Thursday 16/05/19

1. In MACRO AND TARIFF NEWS, the US economy slows while Germany’s picks up and Trump postpones car tariffs
2. In TECH-RELATED NEWS, Alibaba and Tencent smash it and an Uber rival tests flying taxis
3. In RETAIL-RELATED NEWS, John Lewis ditches final salary pensions, Walmart considers a flotation for Asda and British Land suffers mall woes
4. In LEISURE-RELATED NEWS, Tui and Cineworld disappoint while William Hill does well in the US
5. In OTHER NEWS, I bring you an expensive coffee and some dad jokes. For more details, read on…

So the US slows, Germany picks up and Trump delays car tariffs…

Slowdown surprises US as trade war looms (The Times, James Dean and Gurpreet Narwan) cites the latest official figures which show that manufacturing output (the main element of industrial production) fell by 0.5% in April versus the previous month while retail sales fell by 0.2% in the same period versus expectations of small gains in both areas. Manufacturing is suffering because of higher material costs, caused partly because of Trump’s import tariffs – but a broader economic slowdown is also proving to be a drag.

On the other hand, German economy rebounds in first quarter (Financial Times, Valentina Romei and Guy Chazan) highlights a 0.4% expansion for the German economy – a welcome turnaround from the slowdown in the second half of last year when the biggest economy in the eurozone came within a whisker of recession in the final quarter. Although there was a certain amount of relief, Germany’s economy minister Peter Altmaier wasn’t yet cracking open the champers as he pointed out that ongoing international trade conflicts had yet to be resolved. Germany benefited from solid investment in construction

and machinery as well as strengthening private consumption. * SO WHAT? * Germany’s economic performance is key for the economic bloc as a whole, so this turnaround will be broadly welcomed. The ‘zone saw revised figures published by Eurostat yesterday which show the area’s economic output up by 0.4% versus the previous quarter as Italy managed to drag itself out of its third recession in ten years in the second half of last year.

Donald Trump to delay car tariffs decision by up to 6 months (Financial Times, James Politi and Matthew Rocco) should help Germany, given the importance of its car industry, but this is just a reprieve, not a resolution and the threat of tariffs will continue to hang over carmakers. Still, share prices of US and European carmakers and suppliers rose on the news * SO WHAT? * This is probably a wise move by Trump as imposing new/higher tariffs on car imports would have been hugely damaging for trade relations with the EU, Japan and South Korea among others. The threat is still there, however, so at least there’s the possibility that any unpleasantness can be avoided. You would have thought that the longer the delay the better it could be for the likes of the EU, Japan and South Korea etc. given the proximity of the US presidential election as voters probably won’t want to see Trump bashing America’s longtime allies. China-bashing maybe – but ally-bashing could prove trickier.

Alibaba and Tencent knock it out of the park while an Uber rival has its head in the clouds…

Profits triple at Alibaba (The Times, James Dean) shows that the Chinese e-tailing behemoth’s momentum is continuing despite the US-China trade shenanigans as its profit more than tripled as revenues shot up by 51% on the success of its e-commerce business and cloud computing division.

There was more good news in China tech as Tencent posts record profits as China lifts video game ban (Daily Telegraph, Hasan Chowdhury) shows the gaming and internet giant (which owns, among other things, Fortnite developer Epic Games) getting back on track after being on the naughty step since last year when China’s government had a crackdown on the gaming sector on account of it being irresponsible regarding the damaging effect on young gamers. Despite this hobbling of the company’s powerful gaming division, it benefited from strong performances from its cloud and fintech divisions. Tencent

announced the future provision of a cloud-based streaming service for games (a “Netflix for games”) following a similar announcement by Google. * SO WHAT? * Surely this company is “gonna rock” once the gaming thing gets sorted. Tencent is humungous and has massive power in gaming so when the gaming approval bottleneck relaxes it has a whole load of titles for gamers to get their teeth/thumbs into.

