Thursday 16/09/21

  1. In MACRO NEWS, the OECD bigs us up, UK inflation growth continues and BoJo has a reshuffle
  2. In CONSUMER/HIGH STREET NEWS, UK house prices drop, fire at a substation could lead to blackouts, employment recovery could see bumps, Inditex recovers nicely, Co-Op does a deal with Amazon and The Restaurant Group outperforms rivals
  3. In M&A NEWS, Canadian Pacific gets its $31bn deal over the line and Goldman Sachs buys GreenSky
  4. In MISCELLANEOUS NEWS, Macau casinos face increased focus, sports betting sees the rise of data gatekeepers, TikTok faces a GDPR investigation and Britishvolt becomes a unicorn
  5. AND FINALLY, I bring you the right way to clip doggy nails…

1

MACRO NEWS

So the OECD gushes, UK inflation growth continues and BoJo shuffles the deck…

📢 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!

British economy grows faster than all G20 rivals, says OECD (Daily Telegraph, Louis Ashworth) shows that the OECD’s latest report shows that the UK’s economy grew at the fastest rate among developed countries in Q2. The UK’s GDP growth rate over this period was 4.8% – significantly higher than Italy at 2.7%, which was in second place. Before you reach for the Bolly to celebrate, we were decidedly less brilliant when considering our performance under the pandemic as a whole. Although knowledge of this isn’t going to rock your world, it is interesting to know and it shows just how sharply our economy has picked up since restrictions lifted.

Talking about things picking up, UK inflation surges to 3.2% as food and transport costs rise (Financial Times, Chris Giles) piles the pressure on the Bank of England re its current reluctance to calm price rises by increasing interest rates. The monthly rise of 1.2% to bring it to 3.2% is the biggest jump since the Bank of England gained independence in 1997! Now that CPI inflation is over 1% above the Bank of England’s target, governor Andrew Bailey

will have to write a letter to the Chancellor of the Exchequer (yes, a letter, not an e-mail 😁 – in blood, perhaps?!?) to explain why prices have increased so rapidly and what he’s going to do about it. At the moment, I wonder whether he’s going to respond by saying “because people just keep buying stuff” and “dunno, bruv” 🤣, because he’s not given much of an indication so far! Some commentators do say, though, that the basket of prices has been skewed by particularly sharp rises, e.g. second hand car prices, and that other items are quite meh.

I thought I’d also mention Boris Johnson recasts government with big cabinet shake-up (Financial Times, Sebastian Payne) in case you hadn’t heard (or put your fingers in your ears when it was on). BoJo announced a senior ministerial reshuffle yesterday to reinvigorate his domestic and world agenda. Those who got the boot were Gavin Williamson (education secretary), Robert Jenrick (local government secretary), Amanda Milling (Conservative party co-chair)) and Robert Buckland (justice secretary). Rishi Sunak (Chancellor), Priti Patel (home secretary), Sajid Javid (health secretary) and Kwasi Kwarteng (business secretary) all remained in their office while Michael Gove, Steve Barclay, Nadhim Zahawi and Liz Truss all got new jobs (Ministry of Housing, Communities and Local Government, Cabinet Office, education secretary and Foreign Office respectively). There were more appointments and more are expected to happen today. It seems that BoJo has surrounded himself with allies and got rid of some fall guys and gals.

2

CONSUMER/HIGH STREET NEWS

UK house prices drop, a substation blaze could cause blackouts, a two-tier jobs recovery emerges, Inditex recovers, Co-Op does a deal with Amazon and The Restaurant Group outperforms…

House prices drop £9,000 as door shuts on stamp duty relief (The Times, Gurpreet Narwan) cites the latest stats from the ONS which show that the average house price fell in July as buyers reined things in ahead of the end of the stamp duty holiday. Mind you, although it fell versus the previous month, the growth rate is still up versus the same month last year.

Further to what I was saying earlier about inflation, consumers still have a lot to contend with. I have been talking a lot recently about higher energy prices – and it looks like it might get a whole lot worse given Winter blackout fears after substation fire cuts off French power (Daily Telegraph, Alan Tovey) which states that damage caused by a fire cutting off a subsea cable yesterday could potentially cause an energy blackout. Energy prices surged even more on the news, adding to the existing issues facing the energy sector. Under normal circumstances, the damaged interconnector in Kent usually supplies 2GW of energy from France and is one of our main sources of foreign power. It sounds to me like we’ll all have to add BBQs, candles and matches to our early Christmas shopping lists this year to ensure a successful festive season!!!

There’s a lot of talk about what might happen given the end of furlough this month and I think that Tale of twin-speed recovery for jobs (The Guardian, Richard Partington) makes the very valid point that people aren’t going to magically fill all the vacancies knocking around when the deadline comes. For instance, if you are a Heathrow worker on furlough currently (apparently, 51% of all air passenger transport workers in Britain were on furlough at the end of July – the highest proportion of any industry 😱), you are hardly going to up sticks and work at a hotel in Torquay, are you! The CBI business lobby group thinks that this workforce mismatch will mean that there will still be labour shortages in certain areas and they are continuing to campaign for a relaxation of EU worker visas. I guess we’re going to find out pretty soon what the real situation is going to be.

