Thursday 24/09/20

1. In CORONATRENDS NEWS, Sunak scraps the Budget, the City abandons a return to the office, Upper Crust suffers, Ryanair expects a decimated ski season, Asda takes precautionary measures and we look at where we are on coronavirus vaccines
2. In TECH NEWS, we see Chinese criticism of the TikTok deal and Apple opens in India
3. In EV NEWS, Tesla gets sold off, Nikola loses even more credibility and California draws a line in the sand
4. In INDIVIDUAL COMPANY NEWS, WeWork sells a chunk of its China business and Joules sparkles
5. AND FINALLY, I bring you a bus maze…

So Sunak ditches the Budget, the City returns to WFH, Upper Crust and Ryanair suffer, Asda takes precautions and we see the latest on coronavirus vaccines…

*** TODAY IS THURSDAY, WHICH MEANS THAT IT’S ZOOM CALL DAY! This is where I talk over Zoom about the week’s main business and financial markets news and open it up to questions from YOU! You are welcome to ask me whatever you want to. For FREE subscribers, the call will start at 5pm and finish at 5.30pm (the link to join this call is HERE). For FULL/PAYING subscribers, the call will start at 5.30pm and finish at 6.30pm and will cover the week’s news – but we will also have discussions as well as Q&A (the link to join this call is HERE) ***

In Sunak scraps Budget to focus on jobs and business support (Financial Times, George Parker, Sebastian Payne, Jasmine Cameron-Chileshe and Jim Pickard) we see that the UK chancellor scrapped his autumn Budget in order to concentrate on the job in hand. It was supposed to set out a long term recovery plan, but he has decided instead to concentrate on coming up with and implementing measures to minimise business closures and job losses for the next six months. He is likely to announce new measures on wage-support and an extension of government loan schemes among other things. * SO WHAT? * Given we’re in a crisis, I think this is understandable! Having said that, pressure will continue to build on the Chancellor to come up with a longer term plan to give everyone something to aim for.

Meanwhile, City plunged back into shutdown as staff go home (Daily Telegraph, Michael O’Dwyer) shows that some of Britain’s biggest banks, law firms and accountants have dropped plans for staff to return to offices following the latest government guidance. Employees are now being told to work from home unless there is a clear reason for them to go into the office. HSBC, Goldman Sachs, Citigroup, Deutsche Bank, Lloyds and PwC were among those to reverse recent moves to return. This will be a massive blow to the surrounding bars, restaurants, shops and other businesses who supply office workers. Upper Crust owner forecasts 86% sales drop as Covid hits commuting (The Guardian, Sarah Butler) reflects the consequences of a lack of commuters as SSP Group, the owner of Upper Crust and Caffè Ritazza, outlined a downbeat assessment of the current state of play and future prospects with sales for the year to the end of September dropping further than the 80% originally predicted. Ryanair chief’s anger as winter bookings down 90pc (Daily Telegraph, Oliver Gill) shows that people are swerving skiing holidays and Ryanair’s colourful chief exec Michael O’Leary is understandably tearing his hair out given the current paltry booking levels. * SO WHAT? * Everyone’s usual routines and habits are

getting turned upside down and it may well be that at least the changes we have been seeing (particularly regarding the way people work and the increasing amounts of time they are spending at home) will become permanent. You can see why O’Leary is getting frantic – his industry is melting before his very eyes – but for all his huffing and puffing, the fact is that the government is having to make some very difficult choices and, at the moment, they are not going his way. On the plus side, I really think that whoever manages to survive the coronavirus in the travel industry will absolutely clean up when a vaccine is found because demand for international travel (at least between countries that have the outbreak under control) will shoot through the roof. 

Asda puts Covid-proof coating on trolleys and brings back door marshals (Daily Telegraph, Laura Onita) shows that Asda is bringing back door marshals and putting special coating on trolleys and baskets to combat a second wave. It is going to put 1,000 staff outside stores and in the aisles of bigger outlets who will reiterate the need to wear a face covering and keep social distancing. Morrisons also did something similar recently. * SO WHAT? * I would imagine that being a door marshal will be an unpopular job akin to be asked to be a traffic warden as you are bound to get a barrage of abuse (interspersed with some people expressing their gratitude) from mask deniers. Will mask deniers be outweighed by more customers coming in because they feel safer? At least this move will help staff – in theory – but I don’t know how well this can be enforced on a practical level.

