Tuesday 04/06/19

  1. In MACRO NEWS, we look at a UK/Trump trade deal, why the oil price is weakening & disappointing UK retail sales
  2. In NEW DEVELOPMENTS, top banks make their own digital coins, new regulations are to cover flying taxis and ecommerce groups worry about new EU security rules
  3. In TECH NEWS, big US tech companies face investigation while Apple pushes forth
  4. In INDIVIDUAL COMPANY NEWS, a Chinese credit card giant targets Europe and Kier tanks
  5. In OTHER NEWS, I bring you a giraffe puzzle. For more details, read on…



So Trump talks about a UK trade deal, oil prices weaken and UK retail sales crater…

Would a trade deal with Trump boost Brexit Britain? (Financial Times, Chris Giles) discusses the effects of a potential trade deal with the US. Trump said, in an interview with The Sunday Times that “We have tremendous potential to make up more than the difference. One of the advantages of Brexit is the fact that now you can deal with the number one country by far”. He then tweeted yesterday that “Big Trade Deal is possible once UK gets rid of the shackles [of the EU]. Already starting to talk”. However, trade experts have poured cold water on this idea because the US already trades a great deal with the UK anyway and it is way less important to us than the EU. The US accounted for 18% of UK exports and 11% of imports in 2017 while the EU accounted for 45% and 53% respectively. On this data, trade with the US would have to grow a great deal – so if our exports to Europe fell by 10%, trade with the US would have to increase by 37%. * SO WHAT? * In reality, a proper trade agreement will face huge obstacles. For instance, it’s doubtful that the public would support having to agree to US food and animal welfare standards (did you see Dispatches: the truth about chlorinated chicken on Channel 4 last night? Here‘s a review/synopsis. It’s pretty shocking) and the NHS taking away caps on medicine

prices – yet the US wants both of these things as part of any deal. I would also add that, given Trump’s track record of changing his mind, any agreement would be highly subject to passing whims and would be used as a weapon against us – in the same way that his current tariff-wielding is being used against China. The other thing is that, if he’s not re-elected as president for another term, the thing could be up in the air anyway.

Oil price falls amid fears that US policy will squash demand (Daily Telegraph, Julia Bradshaw) highlights the current weakness in oil prices. It contends that they are weakening (they’ve fallen 10% in the last three days) over fears that the US-China trade war will lead to less trading activity overall. If China retaliates in a meaningful way, there are concerns that this could tip everyone into a global recession.

Continuing on that gloomy note, Retail sales figures worst since 1995 (Daily Telegraph, Julia Bradshaw) cites the latest figures from the British Retail Consortium/KPMG monthly report which show that total retail sales – encompassing food, non-food and online shopping – dropped by 2.7% versus May last year. Interestingly – and somewhat alarmingly – online sales growth slowed down dramatically. Online sales of non-foods increased by only 1.5% in May versus 11.5% a year ago. * SO WHAT? * Bad news, but hardly surprising given what’s going on in the economy at the moment! The online slowdown is a bit of a concern if this becomes a trend because it has been one of the only areas of growth in the retail sector.



Digital coins, flying taxis and ecommerce concerns…

Following on from what I was saying yesterday about Facebook’s proposed new digital currency, Top banks push ahead with digital coins for 2020 (Financial Times, Laura Noonan) says that 13 of the world’s biggest banks are looking to launch their own digital currencies next year based on the blockchain technology. * SO WHAT? * The banks believe that it will make trading less risky and cheaper by drastically simplifying paperwork and processing. Banks such as Santander, BNY Mellon, MUFG, Credit Suisse, KBC, ING and Canada’s CIBC are among those who have worked with UBS on a Utility Settlement Coin (USC) and they believe that this will transform the clearing and settling of trades.

Air safety agencies rush to draw up rules for flying taxis (Financial Times, Josh Spero, Sylvia Pfeifer and Nicolle Liu) is a very exciting-sounding headline, isn’t it! Well it seems that air safety agencies around the world are putting together regulations for flying taxis as companies look to launch services in the next five to 10 years. European regulator EASA is preparing tests to ensure the safety of vehicles and their software, the UK’s Civil Aviation Authority has set up a virtual space where flying taxi companies can test their tech, China’s Civil Aviation Authority said it aims to develop regulatory standards and co-ordinate testing of Unmanned Aerial Vehicles (UAV) by 2020. In terms of companies getting involved, Uber wants to launch an aerial ride-sharing network “Uber Air” by 2023 where Uber will use vehicles made by Bell, Boeing and Embraer; Rolls-Royce has plans for an electric aircraft that could take off and land vertically that could be available by the early-to-mid 2020s and Germany-based start-up Lilium

unveiled last month what it claimed to be the world’s first all-electric, five-seater plane that it plans on using as a public air taxi service around 2025. * SO WHAT? * This all sounds very exciting, but REALLY?? It seems to me that there are enough problems with flying drones for deliveries – let alone driverless flying taxis! I would love all these predictions to be true (sounds cool, no?) but I just don’t see it happening for a looooooooooong time. Even if the tech came out, it seems that they will need operators/ “overseers” – but where are they going to come from?? It seems like now is a good time to get yourself qualified as a drone pilot…

