Thursday 19/09/19

1. In MACRO NEWS, the Fed cuts US interest rates, Japanese exports continue to drop, UK inflation falls and house price rises slow
2. In TECH NEWS, Facebook announces Portal TV while smart TVs send out your data
3. In INDIVIDUAL COMPANY NEWS, FedEx delivers bad results, Pendragon suffers and River Island opens stores despite losses
4. In OTHER NEWS, I bring you a couple of accommodation options…

So the Fed cuts rates, Japanese exports weaken further, UK inflation drops and house price growth slows down…

Fed cuts rates but splits between officials widen (The Times, James Dean) highlights the Federal Reserve’s decision to cut rates by 0.25% (also referred to as “25 basis points”) for the second consecutive meeting. This now brings the federal funds rate down to a range of 1.75-2% and Fed chairman Jerome Powell said that “We took this step to help keep the US economy strong in the face of notable developments”. Everyone and their dog expected a rate cut, but Trump had made no secret of his desire for the Fed to cut deeper in the run-up to the Fed meeting so his reaction was unsurprising: “Jay Powell and the Federal Reserve fail again. No guts, no sense, no vision!”. * SO WHAT? * Trump wanted a much bigger cut that would have put the rocket boosters under the stock markets, but it was not to be. What became apparent in this meeting, however, was that the team of rate-setters became more divided on direction with two saying the base rate should have remained unchanged and one called for a bigger cut. As things stand at the moment, Fed officials are expecting the rates to continue at this level until the end of the year.

Japan exports fall for ninth month in a row (Financial Times, Daniel Shane) shows that Japan’s exports continue to weaken in the face of the continued global slowdown. Data from the Ministry of Finance showed that exports from Japan fell by 8.2% year-on-year during August in their worst performance since January. Exports to China, Japan’s biggest trade partner, fell by 12.1% while shipments to the US fell by 4.4%. Exports to South Korea – where trading relations have been getting very frosty of late – fell by 9.4%. Particularly weak categories included automobiles, machinery and other manufactured goods.

* SO WHAT? * Yes, the weakness was due in part to a stronger Yen making its goods less price-competitive, but this has a LOT to do with the current US-China trade spat and the resultant tariffs. Imports also fell in August and there’s a cloud looming large on the horizon that could adversely affect spending – Japan’s consumption tax (its equivalent of VAT) is due to rise later this year from 8% to 10%.

Meanwhile, Inflation falls to 1.7% as costs tumble (The Times, Philip Aldrick) cites the latest figures from the Office for National Statistics which reflect the slowest growth in inflation since December 2016 as it fell from 2.1% in July to 1.7% last month, coming in below market expectations of 1.9%. * SO WHAT? * Hopefully, this will help household finances in conjunction with rising wages, which are growing at a rate that is above inflation currently. Household spending has been a major driver of economic growth in the last few years as business investment has shrunk, mainly due to Brexit uncertainty. Having said that, you do wonder whether the impact of the recent drone attacks on Saudi Arabian oil producing facilities will put sustained upward pressure on fuel prices, which could lead to slightly higher inflation.

House prices in Britain rising at slowest rate for seven years (The Guardian, Richard Partington) cites more data from the Office of Statistics which show that house prices in Britain are rising at their weakest annual rate for seven years due to Brexit uncertainty. House prices fell in four of nine English regions, with the north-east seeing the biggest decline. Depressing fact alert – the north-east region is the region in the country where house prices are still below the levels they were before the 2008 financial crisis 😱. Richard Donnell at property website Zoopla observed that “The reality is that buyers are simply being more cautious and this has reduced the impetus for house-price growth. Weaker levels of house-price growth are set to be a feature of the market for the rest of this year and the first half of 2020 at least”.

Facebook introduces Portal TV and it seems that smart TVs are being naughty with your data…

In Facebook announced video streaming device Portal TV (Financial Times, Hannah Murphy) we see further evidence of the social media company’s efforts to push into consumer hardware this time via a voice-controlled “smart video chat” device that connects to TVs called Portal TV. Facebook launched a smaller device called Portal last year which was just used for video chatting but this latest product – which will cost $149 – will also include video and music streaming services such as Amazon Prime, Spotify, Showtime and CBS All Access. It will also include Amazon’s Alexa smart speaker, which will respond to “Hey Portal”. * SO WHAT? * Sounds great but it is entering a crowded market including Amazon’s Fire Stick, Google’s Chromecast and Roku. Also, ANOTHER virtual assistant?!?! If you were living on your own in an apartment and owned a Samsung phone, an iPad, an Echo and now Portal TV, you’d never be alone! You’d always have your friends Bixby, Siri, Alexa and “Portal” to keep you company!!! In fact, who

would need real friends if your virtual assistant could keep you entertained with the music you like, sort out your pizza deliveries and fun facts about the world??

