Thursday 21/03/19

1. In MACRO NEWS, the Fed keeps US interest rates unchanged, May gets push-back from the EU, UK inflation rises, Spain shows solid growth and Nigeria pledges to sell down oil assets to finance its budget
2. In CAR NEWS, BMW has a downer and Suzuki gives UK car manufacturing some good news
3. In RETAIL NEWS, B&Q’s owner is in a fix and Aldi opens a new “metro” store format
4. In INDIVIDUAL COMPANY NEWS, Google gets a big fine and Bayer’s legal nightmare continues
5. In OTHER NEWS, I show you a very cool new restaurant. For more details, read on…

So the Fed keeps rates unchanged, May gets push-back from the EU, UK inflation increases, Spain’s economy show some impressive growth and Nigeria announces a sell-down of oil assets…

Market relief as Federal Reserve rules out rate rise until 2020 (Daily Telegraph, LaToya Harding) shows that US interest rates will remain unchanged and that there are unlikely to be any more changes this year as economic growth slows down. * SO WHAT? * After raising the interest rates for the last five quarters consecutively, Fed Chairman Jerome Powell has decided to pause for breath, saying that “it’s a great time to be patient”. He cited risks in the ongoing US-China trade negotiations, a tricky Brexit and expectations for a slowing domestic economy as being behind the decision to keep rates on hold. Basically, markets don’t like interest rate rises (it makes the stock market look less attractive as an investment option among other things), so they were up initially on the back of this news.

No Brexit delay without MPs backing deal, warns EU (Financial Times, Jim Brunsden, Alex Barker and George Parker) heralds the latest twist in the Brexit drama as EU leaders look to put more pressure on British MPs to get behind May’s Brexit deal or leave the EU on March 29th with nothing. May is seeking a short extension to the March 29th deadline to June 30th but it looks like this will only be granted if MPs back her existing Brexit deal. The saga continues…

Amidst all the Brexit drama going on at the moment, House price growth at six-year low and inflation rises to 1.9% (The Guardian, Phillip Inman) cites the latest data release from the Office for National Statistics which shows that house prices grew at their slowest rate since 2013 in January, putting the UK on course for the first fall in property values since the financial crash if this current trend continues. The release also shows that inflation was stronger than expected in February with increases in food,

alcohol and tobacco prices. * SO WHAT? * Brexit is the key here – and if we end up with a no-deal, then I would expect prices to rise, pushing inflation over the 2% target. If prices go up, household budgets get squeezed and people will have less money knocking around which would have a direct impact on the housing market and other areas.

Elsewhere, you might be surprised to see Spain leads the way on eurozone growth (Financial Times, Valentina Romei) which highlights the fact that Spain is currently the largest single contributor to eurozone growth with a GDP growth rate of 2.5% in 2018, the fifth quarter in a row of economic growth and the fastest growth rate in the bloc! It is all the more surprising when you consider that the country has the largest number of unemployed in the EU (3.3m – about 14% of the population) and one of the worst poverty rates. * SO WHAT? * I just thought I’d mention this as a little light relief given all the drama going on in Europe at the moment! It charts Spain’s “recovery”, but let’s face it, it’s from a VERY low base and the fact that its politics is very unstable (it is currently facing its third election in four years) means that future growth at this level should not be taken for granted.

Nigeria set to sell down stake in oil ventures to boost finances (Financial Times, Anjli Raval and Neil Munshi) heralds a major development in Nigeria as President Muhammadu Buhari is pressing ahead with his plans to boost state coffers and speed up energy reforms by reducing ownership of joint ventures from the current 60% down to 40% within this year. The government will need this money to power the most expensive budget in the country’s history and companies like Royal Dutch Shell, Chevron and Exxon Mobil will be affected through their joint ventures through the state-owned Nigerian National Petroleum Corporation. There has been talk of doing this in the past, but plans were shelved in 2014 following prolonged oil price weakness but have come to the fore once more given recent oil price strength. * SO WHAT? * This sounds good in theory, but the problem is that the non-Nigerian oil partners will know that the government is, in effect, a forced seller meaning that the government’s position isn’t a particularly strong one. This will be something worth following as oil is key to Nigeria’s economy.

