Thursday 21/05/20

  1. In MACRO NEWS, the Bank of England moots negative interest rates, Sunak looks to extend the mortgage holiday and economic indicators show some positives
  2. In CONSUMER AND RETAIL NEWS, gamblers turn to stock markets, Americans buy TVs and bikes with their cheque, Target strengthens, Shopify accelerates and M&S has issues
  3. In INDIVIDUAL COMPANY NEWS, US and China cloud companies vie for Asian business, Rolls-Royce cuts 9,000 jobs and two UK battery start-ups look to join forces
  4. AND FINALLY, I bring you a hilarious gift-gone-wrong and a “Pac-Man” facemask…



So the Bank of England considers new territory, Sunak aims to extend the mortgage holiday and economic indicators show signs of life…

BoE says negative interest rates are ‘under review’ for first time (Financial Times, Chris Giles) shows that our central bank is entertaining the possibility of negative interest rates for the first time in its 324 years of existence in order to stimulate an economic revival. * SO WHAT? * If this happened, it would pretty much force companies (and households!) to spend rather than save – and this comes only one week after the “new” governor said the Bank was not “planning or contemplating” such a move. It sounds like there’s still debate going on about taking this road but the fact that it is even being considered is interesting. As things stand, it sounds like negative rates are more likely to be introduced in the autumn when the economy might need an additional boost rather than at the next MPC meeting in June.

Following on from Chancellor Rishi Sunak’s gloomy prediction earlier this week that the economy was unlikely to bounce back quickly from this recession, it sounds like he’s looking at ways to help homeowners in UK mortgage payment holiday set to be extended (Financial Times, Jim Pickard, Daniel Thomas and Matthew Vincent). He is currently working with the Financial Conduct Authority

(FCA) on extending the existing scheme that was due to end in June – and this comes shortly after he announced an extension to the government’s job retention scheme, which has now been extended until October. It sounds like this won’t be a universal extension and the criteria for claimants will get tighter.

Glimmers of hope in economy as indicators show signs of life (Daily Telegraph, Tom Rees) highlights thoughts of some city forecasters who believe that there are signs that there could be light at the end of the coronavirus tunnel. Jefferies economist David Owen pointed to stats that showed traffic congestion is edging up, as is energy consumption – and Barclays data is showing slight improvements in spending according to its chief economist Fabrice Montagné. Still, it’s early days yet and no-one really knows what’s going to happen. * SO WHAT? * Economists like looking at direct and indirect signals regarding the state of the economy – along with a whole myriad of other stats and surveys – but even they are made more difficult to interpret because of the unique circumstances we are currently in. For instance, an increase in traffic could just mean that people are avoiding public transport. Also, spending at the moment is heavily skewed to online because most shops aren’t open. Unfortunately, it would be quite dangerous to read too much into this sort of thing, but then again it is their job to make the best predictions they can with the data available.



Gamblers set their sights on the financial markets, Americans spend on TVs and bikes, Target strengthens, Shopify broadens its appeal and M&S continues to suffer…

It’s interesting to see changes in consumer behaviour in these coronavirus days. Frustrated sports punters turn to US stock market (Financial Times, Richard Henderson) shows that online brokerages are benefiting from seeing an uptick in account openings as people attempt to get their gambling fix by betting on the US stock market! With world sporting events cancelled around the world, the likes of Charles Schwab, ETrade and Interactive Brokers have seen record new account sign-ups in either March or April. This is a welcome influx at a time where competition in this area is increasing and trading fees are being slashed. * SO WHAT? * I would be very wary of replacing sports betting with financial markets betting because I would argue it could be more addictive given the constant newsflow and the prospect of “beating the suits” at their own game. As you know by now, I’ve worked at four different investment banks over 13 years myself and I can assure you that trading markets is not “easy”, as many YouTubers would have you believe! This needs to be policed IMO, but I really am not sure of how you could do it effectively. In the meantime, the online brokers can benefit from trading commissions generated by their new clientele betting their government money in order to get rich quick.

Then Americans splash out on bikes and televisions (Financial Times, Alistair Gray) shows that Americans have been spending their $1,200 government handouts on exercise equipment, TVs and video games after panic-buying essentials. Target gains strength during coronavirus (Wall Street Journal, Sarah Nassauer) highlights strong sales for the US retailer in the most recent quarter powered by sales in discretionary items such as clothing and kitchenware. * SO WHAT? * It’s interesting to see these trends emerging from the ashes of the coronavirus. For many, these may be lean times, but for

those who have managed to keep their jobs, they may well be feeling a bit richer and emboldened to buy more expensive items – after all, they are probably less likely to be able to spend it on a holiday this side of Christmas! 

