Thursday 16/01/20

  1. In MACRO NEWS, a US/China trade deal is announced, Vlad Putin has a reshuffle, China’s GDP looks shaky, Germany’s is the worst for six years, UK inflation falls but the number of house sellers rises
  2. In RETAIL NEWS, Bezos announces a big investment in India, Target is off target, Greggs announces Just Eat delivery, Booths has a merry Christmas and Revolution Bars toasts a decent performance
  3. In INDIVIDUAL NEWS, Goldman Sachs takes a hit, Juul pulls back on overseas expansion and Arrival gets money
  4. In OTHER NEWS, I bring you Valentine’s trees and Spotify’s doggy playlist…



So a phase one US/China trade deal is announced, Vladimir Putin has a reshuffle, China’s GDP faces further headwinds, Germany’s GDP hits new lows, UK inflation softens further but UK housing sales rise…

Trump signs China trade pact and boasts of ‘the biggest deal ever seen’ (The Guardian, Dominic Rushe) heralds a long-awaited initial accord between the two superpowers after two years of constant wrangling and tariff increases. The first phase of the deal will leave $360bn-worth of tariffs in place on Chinese goods, with the threat of more to come if China reneagues in any way, BUT it includes a commitment from China to buy about $200bn-worth of American goods and services. It also cancels planned US taxes on China-made mobile phones, laptops and toys and halves the current 15% tariff for about $120bn-worth of some other Chinese electrical goods. * SO WHAT? * If this agreement holds together, it will be a major boon to Trump’s chances of re-election and will give businesses that have been in limbo something to work with. Having said that, there are still many thorny issues yet to be addressed like China’s massive subsidies to big industries (including steel and solar panels) which have helped Chinese companies dominate by flooding markets with their cheap exports. Still, financial markets climbed on the news.

Vladimir Putin outlines leadership revamp and picks new PM (Financial Times, Max Seddon) highlights Vlad’s clearout of the current government and launch of a massive constitutional overhaul that will allow him to continue to pull the strings of power when his presidential term ends in 2024. Once Putin had announced plans for this major revamp to the political system in a state-of-the-nation address, Prime Minister Dmitry Medvedev and the whole cabinet resigned to clear the way for potentially sweeping changes 😱. Mikhail Mishustin, the head of Russia’s tax service, was then installed as the next Prime Minister (as you do). * SO WHAT? * Putin’s approval ratings have been falling and have now reached record lows against the backdrop of a sluggish economy where real incomes have fallen for the last five years. The announcement of this revamp along with a number of “national projects” aimed at boosting the economy and an increase in social spending is obviously part of the attempt to get Russians onside, but it’ll take more than words to counter the scepticism.

In State Grid warns that China GDP at risk of slipping to 4% (Financial Times, Sun Yu) we see that China’s largest utility company and state-monopoly, State Grid, is preparing for the country’s GDP to fall to 4% in the next five years. At least 10 of its 27 regional operations reported a loss last year, leading the company to make major cuts in its infrastructure spending. * SO WHAT? * This is particularly notable because the company is known to be very bullish in its forecasts and is seen by many as a bellwether of China’s economy. The National Bureau of Statistics is expected to report official GDP figures tomorrow.

Talking about disappointing GDP, Germany posts worst annual GDP growth for six years (Daily Telegraph, Tim Wallace) cites data from the official agency Destatis which shows that German GDP growth was just 0.6% in 2019, less than half the rate of 2018 and way lower than the 2.5% of 2017. * SO WHAT? * Germany has been hit particularly hard by the fallout from the US-China trade war that has made its industrial machinery and car exports way more expensive. The manufacturing sector accounts for over 20% of Germany’s economy.

Meanwhile, back in the UK, Inflation falls to three-year low on back of high street discounting (The Guardian, Richard Partington) highlights continued inflation sluggishness that will put pressure on the Bank of England to cut interest rates (the idea of this being that lower interest rates = less incentive to save and more incentive to spend. When lots of people spend, prices go up – which means inflation is going up. There’s more to it than this, but this is one aspect). These figures from the Office for National Statistics show that high street discounting and lower hotel prices had put a particular dent in prices.

Then in Housing market boosted by election win (The Times, Louisa Clarence-Smith) we see that the monthly survey of estate agents carried out by the Royal Institute of Chartered Surveyors (RICS) showed that the number of reported home sales in December rose – the first time it has risen since May 2019. Estate agents are now expecting to sell more homes at higher prices following a decisive election result. * SO WHAT? * This all sounds great, but now the expectations are higher after a very tough 2019 there is always the risk that hopes will be overblown. Having said that, wages continue to trend upwards. If house prices turn a corner and rise as well, people will feel “richer” and sustained strength in the housing market is likely to result. We’ll just have to see.



