Tuesday 09/04/19

1. In MACRO AND COMMODITIES NEWS, concerns increase about a global recession, the US aims tariffs at the EU, oil prices rise on Libyan unrest and pork prices also look set to increase
2. In UK CONSUMER/RETAIL NEWS, shoppers shy away from big purchases, Cafe Rouge’s owner gets downbeat and Debenhams rejects Ashley’s bid
3. In INDIVIDUAL COMPANY NEWS, Merck buys Versum for $6.4bn, Standard Chartered gets a massive $1bn fine and JLR begins a shutdown
4. In OTHER NEWS, I bring you a few of my worst dad jokes. For more details, read on…

So global recession fears increase, the US trains its sights on the EU, oil prices rise and pork prices look like they’re about to rise…

Global recession fears mount as major economies lose momentum (Daily Telegraph, Tim Wallace) sets a rather downbeat tone for today as a number of leading indicators compiled by the OECD show the US, Japan, the eurozone, UK, Canada and Russia all losing momentum. The composite leading indicator now points to the worst economic outlook since 2009 when we were in the midst of the global financial crisis. On the plus side, China, India and France showed signs of stabilising and Brazil even looks like it’s managing to pull itself out of its recent recession. Lovely.

As Trump appears to be nearing some kind of settlement with China, US moves to impose tariffs on $11bn of EU goods (Wall Street Journal, Joshua Zumbrun) shows that he’s now training his sights on Europe, supposedly in response to the bloc’s subsidies for aircraft maker Airbus. The US has been fighting the World Trade Organisation over Airbus subsidies since 2004 and it seems that the Americans have decided to force the issue back into the limelight. * SO WHAT? * This has been going on for ages, but I would have thought that the whole Boeing scenario going on at the moment will be on the mind of the

Americans given that Airbus will be the main beneficiaries of Boeing’s woes. The Americans are now putting together a list of items that will be subject to duties in due course and it won’t be limited to civil aviation products – things like cheese, bicycles, kitchen knives and artists’ brushes will also be on there. Trade Tariffs – ding, ding – round TWO! 

In commodities news, Unrest in Libya helps send oil price past $70 per barrel (Daily Telegraph, Jillian Ambrose) highlights the rising oil price as renewed fighting in Libya raised the prospect of civil war. * SO WHAT? * The prospect of Libya’s oil supply being disrupted comes at a time when Venezuela and Iran are also limited in what they are allowed to supply. If you factor that in with OPEC and Russia in agreement over cutting production to support the oil price, you have a recipe for higher prices.

Then there’s bad news for bacon sandwich-lovers in Pork price to rise as swine fever sweeps China (The Times, Deirdre Hipwell) as African swine fever is ravaging livestock in China, which produces half of the world’s pork. * SO WHAT? * The spread of the disease in China could increase global pig prices for quite some time to come as 19% of China’s breeding herd has now been slaughtered because of the outbreak, according to analysts at Peel Hunt. Pig prices in China are now up by 37% in March and US hog futures have gone up by almost 50%. FTSE 250 company Cranswick could stand to benefit from this crisis, however, as it produces sausages and bacon as well as pies and sirloin beef. Its share price has had a tough time after a recent profit warning, but rising prices could come to its rescue.

UK shoppers stay away from big purchases, Cafe Rouge’s owner faces tricky times and Debenhams rejects Ashley’s offer…

The gloom just continues in Consumers spend more on eating out but less on big-ticket buys (Daily Telegraph, Tim Wallace) as the latest Barclaycard data shows current consumer spending patterns. Pub spending in March was up by 15% versus March 2018 and restaurant spending increased by 12% over the same time period. British Retail Consortium (BRC) figures showed, however, that spending on big ticket items, such as electronics and furniture, were down 0.5% on the year. The BRC’s chief exec, Helen Dickinson, observed that “While jewellery, beauty products and clothing purchases were up to indulge on Mother’s Day, shoppers were generally cautious, particularly on larger items. Brexit continues to feed the uncertainty among consumers” and Barclaycard’s Esme Harwood echoed this when she said that “March was characterised by ongoing uncertainty around Brexit, with consumers concerned about an impact on food prices and supplies. In light of this, consumer confidence in the UK economy is the lowest it’s been since we began recording this data”.

Cafe Rouge owner reaches for red ink (The Times, Dominic Walsh) says that the owner of restaurant chains

such as Cafe Rouge and Bella Italia, Casual Dining Group, will report a £242m loss today following a financial restructuring. The group was sold, in August, to private equity powerhouse KKR for a “nominal consideration” as part of this restructuring process. It is one of the UK’s biggest midmarket restaurant operators and has about 280 restaurants. * SO WHAT? * Although chief exec Steve Richards said that “despite the market challenges, Casual Dining Group has outperformed the market over the past 11 months” you do wonder – especially given the figures I just talked about from Barclaycard. Difficulties continue for many UK restaurants (although Fulham Shore’s restaurants – like Franco Manca – continue to do well in the same sort of space).

In a saga that’s getting almost as exasperating as Brexit negotiations, Debenhams on the brink as it rejects £150m Mike Ashley rescue deal (The Guardian, Sarah Butler) shows that, surprise-surprise, Debenhams management have voted to keep their jobs to reject Sports Direct’s Mike Ashley’s offer in a pre-pack administration deal set to be announced today that will render shareholders’ stakes worthless (including the £150m Ashley spent in building up his 29.9% stake). * SO WHAT? * God knows what the lenders, who are now in control of the company, will do now. As I keep saying, I think Debenhams is a company in terminal decline. I think that Ashley might have been able to do something with it by merging it with House of Fraser in some form, but that is not to be right now. I would not be surprised if the whole company collapsed and Ashley buys it for a song in a year.

Merck buys Versum, Standard Chartered gets a big fine and JLR shuts down…

Merck wins takeover battle for Versum with $6.4bn offer (Financial Times, Eric Platt and James Fontanella-Khan) heralds a win for Germany’s Merck as it managed to fight off rival bidders to buy the maker of chemicals that go into circuit boards and wafers. Versum’s client list includes the likes of Intel, Samsung and SK Hynix. * SO WHAT? * This will boost Merck’s performance materials unit in the face of increasing competition from China. 

I thought I’d mention Standard Chartered in $1bn settlement (The Times, James Dean) because $1bn is a hefty fine that has been imposed by American and British

regulators to settle an investigation into alleged breaches of sanctions against Iran and financial crime controls. * SO WHAT? * Some thought that the fine could be as much as $1.5bn but in a filing to the Hong Kong stock exchange in February this year, Standard Chartered said it had put aside $900m to cover fines, so I would have thought this would be neutral for the stock. In fact, it may be a positive because the size of the fine is now known.

Jaguar Land Rover begins Brexit shutdown as sales fall (The Guardian, Julia Kollewe) heralds the start of the week-long factory shutdown as part of the company’s plans for Brexit as the company also posted weaker sales in Europe and China. Facilities at Castle Bromwich, Solihull, Wolverhampton and Halewood will all be closed from Monday to Friday this week. Weakness has been blamed on slower demand in China, plummeting sales of diesel-powered cars and the costs involved in complying with tighter testing procedures in WLTP.

And finally, in other news…

I didn’t see anything in the tabloids today that particularly grabbed my interest so I thought I’d leave you with some dad jokes because a) I’m a dad and b) I used to do stand-up comedy (a long time ago):

So I asked my mate what he liked about living in Switzerland. “Well, the flag’s a big plus…”

Someone just stole my thesaurus. I’m lost for words.

What do you call someone with no body and no nose? Nobody knows

I thank you.