Thursday 17/10/19

  1. In MACRO & BREXIT-RELATED NEWS, Eurozone and UK inflation see three-year lows while couriers are hired to cope with a no-deal Brexit
  2. In CONSUMER-RELATED & RETAIL NEWS, PayPal turns to China, US retail sales drop, Authentic Brands & Saks bid for Barneys, Hays Travel employs Thomas Cook staff while airlines fight over its landing slots and Asos profits weaken
  3. In INDIVIDUAL COMPANY NEWS, Netflix subscriber numbers fall short, Huawei revenues rise, TikTok goes educational in India and Canopy Growth makes UK inroads
  4. In OTHER NEWS, I bring you a superb new (potential) job…



So Eurozone and UK inflation see three-year lows while no-deal Brexit contingency plans involve the hiring of couriers…

Eurozone inflation rate drops to three-year low as outlook darkens (Financial Times, Valentina Romei) cites the latest figures from Eurostat which show inflation’s lowest growth rate since November 2016. They diverged further away from the ECB’s target as exports contracted, increasing concerns about a potentially steep economic slowdown. France was the only country in the eurozone to see an inflation rate above 1% while Germany’s more than halved versus September last year and prices in Italy and Spain hardly changed (+0.2%).

Fall in petrol prices helps to keep cap on inflation (Daily Telegraph, Tim Wallace) cites the latest figures from the Office for National Statistics which show a UK inflation rate of 1.7%, which is below the Bank of England’s 2% target – meaning that there will be less pressure to rise the interest rate at a tricky time while Brexit negotiations are ongoing. The Bank of England usually starts at least thinking about raising interest rates if inflation goes above 2% – hence, “the target” – in order to take the edge off spending, but as it’s comfortably below that level, there is no imminent need at the moment. * SO WHAT? * Given that the unemployment rate is only 3.9% and that average wages were up by 3.8% in the 12 months to August, you would have thought that inflation would be higher because of

rising household spending power as employers pay more to attract/retain staff in a tight labour market. As far as spending goes, you have retailers complaining that total sales in September fell at their sharpest rate since 1995 on the one hand and then other stats saying that consumer spending is pretty healthy on the other. Spending power is to be further enhanced as working-age benefits are due to increase for the first time in four years due to the government relaxing its stance on austerity. As things currently stand, it is the UK consumer that’s propping up the economy as investment and manufacturing are in limbo under Brexit uncertainty. Let’s hope everyone keeps spending otherwise the economy will get a big shock!

Talking about Brexit uncertainty, Courier groups hired to keep medicine flowing after no-deal Brexit (Financial Times, Sarah Neville) shows that logistics groups UPS, DFDS and Biocair have won health department contracts to make sure that essential medicines and medical products can get to the UK within two days in the event of a no-deal Brexit. The companies will provide an express freight service for drugs and medical products in contracts worth £25m. This is in addition to the announcement last week that Brittany Ferries, DFDS, P&O and Stena Line would provide capacity for around 2,500 HGVs per week to be transported into the UK for 6 months starting on October 31st as part of plans for patients to get the medicines they need. Health Secretary Matt Hancock said that “This dedicated delivery service will get urgent supplies and short shelf-life medicines, like radio-isotopes for cancer treatments, rapidly into the country, including by plane where necessary”.



PayPal turns to China, US retail sales weaken, Barneys edges closer to safety, Hays Travel saves Thomas Cook jobs while airlines fight over its landing slots and Asos sales drop…

PayPal wants to help Chinese online shoppers buy from overseas (Financial Times, Ryan McMorrow and Yuan Yang) highlights an important new development for PayPal as China’s Central Bank has just given it permission to buy a majority stake in Chinese payments group Gopay, giving Chinese online shoppers a new way to buy things from outside China. This means that PayPal will be the only foreign company to have licences that cover domestic and cross-border web and mobile payment services. * SO WHAT? * Until now, China’s payments industry has been a closed shop to foreigners, meaning that Alibaba affiliate Ant Financial’s Alipay and Tencent’s WeChat have basically had the sandpit to themselves – Alipay has 53.8% market share and WeChat has 39.9%, according to iResearch. Clearly there is a massive mountain for PayPal to climb here, but it is hoping that it can differentiate itself by offering Chinese shoppers a way of buying from oversees where the majority of merchants aren’t set up to accept Alipay or WeChat Pay and take advantage of the fact that China is the only market in the world with more online shopping than the US. On the other hand I would have thought that, given Alipay and WeChat’s formidable financial firepower, the Chinese giants would just have to do a bit of an overseas charm offensive to convert merchants and PayPal’s one advantage will just disappear in a (small) puff of smoke! Good luck to PayPal, though.

Fall in US retail sounds alarm (The Times, James Dean) cites the latest US Commerce Department data released yesterday which shows that retailers saw an unexpected fall in headline retail sales (a drop of 0.3% for September versus market expectations of a 0.3% rise for the month). * SO WHAT? * This would imply that consumer spending, which accounts for two thirds of the US economy, may be weakening. If you couple that with recent figures showing two consecutive months of weakness in the US manufacturing sector, things aren’t looking great. If it go on like this, the Federal Reserve may have to cut interest rates further at its December meeting to try to give the economy some pep.

