Thursday 11/11/21

  1. In MACRO, CLIMATE & ENERGY NEWS, we look at major developments in the US, China, Brazil, Germany and Poland while US/China commit, Russia turns on the gas and EDF readies for nuclear
  2. In AUTOMOTIVE-RELATED NEWS, Rivian booms on debut, Musk sells shares, Infineon benefits from chips and second hand car prices drive up insurance premiums
  3. In SOCIAL MEDIA-RELATED NEWS, Google loses its appeal, YouTube snuffs out “dislikes” and Twitter tries crypto
  4. In RETAIL/LEISURE NEWS, M&S stages a comeback, Asos targets overseas, Halfords benefits from more drivers and Wetherspoons suffers from cautious customers
  5. AND FINALLY, I bring you the sweetest video and good news for Bounty-lovers…



So we look at US inflation and major developments in China, Brazil, Germany and Poland as the US and China surprise everyone on climate, Russia turns on the gas and EDF readies itself for nuclear…

📢 It’s Thursday – so it’s time for the one hour weekly ZOOM call for SILVER and GOLD subscribers where I will do a detailed review of the week as well as chance for Q&A and discussion 👍 The ZOOM call will start at 5.30pm and run until 6.30pm. See you there! I will also be doing another call straight afterwards aimed at university societies. If you want details for that, please ask your presidents to get in contact with me! The details are also on our socials.

BTW, you may recall that I mentioned a story about Polish company InPost last week, hoping to take over postal locker boxes in the UK. I thought it was a really interesting story and I asked a Polish Watson’s Daily ambassador to do a Watson’s Daily Quick Bites report on it. Why not take a moment and have a read? I found it to be a fascinating subject and is something that really isn’t very widespread over here…

In Biden demands action after prices soar at fastest pace since 1990 (Daily Telegraph, Tom Rees and Louis Ashworth) we see that President Biden has thrown his toys out of the pram regarding the fact that inflation has now reached its highest level since 1990! He has directed his top economic advisers at the National Economic Council and competition regulator, the Federal Trade Commission, to get on it, saying that tackling inflation is a “top priority”. US inflation came in way above market expectations, which has caused a major kerfuffle. * SO WHAT? * I’d say that now is a time for action, not words. It seems to me that current Fed chief Jerome Powell has pretty much entrenched himself in his own “do nothing” rhetoric, so I would have thought it will be tricky for him to increase interest rates too soon – unless he takes a leaf out of the book of Bank of England governor Andrew Bailey, and his predecessor Mark Carney – and becomes the “unreliable boyfriend”. Alternatively, this might be an interesting/opportune time to replace him (as per what I said yesterday) with Lael Brainard who doesn’t have the baggage Powell does. The Fed is independent of the administration, but having someone from his camp in the Fed hot seat might be useful…

Soaring inflation at China’s factory gates raises fears for rest of world (The Times, Patrick Hosking) highlights another major concern as factory gate inflation (the rate at which costs that wholesalers pay to buy materials from producers – excluding transport and distribution fees – rise) rose at its fastest rate in 26 years in the month of October thanks to major power shortages and skyrocketing

commodity prices. This was comfortably above market consensus – and came at a time when consumer price inflation also rose, mainly because of higher vegetable prices. This is likely to put upward pressure on wholesalers, retailers both at home and abroad and brings up the possibility that China may be heading towards stagflation – a period when rising prices occur at the same time as an economic slowdown.

In other macro developments, Bolsonaro hopes new social welfare scheme will lift re-election prospects (Financial Times, Bryan Harris, Michael Pooler and Carolina Pulice) shows that Brazil is going to launch an enhanced social welfare programme for its poorest citizens next week, in a move that critics say is a cheap move to buy votes at next year’s election that will come at a very high economic cost. In order to launch Auxílio Brazil, the name of the new scheme, the government is having to swerve around a mandatory spending ceiling, something that investors hate because it makes things less predictable. Given that Brazil’s inflation rate is already above 10%, this doesn’t bode well for self-control in other areas of the economy.

Elsewhere, German economic recovery stumbles as Covid cases hit record high (Martin Arnold and Guy Chazan) cites the conclusions of the German Council of Economic Experts, which advises the government and says that the country could become the eurozone’s economic laggard as higher rates of Covid will stunt consumer activity and exacerbate existing supply chain problems. Things aren’t going great for one of its neighbours either in Poland’s economy faces increasing pressure from the east and the west (Daily Telegraph, Tom Rees and Tim Wallace) as the country faces chaos on its border with Belarus on the one hand and difficulties with the EU on the other, (it is withholding €57bn in grants and low-interest loans because of an impasse on judicial reforms). The EU is having a very tricky time at the moment.

