Tuesday 12/03/19

  1. In MACRO NEWS, Turkey hits recession, Mexico tries to avoid it, Venezuela’s Maduro feels the heat and German Industrial Production hits the skids
  2. In TECH-RELATED NEWS, Microsoft moves into biological computing and Nvidia splashes $6.9bn on an Israeli chipmaker
  3. In INDIVIDUAL COMPANY NEWS, Tesla makes a U-turn and Levi Strauss prepares for market
  4. In OTHER NEWS, I bring you one flatmate’s plea to her fellows. For more details, read on…



So it’s all kicking off in Turkey, Mexico and Venezuela while German IP weakens…

Turkey falls into recession as currency crisis takes toll (Financial Times, Laura Pitel) highlights the country’s first fall into recession for a decade at the end of last year as its currency fell off a cliff and its interest rates sky-rocketed. This isn’t great news for Turkish president Erdogan ahead of nationwide local elections at the end of this month. Opposition parties have criticised his ruling party presiding over the country’s current 20% inflation rate and rising unemployment – so they can now add recession to the list. * SO WHAT? * The currency crisis that was triggered by the spat between Trump and Erdogan last summer was always going to have consequences but the depth of economic contraction for the fourth quarter was worse than the market had been expecting. The sudden interest rate hike to 24% in September arrested the slide in the lira but caused a massive fall in bank lending, business confidence and consumer spending. Industrial production, car and house sales have all cratered. Turkey is highly reliant on foreign financing and so would be especially vulnerable to any shifts in sentiment given its current precarious state.

In Mexico’s Lopez Obrador rejects recession fear in ‘100-day’ speech (Financial Times, Jude Webber) we see that Mexico’s President Andres Manuel Lopez Obrador (aka “AMLO” – a bit like “J-Lo” but more boring) is talking a good game by saying “There is no hint of recession as our political adversaries and conservatives want, or analysts forecast with bad faith” at a speech marking his first 100 days in office. He talked about some key infrastructure projects to be completed during his six-year term in office and vowed to ensure that Mexico lived within its means whilst also committing to eliminate corruption and simplify bureaucracy. * SO WHAT? * Decent enough sentiment, but it’s early days yet. I suspect that Mexico’s fortunes will be highly dependent on Trump’s whims across the border.

Blackouts raise political heat on Venezuela’s Nicolas Maduro (Financial Times, Gideon Long) gives us a snapshot of Venezuela as its power outage extended into a fifth day yesterday, leaving thousands of homes without

electricity. Shops and businesses have had to close as the government ordered them to stay at home. President Maduro blames the nationwide blackouts on US-based sabotage, but the opposition says that the outages are due to government incompetence and years of neglect regarding the country’s creaking infrastructure. Opposition leader Juan Guaido, who is trying to oust Maduro, is pushing for the National Assembly to declare a national emergency. * SO WHAT? * The situation is getting pretty dire as people in Caracas are starting to troop up the Avila mountain, which looks over the city, to find water and supermarkets have been selling food at discount prices before it rotted. The metro is also out of action, phonelines don’t work and many people don’t have mobile signal. The pressure is building on Maduro to quit as the US and about 50 other countries are now recognising Juan Guaido as the country’s interim leader. Having said that, Maduro still has the support of Russia, China and his military. Ironically, Venezuela sits on the world’s largest energy reserves, but oil output has fallen by two-thirds since 2001 to about 1m barrels per day. Clearly, if Maduro’s regime gets cleared out, the next lot will have to sort out corruption and turn its oil industry around as a matter of urgency.