Bezos invests in India, Target misses, Greggs delivers with Just Eat, Booths experiences Christmas cheer and Revolution Bars show revellers’ thirst for “experiences”…

Jeff Bezos promises $1bn Amazon investment in India (Financial Times, Stephanie Findlay) highlights Bezos’ ambitions in India just days after the Competition Commission of India (CCI) announced its decision to investigate Amazon and Walmart-owned Flipkart in relation to potential violations of the competition law. Bezos said that Amazon will invest $1bn to digitise small and medium businesses across India – perhaps a warning shot to Mukesh Ambani, head of Reliance Industries, who will be flying the domestic flag via his new venture JioMart. It’s going to be rough, but the potential in India is just vast.

Target says holiday sales missed its forecasts (Wall Street Journal, Sarah Nassauer) shows that all is not well at Target as it reported poor sales over the festive period and warned that growth for the fourth quarter (which includes January) will fall short of its previous forecasts. This was put down to slow sales of toys and electronics, which are usually big sellers at this time of year. * SO WHAT? * A government report on December retail sales is due out today and will probably give clues, along with Walmart’s forthcoming results announcement, as to whether current

sluggishness is a Target thing or industry-wide. The current state of affairs is disappointing for Target which had seen its shares nearly double last year following a store revamp, the addition of more in-house brands and investment in its digital business.

In the UK, Greggs rolls out delivery with takeaway company Just Eat (Daily Telegraph, Louis Ashworth) highlights a new deal between the baker and the food delivery supremo that will roll out food deliveries across the UK, city-by-city. Customers will be able to order Greggs’ products via the Just Eat app and early trials proved to be very popular – especially at breakfast!

Elsewhere, Supermarket group Booths reports strong Christmas sales growth (Financial Times, Jonathan Eley) heralds a strong Christmas ahead of its more mainstream rivals. This marks an impressive turnaround for the supermarket that is often dubbed “the Waitrose of the North” in a reference to its regional focus as it came within a whisker of breaching its bank lending covenants in 2017. Since then losses have narrowed but the company is remaining coy as to whether it will be profitable this year. Still, it’s all moving in the right direction!

I thought I’d also mention Revolutions Bars raises glass to record Christmas (Daily Telegraph) because the cocktail bar chain reported stellar festive results in its seventh consecutive record Christmas! This is another bit of evidence that goes to show how consumers seem to be spending more on “experiences”, which was echoed by Mitchells & Butlers’ recent results



Goldman Sachs suffers, Juul rethinks overseas and Arrival attracts foreign investment…

Goldman Sachs suffers $1.2bn hit over Malaysian IMDB scandal (Daily Telegraph, Lucy Burton) highlights a rare hiccup for the company as it announced quarterly profits that were down 24% versus the previous year as it put aside a hefty $1.2bn to finance legal costs. * SO WHAT? * Goldman’s trading revenues were actually pretty good, but the headline figure was obviously disappointing given the impressive results announcements from rivals JP Morgan and Citigroup.

Juul scales back overseas expansion (Wall Street Journal, Jennifer Maloney) heralds more bad news for the king of vaping as the company told staff that it may exit South Korea and will put off its entry into New Zealand. The new

CEO, K.C.Crossthwaite, is adopting a more cautious approach versus the previous strategy of expand first, deal with the regulations later. * SO WHAT? * Vaping is in dire trouble at the moment as it has become a victim of its own success and suffered from massive crackdowns around the world following concerns over the health impact. The thing is, Juul is ONLY exposed to vaping, so will suffer exponentially in a crackdown whereas the vaping business is still only a very small part of the business for big tobacco companies. 

UK electric van maker Arrival secures £85m from Kia and Hyundai (The Guardian, Jasper Jolly) highlights an encouraging development for the electric van start-up and will be a welcome boost in its bid to scale up production of its (sort of) cheap and cheerful electric van. The Korean companies will help Arrival to develop new zero-emissions commercial vehicles. * SO WHAT? * This latest funding gives Arrival a £3bn implied valuation, making it a “unicorn” which is particularly rare for a UK manufacturing company. The British automotive industry could do with some good news at the moment – so best of luck to Arrival



And finally, in other news…

Most of you, by now, will have taken down your Christmas trees and packed away those baubles. However, some people just can’t let it go and want to keep the party going as per People are redecorating Christmas trees for Valentine’s Day so they can keep them up (The Mirror, Courtney Pochin which focuses in on a new Instagram trend. Weird. And then there’s a nice development for all you dog-lovers out there in Spotify launches playlists for dogs left home alone (Reuters, Ahhhh!

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Some of today’s market, commodity & currency moves (as at hrs 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 **
7,640 (+0.19%)29,017 (+0.30%)3,288 (+0.19%)9,25913,423 (-0.19%)6,029 (-0.11%)23,933 (+0.07%)3,088 (-0.07%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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