Tuesday 06/10/20

  1. In MACROECONOMIC & OIL NEWS, Trump returns, Spain looks precarious, Indonesia announced reform and Exxon Mobil cuts jobs
  2. In CONSUMER/HIGH STREET NEWS, car sales fall to new lows, the 10pm curfew hits footfall and Chanel buys into Bond Street
  3. In TECH NEWS, SMIC shares fall again and Google treads lightly in India
  4. In INDIVIDUAL COMPANY NEWS, Crowdcube and Seedrs merge
  5. AND FINALLY, I bring you two unusual pets…



So Trump returns to the White House, Spain looks troubled, Indonesia announces reforms and ExxonMobil axes jobs…

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Trump leaves hospital Monday evening, as White House cases mount (Wall Street Journal, Andrew Restuccia and Alex Leary) shows that Trump has recovered enough to throw on a suit and get back to business although more of his aides have also tested positive. He tweeted things like “Don’t be afraid of Covid. Don’t let it dominate your life”, “Now I’m better. And maybe I’m immune. I don’t know” and “Will be back on the Campaign Trail soon!!!”. * SO WHAT? * Trump just has to do this to even stand a chance of getting re-elected. He is by no means back at 100%, but as I said before, this election is now there for Biden to lose.

Spain’s ailing economy may be eurozone’s next flashpoint (Daily Telegraph, Tom Rees) shows that the German government is getting increasingly concerned that Spain has now overtaken Italy or Greece as Europe’s most at-risk economy. Since lockdown, there has been a load of political turmoil, rapidly rising unemployment and the nascent business recovery has now gone into reverse. Madrid is facing new restrictions and it looks like Spain will be Europe’s worst performing economy in the second half as well as the first. * SO WHAT? * Spain’s economy has taken a real battering given the ultra-stringent lockdown,

evaporation of tourism and over-reliance (compared to other countries) on the use of temporary employment contracts which meant that jobs had less protection. The only good news at the moment is that infection rates seem to be flattening out but the country’s precarious coalition government continues to be a key risk for any kind of recovery because of the lack of unity.

Indonesia’s parliament passes sweeping reform bill (Financial Times, Stefania Palma) highlights a newly-passed bill that will change a number of tax and labour market laws in south-east Asia’s biggest economy in an attempt to attract more foreign investment and mitigate the impact of the coronavirus. The so-called “Omnibus Law” was rushed through parliament yesterday – just before today’s union-planned three-day national strike. * SO WHAT? * The new law is designed to try to make investment easier and more attractive especially given that supply chains are being reshuffled at the moment due to tricky US-China trade relations – and Indonesia wants a piece of that action. Labour laws have been particularly restrictive from an outsider’s point of view as severance payments have been among the most generous in the world. Clearly the unions don’t like this and are seeking a judicial review.

Then in ExxonMobil to axe 1,600 jobs in Europe (Financial Times, Myles McCormick) we see that America’s biggest oil company by market cap has decided to cut jobs as part of its efforts to mitigate the impact of the pandemic and lower oil prices. The cuts amount to over 10% of its European workforce. * SO WHAT? * The company’s share price has fallen by over 50% this year but it is not alone in its travails given that rivals BP and Royal Dutch Shell are among the companies announcing big job losses along with related oilfield services companies like Schlumberger, which is in the process of cutting its workforce by 20% (about 21,000 roles). The tough times continue…



Cars sales are week, the 10pm curfew takes effect and Chanel buys a piece of Bond Street…

As many of you know, I like to keep track of what’s going on with the consumer as this can reflect wider trends. UK new car sales slide to lowest September level this century (The Guardian, Joanna Partridge) cites the latest figures from the Society of Motor Manufacturers and Traders which show that demand for new cars – across both consumers and business customers – weakened in a month that is usually strong due to the new registration plate coming in. It was the worst September since new number plates started to be issued in March and September back in 1999 (previously, it was only once a year). On the plus side, sales of battery electric vehicles and plug-in hybrids did relatively well, accounting for over 10% of new car registrations. * SO WHAT? * Car sales in the UK have fallen by 33.2% so far this year versus the same period last year. Given that cars are big ticket items and the economic backdrop continues to look uncertain, this is not surprising.

