Tuesday 12/04/22

1. In MACRO & SANCTIONS NEWS, Shanghai challenges continue, the UK economy stalls as consumer confidence falls while SocGen and Ericsson move to exit Russia
2. In TECH NEWS, China approves online games, TikTok smashes it on ads, Epic Games gets $2bn from Sony and Lego, Apple faces another antitrust suit and the Elon/Twitter thing rumbles on
3. In CONSUMER TRENDS & RETAIL NEWS, warehousing powers through, Tortilla sees record sales and M&S lowers prices
4. In MISCELLANEOUS NEWS, Thoma Bravo buys into cybersecurity, GoTo shares rocket and Cornish Lithium gets an experienced hand
5. AND FINALLY, I bring you another interesting optical illusion…

So Shanghai repercussions unfold and the UK economy stalls while SocGen and Ericsson move to exit Russia…

Shanghai unveils limited easing of Covid lockdown as Chinese markets fall (Financial Times, Thomas Hale, Hudson Lockett and Primrose Riordan) shows that there may be light at the end of the tunnel for Shanghai’s lockdowns as authorities yesterday announced a blueprint for easing restrictions but Cargo ships queue outside Shanghai (Daily Telegraph, Tim Wallace) highlights the damage done so far as almost 500 containers ships are stuck outside Chinese ports and Chinese energy bills up by 30pc after repeated Covid lockdowns (Daily Telegraph, Tim Wallace) shows the effect all this is already having on Chinese consumers as the latest annual producer price inflation figures reflect rising costs all the way through the supply chain. A slowdown in the Chinese economy means a slowdown for the global economy.

Meanwhile, closer to home, Growth rate falls as slump ends brief recovery (The Guardian, Richard Partington) cites the latest data from the ONS which says that GDP increased by just 0.1% in February, below the previous monthly rate of 0.8%, but then I think this is unsurprising given what’s going on in the world at the moment! Still, Sales slide as UK consumer confidence sinks to record low (The Guardian, Richard Partington) reflects the findings in figures from the British Retail Consortium which show that macroeconomic factors and rising prices are

taking their toll. Total sales rose by 3.1% in March, but it is thought that this is due to rising prices, not because people are buying more stuff.

The exodus from Russia continues in SocGen quits Russia with sale to oligarch (The Times, Ben Martin) highlights another bank leaving Russia as France’s Société Générale said it had offloaded its stake in Rosbank to Interros Capital, which is controlled by Vladimir Potanin, the richest man in Russia. * SO WHAT? * SocGen will take a financial hit in the process, but Potanin has just done an amazing piece of business buying at a bargain price. Other western firms needing to sell their business interests in Russia need to get a move on as the sanctions list (which contains a lot of potential buyers!) keeps growing by the day.

Ericsson puts staff on paid leave as it closes Russian units (Daily Telegraph, Giulia Bottaro) shows that the Swedish telecoms giant is suspending its activities in Russia and putting its 600 employees on paid leave whilst also putting aside £72.8m for the purpose of shutting down operations. * SO WHAT? * Although Russia and Ukraine make up less than 2% of Ericsson’s worldwide sales the company does, in combination with Nokia, control between 40% and 60% of the Russian market for wireless network equipment. If Ericsson makes this permanent, you would have thought that China’s Huawei and ZTE will be more than happy to step in (although they are not saying that overtly at the moment)!

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!

China thaws on gaming, TikTok rakes it in, Epic Games/Sony/Lego do a metaverse deal, Apple faces another antitrust lawsuit and Twitter shenanigans continue…

China approves new online games as crackdown eases (Financial Times, Primrose Riordan, Gloria Li and Eleanor Olcott) shows that there are signs of a thawing of relations between the Chinese regulators and gaming companies as they approved new online games from companies including Tencent for the first time in nine months. * SO WHAT? * The gaming sector has been targeted as part of the “common prosperity” drive by the government to encourage more “wholesome” behaviour from China’s citizens and proved to be a real nightmare for the sector. Other sectors that have been targeted as part of this campaign have included fintech, education and entertainment but gaming has had it particularly hard because authorities don’t want children in particular to spend their time on “frivolous” things and have implemented measures like restricting minors to only three hours gaming per week.

Meanwhile, TikTok ad revenues on hot streak (The Times, Callum Jones) highlights TikTok’s amazing performance in advertising revenues that are expected to triple to a mind-boggling $11.6bn this year. To put this into perspective, this is more than the combined sales of Twitter and Snap – and British turnover rose steeply. Amazing, no?

