Tuesday 07/01/20

1. In MACRO & COMMODITIES NEWS, we look at more Iran/US fallout, Venezuela’s Guaidó getting ousted, buoyant services sectors in France and the UK and a “decade of renewal” budget
2. In RETAIL NEWS, boozers help Aldi, Mountain Warehouse looks for more shops and a retail park transforms itself into warehouses
3. In CAR NEWS, German car orders spike and Tesla’s depend on subsidies
4. In OTHER NEWS, I bring you Nike’s super-shoes!

So the US/Iran conflict fallout continues, Venezuela’s Guaidó gets ousted, services sectors in France and the UK give reason for cheer and Javid talks up a budget…

Qassem Soleimani’s successor vows to expel US from Middle East (Financial Times, Najmeh Bozorgmehr, David Sheppard, Katrina Manson and James Politi) highlights the latest reaction to Soleimani’s assassination as his successor, Brigadier General Esmail Ghaani, talked of revenge on state TV. US adds troops to mideast as Iranians call for revenge at General’s funeral (Wall Street Journal, Aresu Eqbali, Sune Engel Rasmussen and Nancy A. Youssef) is the response on the US side as oil prices rose further and Gold nears 7-year high as Iran fears hit markets (The Times, James Dean). * SO WHAT? * This is not surprising really considering that gold is one of those assets that investors buy in times of uncertainty (it’s often referred to as a “safe haven” asset for this reason). Weirdly, Bitcoin has also increasingly been acting like a safe haven asset and it strengthens in times of strife but I’m not really sure why given that it doesn’t have the intrinsic value like gold does! There will be more sabre rattling on the Iran and US sides, especially until the conclusion of Soleimani’s funeral.

Juan Guaidó ousted in chaotic Venezuelan parliamentary vote (Financial Times, Gideon Long and Katrina Manson) heralds a major development in Venezuela as the opposition leader and self-declared interim president has been ousted as the head of the National Assembly. He has been able to claim to be the legitimate leader (rather than

the incumbent president Nicolás Maduro who has been in office since 2013) by virtue of the fact that he was head of the National Assembly, but amid chaotic scenes at the parliamentary vote where he and his supporters were denied entry, Maduro’s mate Luis Eduardo Parra became the new head of the National Assembly. * SO WHAT? * Washington said it would still recognise Guaidó as the legitimate leader of the Assembly and Maduro’s actions have been roundly criticised. Venezuela continues to be in crisis.

Meanwhile, Relief for Macron as French service industry grows despite strikes (Daily Telegraph, Lizzy Burden) cites the latest IHS Markit Purchasing Managers’ Index (PMI) which shows that the services sector of the economy expanded while manufacturing growth fell slightly – not too bad considering all the strikes going on at the moment over his pension reforms. * SO  WHAT? * This will be a relief for the embattled President and is arguably a solid performance given that manufacturing across Europe has been hit hard by tariffs and a global slowdown in trade over the last year.

In the UK, Services sector rebounds as Brexit uncertainty recedes (The Guardian, Richard Partington) cites the same survey which also shows that the UK services sector actually rebounded in December as optimism increased in the wake of the new majority government. Separately, a poll of members of the Institute of Directors the day after the election showed that optimism shot up to its highest level for over three years. So it is against this backdrop that we see Budget will launch ‘decade of renewal’, says Javid (The Guardian, Larry Elliott) where chancellor Sajid Javid has announced that he will be unveiling a new budget on 11th March. Everyone will be trying to second-guess at the detail, but I think it’s better to wait until we hear from the horse’s mouth.

Alcohol sales boost Aldi, Mountain Warehouse looks to expand and a retail park changes into a warehouse park in a sign of the times…

Festive drinkers help Aldi break £1bn sales bar (Daily Telegraph, Laura Onita) highlights a historic moment for Aldi as it breached the £1bn festive sales mark for the first time ever. Sales for the four weeks going into Christmas Eve were up by 7.9% versus 10% in the same period last year and 15% the year before, so momentum appears to be slowing. * SO WHAT? * The company doesn’t release “like-for-like” figures (this is where new stores are excluded so you can compare like with like, which means it’s easier to see trends) so it’s tricky to say whether this was a good or a disappointing Christmas given that it added 47 shops over the year. The company said in September that it would be upping expansion in London and the South East, with plans to open up to 250 stores in the region over the next five years.

Mountain Warehouse climbs to new highs (The Times, Miles Costello) highlights a rare high street winner as Mountain Warehouse announced record trading over Christmas, with socks, winter jackets and hats being its most popular products. The company started off with a

single outlet in 1997 but now has 400 stores in nine countries, including Germany, Poland, the US, Canada and New Zealand! The company plans on opening another five stores this year and Mark Neale, the founder chief exec was obviously very bullish about its prospects. Fun fact: the company had its busiest trading day in history on Black Friday. * SO WHAT? * It’s as the chief exec said – if you have the right product in the right places at the right price, people will spend. I think they sell quality gear very cheaply – and, anecdotally, I see how successful they are by the number of kids who wear their stuff at school! 

I thought I’d mention Retail park converted to online warehouses in landmark deal (Daily Telegraph, Rachel Millard) because, given the general malaise in the retail sector, it could be a sign of things to come. Prologis, the world’s biggest warehouse company, just bought the 128,000 sq ft Ravenside Park in Edmonton, North London for £51.4m from investment manager M&G. This is thought to be the first retail park brought specifically to be turned into warehouse space in the UK. * SO WHAT? * I think that this is a big deal and is potentially a sign of the future as warehouse property values climb (because of increasing demand from online retail operators) and retail property values fall (because of lower customer footfall). When you couple that with property funds who are trying desperately to reduce their retail property exposure, I suspect that other warehouse operators will be able to pick up some decent bargains (although if they start to fight over properties, this would be good news for the sellers who want to achieve higher prices).

German sales rise and Tesla’s depend on subsidies in China…

German car orders surge to beat tighter EU emissions rules (Financial Times, Joe Miller) highlights a sudden surprise influx of new car sales in the last weeks of 2019 which boosted the number of annual orders in Germany to their highest level in ten years! Basically, manufacturers offered loads of incentives to cut their stock of gas guzzlers before new EU emissions regulations came into effect on January 1st. Sales of SUVs rose by 20% in 2019, but overall forecasts for German car sales remain downbeat for 2020.

Tesla/regional suppliers: part mart (Financial Times, Lex) is an interesting piece that emphasises how important subsidies are when you are selling electric cars in China. Basically, Tesla is on the approved list even though it uses foreign-made batteries and this will help enormously in its quest for sales of the Model 3, which went on sale this week. The company also cut the sale price to close the gap with local rivals so it is about 10% cheaper than it is elsewhere. * SO WHAT? * This is great for Tesla, but also its suppliers who include solar glass supplier Changzhou Almaden (whose share price has shot up by 86% over the past month) and parts maker Ningbo Tuopu. Let’s hope that Tesla remains on the approved list – because sales fall through the floor when government subsidies dry up…

And finally, in other news…

Some of you may well have New Year’s resolutions that involve doing a bit of running. Well if you want ideas on what shoes to wear, have a look at Asics Runs Into Trouble as Athletes Opt for Nike’s Super-Shoe (Bloomberg.com, Shoko Oda https://tinyurl.com/yeurnt4e). Apparently, over 84% of runners did the race in Nike’s Vaporfly Next%! That is incredible!