Mind you, Smart TVs sending private data to Netflix and Facebook (Financial Times, Madhumita Murgia) sounds rather creepy as it turns out that smart TVs are sending sensitive user data to companies including Netflix, Google and Facebook even when they are idle, according to analysis published by researchers at Northeastern University and Imperial College London. Devices including those made by Samsung and LG were found to be sending data on location and IP addresses to Netflix and other third-party advertisers even when users did not have a Netflix account. Other smart devices such as speakers and cameras were also sending user data to companies such as Spotify and Microsoft! * SO WHAT? * When you consider the growing number of smart devices popping up in your average home, it is somewhat discomforting to think that they are spying on you. Given all the hoo-ha going on at the moment re data privacy, surely the regulators have got to clamp down on this sort of thing hard. As Max Van Kleek, a computer scientist at the University of Oxford, put it “People are spending more and more time on these devices, and they are placed in such critical places in people’s homes, so we need to hold them to account”.

FedEx has a disappointing delivery, Pendragon suffers and River Island says it’ll open more stores…

FedEx shares plummet following dismal results (Wall Street Journal, Paul Ziobro) highlights the biggest one-day percentage fall in the company’s share price since December 2008 as it cut its earnings guidance for the fiscal year. The shares fell by 13% in trading yesterday as forecasts were cut due to lower revenues in its TNT Express division which takes packages and cargo by planes around the world. * SO WHAT? * This is clearly not great news, but it seems to me that FedEx is doing a real overhaul of its business by cutting costs, investing in the struggling Express business and doing things like reviewing its customer relationships (like with Amazon, for example). Investors will want to see a turnaround in the foreseeable future but with a weaker economic backdrop and falling global shipments, I can’t see things changing any time soon. You do wonder whether the company is “kitchen sinking” all the bad stuff now while expectations are low…

Car giant Pendragon drives into red and trims 300 jobs (Daily Telegraph, Alan Tovey) reflects a company that is going through a rough patch at the moment as the

chairman of the Britain’s biggest car dealer resigned yesterday following the June departure of its former chief exec, who himself was only in the hot seat (ejector seat, more like!) for a few months. Pendragon owns the Evans Halshaw and Stratsone brands and posted a hefty loss yesterday for H1, reversing a decent profit in the same period last year. The loss was put down to having too many secondhand cars which forced the company to cut prices or sell at auction. Pendragon also had a downbeat outlook, warning that it is “not anticipating any improvement in [customer confidence] for the rest of our financial year”. Shares in the company have halved over the last 12 months and they fell by a further 10% on yesterday’s news. * SO WHAT? * Cars are big ticket items and when consumers are worried about the economy they sit on their hands. Clearly, Brexit uncertainties are at play here and Pendragon is paying the price.

River Island on course to open stores despite profit slump (Daily Telegraph, Laura Onita) is a somewhat counter-intuitive sounding headline as the the departing chief exec said that that the company will continue store openings despite unveiling falling profits and revenues yesterday. * SO WHAT? * The company, like its competition, is battling against high rates, expensive rents and a customer base that is increasingly going online. It said it would continue to commit to physical stores, but only when they are economically viable.

And finally, in other news…

I thought I’d leave you today with two accommodation options at the opposite ends of the cost scale: Highclere Castle – the real-life Downton Abbey – is available to rent on Airbnb (Mental Floss, Garin Pirnia https://tinyurl.com/y34smsjt) for fans who will have to fork out $159 for one room for one night (so a VERY limited offer!) and, if you are feeling a bit more financially flush World’s tallest residential building has 112th floor penthouse (Sky News, Alix Culbertson https://tinyurl.com/yyjvob5a), which could set you back a piffling $63m for a five-bed penthouse or a mere $6.9m for a two-bedroom flat. I’ll have both 😂