developments for Amazon
  5. In OTHER NEWS, I bring you an inadvisable dress and some entertaining snow monkeys. For more details, read on…



So the latest US-China trade talks conclude, Eurozone unemployment goes lower and Macron vows to continue his reforms…

It’s obviously too early to crack open the Bolly and get the cigars out, but US and China make progress on trade, but major hurdles remain (Wall Street Journal, Lingling Wei) suggests that some ground was made in the first talks between the two sides since the “truce” was declared at last month’s G20 meeting. Progress was made on things like the additional purchase of US goods and services and better access to China markets for American capital. However, agreement on more difficult issues like getting the Chinese to cut subsidies to domestic firms to level the playing field and protection of intellectual property are still to be addressed. Both sides made positive noises at the conclusion of the talks and it looks like there will be more to come, probably at a higher level. * SO WHAT? * Waaaaaaay too early to get positive – and with someone as petulant as Trump in the driving seat, who knows what will happen?! But I guess that’s how he likes it – to keep everyone on their toes. Still, at least the talks didn’t finish early and both sides seemed to want to go to the next step.

Eurozone jobless rate slips below 8% for first time in a decade (Financial Times, Valentina Romei) cites the latest figures from Eurostat which show the unemployment rate dipping under the 8% level – at 7.9% – for the first time since 2008. Oxford Economics’ chief exec James Nixon observed that “[the figures] suggest that the eurozone economy may be in better health than the string of recent poor numbers have suggested”. Clearly, unemployment

levels across the ‘zone vary widely with tighter markets being in places like Germany (3.3%) and the Netherlands (3.7%) versus the rather higher levels in Greece, Spain, Italy and France. * SO WHAT? * It’s great that this rate has dropped below 8% and I think it’s even better news that the level of eurozone youth unemployment has dropped to below 17% in November for the first time since September 2008. Still, I think there is a boatload of other factors that need to be taken into account before everyone starts to celebrate overall eurozone strength and stability. As I keep saying, the biggest economies in the eurozone are facing leadership crises (Germany and France) and then there are the Italian and Spanish economies that could still go either way. Europe is NOT out of the woods yet.

Speaking of which, France to forge ahead with reforms despite ‘gilets jaunes’ protests (Financial Times, Victor Mallet) shows France’s President Macron’s defiance in the face of continued violent protests against his reform agenda. Pensions and unemployment benefits are coming under the microscope now and he faces an uphill battle what with increasing opposition and the continued exodus of some of his senior ministers. * SO WHAT? * Macron is in trouble at the moment and I think that the dissenters smell blood. I believe that if he continues to cave to the violent protesters and puts off some of the knottier problems too long he will lose what remains of his credibility, not to mention the wave of popularity that he surfed in order to get into office. France is in dire need of root-and-branch reform and if Macron can’t do it with the mandate that he got when he assumed the presidency, then I doubt anyone can. Having said that, I think that it is important for him to listen to what his people have to say in the three month “national debate” otherwise he’ll just cement existing opinion that he’s a president who is out of touch with his people.



Let’s have a look at the winners and losers…

UK retailers endured worst Christmas since 2008, data show (Financial Times, Jonathan Eley) isn’t the most uplifting headline you’ll ever see, but data compiled by KPMG and the British Retail Consortium (BRC) leads to this rather depressing conclusion. BRC chief exec Helen Dickinson observed that “Squeezed customers chose not to splash out this Christmas with retail sales growth stalling for the first time in 28 months”. Separate data from Barclaycard appeared to confirm this observation as it said that consumer spending in the month to December 22nd increased 1.8% year on year – which lags consumer price growth – propped up by strength in the casual dining sector, with spending in pubs up by 12.9% and restaurants up by 9%. Esme Harwood, a director at Barclaycard, cautioned that “Many shoppers are anticipating price increases over the next three months, particularly around the cost of fuel, household utilities and groceries”. * SO WHAT? * This doesn’t sound good, but at the end of the day, there are always some bright spots – and again, I point to spending on “experiences” rather than “things”. ALL retailers need to take this to heart and improve their customer experience IMHO. Just as an aside, I think that stats from the likes of Barclaycard will become increasingly important as we continue to use our cards more and more and progress towards what will probably become a cashless society at some point. TBH, I take Barclaycard stats much more seriously than stats from surveys because it’s hard data based on real spending rather than more touchy-feely stuff you get on questionnaires. 

So, in the Battle of The High Street, Winners: sweet success for Greggs and Majestic Wine (The Guardian, Sarah Butler) applauds the performances of Greggs (which

benefited from mince pie and festive bake sales – but didn’t include the runaway success of its vegan sausage roll), Majestic Wine (which did great in sales, but took a hit on margins due to the heavy use of promotions) and Ted Baker (which had strong sales despite all the shenanigans going on with its founder Ray Kelvin). Ted Baker’s share price shot up by 31% on the news. Topps Tiles courts trade customers as DIY trend flags (Daily Telegraph, Charlie Taylor-Kroll) was also a “winner” due to the success of its commercial arm (sounds a lot like what Travis Perkins and Kingfisher are finding).