Meanwhile, on the high street, Inditex bounces back as consumer demand recovers (Financial Times, Daniel Dombey) shows that the world’s biggest clothing retailer announced strong quarterly results yesterday as sales, profits and cash generation all recovered to better-than pre-Covid levels! Consumer demand remains strong and online sales also played a major part in the recovery. * SO WHAT? * These results were particularly interesting given that rival H&M’s looked quite muted in contrast. H&M’s overall sales were still below 2019 levels despite a recovery but it seems that Inditex’s secret weapon has been its integrated stock system. This looks at store and warehouse inventory and enables a more efficient way of shuffling product around and getting it to its customers.

Then in Co-op faces criticism as it begins selling groceries via Amazon (The Guardian, Sarah Butler) we see that the Co-op announced that it is making its full 3,000 item range available on Amazon. Their wares will be available to Amazon Prime subscribers and the service will launch initially in Glasgow and then be rolled out elsewhere. * SO WHAT? * This is an interesting development for Amazon as it continues to expand its capability in groceries. I think it’s interesting that it has brought on partners like Morrisons and the Co-op in combination with its very own Whole Foods Market and I would have thought this will be good for all concerned as the grocers will gain another sales channel with an established delivery network and Amazon gives its customers even more convenience.

Consumers continue to indulge as per Restaurant Group hungry for growth after beating rivals (The Times, Dominic Walsh), which highlights the bounceback of the owner of Wagamama’s and Frankie & Benny’s after a torrid 2020. The Restaurant Group (TRG) traded so well, in fact, that it was confident enough to upgrade its full-year earnings guidance! Although it’s clearly positive, the bullishness is tinged with worries about inflationary pressures (wages, ingredients prices and now, presumably, electricity bills). The company mentioned that it wanted to continue with the expansion of the Wagamama portfolio as well as its Brunning & Price gastropubs. * SO WHAT? * Lockdown lifting has been a huge boon for the industry as a whole and I think that going out to such places falls firmly within the “affordable treats” category of spend for those who have managed to weather the pandemic with jobs intact. It’s good to hear about expansion plans, but clearly this will all change if we do return to some form of restrictions heading into the winter months and ‘flu season.

3

M&A NEWS

Canadian Pacific gets its deal through and Goldman Sachs buys in…

Canadian Pacific clinches hard-fought $31bn deal for Kansas City Southern (Financial Times, James Fontanella-Khan) shows that this deal is going to go ahead finally after its ditched a $34bn deal with Canadian National. This will now create a single railway connecting Canada and Mexico via the US. This whale of a deal managed to go ahead after US regulators indicated that they would not approve the Canadian National deal.

Then in Goldman to buy specialty lender GreenSky for $2.2bn (Financial Times, Ortenca Aliaj, James Fontanella-Khan, Imani Moise and Joshua Franklin) we see that the investment bank bought online loan-provider GreenSky in an all-paper deal as part of its bid to beef-up its consumer lending business. Goldman Sachs: GreenSky purchase shows the benefit of buy vs build (Financial Times, Lex) suggests that the price it paid is quite high, but then again when Goldman Sachs’ share price has risen by 82% in the last two years, it can afford to pay a premium to fast-forward its consumer business. * SO WHAT? * It launched its digital bank back in 2018 and has been making acquisitions like NN Group last month in order to spread its exposure into the consumer arena. There’s also the venture that it’s working on with Apple in the BNPL space as well – so it’s full steam ahead!

4

M&A NEWS

Macau faces tricky times, sports betting sees winners emerging, TikTok is up for inspection and Britishvolt becomes a unicorn…

In a quick scoot around some of today’s other interesting stories, Casinos/Macau: it is time to take the chips off the table (Financial Times, Lex) shows that China’s recent crackdowns will not leave Macau’s casinos untouched as it embarks on a regulatory review and faces the prospect of fewer permits being granted by a gambling-averse Chinese administration. Troubled US-China relations will put the likes of US-based operators Wynn Resorts, MGM Resorts and Las Vegas Sands on watch and costs may well trend higher.

Staying on the subject of gambling, Rise of sports betting fuels demand for data gatekeepers (Financial Times, Sara Germano) discusses a different aspect of US sports betting than we normally hear about – companies who churn out statistics on players, games, performance and teams.

Sportradar Group (Swiss-based) and Genius Sports (London-based) are emerging as winners in this area as they sell to betting platforms and media companies. Sportradar listed on the Nasdaq on Tuesday and Genius did a SPAC-backed listing in April. * SO WHAT? * This is a fascinating area and you should definitely read this article in full! I would imagine barriers to entry are going to be pretty high and, what with the massive growth potential in sports betting in America I would have thought that there will be growth for some time to come!

Then in TikTok faces GDPR probe over children’s data and China transfers (Financial Times, Hannah Murphy) we see that the Irish Data Protection Commission, fresh from imposing a massive fine on WhatsApp recently, is now turning its sights on TikTok regarding the processing of personal data for under-18s and its age-verification procedure for the under-13s. This sounds pretty juicy, but we’ll just have to see how this all plays out…

Meanwhile, British gigafactory builder becomes $1bn ‘unicorn’ (Daily Telegraph, Alan Tovey) shows that Britishvolt managed to secure more funding which means that it now has an implied valuation of $1bn, making it a “unicorn”. The company aims to be able to make enough battery packs to power 300,000 vehicles a year by 2027 and it has a number of provisional deals with major car manufacturers in place. Up to 3,000 jobs are going to be created at the Blyth factory.

5

...AND FINALLY...

…in other news…

Today, I thought I’d bring you the ingenious invention in Woman shares genius hack for clipping her dog’s nails and it works every time (The Mirror, John Bett). If you are in need of a pick-me-up today, do yourself a favour and have a look at this! It is both brilliant and hilarious 🤣!

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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 **
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