Tuesday 01/09/20

1. In MACROECONOMIC, MARKETS & OIL NEWS, India has a GDP shocker, global markets have a stellar August and oil prospects improve
2. In CONSUMER-RELATED NEWS, white-collar jobs lag, landlords suffer, Swissport and Addison Lee turn to job cuts while car finance applications rise
3. In RETAIL NEWS, Amazon gets drone approval and M&S kicks off with Ocado
4. In INDIVIDUAL COMPANY NEWS, Zoom raises its outlook again, Apple and Tesla continue to benefit from their stock splits while Nestlé makes an acquisition
5. AND FINALLY, I bring you a racing duck…

So India suffers, markets prosper and oil prospects depend on a vaccine…

*** I’M BAAAACK! I hope you haven’t missed me too much since I was off last week! You will be glad to know that I caught up on a load of sleep in the meantime 👍 ***

India’s economy contracts 24% during coronavirus lockdown (Financial Times, Amy Kazmin) highlights disastrous economic figures as the country’s GDP contracted by an annualised 23.9% in the quarter ending in June – way more than analysts were expecting – and it is also on track to overtake Brazil in terms of cumulative Covid-19 cases, making it second only to the US. * SO WHAT? * India’s economy was losing momentum even before the pandemic hit and Modi’s draconian anti-Covid actions seem to have not only decimated the economy – they also failed to contain the virus. Just to give you an idea of scale, India’s construction output fell by half and manufacturing output fell by 40% during lockdown. On the other hand, agriculture was a rare positive as it expanded by 3.4% due in some part to farmers being allowed to get back to work before many others. Clearly this is a shocking performance but given that India is the world’s second most populous country (China is the #1, the US is #3 and Brazil is #6, according to figures from Worldometer), I don’t think that it should be too surprising. The government’s chief economic adviser, K.V. Subramanian, told local TV that “the worst is over and the V-shaped recovery can continue” but others, such as investment bank Nomura, believe that the rebound is actually slowing down. The pressure is increasing on the government to provide more of a helping hand to struggling Indians.

In Global equities complete hottest August since 1986 (Financial Times, Adam Samson, Hudson Lockett and Richard Henderson) we see that markets around the world trended higher over August for over three decades. The combination of a weaker dollar, co-ordinated fiscal and monetary stimulus and the recovery of major global economies put the boosters under global equities during a month that is usually pretty quiet. * SO WHAT? * Given that the world tends to follow the US, there are two big tests on the horizon regarding the sustainability of the current rally. One is the next meeting of the US Federal Reserve – where everyone will be hoping for more stimulus measures to be announced – and the other is the presidential election in November. If the result of the latter is close, then months of political wrangling are likely to follow – which could scupper any major policy changes and scare off investors (which will hit markets). I would also add that perhaps China’s apparent recovery, according to recent official figures, is also adding to the feelgood.

Then in Vaccine to be shot in the arm for oil (The Times, Ben Martin) we see that Goldman Sachs is forecasting a Brent crude oil price of $65 a barrel by the third quarter of 2021 powered largely by the prospect of a vaccine prompting a boost to global trade. * SO WHAT? * I think anyone with half a brain cell could have told you that global economies will improve with the advent of a vaccine, the implication being that a recovery in economic confidence will boost trade. This will, in turn, boost oil demand as goods fly and sail around the world in increasing quantities. The main point of note here is that this brings forward Goldman’s initial expectations of recovery. Oil majors such as BP and Royal Dutch Shell will be praying they are right as they have, along with many others (especially shale producers) suffered a great deal due to oil price weakness this year.

Job prospects vary but more punters want to buy cars on finance…

Low demand for UK office workers reveals ‘asymmetric recovery’ (The Guardian, Jasper Jolly) shows that job recovery is patchy since lockdown has eased with LinkedIn Data revealing that jobs in white-collar areas – such as media, software and finance – has lagged other sectors. For instance, the new job rate for transports and logistics workers has climbed by 18% year-on-year while demand has also increased for delivery drivers and workers in areas such as healthcare and construction. Perhaps unsurprisingly, the leisure sector has been among the hardest hit areas. Separately, data from the jobs website Indeed show that new job postings are still far below what they were last year but they are showing signs of improvement. * SO WHAT? * This is, I think, to be expected, but I would caution against relying too much on data from LinkedIn because I think that its coverage can be patchy as not everyone uses it. I think it’s also difficult to tell trends on a per-industry basis because not ALL people in finance use LinkedIn ALL of the time, for instance. I used to be a headhunter for a number of years in the investment banking industry and I can tell you now that there were whole swathes of areas where employees did not bother with LinkedIn (and if they did, they didn’t always update it!). Indeed is perhaps a bit more reliable because it is broader, but even then they are talking about job postings. They will be very strong in a tight labour market, but I would also imagine that if you are, say, a delivery driver, your employer will probably ask you to recommend your mates first before spending money on posting a job ad at the moment. At least both LinkedIn and Indeed are saying that the job market is turning up – but then again many are forecasting a doubling of unemployment when the government withdraws wage support in November.