Meanwhile, on the UK high street, Footfall slumps as 10pm curfew threatens recovery (Daily Telegraph, Tom Rees) cites the latest data from Springboard which says that the recently-imposed 10pm curfew has resulted in slowing footfall for the second consecutive week. Last week’s footfall was 7.1% lower last week than the previous week, with the restrictions hitting town and city centres particularly hard.

On a brighter note, Chanel snaps up Bond Street jewel (The Times, Louisa Clarence-Smith) shows that Chanel has just bought its flagship shop on Bond Street for about £310m. Some will interpret this move as consolidating the idea of Bond Street being a safe haven for investors. * SO WHAT? * Maybe this is opportune (although it paid significantly above the asking price of “only” £240m due to having to fight off competition to land it), but I would argue that this is also a one-off as the company managed to borrow £600m from the Bank of England’s emergency coronavirus lending scheme a few months ago – so clearly it suddenly had the financial means! I think it’s too early to say whether this really is a signal that Bond Street is a safe haven given that Chanel may well have just taken advantage of a very chunky handout. Fun fact: Chanel’s global HQ is in the UK!



SMIC weakens further and Google treads carefully in India…

SMIC shares fall as Chinese chipmaker warns of hit from US curbs (Financial Times, Kathrin Hille, Patrick McGee and Kiran Stacey) highlights further weakness in SMIC’s share price (a continuation of its recent trend) as the group confirmed that the US Department of Commerce now forces American companies to apply for an export licence before selling to it. SMIC said that “it may have potential material adverse effects on the company’s future production and operations” and it is likely that the expansion of its production plants may have to stop, potentially prompting customers to shop elsewhere. * SO WHAT? * Some say that the new restrictions will have a devastating effect on SMIC, but America-based semiconductor equipment suppliers like Applied Materials, Lam Research and KLA-Tencor will feel the worst of the restrictions given their business with SMIC. As for SMIC

itself, this move will impact their development of advanced process technologies. On the plus side, it is not a complete ban at the moment but on the minus, it is still unclear as to what Trump is trying to achieve here given that he will also be damaging American companies.

Then in Google defers enforcement of app store fee in India after backlash (Financial Times, Stephanie Findlay) we see that Google has delayed the introduction of the new Play Store billing policy in India (a 30% fee on some in-app payments) after massive resistance from developers and start-ups. * SO WHAT? * This is particularly interesting given the growing resistance around the world against Apple and Google’s app store policies. It’s a particularly big deal in India as most people use Android phones, over 265m people use YouTube (which it owns) and GooglePay is one of the largest digital payments providers. Given that the company recently invested $4.5bn in India’s Jio Platforms and committed to invest $10bn over the next five to seven years you can see why Google is keen not to rock the boat – especially given rising resistance in India toward Big Tech. 



Crowdcube and Seedrs merge…

Two’s company as Crowdcube and rival Seedrs agree to merger (The Times, James Hurley) shows that Britain’s leading equity crowdfunding platforms are going to get

together as Crowdcube has agreed to acquire Seedrs. Both are loss-making, but the merger will help them to cut costs and provide new services to investors and companies. The merger will be subject to regulatory approval. Given that I would have thought that scale is key in this business, it sounds like the deal is a good one on a strategic basis.



…in other news…

Today, I thought I’d bring you some pet ideas for those of you for whom cats, dogs and hamsters are just a bit too common for your liking in Man’s pet geese come with him to the pub wearing special nappies (Metro, Tom Williams). Interesting…

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Some of today’s market, commodity & currency moves (as at hrs 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 **
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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