I thought I’d include How close is a coronavirus vaccine? (Financial Times, Anna Gross and Ian Bott) because, let’s face it, that’s what we all want to know isn’t it? Super fast (well, compared to normal rates) production will swing into action on an unprecedented scale when a vaccine is found but until then, the slog to find suitable candidates continues. According to the World Health Organization, there are currently over 300 vaccine candidates, 40 of those are now being tested on humans and only 9 have reached the final stage (phase 3 trials). Of those nine, one is being developed by AstraZeneca and Oxford University in the UK, two US candidates come from Pfizer (in partnership with Germany’s BioNTech and Moderna), another candidate is being led by US giant Johnson & Johnson, four are being produced in China by Sinovac Biotech, CanSino Biologies and Sinopharm and the Gamaleya Research Institute in Russia has just put its candidate into phase 3. Governments around the world have been buying up doses in anticipation of breakthrough with the US, UK, EU, Japan and other rich nations representing only 13% of the world’s population is buying up 50% of the leading vaccine’s promised doses. At the moment, forecasts for the first vaccine to pass the phase 3 stage range from October this year to mid-2021. Once this happens, analysts believe that the successful vaccine could be approved by the appropriate national regulator within one month. This is a really fascinating article and I recommend that you read it in full if you can.

The TikTok deal continues to hang in the balance and Apple sets up (online) shop in India…

China’s state media denounce TikTok deal as ‘dirty and unfair’ (Financial Times, Ryan McMorrow) shows that several Chinese state media groups are criticising the current ByteDance deal with Oracle and Walmart, saying that Beijing should not approve it. Given that there is still confusion over who is going to be the dominant partner in this relationship, there seems to be a lot of room for interpretation. Oracle says that ByteDance would have “no ownership” in TikTok Global because of the share structure whereas ByteDance says it will be a 100%-owned subsidiary and that it would maintain an 80% stake. The drama continues…

In Apple launches first online store in India (Financial Times, Stephanie Findlay) we see that Apple opened its first online store in India yesterday in order to increase sales and manufacturing capacity in the country. * SO WHAT? * Apple has been trying for ages to expand its presence in India – the world’s second biggest mobile phone market (China is #1) – but has been held back by rules forcing foreign companies to source at least 30% of components locally. These rules started to relax going into the end of last year in order to attract wavering investment in China and it has also benefited from schemes to boost smartphone manufacturing. On a longer term basis, if this all works out, Apple could start exporting phones made in India globally – but this won’t happen just yet as local manufacturing capability of some sophisticated components is still lacking. Still, this is a positive move by Apple which clearly wants to get exposure in a market with huge potential. If it can manufacture there and export globally, its could potentially be excellent for margins due to low input costs.

Both Tesla and Nikola suffer and California commits…

A tricky period for electric vehicle manufacturers continues in Investors reverse out of Tesla after Musk’s flat Battery Day (The Times, James Dean) as investors felt rather short-changed by the lack of any amazing developments hinted at by Elon Musk in the build-up to Battery Day on Tuesday. * SO WHAT? * Everyone wanted to hear about things like solid-state batteries and hydrogen and all they got was a promise to halve battery costs by 2022. Tesla’s market value fell from over $400bn on Monday to $354.4bn yesterday as a result.

The ridiculousness continues in Nikola’s talks with major energy firms stalled following short-seller report (Wall

Street Journal, Ben Foldy and Mike Colias) as talks between Nikola and a number of potential partners – including BP – have paused due to allegations made in the Hindenburg Research report that has given the glitzy start-up a huge kicking. I wonder who else will be abandoning – and what General Motors is going to do considering it announced it was buying an 11% stake in the company very recently. Heads will surely roll if things start to get any worse. A fiasco!

California to ban sales of new gas-powered cars starting in 2035 (Wall Street Journal, Alejandro Lazo, Russell Gold and Micah Maidenburg) shows that California has drawn a line in the sand for the end of the internal combustion engine. * SO WHAT? * Nice. But, let’s face it, 2035 is ages away 😂. Mind you, if enough states and countries decide to do something similar it will provide car companies even more incentive to get their electric act together.

WeWork sells out and Joules does well…

WeWork sells majority stake in China business, cutting costs (Wall Street Journal, Konrad Putzier) highlights the office provider’s decision to sell down its interest in its China business and will cede operating control to a group led by investment firm Trustbridge Partners for $200m. * SO WHAT? * This would imply that the company is perhaps

now focusing less on growth at all costs and being more realistic about its prospects. They haven’t completely sold out, though – so they will still get a bit of any upside. 

Joules sparkles after online sales surge (The Times, Louisa Clarence-Smith) highlights success for Joules as it saw online sales rise by 45% in June, July and August and group revenues rose ahead of company expectations. It was, however, 19% lower than the equivalent quarter last year due to store closures during lockdown. A rare ray of sunshine in an otherwise stark high street landscape.

…in other news…

I thought I’d leave you today with an interesting initiative by a bus company to make money while passengers stay away in Company uses empty buses to create giant maze after tours drop due to COVID-19 (SoraNews24, Oona McGee). Surely TfL should do this! Double-decker London buses would be way better for this!