German industrial production drops unexpectedly (Financial Times, Claire Jones and Sarah Provan) cites the latest data from the German statistics office which show that industrial output fell sharply in January indicating sluggish exports due to weaker global demand and political uncertainty. * SO WHAT? * This just confirms other recent business surveys which show that manufacturers are really feeling the pinch in Europe’s largest economy. Although there’s a lot of pessimism abounding in the market about the current state of Germany’s economy, some are painting a more upbeat picture with JP Morgan economist Greg Fuzesi saying that “The IP weakness in January was entirely due to a 9.2% month on month slump in motor vehicle production. This does not make much sense and could reflect the one-week strike at a Hungarian engine plant in late January” and Oliver Rakau, of Oxford Economics, saying that “A normalisation in the car sector is under way with factory orders over the past two months up by 9 per cent from the third quarter’s low, and already published February car production data strongly suggesting a bounceback”.



Microsoft goes biological and Nvidia makes a chunky acquisition…

Microsoft moves into biological computing with Platform B (Financial Times, Clive Cookson) heralds a major move by Microsoft into biotechnology as it is launching a new system that helps scientists engineer living cells using machine learning and data analysis. The company is partnering up with Princeton University researchers and two UK companies – Oxford BioMedica and Synthace – to roll out the new system, called Platform B. Basically, Platform B analyses huge volumes of biomedical data and advises scientists how to proceed with their research. Oxford BioMedica’s chief business officer Jason Slingsby said that the aim of Platform B was to “dramatically lower the costs of life-saving treatments and put them within the reach of more patients”. * SO WHAT? * This sounds like a good move and adds another string to Microsoft’s bow as it tries to diversify away from almost complete reliance on Windows.

Nvidia to acquire Israeli chipmaker Mellanox for $6.9bn (Financial Times, Eric Platt, James Fontanella-Khan, Mehul Srivastava and Tim Bradshaw) highlights Nvidia’s acquisition of Israeli rival Mellanox in the biggest deal ever done by a US semiconductor company as it tries to boost its business in data centres. The deal is all-cash, at a 14% premium to Mellanox’s closing price on Friday, and will go some way to reducing the company’s reliance on the gaming industry. Nvidia beat Intel’s rival bid for the company. Mellanox makes cables and switches that transfer data between servers, storage systems and infrastructure equipment and will fit in nicely with Nvidia’s graphics processors which are increasingly being used in machine learning systems. * SO WHAT? * This is a major deal which will give Nvidia a real boost in what is expected to be a growth business as increased use of AI will necessitate growth in the number and power of data centres to do all the processing. The combined entity will serve every major cloud computing services provider and power over half of the world’s fastest supercomputers with clients including the likes of Dell, Alphabet and IBM. The deal is expected to complete before the end of this year after getting regulatory approval in the US, China and other areas.



Musk does a U-turn and Levi Strauss prepares for market…

In a quick scoot around other news stories today, Tesla, in reversal, to keep more stores open (Wall Street Journal, Kimberly Chin and Esther Fung) shows Elon Musk going back on his recent pronouncement where he said that almost all Tesla sales outlets would be closed to save costs, with all sales going online-only. Funnily enough, there was a lot of resistance to this from landlords, car

dealers and lawmakers and some prospective customers also complained. Tesla will instead raise vehicle prices by about 3% worldwide to offset some of the costs of keeping the stores open (although the price of the Model 3 will remain unchanged).

Then in Levi Strauss seeks $6.2bn valuation in stock market listing (The Guardian, Rob Davies) we see that the company announced plans to go back into public ownership after over thirty years as a private company as demand for denim surges around the world. * SO WHAT? * The company said that it will use the profits to fund acquisitions.



And finally, in other news…

I thought I’d bring you the plight of one girl who I think many of us can sympathise with in Woman hilariously gets her own back on housemates who never put the bin out (The Mirror, Courtney Pochin https://tinyurl.com/y3dxwyq6). Good move!

Some of today’s market, commodity & currency moves (as at 0826hrs 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 **
7,131 (+0.37%)25,651 (+0.75%)2,783 (+1.47%)7,55811,543 (+0.75%)5,266 (+0.66%)21,504 (+1.79%)3,060 (+1.10%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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