Thursday 28/03/19

  1. In MACRO NEWS, the latest votes throw up no Brexit deal alternatives and Turkey hits big turbulence
  2. In CAR NEWS, UK output drops sharply, Renault cosies up to Nissan, Ford leaves Russia and BMW expresses interest in Honda’s site in Swindon
  3. In M&A NEWS, Saudi Aramco buys a $69bn stake in Sabic
  4. In OTHER NEWS, I bring you an incredibly talented make-up artist. For more details, read on…



So MPs can’t agree on an alternative to May’s Brexit deal and Turkey sees turmoil in its financial markets…

Theresa May’s resignation gambit thwarted by DUP opposition (Financial Times, George Parker, Laura Hughes and Sebastian Payne) basically tells us that MPs failed to agree on any alternative to May’s Brexit withdrawal deal. Theresa May also offered to step down in the next few months in a bid to garner more support, but it looks like she won’t get DUP falling in behind her as it said her Brexit deal posed “an unacceptable threat to the integrity of the United Kingdom” due to the new barriers that would exist between Northern Ireland and Great Britain. The plan, at the moment, is to have yet another vote on her deal tomorrow. If the deal gets voted through (and it doesn’t look like it will, despite some high profile brexiteers like Jacob Rees-Mogg and Boris Johnson switching sides to support it), we will leave the EU on May 22nd and the PM will resign once the withdrawal agreement bill is passed. If it doesn’t, May will have to go back to Brussels before April 12th with an action plan which could well involve asking for a longer extension.

Turmoil in Turkey’s financial markets after currency crackdown (The Guardian, Richard Partington) shines the spotlight yet again on emerging markets as Turkey’s main index, the Borsa Istambul 100, fell by 5.7% yesterday (the sharpest fall since July 2016). Investors sold shares as a way of reducing their exposure to the country because the government tried to strangle foreign currency speculation by forbidding lending of lira to overseas financial institutions (although this was denied by the head of the Turkish banking association). This sudden intervention pushed the cost of offshore borrowing of the lira up by 1000%. * SO WHAT? * The country’s economy is still reeling from financial market unrest last year and it looks very much like this is an attempt by the government to prop up the lira ahead of local elections this Sunday. As David Cheetham, chief market analyst at the financial trading firm XTB, put it “Unfortunately for Turkey, these tactics to fight market forces almost always end in tears and what appears to be a last-ditch attempt to prop up the currency ahead of crucial local elections this coming weekend may well sow the seeds for another run on the lira”. More emerging market weakness to come on the back of this, I suspect.



British car production falls to new lows, Renault and Nissan cosy up, Ford decides to retreat from Russia and BMW expresses an interest in Honda’s Swindon facility…

Car output crashes to a six-year low (The Times, Robert Lea) is the leading headline in The Times’ business section today as the number of vehicles rolling off assembly lines fell by 15% last month. This should come as no surprise given all the recent negative newsflow on slowing China sales (exports to China have halved this year), tariff wars, manufacturing facility closures and job losses but these latest figures from the Society of Motor Manufacturers and Traders (SMMT) just provide more evidence of industry slowdown. The SMMT’s chief exec, Mike Hawes, complained that “Uncertainty has paralysed investment, cost jobs and damaged our global reputation. Business anxiety has reached fever pitch and we need parliament to restore stability so we can rebuild confidence and get back to the business of delivering for the economy”. * SO WHAT? * I think that the main thing that could help improve things short-term would be if the whole US-China tariff thing could be sorted (i.e. tariffs lifted). I’m not sure that would help boost car sales immediately in Europe and China, but I would have thought that it would at least help in America where the economy is still buzzing (albeit with a bit less fizz than last year) and wages are rising. I suspect that industry consolidation will continue as auto manufacturers try to adapt to changing technologies and customer behaviour.