BMW suffers while Toyota/Suzuki have good news for UK car manufacturing…

BMW warns of falling profits as it ramps up e-vehicle spending (Daily Telegraph, Alan Tovey) signals tough times in 2019 for beemer as it warned that profits will come in “well below” the €9.8bn it made last year. The company blamed major investment in electric vehicles and self-driving cars, tighter emissions regulations and increased production costs on the warning. If you add tricky currency rates, ongoing trade wars with the US and China and Brexit, you have a recipe for a cr*p year. * SO WHAT? * The news sent its share price down by 5%, but the company said that it would increase efforts on cost-cutting that will involve the retirement of poor-selling models and the number of drivetrain and country-specific models axed.

BMW wasn’t the only one kitchen-sinking all its troubles – Volkswagen also moaned about the costs of electrification yesterday. This followed on from what VW said last week about having to cut 7,000 jobs over the next five years as it moves towards electric cars.

Suzuki cars to be built at Toyota’s UK factory (The Times, Robert Lea) highlights some rare good news for the UK car manufacturing industry as Mitsubishi is considering moving some production to the UK (if Brexit goes OK – good news for Nissan’s Sunderland factory because that’s where the car would be manufactured as part of a shareholding agreement between Nissan and Mitsubishi) and Toyota and Suzuki also announced that small Suzuki estate cars will be rolling off Toyota production lines in Burnaston as part of a global manufacturing collaboration. The new Suzuki is expected to go into production next year and will be the first car to be produced by the company in Britain. * SO WHAT? * This is great even if it won’t mean any news jobs – but at least it will be safeguarding existing ones.

B&Q’s owner is in a quandry and Aldi rolls out a “metro” format…

In B&Q owner in a fix as boss leaves with turnaround left unfinished (Daily Telegraph, Ashley Armstrong) we see that B&Q’s owner, Kingfisher, is in a bit of a pickle as the company’s CEO Veronique Laury announced that she’s leaving the company half way through executing her plans to streamline international sourcing operations. * SO WHAT? * The writing has been on the wall for some time as the company continued to fall short of the ambitious targets Laury set out to achieve. The fact that profits didn’t improve and the company’s share price fell by 25% since she got the top job also pointed to the fragility of her

tenure. This is not good for the company and will no doubt increase speculation of a break-up of the company into its B&Q, Screwfix, Castorama and Brico Depot constituent parts.

I suspect that Aldi opens its first ‘local’ high street store in London (Daily Telegraph, Ashley Armstrong) will be putting fear into the hearts of convenience store operators as the German discounter opened its first “Local” store in Balham, South London, last week. It’s target audience is urban consumers and it obviously stocks less product lines than its bigger sibling. * SO WHAT? * An Aldi spokesman said it wasn’t part of an effort to take on the likes of Tesco Express and Sainsbury’s Local stores, but – yeah, right. This is only a one-off, but I’m sure that if it is successful, it will be rolled out elsewhere. It would be a good way to plug gaps in areas where it has no current presence.

Google is slapped with a big fine and Bayer’s nightmares continue…

EU fines Alphabet’s Google €1.5bn for antitrust violations (Financial Times, Rochelle Toplensky) highlights the bigger-than-expected fine from the EU after a competition investigation found that Google has been blocking rival online advertisers for the ten years between 2006 and 2016! EU competition commissioner Margrethe Vestager said that “the misconduct last over 10 years and denied other companies the possibility to compete on the merits and to innovate – and consumers the benefits of competition”, adding that the size of the fine reflected the “serious and sustained nature” of the breach.

Bayer shares fall after jury finds exposure to roundup helped trigger cancer (Wall Street Journal, Ruth Bender) shows the latest development in the whole Roundup-cancer saga as a San Francisco jury found that a man’s exposure to the company’s weedkiller was a “substantial factor” in causing his Hodgkin lymphoma. The company is facing lawsuits from 11,200 farmers, gardeners and landscapers. Ouch. * SO WHAT? * I bet that Bayer wished that it hadn’t splashed $63bn on buying the US agriculture giant as it is proving to be an absolute nightmare. The other danger here is that other plaintiffs might start jumping on the legal bandwagon and make things even worse. Still, if Roundup DID contribute to cancer, the company deserves everything that’s going to be thrown at it – even if it was Monsanto’s and not Bayer’s fault. 

And finally, in other news…

I thought I’d bring you news of a new super-cool restaurant in Going ‘Under’: Europe’s first underwater restaurant opens in Norway (Reuters, Lefteris Karagiannopoulos https://tinyurl.com/y55hfrqz). Wow!