On the other side, Losers: festive gloom for Sainsbury’s and Mothercare (The Guardian, Sarah Butler) lists the casualties who include Sainsbury’s (the performance of its subsidiary, Argos, proved to be a drag – and lacklustre sales of non-food generally was disappointing), Mothercare (which seems to be continuing its terminal decline) and FatFace (who did badly on the domestic front, but actually did quite well overseas and online).

* SO WHAT? * I said before Christmas that the overall default setting for investors regarding the retail sector was very pessimistic and so anyone who did well was likely to see a steep rise in the share price – well that is turning out to be the case. There will always be SOME winners. Of the winners, I have more faith in Greggs and Majestic Wine (the latter especially, because they are doing some very exciting stuff at the moment whilst also keeping a very close eye on costs and performance), whereas maybe Ted Baker could be more fleeting because of the whole Ray Kelvin thing. Out of the losers, I think that it’s actually quite useful for Sainsbury’s to look cr*p because they want to buy Asda (that’s just my opinion, but I’m sure they’ll say that they are really really doing their best ????), Mothercare just looks like a disaster (what is it about places that sell kids’ clothes?? There is a serious gap in the market here…) but it looks like there may be a glimmer of hope for FatFace given its overseas strength. Ditch shops and strengthen overseas marketing and capability, perhaps?



China car sales fall, Rolls-Royce sales rise and scepticism increases on driverless…

Chinese car sales go into reverse for first time in two decades (Daily Telegraph, Alan Tovey) cites the latest figures released by the China Passenger Car Association (CPCA) which make grim reading for automotive manufacturers with Chinese ambitions as car sales in the world’s biggest car market have fallen by 6%. * SO WHAT? * Basically, the trade war with the US, a slowing economy and the exponential growth of ride-hailing services are coming together to brew up the perfect storm. UK-based Jaguar Land Rover has been particularly badly hit as China was, until recently, its biggest and most profitable market, but it has now fallen into 4th place behind the US, UK and mainland Europe. A further decline in overall car sales is widely expected to continue this year.

On the flip-side to this, Rolls-Royce enjoys record car sales after US tax cuts (Financial Times, Peter Campbell) shows that there was something to cheer about in the automotive sector as the BMW-owned marque saw a massive 22%

sales rise following the launch of its flagship Phantom and the newer Cullinan SUV models. Ultra-wealthy US buyers snapped up the vehicles emboldened by Trump’s tax cuts. * SO WHAT? * Enjoy it while it lasts! Rolls-Royce hand-builds ALL of its cars at Goodwood and imports 92% of its parts from overseas, which could potentially be a bit of a disaster following Brexit. They could also suffer a double-whammy as they can’t really stockpile parts like everyone else because their cars have a lot of bespoke elements. They must be praying for a Remain post-Christmas miracle…

Carmakers temper their enthusiasm for driverless technology (Financial Times, Richard Waters) highlights a changing mood amongst carmakers and tech companies as participants in the current Consumer Electronics Show (CES) in Las Vegas seem to be less strident in their ambitions for “level 3” (properly driverless) autonomy where, in the past, the implication has been that it is only around the corner. At CES this week, Audi in particular has wound its neck in and instead talked about the advances in road safety and that the “technical challenges of creating driverless vehicles are solvable”. * SO WHAT? * This is a really interesting article which charts the current progress of the “race to Level 3”, but it does show that there are still a great number of hurdles to be overcome in order to fully transfer full responsibility and legal liability from the driver to the car.



Apple cuts iPhone production and Amazon may hit a small bump in the road…

Apple to cut iPhone production by 10 per cent (The Times, James Dean) heralds a production cut for the first three months as sluggish handset sales continue. Suppliers were told about the reduction at the end of December and it will affect manufacture of the iPhone, Xr, Xs and Xs Max. * SO WHAT? * Not good news for Apple, but after it cut its quarterly sales forecast last week, this move should have 

been expected. The nightmare continues.

I thought I would quickly mention Bezos divorce clouds his stake in Amazon (Wall Street Journal, Laura Stevens and Sara Randazzo) because chief exec Jeff Bezos was married to his wife MacKenzie for 25 years, meaning that the settlement is likely to be humungous however “amicable” the split (you should see the official statement – you may need to take a sick bucket with you). I wouldn’t normally mention this kind of thing in Watson’s Daily, but Amazon is clearly a major company and big divorces can have consequences as per For some CEOs, divorce spilled into the corporate realm (Wall Street Journal, Micah Maidenberg). The settlement will no doubt be eye-watering.



And finally, in other news…

I’m sorry but when I saw this I just laughed so much I had to share it with you: Newsreader mocked for wearing ‘p3nis jacket’ on TV – people ‘can’t unsee it’ (The Mirror, Robyn Darbyshire Apologies.

With that in mind, I thought I’d balance this out with the altogether much cuter Japanese snow monkeys find novel way to travel during winter (SoraNews24, Oona McGee Ahhhhhh.