Tuesday 09/04/24

  1. In MACRO & COMMODITIES NEWS, Jamie Dimon warns of global economic risks, German factory production expands, gold hits a record high, Shell threatens to head across The Pond and Vitol puts in another strong performance
  2. In RETAIL & BEAUTY NEWS, UK retail sales growth picks up, we look at John Lewis’s new boss, Ted Baker closes stores and Puig eyes an IPO
  3. In TECH NEWS, TSMC plans to make chips in the US and Microsoft invests in AI in London
  4. In MISCELLANEOUS NEWS, European defence firms warn about over-reliance on Chinese cotton, Tesla settles an Autopilot lawsuit, Lotus promises to make more cars and mortgage costs calm down
  5. AND FINALLY, I bring you the beginning of McDonald’s…

1

MACRO & COMMODITIES NEWS

So Dimon warns of global risks, Germany sees an uplift in factory production, gold booms, Shell threatens and Vitol is sitting pretty…

Don’t miss our next news roundup for April, it’ll be on Monday 29th April at 5pm with Jake Schogger of the Commercial Law Academy. HERE’S THE LINK TO REGISTER! See you there!

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Global economic risks ‘could eclipse anything since second world war’, says JP Morgan boss (The Guardian, Kalyeena Makortoff) cites JP Morgan boss Jamie Dimon’s annual letter to investors which says that while the world had been “generally on a path to becoming stronger and safer”, that all changed in February 2022 when Russia invaded Ukraine. Similar warnings were made by the IMF back in December when they said that the global economy was on the verge of a second cold war. Meanwhile, Dimon warned that the increase in government spending on the military, climate change projects and healthcare could result in “stickier inflation and higher rates than the markets expect”.

On a lighter note, German factory production expands at fastest rate for a year (Financial Times, Martin Arnold) cites the latest official figures which show that monthly industrial output rose by 2.1%, the second month of growth for German industry, coming in significantly higher than a recent Reuters post of economists. That being said, industrial production is still down 4.9% from a year ago and 8% below the peak it hit before Covid. * SO WHAT? * I think it’d be fair to say that German manufacturing isn’t out of the woods just yet after taking an almighty hit when Russia invaded Ukraine and energy prices went through the roof. The German economy was the weakest of any major developed country last

year while five German economic research institutes AND THE BUNDESBANK all cut their GDP growth forecasts. Mind you, a recent fall in inflation will heighten hopes that the ECB will cut interest rates sooner rather than later – so maybe THAT will prompt better economic performance!

In commodities news, Gold hits record high of $2,353 on conflicts and rate cut hopes (The Times, Tom Saunders) highlights the cumulative effect of ongoing geopolitical tensions (investors look to gold as a “safe haven”), central bank buying (more buyers = higher prices) and the prospect of interest rate cuts (gold becomes more attractive than government bonds when interest rates come down). The gold price has been on an upward trajectory since mid-February when it cost around $2,000 an ounce.

Meanwhile, in oil news, Shell considers quitting London for New York in threat to City (Daily Telegraph, Matt Oliver, James Warrington and Michael Bow) shows that the oil major is threatening to quit the London Stock Exchange as it said that it feels under-appreciated by investors. * SO WHAT? * I think that the CEO is full of 💩 on this threat and that he’s using this as a way to stop the government meddling any further with the company’s affairs (think North Sea and windfall taxes etc.). If his bluff WAS called, however, and he DID go for a New York listing, this would be a major pain for the London Stock Exchange as Shell is Britain’s most valuable company with a market cap of £180bn. Its departure would leave a gaping hole in the market and it might actually precipitate an exodus. In Europe, oil and gas companies take a lot of flak from the environmental lobby but they won’t get this over in New York.