I touched on this on my YouTube channel yesterday but Renault and Nissan take slow road to consolidation (Financial Times, Kana Inagaki, Leo Lewis, David Keohane and Peter Campbell) highlights a return to talks of a merger between Renault and Nissan before that whole Carlos Ghosn thing kicked off. It also refers to the potential acquisition of the enlarged group of Fiat Chrysler in a bid to keep the pace with rivals such as Volkswagen and Toyota. * SO WHAT? * Despite the long relationship between Renault and Nissan that stretches back twenty years, this is

not going to be a quick and easy process given that you have a heady mix of cross-shareholdings going on: Renault owns a 43% voting stake in Nissan, Nissan holds a 15% non-voting stake in Renault and 34% in Mitsubishi (which could also be part of a deal) and then you have the French government which has a 15% stake in Renault. Everyone is going to have to come to an agreement before a Renault-Nissan merger goes ahead – and that’s all before you even consider something like an acquisition of Fiat Chrysler! Still, as I said before, more industry consolidation is on the cards – not less.

Ford quits Russia car market in latest retrenchment (Financial Times, Henry Foy and Peter Campbell) shows Ford’s latest move to cut its overseas business as it announced its withdrawal from the car market after years of losses that will involve the closure of two Russian factories. It still plans to make and sell commercial vehicles in the country but Steven Armstrong, head of Ford in Europe said that “This represents an important step towards Ford’s target to deliver improved profitability and a more competitive business for our stakeholders”. * SO WHAT? * Ford has been making some pretty drastic moves recently, what with it pulling out of the saloon car market in the US to focus on pick-up trucks and SUVs, ceasing production of heavy trucks in Latin America and – looking a bit further back – pulling out of the Japanese and Indonesian markets completely three years ago. The landscape is rather different now when you compare it to ten years ago when Russia was seen to be the market to offset sluggish sales in western countries. Again, this is just more evidence of the shifting sands in the world of car manufacturing.

BMW shows interest in buying Honda’s Swindon plant (Daily Telegraph, Alan Tovey) heralds some potentially good news for Swindon as it turns out that BMW is thinking about taking it on after Honda closes it down in 2021 to boost UK production, with rumours that it could relocate some of its X1 small SUV production to the UK from the Netherlands to meet demand. BMW currently makes Minis in Oxford, Engines near Birmingham and body panels in Swindon. BMW’s official comment was “There are currently no plans for additional plant locations in the UK”. Possibly pipe dreams at the moment then, but it might not be Game Over for Swindon just yet…



Saudi Aramco looks like its about to put $69bn into Sabic while Centene and WellCare merge to become a major US insurance force…

Saudi Aramco to buy majority stake in petrochemicals producer Sabic for $69.1bn (Wall Street Journal, Summer Said and Rory Jones) heralds a big “payday” of sorts that will put the boosters under plans that Crown Prince Mohammed bin Salman (aka MbS) has to wean his country off its almost total dependency on oil revenues. Saudi Aramco is to buy a 70% stake in state-owned Saudi Basic Industries Corp (aka “Sabic”). This will give MbS a

significant lump sum to implement his “Vision 2030″strategy as the country’s two biggest companies join together because Sabic is currently owned by Saudi Arabia’s PIF sovereign wealth fund. * SO WHAT? * Call me an old cynic but this just sounds like an enforced cashreshuffle by MbS whose rather heavy-handed tactics are forcing together two companies that don’t really want to get together (well they haven’t until now, strangely enough). Saudi Aramco’s much-anticipated IPO – that had countries falling over themselves to accommodate – was eventually abandoned/postponed and then the Khashoggi thing happened, denting MbS’s credibility with the West. This amount of money is almost exactly the amount that would have been raised if Saudi Aramco had gone through with its IPO so it just goes to show that MbS has got the money he wanted – just via a different means.



And finally, in other news…

I thought I’d leave you today with the work of an incredibly talented makeup artist in Makeup artist transforms herself into amazing likenesses of famous oil paintings, celebrities (SoraNews24, Shannon McNaught This woman’s work is astounding…

Some of today’s market, commodity & currency moves (as at 0833hrs 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 **
7,194 (-0.03%)25,626 (-0.13%)2,805 (-0.46%)11,419 (unch)5,301 (-0.12%)21,034 (-1.61%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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