On a more positive note, US and China pledge co-operation over ‘existential’ climate crisis (Financial Times, Leslie Hook) highlights a move that surprised everyone at COP26 as the two most polluting countries in the world said that they issued a joint statement saying that they would co-operate on climate change. There wasn’t much detail in the statement apart from China saying that it would start to address methane emissions but I guess it’s a move in the right direction.

Meanwhile, in energy developments, Russia starts pumping gas and driving down price (The Times, Emily Gosden) shows that Russia has started pumping out more gas, which led to gas prices falling across Europe. This will be a particular relief to those concerned about shortages over winter. Staying on the subject of energy, EDF ‘ready’ to build six reactors as Macron revives nuclear power (The Times, Adam Sage) shows that the state electricity group is girding itself for action following France’s re-commitment to nuclear power – an interesting turnaround given what Macron said when he assumed office.



Rivian had a strong debut, Musk sold shares, Infineon storms it and second hand car price rises are pushing up insurance premiums…

Bezos-backed electric carmaker Rivian in biggest US float since Facebook (The Guardian, Dominic Rushe and Jasper Jolly) shows that the EV maker managed to raise $11bn on its stock market debut yesterday. Investors piled in to the extent that its market valuation exceeded that of Ford or General Motors despite having lost over $2bn since the start of last year and delivered the princely total of 53 vehicles by the end of last month (and only 12 of those were in this year) 🤣! Rivian Automotive: Wall Street embraces venture capital risk in the public markets (Financial Times, Lex) points out that although Rivian floated the “hard way” in that it went down the traditional route rather than the easier SPAC one, the share price performance of rivals such as Lucid Motors, Fisker, Lordstown Motors and Nikola have all hit a slippery slope since flotation. * SO WHAT? * Rivian has a lot to prove, but I think that the ace up its sleeve is having Jeff Bezos as a backer. If he EVER cuts his order, complains, or sells down his stake, I think the company’s share price will go down the toilet.

Talking of key drivers of EV companies, Elon Musk sells around $5billion in Tesla stock (Wall Street Journal, Rebecca Elliott, Richard Rubin and Theo Francis) shows that Musk was true to his Twitter followers and sold down some of his stake in Tesla, although thus far it seems that he’s sold a lot less than the 10% of his shareholding he said he was going to dispose of (but there’s still time!). * SO WHAT? * It all seems above-board as things stand – with

no dodgy business – and I wouldn’t be surprised to see the share price going up again if/when we see that he has sold 10% of his shareholding because, at the moment, everyone knows there is a seller in size in the market. Once that clears, investors may well jump on the EV bandwagon going to the end of the rainbow!

Then in Infineon profits almost double as chip shortage raises demand (Financial Times, Joe Miller) we see that Europe’s biggest chipmaker almost doubled its profits in the latest quarter as it benefited from the red-hot demand for semiconductors against a backdrop of a global shortage. Infineon gets 40% of its revenues from the automotive industry and the company says that demand is currently way above supply. * SO WHAT? * Some observers say that semiconductor manufacturers may be benefiting from customers over-ordering in order to build up inventory, meaning that order levels may be appreciably lower in future but it was good to hear from Continental, one of Infineon’s customers, that it thought that the global semiconductor shortage has “likely reached its peak”.

Meanwhile, Surge in second-hand car prices fuels insurance costs for drivers (Daily Telegraph, Will Kirkman) shows that car insurance premiums are likely to rise as rising second hand car prices mean that payouts are rising as well. This is being made worse by the fact that there is currently a shortage of parts, which causes delays, which again increases costs. Separately, from next year insurers won’t be able to charge new customers lower premiums and existing policies higher premiums when they renew, so it’ll be interesting to see what effect this has.



Google loses its appeal, YouTube dislikes “dislikes” and Twitter tries crypto…

EU wins €2.4bn Google Shopping case (Financial Times, Javier Espinoza) shows that Google lost its appeal against a chunky EU fine imposed on its Shopping service at the General Court of Luxembourg yesterday, giving European regulators a boost. The Court ruled that Google prioritises “its own comparison shopping service over competing services” in search results rather than putting forward the “better result”. * SO WHAT? * The ruling is likely to be appealed, but it is a bit of rare good news for regulators fighting Big Tech that could hearten them for other causes.

