Tuesday 07/05/19

  1. In MACRO AND OIL NEWS, Trump stirs things up with China and oil prices rise
  2. In FOOD-RELATED NEWS, Tyson Foods warns about African swine fever and Kraft-Heinz uncooks its books
  3. In TRANSPORT APP NEWS, Lyft faces a pasting while Trainline aims for a listing
  4. In INDIVIDUAL COMPANY NEWS, Apple faces investigation, Ikea opens in central Paris and the G4S buyer abandons
  5. In OTHER NEWS, I bring you a fake speed camera and a colour test. For more details, read on…



So Trump pokes the hornets’ nest again and oil prices rise…

Markets slide after Trump threatens to dramatically increase China tariffs (The Guardian, Martin Farrer) highlights weaker financial markets around the world yesterday after Trump surprised everyone by saying that he would raise tariffs again on Chinese goods this week. Everything had been moving towards an agreement being reached this Friday but his latest comments have thrown a massive spanner in the works. He said that he would raise the existing 10% tariff on $200bn worth of Chinese goods to 25% by the end of the week unless China changed its negotiation tactics and added insult to injury by saying that he would take aim at an additional $325bn worth of Chinese goods with a 25% tariff (meaning that pretty much everything imported from China to the States would be affected). Interestingly, Chinese state media has remained silent on Trump’s latest outburst thus far. China’s Xi faces a ‘big gamble’ after Trump rebuke (Financial Times, Tom Mitchell and Yizhen Jia) said that sources on the Chinese side indicated that Xi’s lead trade negotiator Lui He might delay his Washington trip while a number of other representatives from major state-owned enterprises

have already been rearranging their travel plans. Chinese equities/US trade war: Beijing blushes (Financial Times, Lex) points out that both sides have much to lose as a failure to agree would damage China’s exports and employment, leading to a fall in GDP growth while an increase in tariffs on Chinese imports would raise production costs. * SO WHAT? * As far as negotiation tactics go, this is pretty crude – but par for the course for Trump. Maybe he thought that a deal wasn’t going to get done anyway so decided to make a big song and dance about it to his supporters that would make him look like a hero either way – if it doesn’t go ahead, he’ll say that he is a tough negotiator and if it does, he’ll look like a victor and all this posturing on tariffs will have been vindicated. In the meantime, American and Chinese companies get caught in the crossfire while all they want is some kind of certainty.

Oil rises as US sends carrier to Middle East (Wall Street Journal, Dan Molinski) heralds higher oil prices as the US announced that it was sending an aircraft carrier and strike force to the Middle East as a warning to Iran. * SO WHAT? * Prices rose after an initial drop on the back of Trump’s US/China trade war Twitterings, so they won’t look quite as dramatic as they would have done had he not dropped the T-bomb.



Tyson Foods cautions on African swine fever and Kraft-Heinz try to atone for Krafty accounting…

Tyson Foods chief warns African swine fever could reach US (Financial Times, Gregory Mayer) is a pretty serious warning and comes after almost 20% of pigs were culled because of the outbreak in China (that’s over 100 million animals – just to give you an idea of scale). When Noel White, Tyson’s chief exec, says “In my 39 years in the business, I’ve never seen an event that has the potential to change global protein production and consumption patterns as African swine fever does”, you know it’s baaaaad. Tyson is the biggest meat packer in the US and is one of a number of meat exporters who have seen their share prices rise as Chinese pigs have been slaughtered to contain the outbreak. * SO WHAT? * Although Tyson – and others – are benefiting now, it is certainly possible that the virus could spread given that it can survive up to a year in blood, faeces and meat. It is fatal to pigs but harmless for

humans – but if it DID spread to the US, it would be a nightmare as the virus has no treatment or vaccine and would shut down all pig exports. No doubt Tyson will use the current situation to ease sales into China as US pork currently attracts a 62% tariff in response to Trump’s actions and US chicken has been banned since 2015 following an avian ‘flu outbreak. Tricky times – and I would have thought this kind of thing should also be a boon to meat-alternatives companies such as Impossible Foods and Beyond Meat given that their products are plant-based.

