Thursday 20/05/21

  1. In MACRO & CRYPTO NEWS, UK inflation, houses prices and pay are all up, but Bitcoin has a rough one
  2. In TRAVEL-RELATED NEWS, the US travel boom is already here, the EU considers opening up to vaccinated tourists, Ryanair agitates in court and Trainline might get a major competitor
  3. In RETAIL NEWS, Home Depot, Lowe’s, Target and TJX gain momentum and Lord Wolfson steps up for Reiss
  4. In MISCELLANEOUS NEWS, John Laing is snapped up by a PE firm and Musk causes a UK stir
  5. AND FINALLY, I bring you an interesting optical illusion…

1

MACRO & CRYPTO NEWS

So we see strengthening UK inflation, house prices and pay and weakening Bitcoin

📢 It’s Thursday – so it’s time for my 30-minute Instagram Live At Five where I will run through the week’s key stories AND the one hour weekly ZOOM call for paying subscribers where I will do the same but in more detail and with much more interaction 👍 The ZOOM call will start at 5.30pm and run until 6.30pm. See you there!

The pressure’s really building now on the Bank of England regarding interest rates given Higher energy bills help spark a big jump in the inflation rate (The Times, Gurpreet Narwan) cites the latest data from the Office for National Statistics which shows that the rate of inflation in April doubled from 0.7% to 1.5%, above consensus forecasts of 1.4%! If you add in UK house prices grew in March at fastest pace since August 2007 (The Guardian, Julia Kollewe) and UK pay growth picks up sharply in April as lockdown eases (Financial Times, Delphine Strauss), the

pressure on the Bank of England to calm things down a bit by increasing interest rates is going to get increasingly difficult to ignore. OK, so The signs that suggest house prices could crash to Earth (Daily Telegraph, Melissa Lawford) says that there could be some turbulence ahead in the form of the end of the stamp duty and furlough, leading to a sudden increase in the number of properties on the market from the newly-unemployed (and therefore a fall in house prices as many will be forced sellers). This last article is well worth a read if you have a particular interest in the residential property market.

I did talk about this in yesterday’s podcast and newsletter, but I thought I’d include Bitcoin gyrates on fears of regulatory crackdown (Financial Times, Thomas Hale, Tabby Kinder and Philip Stafford) just in case you didn’t see it and wondered whether I’d missed something 😜. Anyway, Bitcoin fell up to 30% at one point to $30,101, but it’s now recovered. Presumably the market was relieved when Elon Musk indicated in a tweet yesterday that Tesla would hold Bitcoin for the long term and would not be selling its position. Interestingly, Binance and Coinbase (two of the best known cryptocurrency exchanges) experienced outages as users tried to sell. It sounds like Robinhood all over again 😂!

2

TRAVEL-RELATED NEWS

Americans rush back to travel, the EU considers travel for the vaccinated, Ryanair wins at court and Trainline looks like getting a major competitor…

The US travel surge isn’t coming – it’s here (Wall Street Journal, Scott McCartney) is a really interesting article which shows that Americans are really embracing their new-found freedom to travel – domestically. With the continuation of the rapid vaccine rollout ticket prices are already approaching the highs of the expensive summer 2019 season. Despite miniscule amounts of international and business travel compared to normal levels TSA airport screenings in the first half of May were only down by 35% versus 2019 levels, which just goes to show how strong the demand for domestic travel has been. Mind you, EU plans to open up to vaccinated tourists (Financial Times, Michael Peel) shows that advances are being made in Europe, according to a provisional agreement. However, each of the 27 member states will have the right to bar visits from countries with variants “of concern or interest”. At the moment this is a recommendation and, as such, is not binding – but it does give an indication of direction (and possibly timing).

Ryanair scores first win in EU court against state-propped flag carriers (Financial Times, Valentina Pop and Philip Georgiadis) highlights an important win for the low-cost Irish airline as it continues to argue that state help given to national airlines is tantamount to suppression of competition. The Luxembourg-based General Court ruled that the European Commission did not provide an adequate explanation of why Portugal’s TAP and the Netherlands’ KLM should get €4.6bn-worth of aid. The court is not making the airlines in question pay the money back, though. This will no doubt continue until CEO Michael O’Leary’s dying breath as we all know how feisty he is!