Then in Vitol posts $13bn profits in another year of strong results (The Times, James Hurley) we see that profits at Vitol, the world’s biggest independent commodity trader, came in at $13bn, $2bn less than the record $15bn of profit it made in 2022. Still, this is quite a lot higher than the $4bn it got in 2021! * SO WHAT? * Lower commodity prices were thought to be behind the drop in turnover. Interestingly, the CEO said that he thought that peak oil demand would not be reached until the early 2030s, which is later than it had originally thought, because of the slowing uptake of EVs and higher oil demand from some developing markets.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

2

RETAIL & BEAUTY NEWS

Retail sales gather pace, John Lewis gets a new leader, Ted Baker shuts stores and Puig aims for an IPO…

UK retail sales growth picks up as price pressures ease (Financial Times, Aiden Reiter) cites the latest data from the BRC which shows that retail sales gathered pace in March after hitting a two-year low in February. UK shop price inflation dropped to its lowest point in two years last month according to separate BRC data and in February, official consumer price inflation dropped by more than forecast to its lowest rate since 2021. Separate data from Barclays reflected cautious spending growth. * SO WHAT? * Before we all get too excited about this, I would highlight that the main driver of this increase in retail sales was food purchases and that both reports showed slow growth in discretionary spend. Some say that the wet weather was a factor in this and that may well be the case. Going forward, there will be a lot of hope riding on an improving economic outlook, improving retail data and better weather – particularly as many retailers face higher overheads thanks to the higher living wage and business rates.

Meanwhile, John Lewis turns to retail experience as White exits (Daily Telegraph, Hannah Boland and Daniel Woolfson) puts a bit more of flesh on the bone of what I said yesterday about the appointment of new chairman Jason Tarry. He was at Tesco for over 30 years and was instrumental in the turnaround of the company following an accounting scandal in 2014, helping the company regain its position as Britain’s #1 supermarket. He worked very closely with “Drastic” Dave Lewis, former CEO of Tescoso I almost got it right when I suggested that Lewis should get the top job at John Lewis 😜! * SO WHAT? * Thank the Lord. FINALLY, someone decent who has knowledge of the retail sector! Maybe now they should get rid of the CEO that Dame Sharon White appointed Nish Kankiwala (who I think is another no-hoper with virtually no retail experience). Tarry has said, however that he would be working closely with him but let’s see how that goes. Don’t get me wrong, White is an impressive woman

but given that, prior to her appointment she had been an economist who worked as a civil servant for most of her career before being made head of Ofcom, it remains an absolute mystery as to how she even got an interview to run one of Britain’s biggest retailers at a time of crisis (and that was BEFORE Covid!). She subsequently missed opportunities and, from where I sit, did virtually nothing to address the central problem – THE RETAIL BUSINESS. Anyway, she’ll be counting down the days now and no doubt she’ll get a cushy public sector job lined up.

Then in Ted Baker to close 15 UK stores with the loss of 245 jobs (The Guardian, Jane Croft) we see that Ted Baker is going to close 15 stores in the UK, with the loss of 245 jobs after it fell into administration (it has 46 stores in the UK and Europe currently). Teneo was appointed as administrator last month. * SO WHAT? * This will be another blow to the UK high street but, TBH, it was inevitable given its sluggish performance over the last few years. It’ll be interesting to see whether Authentic Brands, the owner of Ted Baker’s IP, will come up with a proper turnaround plan or whether it’ll just try to trim it down and sell it off.

Then Beauty group Puig looks to raise €2.5bn in IPO (Financial Times, Barney Jopson and Ivan Levingston) shows that the family-owned Barcelona-based beauty group is preparing for what is likely to be the biggest flotation in the sector since Ermenegildo Zegna had its IPO in 2021. Puig (pronounced “poodge”) is expected to launch in the next few weeks! Bankers reckon that the whole business – which owns (or has big stakes in) brands including Paco Rabanne, Charlotte Tilbury and Jean Paul Gaultier, among others – could be worth anything between €10bn and €12bn. * SO WHAT? * Puig is smaller than rivals L’Oréal and Estée Lauder but has grown a lot over the last decade through some high-profile acquisitions. Why the owner of Paco Rabanne will attract interest in its IPO (Financial Times, Lex) suggests that it has a decent chance of doing well on flotation despite the beauty industry seeing an overall slowdown recently.