Uber rival’s electric flying taxi takes to skies for first test flight (Daily Telegraph, Matthew Field) shows that Uber isn’t the only company to pursue flights of fancy as German air taxi start-up Lilium announced the maiden test flight of its five-seater jet-powered flying car over Germany. The Lilium jet has a top speed of 186mph and a range of 186 miles and could whisk you from London to Manchester in under an hour. The jet would initially be flown by a pilot but would eventually go autonomous. Both Uber and Boeing are among those who are also developing electric flying taxis. * SO WHAT? * This company has achieved some truly amazing things in the last couple of years, but I am hugely sceptical that we will see flying taxis any time soon given that there are enough problems letting drones fly freely let along bigger air taxis with people in them! Still, it sounds pretty amazing…

John Lewis abandons final salary, Walmart considers floating Asda and British Land suffers from retail woes…

John Lewis axes final salary pension (The Times, Simon Duke) heralds the end of fat pensions for employees as it becomes one of the last private sector employers to close this down. This will reduce annual pension payments by about £80m. * SO WHAT? * I think that it is amazing that John Lewis has continued so long with this scheme when everyone else has abandoned it. It’s unfortunate for future employees but is a necessary part of the company’s bid to change with the times. There will be more tough days to come…

Following on from the recent high profile failure of the Sainsbury’s/Asda merger, Walmart reveals Asda float ‘path’ (Daily Telegraph, Ashley Armstrong) shouldn’t be all that surprising given that Walmart has been taking the axe to its overseas business to concentrate on its knitting in its own backyard. Judith McKenna, chief exec of Walmart International, is just floating the idea at this stage, saying that these plans could take years to come to fruition (yeah right). * SO WHAT? * Flotation of a supermarket chain in a

hugely competitive mature market like the UK?? Good luck with selling that in today’s market. Surely the Walmart will want to get rid as soon as it can. Maybe private equity who would cut store numbers and sell off real estate perhaps? I just can’t see Walmart wanting to throw too much money at Asda now given its current overseas strategy. There were a lot of retailers (not just supermarkets) who were disappointed that the “Sasda” deal didn’t go ahead as they were hoping to snap up some of the overlapping real estate. The demand for the space is there, but I’m not sure that there will be that much appetite for the supermarkets themselves…

Following on from what I talked about yesterday re Landsec, British Land slumps to loss after writedown on value of its malls (Daily Telegraph, Jack Torrance) shows that the owner of shopping centres like Sheffield’s Meadowhall and the Broadgate complex in the City of London is just the latest company to suffer the knock-on effects of the current retail slowdown. Like Landsec, the company revealed that a revaluation of its properties dragged it into loss for the full year. Chief exec Chris Grigg tried to put a brave face on it saying that “London continues to be strong despite uncertainties associated with Brexit and the pessimism that was slopping around two or three years ago” but I suspect that there will be more gloom to come.

Tui and Cineworld suffer but William Hill sees growth in America…

In a quick scoot around some leisure-related stories today, Tour Operator Tui faces deepening losses (Financial Times, Alice Hancock) shows that the Anglo-German tour operator announced bigger losses for the first half of this year as customers held off on summer bookings because of Brexit and the ongoing effects of all those flights being cancelled because of the Boeing 737 Max groundings. * SO WHAT? * The good news is that this announcement wasn’t a profit warning (it’s already warned on profits twice this year) and that it kept its full-year guidance as it hopes that sales of high margin “experiences” will make up for weaknesses in its airline and holiday sales division. Tui needs a good holiday after all it’s been through ????

Elsewhere, Cineworld revenues fall as industry targets boost from Avengers and Star Wars (The Guardian, Mark Sweney) heralds some disappointing news re box office performance so far this year as British-based Cineworld – the world’s second biggest cinema chain – unveiled a 13% fall in global box office revenues. Although this isn’t great, it’s in line with global box office trends but films like Avengers: Endgame, The Rise of Skywalker, Lion King and Frozen 2 are expected to help it bounce back.

There was good news in American sports betting pays out for William Hill (The Times, Dominic Walsh) as the betting company made up for gloom at home following the government’s clampdown on Fixed Odds Betting Terminals (FOBTs) in the UK by the success of its US business which continues to go from strength to strength following the lifting of a ban on sports betting. Its revenues stateside shot up by 48% with the Super Bowl seeing record betting activity while Indiana and Iowa are also about to legalise sports betting, so there’s still plenty more where that came from.

And finally, in other news…

My usual search of the “other news” didn’t bring up too many nuggets today apart from this for any of you coffee fans out there: Good ’til the last drop? $75 cups of coffee sell out in California (USA Today, Rasha Ali https://tinyurl.com/y4qqdpzp) so here are a couple of dad jokes for you (I’m a dad and I like poor quality jokes, so hey):

What do you call a woman with one leg longer than the other? Eileen

What do you call an Italian man with a toe made of rubber? Roberto

And then finally, I burnt my Hawaiian pizza last night. I should have put it on aloha setting