Staff ‘misconduct’ makes Kraft Heinz restate years of earnings (Daily Telegraph, Alan Tovey) is a story that’s doing the rounds in today’s press as the food giant has been forced to restate its figures for the last three years after a review into buying and accounting procedures revealed “misconduct” by some employees. * SO WHAT? * This is just the latest problem that the company has faced as it announced a $10bn loss following a $15.4bn writedown as recently as February. Fortunately for them, super-investor Warren Buffett is a major shareholder in the business and was a major force in its creation. He reiterated his confidence in the company, but clearly this isn’t great news.



Lfyt’s goin’ daaairn and Trainline choo-choses to float…

Heavy losses set to deliver fresh blow to Lyft after botched float (Daily Telegraph, Matthew Field) sets the scene for Lyft’s maiden set of results today, six weeks after it floated during which time its share price has cratered by 20%. Analysts are expecting to see a big “lyft” in revenues amid humungous losses in the hundreds of millions of dollars. * SO WHAT? * Lyft has become one of America’s most shorted stocks as investors bet that its share price will fall further. Sentiment surrounding it will no doubt be foremost in investors’ minds when bigger rival Uber comes to market this week in what is expected to be the biggest US listing this year at a valuation of around $91bn. Both ride hailers face continued threats of increasing regulation in the US and Europe as well as ongoing driver unrest.

Meanwhile, closer to home, £1bn flotation is just the ticket for Trainline (The Times, Simon Duke) shows that the route-planning and ticket-buying app is close to finalising plans for a stock market float that could value it at around £1bn. Some say that it could list as soon as next month in what would be the biggest listing of a UK-based company this year. Trainline is currently owned by American investment giant KKR, who picked it up in 2014, and a successful flotation would make it a fat profit. The-website-formerly-known-as thetrainline.com is now called Trainline and processes over £3bn of ticket sales a year in 45 countries and employs about 600 people in London, Edinburgh and Paris. It is the UK’s most popular service for buying tickets and has ambitions to expand in Japan and North America. * SO WHAT? * This all sounds pretty good but the company has refused to comment on flotation rumours and its official stance is that there is “no fixed sale plan at this point”. If it DID float, however, it would garner a lot of attention given that IPOs have been rather thin on the ground due to Brexit uncertainty.



Apple faces investigation, Ikea opens in central Paris and G4S’s Canadian bidder pulls out…

Apple braces for EU investigation after Spotify complaint (The Guardian, Daniel Boffey) heralds some potential legal headwinds for Apple as the European Comissioner for Competition, Margrethe Vestager, is about to launch an inquiry over claims by Spotify that it has abused the dominant position of its App Store to push people onto its Apple Music service. A lawyer at Hausfield, which brought successful antitrust complaints against Google said, in Brussels may widen competition proble to Apple news and video (Daily Telegraph, Matthew Field), that “Such a case can and arguably should be extended to other media such as video streaming and news. It is very hard for providers to compete with Apple, who both owns the platform and offers rival services”. * SO WHAT? * If an investigation goes ahead, Apple could face a fine of up to

10% of its global turnover if it doesn’t change its behaviour. And we all know that Vestager likes a fight – just ask Google. Things could get interesting…

In other news, Ikea opens first store in central Paris as part of €400m push (Financial Times, Harriet Agnew) shows that Ikea continues to follow through on plans to bring the out-of-town store downtown in its ongoing efforts to change its business model (other city-centre outlets are scheduled in Lyon and Nice) while Canadian rival bids adieu to G4S offer (The Times, Dominic Walsh) heralds the end (at least for now) of Canadian security firm Garda World Security’s interest in G4S, which is expected to send the latter’s share price into freefall today. Garda World was considering making a cash offer for a company and made an approach about a month ago. Stepping back now means that it won’t be able to have another crack at G4S for at least six months. * SO WHAT? * This is going to be really bad for the embattled G4S as investors will probably be rattled about what Garda found in its due dilligence checks. Who knows, maybe Garda will be able to pick it up on the cheap in six months’ time if it is still interested…



And finally, in other news…

I thought I’d leave you with two things today: Fake speed camera is actually a bird box in disguise (Metro, Richard Hartley-Parkinson https://tinyurl.com/y4qs3wpr) and a very interesting test for your eyes in How good is your colour vision? Take the quiz (Espresson Communication, https://tinyurl.com/yxsgz6xd).

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 **
7,381 (+0.40%)26,438 (-0.25%)2,932 (-0.45%)8,125 (+0.02%)12,287 (-1.01%)5,484 (-1.18%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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