Tuesday 04/08/20

  1. In TECH NEWS, the Trump/Microsoft/TikTok thing moves on, Apple faces a $1.4bn lawsuit in China and Amazon drones on
  2. In FINANCIALS NEWS, HSBC accelerates job cuts as profits plunge, SocGen has a surprise loss, Hiscox ups its coronavirus claims estimate and Metro Bank buys RateSetter
  3. In CORONAVIRUS “WINNERS” & LOSERS, the UK property market strengthens and Eat Out To Help Out provides support but cruises take a massive blow, Hays Travel announces job losses and advertisers cut budgets
  4. AND FINALLY, I bring you a great anti-influencer tactic and the false Shibuya Scramble…



So the Trump/TikTok/Microsoft thing gathers pace, Apple faces a lawsuit in China and Amazon aims to launch its UK drones…

Trump seeks cut of Microsoft deal to acquire TikTok (Financial Times, Demetri Sevastopulo and Hannah Murphy) shows that Trump has done a u-turn on his opposition to Microsoft buying TikTok’s US operations but now wants a “very large percentage” of the purchase price for the US Treasury. There were no details given as to how that would actually work in practice but he did say that if nothing happens deal-wise by around the middle of September, he will shut down TikTok’s US operations. Microsoft/TikTok is not a done deal and The challenges Microsoft faces in buying TikTok (Financial Times) cites difficulties with valuation, how the US business could be separated out of the global operations due to having to split up back-end bits and pieces, the potential for rival bidders (how about Apple, Disney or Snap?) and whether a deal will solve all of TikTok’s political problems. Why TikTok owner ByteDance is no Huawei for Beijing (Financial Times, Yuan Yang) makes the point that China is unlikely to “fight” for ByteDance/TikTok in the same way as it has done for Huawei because it’s not strategically important (and it has a tense relationship with the government anyway) and TikTok ponders HQ in London after Trump’s hostility (The Guardian, Rob Davies) shows that talks are back on, after being suspended, about a London HQ that could be a decent non-US base from which to launch further expansion. Facebook at risk from TikTok’s unlikely saviour (Daily Telegraph, Laurence Dodds) suggests that Facebook will be quaking in its boots at the prospect of a Microsoft-funded TikTok but TikTok but Microsoft/TikTok: racing against the clock (Financial Times, Lex) suggests that a deal could pose wider questions about the continued dominance of Big Tech and that the companies within this category are increasingly becoming politicised. * SO WHAT? * God knows how Trump is going to extract money

from Microsoft for this deal. Will he be charging a 20% introduction fee 😂?? This sounds like hot air to me as it looks like he is just latching on to something now that had already been going on for a few weeks and turning it into a vote-winner (because it shows that he is living up to his pledge to Make America Great Again). TBH, if he uses the argument that the Treasury deserves some dosh because of this deal, I’d argue that Microsoft should send a cheque to India for doing them a favour because the ban TikTok is living under over there at the moment shows that a nationwide lock-out is actually possible, giving credence to Trump’s threat. Even though TikTok is not a strategic asset as far as China is concerned, I am sure that it will use its treatment as an excuse to retaliate in its own way – the recent removal of about half of the paid games from the Apple App Store China is an example of this.

In other tech news, Apple faces $1.4bn lawsuit in China in Siri patent fight (Wall Street Journal, Liza Lin) shows that Shanghai Zhizhen Network Technology said yesterday that it is suing Apple for $1.4bn in damages after China’s Supreme Court recently upheld the validity of its Chinese patent for a Siri-like chatbot after eight years going through the courts. * SO WHAT? * Apple intends to appeal the decision and it’s not a foregone conclusion for either side. However, if Shanghai Zhizhen applies for a preliminary injunction, the court could decide to prohibit Apple from selling products loaded with Siri in China for the duration of the court case. Presumably that would be an inconvenience rather than disastrous for Apple given that they could just do some kind of iOS update to sort that out (although I don’t know that for sure).

Amazon aiming high as UK drone fleet set for launch (Daily Telegraph, Hannah Boland) highlights something quite exciting – that Amazon is on the cusp of rolling out a fleet of drones in the UK that will deliver light packages! Figures pulled together by The Daily Telegraph using LinkedIn data suggest that Amazon has almost doubled member numbers of its Cambridge-based “Prime Air” team in the last year – and have most recently hired several “flight operators”. Sounds exciting, no?



HSBC accelerates cuts, SocGen surprises on the downside, Hixcox ups its Covid claims estimate and Metro Bank makes an acquisition…

In a tricky day of news for financials, HSBC accelerates 35,000 job cuts amid Covid-19 profit plunge (The Guardian, Kalyeena Makortoff) shows that the bank announced a much-worse-than-expected 80% drop in pre-tax profits in the second quarter, a hefty $3.8bn loan loss charge and an acceleration in cost-cutting plans globally. Société Générale falls to surprise loss with equities unit under pressure (Financial Times, Davide Keohane and Owen Walker) shows that the French bank fell to an unexpected loss in the second quarter as an overhaul of its struggling investment bank resulted in a chunky charge. * SO WHAT? * This is the second consecutive quarter of loss for SocGen and company’s share price is now 60% lower than it was at the start of this year. Ouch! This is particularly painful given that arch-rival BNP Paribas actually beat market expectations in its results last week due to a strong performance in fixed income trading and lower-than-expected loan loss provisions.