I thought that Epic Games secures $2bn from Sony and Lego to build gaming metaverse (Financial Times, Anna Gross) is a really exciting story as it talks about how the maker of Fortnite, Sony and Lego are coming together to build a metaverse specifically for children. * SO WHAT? * This comes not long after Microsoft put in an offer to buy Activision Blizzard for $75bn, another move – this time by Microsoft – to get a foothold in the metaverse. Sony already has a history of funnelling money into Epic Games and this will undoubtedly help them in the race for supremacy in the metaverse as, combined with Epic, it is now competing with Microsoft, Meta and Roblox to be the first to a billion users…

In other tech developments, Apple faces new antitrust charge from Brussels (Daily Telegraph) shows that Apple is facing an additional antitrust charge from the EU as part of the ongoing investigation into music streaming – and this comes on top of another ongoing investigation regarding its app store and the strangling of competition. Musk fuels rumours of hostile Twitter takeover (The Times, Callum Jones, Alex Ralph and Keiran Southern) follows on from what I said yesterday while Twitter/Musk: social media heft is organic, financial clout is regulated (Financial Times, Lex) emphasises that Musk doesn’t need a seat on the board to exert pressure on the company but that there may be conflicts of interest arising from his various musings on Twitter given that he’s now such a big shareholder and impact he will undoubtedly have. Is this going to be a takeover by stealth??

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!

Warehousing soars, Tortilla wraps up a decent performance and M&S does a nice thing…

Online drives storage boom (Daily Telegraph, Tim Wallace) cites some findings from the ONS which show that the growth in online shopping has prompted a major boom in Britain’s storage and transport industries (no surprise there). Logistics is miles ahead of any other sector in the country at the moment in terms of output growth while construction and hospitality vie for second place. * SO WHAT? * I personally do not see any reason for growth in these areas (especially storage) to slow down as they will be powered by the double boost of companies needing to hold more inventory to buffer against ongoing and future supply chain issues and the continued growth of online shopping.

Record sales at Mexican restaurant chain Tortilla as families fill up (Daily Telegraph, Laura Onita) shows that Tortilla has benefitted from a boom in casual dining as families still want to go out – but not break the bank in doing so (I am all for this!). It announced record sales and

profits for the year to Jan 2nd. * SO WHAT? * I maintain my stance that the long-haul holiday sector in particular won’t be as good as companies are painting and that there will be cancellations as households try to get to grips with higher costs. In the meantime, after two years of lockdown, people will still be keen to get out and about, so cheaper casual dining seems like an “affordable treat”.

M&S slashes prices of everyday items (Daily Telegraph, Matt Oliver) shows that the high street stalwart continues to listen to customers and is now going to be cutting the price of a number of essentials in order to help them in the current cost-of-living crisis. Prices in its “Remarksable” range are going to be cut and it also announced a “family dine in” deal at shops across the country. * SO WHAT? * Clearly this is an effort to hang on to as many customers as it can and stop them defecting to the likes of Aldi and Lidl. I must say that I think M&S is doing all the right things recently in terms of offering more brands, offering re-selling and hiring options and now cheaper basics. It may well suffer as household budgets get tighter, but it sounds to me like they are doing the right things.

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!

Thoma Bravo goes shopping again, GoTo goes to the moon and Cornish Lithium gets a veteran…

In a quick scoot around other interesting stories today, Thoma Bravo agrees $6.9bn deal for cyber security group SailPoint (Financial Times, Antoine Gara) shows that the US private equity firm – which manages over $100bn in assets – is now buying cyber security company SailPoint Technologies for $6.9bn. SailPoint is used by businesses to grant employees secure access to remote working software and to protect cloud computing infrastructure. This goes to show that after a brief pause for the Russia/Ukraine war, leveraged buyouts are back on.

Meanwhile, GoTo shares jump as investors back Indonesia’s fast-growing market (Financial Times, Oliver Telling) shows that the share price of Indonesia’s GoTo, which provides a whole range of services like ride-hailing and payments, boomed by 14% on its market debut

yesterday. It was formed from the $18bn merger of super app GoJek and e-commerce business Tokopedia last year. However, GoTo/Indonesia: sky-high valuations for lossmaking start-ups cannot last (Financial Times, Lex) shows that reality is likely to set in as the negative impact of the population’s low income could well mitigate the growth attractions of a young population and low digital uptake. It is, along with rivals Grab, Sea and Bukalapak, lossmaking and could find it hard to grow itself out of this for some time yet.

Then in Cornish role for mining veteran with float in sight (The Times, Emily Gosden) we see that the former chairman of Polymetal (the Russian goldmining giant), Ian Cockerill, has been hired by the lithium mining start-up – a canny move since it is planning on a stock market float later this year. Britain’s battle to become lithium powerhouse (Daily Telegraph, Howard Mustoe) takes a broader look at lithium in the UK, particularly the processing of it. Tees Valley Lithium is a key player in this area, but the article also takes a look at British Lithium (another lithium miner in Cornwall). The future’s lithium – and if we can source and process it here, the future may look pretty good!

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!

…in other news…

No optical illusions in this section of Watson’s Daily and then all of a sudden you get two in a row! See what you make of Mind-bending optical illusion has hidden message – but not everyone can read it (The Mirror, Julia Banim). What do you see?