Thursday 22/11/18

  1. In MACRO AND MARKETS NEWS, the Italians remain defiant after a second budget rejection and markets recover
  2. In RETAIL NEWS, Ikea unveils plans to cut staff and increase small stores and Kingfisher gets more focused
  3. In INDIVIDUAL COMPANY NEWS, Amazon has a breach, Foxconn looks at big cost cuts and Johnson Matthey coins it in from tighter emissions regulation
  4. In OTHER NEWS, I bring you an unusual kitchen feature. For more details, read on…



So the Italians get shirty and the market rout takes a break…

Salvini ‘ready to confront EU leaders’ as Italy’s budget is rejected again (The Guardian, Angela Giuffrida) shows that things are about to get more interesting as Italy faces sanctions for not confirming to the EU’s fiscal rules after the amended draft budget following its original submission was rejected. Italy’s coalition government leaders have refused to change their deficit target of 2.4% of GDP. * SO WHAT? * This refusal to bow to Europe’s demands will lead to Italy having to pay an initial fine of 0.2% of GDP – or €8bn – which will just make their tricky debt situation even worse. If it continues to refuse to comply, the fine could rise to 0.7% of GDP. However, the fantastically-named 

Wolfango Piccoli, of research firm Teneo Intelligence pointed out that “Given the complexity of the overall procedure and the fact that political considerations might prevail ahead of the May 2019 European elections, Italy is not expected to face sanctions until late spring at the earliest, if they materialise at all”. So it seems that there’s plenty of time for more Euro-baiting from the Italians.

Technology, oil stocks help markets stabilise (Wall Street Journal, Georgi Kantchev and Michael Wursthorn) highlights a rebound for tech and other growth stocks, dabbing the brakes on the current stock market sell-off. Trading volumes were light in the day before Thanksgiving and oil stocks also enjoyed a recovery on a higher oil price and some positive earnings reports. One of the best performers of the S&P 500 yesterday was Foot Locker which notched up a healthy 15% share price rise on the announcement of strong same-store sales.



Ikea rings in the changes and Kingfisher decides to focus…

Ikea cuts office jobs to focus on smaller stores (The Times, Deirdre Hipwell) shows that the Swedish furniture retailer is getting serious about its future transformation as it announced that it would be cutting over 7,000 jobs worldwide as it evolves its business model to take into account changing customer behaviour and preferences. Ikea’s parent, Ingka Group, said that it wants to invest in its online business as well as its traditional out-of-town stores and the smaller ones in town. It believes that this transformation could, over the next two years, actually result in the creation of 11,500 jobs at its smaller outlets. To put this all into context, Ikea employs 160,000 staff worldwide and has 422 stores (of which 21 are in Britain) in over 50 markets. * SO WHAT? * This is all in line with the company’s desire to reinvent itself and sounds like a decent enough direction. I think that Ikea’s timing could be quite good if it is looking to take on smaller in-town stores in the UK as a lot of retail space is getting freed-up at the moment. I have said before that I think Ikea is one of the only retailers I can think of who could take up big city-

-centre retail space given that furniture shops tend to need a lot of room. They’d probably be able to get a decent price as well given who they are (i.e. they’d attract a lot of foot traffic) and landlords’ current situation. Everyone’s a winner!

In Kingfisher to exit smaller markets as French woe deepens (Financial Times, Jonathan Eley) we see that Kingfisher has decided to exit peripheral markets such as Russia, Portugal and Spain and concentrate on fixing its troubled French operations. Kingfisher has been a tricky place to be what with a load of senior management departures and widespread scepticism that the current chief exec, Veronique Laury, can deliver the £500m of additional profit she promised back in 2016 as part of her streamlining of the company. * SO WHAT? * Although the French operations have been troublesome, the UK has been doing OK. B&Q is still the market leader, but has benefited somewhat by the travails at rival Homebase which is closing 42 stores after being sold for £1. Screwfix, which concentrates more on trade, has been doing rather better – so much so that there is speculation that it could be spun off but the slimmer the overall operation gets the harder that will be to execute. I think that for B&Q and Screwfix to “get back on it”, the housing market needs to get out of the current rut it’s in – but I don’t expect that to happen until we get more clarity (!) on Brexit. 



Amazon has a data breach, Foxconn cuts on Apple slowdown and Johnson Matthey cleans up…

Amazon admits data breach just before Black Friday sales (Daily Telegraph, Hannah Boland) heralds a bit of an embarrassing revelation in the run-up to Black Friday as it had a data leak where names and e-mail addresses were disclosed due to a technical error on its website as opposed to it being hacked. The issue has been fixed and customers have been informed. * SO WHAT? * If Amazon’s explanation of the cause of the breach is true, then there’s probably not too much to worry about. The company did not reveal when the incident happened or how many people were affected, but it must have been pretty recent as GDPR requires data breaches to be reported to users within 72 hours of discovery.

Apple iPhone maker Foxconn to cut costs and axe thousands (Daily Telegraph, Matthew Field) adds to the worrying trend for Apple-watchers as Foxconn (the Taiwanese behemoth that assembles iPhones) announced that it will cut billions of pounds in costs and thousands of workers as the global smartphone slowdown continues.

The company employs a whopping 800,000 people across Taiwan and China but said that it will cut the numbers of non-technical staff by 10%. * SO WHAT? * This is just the latest big of bad news to come from an Apple supplier in the last few weeks as the reality of a maturing smartphone market bites. Given that Apple is now refusing to disclose unit sales of its devices I suspect that the spotlight will be well and truly on suppliers like Foxconn as indicators of Apple’s fortunes.

Johnson Matthey cleans up as carmakers target emissions (Daily Telegraph, Alan Tovey) highlights the 13% share price spike in the company’s shares as the maker of catalytic converters showed a rise in revenue and profits due to strong demand for the devices that clean vehicle exhaust emissions. The company’s clean air division makes up 65% of the company’s sales and this uptick is particularly impressive given concerns about a fall in demand for catalytic converters due to the general slowdown in car sales. Johnson Matthey is also preparing for the migration to electric vehicles with its own battery business that is getting closer to launching its first products. * SO WHAT? * This all sounds great and rising sales for its battery materials shows that it is moving with the times, whilst still keeping one foot planted firmly in the present.



And finally, in other news…

Are you bored of conventional kitchen layouts? Maybe this could be a bit of a conversation starter for you: A Beijing apartment has a totally transparent bathroom in its kitchen, and it’s the stuff of nightmares (MSN, Jacob Shamsian At least you will be able to carry on conversations that you started in the kitchen…

Some of today’s market, commodity & currency moves (as at 0816rs 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 **
7,048 (+1.45%)24,459 (-0.02%)2,650 (+0.32%)6,97311,238 (+1.58%)4.966 (+0.85%)21,647 (+0.65%)2,645 (-0.23%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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