If banks are being hit by loan loss provisions due to the coronavirus, UK insurer Hiscox ups Covid claim estimate by 50% (Financial Times, Oliver Ralph) shows that insurers are increasing the amount they need to put aside for Covid-related claims. There is a risk that this could more than double as well if the ongoing High Court Test case it is engaged in against the Financial Conduct Authority goes against both it and fellow insurers! It is one of eight insurers involved in the case that is going to decide whether their policy wordings were enough to help them squirm out of having to pay companies who thought they were covered for coronavirus-related business disruption.

Then in Metro Bank snaps up RateSetter for £2.5m (Daily Telegraph, Simon Foy) we see that the troubled challenger bank bought internet lender RateSetter for £2.5m – with another £9.5m to come over three years following completion of the deal – in an effort to reivigorate the high street chain. Metro Bank is still struggling to recover from a massive accounting error last year which ended up seeing off many of its top management, including chairman Vernon Hill and chief exec Craig Donaldson. * SO WHAT? * This is a tiddler of a deal, but I guess it shows willing. The company is in the early stages of a four-year restructuring plan, so presumably there will be more to come. This deal will at least advance its ambitions to increase its unsecured lending business but it’s got a long way to go! 



The UK property market strengthens, restaurants get a boost but travel and advertising continues to hurt…

In the “winners” corner today, Stamp duty cut lifts agent Purplebricks to listings high (Daily Telegraph, Rachel Millard) shows that Aim-listed Purple Bricks saw a massive increase in the number of properties listed with the online estate agent following Rishi Sunak’s recent raising of the stamp duty threshold and ‘Eat Out’ scheme fills tables but operators worry about afters (Financial Times, Alice Hancock and Andy Bounds) shows that restaurants are going to be enjoying a boost from another Sunak initiative to pay £10 towards people eating out at participating venues. Whether or not this will help long term, though, is a moot point and it is too early to tell. FWIW, I think it is a good way of easing people into the idea of going out to restaurants once more after a long period of being confined to their homes.

Over in the “losers” corner, though, Hurtigruten suspends all expedition cruises after Arctic Covid-19 outbreak (Financial Times, Richard Milne) puts another nail into the coffin of the cruise ship industry as at least 41 staff and

passengers were infected with the coronavirus on two sailings of the Norwegian shipping company’s vessels at the end of July. What a nightmare for all involved given the cripplingly negative PR the industry received in the early stages of the outbreak. Staying on the subject of leisure, Hays Travel cuts and DW Sports collapse put 2,600 jobs at risk (The Guardian, Rob Davies and Mark Sweney) shows that tour operator Hays Travel is targeting about 900 cuts and DW Sports about 1,700 due to disastrous conditions. Hays Travel is the company that bought the high street shops from Thomas Cook when it collapsed last year. In addition to owning shops, DW Sports also owns Fitness First, but this business will be unaffected.

The gloom continues in Advertisers pulled more than £1.1bn spend during lockdown (The Guardian, Mark Sweney) which cites the latest figures from Nielsen as showing the impact of the coronavirus lockdown on advertising spend. UK advertising on traditional media including TV, newspapers, magazines, radio and cinema, billboards etc. almost halved during lockdown. * SO WHAT? * This is hardly surprising because it is a well-known fact that one of the first things to get cut during a downturn is advertising spend. I suspect that spend will increase from the currently very low base, but I don’t expect a sharp recovery to pre-Covid levels as I think that companies will be much more picky about what they spend their advertising budgets on.



…in other news…

I referred, in yesterday’s Watson’s Daily, to some rather unsavoury influencer behaviour yesterday – and that continues today in Restaurant plagued by influencers asking for free food shares ‘wonderful’ solution (The Mirror, Courtney Pochin). Well done to the restaurant taking this admirable stance! Then I thought I’d bring you Brand-new Tokyo Shibuya Scramble intersection opens…but over 50 miles away from Tokyo?! (SoraNews24, Casey Baseel). For those of you who know a bit about Tokyo, there is a famous road crossing that everyone sees in a district called Shibuya in news reports, films, dramas etc. The thing is, it’s so busy that it is very difficult to film there – so they built another one over 50 miles away! How random is that?!?

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Some of today’s market, commodity & currency moves (as at 0754hrs 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 **
6,033 (+2.29%)26,664 (+0.89%)3,295 (+0.72%)10,903 (+1.47%)12,647 (+2.71%)4,876 (+1.93%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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