Thursday 11/07/19

  1. In MACRO & MARKETS NEWS, the UK economy returns to growth and Wall Street buzzes on rate decrease hopes
  2. In CAR NEWS, sales in both China and India weaken while JLR continues to suffer
  3. In UK HIGH STREET NEWS, we look at Superdry’s downbeat outlook, Wetherspoon’s relative success and the probe into Heineken
  4. In OTHER NEWS, I bring you an optical illusion…



So the UK economy returns to growth and Wall Street gets a boost on hopes of an interest rate cut…

UK economy returns to growth as carmakers end Brexit shutdown (The Guardian, Richard Partington) cites the latest figures from the Office for National Statistics (ONS) which say that UK GDP went up by 0.3% in May versus the previous month as production stoppages by carmakers that coincided with the original Brexit “leave” date fired back up again. Carmakers normally shutdown over the summer period for maintenance but this was brought forward in order to avoid difficulties related to border delays. On the services side of things, growth remained steady at 0.3% in the same time period, although the ONS pointed out that the sector – which accounts for about 80% of UK GDP and includes areas such as banking, hospitality and leisure – has seen a notable slowdown since July 2018. The British Chambers of Commerce head of economics, Suren Thiru, observed that “The continued slowdown on the underlying three-month measure is

further evidence that the UK economy is faltering under the weight of relentless Brexit uncertainty and tougher global economic conditions”.

In Wall Street climbs with cuts on horizon (The Times, James Dean) we see that US Federal Reserve chairman Jerome Powell said that a combination of Brexit uncertainty, international trade wars, sluggish global growth and inflation is leaving the American economy vulnerable – and markets strengthened on hopes that interest rates would be cut at the next meeting of the Fed which concludes on July 31st. Separately, Powell also dampened enthusiasm for Facebook’s new digital currency, Libra, by saying that he was concerned about its potential impact on consumers and markets and that there were “many serious concerns regarding privacy, money laundering, consumer protection and financial stability”, which took a bit of the shine off Bitcoin’s recent rally. * SO WHAT? * Everyone monitors the Federal Reserve’s actions and observations very closely due to its huge influence on world markets being the central bank of the world’s largest economy. The last meeting prepared the ground for an interest rate cut, so it seems that Powell’s remarks are edging closer to making this a reality.



China, India and Jaguar Land Rover all face weakening car sales…

No turnaround in sight for China car sales (Wall Street Journal, Trefor Moss) heralds continued weakness in car sales in the world’s biggest market following thirty straight years of growth. The latest data from the China Association of Automobile Manufacturers showed June sales down by 9.6% versus the previous year, falling for the 12th month in a row as consumers continued to tighten the purse strings against the US-China trade war backdrop. US automakers Ford, GM and FiatChrysler’s Jeep division suffered the most among the foreigners – and European competitors such as VW are also suffering – but domestic players such as Zhejiang Geely, which announced a profit warning on Monday this week, are also suffering a rough ride. On the flipside, Japanese makers Honda and Toyota actually saw sales rise. * SO WHAT? * Clearly, economic uncertainty exacerbated by the US-China trade conflict is making potential buyers sit on their hands so I think it’s just a case of the manufacturers having to weather the current conditions. There’s not really much they can do apart from

keep their operations lean IMHO.

If that’s not bad enough, India car sales plunge by a quarter as credit crunch bites (Financial Times, Benjamin Parkin and Hudson Lockett) shows a MASSIVE drop in Indian car sales – the biggest in over ten years – as a credit crunch bites into the whole country. * SO WHAT? * The latest figures from the Society of Indian Automobile Manufacturers show three continuous months of decline of 20% or more as credit growth has dried up, suddenly leaving customers with fewer financing options. Given that non-banks had come to account for 40% of new vehicle loans, according to Capital Economics, this sudden drop-off is hardly surprising. Tough times ahead for car sales in India – and it’s not being made any better by unemployment being at its worst level in decades.

Jaguar Land Rover sales add to British motor industry woes (Daily Telegraph, Alan Tovey) highlights poor sales figures for the embattled car maker as its global sales fell by 11.6% in the latest quarter versus the same time period a year ago. Sales of the new Evoque are helping to stem the decline, but then again sales are suffering to some extent because customers are waiting for the new version of its popular Discovery Sport model. * SO WHAT? * The tough times continue…



Superdry gets bleak, Wetherspoon outpaces rivals and Heineken gets investigated…

Superdry founder dampens early revival hopes amid $85m loss (Daily Telegraph, Laura Onita) shows that things continue to be tricky for the Japanese-themed fashion retailer as it made £85.4m in losses for the year to April versus a profit of £65.3m the previous year. Returning co-founder Julian Dunkerton obviously blamed the cr*p performance on the previous management and said that a turnaround would take up to two years. * SO WHAT? * I think that the company needs a MASSIVE overhaul. There are surely only so many t-shirt/polo shirts/hoodies you can sell – the company surely has to come up with something new otherwise I fear it could go the way of previous stars such as French Connection.

Elsewhere, Wetherspoon still leads the pack despite refusal to increase prices (Daily Telegraph, Oliver Gill) shows that the pub group is still managing to pull ahead of peers such as Young’s and Greene King despite its refusal to increase prices squeezing their margins. Despite this, it is still investing in upgrades to its pubs and buying up freeholds of sites where it used to be a tenant. Then in Heineken’s pub and bar business investigated by PCA over ‘beer tie’ (The Guardian, Rob Davies) we see that Heineken’s pub chain is going to be under scrutiny by the Pubs Code Adjudicator for imposing unfair terms on landlords who try to cut links with the brewer. * SO WHAT? * If the PCA finds against Heineken, it could be fined up to 1% of UK turnover – about £11m. This could also lead to other similar investigations in the sector.



And finally, in other news…

I thought I’d leave you with A new optical illusion on Twitter has people mistaking a car door for the beach (Insider, Gabbi Shaw What do you see?

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Some of today’s market, commodity & currency moves (as at 0904hrs 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 **
7,531 (-0.08%)26,860 (+0.29%)2,993 (+0.45%)8,20312,373 (-0.51%)5,568 (-0.08%)21,644 (+0.51%)2,918 (+0.08%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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