Back on dry land, Trainline is threatened by state ticket app (Daily Telegraph, Oliver Gill) shows that the Trainline’s dominance could be taking a major hit from a rival app that will be run by a new state-owned body called Great British Railways. All of Britain’s 26 rail operators will migrate to this platform because their contracts with aggregators like Trainline will come to an end. Aggregators will still be able to sell tickets but the new government app will be able to benefit from a “flexible commission structure”. * SO WHAT? * I did say the other day that I thought that Trainline could be a bit of a dark horse as lockdown lifts and commuters return to work – but this latest development isn’t going to help! Mind you, the word is (at the moment) that the government effort will be 💩 and that Trainline will have at least nine months to get their ducks in a row. Still, a bit of competition never hurt, did it?!?

3

RETAIL NEWS

Home Depot, Lowe’s, Target and TJX do well in the US while Next’s chief steps up for Reiss…

Home Depot/Lowe’s: housing scramble furnishes rooms for improvement (Financial Times, Lex) shows that although both of America’s biggest DIY retailers announced strong Q1 revenues, the share prices of both weakened as investors bet that such performances are unsustainable. The article argues that a red hot property market will encourage people to invest in their homes (either making it better while they stay/move in or sprucing it up for sale etc.) and that Lowe’s margin improvements and Home Depot’s greater focus on professional contractors will help to keep the party going. Target, TJX sales surge as shoppers return (Wall Street Journal, Sarah Nassauer) were two additional retailers whose strong sales and better footfall added to the number of retailers reporting decent results. It sounds like there’s a retail bonanza going on in US retail at the moment!

Meanwhile, Wolfson to chair Reiss after Next takes stake in retailer (Daily Telegraph, Laura Onita) shows that Next’s boss, Simon Wolfson, is going to become Reiss’ chairman following its purchase of a 25% stake in the apparel retailer a couple of months ago. This is all quite cosy as Reiss’ current CEO is Christos Angelides who, prior to taking the top job at Reiss, worked at Next for 28 years! I think it is going to be very interesting to see what these two can do in the next few years as they’ve now got a lot of assets to play with.

* SO WHAT? * All this retail frenzy on both sides of the Atlantic just continues to suggest (to me, anyway!) that inflation is rising rapidly, it’s not a blip, and if the central banks don’t change their course soon, we might have to see bigger cuts and more volatility to put the breaks on red hot economies.

4

MISCELLANEOUS NEWS

John Laing gets snapped up by a PE firm and Musk gets everyone excited…

KKR snaps up John Laing in latest private equity swoop (Daily Telegraph, Alan Tovey) highlights the latest British company to be a target of cash-rich private equity firms. The London-listed infrastructure company’s management backed the PE firm’s bid that was made at a 27% premium to the share price pre-announcement. * SO WHAT? * John Laing has had a rough time of it what with Brexit and then the coronavirus so it gets a sugar daddy in the form of KKR while John Laing/KKR: buyout firm seeks inflation protection in infrastructure (Financial Times, Lex) points out that KKR gets a bit of protection from inflation by investing in something that is likely to rise in value as more money is poured into infrastructure over the next few years.

Meanwhile, it seems that everyone got in a bit of a tiz recently as per Musk jets in as UK hunts for car manufacturing sites (Daily Telegraph, Russell Lynch and Alan Tovey) because it turns out that Elon popped in to the UK on his private jet over the weekend purportedly looking for potential locations for a new factory. What to expect when Musk’s circus is in town (Daily Telegraph, Alan Tovey and Rachel Millard) gives a bit more colour on the background of Tesla’s factory rollouts thus far but makes the excellent point that the UK needs more battery production than car production at the moment. * SO WHAT? * Tesla has rejected the UK as a suitable place for a gigafactory before, but Brexit may have given the government more wiggle room regarding incentives that can be offered – and Elon likes a good incentive. Also, if EV production is to stand any chance of improving in the longer term future, batteries really should be produced here otherwise the UK will always have to compete with one hand tied behind its back because of the increased cost of importing them. I think that domestic battery production is an essential – not a luxury.

5

...AND FINALLY...

…in other news…

I said, a couple of days ago, that I hadn’t included an optical illusion for a while in this section. Well here’s another one: Incredible optical illusion appears to show man leaping up into the sky (The Mirror, John Bett). Very weird!

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Some of today’s market, commodity & currency moves (as at 0742hrs 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 **
6,950 (-1.19%)33,896.04 (-0.48%)4,115.68 (-0.29%)13,299.74 (-0.03%)15,114 (-1.77%)6,263 (-1.43%)28,105 (+0.22%)3,507 (-0.11%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿
$63.68$66.89$1,874.161.412931.21924109.081.158840,057.26

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