Government U-turn is a nightmare for landlords (Daily Telegraph, Ben Beadle) highlights the current plight of landlords after extending the ban on repossessions by one more month in order to protect renters. Government data shows that 94% of private landlords are individuals, many of whom have invested money in one or two properties as a pension. 60% of landlords have a gross non-rental income of less than £20,000 and so many do not have the

reserves to weather the current crisis. Some will face a double-whammy of being made homeless and then further legal action if they can’t meet certain legal requirements regarding their property. * SO WHAT? * OK, so this article was written by the chief exec of the National Residential Landlords Association, so it’s his job to represent his members and paint as bleak a picture as possible, but it is still worth considering that landlords who were previously sitting pretty on their investments got a very rude awakening due to the effects of the coronavirus. Calls will be increasing on the government to step in to protect landlords as well as tenants, but I imagine that they are not going to be high on the government’s list of priorities.

There’s more bad news on the jobs front in Thousands of jobs at risk despite rescue in the bag (The Times, Callum Jones) as Swissport, one of the UK’s biggest airport baggage handlers, has warned that between 3,500 and 4,500 staff could lose their jobs unless the government extends the current furlough scheme. And this is despite having successfully negotiated a €1.9bn rescue deal with creditors. Taxi firm Addison Lee accelerates job cuts (Daily Telegraph, Ed Clowes) piles on more misery as it said that it could cut up to 10% of its workforce to save money as the evaporation of international and corporate travel has hit it particularly hard. The tough times continue…

Meanwhile, UK car finance applications rise by quarter in July and August (Financial Times, Peter Campbell) shows that although the economy out there is looking pretty shaky, some consumers are going out there and buying cars. * SO WHAT? * Some of this is due to pent-up demand that built up over lockdown and some of it is due to people wanting to avoid public transport in increasing numbers. There are those, of course, who have continued to work under lockdown and saved enough money to buy. Let’s not get too excited here, though – yes, car sales were up by just over 24% from July 1st to August 24th VERSUS THE PREVIOUS YEAR, but sales overall IN THE YEAR SO FAR are still way less than they were in 2019. July and August are traditionally weak months as buyers tend to wait for the new registration in September so the figures look more flattering than they actually are – so car dealers should keep the champagne on ice for now. It’ll be interesting to see what new car registrations are like this month but I think that the fate of furlough is likely to be more of an accurate indicator of where the car industry is going to be heading.

Amazon gets some good news and M&S kicks off with Ocado…

Amazon gets US approval for drone fleet, a package-delivery milestone (Wall Street Journal, Sebastian Herrera and Andy Pasztor) highlights an exciting development as the e-tailing behemoth said it got approval from the Federal Aviation Administration to establish a fleet of delivery drones. Having said that, they will still have to go through many more hoops before they get the green light for widespread use. At the moment, the company can only perform tests involving customers from the UK and US –

so it’ll be a while yet before we get drone delivery! Exciting, though, no? Also, this will potentially be very exciting for drone manufacturers – but it’ll be a slow burn, I think.

Percy Pig hits the roads as M&S deliveries by Ocado begin (The Guardian, Mark Sweney) highlights today as being the first day for Ocado delivering M&S food, rather than Waitrose’s. * SO WHAT? * Waitrose is going it alone after its 20-year association with Ocado as M&S is now being dragged up to date with online shopping trends via the Ocado venture after years of being on the sidelines regarding its online shopping capability. About blimmin’ time! You will be seeing a lot of Percy Pig branded Ocado vans travelling around now! M&S “just” needs to sort out the rest of its business now…

Zoom lifts expectations again, stock splits continue to benefit Apple and Tesla while Nestle makes an acquisition…

In other news doing the rounds today, Zoom again lifts full-year outlook as sales surge during pandemic (Wall Street Journal, Kimberly Chin) shows that the company continues to knock it out of the park as it lifted its full-year forecasts for the second time during the pandemic and Apple, Tesla shares keep rising after stock splits (Wall Street Journal, Karen Langley) shows that these winners just keep winning in the share price stakes following the 4-for-1 and 5-for-1 respective splits that came into effect after the market close on Friday. Nice!

Then in Nestlé agrees $2.6bn deal for Aimmune Therapeutics (Financial Times, Alice Hancock) we see that Nestlé’s health division got a boost by buying the biopharm company Aimmune Therapeutics that will strengthen its presence in food allergy prevention. Still, Nestlé/biotech: peanut gallery (Financial Times, Lex) says the acquisition is a big gamble but then again up to 240m people suffer from food allergies on a global basis, according to the World Health Organization, so there is some logic to this purchase. It’s just that Aimmune has made no sales as of yet (although the company shows potential having recently won US approval for its peanut allergy treatment) and it is likely that the investment will take some time to pay off.

…in other news…

Did you see David Attenborough’s Planet Earth: A Celebration last night? If you didn’t, you need to watch it on iPlayer. There were so many examples there of nature vs nature – and it was incredibly fascinating. Sometimes, though, nature decides to compete with man – and there’s a great example of it in Daredevil duck races cars down the motorway at 60mph (Metro, James Hockaday). Amazing!