Thursday 20/09/18

  1. In MACROECONOMIC NEWS, UK inflation hits new highs and house price growth hits new lows
  2. In RETAILER NEWS, the EU gets on Amazon’s case, Alibaba pulls back from its US jobs promise and Jack’s launches
  3. In INDIVIDUAL COMPANY NEWS, Google loses out on ad revenues and cannabis stock Tilray puffs up
  4. In OTHER NEWS, I bring you the secret to growing giant vegetables. For more details, read on…



So UK inflation hits a six-month high while house price growth hits a five-year low…

Travel and theatre help push inflation to six-month peak (The Guardian, Richard Partington) cites the latest figures from the Office for National Statistics (ONS) which show that consumer prices increased by 2.7% last month, versus an increase of 2.5% in July and market expectations of 2.4%. The ONS said that the main driver behind the higher cost of living was the fastest rise in recreation and culture-related costs since January 2010. * SO WHAT? * This isn’t great news for many households as average wages have only just nosed ahead of inflation. Some of the more optimistic economists are saying that this inflation increase is just a blip given that it was driven by big rises 

from a relatively small amount of items and that the overall inflation trend is in the downward direction as the effect of a weaker sterling post the EU referendum continues to fade.

House price growth falls to a five-year low, figures show (Daily Telegraph, Charlie Taylor-Kroll) cites the latest ONS House Price figures which show the lowest house price growth since August 2013. The north-west had the fastest price growth over the last year with 5.6% versus the national average of 3.1% as falling prices in the south and east of England dragged everywhere else down. * SO WHAT? * This is hardly surprising given the uncertainty we are facing with Brexit. House price chat, although intensely boring, is important because a buoyant housing market makes everyone feel richer (even though you’re only really richer on paper) which makes them more likely to spend more and keep the economy ticking over. Weaker house prices tend to have the opposite effect.



In retailer news, the EU opens an investigation into Amazon’s use of data, Alibaba pulls back on its US jobs promise and Tesco launches its discount chain…

EU opens probe into Amazon use of data about merchants (Financial Times, Rochelle Toplensky and Shannon Bond) highlights a new investigation by the European Commission which will look at how the company uses data about merchants as it is currently not only their host, but also their major competitor. EU officials were keen to stress that this is NOT a formal probe at this stage and that they are currently just gathering information from merchants. * SO WHAT? * There’s nothing to see here – yet. I guess the reason it’s making the headlines is because it’s a shift of focus for Margrethe Vestager, who is coming to the end of a five-year term and was the one responsible for fining Google €4.3bn in July for allegedly abusing its position of power in mobile operating systems.

Alibaba’s Jack Ma pulls plug on ‘million jobs’ pledge (Daily Telegraph, Margi Murphy) shows that the founder of the Chinese e-tailer behemoth has reacted to the current US-China trade spat by pulling back from his January 2017 promise of creating one million jobs in America. He said that “The promise was made on the premise of friendly US-China partnership and rational trade relations…That premise no longer exists today, so our promise

cannot be fulfilled”. * SO WHAT? * TBH, it’s all words but I think that the important thing here is that someone as high-profile as Jack Ma saying something like this could embolden other Chinese employers in the US to do the same. Mind you, Ma is on a different planet to everyone else and so they might need more of a Chinese uprising before jumping on his no-job bandwagon.

Tesco’s Drastic Dave brings back Slasher Jack (The Times, Deirdre Hipwell) highlights Tesco’s move to dislodge the supremacy of Aldi and Lidl in the discount supermarket space as it launches its first two “Jacks’s” branded stores. Cutting to heart of it, the stores are made more cheaply with lower overheads, a limited product range and they even have a When It’s Gone It’s Gone aisle. Tesco plans to open between 10 and 15 stores this year and chief exec Dave Lewis sounded quite airy about cannibalising Tesco sales when he said “I’d rather cannibalise myself than have somebody else cannibalise me”. * SO WHAT? * It may be a bit premature to assume this venture will end in failure, but the odds are stacked against it – both Asda and Sainsbury’s have tried and failed with discount formats in the past. I’m a sceptic on Jack’s because, at this stage, I don’t see that they’re doing anything new – they’re just copying other (admittedly, successful) existing formats. I believe that, in order for Tesco to truly succeed, it has to build its own identity and come up with new, original ideas – maybe even harness that pioneering spirit of the Tesco founder Sir Jack Cohen. Just chucking a bit of money at a tarted-up copy of the competition surely isn’t enough to get the German discounters quaking in their boots.



In individual company news, Google’s ad share gets a little dent and cannabis company Tilray gets high…

Google’s grip on advertising is weakening (Daily Telegraph, Hannah Boland) highlights the latest forecasts from research group eMarketer, which say that Amazon will have a 4.15% share of the US digital ad market this year. This is a significant increase from their previous forecasts and would make Amazon the US’s #3 digital ad platform, taking it ahead of Oath and Microsoft for the first time. * SO WHAT? * Google and Facebook won’t be too concerned just yet (they have 37.14% and 20.57% market share respectively), but they will need to keep Amazon on the radar.

Reefer madness as pot stock Tilray hits $20bn valuation (Financial Times, Nicole Bullock, Peter Wells and

Andrew Edgecliffe-Johnson) shows what hype does when the lossmaking Canadian cannabis producer with less than $10m of sales in its latest quarter hit a market cap of $20bn in trading yesterday. It floated at $17 per share on Nasdaq only two months ago, but it was up to $300 in mid-afternoon trading in New York yesterday on the back of news that it had received approval from the US Drug Enforcement Administration to import one of its products in capsule form to use in a clinical trial to treat a neurological disorder called essential tremor. When the hype calmed down, it went back to $214.06, which still meant the stock had risen by a chunky 38% on the day. * SO WHAT? * Tilray is a proper company and has several brands that it markets in Canada, where recreational use will be legalised next month. However, one of the reasons why Tilray was up so strongly yesterday was because only 20% of its shares are available to trade in the market – and this can skew price movements hugely. Current valuations are looking toppy at these levels but the growth potential of the pot market looks pretty attractive from here – especially if legalisation becomes a global trend.



…And finally, in other news…

Ever dreamed of growing giant veg? Me neither. However, I’ve got you covered if you ever get the urge: Giant vegetable whisperer strokes his leeks to help them grow (Metro, Zoe Drewett

As always, thank you for reading Watson’s Daily!

Some of today’s market, commodity & currency moves (as at 0805hrs 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
7,331 (+0.42%)26,406 (+0.61%)2,908 (+0.13%)7.95012,219(+0.50%)5,394 (+0.56%)23,615 (-0.27%)2,728 (-0.11%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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