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

3

TECH NEWS

TSMC heads to the US and Microsoft invests in London…

TSMC to make state-of-the-art chips in US after multibillion subsidy pledge (The Guardian, Jasper Jolly) shows that the world’s most valuable chipmaker, TSMC, is going to build its most advanced chips in Arizona, taking advantage of a MAHOOSIVE US government subsidy of up to $11.6bn under the 2022 Chips Act. Clearly the initiative, designed to boost chipmaking in the country, has now worked! US rival Intel managed to get government support worth almost $20bn in grants under this banner as well. * SO WHAT? * This is a good move that will diversify chip

production outside Asia (and particularly Taiwan, which looks pretty vulnerable at the moment).

Then in Microsoft plots new London artificial intelligence hub (Daily Telegraph, Matthew Field) we see that the tech giant is planning to open a new AI hub at its office in Paddington, London, as part of plans to invest £2.5bn in the UK. It will be headed up by newly-hired Google DeepMind co-founder Mustafa Suleyman. This is great news for the tech industry in the UK as it is a pretty strong endorsement!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

4

MISCELLANEOUS NEWS

European defence companies warn about Chinese cotton, Tesla settles a lawsuit, Lotus promises to make more cars and mortgage costs settle down…

In a quick scoot around some of today’s other interesting stories, European defence groups warn over reliance on Chinese cotton used in gunpowder (Financial Times, Arjun Neil Alim, Patricia Nilsson and Sylvia Pfeifer) shows that the likes of Saab and Rheinmettall are warning about over-reliance on Chinese cotton used in gunpowder for ammunition, saying that the use of cotton linters (a byproduct and primary ingredient that is needed to make nitrocellulose that is used in explosives – aka “guncotton”) from China is so prevalent that if China decided to cut off supply it would cause a real problem. Apparently, Europe relied on China for “more than 70%” of its cotton linters! * SO WHAT? * The EU is currently racing to replenish its stocks of ammo that have been depleted to help Ukrainian armed forces. This is yet another example of a key commodity that China has effectively taken control of. I get the feeling that the world has got into this state because buyers have only been motivated by low prices and not broader issues like protecting supply chains. This needs to change not just for “guncotton” but also for sola panels, EV batteries and a whole host of other things!

Meanwhile, Tesla Agrees to Settle Lawsuit Over Autopilot’s Involvement in 2018 Fatal Crash (Wall Street Journal, Ryan Felton and Rebecca Elliott) shows that Tesla has reached a settlement with the family of a driver in a fatal 2018 crash where Tesla’s driver-assistance tech was involved in the death of Apple engineer Walter Huang. This case would have been a test of whether drivers, and not the automaker, were responsible for crashes that involved the Autopilot tech. No further details were disclosed. Well that just kicks the can down the road for a while longer then…

In other car news, Lotus vows just increase in car production after £590m loss (Daily Telegraph, Matt Oliver) shows that Geely-owned Lotus said that it is on track to boost its EV production 20-fold as it reported a $750m annual loss at its first set of results after its NYSE flotation. Good luck with that! They have some nice cars, so let’s hope that consumers vote with their wallets!

Then in Mortgage costs stabilise after surge in interest rates, says Barclays (Daily Telegraph, Szu Ping Chan) we see that mortgage repayments and rents are stabilising after years of rises, according to the latest data from Barclays! The 1.8% rise in March is waaaaaaay less than the 12.2% rise in June 2023 – so that will comes as very welcome news to many!

Want to engage with myself and the team at Watson’s Daily about these stories? Why not ask us something in the Forum HERE. It’d be great to hear what you think!

5

...AND FINALLY...

…in other news…

This clip is from one of my favourite films, The Founder. In short, it’s about the evolution of McDonald’s and is absolutely fascinating! The scene about how the team comes up with its “Speedee Service System” blew my mind!

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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)