Ecommerce groups sound alarm over EU security rules (Financial Times, Tim Bradshaw and Nicholas Megaw) highlights what looks like being this year’s GDPR, in the sense that it’s important European legislation that’s going to catch a lot of companies unaware. Big hitters such as Amazon, Worldpay and Stripe say that billions of dollars of online purchases could be lost due to lack of company awareness/preparation in the run-up to the implementation of the Second Payment Services Directive (PSD2), which will require Strong Customer Authentication (SCA) for most online payments over €30 from September. The rules are intended to weed out fraud, but require significant changes to process and technology to comply and if the customers don’t approve a transaction by acknowledging it, they may not be allowed to complete a purchase. * SO WHAT? * This is going to be major. Even Amazon is going to be affected by this – its 1-click checkout process will be affected by the current rules and you can bet your bottom dollar that LOADS of companies are going to feel the consequences. A survey commissioned by Stripe and analysts at 451 Research showed that fewer than half of businesses surveyed expect to be ready by the deadline. I predict carnage – and this could stop the rise of e-commerce in its tracks (although I think this would only be temporary).



US tech is about to be investigated and Apple breaks with the past…

Congress, enforcement agencies target tech (Wall Street Journal, Brent Kendall and John D.McKinnon) heralds a major movement by antitrust enforcers and lawmakers who are going to investigate America’s biggest tech companies for potential anticompetitive practices. Officials at the Justice Department and Federal Trading Commmission are mulling over which areas they will be cracking down on with the likes of Google, Apple, Facebook and Amazon. The House Judiciary Committee also announced that it will be looking into competition in digital markets and whether existing antitrust laws and resulting enforcement has kept up with the pace of change of the industry. * SO WHAT? * This is obviously a big thing and has rattled investors who have grown used to a relatively free-wheeling Silicon Valley (although you could argue that the writing was on the wall at the end of last year with all the Facebook privacy shenanigans). Still, I suspect such investigations will go on for quite some time while everyone tries to double-guess what the authorities will say

in the meantime. I would expect some share price volatility in these companies until we get more clarity on the outcome of these investigations.

In Apple joins streaming chorus as iTunes fades out (Daily Telegraph, Matthew Field) we see that the curtain is being drawn on iTunes which started the “digital music revolution” to be replaced by revamped Music, TV and Podcast apps while Apple’s supporting actors – iPad, Watch and Mac take centre stage at WWDC” (Wall Street Journal, David Pierce) looks at the hardware side of things as Apple continues in its efforts to de-emphasise the iPhone at yesterday’s WorldWide Developers Conference in San Jose. Apple Watch is getting a separate App Store this month, meaning that you won’t have to download via your iPhone and it also formally separated the iPad from the iPhone with new iPadOS software. * SO WHAT? * Apple is clearly trying to move with the times and its effort at pushing its other hardware products forward – and encouraging developers to think “outside” the iPhone – shows how keen it is to use growth in previously peripheral areas to make up for maturing handset growth. This will take some time to happen, but at least it’s going in the right direction IMHO.



A Chinese credit card giant eyes Europe and Kier has a nightmare…

In other news, Chinese credit card giant eyes up Europe (The Times, Katherine Griffiths) signals the imminent arrival of China’s biggest issuer of debit and credit cards, Unionpay, in Europe following a tie-up with British fintech start-up Tribe Payments. The venture will mean that banks can choose Unionpay as their credit card provider as an

alternative to VisaMastercard or Amex. Unionpay’s expansion comes at a time when it is facing fierce competition in its domestic market from Alipay and Wechat Pay. It’ll be interesting to see the rollout!

Then Kier shares plunge more than 40% after profit warning (The Guardian, Julia Kollewe) highlights investor reaction to the company’s profit warning – prompting comparisons with Carillion that collapsed last year. The share price is now at its lowest level since February 1999. Nightmare. The company is due to announce the conclusions of a strategic review on July 30th.



And finally, in other news…

I thought I’d leave you today with this: One of the giraffes in this brainteaser doesn’t have a twin – can you spot which one? (Insider, Talia Lakritz https://tinyurl.com/y6dtogtk). Frustrating (if you don’t use a pen to cross out giraffes!).

Some of today’s market, commodity & currency moves (as at 0858hrs 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 **
7,185 (+0.32%)24,820 (+0.02%)2,744 (-0.28%)7,32911,793 (+0.56%)5,241 (+0.65%)20,409 (-0.01%)2,862 (-0.96%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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