In Shopify accelerates online shopping services to take advantage of crisis (Financial Times, Tim Bradshaw) we see that the e-commerce company is unveiling more new services for retailers and an unexpected expansion into groceries. Restaurants are also using Shopify to sell takeaways and meal kits, among other things, and although Shopify doesn’t do deliveries itself, it is building a warehouse and logistics network to compete with Amazon. * SO WHAT? * It seems that Shopify is getting more widely recognised as it transitions from being more of a “back-end” service to something that consumers themselves can engage with. Its recently launched app, Shop, helps consumers track their orders from Shopify’s retailers and locate new stores in their area. As things stand, it looks like Shopify will be more generous than Amazon to the retailers that sign up as Harley Finkelstein, the company’s COO, said that it sees itself as being the distributor of “the economies of scale directly to small businesses, as opposed to keeping it for ourselves”. That and maybe not, like Amazon, allegedly using their data and becoming their biggest source of competition 😂.

M&S takes £145m hit on unsold stock as clothing sales fall 75% (The Guardian, Zoe Wood) shows that the high street stalwart has taken a massive hit on the mountains of unsold stock left idle by selling restrictions due to the coronavirus. It launched a “rainbow sale” last week to clear its spring and summer fashion, but this is unlikely to clear the decks completely for the troubled retailer. Although clothing and home sales fell by a whopping 75% in the six weeks to May 9th, sales in its food halls – excluding its restaurants – only fell by 4.6%. * SO WHAT? * M&S’ food business has not benefited as much as some supermarkets from the surge in grocery buying because many of its outlets are near offices or in transport hubs – and that has taken the edge off. However, help is at hand as its food will be delivered by Ocado from September – but unfortunately its clothing business still needs major surgery IMO. If it doesn’t sort out this turkey, I think M&S will be vulnerable to takeover. A target for Amazon, perhaps??



US and Chinese cloud companies fight over Asia, Rolls-Royce announces job cuts and two UK battery start-ups talk about joining forces…

US and Chinese cloud companies vie for dominance in south-east Asia (Financial Times, Mercedes Ruehl) looks at how increased demand for online services during lockdown has spurred demand for data centres in the region with the likes of Amazon, Google and Microsoft competing with “local” rivals Alibaba, Tencent and relative newbie Huawei cloud. Investment and competition is likely to get fiercer as the coronavirus has increased the need for online capability considerably.

Anger as Rolls-Royce cuts 9,000 jobs (The Times, Alex Ralph and Martin Strydom) heralds bad news for

employees at Rolls-Royce as engineering company announces the biggest ever redundancy round since the company went private in 1987. Most of the cuts will be suffered by the civil aerospace division and could mean that some sites are closed down. * SO WHAT? * This is obviously bad news but is hardly surprising given that Airbus and Boeing’s plane orders are being decimated at the moment.

I thought I’d try to end on a positive note today in Deal between battery start-ups brings UK’s first gigafactory closer (Financial Times, Peter Campbell) where AMTE Power and Britishvolt are talking about joining up to produce battery cells for carmakers and energy storage groups. They are looking at a £4bn project to build manufacturing facilities in the UK and are considering an IPO to fund the venture. * SO WHAT? * This could make a huge difference to supply chains in the UK because, as we have seen, battery manufacturing facilities have thus far been very Asia-centric. At the end of the day, though, the success of this venture will depend largely on how cheaply they can produce. Still, this sounds good, no?



…in other news…

I thought I’d leave you today with the hilarious Man’s awkward error on personalised glass for fiancee’s 30th birthday (The Mirror, Paige Holland and the, quite frankly, bizarre Mask in a restaurant? This one can gobble like Pac-Man (Reuters, Eli Berzlon Nice idea in theory, but surely you would feel like a right kn0b wearing one of these?? Better to avoid the restaurant IMO…

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Some of today’s market, commodity & currency moves (as at 0739hrs 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 **
6,067 (+1.08%)9,37611,224 (+1.34%)4,497 (+0.75%)20,552 (-0.21%)2,868 (-0.55%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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