Meanwhile, YouTube to hide ‘dislikes’ to attract more contributors (Daily Telegraph) highlights a new

development for YouTube as it says it will no longer show “dislikes” on videos to make the environment more attractive for creators. * SO WHAT? * Smaller creators seem to be disproportionately affected by this kind of trolling and given that YouTube faces a lot more competition these days from the likes of Instagram, TikTok and Spotify I guess they have to make the effort.

Then I thought Twitter sets up crypto team to explore decentralised apps (Financial Times, Hannah Murphy) was worth mentioning as this marks the latest effort by chief exec Jack Dorsey to get more involved with digital assets, decentralised apps and their related communities. There’s going to be a new Twitter Crypto team whose mission will be to “set the strategy for the future of crypto at (and on) Twitter”. Dorsey’s a fan of Bitcoin and has said that he wants to integrate digital assets into Twitter. There aren’t any other real specifics to relate at this stage, though…



M&S stages a comeback, Asos looks overseas, Halfords benefits from more drivers and Wetherspoons loses older customers…

M&S on track for FTSE100 comeback as shares surge (Daily Telegraph, Laura Onita and Louis Ashworth) highlights a stellar performance from the high street stalwart which could help it return to the FTSE100 after serving time in the FTSE250 wilderness since September 2019. Its clothing business is doing well and it upgraded its full-year forecasts, helping its share price to spike by 16.5% in trading yesterday. Five reasons why Marks & Spencer’s turnaround looks like the real deal (The Guardian, Nils Pratley) reckons that, after some false dawns and a whole load of soul-searching, this overhaul could stick because a) it’s cutting its store numbers ruthlessly, b) it’s doing better with its online offering and its logistics, c) its partnership with Ocado is going well, d) it’s cost-cutting has been deep and e) it’s had a proper re-jig of in-store brands and brought in some “outsiders”. * SO WHAT? * I’ve seen M&S overhauled many times over the years but it certainly seems to be doing better in this latest re-set. Clothing is looking far more interesting and food has been helped enormously by Ocado – but I would still want a proper store overhaul to top it all off!!!

Elsewhere, Asos plans aggressive expansion into overseas retail markets (Daily Telegraph, Matt Oliver) highlights major expansion plans for the US and Europe in

a bid to double annual sales over the next 3-4 years. The company also forecast a doubling of profit margins over the long term due to cost savings from economies of scale. * SO WHAT? * This all sounds lovely, but Asos’ share price has fallen by over 30% and it has issued no less than THREE profit warnings in the last eight months! Investors seemed to like what they heard, though, as the share price rose by 10%, but of course success is all in the execution!

Halfords is boosted by more drivers taking to the roads (Daily Telegraph) shows that profits are likely to come in above market expectations as increased car ownership under lockdown has boosted sales – and the company’s share price bumped up by almost 20% as it added that supply chain pressures were improving. Autocentres saw an impressive 88.8% boom in revenues. The company added that stock levels of kids’ bikes and electric bikes were “very good” ahead of Christmas.

Things were not quite so perky in Wetherspoon’s sales slump as Covid-wary older customers stay away (The Guardian, Rob Davies) as the cheap’n cheerful pub operator said that it saw weaker sales due to older customers staying away because of Covid concerns – but on the other hand, younger customer numbers were rising. This was reflected in what drinks were being consumed as sales of cocktails were up by 45%, vodka by 17% and rum by 26%. Sales of ale were pale in comparison. * SO WHAT? * This is OK in the short term, but Wetherspoons tends to attract older clientele so unless it suddenly tries to go after a younger demographic on a more permanent basis it could suffer.



…in other news…

I thought I’d leave you today with the most feelgood video you are likely to see ever in Adorable golden retriever pup compared to Marilyn Monroe after first day at dog school (The Mirror, Catherine Swan) 😍😍😍 and good news for Bounty-haters in Bounty bars mocked in Christmas advert that admits most Brits can’t stand them (The Mirror, Rosaleen Fenton). TBH I think they are all winners, but if I had to pick one I’d leave to the end it would be a Galaxy (definitely not Bounty – what’s wrong with a Bounty?!?). Still, a Bounty amnesty may satisfy the haters…

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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 **
7,340 (+0.91%)36,079.94 (-0.66%)4,646.71 (-0.82%)15,622.71 (-1.66%)16,068 (+0.17%)7,045 (+0.03%)29,278 (+0.59%)3,533 (+1.15%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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