Authentic Brands teams with Saks to make bid for Barneys (Wall Street Journal, Soma Biswas) follows on from what I said on Tuesday, but now it appears that that Barneys New York has finalised a deal to sell its name and brands to Authentic Brands Group and investment firm

B.Riley Financial and close all of its stores – including its flagship store on Madison Avenue and the one in Beverly Hills. Having said that, it is possible that Authentic Brands could keep some stores open – but this will depend on talks about rents with landlords. The deal is worth around $271m and will mean that Barneys will avoid a total liquidation. Competing bidders will have until October 22nd to come forward or the deal will go through as is – and if they do, an auction process will be triggered on October 24th. * SO WHAT? * Authentic Brands, which owns Nine West and Aeropostale is known for buying fashion brands for peanuts when they go into bankruptcy and then turning them around. This whole process got kicked into action when the landlord of Barneys’ flagship store on Madison Avenue decided to double the annual rent to $27.9m. We’ll just have to see whether any other bidders come out of the woodwork. As I keep saying, I think that department stores are dying a slow death in many parts of the world as their often tired formats just aren’t compelling enough to get customers to buy there rather than online (or, indeed elsewhere). Consumers still value experience, so I think that if department stores can refresh this side of things dramatically, they may stand a chance. But it’s only a small chance and those changes are going to have to be biiiiiiiig.

Hays Travel owners offer jobs to 2,000 ex-Thomas Cook staff (The Guardian, Rob Davies) heralds some good news for those caught up in the Thomas Cook debacle as the new owner of its high street network announced it has made offers to 1,982 of the 9,000 staff affected. Meanwhile, Thomas Cook airport slots draw bids from rivals (Financial Times, Tanya Powley and Alice Hancock) shows that carriers including easyJet, IAG (which owns British Airways) and Wizz air are among those bidding for Thomas Cook’s take-off and landing slots at Gatwick in a process that is being managed by KPMG in their capacity as liquidators. The sale could generate tens of millions of pounds. Other Thomas Cook assets, including those of its Nordic businesses Ving, Spies and Tjarebord, have also attracted buyer interest. * SO WHAT? * This is all great news for employees, but the opening up of slots is also good news for the airlines that get them (although just HOW good depends on the price they end up paying!) as they will be able to give their customers a better offering.

Meanwhile, in online retailing, Asos still in fashion despite profit slump (The Times, Ashley Armstrong) highlights the stunning performance of Asos shares yesterday which shot up by 28% despite profits falling by 68%. Investors clearly believed that the profit loss was not long term (IT problems at its warehouses) and that Asos would be able to grow profit margins from here after bolstering its management team and resolving its warehouse issues. * SO WHAT? * Asos has had a difficult year over which time its share price has halved. However, things are now looking good for Black Friday next month.



Netflix falls short, Huawei revenues strengthen, TikTok tries education in India and there’s an important development for Canopy Growth in the UK…

In a quick scoot around other news, Netflix subscribers fall slightly short of expectations (Wall Street Journal, Joe Flint and Micah Maidenberg) shows that the streamer missed its subscriber target for the second quarter in a row – although it did OK domestically and very well internationally – giving cause for concern ahead of the imminent launch of competitor streaming services from Disney, Apple and Warner Media, among others.

Huawei rings up 24pc boost in revenue after string of 5G deals (Daily Telegraph, Natasha Bernal) shows that it’s still possible to survive a massively negative PR campaign and come up smelling of roses as its revenues shot up on the

back of major 5G deals with EE, Three and Vodafone. TikTok launches educational push in India (Financial Times, Stephanie Findlay) shows that the Chinese viral video specialist is working to repair its reputation with local authorities that think it just provides “vulgar” content by announcing an education programme that “aims at revolutionalising e-learning in India”. TikTok’s parent ByteDance is trying to make a global push into education with things like the launch of the English tutoring platform Gogokid and learning app Haohao Xuexi (“study well”) this year.

Then Canopy Growth wins UK’s first medical cannabis bulk import licence (Financial Times, Alice Hancock) highlights a major development for Canadian cannabis company Canopy Growth as the Home Office has just granted a licence to Canopy’s pharmaceutical division, Spectrum Therapeutics, to import medical cannabis in bulk to the UK. * SO WHAT? * At the moment, patients needing medical cannabis have to wait up to three months to get it, so this will speed the process up considerably. It may also signal a gradual softening of the stance the UK currency has on cannabis.



And finally, in other news…

I thought I’d let you know about quite an interesting job opportunity in A luxury travel company is hiring someone to stay in lavish homes around the world for $2,500 a week (Insider, Rachel Hosie Wow!

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Some of today’s market, commodity & currency moves (as at 0912hrs 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 **
7,168 (-0.61%)27,002 (-0.08%)2,990 (-0.20%)8,12412,670 (+0.32%)5,697 (-0.09%)22,452 (-0.09%)2,977 (-0.05%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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